KEEMO Fashion Group Ltd 10-Q Analysis & Summary – 3/14/2025

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KEEMO Fashion Group Ltd

10-Q

Quarterly report

Filing date:

03/14/2025

TLDR:

ELI5:

KEEMO Fashion Group is in a tough spot. They’re losing money, owe more than they own, and depend heavily on one customer and supplier. Also, there are problems with how they keep track of their finances, making it hard to trust their numbers.

Accession #:

0001493152-25-010279

Published on

March 16, 2025

Analyst Summary

The company’s balance sheet reveals a concerning financial position with total current liabilities exceeding total current assets, resulting in negative working capital and an increasing accumulated deficit.
Revenue has decreased for both the three and six-month periods compared to the previous year, while general and administrative expenses have increased, contributing to a larger net loss.
The company generated positive cash flow from operating activities for the six months ended January 31, 2025, primarily due to changes in operating assets and liabilities, but the overall cash balance remains low.
Management acknowledges substantial doubt about the company’s ability to continue as a going concern and admits that disclosure controls and procedures were not effective due to material weaknesses in internal controls over financial reporting.
The company’s revenue is entirely dependent on a single customer for the three and six months ended January 31, 2025, making it highly vulnerable to the loss of that customer.
Gross Profit Margin increased by 0.9% from 48.97% to 49.87%.
Operating Profit Margin increased by 22.35% from -241.28% to -187.36%.
Net Profit Margin increased by 22.35% from -241.28% to -187.36%.
Return on Assets increased by 59.49% from -172.8% to -71.0%.
Return on Equity decreased by -65.84% from 80.8% to 27.6%.
Earnings Per Share increased by 33.53% from -$0.000510 to -$0.000339.
Current Ratio decreased by -24.32% from 0.37 to 0.28.
Quick Ratio decreased by -26.47% from 0.34 to 0.25.
Cash Ratio decreased by -8% from 0.25 to 0.23.
Debt-to-Equity Ratio decreased by 12.03% from -1.58 to -1.39.
Debt-to-Assets Ratio increased by 31.25% from 2.72 to 3.57.
Inventory Turnover decreased by -58.21% from 4.69 to 1.96.
Asset Turnover decreased by -74.83% from 1.43 to 0.36.
Price-to-Earnings Ratio is -2949.85.
Price-to-Book Ratio is -1627.22.
Price-to-Sales Ratio is 5523.75.
Enterprise Value to EBITDA is 22,197.78.
Revenue Growth is -14.28%.
Net Income Growth is -33.44%.
EPS Growth is -33.53%.

Opportunities and Risks

The company’s ability to continue as a going concern is highly uncertain.
The significant negative working capital position indicates a lack of liquidity and potential difficulty in meeting short-term obligations.
The reliance on a single customer makes the company vulnerable to the loss of that customer.
The reliance on a single supplier makes the company vulnerable to disruptions in the supply chain.
Material weaknesses in internal controls increase the risk of financial misstatements and fraud.
The trend of decreasing revenue raises concerns about the company’s ability to generate future profits.
Addressing the internal control weaknesses could improve efficiency and reduce costs.
The company could explore opportunities to diversify its customer base and expand into new markets.

Potential Implications

Company Performance

Continued losses and negative cash flow could further erode shareholder equity and jeopardize the company’s ability to operate.
Failure to address the material weaknesses in internal controls could lead to regulatory scrutiny and further damage the company’s reputation.
The company’s reliance on a single customer and supplier makes it vulnerable to disruptions in its supply chain and revenue stream.
The company’s negative working capital position could make it difficult to meet its short-term obligations and invest in future growth.

Stock Price

The company’s precarious financial situation and the going concern warning could negatively impact its stock price.
The admission of material weaknesses in internal controls could further erode investor confidence and lead to a decline in the stock price.
Any negative news regarding the company’s relationship with its single customer or supplier could have a significant impact on its stock price.

SEC Filing Report: KEEMO Fashion Group Ltd. – 10-Q for January 31, 2025

Executive Summary

This report analyzes KEEMO Fashion Group Ltd.’s Form 10-Q for the quarterly period ended January 31, 2025. The analysis reveals a company facing significant challenges, including a net loss, negative working capital, and reliance on a single customer and supplier. Furthermore, material weaknesses in internal controls raise concerns about the reliability of financial reporting. The company’s ability to continue as a going concern is questionable without additional funding. Given these factors, a Sell recommendation is warranted.

Company Overview

KEEMO Fashion Group Limited is a Nevada corporation headquartered in Shenzhen, China. The company operates in the men’s and women’s apparel and garment trading business, focusing on wholesaling to distributors, primarily in Asian countries. They source directly from manufacturers in China and do not have their own production facilities.

