U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2002
[ ] Transition report pursuant section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from_______________to_______________
Commission file number: 333-76242
Pinoak, Inc.
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(Exact name of small business issuer in its charter)
Nevada 86-0983750
- - ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
10801 E. Grove Street, Mesa, AZ 85208
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(Address of principal executive offices)
(480) 984-8446
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Number of shares outstanding of the issuer's classes of common equity, as of
June 30, 2002:
2,000,000 Shares of Common Stock (One Class)
Transitional Small Business Disclosure Format: Yes [ ] No [X]
This document consists of 14 pages, excluding exhibits.
The Exhibit Index is on page 13.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 3
Balance Sheet (unaudited)............................ 4
Statements of Operations (unaudited)................. 5
Statements of Cash Flows (unaudited)................. 6
Notes to Financial Statements........................ 7
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 14
Item 2. Changes in Securities and Use of Proceeds............ 14
Item 3. Defaults upon Senior Securities...................... 14
Item 4. Submission of Matters to a Vote
of Security Holders.................................. 14
Item 5. Other Information.................................... 14
Item 6. Exhibits and Reports on Form 8-K..................... 15
Signatures..................................................... 16
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
As prescribed by Item 310 of Regulation S-B, the independent auditor has
reviewed these unaudited interim financial statements of the registrant
for the three months ended June 30, 2002. The financial statements
reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim period presented. The
unaudited financial statements of registrant for the six months ended
June 30, 2002, follow.
3
Pinoak, Inc.
(a Development Stage Company)
Balance Sheets
BALANCE SHEET
(Unaudited)
June 30 December 31,
2002 2001
------------ ------------
Assets
Current assets:
Cash and equivalents $ 1,559 $ 2,013
-------- ---------
Total current assets 1,559 2,013
-------- ---------
$ 1,559 $ 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 2,000
Additional paid-in capital 2,820 2,820
(Deficit) accumulated during development stage (3,261) (2,807)
-------- ---------
1,559 2,013
-------- ---------
$ 1,559 $ 2,013
======== =========
See accompanying notes to financial statements.
4
PINOAK, Inc.
(a Development Stage Company)
Statement of Operations
(Unaudited)
STATEMENT OF OPERATIONS
Three Months Ending Six Months Ending Dec. 31, 1998
------------------- ----------------- (Inception) to
June 30, June 30, June 30, June 30, June 30,
2002 2001 2002 2001 2002
---------- ------- -------- -------- --------------
Revenue $ - $ - $ - $ - $ -
-------- -------- -------- -------- ---------
Expenses:
General and
administrative 424 - 454 - 3,261
-------- -------- -------- -------- ---------
Total expenses 424 - 454 - 3,261
-------- -------- -------- -------- ---------
Net loss - basic and
fully diluted (424) - $ (454) $ - $ (3,261)
======== ======== ======== ======== =========
Weighted average number of
common shares outstanding 2,000,000 -
========= ========
Net (loss) per share - basic
and fully diluted $ (0.00) $ (0.00)
========= ========
See accompanying notes to financial statements.
5
PINOAK, Inc.
(a Development Stage Company)
Statement of Cash Flows
(Unaudited)
STATEMENT OF CASH FLOWS
Six Months Ending Dec. 31, 1998
June 30, (Inception) to
-------------------- June 30,
2002 2001 2002
--------- --------- -------------
Cash flows from operating activities
Net (loss) $ (454) $ - $ (3,261)
-------- -------- ---------
Adjustments to reconcile net (loss) to
net cash (used) by operating activities:
Net cash (used)
by operating activities $ (454) $ - $ (3,261)
-------- -------- ---------
Cash flows from
investing activities - - -
-------- -------- --------
Cash flows from financing activities
Issuance of capital stock - - 4,820
-------- -------- --------
Net cash provided by
financing activities - - 4,820
-------- -------- --------
Net increase in cash (454) - 1,559
Cash - beginning 2,013 - -
-------- -------- --------
Cash - ending $ 1,559 $ - $ 1,559
======== ======== ========
Supplemental disclosures:
Interest paid $ - $ - $ -
======== ======== ========
Income taxes paid $ - $ - $ -
======== ======== ========
See accompanying notes to financial statements.
