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 September 30, 2003
[ ] 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
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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
September 30, 2003:
2,000,000 Shares of Common Stock (One Class)
Transitional Small Business Disclosure Format: Yes [ ] No [X]
This document consists of 13 pages, excluding exhibits.
The Exhibit Index is on page 12.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 3
Balance Sheet (unaudited)............................ 3
Statements of Operations (unaudited)................. 4
Statements of Cash Flows (unaudited)................. 5
Notes to Financial Statements........................ 6-7
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 8
Item 3. Controls and Procedures.............................. 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 12
Item 2. Changes in Securities and Use of Proceeds............ 12
Item 3. Defaults upon Senior Securities...................... 12
Item 4. Submission of Matters to a Vote
of Security Holders.................................. 12
Item 5. Other Information.................................... 12
Item 6. Exhibits and Reports on Form 8-K..................... 12
Signatures..................................................... 13
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
PINOAK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
BALANCE SHEETS
(Unaudited)
September 30, December 31,
2003 2002
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ASSETS
Current assets:
Cash and equivalents $ 689 $ 779
Funds held in escrow 59,983 59,983
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Total current assets 60,672 60,762
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$ 60,672 $ 60,762
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Subscriptions payable $ 59,233 $ 59,233
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Total current liabilities 59,233 59,233
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Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000
shares authorized, no shares issued and
outstanding - -
Common stock, $0.001 par value, 20,000,000
shares authorized, 2,000,000 shares
issued and outstanding 2,000 2,000
Additional paid-in capital 2,820 2,820
(Deficit) accumulated during development stage (3,381) (3,291)
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1,439 1,529
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$ 60,672 $ 60,762
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The accompanying notes are an integral part of these financial statements
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PINOAK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
STATEMENTS OF OPERATIONS
Three Months Ending Nine Months Ending
September 30, September 30, Dec 31, 1998
------------------- ------------------ (Inception) to
2003 2002 2003 2002 Sep 30, 2003
--------- --------- -------- --------- --------------
Revenue $ - $ - $ - $ - $ -
--------- --------- -------- --------- --------------
Expenses:
General and administrative
expenses 30 30 90 454 3,381
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Total expenses 30 30 90 454 3,381
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Net (loss) $ (30) $ (30) $ (90) $ (454) $ (3,381)
========= ========= ======== ========= ==============
Weighted average number of
common shares outstanding-
basic and fully
diluted 4,357,374 - 4,168,734 -
========= ========= ========= ========
Net (loss) per share-
basic and fully diluted $ (0.00) $ - $ (0.00) $ -
========= ========= ========= ========
The accompanying notes are an integral part of these financial statements
4
PINOAK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
STATEMENTS OF CASH FLOWS
Nine Months Ending
September 30, December 31, 1998
-------------------- (Inception) to
2003 2002 September 30, 2003
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (90) $ (454) $ (3,381)
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Net cash (used) by operating activities (90) (454) (3,381)
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CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of common stock - - 4,820
(Increase) in funds held in escrow - (59,934) (59,934)
Increase in subscriptions payable - 59,184 59,184
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Net cash provided (used) by
financing activities - (750) 4,070
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Net increase (decrease) in cash (90) (1,204) 689
Cash - beginning 779 2,013 -
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Cash - ending $ 689 $ 809 $ 689
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Supplemental disclosures:
Interest paid $ - $ - $ -
========== ========= ==================
Income taxes paid $ - $ - $ -
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The accompanying notes are an integral part of these 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, 2002 and notes
thereto included in the Company's Form 10-KSB. 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 $3,381 for the period from
December 31, 1998 (inception) to September 30, 2003, 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 - FUNDS HELD IN ESCROW AND SUBSCRIPTIONS PAYABLE
On July 24, 2002, the Company closed its 419 offering and collected total cash,
net of offering costs, of $59,983. As of September 30, 2002, the balance of
funds held with an escrow agent totaled $59,233. Under the 419 Rule, the
shareholders can ask to have these monies returned to them if they do not
reconfirm the 419 merger candidate or eighteen months pass without finding a
merger candidate; therefore these funds may or may not be released to the
Company.
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PINOAK, INC.
(a Development Stage Company)
Notes
NOTE 4 - 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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ITEM 2. Management's Discussion and Analysis of 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.
On July 24, 2002, the Company closed its 419 offering and collected total cash,
net of offering costs, of $59,233. These funds are currently being held by our
escrow agent. Since the Company has been unable to complete an acquisition
pursuant to 419 Rule, these funds are being returned to the original 419
shareholders.
Rule 419(e)(2)(iv) of Regulation C provides that "if a consummated
acquisition(s) meeting the requirements of this section has not occurred by a
date 18 months after the effective date of the initial registration statement,
funds held in the escrow or trust account shall be returned by first class mail
or equally prompt means to the purchaser within five business dates following
that date." This Rule required the Company to consummate an acquisition before
October 25, 2003.
Since an acquisition will not take place by October 25, 2003, the Company has
terminated its current offering, and notified Southwest Escrow, Las Vegas,
Nevada to close the escrow and return the raised funds to the original 419
investors. Under Rule 419, the Company could request 10% of the funds held in
escrow to pay for general expenses. As stated in our Registration Statement,
management has no intention to use these funds, and all funds are being
returned to the shareholders. Management will absorb the costs associated
with the return of these funds. There will be no reconfirmation offering.
The Company also plans to file a post-effective amendment to deregister all
securities previously registered under the Securities Act.
The Company remains a shell corporation and still plans to identify a merger
or acquisition candidate. 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'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.
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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.
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.
9
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.
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.
10
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 3. Controls and Procedures
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this
evaluation, the principal executive officer and principal financial officer
concluded that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There was no change in the Company's
internal control over financial reporting during the Company's most recently
completed fiscal quarter that has materially affected, or is reasonably likely
to materially affect, the Company's internal control over financial reporting.
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PART II OTHER INFORMATION
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 September 30, 2003, no matters were submitted to
the Company's security holders.
ITEM 5. Other Information
None.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Title of Document
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(a) Exhibits
31.1 Certifications of the Chief Executive Officer and Chief Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certifications of Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
During the quarter ended September 30, 2003, no Current Reports were filed on
Form 8-K.
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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.
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Registrant
Date: October 23, 2003 By: /s/ Rick Jesky
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Rick Jesky
Chief Executive Officer
Chief Financial Officer
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