UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(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, 2002.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from ______ to ______.
Commission File Number: 000-29445
Wrap-N-Roll USA, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 84-1432450
--------------------------------- --------------------------
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
1056 East Platinum Way, Sandy, Utah 84094
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(Address of Principal Executive Offices and Zip Code)
Issuer's telephone number: (801) 576-8073
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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 14, 2002, there were 10,550,000 shares of common stock
issued and outstanding.
Transitional Small business Format (Check one): Yes [ ] No [X]
FORM 10-QSB
WRAP-N-ROLL USA, INC.
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . 3-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. . . 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 2. CHANGES IN SECURITIES. . . . . . . . . . . . . . . . . . . . . 18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. . . . . . . . . . . . . . . . 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . 18
ITEM 5. OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . 18
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PART I
ITEM 1. FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited condensed
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]
WRAP-N-ROLL USA, INC.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2002
WRAP-N-ROLL USA, INC.
CONTENTS
PAGE
- Unaudited Condensed Balance Sheets, June 30,
2002 and December 31, 2001 2
- Unaudited Condensed Statements of Operations, for
the three and six months ended June 30, 2002 and 2001 3
- Unaudited Condensed Statements of Cash Flows,
for the six months ended June 30, 2002 and 2001 4
- Notes to Unaudited Condensed Financial Statements 5 - 13
-1-
WRAP-N-ROLL USA, INC.
UNAUDITED CONDENSED BALANCE SHEETS
ASSETS
June 30, December 31,
2002 2001
___________ ___________
CURRENT ASSETS:
Cash in bank $ 2,800 $ 17,657
Accounts receivable, net of allowance for doubtful
accounts of $0 and $1,819, respectively 8,692 1,050
Related party receivable 1,003 523
Notes receivable - related party 12,867 14,127
___________ ___________
Total Current Assets 25,362 33,357
PROPERTY AND EQUIPMENT, net 23,524 26,660
___________ ___________
$ 48,886 $ 60,017
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 66,753 $ 35,212
Accounts payable and accrued expenses - related
party 30,413 21,427
Notes payable - related party 22,671 16,671
Current portion of long-term debt 5,623 5,554
___________ ___________
Total Current Liabilities 125,460 78,864
LONG-TERM DEBT, less current portion 17,373 20,206
___________ ___________
Total Liabilities 142,833 99,070
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
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, 10,550,000 and 11,000,000 shares
issued and outstanding, respectively 10,550 11,000
Capital in excess of par value 450 -
Retained earnings (deficit) (104,947) (50,053)
___________ ___________
Total Stockholders' Equity (Deficit) (93,947) (39,053)
___________ ___________
$ 48,886 $ 60,017
___________ ___________
Note: The Balance Sheet of December 31, 2001 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-
WRAP-N-ROLL USA, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
_________________________ _________________________
2002 2001 2002 2001
__________ __________ __________ __________
SALES REVENUE, net of returns,
discounts and allowances $ 27,188 $ 41,035 $ 40,791 $ 42,140
COST OF GOODS SOLD 22,572 33,272 33,145 36,774
__________ __________ __________ __________
GROSS PROFIT 4,616 7,763 7,646 5,366
__________ __________ __________ __________
EXPENSES:
Selling 31 906 31 906
General and administrative 29,753 23,641 61,142 28,305
__________ __________ __________ __________
Total Expenses 29,784 24,547 61,173 29,211
__________ __________ __________ __________
LOSS BEFORE OTHER INCOME (25,168) (16,784) (53,527) (23,845)
__________ __________ __________ __________
OTHER INCOME (EXPENSE):
Gain on assignment of operating
lease - 1,500 - 1,500
Interest income - related party 240 - 480 -
Interest expense - related party (408) (293) (942) (563)
Interest and other expense (488) (296) (905) (296)
__________ __________ __________ __________
Total Other Income
(Expense) (656) 911 (1,367) 641
__________ __________ __________ __________
LOSS BEFORE INCOME TAXES (25,824) (15,873) (54,894) (23,204)
CURRENT TAX EXPENSE - - - -
DEFERRED TAX EXPENSE - - - -
__________ __________ __________ __________
NET LOSS $ (25,824) $ (15,873) $ (54,894) $ (23,204)
__________ __________ __________ __________
LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.01) $ (.00)
__________ __________ __________ __________
The accompanying notes are an integral part of these unaudited condensed financial statements.
