As filed with the Securities and Exchange Commission on January 3, 2002
Registration No. 333-
- ------------------------------------------------------------------------
U.S. SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pinoak, Inc.
----------------------------------------------
(Name of small business issuer in its charter)
Nevada 6770 86-0983750
- ----------------- -------------------------- ---------------
(State or other (Primary Standard of (IRS Employer
jurisdiction of Industrial Classification Identification
Incorporation or or Code Number) Number)
Organization)
Pinoak, Inc.
10801 E. Grove Street
Mesa, AZ 85208
Phone: (480) 984-8446
- ----------------------------------------------------------------------------
(Address and telephone number of principal executive offices and principal
place of business; and name, address and telephone number of service agent)
- -----------------------------------------------------------------------------
Copies to:
Thomas C. Cook, Esq.
Thomas C. Cook & Associates, Ltd.
4955 South Durango, Suite 214
Las Vegas, Nevada 89113
Phone: (702) 952-8520
Fax: (702) 952-8521
Approximate date of commencement of proposed sale to public:
As soon as practicable after the registration statement becomes effective.
These 3,000,000 shares are being offered on a direct participation basis,
without the involvement of underwriters. We intend to sell a minimum of
1,000,000 shares.
Closing date: [Date], 2002 (90 days from the date of this prospectus)
Funds will be held in a non-interest bearing escrow account under Rule 419
until the minimum required shares are sold. If the minimum has not been
raised by the closing date, all funds will be returned within 10 (ten) days
by first class mail.
----------------------------------
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS,"
BEGINNING ON PAGE 9
If this Form is filed to register additional securities for an offering
according to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. / /
___X___
If this Form is a post-effective amendment filed according to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier registration statement for
the same offering. / /_______
If this Form is a post-effective amendment filed according to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration number of the earlier effective registration statement for
the same offering. / /_______
If delivery of the prospectus is expected to be made according to Rule 434,
please check the following box. / /_______
-------------------------------
We hereby amend this registration statement on such date or dates as may be
necessary to delay its effective date until we file a further amendment
which specifically states that this registration statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of
1933 or until the registration statement shall become effective on a date as
the SEC, acting pursuant to said Section 8(A), may determine.
---------------------------------------------------------
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SEC IS EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OF SALE IS NOT PERMITTED.
Prospectus (Subject to completion): Dated [Date], 2001.
============================================================================
TITLE OF EACH PROPOSED
CLASS OF PROPOSED MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED RESISTERED SHARE(1) PRICE(1) FEE
Common Stock
$0.001 par value 3,000,000 $0.025 $75,000 $17.92
-----------------------------------------------
TOTAL 3,000,000 $0.025 $75,000 $17.92
============================================================================
Estimated solely for the purpose of calculating the registration fee and
pursuant to Rule 457.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(A) of The Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the commission, acting
pursuant to said Section 8(A),may determine.
[Note: The following section of cross referenced material is not to appear
in the prospectus itself.]
PART I - INFORMATION REQUIRED IN PROSPECTUS
Cross Reference Sheet showing the location in Prospectus of information
required by items of Form SB-2
Item No. Required item Location of caption in Prospectus
- -------- ---------------------------- ---------------------------------
1. Forepart of the Registration Cover Page; Outside
Statement and outside front front page of
cover of Prospectus Prospectus
2. Inside front and outside back Inside Front and
cover pages of Prospectus outside back cover
pages of Prospectus
3. Summary Information and Risk Prospectus Summary;
Factors Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Prospectus Summary -
Determination of Offering
Price; Risk Factors
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Legal Proceedings
10. Director, Executive Officer, Management
Management, Promoters and
Control Persons
11. Security Ownership of certain Principal Shareholders
Beneficial Owners and Management
12. Description of Securities Description of
Securities
13. Interest of named experts and Legal Matters; Experts
counsel
14. Disclosure of Commission Statement as to
Position on Indemnification Indemnification
for Securities Act Liabilities
15. Organization within last five Management, Certain
years Transactions
16. Description of Business Proposed Business
17. Management's Discussion and
Analysis or Plan of Operation Plan of Operation
18. Description of Property Proposed Business
19. Certain Relationships and Certain Transactions
Related Transactions
20. Market for Common Equity and Prospectus Summary, Market for
Related Stockholder Matters Registrant's Common Stock and
Related Stockholders' Matters;
Shares Eligible for Future
Sale
21. Executive Compensation Management
22. Financial Statements Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
PART II - INFORMATION NOT REQUIRED IN THE PROSPECTUS
24. Indemnification of Indemnification of
Officer/Director Officer/Director
25. Other Expenses of Issuance and Other Expenses of
Distribution Issuance and Distribution
26. Recent Sales of Unregistered Recent Sales of Unregistered
Securities Securities
27. Exhibits Exhibits
28. Undertakings Undertakings
Prospectus
- ----------
3,000,000
Pinoak, Inc.
Common Stock
------------
This is Pinoak, Inc.'s initial public offering.
Prior to this Offering, no public market exists for these shares
Investing in common stock involves risks that are described in the "Risk
Factors" section beginning on Page 8 of this Prospectus.
---------------------
Offering Information
--------------------
=========================================================================
Shares Price To Selling Proceeds To
Offered Public Commissions(1) Company(2)
Per share
Min. Share Amount 1,000,000 $0.025 $0.00 $25,000
Max. Share Amount 3,000,000 $0.025 $0.00 $75,000
=========================================================================
(1) We are offering for sale 3,000,000 shares of common stock, at a
purchase price of $0.025 per share. The shares shall be sold
exclusively by us on a direct participation basis for a period of
ninety days. This offering will be conducted directly by us
through our officer/director according to the safe harbor provisions
of Rule 3a4(1) of the Securities Exchange Act of 1934.
(2) The minimum offering or proceeds to be raised is $25,000. The maximum
offering or proceeds to be raised is $75,000.
Our offering is being made in compliance with Rule 419 of SEC Regulation C,
under which the offering proceeds and the securities to be issued to
purchasers will be placed in an escrow account until the offering has been
reconfirmed by our shareholders and a business has been acquired in
accordance with the provisions of that rule. Under SEC Rule 3a51-1(d) under
the Exchange Act, the securities we are offering constitute penny stocks,
and as such, certain sales restrictions apply to them. Up to 80% of the
offering may be purchased by our officer/director, who is also our sole
shareholder, and any of his affiliates or associates. No public market
currently exists for our common stock. No public market may ever develop.
Even if a market develops, you may not be able to sell your shares.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is [Date], 2002
1
TABLE OF CONTENTS
-----------------
PROSPECTUS SUMMARY............................................4
LIMITED STATE REGISTRATION....................................5
SUMMARY FINANCIAL INFORMATION.................................7
RISK FACTORS..................................................8
YOUR RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419........19
DILUTION.....................................................21
USE OF PROCEEDS..............................................23
CAPITALIZATION...............................................27
PLAN OF DISTRIBUTION.........................................28
PROPOSED BUSINESS............................................29
PLAN OF OPERATION............................................37
DESCRIPTION OF CAPITAL STOCK.................................38
SHARES ELIGIBLE FOR FUTURE SALE..............................40
MANAGEMENT...................................................41
CONFLICT OF INTEREST.........................................42
PRINCIPAL SHAREHOLDERS.......................................44
CERTAIN TRANSACTIONS.........................................45
WHERE CAN YOU FIND MORE INFORMATION .........................45
MARKET FOR OUR COMMON STOCK..................................47
REPORTS TO STOCKHOLDERS......................................47
LEGAL MATTERS................................................47
EXPERTS......................................................47
FINANCIAL STATEMENTS.......................................F-1-10
INDEMNIFICATION OF DIRECTORS AND OFFICERS....................50
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION..................51
RECENT SALES OF UNREGISTERED SECURITIES......................52
EXHIBITS.....................................................53
UNDERTAKINGS.................................................54
Signatures...................................................55
Index to Exhibits............................................56
2
Dealer Prospectus Delivery Obligation
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in
this prospectus, and if given or made, such information or representations
must not be relied upon as having been authorized by us. This prospectus
does not constitute an offer to sell or a solicitation of any offer to buy
any securities in any jurisdiction in which such an offer or solicitation
would be unlawful. The delivery of this prospectus shall not under any
circumstances create any implication that there has not been any change in
our affairs since the date of delivery; however, any changes that may have
occurred are not material to an investment decision. In the event there
have been any material changes in our affairs, a post-effective amendment
will be filed. We reserve the right to reject any order, in whole or in
part, for the purchase of any of the shares offered.
Until 90 days after the date when the funds and securities are released
from the escrow account, all dealers effecting transactions in the shares,
whether or not participating in this distribution, may be required to
deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters to their unsold allotments
or subscriptions.
3
Prospectus Summary
PINOAK, INC.
14601 Bellaire Blvd, Suite 338
Mesa, TX 77083
(281) 564-6418
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
BECAUSE THIS IS A SUMMARY, IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT
YOU SHOULD CONSIDER BEFORE RECEIVING A DISTRIBUTION OF OUR COMMON STOCK. YOU
SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY.
We were organized under the laws of the State of Nevada on December 31, 1998,
under the name Pinoak, Inc. We are a development stage entity, and have
neither engaged in any operations nor generated any revenues to date.
The Company has been dormant since its date of inception until December,
2001.
We were organized as a vehicle to acquire or merge with an existing business
or company. A company with this purpose and structure is referred to as a
"blank check company" as defined in Rule 419 of Regulation C under the
Securities Act of 1933.
We have not yet identified any specific target business or company
More about Rule 419:
- --------------------
The securities purchased by you and other investors and the funds received
in the offering will be deposited and held in an escrow account until an
acquisition meeting specific criteria is completed. Once that agreement has
been executed, we will update the registration statement with a post-
effective amendment. This will give details of the acquisition. You will
then have 45 days to reconfirm your investment. Investors who do not
reconfirm will receive a refund. Funds and securities will be released once
the escrow agent is satisfied that all provisions have been met and the
transaction has closed. (See "Your Rights under Rule 419.")
Persons should not purchase shares in the offering if they expect short-term
earnings or appreciation in the value of our company.
The Offering:
- -------------
Securities offered 3,000,000 shares of common stock, $0.001
par value, Maximum Offering.
1,000,000 shares of common stock, $0.001
par value, Minimum Offering.
These shares are being offered on a direct
participation basis; that is, they are to
be self-underwritten.
$0.025 per share.
(See "Description of Capital Stock".)
4
Common stock outstanding 2,000,000 shares
prior to the offering
Common stock to be 5,000,000 shares (Maximum Offering)
outstanding after the offering 3,000,000 shares (Minimum Offering)
Dilution: Dilution to the investors in this offering will be approximately
$0.015 (minimum offering per share) and $0.009 (maximum offering).
Dividends: No dividends have yet been paid and none will be paid in the
foreseeable future.
Limited State Registration: Initially, our securities may be sold in Arizona
and Nevada only (although we are considering registering the shares in other
states) according to filings in the States of Arizona and Nevada. (See
"Special State Law Considerations" for a discussion of the resale limitations
that result from this limited state registration.)
Use of Proceeds: If the maximum shares are sold, the gross proceeds of this
offering will be $75,000; if the minimum, $25,000. Though we could request
10% of these funds under Rule 419 prior to the reconfirmation, we do not
intend to do so. Less approximately $2,500 in escrow and offering expenses,
proceeds will be used to defray the costs of finding and consummating a
business combination. We estimate these costs could run as much as $25,000.
Plan Of Distribution: Our executive officer, Mr. Rick Jesky, will sell
all shares. He will receive no compensation or commissions for doing so,
and will limit his activities in the making of this offering to delivering
this prospectus and answering questions from prospective investors. Though
reserving the right to do so, management will not use broker-dealers in the
making of this offering.
Proposed Business: PINOAK will not restrict its search to any particular
business, industry, or geographical location, and may evaluate and enter
into any type of business in any location. In seeking a business venture,
the decision of management will be based on the business objective of seeking
long-term capital appreciation in the real value of the business acquired
by Pinoak, Inc.
The analysis of new businesses will be undertaken by or under the supervision
of our officer/director. It is anticipated that the analysis of specific
proposals and the selection of a business will take several months, to
which additional months will be added by the reconfirmation process of Rule
419.
For details of the way in which an acquisition might be structured, see
"Proposed Business: Form and Structure of Acquisition."
5
Daily Operations: Until an active business is commenced or acquired, we
will have no employees or day-to-day operations.
Plan of Operation: As of December 31, 2001, we have no significant expenses
with the exception of incorporation fees, accounting fees, SEC filing fees,
and escrow establishment fees. Virtually all of our expenses, to be funded
by the money in our treasury or by management, are attributable to our
efforts to identify a suitable acquisition candidate and close the
acquisition. Up to that time, we anticipate our expenses to be limited to
accounting, legal, transfer agent, and filing fees, plus telephone and
mailing expenses.
