Filing identity and period
Material mismatch: The supplied filing is for First American Group Inc., not Loop Industries, Inc. It is a Form 10-Q for the quarter ended December 31, 2012, filed January 28, 2013—not a 2013 Q1 filing for Loop Industries. The company describes itself as a development-stage business developing advertising-supported VoIP services. The statements are unaudited.
Financial results and liquidity
- Revenue: $0 for the three months ended December 31, 2012 and 2011, and $0 since inception.
- Expenses and loss: Operating expenses and net loss were $3,198 in the quarter, down from $4,964 a year earlier. Current-quarter expenses comprised $2,200 of professional fees and $998 of general and administrative expenses. Basic and diluted loss per share was reported as $(0.00).
- Cash flow: Operating cash used was $8,836, versus $5,296 in the prior-year quarter. No financing cash was raised during the current quarter, compared with $4,025 in the prior-year quarter.
- Cash and liabilities: Cash was $12,902 at December 31, 2012, down from $21,738 at September 30, 2012. Current liabilities were $6,457, including $6,132 of accounts payable and accrued expenses and $325 due to a director. The director advance is unsecured, bears no interest, and is due on demand. The filing reports no long-term debt.
- Equity: Stockholders’ equity was $7,661, compared with $10,859 at September 30, 2012. Accumulated development-stage deficit was $60,156.
- Margins: Not meaningful because the company had no revenue.
Changes, outlook, and risks
The quarterly loss narrowed by $1,766 year over year, while operating cash use increased by $3,540. The company said its cash was insufficient to start its business plan or fund operations beyond six months and that additional financing was not arranged. It expected to seek equity financing, which could dilute existing shareholders; it warned that failure to obtain funding could cause the business to fail. The filing states that these conditions raise substantial doubt about the company’s ability to continue as a going concern.
Management reported delays to the website project, then targeted completion by April 2013. The company had selected and integrated open-source Asterisk VoIP and a2billing software and said directors were customizing the systems. It did not expect sales revenue in the next nine months and projected revenue beginning approximately 10–16 months after the filing date. Illustrative projections showed $153,750 in Year 2 and $460,000 in Year 3; these depend on unproven development, customer-demand, traffic, and advertising assumptions and are not assurances of results.
Disclosure controls and procedures were deemed ineffective as of December 31, 2012 because of a lack of segregation of duties. The company reported no pending material legal proceedings and no subsequent events through the filing date.
Key facts to verify
- Confirm the issuer and period: the supplied document identifies First American Group Inc., not Loop Industries, and reports the quarter ended December 31, 2012.
- Check the original filing for period and presentation errors: portions of the index refer to June 30, 2012, although the financial statements and report cover December 31, 2012.
- Verify current cash needs, financing availability, and the company’s ability to continue as a going concern.
- Assess progress on product development and whether projected customer, advertising, and revenue assumptions are achievable.
- Consider the ineffective disclosure controls and potential dilution from future equity financing.