Business Context and Reporting Period
This filing is a Form 10-Q for the quarter ended June 30, 2012, filed August 14, 2012. The filing identifies the registrant as Zeta Acquisition Corp. II, not Whitehawk Therapeutics, Inc.; this entity-name discrepancy should be verified. Zeta describes itself as a development-stage, blank-check and shell company formed to identify and complete a business combination. It had no operating business, no identified target, and no revenue.
Financial Performance and Position
- Revenue: None for the three or six months ended June 30, 2012 or since inception.
- Net loss: $6,303 for the quarter and $11,665 for the six months ended June 30, 2012, compared with losses of $6,760 and $11,914, respectively, in the comparable 2011 periods. Cumulative loss since inception was $129,841.
- Expenses: Six-month operating expenses were $9,262, primarily legal, accounting, audit and reporting costs. Interest expense was $2,403. There was no operating margin because the company generated no revenue.
- Cash flow: Net cash used in operating activities was $19,814 for the six months, versus $17,668 in 2011. Financing provided $25,000 through stockholder loans, resulting in a $5,186 increase in cash.
- Liquidity: Cash and cash equivalents were $9,311 at June 30, 2012, versus $4,125 at December 31, 2011. Current assets were $15,561 and current liabilities were $95,402, producing a substantial working-capital deficit.
- Debt: Stockholder notes payable totaled $85,000, up from $60,000 at December 31, 2011. The 2012 advances were unsecured, bear interest at 6% and are due on demand. Accrued and unpaid interest was $8,727.
- Equity: Stockholders’ deficit was $79,841 at June 30, 2012, compared with $68,176 at year-end 2011. The company had 5,000,000 common shares outstanding.
Material Changes, Outlook and Risks
- The six-month net loss declined modestly from $11,914 to $11,665, while operating cash use increased by $2,146.
- Cash improved only because of $25,000 in related-party financing; the company remains dependent on additional stockholder, management or other financing.
- Management expects to incur costs for SEC reporting and investigating, analyzing and potentially completing an acquisition. It stated that no business-combination discussions had occurred since the registration statement became effective.
- Management disclosed substantial going-concern uncertainty. The company cannot assure that it can satisfy cash requirements for the next twelve months, obtain additional funding, find a suitable target or complete a reverse merger.
- Potential targets could be financially unstable, early-stage or in high-risk industries. The company expects it may complete only one business combination, creating concentration and dilution risks.
- The company uses office space and equipment provided by an officer and director at no cost on a month-to-month basis. No material off-balance-sheet arrangements or pending legal proceedings were reported.
- Management concluded that disclosure controls and procedures were effective as of June 30, 2012, with no material changes to internal control over financial reporting.
Investor Verification Priorities
- Confirm whether this filing belongs to Whitehawk Therapeutics, Inc. or to Zeta Acquisition Corp. II, as the filing text identifies Zeta as the registrant.
- Verify the status, terms, maturity and related-party nature of the $85,000 stockholder notes and the $8,727 accrued interest.
- Assess the company’s ability to obtain additional financing given $9,311 of cash, $95,402 of current liabilities and continued operating cash burn.
- Determine whether any business-combination target or transaction emerged after June 30, 2012.
- Review dilution, ownership and control implications of any proposed reverse merger or equity financing.