Exhibit 99.4
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
------------------------
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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To the Board of Directors
Pinoak, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Pinoak, Inc. as of
December 31, 2005, and the related statements of operations, stockholders'
equity and cash flows for the period from inception on December 31, 1998 through
December 31, 2005. These statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits 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 statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pinoak, Inc. as of
December 31, 2005 and the results of its operations and its cash flows for the
period from inception on December 31, 1998 through December 31, 2005, in
conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company's recurring losses and lack of operations
raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Moore & Associates
- ----------------------------
Moore & Associates Chartered
Las Vegas, Nevada
April 14, 2006
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7511 Fax (702) 253-7501
F-1c
PINOAK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
BALANCE SHEETS
December 31,
2005 2004
------------- -----------
ASSETS
Current assets:
Cash and equivalents $ 370 $ 522
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Total current assets 370 522
------------- -----------
$ 370 $ 522
============= ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current liabilities $ - $ -
------------- -----------
Total current liabilities - -
------------- -----------
Stockholder's 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 and 2,000,000
shares issued and outstanding as of
12/31/04 and 12/31/03, respectively 2,000 2,000
Additional paid-in capital 2,820 2,820
(Deficit) accumulated during development stage (4,450) (4,298)
------------- -----------
370 522
------------- -----------
$ 370 $ 522
============= ===========
The accompanying notes are an integral part of these financial statements
F-2c
PINOAK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS
December 31, 1998
December 31, (Inception) to
----------------------- December 31,
2005 2004 2005
---------- ---------- --------------
Revenue $ - $ - $ -
---------- ---------- --------------
Expenses:
General and administrative
expenses 152 131 4,450
---------- ---------- -------------
Total expenses 152 131 4,450
---------- ---------- --------------
Net (loss) $ (152) $ (131) $ (4,450)
=========== =========== ==============
Weighted average number of
common shares outstanding-
basic and fully
diluted 2,000,000 2,000,000
========= =========
Net (loss) per share-
basic and fully diluted $ (0.00) $ (0.00)
========= =========
The accompanying notes are an integral part of these financial statements
F-3c
Pinoak, Inc.
(a Development Stage Company)
Statements of Changes in Stockholder's Equity
Statements of Changes in Stockholder's Equity
(Deficit)
Accumulated
Common Stock Additional During Total
----------------- Paid-in Development Stockholder's
Shares Amount Capital Stage Equity
--------- ------ ---------- ----------- -------------
December 1998
Beginning balance - $ - $ - $ - $ -
Net (loss)
December 31, 1998
(inception) to
December 31, 1998 - -
--------- ------ ---------- ----------- -------------
Balance, Dec 31, 1998 - $ - $ - $ - $ -
Net (loss)
For the year ended
December 31, 1999 - -
--------- ------ ---------- ----------- -------------
Balance, Dec 31, 1999 - $ - $ - $ - $ -
Net (loss)
For the year ended
December 31, 2000 - -
--------- ------ ---------- ----------- -------------
Balance, Dec 31, 2000 - $ - $ - $ - $ -
December 2001
Issued for cash 2,000,000 2,000 $ 2,820 - 4,820
Net (loss)
For the year ended
December 31, 2001 (2,807) (2,807)
--------- ------ ---------- ----------- -------------
Balance, Dec 31,2001 2,000,000 $2,000 $ 2,820 $ (2,807) $ 2,013
Net (loss)
For the year ended
December 31, 2002 (484) (484)
--------- ------ ---------- ----------- -------------
Balance, Dec 31,2002 2,000,000 $2,000 $ 2,820 $ (3,291) $ 1,529
F-4c
Pinoak, Inc.
(a Development Stage Company)
Statements of Changes in Stockholder's Equity
(Continued)
(Deficit)
Accumulated
Common Stock Additional During Total
----------------- Paid-in Development Stockholder's
Shares Amount Capital Stage Equity
--------- ------ ---------- ----------- -------------
Net (loss)
For the year ended
December 31, 2003 (876) (876)
--------- ------ ---------- ----------- -------------
Balance, Dec 31,2003 2,000,000 $2,000 $ 2,820 $ (4,167) $ 653
Net (loss)
For the year ended
December 31, 2004 (131) (131)
--------- ------ ---------- ----------- -------------
Balance, Dec 31,2004 2,000,000 $2,000 $ 2,820 $ (4,298) $ 522
Net (loss)
For the year ended
December 31, 2005 (152) (152)
========= ====== ========== =========== =============
Balance, Dec 31,2005 2,000,000 $2,000 $ 2,820 $ (4,450) $ 370
The accompanying notes are an integral part of these financial statements.
