Business context and reporting period
The supplied filing is a Form 10-Q for First American Group Inc., not Loop Industries, Inc. It covers the quarter and six months ended March 31, 2015; the report’s cover page and index contain conflicting period descriptions, so the filing period should be verified.
First American Group describes itself as a pre-revenue developer of advertising-supported VoIP telephone services. It had not launched operations. The filing identifies it as a shell company and says product development was delayed and constrained by lack of cash.
Financial results and condition
- Revenue: None in the three or six months ended March 31, 2015 or in the comparable 2014 periods.
- Expenses and losses: Six-month expenses were $13,946 versus $6,506 in 2014, producing a net loss of $13,946 versus $6,506. Second-quarter net loss was $9,748 versus $1,908. The six-month loss per share was $0.01 versus $0.00.
- Cash flow: Six-month operating cash use was $20,887, compared with $9,555 in 2014. A $20,000 related-party loan funded the period; cash decreased by $887 to $1,775.
- Liquidity and liabilities: At March 31, 2015, cash was $1,775, current assets $2,315, and current liabilities $40,993. These included $35,243 payable to a director, due on demand, unsecured and non-interest-bearing. Management said cash would cover ongoing expenses for no more than two months.
- Equity: Stockholders’ deficit was $38,678, and accumulated deficit was $106,495. No interest or income taxes were paid during the six-month period.
Changes versus the prior comparable period
Six-month net loss more than doubled, chiefly as general and administrative expense rose to $11,214 from $2,261, despite lower professional fees ($2,732 versus $4,245). Cash used in operations increased, while related-party borrowing rose to $20,000 from $9,935. Cash declined from $2,662 at September 30, 2014 to $1,775 at March 31, 2015; current liabilities increased from $27,507 to $40,993.
Outlook, risks and other matters
- Management said the company needed additional financing to develop its product and fund operations, had no financing arranged, and could not assure it would obtain funding. Failure to raise funds could prevent continued development and lead to business failure. The filing and notes state that conditions raise substantial doubt about the company’s ability to continue as a going concern.
- Management estimated no sales revenue for the next nine months and forecast revenue beginning approximately 10 to 16 months after the filing date, subject to development, financing and customer demand. An illustrative projection showed $153,750 of revenue in Year 3; it was assumption-based, not a guarantee.
- Management said it had installed and integrated open-source VoIP and billing software but lacked funds to hire programmers. The website and product schedule had repeatedly slipped.
- Forward-looking risks include inability to develop the product, attract customers or advertisers, and obtain financing, as well as concentrated voting control. The two officers and directors collectively held approximately 79.3% of voting securities, according to the filing.
- Disclosure controls and procedures were assessed as ineffective as of March 31, 2015. No material change in internal control over financial reporting was reported during the quarter. The company reported no pending material legal proceedings and no subsequent events through filing.
Important facts to verify
- Confirm issuer identity: the document names First American Group Inc., whereas the request identifies Loop Industries, Inc.
- Reconcile the reported period: the cover says quarter ended March 31, 2015, while the index refers to a report for the period ended December 31, 2014.
- Verify share-count disclosures: the balance sheet reports 126,063,200 shares issued and outstanding, while the income statement reports weighted-average shares of 2,521,264.
- Assess whether the company can obtain financing, meet its demand-payable related-party obligation, and continue operations given its minimal cash and going-concern warning.