PINX:SACQ SMSA Gainesville Acquisition Corp Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

Form 10-Q

(Mark one)
x
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
       
   
For the quarterly period ended March 31, 2012
 
       
o
Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
       
   
For the transition period from ______________ to _____________
 


Commission File Number: 000-53803
 
SMSA Gainesville Acquisition Corp.
(Exact name of registrant as specified in its charter)
Nevada
27-0984261
(State of incorporation)
(IRS Employer ID Number)
5956 Sherry Lane, Suite 1000, Dallas, TX 75225
(Address of principal executive offices)

(972) 233-0300
(Issuer's telephone number)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   YES  x NO  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
Large accelerated filer    o
Accelerated filer                          o
 
 
Non-accelerated filer      o
Smaller reporting company        x
 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):
YES  x  NO  o

State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date:May 4, 2012: 10,000,005
 
Transitional Small Business Disclosure Format (check one):    YES  o  NO x
 
 
 
 
1

 
 
SMSA Gainesville Acquisition Corp.

Form 10-Q for the Quarter ended March 31, 2012

Table of Contents


 
Page
Part I - Financial Information
 
   
Item 1 - Financial Statements
3
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operation
13
   
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
14
   
Item 4 - Controls and Procedures
14
   
Part II - Other Information
 
   
Item 1 - Legal Proceedings
15
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
15
   
Item 3 - Defaults Upon Senior Securities
15
   
Item 4 - (Removed and Reserved)
15
   
Item 5 - Other Information
15
   
Item 6 - Exhibits
15
   
Signatures
15
 
 
 
 
 
2

 
 
Part I - Financial Information
Item 1 - Financial Statements


SMSA Gainesville Acquisition Corp.
(a development stage company)
Balance Sheets
March 31, 2012 and December 31, 2011
 
 
   
(Unaudited)
   
(Audited)
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
ASSETS
 
Current Assets
           
Cash on hand and in bank
  $ 9,997     $ 12,721  
                 
Total Assets
  $ 9,997     $ 12,721  
                 
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 
Current Liabilities
               
Accounts payable - trade
  $ -     $ -  
                 
Total Liabilities
    -       -  
                 
                 
Commitments and Contingencies
               
                 
                 
Stockholders' Equity (Deficit)
               
Preferred stock - $0.001 par value
               
10,000,000 shares authorized.
               
None issued and outstanding
    -       -  
Common stock - $0.001 par value.
               
100,000,000 shares authorized.
               
10,000,005 shares
               
issued and outstanding, respectively
    10,000       10,000  
Additional paid-in capital
    90,670       90,670  
Deficit accumulated during the development stage
    (90,673 )     (87,949 )
                 
Total Stockholders' Equity (Deficit)
    9,997       12,721  
                 
Total Liabilities and Stockholders’ Equity (Deficit)
  $ 9,997     $ 12,721  
 

The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
 
 
 
 
3

 


SMSA Gainesville Acquisition Corp.
(a development stage company)
Statements of Operations and Comprehensive Loss
Three months ended March 31, 2012 and 2011 and
Period from August 1, 2007 (date of bankruptcy settlement) through March 31, 2012

(Unaudited)


               
Period from
 
               
August 1, 2007
 
               
(date of
 
               
bankruptcy
 
   
Three months
   
Three months
   
settlement)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
                   
Revenues
  $ -     $ -     $ -  
                         
Operating expenses
                       
Reorganization costs
    -       -       2,500  
Professional fees
    2,400       2,693       77,333  
Other general and administrative costs
    324       340       10,840  
                         
Total operating expenses
    2,724       3,033       90,673  
                         
Loss from operations
    (2,724 )     (3,033 )     (90,673 )
                         
Provision for income taxes
    -       -       -  
                         
Net Loss
    (2,724 )     (3,033 )     (90,673 )
                         
Other comprehensive income
    -       -       -  
                         
Comprehensive Loss
  $ (2,724 )   $ (3,033 )   $ (90,673 )
                         
Loss per weighted-average share of common stock
                       
outstanding, computed on net loss -
                       
basic and fully diluted
  $ (0.00 )   $ (0.00 )   $ (0.02 )
                         
Weighted-average number of shares of common stock
                       
outstanding - basic and fully diluted
    10,000,005       10,000,005       3,876,545  
 
 
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
 



 
4

 

