UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______ to ______.
Commission File Number: 000-28409
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WALLIN ENGINES CORPORATION
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(Name of Small Business Issuer in its charter)
Nevada 84-1416078
--------------------------------- --------------------------
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
6314 King Valley Drive, West Valley City, Utah 84128
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(Address of Principal Executive Offices and Zip Code)
Issuer's telephone number: (801) 964-4810
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Check whether the registrant has filed all documents and reports required to
be filed by Sections 12, 13, or 15(d) of the Exchange Act subsequent to the
distribution of securities under a plan confirmed by a court.
Yes [ ] 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:
As of May 1, 2001, there were 19,900,000 shares of common stock issued
and outstanding.
Total of Sequentially Numbered Pages: 29
Index to Exhibits on Page: 22
FORM 10-QSB
WALLIN ENGINES CORPORATION
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION . . .16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . .19
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . .20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . .20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . .20
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . .20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . .21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
2
PART I
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ITEM 1. FINANCIAL STATEMENTS
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In the opinion of management, the accompanying unaudited financial
statements included in this Form 10-QSB reflect all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results of operations for the periods presented. The results of operations
for the periods presented are not necessarily indicative of the results to be
expected for the full year.
[THIS SPACE INTENTIONALLY LEFT BLANK]
3
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2001
4
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
CONTENTS
PAGE
- Unaudited Condensed Balance Sheets, March 31,
2001 and December 31, 2000 2
- Unaudited Condensed Statements of Operations,
for the three months ended March 31, 2001 and
2000 and for the period from inception on July 18,
1997 through March 31, 2001 3
- Unaudited Condensed Statements of Cash Flows,
for the three months ended March 31, 2001 and
2000 and for the period from inception on July 18,
1997 through March 31, 2001 4
- Notes to Unaudited Condensed Financial Statements 5 - 10
5
ACCOUNTANTS' REVIEW REPORT
Board of Directors
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
Salt Lake City, Utah
We have reviewed the accompanying condensed balance sheet of Wallin
Engines Corporation (formerly Eastport Red's Incorporated) (a development
stage company) as of March 31, 2001, and the related condensed statements
of operations and cash flows for the three months ended March 31, 2001 and
2000, and for the period from inception on July 18, 1997 through March 31,
2001. All information included in these financial statements is the
representation of the management of the Company.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review consists
principally of inquiries of Company personnel and analytical procedures
applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that
should be made to the condensed financial statements reviewed by us, in
order for them to be in conformity with generally accepted accounting
principles.
The accompanying condensed financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in
Note 7 to the financial statements, the company has incurred losses since
its inception and has not yet been successful in establishing profitable
operations. Further, the Company has current liabilities in excess of
current assets. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regards to
these matters are also described in Note 7. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
/s/ PRITCHETT, SILER & HARDY, P.C.
PRITCHETT, SILER & HARDY, P.C.
May 14, 2001
Salt Lake City, Utah
6
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED BALANCE SHEETS
[Unaudited]
ASSETS
March 31, December 31,
2001 2000
___________ ___________
CURRENT ASSETS:
Cash in bank $ 1,994 $ 9,764
Inventory 612 612
Receivable - related party 2,000 -
Sales tax receivable 37 -
___________ ___________
Total Current Assets 4,643 10,376
PROPERTY AND EQUIPMENT, net 7,829 8,248
OTHER ASSETS:
Inventory 3,700 3,700
___________ ___________
$ 16,172 $ 22,324
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 421 $ 510
Accrued liabilities - related party 3,898 -
Notes payable - related party 10,000 10,000
___________ ___________
Total Current Liabilities 14,319 10,510
___________ ___________
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value,
5,000,000 shares authorized,
no shares issued and outstanding - -
Common stock, $.001 par value,
20,000,000 shares authorized,
19,900,000 shares issued and
outstanding 19,900 19,900
Capital in excess of par value 334 334
Deficit accumulated during the
development stage (18,381) (8,420)
___________ ___________
Total Stockholders' Equity 1,853 11,814
___________ ___________
$ 16,172 $ 22,324
___________ ___________
Note: The Balance Sheet of December 31, 2000 was taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these unaudited condensed
financial statements.
