Business context and reporting period
This filing is for the three months ended March 31, 2012, and identifies the registrant as Jolley Marketing, Inc. The request metadata names Creative Medical Technology Holdings, Inc.; that does not match the company identified in the filing. Jolley describes itself as a shell company with no revenue since September 2008, seeking a business acquisition or merger. It reports no identified target or acquisition negotiations.
Financial results and liquidity
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $7,812 | $7,270 |
| Interest expense | $1,240 | $912 |
| Net loss | $9,052 | $8,182 |
| Net loss per share | $0.00 | $0.00 |
| Cash used in operations | $6,974 | $3,750 |
At March 31, 2012, cash was $631, prepaid expenses were $1,000, and total current assets were $1,631, versus $3,105 at year-end 2011. Current liabilities were $82,847, including $7,709 of accounts payable and $75,138 of related-party notes and accrued interest. The resulting working-capital deficit was $81,216. Stockholders’ deficit was also $81,216. The company reported no capital expenditures, investing cash flow, or cash interest or income-tax payments. There is no operating revenue from which to assess margins.
Material changes and financing
Compared with Q1 2011, the net loss increased by $870 and operating cash use increased by $3,224. Professional fees rose from $6,520 to $7,812; other general and administrative expense fell from $750 to zero. Cash declined by $474 during Q1 2012, compared with a $100 decline in Q1 2011. The company received $6,500 in related-party loan proceeds in Q1 2012, versus $3,650 a year earlier. The new notes are unsecured, bear 8% interest, and are payable on demand.
Outlook, risks, and controls
Management estimated ongoing public-company expenses of approximately $20,000 per year and said additional funds would likely be needed. It expected related-party advances to cover needs for the next 12 months, but gave no assurance. Management may also seek loans or sell common stock. The filing states that losses, operating cash outflows, excess current liabilities over current assets, and lack of revenue raise substantial doubt about the company’s ability to continue as a going concern; no assurance is given that additional capital or profitable operations can be achieved. The financial statements include no adjustments for the outcome of these uncertainties.
Management concluded that disclosure controls and procedures were ineffective as of March 31, 2012. It reported no material change in internal control over financial reporting during the quarter. The company had no employees, and its sole officer and director served without cash compensation. The filing reports no subsequent events requiring disclosure and no acquisition commitments.
Important facts to verify
- Confirm the issuer identity: the filing is for Jolley Marketing, Inc., not the company named in the request metadata.
- Review the going-concern disclosures and the availability, terms, and sustainability of related-party financing.
- Reconcile related-party debt and accrued-interest disclosures: the balance sheet reports $75,138, while MD&A splits this into $65,650 of notes and $9,488 of interest payable; note detail should be checked against those totals.
- Note the MD&A’s description of $9,052 as “operating expenses” includes $1,240 of interest, while the income statement presents $7,812 of operating expenses plus interest.
- Assess the implications of ineffective disclosure controls and the company’s lack of revenue, identified acquisition target, and committed financing.