SMSA Gainesville Acquisition Corp.
(a development stage company)
Statement of Cash Flows
Three months ended March 31, 2012 and 2011 and
Period from August 1, 2007 (date of bankruptcy settlement) through March 31, 2012

(Unaudited)

               
Period from
 
               
August 1, 2007
 
               
(date of
 
               
bankruptcy
 
   
Three months
   
Three months
   
settlement)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
Cash Flows from Operating Activities
                 
Net loss for the period
  $ (2,724 )   $ (3,033 )   $ (90,673 )
Adjustments to reconcile net loss
                       
to net cash provided by operating activities
                       
Depreciation
    -       -       -  
(Increase) Decrease in
                       
Accounts receivable
    -       -       -  
Prepaid expenses and other assets
    -       -       -  
Increase (Decrease) in
                       
Accounts payable
    -       3,003       -  
Other accrued liabilities
    -       -       -  
                         
Net cash provided by operating activities
    (2,724 )     (33 )     (90,673 )
                         
                         
Cash Flows from Investing Activities
    -       -       -  
                         
                         
Cash Flows from Financing Activities
                       
Sale of common stock
    -       -       9,500  
Capital contributed to support operations
    -       -       15,500  
Cash funded from bankruptcy trust
    -       -       1,000  
Working capital advances from stockholder
    -       33       74,670  
                         
Net cash provided by financing activities
    -       33       100,670  
                         
                         
Increase in Cash
    (2,724 )     -       9,997  
 
                       
Cash at beginning of period
    12,721       9,500       -  
                         
Cash at end of period
  $ 9,997     $ 9,500     $ 9,997  
                         
Supplemental Disclosure of
                       
Interest and Income Taxes Paid
                       
Interest paid during the period
  $ -     $ -     $ -  
Income taxes paid during the period
  $ -     $ -     $ -  
 
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
 
 
 
5

 


SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements
March 31, 2012 and December 31, 2011



Note A - Background and Description of Business

SMSA Gainesville Acquisition Corp. (Company) was organized on September 9, 2009 as a Nevada corporation to effect the reincorporation of Senior Management Services of Gainesville, Inc., a Texas corporation, mandated by the plan of reorganization discussed below.

The Company’s emergence from Chapter 11 of Title 11 of the United States Code on August 1, 2007 created the combination of a change in majority ownership and voting control - that is, loss of control by the then-existing stockholders, a court-approved reorganization, and a reliable measure of the entity’s fair value - resulting in a fresh start, creating, in substance, a new reporting entity.  Accordingly, the Company, post bankruptcy, has no significant assets, liabilities or operating activities.  Therefore, the Company, as a new reporting entity, qualifies as a “development stage enterprise” as defined in Development Stage Entities topic of the FASB Accounting Standards Codification and as a shell company as defined in Rule 405 under the Securities Act of 1933, (Securities Act), and Rule 12b-2 under the Securities Exchange Act of 1934, (Exchange Act).

On August 4, 2010, the Company entered into a Share Purchase Agreement, (Share Purchase Agreement), with Paul Interrante (Interrante), a resident of Dallas, Texas, pursuant to which he acquired 9,500,000 shares of our common stock for approximately $9,500 cash or $0.001 per share.  As a result of this transaction, 10,000,005 shares of our common stock are currently issued and outstanding.

Our current business plan is to develop a chain of fitness clubs in under served markets comprised of total population bases of less than 250,000 throughout Texas.


Note B - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code

On January 17, 2007, Senior Management Services of Gainesville, Inc. and its affiliated companies (SMS Companies or Debtors) filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code.  During the three years prior to filing the reorganization petition, SMS Companies operated a chain of skilled nursing homes in Texas, which prior to the bankruptcy proceedings consisted of a total of 14 separate nursing facilities, ranging in size from approximately 114 beds to 325 beds.  In the aggregate, SMS Companies provided care to approximately 1,600 resident patients and employed over 1,400 employees.  A significant portion of the SMS Companies cash flow was provided by patients covered by Medicare and Medicaid.  The SMS Companies facilities provided round-the-clock care for the health, well-being, safety and medical needs of its patients.  The administrative and operational oversight of the nursing facilities was provided by an affiliated management company located in Arlington, Texas.  In 2005, SMS Companies obtained a secured credit facility from a financial institution.  The credit facility eventually was comprised of an $8.3 million term loan and a revolving loan of up to $15 million which was utilized for working capital and to finance the purchase of the real  property on which 2 of its nursing care facilities operated.  By late 2006, SMS Companies were in an "overadvance" position, whereby the amount of funds extended by the lender exceeded the amount of collateral eligible to be borrowed under the credit facility.  Beginning in September 2006, SMS Companies entered into the first of a series of forbearance agreements whereby the lender agreed to forebear from declaring the financing in default provided SMS Companies obtained a commitment from a new lender to refinance and restructure the credit  facility.  SMS Companies were unsuccessful in obtaining a commitment from a new lender and, on January 5, 2007, the lender declared SMS Companies in default and commenced foreclosure and collection proceedings.  On January 9, 2007, the lender agreed to provide an additional $1.7 million to fund payroll and permit a controlled transaction to bankruptcy.  Subsequently, on January 17, 2007, the SMS Companies filed a petition for reorganization under Chapter 11 of the Bankruptcy Code.

