WIN OR LOSE ACQUISITION CORP - 10-Q Quarterly Report

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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

DELAWARE		59-3685745
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

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.

Title of Each Class		Outstanding at May 13, 2004
Common Stock, $0.001 Par Value		2,400,000 Shares

Form 10-QSB — Page 1

PART I	FINANCIAL INFORMATION	PAGE

ITEM 1	Financial Statements

	Balance Sheets as of March 31, 2004 and December 31, 2003	3

	Statements of Operations for the three-month periods ended March 31, 2003 and 2002	4

	Statements of Cash Flow for the three-month periods ended March 31, 2003 and 2002	5

	Notes to Unaudited Interim Financial Statements	6

ITEM 2	Management’s Discussion and Analysis of Results of Operations, Financial Condition and Plan of Operations	9


ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	10

ITEM 4	Controls and Procedures	10

PART II	OTHER INFORMATION	10

ITEM 4	Submission to a Vote of Security Holders	10

ITEM 6	Exhibits and Reports on Form 8-K	11

	SIGNATURES	11

Form 10-QSB — Page 2

ASSETS
	March 31,			December 31,
	2004			2003
	(unaudited)			(audited)
Current Assets:
Cash	$	24,700		$	1,085
Deposits and prepaid expense	$	4,375		$	-

Total current assets		29,075			1,085


Deferred Offering Costs
Filing fees		610			10
Miscellaneous offering costs		8,950			-
Legal fees		1,625			-

Total deferred offering costs		11,184			10


Total Assets	$	40,260		$	1,095


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	250		$	2,250
Due to affiliates	$	4,875		$	-

Total current liabilities	$	5,125		$	2,250


Long-term Debt
Total long-term debt	$	-		$	-


Total Liabilities	$	5,125		$	2,250


Stockholders’ Equity
Common stock, $0.001 par value, 25,000,000 shares authorized, 1,500,000 shares outstanding at December 31, 2000 and 2,400,000 shares outstanding at December 31, 2001 and 2002	$	2,400		$	2,400
Preferred, $0.001 par value, 5,000,000 shares authorized, no shares outstanding		-			-
Additional paid in capital	$	253,444		$	213,443
Deficit accumulated during development stage	$	(220,709	)	$	(216,998	)


Total Stockholder’s Equity	$	35,135		$	(1,155	)


Total Liabilities and Stockholders’ Equity	$	40,260		$	1,095

	Three Months Ended March 31,

	2004			2003
	(Unaudited)			(Unaudited)
Revenue	$	-		$	-

Expenses
Organization Costs
General and administrative	$	3,710		$	5,098

Total Expenses	$	3,710		$	5,098


Net Income (Loss)	$	(3,710	)	$	(5,098	)


Net Income (Loss) Per Common Share	$	-		$	-


Number of common shares issued
and outstanding during period		2,400,000			2,400,000


Number of common shares used in
calculation of earnings per share		2,400,000			2,400,000

	Three-Months Ended March 31,

	2004			2003
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income (loss)	$	(3,710	)	$	(5,098	)
Change in operating assets and liabilities:
(Increase) in deposits and prepaid expenses	$	(4,375	)		0
Increase in current liabilities	$	2,874		$	1,000

Net cash provided by (used in)operating activities	$	(5,211	)	$	(4,098	)

Cash flows from financing activities:
Additional capital contribution	$	40,000			0
(Increase) in deferred offering costs incurred by the company	$	(11,174	)	$	(10	)

Net cash provided by (used in)financing activities	$	28,826		$	(10	)


Net increase (decrease) in cash	$	23,615		$	(4,108	)
Cash balance, beginning of period	$	1,085		$	0


Cash balance, end of period	$	24,700		$	(4,108	)

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2003 Annual Report on Form 10-KSB and should be read in conjunction with the Notes to Consolidated Financial Statements which appear in that report.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

In the opinion of management, the information furnished in this Form 10-QSB reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three month periods ended March 31, 2004 and 2003. All such adjustments are of a normal recurring nature. The Financial Statements have been prepared in accordance with the instructions to Form 10-QSB and therefore do not include some information and notes necessary to conform with annual reporting requirements.

As of January 1, 2003, the Company adopted the fair value method of accounting for employee stock options contained in Statement of Financial Standards No.123 ("SFAS No. 123") "Accounting for Stock-Based Compensation," which is considered the preferable method of accounting for stock-based employee compensation. Prior to the change, the Company accounted for employee stock options using the intrinsic value method of APB 25. During the transition period, the Company will be utilizing the prospective method under SFAS No.148 "Accounting for Stock-Based Compensation -Transition and Disclosures." All employee stock options granted subsequent to January 1, 2003 will be expensed over the stock option vesting period based on fair value, determined using the Black-Scholes option-pricing method, at the date the options were granted.

Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assumes that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

The Company’s Certificate of Incorporation authorizes the issuance of 25,000,000 shares of common stock. The Company’s Board of Directors has the power to issue any or all of the authorized but unissued common stock without stockholder approval. The Company currently has no commitments to issue any shares, however, it may issue a substantial number of additional shares in connection with a Business Combination.

The Board of Directors is also empowered, without stockholder approval, to issue up to 5,000,000 shares of “blank check” preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the company’s common stock. There are no shares of preferred stock issued or outstanding.

In January 2004, our officers elected to recapitalize the Company by contributing an additional $40,000 and filing a second Form S-1 registration statement under the Securities Act of 1933. This registration statement (effective March 8, 2004) included:

We will not be able to obtain additional financing until we complete a Business Combination. If we spend our available cash before we close a Business Combination, we may be forced to unwind the second Rule 419 distribution and deregister the founders’ shares and acquisition shares.

Costs incurred in connection with the Rule 419 Distribution are capitalized and will be recorded as a reduction to additional paid-in capital upon the completion of the offering. As of March 31, 2004, we capitalized deferred offering costs in the amount of $11,184. These amounts are included in deferred offering costs on the balance sheet. If the offering is terminated, all amounts will be charged to operations in the period of the termination.

Variable Interest Entities: In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of ARB 51” (“FIN 46”). The primary objectives of FIN 46 were to provide guidance on the identification of entities for which control is achieved through means other than through voting rights and how to determine when and which business enterprise should consolidate the variable interest entity (“VIE”). We adopted FIN 46 on July 1, 2003. The implementation of FIN 46 did not have an impact on the earnings or financial position of the Company.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No.146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." The principal difference between SFASNo.146 and EITF 94-3 relates to the recognition of a liability for a cost associated with an exit or disposal activity. SFAS No. 146 requires that a liability be recognized for those costs only when the liability is incurred. A commitment to an exit or disposal plan no longer will be a sufficient basis for recording a liability for those activities. The provisions of SFAS No. 146 are effective for exit or disposal activities initiated after D ecember 31, 2002. Accordingly, the Company adopted the provisions of SFAS No. 146 effective January 1, 2003. The implementation of SFAS No. 146 did not have a material impact on the earnings or financial position of the Company.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires the guarantor to recognize a liability for the non-contingent component of a guarantee; that is, the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at its inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. FIN 45 also requires additional disclosures related to guarantees. The recognition measurement provisions of FIN45 are effective for all guarantees entered int o or modified after December 31, 2002. FIN 45 also requires additional disclosures related to guarantees in interim and annual financial statements.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATIONS

We were incorporated in Delaware on December 1, 2000. Thereafter, we registered an initial public offering of common stock under the Securities Act. Our prior registration statement was declared effective in June 2002 and we completed our first Rule 419 distribution in August 2002. Market conditions were very poor in late 2002 and early 2003. Moreover, our president became ill in early 2003 and she subsequently learned that her condition would require complex surgery and a lengthy recovery. The combination of poor market timing and unanticipated medical problems negatively impacted our ability to implement our business plan. Since our first distribution was subject to Rule 419 and we were unable to close an acquisition within 18 months, we unwound our first Rule 419 distribution in November 2003 and removed all our shares from registration.

Between December 2000 and December 2003, our officers spent $218,999 to organize our company, register our prior distribution and finance our operations. Our expenses included $7,215 in organization costs, $176,479 in offering costs and $35,305 in operating costs. When our first Rule 419 distribution was unsuccessful, our officers considered the available options and ultimately decided to recapitalize our company and file a second registration statement for a substantially identical distribution of securities. We believe market conditions and our president’s health have improved to a point where we have a reasonable probability of success. However we cannot give you any assurance that our second Rule 419 distribution will have a better outcome than our prior distribution.

During the three-months ended March 31, 2004, our officers contributed $40,000 in additional paid in capital to our Company. We will not be able to obtain additional financing until we complete a Business Combination. If we spend our available cash before we close a Business Combination, we may be forced to unwind the second Rule 419 distribution and deregister the founders’ shares and acquisition shares.

