Business context and reporting period
This filing is Global System Designs, Inc.’s Form 10-K for the fiscal year ended November 30, 2013, covering a development-stage green-building information and consulting business incorporated in November 2012. It is not a filing for TON Strategy Co.; the supplied filing identifies Global System Designs, Inc. The company formed a wholly owned Canadian subsidiary in October 2013 and reported that operations and revenue began in November 2013.
Financial results and position
| Metric | FY ended Nov. 30, 2013 |
|---|---|
| Revenue | $6,966 |
| Operating expenses | $25,210, including $22,275 of professional fees and $2,935 of general and administrative expenses |
| Net loss | $18,244; cumulative loss since inception was $19,194 |
| Cash from operations | $(31,779) |
| Cash from financing | $54,750 |
| Cash at year-end | $22,971 |
| Total assets | $42,728, including $7,757 accounts receivable and $12,000 prepaid expenses |
| Liabilities and working capital | $6,324 current liabilities, reported as accounts payable and accrued liabilities; $36,404 working capital |
No interest-bearing debt is reported. The filing does not provide a gross-margin figure; revenue was newly commenced and the company reported an operating loss. Other comprehensive loss included a $102 foreign-currency translation adjustment.
Changes versus the prior period
The comparable period ended November 30, 2012 covered only four days after incorporation. It reported no revenue, $950 in expenses and a $950 net loss, so year-over-year comparisons are not meaningful. At November 30, 2012, cash, assets and liabilities were reported as zero; by November 30, 2013, the company had $22,971 cash and $36,404 stockholders’ equity. Financing cash flows for 2013 included proceeds from share issuances.
Outlook, risks and unusual items
- The auditor expressed substantial doubt about the company’s ability to continue as a going concern. Management said available cash was insufficient to fund business development for the next 12 months, although it expected cash to cover professional fees. It estimated at least $20,000 of accounting, legal and other professional costs in the next year.
- Plans included completing the website, expanding Canadian operations, pursuing U.S. clients and marketing downloadable fact sheets and consulting services. Management expected website completion in about six months and marketing to begin in eight to twelve months; these are plans, not guaranteed results.
- Management’s statements on future financing conflict: the MD&A says the company did not plan to raise additional funds through securities, while the financial-statement note says management intended to seek public or private financing. Potential equity financing could dilute shareholders.
- The filing contains an inconsistency about revenue: the business and MD&A sections report $6,966 since inception, while the going-concern note says no revenue had been earned since inception.
- Management concluded disclosure controls and internal control over financial reporting were ineffective, identifying material weaknesses including no functioning audit committee, no majority-independent board, inadequate segregation of duties and management concentration in one individual.
- The stock had been approved for OTC Bulletin Board quotation in February 2014 but had not traded as of the filing. The filing reports 5,825,000 shares outstanding, with officers and directors holding 57.1% as a group. No dividends were anticipated.
Most important facts to verify
- Confirm the filing is intended: its registrant is Global System Designs, Inc., not TON Strategy Co.
- Reconcile the stated $6,966 revenue with the going-concern note’s statement that no revenue was earned.
- Clarify the company’s actual financing plans and the amount of funding needed to execute its business plan.
- Assess whether the website launch, Canadian expansion and planned customer acquisition progressed as described.
- Review cash burn, collection of receivables, use of prepaid expenses and the going-concern risk.
- Track remediation of the disclosed material weaknesses and the liquidity and trading status of the shares.