Business context and reporting period
The filing is for Real Estate Restoration and Rental, Inc., a development-stage company formed to provide renovation, management, and rental services for vacation properties in North and South Carolina, and to market energy-related products. It reports the three months ended September 30, 2011; the supplied metadata’s company name, Vivosim Labs, Inc., does not match the registrant named in the filing.
Financial results and position
- Revenue: $1,677, compared with $0 in the three months ended September 30, 2010. All current-quarter revenue came from one customer; management attributed a small royalty payment to the Madison Energy/Frigitek relationship.
- Expenses and loss: Operating expenses were $25,122, including $22,500 in professional fees and $2,622 in general and administrative expenses. Net loss was $23,445, versus $25,721 a year earlier. Reported basic and diluted loss per share was $(0.00).
- Cash flow: Cash used in operations was $647, versus $22,225 in the prior-year quarter. The current-period figure benefited from increases in accounts payable and deferred revenue. Ending cash was $1,128.
- Liquidity and liabilities: Current assets were $3,628 and current liabilities were $32,190, a working-capital deficit of $28,562. Liabilities consisted of $28,868 in accounts payable and $3,322 in deferred revenue. The filing reports no interest-bearing debt at quarter-end.
- Equity: Stockholders’ deficiency was $28,562; 6,802,500 common shares were outstanding as of October 28, 2011.
- Margins: The filing does not present a gross-profit or operating-margin measure; the company reported minimal operations and a quarterly operating loss.
Changes versus the prior comparable period
Revenue increased from zero to $1,677, while net loss narrowed by $2,276. Operating expenses declined by $599, with lower professional fees partly offset by higher general and administrative expenses. Operating cash use fell substantially, largely in connection with higher accounts payable and deferred revenue.
Outlook, risks, and unusual items
- Management said the slow vacation-home market delayed its original plan to manage three homes for summer 2011; it did not expect homes under management until August 2012. It aimed to add 10–12 homes for the summer 2012 season and discussed increasing marketing spending to as much as $2,500 per month beginning January 2012.
- The company had not identified the two real estate developers and one hedge fund it hoped to serve. Management said additional capital may be needed and that existing cash was inadequate for the next 12 months; without more cash, expansion could be suspended or stopped.
- The filing states that the company’s development-stage status, operating cash use since inception of $139,797, and accumulated net loss since inception of $209,187 raise substantial doubt about its ability to continue as a going concern. Management’s plans depend on raising capital and executing its business plan.
- The Madison Energy licensing agreement had been impaired by $27,723 in fiscal 2011. Management did not anticipate further material payments from the agreement. The filing reports $0 amortization for the current quarter.
- A consulting agreement requires payment of $5,000 per month and remains in effect unless either party cancels it. On October 18, 2011, after quarter-end, the company received a $2,500 unsecured, non-interest-bearing loan from an unrelated party, due on demand.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting during the quarter. No legal proceedings or off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Confirm the filing’s registrant identity and reporting period, given the mismatch with the supplied company metadata.
- Determine the source, terms, and collectability of the $1,677 of revenue and whether the single-customer concentration continues.
- Assess near-term funding needs, the ability to meet current liabilities and the $5,000 monthly consulting commitment, and the status of the demand loan.
- Verify whether management secured property-management clients, implemented its delayed operating plans, or raised additional capital.
- Review the basis and remaining value of the impaired licensing agreement and the prospects for future royalties.