Business context and reporting period
The supplied filing is a Form 10-Q for Fits My Style Inc., not Rezolute, Inc. It covers the quarter ended September 30, 2012 (the company’s fiscal first quarter). The filing identifies the company as a development-stage business and says its financial statements are unaudited. It also states that dollar amounts are in U.S. dollars and “in thousands,” although the displayed figures and share-capital amounts make the scale unclear; figures below are reported as presented.
On September 4, 2012, Tungsten 74 LLC acquired 80.8% of the company’s outstanding common stock. The company had stopped pursuing its website business, was inactive, and planned to seek a new business opportunity, including a possible acquisition or merger.
Financial results and liquidity
- Revenue: None in either the three months ended September 30, 2012 or the comparable 2011 quarter.
- Net loss: $9,749 in 2012 versus $7,394 in 2011, an increase of $2,355. Basic and diluted loss per share were each reported as $0.00.
- Expenses: General and administrative expense was $9,749 versus $7,394; management attributed the increase mainly to legal and other costs of seeking new business opportunities. Research and development expense was nil in both quarters.
- Cash flow: Operating cash use was $4,652 versus $13,552 in the comparable quarter. Cash fell from $5,132 at June 30 to $480 at September 30. No financing cash flow was reported for the quarter.
- Balance sheet and liquidity: Total assets were $480, entirely cash. Accounts payable and total current liabilities were $15,643; the company reported a working-capital and stockholders’ deficit of $15,163. At June 30, cash was $5,132, accounts payable $10,546, and the reported deficit was $5,414.
- Debt and margins: Accounts payable was the only liability identified; no interest expense or cash interest payments were reported. With no revenue, a revenue-based margin is not meaningful.
Material changes, outlook, and risks
- The quarterly loss increased year over year, while cash declined substantially from quarter-end June 30. The company reported no new common-stock issuance during the quarter.
- Management planned to raise additional capital and explore business opportunities, but disclosed no definitive business-combination agreement and no financing arrangement. Any prospective business could require additional capital; equity financing could dilute shareholders, and debt financing could increase liabilities and cash commitments.
- The filing says available cash and expected operating cash flows would not sustain operations for more than one year. Management identified substantial doubt about the company’s ability to continue as a going concern. There is no assurance it can obtain financing, find a suitable business, or achieve profitable operations.
- The company expected to target a single business combination, leaving it exposed to the performance and commercial viability of one business. It also stated there were no off-balance-sheet arrangements and no legal proceedings.
- Management concluded disclosure controls were ineffective because of a material weakness involving lack of segregation of duties and the need for a stronger internal-control environment. No material change in internal control over financial reporting was reported during the quarter.
- The company recognized a $1,779 website impairment in the fiscal year ended June 30, 2012 after deciding not to continue website development; no impairment expense was reported for this quarter.
Important facts for investors to verify
- Confirm the filing’s issuer and period: the document is for Fits My Style Inc. and the quarter ended September 30, 2012, despite the request identifying Rezolute, Inc. and “2012 Q1.”
- Verify the dollar scale: the filing says amounts are in thousands, but the presentation does not clearly reconcile that statement with the reported figures and share-capital amounts.
- Review subsequent filings for financing, liquidity, going-concern developments, and whether the company completed a business combination or resumed operations.
- Review the September 2012 change-of-control disclosure and the material weakness in disclosure controls, including any later remediation.