-2-
7
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
[Unaudited]
For the Three From Inception
Months Ended on July 18,
March 31, 1997 Through
___________________ March 31,
2001 2000 2001
_________ _______ ________
REVENUE $ 752 $ - $ 752
EXPENSES:
General and Administrative (10,463) (2,235) (18,648)
_________ _______ ________
LOSS BEFORE OTHER
EXPENSES (9,711) (2,235) (17,896)
OTHER EXPENSES:
Interest Expense (250) (19) (485)
_________ _______ ________
LOSS BEFORE INCOME TAXES (9,961) (2,254) (18,381)
CURRENT TAX EXPENSE - - -
DEFERRED TAX EXPENSE - - -
_________ _______ ________
NET LOSS $(9,961) $(2,254) $(18,381)
_________ _______ ________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00)
_________ _______ ________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
-3-
8
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Three From Inception
Months Ended on July 18,
March 31, 1997 Through
____________________ March 31,
2001 2000 2001
________ _________ ________
Cash Flows Provided by
Operating Activities:
Net loss $ (9,961) $ (2,254) $(18,381)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Stock issued for services - - 1,000
Depreciation expense 419 - 559
Changes in assets and liabilities:
Increase in inventory - - (3,700)
Increase (decrease) in
accounts payable (89) - 421
Increase in accrued liabilities 3,898 19 4,132
Decrease (increase) in
receivables (2,037) - (2,037)
________ _________ ________
Net Cash Provided (Used) by
Operating Activities (7,770) (2,235) (18,006)
________ _________ ________
Cash Flows Provided by
Investing Activities - - -
________ _________ ________
Net Cash Provided by
Investing Activities - - -
________ _________ ________
Cash Flows Provided by
Financing Activities:
Proceeds from issuance of
common stock - - 10,000
Proceeds from notes payable
- related party - - 10,000
________ _________ ________
Net Cash Provided by
Financing Activities - - 20,000
________ _________ ________
Net Increase in Cash (7,770) (2,235) 1,994
Cash at Beginning of Period 9,764 7,793 -
________ _________ ________
Cash at End of Period $ 1,994 $ 5,558 $ 1,994
________ _________ ________
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Supplemental Schedule of Noncash Investing and Financing Activities:
For the period from inception on July 18, 1997 through March 31, 2001:
The Company issued 18,000,000 shares of common stock to acquire
equipment and inventory. A shareholder canceled and returned to the
Company 9,100,000 shares of stock. A shareholder forgave accrued
interest of $234, which is accounted for as a capital contribution.
The Company issued 1,000,000 shares of common stock for services
rendered, valued at $1,000.
The accompanying notes are an integral part of these unaudited condensed
financial statements.
-4-
9
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - Wallin Engines Corporation (the Company) was organized
under the laws of the State of Nevada on July 18, 1997 as Eastport Red's
Incorporated. On December 1, 2000 the Company acquired certain assets
from Michael Linn (the Company's current president, director and majority
shareholder) and changed its business plan from seeking potential business
ventures to building and overhauling car and truck engines. On December
20, 2000 the Company's board of directors adopted a resolution to change
the Company's name to Wallin Engines Corporation effective January 24,
2001. The Company has not yet generated significant revenues from its
planned principal operations and is considered a development stage company
as defined in SFAS No. 7. The Company has, at the present time, not paid
significant dividends and any dividends that may be paid in the future
will depend upon the financial requirements of the Company and other
relevant factors.
Condensed Financial Statements - The accompanying financial statements
have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results
of operations and cash flows at March 31, 2001 and 2000 and for the
periods then ended have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 2000 audited financial statements. The results of operations for the
periods ended March 31, 2001 are not necessarily indicative of the
operating results for the full year.
Inventory - Inventories consists of parts and equipment and is stated at
the lower of cost, or market value. Inventory of $3,700 shown on the
balance sheet as a noncurrent asset represents an automobile acquired for
cash that is not expected to be sold currently.
Property and Equipment - Property, and equipment are recorded at cost or
carry-over basis. Depreciation is calculated using the straight-line
method and is based upon estimated useful lives of the assets [See Note
2].
Revenue Recognition - The Company plans to recognize revenue upon delivery
of completed rebuilt or serviced engine, or upon completion of services to
be provided.
