Business Context and Reporting Period
The provided filing is a Form 10-Q for Putnam Hills Corp., not Lunai Bioworks Inc. It covers the quarter and nine months ended December 31, 2011, with the company incorporated on January 18, 2011. Putnam Hills was a development-stage, blank-check and shell company formed to identify and complete a business combination with an operating company. The financial statements are unaudited.
Financial Highlights
| Metric | Three Months Ended December 31, 2011 | Nine Months Ended December 31, 2011 | Inception to December 31, 2011 |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| General and administrative expense | $11,351 | $25,534 | $34,269 |
| Net loss | $11,351 | $25,534 | $34,269 |
| Operating cash flow | Not separately provided | $(20,158) | $(20,158) |
| Investing cash flow | Not separately provided | $(13,219) | $(13,219) |
| Financing cash flow | Not separately provided | $33,500 | $33,500 |
| Ending cash | Not separately provided | $123 | $123 |
At December 31, 2011, total assets were $13,342, consisting of $123 of cash and a $13,219 related-party loan receivable. Total current liabilities were $22,611, including $376 of accounts payable, a $17,235 related-party loan payable, and a $5,000 related-party note payable. Stockholders’ deficiency was $9,269. No debt, liquidity or profit margins beyond these amounts are clearly reported.
The company had 5,000,000 shares outstanding as of February 21, 2012. The reported basic and diluted loss per share and weighted-average share amounts were presented as zero in the filing.
Material Changes Versus Prior Comparable Period
- Compared with March 31, 2011, assets increased from $0 to $13,342, while liabilities increased from $8,735 to $22,611.
- Cash increased to $123 from zero at March 31, 2011.
- The subscription receivable of $25,000 at March 31, 2011 was collected on August 10, 2011; the company recorded $25,000 of contributed capital and issued or subscribed for 5,000,000 common shares.
- Accumulated development-stage deficit increased from $8,735 to $34,269, reducing total stockholders’ deficiency to $9,269.
- No prior-year comparable quarterly operating results are provided because the company commenced operations in January 2011.
Guidance, Outlook, Risks and Unusual Items
- Management planned to continue searching for a suitable acquisition or merger candidate. No definitive business-combination agreement had been entered into as of the filing.
- The company generated no operating cash flow or revenue and expects to fund reporting, acquisition-search and transaction costs through remaining cash, deferred service-provider fees, equity financing and related-party advances.
- Management stated that substantial doubt exists about the company’s ability to continue as a going concern. Continued operations depend on completing a business combination, raising capital, obtaining related-party loans and ultimately generating operating income.
- Related parties paid $5,000 of professional fees and advanced $3,500 during the nine months. The $17,235 related-party loan payable is unsecured, non-interest-bearing and has no stipulated repayment terms.
- The company advanced $13,219 to related entities. The receivable is unsecured, non-interest-bearing and has no stipulated repayment terms.
- A $5,000 related-party promissory note bears interest at 6% and is payable upon completion of a qualifying business combination.
- Subsequent to December 31, 2011, Sunrise provided an additional $1,000 for professional fees.
- The company disclosed no material litigation, off-balance-sheet arrangements, defaults upon senior securities or unregistered equity sales during the period. Management concluded disclosure controls were effective as of December 31, 2011.
- A valuation allowance fully offset approximately $12,000 of deferred tax assets arising from net operating loss carryforwards of approximately $34,000.
Investor Verification Priorities
- Verify the registrant’s identity: the source filing names Putnam Hills Corp., while the request identifies Lunai Bioworks Inc.
- Confirm the company’s shell and blank-check status, the absence of an executed business-combination agreement, and the status of any subsequently announced transaction.
- Reconcile the $13,219 related-party receivable, $17,235 related-party loan payable and $5,000 note, including counterparties, repayment terms and collectability.
- Assess going-concern risk given only $123 of cash, negative stockholders’ equity, no revenue and reliance on additional financing.
- Verify the share subscription, ownership changes following the former president’s resignation, and the 5,000,000 shares outstanding as of February 21, 2012.
- Review subsequent financing, acquisition activity, and any later filings for changes after December 31, 2011.