SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2003
OR
[ ]TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE EXCHANGE ACT OF 1934
From the transition period from to
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Commission File Number 000-31631
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PERMA-TUNE ELECTRONICS, INC.
----------------------------
(Exact name of small business issuer as specified in its charter)
Texas 75-2510791
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(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
199 TRADE ZONE DRIVE, RONKONKOMA, NEW YORK 11779
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(Address of principal executive offices)
(631) 981-2023
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(Issuer's telephone number)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days:
Yes XX No:
As of November 12, 2003, 17,702,079 shares of Common Stock of the issuer were
outstanding.
PERMA-TUNE ELECTRONICS, INC.
CONDENSED BALANCE SHEET
SEPTEMBER 30, DECEMBER 31,
2003 2002
ASSETS (UNAUDITED) (NOTE)
- ---------------- ------------- -------------
Current assets:
Cash and cash equivalents $ 32,222 $ -
Accounts receivable, net 9,785 12,098
Inventory 39,381 34,447
Other current assets 130,369 529
-------------- ------------
Total current assets 211,757 47,074
Property and equipment, net 16,928 3,334
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Total assets $228,685 $ 50,408
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ---------------------------------------------------
Current liabilities:
Line of credit $ 22,824 $ 22,800
Accounts payable 50,374 44,413
Accrued expenses 13,040 5,767
Notes payable to stockholders 60,000 60,000
-------------- ----------
Total current liabilities 146,238 132,980
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Commitments and contingencies
Stockholders' equity (deficit):
Common stock; no par value; 50,000,000 shares
authorized; 17,633,331 and 2,322,700 shares,
respectively, issued and outstanding 549,132 264,966
Accumulated deficit (466,685) (347,538)
-------------- ----------
Total stockholders' equity (deficit) 82,447 (82,572)
-------------- ----------
Total liabilities and stockholders' equity $228,685 $ 50,408
============== ==========
Note: The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements.
The accompanying notes are an integral part of
these unaudited condensed financial statements.
2
PERMA-TUNE ELECTRONICS, INC.
UNAUDITED CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Sales, net $ 47,280 $ 88,424 $ 205,370 $ 215,525
Cost of goods sold 36,771 31,597 94,680 82,419
----------- ----------- ----------- -----------
Gross profit 10,509 56,827 110,690 133,106
----------- ----------- ----------- -----------
Operating expenses:
General and administrative
expenses 132,594 35,884 221,359 138,095
Depreciation 1,074 841 2,574 2,523
----------- ----------- ----------- -----------
Operating expenses, net 133,668 36,725 223,933 140,618
----------- ----------- ----------- -----------
(Loss)income from operations (123,159) 20,102 (113,243) (7,512)
Interest expense (2,345) (3,696) (5,904) (7,776)
----------- ----------- ----------- -----------
Net (loss) income $ (125,504) $ 16,406 $ (119,147) $ (15,288)
=========== =========== =========== ===========
Net (loss) income per share-basic
and diluted $ (0.01) $ 0.01 $ (0.02) $ (0.01)
=========== =========== =========== ===========
Weighted average shares
outstanding 14,241,438 2,312,700 6,339,271 2,312,700
=========== =========== =========== ===========
The accompanying notes are an integral part of
these unaudited condensed financial statements.
3
PERMA-TUNE ELECTRONICS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
COMMON STOCK ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
----------- -------- ---------- ---------
Balance at December 31, 2002 2,322,700 $264,966 $(347,538) $(82,572)
Effect of reverse merger 15,177,300 277,500 - 277,500
Shares issued for services 75,000 3,750 - 3,750
Shares issued to employees
for services 58,331 2,916 - 2,916
Net (loss) - - (119,147) (119,147)
--------- -------- ---------- ---------
Balance at September 30, 2003
(unaudited) 17,633,331 $549,132 $(466,685) $ 82,447
=========== ======== ========== =========
The accompanying notes are an integral part
of these unaudited condensed financial statements.
