Filing Scope and Business Context
Important entity mismatch: The requested company is Kura Oncology, Inc., but the provided Form 10-K is for Zeta Acquisition Corp. III, filed for the fiscal year ended December 31, 2013 and signed March 31, 2014. The filing does not contain information about Kura Oncology.
Zeta Acquisition Corp. III was a Delaware development-stage, blank-check and shell company formed to seek a business combination. As of December 31, 2013, it had identified no target, conducted no operating business, generated no revenue, and had entered into no business-combination agreement.
Financial Position and Results
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Net loss | $(28,611) | $(27,315) |
| Net loss per basic and diluted share | $(0.01) | $(0.01) |
| Net cash used in operating activities | $(23,234) | $(24,418) |
| Net cash provided by financing activities | $25,000 | $25,000 |
| Cash and cash equivalents, year-end | $6,568 | $4,802 |
| Total assets | $9,068 | $8,302 |
| Total liabilities | $133,025 | $103,648 |
| Stockholders’ deficit | $(123,957) | $(95,346) |
Operating expenses consisted primarily of general and administrative costs and interest expense. General and administrative expense was $22,734 in 2013 versus $22,341 in 2012; interest expense was $5,877 versus $4,974. No operating margin is meaningful because the company had no revenue.
At December 31, 2013, liabilities included $110,000 of notes payable to stockholders, $17,175 of accrued interest, $5,500 of accrued expenses and $350 of accounts payable. Stockholder notes were unsecured, bore interest at 6%, and were due on demand.
Material Changes Versus the Prior Period
- Net loss increased by $1,296, or approximately 4.7%, from $27,315 to $28,611.
- Cash increased by $1,766 to $6,568, primarily because $25,000 of stockholder financing exceeded operating cash use of $23,234.
- Total liabilities increased by $29,377, primarily reflecting an increase in stockholder notes payable from $85,000 to $110,000 and accrued interest from $11,298 to $17,175.
- Total assets increased by $766, as cash increased by $1,766 while prepaid expenses declined by $1,000.
- Accumulated development-stage losses increased to $173,957, producing a stockholders’ deficit of $123,957.
Liquidity, Outlook, Risks and Unusual Items
Management stated that the company did not have sufficient resources to satisfy cash requirements for at least the next twelve months with certainty. Continuation as a going concern depended on obtaining additional financing, related-party advances and completing a reverse merger or other business combination. The filing states that there was no assurance such funding or a suitable target would be available.
Management expected to incur costs for SEC reporting and for investigating and consummating an acquisition. It had no employees apart from its officers and directors, who expected to devote limited time to the company. The company used management’s office space and equipment at no cost, with the benefit estimated to be immaterial.
The company had no listed trading market, paid no dividends, had no equity compensation plans, and had no material pending legal proceedings or material off-balance-sheet arrangements. Management reported effective disclosure controls and internal control over financial reporting; the independent auditor did not provide an internal-control attestation because the company qualified for the applicable emerging-growth-company exemption.
The company’s principal risks included lack of operations and revenue, dependence on related-party funding, inability to identify or complete a business combination, limited due diligence resources, potential dilution, conflicts involving management and stockholder lenders, and the concentration of value in a single future transaction. The filing also notes that management expected a transaction could substantially dilute existing stockholders.
Investor Verification Items
- Verify the issuer identity: the supplied filing is for Zeta Acquisition Corp. III, not Kura Oncology, Inc.
- Confirm the applicable reporting period and whether a separate Kura Oncology filing was intended.
- Review the $110,000 of stockholder notes, their 6% interest rate, demand repayment terms and related-party holders.
- Assess the going-concern uncertainty in light of only $6,568 of cash, $133,025 of liabilities and no revenue.
- Confirm that no acquisition target, letter of intent or definitive business-combination agreement had been identified as of the filing date.
- Verify the reported share count of 5,000,000 common shares outstanding and the potential dilution from any future reverse merger or financing.