Business Context and Reporting Period
The provided filing is a Form 10-Q for the quarter ended March 31, 2015, filed May 12, 2015. The filing identifies the registrant as Zeta Acquisition Corp. II, not Whitehawk Therapeutics, Inc.; investors should verify the issuer identity.
Zeta Acquisition Corp. II is a Delaware blank-check and shell company formed to identify and complete a business combination. It has conducted no active operations, generated no revenue since inception, and had not identified a target or held discussions with potential combination candidates as of the filing date. Five million common shares were outstanding as of May 11, 2015.
Key Financial Metrics
| Metric | Three months ended March 31, 2015 | Three months ended March 31, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| General and administrative expense | $3,962 | $4,138 |
| Interest expense | $1,853 | $1,628 |
| Net loss | $5,815 | $5,766 |
| Net loss per basic and diluted share | $0.00 | $0.00 |
| Net cash used in operating activities | $1,976 | $400 |
| Net cash provided by financing activities | $20,000 | $0 |
| Cash at period end | $23,287 | $5,883 |
At March 31, 2015, total assets consisted of $23,287 of cash and cash equivalents. Current liabilities totaled $184,143, including $145,000 of notes payable to stockholders, $25,855 of accrued interest, $10,088 of accounts payable, and $3,200 of accrued expenses. Stockholders’ deficit was $160,856. The filing does not present a meaningful operating margin because the company has no revenue.
Material Changes Versus the Prior Comparable Period
- Net loss increased slightly to $5,815 from $5,766, primarily because lower general and administrative expense was more than offset by higher interest expense.
- Operating cash use increased to $1,976 from $400.
- Stockholders provided $20,000 of unsecured, demand promissory-note financing bearing 6% interest, compared with no financing proceeds in the first quarter of 2014.
- Cash increased to $23,287 from $5,263 at December 31, 2014, while current liabilities increased to $184,143 from $160,304.
- Accumulated deficit increased to $210,856 from $205,041 at December 31, 2014.
Outlook, Risks, Contingencies, and Unusual Items
Management plans to continue searching for a suitable acquisition candidate and expects to incur reporting, investigation, analysis, and potential transaction costs. Funding is expected to come from existing cash, deferred service-provider fees, additional stockholder or management loans, equity financing, or a reverse-merger transaction. No assurance is provided that additional financing will be available.
The financial statements include a going-concern uncertainty. The company has generated no revenue, has incurred a cumulative net loss of $210,856 since inception, has liabilities substantially exceeding its cash, and depends on related-party financing. Management states that continuation depends on obtaining financing, generating profitable operations, and finding a suitable target company.
The company has no material off-balance-sheet arrangements and reported no material pending or threatened legal proceedings. Deferred tax assets of approximately $71,700 were fully offset by a valuation allowance. Office space and equipment are provided by an officer and director at no cost under a month-to-month arrangement.
As of the filing, the company was classified as a shell company, smaller reporting company, and emerging growth company. It adopted ASU 2014-10 effective January 1, 2015, eliminating development-stage-entity presentation requirements. Management concluded that disclosure controls and procedures were effective as of March 31, 2015, with no material changes in internal control during the quarter.
Investor Verification Items
- Verify whether this filing belongs to Whitehawk Therapeutics, Inc.; the supplied filing names Zeta Acquisition Corp. II throughout.
- Assess the going-concern disclosure and the company’s ability to obtain additional related-party or equity financing.
- Review the $145,000 of stockholder notes payable, including the 6% interest rate on 2015 borrowings and demand repayment terms.
- Confirm that no business combination had been identified or negotiated as of March 31, 2015.
- Reconcile cash of $23,287 with current liabilities of $184,143 and the $160,856 stockholders’ deficit.
- Consider the risks associated with the company’s shell status, lack of revenue, lack of operating history, and likely concentration in a single future business combination.