Business Context and Reporting Period
The filing is a Form 10-Q for Putnam Hills Corp., although the request metadata identifies Lunai Bioworks Inc. The report covers the three and six months ended September 30, 2011, and the period from January 18, 2011, inception, through September 30, 2011. Putnam Hills was incorporated in Delaware as a development-stage, blank-check and shell company to pursue an acquisition or merger with an operating business. It reported 5,000,000 common shares outstanding as of November 25, 2011.
Financial Condition and Results
| Metric | Three Months Ended September 30, 2011 | Six Months Ended September 30, 2011 | Cumulative Since Inception |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| General and administrative expenses | $14,153 | $14,183 | $22,918 |
| Net loss | $(14,153) | $(14,183) | $(22,918) |
| Income tax benefit | $0 | $0 | $0 |
| Basic and diluted loss per share | Reported as “-” | Reported as “-” | Reported as “-” |
Because the company had no revenue, meaningful gross, operating or net profit margins cannot be calculated. The filing does not provide a clear weighted-average share count for the reported periods.
| Balance Sheet Metric | September 30, 2011 | March 31, 2011 |
|---|---|---|
| Cash | $12,492 | $0 |
| Related-party loan receivable | $8,400 | $0 |
| Total assets | $20,892 | $0 |
| Total current liabilities | $18,810 | $8,735 |
| Stockholders’ equity | $2,082 | $(8,735) |
Current liabilities consisted of $75 of accounts payable, a $13,735 unsecured, non-interest-bearing related-party loan with no stipulated repayment terms, and a $5,000 related-party note. The note bears interest at 6% and is payable upon completion of a qualifying business combination.
Cash flow for the six months ended September 30, 2011 included $9,108 used in operating activities, $8,400 used for loans to related parties, and $30,000 provided by financing activities. Financing consisted of $25,000 received for common stock and $5,000 from the related-party note. Ending cash was $12,492.
Material Changes Versus Prior Comparable Period
- The filing does not present a comparable prior-year quarterly or six-month operating period because the company was formed on January 18, 2011.
- Compared with March 31, 2011, assets increased from zero to $20,892, primarily reflecting cash and the related-party loan receivable.
- Liabilities increased from $8,735 to $18,810 due to additional related-party funding, a $5,000 note, and $75 of accounts payable.
- Stockholders’ equity improved from a deficiency of $(8,735) to positive equity of $2,082 following receipt of the $25,000 stock subscription and recognition of additional losses.
- The former president’s stock subscription was cancelled, and a company controlled by the former president subscribed for 5,000,000 shares for $25,000; the subscription was paid on August 10, 2011.
Guidance, Outlook, Risks and Unusual Items
Management planned to continue searching for a suitable acquisition or reverse-merger candidate. Since the Form 10 became effective, management stated that it had not held discussions with representatives of other entities regarding a business combination. The company had no operating business or cash-generating activities.
The financial statements include a going-concern warning. The company had accumulated losses of approximately $23,000 and stated that its ability to continue depends on finding a suitable acquisition or merger candidate, obtaining additional equity financing, receiving related-party loans, and ultimately generating operating income. Management stated that it could not assure funding sufficient to meet cash requirements for the next twelve months.
Subsequent to September 30, 2011, Sunrise provided $3,500 for professional fees through unsecured, non-interest-bearing advances with no stipulated repayment terms. The company reported no material legal proceedings, no material off-balance-sheet arrangements, no unregistered equity sales during the period, and no defaults upon senior securities.
Management concluded that disclosure controls and procedures were effective as of September 30, 2011, with no material changes in internal control over financial reporting during the quarter.
Facts Investors Should Verify
- Confirm the issuer identity, since the filing names Putnam Hills Corp., not Lunai Bioworks Inc.
- Verify the status, terms and beneficial ownership of the 5,000,000-share common-stock issuance and related-party ownership structure.
- Review the $13,735 related-party loan, $5,000 related-party note, and subsequent $3,500 advance, including repayment expectations and conflicts of interest.
- Assess the company’s ability to continue as a going concern given $12,492 of cash, no revenue, ongoing losses and dependence on additional financing.
- Verify whether a business combination was identified or completed after the reporting date and whether any resulting dilution or change in control occurred.