Business Context and Reporting Period
The provided filing is a Form 10-Q for the quarter ended June 30, 2011, filed August 15, 2011. Although the request identifies Kura Oncology, Inc., the filing names Zeta Acquisition Corp. III, a Delaware development-stage, blank-check and shell company. The company had no operating business and was formed to identify and complete a business combination with an unidentified target.
The financial statements are unaudited and cover the three and six months ended June 30, 2011, with cumulative activity from inception on November 16, 2007.
Financial Results and Position
| Metric | Three Months Ended June 30, 2011 | Six Months Ended June 30, 2011 | Comparable Period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net loss | $6,735 | $11,889 | $5,576 and $9,882, respectively |
| Operating loss | $5,837 | $10,104 | $5,121 and $9,057, respectively |
| Interest expense | $898 | $1,785 | $455 and $825, respectively |
| Net loss per share | $0.00 loss | $0.00 loss | $0.00 loss |
- Cash and cash equivalents were $9,255 at June 30, 2011, down from $26,898 at December 31, 2010.
- Total assets were $15,505, including $6,250 of prepaid expenses.
- Current liabilities were $68,385, including $60,000 of stockholder notes payable, $6,185 of accrued expenses and $2,200 of accounts payable.
- Stockholders’ deficit was $52,880 at June 30, 2011, compared with $40,991 at December 31, 2010.
- Cash used in operating activities was $17,643 for the six months ended June 30, 2011, versus $15,382 in the prior-year period. There was no investing cash flow and no financing cash flow in the 2011 period.
- Cumulative net loss from inception through June 30, 2011 was $102,880; cumulative cash used in operating activities was $100,745.
Material Changes Versus the Prior Comparable Period
- Six-month net loss increased by $2,007, or approximately 20%, from $9,882 to $11,889.
- Six-month operating expenses increased by $1,047, or approximately 12%, from $9,057 to $10,104.
- Six-month interest expense increased by $960, from $825 to $1,785.
- Cash used in operating activities increased by $2,261, or approximately 15%, from $15,382 to $17,643.
- The company received no financing during the first six months of 2011, compared with $10,000 of stockholder financing in the prior-year period.
- The company continued to have no revenue and no active operating business.
Guidance, Outlook, Risks and Unusual Items
- Management planned to continue searching for a suitable acquisition or merger candidate during the next twelve months. The filing states that no target had been identified and that management had not discussed a business combination with other entities since the registration statement became effective.
- Management expected to fund reporting, investigation and acquisition-related costs with existing cash, deferred service-provider fees, stockholder or management loans, or other financing. No assurance was provided that additional funding would be available.
- The filing expressly raises substantial doubt regarding the company’s ability to continue as a going concern. Continued operations depend on additional financing, future profitable operations, and ultimately locating and completing a suitable business combination.
- The $60,000 of stockholder notes were unsecured, bear interest at 6%, and are due on demand. Interest of $4,510 had accrued and remained unpaid at June 30, 2011.
- The company had approximately $15,400 of deferred tax assets, fully offset by a valuation allowance.
- 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 de minimis.
- No material litigation, off-balance-sheet arrangements, unregistered equity sales, or defaults upon senior securities were reported.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2011, with no material changes in internal controls during the quarter.
Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is for Zeta Acquisition Corp. III, not Kura Oncology, Inc.
- Verify whether the company completed any subsequent business combination, reverse merger, name change, or change in business purpose after June 30, 2011.
- Review the terms, maturity status and repayment history of the $60,000 of stockholder notes and accrued interest.
- Assess the company’s ability to obtain additional financing given only $9,255 of cash and $68,385 of current liabilities at quarter-end.
- Verify whether the going-concern uncertainty was resolved and whether a suitable acquisition target was identified.
- Reconcile the filing’s reported share count of 5,000,000 common shares outstanding as of August 9, 2011 with subsequent capitalization records.