Business Context and Reporting Period
This unaudited Form 10-Q covers the three months ended March 31, 2012, and was filed May 15, 2012. The filing identifies the registrant as Zeta Acquisition Corp. II, not Whitehawk Therapeutics, Inc.; investors should verify the company and filing association.
Zeta Acquisition Corp. II is a Delaware development-stage, blank-check and shell company incorporated in 2007. It has no operating business or revenue and is seeking a business combination with an unidentified target in any industry or geography. No business combination discussions had occurred as of the filing.
Financial Position and Key Metrics
- Revenue: None for the quarter or since inception.
- Net loss: $5,362 for the quarter, compared with $5,154 in the prior-year quarter; cumulative development-stage net loss was $123,538.
- Operating expenses: $4,231, consisting primarily of general and administrative costs; interest expense was $1,131.
- Cash flow: Operating cash use was $5,527, compared with $2,264 in the prior-year quarter. Financing provided $25,000 through stockholder loans. Cash increased by $19,473 to $23,598.
- Liquidity: Current assets were $24,223, while current liabilities were $97,761, resulting in a working-capital deficit of approximately $73,538.
- Debt: Notes payable to stockholders totaled $85,000, up from $60,000 at December 31, 2011. The 2012 stockholder loans are unsecured, bear interest at 6%, and are due on demand. Accrued interest was $7,455.
- Equity: Stockholders’ deficit was $73,538 at March 31, 2012. There were 5,000,000 common shares outstanding.
- Margins: Not meaningful because the company generated no revenue.
Material Changes Versus the Prior Comparable Period
- Quarterly net loss increased slightly from $5,154 to $5,362.
- Operating cash use increased from $2,264 to $5,527.
- Cash increased from $4,125 at December 31, 2011 to $23,598 at March 31, 2012, primarily because of $25,000 in new stockholder financing.
- Current liabilities increased from $74,801 to $97,761, including the additional stockholder loans.
- The company continued to have no revenue, no active operations, and no identified acquisition target.
Outlook, Risks, Contingencies, and Unusual Items
Management plans to continue searching for a suitable acquisition candidate and expects to incur costs for SEC reporting and acquisition investigations. Management anticipates funding these costs through existing cash, deferred service-provider fees, and additional loans or investments from stockholders, management, or other investors.
The financial statements were prepared on a going-concern basis. Management stated that continued operations depend on obtaining additional financing, generating future profitable operations, and identifying and completing a suitable business combination. The company expressly stated that there is no assurance additional funding will be available or that a transaction will occur.
Potential targets may be financially unstable, early-stage, or in high-risk industries. A single business combination would likely create significant concentration risk and could dilute existing stockholders. The company had no material legal proceedings, no off-balance-sheet arrangements, and no reported unregistered equity sales during the quarter. Office space and equipment were provided by an officer and director at no cost on a month-to-month basis.
Management concluded that disclosure controls and procedures were effective as of March 31, 2012, and reported no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm whether this filing belongs to Whitehawk Therapeutics, Inc.; the document names Zeta Acquisition Corp. II throughout.
- Verify the company’s shell-company status, absence of revenue and operations, and lack of an identified acquisition target.
- Review the terms, related-party nature, interest rate, and demand repayment provisions of the $85,000 stockholder notes.
- Assess the going-concern risk given the $73,538 working-capital deficit and reliance on additional related-party or equity financing.
- Confirm the outstanding share count, potential dilution from a future reverse merger or financing, and any subsequent business-combination activity.