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)
P.O. Box 65423, Salt Lake City, Utah 84165-0423
--------------------------------------------------------------
(Address of Principal Executive Offices and Zip Code)
Issuer's telephone number: (801) 502-8768
----------------
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 November 14, 2001, there were 20,027,500 shares of common stock
issued and outstanding.
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 . . . 4
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . 9
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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, pages F-1 through F-10, 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]
CONTENTS
PAGE
------
-- Unaudited Condensed Balance Sheets, September 30,
2001 and December 31, 2000 2
-- Unaudited Condensed Statements of Operations, for the
three and nine months ended September 30, 2001 and
2000 and for the period from inception on July 18, 1997
through September 30, 2001 3
-- Unaudited Condensed Statements of Cash Flows, for the
nine months ended September 30, 2001 and 2000 and
for the period from inception on July 18, 1997 through
September 30, 2001 4
-- Notes to Unaudited Condensed Financial Statements 5 - 10
F-1
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
September 30, December 31,
2001 2000
___________ ___________
CURRENT ASSETS:
Cash in bank $ 4,092 $ 9,764
Inventory 6,360 612
Note receivable - related party 5,177 -
___________ ___________
Total Current Assets 15,629 10,376
PROPERTY AND EQUIPMENT, net 11,528 8,248
OTHER ASSETS:
Inventory 3,700 3,700
___________ ___________
$ 30,857 $ 22,324
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 5,176 $ 510
Accrued liabilities - related party 11,550 -
Notes payable - related party 10,000 10,000
___________ ___________
Total Current Liabilities 26,726 10,510
___________ ___________
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.001 par value, 45,000,000 shares
authorized, 20,025,000 and 19,900,000 shares
issued and outstanding, respectively 20,025 19,900
Capital in excess of par value 11,979 334
Deficit accumulated during the development stage (27,873) (8,420)
___________ ___________
Total Stockholders' Equity 4,131 11,814
___________ ___________
$ 30,857 $ 22,324
=========== ===========
Note: The Balance Sheet as 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.
F-2
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three For the Nine From Inception
Months Ended Months Ended on July 18,
September 30, September 30, 1997 Through
_______________________ _______________________ September 30,
2001 2000 2001 2000 2001
__________ __________ __________ __________ __________
REVENUE:
Sales $ - $ - $ 752 $ - $ 752
__________ __________ __________ __________ __________
EXPENSES:
General and Administrative 6,876 522 19,444 3,425 27,629
__________ __________ __________ __________ __________
LOSS BEFORE OTHER INCOME
(EXPENSE) (6,876) (522) (18,692) (3,425) (26,877)
__________ __________ __________ __________ __________
OTHER INCOME (EXPENSE):
Interest Income - related party 30 - 30 - 30
Interest Expense (41) - (41) - (41)
Interest Expense - related
party (250) (19) (750) (56) (985)
__________ __________ __________ __________ __________
Total Other Income
(Expense) (261) (19) (761) (56) (996)
__________ __________ __________ __________ __________
LOSS BEFORE INCOME
TAXES (7,137) (541) (19,453) (3,481) (27,873)
CURRENT TAX EXPENSE - - - - -
DEFERRED TAX EXPENSE - - - - -
__________ __________ __________ __________ __________
NET LOSS $ (7,137) $ (541) $ (19,453) $ (3,481) $ (27,873)
__________ __________ __________ __________ __________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00) $ (.00)
__________ __________ __________ __________ __________
The accompanying notes are an integral part of these unaudited condensed
financial statements.
F-3
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine From Inception
Months Ended on July 18,
September 30, 1997 Through
_______________________ September 30,
2001 2000 2001
__________ __________ ____________
Cash Flows From Operating Activities:
Net loss $ (19,453) $ (3,481) $ (27,873)
Adjustments to reconcile net loss to net cash used by operating
activities:
Stock issued for services - - 1,000
Depreciation expense 1,697 - 1,837
Changes is assets and liabilities:
Increase in inventory (5,748) - (9,448)
Increase in receivables - related party (5,177) - (5,177)
Increase in accounts payable and accrued liabilities 4,666 - 5,176
Increase in accrued liabilities - related party 11,550 56 11,784
__________ __________ ____________
Net Cash Used by Operating Activities (12,465) (3,425) (22,701)
__________ __________ ____________
Cash Flows From Investing Activities:
Payments for property and equipment (4,977) - (4,977)
__________ __________ ____________
Net Cash Used by Investing Activities (4,977) - (4,977)
__________ __________ ____________
Cash Flows From Financing Activities:
Proceeds from notes payable - related party - - 10,000
Proceeds from issuance of common stock 12,500 - 22,500
Payment of stock offering costs (730) - (730)
__________ __________ ____________
Net Cash Provided by Financing Activities 11,770 - 31,770
__________ __________ ____________
Net Increase (Decrease) in Cash (5,672) (3,425) 4,092
Cash at Beginning of Period 9,764 7,793 -
__________ __________ ____________
Cash at End of Period $ 4,092 $ 4,368 $ 4,092
__________ __________ ____________
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 September 30, 2001:
On September 1, 2001, the Company converted a receivable of $5,147 into
a note receivable.
