Beyond Air, Inc. quarterly report, Q1 FY2016

Business Context and Reporting Period

Company: KokiCare, Inc. (Note: Request metadata listed "Beyond Air, Inc.", but the filing text identifies the registrant as KokiCare, Inc.)
Reporting Period: Quarterly report (Form 10-Q) for the period ended March 31, 2016.
Business Stage: Early-stage development. The company is in the discovery and planning phase to develop a SaaS-based enterprise software application for healthcare asset management. It has not yet commenced commercial operations or generated revenue.

Key Financial Metrics

MetricThree Months Ended Mar 31, 2016Nine Months Ended Mar 31, 2016Balance Sheet (Mar 31, 2016)
Net Revenue$0$0-
Net Loss$(2,591)$(11,727)-
Operating Expenses$2,540$11,576-
Cash and Cash Equivalents--$2,994
Total Assets--$3,020
Total Liabilities--$10,159
Stockholders' Equity (Deficit)--$(7,139)
Net Cash Used in Operating Activities-$(11,602)-

Debt: The company has a related-party note payable of $10,000 (principal) with accrued interest, totaling $10,159 as of March 31, 2016. The note bears 2% interest and matures June 15, 2017.

Material Changes vs. Prior Period

  • Cash Position: Cash and cash equivalents decreased from $14,596 (June 30, 2015) to $2,994 (March 31, 2016), a reduction of approximately 79% due to operating losses.
  • Accumulated Deficit: The accumulated deficit grew from $(512) at June 30, 2015 to $(12,239) at March 31, 2016.
  • Liabilities: Total liabilities increased slightly from $10,008 to $10,159, primarily due to accrued interest on the related-party note.
  • Revenue: Remained at $0, consistent with the prior period, as the company has not yet launched its product.

Outlook, Risks, and Management Commentary

  • Going Concern: The filing explicitly states that the company's financial position raises "substantial doubt" about its ability to continue as a going concern. The company has an accumulated deficit and negative cash flow from operations.
  • Capital Needs: Management intends to raise additional funds through private or public offerings to support daily operations and product development. There is no assurance that such funding will be obtained.
  • Subsequent Event: On April 5, 2016, the company entered into a Securities Purchase Agreement for a $5,000 convertible promissory note. The note bears 8% interest (increasing to 24% upon default) and is convertible into common stock at a discount to the market price.
  • Internal Controls: Management concluded that disclosure controls and procedures were not effective due to material weaknesses, including inadequate segregation of duties and insufficient written policies.
  • Ownership Concentration: The founder, Jason Lane, owns approximately 87.21% of the outstanding common stock, giving him significant control over corporate decisions.

Investor Verification Checklist

  • Cash Runway: Verify if the remaining cash of ~$3,000 is sufficient to cover professional fees and administrative costs until the next funding round.
  • Funding Status: Confirm whether the company has successfully secured the additional capital required to move from the planning phase to the implementation phase.
  • Dilution Risk: Assess the potential dilution from the subsequent $5,000 convertible note and any future equity offerings required to sustain operations.
  • Product Development: Verify progress on the software application, as the business model relies entirely on future revenue from a product that is not yet developed.
  • Related Party Transactions: Review the terms of the $10,000 related-party note and the new $5,000 convertible note to ensure terms are consistent with market rates.