Business context and reporting period
Entity mismatch: The supplied filing is for Jolley Marketing, Inc., not Creative Medical Technology Holdings, Inc. It is a Form 10-Q for the quarter ended September 30, 2014.
Jolley describes itself as a shell company with no revenue since September 2008. It is seeking a business combination but had identified no target or entered acquisition negotiations. The company reported no employees; its sole officer and director provides services without cash compensation.
Financial results and liquidity
| Metric | Three months ended September 30, 2014 | Nine months ended September 30, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses, excluding interest | $3,553 | $15,227 |
| Related-party interest expense | $2,200 | $6,282 |
| Net loss | $5,753 | $21,509 |
| Basic and diluted loss per share | $0.00 | $0.00 |
For the nine months, net cash used in operations was $11,985, compared with $18,609 in 2013. Related-party financing provided $12,900; cash increased $915 to $1,289. No investing cash flow was reported.
At September 30, 2014, current assets were $1,289, all cash, versus current liabilities of $147,829: accounts payable of $11,325 and related-party notes and accrued interest of $136,504. The resulting working-capital deficit was $146,540, matching the stockholders’ deficit. Related-party principal was reported as $111,000 and accrued interest as $25,504. No revenue-based margins are available. Common shares outstanding were 18,113,750, unchanged from December 31, 2013.
Changes versus prior comparable periods
Quarterly net loss increased to $5,753 from $5,443, primarily as related-party interest expense rose to $2,200 from $1,846; professional fees were slightly lower. Nine-month net loss increased to $21,509 from $21,232: lower professional fees were more than offset by higher interest expense and other general and administrative costs. Nine-month operating cash use improved by $6,624 year over year. Cash rose from $374 at December 31, 2013 to $1,289 at September 30, 2014, while related-party notes and accrued interest increased.
Outlook, risks and unusual items
- Management estimates ongoing public-company expenses of about $25,000 annually and expects related-party advances to fund operations for the next 12 months, but gives no assurance that funding will be available. It may seek loans or sell common stock.
- The filing states that losses, negative operating cash flow, liabilities exceeding current assets, and no revenue-generating activities raise substantial doubt about the company’s ability to continue as a going concern. No assurance is given that it can raise capital, complete an acquisition, or achieve profitable operations.
- On November 3, 2014, six promissory notes that had matured during 2014 were extended for one year. Related-party notes are generally due on demand and bear 8% annual interest.
- Management concluded disclosure controls and procedures were not effective as of September 30, 2014. It reported no material change in internal control over financial reporting during the quarter.
- The financial statements are unaudited and prepared on a going-concern basis; they contain no adjustments for the potential outcome of the stated uncertainties. No acquisition guidance or specific target was disclosed.
Important facts to verify
- Confirm the issuer: this filing identifies Jolley Marketing, Inc., which conflicts with the requested company, Creative Medical Technology Holdings, Inc.
- Verify current availability and terms of related-party funding, including demand repayment obligations and the subsequent one-year note extensions.
- Review the going-concern disclosure, working-capital deficit, and management’s stated funding plans.
- Assess the ineffective disclosure controls and consider the company’s shell status and lack of an identified acquisition target.