Management: Mr. Rick Jesky of Mesa, Arizona is the sole officer, director,
and shareholder of Pinoak, Inc. He has limited business experience; this is
his first experience with a 419 company. He currently receives no salary or
other compensation and devotes time to Pinoak, Inc. in and around other
activities.
Method of Subscribing: Prospective investors should make their checks
payable to Pinoak, Inc., c/o Southwest Escrow Company (escrow agent) and
remit the checks and subscription agreements to Southwest Escrow Company,
8215 S. Eastern Avenue, Suite 100, Suite 205, Las Vegas, Nevada 89123.
Subscriptions may not be withdrawn once made except in accordance with
applicable law.
We reserve the right to reject all or part of any subscription at our sole
discretion even if payment is made, and to withdraw this blank check
offering at any time prior to our acceptance of the subscriptions received.
6
SUMMARY FINANCIAL INFORMATION
-----------------------------
The table below contains certain summary historical financial data for
Pinoak, Inc. The historical financial data for the period ended June 30,
2001 has been derived from our financial statements appearing elsewhere in
this prospectus and should be read in conjunction with those financial
statements and the notes to them.
CAPTION>
December 31, 2001
--------------
INCOME STATEMENT:
Net Sales $ 0
Net Income $ (0)
BALANCE SHEET (at end of period):
Cash on Hand $ 2,013
--------
Total Assets $ 2,013
Total Indebtedness $ 0
Total Shareholders Equity $ 2,013
PER SHARE(1):
Income per common share $ 0
Net Income per common share (at end of period) $ (0.00)
Net Income per share on a fully dilated basis $ (0.00)
(1) Number of shares of common stock outstanding during period was
2,000,000.
This offering will expire 90 days from the date of this prospectus. The
offering will not be extended.
7
RISK FACTORS
------------
There is a high degree of risk associated with an investment in our common
stock. You should know that our business, financial condition or results of
operations, and, more importantly, that of any business we acquire, could be
materially and adversely affected by any of the following risks. You should
carefully consider the following factors in addition to the other
information in this prospectus before considering the purchase of shares.
Our lack of an operating history makes an investment in these securities a
risky & speculative one in which your entire investment may be lost.
- --------------------------------------------------------------------------
Pinoak, Inc. was organized under the laws of the State of Nevada on December
31, 1999, and has no revenues from operations or meaningful assets. The
company has been dormant from its date of inception until December, 2001.
In December, 2001, the Company opened its first bank account. We face
all of the risks inherent in a new business, and those risks specifically
inherent in the type of business in which we propose to engage, namely, the
investigation and acquisition of an interest in a business. The purchase of
these securities must be regarded as the placing of funds at a high risk in
a new or "start-up" venture with all of the unforeseen costs, expenses,
problems, and difficulties to which such ventures are subject.
Disadvantages of Blank Check Offering.
- --------------------------------------
Our business may enter into a business combination with an entity, which does
not need substantial additional capital but desires to establish a public
trading market for its shares. A business opportunity may attempt to avoid
what it deems to be adverse consequences of undertaking its own public
offering by seeking a business combination with the Company. Such
consequences may include, but are not limited to, time delays of the
registration process, significant expenses to be incurred in such an
offering, loss of voting control to public shareholders and the companies
merging with or acquiring a blank check company are required, at the
minimum, to file all information required by a Form 10 Registration with
the U. S. Securities and Exchange Commission.
They might do so because of various factors that they consider to entail
disadvantageous situations or conditions. The time delays that would be
attendant on preparing the proper documentation might constitute one such
factor. Significant expenses involved in going public might be another.
Entrepreneurs and company founders might fear the potential loss of voting
power that could put control of their own companies at risk.
8
In making an investment in us, therefore, you may be doing so under terms
which might ultimately be less favorable than those to be had by investing
directly in a company with a specific business in which these sorts of
unforeseeable issues do not come into play. The name "blank check," after
all, was chosen to give notice that, like a literal blank check you might
issue with your authorizing signature and no amount filled in above it,
elements of uncertainty are inherent in the process.
A business reorganization may dilute your investment and reduce your equity
interest in the company.
- ---------------------------------------------------------------------------
It is likely that we will issue additional shares of common stock or
preferred stock in connection with our potential merger, consolidation, or
other business reorganization, and that the proceeds of the offering will be
used in the business of the acquisition or merger candidate, though we will
not make loans of the offering's net proceeds. The consequences may be a
change of control of Pinoak, Inc., significant dilution to the public
shareholders' investment, and a material decrease in the public
shareholders' equity interest in the company. Since we have not made any
determination with respect to the acquisition of any specific business, we
cannot speculate on the form of any potential business reorganization or on
the amount of securities which we might issue in connection with it. At its
sole discretion, the board of directors may issue additional company
securities without seeking shareholder approval.
There is a substantial possibility that the shareholders of Pinoak, Inc.
immediately prior to the transaction would retain less than 50% of the
issued and outstanding shares of the surviving entity. therefore,
regardless of the form of the business acquisition, it may be anticipated
that the investors in this offering will experience a significant reduction
in their percentage of ownership in the company. (See "Acquisition of a
Business," in PROPOSED BUSINESS.)
Shares in this offering are available only to residents of Nevada and Arizona
and will be difficult to resell or transfer.
- ---------------------------------------------------------------------------
Initially, these shares are being made available only to residents of the
states of Arizona and Nevada because of the simplicity of selling a small
offering under the laws of those states: Registration there is not necessary
if fewer than twenty-five people purchase the shares in a given offering.
Without registering them there, however, the shares cannot be sold or
transferred. As this may never happen, the ability to resell or transfer
these shares is unlikely.
9
You are subject to dilution which will lower the value of your shares.
- ----------------------------------------------------------------------
The difference between the initial public offering price per share of common
stock and the net tangible book value per share after this offering
constitutes the dilution to investors in this offering. Net tangible book
value per share of common stock is determined by dividing our net tangible
book value by the number of shares of common stock outstanding.
Assuming the sale of the maximum number of shares based on our financial
statements as of December 31, 2001, new investors will incur an immediate
dilution of approximately $0.009 or 36.53% per share after the offering of
the maximum number of shares is consummated. The existing stockholder of
our company acquired his shares of common stock at a price of $0.001 per
share which is $.024 per share lower than the offering price of the shares.
Accordingly, new investors will bear virtually all of the risks inherent
in an investment in this company. (See DILUTION.)
There may not be a public market for the shares you buy.
- --------------------------------------------------------
There is no current trading market for the shares, nor can we say for
certain that a trading market will develop, or, if a trading market does
develop, that it will be sustained even after we identify a merger candidate
and consummate a business combination. The shares, to the extent that a
market develops for the shares at all, will likely appear in what is
customarily known as the "pink sheets" or on the NASD's Over-the-Counter
Bulletin Board, which may limit the marketability and liquidity of the
shares. (See Risk Factor, "There are rules for low-priced stocks that may
affect your ability to resell your shares.")
According to Rule 419, all shares issued by a blank check company, must be
placed in the Rule 419 escrow account. These shares will not be released
from the Rule 419 escrow until (1) the consummation of a merger or
acquisition as provided for in Rule 419, or (2) the expiration of 18 months
from the date of this prospectus. There is no present market for our common
stock and there is no likelihood of any active and liquid public trading
market developing following the release of securities from the Rule 419
escrow. Thus, stockholders may find it difficult to sell their shares.
As a shareholder, you will have limited rights in an acquisition.
- -----------------------------------------------------------------
Although investors may request the return of their investment funds in
connection with the reconfirmation offering required by Rule 419, the
shareholders of Pinoak, Inc. may not be afforded an opportunity specifically
to approve or disapprove any particular business reorganization or
acquisition. Our officer/director will be able to consummate an acquisition
of or by us without the approval of our shareholders.
10
Certain circumstances could constitute exceptions. Under applicable
corporate law, only in the event of a merger, consolidation, or the sale of
all or substantially all of our assets, will you as a shareholder have the
right to object to the merger, consolidation, or sale and assert your
dissenter's right to appraisal of your shares. Similar restrictions apply if
an acquisition is consummated in the form of an exchange of securities.
Though ultimately protected by the reconfirmation, this could adversely
affect the furthering of your interests within the structure of Pinoak, Inc.
There are currently no negotiations in progress regarding an acquisition or
merger, thus delaying any return on your investment.
- ---------------------------------------------------------------------------
Neither PINOAK's officer/director nor any of his affiliates and associates
has had any preliminary contact or discussion, and there are no present
plans, proposals, arrangements or understanding, with any representatives
of the owners of any business or company regarding the possibility of the
acquisition or merger transaction contemplated in the prospectus. Potential
investors are cautioned that this may extend even further the amount of time
before you can hope to see any return on your investment.
We have not yet even identified an acquisition candidate.
- ---------------------------------------------------------
As of the date of this prospectus, we have not entered into or negotiated
any arrangements for a business combination with an acquisition candidate.
Since we have not yet attempted to seek a business combination, and due to
our lack of experience, there is only a limited basis upon which to evaluate
our prospectus for achieving our intended business objectives. Furthermore
potential investors should know that the process of seeking out and then
qualifying an appropriate acquisition is a lengthy and involved one; thus,
there are "miles to go before we sleep."
Resources could be wasted in researching acquisitions that do not work out.
- ---------------------------------------------------------------------------
It is anticipated that the investigation of specific businesses and the
negotiation, drafting, and execution of relevant agreements, disclosure
documents, and other instruments will require substantial management time
and attention and substantial costs for accountants, attorneys, and others
If a decision is made not to participate in a specific business, the costs
incurred up to that point in the related investigation would not be
recoverable. Furthermore, even if an agreement is reached for the
participation in a specific business, the failure to consummate that
transaction may result in a loss to us of the related costs incurred which
could materially adversely affect subsequent attempts to locate and
participate in additional businesses.
11
There can be no assurance of profitability, even once the acquisition has
been accomplished
- -------------------------------------------------------------------------
There can be no assurance that Pinoak, Inc. will be able to acquire a
favorable business. Different sorts of risk are entailed whether we
ultimately acquire a new or an old business. Participation in a new business
venture entails greater risks since in many instances management of such a
venture will not have proven its ability, the eventual market for its
product or services will likely not be established, and the profitability of
the venture will be unproven and cannot be predicted accurately. If we
participate in a more established firm with existing financial problems, it
may be subjected to risk because our financial resources may not be adequate
to eliminate or reverse those negative circumstances.
Auditors have issued an opinion raising substantial doubt as to our ability
to continue as a going concern.
- ---------------------------------------------------------------------------
In a letter that accompanies this application, our accountant, G. Brad
Beckstead, says in part, "The accompanying financial statements have been
prepared assuming the Company will continue as a going concern." As
discussed in Note 2 to the financial statements, the Company has had limited
operations and has not commenced planned principal operations. This raises
substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters are also described in Note 5."
Potential investors should be aware of this opinion and the fact that no
guarantees can be given that our strategies for business success will
overcome the obstacles referred to in Mr. Beckstead's letter.
A limitation on acquisitions could hamper our ability to forge the right
business combination
- ------------------------------------------------------------------------
Pinoak, Inc. is subject to Rule 419 and certain reporting requirements of the
Securities Exchange Act of 1934. This requires us to furnish certain
information about significant acquisitions, including audited financial
statements for the company(s) acquired for one, two, or three years,
depending on the relative size of the acquisition. Consequently, the
acquisition prospects available to the Company are limited to those
that can provide the required audited financial statements. This further
hampers our ability to acquire desirable going concerns. (See "PROPOSED
BUSINESS: Other Ramifications of Rule 419 on the Selection Process.").
12
We have extremely limited capitalization.
- -----------------------------------------
The offering is a direct participation offering for which the minimum amount
is only $25,000. Management faces the challenge of successfully implementing
our business strategy and plan. We may not be able to successfully manage
our business to achieve our goals if we must proceed having raised only the
minimum offering. Investors could suffer a loss if as a consequence the
amount raised is not enough to fully implement the intended business
strategy. Even if we are successful in raising up to the maximum amount we
seek, $75,000, this might not be enough to successfully identify a merger
candidate and consummate an acquisition.
Inability to secure financing after acquisition may force us to use venture
capital with exorbitant interest rates.
- ---------------------------------------------------------------------------
It is possible that the Company will not have sufficient funds from the
proceeds of this offering to fully undertake the development, marketing,
and manufacturing of products which may be acquired.
Although there are no specific business combinations or other transactions
contemplated by management, it may be expected any such target business
will present such a level of risk that conventional private or public
offerings of securities or conventional bank financing would not be
available to us once we have acquired the business. In that case the target
company might be forced to seek venture capital for initial operations,
available only at very high interest rates, if at all. The ensuing burden of
debt would further limit chances for success. And of course there is no
guarantee that such financing would be obtained even if sought.
A leveraged buy-out could expose us to a high risk of business failure.