-3-
WRAP-N-ROLL USA, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
For the Six
Months Ended
June 30,
_______________________
2002 2001
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (54,894) $ (23,204)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation expense 3,136 1,468
Non-cash expenses 1,200 -
Changes in assets and liabilities:
(Increase) in accounts receivable (7,642) (3,225)
(Increase) in related party receivable (480) (7,797)
Increase in accounts payable and accrued expenses 31,541 21,058
Increase in accounts payable and accrued expenses - related party 8,986 17,613
Increase in unearned revenue - 36,260
__________ __________
Net Cash Provided (Used) by Operating Activities
(18,153) 42,173
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from notes receivable 60 -
Payments for property and equipment - (29,368)
__________ __________
Net Cash Provided (Used) by Investing Activities
60 (29,368)
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - related party 6,000 1,400
Proceeds from long-term debt - 26,868
Payments on long-term debt (2,764) 314)
__________ __________
Net Cash Provided by Financing Activities 3,236 27,954
__________ __________
NET INCREASE (DECREASE) IN CASH (14,857) 40,759
CASH AT BEGINNING OF PERIOD 17,657 3,059
__________ __________
CASH AT END OF PERIOD $ 2,800 $ 43,818
__________ __________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 865 $ 204
Income taxes $ - $ -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
For the six months ended June 30, 2002:
The Company applied expenses totaling $1,200 against notes receivable.
For the Six months ended June 30, 2001:
None
The accompanying notes are an integral part of these unaudited condensed financial statements.
-4-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION - Wrap-N-Roll USA, Inc. ("the Company") was organized under
the laws of the State of Nevada on September 26, 1997 as Oxy General
Corporation. Effective November 17, 2000, the Company changed its name
from Oxy General Corporation to Wrap-N-Roll USA, Inc. The Company provides
specialized advertising services to businesses of all sizes emphasizing
large format digital printing on perforated and non-perforated vinyl
substrates. Through use of a special non-corrosive, vinyl material with a
patented adhesive made by 3M, the Company offers businesses the ability to
wrap the exterior of buildings, windows and motor vehicles with an
advertising message. In addition to the sale of its wrapping services, the
Company also offers advertising services using wrapped property.
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, 2002 and 2001 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 in the United States of America 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, 2001 audited financial statements. The results of
operations for the periods ended June 30, 2002 and 2001 are not necessarily
indicative of the operating results for the full year.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost.
Depreciation is calculated using the straight-line method and is based upon
the estimated useful lives of the assets of five years [See Note 2].
REVENUE RECOGNITION - The Company's revenue comes primarily from the
installation of advertising which is wrapped around a vehicle, window or
building. Installation revenue is recognized upon completion of the
installation. The Company also sells monthly advertising, typically with a
term ranging from 1 month to 1 year. The advertising is displayed on
vehicles owned or rented by the Company. Advertising revenue is recognized
over the term of the advertising agreement using the straight-line method.
The actual design, layout, printing and installation of the advertising are
subcontracted out to third party vendors. These direct costs are recorded
by the Company as cost of goods sold.
The Company has joint agreements wherein the Company jointly shares
advertising revenue with other entities. Revenue derived from joint
agreements or from commission type agreements is recorded on a net basis.
On a net basis, only the share of revenue belonging to the Company is
recorded as revenue.
Advance payments and deposits, which are received up front by the Company,
are deferred and recognized as revenue upon completion of the installation
or upon delivery of the advertising.
-5-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
ADVERTISING COSTS - Advertising costs, except for costs associated with
direct-response advertising, are charged to operations when incurred. The
costs of direct-response advertising are capitalized and amortized over the
period during which future benefits are expected to be received.
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 12].
CASH AND CASH EQUIVALENTS - 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 in the United
States of America 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. 141, "Business Combinations", SFAS No. 142,
"Goodwill and Other Intangible Assets", SFAS No. 143, "Accounting for Asset
Retirement Obligations", SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", and SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections", were recently issued. SFAS No. 141, 142, 143, 144
and 145 have no current applicability to the Company or their effect on the
financial statements would not have been significant.
RECLASSIFICATION - The financial statements for periods prior to June 30,
2002 have been reclassified to conform to the headings and classifications
used in the June 30, 2002 financial statements.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at:
June 30, December 31,
2002 2001
___________ ___________
Vehicles $ 31,365 $ 31,365
Less: Accumulated depreciation (7,841) (4,705)
___________ ___________
Net Property and Equipment $ 23,524 $ 26,660
___________ ___________
Depreciation expense for the six months ended June 30, 2002 and 2001 was
$3,136 and $1,468, respectively.
