Filing Summary
Important entity and period discrepancy: The request identifies Travere Therapeutics, Inc., but the filing is for Desert Gateway, Inc., a Delaware shell company. It reports the quarter and nine months ended November 30, 2011; the filing does not identify Travere. Verify the issuer before relying on these figures.
Business context
Desert Gateway reported no significant operations and no operating revenue. Its stated objective was to locate and complete a business combination, with no target identified and no preliminary discussions reported. The filing marks “No” for having filed all required Exchange Act reports during the preceding 12 months.
Financial results and liquidity
| Metric | Three months ended Nov. 30, 2011 | Nine months ended Nov. 30, 2011 | Comparison |
|---|---|---|---|
| Revenue | $0 | $0 | $0 in the comparable 2010 periods |
| General and administrative expense | $3,018 | $9,067 | $3,091 and $9,109, respectively, in 2010 |
| Interest and debt-discount amortization | $500 | $1,500 | $2,581 and $9,833, respectively, in 2010 |
| Net loss | $3,518 | $10,567 | $5,672 and $18,942, respectively, in 2010 |
| Operating cash used | Not separately presented | $67 | $109 used in 2010 |
For the nine months, the net loss narrowed by $8,375 year over year, mainly as interest and debt-discount amortization decreased. The filing reports no gross margin; with no revenue, a meaningful operating margin is not available. Basic and diluted loss per share for the nine-month periods was $0.01 in 2011 and $0.02 in 2010; quarterly per-share amounts are shown as nil.
At November 30, 2011, cash was $3,891, versus $3,958 at February 28, 2011. Current liabilities were $65,713, compared with $64,213; working capital was therefore negative $61,822. Total assets were $3,891 and stockholders’ deficiency was $61,822. Liabilities included $25,000 of convertible debt due within one year, $31,167 of accrued expenses, $8,796 due to related parties, and $750 of trade payables. The filing describes accrued professional fees of $25,000 and accrued interest of $6,167.
The $25,000 note bears 8% interest, matured November 1, 2010, and is in default. It is convertible at the holder’s option at $0.01 per share; management’s discussion describes conversion into 2.5 million shares.
Management commentary, risks, and controls
Management stated that ongoing costs would be funded from available cash and, as needed, loans or investments from stockholders, management, or other investors. It warned that negative working capital, negative equity, no operating revenue, and dependence on additional financing raise substantial doubt about the company’s ability to continue as a going concern. The statements contain no adjustments that might be necessary if it cannot continue as a going concern.
The company expected to pursue a business combination, likely only one, and acknowledged risks including target-selection uncertainty, competition, potential dilution and change of control, and the possibility of acquiring an early-stage or financially unstable business. No business combination agreement was reported. The filing reported no material litigation and no off-balance-sheet transactions.
Management concluded disclosure controls and procedures were not effective at period end. It reported no material changes in internal control during the quarter. The sole officer and director provided services and office space without charge, valued at $9,000 for the nine-month period and recorded as general and administrative expense with a corresponding contribution to paid-in capital.
Investor verification priorities
- Confirm the filing belongs to the intended issuer: it names Desert Gateway, not Travere Therapeutics.
- Verify the filing period and status of required prior Exchange Act reports.
- Confirm the defaulted convertible note balance, accrued interest, maturity, and conversion terms.
- Reconcile the filing’s conflicting preferred-share disclosures: the balance sheet lists 501 preferred shares outstanding, while another section says no preferred shares have been issued.
- Assess near-term funding needs, going-concern uncertainty, and the ineffective disclosure controls.