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PINOAK, INC.
(a Development Stage Company)
Notes
NOTE 1 - BASIS OF PRESENTATION
The interim financial statements included herein, presented in accordance with
United States generally accepted accounting principles and stated in US
dollars, have been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.
These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. It is suggested that these
interim financial statements be read in conjunction with the financial
statements of the Company for the period ended December 31, 2001 and notes
thereto included in the Company's Form SB-2. The Company follows the same
accounting policies in the preparation of interim reports.
Results of operations for the interim periods are not indicative of annual
results.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company has incurred a net loss of $3,261 for the period from
December 31, 1998 (inception) to June 30, 2002, and has no sales. The future
of the Company is dependent upon its ability to obtain financing and upon
future profitable operations from the development of its new business
opportunities. Management has plans to seek additional capital through private
placements and public offerings of its common stock. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts of and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company does not lease or rent any additional 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.
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PINOAK, INC.
PLAN OF OPERATION
The Company intends to seek to acquire assets or shares of an entity
actively engaged in a business that generates revenues, in exchange for its
securities. We have not identified a particular acquisition target and have
not entered into any negotiations regarding such an acquisition. As of June
30, 2002, we have not sold any stock in our Company. We intend to close
our offering by the middle of July, 2002. Our sole officers and director has
not engaged in any preliminary contact or discussions with any representative
of any other company regarding the possibility of an acquisition or merger
between the Company and such other company.
Depending upon the nature of the relevant business opportunity and the
applicable state statutes governing the manner in which the transaction is
structured, the Company's Board of Director expects that it will provide the
Company's shareholders with complete disclosure documentation concerning a
potential business opportunity and the structure of the proposed business
combination prior to consummation. Such disclosure is expected to be in the
form of a proxy or information statement.
While such disclosure may include audited financial statements of such
a target entity, there is no assurance that such audited financial statements
will be available. As part of the negotiation process, the Board of Directors
does intend to obtain certain assurances of value, such as statements of
assets and liabilities, material contracts, accounts receivable statements,
or other indicia of the target entity's condition prior to consummating such
a transaction, with further assurances that an audited statement would be
provided within sixty days after closing. Closing documents will include
representations that the value of the assets conveyed to or otherwise so
transferred will not materially differ from the representations included in
such closing documents, or the transaction will be voidable.
Due to the Company's intent to remain a shell corporation until a merger
or acquisition candidate is identified, it is anticipated that its cash
requirements shall be minimal, and that all necessary capital, to the extent
required, will be provided by the Company's sole officer/director. The
Company does not anticipate that it will have to raise capital in the next
twelve months. The Company also does not expect to acquire any plant or
significant equipment.
The Company has not, and does not intend to enter into, any arrangement,
agreement or understanding with non-management shareholders under which non-
management shareholders may directly or indirectly participate in or
influence the management of the Company. Management currently holds 100%
of the outstanding stock in the Company. As a result, management is in a
position to elect a majority of the directors and to control the Company's
affairs.
The Company has no full time employees. Our President has agreed to
allocate a portion of his time to the activities of the Company, without
compensation. This officer anticipate that the business plan of the
Company can be implemented by their devoting approximately 15 hours each
per month to the business affairs of the Company and, consequently,
conflicts of interest may arise with respect to the limited time commitment
by such officers. The Company does not expect any significant changes in
the number of employees.
Our officer and director may become involved with other companies who
have a business purpose similar to that of the Company. As a result,
potential conflicts of interest may arise in the future. If such a conflict
does arise and an officer or director of the Company is presented with
business opportunities under circumstances where there may be a doubt as to
whether the opportunity should belong to this "blank check" company.
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The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms who or which desire to seek the perceived advantages of an
Exchange Act registered corporation. The Company will not restrict its
search to any specific business, industry, or geographical location and the
Company may participate in a business venture of virtually any kind or nature.
This discussion of the proposed business is purposefully general and is not
meant to be restrictive of the Company's virtually unlimited discretion to
search for and enter into potential business opportunities. Management
anticipates that it may be able to participate in only one potential business
venture because the Company has nominal assets and limited financial resources.
