Filing scope and business context
The supplied filing is Great West Resources, Inc.’s Form 10-K for the fiscal year ended December 31, 2013; its financial statements identify the company as Silver Horn Mining Ltd. during the reporting period. This does not match the request metadata naming Nextplat Corp or “2013 Q4.” The report is an annual filing, not a standalone quarterly report.
The company was an exploration-stage business focused on acquiring and exploring Arizona mineral claims, principally for silver. Its 50 claims cover approximately 1,000 acres across the 76 and COD properties. Neither property had established reserves, and the company had generated no revenue from planned operations.
Key financial results
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses / operating loss | $573,793 | $4,670,202 |
| Net income (loss) | $624,118 | $(4,811,073) |
| Net cash used in operating activities | $20 | $192,527 |
| Cash at year-end | $0 | $20 |
| Current liabilities / working capital deficit | $765,832 / $765,832 | $1,715,331 / approximately $1.71 million |
| Convertible notes and debentures | $0 outstanding | $210,110 net of discounts |
FY 2013 net income was not produced by operating performance: it included a $1,285,872 gain from debt forgiveness, while the company recorded a $573,793 operating loss and $120,575 interest expense. The filing reports a $32,614 gain from the change in fair value of derivative liabilities and a year-end derivative liability of $11,942. Operating margins are not meaningful because revenue was zero.
Current liabilities at December 31, 2013 included $466,493 of accounts payable and accrued expenses, $175,000 due to a related party, $11,942 of derivative liability, and $112,397 of liabilities for discontinued operations. Total assets were zero. The company reported an accumulated deficit of approximately $49.0 million and stockholders’ deficit of $765,832.
Changes versus the prior year
- Operating expenses fell approximately 88%, to $573,793 from $4,670,202. The largest factor was the absence of 2012 stock-based compensation; payroll and stock-based compensation declined to $190,083 from $3,875,049.
- Exploration expense declined to $5,000 from $115,832, which management attributed primarily to limited working capital. Management fees fell to $225,000 from $300,000 following termination of the MJI services agreement in November 2013.
- Net results shifted from a $4.81 million loss to $624,118 of income, principally because of debt forgiveness. The company converted $243,382 of notes and debentures into 8,112,733 common shares after amending the conversion price to $0.03 per share; it reported no such debt outstanding at year-end.
- Cash used in operations decreased to $20 from $192,527, but cash at year-end was zero. The reduction in liabilities included debt forgiveness, while accounts payable and accrued expenses remained substantial.
- 2013 fourth-quarter OTC bid quotations were $0.01 to $0.03, compared with $0.04 to $0.10 in the fourth quarter of 2012. Quotations were inter-dealer bids and may not represent actual transactions.
Outlook, risks and unusual items
- Going concern and financing: The auditor and management cited substantial doubt about the company’s ability to continue as a going concern. The company had no cash, no revenue, no available credit or other identified external liquidity source, and said it needed additional capital. It warned that financing might not be available on acceptable terms and that failure to obtain it could require curtailing operations. Management did not expect profitability in fiscal 2014.
- Exploration uncertainty: All mineral activity remained exploratory; no reserves or commercial feasibility had been established. Planned sampling, mapping, surveys and assaying, and any future drilling, depend on funding and required permits and approvals.
- Property dispute: A third party asserted that at least nine COD claims overlap earlier claims and sought to stop sampling or ore removal. The company disputed the claim. The filing describes litigation and a trial date of August 20, 2013; it does not clearly state the case’s disposition or current status.
- Other legal and trading matters: A $47,362.29 default judgment relating to unpaid accounting services was entered in 2012 and is included in accounts payable. A British Columbia Securities Commission cease-trade order remained applicable to trading in British Columbia.
- Debt forgiveness and related-party amounts: MJI and Bond Media forgave a combined $1,285,872 of debt. The company retained a conditional $175,000 payment obligation to MJI upon a qualifying future acquisition and financing transaction. The company also disclosed related-party transactions and facilities supplied at no cost by officers or related parties.
- Management and strategy: Patrick Avery became CEO, president, CFO, treasurer and chairman in January 2014. Management said it would explore additional business opportunities, including possible sale, disposition or suspension of historic operations. Subsequent to year-end, the company reincorporated in Nevada as Great West Resources, with each former common share converted into 1/150th of a Great West common share.
- Controls: Management concluded that disclosure controls and internal control over financial reporting were ineffective, citing limited internal audit resources and inadequate segregation of accounting duties. The filing states that material misstatements could occur without timely prevention or detection.
Investor verification priorities
- Confirm the filing entity and period: the supplied document is Great West/Silver Horn’s FY 2013 10-K, not a Nextplat Corp filing or a standalone Q4 report.
- Verify current liquidity, unpaid liabilities, the conditional $175,000 MJI obligation, and the company’s ability to raise capital after the reporting date.
- Confirm the status and outcome of the COD claim dispute and the British Columbia cease-trade order.
- Assess whether exploration plans, property rights, permits and funding have advanced; the filing reports no reserves and no operating revenue.
- Review the post-year-end 1-for-150 share conversion, outstanding warrants and preferred stock, new executive compensation arrangements, and potential dilution.
- Evaluate whether the disclosed financial-reporting control deficiencies have been remediated.