Filing summary
Entity and period: The supplied filing is Great West Resources, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2014. It does not identify Nextplat Corp; investors should verify that this is the intended filing. Great West was formerly Silver Horn Mining, Ltd. and completed a reincorporation from Delaware to Nevada on March 28, 2014.
Business context
Great West is an exploration-stage company focused on acquiring and exploring mineral properties, principally for silver. It reported no revenue and had not established proven or probable reserves on its Arizona properties. The company stated it had no active mining operations.
Financial performance and position
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $321,694 | $170,021 |
| Operating loss | $321,694 | $170,021 |
| Net loss | $343,414 | $183,980 |
| Basic and diluted loss per share | $0.23 | $0.11 |
| Cash used in operating activities | $10,000 | $0 |
- At March 31, 2014, cash and total assets were both $0. Current liabilities were $929,412, resulting in a working-capital and stockholders’ deficit of approximately $929,000.
- Current liabilities included $598,353 in accounts payable and accrued expenses, $175,000 payable to a related party, a $10,000 related-party loan due on demand, a $33,662 derivative liability, and $112,397 of discontinued-operation liabilities.
- No meaningful revenue or profit margins are reported. The filing states no material capital-expenditure commitments and no available credit or other external working-capital source.
Changes and notable items
- Operating expenses rose 89% year over year, primarily because professional and consulting costs increased to $232,031 from $11,599. This included $179,834 of noncash option expense for director awards and expenses related to the reincorporation.
- Net loss increased by $159,434 year over year. Management fees fell to zero from $75,000, exploration costs fell to zero from $5,000, and interest expense fell to zero from $29,106; these reductions were outweighed by higher professional and general expenses and a $21,720 derivative fair-value expense.
- A related-party affiliate provided a $10,000 working-capital loan. The company also sold two inactive subsidiaries to its controlling stockholder, Auracana, LLC, for $1.
- The company reported 1,510,950 common shares outstanding as of May 17, 2014. It also had 60,000 director options and 245,000 warrants outstanding at quarter-end.
Outlook, risks, and contingencies
- Management said it did not expect the company to be profitable for the remainder of 2014 and would seek additional capital through a public or private offering. It warned that funding may not be available on acceptable terms and that failure to obtain financing could require curtailing operations.
- The filing states that the accumulated deficit was approximately $49.3 million and that the company’s losses, working-capital deficiency, and financing needs raise substantial doubt about its ability to continue as a going concern. Management’s financing plan is not assured.
- A third party disputes the company’s claim priority on nine of the COD Property’s 14 claims; the company says it believes the demands are without merit. A British Columbia Securities Commission cease-trade order, issued in 2012 for disclosure failures, bars trading in the company’s common stock in British Columbia.
- Disclosure controls and procedures were reported ineffective at March 31, 2014 because of limited internal resources and insufficient transaction-review levels. Management described remediation plans but gave no assurance they would be completed or prove adequate.
- The CEO’s January 2014 employment agreement provides a $30,000 monthly base salary, subject to stated conditions for an increase, and potential bonus and severance benefits. The company also accrued $15,000 for consulting services from the president of Auracana.
Key facts for investors to verify
- Confirm that Great West Resources’ 2014 Q1 filing, rather than a Nextplat Corp filing, is the intended document.
- Verify the company’s current cash position, unpaid obligations, financing progress, and ability to meet liabilities as they fall due.
- Review the controlling-stockholder relationships and related-party transactions, including the subsidiary sale, consulting arrangement, and demand loan.
- Check the status of the COD claim dispute, the British Columbia cease-trade order, and any changes in internal controls.
- Assess whether any mineral properties have since demonstrated commercially viable reserves; none were established in this filing.