Business context and reporting period
The filing is Bear Lake Recreation, Inc.’s unaudited Form 10-Q for the quarter and six months ended December 31, 2016 (fiscal Q2 2017). The request identifies Modular Medical, Inc.; that does not match the registrant named in this filing. Bear Lake reports no assets or operations and identifies itself as a shell company. Its stated plan is to seek a merger with an existing, well-capitalized operating company.
Financial results and position
- Revenue: None in the three or six months ended December 31, 2016, or in the comparable 2015 periods. With no revenue or cost of goods sold, gross margin is not meaningful.
- Expenses and losses: For Q2, general and administrative expense was $2,492 versus $2,417; related-party interest expense was $5,244 versus $4,440; net loss was $7,736 versus $6,857. For the six months, G&A was $8,720 versus $9,268; related-party interest expense was $10,195 versus $8,621; net loss was $18,915 versus $17,889.
- Per-share results: Basic and diluted loss per share was $0.01 for Q2 in both years, and $0.02 for the six months ended December 31, 2016, versus $0.01 in 2015.
- Cash flow and liquidity: Cash and cash equivalents were zero at December 31, 2016. The cash flow statement reports zero net operating, investing, and financing cash flows and zero ending cash for the six-month period. Shareholders paid expenses and payables on the company’s behalf.
- Liabilities and deficit: Current liabilities were $212,678, up from $193,763 at June 30, 2016, including $139,797 payable to related parties and $72,866 accrued related-party interest. Total assets were zero; stockholders’ deficit was $212,678.
Changes, outlook, and risks
Six-month net loss increased by $1,026 year over year, primarily because interest expense rose, despite lower G&A. Related-party loans are unsecured, non-interest-bearing, and payable on demand; the company imputes interest at 10% annually. Management says it expects shareholders to continue covering foreseeable expenses and does not anticipate needing additional funds during the next 12 months, but says future funding needs for a potential venture cannot be predicted.
The company has accumulated losses, no assets, and no established operations. Management states these conditions raise substantial doubt about its ability to continue as a going concern. It intends to seek a merger; no acquisition or venture had been identified. The financial statements include no adjustments for the going-concern uncertainty. Management reported effective disclosure controls and no material change in internal control. No legal proceedings, off-balance-sheet arrangements, or subsequent events requiring disclosure were reported.
Important facts for investors to verify
- Confirm the filing belongs to Bear Lake Recreation, Inc. rather than Modular Medical, Inc., and verify the intended reporting period.
- Review the company’s shell status, merger-seeking plan, and the substantial-doubt going-concern disclosure.
- Verify the terms, demand status, and continued availability of shareholder funding, and how accrued imputed interest is treated.
- Reconcile the reported zero cash flows with the losses and shareholder-paid expenses, and confirm current liabilities and accrued interest.