Filing summary
Entity and period: The supplied filing identifies the registrant as Camp Nine, Inc., not RELMADA THERAPEUTICS, INC. It is a Form 10-Q for the quarter ended May 31, 2013, covering the three and nine months ended that date. Camp Nine describes itself as a development-stage surfboard manufacturer and retailer and checked the box indicating it was a shell company.
Financial performance and position
- Revenue: Three-month revenue was $634, compared with $400 in the prior-year quarter. Nine-month revenue was $5,129, down from $6,426.
- Gross profit: Gross margin dollars were $312 for the quarter versus $108, and $1,093 for the nine months versus $1,625. The filing reports no separate gross-margin percentages.
- Operating expenses and losses: Operating expenses were $19,797 for the quarter, versus $2,589, and $33,744 for the nine months, versus $5,048. Net losses were $19,485 and $32,651, respectively, compared with $2,481 and $3,423 in the prior-year periods. The filing attributes the increase primarily to general and administrative expenses, but does not clearly explain their underlying nature.
- Cash flow: Nine-month operating cash use was $6,485, investing cash use was $1,800, and financing cash flow was zero. Cash declined by $8,285 to $664.
- Liquidity and liabilities: At May 31, 2013, current assets were $3,033, including $664 cash, while current liabilities were $26,026, principally accounts payable of $25,751. Working capital was negative $22,993. Total assets were $4,733 and stockholders’ deficit was $21,293.
- Debt and other metrics: The balance sheet lists no borrowings; liabilities shown are accounts payable and sales tax payable. The company reported no off-balance-sheet arrangements and no cash paid for interest or income taxes.
Changes, outlook, and risks
- Nine-month revenue declined year over year while operating expenses and net losses rose substantially. Cash fell from $8,949 at August 31, 2012 to $664 at May 31, 2013; accounts payable increased from $6,996 to $25,751.
- Management says the company has limited liquidity, has not established stable revenue sufficient to cover operating costs, and expects to depend on additional capital. The filing states there is substantial doubt about the company’s ability to continue as a going concern; management’s plans to raise equity or debt financing are not assured.
- As a subsequent event, the company reported subscriptions for 2,125,000 registered common shares totaling $8,500 beginning in June 2013; shares were to be issued upon closing. Separately, the cover reports 23,500,000 shares outstanding as of July 12, 2013.
- Management planned to spend $6,000 on materials and labor to produce approximately 15 additional boards, increase inventory to about 19 boards, expand print advertising if funds allowed, and introduce a new model, The Classic, by the end of summer 2013. These are plans, not assured results.
- Key business risks include competition, dependence on independent contractors without written agreements, limited funding, and uncertainty over whether the new board prototype would be suitable for sale. The filing also notes that interim results are not necessarily indicative of full-year results.
Important facts to verify
- Confirm the filing’s identity: the document names Camp Nine, Inc., while the request identifies RELMADA THERAPEUTICS, INC.
- Reconcile the MD&A statement that the company had not yet received revenue from product or service sales with the reported revenue in the financial statements.
- Determine what drove the sharp increase in general and administrative expense and the rise in accounts payable.
- Verify whether the June share offering closed, whether subscribed funds were received, and whether additional financing was obtained.
- Assess the company’s near-term ability to pay liabilities and fund operations given $664 cash and the stated going-concern uncertainty.