4
PERMA-TUNE ELECTRONICS, INC.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
2003 2002
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Cash flows from operating activities:
Net (loss) $(119,147) $(15,288)
Adjustment to reconcile net (loss) to net cash
used in operating activities:
Depreciation expense 2,574 2,523
Common Stock issued for services 6,666 -
Changes in operating assets and liabilities:
Accounts receivable 2,313 (13,012)
Inventory (4,934) 279
Other assets (129,840) -
Accounts payable and accrued expenses 13,234 8,411
---------- ---------
Net cash (used in) operating activities (229,134) (17,087)
---------- ---------
Cash flows from investing activities:
Purchases of property and equipment (16,168) -
---------- ---------
Net cash (used in) investing activities (16,168) -
---------- ---------
Cash flows from financing activities:
Proceeds from stockholder advances - 20,000
Line of credit, net 24 2,000
Additional capital contributed 277,500 -
---------- ---------
Net cash provided by financing activities 277,524 22,000
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Net increase in cash and cash equivalents 32,222 4,913
Cash and cash equivalents, beginning of period - 811
---------- ---------
Cash and cash equivalents, end of period $ 32,222 $ 5,724
========== =========
Supplemental cash flow information:
Cash paid for interest $ 4,904 $ 7,776
========== =========
Cash paid for income taxes $ - $ -
========== =========
The accompanying notes are an integral part of
these unaudited condensed financial statements.
5
PERMA-TUNE ELECTRONICS, INC.
SELECTED NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. GENERAL
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The unaudited condensed financial statements included herein have been prepared
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted, pursuant to such rules and regulations. These unaudited
condensed financial statements should be read in conjunction with the audited
financial statements and notes thereto of Perma-Tune Electronics, Inc. (the
"Company") included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2002.
In the opinion of management, the unaudited condensed financial information
included herein reflect all adjustments, consisting only of normal, recurring
adjustments, which are necessary for a fair presentation of the Company's
financial position, results of operations and cash flows for the interim periods
presented. The results of operations for the interim periods presented herein
are not necessarily indicative of the results to be expected for a full year or
any other interim period.
2. ESTIMATES
---------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets or liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
3. REVERSE MERGER
--------------
On July 21, 2003 the Company acquired 100% of the issued and outstanding stock
of Trans Max Technologies, Inc. ("Trans Max") a Florida corporation, in exchange
for 15,177,300 shares of the Company's common stock. As a result of this
acquisition, the control of the Company shifted to the former shareholders of
Trans Max and this transaction was treated as a reverse merger. In addition, the
former shareholders of Trans Max, who have become the Company's majority
stockholders, contributed additional capital to the Company of $277,500 during
the third quarter of 2003.
4. OTHER ASSETS
------------
Included in other assets at September 30, 2003 is a $130,000 deposit for a
building the Company expects to purchase and use for its operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This report contains forward looking statements within the meaning of Section
27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act
of 1934. These forward looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth under
"Factors that may affect future results" in this Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
report. The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's financial statements and notes
thereto included elsewhere in this report and the audited financial statements
included in the Company's Form 10-KSB for the year ended December 31, 2002.
6
OVERVIEW
Since its inception, the Company has focused on the production, research and
development of Porsche and Ferrari high performance ignition systems. The
Company's principal source of revenue has been from the Porsche repair parts
product line. In 1997 the Company began development of new product lines to
supply many repair and performance parts for a variety of cars and trucks.
The Company has introduced new products, updated its extensive website and
strengthened executive management. Management believes it is continuing to see
the benefits of taking advantage of the infrastructure improvements it has made
(implementation of fully integrated manufacturing/data base accounting software,
the dedication of an officer to finance and SEC compliance, marketing planning,
and outsourcing of certain manufacturing functions).
The Company has focused on expanding its existing product lines, on
concentrating its efforts on streamlining and increasing the production of its
existing product lines in order to eliminate backorders for Porsche products, on
introducing a new line of spark plug wire sets for Porsche cars, and on
introducing a new product line for late model Porsche cars.
NEW PRODUCTS
The development of the Plasma Drive for the 2000, 2001 and 2002 model year Honda
is complete. Testing of the new Honda product line is expected to begin soon to
pursue dyno testing and CARB certification. Development of the Toyota and
domestic product lines were rescheduled for the third and fourth quarters of
2003 respectively.
The Company recently purchased an in-car gravitational force dynamometer, the
competition model G-Meter from G-Tech. In the third quarter of 2003, G-Tech made
its software available. Testing of the Lamborghini Jalpa and Countach product
line using the G-Tech is planned to begin in the fourth quarter of 2003. A
sample Jalpa unit has been sent to Europe for track testing and the results have
been favorable. The Company's web site will be modified to accommodate the
Lamborghini product line and its accompanying product information in the fourth
quarter of 2003.
The Company continues to find new uses for its Plasma Drive Ignition system.