Under Chapter 11, certain claims against the Debtors in existence prior to the filing of the petitions for relief under Federal Bankruptcy Laws are stayed while the Debtors continue to operate their businesses as debtors-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.  These claims were reflected in the predecessor company’s balance sheets as “Liabilities Subject to Compromise” through the settlement date.  Additional claims (liabilities subject to compromise) may arise subsequent to the petition date resulting from the rejection of executory contracts, including leases, and from the determination of the court (or agreed to by parties in interest) of allowed claims for contingencies and other disputed amounts.
 
 
 
6

 
 
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note B - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code - Continued

The First Amended, Modified Chapter 11 Plan, (the Plan) as presented by SMS Companies and their creditors was approved by the United States Bankruptcy Court, Northern District of Texas - Dallas Division on August 1, 2007.  The Plan, which contemplates the Company entering into a reverse merger transaction, provided that certain identified claimants as well as unsecured creditors, in accordance with the allocation provisions of the Plan of Reorganization, and the Company’s new controlling stockholder would receive “new” shares of the Company’s post-reorganization common stock, pursuant to Section 1145(a) of the Bankruptcy Code (Plan Shares).  As a result of the Plan’s approval, all liens, security interests, encumbrances and other interests, as defined in the Plan of Reorganization, attach to the creditor’s trust.  Specific injunctions prohibit any of these claims from being asserted against the Company prior to the contemplated reverse merger.

All assets, liabilities and other claims, including “Allowed Administrative Claims” which arise in the processing of the bankruptcy proceedings, against the Company and it’s affiliated entities were combined into a single creditor’s trust for the purpose of distribution of funds to creditors.  Each of the individual SMS Companies entities otherwise remained separate corporate entities.  From the commencement of the bankruptcy proceedings through August 1, 2007 (the confirmation date of the plan of reorganization), all secured claims and/or administrative claims during this period were satisfied through either direct payment or negotiation.

Pursuant to the Plan, the pre-confirmation unsecured creditors of Senior Management Services of Gainesville, Inc. (our predecessor company) agreed to accept Plan Shares in SMSA Gainesville Acquisition Corp., as reorganized, in lieu of asserting recovery of their claims against the Plan’s liquidating trust.
It was determined that SMSA Gainesville Acquisition Corp’s reorganization value computed immediately before the confirmation date of the Plan as approximately $1,000, which consisted of the following:
 
Current assets to be transferred to the post-confirmation entity
  $ 1,000  
Fair market value of property and equipment
    -  
Deposits with vendors and other assets transferred
       
to the post-confirmation entity
    -  
         
Reorganization value
  $ 1,000  

Pursuant to the Plan, all of the operations of the Company were transferred to a combined creditor’s trust and, as approved by the Bankruptcy Court, a completely new entity was formed for purposes of completing the aforementioned reverse merger transaction.  The Company adopted fresh-start reporting because the holders of existing voting shares immediately before filing and confirmation of the Plan received less than 50.0% of the voting shares of the emerging entity and its reorganization value is not greater than its postpetition liabilities and allowed claims, as shown below:
 
Postpetition current liabilities
  $ -  
Liabilities deferred pursuant to Chapter 11 proceeding
    -  
“New” common stock issued upon reorganization
    1,000  
         
Total postpetition liabilities and allowed claims
    1,000  
Reorganization value
    (1,000 )
         
Excess of liabilities over reorganization value
  $ -  


 
7

 

SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note B - Reorganization Under Chapter 11 of the U. S. Bankruptcy Code - Continued

The reorganization value of SMSA Gainesville Acquisition Corp. was determined in consideration of several factors and by reliance on various valuation methods, including discounting cash flow and price/earnings and other applicable ratios.  The factors considered by SMSA Gainesville Acquisition Corp. included the following:

 
Forecasted operating and cash flows results which gave effect to the estimated impact of
 
-
Corporate restructuring and other operating program changes
 
-
Limitations on the use of available net operating loss carryforwards and other tax attributes resulting from the Plan of Reorganization and other events
 
The discounted residual value at the end of the forecast period based on capitalized cash flows for the last year of that period.
 
