Business context and reporting period
The supplied filing is Silver Horn Mining Ltd.’s unaudited Form 10-Q for the quarter ended September 30, 2013; it does not identify Nextplat Corp. Investors should verify that this is the intended filing. Silver Horn was an exploration-stage company focused on silver properties in Arizona, with no operating revenue, active mining, or established proven or probable reserves.
Financial results and liquidity
- Revenue: $0 for the three and nine months ended September 30, 2013 and the comparable 2012 periods.
- Net loss: $144,203 for Q3 2013 versus $340,000 in Q3 2012; $510,128 for the first nine months of 2013 versus $4,602,018 in the comparable 2012 period. Nine-month basic and diluted loss per share was reported as $0.00 versus $0.02.
- Operating expenses: $163,412 for Q3, down 48% year over year; $487,639 for the first nine months, down about 89%. The filing attributes the reductions mainly to lower activity and no stock-based compensation in 2013.
- Cash flow: Operating cash use was $20 for the first nine months of 2013, versus $142,484 in 2012. Financing cash flow was $0 in 2013. Cash was $0 at September 30, 2013.
- Liquidity and debt: Current assets were $0 and current liabilities were $2,217,939, resulting in a $2,217,939 working-capital deficit. Convertible notes and debentures totaled $243,382 before discounts ($237,132 net); accrued interest was $97,393. The filing says the notes were due within one year and a related-party note was past due and payable on demand.
- Margins: Not meaningful because the company had no revenue.
Material changes and unusual items
Nine-month net loss fell substantially from 2012, primarily as payroll and stock-based compensation, exploration, professional, and general and administrative expenses declined. Exploration spending was $5,000 for the first nine months, down from $83,701, which management linked to limited working capital. A $22,807 nine-month gain from the change in fair value of derivative liabilities reduced reported expense.
After quarter-end, on November 8, 2013, executives and directors resigned and new directors and a CEO/CFO were appointed. Former CEO Daniel Bleak agreed to cancel 34.5 million shares. Bond Media agreed to forgive $196,620 of debt; MJI agreed to forgive its $1,264,253 balance less $175,000, with that $175,000 payable only upon a future acquisition and financing transaction. Convertible-note conversion prices were amended from $0.05 to $0.03 per share, and the company issued 8,112,733 shares on conversion.
Outlook, risks, and contingencies
Management said it did not expect to be profitable for the remainder of 2013 and needed additional capital; it had no revenues, available credit, or other external working-capital source and cautioned that financing might not be available on acceptable terms. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern. Management planned to seek funding through public or private offerings, but gave no assurance of success.
The company reported no established reserves and only planned sampling, mapping, and assaying at its properties. A third party disputed the company’s title to nine of its 14 COD claims; the company said it believed the demand was without merit. A $47,362.29 default judgment relating to predecessor-company accounting services was included in payables. Disclosure controls were deemed ineffective at September 30, 2013 because of limited internal resources and insufficient transaction-review levels.
Important facts to verify
- Confirm whether the Silver Horn filing is the intended filing for Nextplat Corp.
- Verify the post-quarter debt-forgiveness agreements, the conditions attached to the $175,000 MJI payment, and their accounting treatment.
- Confirm the share count and dilution after the 8,112,733-share note conversion and the 34.5 million-share cancellation.
- Check current cash, financing availability, going-concern status, and whether the company can meet obligations due on demand.
- Review the COD claim overlap dispute, the default judgment, and progress on remediation of ineffective disclosure controls.