10-Q 1 rkoq63001.txt 10Q UNITED STATES 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 Quarter Ended June 30, 2001 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 0-24633 RAKO CAPITAL CORPORATION --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Nevada 91-0853320 ------------------------------- ----------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 56 W. 400 S. Ste. 220, Salt Lake City, Utah 84101 -------------------------------------- ---------- (Address of principal executive offices) Zip code Registrant's telephone no., including area code: (801) 322-3401 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class Outstanding as of June 30, 2001. Common Stock, $.001 par value 2,525,030 RAKO CAPITAL CORPORATION (A Development Stage Company) FINANCIAL STATEMENTS June 30, 2001 and December 31, 2000 C O N T E N T S PART I Balance Sheets 3 Statements of Operations 4 Statements of Stockholders' Equity (Deficit) 5 Statements of Stockholders' Equity (Deficit) Continued 6 Statements of Cash Flows 7 Statements of Cash Flows (Continued) 8 Notes to the Financial Statements 9 PART II Item 1 Legal Proceedings 10 Item 2 Changes in Securities 10 Item 3 Defaults in Senior Securities 10 Item 4 Submission of Matters to a Vote of Security Holders 10 Item 5 Other Information 10 Item 6 Exhibits and Reports on Form 8-K 10 RAKO CAPITAL CORPORATION (A Development Stage Company) Balance Sheets ASSETS June 30, December 31, 2001 2000 CURRENT ASSETS Cash $ - $ - ---------- ---------- Total Current Assets - - ---------- ---------- TOTAL ASSETS $ - $ - =========== ========== LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 338 $ 338 ----------- -------- Total Current Liabilities 338 338 ----------- -------- STOCKHOLDERS' EQUITY (DEFICIT) Common stock at $0.001 par value; authorized 70,000,000 common shares and 20,000,000 preferred shares; 2,525,030 and 1,025,030 common shares issued and outstanding, respectively 2,525 1,025 Additional paid-in capital 99,412 98,187 Deficit accumulated during the development stage (102,275) (99,550) ----------- -------- Total Stockholders' Equity (Deficit) (338) (338) ----------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ - $ - =========== ==========

The accompanying notes are an integral part of these financial statements. RAKO CAPITAL CORPORATION (A Development Stage Company) Statements of Operations (Unaudited) From Inception on For the For the October 9, Three Months Ended Six Months Ended 1968 Through June 30, June 30, June 30, 2001 2000 2001 2000 2001 ------------------------------------------------------ REVENUE $ - $ - $ - $ - $ - EXPENSES 1,125 1,814 2,725 3,344 102,275 -------- -------- -------- -------- --------- NET LOSS $(1,125) $(1,814) $(2,725) $(3,344) $(102,275) ======== ======== ======== ======== ========== BASIC LOSS PER SHARE (0.00) (0.00) (0.00) (0.00) ======== ======== ======== ========

The accompanying notes are an integral part of these financial statements. RAKO CAPITAL CORPORATION (A Development Stage Company) Statements of Stockholders' Equity (Deficit) From Inception on October 9, 1968 Through June 30, 2001 Deficit Accumulated Additional During the Common Stock Paid-in Development Shares Amount Capital Stage ----------------------------------------------------- Inception on October 9, 1968 - $ - $ - $ - Common stock issued for mining claims recorded at predecessor cost of $0.00 per share 400,000 400 (400) - Common stock issued for services at $0.15 per share 400,000 400 59,600 - Common stock issued for cash at $0.45 per share 14,734 15 6,615 - Costs associated with stock offering - - (994) - Common stock issued for mining claims recorded at predecessor cost of $0.075 per share 333,334 333 24,667 - Net loss for the period from inception on October 9, 1968 through December 31, 1995 - - - (90,636) --------- ---------- ---------- --------- Balance, December 31, 1995 1,148,068 1,148 89,488 (90,636) Cancellation of common stock (123,024) (123) 123 - Fractional shares adjustment (14) - - - Capital contributed for payment of expenses - - 2,461 - Net loss for the year ended December 31, 1996 - - - (2,461) ---------- ---------- ---------- --------- Balance, December 31, 1996 1,025,030 1,025 92,072 (93,097) Net loss for the year ended December 31, 1997 - - - - ---------- ---------- ---------- --------- Balance, December 31, 1997 1,025,030 1,025 92,072 (93,097) Capital contributed for payment of expenses - - 1,574 - Net loss for the year ended December 31, 1998 - - - (1,574) ----------- ---------- ----------- --------- Balance, December 31, 1998 1,025,030 $ 1,025 $ 93,646 $(94,671) ----------- ---------- ----------- ---------

