U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
Commission File No. 000-50337
SCAPPLE INC.
(Exact name of small business issuer as specified in its charter)
New Jersey 98-0401805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
34A 2755 Lougheed Hwy #142, Port Coquitlam, British Columbia V3B 5Y9
(Address of Principal Executive Offices)
(604) 649 8166
(Issuer's telephone number)
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the issuer was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 16, 2004: 100,000 shares of common stock outstanding,
$0.0001 par value.
SCAPPLE, INC.
FINANCIAL STATEMENTS
INDEX
Part I-- FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
Part II-- OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Item 1. Financial Information
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BASIS OF PRESENTATION
The accompanying reviewed financial statements are presented in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QSB and item 310 under subpart A of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting only of normal
occurring accruals) considered necessary in order to make the financial
statements not misleading, have been included. Operating results for the quarter
ended March 31, 2004 are not necessarily indicative of results that may be
expected for the year ending December 31, 2004. The financial statements are
presented on the accrual basis.
SCAPPLE, INC.
FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
Scapple, Inc.
Financial Statements Table of Contents
FINANCIAL STATEMENTS Page #
Balance Sheet F-1
Statement of Operations and Retained Deficit F-2
Statement of Stockholders Equity F-3
Cash Flow Statement F-4
Notes to the Financial Statements F-5
SCAPPLE, INC.
BALANCE SHEET
As of March 31, 2004 and December 31, 2003
ASSETS
------
March 31, December 31,
CURRENT ASSETS 2004 2003
Cash $ (0) $ (0)
------- -------
TOTAL ASSETS $ (0) $ (0)
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
CURRENT LIABILITIES
Accrued expenses $ 1,500 $ 1,250
------- -------
TOTAL LIABILITIES 1,500 1,250
STOCKHOLDER'S EQUITY
Common Stock - par value $0.001;
50,000,000 shares authorized;
100,000 issued and outstanding 100 100
Additional paid in capital 0 0
Preferred Stock - Par value $0.001;
1,000,000 shares authorized;
none issued and outstanding 0 0
Accumulated Deficit (1,600) (1,350)
------- -------
Total stockholder's equity (1,500) (1,250)
------- -------
TOTAL LIABILITIES AND EQUITY $ (0) $ (0)
======= =======
The accompanying notes are an integral part of these financial statements.
F-1
SCAPPLE, INC.
STATEMENT OF OPERATIONS
For the three months ending March 31, 2004 and
from inception (June 24, 2003) through March 31, 2004
Three Months From Inception to
March 31, 2004 March 31, 2004
REVENUE
Sales $ 0 $ 0
Cost of sales 0 0
------------ ------------
GROSS PROFIT 0 0
GENERAL AND ADMINISTRATIVE EXPENSES 250 1,600
------------ ------------
NET LOSS (250) (1,600)
ACCUMULATED DEFICIT, BEGINNING BALANCE (1,350) 0
------------ ------------
ACCUMULATED DEFICIT, ENDING BALANCE $ (1,600) $ (1,600)
============ ============
NET EARNINGS PER SHARE
Basic and Diluted
Net loss per share (.01)
Basic and Diluted Weighted Average
Number of Common Shares Outstanding 100,000
The accompanying notes are an integral part of these financial statements.
F-2
SCAPPLE, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
From inception (June 24, 2003) through March 31, 2004
COMMON ADDITIONAL ACCUMULATED
SHARES STOCK PAID IN DEFICIT TOTAL
--------- --------- ---------- ----------- ----------
Stock issued on acceptance
Of incorporation expenses
June 24, 2003 100,000 $ 100 $ 0 $ 0 $ 100
Net loss (1,350) (1,350)
-------- -------- -------- -------- --------
Total at December 31, 2003 100,000 $ 100 $ 0 (1,350) $ (950)
Net loss (250) (250)
-------- -------- -------- -------- --------
Total at March 31, 2004 100,000 $ 100 $ 0 $ (1,600) $ (1,500)
======== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-3
SCAPPLE, INC.
