Filing Overview
The provided filing is a Form 10-Q for Olivia Ventures, Inc., not Compass Therapeutics, Inc. It covers the quarter and nine months ended December 31, 2018, with a March 31 fiscal year-end. The company was incorporated on March 20, 2018 and operates as a shell and blank-check company seeking a business combination. The financial statements are unaudited.
Financial Highlights
| Metric | Three Months Ended December 31, 2018 | Nine Months Ended December 31, 2018 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expenses | $9,267 | $24,946 |
| Interest expense | $875 | $2,226 |
| Net loss | $10,142 | $27,172 |
| Basic and diluted loss per share | $0.00 | $0.01 |
- Cash at December 31, 2018 was $4,679, compared with $0 at March 31, 2018.
- Total assets were $4,679, compared with $25 at March 31, 2018.
- Current liabilities were $66,403, compared with $34,577 at March 31, 2018.
- Stockholders’ deficit was $61,724 at December 31, 2018, compared with $34,552 at March 31, 2018.
- The company had no revenue-producing operations and no material margins to report.
- Net cash used in operating activities for the nine months was $22,946. Financing activities provided $27,625, including $27,600 from a stockholder note and $25 collected on a stock subscription receivable.
Material Changes Versus the Prior Comparable Period
The filing does not provide a prior-year comparable quarter or nine-month income statement because the company was formed in March 2018. Compared with March 31, 2018, cash increased by $4,679, current liabilities increased by $31,826, and stockholders’ deficit increased by $27,172, consistent with the nine-month net loss.
Accounts payable and accrued expenses increased from $52 to $4,278, while the stockholder note payable increased from $34,525 to $62,125. The filing reports total amounts due under the stockholder note of $64,403, including $2,278 of accrued interest; the presentation of these amounts across the balance sheet accounts should be reconciled.
Outlook, Risks, and Unusual Items
- Management plans to continue identifying and evaluating a target for an acquisition, merger, reverse takeover, or similar business combination. No definitive agreement or specific target discussions had been entered into as of the filing date.
- The company expects to incur costs for SEC reporting and acquisition investigations and expects to fund operations through additional borrowings, equity financing, related-party advances, or a future reverse merger.
- Management states that the company’s losses, approximately $62,000 of negative working capital, and approximately $62,000 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 company had only $4,679 of cash at period-end and cautioned that additional funding may not be available.
- The stockholder note bears interest at 6% annually and is generally repayable upon consummation of a business combination. Upon an event of default, the rate may increase to 18% after the specified grace period.
- The company has approximately $62,000 of net operating loss carryforwards and a related deferred tax asset of approximately $13,000, fully offset by a valuation allowance. No income tax provision was recorded.
- Office space is provided at no charge by a company officer and stockholder. The company reported no material legal proceedings or off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were effective as of December 31, 2018, with no material changes in internal control over financial reporting during the quarter.
Investor Verification Priorities
- Verify the issuer identity: the supplied filing names Olivia Ventures, Inc., while the request identifies Compass Therapeutics, Inc.
- Reconcile the $62,125 stockholder note balance, $4,278 of accounts payable and accrued expenses, and the disclosed $64,403 total amount due including interest.
- Confirm the company’s ability to obtain additional financing and the terms, maturity, and repayment priority of future related-party advances.
- Assess whether a business combination target has been identified or whether any transaction occurred after December 31, 2018.
- Evaluate the going-concern uncertainty given $4,679 of cash, no revenue, negative working capital, and continuing operating losses.
- Review potential dilution and ownership changes associated with any future reverse merger or equity financing, including possible limitations on use of net operating losses under Section 382.