The accompanying notes are an integral part of these financial statements. RAKO CAPITAL CORPORATION (A Development Stage Company) Statements of Cash Flows (Unaudited) From Inception on For the For the October 9, Three Months Ended Six Months Ended 1968 Through June 30, June 30, June 30, 2001 2000 2001 2000 2001 ------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (1,125) $ (1,814) $ (2,725) $ (3,344) $ (102,275) Adjustments to reconcile net loss to net cash (used) by operating activities: Stock issued for services - - - - 60,000 Increase in accounts payable 1,125 314 2,725 1,726 28,063 -------- -------- -------- -------- --------- Net Cash (Used) by Operating Activities - (1,500) - (1,618) (14,212) -------- -------- -------- -------- --------- CASH FLOWS FROM - - - - - INVESTING ACTIVITIES -------- -------- -------- -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock - - - - 5,636 For cash Expenses paid on Company's behalf - 1,500 - 1,618 8,576 -------- -------- -------- -------- --------- Net Cash Provided by Financing Activities - 1,500 - 1,618 14,212 -------- -------- -------- -------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS - - - - - CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - - - - - -------- -------- -------- -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ - $ - $ - $ - ========= ========= ======== ======== ========== Cash Paid For: Interest $ - $ - $ - $ - $ - Income taxes $ - $ - $ - $ - $ - SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES Stock issued for services $ - $ - $ - $ - $60,000 Stock issued for mining claims $ - $ - $ - $ - $25,000 Stock issued in lieu of debt $ 2,725 $ - $ 2,725 $ - $ 2,725

The accompanying notes are an integral part of these financial statements. RAKO CAPITAL CORPORATION (A Development Stage Company) Notes to the Financial Statements June 30, 2001 and December 31, 2000 NOTE 1 ORGANIZATION AND DESCRIPTION OF BUSINESS On October 9, 1968, Bell Silver Mining and Milling Corporation was incorporated under the Laws of Idaho with the purpose of developing mining claims. On the date of incorporation, 10,000,000 shares of $0.10 par value common stock were authorized. On March 3, 1969, Bell Silver Mining and Milling Corporation changed its name to Silver Strike Mining Co. Inc. The number of shares of common stock authorized was changed from 10,000,000 shares of $0.10 par value common stock to 5,000,000 shares of $0.10 par value common stock. On May 17, 1973, Silver Strike Mining and Milling Co. Inc, changed its name to Rako Corporation. On March 25, 1996, the Articles of Incorporation were amended to change the par value of the common stock to $0.005 and the number of authorized shares to 100,000,000. On May 15, 1996, the Articles of Incorporation were amended to change the par value of the common stock to $0.001 and the number of authorized shares to 50,000,000 common and 20,000,000 preferred. On April 10, 2001, the Board of Directors of the Company approved a merger with Rako Capital Corporation, a Nevada corporation. Rako Capital Corporation became the surviving entity which effectively changed the state of domicile from Idaho to Nevada. Shares were exchanged on a one-for-one basis. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a calendar year end. b. Provision for Taxes No provision for income taxes has been made due to the inactive status of the Company. The Company has net operating loss carryovers of approximately $10,600 which expire in 2020. The potential tax benefit of the loss carryovers has been offset in full by a valuation allowance. c. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. RAKO CAPITAL CORPORATION (A Development Stage Company) Notes to the Financial Statements June 30, 2001 and December 31, 2000 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. e. Basic Loss Per Common Share Basic loss per common share has been calculated based on the weighted average number of shares of common stock outstanding during the period. For the For the Three Months Ended Six Months Ended June 30, June 30, ------------------------------------------------ 2001 2000 2001 2000 ------------------------------------------------ Numerator loss $ (1,125) $ (1,814) $ (2,725) $ (3,344) Denominator - weighted average number of shares outstanding 1,125,030 1,025,030 1,525,030 1,025,030 ----------- ----------- ----------- ----------- Loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00) =========== =========== =========== ===========