See "Financial Statements." This lack of diversification should be considered
a substantial risk to shareholders of the Company because it will not permit
the Company to offset potential losses from one venture against gains from
another.
The Company may seek a business opportunity with entities that have
recently commenced operations, or that wish to utilize the public marketplace
in order to raise additional capital in order to expand into new products or
markets, to develop a new product or service, or for other corporate purposes.
We may acquire assets and establish wholly owned subsidiaries in various
businesses or acquire existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation.
Such perceived benefits may include facilitating or improving the terms on
which additional equity financing may be sought, providing liquidity for
incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes) for all
shareholders and other factors. Potentially, available business
opportunities may occur in many different industries and at various stages
of development, all of which will make the task of comparative investigation
and analysis of such business opportunities extremely difficult and complex.
We have, and will continue to have, no capital with which to provide the
owners of business opportunities with any significant cash or other assets.
However, management believes we will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
publicly registered company without incurring the cost and time required to
conduct an initial public offering. The owners of the business opportunities
will, however, incur significant legal and accounting costs in connection
with acquisition of a business opportunity, including the costs of preparing
Form 8-K's, 10-K's or 10-KSB's, agreements and related reports and documents.
The 1934 Act specifically requires that any merger or acquisition candidate
comply with all applicable reporting requirements, which include providing
audited financial statements to be included within the numerous filings
relevant to complying with the 1934 Act. Nevertheless, the officers and
directors of the Company have not conducted market research and are not
aware of statistical data which would support the perceived benefits of a
merger or acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, our sole officer/director of the Company, who is
not a professional business analyst. Management intends to concentrate on
identifying preliminary prospective business opportunities which may be
brought to its attention through present associations of our officers and
directors, or by our shareholders. In analyzing prospective business
opportunities, management will consider such matters as the available
technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the
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future; 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;
specific risk factors not now foreseeable but which then may be anticipated
to impact the proposed activities of the Company; the potential for growth or
expansion; the potential for profit; the perceived public recognition of
acceptance of products, services, or trades; name identification; and other
relevant factors. Officers and directors of the Company expect to meet
personally with management and key personnel of the business opportunity as
part of their "due diligence" investigation. To the extent possible, the
Company intends to utilize written reports and personal investigations to
evaluate the above factors. We will not acquire or merge with any company
that cannot provide audited financial statements within a reasonable period
of time after closing of the proposed transaction.
Management of the Company, while not especially experienced in matters
relating to the new business of the Company, shall rely upon their own efforts
and, to a much lesser extent, the efforts of our shareholders, in
accomplishing the business purposes of the Company. It is not anticipated
that any outside consultants or advisors, except for our legal counsel and
accountants, will be utilized by the Company to effectuate its business
purposes. However, if we do retain such an outside consultant or advisor,
any cash fee earned by such party will be paid by the prospective merger/
acquisition candidate, as the Company has no cash assets with which to pay
such obligation. We have no contracts or agreements with any outside
consultants and none are contemplated.
We will not restrict our search for any specific kind of firms, but may
acquire a venture that is in its preliminary or development stage or is
already operating. It is impossible to predict at this time the status of
any business in which the Company may become engaged, in that such business
may need to seek additional capital, may desire to have its shares publicly
traded, or may seek other perceived advantages which the Company may offer.
Furthermore, we do not intend to seek capital to finance the operation of
any acquired business opportunity until such time as the Company has
successfully consummated a merger or acquisition.
It is anticipated that the Company will incur nominal expenses in the
implementation of its business plan. Because the Company has no capital
with which to pay these anticipated expenses, present management of the
Company will pay these charges with their personal funds, as interest free
loans to the Company, for a minimum of twelve months from the date of this
registration statement, without seeking reimbursement from the Company. If
additional funding is necessary, management will continue to provide capital
or arrange for additional outside funding. Management has no agreements with
the Company that would impede or prevent consummation of a proposed
transaction. There is no assurance, however, that management will continue
to provide capital indefinitely if a merger candidate cannot be found. If a
merger candidate cannot be found in a reasonable period of time, management
may be required reconsider its business strategy, which could result in
the dissolution of the Company.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture,
or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of
the Company will no longer be in control of the Company. In addition, our
directors may, as part of the terms of the acquisition transaction, resign
and be replaced by new directors without a vote of the Company's shareholders.