In connection with our first Rule 419 distribution, our president received an office overhead allowance of $1,000 per month. We do not intend to pay any compensation to our president in connection with our second Rule 419 distribution. Accordingly we believe our future operating expenses will be lower than our historical operating expenses.

We have not yet identified a potential target that satisfies our acquisition standards. We have, however, engaged in preliminary discussions with a number of companies that may be able to satisfy our acquisition standards in the foreseeable future. We have not entered into a letter of intent or standstill agreement with any potential target. However we have advised a number of potential targets that we would be willing to negotiate a transaction with them if they are able to attain certain quantifiable business goals in a timely manner.

We are continuing with our efforts to find a suitable target and negotiate a business combination agreement. While our discussions to date indicate that a number of desirable potential targets would be interested in pursuing a business combination with our company, all of these companies need to achieve other business goals before a business combination with our company is a feasible alternative.

There can be no assurance that we will be successful in our efforts to locate a potential target, or that we will be able to negotiate a business combination with any target that is ultimately selected by our officers. Even if we negotiate and close a business combination, there is no assurance that a trading market for the stock of the combined companies will ever develop.

We will use our available cash resources to pay the costs of operating our company, investigating business opportunities, negotiating a business combination and preparing the required post-effective amendment to our registration statement. We will not pay any compensation to our officers, but we will reimburse any out-of-pocket expenses they incur on our behalf. We intend to request a reasonable due diligence fee before we begin a detailed investigation into the affairs of a potential target. There can be no assurance that any potential target will be willing to pay a due diligence fee, or that any fees we receive will be sufficient to offset the out-of-pocket costs incurred.

Rule 419 will require us to unwind the gift share distribution and deregister the gift shares, founders’ shares and acquisition shares if we are unable to negotiate a business combination, complete our reconfirmation offering and close the transaction within 18 months from the date of our prospectus. If we ultimately conclude that we will be unable to meet this deadline, we will promptly distribute any remaining assets to our stockholders and liquidate our company. We believe our available cash resources will be adequate for our anticipated needs. Nevertheless, we may run out of money if a particular investigation requires significant technical expertise, or if we spend substantial amounts of money investigating a potential target and then determine that the potential target is not suitable.

The SEC’s integration and general solicitation doctrines will preclude private placement transactions until we complete our reconfirmation offering and close the associated business combination. Therefore, we will be unable to obtain funds by selling additional securities. We have the corporate power to borrow money, but credit is not likely to be available. Our officers have no duty to loan money to our company. If we spend our available cash and are unable to obtain additional financing, we will be forced to abandon our business and liquidate.

As of May 7, 2004, an evaluation was completed under the supervision and with the participation of the Company's management, including the Company's President and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management including the President and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of January 15, 2004. There have been no significant changes to the Company's internal controls or other factors that could significantly affect internal controls subsequent to May 7, 2004.

ITEM 1.	LEGAL PROCEEDINGS

	NONE

ITEM 2.	CHANGES IN SECURITIES AND USE OF PROCEEDS

	NONE

ITEM 3.	DEFAULTS ON SENIOR SECURITIES

	NONE

ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On December 29, 2003, a special meeting of our stockholders was held to consider alternative courses of action in light of our failure to successfully implement our business plan in connection with our prior distribution of securities. On the date of the meeting, we only had four stockholders, each of whom was an officer of our company. No proxies were solicited in connection with the meeting and all of our stockholders participated in the meeting.

In connection with the meeting, John L. Petersen, Rachel A. Fefer and Mark A. Dolan were unanimously re-elected to serve as directors of our company for terms that will end on the date of our 2005 annual meeting of stockholders. Concurrently, all of our officers were appointed similar terms. In connection with the meeting, our stockholders unanimously approved a proposal to recapitalize our company with $40,000 and file a new registration statement under the Securities Act for substantially identical distribution of common stock.

ITEM 5.	OTHER INFORMATION

		NONE

ITEM 6.	EXHIBITS AND REPORTS ON FORM 8-K

	(a)	EXHIBITS

	31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)

	31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)

	32.1	Statement of Chief Executive Officer Pursuant to Section 1350 of Title 18 of the United States Code

	32.2	Statement of Chief Financial Officer Pursuant to Section1350 of Title 18 of the United States Code

	(b)	REPORTS ON FORM 8-K

		NONE

WIN OR LOSE ACQUISITION CORPORATION

/s/ Sally A Fonner

Sally A. Fonner, President Dated: May 13, 2004

/s/ John L. Petersen

John L. Petersen, Chief Accounting Officer Dated: May 13, 2004

Form 10-QSB — Page 9