Business Context and Reporting Period
Filing: Unaudited Form 10-Q for the quarter ended September 30, 2012, filed November 14, 2012. The supplied filing identifies the registrant as Zeta Acquisition Corp. II, not Whitehawk Therapeutics, Inc.; this entity discrepancy should be verified.
Zeta Acquisition Corp. II was a Delaware development-stage, blank-check and shell company formed on November 16, 2007. Its objective was to identify and complete a business combination with an operating company. It had no operating business, no identified target, and no revenue through September 30, 2012. The filing reports 5,000,000 common shares outstanding as of November 14, 2012.
Financial Condition and Results
| Metric | Three Months Ended September 30, 2012 | Nine Months Ended September 30, 2012 | Comparable 2011 Period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Net loss | $(6,038) | $(17,703) | $(6,337) and $(18,251), respectively |
| Operating loss | $(4,753) | $(14,015) | $(5,430) and $(15,559), respectively |
| Interest expense | $1,285 | $3,688 | $907 and $2,692, respectively |
| Net loss per share | $(0.00) | $(0.00) | $(0.00) |
The company had no revenue or gross profit; operating and net margins are therefore not meaningful. Cumulative net loss from inception through September 30, 2012 was $135,879.
| Balance Sheet Metric | September 30, 2012 | December 31, 2011 |
|---|---|---|
| Cash and cash equivalents | $5,391 | $4,125 |
| Prepaid expenses | $5,875 | $2,500 |
| Total assets | $11,266 | $6,625 |
| Total liabilities | $97,145 | $74,801 |
| Stockholders’ deficit | $(85,879) | $(68,176) |
| Stockholder notes payable | $85,000 | $60,000 |
| Accrued interest | $10,012 | $6,324 |
For the nine months ended September 30, 2012, operating activities used $23,734 of cash, compared with $20,768 used in the prior-year period. Financing activities provided $25,000 through stockholder loans, resulting in a $1,266 increase in cash. No investing cash flows were reported. The company had no material off-balance-sheet arrangements.
Material Changes Versus the Prior Comparable Period
- Three-month net loss improved to $6,038 from $6,337; nine-month net loss improved to $17,703 from $18,251.
- General and administrative expense decreased to $4,753 for the quarter and $14,015 for the nine months, from $5,430 and $15,559, respectively.
- Interest expense increased to $1,285 for the quarter and $3,688 for the nine months, from $907 and $2,692, respectively.
- Cash increased by $1,266 during the first nine months of 2012, compared with a $20,768 decrease in the prior-year period, primarily because of $25,000 in stockholder financing.
- Stockholder notes payable increased by $25,000 to $85,000. The 2012 loans were unsecured, bore interest at 6%, and were due on demand.
- Liabilities exceeded assets by $85,879 at September 30, 2012, compared with a deficit of $68,176 at year-end 2011.
Outlook, Risks, Contingencies, and Unusual Items
Management planned to continue searching for a suitable business combination during the next twelve months. It expected to fund reporting, investigation, and potential acquisition costs through existing cash, deferred service-provider fees, stockholder or management loans, and potential equity financing. No assurance was provided that additional financing would be available.
The filing states that substantial doubt exists regarding the company’s ability to continue as a going concern. Continued operations depended on obtaining financing, generating future profitable operations, and identifying and completing a suitable reverse merger or other business combination. Management reported that it had not had discussions with representatives of potential combination targets since the registration statement became effective.
Potential targets could be financially unstable, early-stage, or operating in high-risk industries. The company expected that limited financing could permit only one business combination, creating concentration and dilution risks. A valuation allowance fully offset approximately $46,200 of deferred tax assets because realization was uncertain.
The company used office space and equipment provided by an officer and director at no cost on a month-to-month basis; management considered the value de minimis. No material legal proceedings, unregistered equity sales, or defaults were reported. Management concluded that disclosure controls were effective as of September 30, 2012, with no material changes in internal control.
Important Facts to Verify
- Registrant identity: Confirm whether this filing belongs to Whitehawk Therapeutics, Inc. or Zeta Acquisition Corp. II.
- Going-concern position: Verify the company’s ability to fund operations with only $5,391 of cash against $97,145 of liabilities.
- Related-party financing: Confirm terms, maturity, accrued interest, and repayment expectations for the $85,000 of stockholder notes payable.
- Business combination status: Verify whether any target or merger discussions occurred after the filing date.
- Capital structure and dilution: Review the authorized preferred and common shares and the potential impact of future financing or a reverse merger.