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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 10-QSB
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(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission File Number [000-30264]
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Acola Corp.
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(Exact name of registrant as specified in its charter)
Delaware 11-3177042
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5503 Blossom Street
Houston, Texas 77007
(Address of principal executive offices including zip code)
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Registrant's telephone number, including area code:
(713) 802-9911
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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
- ---- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 2002.
Class Outstanding at November 13, 2002
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Common Stock, $0.0001 Par Value 41,855,050
ACOLA CORP. AND SUBSIDIARIES
Table of Contents
PAGE
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2003 (unaudited) and June 30, 2003
(audited) 3
Condensed Consolidated Statements of Operations (unaudited) -
Three Months Ended September 30, 2003 and 2002 4
Condensed Consolidated Statements of Changes in Stockholders'
Equity (unaudited) - Three Months ended September
30, 2003 5
Condensed Consolidated Statements of Cash Flows (unaudited) -
Three Months Ended September 30, 2003 and 2002 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial 11
Condition and Results of Operations
Item 3. Controls and Procedures 12
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 13
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 14
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2003 June 30, 2003
(Unaudited) (Audited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,200 $ 5,020
Account receivable-related party 8,000 8,000
Prepaid expenses 4,250 4,250
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Total Current Assets 16,450 17,270
Computer software-net 274 274
INTANGIBLE ASSETS - Net 10 10
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TOTAL ASSETS $ 16,734 $ 17,554
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 9,449 $ 5,503
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TOTAL LIABILITIES 9,449 5,503
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COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
PREFERRED STOCK; $.001 par value,
5,000,000 shares authorized;
and no shares issued and outstanding - -
COMMON STOCK CLASS A; $.001 par value;
100,000,000 shares authorized;
39,755,050 shares issued and
outstanding 39,755 39,755
COMMON STOCK CLASS B; Supervoting shares,
100 votes for each share, $.001 par
value; 2,000,000 shares authorized;
2,000,000 shares issued and
outstanding 2,000 2,000
ADDITIONAL PAID-IN CAPITAL 3,566,176 3,566,176
ACCUMULATED DEFICIT (3,600,646) (3,595,880)
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TOTAL STOCKHOLDERS' EQUITY 7,285 12,051
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 16,734 $ 17,554
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See accompanying notes.
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
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2003 2002
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EXPENSES
Professional fees $ 5,306 $ -
General and administrative expenses 1,699
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5,306 1,699
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LOSS FROM OPERATIONS {5,306) (1,699)
OTHER INCOME - Account forgiveness 540 -
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NET $(4,766) $ (1,699)
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BASIC AND DILUTED INCOME
PER SHARE OF COMMON STOCK $ NIL $ NIL
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 41,755,050 34,805,050
========== ==========
See accompanying notes.
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 2003
(Unaudited)
Class A Class B Additional Accumulated
Common Common Paid-In
Stock Stock Capital Deficit Total
------ ------- ---------- ----------- ---------
BALANCE
AT JUNE
30,2003 $39,755 $2,000 $3,566,176 $(3,595,880) $ 12,051
NET LOSS FOR THE
THREE MONTHS ENDED
SEPTEMBER 30, 2003 - - - (4,766) (4,766)
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BALANCE AT $39,755 $2,000 $3,566,176 $(3,600,646) $7,285
September 30, 2003 ======= ======== ========== ============ =========
See accompanying notes
ACOLA CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
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2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (4,766) $ (1,699)
Adjustments to reconcile net to
net cash used in operating activities
Miscellaneous receivables
Accounts payable and accrued expenses 3,946 (8,833)
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Net cash used in operating activities (820) (10,532)
CASH FLOW FROM FINANCING ACTIVITIES
Short term loans - 10,371
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Net cash provided by financing activities - 10,371
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NET DECREASE IN CASH (820) (161)
CASH - BEGINNING OF PERIOD 5,020 179
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CASH - END OF PERIOD $ 4,200 $ 18
========= ========= =========
See accompanying notes.
ACOLA CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - INTERIM PERIODS
The accompanying unaudited information has been prepared in
accordance with generally accepted accounting principles in
the United States for interim financial information and with
the rules and regulations adopted by the United States
Securities and Exchange Commission. 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 the Company's
management, all adjustments, consisting of normal recurring
items considered necessary for a fair presentation have been
included. These financial statements should be read in
conjunction with the financial statements and notes for
the year ended June 30, 2003, included in the Form 10-KSB.
The results of operations for the three month periods ended
September 30, 2003 and 2002 are not necessarily indicative of
operating results for the full year.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Concentration of Credit Risk Involving Cash
The Company maintains its cash balances in a bank located in the United States.
These balances are insured up to $100,000 by the FDIC.
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three
months or less to be cash equivalents.
Fair Value of Financial Instruments
Financial instruments consist of cash, receivables, and accounts payable. The
carrying amounts approximate fair value because of the short maturity of these
instruments.
Depreciation
The cost of computer software is depreciated over its estimated useful
life using the straight line and accelerated methods. Repair and maintenance
costs are expensed as incurred.
Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the use of estimates based on
management's knowledge and experience. Accordingly, actual results could differ
from those estimates.
Income Taxes
The Company accounts for its income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed
annually for temporary differences between the financial statement and tax bases
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to 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.
Earnings (Loss) Per Share
The Company follows SFAS No. 128, "Earnings Per Share" (EPS), which establishes
standards for computing and presenting EPS. Under this standard, Basic EPS is
computed based on weighted average shares outstanding and excludes any potential
dilution. Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue
common stock. There are no dilutive securities, therefore basic
and diluted earnings (loss) per share are the same at September 30, 2003
and 2002.
..
NOTE 3 - ORGANIZATION CHANGES AND MANAGEMENT PLANS
The Company is seeking a reverse merger partner for the benefit of all
of the Company's shareholders and has retained an investment banker to assist
in this effort. . No specific merger
or acquisition has been agreed and there can be no assurance that a
transaction will be consummated.
NOTE 4 - LEGAL PROCEEDINGS
In August 2000 the Company received a letter from an attorney
advising that there is an Order, dated March 10, 1998, for Entry
of Default Judgment in the District Court of Boulder, Colorado
against Northern Lights Software, Ltd. (a Delaware corporation and
a predecessor of the Company) in favor of two alleged former
employees of Northern Lights Software, Ltd. (a New York corporation
which was a subsidiary of Northern Lights Software (Delaware) Ltd.) in the
total amount of $74,887. The judgment was apparently for alleged
unpaid wages. The Company believes that the Colorado lawsuit was
brought against the wrong corporation and that the default judgment
was erroneously issued in violation of Colorado statutes, as
interpreted by the Colorado Supreme Court. Based upon a review of
the record in the case, management believes that it would be an
error for any court to enforce the default judgment, and the Company
plans to mount a vigorous defense against any effort to enforce the
judgment against the Company.
Other than that stated above, to the best knowledge of the Officers and
Directors of the Company, neither the Company nor any of its Officers or
Directors is a party to any material legal proceeding or litigation and such
persons know of no other material legal proceeding or litigation contemplated or
threatened. Other than that stated above, there are no judgments against the
Company or its Officers or Directors.
Note 5 - INCOME TAXES
The Company has incurred losses since its inception and, therefore,
has not been subject to federal income taxes. The Company may be
entitled to a net operating loss ("NOL") carryforward for income
tax purposes. Because U.S. tax laws limit the time during which NOL
and tax credit carryforwards may be utilized and due
to the change in ownership rules relating to NOL carryforwards, the
Company may not be able to take advantage of its NOL and tax credits
for federal income tax purposes. Consequently, it may be determined
at a future date that the net operating loss carryforwards are not
available to offset earnings of the Company and income taxes may be
due. The Company has not provided for this possible contingency as
management is of the opinion that net operating loss
carryforwards are available to offset current income.
..
NOTE 6 - RECENT EVENTS
In July 2003 the Company retained the investment banking firm
of Keating Investments, LLC to assist the Company in
identifying an appropriate reverse merger partner and
negotiating a merger. Keating Investments is reviewing
possible candidates.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Critical Accounting Policies
The Company's accounting policies are integral to
understanding the results reported. The Securities
and Exchange Commission (SEC) recently issued guidance
for the disclosure of "critical accounting policies".
The SEC defines "critical accounting policies" as those
that are most important to the presentation of a
company's financial condition and results of operations
and require management's most difficult, subjective or
complex judgments, often as a result of the need to
make estimates about the effect of matters that are
inherently uncertain.
The Company follows financial accounting and reporting
policies that are in accordance with generally accepted
accounting principles as more fully discussed in its
Form 10-KSB for the year ended June 30, 2003. Not all
significant accounting policies require management to
make difficult, subjective, or complex judgments. However,
the policies noted below could be deemed to meet the
SEC's definition of critical accounting policies.
Evaluation of the Company as a going concern-As reflected
in the accompanying financial statements and more fully
discuss in the Company's Form 10KSB at June 30, 2003,
the Company has incurred recurring losses, has no
operations and limited liquidity. These matters, among
others, indicate strongly that the Company may not
remain a going concern in the future. Because of this,
management is required to evaluate routinely many
business decisions that may impact the ongoing operations
of the Company. Depending upon decisions made by
management and the Company's board of directors, the
Company may not remain a going concern in the future.
If the Company does not remain a going concern, it is
likely that the Company's shareholders and creditors
will not receive any return of their investment or
payment for outstanding goods or services.
Commitments and contingencies-As reflected in the
accompanying financial statements and more fully
discussed in the Company's Form 10KSB, the Company
is subject to the uncertainty of litigation. Although
management of the Company does not believe that,
should the matter go to trial, any amounts will be
due by the Company; results from litigation are often
unpredictable as to outcome. Moreover, due to the
Company's limited liquidity and access to additional
operating capital, it is possible that should the
legal matters progress to trial, the Company may
not have the required resources necessary to contest
the matter at trial.
The following discussion should be read in conjunction
with the Company's Condensed Consolidated Financial
Statements appearing elsewhere in this report.
