SEC Filing Summary
Important identification note: The supplied filing is for Zeta Acquisition Corp. III, not Kura Oncology, Inc. It is a Form 10-Q for the quarter ended June 30, 2014, filed August 14, 2014.
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 with an operating company. It had no active operating business, had generated no revenue since inception, and had not identified or held discussions with a potential target.
The financial statements are unaudited and cover the three and six months ended June 30, 2014, with comparative periods in 2013 and cumulative activity since inception on November 16, 2007.
Financial Condition and Results
| Metric | Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | Prior Comparable Period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net loss | $(6,887) | $(12,653) | $(6,749) and $(12,722), respectively |
| Operating loss | $(5,242) | $(9,380) | $(5,456) and $(10,172), respectively |
| Interest expense | $1,645 | $3,273 | $1,293 and $2,550, respectively |
| Net loss per share | $(0.00) | $(0.00) | $(0.00) and $(0.00), respectively |
- Cash and cash equivalents were $4,918 at June 30, 2014, down from $6,568 at December 31, 2013.
- Total assets were $4,918, compared with $9,068 at year-end 2013; prepaid expenses declined from $2,500 to zero.
- Total liabilities were $141,528, compared with $133,025 at December 31, 2013.
- Liabilities included $110,000 of notes payable to stockholders, $20,448 of accrued interest, $8,155 of accounts payable and $2,925 of accrued expenses.
- Stockholders’ deficit was $(136,610), compared with $(123,957) at year-end 2013.
- Six-month operating cash flow was $(1,650), compared with $(11,097) in the prior-year period. There was no investing or financing cash flow during the first six months of 2014.
- Cumulative net loss since inception was $186,610, and cumulative net cash used in operating activities was $155,082.
Material Changes Versus the Prior Comparable Period
- Three-month net loss increased modestly by $138, or approximately 2%, primarily because of higher interest expense.
- Six-month net loss decreased by $69, or less than 1%, as lower general and administrative costs more than offset the increase in interest expense.
- Operating cash use improved by $9,447 versus the first six months of 2013, but cash declined by $1,650 during the period because there were no financing proceeds.
- Accounts payable increased from $350 to $8,155, while accrued expenses declined from $5,500 to $2,925.
- No shares were issued during the period. The company had 5,000,000 common shares outstanding.
Guidance, Outlook, Risks and Unusual Items
Management planned to continue searching for a suitable acquisition candidate and expected to incur costs for SEC reporting and investigating, analyzing and completing a potential acquisition. The company stated that it would likely need additional loans, equity investment or financing from stockholders, management or other investors.
Management disclosed substantial doubt regarding the company’s ability to continue as a going concern. Available cash was insufficient to cover current liabilities, and there was no assurance that additional funding would be available or that a suitable target would be identified. The company had no revenues and depended on related parties for continued funding.
- The $110,000 of stockholder notes were unsecured; portions bear 6% interest and are due on demand. Accrued and unpaid interest was $20,448.
- The company’s deferred tax assets of approximately $63,400 were fully offset by a valuation allowance because realization was uncertain.
- The company used office space and equipment provided by an officer and director at no cost under a month-to-month arrangement; management considered the value immaterial.
- No material legal proceedings, unregistered securities sales or defaults upon senior securities were reported.
- Management stated that disclosure controls and procedures were effective as of June 30, 2014, with no material changes in internal controls during the quarter.
- The company had not early adopted ASU 2014-10, which eliminates development-stage-entity reporting requirements for applicable periods after adoption.
Most Important Facts to Verify
- Confirm the filing issuer: the provided document identifies Zeta Acquisition Corp. III, not Kura Oncology, Inc.
- Verify the company’s ability to continue as a going concern given $4,918 of cash versus $141,528 of current liabilities.
- Review the terms, interest accrual and demand status of the $110,000 in stockholder notes.
- Confirm that the company had no revenue, operating business or identified acquisition target as of June 30, 2014.
- Reconcile the stated net loss, accumulated deficit and cash flow figures with the filed financial statements.