Market share and position
 
Competition and general economic conditions
 
Projected sales growth
 
Potential profitability
 
Seasonality and working capital requirements

After consideration of SMSA Gainesville Acquisition Corp.’s debt capacity and other capital structure considerations, such as industry norms, projected earnings to fixed charges, projected earnings before interest and projected free cash flow to debt service and other applicable ratios, management determined that SMSA Gainesville Acquisition Corp.’s reorganization capital structure should be as follows:
 
Common Stock (500,005 “new” shares to be issued at $0.001 par value)
  $ 500  
Additional paid-in capital
    500  
         
Total reorganized capital structure
  $ 1,000  

As previously described, the cancellation of all existing shares outstanding at the date of the bankruptcy filing and the issuance of all “new” shares of the reorganized entity caused an issuance of shares of common stock and a related change of control of the Company with more than 50.0% of the “new” shares being held by persons and/or entities which were not pre-bankruptcy stockholders.  Accordingly, per the Reorganization topic of the FASB Accounting Standards Codification (Reorganization topic), the Company adopted fresh-start accounting as of the bankruptcy discharge date whereby all continuing assets and liabilities of the Company were restated to the fair market value.  The Reorganization topic further states that fresh start financial statements prepared by entities emerging from bankruptcy will not be comparable with those prepared before their plans were confirmed because they are, in fact, those of a new entity.  For accounting purposes, the Company adopted fresh start accounting in accordance with the Reorganization topic as of August 1, 2007, the confirmation date of the Plan.

As of August 1, 2007, in accordance with the Plan of Reorganization, the only asset of the Company was approximately $1,000 in cash transferred from the bankruptcy creditor’s trust.


Note C - Preparation of Financial Statements

The Company follows the accrual basis of accounting in accordance with generally accepted accounting principles and has established a year-end for accounting purposes of December 31.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

 

 
 
8

 
 
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note C - Preparation of Financial Statements - Continued

Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud.  The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.

During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-K containing the Company’s financial statements for the year ended December 31, 2011.  The information presented within these interim financial statements may not include all disclosures required by generally accepted accounting principles and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.

In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-Q, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented.  The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending December 31, 2012.


Note D - Going Concern Uncertainty

The Company has no post-bankruptcy operating history, no cash on hand, no assets and has a business plan with inherent risk.  Because of these factors, the Company’s auditors have issued an audit opinion on the Company’s annual financial statements which includes a statement describing our going concern status.  This means, in the auditor’s opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.

Our current business plan is to develop a chain of fitness clubs in under served markets comprised of total population bases of less than 250,000 throughout Texas.  However, there is no assurance that the Company will be able to successfully consummate an acquisition or merger with a private operating company or, if successful, that any acquisition or merger will result in the appreciation of our stockholders’ investment in the then outstanding common stock.

The Company's ultimate continued existence is dependent upon its ability to generate sufficient cash flows from operations to support its daily operations as well as provide sufficient resources to retire existing liabilities and obligations on a timely basis.  The Company faces considerable risk in it’s business plan and a potential shortfall of funding due the potential inability to raise capital in the equity securities market.  If adequate operating capital and/or cash flows are not received during the next twelve months, the Company could become dormant until such time as necessary funds could be raised or provided as set forth in the Plan.

The Company anticipates future sales or issuances of equity securities to fulfill its business plan.  However, there is no assurance that the Company will be able to obtain additional funding through the sales of additional equity securities or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.

The Company’s Articles of Incorporation authorize the issuance of up to 10,000,000 shares of preferred stock and 100,000,000 shares of common stock.  The Company’s ability to issue preferred stock may limit the Company’s ability to obtain debt or equity financing as well as impede potential takeover of the Company, which may be in the best interest of stockholders.  The Company’s ability to issue these authorized but unissued securities may also negatively impact our ability to raise additional capital through the sale of our debt or equity securities.