f. Unaudited Financial Statements The Accompanying unaudited financial statements include all of the adjustments which, in the opinion of management, are necessary for a fair presentation. Such adjustments are of a normal recurring nature. NOTE 3 GOING CONCERN The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established revenues sufficient to cover its operating costs and allow it to continue as a going concern. The Company is seeking a merger with an existing, operating Company. Currently management has committed to covering all operating and other costs until a merger is completed. NOTE 4 STOCK TRANSACTIONS On October 10, 1968, the Board of Directors issued 400,000 shares of common stock for mining claims received from the founder of the Company. The claims were recorded at predecessor cost of $-0-. On October 10, 1968, the Board of Directors issued 400,000 shares of common stock for services rendered during the organization of the Company. On October 28, 1969, the Board of Directors initiated a public offering in which 14,734 shares of common stock were sold at a gross price of $0.45 per share. On September 13, 1984, the Board of Directors issued 333,334 shares of common stock for mining claims which were recorded at predecessor cost of $0.075 per share. On April 10, 1996, the Company canceled 123,024 shares of common stock. On May 15, 1996, the shareholders effected a 1-for-3 reverse stock split of all the issued and outstanding common stock. RAKO CORPORATION (A Development Stage Company) Notes to the Financial Statements March 31, 2001 and December 31, 2000 NOTE 4 STOCK TRANSACTIONS (Continued) On March 17, 1998, the shareholders effected a 2-for-1 forward stock split of all the issued and outstanding common stock. On May 3, 2001, the Company authorized and issued 1,500,000 shares of common stock in lieu of debt totaling $2,725 owed to H. Deworth Williams, a shareholder who has been paying the Company's expenses, including legal, accounting, rent and all other office expenses. The accompanying financial statements reflect the stock splits on a retroactive basis. NOTE 5 FAILED ACQUISITION On May 9, 1996, the shareholders voted to acquire all of the issued and outstanding shares of Spencer Entertainment, Inc., a Nevada Corporation, in exchange for the Company's authorized, but previously unissued common stock. On June 11, 1996, the Company issued 6,300,000 shares as part of the terms of this agreement, however, on November 22, 1996, the Company completed a recission agreement regarding the plan of reorganization and acquisition agreement between the Company and Spencer Entertainment, Inc. and canceled the 6,300,000 shares that were issued. The recission has been reflected in the financial statements on a retroactive basis. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-QSB. The Company is considered a development stage company with no assets or capital and with no significant operations or income since approximately 1986. In July 1998, the Company filed with the Securities and Exchange Commission a registration statement on Form 10-SB. All costs and expenses associated with the registration statement have been paid for by a shareholder of the Company. It is anticipated that the Company will require only nominal capital to maintain the corporate viability of the Company and necessary funds will most likely be provided by the Company's officers and directors in the immediate future. However, unless the Company is able to facilitate an acquisition of or merger with an operating business or is able to obtain significant outside financing, there is substantial doubt about its ability to continue as a going concern. Plan of Operation During the next 12 months, the Company will actively seek out and investigate possible business opportunities with the intent to acquire or merge with one or more business ventures. Because the Company lacks funds, it may be necessary for the officers and directors to either advance funds to the Company or to accrue expenses until such time as a successful business consolidation can be made. Management intends to hold expenses to a minimum and to obtain services on a contingency basis when possible. Further, the Company's directors will defer any compensation until such time as an acquisition or merger can be accomplished and will strive to have the business opportunity provide their remuneration. However, if the Company engages outside advisors or consultants in its search for business opportunities, it may be necessary for the Company to attempt to raise additional funds. As of the date hereof, the Company has not made any arrangements or definitive agreements to use outside advisors or consultants or to raise any capital. In the event the Company does need to raise capital, most likely the only method available to the Company would be the private sale of its securities. Because of the nature of the Company as a development stage company, it is unlikely that it could make a public sale of securities or be able to borrow any significant