Quarter ended September 30, 2003
Revenue:
The Company did not earn any revenue during the three month
periods ended September 30, 2003 and September 30, 2002.
Professional Fee Expenses:
Professional fee expenses for the quarters ended
September 30, 2003 and 2002 were $5,306 and $0
respectively, an increase of $5,306 from the quarter
ended September 30, 2002. This increase was due to
the Company's limited operations during both quarters
and when professional services were conducted and
recorded by the Company in its accounting records.
General and Administrative Expenses:
General and administrative expenses for the quarter ended
September 30, 2003 were $0, a decrease of $1,699 from
the quarter ended September 30, 2002. The decrease is
because the company is not engaged in any business activity
at this time.
Description of Property:
As of November 13, 2003 the Company maintains its principal
place of business at 5503 Blossom Street, Houston, Texas 77007.
This business location is owned by one of the Company's
shareholders and is provided to the Company without cost.
The Company does not own or maintain any additional properties.
New Accounting Standards
The Financial Accounting Standards Board has issued many new
accounting standards that do not have an impact on the Company
due to its relatively dormant condition. Should the Company
emerge from its somewhat dormant condition to an operating
entity, it is quite possible that decisions made by management
and the Company's board of directors could result in the Company's
adoption of new accounting standards which could have a negative
impact on the Company's financial position, results of operations
and cash flows. Because the Company is currently not operating,
it is not possible to determine which new standards might apply
and what impact, if any, the new standards might have.
ITEM 3. Controls and Procedures
Evaluation of disclosure controls and procedures. Within 90 days
prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based
on this evaluation, the Company's Chief Executive Officer and
Chief Financial Officer concluded that 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")) 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 to the Company's management within the time periods
specified in the Securities and Exchange Commission's rules and
forms.
Changes in internal controls. Subsequent to the date of their
evaluation, there were no significant changes in the Company's
internal controls or in other factors that could significantly
affect the Company's disclosure controls and procedures, and
there were no corrective actions with regard to significant
deficiencies and material weaknesses based on such evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In August 2000 the Company received a letter from an attorney
advising that there is an Order, dated March 10, 1998, for Entry
of Default Judgment in the District Court of Boulder, Colorado
against Northern Lights Software, Ltd. (a Delaware corporation and
a predecessor of the Company) in favor of two alleged former
employees of Northern Lights Software, Ltd. (a New York corporation
which was a subsidiary of Northern Lights Software (Delaware) Ltd.)
in the total amount of $74,887. The judgment was apparently for
alleged unpaid wages. The Company believes that the Colorado lawsuit
was brought against the wrong corporation and that the default
judgment was erroneously issued in violation of Colorado statutes, as
interpreted by the Colorado Supreme Court. Based upon a review of
the record in the case, management believes that it would be an
error for any court to enforce the default judgment, and the Company
plans to mount a vigorous defense against any effort to enforce the
judgment against the Company.
Other than that stated above, to the best knowledge of the Officers
And Directors of the Company, neither the Company nor any of its
Officers or Directors is a party to any material legal proceeding
or litigation and such persons know of no other material legal
proceeding or litigation contemplated or threatened. Other than
that stated above, there are no judgments against the Company or
its Officers or Directors.
Item 2. Changes in Securities and use of proceeds
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports
(a) Exhibits:
Exhibit
Number Description
1 Certification of Chief Executive Officer and Chief Financial
Officer pursuant to Rule 13a-14(a) of the Securities Act of 1934,
as amended.
(b) Reports on Form 8-K:
The Company has not filed any reports on Form 8-K during the three month
period ended September 30, 2003.
FORWARD-LOOKING STATEMENTS
The information in this Form 10-QSB includes "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, Section 21E
of the Securities Exchange Act of 1934, and the Private Securities Litigation
Reform Act of 1995. Acola includes this statement for the express purpose of
availing itself of the protections of these safe harbor provisions with
respect to all of the forward-looking statements Acola makes. The forward-
looking statements in this Form 10-QSB reflect Acola's current views with
respect to possible future events and financial performance. They are
subject to certain risks and uncertainties, including without limitation the
absence of significant revenues, financial resources, significant competition
and those other risks and uncertainties discussed herein that could cause
Acola's actual results to differ materially from its historical results or
those that Acola hopes to achieve. In this Form 10-QSB, the words,
"anticipates," "plans," "believes," "expects," "intends," "future" and
similar expressions identify certain forward-looking statements. Please do
not place undue reliance on the forward-looking statements contained in this
Form 10-QSB. Acola undertakes no obligation to announce publicly revisions
Acola may make to these forward-looking statements to reflect the effect of
events or circumstances that may arise after the date of this Form 10-QSB.
All written and oral forward-looking statements made subsequent to the date
of this Form 10-QSB and attributable to Acola or persons acting on its behalf
are expressly qualified in their entirety by this section.
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACOLA CORP.
By: /s/ James N. Baxter
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Date: November 14, 2003 James N. Baxter
President
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
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/s/ James N. Baxter Director, President & CEO, November 14, 2003
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James N. Baxter (Principal Executive Officer &
Principal Financial Officer)
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