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 common stock. A shareholder
forgave accrued interest of $234, which was 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.
F-4
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 Statement of Financial Accounting Standards 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 September 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 September 30, 2001 are not necessarily indicative of the operating
results for the full year.
Inventory - Inventory consists of engine components and parts 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 currently expected to be sold.
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 a
completed rebuilt or serviced engine, 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 9]
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.
F-5
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. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities - a replacement of FASB
Statement No. 125", SFAS No. 141, "Business Combinations", SFAS No. 142,
"Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset
Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" were recently issued. SFAS No. 140, 141,
142, 143 and 144 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:
September 30, December 31,
2001 2000
___________ ___________
Auto tools and equipment $ 5,961 $ 5,704
Demonstration engine 7,404 2,684
___________ ___________
13,365 8,388
Less: Accumulated Depreciation (1,837) (140)
___________ ___________
Net Property and Equipment $ 11,528 $ 8,248
=========== ===========
Depreciation expense for the nine months ended September 30, 2001 and 2000
were $1,697 and $0, respectively.
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consists of the following:
September 30, December 31,
2001 2000
___________ ___________
Accounts payable $ 5,128 $ 510
Sales tax payable 48 -
___________ ___________
$ 5,176 $ 510
=========== ===========
F-6
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 4 - ACCRUED LIABILITIES - RELATED PARTY
Related party accrued liabilities consists of the following:
September 30, December 31,
2001 2000
___________ ___________
Accrued payroll - related party $ 9,000 $ -
Accrued rent and utilities - related party 1,800 -
Accrued interest - related party 750 -
___________ ___________
$ 11,550 $ -
=========== ===========
NOTE 5 - CAPITAL STOCK
Preferred Stock - The Company has authorized 5,000,000 shares of preferred
stock, $.001 par value, with such rights, preferences and designations and
to be issued in such series as determined by the Board of Directors. No
shares were issued and outstanding at September 30, 2001 and December 31,
2000.
Common Stock - The Company has authorized 45,000,000 shares of common stock
with a par value of $.001. 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 was 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.
During July 2001, the Company amended its Articles of Incorporation
increasing the number of authorized shares of common stock from 20,000,000
to 45,000,000.
Private Offering - The Company is currently making a private offering of
300,000 shares of its previously authorized but unissued common stock.
This offering is 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 is being
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. As of September 30, 2001, the Company had
sold 125,000 shares of common stock for proceeds of $12,500. Stock
offering costs of $730 have been incurred through September 30, 2001 and
were offset against the proceeds of the offering. The offering has been
extended through November 30, 2001.
F-7
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 6 - 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 September 30, 2001, unused operating loss
carryforwards of approximately $28,000 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 tax effect of
the loss carryforwards and, therefore, no deferred tax asset has been
recognized for the loss carryforwards. The net deferred tax assets are
approximately $9,500 and $2,900 as of September 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 $6,600 during the nine months ended September 30, 2001.
NOTE 7 - 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 September 30, 2001, the Company had accrued $9,000 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 September 30, 2001, the Company had
accrued $900 in rent expense and $900 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
contributions.
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 on
January 1, 2002. The note accrues interest at the rate of 10% per annum.
Accrued interest at September 30, 2001 was $750.
Note Receivable - On September 1, 2001, the Company converted a receivable
of $5,147 into a new note receivable. The note accrues interest at 7% per
annum and is due on demand. Accrued interest amounted to $30 at September
30, 2001 and is recorded with notes receivable.
F-8
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 8 - 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.
NOTE 9 - LOSS PER SHARE
The following data show the amounts used in computing loss per share for
the periods presented:
For the Three For the Nine From Inception
Months Ended Months Ended on July 18,
September 30, September 30, 1997 Through
_______________________ _______________________ September 30,
2001 2000 2001 2000 2001
__________ __________ __________ __________ __________
Loss from continuing operations
available to common shareholders
(numerator) $ (7,137) $ (541) $ (19,453) $ (3,481) $ (27,873)
__________ __________ __________ __________ __________
Weighted average number of
common shares outstanding used
in loss per share for the period
(denominator) 19,981,739 11,000,000 19,927,546 11,000,000 8,500,469
__________ __________ __________ __________ __________
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 10 - 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.
F-9
WALLIN ENGINES CORPORATION
(Formerly Eastport Red's Incorporated)
[A Development Stage Company]
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 11 - 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.
NOTE 12 - SUBSEQUENT EVENTS
Through November 18, 2001, the Company had sold 137,500 shares of common
stock for proceeds of $13,750 as part of a private offering of 300,000
shares of common stock.
F-10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ---------------------------------------------------------------------------
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.
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.
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,
4
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 September 30, 2001, the
Company had accrued $900 in rent expense and $900 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 September
30, 2001, the Company had accrued $9,000 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.
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 was to continue through September 30, 2001. As of
September 30, 2001, the Company has sold 125,000 Shares under the Offering.
On September 30, 2001, the Board of Directors of the Company authorized to
extend the Offering through November 30, 2001, an additional sixty (60) days.
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.
