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, 2004
[ ] 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
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(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, 2004:
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
Independent Accountants Review Report................ 4
Balance Sheets (unaudited)............................ 5
Statements of Operations (unaudited)................. 6
Statements of Cash Flows (unaudited)................. 7
Notes to Financial Statements........................ 8
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 9
Item 3. Controls and Procedures.............................. 13
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..................... 14
Signatures..................................................... 15
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 six months ended June 30, 2004. 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, 2004, follow.
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Beckstead and Watts, LLP
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Certified Public Accountants
3340 Wynn Road, Suite B
Las Vegas, NV 89102
702.257.1984
702.362.0540 fax
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
Board of Directors
Pinoak, Inc.
(a Development Stage Company)
Mesa, AZ
We have reviewed the accompanying balance sheet of Pinoak, Inc.(a Nevada
corporation) (a development stage company) as of June 30, 2004 and the
related statements of operations for the three-months ended June 30, 2004
and 2003 and for the period December 31, 1998 (Inception) to June 30, 2004,
and statements of cash flows for the six-months ended June 30, 2004 and 2003
and for the period December 31, 1998 (Inception) to June 30, 2004. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
Public Company Accounting Oversight Board (United States). A review of
interim financial information consists principally of applying analytical
procedures to financial data, and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope than
an audit conducted in accordance with generally accepted auditing standards,
which will be performed for the full year with the objective of expressing
an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying financial statements referred to above for
them to be in conformity with generally accepted accounting principles in the
United States of America.
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 plans 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.
We previously audited, in accordance with generally accepted auditing
standards, the balance sheet of Pinoak, Inc. (a development stage company)
as of December 31, 2003, and the related statements of operations,
stockholders' equity, and cash flows for the year then ended (not presented
herein) and in our report dated April 28, 2004, we expressed an unqualified
opinion on those financial statements.
August 12, 2004
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Pinoak, Inc.
(a Development Stage Company)
Balance Sheets
Balance Sheets
(unaudited)
June 30, December 31,
2004 2003
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Assets
Current assets:
Cash $ 588 $ 653
Funds held in escrow - -
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Total current assets 588 653
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$ 588 $ 653
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Liabilities and Stockholders' Equity
Current liabilities
Subscriptions payable $ $ -
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Stockholders' equity:
Preferred stock, $0.001 par value, 5,000,000
shares authorized, no shares issued and
outstanding - -
Common stock, $0.001 par value, 20,000,000
shares authorized, 2,000,000 shares
issued and outstanding 2,000 2,000
Additional paid-in capital 2,820 2,820
Deficit accumulated during development stage (4,232) (4,167)
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588 653
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$ 588 $ 653
============= ==========
The accompanying notes are an integral part of these financial statements
5
Pinoak, Inc.
(a Development Stage Company)
Statement of Operations
(unaudited)
For the Three Months and Six Months Ending June 30, 2004 and 2003
and For the Period December 31, 1998 (Inception) to June 30, 2004
Statement of Operations
Three Months Ending Six Months Ending December 31, 1998
June 30, June 30, (Inception) to
-------------------- -------------------- June 30,
2004 2003 2004 2003 2004
--------- --------- --------- --------- -----------------
Revenue $ - $ - $ - $ - $ -
--------- --------- --------- --------- --------------
Expenses:
General and
administrative
expenses 32 30 65 60 4,232
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Total expenses 32 30 65 60 4,232
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Net income (loss) $ (32) $ (30) $ (65) $ (60) $ (4,232)
========== ========== ========= ========== ===============
Weighted average
number of common
shares outstanding
- basic and fully
diluted 2,000,000 2,000,000 2,000,000 2,000,000
========= ========= ========= =========
Net income (loss)
per share - basic
and fully diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
========= ========= ========= =========
The Accompanying Notes are an Integral Part of These Financial Statements.
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Pinoak, Inc.