- -----------------------------------------------------------------------
A leveraged buy-out is one that involves financing the acquisition of a
business by borrowing on the assets of the business to be acquired. This
practice, if it were to be employed by Pinoak, Inc. as its strategy for
acquisition, would expose us - and by extension your investment - to
significant risk.
For one thing, there can be no assurance any business acquired through a
leveraged buy-out would generate sufficient revenues to cover the related
debt and expenses. In that case, the lender could exercise the remedies
provided by law and foreclose on PINOAK and all its assets. Furthermore, the
use of leverage to consummate a business combination may reduce our ability
to incur additional debt, make other acquisitions, or declare dividends, and
may subject our operations to strict financial controls and significant
interest expense. It may be expected we will have few, if any,
opportunities to utilize leverage in an acquisition. Even if we were able
to identify a business where leverage may be used, there is no assurance
financing will be available, or if available, on terms we would find
acceptable. (See Acquisition of a Business: "Leverage")
13
A lack of diversification means we lack the flexibility we may need to
succeed.
- ----------------------------------------------------------------------
In the event we are successful in identifying and evaluating a suitable
business combination, we will, in all likelihood, be required to issue our
common stock in an acquisition or merger transaction. Because our
capitalization is limited and the issuance of additional common
stock will result in a dilution of interest for present and prospective
shareholders, we will negotiate only one acquisition or merger.
This lack of diversification should be considered a substantial risk of
investing in Pinoak, Inc. because it will not permit us to offset potential
losses from one venture against gains from another.
We are dependent on one officer with limited formal business experience.
- ------------------------------------------------------------------------
Pinoak, Inc., is highly dependent of the services of Mr. Rick Jesky,
the president and sole director of the company. Over-reliance on a
single individual puts the company at risk; should anything happen to
Mr. Jesky, or if he for unpredictable reasons became disabled or lost
interest in PINOAK, the effect on our prospects would be severe. However, it
should be noted, that he has not served as a founder, officer, and director
of any other companies formed with the express purpose of seeking available
businesses, and he does not have extensive or broad business experience.
His experience involved owning and managing a research cotton seed Company.
(See "MANAGEMENT").
The time to be devoted by management may be inadequate.
- -------------------------------------------------------
PINOAK's main officer is currently seeking a position in the teaching
industry, and will devote only what time he can to the affairs of the
company. The sole officer plans to spend little to no time with the company
until this Registration is approved. As he does not devote his full time to
the company, we may end up missing a target opportunity for business
combination . Once this registration is approved, the officer will spend 10-
12 hours per week, implementing the Offering process. (See "MANAGEMENT").
14
A substantial amount of control is held by present management who is also
the primary shareholder.
- ------------------------
Assuming the sale of all the shares offered, the shares of common stock
purchased by the public will represent 60% of our outstanding common stock
after the completion of this offering. Therefore, our present stockholder
will own a 40% interest in us and will not continue to be able to elect
our directors, appoint our officers, and control our affairs and operations.
Our articles of incorporation do not provide for cumulative voting.
You should be aware that if the minimum amount of shares are sold, our
present stockholder will hold 66.6% of the company's stock and thus continue
to elect all directors, appoint all officers, control our affairs and
operations, and outvote all investors who may participate in this offering.
If, on the other hand, all the shares offered were to be sold, the shares of
common stock purchased by the public would represent 60% of our outstanding
common stock after the completion of this offering. Therefore, our present
stockholder would own only a 40% interest in us and would not be able to
elect our directors, appoint our officers, and control our affairs and
operations only if he were to act in concert with other shareholders.
Though such an arrangement is of course possible, it is not presently being
contemplated.
We anticipate a change in control and management.
- -------------------------------------------------
We anticipate we will experience a change of control upon the closing of a
business combination. In addition, our current managers and directors will
very probably resign. We cannot assure you of the experience or
qualification of new management either in the operation of our activities or
in the operation of the business, assets, or property being acquired. As
such, despite our intention to negotiate the best possible deal for our
stockholders, no guarantee can be given that new management will be
responsible in that regard.
It is possible that our principal stockholder, also the officer/director,
may sell his shares at a premium to the shareholders or management of
whatever company PINOAK may acquire in a way that you cannot.
- -------------------------------------------------------------------------
It should be noted that his shares are not being registered on this
registration statement, and therefore, he cannot sell his shares when this
registration statement is declared effective. No such sales, however, can
be consummated before the registration statement has been made effective.
15
The officer/director of Pinoak, Inc. currently owns 100% of the common stock
presently issued and outstanding. He paid $2,022 for these shares. He
may, in connection with a proposed merger or acquisition transaction,
actively negotiate or consent to the purchase of his common stock, though
he cannot legally do so until our registration statement has been made
effective. A premium may be paid on this stock in connection with such a
purchase, but public investors will neither receive any portion of the
premium that may be paid nor be afforded an opportunity to approve or
consent to any particular stock buy-out. Nor will they be afforded a
similar opportunity.
We have not adopted any policy for resolving this conflict. Potential
investors should be aware of this contradiction in the structure of this
offering.
Management's discretion in the use of proceeds may conflict with your wishes.
- -----------------------------------------------------------------------------
We have some discretion in the use of proceeds.
Of the $25,000-75,000 offering proceeds deposited into the escrow account,
10%, or $2,500-7,500, may be released to us prior to a confirmation offering
in which you reconfirm your investment in accordance with procedures
required by Rule 419. We do not intend to request release of the 10% funds.
Accordingly, we will receive all of the escrowed funds in the event a
business combination is closed under the provisions of Rule 419. We will
use these proceeds as indicated in this document under the section titled
"USE OF PROCEEDS" but have considerable discretion in deciding how to
allocate funds. Investors should be aware of the fact that their wishes
may not be reflected in the decisions of management in these matters. If we
fail to spend the proceeds effectively, our business and financial condition
could be harmed. (See "USE OF PROCEEDS.")
Selling our shares without a professional underwriter may jeopardize our
ability to adequately research the market.
- ------------------------------------------------------------------------
We are selling the shares through our president without the use of a
professional securities underwriting firm. Consequently, there may be less
due diligence performed in conjunction with this offering than would be
performed in an underwritten offering.
Our inability to evaluate investments could lead us into an unwise investment.
- ------------------------------------------------------------------------------
Our limited funds and the lack of full-time management will likely make it
impracticable to conduct a complete and exclusive investigation and analysis
of a business. Therefore, management decisions will likely be made without
detailed feasibility studies, independent analysis, market surveys, and the
like which, if we had more funds available, would be desirable. Pinoak, Inc.
will be particularly dependent in making decisions on information provided
by the promoter, owner, sponsor, or others associated with the businesses
seeking our participation, and which will have a direct economic interest in
completing a transaction with us. In a worse case scenario, this could lead
us to make a poor decision because we might lack the fullest possible
knowledge of the relevant facts.
16
The failure of a sufficient number of investors to reconfirm their
investment could jeopardize the entire transaction.
- ------------------------------------------------------------------
A business combination with an acquisition candidate cannot be closed
unless, for the reconfirmation offering required by Rule 419, we can
successfully convince you and a sufficient number of investors representing
80% of the offering proceeds raised to elect to reconfirm your investments.
If, after completion of the reconfirmation offering, a sufficient number of
investors do not reconfirm their investment, the business combination will
not be closed. Given this scenario, none of the securities held in escrow
will be issued and the funds will be returned to you on a proportionate
basis. Up to 80% of the shares may be purchased by our officers, directors,
current shareholders and any of their affiliates or associates. It is
likely that these insiders will elect to reconfirm a proposed business
combination reducing or eliminating your effect on the outcome of the 80%
required reconfirmation.
If you invest, you will not be able to transfer your escrowed securities.
- -------------------------------------------------------------------------
No transfer or other disposition of the escrowed securities is permitted
other than by will or the laws of descent and distribution, or under a
very specific section of the tax code related to divorce. Potential
investors should be aware that your ability to sell or transfer these
securities while they are in escrow, or any interest in them, is severely
limited, significantly affecting their liquidity and your flexibility.
There are rules for low-priced stocks that may affect your ability to resell
your shares
- ----------------------------------------------------------------------------
It is likely that our common stock will be subject to the regulations on
penny stocks; consequently, the market liquidity for our common stock may be
adversely affected by regulations limiting our ability or that of any
broker/dealers we may in the future ultimately engage to sell our common
stock. Additionally, these regulations sometimes depress stock prices.
This, in turn, may affect your ability to resell those shares in the public
market following termination of the Rule 419 escrow.
We have arbitrarily determined the offering price of the shares.
- ----------------------------------------------------------------
We have arbitrarily determined the offering price of $0.025 per share. This
price bears no relation to our assets, book value, or any other customary
investment criteria, including our prior operating history. Among factors
we considered in determining the offering price were:
o Our limited financial resources
o The amount of equity desired to be retained by present shareholders
o The amount of dilution to the public
o The general condition of the securities markets
17
In net, it is entirely possible that the facts and circumstances surrounding
Pinoak, Inc. have been interpreted incorrectly and that the price has been
set too high.
We face many competing companies with more experience and resources than we.
- ----------------------------------------------------------------------------
In relation to our competitors, we are and will continue to be an
insignificant participant in the business of seeking business combinations.
A large number of established and well-financed entities, including venture
capital firms, have recently increased their merger and acquisition
activities. Most of these entities have significantly greater financial
resources, technical expertise and managerial capabilities than we and,
consequently, we will be at a competitive disadvantage in identifying
suitable merger or acquisition candidates and successfully consummating a
proposed merger or acquisition. Also, we will be competing with a large
number of other small blank check companies.
Possible tax consequences to our activities may adversely effect us or our
investors.
- --------------------------------------------------------------------------
In the course of any acquisition or merger we may undertake, a substantial
amount of attention will be focused upon federal and state tax consequences
both to us and the acquisition candidate. Presently, under the provisions of
federal and various state tax laws, a qualified reorganization between
business entities will generally result in tax-free treatment to the parties
to the reorganization. While we expect to undertake any merger or
acquisition so as to minimize federal and state tax consequences both to us
and the acquisition candidate, such business combination might not meet the
statutory requirements of a reorganization, or the parties might not obtain
the intended tax-free treatment upon a transfer of stock or assets. A non-
qualifying reorganization could result in the imposition of both federal and
state taxes that may have a substantial adverse effect on us.
FORWARD-LOOKING STATEMENTS
--------------------------
This prospectus contains forward-looking statements. We intend to identify
forward-looking statements in this prospectus using words such as
"believes," "intends," "expects," "may," "will," "should," "plan,"
"projected," "contemplates," "anticipates," or similar statements. These
statements are based on our beliefs as well as assumptions we made using
information currently available to us. Because these statements reflect our
current views concerning future events, these statements involve risks,
uncertainties and assumptions. Actual future results may differ
significantly from the results discussed in the forward-looking statements.
Some, but not all, of the factors that may cause these differences include
those discussed in the Risk Factors section. You should not place undue
reliance on these forward-looking statements, which apply only as of the
date of this prospectus.
18
YOUR RIGHTS UNDER RULE 419
--------------------------
It is important that you know that we have had absolutely no preliminary
contact or discussion with any representatives of any business regarding the
possibility or potential for any acquisition or merger. This offering is
being conducted according to Rule 419. You have certain rights and will
receive the substantive protection provided by this Rule. To that end,
the securities purchased by you and other investors and the funds received
in the offering will be deposited and held in the escrow account until an
acquisition meeting specific criteria is completed. The escrow account is
non interest-bearing and the funds deposited in it are held for the named
purchasers.
You should be aware as well of certain trading restrictions on securities
held in escrow accounts subject to Rule 419. According to Rule 15g-8 of the
Exchange Act, it is unlawful for any person to sell or offer to sell any
security that is deposited and held in an escrow or trust account pursuant
to Rule 419 under the Securities Act of 1933, or any interest in or related
to such security, other than pursuant to a qualified domestic relations
order as defined by the Internal Revenue Code of 1986, as amended, or Title
I of the Employee Retirement Income Security Act, or the rules thereunder.
Acquisition criteria
- ---------------------
Rule 419 requires that, before the funds and the securities can be released,
we must first execute an agreement to acquire a candidate meeting certain
specified criteria. The agreement must provide for the acquisition of a
business or assets for which the fair value of the business represents at
least 80% of the offering proceeds. For purposes of the offering, the fair
value of the business or assets to be acquired must be at least 80% of
$75,000, that is $60,000, if the maximum amount is raised; and 80% of
$25,000, or $20,000, if the minimum amount is raised.
The agreement must also include, as a precondition to its closing, a
requirement that the number of investors representing 80% of the offering
proceeds must elect to reconfirm their investment.
We will not acquire or merge with any business or company to which our
officer/director or any associated person has any relationship. Any merger
or acquisition will be strictly at arm's length. While we do not anticipate
seeking an independent appraisal of any proposed merger or acquisition, we
do intend to fully disclose the nature and terms of any business combination
in a post-effective amendment.
