Filing Summary
Entity and period: The supplied filing is for Olivia Ventures, Inc., not Compass Therapeutics, Inc. It is a Form 10-Q for the quarter and six months ended September 30, 2018, filed November 14, 2018. The company was incorporated on March 20, 2018 and is a Delaware shell and blank-check company seeking a business combination. The filing identifies the company as a smaller reporting company and emerging growth company.
Business Context and Reporting Period
Olivia Ventures has no operating business, revenue-generating activities, specific acquisition target, or definitive business-combination agreement. Its activities since inception have consisted primarily of organizational work, regulatory filings, financing, and searching for a potential acquisition or merger candidate. The filing states that management does not intend to develop a market for the securities until a business combination is completed.
Financial Results and Key Metrics
| Metric | Three Months Ended September 30, 2018 | Six Months Ended September 30, 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $7,785 | $15,679 |
| Interest expense | $771 | $1,351 |
| Net loss | $8,556 | $17,030 |
| Basic and diluted loss per share | $0.00 | $0.00 |
| Weighted-average shares outstanding | 5,000,000 | 5,000,000 |
Because the company had no revenue, gross margin and operating margin are not meaningful. The reported losses primarily reflect legal, accounting, audit, filing, other professional fees, general and administrative expenses, and interest expense.
- Cash: $2,446 at September 30, 2018, compared with $0 at March 31, 2018.
- Total assets: $2,446, consisting entirely of cash, compared with $25 at March 31, 2018.
- Current liabilities: $54,028, compared with $34,577 at March 31, 2018.
- Stockholders’ deficit: $51,582, compared with $34,552 at March 31, 2018.
- Cash flow from operations: $(12,679) for the six months ended September 30, 2018.
- Cash flow from financing: $15,125, including $15,100 of stockholder note proceeds and collection of a $25 stock subscription receivable.
- Net increase in cash: $2,446 for the six-month period.
- Debt: A stockholder promissory note bears interest at 6% annually. The filing reports $49,625 as note payable on the balance sheet and states that total amounts due under the note were $51,028, including $1,403 of accrued interest.
Material Changes Versus the Prior Comparable Period
The filing does not provide a prior-year comparable quarter or six-month income statement because the company was formed in March 2018. Compared with March 31, 2018, cash increased from $0 to $2,446, total liabilities increased by $19,451 to $54,028, and the accumulated deficit increased by $17,030 to $52,082. The company moved from a $25 stock subscription receivable to cash, while continuing to fund operations primarily through stockholder advances.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expects to continue searching for a suitable business-combination candidate and anticipates additional reporting, investigation, analysis, and transaction costs.
- The financial statements contain a going-concern warning. Management states that losses since inception, negative working capital of approximately $52,000, and stockholders’ deficit of approximately $52,000 raise substantial doubt about the company’s ability to continue for the twelve months following issuance of the financial statements.
- Management expects to finance operations through additional borrowings under the existing stockholder promissory note, equity financing associated with a reverse merger, or other related-party funding. The filing provides no assurance that such financing will be available.
- During October 2018, after the reporting date, the company received approximately $7,500 of additional advances under the stockholder note.
- The note becomes payable upon consummation of a qualifying business combination or similar transaction. Following an event of default, the interest rate may increase to 18% beginning five days after the default date.
- Any eventual target may be financially unstable, early-stage, or in a high-risk industry. Management expects that limited financing may allow only one business combination, creating significant concentration and dilution risk.
- The company has approximately $52,000 of net operating loss carryforwards and a related deferred tax asset of approximately $11,000, fully offset by a valuation allowance. No income tax provision or benefit was recognized.
- The company reports no material legal proceedings and no material off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were effective as of September 30, 2018, with no material changes to internal control over financial reporting during the quarter.
Important Facts for Investors to Verify
- Verify the issuer identity: the supplied filing is for Olivia Ventures, Inc., while the request metadata identifies Compass Therapeutics, Inc.
- Verify the applicable fiscal period: the filing covers the quarter ended September 30, 2018, although the request labels it “2018 Q2.”
- Confirm the exact classification and reconciliation of the $51,028 stockholder-note balance, including the $1,403 accrued interest and amounts presented in accounts payable.
- Assess the company’s ability to obtain additional related-party or equity financing given only $2,446 of cash and $54,028 of current liabilities.
- Review the terms and subsequent funding under the stockholder promissory note, including the October 2018 advances and potential default-rate increase.
- Monitor whether management identifies and consummates a business combination; no definitive agreement or specific candidate existed as of the filing date.
- Consider the risk that the company may be unable to continue as a going concern or may experience substantial dilution in a future reverse merger or equity financing.