SEC Filing Summary
Company identity discrepancy: The supplied filing is for Knight Knox Development Corp., not Artelo Biosciences, Inc. Verify that this is the intended filing before relying on this summary.
Business Context and Reporting Period
This unaudited Form 10-Q covers the quarter and six months ended February 29, 2016; the company’s fiscal year ends August 31. Knight Knox described itself as a development-stage e-commerce company intending to operate an auction and classified-listings website. It reported minimal operations and no revenue since inception. The company also checked the box identifying itself as a shell company.
Financial Results and Liquidity
| Metric | Three months ended Feb. 29, 2016 | Six months ended Feb. 29, 2016 | Comparable 2015 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $5,090 | $20,309 | $6,150 and $8,150, respectively |
| Net loss | $5,090 | $20,309 | $6,150 and $8,150, respectively |
| Net loss per share | $0.00 loss, rounded | $0.00 loss, rounded | $0.00 loss, rounded |
Six-month operating cash use was $14,639, compared with $6,650 in 2015. Financing provided $1,200: $600 collected on a share subscription receivable and a $600 shareholder advance. There was no investing cash flow. Cash fell to $3,590 from $17,029 at August 31, 2015.
At February 29, 2016, total assets were $3,590, current liabilities were $8,009, and stockholders’ equity was a deficit of $4,419. Working capital was negative $4,419. Liabilities included $7,409 in accounts payable and accrued liabilities and a $600 non-interest-bearing, due-on-demand loan from a majority shareholder. The filing reports no interest or income-tax payments. Profit margins are not meaningful because the company had no revenue.
Changes, Outlook, and Risks
- Six-month operating expenses rose to $20,309 from $8,150, primarily due to professional fees for an S-1 registration and ongoing regulatory requirements. The quarter’s expenses declined to $5,090 from $6,150.
- The accumulated deficit was $50,819, and the company had earned no revenue since inception. Management said additional capital is required and planned to seek equity, debt, or support from management and significant shareholders, but gave no assurance of obtaining funding. It noted that it had no plans for additional securities sales beyond its current offering.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern; it warns that insufficient funding could force the company to cease operations. The financial statements include no adjustments for a potential failure to continue as a going concern.
- Disclosure controls and procedures were deemed ineffective as of February 29, 2016, attributed to the limited number of officers and directors. No material change in internal control over financial reporting was reported.
- The company reported no material legal proceedings and no material off-balance-sheet arrangements. It provided no specific operating or financial guidance. Detailed risk-factor disclosure was omitted under the smaller-reporting-company rules.
Important Facts to Verify
- Confirm that the Knight Knox Development Corp. filing, rather than an Artelo Biosciences filing, is the intended document.
- Verify current cash needs, financing availability, and the status and terms of the company’s offering and shareholder loan.
- Assess the going-concern warning, absence of revenue, and stated plan to develop the auction and classified-listings business.
- Review the ineffective disclosure-controls conclusion and whether any remediation has occurred since the reporting date.