19
Post-effective amendment
- ------------------------
Once the agreement governing the acquisition of a business meeting the
required criteria has been executed, Rule 419 requires us to update the
registration statement with a post-effective amendment. The post-effective
amendment must contain information about the proposed acquisition candidate
and its business, including audited financial statements, the results of
this offering, and the use of the funds disbursed from the escrow account.
The post-effective amendment must also include the terms of the
reconfirmation offer mandated by Rule 419. The reconfirmation offer must
include certain prescribed conditions which must be satisfied before the
funds and securities can be released from escrow. (See the next section,
"Reconfirmation of offering," for a detailed listing of those conditions.)
Reconfirmation of offering
- ---------------------------
The reconfirmation offer must commence after the effective date of the post-
effective amendment. Under Rule 419, the terms of the reconfirmation offer
must include the following conditions:
o The prospectus contained in the post-effective amendment will be sent
to each investor whose securities are held in the escrow account within
5 business days after the effective date of the post-effective amendment.
o Each investor will have no fewer than 20 and no more than 45 business
days from the effective date of the post-effective amendment to notify
us in writing that the investor elects to remain an investor.
o If you do not receive written notification or if you receive notification
that an investor has decided not to reconfirm an investment within 45
business days following the effective date, the proportionate portion
of the funds, less the cost of this Offering, which is estimated to be
$2,500, held in the escrow account on your behalf will be returned
to you within 5 business days by first class mail or other equally prompt
means.
o As previously stated, the acquisition will be closed only if investors
representing 80% of the total proceeds from the offering elect to
reconfirm their investment, that is, if the maximum number of shares have
been sold, proceeds equaling $60,000, and if the minimum, $20,000.
o If a closed acquisition has not occurred by [Date], 2003, 18 months
from the date of this prospectus, the funds held in the escrow account
shall be returned to all investors on a proportionate or pro-rata
basis within 5 business days by first class mail or other equally prompt
means.
20
Release of securities and funds.
- --------------------------------
The funds will be released to us, and the securities will be released to
you, only after the escrow agent has received a signed representation from
us and any other evidence acceptable by the escrow agent that:
o We have executed an agreement for the acquisition of an acquisition
candidate.
o The fair market value of the business to be acquired represents at
least 80% of the minimum offering proceeds.
o We have filed the required post-effective amendment.
o The post-effective amendment has been declared effective.
o We have satisfied all of the prescribed conditions of the
reconfirmation offer.
o The transaction to acquire the business has closed.
DILUTION
--------
The dilution to investors in this offering is constituted by the difference
between the public offering price per share and the pro forma net tangible
book value per share, of common stock of Pinoak, Inc., after this offering.
Net tangible book value per share is determined by dividing the net tangible
book value of the company by the number of outstanding shares of common
stock. The net tangible book value of the company is equal to the total
tangible assets less the total liabilities.
Dilution arises mainly from the arbitrary decision by us as to the offering
price per share. Dilution of the value of the shares purchased by the
public in this offering will also be due, in part, to the lower book value
of the shares presently outstanding, and in part, to expenses incurred in
connection with the public offering.
Net tangible book value is equal to the net tangible assets of the company.
The net tangible assets of the company are equal to the total assets less
the total liabilities and intangible assets. (See "Financial Statements.")
As of December 31, 2001, Pinoak, Inc. had audited net tangible book value
of $2,013.00. The net tangible book value is equal to the total tangible
assets less the total liabilities. The net tangible book value deficit per
share of common stock is approximately $0.001. (See "Certain Transactions.")
21
The information below sets forth the dilution to persons purchasing shares
in this offering without taking into account any changes in the net tangible
book value of Pinoak, Inc. after December 31, 2001, except the sale of the
minimum and maximum number of shares offered at the public offering price
and receipt of the net proceeds from that sale.
DILUTION
Minimum Maximum
------- -------
Public Offering Price Per Share $0.025 $0.025
Net Tangible Book Value Per Share $0.001 $0.001
Before Offering
Net Tangible Book Value Per Share
After Offering $0.009 $0.0154
Increase Per Share Attributable to
Payment by Public Investors $0.008 $0.014
Dilution Per Share to Public Investors
Percentage 64.0% 38.4%
Numerical $0.009 $0.0154
There are no warrants, options, rights or convertible securities currently
outstanding.
22
USE OF PROCEEDS
---------------
If the maximum shares are sold, the gross proceeds of this offering will be
$75,000; if the minimum, $25,000. While Rule 419, prior to the
reconfirmation of the offering permits 10% of the funds ($7,500 and $2,500,
respectively) to be released from escrow to us, we do not intend to request
release of these funds. This offering is contingent on the entire offering
being sold and will be sold on a first come, first served basis. If
subscriptions exceed the amount being offered, these excess subscriptions
will be promptly refunded without deductions for commissions or expenses.
Accordingly, we will receive these funds in the event a business combination
is closed in accordance with Rule 419.
Under Rule 419, after the reconfirmation offering and the closing of
the business combination, and assuming the successful completion of this
offering, $75,000, plus any dividends received but less any amount returned
to investors who did not reconfirm their investment under Rule 419, will be
released to us. For the minimum, that amount will be $25,000
less the $2,500 for the offering preparation expenses. This refund to
investors would also take place if the minimum number of shares is not
obtained, if an acquisition is not consummated within 18 months, or if
a substantial number of investors do not reconfirm their investments.
We estimate the cost of finding and consummating a business combination
could run as much as $20,000. As we have not started the process of
investigating potential acquisition candidates, it is difficult to determine
the percent of proceeds to be used for this purpose.
We have considerable discretion over how to use a significant portion of
the net proceeds of this offering. We cannot assure investors that our use
of the net proceeds will not vary substantially due to unforeseen factors.
The proceeds if and when made available to use will be used to pay the
following expenses in the order stated:
USE OF PROCEEDS
MINIMUM MAXIMUM
------- -------
Offering Expenses(1) 2,000 2,000
Escrow Fees(2) 500 500
TOTAL EXPENSES 2,500 2,500
Working Capital 22,500 72,500
TOTAL EXPENSES+WORKNG CAPITAL(3) 40,000 75,000
(1) Offering costs include filing, printing, legal, accounting,
transfer agent and escrow agent fees.
23
(2) The proceeds received in this offering will be put into the escrow
account pending closing of a business combination and
reconfirmation. (See Exhibit 2.1 Escrow Agreement.)
Upon the consummation of a business combination and the reconfirmation of
the investors' purchase of the shares, the balance of the deposited funds
will be released to use. They may be used to offset the expenses of
consummating a business combination, including legal fees for the
preparation and filing of a post-effective amendment to the registration
statement.
No portion of the proceeds of the offering will be paid to our
officer/director or his affiliates or associates. Expenses will be paid from
our working capital.
Working capital is expected to include incidental expenses related to the
marketing of our company as a vehicle for a merger candidate seeking to
become fully reporting, as well as for incidental operational expenses
including basic office supplies. To the extent that these funds are not
used, they will be deposited in an interest-bearing money market account
which will be available to the merger candidate upon consummation of a
merger or acquisition.
If this capital is insufficient, the company may seek to obtain additional
financing through offerings of equity and/or debt securities. It is unlikely
that we will seek loan financing as the costs of our operations are
negligible and we do not expect to incur any significant additional costs
However, if we are able to raise only the minimum amount of $25,000, and no
additional funds are secured, then we face the risk that our company might
be under-funded, placing all investments substantially at risk. Under those
circumstances, we might attempt to borrow funds. Any loan we undertook
would be repaid in lump sum from the proceeds we expect to derive from the
sale of the company to a merger candidate upon receipt of final payment.
Other Arrangements
- ------------------
Pinoak, Inc. has no agreement or understanding, express or implied, with its
officer/director or any of his affiliates or associates regarding employment
with the Company or compensation for services. It has no plan, agreement, or
understanding, express or implied, with his, or any affiliates regarding the
issuing of any shares of authorized and unissued common stock.
The existing officer/director does reserve the right to acquire shares in
this offering. There is no understanding, however, between him and PINOAK,
Inc. regarding the sale of all or a portion of the common stock he
currently holds in connection with any future participation by PINOAK in a
business, or any other plans, understandings, or arrangements by which he
or his affiliates would receive funds, stock, or other assets in such a
connection. Nor have any advances have been made or contemplated by PINOAK to
Mr. Jesky or anyone connected to him.
24
Except for reimbursement of offering costs and expenses he may have
incurred on PINOAK's behalf, no portion of the net proceeds of the offering
may be paid to our officer/director or any of his associates directly or
indirectly, as consultant fees, officer salaries, director fees, purchase of
their shares, or other payments. No portion of the net proceeds will be
used to make loans to any person. PINOAK will not borrow funds and use the
proceeds acquired from the lender to make payments to its officer/director
or any of his associates.
Pinoak, Inc. has no agreement or understanding with any consultant or advisor
to provide services in connection with any future business acquisition.
Though no concrete plans to do so are currently in place, the possibility
exists that management may find it to be in the company's best interests to
retain the services of such a consultant.
Under no circumstances will Pinoak, Inc. retain the services of its own
officer/director or one of his affiliates or associates as a consultant.
Compensation to a consultant may take various forms, including one time
cash payments, payments based on a percentage of revenues or product sales
volume, payments involving issuance of securities (including those of PINOAK,
Inc.) or any combination of these or other compensation arrangements.
We estimate that any fees for consultant services paid in cash will not
exceed 10% of the amount of the securities it issues to acquire a business.
We will not have funds to pay a retainer in connection with any consulting
arrangement, and no fee will be paid unless and until an acquisition is
completed in accordance with Rule 419.
25
The following tables set forth the percentage of equity to be purchased by
public investors in the offering compared to the percentage equity to be
owned by the present stockholder, and the comparative amounts paid for the
shares by the public investors as compared to the total consideration paid
by the present stockholder of Pinoak, Inc.
Assuming the Minimum Number of Shares Sold
------------------------------------------
Shares Approx Percent Total Approx. Percent
Purchased of Total Shares Dollars of Total Dollars
--------- --------------- ------- ---------------
Public
Stockholders 1,000,000 33.3% 25,000 92.6%
Present
Stockholder 2,000,000 66.6% 2,000 7.4%
--------- ----- ------ ------
Totals 3,000,000 100.0% 27,000 100.0%
Assuming the Maximum Number of Shares Sold
------------------------------------------
Public
Stockholders 3,000,000 60.0% 75,000 97.4%
Present
Stockholder 2,000,000 40.0% 2,000 2.6%
--------- ----- ------ ------
Totals 5,000,000 100.0% 77,000 100.0%
26
CAPITALIZATION
--------------
The following table sets forth our capitalization as of December 31, 2001,
and pro-forma as adjusted to give close to the sale of 3,000,000 shares
offered by us.
Capitalization
As Adjusted
Dec. 31, -----------
2001 Minimum Maximum
Actual Offering Offering
------ -------- --------
Long-term debt
Stockholders' equity:
Common stock, $.001 par value;
authorized 20,000,000 shares,
issued and outstanding
2,000,000 shares as
of December 31, 2001 2,000 3,000 5,000
Additional paid-in capital 0 24,000 72,000
Deficit accumulated during the
development period 0 0 0
------------------ ------ -------- --------
Total stockholders equity 2,000 27,000 77,000
Total Capitalization 2,000 27,000 77,000
27
PLAN OF DISTRIBUTION
--------------------
General
We are offering a minimum of 1,000,000 and a maximum of 3,000,000 shares at
the purchase price of $0.025 per share on a direct participation basis.
If the minimum number of shares is not sold during the offering period, the
proceeds received will be returned to investors within a period of ten days.
This offering will expire 90 days from the date of this prospectus. The
offering will not be extended. The company may allocate among or reject any
offers to purchase, in whole or in part. Moreover, our officer/director may
purchase shares on the same terms, though not with an intention to resell
such shares shortly thereafter, as shares owned by our officer would be
restricted.
The shares will be offered and sold only to residents in the states of
Arizona and Nevada. (For details, see "Special State Law Considerations,"
below, especially as to limitations this places on resale or transfer of
shares.)
Our executive officer, Mr. Rick Jesky, will sell all shares in this
offering. He will receive no compensation or commissions with respect to
them.
The proceeds received under this offering will be deposited in a non-
interest bearing escrow account with Southwest Escrow Company, whose address
is 8215 S. Eastern, Suite 100, Las Vegas, Nevada 89123 (escrow agent).
The escrow agreement is a standard escrow agreement under the Rule
419. It states that all checks must be made out to the escrow company or
they will be returned, sets up the terms and conditions of the account, and
arranges the terms by which funds will be disbursed if necessary within ten
days of the end of the offering period if the minimum has not been met.
Though we could request 10% of these funds under Rule 419 prior to the
reconfirmation, we do not intend to do so.
