Filing summary
Entity and period: The filing is a Form 10-Q for the quarter ended June 30, 2014. The supplied request identifies Creative Medical Technology Holdings, Inc., but the filing itself is for Jolley Marketing, Inc., a Nevada shell company. Confirm that this is the intended filing.
Business context and outlook
Jolley Marketing reported no revenue since September 2008 and describes itself as a shell seeking a merger or acquisition. It had no employees, no identified acquisition target, and no acquisition negotiations. Its plan was to continue searching for a business combination and meet public-company reporting requirements.
Management estimated ongoing expenses of about $20,000 annually and expected related-party advances to fund operations for the next 12 months, but gave no assurance those funds would be available. The company warned that its financial condition raises substantial doubt about its ability to continue as a going concern.
Financial results and liquidity
- Revenue: $0 for both the three and six months ended June 30, 2014, and for the comparable 2013 periods.
- Second-quarter results: Operating expenses were $3,635, including $3,535 in professional fees and $100 in general and administrative costs. Related-party interest expense was $2,106; net loss was $5,741, versus $5,740 in Q2 2013. Basic and diluted loss per share was reported as $0.00.
- First-half results: Operating expenses were $11,674, including $11,499 in professional fees and $175 in general and administrative costs. Related-party interest expense was $4,082; net loss was $15,756, compared with $15,789 in first-half 2013. Loss per share was reported as $0.00.
- Cash flow: First-half operating cash use was $9,335, compared with $14,928 in 2013. Related-party financing provided $10,250, compared with $14,550. Cash increased by $915 to $1,289; the company reported no investing cash flows or cash paid for interest or income taxes.
- Balance sheet at June 30: Cash and total current assets were $1,289; current liabilities were $142,076, including $10,422 of accounts payable. Related-party notes and accrued interest totaled $131,654 on the balance sheet. Stockholders’ deficit was $140,787. The filing reports no other assets or line of credit.
Changes, risks, and unusual items
First-half net loss was slightly lower than in 2013, while interest expense rose from $3,349 to $4,082; management attributed the increase to higher related-party borrowing. The company received a $5,250 unsecured related-party note in May 2014, bearing 8% interest and payable on demand. Other related-party notes were also due on demand and bore 8% interest.
Management cited losses, operating cash outflows, liabilities exceeding current assets, and the absence of revenue-generating activities as factors creating substantial doubt about continued operations. Additional financing through loans or stock sales was proposed, with no assurance of success. The company reported that disclosure controls and procedures were not effective as of quarter-end; it reported no material change in internal control over financial reporting during the quarter.
Reporting note: The statements show Q2 operating expenses of $3,635 and separate interest expense of $2,106, while MD&A describes Q2 “operating expenses” of $5,741 including interest. The financial statements present these as separate line items.
Important facts for investors to verify
- Whether this Jolley Marketing filing is actually the filing intended by the request for Creative Medical Technology Holdings, Inc.
- Availability and terms of future related-party funding, including demand repayment obligations and accrued interest.
- Progress toward identifying and completing a business combination, and any resulting financing or dilution needs.
- The going-concern uncertainty and management’s conclusion that disclosure controls were ineffective.
- The classification difference between Q2 operating expenses in MD&A and the financial statements.