William T. Foley, Esq.
Erickson & Sederstrom, P.C.
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 15,500 shares of Common Stock, par value $ .0001 per share, outstanding as of November 1, 2006.
ESCO, INC.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
| | | | | | |
| | | March 31, | | December 31, | |
| | | 2007 | | 2006 | |
Assets: | | | | | |
| Cash | | $ | 2,942 | | $ | 4,457 | |
| | | | | | | | |
| Total Assets | | $ | 2,942 | | $ | 4.457 | |
| | | | | | | | |
Liabilities: | | | | | | | |
| Accounts Payable | | $ | - | | $ | - | |
| | | | | | | | |
Stockholders’ Equity: | | | | | | | |
Preferred Stock, par value $.001, Authorized 100,000,000 shares, Issued 0 shares at March 31, 2007 and December 31, 2006 | | | - | | | - | |
Common Stock, par value $.001, Authorized 1,000,000,000 shares, Issued 15,500 shares at March 31, 2007 and December 31, 2006 | | | 16 | | | 16 | |
| Paid-In Capital | | | 15,484 | | | 15,484 | |
| Deficit Accumulated During the Development Stage | | | (12,558 | ) | | (11,043 | ) |
| | | | | | | | |
| Total Stockholders’ Equity | | | 2,942 | | | 4,457 | |
| | | | | | | | |
| Total Liabilities and Stockholders’ Equity | | $ | 2,942 | | $ | 4,457 | |
ESCO, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | Cumulative | |
| | | | | | | Since | |
| | | For the Three Months Ended | | November 4, | |
| | | March 31, | | 2005 | |
| | | 2007 | | 2006 | | inception | |
| Revenues: | | $ | - | | $ | - | | $ | - | |
| | | | | | | | | | | |
| Expenses: | | | | | | | | | | |
General & Administrative | | | 1,515 | | | 15 | | | 12,558 | |
| | | | | | | | | | | |
| Net Loss | | $ | (1,515 | ) | $ | (15 | ) | $ | (12,558 | ) |
| | | | | | | | | | | |
| Basic & Diluted Loss per Share | | $ | (0.10 | ) | $ | - | | | | |
| | | | | | | | | | | |
Weighted Average Shares Outstanding | | | 15,500 | | | 15,500 | | | | |
| | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
ESCO, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | Cumulative, | |
| | | | | | | since | |
| | | For the Three Months Ended | | November 4, | |
| | | March 31, | | 2005 | |
| | | 2007 | | 2006 | | inception | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | |
| Net Loss | | $ | (1,515 | ) | $ | (15 | ) | $ | (12,558 | ) |
| | | | | | | | | | | |
| Increase (Decrease) in Accounts Payable | | | - | | | (7,963 | ) | | - | |
| Net Cash Used in operating activities | | | (1,515 | ) | | (7,978 | ) | | (12,558 | ) |
| | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | |
| Net cash provided by investing activities | | | - | | | - | | | - | |
| | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | |
| Common Stock Issued for Cash | | | - | | | - | | | 15,500 | |
| Net Cash Provided by Financing Activities | | | - | | | - | | | 15,500 | |
| | | | | | | | | | | |
| Net (Decrease) Increase in | | | | | | | | | | |
| Cash and Cash Equivalents | | | (1,515 | ) | | (7,978 | ) | | 2,942 | |
Cash and Cash Equivalents at Beginning of Period | | | 4,457 | | | 15,480 | | | - | |
Cash and Cash Equivalents at End of Period | | $ | 2,942 | | $ | 7,502 | | $ | 2,942 | |
| | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
| Cash paid during the year for: | | | | | | | | | | |
| Interest | | $ | - | | $ | - | | $ | - | |
| Franchise and income taxes | | $ | - | | $ | - | | $ | - | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: None
The accompanying notes are an integral part of these financial statements.
ESCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for ESCO, Inc. (a development stage company) is presented to assist in understanding the Company’s financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.
Interim Financial Statements
The unaudited financial statements as of March 31, 2007 and for the three months then ended, reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three months. Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.
Nature of Operations and Going Concern
The accompanying financial statements have been prepared on the basis of accounting principles applicable to a “going concern,” which assume that ESCO, Inc. (hereto referred to as the Company) will continue in operation for at least one year and will be able to realize its assets and discharge its liabilities in the normal course of operations.
Several conditions and events cast doubt about the Company’s ability to continue as a “going concern.” The Company has incurred net losses of approximately $12,558 for the period from November 4, 2005 (inception) to March 31, 2007, has an accumulated deficit, has recurring losses, has no revenues and requires additional financing in order to finance its business activities on an ongoing basis. The Company’s future capital requirements will depend on numerous factors including, but not limited to, continued progress in finding a merger candidate and the pursuit of business opportunities. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. Management believes that actions presently being taken to revise the Company’s operating and financial requirements provide them with the opportunity to continue as a “going concern”
ESCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Nature of Operations and Going Concern (continued)
These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a “going concern.” While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the “going concern” assumption used in preparing these financial statements, there can be no assurance that these actions will be successful. If the Company were unable to continue as a “going concern,” then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used.
Organization and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada on November 4, 2005. The Company did not have any operating activities during the period from its incorporation through March 31, 2007 and was considered dormant.
Nature of Business
The Company has no products or services as of March 31, 2007. The company was organized as a vehicle to seek merger or acquisition candidates.