Shares will be sold in reliance upon the safe harbor provisions of Rule
3a4(1) of the Securities Exchange Act of 1934. Pinoak, Inc. has no
arrangements or agreements, verbal or written, with any underwriters to help
underwrite this offering.
This offering is intended to be made solely by the delivery of this
prospectus and the accompanying subscription application to prospective
investors. PINOAK's officer/director will not participate in the making of
this offering other than by the delivery of this prospectus or by responding
to inquiries by prospective purchasers. His responses will be limited to the
information contained in the Registration Statement of which this prospectus
is a part. Mr. Jesky is not registered as a broker-dealer, nor is he
an associated person of any other brokers or dealers.
The Company will pay its own legal and accounting fees and other expenses
incurred in connection with the offering. If the Company is required to
return funds to potential investors, the company will be unable to return
up to $2,500 in funds, as these funds will be used for the offering
expenses.
28
Though no plans to do so are in effect, we reserve the right to use broker-
dealer(s) in the sale of these securities. We will amend the registration
statement via post-effective amendment if in fact we do require the services
of a broker-dealer(s) if or when the broker-dealer sells a portion of the
offering. Prior to the involvement of the broker-dealer, we would secure a
no objection position from the NASD.
Stock certificates will not be issued until funds from the reconfirmed
investments are released to us from the escrow account by the escrow agent.
Until stock certificates are issued to the subscribers, the subscribers will
not be considered shareholders of the Company.
Subscribers will have no right to a return of their subscription payments
held in the escrow account until the Company decides not to accept such
subscription payment.
PROPOSED BUSINESS
-----------------
History and Organization
- ------------------------
We are a Nevada corporation incorporated on December 31, 1998 for the purpose
of acquiring or merging with an unspecified operating business. We are a
blank check company as defined in Rule 419. Pinoak, Inc. was organized for
the purpose of seeking, investigating, and ultimately acquiring an interest
in a business with long-term growth potential. Persons should not purchase
shares in the offering if they expect short-term earnings or appreciation in
the value of our company. It is emphasized that the business objectives
discussed here are extremely general and are not intended to be restrictive
on the discretion of the management of Pinoak, Inc.
Persons purchasing shares in the offering will be entrusting their funds
to PINOAK's management, subject to the requirements of Rule 419. The net
proceeds of the offering are not specifically allocated to identified
purposes or allocated to the acquisition of any specific type of business
venture. Decisions concerning these matters may be made by management
without shareholder action, except for the right of each investor to recover
his pro rata portion of the deposited funds in accordance with Rule 419.
(See "Use Of Proceeds.")
Management anticipates that it may be able to participate in only one
potential business venture, due primarily to our limited financing.
29
Selection of a Business
- -----------------------
Pinoak, Inc. anticipates that businesses for possible acquisition will be
referred by various sources, including its officer/director, professional
advisors, securities broker-dealers, venture capitalists, members of the
financial community, and others who may present unsolicited proposals.
PINOAK will seek businesses from all known sources, but will rely principally
on personal contacts of the officer/director and his affiliates, as well as
indirect associations between him and other business and professional
people. While it is not presently anticipated that PINOAK will engage
unaffiliated professional firms specializing in business acquisitions or
reorganizations, such firms may be retained if management deems it in the
best interest of the Company. (See "Other Arrangements" under "Use Of
Proceeds," above.)
Process of Selection
- --------------------
PINOAK will not restrict its search to any particular business, industry, or
geographical location, and management reserves the right to evaluate and
enter into any type of business in any location. It may participate in a
newly organized business venture. On the other hand, it may select a more
established company entering a new phase of growth or in need of additional
capital to overcome existing financial problems.
In seeking a business venture, the decision of management will not be
controlled by an attempt to take advantage of any anticipated or perceived
appeal of a specific industry, management group, product, or industry, but
will be based on the business objective of seeking long-term capital
appreciation in the real value of Pinoak, Inc.. We will not acquire or merge
with a business or corporation in which our officer/director or any of his
associates has any direct or indirect ownership interest.
Factors To Be Considered in the Selection Process
- -------------------------------------------------
The analysis of new businesses will be undertaken by or under the
supervision of our officer/director. In analyzing prospective businesses,
he will consider, to the extent applicable, the available technical,
financial, and managerial resources, working capital and other prospects for
the future, the nature of present and expected competition; the quality and
experience of management services which may be available and the depth of
that management; the potential for further research, development, or
exploration; the potential for growth and expansion; the potential for
profit; the perceived public recognition or acceptance of products,
services, or trade or service marks; name identification; and other relevant
factors.
30
The decision to participate in a specific business may be based on
management's analysis of the quality of the other firm's management and
personnel, the anticipated acceptability of new products or marketing
concepts, the merit of technological changes, and other factors which are
difficult, if not impossible, to analyze through any objective criteria. It
is anticipated that the results of operations of a specific firm may not
necessarily be indicative of the potential for the future because of the
requirement to substantially shift marketing approaches, expand
significantly, change product emphasis, change or substantially augment
management, and other factors.
Time Frame of the Selection Process
- -----------------------------------
The period within which we may participate in a business on completion of
this offering cannot be predicted and will depend on circumstances beyond
our control, including the availability of businesses, the time required to
complete our investigation and analysis of prospective businesses, the time
required to prepare appropriate documents and agreements providing for our
participation, and other circumstances. It is anticipated that the analysis
of specific proposals and the selection of a business will take several
months. Even after we have located a prospective acquisition target, it will
still have to comply with the reconfirmation mandate of Rule 419, which may
take months. Persons should not purchase shares in this offering if they
expect a short-term appreciation in the value of Pinoak, Inc. or its
securities.
Other Ramifications of Rule 419 on the Selection Process
- --------------------------------------------------------
It is possible that Pinoak, Inc. may propose to acquire a business in the
development stage. A business is in the development stage if it is devoting
most of its efforts to establishing a new business, and planned principal
operations have either not commenced or not yet resulted in significant
revenues. Under Rule 419, PINOAK must acquire a business or assets for which
the fair value of the business represents at least 80% of the offering
proceeds. Accordingly, PINOAK's ability to acquire a business in the
development stage may be limited to the extent it cannot locate such
businesses with fair value high enough to satisfy the requirements of Rule
419.
PINOAK will be subject to requirements of Rule 419 and certain reporting
requirements under the Exchange Act and will, therefore, upon effectiveness,
be required to furnish audited financial statements for the company(s)
acquired, covering one, two, or three years, depending on the relative size
of the acquisition. Consequently, acquisition prospects that do not have or
are unable to obtain the audited statements to meet these requirements will
not be appropriate for acquisition. Pinoak, Inc. anticipates that it will
voluntarily prepare and file periodic reports under the Exchange Act,
notwithstanding the fact that that obligation may be suspended under
sections 15(d) of the Exchange Act.
31
Acquisition of a Business
- -------------------------
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, or other
reorganization with another corporation or entity; joint venture; license;
purchase and sale of assets; or purchase and sale of stock, the exact nature
of which cannot now be predicted. Notwithstanding the above, the Company
does not intend to participate in a business through the purchase of
minority stock positions. On the consummation of a transaction, it is likely
that PINOAK's present management and shareholder will not be in control of
the company. In addition, a majority or all of PINOAK's directors may, as
part of the terms of the acquisition transaction, resign and be replaced by
new directors without vote of our shareholders.
The possible ramifications of transactions like those mentioned here could
significantly effect investments. See "RISK FACTORS" in connection with
these and other possible effects.
In connection with PINOAK's acquisition of a business, for example, its
present shareholder, officer/director may, as a negotiated element of the
acquisition, sell all or a portion of the common stock he holds at a
significant premium over his original investment in Pinoak, Inc. As a result
of such sales, affiliates of the entity participating in the business
reorganization with PINOAK would acquire a higher percentage of equity
ownership in it.
Although our present shareholder did not acquire his shares of common stock
with a view toward any subsequent sale in connection with a business
reorganization, it is not unusual for affiliates of the entity participating
in the reorganization to negotiate to purchase shares held by the present
shareholders. This reduces the number of restricted securities held by
persons no longer affiliated with the company. This in turn reduces the
adverse impact that might be exerted on the public market in the company's
common stock as a result of substantial sales of those shares once the
restrictions no longer apply.
Public investors will not receive any portion of the premium that may be
paid in those circumstances. Furthermore, our shareholders may not be
afforded an opportunity to approve or consent to any particular stock buy-
out transaction.
While the actual terms of a transaction to which we may be a party cannot be
predicted, it may be expected that the parties to the business transaction
will find it desirable to structure the acquisition as a so-called "tax-
free" event under sections 351 or 368(a) of the Internal Revenue Code of
1986. In order to obtain tax-free treatment under section 351 of the Code,
it would be necessary for the owners of the acquired business to own 80% or
more of the stock of the surviving entity. In that case, PINOAK's
shareholders, including investors in this offering, would retain less than
20% of the issued and outstanding shares of the surviving entity. Section
368(a)(1) of the Code provides for tax-free treatment of certain business
reorganization between corporate entities where one corporation is merged
with or acquires the securities or assets of another.
32
Generally, we will be the acquiring corporation in such a business
reorganization, and the tax-free status of the transaction will not depend
on the issuing of any specific amount of stock of the surviving entity.
Consequently, there is a substantial possibility that the shareholders of
Pinoak, Inc., immediately prior to the transaction, would retain less than
50% of the issued and outstanding shares of the surviving entity. Therefore,
regardless of the form of the business acquisition, it may be anticipated
that the investors in this offering will experience a significant reduction
in their percentage of ownership in the company.
Notwithstanding the fact that the Company is technically the acquiring
entity in these circumstances, generally accepted accounting principles will
ordinarily require that such a transaction be accounted for as if the
Company had been acquired by the other entity owning the business and,
therefore, will not permit a write-up in the carrying value of the assets of
the other company.
The manner in which we participate in a business will depend on the nature
of the business, our needs and desires and those of the other parties
involved in the negotiations , the management of the business, and the
relative negotiating strengths of PINOAK and the other management team.
We will participate in a business only after the negotiation and execution
of appropriate written agreements. Although the exact terms of these
agreements cannot be predicted, generally they will:
* require specific representations and warranties by all of the parties
involved,
* specify certain events of default,
* detail the terms of closing and the conditions which must be satisfied
by each of the parties prior to it ,
* outline the manner of bearing costs if the transaction is not closed,
* set forth remedies on default, and
* include miscellaneous other terms.
One of the conditions will most likely be compliance with Rule 419, and
reconfirmation by investors representing at least 80% of the gross proceeds
of the offering.
As of the date of the amended filing, no probable acquisition candidates
have been identified.
Evaluation Criteria
- -------------------
Despite his non-experience as a professional business analyst, PINOAK's
officer/director, Rick Jesky, will carefully examine businesses for
acquisition.
33
Management anticipates the selection of an acquired business will be
complex and risky because of the competition for such business opportunities
among all segments of the financial community. The nature of the company's
search for the acquisition of a business requires maximum flexibility since
the company will be required to consider various factors and divergent
circumstances which may preclude meaningful direct comparison among the
various business enterprises, product or services investigated. The
management of the company will have virtually unrestricted flexibility in
identifying and selecting a prospective acquired business. Besides
determining its fair market value, management will consider the following:
o the acquired business' net worth;
o the acquired business' total assets;
o the acquired business' cash flow;
o costs associated with effecting the business combination;
o equity interest and possible management participation in the acquired
business;
o earnings and financial condition of the acquired business;
o growth potential of the acquired business and the industry in which it
operates;
o experience and skill of management and availability of additional
personnel of the acquired business;
o capital requirements of the acquired business;
o competitive position of the acquired business;
o stage development of the product, process or service of the acquired
business;
o degree of current or potential market acceptance of the product,
process or service of the acquired business; and
o regulatory environment of the industry in which the acquired business
operates.
These criteria are not intended to be exhaustive. As Mr. Jesky
searches through the candidates for acquisition, other factors he considers
relevant may apply.
Although we believe that locating and investigating specific business
proposals will take several months, the exact duration of the process is
difficult to predict. However, we cannot exceed the 18 month time schedule
set forth in Rule 419. The time and costs required to select and evaluate
an acquired business candidate, including conducting a due diligence review,
and to structure and consummate the business combination, including
negotiating relevant agreements and preparing requisite documents for filing
in keeping with applicable securities laws and state corporate laws, cannot
presently be stated with certainty. See "Investors' Rights and Substantive
Protection Under Rule 419."
Leverage
- --------
PINOAK may be able to participate in a business involving the use of
leverage. Leveraging a transaction involves the acquisition of a business
through incurring indebtedness for a portion of the purchase price of that
business, which is secured by the assets of the business acquired.
34
One method by which leverage may be used is to locate an operating business
available for sale and arrange for the financing necessary to purchase it.
Acquisition of a business in this fashion would enable us to participate in
a larger venture than our limited funds would otherwise permit, or use less
of our funds to acquire a business and thus commit our remaining funds to
the operations of the business acquired. (See "A leveraged buy-out could
expose us to a high risk of business failure." under Risk Factors.)