Detailed Analysis

Financial Statement Analysis

Condensed Balance Sheets

	January 31, 2025 (Unaudited)	July 31, 2024 (Audited)	Change	% Change
Cash and Cash Equivalents	$21,875	$19,421	$2,454	12.64%
Inventories	$2,569	$2,527	$42	1.66%
Prepayment	$1,835	$6,526	-$4,691	-71.88%
Total Current Assets	$26,279	$28,474	-$2,195	-7.71%
Amount due to a director	$90,679	$69,919	$20,760	29.69%
Other accruals	$3,200	$7,500	-$4,300	-57.33%
Total Current Liabilities	$93,879	$77,419	$16,460	21.26%
Accumulated Deficit	($99,700)	($81,045)	-$18,655	23.02%
Total Shareholders’ Equity	($67,600)	($48,945)	-$18,655	38.11%

Analysis: The balance sheet reveals a concerning financial position. Total current liabilities significantly exceed total current assets, resulting in negative working capital. The accumulated deficit has increased, further eroding shareholder equity. The decrease in prepayment is notable, potentially indicating a change in business operations or a reduction in future investments. The amount due to a director has increased significantly, suggesting continued reliance on related-party funding.

Condensed Statement of Operations and Comprehensive Loss

	Three Months Ended January 31, 2025	Three Months Ended January 31, 2024	Six Months Ended January 31, 2025	Six Months Ended January 31, 2024
Revenue	$5,012	$5,100	$9,957	$11,616
Cost of Revenue	($2,553)	($2,523)	($4,991)	($5,928)
Gross Profit	$2,459	$2,577	$4,966	$5,688
General and Administrative Expenses	($12,713)	($4,737)	($23,621)	($33,715)
Net Loss	($10,254)	($2,160)	($18,655)	($28,027)

Analysis: Revenue has decreased for both the three and six-month periods compared to the previous year. While the cost of revenue has also decreased, the significant increase in general and administrative expenses for the three months ended January 31, 2025, has contributed to a larger net loss compared to the same period in 2024. The six-month period shows a smaller net loss than the previous year, primarily due to lower G&A expenses, but the company remains unprofitable.

Condensed Statement of Cash Flows

	Six Months Ended January 31, 2025	Six Months Ended January 31, 2024
Net cash provided by/(used in) operating activities	$2,454	($16,742)
Net increase/(decrease) in cash and cash equivalents	$2,454	($16,742)
Cash and cash equivalents, end of period	$21,875	$12,001

Analysis: The company generated positive cash flow from operating activities for the six months ended January 31, 2025, a significant improvement from the negative cash flow in the same period of the previous year. This is primarily due to changes in operating assets and liabilities, particularly the increase in the amount due to a director. However, the overall cash balance remains low.

Management’s Discussion and Analysis (MD&A)

Going Concern: Management acknowledges substantial doubt about the company’s ability to continue as a going concern.
Funding: The company relies on cash flow from revenue and continued financial support from a shareholder.
Internal Controls: Management admits that disclosure controls and procedures were not effective due to material weaknesses in internal controls over financial reporting. These weaknesses include a lack of a functioning audit committee, inadequate segregation of duties, and insufficient written policies and procedures.
Customer Concentration: The company acknowledges that one customer accounted for 100% of revenue for the three months ended January 31, 2025.
Supplier Concentration: The company acknowledges that one supplier accounted for 100% of the cost of revenue for the three months ended January 31, 2025.

Analysis: Management’s narrative highlights the company’s precarious financial situation and the risks associated with its reliance on a single customer and supplier. The admission of material weaknesses in internal controls is a significant red flag, raising concerns about the accuracy and reliability of the financial statements.

Risks and Opportunities

Risks:

Going Concern: The company’s ability to continue as a going concern is highly uncertain.
Negative Working Capital: The significant negative working capital position indicates a lack of liquidity and potential difficulty in meeting short-term obligations.
Customer Concentration: The reliance on a single customer makes the company vulnerable to the loss of that customer.
Supplier Concentration: The reliance on a single supplier makes the company vulnerable to disruptions in the supply chain.
Internal Control Weaknesses: Material weaknesses in internal controls increase the risk of financial misstatements and fraud.
Decreasing Revenue: The trend of decreasing revenue raises concerns about the company’s ability to generate future profits.

Opportunities:

Potential for Improved Efficiency: Addressing the internal control weaknesses could improve efficiency and reduce costs.
Market Expansion: The company could explore opportunities to diversify its customer base and expand into new markets.

