UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2008
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 000-52343
Pan Asian Corporation
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(Exact name of Registrant as specified in its charter)
Cayman Islands N/A
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(State or other jurisdiction of (I.R.S. Employer
Identification No.) incorporation or organization)
c/o Nautilus Global Partners
700 Gemini, Suite 100, Houston, TX 77056
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(Address of principal executive offices) (Zip Code)
(281) 488-3883
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(Registrant's telephone number, including area code)
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
--- ---
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act
(Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as
defined in rule 12b-2 of the Exchange Act). YES X NO
--- ---
At May 6, 2008, there were 859,375 shares of Registrant's ordinary
shares outstanding.
GENERAL INDEX
Page
Number
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.........................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.................................................11
ITEM 4. CONTROLS AND PROCEDURES.....................................11
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS....................................................12
SIGNATURES..........................................................12
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Pan Asian Corporation
(A Development Stage Company)
Condensed Balance Sheets
March 31, June 30,
2008 2007
(Unaudited) (Audited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ - $ -
----------- -----------
Total assets $ - $ -
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Payable to affiliate $ 11,486 $ 5,835
Accounts payable 326 2,431
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Total current liabilities 11,812 8,266
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Commitments and Contingencies (Note 7) -- --
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SHAREHOLDERS' EQUITY (DEFICIT)
Preference shares, $0.000128 par value, 781,250 shares
authorized, none issued and outstanding -- --
Ordinary shares, $.000128 par value; 39,062,500 shares
authorized; 859,375 shares issued and outstanding 110 110
Additional paid in capital -- --
Deficit accumulated during development stage (11,922) (8,376)
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Total shareholders' equity (deficit) (11,812) (8,266)
----------- -----------
Total liabilities and shareholders' equity (deficit) $ -- $ --
=========== ===========
See accompanying notes to condensed financial statements.
3
Pan Asian Corporation
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
Period of inception Cumulative During
(September 27, 2006) Development Stage
Nine Months through March 31, (September 27, 2006 to
Ended March 31, 2008 2007 March 31, 2008)
-------------------- -------------------- ------------------
Revenues $ -- $ -- $ --
-------------------- -------------------- ------------------
Expenses
Formation, general and administrative
expenses 3,546 7,749 11,922
-------------------- -------------------- ------------------
Total operating expenses 3,546 7,749 11,922
-------------------- -------------------- ------------------
Operating loss (3,546) (7,749) (11,922)
Income tax expense (benefit) -- -- --
-------------------- -------------------- ------------------
Net loss $ (3,546) $ (7,749) $ (11,922)
==================== ==================== ==================
Basic and diluted loss per share $ (0.00) $ (0.01)
==================== ====================
Weighted average ordinary shares
outstanding - basic and diluted 859,375 859,375
==================== ====================
See accompanying notes to condensed financial statements.
4
Pan Asian Corporation
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
Three Months Ended Three Months Ended
March 31, 2008 March 31, 2007
---------------- ----------------
Revenues $ -- $ --
---------------- ----------------
Expenses
Formation, general and administrative expenses 171 4,012
---------------- ----------------
Total operating expenses 171 4,012
---------------- ----------------
Operating loss (171) (4,012)
Income tax expense (benefit) -- --
---------------- ----------------
Net loss $ (171) $ (4,012)
================ ================
Basic and diluted loss per share $ (0.00) $ (0.00)
================ ================
Weighted average ordinary shares outstanding -
basic and diluted 859,375 859,375
================ ================
See accompanying notes to condensed financial statements.
5
Pan Asian Corporation
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
From Inception Cumulative During
(September 27, Development Stage
Nine months ended 2006) through (September 27, 2006 to
March 31, 2008 March 31, 2007 March 31, 2008)
----------------- ---------------- -----------------
Cash flows from operating activities
Net loss $ (3,546) $ (7,749) $ (11,922)
Adjustments to reconcile net loss to cash used in
operating activities:
Shares issued to Founder for payment of
formation costs -- 110 110
Changes in operating assets and liabilities
Payable to Affiliate 5,651 3,905 11,486
Accounts Payable (2,105) 3,734 326
---------------- ---------------- -----------------
Net cash provided by operating activities -- -- --
---------------- ---------------- -----------------
Cash flows from investing activities
Net cash provided by investing activities -- -- --
---------------- ---------------- -----------------
Cash flows from financing activities
Net cash provided by financing activities -- -- --
---------------- ---------------- -----------------
Net increase in cash -- -- --
---------------- ---------------- -----------------
Cash at beginning of the period -- -- --
---------------- ---------------- -----------------
Cash at end of the period $ -- $ -- $ --
================ ================ =================
Supplemental disclosures of cash flow information:
Interest paid $ - $ - $ -
================ ================ =================
Income taxes paid $ - $ - $ -
================ ================ =================
See accompanying notes to condensed financial statements.
