Business context and reporting period
The supplied filing is Great West Resources, Inc.’s unaudited Form 10-Q for the quarter ended June 30, 2014—not a filing identified as Nextplat Corp. The company describes itself as an exploration-stage mineral company focused principally on silver properties in Arizona. It had no revenue, no active mining operations, and no proven or probable reserves.
Financial results and liquidity
| Metric | Three months ended June 30, 2014 | Six months ended June 30, 2014 | Comparable 2013 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $176,274 | $497,968 | $154,206; $324,227 |
| Operating loss | $176,274 | $497,968 | $154,206; $324,227 |
| Net loss | $167,259 | $510,673 | $181,948; $365,925 |
| Loss per share, basic and diluted | $0.11 | $0.34 | $0.11; $0.22 |
In the table, the 2013 figures are for the three- and six-month periods, respectively. No gross margin is meaningful because the company reported no revenue. For the six months, professional and consulting costs rose to $310,771 from $33,085, including approximately $179,834 of director-option compensation; payroll and stock compensation totaled $150,000. No exploration cost was recorded, versus $5,000 in 2013.
At June 30, 2014, cash was $11,390, current liabilities were $1,108,061, and the working-capital deficit was approximately $1.1 million. Total assets were $11,390; stockholders’ deficit was $1,096,671; accumulated deficit was $49,479,717. Cash used in operations for the first six months was $23,610, compared with $20 in 2013. A related-party loan provided $35,000 of financing; it is non-interest-bearing and due on demand. A Level 3 derivative liability was $24,647, up from $11,942 at year-end, with a $12,705 six-month fair-value loss. The filing reports no interest expense in 2014, attributing the decrease from 2013 to repayment and conversion of convertible notes in 2013.
Material changes, outlook and risks
- Six-month net loss increased to $510,673 from $365,925, while operating expenses rose approximately 54%. Management attributed increased expenses mainly to professional costs, director-option compensation, the new CEO, and reincorporation-related filings.
- The company sold inactive subsidiaries to controlling shareholder Auracana for $1.00 in January 2014 and reincorporated from Delaware to Nevada in March. The filing says the reincorporation did not change the business or financial position.
- Management stated it did not expect to be profitable for the remainder of fiscal 2014. It planned to seek capital through a public or private offering or other financing, but gave no assurance funding would be available; without acceptable financing it may have to curtail operations.
- The filing identifies substantial doubt about the company’s ability to continue as a going concern, citing its accumulated deficit, working-capital shortfall, losses and dependence on additional financing. Financial statements contain no adjustments for a potential failure to continue as a going concern.
- Risks and contingencies include a third party’s claim that nine COD mining claims overlap earlier claims, which the company disputes, and a British Columbia cease-trade order issued in 2012 for disclosure failures in that jurisdiction. CEO employment terms include a $30,000 monthly base salary and potential severance and equity-option obligations; the defined transaction triggering certain terms had not occurred by June 30.
- Management concluded disclosure controls were ineffective at quarter-end because of limited resources and insufficient levels of transaction review. Remediation was being developed, with no assurance of timely or adequate implementation.
Important facts for investors to verify
- Confirm the issuer and filing match the intended company: the supplied metadata says Nextplat Corp, while the filing names Great West Resources, Inc. (formerly Silver Horn Mining Ltd.).
- Verify the company’s near-term financing prospects, the demand terms and status of related-party funding, and its ability to meet current obligations.
- Check the status of the COD claim-overlap dispute, the British Columbia cease-trade order, and whether any material litigation or claim developments occurred after the reporting date.
- Review potential dilution and related-party governance: Auracana held preferred shares carrying supermajority voting power; the filing also describes director options, warrants and CEO equity compensation.
- Assess whether internal-control remediation was implemented and whether subsequent filings provide updated financial, operating or going-concern information.