Conclusion and Actionable Insights

KEEMO Fashion Group Ltd. faces significant financial and operational challenges. The negative working capital, accumulated deficit, reliance on a single customer and supplier, and material weaknesses in internal controls raise serious concerns about the company’s viability. While there are potential opportunities for improvement, the risks outweigh the potential rewards. Therefore, a Sell recommendation is warranted.

1. Commentary

Keemo Fashion Group Limited’s financial performance shows a concerning trend. While revenue decreased slightly, the net loss significantly increased for the six months ended January 31, 2025, compared to the same period in 2024. The company’s liabilities far outweigh its assets, resulting in negative shareholders’ equity. The company is reliant on a single customer for all of its revenue.

2. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

Metric: (Revenue – Cost of Revenue) / Revenue
2025 (6 months): ($9,957 – $4,991) / $9,957 = 49.87%
2024 (6 months): ($11,616 – $5,928) / $11,616 = 48.97%
Trend: The gross profit margin increased by 0.9% (($49.87 – $48.97)/$48.97)
Industry: The apparel industry typically has gross margins between 40% and 50%. KMFG is within this range.

Operating Profit Margin

Metric: Loss from Operations / Revenue
2025 (6 months): ($18,655) / $9,957 = -187.36%
2024 (6 months): ($28,027) / $11,616 = -241.28%
Trend: The operating profit margin increased by 22.35% ((-187.36 – -241.28)/-241.28)
Industry: The apparel industry typically has operating margins between 5% and 10%. KMFG is far below this range.

Net Profit Margin

Metric: Net Loss / Revenue
2025 (6 months): ($18,655) / $9,957 = -187.36%
2024 (6 months): ($28,027) / $11,616 = -241.28%
Trend: The net profit margin increased by 22.35% ((-187.36 – -241.28)/-241.28)
Industry: The apparel industry typically has net profit margins between 3% and 8%. KMFG is far below this range.

Return on Assets (ROA)

Metric: Net Loss / Total Assets
2025 (6 months): ($18,655) / $26,279 = -71.0%
2024 (6 months): ($28,027) / $16,219 = -172.8%
Trend: The ROA increased by 59.49% ((-71.0 – -172.8)/-172.8)
Industry: The apparel industry typically has ROA between 5% and 10%. KMFG is far below this range.

Return on Equity (ROE)

Metric: Net Loss / Total Shareholders’ Equity
2025 (6 months): ($18,655) / (-$67,600) = 27.6%
2024 (6 months): ($28,027) / (-$34,697) = 80.8%
Trend: The ROE decreased by -65.84% ((27.6 – 80.8)/80.8)
Industry: The apparel industry typically has ROE between 10% and 15%. KMFG is above this range, but this is due to the negative equity.

Earnings Per Share (EPS) – Basic and Diluted

Metric: Net Loss / Weighted Average Number of Common Shares Outstanding
2025 (6 months): ($18,655) / 55,000,000 = -$0.000339
2024 (6 months): ($28,027) / 55,000,000 = -$0.000510
Trend: The EPS increased by 33.53% ((-0.000339 – -0.000510)/-0.000510)

Liquidity

Current Ratio

Metric: Total Current Assets / Total Current Liabilities
2025: $26,279 / $93,879 = 0.28
2024: $28,474 / $77,419 = 0.37
Trend: The current ratio decreased by -24.32% ((0.28 – 0.37)/0.37)
Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. KMFG is below this range.

Quick Ratio (Acid-Test Ratio)

Metric: (Total Current Assets – Inventories) / Total Current Liabilities
2025: ($26,279 – $2,569) / $93,879 = 0.25
2024: ($28,474 – $2,527) / $77,419 = 0.34
Trend: The quick ratio decreased by -26.47% ((0.25 – 0.34)/0.34)
Industry: A quick ratio of 1.0 or higher is generally considered healthy. KMFG is below this range.

Cash Ratio

Metric: Cash and Cash Equivalents / Total Current Liabilities
2025: $21,875 / $93,879 = 0.23
2024: $19,421 / $77,419 = 0.25
Trend: The cash ratio decreased by -8% ((0.23 – 0.25)/0.25)
Industry: A cash ratio of 0.5 or higher is generally considered healthy. KMFG is below this range.

Solvency/Leverage

Debt-to-Equity Ratio

Metric: Total Liabilities / Total Shareholders’ Equity
2025: $93,879 / (-$67,600) = -1.39
2024: $77,419 / (-$48,945) = -1.58
Trend: The debt-to-equity ratio decreased by 12.03% ((-1.39 – -1.58)/-1.58)
Industry: The apparel industry typically has debt-to-equity ratios between 0.5 and 1.5. KMFG is outside this range due to negative equity.