-6-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following at:
June 30, December 31,
2002 2001
___________ ___________
Accounts payable $ 55,021 $ 30,701
Accrued payroll, taxes and
withholdings 10,754 4,046
Joint agreements revenues payable - 350
Sales tax payable 938 80
Interest payable 40 35
___________ ___________
$ 66,753 $ 35,212
___________ ___________
NOTE 4 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES - RELATED PARTY
Accounts payable and accrued expenses to a related party consisted of the
following at:
June 30, December 31,
2002 2001
___________ ___________
Accrued payroll - related party $ 28,767 $ 20,723
Accrued interest - related party 1,646 704
___________ ___________
$ 30,413 $ 21,427
___________ ___________
NOTE 5 - LONG-TERM DEBT
Long-term debt consisted of the following at:
June 30, December 31,
2002 2001
___________ ___________
Note payable to financing agency for
60 months at an interest rate of 3%,
secured by a vehicle with a net book
value of $23,524 $ 22,996 $ 25,760
Less: Current portion (5,623) (5,554)
___________ ___________
$ 17,373 $ 20,206
___________ ___________
-7-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT [CONTINUED]
Maturity of long-term debt for the twelve month periods ended:
June 30, Principal Due
____________ _____________
2003 $ 5,623
2004 5,787
2005 5,959
2006 5,627
_____________
$ 22,996
_____________
Interest expense for long-term debt for the six months ended June 30, 2002
and 2001 amounted to $349 and $296, respectively.
NOTE 6 - 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 June 30, 2002 and December 31, 2001.
COMMON STOCK - The Company has authorized 20,000,000 shares of common stock
with a par value of $.001. At June 30, 2002 and December 31, 2001, there
were 10,550,000 and 11,000,000 shares issued and outstanding, respectively.
CANCELLATION - On June 5, 2002, a shareholder of the Company returned
450,000 shares of common stock for cancellation.
NOTE 7 - SALES REVENUE
Sales revenue consisted of the following for the six months ended:
June 30, June 30,
2002 2001
___________ ___________
Installation revenues $ 29,100 $ 42,140
Advertising revenues 11,150 -
Joint agreements revenues 541 -
Less: Returns, discounts and
allowances - -
___________ ___________
Sales revenue, net of returns,
discounts and allowances $ 40,791 $ 42,140
___________ ___________
NOTE 8 - OPERATING LEASES
The Company had two cars under operating leases expiring in 2003. In April
2001, the Company purchased a van to replace one of the cars. As part of
the purchase, the Company assigned the lease of the original car to the
financing agency [See Note 10].
-8-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 8 - OPERATING LEASES [CONTINUED]
Minimum future rental payments under the remaining non-cancelable operating
lease having a remaining term in excess of one year as of June 30, 2002 for
the twelve month periods ended and in aggregate are:
June 30, Amount
____________ ___________
2003 $ 3,473
2004 1,158
2005 -
2006 -
2007 -
___________
Total minimum future rental payments: $ 4,631
___________
Rental payments for the six months ended June 30, 2002 and 2001 amounted to
$1,736 and $2,284, respectively.
NOTE 9 - 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. At June 30, 2002, the Company
has available unused operating loss carryforwards of approximately
$104,900, which may be applied against future taxable income and which
expire in various years through 2022.
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 $36,000 and $17,000 as of June 30, 2002 and December 31,
2001, respectively, with an offsetting valuation allowance of the same
amount resulting in an increase in the valuation allowance of approximately
$19,000 during the six months ended June 30, 2002.
NOTE 10 - RELATED PARTY TRANSACTIONS
RECEIVABLE - As of June 30, 2001, an officer/shareholder of the Company had
been advanced a total of $15,027 by the Company as a non-interest bearing
loan. On July 1, 2001, the Company extended the receivable of $15,027 into
a note receivable.
-9-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTIONS [Continued]
NOTES RECEIVABLE - On July 1, 2001, the Company extended a receivable of
$15,027 into a note receivable. On August 1, 2001 the Company signed a
note receivable with an officer/shareholder of the Company for $2,500.
Both notes accrue interest at 7% per annum and are due on demand. At June
30, 2002, accrued interest amounted to $1,003. As of June 30, 2002, the
Company had applied rent and utilities/miscellaneous expenses totaling
$3,600 and a $1,000 down payment made on behalf of the Company against the
principal of the two notes, plus the officer/shareholder repaid $60,
resulting in principal of $12,867 owed at June 30, 2002 [See below and Note
13].
PURCHASE AGREEMENT - On April 21, 2001, the Company purchased a van for
$31,365 to replace one of its leased cars. To finance the purchase, an
officer/shareholder/employee of the Company paid a down payment of $1,000 to
the financing agency. The Company also assigned the operating lease for the
original car to the financing agency and recognized a $1,500 again. The
remaining $28,865 was financed through the financing agency in the name of
the officer/shareholder/employee at an interest rate of 3%. The agreement
was negotiated in the name of the officer/shareholder/employee to take
advantage of certain conditions and financing arrangements that were
unavailable to the Company since it had only recently begun operations and
had incurred losses since inception. The Company then purchased the van
from the officer/shareholder/employee on the same terms and conditions. The
agreement requires the Company to make 60 monthly payments of $518 directly
to the financing agency beginning June 8, 2001. At June 30, 2002, the
Company owed $22,996 on the purchase of the van [See Note 5].
