Business context and reporting period
This is Tamandare Explorations Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2011—not a filing under Tonix Pharmaceuticals Holding Corp.’s name. Tamandare described itself as an exploration-stage company and a shell company. It had no revenue and had abandoned its Que 1-4 mineral property; it was evaluating other opportunities.
Financial results and liquidity
| Metric | Three months ended Sept. 30 | Nine months ended Sept. 30 |
|---|---|---|
| Revenue | None | None |
| Net loss | $2,322 in 2011; $3,685 in 2010 | $9,353 in 2011; $11,909 in 2010 |
| Operating cash used | Not provided for the quarter | $4,419 in 2011; $10,527 in 2010 |
At September 30, 2011, cash was $205, compared with $4,624 at December 31, 2010. Current liabilities were $15,240, including $5,240 of accounts payable and a $10,000 non-interest-bearing loan from President David Moss, with no specific repayment terms. Stockholders’ deficit was $15,035; accumulated deficit since inception was $80,035. No interest or income taxes were paid during the nine-month period. Profit margins are not meaningful because the company had no revenue.
Material changes and proposed transaction
Compared with the first nine months of 2010, net loss and operating cash used decreased. Accounts payable rose from $306 at year-end 2010 to $5,240 at September 30, 2011, while cash declined by $4,419.
On September 13, 2011, with an extension on September 30, Tamandare entered a letter of intent to acquire all outstanding shares of TONIX Pharmaceuticals, Inc. The stated consideration was 22,666,667 Tamandare common shares, after cancellation of 1,500,000 existing shares. Closing required Tamandare and Tonix to raise at least $1.5 million through an 8% convertible promissory note. The filing says there can be no assurance the agreement will be finalized. Shares outstanding were 5,500,000 as of October 6, 2011.
Outlook, risks and controls
If the Tonix transaction did not close, management planned to seek another mineral property or other business opportunity, with no assurance of success. The company reported substantial doubt about its ability to continue as a going concern, citing accumulated losses, no revenue, minimal cash, and dependence on shareholder support or additional equity financing. The filing states that interim results may not indicate full-year results.
Management concluded disclosure controls and procedures were not effective as of September 30, 2011. It described CEO review of financial statements and reconciliations as a mitigating measure and said there had been no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the letter of intent became a definitive agreement, whether the required financing was raised, and the final transaction terms.
- The company’s cash needs and ability to meet liabilities, including the related-party loan and accounts payable.
- The going-concern warning and the company’s lack of revenue or operating business at the filing date.
- The disclosed ineffective controls and any subsequent remediation.