Debt-to-Assets Ratio

Metric: Total Liabilities / Total Assets
2025: $93,879 / $26,279 = 3.57
2024: $77,419 / $28,474 = 2.72
Trend: The debt-to-assets ratio increased by 31.25% ((3.57 – 2.72)/2.72)
Industry: The apparel industry typically has debt-to-assets ratios between 0.2 and 0.5. KMFG is far above this range.

Interest Coverage Ratio (Times Interest Earned)

Metric: Loss from Operations / Interest Expense
2025: ($18,655) / $0 = N/A
2024: ($28,027) / $0 = N/A
Trend: N/A
Industry: N/A

Activity/Efficiency

Inventory Turnover

Metric: Cost of Revenue / Average Inventory
2025 (6 months): $4,991 / (($2,569 + $2,527)/2) = 1.96
2024 (6 months): $5,928 / (($2,527 + $0)/2) = 4.69 (Assuming beginning inventory was 0)
Trend: The inventory turnover decreased by -58.21% ((1.96 – 4.69)/4.69)
Industry: The apparel industry typically has inventory turnover between 3 and 6. KMFG is below this range.

Days Sales Outstanding (DSO)

Metric: (Average Accounts Receivable / Revenue) * Number of Days in Period
2025 (6 months): ($0 / $9,957) * 181 = 0 days
2024 (6 months): ($0 / $11,616) * 181 = 0 days
Trend: No change
Industry: The apparel industry typically has DSO between 30 and 60 days. KMFG is below this range.

Days Payable Outstanding (DPO)

Metric: (Average Accounts Payable / Cost of Revenue) * Number of Days in Period
2025 (6 months): ($0 / $4,991) * 181 = 0 days
2024 (6 months): ($0 / $5,928) * 181 = 0 days
Trend: No change
Industry: The apparel industry typically has DPO between 30 and 50 days. KMFG is below this range.

Asset Turnover

Metric: Revenue / Average Total Assets
2025 (6 months): $9,957 / (($26,279 + $28,474)/2) = 0.36
2024 (6 months): $11,616 / (($16,219 + $0)/2) = 1.43 (Assuming beginning assets were 0)
Trend: The asset turnover decreased by -74.83% ((0.36 – 1.43)/1.43)
Industry: The apparel industry typically has asset turnover between 1 and 2. KMFG is below this range.

Valuation

Price-to-Earnings Ratio (P/E)

Metric: Stock Price / EPS
EPS Calculation: -$0.000339 * 2 = -0.000678
P/E Ratio: $2.00 / (-$0.000678) = -2949.85
Industry: The apparel industry typically has P/E ratios between 15 and 25. KMFG is outside this range due to negative earnings.

Price-to-Book Ratio (P/B)

Metric: Market Capitalization / Total Shareholders’ Equity
Market Cap: 55,000,000 * $2.00 = $110,000,000
P/B Ratio: $110,000,000 / (-$67,600) = -1627.22
Industry: The apparel industry typically has P/B ratios between 2 and 4. KMFG is outside this range due to negative equity.

Price-to-Sales Ratio (P/S)

Metric: Market Capitalization / Revenue
Revenue Calculation: $9,957 * 2 = $19,914
P/S Ratio: $110,000,000 / $19,914 = 5523.75
Industry: The apparel industry typically has P/S ratios between 1 and 2. KMFG is far above this range.

Enterprise Value to EBITDA (EV/EBITDA)

Metric: (Market Cap + Total Debt – Cash) / EBITDA
Market Cap: 55,000,000 * $2.00 = $110,000,000
Total Debt: $93,879
Cash: $21,875
EBITDA Calculation: -$18,655 + $23,621 = $4,966
EV/EBITDA Ratio: ($110,000,000 + $93,879 – $21,875) / $4,966 = 22,197.78
Industry: The apparel industry typically has EV/EBITDA ratios between 8 and 12. KMFG is far above this range.

Growth Rates

Revenue Growth

Metric: (Current Revenue – Previous Revenue) / Previous Revenue
Revenue Growth: ($9,957 – $11,616) / $11,616 = -14.28%

Net Income Growth

Metric: (Current Net Income – Previous Net Income) / Previous Net Income
Net Income Growth: (-$18,655 – (-$28,027)) / (-$28,027) = -33.44%

EPS Growth

Metric: (Current EPS – Previous EPS) / Previous EPS
EPS Growth: (-$0.000339 – (-$0.000510)) / (-$0.000510) = -33.53%

Other Relevant Metrics

The company’s revenue is entirely dependent on a single customer (Customer A) for the three months ended January 31, 2025. For the six months ended January 31, 2025, the company’s revenue is entirely dependent on a single customer (Customer A). For the six months ended January 31, 2024, the company’s revenue is dependent on two customers (Customer A and Customer B). This concentration of revenue makes the company highly vulnerable to the loss of a major customer.