The likelihood that we could obtain a conventional bank loan for a leveraged
transaction would depend largely on the business being acquired and its
perceived ability to generate sufficient revenues to repay the debt.
Generally, businesses suitable for leveraging are limited to those with
income-producing assets that are either in operation or can be placed in
operation relatively quickly. We cannot predict whether it will be able to
locate any such business. As a general matter it may be expected that
PINOAK, Inc. will have few, if any, opportunities to examine businesses where
leveraging would be appropriate, or to acquire financing with acceptable
terms.
Tax Considerations
- ------------------
As a general rule, Federal and state tax laws and regulations have a
significant impact upon the structuring of business combinations. Pinoak,
Inc. will evaluate the possible tax consequences of any prospective business
combination and will endeavor to structure the business combination so as to
achieve the most favorable tax treatment to itself, the acquired business,
and our respective stockholders. The IRS or other appropriate state tax
authorities may, however, attempt to re-characterize the tax treatment of a
particular business combination. (See "There may be tax consequences to our
activities which may adversely effect the company or our investors," under
Risk Factors.)
Form and Structure of Acquisition
- ---------------------------------
Of the various methods and forms by which we may structure a transaction to
acquire another business, management is likely to use, without limitation,
one of the following forms: (1) a leveraged buyout transaction in which most
of the purchase price is provided by borrowings from one or more lenders or
from the sellers in the form of a deferred purchase price; (2) a merger or
consolidation of the acquired corporation into or with the company; (3) a
merger or consolidation of the acquired business corporation into or with a
subsidiary of the company organized to facilitate the acquisition (a
"subsidiary merger"), or a merger or consolidation of such a subsidiary into
or with the acquired corporation (a "reverse subsidiary merger"); (4) an
acquisition of all or a controlling amount of the stock of the acquired
corporation followed by a merger of the acquired business into us; (5) an
acquisition of the assets of a business by us or a subsidiary organized for
such a purpose; (6) a merger or consolidation of the company with or into
the acquired business or such a subsidiary; or (7) a combination of any of
the above.
35
The actual form and structure for a business combination may also be
dependent upon numerous other factors pertaining to the acquired
business and its stockholders, as well as potential tax accounting
treatments afforded the business combination.
As part of an acquisition, we may choose to issue additional securities that
could add numerous complications depending on whether or not these would
need to be registered. Dilution, change of management, additional costs,
time delays or depressed prices for our stock could result, discussions of
which are included in the Risk Factors section of this prospectus.
We are endeavoring, by the way, to conduct our operations so as not to
require registration under the Investment Company Act of 1940.
Daily Operations
- ----------------
We expect to use attorneys and accountants as necessary, and do not
anticipate a need to engage any full-time employees during the phase devoted
to seeking and evaluating business opportunities. The need for employees
and their availability will be addressed along with the decisions specific
to acquiring or participating in a specific business opportunity. We have
allocated a portion of the offering proceeds for general overhead. Although
there is no current plan to hire employees on a full-time or part-time
basis, some portion of working capital may be used to pay any part-time
employees hired.
Until an active business is commenced or acquired, we will have no employees
or day-to-day operations. We are unable to make any estimate as to the
future number of employees, which may be necessary. If an existing business
is acquired it is possible that we would hire its existing staff.
Competition
- -----------
Pinoak, Inc. will be involved in intense competition with other business
entities, many of which will have a competitive edge over us by virtue of
their more substantial financial resources and prior experience in business.
We face as well numerous other smaller blank check companies at the same
stage of development as we are. (See "Competition," in Risk Factors.)
Offices
- -------
Pinoak, Inc. uses office space at 10801 E. Grove Street, Mesa,
Arizona, 85208, provided by Mr. Rick Jesky, our officer/director and
principal shareholder, at no cost. We will reimburse clerical and office
expenses, such as telephone charges, copy charges, overnight courier
service, travel expenses, and similar costs he incurs on company matters,
which are estimated not to exceed, on average, $300.00 per month.
This arrangement will remain in effect until we enter into a business
combination or the Rule 419 escrow is otherwise terminated
36
PLAN OF OPERATION
-----------------
We are a development stage entity, and have neither engaged in any
operations nor generated any revenues to date. As of December 31, 2001,
we have no significant expenses, with the exception of incorporation fees,
accounting fees, SEC filing fees, and escrow establishment fees.
Virtually all of the expenses that will be funded from the money in our
treasury---or, if additional funds are required, that may be funded by
management---will derive from our efforts to identify a suitable acquisition
candidate and close the acquisition. Management may agree to fund our cash
requirements until an acquisition is closed. So long as management does so,
we will have sufficient funds to satisfy our cash requirements and do not
expect to have to raise additional funds during the entire Rule 419 escrow
period of up to 18 months from the date of this prospectus. This is
primarily because we do not anticipate incurring any significant
expenditures. Before the conclusion of this offering, we anticipate our
expenses to be limited to accounting fees, legal fees, telephone, mailing,
filing fees, and transfer agent fees.
We may seek additional financing. At this time, however, we believe that the
funds to be provided by management will be sufficient for funding our
operations until we find an acquisition and therefore do not expect to issue
any additional securities before the closing of a business combination.
37
DESCRIPTION OF CAPITAL STOCK
----------------------------
Authorized Capital Stock Under Our Shares of Capital Stock Outstanding
Articles of Incorporation After offering
- ---------------------------------- -----------------------------------
20,000,000 shares of common stock 5,000,000 shares of common stock-
assuming successful completion of
maximum offering.
3,000,000 shares of common stock-
assuming successful completion of
minimum offering.
All significant provisions of our capital stock are summarized in this
prospectus. You should note that the following description is governed by
applicable Nevada law and our articles of incorporation and bylaws. We have
filed copies of these documents as exhibits to the registration statement
related to this prospectus. If you wish to obtain more detailed information
regarding this topic, please refer to the Index for Part II on page XX for
a complete list of these exhibits.
Authorized Stock
- ----------------
Pinoak, Inc. is authorized to issue 25,000,000 shares, consisting of
20,000,000 shares of Common Stock, par value $0.001 per share, of which
2,000,000 shares are issued and outstanding, and 5,000,000 shares of
preferred stock, par value $0.001 (the "Preferred Stock"), of which no
shares have been issued.
Common Stock
- ------------
Holders of common stock are entitled to one vote per share on each matter
submitted to a vote at any meeting of shareholders. Shares of common stock
do not carry cumulative voting rights; and, therefore, holders of a majority
of the outstanding shares of common stock will be able to elect the entire
board of directors, and, if they do so, minority shareholders would not be
able to elect any members to the board of directors. PINOAK's board of
directors has authority, without action by our shareholders, to issue all or
any portion of the authorized but unissued shares of common stock, which
would reduce the percentage ownership in the company of its shareholders and
which may dilute the book value of the common stock.
Shareholders of Pinoak, Inc. have no pre-emptive rights to acquire additional
shares of common stock. The common stock is not subject to redemption
and carries no subscription or conversion rights. In the event of
liquidation of PINOAK, the holders of shares of common stock are entitled to
share equally in corporate assets after satisfaction of all liabilities.
The shares of common stock, when issued, will be fully paid and non-
assessable.
38
Holders of common stock are entitled to receive such dividends as the board
of directors may from time to time declare out of funds legally available
for the payment of dividends.
NOTE: We have not paid dividends on our common stock and do not anticipate
that we will pay dividends anytime soon. This caution is repeated: You
should not expect to receive any dividends on shares in the near future,
even after a merger. This investment is inappropriate for you if you need
dividend income from an investment in shares.
Preferred Stock
- ---------------
Our board of directors, without your approval, is authorized to issue
preferred stock. They can issue different classes of preferred stock, with
some or all of the following rights or any other legal rights they think are
appropriate, such as:
o Voting
o Dividends
o Required or optional repurchase by us
o Conversion into common stock, with or
without additional payment
o Payments preferred stockholders will
receive before common stockholders if we go out
of business
The issuance of preferred stock could provide us with flexibility for
possible acquisitions and other corporate purposes, but it also could render
your vote meaningless because preferred stockholders could own shares with a
majority of the votes required on any issue. Because we issue preferred
stock, someone interested in buying our company may not follow through with
their plans because they could find it more difficult to acquire, or be
discouraged from acquiring, a majority of our outstanding stock.
Warrants
- --------
The Company has no warrants.
39
Transfer Agent
- --------------
Upon the closing of this offering, the transfer agent for PINOAK's securities
will be Holladay Stock Transfer, 2939 North 67th Place, Scottsdale,
Arizona, phone: 480-481-3940.
.
Reports to Stockholders
- -----------------------
The company intends to furnish its stockholders with annual reports
containing audited financial statements as soon as practicable after the end
of each fiscal year. The company's fiscal year ends on December 31. In
addition, we intend to issue unaudited reviewed interim reports and financial
statements on a quarterly basis.
SHARES ELIGIBLE FOR FUTURE SALE
-------------------------------
Of the shares outstanding after the offering, the 3,000,000 shares sold
in this offering will have been registered with the SEC and can be freely
resold, except if they are acquired by our officer/director or other persons
or entities that he controls or that control him.
Generally, Rule 144 provides that directors, executive officers, and persons
or entities that they control or who control them may sell shares of common
stock in any three-month period in a limited amount. However, the SEC has
taken the position that resales cannot be made pursuant to Rule 144 for blank
check companies. Therefore, the 2,000,000 outstanding shares of common stock
held by sole officer/director cannot be sold pursuant to Rule 144, but must
be registered.
40
MANAGEMENT
----------
The following table and subsequent discussion sets forth information about
our director and executive officer. Mr. Jesky was elected to serve as
a director and President at the time of the founding of Pinoak, Inc. on its
date of inception, December 31, 1998.
He is currently the sole officer/director of Pinoak, Inc.
NAME AGE POSITIONS
Rick Jesky 52 President, CEO, Director, CFO
Pinoak, Inc.'s officer/director is elected annually to serve for two years
until his successor(s) is duly elected and qualified.
Mr. Jesky will not be compensated for the hours he spends handling PINOAK's
affairs; as such, he will devote himself full-time to PINOAK only at such
time as that becomes practical and necessary.
Biographical Information
- ------------------------
Set forth below is biographical information for Mr. Rick Jesky. See
RISK FACTORS for further discussion of the possible ramifications of relying
on a sole officer/director with a relative lack of experience: "We are
dependent on one officer with limited formal business experience."
Rick Jesky
- ----------
Mr. Jesky was born September 18, 1949 in Chicago, IL. He has a BA Degree
from the University of Phoenix, and MA Degree from Northern Arizona
University. Rick Jesky has almost twenty years as an educator (1974-1992)
in the State of Arizona. From 1992 to 1998, he has six years experience as
a General Manger for a major Phoenix nightclub/restaurant, named
Studebaker's. From 1998-1999, he has worked as an educator with Superior
Court of Arizona, Pinal County. He was the founder and sole proprietor of
Oleramma Nursery. He successfully developed and propagated an Oleander
plants which won a Blue Ribbon at the 1992 Arizona State Fair. In September,
1998, he founded Oleramma, Inc, a Nevada Corporation, where he served as
President of the Company until December, 1999. The Company was formed to
develop a hybrid cotton seed, the Company subsequently became public on the
Over-the-Counter Bulletin Board in November, 1999. He resigned as President
of the Company in January, 2000 to return to teaching. At that time, he
taught high school level technical agriculture and criminal law (1999-2000).
In 2001, he worked for the State Department of the United States of America,
in their Peace Corps Division. He was assigned to teaching Environment
Studies to local School Districts on the Island of St. Lucia, in the Eastern
Caribbean. In the Fall of 2001 he returned to Arizona where he is currently
the President of Pinoak, Inc.
Mr. Jesky is not presently associated with any blank check issuer
other than the Company, nor is he presently seeking acquisition targets
though he will begin to do so once the present offering has achieved its
purpose. He will, in fact, be the primary person involved in locating
an acquisition candidate by searching the New York Times, the Wall Street
Journal, other business publications and the Internet for acquisition
candidates and in all other ways open to his seeking appropriate leads.
41
The Company currently does not have employment agreements with its executive
officer. This is the first time that Mr. Jesky has been involved in a
419 Company.
There are no agreements or understandings for any officer or director to
resign at the request of another person. None of the officers or directors
are acting on behalf of or will act at the direction of any other person.
There are no agreements, arrangements or understandings between management
and anyone else by which other management is to be selected for a particular
office or position.
We reserve the right to engage outside consultants and professionals on an
as needed basis, though we have not done so to this point.
CONFLICTS OF INTEREST
---------------------
Our president, treasurer, chief financial and accounting officer and
director, Rick Jesky, does not serve in any capacity for any other
blank check offerings.