NOTES PAYABLE - As of July 31, 2001, the Company owed a shareholder of the
Company $812 for a note payable due April 1, 2002 accruing interest at 10%
per annum, $10,000 for a note payable due October 31, 2001 accruing
interest at 10% per annum and $859 for interest that had accrued on the two
notes payable. On August 1, 2001, the Company extended the notes and
related accrued interest with an additional loan of $5,000 into a note
payable of $16,671 that was due August 1, 2002. The note accrues interest
at 10% per annum. Accrued interest amounted to $1,538 at June 30, 2002.
This note was subsequently extended [See Note 15].
On April 24, 2001, the Company signed a $1,400 note payable to a
shareholder of the Company. The note accrued interest at 10% per annum.
On July 20, 2001, the Company repaid the note payable and accrued interest
of $35 to the shareholder.
On April 15, 2002, the Company signed a $5,000 note payable to an entity
controlled by a shareholder of the Company. The note accrues interest at
10% per annum and is due on demand. Accrued interest amounted to $83 at
June 30, 2002. This note was subsequently extended into a new note payable
[See Note 15].
LOAN PAYABLE - On May 28, 2002, an entity controlled by a shareholder of
the Company loaned $1,000 to the Company as a 30-day loan. The Company
paid $25 for the loan. This loan was subsequently extended into a new note
payable [See Note 15].
-10-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTIONS [Continued]
MANAGEMENT COMPENSATION - For the year ended December 31, 2000, the Company
did not pay any compensation to any officer/director of the Company. On
January 1, 2001, the Company entered into an employment agreement with an
officer/director/employee of the Company to pay $1,000 per month. On April
1, 2001, the Company increased the salary to $4,000 per month. During the
six months ended June 30, 2002 and 2001, total compensation to the
officer/director/shareholder amounted to $24,926 and $15,000, respectively
[See Note 13].
OFFICE SPACE/UTILITIES - During the year ended December 31, 2000, 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. On September 1, 2001, the company decided to
begin paying the rent and utilities as funds are available. During the six
months ended June 30, 2002 and 2001, the Company expensed $1,200 and
$1,200, respectively, as rent and utilities/miscellaneous expenses which
have been applied against the principal of two notes receivable from the
officer/director/employee [See above and Note 13].
NOTE 11 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles in the United States of America,
which contemplate continuation of the Company as a going concern. However,
the Company has incurred losses since its inception and has current
liabilities in excess of current assets, raising 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.
-11-
WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 12 - LOSS PER SHARE
The following data shows the amounts used in computing loss per share for the periods presented:
For the Three For the Six
Months Ended Months Ended
June 30, June 30,
________________________ ________________________
2002 2001 2002 2001
___________ ___________ ___________ ___________
loss from continuing operations
available to common shareholders
(numerator) $ (25,824) $ (15,873) $ (54,894) $ (23,204)
___________ ___________ ___________ ___________
Weighted average number of common
shares outstanding used in loss per
share for the period (denominator) 10,876,374 11,000,000 10,937,845 11,000,000
___________ ___________ ___________ ___________
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 13 - COMMITMENTS AND AGREEMENTS
EMPLOYMENT AGREEMENT - On January 1, 2001, the Company entered into an
employment agreement with its sole officer and director. The agreement
provided for a $1,000 per month salary for a period of three years
commencing January 1, 2001. The expense was to accrue until the Company
had achieved net income of $50,000 at which time the Company would pay 50%
of its net income before tax towards reducing the accrued salary liability.
On April 1, 2001, the Company increased the salary to $4,000 per month and
decided to begin paying the salary as funds are available. During the six
months ended June 30, 2002 and 2001, respectively, the Company accrued
payroll of $8,044 and $15,000 and paid $16,882 and $0 to the
officer/director/employee.
EMPLOYMENT AGREEMENT - On August 1, 2001, the Company entered into an
employment agreement with an employee. The agreement provides for a
$3,000 per month salary for a period of one year commencing August 1, 2001.
During the six months ended June 30, 2002 and 2001, respectively, the
Company accrued payroll of $8,803 and $0 and paid $9,890 and $0 to the
employee.
