SEC Filing Report: KEEMO Fashion Group Ltd. – Form 10-K/A (Amendment No. 1)
Executive Summary
This report analyzes KEEMO Fashion Group Limited’s Form 10-K/A (Amendment No. 1) for the fiscal year ended July 31, 2024. The amendment addresses wording errors in the original filing, specifically the incorrect use of “Consolidated” when the company operates as a single entity. The company faces significant going concern risks due to operating losses, negative cash flow, and reliance on director funding. Internal control weaknesses are also a major concern. Given the financial instability and control deficiencies, a **sell** recommendation is warranted.
Company Overview
KEEMO Fashion Group Limited is a Nevada corporation operating in the apparel and garment trade industry. It focuses on wholesaling men’s and women’s apparel to retailers in Asian countries, particularly China, targeting the low to mid-range price points. The company utilizes a virtual network business structure, outsourcing production, packaging, and logistics. The company is a smaller reporting company and an emerging growth company.
Detailed Analysis
Financial Statement Analysis
The following table summarizes key financial data extracted from the 10-K/A:
| Financial Metric |
July 31, 2024 |
July 31, 2023 |
Change |
| Cash and Cash Equivalents |
$19,421 |
$28,743 |
-$9,322 |
| Accounts Receivable |
$0 |
$6,954 |
-$6,954 |
| Inventories |
$2,527 |
$3,405 |
-$878 |
| Total Current Assets |
$28,474 |
$43,035 |
-$14,561 |
| Amount Due to a Director |
$69,919 |
$40,405 |
+$29,514 |
| Total Current Liabilities |
$77,419 |
$49,705 |
+$27,714 |
| Revenue |
$21,522 |
$16,945 |
+$4,577 |
| Gross Profit |
$10,586 |
$8,351 |
+$2,235 |
| Net Loss |
($42,275) |
($22,196) |
-$20,079 |
Key Ratios:
- Gross Profit Margin (2024): 49.19%
- Gross Profit Margin (2023): 49.28%
Trends:
- Revenue increased slightly, but the net loss significantly widened.
- The company is increasingly reliant on funding from its director.
- Current liabilities far exceed current assets, indicating a severe liquidity problem.
Management’s Discussion and Analysis (MD&A) Insights
- Management acknowledges the company’s going concern risk due to operating losses and insufficient cash.
- The company’s business model relies heavily on the sole officer and director’s network.
- Marketing plans are still under development and lack a definitive timeline.
- The company operates in a highly competitive market.
Red Flags and Uncommon Metrics
- Going Concern: The auditor’s report explicitly mentions substantial doubt about the company’s ability to continue as a going concern.
- Internal Control Weaknesses: Management admits to material weaknesses in internal controls, including a lack of a functioning audit committee, inadequate segregation of duties, and insufficient written policies.
- Related Party Transactions: Significant reliance on funding from the sole director raises concerns about potential conflicts of interest.
- Customer Concentration: Revenue is highly concentrated among a few customers, making the company vulnerable to losing a key client.
- Supplier Concentration: Cost of revenue is concentrated among a few vendors.
Risk and Opportunity Assessment
Risks
- Liquidity Risk: The company’s negative working capital and reliance on director funding pose a significant threat to its survival.
- Operational Risk: Dependence on a single individual and a nascent marketing strategy create operational vulnerabilities.
- Competitive Risk: The apparel industry in China is highly competitive, with established players possessing greater resources.
- Internal Control Risk: Material weaknesses in internal controls increase the risk of financial misstatements and fraud.
- Regulatory Risk: The company’s operations in China are subject to regulatory and legal uncertainties. Enforcement of US judgments in China is not guaranteed.
Opportunities
- Market Growth: The apparel market in Asian countries is growing, presenting potential for expansion.
- E-commerce Potential: Targeting small e-commerce retailers could be a viable strategy.
Conclusion and Actionable Insights
KEEMO Fashion Group Limited faces substantial financial and operational challenges. The going concern warning, internal control deficiencies, and reliance on related-party funding are major red flags. While the company operates in a growing market, its current financial position and operational weaknesses outweigh any potential opportunities.
Recommendation: Sell. The risks associated with investing in KEEMO Fashion Group Limited significantly outweigh the potential rewards. The company’s ability to continue as a going concern is highly uncertain.