STATEMENT OF CASH FLOWS
For the three months ended March 31, 2004, and
from inception (June 24, 2003) through March 31, 2004
CASH FLOWS FROM OPERATING ACTIVITIES March 31, 2004 From Inception
Net income (loss) $ (250) $(1,600)
Increases (Decrease) in accrued expenses 250 1,500
-------- --------
NET CASH PROVIDED OR (USED) IN OPERATIONS (0) (100)
CASH FLOWS FROM INVESTING ACTIVITIES
None 0 0
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issued on incorporation expenses 0 100
CASH RECONCILIATION
Net increase (decrease) in cash 0 0
Beginning cash balance 0 0
-------- --------
CASH BALANCE AT END OF PERIOD $ 0 $ 0
======== ========
The accompanying notes are an integral part of these financial statements.
F-4
SCAPPLE, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. Summary of significant accounting policies:
------------------------------------------
Industry - Scapple, Inc. (the Company), a Company incorporated in the state of
- --------
New Jersey as of June 24, 2003, plans to locate and negotiate with a business
entity for the combination of that target company with The Company. The
combination will normally take the form of a merger, stock-for-stock exchange or
stock- for-assets exchange. In most instances the target company will wish to
structure the business combination to be within the definition of a tax-free
reorganization under Section 351 or Section 368 of the Internal Revenue Code of
1986, as amended. No assurances can be given that The Company will be successful
in locating or negotiating with any target company.
The Company has been formed to provide a method for a foreign or domestic
private company to become a reporting ("public") company whose securities are
qualified for trading in the United States secondary market.
Results of Operations and Ongoing Entity - The Company is considered to be an
- ----------------------------------------
ongoing entity. The Company's shareholders fund any shortfalls in The Company's
cash flow on a day to day basis during the time period that The Company is in
the development stage.
Liquidity and Capital Resources - In addition to the stockholder funding capital
- -------------------------------
shortfalls; The Company anticipates interested investors that intend to fund the
Company's growth once a business is located.
Cash and Cash Equivalents - The Company considers cash on hand and amounts on
- -------------------------
deposit with financial institutions which have original maturities of three
months or less to be cash and cash equivalents.
Basis of Accounting - The Company's financial statements are prepared in
- -------------------
accordance with generally accepted accounting principles.
Income Taxes - The Company utilizes the asset and liability method to measure
- ------------
and record deferred income tax assets and liabilities. Deferred tax assets and
liabilities reflect the future income tax effects of temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and are measured using enacted tax
rates that apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. At this time, The Company has set up an allowance for deferred taxes
as there is no company history to indicate the usage of deferred tax assets and
liabilities.
F-5
SCAPPLE, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
Fair Value of Financial Instruments - The Company's financial instruments may
- -----------------------------------
include cash and cash equivalents, short-term investments, accounts receivable,
accounts payable and liabilities to banks and shareholders. The carrying amount
of long-term debt to banks approximates fair value based on interest rates that
are currently available to The Company for issuance of debt with similar terms
and remaining maturities. The carrying amounts of other financial instruments
approximate their fair value because of short-term maturities.
Concentrations of Credit Risk - Financial instruments which potentially expose
- -----------------------------
The Company to concentrations of credit risk consist principally of operating
demand deposit accounts. The Company's policy is to place its operating demand
deposit accounts with high credit quality financial institutions. At this time
The Company has no deposits that are at risk.
2. Related Party Transactions and Going Concern:
--------------------------------------------
The Company's financial statements have been presented on the basis that it is a
going concern in the development stage, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. At
this time The Company has not identified the business that it wishes to engage
in.
The Company's shareholders fund The Company's activities while The Company takes
steps to locate and negotiate with a business entity for combination; however,
there can be no assurance these activities will be successful.
3. Accounts Receivable and Customer Deposits:
-----------------------------------------
Accounts receivable and Customer deposits do not exist at this time and
therefore have no allowances accounted for or disclosures made.
4. Use of Estimates:
----------------
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenue
and expenses. Management has no reason to make estimates at this time.
5. Revenue and Cost Recognition:
----------------------------
The Company uses the accrual basis of accounting in accordance with generally
accepted accounting principles for financial statement reporting.
6. Accrued Expenses:
----------------
Accrued expenses consist of accrued legal, accounting and office costs during
this stage of the business.
