ESCO 10-Q 2008 Q2 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC

FORM 10-Q

xQUARTERLY REPORT PURSUANT SECTION 13

OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

oTRANSITION REPORT PURSUANT SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to

Commission file number 000-51929

ESCO, INC.

(Exact name of small business issuer as specified in its charter)

Nevada	20-3750479
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification number)
10330 Regency Parkway Drive, Suite 100
Omaha, NE	68114
(Address of principal executive offices)	(Zip Code)

Issuer’s telephone number: (402) 397-2200

No change

(Former name, former address and former fiscal

year, if changed since last report)

Facsimile number (402) 390-7137

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   YES  x            NO  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  x            NO  o

Copies to:

William T. Foley, Esq.

Erickson & Sederstrom, P.C.

10330 Regency Parkway Drive

Omaha, NE 68114

(402) 390-7117

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

APPLICABLE ONLY TO CORPORATE ISSUERS

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 $ .001 per share, outstanding as of August 14, 2008.

Transitional Small Business Disclosure Format (Check one): YES o  NO x

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Index

	Page
Part I — FINANCIAL INFORMATION
Item 1. Financial Statements	1
Item 2. Management’s Discussion and Analysis or Plan of Operation	12
Item 4T. Controls and Procedures	14
Part II — OTHER INFORMATION:
Item 1. Legal Proceedings	15
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3. Defaults Upon Senior Securities	15
Item 4. Submission of Matters to a Vote of Security Holders	15
Item 5. Other Information	15
Item 6. Exhibits and Reports on Form 8-K	15
Signatures	16

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Item 1. Financial Statements

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ESCO, INC.

(A Development Stage Company)

BALANCE SHEET

(Unaudited)

		June 30,			December 31,
		2008			2007
Assets:
Cash	$	587		$	397
Total Assets	$	587		$	397
Liabilities:
Accounts Payable	$	143		$	4,000
Shareholder Loan - Short Term		5,200			-
Total Liabilities		5,343			4,000
Stockholders’ Equity:
Preferred Stock, par value $.001,
Authorized 100,000,000 shares, Issued 0 shares
at June 30, 2008 and December 31, 2007		-			-
Common Stock, par value $.001,
Authorized 1,000,000,000 shares, Issued 15,500 shares
at June 30, 2008 and December 31, 2007		16			16
Paid-In Capital		15,484			15,484
Deficit Accumulated During the Development Stage		(20,256	)		(19,103	)
Total Stockholders’ Equity		(4,756	)		(3,603	)
Total Liabilities and Stockholders’ Equity	$	587		$	397

The accompanying notes are an integral part of these financial statements.

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ESCO, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

													Cumulative
													since
													November 4,
													2005
	For the Three Months Ended						For the Six Months Ended						inception of
	June 30,						June 30,						development
	2008			2007			2008			2007			stage
Revenues:	$	-		$	-		$	-		$	-		$	-
Expenses:
General & Administrative		88			15			1,153			1,530			20,256
Net Loss	$	(88	)	$	(15	)	$	1,153		$	(1,530	)	$	(20,256	)
Basic & Diluted Loss per Share	$	-		$	-		$	(.07	)	$	(0.10	)
Weighted Average Shares Outstanding		15,500			15,500			15,500			15,500

The accompanying notes are an integral part of these financial statements.

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ESCO, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

							Cumulative,
							since
	For the Six Months Ended						November 4,
	June 30,						2005
	2008			2007			inception
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(1,153	)	$	(1,530	)	$	(20,256	)
Increase (Decrease) in Accounts Payable		(3,857	)		-			143
Net Cash Used in operating activities		(5,010	)		(1,530	)		(20,113	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash provided by investing activities		-			-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder Loan - Short Term		5,200						5,200
Common Stock Issued for Cash		-			-			15,500
Net Cash Provided by Financing Activities		5,200			-			20,700
Net (Decrease) Increase in
Cash and Cash Equivalents		190			(1,530	)		587
Cash and Cash Equivalents at Beginning of Period		397			4,457			-
Cash and Cash Equivalents at End of Period	$	587		$	2,927		$	587
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.

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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 June 30, 2008 and for the six (6) 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 six (6) 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 $20,200 for the period from November 4, 2005 (inception) to June 30, 2008, 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”

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.

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ESCO, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 June 30, 2008 and is in the development stage.

Nature of Business

The Company has no products or services as of June 30, 2008. 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 a short term demand loan from a shareholder. 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.

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 June 30, 2008 and 2007.