In addition, in order to mitigate any potential conflict, the
officer/director of PINOAK has promised in writing not to participate as an
officer or director in any blank check company that files a registration
statement under the Securities Act of 1933, prior to the date the Company
identifies a business it proposes to acquire which meets the acquisition
criteria of Rule 419, or the date six months following the date of this
prospectus, whichever occurs first. Note that, technically, if the latter
date were to occur before PINOAK has identified a company suitable for
acquisition, he could in fact participate in another blank check
company before that happens.
Our director will hold office until the next scheduled shareholder meeting
and the election of his successor. Our director receives no compensation for
serving on the board other than reimbursement of reasonable expenses
incurred in attending meetings. Officers are appointed by the board and
serve at their discretion.
Potential investors will recall that, as stated above, its present
shareholder, officer/director may, in connection with PINOAK's acquisition
of a business and as a negotiated element of the acquisition, sell all or
a portion of the common stock he holds at a significant premium over his
original investment in Pinoak, Inc. As a result of such sales, affiliates of
the entity participating in the business reorganization with PINOAK would
acquire a higher percentage of equity ownership in it. It should be
noted that his shares are not being registered on this registration
statement, and therefore, he cannot sell his shares when this registration
statement is declared effective. No such sales, however, can be consummated
before the registration statement has been made effective.
42
Executive Compensation
- ----------------------
As previously stated, Mr. Jesky receives no salary for his efforts on
PINOAK's behalf, nor will he receive bonuses, stock options, consulting
fees, finder's fees, or in any other form.
Management Control
- ------------------
PINOAK's officer/director has pledged not to divest himself of ownership
and/or control of the company prior to an acquisition or merger transaction.
Statement Concerning Indemnification
- ------------------------------------
Our director is bound by the general standards for director provisions in
Nevada law. These provisions allow him wide latitude in decision-making,
including consideration of our long-term prospects and interests and the
social, economic, legal or other effects of any proposed action on potential
employees, suppliers, customers, communities in which we may operate and the
economy.
We have agreed to indemnify our director, meaning that we will pay for
damages he incurs for properly acting as director. It is the belief of the
SEC, however, that this indemnification may not be given for violations of
the Securities Act that governs the distribution of our securities, and is
therefore unenforceable.
What happens, therefore, in the event that a claim for indemnification is
asserted by our officer/director for liabilities incurred while acting on
our behalf in connection with the securities being registered?
Simply put, if he incurred or paid the expenses in the successful defense
of a legal action, suit or proceeding, we will pay them. Otherwise,
unless our counsel determines that the matter has been settled by
controlling legal precedent, we will submit to a court of appropriate
jurisdiction the question of whether indemnification by us is against
public policy as expressed in the Act, and will abide by its final
adjudication of the issue. (For a fuller discussion of this issue, see
the first item of Part II of this prospectus, Item 24, Indemnification
of Directors and Officers, which includes references to the relevant
section of Nevada law and to SEC policy.)
43
PRINCIPAL SHAREHOLDER
---------------------
The following table sets forth information about our current shareholder.
The person named below has sole voting and investment power with respect
to the shares. The numbers in the table reflect shares of common stock held
as of the date of this prospectus. The numbers in this table assume
5,000,000 shares of common stock outstanding (maximum offering) and
3,000,000 shares of common stock outstanding (minimum offering) following
the offering:
Name and Address of Shares of Pre Min. Post Max Post
Beneficial Owner Common Stock Offer % Offer % Offer %
- ---------------------------------------------------------------------------
Rick Jesky(1) 2,000,000 100% 55% 40%
(1) Rick Jesky, 10801 E. Grove Street, Mesa, Arizona, 85208.
Under blank check company rules, none of these shares will be available for
resale unless they are registered with the U. S. Securities and Exchange
Commission. (See, "Market for Our Common Shares," below.)
Except for the securities being registered here, these shares are restricted
securities, as that term is defined in the Act. They are subject to
restrictions regarding resale; the certificates issued for them have been
stamped with a restrictive legend and will be subject to stop transfer
orders. His shares are not being registered in this Registration and cannot
be sold until they are registered.
Mr. Jesky may be deemed our promoter, as that term is defined under the
Securities Act.
44
CERTAIN TRANSACTIONS
--------------------
The following table sets forth information regarding all securities sold by
us since our inception on December 31, 1998.
Name and Address of Shares of Date Amount
Beneficial Owner Common Stock Purchased Paid
- ---------------------------------------------------------------------------
Rick Jesky(1) 2,000,000 12/07/01 $2,022
(1) Rick Jesky, 10801 E. Grove Street, Mesa, Arizona, 85208.
All sales were made in reliance on Section 4(2) of the Securities Act.
These sales were made without general solicitation or advertising. Each
purchaser was an accredited investor with access to all relevant information
necessary to evaluate the investment and represented to the Registrant that
the shares were being acquired for investment.
WHERE CAN YOU FIND MORE INFORMATION?
------------------------------------
We have not previously been required to comply with the reporting
requirements of the Exchange Act. We have filed a registration statement
with the SEC on Form SB-2 to register the offer and sale of the shares. This
prospectus is part of that registration statement, and, as permitted by the
SEC's rules, does not contain all of the information in the registration
statement. For further information about us and the shares offered under
this prospectus, you may refer to the registration statement and to the
exhibits and schedules filed as a part of the registration statement. You
can review the registration statement and its exhibits and schedules at the
public reference facility maintained by the SEC at Judiciary Plaza, Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC at 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. The registration statement is
also available electronically on the World Wide Web at http://www.sec.gov.
You can also call or write us at any time with any questions you may have.
We would be pleased to speak with you about any aspect of our business and
this offering.
45
MARKET FOR OUR COMMON STOCK
---------------------------
Prior to now, there has been no trading market for our common stock. Under
the requirements of Rule 15g-8 of the Exchange Act, a trading market will
not develop prior to or after the effectiveness of this prospectus or while
the common stock under this offering is maintained in escrow.
PINOAK's present management has not and does not anticipate being in contact
with any broker-dealers regarding the making of a market for our common
stock prior to the execution of an acquisition agreement; that task is more
properly to be initiated by the management of the entity that will exist
post-acquisition.
There are no outstanding options or warrants to purchase, or securities
convertible into, our common equity. The 2,000,000 shares of our common
stock currently outstanding are restricted securities as that term is
defined in the Securities Act. Under blank check company rules established
by the SEC, these shares must be registered with the SEC before they can be
resold. It is to be noted that no such sale can be contemplated or take
place prior to the registration statement being declared effective.
Special State Law Considerations
- --------------------------------
The shares have not been registered in the states of Arizona or Nevada
because of specific exemptions in their laws relating to the limited
availability of the offering. The shares cannot be sold, transferred or
otherwise disposed of to any person or entity unless subsequently registered
in the states of Arizona and Nevada, if that registration is ultimately
required. Registration there is not necessary if fewer than twenty-five
people purchase the shares in a given offering. We may never reach that
point. The following paragraphs refer you to the applicable statutes of
those states.
The shares have not been registered under the Arizona Uniform Securities Act,
in reliance upon the exemption contained in Section R14-4-126.C.3 of that
Act. These Securities cannot be sold, transferred or otherwise disposed of
to any person or entity unless subsequently registered under the Securities
Act of 1933, as amended, and/or the Arizona Securities Act or an exemption
from it.
The shares have not been registered under the Nevada Uniform Securities Act,
in the event that sales are not made to twenty-five (25) or more persons in
the state of Nevada in accordance with the exemption for limited offers or
sales of securities set forth in Nevada Revised Stature Section 90.530(11)
of the Nevada Uniform Securities Act.
46
REPORTS TO STOCKHOLDERS
-----------------------
We intend to furnish our stockholders with annual reports containing
audited financial statements as soon as practicable at the end of each
fiscal year. Our fiscal year ends on December 31.
Method of Subscribing
- ---------------------
Prospective investors should make their checks payable to Pinoak, Inc., c/o
Southwest Escrow Company, 8215 S. Eastern, Suite 100, Las Vegas, Nevada
89123 (escrow agent) and remit the checks and subscription agreements to
Southwest Escrow at their address listed above. Subscriptions may not be
withdrawn once made except in accordance with applicable law. The company
reserves the right to reject any subscription in whole or in part in its
sole discretion for any reason whatsoever notwithstanding tender of payment,
and to withdraw this blank check offering at any time prior to acceptance
by us for the subscriptions received.
Funds will be held by the escrow agent, as described here.
No offers to sell will be made and no offers to subscribe will be accepted
until the registration statement has been declared effective.
LEGAL MATTERS
-------------
The validity of the issuing of the shares offered here will be attested
to for Pinoak, Inc. by Thomas C Cook, our attorney.
EXPERTS
-------
The financial statements of Pinoak, Inc. as of December 31, 2001 are included
in this Prospectus and have been audited by G. Brad Beckstead, CPA, an
independent auditor. Along with his audit, Mr Beckstead has also included
his expert opinion.
47
PART F/S
Financial Statements
Pinoak, Inc.
(A Development Stage Company)
Balance Sheet
as of
December 31, 2001
and
Statements of Income,
Stockholders' Equity, and
Cash Flows
for the period
December 31, 1998 (Inception)
To December 31, 2001
48
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE #
INDEPENDENT AUDITOR'S REPORT F-1
BALANCE SHEET F-2
STATEMENT OF OPERATIONS F-3
STATEMENT OF STOCKHOLDERS' EQUITY F-4
STATEMENT OF CASH FLOWS F-5
FOOTNOTES F-6-10
49
G. BRAD BECKSTEAD
- ---------------------------
Certified Public Accountant
330 E. Warm Springs
Las Vegas, NV 89119
702.528.1984
425.928.2877 (efax)
INDEPENDENT AUDITOR'S REPORT
----------------------------
January 2, 2002
Board of Directors
Pinoak, Inc.
Las Vegas, NV
I have audited the Balance Sheet of Pinoak, Inc. (the "Company") (A
Development Stage Company), as of December 31, 2001, and the related
Statements of Operations, Stockholders' Equity, and Cash Flows for the
period December 31, 1998 (Date of Inception) to December 31, 2001.
These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statement presentation. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the balance sheet of Pinoak, Inc.,
(A Development Stage Company), as of December 31, 2001, and its
related statements of operations, equity and cash flows for the
period December 31, 1998 (Date of Inception) to December 31, 2001,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to
the financial statements, the Company has had limited operations and
have not commenced planned principal operations. This raises substantial
doubt about its ability to continue as a going concern. Management's
plan in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ G. Brad Beckstead
- ----------------------
G. Brad Beckstead, CPA
F-1
Pinoak, Inc.
(a Development Stage Company)
Balance Sheet
BALANCE SHEET
Assets
Current assets:
Cash and equivalents $ 2,013
--------
Total current assets $ 2,013
--------
$ 2,013
========
Liabilities and Stockholders' Equity
Current liabilities $ -
--------
Stockholders' Equity
Preferred stock, $0.001 par value
5,000,000 shares authorized,
no shares issued and outstanding -
Common stock, $0.001 par value,
20,000,000 shares authorized;
2,000,000 shares issued and
outstanding 2,000
Additional paid-in capital 22
(Deficit) accumulated during development stage (9)
---------
2,013
--------
$ 2,013
========
See accompanying notes to financial statements.
F-2
PINOAK, Inc.
(A Development Stage Company)
Statement of Operations
STATEMENT OF OPERATIONS
December 31, 1998
(date of inception)
to December 31,
2001
------------------
Revenue $ -
--------
Expenses
General and administrative 9
--------
Total expenses 9
--------
Net loss $ (9)
=========
Weighted average number of
common shares outstanding 2,000,000
=========
Net (loss) per share (0.00)
=========
See accompanying notes to financial statements.
F-3
PINOAK, Inc.
(a Development Stage Company)
Statement of Changes in Stockholders' Equity
For the period December 31, 1998 (Date of Inception) to December 31, 2001
CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During Total
------------ Paid-in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ---------- ----------- ------------
Beginning balance
December 31, 2000 - $ - $ - $ -
Founders shares
issued
for cash 2,000,000 2,000 22 - 2,022
Net (loss)
Year ended
12/31/2001 (9) (9)
-----------------------------------------------------
Balance as of
12/31/2001 2,000,000 $2,000 $ 22 $ (9) $ 2,013
========= ====== ======== ======== =======
See accompanying notes to financial statements.
F-4
PINOAK, Inc.
(a Development Stage Company)
Statement of Cash Flows
STATEMENT OF CASH FLOWS
December 31, 1998
Year ended (date of inception)
December 31, to December 31,
2000 2001
------------ -------------------
Cash flows from operating activities
Net (loss) $ (9) $ (9)
---------- ----------
Net cash (used) by operating activities (9) (9)
---------- ----------
Cash flows from investing activities - -
---------- ----------
Cash flows from financing activities
Issuance of capital stock 2,022 2,022
---------- ----------
Net cash provided by financing activities 2,022 2,022
---------- ----------
Net increase in cash 2,013 2,013
Cash - beginning - -
---------- ----------
Cash - ending $ 2,013 $ 2,013
========= =========
Supplemental disclosures:
Interest paid $ - $ -
========= =========
Income taxes paid $ - $ -
========= =========
See accompanying notes to financial statements.