-5-
10
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Loss Per Share - The computation of loss per share is based on the
weighted average number of shares outstanding during the period presented
in accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". [See Note 8]
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
Accounting 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, the disclosures of contingent assets
and liabilities at the date of the financial statements, and the reported
amount of revenues and expenses during the reported period. Actual
results could differ from those estimated.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 136, "Transfers of Assets to a not for profit
organization or charitable trust that raises or holds contributions for
others", SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - deferral of the effective date of FASB Statement No. 133 (an
amendment of FASB Statement No. 133)", SFAS No. 138 "Accounting for
Certain Derivative Instruments and Certain Hedging Activities - and
Amendment of SFAS No. 133", SFAS No. 139, "Recission of SFAS No. 53 and
Amendment to SFAS No. 63, 89 and 21", and SFAS No. 140, "Accounting to
Transfer and Servicing of Financial Assets and Extinguishment of
Liabilities", were recently issued. SFAS No. 136, 137, 138, 139 and 140
have no current applicability to the Company or their effect on the
financial statements would not have been significant.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
March 31
2001
__________
Auto tools and equipment $ 8,388
Less: Accumulated Depreciation (559)
__________
Net Equipment $ 7,829
___________
Depreciation expense for the quarters ended March 31, 2001 and 2000 were
$419 and $0, respectively.
-6-
11
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 3 - ACCRUED LIABILITIES - RELATED PARTY
Accrued liabilities consists of the following at March 31, 2001 and
December 31, 2000:
March 31, December 31,
2001 2000
___________ ___________
Accrued payroll - related party $ 3,000 $ -
Accrued rent and utilities -
related party 600 -
Accrued interest - related party 250 -
Sales tax payable 48 -
___________ ___________
$ 3,898 $ -
____________ ____________
NOTE 4 - CAPITAL STOCK
Common Stock - During July 1997, in connection with its organization, the
Company issued 1,000,000 shares of its previously authorized, but unissued
common stock. The shares were issued for services rendered at $1,000 (or
$.001 per share).
During May 1999, the Company issued 10,000,000 shares of its previously
authorized, but unissued common stock for cash of $10,000 (or $.001 per
share).
During December 2000, the Company issued 18,000,000 shares of its
previously authorized, but unissued common stock as consideration for the
acquisition of certain assets (tools, equipment and parts inventory) from
Michael Linn, valued at $9,000 (or $.0005 per share). The assets were
valued at the carryover basis of the shareholder, which is lower than the
estimated market value.
During December 2000, a shareholder of the Company canceled 9,100,000
shares of the Company's issued and outstanding common stock for no
consideration.
Simultaneous with the issuance and cancellation of shares, Michael Linn
was appointed as president and director of the Company and Ken Kurtz,
former president and director of the Company resigned from all positions
as officer and director.
NOTE 5 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes".
FASB 109 requires the Company to provide a net deferred tax
asset/liability equal to the expected future tax benefit/expense of
temporary reporting differences between book and tax accounting methods
and any available operating loss or tax credit carryforwards.
-7-
12
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 5 - INCOME TAXES [Continued]
The Company has available at March 31, 2001, unused operating loss
carryforwards of approximately $18,000 which may be applied against future
taxable income and which expire in various years from 2017 through 2021.
The amount of and ultimate realization of the benefits from the operating
loss carryforwards for income tax purposes is dependent, in part, upon the
tax laws in effect, the future earnings of the Company, and other future
events, the effects of which cannot be determined. Because of the
uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the amount of the
loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $6,200 and $2,900 as of March 31, 2001 and December 31,
2000, respectively, with an offsetting valuation allowance of the same
amount resulting in a change in the valuation allowance of approximately
$3,300 during the three months ended March 31, 2001.
NOTE 6 - RELATED PARTY TRANSACTIONS
Management Compensation - For the years ended December 31, 2000 and 1999
the Company did not pay any compensation to any officer/director of the
Company. On January 1, 2001, the Company entered into a employment
agreement with an officer/director/employee of the Company to pay $1,000
per month. As of March 31, 2001, the Company has accrued $3,000 in salary
expense.
Office Space/Utilities - During the years ended December 31, 2000 and
1999, the Company did not have a need to rent office space. On January 1,
2001, the Company entered into a rental/utilities agreement with an
officer/director/employee of the Company allowing the Company to use
office space in his home for the operations of the Company at a base rent
of $100 per month. The Company also agreed to pay the
officer/director/employee of the Company a base utilities/miscellaneous
expense of $100 per month designated for but not limited to heat, power,
water, sewer, garbage collection, recycling, phone, fax, Internet,
computer, printer and any other office items needed for the operations of
the Company, not currently being paid by the Company. As of March 31,
2001, the Company had accrued $300 in rent expense and $300 in
utilities/miscellaneous expense.