While the Company is of the opinion that good faith estimates of the Company’s ability to secure additional capital in the future to reach its goals have been made, there is no guarantee that the Company will receive sufficient funding to sustain operations or implement any future business plan steps.
 
 
 
9

 
 
SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note E - Summary of Significant Accounting Policies

1.
Cash and cash equivalents

The Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

2.
Reorganization costs

The Company has adopted the provisions of provisions required by the Start-Up Activities topic of the FASB Accounting Standards Codification whereby all costs incurred with the incorporation and reorganization of the Company were charged to operations as incurred.

3.
Income taxes

The Company files income tax returns in the United States of America and various states, as appropriate and applicable.  As a result of the Company’s bankruptcy action, the Company is no longer subject to U.S. federal, state and local, as applicable, income tax examinations by regulatory taxing authorities for any period prior to 2009.  The Company does not anticipate any examinations of returns filed for periods ending after 2008.

The Company uses the asset and liability method of accounting for income taxes.  At March 31, 2012 and December 31, 2011, respectively, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences.  Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization, allowance for doubtful accounts and vacation accruals.

The Company has adopted the provisions required by the Income Taxes topic of the FASB Accounting Standards Codification.  The Codification Topic requires the recognition of potential liabilities as a result of management’s acceptance of potentially uncertain positions for income tax treatment on a “more-likely-than-not” probability of an assessment upon examination by a respective taxing authority.  As a result of the implementation of Codification’s Income Tax Topic, the Company did not incur any liability for unrecognized tax benefits.

4.
Income (Loss) per share

Basic earnings (loss) per share is computed by dividing the net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.

Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).

Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.

As of March 31, 2012 or 2011, respectively, the Company had no outstanding stock warrants, options or convertible securities which could be considered as dilutive for purposes of the loss per share calculation.
 

 
 
10

 

SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note F - Fair Value of Financial Instruments

The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.

Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates.  The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.

Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates.  The Company does not use derivative instruments to moderate its exposure to financial risk, if any.


Note G - Related Party Transactions

HFG managed the $1,000 in cash transferred from the bankruptcy creditor’s trust on our behalf until exhausted and contributed approximately $-0- and $65,469 during the three months ended March 31, 2012 and the year ended December 31, 2011, respectively, to support our operations.  During the 4th quarter of calendar 2010, HFG forgave all cumulative advances and the Company reclassified these advances as contributed capital and a component of additional paid-in capital in the accompanying balance sheets.


Note H - Income Taxes

The components of income tax (benefit) expense for each of the three months ended March 31, 2012 and 2011 and for the period from August 1, 2007 (date of bankruptcy settlement) through March 31, 2012 are as follows:
 
                 
Period from
 
                 
August 1, 2007
 
                 
(date of
 
                 
bankruptcy
 
     
Three months 
   
Three months 
   
settlement)
 
     
ended
   
ended
   
through
 
     
March 31,
   
March 31,
   
March 31,
 
     
2012
   
2011
   
2012
 
                     
 
Federal:
                 
 
Current
  $ -     $ -     $ -  
 
Deferred
    -       -       -  
        -       -       -  
 
State:
                       
 
Current
    -       -       -  
 
Deferred
    -       -       -  
        -       -       -  
                           
 
Total
  $ -     $ -     $ -  

As of March 31, 2012, the Company has a net operating loss carryforward of approximately $90,600 to offset future taxable income.  The amount and availability of any net operating loss carryforwards will be subject to the limitations set forth in the Internal Revenue Code.  Such factors as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of any net operating loss carryforward(s).
 
 
 
11

 

SMSA Gainesville Acquisition Corp.
(a development stage company)
Notes to Financial Statements - Continued
March 31, 2012 and December 31, 2011



Note H - Income Taxes - Continued

The Company's income tax expense (benefit) for each of the three month periods ended March 31, 2012 and 2011 and for the period from August 1, 2007 (date of bankruptcy settlement) through March 31, 2012 varied from the statutory rate of 34% as follows:
 
               
Period from
 
               
August 1, 2007
 
               
(date of
 
               
bankruptcy
 
   
Three months 
   
Three months 
   
settlement)
 
   
ended
   
ended
   
through
 
   
March 31,
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
                   
Statutory rate applied to
                 
income before income taxes
  $ (1,000 )   $ (1,000   $ (31,000 )
Increase (decrease) in income
                       
taxes resulting from:
                       