Clarke Energy has begun testing the unit they purchased in the second quarter of
2003 during the third quarter. Florida Turbine has not completed their testing
of the Plasma Drive as of the end of the third quarter. A major European company
has expressed interest in the technology. They plan to test the Plasma Drive
technology for possible use in a new product line. They have not disclosed the
nature of the product line they are experimenting with, other than to say that
it may go into mass production. A major U.S. manufacturer of agricultural
machinery and vehicles has expressed interest in the Plasma Drive for a new
product line.
The Company is now focusing its R&D efforts on customizing the Plasma Drive
technology for late model, V8, domestic vehicles. The 2003 model year Ford Crown
Victoria will be the first test vehicle in this new R&D effort. The first phase
of the effort will attempt to prove that eight Plasma Drive units can be fitted
to a V8 engine and be controlled by the vehicle engine control computer. A
feedback simulation circuit will be used to ease the coupling of the Plasma
Drive unit with the engine control computer.
7
Once the Plasma Drive units are fitted and working properly, the vehicle will be
tested by an independent testing laboratory to document the improvement in fuel
economy. This testing is expected to begin in the fourth quarter of 2003. The
next phase of the R&D effort is scheduled to begin in the fourth quarter of 2003
and will focus on creating a true feedback circuit to complete the design. When
this phase is complete, more testing will be done by an independent testing
laboratory to document the improvement in fuel economy, performance and the
reduction of emissions realized by the addition of the Plasma Drive technology
to the vehicle.
MARKETING STRATEGY
Until it is financially able to put a public relations firm on retainer, the
Company will continue its current marketing strategy of conducting sales
training missions to its wholesale distributors, continuing to improve and
expand its website, and making low-cost postcard mailings to alert distributors
to new product offerings. The Company now provides its warehouse distributors
with compact disks containing information on all of its product offerings in a
format that distributors can use to promote the Company's products in their
advertising and catalogs. The Company has continued to increase export sales as
a result of efforts by its new distributors. The Company's Internet site has
been instrumental in those sales and the Company is cultivating more contacts in
Europe. The Company has been told that publication of the FVD Worldwide
catalogue has been delayed. It is now expected to be released in the fourth
quarter of 2003.
The Company will exhibit its products at the Performance Racing Industry trade
show that is being held at the beginning of December in Indianapolis.
Additionally, the Company has registered as an exhibitor at the Miami
International Boat Show which will be held in February, 2004.
MANUFACTURING OVERVIEW
Management has prepared for rapid growth. The Company's manufacturing technique
is flexible because of its modular design and it can respond easily to customer
demand. Modules can be mass-produced and then assembled to meet additional
customer orders. Production can be increased and new products introduced
readily. Currently the Company is operating at a small percentage of its
manufacturing capacity.
The Company expects to begin outsourcing the production of the circuit boards
used in the entire product line. The outsourcing will reduce the direct labor
hours of manufacturing the product line and will reduce the overall cost of
goods sold. Outsourcing the circuit boards will allow the Company to increase
production without hiring more employees and reduce overhead costs by reducing
the number of production parts that must be stocked.
COMPARISON OF OPERATING RESULTS
Quarter Ended September 30, 2003 Compared to the Quarter Ended September 30,
- -------------------------------------------------------------------------------
2002
- -----
In the third quarter of 2003, the Company experienced a 47% decrease in sales as
gross sales decreased from $88,424 in the third quarter of 2002 to $47,280 in
the third quarter of 2003. This decrease was attributable to the disruption in
manufacturing and sales caused by the Company's move from Texas to New York in
the third quarter of 2003.
Gross profit in the third quarter of 2003 was $10,509 compared to $56,827 in the
third quarter of 2002. As a percentage of sales, gross profit decreased in the
third quarter of 2003 to 22% from 64% in the third quarter of 2002.
These results reflect not only a decrease in sales for the period, but an
increase in expenses associated with the Company's move to New York, including
higher compensation expenses for relocated employees.
8
The Company has begun sub-contracting some labor-intensive operations to
increase its gross profit margin and to allow for rapid growth. The Company
believes it can further improve its profit margin, as it has lined up additional
sub-contractors to use in this expense-reducing effort, and will begin
outsourcing additional segments of production once market demand allows it to
take advantage of the economies of scale these opportunities offer the Company.
The higher the quantity of parts we can subcontract to outside vendors, the
better price per piece the Company will be able to negotiate with each vendor,
lowering its cost of goods sold and raising its profit margin. Circuitry which
is currently hand-made in-house, can be outsourced for robotic manufacture with
an expected increase in accuracy and reliability, but the Company will need to
make a large quantity purchase commitment and incur up-front set-up costs
to implement these plans. In all cases, the Company will retain control over
production of the Perma-Tune product line and its trade secrets by manufacturing
the key components itself.