(a Development Stage Company)
Statement of Cash Flows
(unaudited)
For the Six Months Ending June 30, 2004 and 2003
and For the Period December 31, 1998 (Inception) to June 30, 2004
Statement of Cash Flows
Six Months Ending December 31, 1998
June 30, (Inception) to
----------------------- March 31,
2004 2003 2004
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Cash flows from operating activities
Net (loss) $ (65) $ (60) $ (4,232)
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Net cash (used) by operating activities (65) (60) (4,232)
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Cash flows from financing activities
Issuances of common stock - - 4,820
Net cash provided by financing activities - - 4,820
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Net (decrease) increase in cash (65) (60) 588
Cash - beginning 653 779 -
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Cash - ending $ 588 $ 719 $ 588
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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 consolidated 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 consolidated interim financial statements be read in conjunction with
the financial statements of the Company for the year ended December 31, 2003
and notes thereto included in the Company's 10-KSB annual report. 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
These consolidated financial statements have been prepared in accordance with
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and the satisfaction of liabilities
and commitments in the normal course of business. As at June 30, 2004, the
Company has not recognized revenue to date and has accumulated operating
losses of approximately $4,232 since inception. The Company's ability to
continue as a going concern is contingent upon the successful completion of
additional financing arrangements and its ability to achieve and maintain
profitable operations. While the Company is expending its best efforts to
achieve the above plans, there is no assurance that any such activity will
generate funds that will be available for operations.
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 property. A director provides office
services, without charge. 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.
(a) Results of Operations
- - -------------------------
As a developmental stage Company, the Company had no revenues for the six
months ending June 30, 2004. The Company does not expect to generate any
revenues over the next approximately to twelve (12) months. During six months
ending June 30, 2004 the Company experienced net losses $(65). These expenses,
$65 were month bank fees and classified as general and administrative costs.
Since the Company's inception on December 31, 1998 through June 30, 2004
it has lost $(4,232). The Company does not have any material commitments for
capital expenditures.
(b) Plan of Operation
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The management of Pinoak is currently seeking to engage in a merger with or
acquisition of an unidentified foreign or domestic company which desires to
become a reporting ("public") company whose securities are qualified for
trading in the United States secondary market. Pinoak meets the definition of
a "blank check" company contained in Section (7)(b)(3) of the Securities Act
of 1933, as amended. Pinoak has been in the developmental stage since
inception and have no operations to date. Other than issuing shares to the
Registrant's sole stockholder, the Registrant has not commenced any
operational activities.
Pinoak will not acquire or merge with any entity which cannot provide audited
financial statements at or within a reasonable period of time after closing
of the proposed transaction. Pinoak is subject to all the reporting
requirements included in the Exchange Act. Included in these requirements is
Pinoak's duty to file audited financial statements as part of Pinok's Form 8-K
to be filed with the Securities and Exchange Commission upon consummation of a
merger or acquisition, as well as Pinoak's audited financial statements
included in the annual report on Form 10-KSB. If such audited financial
statements are not available at closing, or within time parameters necessary
to insure the Registrant's compliance with the requirements of the Exchange Act,
or if the audited financial statements provided do not conform to the
representations made by the target business, the closing documents may provide
that the proposed transaction will be voidable at the discretion of the
Company's present management.
The management of Pinoak will not restrict its search for any specific kind of
businesses, but may acquire a business which is in its preliminary or
development stage, which is already in operation, or in essentially any stage
of its business life. It is impossible to predict at this time the status of
any business in which the Registrant 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 Registrant may offer.
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A business combination with a target business will normally involve the
transfer to the target business of the majority of the Company's common stock,
and the substitution by the target business of its own management and board of
directors.
Pinoak has, and will continue to have, no capital with which to provide the
owners of business opportunities with any cash or other assets. The
Company's sole officer and director has not conducted market research and is
not aware of statistical data to support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
The Pinoak audit reflects the fact that the Company has no current source of
income. Further, that without realization of additional capital, it would be
unlikely for the Company to continue as a going concern.
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.
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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.
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.
11
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.
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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 year 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 June 30, 2004, 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 June 30, 2004, no Current Reports were filed on
Form 8-K.
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PINOAK, INC.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
PINOAK, INC.
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Registrant
Date: August 12, 2004 By: /s/ Rick Jesky
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Rick Jesky
Chief Executive Officer
Chief Financial Officer
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.
By: /s/ Rick Jesky August 12, 2004
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Rick Jesky
Chief Executive Officer
Chief Financial Officer
15