6
Pan Asian Corporation
(A Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2008
(Unaudited)
NOTE 1 - Organization, Business and Operations
On September 27, 2006, Pan Asian Corporation (the "Company") was
formed in the Cayman Islands with the objective to acquire, or merge with, an
operating business. The Company's formation costs of $2,592 were financed
through the issuance of ordinary shares at par value together with a payable
to the Company's founders of $2,482.
At March 31, 2008, the Company had not yet commenced any operations. All
activity from September 27, 2006 ("Date of Inception") through March 31,
2008 relates to the Company's formation. The Company selected June 30 as
its fiscal year-end.
The Company, based on its proposed business activities, is a "blank check"
company. The Securities and Exchange Commission defines such a company as "a
development stage company" as it either has no specific business plan or
purpose, or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies, or other entity or
person; and has issued 'penny stock,' as defined in Rule 3a51-1 under the
Securities Exchange Act of 1934. Many states have enacted statutes, rules
and regulations limiting the sale of securities of "blank check" companies
in their respective jurisdictions. Management does not intend to undertake
any efforts to cause a market to develop in its securities, either debt or
equity, until the Company concludes a business combination with an operating
entity.
The Company was organized to acquire a target company or business seeking the
perceived advantages of being a publicly-held company and, to a lesser extent,
that desires to employ the Company's funds in its business. The Company's
principal business objective for the next 12 months and beyond will be to
achieve long-term growth potential through a business combination rather than
short-term earnings. The Company will not restrict its potential candidate
target companies to any specific business, industry or geographical location.
The analysis of new business opportunities will be undertaken by or under the
supervision of the officers and directors of the Company.
NOTE 2 - Summary of Significant Accounting Policies
Basis of Presentation
These financial statements are presented on the accrual basis of accounting
in accordance with generally accepted accounting principles in the United
States of America, whereby revenues are recognized in the period earned and
expenses when incurred. The Company also follows Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting for
Development Stage Enterprises" in preparing its financial statements.
Statement of Cash Flows
For purposes of the statement of cash flows, we consider all highly liquid
investments (i.e., investments which, when purchased, have original
maturities of three months or less) to be cash equivalents.
7
NOTE 2 - Summary of Significant Accounting Policies (Continued)
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
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 reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Loss Per Ordinary Share
Basic loss per ordinary share is based on the weighted effect of ordinary
shares issued and outstanding, and is calculated by dividing net loss by the
weighted average shares outstanding during the period. Diluted loss per
ordinary share is calculated by dividing net loss by the weighted average
number of ordinary shares used in the basic loss per share calculation plus
the number of ordinary shares that would be issued assuming exercise or
conversion of all potentially dilutive ordinary shares outstanding. The
Company does not present diluted earnings per share for years in which it
incurred net losses as the effect is antidilutive.
At March 31, 2008, there were no potentially dilutive ordinary shares
outstanding.
On March 1, 2008, the Company consolidated the authorized ordinary share
capital of the Company from 50,000,000 ordinary shares of $0.0001 par value
each to 39,062,500 ordinary shares of $0.000128 par value each. This resulted
in every shareholder as of March 1, 2008 receiving 0.78125 ordinary shares for
every ordinary share previously held. This was treated as a stock split for
U.S. GAAP purposes, and all share and per share data is presented as if the
consolidation took place as of the date of inception, September 27, 2006. On
March 1, 2008, the Company also consolidated the authorized preference share
capital of the Company from 1,000,000 preference shares of $0.0001 par value
each to 781,250 Preference Shares of $0.000128 par value.
Income Taxes
Pan Asian Corporation was registered as an Exempted Company in
the Cayman Islands, and therefore, is not subject to Cayman Island income
taxes for 20 years from the Date of Inception. While the Company has no
intention of conducting any business activities in the United States, the
Company would be subject to United States income taxes based on such
activities that would occur in the United States.
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement prescribes the use of the
liability method whereby deferred tax asset and liability account balances are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. In
assessing the realization of deferred tax assets, management considers whether
it is likely that some portion or all of the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is dependent upon
the Company attaining future taxable income during periods in which those
temporary differences become deductible.
Fair Value of Financial Instruments
Our financial instruments consist of a payable to an affiliate. We believe the
fair values of our payable reflect its respective carrying amounts.