General and Administrative (G & A) expenses were $132,594 and $35,884 in the
third quarters of 2003 and 2002, respectively. As a percentage of sales, G & A
expenses increased to 280% from 41%. As stated, this highly atypical result was
caused by the Company's move from Texas to New York because such a move disrupts
sales and manufacturing, and entails numerous one-time expenses. Compensation
expenses also increased with the addition of added management and increased
compensation of relocated employees.
Interest expense decreased from $3,696 in the third quarter of 2002 to $2,345 in
the third quarter of 2003. This decrease reflects progress made in satisfying
the Company's interest-bearing debt associated with agreements with the
Company's previous accountants to allow the Company to pay its outstanding
balances as revenue became available from the collection of normal accounts
receivable. Third-party debt levels have decreased in the third quarter of 2003.
The Company showed a net loss in the third quarter of 2003, but showed a small
net profit for the third quarter of 2002. The Company has a $466,685 net
operating loss carry-forward, so there was no income tax liability for either
quarter. This net operating loss carry-forward will be offset against future
income through years ended December 31, 2011 through 2022. The majority of this
net operating loss carry-forward, $286,250, has occurred in the last five years.
This was the direct result of increased R&D expenses for developing new products
as well as the costs associated with the public offering of the Company's
securities.
As of September 30, 2003, the Company's accumulated losses were $466,685.
Nine Months Ended September 30, 2003 Compared to the Nine Months Ended September
- --------------------------------------------------------------------------------
30, 2002
- --------
In the first nine months of 2003, the Company experienced a sales decrease as
gross sales decreased from $215,525 in the first nine months of 2002 to $205,370
in the first nine months of 2003.
Gross profit in the first nine months of 2003 was $110,690 compared to $133,106
in the first nine months of 2002. As a percentage of sales, gross profit
decreased in the first nine months of 2003 to 54% from 62% in the first nine
months of 2002.
General and Administrative (G & A) expenses were $221,359 and $138,095 in the
first nine months of 2003 and 2002, respectively. As a percentage of sales, G &
A expenses increased to 108% from 64%. This highly atypical result was caused by
the Company's move from Texas to New York because such a move disrupts sales and
manufacturing, and entails numerous one-time expenses. Compensation expenses
also increased with the addition of added management and increased compensation
of relocated employees.
9
Interest expense decreased slightly from $7,776 in the first nine months of 2002
to $5,904 in the first nine months of 2003.
Research and development expenses were $0 in the first nine months of 2002 and
$1,378 in the first nine months of 2003. This increase in R&D expenditures was
due to preliminary work to develop a new application for the Plasma Drive.
LIQUIDITY AND CAPITAL RESOURCES
For the quarter ended September 30, 2003, the Company showed a net loss of
$125,504. Consequently, the Company has been dependent on additional capital
contributions and debt financing to fund its cash requirements, as well as
revenues provided by the normal operations of Perma-Tune.
On September 12, 2003, the Company's $25,000 line of credit with The American
National Bank of Texas in Wylie matured. The note was collateralized by the
Company's accounts receivable, inventory and equipment, with an initial interest
rate of 7.75%. Interest is variable, based on the Prime Rate plus 3%. Accrued
interest is payable monthly. For the period ended September 30, 2003, the
principal balance owed on this line of credit was $22,824. The Company is
negotiating a repayment plan with the bank.
On December 8, 1997, the Company issued an offering circular for 125,000 units
priced at $2.00 per unit. Each unit entitled the investor to one share of common
stock and three stock purchase warrants. Each warrant entitled the holder to
purchase one share of stock for $2.00. The warrants expire on December 31, 2003.
At September 30, 2003, there were 348,000 warrants outstanding.
Proceeds from operations, debt funding or additional capital contributions are
expected to fund production tooling and start up costs of the Honda and Toyota
product lines. The Company plans to manufacture the required tooling estimated
at $35,000 in materials and 560 man hours. There may be other costs associated
with attaining the California Air Resources Board certification for the Honda,
Toyota and late model Porsche product lines.
As of September 30, 2003 the Company's cash reserves totaled $32,222 and total
current assets were $211,757. The Company is continuing production and sales
efforts as well as further research and development. For the remainder of 2003
and into 2004, the Company has no long-term commitments but expects to incur
additional costs for research and development. It also expects to expand its
sales and marketing effort. These efforts could significantly increase demand
for the Company's products beyond the Company's current production capacity.
While the Company believes it can increase its production capacity to meet sales
demand, additional capital could be required to meet expansion
requirements.
