Filing identity and period
Important identity discrepancy: The request identifies Creative Medical Technology Holdings, Inc., but the supplied Form 10-Q is for Jolley Marketing, Inc. The summary below reflects the supplied filing, not the company named in the request. It covers the unaudited quarter ended March 31, 2014.
Business context
Jolley Marketing reported that it was a shell company with no revenue since September 2008, no employees, and no identified acquisition target or acquisition negotiations. Its stated plan was to seek a business combination and maintain its public-company reporting.
Financial results and liquidity
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $8,039 | $8,454 |
| Interest expense | $1,976 | $1,595 |
| Net loss | $10,015 | $10,049 |
| Basic and diluted loss per share | $0.00 | $0.00 |
| Cash from operations | $(4,085) | $(9,034) |
| Cash at quarter end | $1,289 | $597 at March 31, 2013 |
| Current assets | $1,289 | $374 at December 31, 2013 |
| Current liabilities | $136,335 | $125,405 at December 31, 2013 |
At March 31, 2014, current liabilities exceeded current assets by $135,046. Liabilities included $12,037 of accounts payable and $124,298 of related-party notes and accrued interest; management’s discussion breaks the latter into $103,100 of principal and $21,198 of interest payable. The balance sheet reports a stockholders’ deficit of $135,046. No revenue or operating margin was reported.
Financing activities provided $5,000 in the quarter from a related-party loan, offsetting operating cash use and resulting in a $915 increase in cash. No investing cash flows or cash payments for interest or income taxes were reported. The filing reports no line of credit.
Changes, outlook, and risks
- Net loss improved slightly by $34 year over year; professional fees declined, while interest expense increased by $381, which the company attributed to higher notes payable.
- Management estimated ongoing expenses of approximately $20,000 per year and said additional funding would likely be needed. It expected related-party advances to meet needs for the next 12 months, but gave no assurance.
- A related party loaned the company $5,250 on May 8, 2014, after quarter end. It bears 8% interest and is due on demand. The filing also says a $5,000 related-party note issued March 18 was due on demand and bore 8% interest.
- The company disclosed substantial doubt about its ability to continue as a going concern, citing losses, negative operating cash flow, liabilities exceeding current assets, and no revenue-generating activities. It proposed raising funds through loans or common-stock sales; success was not assured.
- Management stated that disclosure controls and procedures were not effective as of quarter end. No material change in internal control over financial reporting was reported during the quarter.
- The filing cautioned that forward-looking statements were subject to risks, including economic and industry conditions, competition, regulatory changes, technology, and failure to develop business relationships.
Key facts investors should verify
- Confirm the issuer: the supplied filing is for Jolley Marketing, Inc., not Creative Medical Technology Holdings, Inc.
- Assess the company’s ability to fund operations given $1,289 in cash, $136,335 in current liabilities, and reliance on demand loans from related parties.
- Verify the terms, balances, and availability of related-party financing, including the May 2014 loan and any further advances.
- Consider the disclosed going-concern uncertainty, absence of revenue, and lack of an identified acquisition target.
- Review the disclosed ineffective controls and the filing’s unaudited, condensed financial statements.