Business context and reporting period
This is Global System Designs, Inc.’s unaudited Form 10-Q for the quarter and nine months ended August 31, 2014; it is not identified in the filing as a TON Strategy Co. report. The company was a development-stage business with limited consulting revenue and said it was shifting its focus from green-building education and consulting to a proposed acquisition of bBooth, Inc., an operator of portable video-recording booths. The company also identified itself as a shell company.
Financial results and position
| Metric | Three months ended August 31, 2014 | Nine months ended August 31, 2014 | Comparable 2013 period |
|---|---|---|---|
| Revenue | $0 | $7,768 | $0 in both periods |
| Operating expenses | $51,550 | $73,826 | $2,849 and $16,602 |
| Net loss | $51,550 | $66,058 | $2,849 and $16,602 |
| Comprehensive loss | $51,710 | $66,360 | $2,849 and $16,602 |
| Basic loss per share | $0.01 | $0.01 | $0.00, rounded |
Nine-month professional fees were $72,715, principally attributed to costs associated with the proposed bBooth acquisition. No income-tax expense was recorded. The filing does not provide a useful positive profit margin; revenue was zero for the quarter and limited for the nine-month period.
At August 31, 2014, cash was $21,500, total current assets were $22,298, and current liabilities were $52,254, producing negative working capital of $29,956. Total liabilities were $52,254; no interest-bearing debt is identified in the presented balance sheet. Cash used in operations was $1,471 for the nine months, with no investing or financing cash flows in that period. Cash declined from $22,971 at November 30, 2013. Stockholders’ deficit was $29,956, versus equity of $36,404 at year-end, and accumulated deficit was $85,252.
Material changes versus prior comparable periods
- Quarterly and nine-month losses increased substantially year over year, driven mainly by higher professional fees; quarterly revenue remained zero.
- Nine-month 2014 revenue was $7,768, compared with none in 2013. Management also reported $14,734 of revenue from inception through August 31, 2014.
- Accounts payable and accrued liabilities rose to $52,254 from $6,324, while current assets fell to $22,298 from $42,728, reversing working capital from positive $36,404 to negative $29,956.
- No shares were issued in the nine months ended August 31, 2014; financing proceeds were $54,750 in the comparable 2013 period.
Outlook, risks, and unusual items
The August 11, 2014 share exchange agreement to acquire all bBooth shares had not closed as of the filing date. The proposed transaction contemplated approximately 50 million shares to bBooth securityholders, subject to adjustments and conditions, including a bBooth private placement of at least $4.5 million, liability limits, due diligence, approvals, a two-for-one forward split, and a cap of 60 million shares outstanding at closing. The filing cautions there is no assurance the transaction will close.
Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing limited revenue, accumulated losses, and the need for additional capital. Management planned to seek public or private equity financing; the controlling shareholder had pledged support but had no written funding commitment. Management said available cash could cover minimal compliance costs for 12 months, but was insufficient for business development. No formal revenue or earnings guidance was provided.
Management reported ineffective disclosure controls and internal control over financial reporting, citing no functioning audit committee, insufficient independent board oversight, inadequate segregation of duties, and reliance on a single individual. It warned these weaknesses could lead to material misstatement in future periods. The filing reported no current material litigation, commitments, or contingencies, and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Confirm the registrant and filing identity: the supplied filing names Global System Designs, Inc., not TON Strategy Co.
- Check the status and final terms of the bBooth transaction, including its financing, closing conditions, share issuance, split, and post-closing capitalization.
- Assess the company’s ability to raise capital and fund operations given negative working capital, limited cash, and the disclosed going-concern uncertainty.
- Review the drivers and composition of the sharp increase in professional fees and accrued liabilities.
- Track remediation of the disclosed material weaknesses in financial reporting and disclosure controls.