7. Operating Lease Agreements:
--------------------------
The Company has no agreements at this time.
F-6
SCAPPLE, INC.
NOTES TO FINANCIAL STATEMENTS
================================================================================
8. Stockholder's Equity:
--------------------
Common Stock includes 50,000,000 shares authorized at a par value of $0.001, of
which 100,000 have been issued for the amount of $100 on September 19, 2003 in
acceptance of the incorporation expenses for the Company.
9. Required Cash Flow Disclosure for Interest and Taxes Paid:
---------------------------------------------------------
The company has paid no amounts for federal income taxes and interest. The
Company issued 100,000 common shares of stock to its sole shareholder in
acceptance of the incorporation expenses for the Company.
10. Earnings Per Share:
------------------
Basic earnings per share ("EPS") is computed by dividing earnings available to
common shareholders by the weighted-average number of common shares outstanding
for the period as required by the Financial Accounting Standards Board (FASB)
under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Shares". Diluted EPS reflects the potential dilution of securities that could
share in the earnings.
11. Income Tax:
----------
The Company had a net operating loss carry-forward of $1,300 which will expire
for tax purposes as a tax benefit during the year of 2024. The carry-forward has
been fully reserved for in an allowance account and therefore does not appear on
the Balance Sheet as an asset.
12. Subsequent Event:
----------------
Subsequent to the balance sheet date, the Company had a change in control
whereby the majority shareholder has sold their shares in the Company.
F-7
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
- --------------------------------------------------------------------------------
Plan of Operation
- -----------------
We are continuing our efforts to locate a merger candidate for the purpose of a
merger. It is possible that we will be successful in locating such a merger
candidate and closing such merger. However, if we cannot effect a non-cash
acquisition, we may have to raise funds from a private offering of our
securities under Rule 506 of Regulation D. There is no assurance we will obtain
any such equity funding.
Results of Operation
- --------------------
We did not have any operating income from inception (June 24, 2003) through
March 31, 2004. We recognized a net loss of $1,600. Some general and
administrative expenses from inception were accrued. Expenses from inception
were comprised of costs mainly associated with legal, accounting and office.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2004, we had no capital resources and will rely upon the
issuance of common stock and additional capital contributions from shareholders
to fund administrative expenses pending acquisition of an operating company.
Management anticipates seeking out a target company through solicitation. Such
solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Management may engage in such solicitation
directly or may employ one or more other entities to conduct or assist in such
solicitation. Management and its affiliates will pay referral fees to
consultants and others who refer target businesses for mergers into public
companies in which management and its affiliates have an interest. Payments are
made if a business combination occurs, and may consist of cash or a portion of
the stock in the Company retained by management and its affiliates, or both.
The Company and or shareholders will supervise the search for target companies
as potential candidates for a business combination. The Company and or
shareholders may pay as their own expenses any costs incurred in supervising the
search for a target company. The Company and or shareholders may enter into
agreements with other consultants to assist in locating a target company and may
share stock received by it or cash resulting from the sale of its securities
with such other consultants.
Item 3. Controls and Procedures
- -------------------------------
(a) Evaluation of disclosure controls and procedures.
Our Chief Executive Officer and Chief Financial Officer (collectively the
"Certifying Officers") maintain a system of disclosure controls and procedures
that is designed to provide reasonable assurance that information, which is
required to be disclosed, is accumulated and communicated to management in a
timely manner. Under the supervision and with the participation of management,
the Certifying Officers evaluated the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule
[13a-14(c)/15d-14(c)] under the Exchange Act) within 90 days prior to the filing
date of this report. Based upon that evaluation, the Certifying Officers
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relative to our company required to be
disclosed in our periodic filings with the SEC.
(b) Changes in internal controls.
Our Certifying Officer has indicated that there were no significant changes in
our internal controls or other factors that could significantly affect such
controls subsequent to the date of his evaluation, and there were no such
control actions with regard to significant deficiencies and material weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports of Form 8-K.
(a) Exhibits
31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act
of 2002
32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act
of 2002
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed in its
behalf by the undersigned, thereunto duly authorized.
SCAPPLE, INC.
Date: August 19, 2004 /s/ David Feurborn
--------------------------------
David Feurborn
President