F-5c
PINOAK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS
December 31, 1998
December 31, (Inception) to
----------------------- December 31,
2005 2004 2005
---------- ---------- --------------
(Restated) (Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (152) $ (131) $ (4,450)
Non-cash expense - - -
---------- --------- --------------
Net cash (used) by operating activities (152) (131) (4,450)
---------- --------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuances of common stock - - 4,820
---------- --------- --------------
Net cash provided (used) by
financing activities - - 4,820
---------- --------- -------------
Net increase (decrease) in cash (152) (131) 370
Cash - beginning 522 653 -
---------- --------- -------------
Cash - ending $ 370 $ 522 $ 370
========== ========= =============
Supplemental disclosures:
Interest paid $ - $ - $ -
========== ========= =============
Income taxes paid $ - $ - $ -
========== ========= =============
The accompanying notes are an integral part of these financial statements
F-6c
Pinoak, Inc.
(a Development Stage Company)
Footnotes
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized December 31, 1998 (Date of Inception) under the laws
of the State of Nevada, as Pinoak, Inc. The Company has no operations and in
accordance with SFAS #7, the Company is considered a blank check company
with no business or operations. The Company is authorized to issue
5,000,000 shares of $0.001 par value preferred stock and
20,000,000 shares of $0.001 par value common stock.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
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. There
were no cash equivalents as of December 31, 2005 and 2004.
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, 2005 and 2004.
Revenue recognition
- -------------------
The Company reports revenue as invoiced on an accrued basis. Costs of sales
are recorded as items are sold and are comprised of product purchases and
shipping costs.
Advertising costs
- -----------------
The Company expenses all costs of advertising as incurred. There were no
advertising costs included in selling, general and administrative expenses in
2005 and 2004.
F-7c
Pinoak, Inc.
(a Development Stage Company)
Footnotes
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 outstanding during the period. The
Company had no dilutive common stock equivalents, such as stock options or
warrants as of December 31, 2005 and 2004.
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.
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.
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, 2005 and
2004. 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.
F-8c
Pinoak, Inc.
(a Development Stage Company)
Footnotes
Income Taxes
- ------------
Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable on the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
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.
Dividends
- ---------
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid or declared since inception.
Year end
- ---------
The Company has adopted December 31 as its fiscal year end.
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 $4,450 for the period from
December 31, 1998 (inception) to December 31, 2005, 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.
F-9c
Pinoak, Inc.
(a Development Stage Company)
Footnotes
NOTE 3 - STOCKHOLDER'S EQUITY
The Company is authorized to issue 5,000,000 shares of its $0.001 par value
preferred stock 20,000,000 shares of its $0.001 par value common stock.
On December 7, 2001, the Company issued 2,000,000 shares of its $0.001 par
value common stock for cash of $4,820.
There have been no other issuances of preferred and/or common stock.
NOTE 4 - RELATED PARTY TRANSACTIONS
On December 7, 2001, the Company issued 2,000,000 shares of its $0.001 par
value common stock to the founder of the Company. (See Note 4).
The Company does not lease or rent any property. Office services are provided
without charge by an officer and director. Such costs are immaterial to the
financial statements and, accordingly, have not been reflected therein. The
officer and director of the Company is 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 - WARRANTS AND OPTIONS
As of December 31, 2005 and 2004, there are no warrants and options outstanding
to acquire any additional shares of preferred and/or common stock.
F-10c
Pinoak, Inc.
(a Development Stage Company)
Footnotes
NOTE 6. PROVISION FOR 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.
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 -%
NOTE 7. OPERATING LEASES AND OTHER COMMITMENTS
The Company also has no assets, other than its bank account, and no lease
obligations.
F-11c
Pinoak, Inc.
(a Development Stage Company)
Footnotes
NOTE 8. RECENT PRONOUNCEMENTS
In November 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment
of ARB No. 43, Chapter 4. SFAS No. 151 amends the guidance in ARB No. 43,
Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts
of idle facility expense, freight, handing costs, and spoilage. This statement
requires that those items be recognized as current period charges regardless
of whether they meet the criterion of "so abnormal" which was the criterion
specified in ARB No. 43. In addition, this Statement requires that allocation
of fixed production overheads to the cost of production be based on normal
capacity of the production facilities. This pronouncement is effective for
the Company beginning October 1, 2005. The Company does not believe adopting
this new standard will have a significant impact to its financial statements.
In December 2004, the FASB issued SFAS No. 123 (revised 2004). Share-Based
Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123(R) supersedes APB Opinion No. 25, Accounting for
Stock Issued to Employees and amends SFAS No. 95, Statement of Cash Flows.
Generally, the approach in SFAS No. 123(R) is similar to the approach
described in SFAS No. 123. However, SFAS No. 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative. The new standard will be effective
for the Company in the first interim or annual reporting period beginning
after December 15, 2005. The Company expects the adoption of this standard
will have a material impact on its financial statements assuming employee
stock options are granted in the future.
F-12