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It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, we may agree to register all or a part
of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can
be no assurance, it will be undertaken by the surviving entity after the
Company has successfully consummated a merger or acquisition and the Company
is no longer considered a "shell" company. Until a merger or acquisition is
consummated, the Company will not attempt to register any additional
securities. The issuance of substantial additional securities and their
potential sale into any trading market which may develop in the Company's
securities may have a depressive effect on the value of the Company's
securities in the future, if such a market develops, of which there is no
assurance.
As part of the Company's "due diligence" investigation, the officer and
director of the Company will meet personally with management and key
personnel, may visit and inspect material facilities, obtain independent
analysis of verification of certain information provided, check references
of management and key personnel, and take other reasonable investigative
measures to the extent of the Company's limited financial resources and
management expertise. The manner in which the Company participates in an
opportunity will depend on the nature of the opportunity, the respective
needs and desires of the Company and other parties, the management of the
opportunity and the relative negotiation strength of the Company and such
other management.
With respect to any merger or acquisition, negotiations with target
company management is expected to focus on the percentage of the Company
which the target company shareholders would acquire in exchange for all of
their shareholdings in the target company. Depending upon, among other
things, the target company's assets and liabilities, the Company's
shareholders will in all likelihood hold a substantially lesser percentage
ownership interest in the Company following any merger or acquisition.
The percentage ownership may be subject to significant reduction in the
event the Company acquires a target company with substantial assets. Any
merger or acquisition effected by the Company can be expected to have a
significant dilutive effect on the percentage of shares held by the
Company's then shareholders.
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We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require some
specific representations and warranties by all of the parties, will specify
certain events of default, will detail the terms of closing and the conditions
that must be satisfied by each of the parties prior to and after such closing,
will outline the manner of bearing costs, including costs associated with the
Company's attorneys and accountants, will set forth remedies on default and
will include miscellaneous other terms.
As stated previously, we will not acquire or merge with any entity that
cannot provide independent audited financial statements within a reasonable
period of time after closing of the proposed transaction. The Company is
subject to the reporting requirements of the 1934 Act. Included in these
requirements is the affirmative duty of the Company to file independent
audited financial statements as part of its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements included
in its annual report on Form 10-K (or 10-KSB, as applicable). If such
audited financial statements are not available at closing, or within time
parameters necessary to insure the Company's compliance with the requirements
of the 1934 Act, or if the audited financial statements provided do not
conform to the representations made by the candidate to be acquired in the
closing documents, the closing documents will provide that the proposed
transaction will be voidable at the discretion of the present management of
the Company. If such transaction is voided, the agreement will also contain
a provision providing for the acquisition entity to reimburse the Company for
all costs associated with the proposed transaction.
Competition
The Company will remain an insignificant participant among the firms
which engage in the acquisition of business opportunities. There are many
established venture capital and financial concerns which have significantly
greater financial and personnel resources and technical expertise than the
Company. In view of the Company's combined extremely limited financial
resources and limited management availability, the Company will continue to
be at a significant competitive disadvantage compared to the Company's
competitors.
ITEM 1. Legal Proceedings
There is no litigation pending or threatened by or against the Company.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
During the quarter ended June 30, 2002, no matters were submitted to
the Company's security holders.
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ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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EXHIBITS
SEC REFERENCE TITLE OF DOCUMENT
NUMBER
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2.1 Escrow Agreement*
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3.1 Articles of Incorporation*
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3.2 Bylaws*
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5 Consent of Thomas C. Cook, Esq.*
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23.1 Consent of G. Brad Beckstead, CPA*
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24 Consent of Thomas C. Cook, Esq.*
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99.1 Subscription Agreement*
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99.2 Management Letter to Shareholders**
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* Previously filed as an exhibit to the Company's Form SB-2 filed on
January 3, 2002.
** Previously filed as an exhibit to the Company's Form SB-2 filed on
February 25, 2002.
(b) Reports on Form 8-K
None
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PINOAK, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PINOAK, INC.
Date: July 19, 2002 By: /s/ Rick Jesky
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Rick Jesky, President
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