RENTAL/UTILITIES AGREEMENTS - On January 1, 2001, the Company entered into
rental and utilities agreements with its sole officer and director. The
agreements provide 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 was to accrue until the Company had
achieved net income of $50,000, at which time the Company would pay 10% of
its net income before tax towards reducing the accrued rent liability. The
utilities portion was to accrue until the Company elected to make payment.
On September 1, 2001, the company decided to begin paying the rent and
utilities as funds are available [See Note 10]. During the six months
ended June 30, 2002 and 2001, respectively, rent and
utilities/miscellaneous expenses totaled $1,200 and $1,200 and were applied
toward two notes receivable [See Note 10].
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WRAP-N-ROLL USA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 13 - COMMITMENTS AND AGREEMENTS [Continued]
JOINT AGREEMENTS - On May 14, 2001, the Company entered into a joint
agreement with Jose Dicenzo ("JD") to provide advertising services. The
Company was to provide advertisers and collection of payments. JD was to
provide a fleet of vehicles available for wrapping, business referrals and
vehicle wrapping. The Company and JD would evenly split the revenues. The
agreement was for one year and was not extended. No revenues were
generated as part of this agreement.
On June 11, 2001, the Company entered into a joint agreement with Newspaper
Agency Corporation ("NAC") to provide advertising services. The Company
provides advertisers, vehicle wrapping and collection of payments. NAC
provides a fleet of vehicles available for wrapping and business referrals.
The Company and NAC evenly split the revenues. The agreement is for one
year and may be extended or cancelled at any time by written mutual consent.
During the six months ended June 30, 2002 and 2001, respectively, the
Company recognized $350 and $0 in revenues as part of this agreement.
The Company is currently negotiating a joint agreement with the Standard
Examiner ("SE") to provide advertising services. The Company is expected
to provide advertisers, vehicle wrapping and collection of payments. SE is
expected to provide a fleet of vehicles available for wrapping and business
referrals. The Company and SE are expected to evenly split the revenues.
The agreement is expected to be for six months. The Company has started
providing services based on the anticipated agreement. During the six
months ended June 30, 2002 and 2001, respectively, the Company recognized
$191 and $0 in revenues as part of the anticipated agreement.
NOTE 14 - CONCENTRATIONS OF CREDIT RISK
SIGNIFICANT CUSTOMERS - During the six months ended June 30, 2002, the
Company had two customers that accounted for approximately 32% of the
Company's revenues. The following table lists the percent of sales made to
each customer that accounted for 10% or more of total sales during the six
months ended June 30, 2002:
Customer A 18%
Customer B 14%
The loss of these significant customers could adversely affect the
Company's business and financial position.
GEOGRAPHIC REGION - During the six months ended June 30, 2002, all of the
Company's sales and operations were located in and around Salt Lake City,
Utah.
NOTE 15 - SUBSEQUENT EVENTS
NOTE PAYABLE EXTENSION - On August 1, 2002, the Company extended a $16,671
note payable to a shareholder of the Company to be due on demand.
NOTE PAYABLE - On July 30, 2002, the Company extended a $5,000 note
payable, a $1,000 loan payable, and related accrued interest of $108 with
an additional loan of $3,892 into a note payable of $10,000 due on demand.
The new note accrues interest at 10% per annum.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
Wrap-N-Roll is a marketing company for specialty advertising in the form
of large format digital printing on perforated and non-perforated vinyl
substrates that can be applied to the exterior of buildings, windows, and
motor vehicles. We began this business in October 2000, but did not realize
any revenue from the business until the first quarter of 2001. Before then we
had no business operations, so our specialty advertising business is a new
venture.
Our business is not capital intensive because we do not require
production or storage facilities to operate our business. We rely on third
party suppliers to produce and install the advertising product we sell, and we
place orders with suppliers only against purchase orders we receive through
our marketing efforts. The cost of production and installation of the
advertising product averages 81 percent of the total invoice price.
Our operations recently commenced at the end of 2000 and we do not have
a history of operations from which we can evaluate our ability to generate
revenue at sufficient levels to sustain and develop our operations without
outside financing. We emphasize that it is management's belief alone
regarding the potential market for our advertising product that serves as the
basis for pursuing this business. If our belief about the market for our
product is wrong, then our sales revenues will likely stagnate or decrease and
our ability to sustain and develop the business will be substantially
impaired. In these circumstances we would likely need to seek outside
financing to sustain our operations, and we do not know whether financing
would be available on acceptable terms. The foregoing factors raise
substantial doubt about our ability to continue as a going concern.
