Filing summary
Issuer and period: The supplied filing is for Desert Gateway, Inc., not Travere Therapeutics, Inc. It is a Form 10-Q for the quarter ended August 31, 2012, covering the three- and six-month periods ended that date. The balance sheet compares August 31, 2012 with February 29, 2012. The filing also marks “No” for having filed all required reports during the preceding 12 months.
Business context and financial performance
Desert Gateway describes itself as a shell company seeking a business combination. It reports no operating revenue and says it has no current business activities generating cash flow.
| Metric | Three months ended Aug. 31, 2012 | Six months ended Aug. 31, 2012 | Prior-year comparison |
|---|---|---|---|
| Revenue | $0 | $0 | $0 in both comparable 2011 periods |
| General and administrative expense | $3,000 | $6,009 | $3,025 and $6,049, respectively |
| Interest and debt-discount amortization | $500 | $1,000 | Unchanged at $500 and $1,000 |
| Net loss | $3,500 | $7,009 | $3,525 and $7,049, respectively |
| Basic and diluted loss per share | $0.03 | $0.07 | Same as comparable 2011 periods |
For the six months, operating cash use was $9, versus $49 in 2011. Cash declined from $3,909 at February 29 to $3,900 at August 31. The company recorded $6,000 of contributed officer services and office space as general and administrative expense, with a corresponding contribution to paid-in capital.
Financial position and material changes
At August 31, 2012, total assets were $3,900, all cash. Current liabilities were $67,989, including $25,000 of convertible debt due within one year, $9,572 due to related parties, $32,667 of accrued expenses, and $750 of trade payables. Working capital was negative $64,089; stockholders’ deficiency was $64,089. Compared with February 29, cash fell $9, current liabilities rose $1,000, and accumulated deficit increased from $136,081 to $143,090.
The $25,000 note bears 8% annual interest, matured November 1, 2010, and is in default. It is convertible at the holder’s option at $0.01 per share; management describes the conversion as 2.5 million shares. Accrued interest was reported as $7,667 in MD&A.
Outlook, risks, and controls
Management plans to seek a business combination and expects reporting and acquisition-related costs over the next 12 months. It says these costs may depend on cash on hand and additional loans or investments from shareholders, management, or other investors. No target discussions or agreements were reported. Management and the filing state that negative working capital, negative equity, no operating revenue, and reliance on external funding raise substantial doubt about the company’s ability to continue as a going concern; the financial statements include no adjustments for a potential inability to continue.
Risks highlighted include failure to find or complete a combination, competition for targets, dependence on a part-time sole officer and director, likely dilution and possible change of control, potential lack of diversification, limited trading liquidity, and costs or delays associated with shell-company reporting and audited target financial statements. The company reported no material litigation and no off-balance-sheet transactions. Management concluded disclosure controls were not effective at period-end; it reported no material change in internal control during the six-month period.
Important facts to verify
- Confirm the issuer and reporting period: the provided filing identifies Desert Gateway, Inc., not Travere Therapeutics, Inc.
- Verify the filing’s reporting-compliance status and any omitted or late SEC filings.
- Confirm the convertible note’s default status, accrued interest, conversion terms, and current settlement expectations.
- Resolve the filing’s conflicting preferred-stock disclosures: the balance sheet reports 501 preferred shares outstanding, while a later section says no preferred shares have been issued.
- Verify current cash needs, sources of funding, and whether any business-combination discussions or agreements have arisen since the filing.