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
| Metric | Three Months Ended Mar 31, 2016 | Nine Months Ended Mar 31, 2016 | Balance 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.