Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended September 30, 2012, covering the three and six months ended September 30, 2012. Although the request identifies Lunai Bioworks Inc., the filing itself identifies the registrant as Putnam Hills Corp., a Delaware development-stage, blank-check and shell company incorporated on January 18, 2011.
The company has no operating business and is seeking a business combination, acquisition or reverse merger with an operating company. It had 5,000,000 common shares outstanding as of November 14, 2012.
Key Financial Metrics
| Metric | Three Months Ended September 30, 2012 | Six Months Ended September 30, 2012 | Prior Comparable Period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| General and administrative expense | $7,040 | $18,040 | $14,153 and $14,183, respectively |
| Interest expense | $25 | $25 | $0 |
| Net loss | $(7,065) | $(18,065) | $(14,153) and $(14,183), respectively |
| Net cash used in operating activities | Not separately provided | $(18,040) | $(9,108) |
Margins and profitability ratios are not meaningful because the company generated no revenue. Cumulative net loss from inception through September 30, 2012 was $56,745.
| Balance Sheet Metric | September 30, 2012 | March 31, 2012 |
|---|---|---|
| Cash | $2,296 | $336 |
| Loans receivable from related parties | $13,219 | $13,219 |
| Total assets | $15,515 | $13,555 |
| Total current liabilities | $47,260 | $27,235 |
| Stockholders’ deficiency | $(31,745) | $(13,680) |
Liabilities consisted primarily of a $38,235 related-party loan payable, a $9,000 related-party note payable, and $25 of accrued expenses. The note bears 6% interest and is payable upon completion of a business combination; the lender waived accrued interest through August 20, 2012.
Six-month financing inflows were $20,000, consisting of $16,000 of additional related-party loans and $4,000 of additional related-party notes. The company had no material investing cash inflows or outflows during the six months.
Material Changes Versus Prior Comparable Period
- Six-month net loss increased to $18,065 from $14,183, primarily reflecting higher general and administrative expenses and $25 of interest expense.
- Six-month operating cash use increased to $18,040 from $9,108.
- Cash increased by $1,960 from March 31, 2012, to $2,296, but only because of $20,000 of related-party financing.
- Total liabilities increased by $20,025, largely due to additional related-party borrowing.
- Stockholders’ deficiency widened to $31,745 from $13,680 as accumulated losses increased.
- The company continued to generate no revenue and reported no active operating business.
- Effective October 19, 2012, Sasha Masri resigned as chief financial officer and director. Samir Masri was appointed chief financial officer while continuing as chief executive officer, president, secretary and director.
Outlook, Risks, Contingencies and Unusual Items
Management plans to continue searching for a suitable acquisition or merger candidate. The company expects to fund reporting, investigation and transaction costs through available cash, deferred service-provider fees, related-party advances, equity financing or other capital. Management states that it has had no discussions with representatives of potential business-combination targets since the Form 10 registration statement became effective.
The financial statements disclose substantial doubt about the company’s ability to continue as a going concern. The company has approximately $57,000 of cumulative losses, negative working capital of approximately $32,000, only $2,296 of cash, no revenue-producing activities and dependence on additional financing and a successful business combination. No assurance is provided that additional funding or a suitable target will be obtained.
The company is a shell and blank-check company with no specific industry or geographic acquisition focus. Any future transaction may involve a financially unstable or early-stage business, substantial dilution, limited diversification and significant execution risk. The company states that it has no material off-balance-sheet arrangements and no material pending legal proceedings.
The company has approximately $57,000 of federal and state net operating loss carryforwards, but recorded no tax benefit because the related deferred tax asset was fully offset by a valuation allowance.
Investor Verification Items
- Verify the registrant’s identity: the supplied filing names Putnam Hills Corp., not Lunai Bioworks Inc.
- Confirm the going-concern disclosure, negative working capital and dependence on related-party funding.
- Review the terms, repayment conditions and related-party nature of the $38,235 loan and $9,000 note.
- Assess the collectability and terms of the $13,219 in related-party loans receivable.
- Determine whether any business combination was subsequently identified or consummated, since none had been discussed as of the filing.
- Confirm the October 19, 2012 CFO and director resignation and appointment.
- Reconcile the stated quarterly period with the September 30, 2012 reporting date and the six-month comparative figures.