Compass Therapeutics, Inc. quarterly report, Q3 FY2020

SEC Filing Summary

Filing identity: The supplied Form 10-Q is for Olivia Ventures, Inc., not Compass Therapeutics, Inc. The report covers the quarter and nine-month period ended December 31, 2019 and was filed February 13, 2020. Olivia Ventures was a Delaware shell and blank-check company seeking a business combination; it had no operating business or revenue.

Business Context and Reporting Period

  • Olivia Ventures was incorporated in March 2018 to identify and complete an acquisition, merger, reverse takeover, or similar business combination.
  • The company reported no definitive agreement or specific discussions with a potential target as of the filing date.
  • The company was designated a smaller reporting company, emerging growth company, shell company, and blank-check company.
  • The financial statements are unaudited interim statements prepared under U.S. GAAP.

Financial Highlights

MetricThree Months Ended December 31, 2019Nine Months Ended December 31, 2019Comparable Prior Period
Revenue$0$0$0
General and administrative expense$10,238$27,707$9,267 and $24,946, respectively
Interest expense$1,444$3,840$875 and $2,226, respectively
Net loss$11,682$31,547$10,142 and $27,172, respectively
Basic and diluted loss per share$0.00$0.01$0.00 and $0.01, respectively
Operating cash flowNot provided for the quarter$(24,707)$(22,946)
Financing cash flowNot provided for the quarter$20,985$27,625

Balance Sheet and Liquidity

  • Cash was $1,144 at December 31, 2019, compared with $4,866 at March 31, 2019.
  • Total assets were $1,144, consisting entirely of cash.
  • Current liabilities were $103,280, including $10,170 of accounts payable and accrued expenses and $93,110 classified as a stockholder note payable on the balance sheet.
  • The note payable disclosure states that the total amount due, including accrued interest, was $100,280, creating a classification or presentation difference that should be reconciled.
  • Stockholders’ deficit was $102,136, compared with $70,589 at March 31, 2019.
  • Cash declined by $3,722 during the first nine months of fiscal 2020, from $4,866 to $1,144.
  • The company had no capital expenditures, material off-balance-sheet arrangements, or revenue-generating activities.

Material Changes Versus the Prior Comparable Period

  • Nine-month net loss increased 16.1%, from $27,172 to $31,547.
  • Nine-month general and administrative expense increased 11.1%, from $24,946 to $27,707.
  • Nine-month interest expense increased 72.5%, from $2,226 to $3,840.
  • Operating cash use increased from $22,946 to $24,707.
  • Financing proceeds declined from $27,625 to $20,985, consisting primarily of additional advances under the stockholder note.
  • Cash shifted from $4,679 at December 31, 2018 to $1,144 at December 31, 2019.

Guidance, Outlook, Risks, and Unusual Items

  • Management expects to continue searching for a suitable business combination and anticipates expenses for SEC filings, investigation, analysis, and transaction execution.
  • Management stated that it expects to finance operations through additional borrowings from the existing note, equity financing, reverse-merger proceeds, or related-party advances, but no funding is assured.
  • The financial statements identify substantial doubt about the company’s ability to continue as a going concern for the twelve months following issuance.
  • The company had approximately $103,000 of accumulated losses and net operating loss carryforwards, but recorded a full valuation allowance against the approximately $22,000 deferred tax asset.
  • The stockholder note bears interest at 6% annually and may accelerate upon default; the rate increases to 18% after the specified post-default period.
  • Office space was provided at no charge by the sole officer and a stockholder.
  • There were no material legal proceedings, unregistered securities sales, senior-security defaults, or reported changes in internal control. Management concluded that disclosure controls were effective.

Facts Investors Should Verify

  1. Confirm the issuer identity: the supplied filing is for Olivia Ventures, Inc., not Compass Therapeutics, Inc.
  2. Reconcile the balance-sheet stockholder note payable of $93,110 with the disclosed total amount due of $100,280, including accrued interest.
  3. Assess the going-concern warning and whether additional related-party financing was obtained after December 31, 2019.
  4. Verify whether the company completed or announced any business combination after the filing date.
  5. Review the terms, repayment trigger, default provisions, and related-party status of the stockholder promissory note.
  6. Confirm the filing period, because the supplied metadata labels the filing “2019 Q3,” while the Form 10-Q states that the quarter ended December 31, 2019.