Business context and reporting period
Filing identity discrepancy: Although the request identifies Artelo Biosciences, Inc., this 10-Q names Knight Knox Development Corp. as the registrant. The filing covers the quarter and six months ended February 28, 2015, for a Nevada development-stage company planning an online auction and classified-advertising business. It reports no operating revenue since inception.
Financial performance and position
| Metric | Three months ended Feb. 28, 2015 | Six months ended Feb. 28, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $6,150 | $8,150 | $6,595 |
| Net loss | $6,150 | $8,150 | $6,595 |
| Operating margin | Not meaningful; no revenue | Not meaningful; no revenue | Not meaningful; no revenue |
At February 28, 2015, cash and total assets were $8,081, accounts payable and accrued liabilities were $1,500, and stockholders’ equity was $6,581. Working capital was $6,581 (current ratio approximately 5.4). The filing reports no debt. For the six months, operating cash use was $6,650, investing cash flow was $0, financing cash flow was $0, and cash declined by $6,650 from $14,731. No cash interest or taxes were paid.
Material changes versus prior comparable period
Six-month operating expenses and net loss increased by $1,555 from $6,595 to $8,150, primarily due to professional fees associated with the registration statement. Quarterly expenses and net loss decreased by $445 year over year. Cash used in operations rose to $6,650 from $95; the prior-year period included $30,000 of stock-issuance proceeds, while the current period had no financing proceeds. Accounts payable and accrued liabilities increased from $0 to $1,500.
Outlook, risks, and other notable items
- Going concern: Management says the company needs additional capital and has no established revenue source sufficient to cover operating costs. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern; there is no assurance financing or profitability will be achieved.
- Business plans: The company described a self-underwritten offering of 8,000,000 shares at $0.01 per share, seeking up to $80,000 with no minimum. It said the website would be completed within six months after the offering and fees might begin nine months after completion. These are plans, not confirmed results; the filing does not clearly state how much, if any, had been raised under the offering by the reporting date.
- Controls and contingencies: Management concluded disclosure controls were not effective as of February 28, 2015. It reported no material litigation, commitments, or contingencies, and no subsequent events requiring disclosure.
- The company reported no public trading market for its shares and warned that investors may be unable to sell them. Its financial statements are unaudited and state that interim results are not necessarily indicative of full-year results.
Most important facts for investors to verify
- Confirm the registrant’s identity: this filing is for Knight Knox Development Corp., not Artelo Biosciences, Inc.
- Verify the offering’s status, proceeds raised, remaining shares, and available cash after February 28, 2015.
- Assess near-term funding needs and the going-concern uncertainty against the company’s limited cash and lack of revenue.
- Confirm progress toward launching the auction website and whether the stated development and revenue timelines remain achievable.
- Review the remediation, if any, of the ineffective disclosure controls.