Form 10-Q Summary
Important entity discrepancy: The supplied filing is for Zeta Acquisition Corp. III, not Kura Oncology, Inc. It reports the quarter ended June 30, 2012 and was filed August 14, 2012.
Business Context and Reporting Period
Zeta Acquisition Corp. III was a Delaware development-stage, blank-check and shell company formed to identify and complete a business combination. It had no operating business, generated no revenue, and had not identified or contacted any prospective combination target as of the filing date. The filing covers the three and six months ended June 30, 2012, with comparative 2011 periods.
The company reported 5,000,000 common shares outstanding as of August 14, 2012 and was classified as a smaller reporting company.
Financial Position and Results
| Metric | Three Months Ended June 30, 2012 | Six Months Ended June 30, 2012 | Prior Comparable Period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net loss | $(6,268) | $(11,640) | $(6,735) and $(11,889), respectively |
| Operating loss | $(4,996) | $(9,237) | $(5,837) and $(10,104), respectively |
| Interest expense | $1,272 | $2,403 | $898 and $1,785, respectively |
| Net loss per share | $(0.00) | $(0.00) | $(0.00) and $(0.00), respectively |
General and administrative expense was $4,996 for the quarter and $9,237 for the six-month period. The cumulative net loss since inception was $129,671. No meaningful operating margin analysis is applicable because the company had no revenue or operating activities.
| Balance Sheet Metric | June 30, 2012 | December 31, 2011 |
|---|---|---|
| Cash and cash equivalents | $9,481 | $4,220 |
| Prepaid expenses | $6,250 | $2,500 |
| Total assets | $15,731 | $6,720 |
| Total liabilities | $95,402 | $74,751 |
| Stockholders’ deficit | $(79,671) | $(68,031) |
| Stockholder notes payable | $85,000 | $60,000 |
Stockholder notes issued during 2012 totaled $25,000, are unsecured, bear interest at 6%, and are due on demand. Accrued and unpaid interest was $8,727 at June 30, 2012.
Cash Flow and Liquidity
| Cash Flow Metric | Six Months Ended June 30, 2012 | Six Months Ended June 30, 2011 |
|---|---|---|
| Cash used in operating activities | $(19,739) | $(17,643) |
| Cash provided by financing activities | $25,000 | $0 |
| Cash used in investing activities | $0 | $0 |
| Net change in cash | $5,261 | $(17,643) |
Current assets of $15,731 were substantially below current liabilities of $95,402. Management stated that the company may not be able to satisfy its cash requirements for the next twelve months and is dependent on stockholder or other financing. The financial statements were prepared on a going-concern basis, without adjustments that might be required if the company cannot continue operations.
Material Changes, Outlook, and Risks
- Six-month net loss improved modestly from $11,889 in 2011 to $11,640 in 2012, while operating cash use increased from $17,643 to $19,739.
- Cash increased by $5,261 because $25,000 of stockholder financing exceeded operating cash needs.
- Liabilities increased by $20,651 from December 31, 2011, primarily reflecting additional stockholder notes and accrued interest.
- Management intends to continue searching for a business combination but had not identified a target. No assurance was provided that a transaction or additional financing will occur.
- The company expects to fund reporting and acquisition-search costs with available cash, deferred service-provider fees, and additional stockholder, management, equity, or other financing.
- Potential targets may be financially unstable, early-stage, or in high-risk industries. A single business combination could result in substantial concentration and dilution for existing stockholders.
- The company had no material legal proceedings, no material off-balance-sheet arrangements, and no unregistered equity sales during the reported period.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2012, with no material changes in internal control during the quarter.
Investor Verification Items
- Verify the issuer identity: the supplied filing is for Zeta Acquisition Corp. III, not Kura Oncology, Inc.
- Confirm the company’s shell-company status, lack of revenue, lack of an identified target, and absence of operating activities.
- Review the $85,000 of demand notes payable to stockholders, including the 6% interest rate and $8,727 of accrued interest.
- Assess going-concern risk given $9,481 of cash, $95,402 of liabilities, accumulated deficit of $129,671, and dependence on related-party financing.
- Review whether any subsequent business combination, financing, name change, or reverse merger occurred after the June 30, 2012 reporting date.