Business context and reporting period
This filing is by Max-1 Acquisition Corporation, not Exicure, Inc. Max-1 was a shell/blank-check company formed in February 2017 to pursue a business combination. The unaudited reporting period ended August 31, 2017; operating results cover the three and six months then ended. The filing says discussions were underway for a merger with Exicure, but no binding agreement had been signed and the merger remained incomplete as of September 11, 2017.
Financial highlights
| Metric | Period or date | Amount |
|---|---|---|
| Revenue | Three and six months ended August 31, 2017 | $0 |
| General and administrative expenses | Three months / six months | $11,898 / $29,730 |
| Interest expense | Three months / six months | $377 / $592 |
| Net loss | Three months / six months | $12,275 / $30,322 |
| Basic and diluted loss per share | Three months / six months | $0.01 / $0.03 |
| Cash | August 31, 2017 | $1,545 |
| Total assets | August 31, 2017 | $1,545 |
| Total current liabilities | August 31, 2017 | $27,702 |
| Stockholder note payable | August 31, 2017 | $24,600 on the balance sheet |
| Operating cash used | Six months ended August 31, 2017 | $23,230 |
| Financing cash provided | Six months ended August 31, 2017 | $18,750 |
| Net decrease in cash | Six months ended August 31, 2017 | $4,480 |
Changes versus prior period
Compared with February 28, 2017, cash fell from $6,025 to $1,545, prepaid expenses fell from $4,000 to zero, and current liabilities rose from $12,110 to $27,702. Stockholders’ deficit increased from $2,085 to $26,157. The filing provides no prior-year comparable income-statement period; the company was formed in February 2017.
Outlook, risks and unusual items
- Management reported substantial doubt about the company’s ability to continue as a going concern, citing approximately $57,000 of accumulated losses and approximately $26,000 of negative working capital. Continued operations depend on finding a suitable merger or acquisition and obtaining additional equity or related-party funding; funding is not assured.
- The stockholder note bears 6% annual interest and is repayable upon a qualifying business combination or transaction ending shell status. The filing reports $25,202 due including $602 accrued interest in the note disclosure; the balance sheet separately presents $24,600 as note payable and $3,102 in accounts payable and accrued expenses. A further $5,000 was advanced under the note on September 6, 2017.
- On June 16, the company issued 250,000 shares to four accredited investors, including a director/majority stockholder and an affiliate, for gross proceeds of $6,250. Shares outstanding increased from 1,000,000 at February 28 to 1,250,000 at August 31.
- The company has no operating revenue and expects expenses related to SEC reporting and evaluating and completing a potential acquisition. It cautions that a target could be an early-stage or financially unstable business and that a likely single business combination would limit diversification.
- Net operating loss carryforwards were approximately $57,000; a full valuation allowance offset the reported deferred tax benefit. No material pending legal proceedings or material off-balance-sheet arrangements were reported.
Important facts for investors to verify
- Confirm the correct issuer and filing: this 10-Q is for Max-1 Acquisition Corporation, despite the request identifying Exicure, Inc.
- Check whether a definitive merger agreement with Exicure was subsequently signed, approved, and completed, and review its terms and any resulting dilution or change of control.
- Verify current cash needs, availability and terms of related-party advances, and the note’s repayment and default provisions.
- Reconcile the note and accrued-interest amounts across the balance sheet and note disclosure, and assess the going-concern warning.
- Review the post-merger capital structure, including the share issuance to insiders and affiliates and any additional financing.