Filing summary
Issuer and period: The supplied filing is a Form 10-Q for Prime Estates & Developments, Inc., a development-stage real estate company—not Cosmos Health Inc. It reports the quarter and six months ended January 31, 2012. The issuer-name discrepancy with the request should be resolved before relying on this summary.
Financial performance and position
- Revenue: No revenue was reported for the three or six months ended January 31, 2012. The company said it had not completed a transaction producing revenue.
- Loss: Net loss was $55,914 for the three-month period and $216,299 for the six-month period, compared with $8,135 and $20,485, respectively, in the comparable 2011 periods. Six-month loss per share was $0.01; quarterly loss per share was reported as $0.00.
- Expenses: Six-month general and administrative expense rose to $214,579 from $20,009; related-party interest expense was $1,720 versus $476. The filing attributes higher costs mainly to GreenEra agreement accruals, officer and director salaries, and $87,900 of stock-based compensation.
- Margins: Not meaningful because the company reported no revenue.
- Cash flow and liquidity: Six-month operating cash use was $41,647; financing provided $26,452, leaving cash of $43 at January 31, 2012, down from $15,238 at July 31, 2011. Current assets were $43 and current liabilities $117,384, a working-capital deficit of approximately $117,341.
- Debt and equity: Current liabilities included a $12,352 related-party note payable, $100,000 of accrued related-party expenses, and $5,032 of accounts payable and accrued expenses. Shareholders’ equity was negative $117,341. The company had 24,684,282 common shares outstanding at January 31, 2012.
Material changes and notable items
- Six-month net loss increased substantially from the prior-year period, primarily reflecting higher operating expenses and noncash share compensation.
- The company accrued $50,000 under its GreenEra forest/carbon-credit agreement and reported no cash payments to GreenEra. The agreement calls for $5,000 monthly payments over approximately 34 years, is cancelable by Prime Estates, and involves potential development costs of up to $1.2 million. Carbon-credit certification and sale are uncertain; the landowner may veto sales below $2 per credit.
- During the six months, the company issued 23,500 shares for $14,100 cash and 146,500 shares for services valued at $87,900.
Outlook, risks and controls
- Management estimated a need for at least $120,000 over the next 12 months and an approximately $10,000 monthly burn rate. It said the company needed additional financing, had no specific funding agreements, and might cease or curtail operations if it could not raise funds. Management expected officers and directors might lend funds but stated they were not obligated to do so.
- The company planned to raise capital, pursue real estate acquisitions, and potentially invest in the Brazilian forest project. It discussed a possible business combination with Mave SA but had no formal understanding or agreement. These plans are forward-looking and not assured.
- The filing states that losses, a working-capital deficit, lack of revenue, and funding needs raise substantial doubt about the company’s ability to continue as a going concern.
- Management concluded that disclosure controls and procedures were not effective. No material change in internal control over financial reporting was reported during the quarter. The filing reported no legal proceedings.
Important facts for investors to verify
- Confirm the issuer: the filing names Prime Estates & Developments, Inc., not Cosmos Health Inc.
- Confirm the reporting period and statement labels: the filing covers January 31, 2012, but portions of the text refer to October 31, 2011 or contain inconsistent period descriptions.
- Clarify the composition and repayment terms of the $100,000 accrued related-party expenses and the $12,352 director loan, including the GreenEra accruals and any related-party interests.
- Assess whether the company obtained the financing it said it needed, and whether any real estate, carbon-credit, or business-combination plans advanced beyond preliminary discussions.
- Verify the effectiveness of disclosure controls and the company’s ability to meet ongoing SEC reporting and operating costs.