Filing summary
Issuer and period: The filing is a Form 10-Q for the quarter ended June 30, 2013, and identifies the registrant as Silver Horn Mining Ltd. The request metadata names Nextplat Corp.; this does not match the issuer named in the filing. Financial statements are unaudited.
Business context
Silver Horn describes itself as an exploration-stage company focused on acquiring and exploring mineral properties, principally for silver. It reports no revenue and no proven or probable reserves. Its Arizona properties—the 76 and COD claims—remain exploratory. The filing also checks “shell company: yes.”
Financial results
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 in 2013 and 2012 | $0 in 2013 and 2012 |
| Operating expenses | $154,206 in 2013; $271,763 in 2012 | $324,227 in 2013; $4,080,992 in 2012 |
| Net loss | $181,948 in 2013; $432,568 in 2012 | $365,925 in 2013; $4,262,018 in 2012 |
| Basic and diluted loss per share | $0.00 in both periods | $0.00 in 2013; $0.02 in 2012 |
| Operating cash flow | $20 used in the first six months of 2013; $142,301 used in the first six months of 2012 |
Margins are not meaningful because there was no revenue. The filing’s quarterly statement of operations reports an operating loss of $142,715, which does not reconcile to quarterly operating expenses of $154,206 or to the reported net loss after other expense; investors should verify this apparent inconsistency. The six-month operating loss equals reported operating expenses.
Financial position and liquidity
- At June 30, 2013, cash and total assets were both $0, compared with total assets of $7,520 at December 31, 2012.
- Current liabilities were $2,073,736, versus $1,715,331 at year-end 2012; working capital deficiency was $2,073,736. Stockholders’ deficiency was also $2,073,736.
- Accounts payable and accrued expenses were $535,889; related-party payables were $1,138,922. The filing says approximately $994,974 was owed to MJI, a related party, for fees, salaries and reimbursable expenses.
- Convertible debt and notes had a face amount of $243,382 and a net carrying amount of $237,132 after debt discount. A separate $105,882 note issuance matured in February 2013 and is past due and due on demand. Accrued interest was $95,330.
- Cash used in operations was only $20, while accounts payable and accrued expenses increased by $332,875. The company reported no financing proceeds in the first six months of 2013 and no available credit or other external working-capital source.
Changes, outlook and risks
Six-month operating expenses and net loss fell sharply from 2012, principally because payroll and stock-based compensation, general and administrative costs, and exploration spending were lower. Management attributes reduced exploration spending to limited working capital. Related-party management fees were $150,000 for the first half of 2013; management expected general and administrative expenses to rise during the rest of the year due to the services and employee-leasing agreement. The filing gives no revenue or profitability guidance and says the company did not anticipate being profitable in the remainder of fiscal 2013.
- Going concern: The company reports substantial doubt about its ability to continue as a going concern. Management intended to seek additional capital through a public or private offering, but gives no assurance financing would be available; failure to obtain funding could force curtailment of operations.
- Property and legal matters: The company is disputing a third party’s claims to some COD property mining claims. The filing describes a quiet-title action and says it agreed to dismiss the action without prejudice; the current status and effect on claim ownership are not clear. A $47,362.29 default judgment for unpaid predecessor-company accounting services is included in accounts payable.
- Related-party arrangements: The five-year MJI services and employee-leasing agreement provides for $25,000 per month and is subject to 180 days’ notice to terminate. Significant amounts owed to MJI and the relationship of company officers/directors to MJI warrant review.
- Controls: Management concluded disclosure controls and procedures were ineffective at June 30, 2013, citing limited internal resources and insufficient levels of transaction review. Remediation was being considered, with no assurance of timely or adequate implementation.
- Other: A derivative liability of $49,396 was recorded at June 30, 2013. Its fair-value assumptions include high expected volatility; related valuation changes affected reported income or expense.
Key facts for investors to verify
- Confirm the intended issuer: the filing names Silver Horn Mining Ltd., not Nextplat Corp.
- Reconcile the quarterly operating loss, operating expenses and net loss figures in the statements and MD&A.
- Confirm the status and ownership implications of the COD claims dispute and the agreed dismissal without prejudice.
- Assess near-term financing capacity, the past-due note, related-party payables and the company’s ability to meet obligations with no cash or revenue.
- Review progress on internal-control remediation and the nature of the filing’s “shell company: yes” designation.