Notes Payable - During October 1997, an officer/shareholder of the Company
advanced $750 to the Company. This note was repaid November 28, 2000, and
accrued interest of $234 was forgiven and recorded as capital in excess of
par value.
During December 2000, the Company received a loan in the amount of $10,000
from a related entry. The loan is in the form of an unsecured promissory
note dated January 1, 2001 and payable in full with accrued interest
January 1, 2002. The note accrues interest at the rate of 10% per annum.
Interest accrued at March 31, 2001 was $250.
Receivable - During January 2001, the company advanced $2,000 to an
officer/shareholder of the Company. No interest accrues on the balance.
-8-
13
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has
incurred losses since its inception and has not yet been successful in
establishing profitable operations. Further, the Company has current
liabilities in excess of current assets. These factors raise substantial
doubt about the ability of the Company to continue as a going concern. In
this regard, management is proposing to raise any necessary additional
funds not provided by operations through loans or through additional sales
of its common stock. There is no assurance that the Company will be
successful in raising this additional capital or achieving profitable
operations. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
NOTE 8 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for
the periods presented:
For the Three From Inception
Months Ended on July 18,
March 31, 1997 Through
_______________________ March 31,
2001 2000 2001
__________ __________ _________
Loss from continuing operations
available to common shareholders
(numerator) $(9,961) $(2,254) $(18,381)
__________ __________ _________
Weighted average number of
common shares outstanding used
in loss per share for the period
(denominator) 19,900,000 11,000,000 6,951,923
__________ __________ _________
Dilutive loss per share was not presented, as the Company had no common
stock equivalent shares for all periods presented that would affect the
computation of diluted loss per share.
NOTE 9 - COMMITMENTS AND AGREEMENTS
Employment Agreement - The Company has entered into an employment
agreement with its sole officer and director ("employee"). The agreement
provides for a $1,000 per month salary for a period of three years
commencing January 1, 2001. The salary shall accrue until the Company has
achieved net income of $50,000 at which time the Company will pay 50% of
its net income before tax towards reducing the accrued salary liability.
-9-
14
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 9 - COMMITMENTS AND AGREEMENTS [Continued]
Rental/Utilities Agreement - The Company has entered into a
rental/utilities agreement with its sole officer and director
("landlord"). The agreement provides for payment of $100 per month for
rent and $100 per month for utilities and other incidentals on a month-to-
month basis starting January 1, 2001. The rent shall accrue until the
Company has achieved net income of $50,000 at which time the Company will
pay 10% of its net income before tax towards reducing the accrued rent
liability. The utilities portion shall accrue until the Company elects to
make payment.
NOTE 10 - SIGNIFICANT CUSTOMERS
The Company has just recently commenced operations and all of the revenues
received by the Company are from a limited number of clients, the loss of
which could have a material impact on the operations of the Company.
-10-
15
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ---------------------------------------------------------------------------
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Forward-looking Statements
******************************************************************
Various forward-looking statements have been made in this Form 10-QSB.
Forward-looking statements may also be in the Company's other reports filed
under the Securities Exchange Act of 1934, in its press releases and in other
documents. In addition, from time to time, the Company, through its
management, may make oral forward-looking statements.
Forward-looking statements are only expectations, and involve known and
unknown risks and uncertainties, which may cause actual results in future
periods and other future events to differ materially from what is currently
anticipated. Certain statements in this Form 10-QSB, including those relating
to the Company's expected results, the accuracy of data relating to, and
anticipated levels of, its future inventory and gross margins, its anticipated
cash requirements and sources, are forward-looking statements. Such
statements involve risks and uncertainties, which may cause results to differ
materially from those set forth in these statements. Factors which may cause
actual results in future periods to differ from its current expectations
include, among other things, the continued availability of sufficient working
capital, the availability of adequate sources of capital, the successful
integration of new employees into existing operations, the continued
desirability and customer acceptance of existing and future services, possible
cancellations of orders, the success of competitive services, the success of
the Company's programs to strengthen its operational and accounting controls
and procedures. In addition to these factors, the economic and other factors
identified in this Form 10-QSB, including but not limited to the risk factors
discussed herein and in the Company's previously filed public documents could
affect the forward-looking statements contained in herein and therein.
Forward-looking statements generally refer to future plans and
performance, and are identified by the words "believe", "expect",
"anticipate", "optimistic", "intend", "aim", "will" or the negative thereof
and similar expressions. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of which
they are made. The Company undertakes no obligation to update publicly or
revise any forward-looking statements.
