Filing summary
Filing identity: The supplied filing is for Prime Estates & Developments, Inc., not Cosmos Health Inc. It is a Form 10-Q for the three months ended October 31, 2012, not 2013 Q1. The filing describes Prime Estates as a development-stage company pursuing real estate and related assets.
Financial results and position
| Metric | Three months ended Oct. 31, 2012 | Comparable 2011 period |
|---|---|---|
| Revenue | $0 reported | $0 reported |
| General and administrative expense | $126,121 | $159,788 |
| Interest expense | $1,606 | $597 |
| Net loss | $127,727 | $160,385 |
| Basic and diluted loss per share | $0.01 | $0.01 |
| Net cash used in operations | $8,532 | $30,780 |
- At October 31, 2012, cash and total assets were $981. Current liabilities were $270,024, including $145,000 in salaries payable and $124,739 in related-party notes payable. Working capital was therefore approximately negative $269,043; shareholders’ deficit was also $269,043.
- Cash increased by $941 during the quarter: $9,473 of related-party financing exceeded $8,532 of operating cash use. No cash was paid for interest or income taxes.
- Noncash stock compensation was $70,200, related to shares issued to a director for services. Weighted-average shares outstanding were 24,818,412, versus 24,601,239 in 2011. Shares outstanding at October 31 were 24,905,532.
Changes, outlook, and risks
- Net loss narrowed by $32,658 year over year, mainly as G&A expense declined; the company cited fewer prior-year share issuances for legal and promotional services and no comparable cash promotional expense. Interest expense increased, principally due to imputed interest on GreenEra-related obligations.
- Management said the company had no completed property acquisitions or revenue-generating closings and no commitment to acquire a property. It reported reviewing potential properties and pursuing financing and real-estate opportunities.
- Management estimated a need for at least $150,000 over the next 12 months, and an approximately $17,000 monthly cash burn, including estimated annual costs of up to $50,000 to remain public. It stated that it hoped to raise equity funding, but had no specific funding agreement; officers and directors had indicated an intention to provide loans if funds were available, but were not obligated to do so.
- The company disclosed substantial doubt about its ability to continue as a going concern, citing accumulated losses, a working-capital deficit, minimal cash, and dependence on financing. Management warned that failure to obtain financing could prevent continued operations and put its public-market trading and reporting status at risk.
- A planned share-based acquisition of Mainline Land Co. LLC was canceled on November 23, 2012. The company also disclosed a GreenEra forest-rights agreement requiring monthly payments and up to $1.2 million in financing for possible carbon-credit development; it said insufficient financing had prevented progress. The filing notes that the company’s directors were shareholders of GreenEra.
- Management reported disclosure controls and procedures were not effective as of period-end. The filing’s internal-control discussion refers to a quarter ended April 30, 2011, an apparent inconsistency with the reporting period.
Most important facts to verify
- Confirm the intended issuer and reporting period: the supplied document identifies Prime Estates and a quarter ended October 31, 2012, despite the request metadata naming Cosmos Health and 2013 Q1.
- Verify available financing, officer/director support, and the company’s ability to meet near-term obligations given $981 cash and $270,024 current liabilities.
- Review the terms, accrued amounts, related-party aspects, and current status of the GreenEra agreement and other obligations.
- Confirm the canceled Mainline transaction and whether any subsequent acquisition, financing, or other material event occurred.
- Assess the disclosed ineffective controls and the apparent period-date error in the internal-control discussion.