Recently Issued Accounting Pronouncements
The Company adopted SFAS No. 157 effective January 1, 2008. SFAS 157
established a framework for measuring fair value in GAAP and clarified the
definition of fair value within that framework. SFAS 157 does not require
assets and liabilities that were previously recorded at cost to be recorded at
fair value or for assets and liabilities that are already required to be
disclosed at fair value, SFAS 157 introduced, or reiterated, a number of key
concepts which form the foundation of the fair value measurement approach to
be used for financial reporting purposes. The fair value of the Company's
8
financial instruments reflects the amounts that the Company estimates to
receive in connection with the sale of an asset or paid in connection with the
transfer of a liability in an orderly transaction between market participants
at the measurement date (exit price). SFAS 157 also established a fair value
hierarchy that prioritizes the use of inputs used in valuation techniques into
the following three levels:
Level 1-quoted prices in active markets for identical assets and liabilities.
Level 2-observable inputs other than quoted prices in active markets for
identical assets and liabilities.
Level 3-unobservable inputs.
The adoption of FAS 157 did not have an effect on the Company's financial
condition or results of operations, but SFAS 157 introduced new disclosures
about how we value certain assets and liabilities. Much of the disclosure is
focused on the inputs used to measure fair value, particularly in instances
where the measurement uses significant unobservable (Level 3) inputs. As of
March 31, 2008, the Company did not have financial assets or liabilities that
would require measurement on a recurring basis based on the guidance in SFAS
157. At March 31, 2008 all financial assets consisted of cash and cash
equivalents.
NOTE 3 - Liquidity and Capital Resources
The Company has no revenues for the period from inception through March 31,
2008, and does not expect to realize revenues until the consummation of a
merger with an operating entity. The Company's principal business objective
for the next 12 months and beyond will be to achieve long-term growth
potential through a business combination rather than short-term earnings.
There can be no assurance that the Company will ever consummate the business
combination; achieve or sustain profitability or positive cash flows from its
operations, reduce expenses or sell ordinary shares. To date, the Company has
funded its formation activities primarily through the issuance of its ordinary
shares and a payable to affiliate. The Company will continue to fund its
activities through payables to its Founders until a merger is consummated or
alternative forms of financing are secured. As of March 31, 2008, the Company
did not have a cash balance.
NOTE 4 - Payable to Affiliate and Accounts Payable
As of March 31, 2008, The Company has a payable of $11,486 to a founder of the
Company. The payable is non-interest bearing and payable on demand. The
Company also has accounts payable for $326 as of March 31, 2008.
NOTE 5 - Ordinary Shares
On September 27, 2006, the Company was formed with 859,375 shares of its
restricted ordinary shares issued at par value of $0.000128 per share, for
consideration of $110 to its founding shareholders. The stock, along with a
payable issued to a Founder of $2,482 were the basis of the funding of the
Company's formation costs.
NOTE 6 - Preference Shares
The Company is authorized to issue 781,250 preference shares with such
designations, voting and other rights and preferences as may be determined
from time to time by the Board of Directors. At March 31, 2008, there were
no preference shares issued or outstanding.
NOTE 7 - Commitments and Contingencies
The Company may become subject to various claims and litigation. The Company
vigorously defends its legal position when these matters arise. The Company
is not a party to, nor the subject of, any material pending legal proceeding
nor to the knowledge of the Company, are any such legal proceedings threatened
against the Company.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Disclosure Regarding Forward Looking Statements
Statements, other than historical facts, contained in this Quarterly
Report on Form 10-Q, including statements of potential acquisitions and our
strategies, plans and objectives, are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Although we believe that our forward looking
statements are based on reasonable assumptions, we caution that such
statements are subject to a wide range of risks, trends and uncertainties that
could cause actual results to differ materially from those projected. Among
those risks, trends and uncertainties are important factors that could cause
actual results to differ materially from the forward looking statements,
including, but not limited to; the effect of existing and future laws,
governmental regulations and the political and economic climate of the United
States; the effect of derivative activities; and conditions in the capital
markets. We undertake no duty to update or revise these forward-looking
statements.
When used in this Form 10-Q, the words, "expect," "anticipate,"
"intend," "plan," "believe," "seek," "estimate" and similar expressions are
intended to identify forward-looking statements, although not all forward-
looking statements contain these identifying words. Because these forward-
looking statements involve risks and uncertainties, actual results could
differ materially from those expressed or implied by these forward-looking
statements for a number of important reasons.
