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 June 30, 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) 637-0799
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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 August 10, 2001, there were 19,900,000 shares of common stock
issued and outstanding.
Total of Sequentially Numbered Pages: 21
Index to Exhibits on Page: 21
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 . . .15
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . .19
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . .19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . .19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . .19
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . .19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . .19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
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
JUNE 30, 2001
4
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
CONTENTS
PAGE
----
- Unaudited Condensed Balance Sheets, June 30,
2001 and December 31, 2000 2
- Unaudited Condensed Statements of Operations,
for the three and six months ended June 30, 2001 and
2000 and for the period from inception on July 18,
1997 through June 30, 2001 3
- Unaudited Condensed Statements of Cash Flows,
for the six months ended June 30, 2001 and
2000 and for the period from inception on July 18,
1997 through June 30, 2001 4
- Notes to Unaudited Condensed Financial Statements 5 - 10
5
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
2001 2000
___________ ___________
CURRENT ASSETS:
Cash in bank $ 208 $ 9,764
Inventory 2,228 612
Receivable - related party 2,193 -
___________ ___________
Total Current Assets 4,629 10,376
PROPERTY AND EQUIPMENT, net 12,138 8,248
OTHER ASSETS:
Inventory 3,700 3,700
___________ ___________
$ 20,467 $ 22,324
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,221 $ 510
Accrued liabilities - related party 7,748 -
Notes payable - related party 10,000 10,000
___________ ___________
Total Current Liabilities 20,969 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 (20,736) (8,420)
___________ ___________
Total Stockholders' Equity (502) 11,814
___________ ___________
$ 20,467 $ 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 -
6
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three For the Six From Inception
Months Ended Months Ended on July 18,
June 30, June 30, 1997 Through
_________________________ _________________________ June 30,
2001 2000 2001 2000 2001
__________ __________ __________ __________ __________
REVENUE:
Sales $ - $ - $ 752 $ - $ 752
__________ __________ __________ __________ __________
EXPENSES:
General and Administrative 7,380 668 12,568 2,902 20,753
__________ __________ __________ __________ __________
LOSS BEFORE OTHER
EXPENSES (7,380) (668) (11,816) (2,902) (20,001)
OTHER EXPENSES:
Interest Expense (250) (18) (500) (38) (735)
__________ __________ __________ __________ __________
LOSS BEFORE
INCOME TAXES (7,630) (686) (12,316) (2,940) (20,736)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
__________ __________ __________ __________ __________
NET LOSS $ (7,630) $ (686) $ (12,316) $ (2,940) $ (20,736)
__________ __________ __________ __________ __________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00) $ (.00)
__________ __________ __________ __________ __________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
- 3 -
7
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Six From Inception
Months Ended on July 18,
June 30, 1997 Through
_______________________ June 30,
2001 2000 2001
__________ __________ __________
Cash Flows From Operating Activities:
Net loss $ (12,316) $ (2,940) $ (20,736)
Adjustments to reconcile net loss to
net cash used by operating activities:
Stock issued for services - - 1,000
Depreciation expense 1,030 - 1,170
Changes is assets and liabilities:
Increase in inventory (1,616) - (5,316)
Increase in receivables (2,193) - (2,193)
Increase in accounts payable 2,711 - 3,221
Increase in accrued liabilities - related party 7,748 37 7,982
__________ __________ __________
Net Cash Provided (Used) by Operating Activities (4,636) (2,903) (14,872)
__________ __________ __________
Cash Flows From Investing Activities:
Payments for property and equipment (4,920) - (4,920)
__________ __________ __________
Net Cash Provided by Investing Activities (4,920) - (4,920)
__________ __________ __________
Cash Flows From Financing Activities:
Proceeds from notes payable - related party - - 10,000
Proceeds from issuance of common stock - - 10,000
__________ __________ __________
Net Cash Provided by Financing Activities - - 20,000
__________ __________ __________
Net Increase (Decrease) in Cash (9,556) (2,903) 208
Cash at Beginning of Period 9,764 7,793 -
__________ __________ __________
Cash at End of Period $ 208 $ 4,890 $ 208
__________ __________ __________
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 June 30, 2001:
On December 1, 2000, 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.
On July 19, 1997, 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 financial statements.
- 4 -
8
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
June 30, 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
June 30, 2001 are not necessarily indicative of the operating results for the
full year.
Inventory - Inventory 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 recognizes revenue upon delivery of
completed rebuilt or serviced engines, or upon completion of services to be
provided.
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.
- 5 -
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 [Continued]
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:
June 30, December 31,
2001 2000
__________ __________
Auto tools and equipment $ 5,904 $ 5,704
Demonstration engine 7,404 2,684
__________ __________
13,308 8,388
Less: Accumulated Depreciation (1,170) (140)
__________ __________
Net Equipment $ 12,138 $ 8,248
__________ __________
Depreciation expense for the quarters ended June 30, 2001 and 2000 were $1,030
and $0, respectively.
