Filing identity and period
The supplied filing is Jolley Marketing, Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2012—not a filing identified as Creative Medical Technology Holdings, Inc. The company describes itself as a shell company seeking a business combination and reports no revenue since September 2008. It had no employees and no identified acquisition target or active acquisition negotiations.
Financial results and condition
| Metric | Three months ended September 30, 2012 | Nine months ended September 30, 2012 | Comparable 2011 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $4,083 | $15,589 | $3,497 and $14,214, respectively |
| Interest expense, related parties | $1,418 | $4,003 | $1,105 and $3,042, respectively |
| Net loss | $5,501 | $19,592 | $4,602 and $17,256, respectively |
| Net loss per share | $0.00 | $0.00 | $0.00 in both comparable periods |
At September 30, 2012, cash was $756, prepaid expense was $394, and total current assets were $1,150. Current liabilities were $92,906, including $8,305 of accounts payable and $84,601 of related-party notes and accrued interest. The company had a stockholders’ deficit of $91,756. The filing does not present a meaningful revenue margin because revenue was zero.
For the nine months, operating cash use was $13,549, financing provided $13,200 through related-party notes, and cash decreased $349 to $756. No investing cash flows were reported. No cash interest or income taxes were paid. The notes are due on demand and generally bear 8% interest; the filing reports no line of credit.
Changes versus prior comparable periods
- Nine-month net loss increased by $2,336, from $17,256 to $19,592. Management attributed the increase to higher professional fees, including XBRL services not required in 2011, and higher interest expense as notes payable increased.
- Third-quarter net loss increased by $899, from $4,602 to $5,501; management attributed the increase primarily to higher interest expense.
- Cash fell from $1,105 at December 31, 2011 to $756 at September 30, 2012, while current liabilities rose from $75,269 to $92,906.
Outlook, risks, and notable items
- Management estimated ongoing expenses of approximately $20,000 per year and expected to need additional funds. It anticipated related-party advances could cover needs for the next 12 months, but gave no assurance.
- The filing states that losses, operating cash outflows, liabilities exceeding assets, and absence of revenue raise substantial doubt about the company’s ability to continue as a going concern. Management proposed funding through loans or common-stock sales; success is not assured.
- On November 1, 2012, the company borrowed an additional $1,600 from a shareholder, due on demand at 8% interest, for operating expenses.
- Management concluded disclosure controls were not effective because a single officer handled financial reporting, with no audit committee, adequate segregation of duties, or sufficient accounting expertise. No material change in internal control was reported during the quarter.
- Management’s acquisition plan and forward-looking statements are subject to uncertainty, including the ability to identify and complete a suitable transaction, obtain financing, and operate profitably after a combination.
Important facts for investors to verify
- Confirm the issuer: the provided filing names Jolley Marketing, Inc., whereas the request identifies Creative Medical Technology Holdings, Inc.
- Reconcile related-party debt and accrued interest balances, including the notes’ demand terms, interest accruals, and subsequent $1,600 borrowing.
- Assess the company’s ability to fund operations and address the going-concern uncertainty given minimal cash, no revenue, and current liabilities substantially exceeding current assets.
- Review the disclosed ineffective controls and whether any remediation, financing, or acquisition developments occurred after the reporting date.