Business context and reporting period
The supplied filing is Jolley Marketing, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2016—not a filing under the requested company name, Creative Medical Technology Holdings, Inc. Jolley describes itself as a non-operating shell company with no revenue since September 2008. It reported no revenue in either comparative quarter.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $2,522 | $6,992 |
| Interest expense | $2,618 | $2,280 |
| Net loss | $5,140 | $9,272 |
| Loss per share | $0.00 | $0.00 |
| Cash at quarter-end | $216 | $583 |
At March 31, 2016, total assets were $216, current liabilities were $170,960, long-term related-party notes were $18,200, and stockholders’ deficit was $188,944. Current liabilities included $19,601 of accounts payable and $151,359 of related-party notes and accrued interest. The company reported no capital expenditures or credit line. No gross-margin measure is meaningful because revenue was zero.
The cash-flow statement reports $0 net cash used by operating activities for Q1 2016, with no investing or financing cash flows and no change in cash. This conflicts with the going-concern note, which says the company had negative operating cash flow during the quarter; the filing does not reconcile the discrepancy.
Changes versus the prior comparable period
Net loss narrowed by $4,132, primarily as operating expenses fell from $6,992 to $2,522; interest expense increased by $338. Cash remained $216 from year-end 2015. Current liabilities rose from $157,820 at December 31, 2015 to $170,960 at March 31, 2016, while long-term related-party notes declined from $26,200 to $18,200.
Outlook, risks, and unusual items
- Management states substantial doubt exists about the company’s ability to continue as a going concern, citing losses, no revenue-generating activities, and current liabilities exceeding current assets. It proposed obtaining funding through loans or common-stock sales; success is not assured.
- Management estimated ongoing public-company costs at $30,000 annually and anticipated relying on related-party advances, without assurance that funding would be available.
- On April 29, 2016, Jolley entered into a merger agreement to acquire Creative Medical Technologies, Inc. The proposed transaction was scheduled to close May 18, 2016, subject to conditions. CMT shareholders were to receive at least 97 million Jolley shares, representing approximately 97% of the post-transaction company; the filing anticipated 100,013,750 shares outstanding after the transaction and cancellation of the majority shareholder’s 15.1 million shares.
- CMT’s parent had advanced $13,255.70 before the merger agreement and was to provide total advances of $25,000 for specified obligations. The filing also says noteholders agreed to cancel promissory-note debt except for $20,000 to be paid after closing. These transactions were proposed or pending, not completed as of the filing.
- Management concluded disclosure controls and procedures were not effective. It reported no material change in internal control over financial reporting during the quarter.
Key facts for investors to verify
- Confirm the issuer: the supplied document identifies Jolley Marketing, Inc., despite the request naming Creative Medical Technology Holdings, Inc.
- Check the merger’s actual closing, resulting ownership and share count, and whether the proposed advances and debt settlement were completed.
- Reconcile the cash-flow statement’s zero operating cash use with the going-concern note’s statement that operating cash flow was negative.
- Verify available funding, remaining liabilities, and the company’s ability to meet obligations given $216 in reported cash and substantial going-concern doubt.