F-5
Pinoak, Inc.
(A Development Stage Company)
Notes
Note 1 - Significant accounting policies and procedures
Organization
- ------------
The Company was organized December 31, 1998 (Date of Inception) under
the laws of the State of Nevada, as Pinoak, Inc.
The Company has been dormant and has had limited operations since its
inception, and in accordance with SFAS #7, the Company is considered a
development stage company.
Estimates
- ---------
The preparation of financial statements in conformity with generally
accepted accounting principles 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 the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and cash equivalents
- -------------------------
The Company maintains a cash balance in a non-interest-bearing account
that currently does not exceed federally insured limits. For the purpose
of the statements of cash flows, all highly liquid investments with an
original maturity of three months or less are considered to be cash
equivalents.
Revenue recognition
- -------------------
The Company recognizes revenue on an accrual basis as it invoices for
services.
Reporting on the costs of start-up activities
- ---------------------------------------------
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of
Start-Up Activities," which provides guidance on the financial reporting
of start-up costs and organizational costs, requires most costs of
start-up activities and organizational costs to be expensed as incurred.
SOP 98-5 is effective for fiscal years beginning after December 15, 1998.
With the adoption of SOP 98-5, there has been little or no effect on
the Company's financial statements.
F-6
Pinoak, Inc.
(A Development Stage Company)
Notes
Loss per share
- --------------
Net loss per share is provided in accordance with Statement of Financial
Accounting Standards No. 128 (SFAS #128) "Earnings Per Share". Basic
loss per share is computed by dividing losses available to common
stockholders by the weighted average number of common shares
utstanding during the period. The Company had no dilutive common
stock equivalents, such as stock options or warrants as of December
31, 2001.
Advertising Costs
- -----------------
The Company expenses all costs of advertising as incurred. There were
no advertising costs included in selling, general and administrative
expenses for the periods ended December 31, 2001.
Fair value of financial instruments
- -----------------------------------
Fair value estimates discussed herein are based upon certain market
assumptions and pertinent information available to management as of
December 31, 2001. The respective carrying value of certain on-balance-
sheet financial instruments approximated their fair values. These
financial instruments include cash and accounts payable. Fair values
were assumed to approximate carrying values for cash and payables
because they are short term in nature and their carrying amounts
approximate fair values or they are payable on demand.
Impairment of long lived assets
- -------------------------------
Long lived assets held and used by the Company are reviewed for
possible impairment whenever events or circumstances indicate the
carrying amount of an asset may not be recoverable or is impaired.
No such impairments have been identified by management at December
31, 2001.
Segment reporting
- -----------------
The Company follows Statement of Financial Accounting Standards No.
130, "Disclosures About Segments of an Enterprise and Related
Information". The Company operates as a single segment and will
evaluate additional segment disclosure requirements as it expands
its operations.
F-7
Pinoak, Inc.
(A Development Stage Company)
Notes
Dividends
- ---------
The Company has not yet adopted any policy regarding payment of dividends.
No dividends have been paid or declared since inception.
Income taxes
- ------------
The Company follows Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") for recording the
provision for income taxes. Deferred tax assets and liabilities are
computed based upon the difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal
tax rate applicable when the related asset or liability is expected to
be realized or settled. Deferred income tax expenses or benefits are
based on the changes in the asset or liability each period. If available
evidence suggests that it is more likely than not that some portion or
all of the deferred tax assets will not be realized, a valuation
allowance is required to reduce the deferred tax assets to the amount
that is more likely than not to be realized. Future changes in such
valuation allowance are included in the provision for deferred income
taxes in the period of change.
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or non-
current, depending on the classification of assets and liabilities to which
they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-
current depending on the periods in which the temporary differences are
expected to reverse.
Recent pronouncements
- ---------------------
The FASB recently issued Statement No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB
Statement No. 133". The Statement defers for one year the effective date
of FASB Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities". The rule now will apply to all fiscal quarters of
all fiscal years beginning after June 15, 2000. In June 1998, the FASB
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Statement will require the company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income, if the
derivative is a hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the change
in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in
earnings. The company does not expect SFAS No. 133 to have a material
impact on earning s and financial position.
F-8
Pinoak, Inc.
(A Development Stage Company)
Notes
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
(SAB No. 101), which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements. SAB No. 101 did not
impact the company's revenue recognition policies.
Year-end
- --------
The Company has selected December 31 as its year-end.
Note 2 - Going concern
The Company's financial statements are prepared using the 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 has not commenced
its planned principal operations. Without realization of additional
capital, it would be unlikely for the Company to continue as a going
concern.
Note 3 - Income taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"), which requires use of the liability method. SFAS No. 109
provides that deferred tax assets and liabilities are recorded based on
the differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes, referred to as
temporary differences. Deferred tax assets and liabilities at the end
of each period are determined using the currently enacted tax rates
applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
F-9
Pinoak, Inc.
(A Development Stage Company)
Notes
The provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to income before provision
for income taxes. The sources and tax effects of the differences are as
follows:
U.S federal statutory rate (34.0%)
Valuation reserve 34.0%
------
Total -%
=======
As of December 31, 2001, the Company has a net operating loss carryforward
of approximately $9 for tax purposes, which will be available to offset
future taxable income. If not used, this carryforward will expire in
2020. The deferred tax asset relating to the operating loss carryforward
has been fully reserved at December 31, 2001.
Note 4 - Related party transactions
The Company does not lease or rent any property. Office services are
provided without charge by a director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available,
such persons may face a conflict in selecting between the Company and
their other business interests. The Company has not formulated a policy
for the resolution of such conflicts.
Note 5 - Stockholders' Equity
The Company is authorized to issue 20,000,000 shares of its $0.001 par
value common stock and 5,000,000 shares of its $0.001 par value preferred
stock.
On December 7, 2001, the Company issued 2,000,000 shares of its $.001
par value common stock for cash of $2,022.
There have been no other issuances of common or preferred stock.
Note 6 - Warrants and options
There are no warrants or options outstanding to acquire any additional
shares of common stock.
F-10
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as set forth in the following part of this document, there is no
charter provision, bylaw, contract, arrangement or statute under which any
officer or director of the registrant is insured or indemnified in any
manner against any liability which he or she may incur in his or her
capacity as such.
Nevada Law
- ----------
Pursuant to the provisions of Nevada Revised Statutes 78.751, the
Corporation shall indemnify its directors, officers and employees as
follows:
Every director, officer, or employee of the corporation shall be indemnified
by the corporation against all expenses and liabilities, including counsel
fees, reasonably incurred by or imposed upon her/her in connection with any
proceeding to which he/she may be made a party, or in which he/she may
become involved, by reason of being or having been a director, officer,
employee or agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee or agent of the
corporation, partnership, joint venture, trust or enterprise, or any
settlement thereof, whether or not he/she is a director, officer, employee
or agent at the time such expenses are incurred, except in such cases
wherein the director, officer, employee or agent is adjudged guilty of
willful misfeasance or malfeasance in the performance of his/her duties;
provided that in the event of a settlement the indemnification herein shall
apply only when the Board of Directors approves such settlement and
reimbursement as being for the best interests of the Corporation.
The Corporation shall provide to any person who is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of the
corporation, partnership, joint venture, trust or enterprise, the indemnity
against expenses of a suit, litigation or other proceedings which is
specifically permissible under applicable law.
The Securities and Exchange Commission's Policy on Indemnification.
- -------------------------------------------------------------------
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to any provisions contained in its Certificate of
Incorporation, or bylaws, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of
50
the registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with this offering are as follows:
MINIMUM MAXIMUM
------- -------
Offering Expenses(1) 2,000 2,000
Escrow Fees(2) 500 500
TOTAL EXPENSES 2,500 2,500
Working Capital 22,500 72,500
TOTAL EXPENSES+WORKNG CAPITAL(3) 25,000 75,000
(1) Offering costs include filing, printing, legal, accounting,
transfer agent and escrow agent fees.
(2) The proceeds received in this offering will be put into the escrow
account pending closing of a business combination and
reconfirmation. (See Exhibit 2.1 Escrow Agreement.)
(3) All offering proceeds will be held in escrow pending a business
combination. We will not request a release of 10% of these funds
under Rule 419.
There will be no compensation paid or due or owing to any officer or
director.
The law firm of Thomas C. Cook & Associates has agreed to delay billing in
connection with services rendered on behalf of this offering.
51
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past year, the registrant has sold securities in the manner set
forth below without registration under the Securities Act of 1933 (the
"Act"). On or about December 7, 2001, the company raised $2,022.00 through
the sale of 2,000,000 shares of common stock at a price of $.001 per share
as follows:
Name and Address of Shares of Date Amount
Beneficial Owner Common Stock Purchased Paid
- ----------------------------------------------------------------
Rick Jesky(1) 2,000,000 12/07/01 $2,022
(1) Rick Jesky, 10801 E. Grove Street, Mesa, Arizona, 85208.
These shares are "restricted securities," as that term is defined in the
rules and regulations promulgated under the Securities Act of 1933 and are
subject to certain restrictions regarding resale. Certificates evidencing
all of the above-referenced securities have been stamped with a restrictive
legend and will be subject to stop transfer orders.
52
ITEM 27. EXHIBITS
The following exhibits are filed with this Registration Statement:
- -------------------------------------------------------------------------
EXHIBITS
SEC REFERENCE TITLE OF DOCUMENT LOCATION
NUMBER
- -------------------------------------------------------------------------
2.1 Escrow Agreement Filed herewith
- ------------------------------------------------------------------------
3.1 Articles of Incorporation Filed herewith
- -------------------------------------------------------------------------
3.2 Bylaws Filed herewith
- -------------------------------------------------------------------------
5 Consent of Thomas C. Cook, Esq. Filed herewith
- -------------------------------------------------------------------------
10.1 Form of Employment Agreements Not applicable
- -------------------------------------------------------------------------
10.4 Voting Trust Agreement - Not applicable
- -------------------------------------------------------------------------
23.1 Consent of G. Brad Beckstead, CPA Filed herewith
- -------------------------------------------------------------------------
24 Consent of Thomas C. Cook, Esq. Filed herewith
- -------------------------------------------------------------------------
99 Subscription Agreement Filed herewith
- -------------------------------------------------------------------------
All other Exhibits called for by Rule 601 of Regulation S-B are not
applicable to this filing. Information pertaining to our Common Stock is
contained in our Articles of Incorporation and By-Laws.
53
ITEM 28. UNDERTAKINGS
(1) To file, during any period in which offers and sales of the securities
offered are made, a post-effective amendment to this Registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933 (the "Act"); and
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration statement (or the most recent post-
effective amendment thereof) that, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration statement or any material change to such information in the
Registration statement.
(2) That, for the purpose of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered that remain unsold at the termination of
the offering.
(4) That all such post-effective amendments will comply with the applicable
form, rules and regulations of the Securities and Exchange Commission in
effect at the time of the filing.
(5) In the event any material changes or transactions are not mentioned
arise, we have undertaken the responsibility to amend this prospectus and
the registration statement, of which this prospectus is a part, through the
filing of post-effective amendments, indicating the existence of any such
material changes or transactions which are not reflected or contained
previously, if these changes occurs within 90 days of the effective date.
54
Signatures
According to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this the
Registration statement to be signed on its behalf by the undersigned
hereunto duly authorized in the City of Mesa on this day, January 3, 2002.
Pinoak, Inc.
------------
(Registrant)
/s/ Rick Jesky
---------------------------
Rick Jesky
President, CEO, CFO and Director
55
EXHIBIT INDEX
The following exhibits are filed as part of this Registration statement with
the Securities and Exchange Commission, following Item 601 of Regulation
S-B. All exhibits refer to Pinoak, Inc., unless otherwise indicated.
- -------------------------------------------------------------------------
EXHIBITS
SEC REFERENCE TITLE OF DOCUMENT LOCATION
NUMBER
- -------------------------------------------------------------------------
2.1 Escrow Agreement Filed herewith
- ------------------------------------------------------------------------
3.1 Articles of Incorporation Filed herewith
- -------------------------------------------------------------------------
3.2 Bylaws Filed herewith
- -------------------------------------------------------------------------
5 Consent of Thomas C. Cook, Esq. Filed herewith
- -------------------------------------------------------------------------
10.1 Form of Employment Agreements Not applicable
- -------------------------------------------------------------------------
10.4 Voting Trust Agreement - Not applicable
- -------------------------------------------------------------------------
23.1 Consent of G. Brad Beckstead, CPA Filed herewith
- -------------------------------------------------------------------------
24 Consent of Thomas C. Cook, Esq. Filed herewith
- -------------------------------------------------------------------------
99 Subscription Agreement Filed herewith
- -------------------------------------------------------------------------
56