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Results of Operations (Unaudited)
for the Three Month Periods Ended March 31, 2001 and 2000
and from Inception on July 18, 1997 through March 31, 2001
****************************************************************
The Company had $752 in revenues from continuing operations for the three
month period ended March 31, 2001, $0 for the three month period ended March
31, 2000 and $752 from inception on July 18, 1997 through March 31, 2001.
16
General and administrative expenses for all periods ended consisted of
general corporate administration, legal and professional expenses, accounting
and auditing costs, rent and utilities/miscellaneous expenses, and salaries
and wages expense. These expenses were $10,463 for the three month period
ended March 31, 2001, $2,235 for the three month period ended March 31, 2000
and $18,648 from inception on July 18, 1997 through March 31, 2001. The rent
and utilities/miscellaneous expenses and the salaries and wages expense are
being accrued on a monthly basis until such time the Company has sufficient
net income to pay the expenses.
Interest expense for the three month periods ended March 31, 2001 and
2000 and from inception on July 18, 1997 through March 31, 2001 was $250, $19
and $485 respectively. Interest was accrued on a note payable dated October
1, 1997, by the Company's previous President Marlon Hill, in the principal
amount of $750 and bears interest at 10% per annum. Interest was also accrued
on a second note payable dated January 1, 2001 in the amount of $10,000 with a
third party and bears interest at 10% per annum.
As a result of the foregoing factors, the Company realized a net loss of
$9,961 for the three month period ended March 31, 2001, $2,254 for the three
month period ended March 31, 2000 and $18,381 from inception on July 18, 1997
through March 31, 2001.
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Results of Operations (Audited)
for the Calendar Years Ended December 31, 2000 and 1999
and from Inception on July 18, 1997 through December 31, 2000
******************************************************************
The Company did not have any revenues for the calendar years ended
December 31, 2000 and 1999 nor from inception July 18, 1997 through December
31, 2000. The Company incurred $4,294 in net operating losses for the
calendar year ended December 31, 2000 as compared to $2,292 in net operating
losses for the calendar year ended December 31, 1999 and $8,420 from
inception on July 18, 1997 through December 31, 2000.
The net operating loss for all periods resulted primarily from general
and administrative expenses and interest expense. The net loss per share for
each period was $0.00 per share.
General and administrative expenses for all periods ended consisted of
general corporate administration, legal and professional expenses, and
accounting and auditing costs. These expenses were $4,228 for the calendar
year ended December 31, 2000, $2,217 for the calendar year ended December 31,
1999 and $8,185 from inception on July 18, 1997 through December 31, 2000.
Interest expense for the calendar year ended December 31, 2000 and 1999
and from inception on July 18, 1997 through December 31, 2000 was $66, $75,
and $235 respectively. Interest was accrued only on the October 1, 1997 note
payable, as mentioned above. The October 1, 1997 note payable was repaid on
November 28, 2000, and accrued interest of $234 was forgive and recorded as
capital in excess of par value.
For the current calendar year, the Company anticipates incurring a loss
as a result of legal and accounting expenses, expenses associated with
registration under the Securities Exchange Act of 1934, as amended, and
expenses associated with its new business plan, as described herein.
17
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Liquidity and Capital Resources
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The Company remains in the development stage and, since inception, has
had $752 in revenues. At March 31, 2001, the Company had working capital of
($9,676). The Company had cash in the amount of $1,994. All cash raised by
the Company to date, has come from the sale of 10,000,000 shares of the
Company's common stock to First Avenue, Ltd. for $10,000, as well as a $10,000
loan to the Company by a third party and a $750 loan to the Company by its
previous President, Marlon Hill. The shares were sold to First Avenue, Ltd.
to obtain capital to pay the costs of becoming a reporting company under the
Securities Exchange Act of 1934, as amended, and also to pay the costs of
general administrative expenses.
Management believes that between the Company's current cash reserves and
through limited amount of work, the Company will have adequate cash to remain
operating on a limited basis through the remainder of the calendar year 2001.
However, there can be no assurances to that effect, as the Company has had
minimal revenues through the date of filing this report and its need for
capital may change dramatically. In the event the Company requires additional
funds, the Company will have to seek loans or equity placements to cover such
cash needs. There is no assurance additional capital will be available to the
Company on acceptable terms.