State income taxes
    -       -       -  
Other, including reserve for
                       
deferred tax asset and application
                       
of net operating loss carryforward
    1,000       1,000       31,000  
                         
Income tax expense
  $ -     $ -     $ -  

The Company’s only temporary difference as of March 31, 2012 and December 31, 2011, respectively, relates to the Company’s net operating loss pursuant to the applicable Federal Tax Law.  As of March 31, 2012 and December 31, 2011, respectively, the deferred tax asset is as follows:
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
Deferred tax assets
           
Net operating loss carryforwards
  $ 31,000     $ 30,000  
Less valuation allowance
    (31,000 )     (30,000 )
                 
Net Deferred Tax Asset
  $ -     $ -  


During the three months ended March 31, 2012 and the year ended December 31, 2011, respectively, the valuation allowance against the deferred tax asset increased by approximately $1,000 and $4,300.


Note I - Capital Stock Transactions

Pursuant to the Plan affirmed by the U. S. Bankruptcy Court - Northern District of Texas - Dallas Division, the Company issued 500,005 plan shares to meet the requirements of the Plan.  The 500,005 shares of the Company’s “new” common stock were issued to holders of various claims, as defined in the Plan, in settlement of all unpaid pre-confirmation obligations of the Company and/or the bankruptcy trust.

On August 4, 2010, the Company entered into a Share Exchange Agreement with Interrante pursuant to which he acquired 9,500,000 shares of our common stock for approximately $9,500 cash or $0.001 per share.  As a result of this transaction, 10,000,005 shares of our common stock are currently issued and outstanding.  The Company relied upon Section 4(2) of the Securities Act of 1933, as amended, for an exemption from registration on these shares and no underwriter was used in this transaction.


Note J - Subsequent Events

Management has evaluated all activity of the Company through May 4, 2012 (the issue date of the financial statements) and concluded that no subsequent events have occurred that would require recognition in the financial statements or disclosure in the notes to financial statements.
 
 
 
12

 


Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1)  
Caution Regarding Forward-Looking Information

Certain statements contained in this quarterly filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business  disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.

Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

(2)
General

SMSA Gainesville Acquisition Corp. was organized on September 9, 2009 as a Nevada corporation to effect the reincorporation of Senior Management Services of Gainesville, Inc., a Texas corporation, mandated by the plan of reorganization.

The Company’s emergence from Chapter 11 of Title 11 of the United States Code on August 1, 2007 created the combination of a change in majority ownership and voting control - that is, loss of control by the then-existing stockholders, a court-approved reorganization, and a reliable measure of the entity’s fair value - resulting in a fresh start, creating, in substance, a new reporting entity.  Accordingly, the Company, post bankruptcy, has no significant assets, liabilities or operating activities.  Therefore, the Company, as a new reporting entity, qualifies as a “development stage enterprise” as defined in Development Stage Entities topic of the FASB Accounting Standards Codification and as a shell company as defined in Rule 405 under the Securities Act of 1933, (Securities Act), and Rule 12b-2 under the Securities Exchange Act of 1934, (Exchange Act).

On August 4, 2010, the Company entered into a Share Exchange Agreement, (the “Share Exchange Agreement”), with Paul Interrante (Interrante), a resident of Dallas, Texas, pursuant to which he acquired 9,500,000 shares of our common stock for approximately $9,500 cash or $0.001 per share.  As a result of this transaction, 10,000,005 shares of our common stock are currently issued and outstanding.

Our current business plan is to develop a chain of fitness clubs in under served markets comprised of total population bases of less than 250,000 throughout Texas.

(3)
Results of Operations

The Company had no revenue for either of the three month periods ended March 31, 2012 or 2011 or for the period from August 1, 2007 (date of bankruptcy settlement) through March 31, 2012.

General and administrative expenses for the respective three month periods ended March 31, 2012 and 2011 were  approximately $2,700 and $3,000.  These expenses were directly related to the maintenance of the corporate entity and the preparation and filing of periodic reports pursuant to the Exchange Act.

It is anticipated that future expenditure levels will fluctuate as the Company complies with its periodic reporting requirements and implements its business plan.