sum from either a commercial or private lender. There can be no assurance that the Company will be able to obtain additional funding when and if needed, or that such funding, if available, can be obtained on terms acceptable to the Company. The Company does not intend to use any employees, with the possible exception of part-time clerical assistance on an as-needed basis. Outside advisors or consultants will be used only if they can be obtained for minimal cost or on a deferred payment basis. Management is confident that it will be able to operate in this manner and to continue its search for business opportunities during the next twelve months. Net Operating Loss The Company has accumulated approximately $10,600 of net operating loss carryforwards as of June 30, 2001, which may be offset against taxable income and income taxes in future years. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The carry-forwards expire in the year 2020. In the event of certain changes in control of the Company, there will be an annual limitation on the amount of net operating loss carryforwards which can be used. No tax benefit has been reported in the financial statements for the year ended December 31, 2000 or the nine month period ended June 30, 2001 because there is a 50% or greater chance that the carryforward will not be used. Accordingly, the potential tax benefit of the loss carryforward is offset by a valuation allowance of the same amount. Inflation In the opinion of management, inflation has not and will not have a material effect on the operations of the Company until such time as the Company successfully completes an acquisition or merger. At that time, management will evaluate the possible effects of inflation on the Company related to it business and operations following a successful acquisition or merger. Risk Factors and Cautionary Statements This report contains certain forward-looking statements. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements, including, but not limited to, the following: the ability of the Company search for appropriate business opportunities and subsequently acquire or merge with such entity, to meet its cash and working capital needs, the ability of the Company to maintain its existence as a viable entity, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. PART II Item 1. Legal Proceedings There are presently no other material pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of its property is subject and, to the best of its knowledge, no such actions against the Company are contemplated or threatened. Item 2. Changes In Securities On May 3, 2001, the Company authorized and issued 1,500,000 shares of common stock in lieu of debt totaling $2,725 owed to H. Deworth Williams, a shareholder who has been paying the Company's expenses, including legal, accounting, rent and all other office expenses. The shares were issued in reliance upon exemption from registration pursuant to section 4(2) of the Securities Act of 1933. Item 3. Defaults Upon Senior Securities This Item is not applicable to the Company. Item 4. Submission of Matters to a Vote of Security Holders On May 3, 2001 the registrant held a Special Meeting of the Shareholders. At the meeting the shareholders voted to: Approve the proposal to change the registrants State of Incorporation from the State of Idaho to the State of Nevada with 832,536 shares voting for the proposal, zero shares withholding, 666 shares voting against and 3,064 shares abstaining. Elect Geoff Williams and Bobbi Heywood to serve on the Board of Directors with 835,600 shares voting for the proposal, 666 shares withholding, zero shares voting against and zero shares abstaining. Mr. Williams and Ms. Heywood are the sole Directors of the Company. Approve the proposal to issue 1,500,000 shares of the registrant's common stock to H. Deworth Williams as consideration for Company expenses that he has paid. The proposal passed with 832,536 shares voting for, zero shares withholding, 666 shares voting against and 3,064 shares abstaining. Approve the appointment of HJ & Associates as independent auditors with 832,536 shares voting for the proposal, zero shares withholding, 666 shares voting against and 3,064 shares abstaining. Item 5. Other Information This Item is not applicable to the Company. Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K No report on Form 8-K was filed by the Company during the three month period ended June 30, 2001. SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RAKO CORPORATION Date: August 1, 2001 By: /S/ Geoffery Williams GEOFFERY WILLIAMS President and Director Date: August 1, 2001 By: /S/ Bobbi Heywood BOBBI HEYWOOD Secretary/Treasurer, and Director

RAKO CORP 10-Q