Financial Instruments
The Company’s financial assets consist of cash. The Company has no financial liabilities. Except as otherwise noted, it is management’s opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due to the sort-term maturities of these instruments.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.
ESCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Loss per Share
Basic income (loss) per share has been computed by dividing the income (loss) for the year applicable to the common stockholders by the weighted average number of common shares outstanding during the years. There were no common equivalent shares outstanding at March 31, 2007 and 2006.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.
Recent Accounting Standards
In September 2006, the FASB issued SFAS No. 157, "Accounting for Fair Value Measurements." SFAS No. 157 defines fair value, and establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure about fair value measurements. SFAS No. 157 is effective for the Company for financial statements issued subsequent to November 15, 2007. The Company does not expect the new standard to have any material impact on the financial position and results of operations.
In September 2006, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108 (“SAB 108”) which provides interpretive guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. SAB 108 becomes effective in fiscal 2007. Management is evaluating the financial impact of this pronouncement.
In October 2005, the FASB issued FSP FAS 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defied in FASB Statement No. 123(R)”, which provides clarification of the concept of mutual understanding between employer and employee with respect to the grant date of a share-based payment award. This FSP provides that a mutual understanding of the key terms and conditions of an award shall be presumed to exist on the date the award is approved by management if the recipient does not have the ability to negotiate the key terms and conditions of the award and those key terms and conditions will be communicated to the individual recipient within a relatively short time
ESCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited-)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Standards (Continued)
period after the date of approval. This guidance was applicable upon the initial adoption of SFAS 123(R). The adoption of this pronouncement did not have an impact on the Company’s financial position, results of operations, or cash flows.
In December 2006, the FASB approved FASB Staff Position (FSP) No. EITF 00-19-2, “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”), which specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, “Accounting for Contingencies”. FSP EITF 00-19-2 also requires additional disclosure regarding the nature of any registration payment arrangements, alternative settlement methods, the maximum potential amount of consideration and the current carrying amount of the liability, if any. The guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”, and FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure requirement for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, to include scope exceptions for registration payment arrangements.
FSP EITF 00-19-2 is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the issuance date of this FSP, or for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years, for registration payment arrangements entered into prior to the issuance date of this FSP. The adoption of this pronouncement is not expected to have an impact on the Company’s financial position, results of operations or cash flows.
In October 2005, the FASB issued FSP FAS 123(R)-2, “Practical Accommodation to the Application of Grant Date as Defied in FASB Statement No. 123(R)”, which provides clarification of the concept of mutual understanding between employer and employee with respect to the grant date of a share-based payment award. This FSP provides that a mutual understanding of the key terms and conditions of an award shall be presumed to exist on the date the award is approved by management if the recipient does not have the ability to negotiate the key terms and conditions of the award and those key terms and conditions will be communicated to the individual recipient within a relatively short time period after the date of approval. This guidance was applicable upon the initial adoption of SFAS 123(R). The adoption of this pronouncement did not have an impact on the Company’s financial position, results of operations, or cash flows.
ESCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited-)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Standards (Continued)
The FASB has indicated it believes that SFAS 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.
SFAS 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFA No. 107, “Disclosures about Fair Value of Financial Instruments.” SFAS 159 is effective for the Company as of the beginning of fiscal year 2009. The adoption of this pronouncement is not expected to have an impact on the Company’s financial position, results of operations or cash flows.
NOTE 2 - INCOME TAXES
As of December 31, 2006, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $11,043 that may be offset against future taxable income through 2025 and 2026. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.
| | | 2006 | | 2005 | |
Net Operating Losses | | $ | 1656 | | $ | 1197 | |
| Valuation Allowance | | | (1656 | ) | | (1197 | ) |
| | | $ | - | | $ | - | |
The provision for income taxes differs from the amount computed using the federal US statutory income tax rate as follows:
| | | 2006 | | 2005 | |
| Provision (Benefit) at US Statutory Rate | | $ | 459 | | $ | 1197 | |
| Increase (Decrease) in Valuation Allowance | | | (459 | ) | | (1197 | ) |
| | | $ | - | | $ | - | |
ESCO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited-)
NOTE 2 - INCOME TAXES (Continued)
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and causes a change in management's judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is common with a development stage company, the Company has had recurring losses during its development stage. The Company’s financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. In the interim, shareholders of the Company have committed to meeting its minimal operating expenses.
NOTE 4 - COMMITMENTS
As of March 31, 2007 corporate officers from either their homes or business offices have conducted all activities of the Company. Currently, there are no outstanding debts owed by the company for the use of these facilities and there are no commitments for future use of the facilities.
NOTE 5 - COMMON STOCK TRANSACTIONS
On November 29, 2005 the company issued 15,500 shares of common stock for $1.00 per share.
The Company incurred a net loss of $1,515 for the three months ended March 31, 2007, and $12,588 for the period from November 4, 2005 (inception) to March 31, 2007. It is management's assertion that these circumstances may hinder the Company's ability to continue as a going concern.
Plan of Operation. The Company has not realized any revenues from operations since November 4, 2005 (inception), and its plan of operation for the next twelve months shall be to continue its efforts to locate suitable acquisition candidates. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
Liquidity and Capital Resources. As of March 31, 2007, the Company had assets consisting of $2,942 in cash.
Evaluation of disclosure controls and procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules, regulations and related forms, and that such information is accumulated and communicated to the our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Within the 90 days prior to the filing date of this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.
Changes in internal controls.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused the Report to be signed on its behalf by the undersigned thereunto duly authorized.
