Business context and reporting period
This is an unaudited Form 10-Q for the quarter and nine months ended September 30, 2011. The filing identifies the registrant as Jolley Marketing, Inc., a Nevada shell company seeking a merger or acquisition; it reports no revenue since September 2008 and has no employees. This differs from the company named in the request metadata, Creative Medical Technology Holdings, Inc.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue, 2011 / 2010 | $0 / $0 | $0 / $0 |
| Net loss, 2011 / 2010 | $4,602 / $3,565 | $17,256 / $13,399 |
| Operating expenses, 2011 / 2010 | $3,497 / $2,765 | $14,214 / $11,266 |
| Interest expense, 2011 / 2010 | $1,105 / $800 | $3,042 / $2,133 |
Margins are not meaningful with no revenue. Basic and diluted loss per share was reported as $0.00 in each period, rounded to cents. At September 30, 2011, cash was $1,205, prepaid expenses $3,000, total assets $4,205, current liabilities $69,570, and stockholders’ deficit $65,365. Current liabilities exceeded current assets by $65,365. Liabilities included $3,355 accounts payable, $6,042 in third-party note principal and accrued interest, and $60,173 in related-party note principal and accrued interest.
For the nine months, operating cash use was $13,859 versus $10,822 in 2010; financing provided $14,650 versus $10,500. Cash increased $791 to $1,205, compared with a $322 decrease to $253 in 2010. There were no investing cash flows and no cash interest or income taxes paid. No operating margin is available.
Material changes versus the prior comparable period
Nine-month net loss increased by $3,857, while operating expenses rose by $2,948. Professional fees increased to $13,270 from $11,166; interest expense rose to $3,042 from $2,133. The company recorded $944 of other general and administrative expense in 2011, compared with $100 of state franchise taxes in 2010. Revenue remained zero. Related-party notes and accrued interest increased from $48,523 at year-end 2010 to $60,173 at September 30, 2011; cash rose from $414 to $1,205.
Outlook, risks, and unusual items
Management estimates ongoing reporting and corporate expenses of about $20,000 per year and says additional funds will likely be needed. It anticipates related-party advances may cover needs for the next 12 months, but gives no assurance. Management is considering loans or common-stock sales; no acquisition target, negotiation, financing commitment, or capital-expenditure commitment is disclosed. The company reports no assurance it can raise funds, find or complete an acquisition, or operate profitably.
The filing states that recurring losses, operating cash outflows, liabilities exceeding current assets, and absence of revenue raise substantial doubt about the company’s ability to continue as a going concern. The statements include no adjustments for that uncertainty. Management concluded disclosure controls and procedures were not effective; it reported no material change in internal control over financial reporting during the quarter.
An August 1, 2011 $6,000 loan from Dassity, Inc., an entity owned and controlled by Brenda Hall, bears 8% interest. The filing says the company should have filed a Form 8-K disclosing the transaction. The loan’s maturity is inconsistent across the filing: the note disclosure says due on demand, while Item 5 says principal and interest are due 24 months after August 1, 2011. The filing reports no additional subsequent events.
Important facts for investors to verify
- Confirm the registrant identity: this filing is for Jolley Marketing, Inc., not the company in the request metadata.
- Resolve the third-party note’s conflicting maturity terms and confirm its balance and repayment status.
- Review the related-party financing terms, availability, and management’s expectation of advances to fund operations.
- Assess the going-concern warning, lack of revenue, minimal cash, and dependence on new financing or a potential acquisition.
- Consider the ineffective disclosure controls and the company’s statement that it did not timely file a Form 8-K for the loan.