Business Context and Reporting Period
The submitted filing is a Form 10-K for Zeta Acquisition Corp. II, not Whitehawk Therapeutics, Inc. It covers the fiscal year ended December 31, 2011, and was filed March 30, 2012. Zeta was a Delaware development-stage blank-check and shell company formed to pursue a business combination. It had identified no target, entered no negotiations, and conducted no operating business since inception on November 16, 2007.
The company had no employees other than its officers and directors, no owned or leased property, no publicly traded market for its common stock, and no non-affiliate holders as of December 31, 2011.
Financial Results and Key Metrics
| Metric | 2011 | 2010 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $(27,185) | $(22,395) |
| Operating expenses | $23,585 | $20,509 |
| Interest expense | $3,600 | $1,886 |
| Net cash used in operating activities | $(22,773) | $(19,244) |
| Net cash provided by financing activities | $0 | $35,000 |
| Cash and cash equivalents at year-end | $4,125 | $26,898 |
| Total assets | $6,625 | $29,398 |
| Total liabilities | $74,801 | $70,389 |
| Stockholders’ deficit | $(68,176) | $(40,991) |
The company generated no revenue or operating cash flow and therefore had no meaningful revenue or operating margins. Its liabilities included $60,000 of stockholder notes payable, $6,324 of accrued interest, $2,977 of accounts payable, and $5,500 of accrued expenses. The stockholder notes bear 6% interest, are unsecured, and are payable on demand.
Basic and diluted loss per share was $(0.01) in 2011 and $(0.00) in 2010, based on 5,000,000 weighted-average common shares outstanding in each year. No preferred stock was issued, and no dividends were paid or planned in the foreseeable future.
Material Changes Versus the Prior Comparable Period
- Net loss increased by $4,790, or approximately 21%, primarily from higher general and administrative costs and interest expense.
- Cash declined by $22,773, or approximately 85%, from $26,898 to $4,125.
- Total assets fell by $22,773, while total liabilities increased by $4,412.
- Stockholders’ deficit increased by $27,185 to $68,176, reflecting the 2011 net loss.
- There was no financing activity during 2011, compared with $35,000 of stockholder loan proceeds in 2010.
- The company remained without an acquisition target or active operations.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management planned to continue searching for a suitable acquisition candidate and expected to incur costs for SEC reporting and acquisition investigations. It expected to fund operations through existing treasury funds, deferred fees, related-party advances, additional equity financing, or financing associated with a reverse merger.
Management stated that the company’s ability to continue as a going concern depends on obtaining additional financing, generating future profitable operations, and finding a suitable target. The filing provides no assurance that additional funding will be available. The financial statements were prepared on a going-concern basis and contain no adjustments that might be required if the company cannot continue operations.
Subsequent to year-end, stockholders and affiliates provided $25,000 of additional unsecured, 6% notes payable on demand: $15,000 issued January 17, 2012, and $10,000 issued February 29, 2012. The company used management office space and equipment at no cost. It reported no material pending legal proceedings and no material off-balance-sheet arrangements.
The company was subject to substantial risks associated with blank-check and shell companies, including limited capital, intense competition for targets, potentially inadequate due diligence, dependence on related-party funding, possible substantial dilution, lack of diversification, and the possibility of acquiring a financially unstable or early-stage business. The company’s management concluded that disclosure controls and internal control over financial reporting were effective; the auditor was not engaged to attest to internal control effectiveness.
Important Facts for Investors to Verify
- Issuer identity: Confirm whether this filing belongs to Zeta Acquisition Corp. II or Whitehawk Therapeutics, Inc.; the supplied filing text identifies Zeta throughout.
- Liquidity: Verify the $4,125 year-end cash balance against $74,801 of liabilities and the company’s stated going-concern dependence on new financing.
- Related-party debt: Review the $60,000 stockholder notes outstanding at year-end and the additional $25,000 of notes issued after year-end.
- Business status: Confirm that no acquisition target, letter of intent, or business-combination agreement existed as of the filing date.
- Ownership and dilution: Verify that management beneficially owned 80% of the 5,000,000 outstanding common shares and assess potential dilution from a future business combination.
- Financial statements: Review the audited statements and going-concern disclosures, including the full valuation allowance against deferred tax assets.