Further, management believes that if it can position the Company as a
publicly traded and listed entity, the Company will secure a more attractive
position in the view of the investing public because of the theoretical
increase in the liquidity of an investment in the Company's securities.
Additionally, management believes that should the Company need additional
capitalization, it would most likely obtain capital from investors through
private placements of the Company's equity securities. Notwithstanding such
an evaluation, the Company is not presently aware of any specific interest
from potential investors, nor is management certain that such capital will be
available or that the Company will in fact be successful in securing
additional capital. If or when the Company can establish a positive cash flow
for a period of time and therefore can demonstrate to potential private
investors that it can generate profits, then this factor, combined with a
publicly traded and listed status, is expected to be used to market the
Company as an attractive investment for private placement purposes.
Management prefers to attempt such a strategy sometime during 2001. If the
Company cannot succeed in enforcing such a strategy, then its chances for
growth are significantly undermined. Without additional capitalization the
Company's ability to survive as a going concern is substantially limited.
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Plan of Operations
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The Company is a development stage company seeking to offer services as a
re-builder of custom car and truck engines specializing in pre-1985 internal
combustion engines with block sizes ranging from 298 to 490 cubic inches.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
18
The Company does not own any property. On January 1, 2001, the Company
entered into a Rental/Utilities Agreement with Michael Linn ("Rental/Utilities
Agreement"). The Rental/Utilities Agreement allows the Company to use office
space in his home for the operations of the Company at a base rent of $100 per
month. The Company also agreed to pay a base utilities/miscellaneous expense
of $100 per month designated for but not limited to heat, power, water, sewer,
garbage collection, recycling, phone, fax, Internet, computer use, printer
use, and any other office items needed for the operations of the Company, not
currently being paid by the Company. The Company and Mr. Linn have agreed to
accrue the monthly rent and utilities/miscellaneous expenses until the Company
has sufficient net income to pay the expenses. A copy of the Rental/Utilities
Agreement is attached as an exhibit and is incorporated herein by this
reference. At March 31, 2001, the Company had accrued $300 in rent expense
and $300 in utilities/miscellaneous expense. The Company will continue to
maintain operations at this location until management believes that the
Company's revenues and financial resources justify a move to an alternative
location. If such a move is required, the Company believes that there is an
inadequate supply of office/warehouse/retail space in Salt Lake County, Utah
meeting the Company's anticipated needs for the foreseeable future.
Initially, the Company expects that it will lease rather than purchase such
property in order to allocate its resources specifically to its operations.
Because of our president's relationship with his current employer, we
also expect to utilize shop space and certain machine tools on a limited basis
at no charge to the Company, from the employer's local machine shop. We
expect these facilities to be adequate for small projects, but expect to have
to pay for the use of the facilities and/or tools as we grow.
Additionally, on January 1, 2001 the Company entered into an Employment
Agreement with Michael Linn, the Company's sole officer/director/employee
("Employment Agreement"). Mr. Linn shall receive a salary in the amount of
$1,000 per month for services related to the operations of the Company. As of
the date of this report, the Company had no funds available to pay this
salary. The Company and Mr. Linn have agreed to accrue the monthly salary
until the Company has sufficient net income to pay the expense. A copy of the
Employment Agreement is attached as an exhibit and is incorporated herein by
this reference. At March 31, 2001, the Company had accrued $3,000 in salary
expense.
The Company may attempt to employ additional personnel if it is able to
generate revenues or obtain additional financing. However, there is no
assurance that the services of such persons will be available or that they can
be obtained upon terms favorable to the Company.
Irrespective of whether the Company's cash assets prove to be adequate to
meet the Company's operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
PART II
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ITEM 1. LEGAL PROCEEDINGS
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The Company is not a party to any material pending legal proceedings, and
to the best of its knowledge, no such proceedings by or against the Company
have been threatened.
19
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ITEM 2. CHANGES IN SECURITIES
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Effective January 22, 2001, the name of the Company changed from
Eastport Red's Incorporated to Wallin Engines Corporation. See information
furnished in Item 4 below.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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Not Applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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On December 21, 2000, the board of directors and majority shareholders of
the Company consented to change the Company's name from Eastport Red's
Incorporated to Wallin Engines Corporation to be effective January 22, 2001.
Of the 19,900,000 shares of common stock issued and outstanding and
entitled to vote by written consent on that date, Mr. Linn, the Company's
president, secretary, treasurer, director and majority shareholder owning
18,000,000 shares, or approximately 90.5% of the outstanding common stock,
consented to this name change by written consent taken without a meeting.
