Filing identity and period
The supplied filing is Prime Estates and Developments, Inc. (OTC: PMLT), not Cosmos Health Inc. It is a Form 10-K for the fiscal year ended July 31, 2013—not a Cosmos Health filing or a calendar-quarter report. The company describes itself as a development-stage real estate venture; it had not acquired property or generated operating revenue.
Financial performance and position
| Metric | FY ended July 31, 2013 | FY ended July 31, 2012 |
|---|---|---|
| Revenue | No operating revenue; only de minimis interest income since inception | No operating revenue |
| General and administrative expense | $336,789 | $326,860 |
| Net loss | $344,543 | $330,589 |
| Net loss per share | $0.01 | $0.01 |
| Cash used in operating activities | $72,938 | $66,064 |
| Cash at year-end | $18,836 | $40 |
At July 31, 2013, current liabilities were $358,667, against current assets of $18,836, resulting in a working-capital deficit of $339,831. Total assets were $18,836; shareholders’ deficit was $339,831. Current liabilities included $194,092 of salaries payable, $140,000 owed to related party GreenEra, and $24,575 of accounts payable and accrued expenses. The filing reports no cash interest paid and no off-balance-sheet arrangements. Profit margins are not meaningful because there was no operating revenue.
Changes versus prior year
- Net loss increased by $13,954; G&A expense rose by $9,929. Non-cash stock compensation was $70,200 in 2013 versus $87,900 in 2012, with an additional $24,472 expense for director options in 2013.
- Imputed related-party interest expense increased to $7,754 from $3,729.
- Cash rose from $40 to $18,836, while current liabilities increased from $213,162 to $358,667.
- The company issued 400,000 shares for $100,000 during the year. Subsequent to year-end, it issued another 280,000 shares for $70,000.
Business, outlook, and risks
- The company intended to acquire commercial real estate, initially focusing on Chicago-area opportunities, and also pursued a forest/carbon-credit project in Brazil. It owned or leased no real estate other than its office and had no employees.
- Management said existing cash was expected to cover requirements only until the end of November 2013; the filing estimated a monthly burn rate of about $16,000. Management warned that failure to raise funds could prevent continued operations. The auditor also expressed substantial doubt about the company’s ability to continue as a going concern.
- Management planned to raise equity and considered debt financing, but had not secured financing for planned property acquisitions. Its projections included raising $10 million by year-end 2013, acquiring properties, and raising at least $190,000 for the next 12 months’ operating expenses; these were plans, not commitments. The filing separately states a minimum need of $140,000, in addition to funds to stay public.
- The GreenEra agreement requires payments of $5,000 per month for approximately 34 years, subject to a right to cancel. The company had accrued $140,000 through July 31, 2013 and paid none. The underlying carbon-credit arrangement could be voided if certification or specified transfer/sale rights were not obtained by December 31, 2013. The CEO is a shareholder of GreenEra.
- Other strategic efforts did not proceed: the Madison joint venture was canceled in June 2013; the Pelion Exclusive joint venture expired in August 2013; discussions with Mave SA ended; and the Greenbase acquisition agreement was terminated in May 2013. A possible Cyprus business combination remained preliminary and nonbinding.
- Disclosure controls and internal control over financial reporting were reported ineffective, with a material weakness stemming from a single consultant handling key accounting duties without checks and balances. Management said remediation depended on hiring additional employees. The board had no independent directors or separate audit committee.
- Additional risks include limited capital and resources, competition, difficulty raising funds, potential loss of OTC quotation or SEC reporting status if obligations are not met, and penny-stock trading restrictions. No pending legal proceedings were reported.
Most important facts to verify
- Confirm the issuer identity and reporting period: this text is Prime Estates and Developments’ FY2013 10-K, not Cosmos Health’s filing.
- Verify current cash, subsequent financing, unpaid liabilities, and whether management or other investors actually funded operations after the filing date.
- Check the status and enforceability of the GreenEra agreement, the accrued $140,000 balance, cancellation rights, and any carbon-credit certification or project progress.
- Determine whether any real estate acquisition or Cyprus combination closed; the filing reports none as of its date.
- Review subsequent filings for remediation of the disclosed control weakness and any changes to going-concern status.