Filing summary
Issuer and period: The filing is for Retrophin, Inc., then known as Desert Gateway, Inc., and covers the quarter ended November 30, 2012, with nine-month results and a February 29, 2012 balance-sheet comparison. It is not a filing under the name Travere Therapeutics, Inc.; the supplied filing text does not establish a connection to Travere.
Financial results and position
| Metric | Nine months ended Nov. 30, 2012 | Comparable 2011 period |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $9,170 | $9,067 |
| Interest and debt-discount amortization | $1,500 | $1,500 |
| Net loss | $10,670 | $10,567 |
| Net loss per share | $0.10 | $0.10 |
| Cash used in operating activities | $9 | $67 |
- For the three months ended November 30, 2012, revenue was $0 and net loss was $3,661, versus a $3,518 loss in 2011. The filing reports no gross margin.
- At November 30, 2012, cash and total assets were $3,900; current liabilities were $68,650, including a $25,000 convertible note, $33,328 accrued expenses, $9,572 due to related parties, and $750 trade payables. Stockholders’ deficiency was $64,750; accumulated deficit was $146,751.
- There was no reported operating business generating cash. The $9,000 officer-provided services and office space charge in the nine-month period was recorded as general and administrative expense with a corresponding contribution to paid-in capital.
- No profitability or operating margin was reported. The filing provides no clear cash-flow forecast or quantified funding plan.
Changes, outlook, and risks
- Results were broadly similar to 2011: nine-month net loss increased by $103, while operating cash use declined from $67 to $9. Revenue remained zero.
- The company described itself as a shell with nominal assets and operations during the reported periods. It stated that it depended on funding and that its negative working capital, negative equity, and lack of revenue raised substantial doubt about its ability to continue as a going concern. The financial statements contain no going-concern adjustments.
- Subsequent events: On December 10, 2012, the matured $25,000 convertible note was converted into 2,500,000 common shares; the related $8,168 accrued interest was canceled. On December 12, 2012, Retrophin merged into the company’s wholly owned subsidiary, former Retrophin stockholders received 5,434,120 company shares and held 68.9% after the transaction, and Retrophin’s business plan and management took over. The filing says the transaction is accounted for as a reverse merger and recapitalization.
- Disclosure controls and procedures were deemed ineffective at period-end. Management attributed the material weakness to having one employee and no operations, and cited additional post-closing review procedures. The filing reports no material litigation or off-balance-sheet transactions.
- The company elected the emerging-growth-company extended transition period for adopting certain accounting standards. Management cautioned that interim results may not indicate full-year results.
Important facts to verify
- Confirm the issuer identity and reporting period: this is a Retrophin/Desert Gateway filing, not identified as a Travere Therapeutics filing.
- Review the December 2012 merger terms, share issuance, change of control, and reverse-merger accounting in subsequent filings.
- Verify the post-period note conversion and cancellation of accrued interest, including their effects on liabilities and share count.
- Assess the going-concern disclosure, financing needs, and whether the post-merger business had adequate liquidity; this filing provides no quantified forward funding outlook.
- Check share-count and balance-sheet-date details: the filing reports 501 preferred shares in its financial statements but later states no preferred shares had been issued, and its text refers to both February 28 and February 29, 2012 for the comparative balance sheet.