Filing summary
Important identification mismatch: The supplied metadata names RELMADA THERAPEUTICS, INC. and “2013 Q2,” but the filing itself is for CAMP NINE, INC., a surfboard business. It reports the quarter and six months ended February 28, 2014, and was signed April 15, 2014. The financial statements are unaudited.
Business context and reporting period
Camp Nine describes itself as a development-stage surfboard designer and seller, operating through its wholly owned Hawaii subsidiary. Sales were concentrated on Oahu. The company marketed several surfboard lines, used independent contractors for manufacturing, and reported seven boards in inventory.
Financial results and liquidity
| Metric | Three months ended Feb. 28, 2014 | Six months ended Feb. 28, 2014 |
|---|---|---|
| Revenue | $682 | $2,532 |
| Cost of goods sold | $685 | $2,371 |
| Gross margin | $(3), or negative | $161, about 6.4% of revenue |
| Operating expenses | $3,121 | $17,659 |
| Net loss | $(3,124) | $(17,498) |
| Cash used in operating activities | Not separately presented | $(12,664) |
At February 28, 2014, cash was $2,626, inventory was $6,124, total current assets were $8,750, and total assets were $10,000. Current liabilities consisted of $41,155 in accounts payable. Working capital was negative $32,405 and stockholders’ deficit was $31,155. No borrowing is shown on the balance sheet; however, management says the company has depended on convertible debt and private equity funding, without providing a debt balance here.
Cash fell by $12,664 from August 31, 2013. No investing or financing cash flows were reported for the six-month period. The company reported no interest or income taxes paid.
Changes versus comparable periods
- Quarterly revenue declined from $2,346 to $682; the quarterly net loss narrowed from $4,146 to $3,124.
- Six-month revenue declined from $4,495 to $2,532, while the net loss widened from $13,166 to $17,498.
- Six-month gross margin fell from $781 to $161. Operating expenses increased from $13,947 to $17,659, primarily reflecting higher general and administrative costs.
- Operating cash use increased to $12,664 from $1,445 in the prior-year six-month period.
Outlook, risks, and notable disclosures
- Management says cash is insufficient to support operations at the current level for the next 12 months. It plans to seek private equity or other debt/equity financing, increase sales, and reduce spending, but gives no assurance financing will be available or the business will become viable.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern. It reports cumulative losses of $74,655 since inception and no stabilized revenue source sufficient to cover operating costs.
- Management planned to gauge customer response to new board models before producing more inventory. It intended to manufacture some higher- and medium-performance models only on request and potentially maintain limited inventory of certain fun-board models.
- Key operating risks include intense local and national competition and reliance on independent contractors without written agreements; contractor availability or changes to supply terms could impair production and sales.
- Management concluded that disclosure controls and procedures were ineffective at period-end. The company identified itself as a shell company and smaller reporting company.
- The filing reports no subsequent events requiring disclosure, pending legal proceedings, unregistered equity sales, or defaults upon senior securities.
Facts investors should verify
- Confirm the issuer and reporting period: the submitted filing identifies Camp Nine, Inc., not Relmada Therapeutics, Inc.
- Reconcile the statement that operations have depended on convertible debt with the balance sheet, which lists only accounts payable as a liability and shows no debt amount.
- Check the company’s near-term cash needs, accounts payable, and ability to obtain additional financing given $2,626 in cash and management’s going-concern warning.
- Verify share-count disclosures: the balance sheet reports 28.5 million shares outstanding for both balance-sheet dates, while prior-period weighted-average shares were 23.5 million.
- Assess the causes of ineffective disclosure controls and whether they were remediated after the reporting date.