Business Context and Reporting Period
The provided filing is for Olivia Ventures, Inc., not Compass Therapeutics, Inc. It is a Form 10-Q for the three months ended June 30, 2018, filed August 14, 2018. The company was incorporated on March 20, 2018 and is a Delaware blank-check and shell company seeking to acquire or merge with an operating business. It had no specific target or definitive business-combination agreement as of the filing date.
The company is classified as a smaller reporting company and emerging growth company and had 5,000,000 common shares outstanding as of August 14, 2018.
Financial Performance and Position
| Metric | Three Months Ended June 30, 2018 | Comparison |
|---|---|---|
| Revenue | $0 | No revenue since inception |
| General and administrative expenses | $7,894 | Prior comparable operating-period data not provided |
| Operating loss | $(7,894) | Prior comparable operating-period data not provided |
| Interest expense | $580 | Prior comparable operating-period data not provided |
| Net loss | $(8,474) | Prior comparable operating-period data not provided |
| Basic and diluted loss per share | $(0.00) | Based on 5,000,000 weighted-average shares |
| Net cash used in operating activities | $(7,894) | Prior comparable cash-flow data not provided |
| Net cash provided by financing activities | $15,125 | Included $15,100 of related-party advances and $25 collection of stock subscription receivable |
| Net increase in cash | $7,231 | Beginning cash was zero |
| Cash at June 30, 2018 | $7,231 | Cash was $0 at March 31, 2018 |
| Total current liabilities | $50,257 | $34,577 at March 31, 2018 |
| Stockholders’ deficit | $(43,026) | $(34,552) at March 31, 2018 |
Margins are not meaningful because the company had no revenue. Assets consisted exclusively of cash at June 30, 2018. The company had no operating business, capital expenditures, or material off-balance-sheet arrangements reported.
Material Changes Versus the Prior Comparable Period
- Cash increased from $0 at March 31, 2018 to $7,231 at June 30, 2018, primarily from related-party financing.
- Current liabilities increased by $15,680, from $34,577 to $50,257, principally reflecting additional advances under the stockholder note.
- Stockholders’ deficit increased from $(34,552) to $(43,026), reflecting the current-quarter net loss.
- Accounts payable and accrued expenses increased from $52 to $632; the $580 balance at June 30, 2018 included accrued interest.
- The filing does not provide a prior comparable quarterly income statement or cash-flow statement, so period-over-period changes in revenue, expenses, loss, and cash flow cannot be fully quantified.
Guidance, Outlook, Risks, and Unusual Items
- Management plans to continue seeking a suitable acquisition or merger candidate. No target, negotiations, or definitive agreement had been identified as of the filing date.
- Management expects to incur costs for SEC reporting and investigating, analyzing, and consummating a potential acquisition.
- The company expects to fund operations through additional borrowings under the existing promissory note, equity financing, related-party advances, or financing associated with a reverse merger. There is no assurance that funding will be available.
- Management stated that the company’s recurring losses, approximately $43,000 of negative working capital, and approximately $43,000 stockholders’ deficit raise substantial doubt about its ability to continue as a going concern for the twelve months following issuance of the financial statements.
- The stockholder note bears interest at 6% annually and is generally repayable upon consummation of a qualifying business combination. The note balance was $49,625 in principal, with total amounts due of $50,257 including accrued interest. Upon certain defaults, the interest rate may increase to 18% after the specified grace period.
- Office space is provided at no charge by the sole officer and a stockholder.
- The company has approximately $44,000 of federal and state net operating loss carryforwards and a deferred tax asset of approximately $9,000, fully offset by a valuation allowance. No income tax provision was recorded.
- Potential business-combination risks include selecting a financially unstable or early-stage target, lack of diversification, dilution, limited funding, and inability to complete a transaction.
- No material legal proceedings, unregistered equity sales, defaults upon senior securities, or material internal-control changes were reported. Management concluded that disclosure controls were effective as of June 30, 2018.
Most Important Facts for Investors to Verify
- Verify the issuer identity: the supplied filing is for Olivia Ventures, Inc., while the request identifies Compass Therapeutics, Inc.
- Verify whether a business-combination target or definitive agreement was announced after June 30, 2018.
- Review the stockholder promissory note, including repayment terms, accrued interest, default provisions, and related-party advances.
- Assess the going-concern uncertainty, the company’s $7,231 cash balance, and its dependence on additional related-party or equity financing.
- Confirm the company’s shell-company status, lack of revenue and operations, and potential dilution from any future reverse merger or acquisition.
- Reconcile the filing’s current liabilities, stockholder deficit, and accrued interest amounts to the underlying financial statements and subsequent filings.