Filing summary
Entity and period: The supplied filing is for Fits My Style Inc., not Rezolute, Inc. It is a Form 10-Q for the quarter ended September 30, 2011, the first quarter of fiscal 2012. The company describes itself as a development-stage business incorporated in July 2010 and headquartered in Israel.
Business context
The company was developing an interactive web service, with a planned smartphone application, to help customers visualize furnishings in a home, office, or other setting before purchase. It had not yet initiated operations or generated revenue. Its shares were not trading on a stock market or quotation system; a market maker had agreed to seek OTC Bulletin Board quotation eligibility.
Financial results and liquidity
| Metric | Three months ended September 30, 2011 | Comparable figure shown in filing |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $7,394 | $25,000 |
| Net loss | $7,394 | $25,000 |
| Basic and diluted loss per share | $0.002 | $0.008 |
| Cash used in operating activities | $13,552 | $25,000 |
The comparison column is for July 26, 2010 (inception) through September 30, 2010, rather than a matching three-month period, so it is not directly comparable. No meaningful revenue or profit margins are available because the company had no revenue.
At September 30, 2011, cash and total current assets were $23,478, accounts payable and total current liabilities were $5,499, and working capital was $17,979. Total stockholders’ equity was $17,979. The filing reports no debt or interest expense; accounts payable were the reported financial liability. Cash declined by $13,552 during the quarter, with no financing proceeds reported in that quarter. Cash at June 30, 2011 was $37,030.
Changes, outlook, and risks
- Quarterly general and administrative expense was $7,394, up from $500 in the inception-to-September 2010 comparison; management attributed the increase to legal, printing, and audit costs associated with becoming a reporting company.
- Research and development expense was $0 in the quarter, versus $24,500 in the earlier inception-period comparison. The earlier charge related to shares issued to the CEO for intellectual property. Cumulative development-stage losses were $49,321.
- The filing states that management believed approximately $40,000 would be needed to fund expenses over the next 12 months. It disclosed no financing arrangements with banks or other sources; the CEO had orally agreed to lend funds if needed. Management said additional equity financing and business-plan development were necessary, with no assurance that capital would be available.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern. The financial-statement note says cash and expected operating cash flows would not sustain operations for more than one year, while MD&A says resources would not suffice for more than nine months. These runway statements differ.
- Management concluded disclosure controls and procedures were ineffective as of September 30, 2011, citing a material weakness involving lack of segregation of duties and the need for a stronger internal control environment, attributed to the small staff.
- The filing reports no off-balance-sheet arrangements. It describes financial, operational, regulatory, and business-failure risks associated with development-stage operations.
Key facts for investors to verify
- Confirm the filing identity: the supplied document names Fits My Style Inc., although the request metadata names Rezolute, Inc.
- Verify the conflicting nine-month versus more-than-one-year cash runway disclosures and the assumptions behind the stated $40,000 funding need.
- Assess the availability and terms of future financing, including whether the CEO’s oral lending commitment became a binding arrangement.
- Check progress on product development, commencement of operations, and any OTC quotation application; the filing reports no revenue and no current market trading.
- Review remediation of the disclosed material weakness in disclosure controls and procedures.