5
Results of Operations (Unaudited)
Nine-Month Periods Ended September 30, 2001 and 2000,
Three-Month Periods Ended September 30, 2001 and 2000
and from Inception on July 18, 1997 through September 30, 2001
- ---------------------------------------------------------------
The Company had $752 in revenues from continuing operations for the nine
months ended September 30, 2001 and $0 in revenues from continuing operations
for the nine months ended September 30, 2000. The Company had $0 in revenues
from continuing operations for the three months ended September 30, 2001 and
$0 In revenues from continuing operations for the three months ended September
30, 2000. The Company had $752 in revenues from continuing operations from
inception on July 18, 1997 through September 30, 2001. The increase in
revenues was the result of a small automotive project.
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 $19,444 for the nine month period ended
September 30, 2001, $3,425 for the nine month period ended September 30, 2000,
$6,876 for the three month period ended September 30, 2001, $522 for the three
month period ended September 30, 2000 and $27,629 from inception on July 18,
1997 through September 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 nine month periods ended September 30, 2001 and
2000, the three month periods ended September 30, 2001 and 2000 and from
inception on July 18, 1997 through September 30, 2001 was $(761), $(56),
$(261), $(19) and $(996), 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. Accrued interest
amounted to $750 at September 30, 2001. On September 1, 2001, the Company
converted a receivable of $5,147 into a new note receivable. The note accrues
interest at 7% per annum and is due on demand. Accrued interest amounted to
$30 at September 30, 2001.
As a result of the foregoing factors, the Company realized a net loss of
$(19,453) for the nine month period ended September 30, 2001, $(3,481) for the
nine month period ended September 30, 2000, $(7,137) for the three month
period ended September 30, 2001, $(541) for the three month period ended
September 30, 2000 and $(27,873) from inception on July 18, 1997 through
September 30, 2001.
Results of Operations (Audited)
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.
6
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 forgiven 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.
Liquidity and Capital Resources
- --------------------------------
The Company remains in the development stage and, since inception, has
had $752 in revenues. At September 30, 2001, the Company had working capital
of $(11,097). The Company had cash in the amount of $4,092. All cash raised
by the Company at September 30, 2001 had 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. Additionally, the Company produced a small
amount income from engine work, and further the Company's July 1, 2001
offering under Rule 506 of Regulation D.
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.
The January 1, 2001 note payable in the principal amount of $10,000 from
a third party and is due January 1, 2002 and accrues interest at 10% per
annum. The October 1, 1997 note payable in the principal amount of $750 was
repaid on November 28, 2000, and accrued interest of $234 was forgiven and
recorded as capital in excess of par value. These notes were executed to
obtain capital to pay the costs of becoming a reporting company under the
Securities Exchange Act of 1934 and general administrative expenses.
The remainder of the income came from engine work.
In addition, the Company obtained capital in the amount of $12,500 from
investors through private placements of the Company's equity securities
through September 30, 2001. 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").
The terms of the Offering were as follows:
The Shares are offered by the Company on a "best efforts" basis, through
its officers and directors, who will not receive any commissions for
such sales. A maximum of 300,000 shares are offered. No underwriter or
broker-dealer is participating in the Offering. There is no minimum
number of Shares which must be sold, and all proceeds received from
investors will be made
7
immediately available to the Company (after clearance and acceptance of
the subscription by the Company) for application.
The Offering Period will commence on July 1, 2001, the date of the
Private Placement Memorandum, and shall continue until September 30,
2001. The Company reserves the right, however, in its absolute
discretion, to extend the closing date of the Offering or close the
Offering prior to the closing date or prior to sale of all of the Shares
offered. The Company may reject any subscription, in whole or in part
and in such cases will refund the amount of the subscription or portion
thereof which has not been accepted to the subscriber without interest.
The Company intends on establishing a checking account for deposit of
its funds.
On September 30, 2001, the Board of Directors of the Company authorized
to extend the Offering through November 30, 2001, an additional sixty (60)
days.
In addition, at August 31, 2001 Mike Linn, an
officer/director/shareholder/employee of the Company, had been advanced a
total of $5,147.08 by the Company as non-interest bearing loans. On September
1, 2001, the Company extended these loans into a note receivable of the same
amount. The note accrues interest at 7% per annum and is due on demand. A
copy of the note receivable dated September 1, 2001 between the Company and
Mike Linn is attached as an exhibit and is incorporated herein by this
reference.
Management believes that between the Company's current cash reserves
proceeds from its equity offering 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.
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
- ---------------------------------------------------------------------------
Not Applicable.
8
- ---------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------
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 was to continue through September 30, 2001. At
September 30, 2001, the Company sold 125,000 Shares under the Offering. On
September 30, 2001, the Board of Directors of the Company authorized to extend
the Offering through November 30, 2001, an additional sixty (60) days.
- ---------------------------------------------------------------------------
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.
- ---------------------------------------------------------------------------
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: November 19, 2001 By: Michael Linn, President, Secretary
Treasurer & Director
9
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.
Ex-10.5 E-1 Note receivable in the form of Promissory Note dated
September 1, 2001 executed by the Company.
*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.
10