NOTE 3 - ACCRUED LIABILITIES - RELATED PARTY
Accrued liabilities consists of the following:
June 30, December 31,
2001 2000
__________ __________
Accrued payroll - related party $ 6,000 $ -
Accrued rent and utilities -
related party 1,200 -
Accrued interest - related party 500 -
Sales tax payable 48 -
__________ __________
$ 7,748 $ -
__________ __________
- 6 -
10
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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". SFAS
No. 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.
The Company has available at June 30, 2001, unused operating loss
carryforwards of approximately $21,000 which may be applied against future
taxable income and which expire in various years 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 $7,000 and $2,900 as of June 30, 2001
and December 31, 2000, respectively, with an offsetting valuation allowance at
each year end of the same amount resulting in a change in the valuation
allowance of approximately $4,100 during the six months ended June 30, 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 June
30, 2001, the Company has accrued $6,000 in salary expense.
- 7 -
11
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - RELATED PARTY TRANSACTIONS [Continued]
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 June 30, 2001, the Company had accrued $600 in rent expense
and $600 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 the
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 entity. 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. Accrued
interest at June 30, 2001 was $500.
Receivable - During January 2001, the company advanced $2,000 to an
officer/shareholder of the Company. From April through June 2001, the Company
advanced an additional $193 to the officer/shareholder. No interest accrues
on the balance.
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 just recently
commenced operations and has incurred losses since its inception. 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.
- 8 -
12
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 8 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for the
periods presented:
For the Three For the Six From Inception
Months Ended Months Ended on July 18,
June 30, June 30, 1997 Through
_________________________ _________________________ June 30,
2001 2000 2001 2000 2001
__________ __________ __________ __________ __________
Loss from continuing operations
available to common shareholders
(numerator) $ (7,630) $ (686) $ (12,316) $ (2,940) $ (20,736)
__________ __________ __________ __________ __________
Weighted average number of
common shares outstanding used
in loss per share for the period
(denominator) 19,900,000 11,000,000 19,900,000 11,000,000 7,768,468
__________ __________ __________ __________ __________
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.
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.
- 9 -
13
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 11 - SUBSEQUENT EVENTS
Proposed Private Offering of Common Stock - The Company is proposing to
make a private offering of 300,000 shares of its previously authorized but
unissued common stock. This offering is proposed to be exempt from
registration with the Securities and Exchange Commission under Rule 506 of
Regulation D as promulgated under the Securities Act of 1933, as amended. An
offering price of $.10 per share has arbitrarily been determined by the
Company. The offering will be managed by the Company without any underwriter.
The shares will be offered and sold by an officer of the Company, who will
receive no sales commissions or other compensation in connection with the
offering, except for reimbursement of expenses actually incurred on behalf of
the Company in connection with the offering. The Company has not incurred any
stock offering costs as of June 30, 2001, but any such costs will be netted
against the proceeds of the proposed private stock offering.
- 10 -
14
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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.
****************************************************************
Six-Month Periods Ended June 30, 2001 and 2000,
Three-Month Periods Ended June 30, 2001 and 2000
and from Inception on July 18, 1997 through June 30, 2001
****************************************************************
The Company had $752 in revenues from continuing operations for the six
months ended June 30, 2001 and $0 in revenues from continuing operations for
the six months ended June 30, 2000. The Company had $0 in revenues from
continuing operations for the three-month periods ended June 30, 2001 and
2000. The Company had $752 in revenues from continuing operations from
inception on July 18, 1997 through June 30, 2001. The increase in revenues
was the result of a small automotive project completed by the Company in the
first quarter of 2001.
15
General and administrative expenses for all periods ended consisted of
general corporate administration, legal and professional expenses, accounting
and auditing costs, utilities/miscellaneous expenses and salaries and wages
expense. These expenses were $12,568 for the six month period ended June 30,
2001, $2,902 for the six month period ended June 30, 2000, $7,380 for the
three month period ended June 30, 2001, $668 for the three month period ended
June 30, 2000 and $20,753 from inception on July 18, 1997 through June 30,
2001. The increase in expenses was the result of the Company's shift in its
business plan to offering services as a re-builder of custom car and truck
engines.
Interest expense for the six month periods ended June 30, 2001 and 2000,
the three month periods ended June 30, 2001 and 2000 and from inception on
July 18, 1997 through June 30, 2001 was $500, $38, $250, $18 and $735,
respectively. Interest was accrued on a note payable to a third party in the
principal amount of $10,000. This note is due January 1, 2002 and accrues
interest at 10% per annum.