On January 2, 2001, the Company mailed an information statement regarding
the name change to all shareholders of record as of December 21, 2000. Also
on January 2, 2001, the Company filed an Information Statement on Schedule 14C
with the Securities and Exchange Commission. The name change is to be
effective January 22, 2001.
For more information regarding the name change, see the Company's
Information Statement filed on Schedule 14C with the Securities and Exchange
Commission on January 2, 2001, which is incorporated herein by this reference.
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ITEM 5. OTHER INFORMATION
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On January 1, 2001, the Company entered into a Rental/Utilities Agreement
with Michael Linn ("Rental/Utilities Agreement"). The Rental/Utilities
Agreement allows the Company to use office space in his home for the
operations of the Company at a base rent of $100 per month. The Company also
agreed to pay a base utilities/miscellaneous expense of $100 per month
designated for but not limited to heat, power, water, sewer, garbage
collection, recycling, phone, fax, Internet, computer use, printer use, and
any other office items needed for the operations of the Company, not currently
being paid by the Company. The Company and Mr. Linn have agreed to accrue the
monthly rent and utilities/miscellaneous expenses until the Company has
sufficient net income to pay the expenses. A copy of the Rental/Utilities
Agreement is attached as an exhibit and is incorporated herein by this
reference. At March 31, 2001, the Company had accrued $300 in rent expense
and $300 in utilities/miscellaneous expense.
20
Additionally, on January 1, 2001, the Company entered into an Employment
Agreement with Michael Linn, the Company's sole officer/director/employee
("Employment Agreement"). Mr. Linn shall receive a salary in the amount of
$1,000 per month for services related to the operations of the Company. As of
the date of this report, the Company had no funds available to pay this
salary. The Company and Mr. Linn have agreed to accrue the monthly salary
until the Company has sufficient net income to pay the expense. A copy of the
Employment Agreement is attached as an exhibit and is incorporated herein by
this reference. At March 31, 2001, the Company had accrued $3,000 in salary
expense.
Further, on January 1, 2001, the Company executed a note payable with a
third party in the amount of $10,000. This note is due at maturity on January
1, 2002 and accrues interest at 10% per annum. This note was executed to
obtain capital to pay general administrative expenses and expenses relating to
the Company's new business plan, as described in this report.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits: Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits of this Form 10-QSB, which is
incorporated herein by reference.
(b) Reports on Form 8-K: No reports on Form 8-K have been filed during the
last quarter of the period covered by this report.
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SIGNATURES
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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.
Wallin Engines Corporation
/s/ Michael Linn
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Date: May 20, 2001 By: Michael Linn, President, Secretary
Treasurer & Director
21
INDEX TO EXHIBITS
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SEC Ref Page
No. No. Description
- ------- ---- -----------
Ex-2 ** Asset Acquisition Agreement dated December 1, 2000
between the Company and Michael Linn.
Ex-3(i)(a) * Articles of Incorporation of the Company, filed with
the State of Nevada on July 18, 1997.
Ex-3(i)(b) 23 Certificate of Amendment of Articles of Incorporation,
filed with the State of Nevada on January 24, 2001,
but effective January 22, 2001.
Ex-3(ii) * Bylaws of the Company.
Ex-10(i) * Promissory Note made by the Company to the order of
Marlon Hill, dated October 1, 1997.
Ex-10(ii) *** Promissory Note dated January 1, 2001 executed by the
Company.
Ex-10(iii) 24 Employment Agreement by and between the Company and
Michael Linn dated January 1, 2001.
Ex-10(iv) 28 Rental/Utilities Agreement by and between the Company
and Michael Linn dated January 1, 2001.
*** The listed exhibits are incorporated herein by this reference to
the Annual Report on Form 10-KSB for the calendar year ended
December 31, 2000, filed by the Company with the Securities and
Exchange Commission on April 16, 2001.
** The listed exhibits are incorporated herein by this reference to
the Current Report on Form 8-K, filed by the Company with the
Securities and Exchange Commission on December 7, 2000 and
Amendment No. 1 thereto, filed by the Company with the Securities
and Exchange Commission on December 8, 2000.
* The listed exhibits are incorporated herein by this reference to
the Registration Statement on Form 10-SB, filed by the Company
with the Securities and Exchange Commission on December 8, 1999.
22