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ESCO, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 December 2007, the FASB issued No. 160, “Noncontrolling Interests in Financial Statements, an amendment of ARB No. 51" (“SFAS 160"). SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This Statement is effective for fiscal years beginning on or after December 15, 2008. Early adoption is not permitted. Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

In December 2007, the FASB issued No. 141(R), “Business Combinations” (“SFAS 141(R)”. SFAS 141(R) provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. SFAS 141(R) also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141(R) is effective for business combinations occurring in fiscal years beginning after December 15, 2008, which will require the Company to adopt these provisions for business combinations occurring in fiscal 2009 and thereafter. Early adoption of SFAS 141(R) is not permitted. Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

In March 2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. (“SFAS 161"). SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

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ESCO, INC.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 2 - 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 3 - COMMITMENTS

As of June 30, 2008 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 4 - COMMON STOCK TRANSACTIONS

On November 29, 2005 the Company issued 15,500 shares of common stock for $1.00 per share.

NOTE 5 - SHORT TERM SHAREHOLDER LOAN

On March 17, 2008 and March 18, 2008, the Company secured a short term loan in the face amount of $5,200 from Virgil K. Johnson, one of its shareholder, which is due on demand and bears interest beginning April 1, 2008 at a rate of 7.0% per annum, payable upon demand or at least by December 31^st of each year.

NOTE 6 - SALE OF CONTROLLING INTEREST

Effective January 1, 2008, the shareholders of the Company entered into a Share Purchase Agreement, wherein they are selling ninety-seven percent (97%) of their shares of common stock to Luther Capital Management, LLC. Closing has been delayed, but is expected to occur prior to December 31, 2008.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Forward Looking Statement Notice

Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of SRKP 16, Inc. (“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

Description of Business

The Company, based on proposed business activities, is a “blank check” company. The SEC defines those companies as “any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies.” Many states have enacted statutes, rules and regulations limiting the sale of securities of “blank check” companies in their respective jurisdictions. The Company is also a “shell company,” defined in Rule 12b-2 under the Exchange Act as a company with no or nominal assets (other than cash) and no or nominal operations. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.

The Company was organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with an operating business. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.

Liquidity and Capital Resources

As of June 30, 2008, the Company had assets equal to $587, consisting exclusively of cash.  The Company’s current liabilities as of June 30, 2008 totaled $5,343, comprised mostly of monies due to stockholders. The Company borrowed these funds from Virgil Johnson, its director and stockholder, on March 17, 2008 so that operations could continue. The note is due on demand and bears interest at 7% per annum beginning on April 1, 2008. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.

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The Company has only cash assets and has generated no revenues since inception. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company is dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.

Results of Operations

The Company has not conducted any active operations since inception, except for its efforts to locate suitable acquisition candidates. The Company incurred a net loss of $88 for the six months ended June 30, 2008, and $20,256 for the period from November 4, 2005 (inception) to June 30, 2008. The Company incurred a net loss of $15 for three months ended June 30, 2008. It is management’s assertion that these circumstances may hinder the Company’s ability to continue as a going concern.

On January 1, 2008, the shareholders of the Company entered into a Share Purchase Agreement, wherein they are selling ninety-seven percent of their shares of Common Stock to Luther Capital Management, Inc. Closing has been delayed, but it is expected that closing will during 2008.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Liquidity and Capital Resources.

As of June 30, 2008, the Company had assets consisting of $587 in cash.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4T. CONTROLS AND PROCEDURES.

(a) 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 Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

As of December 31, 2007, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our 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 our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

This Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this report.

(b) Changes in Internal Controls.

There have been no changes in our internal controls over financial reporting during the period covered by this report that has materially affected or is reasonably likely to materially affect our internal controls. This report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

To the best knowledge of the officers and directors, the Company is not a party to any legal proceeding or litigation.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.

ITEM 5. OTHER INFORMATION. None.

ITEM 6. EXHIBITS.

Exhibit No.	Description
*3.1	Articles of Incorporation, as filed with the Nevada Secretary State on November 4, 2005.
*3.2	By-Laws
31.1	Certification of the Company’s Principal Executive Officer to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the Quarterly Report on Form 10-QSB for the quarter ended September 30, 2006.
32.1	Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed as an exhibit to the Company’s Registration Statement on Form 10-SB, as filed with the Securities and Exchange Commission on April 25, 2006, and incorporated herein by this reference.

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SIGNATURES

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.

Dated: August 14, 2008

ESCO, INC.
By:	/s/ William T. Foley
	William T. Foley, President

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