As a result of the foregoing factors, the Company realized a net loss of
$12,316 for the six month period ended June 30, 2001, $2,940 for the six month
period ended June 30, 2000, $7,630 for the three month period ended June 30,
2001, $686 for the three month period ended June 30, 2000 and $20,736 from
inception on July 18, 1997 through June 30, 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 and for the period 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 a note payable dated
October 1, 1997. 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 expenses associated with its new business plan, as described
herein.
16
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Liquidity and Capital Resources
******************************************************************
The Company remains in the development stage and, since inception, has
had $752 in revenues. At June 30, 2001, the Company had working capital of
$16,340. The Company had cash in the amount of $208. All cash raised by the
Company at June 30, 2001, 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 a
former President. The shares that were sold to First Avenue, Ltd. were sold
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
proceeds from its anticipated equity offering (discussed below) and through a
limited amount of revenues, 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 the Company will be able to obtain
capital from investors through private placements of the Company's equity
securities. On June 22, 2001, the Board of Directors of the Company
authorized a private offering under Rule 506 of Regulation D (the "Offering")
to raise additional working capital for the Company. The Company is offering
three hundred thousand (300,000) shares of its $0.001 par value common stock
at a price of $0.10 per share in the Offering (the "Shares").
******************************************************************
Plan of Operations
******************************************************************
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 additional
funds will be available to the Company to allow it to cover its expenses as
they may be incurred.
17
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. At June 30, 2001, the Company
had accrued $600 in rent expense and $600 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.
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. At June 30,
2001, the Company had accrued $6,000 in salary expense.
Because of the Company's president's relationship with his current
employer, the Company expects 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. The Company expects these facilities to be adequate for small
projects, but expects to have to pay for the use of the facilities and/or
tools as it grows.
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.
On June 22, 2001, the Board of Directors of the Company authorized a
private offering under Rule 506 of Regulation D (the "Offering") to raise
additional working capital for the Company. The Company is offering three
hundred thousand (300,000) shares of its $0.001 par value common stock at a
price of $0.10 per share in the Offering (the "Shares"). This Offering
commenced July 1, 2001 and shall continue until September 30, 2001. As of
August 10, 2001, the Company has sold 85,000 Shares under the Offering.
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.
18
PART II
- ---------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- ---------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- ---------------------------------------------------------------------------
On June 22, 2001, the Board of Directors of the Company authorized a
private offering under Rule 506 of Regulation D (the "Offering") to raise
additional working capital for the Company. The Company is offering three
hundred thousand (300,000) shares of its $0.001 par value common stock at a
price of $0.10 per share in the Offering (the "Shares"). This Offering
commenced July 1, 2001 and shall continue until September 30, 2001.
The officers and directors of the Company are selling the Shares offered under
the Offering. No underwriters are being used for the Offering and the Company
is paying no commissions. The Shares are being offered to both accredited and
non-accredited investors. As of August 10, 2001, the Company had sold 85,000
Shares under the Offering.
- ---------------------------------------------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ---------------------------------------------------------------------------
Not Applicable.
- ---------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ---------------------------------------------------------------------------
Not Applicable.
- ---------------------------------------------------------------------------
ITEM 5. OTHER INFORMATION
- ---------------------------------------------------------------------------
Not Applicable.
- ---------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ---------------------------------------------------------------------------
(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.
19
- ---------------------------------------------------------------------------
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.
Wallin Engines Corporation
/S/ MICHAEL LINN
-----------------------------------
Date: August 20, 2001 By: Michael Linn, President, Secretary
Treasurer & Director
20
INDEX TO EXHIBITS
---------------------
SEC Ref Page
No. No. Description
- ------- ---- -----------
Ex-2 *2* Asset Acquisition Agreement dated December 1, 2000
between the Company and Michael Linn.
Ex-3.1 *1* Articles of Incorporation of the Company, filed with
the State of Nevada on July 18, 1997.
Ex-3.2 *4* Certificate of Amendment of Articles of Incorporation,
filed with the State of Nevada on January 24, 2001,
but effective January 22, 2001.
Ex-3.3 *1* Bylaws of the Company.
Ex-10.1 *1* Promissory Note made by the Company to the order of
Marlon Hill, dated October 1, 1997.
Ex-10.2 *3* Promissory Note dated January 1, 2001 executed by the
Company.
Ex-10.3 *4* Employment Agreement by and between the Company and
Michael Linn dated January 1, 2001.
Ex-10.4 *4* Rental/Utilities Agreement by and between the Company
and Michael Linn dated January 1, 2001.
*4* The listed exhibits are incorporated herein by this reference to
the Quarterly Report on Form 10-QSB for the quarter ended March
31, 2001, filed by the Company with the Securities and Exchange
Commission on May 21, 2001.
*3* 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.
*2* 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.
*1* 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.
21