Earnings per share for the three months ended March 31, 2012 and 2011 and for the period from August 1, 2007 (date of bankruptcy settlement) through March 31, 2012 were approximately $(0.00), $(0.00) and $(0.02) based on the weighted-average shares issued and outstanding.

The Company does not expect to generate any meaningful revenue or incur operating expenses for purposes other than fulfilling the obligations of a reporting company under the Exchange Act unless and until such time that the Company’s executes upon its current business plan.
 
 
 
13

 
 
(4)
Liquidity and Capital Resources

At March 31, 2012 and December 31, 2011, the Company had working capital of approximately $10,000 and $13,000, respectively.

The Company currently has limited cash on hand, no operating assets and a business plan with inherent risk.  Because of these factors, the Company’s auditors have issued an audit opinion on the Company’s financial statements which includes a statement describing our going concern status.  This means, in the auditor’s opinion, substantial doubt about our ability to continue as a going concern exists at the date of their opinion.

Our current business plan is to develop a chain of fitness clubs in under served markets comprised of total population bases of less than 250,000 throughout Texas.

It is the belief of management and significant stockholders that they will provide sufficient working capital necessary to support and preserve the integrity of the corporate entity.   However, there is no legal obligation for either management or significant stockholders to provide additional future funding.  Further, the Company is at the mercy of future economic trends and business operations for the Company’s majority stockholder to have the resources available to support the Company.  Should this pledge fail to provide financing, the Company has not identified any alternative sources.  Consequently, there is substantial doubt about the Company's ability to continue as a going concern.

Regardless of whether the Company’s cash assets prove to be inadequate to meet the Company’s operational needs, the Company might seek to compensate providers of services by issuances of stock in lieu of cash.

(5)
Critical Accounting Policies

Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”).  GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue and expense amounts reported.  These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition.  We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied.  We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.  Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
 
Our significant accounting policies are summarized in Note E of our financial statements.  While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates.  Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

(6)
Effect of Climate Change Legislation
 
The Company currently has no known or identified exposure to any current or proposed climate change legislation which could negatively impact the Company’s operations or require capital expenditures to become compliant.  Additionally, any currently proposed or to-be-proposed-in-the-future legislation concerning climate change activities, business operations related thereto or a publicly perceived risk associated with climate change could, potentially, negatively impact the Company’s efforts to identify an appropriate target company which may wish to enter into a business combination transaction with the Company.

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

In future periods, the Company may become subject to certain market risks, including changes in interest rates and currency exchange rates.  At the present time, the Company has no identified exposure and does not undertake any specific actions to limit exposures, if any.

Item 4 - Controls and Procedures

(a)
Evaluation of Disclosure Controls and Procedures
 
 
 
14

 

Our management, under the supervision and with the participation of our Chief Executive and Financial Officer (Certifying Officer), has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 promulgated under the Exchange Act as of the end of the period covered by this Quarterly Report.  Disclosure controls and procedures are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our Certifying Officer, as appropriate, to allow timely decisions regarding required disclosure.  Based upon that evaluation, our Certifying Officer concluded that as of such date, our disclosure controls and procedures were not effective to ensure that the information required to be disclosed by us in our reports is recorded, processed, summarized and reported within the time periods specified by the SEC due to a inherent weakness in our internal controls over financial reporting due to our status as a shell corporation and having a sole officer and director.  However, our Certifying Officer believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the respective periods presented.

(b)
Changes in Internal Controls

There were no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls over financial reporting that occurred during the quarter ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Part II - Other Information

Item 1 - Legal Proceedings

None

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3 - Defaults Upon Senior Securities

None

Item 4 - (Removed and Reserved)


Item 5 - Other Information

None

Item 6 - 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
101           Interactive data files pursuant to Rule 405 of Regulation S-T.




SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
  SMSA Gainesville Acquisition Corp.
   
Dated: May 8, 2012
       /s/ Paul Interrante         
  Paul Interrante
  President, Chief Executive Officer,
  Chief Financial Officer and Sole Director
 
 
 
 
 
 
 
15

 
 
 
 




PINX:SACQ SMSA Gainesville Acquisition Corp Quarterly Report 10-Q Filling

SMSA Gainesville Acquisition Corp PINX:SACQ Stock - Get Quarterly Report SEC Filing of SMSA Gainesville Acquisition Corp PINX:SACQ stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:SACQ SMSA Gainesville Acquisition Corp Quarterly Report 10-Q Filing - 3/31/2012
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