Results of Operations
****************************************************************
SIX MONTH PERIODS ENDED JUNE 30, 2002 AND 2001,
AND THREE MONTH PERIODS ENDED JUNE 30, 2002 AND 2001
****************************************************************
Revenue: The Company had revenues of $40,791 and $42,140 respectively
for the six month periods ended June 30, 2002 and 2001. The Company had
revenues of $27,188 and $41,035 respectively for the three-month periods ended
June 30, 2002 and 2001.
Our average monthly revenue rate over the first six months of 2002 was
approximately $6,799. Our goal is to increase monthly revenue by at least 10
percent each month over the next 12 months. At present our marketing effort
is limited to personal sales calls we initiate with business owners in the
Salt Lake City metropolitan area. We have set as a sales goal an average of
20 van advertising installations and 10 installations on other vehicles per
month. We have not implemented any other form of advertising or marketing for
our advertising product and believe we can achieve our sales goals over the
next 12 months with direct sales efforts. We believe the revenue we generate
internally from marketing our specialty advertising products with our current
personnel and resources will be adequate to cover our costs of production and
operating expenses through the next 12 months.
Cost of Goods Sold: Cost of goods sold for the six month periods ended
June 30, 2002 and 2001 were $33,145 and $36,774 respectively. The cost of
goods sold for the three-month periods ended June 30, 2002 and 2001 were
$22,572 and $33,272 respectively. For the six months ended June 30, 2002, our
cost of goods sold was 81% percent of sales revenue. Cost of goods sold
includes the cost of production of the advertising material we sell and its
installation.
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General and Administrative Expenses: General and administrative expenses
and selling expenses for the six month periods ended June 30, 2002 and 2001
were $61,173 and $29,211 respectively. These expenses for the three-month
periods ended June 30, 2002 and 2001 were $29,784 and $24,547 respectively.
The increase in these expenses is a result of implementing our principal
business operations, which resulted in a substantial increase in operating
expenses.
Operating Expenses: Operating expenses consist primarily of salary for
our two employees, office expenses, and professional fees. The total salary
accrued for and paid to Cliff Halling, our president, was $24,926 for the six
month period ended June 30, 2002, or 61% percent of sales revenue compared to
$15,000 for the six month period ended June 30, 2001, or 36% of sales. The
total salary accrued for and paid to Mr. Halling for the three-month periods
ended June 30, 2002 and 2001 was $12,692 and $12,000 respectively. His monthly
salary is $4,000 through the remainder of 2002. We pay to our sales person a
salary of $3,000 per month, which began in August 2001. Our vehicle leasing
and purchase obligations total $807 per month, which includes approximately
$300 payable over a three-year term for the leased vehicle and the remainder
payable over a five-year term for the vehicle being purchased. Our office
rent and utilities through the six-month periods ended June 30, 2002 and 2001
was $1,200 and $1,200 respectively. Office rent and utilities for the
three-month periods ended June 30, 2002 and 2001 was $600 and $600
respectively. We expect our office expense will remain at a rate of
approximately $200 per month through the end of 2002. Professional fees for
the six-month periods ended June 30, 2002 and 2001 were $7,849 and $8,981
respectively and for the three-month periods ended June 30, 2002 and 2001 were
$4,449 and $8,731 respectively.
Wrap-N-Roll had two cars under operating leases expiring 2003. On April
21, 2001, we purchased a new van to replace one of the cars. To finance the
purchase, Cliff Halling, our sole officer and director, paid $1,000 to the
financing agency. This payment made by Mr. Halling for our benefit was
applied to reduce his outstanding obligations payable to us. Wrap-N-Roll also
assigned the operating lease for the original car to the financing agency and
recognized a $1,500 gain on the assignment. The remaining $28,865 was
financed through an unrelated financing agency at an interest rate of 3
percent.
Interest Expense and Interest Income: Interest expense for the six-month
periods ended June 30, 2002 and 2001, was $1,847 and $859, respectively.
Interest expense for the three-month periods ended June 30, 2002 and 2001 was
$896 and $589 respectively. We also recognized interest income of $480 for
the six-month period ended June 30, 2002, on a note receivable from Cliff
Halling compared to $0 for the six-month period ended June 30, 2001. Interest
income for the three-month periods ended June 30, 2002 and 2001, was $240 and
$0 respectively.
As a result of the foregoing factors, Wrap-N-Roll realized a net loss of
$54,894 for the six-month period ended June 30, 2002, compared to a net loss
of $23,204 for the six-month period ended June 30, 2001. Wrap-N-Roll realized
a net loss of $25,824 for the three-month period ended June 30, 2002, compared
to a net loss of $15,873 for the three-month period ended June 30, 2001.
