Filing identity and reporting period
Important metadata mismatch: The supplied filing is for Desert Gateway, Inc., not Travere Therapeutics, Inc. It is a Form 10-Q for the three months ended May 31, 2012, filed July 10, 2012. Desert Gateway describes itself as a shell company seeking a business combination, not as an operating therapeutics business.
Financial results and position
| Metric | Three months ended May 31, 2012 | Comparable 2011 period |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $3,009 | $3,024 |
| Interest and debt-discount amortization | $500 | $500 |
| Net loss | $3,509 | $3,524 |
| Basic and diluted loss per share | $0.03 | $0.03 |
| Cash used in operations | $9 | $24 |
At May 31, 2012, cash and total assets were $3,900, versus current liabilities of $67,489, leaving negative working capital of $63,589. Stockholders’ deficiency was $63,589. Liabilities included $25,000 of convertible debt, $9,572 due to related parties, and accrued expenses of $32,167. The note carries 8% interest, matured November 1, 2010, and is in default. No operating margin is meaningful because the company reported no revenue.
Changes, outlook, and key risks
Compared with 2011, quarterly revenue remained zero, operating expenses declined by $15, and net loss improved by $15. Cash fell by $9 during the quarter. The company recorded $3,000 of contributed officer services and office space as expense and additional paid-in capital in each comparison period.
Management said the company had no significant operations or operating cash flow and was seeking a merger or acquisition, with no target or preliminary business-combination discussions identified. It expected compliance and acquisition-related costs to be funded from its limited treasury and, if needed, loans or investments from shareholders, management, or others; no assurance of such funding was given. Management and the filing identify substantial doubt about the company’s ability to continue as a going concern, given its lack of revenue, negative working capital, and dependence on additional capital and a completed business combination. The filing also warns of risks related to finding a target, competition, dilution and potential loss of control, limited management resources, and the possibility of having only one business combination.
Management reported disclosure controls and procedures were not effective at period-end. It reported no material change in internal control over financial reporting during the quarter and no material litigation. Market-risk exposure includes interest-rate and currency changes; the company said it did not take specific actions to limit those exposures. The filing indicates the company had not filed all required Exchange Act reports during the preceding 12 months.
Investor verification points
- Confirm the issuer and filing match the intended company: the supplied document identifies Desert Gateway, Inc., not Travere Therapeutics, Inc.
- Verify the going-concern assessment, available funding, and ability to meet obligations; cash was $3,900 against $67,489 of current liabilities.
- Review the status and enforceability of the $25,000 convertible note, which is past maturity and in default.
- Reconcile share and preferred-stock disclosures: the balance sheet reports 106,681 common shares and 501 preferred shares outstanding, while other filing passages report 106,695 common shares and state no preferred shares had been issued. The filing also notes a 1-for-9 reverse split effective November 8, 2011.
- Assess the implications of ineffective disclosure controls and the company’s stated reporting-filing delinquency.