General
Pan Asian Corporation ("we," "us," or the "Company") is a
development stage company formed solely for the purpose of identifying and
entering into a business combination with a privately held business or
company, domiciled and operating in an emerging market that is seeking the
advantages of being a publicly held corporation whose stock is eventually
traded on a major United States stock exchange. We intend to focus on targets
located primarily in Asia, South America and Eastern Europe, as we believe
that businesses with operating history and growth potential in these locations
would benefit significantly from access to the United States capital markets
and may offer the potential of capital appreciation stemming from the economic
growth in such emerging markets.
Plan of Operation
We have not engaged in any business activities that generate revenue.
Our activities to date have been primarily focused upon our formation and
raising capital. We have conducted private offerings of our ordinary shares,
the proceeds of which we intend to use for payment of costs associated with
formation, accounting and auditing fees, legal fees, and costs associated with
identifying acquisition targets and completing necessary due diligence. In
addition, we expect to incur costs related to filing periodic reports with the
Securities and Exchange Commission. We believe we will be able to meet these
costs for at least the next 12 months by obtaining loans from our
shareholders, management or other investors.
We may consider a business which has recently commenced operations, is a
developing company in need of additional funds for expansion into new products
or markets, is seeking to develop a new product or service, or is an
established business which may be experiencing financial or operating
difficulties and is in need of additional capital. In the alternative, a
business combination may involve the acquisition of, or merger with, a company
which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding, among other
things, the time delays, significant expense, and loss of voting control which
may occur in a public offering.
10
Comparison of the three months March 31, 2008 and 2007
Because we currently do not have any business operations, we have not
had any revenues during the three months ended March 31, 2008 or 2007. Total
expenses for the three months ended March 31, 2008 were $171, compared with
$4,012 for the three months ended March 31, 2007. The decrease is primarily
due to the accrual of the annual registration fee in the Cayman Islands
recorded in the second quarter of fiscal 2008 vs. the third quarter in
fiscal 2007.
Comparison of the nine months ending March 31, 2008 and 2007
Because we currently do not have any business operations, we have not
had any revenues during the nine months ended March 31, 2008 or 2007. Total
expenses for the nine months ended March 31, 2008 were $3,546, compared with
$7,749 for the period of September 27, 2006 (date of inception) to March 31,
2007. This decrease primarily relates to formation expenses incurred in the
year ended June 30, 2007 that were not applicable for 2008.
Liquidity and Capital Resources
As of March 31, 2008, we had current liabilities of $11,486 to a related
party and $326 to unrelated parties. The Company is actively pursuing merger
opportunities as described in the "General" Section of Management's Discussion
and Analysis, and believes that it will be able to fund necessary expenses
through the continued funding from its founding shareholders in the form of
payables, but may seek additional financing in connection with a potential
business combination or if it otherwise requires additional funds. As of
March 31, 2008, the Company did not have a cash balance.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. Our Chief Executive
and Financial Officer has reviewed and evaluated the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-
15(e) or 15d-15(e)) as of the end of the period covered by this report. Based
on that evaluation, the Chief Executive and Financial Officer has concluded
that our current disclosure controls and procedures provide him with
reasonable assurance that they are effective to provide him with timely
material information relating to us required to be disclosed in the reports we
file or submit under the Exchange Act.
Changes in Internal Control over Financial Reporting. There has been
no change in our internal control over financial reporting during the period
covered by this report that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
There have been no material changes to the risk factors previously
disclosed under Item 1A of the Company's Annual Report on Form 10-K, filed
with the Securities and Exchange Commission on October 15, 2007.
11
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.
On March 1, 2008, our two shareholders held a special meeting and voted
all 1,100,000 ordinary shares then outstanding in favor of approving an
amendment to our Memorandum and Articles of Association to (i) consolidate
our authorized ordinary share capital from 50,000,000 ordinary shares of
$0.0001 par value each to 39,062,500 ordinary shares of 0.000128 par value
each and (ii) to consolidate our authorized preference share capital from
1,000,000 preference shares of $0.0001 par value each to 781,250 Preference
Shares of $0.000128 par value. As a result of the amendment, our total
outstanding ordinary shares was reduced to 859,375 shares.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
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Exhibit Number Description
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3.1 Amended Memorandum and Articles of Association
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31 Certification of Principal Executive Officer and Principal Financial
Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and
Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
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32 Certification of Principal Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pan Asian Corporation
(Registrant)
By: /s/JOSEPH R. ROZELLE
---------------------
JOSEPH R. ROZELLE
Chief Executive Officer
Date: May 15, 2008