********************************************************************
CALENDAR YEARS ENDED DECEMBER 31, 2001 AND 2000
********************************************************************
The Company had $258,872 in revenue for the calendar year ended December
31, 2001 and no revenues for the calendar year ended December 31, 2000. The
-15-
Company incurred $36,713 in net operating losses for the calendar year ended
December 31, 2001 as compared to $10,942 in net operating losses for the
calendar year ended 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 $96,859 for the calendar
year ended December 31, 2001 and $10,584 for the calendar year ended December
31, 2000.
Selling expenses for the calendar year ended December 31, 2001 and 2000
were $925 and $116 respectively.
Interest expense for the calendar year ended December 31, 2001 and 2000
was $3,059 and $242 respectively. Interest was accrued on notes payable to a
related party in the principal amount of $10,812. These notes payable and
related accrued interest of $859 were rolled into a new one-year related party
note payable, due on August 1, 2002, and bears interest at 10% per annum.
Interest was accrued on the note payable in the amount of $704 at December 31,
2001.
For the current fiscal 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.
Liquidity and Capital Resources
At June 30, 2002, we had a working capital deficit of $100,098, compared to
working capital of $4,559 at June 30, 2001.
Current assets consist primarily of cash in the amount of $2,800,
accounts receivable of $8,692, and notes receivable and accrued interest from
Cliff Halling, our president and sole director, in the amount of $13,870.
Prior to July 2001, Wrap-N-Roll advanced a total of $15,027 to Mr. Halling,
which is represented by a note payable to Wrap-N-Roll bearing interest at 7
percent per annum and due on demand. We made a further advance to Mr. Halling
in the amount of $2,500 represented by a note dated August 1, 2002, bearing
interest at 7 percent per annum and due on demand. Mr. Halling has repaid
$4,660 on the notes, so that the outstanding balance at June 30, 2002, was
$12,867 with accrued interest of $1,003.
Current liabilities consist primarily of $66,753 in accounts payable and
accrued expenses, $28,767 of accrued payroll due to Cliff Halling, $22,671 on
a note payable to Ken Kurtz, a stockholder, and $5,623 of current portion on
long-term debt incurred to purchase our van. Ken Kurtz loaned to us $712
through April 2000, $10,000 in November 2000, $1,400 in April 2001, and $5,000
in August 2001. These funds were used to fund our working capital needs. The
loan for $1,400 was repaid, with interest, in July 2001. The remaining loans
and their accrued interest were restructured as a new note in August 2001 in
the principal amount of $16,671 bearing interest of 10 percent per annum and
due on August 1, 2002. Accrued interest on this note at June 30, 2002 was
$1,538. On April 15, 2002, the Company signed a $5,000 note payable to an
entity controlled by a shareholder of the Company. The note accrues interest
at 10% per annum and is due upon demand. On May 31, 2002, the Company was
advanced $1,000 by an entity controlled by a shareholder of the Company. On
July 30, 2002 the Company was advanced an additional $3,892 by an entity
controlled by a shareholder of the Company. The Company signed a Promissory
Note to an entity controlled by a shareholder for $10,000 on July 30, 2002.
-16-
This note combines the April 15, 2002 note for $5,000 including interest of
$83, the $1,000 advance at May 31, 2002 including a $25 fee and the additional
$3,892 advanced on July 30, 2002. The note accrues interest at 10% per annum
and is due upon demand.
Long-term debt at June 30, 2002, consisted of $22,996 due an unrelated
finance company that provided the financing on our van. The obligation is
payable in monthly installments over a term of five years commencing in April
2001, bears interest at three percent per annum, and is secured by our van
with a net book value of $23,524.
If we achieve our revenue goals by the end of 2002, then we will
evaluate the feasibility of adding two employees, one sales person and one
clerical person. New employees will be added only if our operations can
support the new employees without outside financing and if we believe the
addition of these employees will enable us to penetrate our market more
effectively. An increase in our operations and the number of employees may
require us to seek larger office space to house our marketing and service
personnel. Should this growth occur, we expect that we would not need more
than approximately 600 square feet of office space. We believe that there is
an adequate supply of office space in Salt Lake County, Utah to meet our need
for larger space, should it arise. Based solely on our informal investigation
of office space, we believe we could find suitable space to rent for $12 per
square foot per year, or a total of $7,200 per year for 600 square feet.
Wrap-N-Roll began generating sales revenue from its business operations
since the beginning of 2001. Consequently, we do not have a history of
operations that allows us to predict with any certainty whether our sales will
continue at current levels or increase over the next 12 months. Assuming we
can maintain our current level of sales revenue, we believe we can fund our
operations internally over the next 12 months. The agreement with the
Newspaper Agency Corporation expired in June 2002 after a one-year term. We
are currently negotiating a joint agreement with the Standard Examiner to
provide advertising services. The agreement is expected to be for six months.
