Filing summary
Reporting entity and period: The supplied filing is for Bear Lake Recreation, Inc., not Modular Medical, Inc. It is a Form 10-Q for the quarter ended December 31, 2012, covering the three and six months ended December 31, 2012. The company describes itself as a development-stage, non-operating shell and reports that its common stock traded under BLKE.OB.
Financial condition and results
| Metric | Three months ended Dec. 31, 2012 | Six months ended Dec. 31, 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expenses | $2,115 | $6,820 |
| Related-party imputed interest expense | $2,430 | $4,716 |
| Net loss | $4,545 | $11,536 |
| Basic and diluted loss per share | $0.01 | $0.01 |
- Gross margin is not meaningful for the current periods because there was no revenue or cost of goods sold. Since inception, reported revenue was $1,396 and gross profit was $689.
- At December 31, 2012, assets and cash were $0; current and total liabilities were $99,637, comprising $86,942 due to a related party and $12,695 accrued related-party interest. Stockholders’ deficit was $99,637.
- Six-month cash flow from operating, investing, and financing activities was reported as $0 in each category. The company reported no cash paid for interest or income taxes.
- The related-party advances are unsecured, non-interest-bearing, and payable on demand; the company imputes interest at 10% annually. A principal shareholder paid $2,765 of expenses during the quarter.
Changes, outlook, and risks
Compared with the same 2011 periods, quarterly net loss increased from $3,841 to $4,545 and six-month net loss increased from $9,976 to $11,536. General and administrative expenses also rose: from $1,879 to $2,115 for the quarter and from $6,175 to $6,820 for six months. Imputed related-party interest expense increased in both comparisons. Revenue remained zero.
Management plans to consider potential industries and seek a merger with an existing, well-capitalized operating company or otherwise fund and acquire a going concern. The company had not identified a venture or acquisition. Management expected a principal shareholder to continue paying foreseeable expenses and did not anticipate needing additional funds during the next 12 months, but said any potential financing need could not be predicted.
The filing states that having no assets or established operations and having accumulated losses raise substantial doubt about the company’s ability to continue as a going concern. The financial statements include no adjustments for the outcome of this uncertainty. Management identified risks including its ability to raise capital and general economic, market, regulatory, and other factors. It reported no off-balance-sheet arrangements or legal proceedings. Management concluded disclosure controls were effective and reported no material change in internal control during the quarter.
Important facts to verify
- Confirm the issuer and filing period: the provided filing names Bear Lake Recreation, Inc., despite the request metadata naming Modular Medical, Inc.
- Verify the reported related-party payable balance and date: the balance sheet shows $86,942 at December 31, 2012, while the note describes that balance as due as of September 30, 2012.
- Assess the company’s ability to meet on-demand related-party obligations given its zero cash and zero assets, and the uncertainty around future funding or a merger.
- Confirm the filing’s reporting-period labeling: the quarter ended December 31, 2012 is the company’s fiscal second quarter, based on its June 30 fiscal year-end.