During the six months ended June 30, 2002 the Company recognized $191 in
revenues as part of the anticipated agreement.
In the past Cliff Halling, our president and sole director, agreed to
defer payment of his compensation when we did not have sufficient revenue to
pay the expense. We have no agreement or arrangement with Mr. Halling to
renew this practice in the future, should the need arise. We have also relied
in the past on loans from Ken Kurtz, a stockholder, to provide working capital
for our operations. We similarly have no agreement or arrangement with Mr.
Kurtz to provide financing in the future. Should there be a substantial
reduction in our sales revenue at any time over the next 12 months it is
likely we would need to seek outside financing to fund our operations. We
have not identified any sources for such financing and we do not know whether
any financing would be available to us on acceptable terms.
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
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Not Applicable.
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 5, 2002, Ken Kurtz, a shareholder, canceled 450,000 shares of the
500,000 shares which he previously owned, thereby reducing the Company's
issued and outstanding shares from 11,000,000 shares to 10,550,000 shares.
The remaining 50,000 shares owned by Mr. Kurtz were sold in a private
transaction to an unrelated third party. As a result of these transactions,
Mr. Kurtz has no further ownership interest in the Company.
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, 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 Section 13 or 15(d) of the Exchange Act, this report
has been signed below by the following persons on behalf by the undersigned
thereunto duly authorized.
WRAP-N-ROLL USA, INC.
/s/ Cliff Halling
September 20, 2002 ________________________________________
Date: _____________________ By: Cliff Halling, President, Secretary
Treasurer, Director
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INDEX TO EXHIBITS
---------------------
SEC Ref
No. Page No. Description
- ------- -------- -----------
3.1 *1* Articles of Incorporation of the Company, filed with the
State of Nevada on September 26, 1997.
3.2 *2* Certificate of Amendment of Articles of Incorporation,
filed with the State of Nevada on October 19, 2000, but
effective November 17, 2000.
3.3 *1* Bylaws of the Company.
5.1 *6* Opinion and consent of Lehman Walstrand & Associates,
LLC.
10.1 *3* Promissory Note dated April 1, 2000 executed by the
Company.
10.2 *4* Promissory Note dated November 1, 2000 executed by the
Company.
10.3 *5* Employment Agreement by and between the Company and Cliff
Halling dated January 1, 2001.
10.4 *5* Rental/Utilities Agreement by and between the Company
and Cliff Halling dated January 1, 2001.
10.5 *7* Promissory Note dated July 1, 2001 executed by the
company.
10.6 *7* Promissory Note dated August 1, 2001 executed by the
company.
10.7 *7* Amended Employment Agreement by and between the Company
and Cliff Halling dated April 1, 2001.
10.8 *8* Joint Agreement with Jose Dicenzo dated May 14, 2001.
10.9 *8* Joint Agreement with Newspaper Agency Corporation dated
June 11, 2001.
10.10 *8* Form of Wrap-N-Roll Service Agreement.
10.11 *9* Employment Agreement by and between the Company and Derek
Williams dated August 1, 2001.
10.12 *9* Rental/Utilities Agreement by and between the Company
and Cliff Halling dated September 1, 2001.
10.13 *9* Note Receivable in the form of a Promissory Note Dated
August 1, 2001 executed by the Company.
10.14 11 Note Payable in the form of a Promissory Note Dated April
15, 2002 executed by the Company.
10.15 21 Note Payable in the form of a Promissory Note Dated July
30, 2002.
-19-
10.16 22 Promissory Note Dated August 1, 2002, executed by the
Company.
*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 February 10, 2000.
*2* The listed exhibit is 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 12, 2001.
*3* The listed exhibit is incorporated herein by this reference to the
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000, filed by
the Company with the Securities and Exchange Commission on August 14, 2000.
*4* The listed exhibit is incorporated herein by this reference to the
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2000,
filed by the Company with the Securities and Exchange Commission on November
9, 2000.
*5* 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 16, 2001.
*6* The listed exhibit is incorporated herein by this reference to the
Registration Statement on Form SB-2, filed by the Company with the Securities
and Exchange Commission on July 10, 2001.
*7* The listed exhibits are incorporated herein by this reference to the
Quarterly Report on Form 10-QSB for the quarter ended June 30, 2001, filed by
the Company with the Securities and Exchange Commission on August 20, 2001.
*8* The listed exhibits are incorporated herein by this reference to
Amendment No. 1 of the Registration Statement on Form SB-2/A, filed by the
Company with the Securities and Exchange Commission on October 9, 2001.
*9* The listed exhibits are incorporated herein by this reference to the
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2001,
filed by the Company with the Securities and Exchange Commission on November
19, 2001.
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