Inventory at September 30, 2003 was $39,381. Inventory at December 31, 2002 was
$34,447. Other current assets primarily represent a deposit made toward the
purchase of a building in which the Company will operate.
The Company presently has an outstanding loan payable on demand to Terry Taylor,
a stockholder. Principal balance as of September 30, 2003 is $40,000. The loan
bears an interest rate of 10%. Interest is payable quarterly. The loan is
secured by inventory.
The Company also presently has an outstanding loan payable on demand to Lonnie
Lenarduzzi and Linda Decker, stockholders and former directors. Principal
balance as of September 30, 2003 is $20,000. The loan bears an interest rate of
10%, and is unsecured. The note is due June 28, 2004, with the option to renew
the term for an additional year.
The Company's working capital ratio was 1.45 in the third quarter of 2003,
compared with 0.59 in the third quarter of 2002. The Company will retire
accounts payable from income generated by normal operations. It has agreements
with its former accounting firm to pay them as funding becomes available.
10
The Company's inventory turnover ratios were 2.46 and 2.4 for the third quarter
2002 and 2003, respectively.
The Company's accounts receivable turnover ratios were 36 days and 13 days for
the third quarters of 2002 and 2003, respectively. This improvement is
attributable to the increase in customers paying by advance wire transfer or COD
terms. The Company continues to manage its accounts receivable very effectively,
collecting monies due within the terms offered to its customers.
The former shareholders of Trans Max, who have become the Company's majority
stockholders, contributed additional paid-in-capital of $277,500 in the third
quarter, and the Company may require additional capital. There can be no
assurance that any new capital would be available to the Company or that
adequate funds for the Company's operations, whether from the Company's
revenues, financial markets, or other arrangements will be available when needed
or on terms satisfactory to the Company. The Company has no commitments from
officers, directors or affiliates to provide funding. The failure of the Company
to obtain adequate additional financing may require the Company to delay,
curtail or scale back some or all of its research and development programs,
sales and marketing efforts, and manufacturing operations. Any additional
financing may involve dilution to the Company's then-existing shareholders.
Without additional capital funding, the Company believes it can operate at its
current level of liquidity for twelve to twenty-four months. However, it hopes
to obtain short-term funding until operations are ramped up, creating the
profitability that will improve its liquidity position. The Company recently
completed a reverse merger transaction as discussed below.
REVERSE MERGER
On July 21, 2003, the Registrant acquired 100% of the issued and outstanding
shares of Trans Max Technologies, Inc., a Florida corporation, ("Trans Max") in
exchange for 15,177,300 shares of the Registrant's common stock. As a result of
the acquisition of Trans Max, the control of the Registrant shifted to the
former shareholders of Trans Max. The following individuals exercise control of
the Registrant.
Name No. of shares Percentage
---- --------------- ----------
Colonel Robert Fyn 5,312,055 30.4%
Murray H. Stark 5,312,055 30.4%
Peter Merganthaler 2,276,595 13.0%
Garth S. Bailey 2,276,595 13.0%
Following the Share Exchange there were 17,500,000 shares of the Registrant's
common stock outstanding. The change in control was reported via a Form 8-K in
August, 2003. The business of Perma-Tune Electronics, Inc. will remain the
business of the Registrant.
As a result of the acquisition of Trans Max, the Registrant will be changing its
name from Perma-Tune Electronics, Inc. to Trans Max Technologies, Inc. In
addition, Lonnie Lenarduzzi resigned as the Registrant's President, Chief
Executive Officer and Director, Linda Decker resigned as Secretary, Chief
Financial Officer, and Director and the following persons resigned as directors:
Larrie Lenarduzzi, Wayne Robertson, and Harold "Red" Smith. Peter Mergenthaler
was appointed as director and the Chief Executive Officer. Paul M. Cervino has
been appointed as the Chief Financial Officer of the Company.
11
ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our chief financial officer, after evaluating the effectiveness
of the Company's "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the
end of the period covered by this quarterly report (the "Evaluation Date"),
have concluded that as of the Evaluation Date, our disclosure controls and
procedures were adequate and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made known to
them by others within those entities.
(b) Changes in internal control over financial reporting. There were no
significant changes in our internal control over financial reporting during
our most recent fiscal quarter that materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
a. None.
b. None.
c.
On July 21, 2003, the Registrant issued 15,177,300 shares of the Registrant's
common stock in consideration for 100% of the issued and outstanding shares of
Trans Max Technologies, Inc. in connection with a Share Exchange Agreement. The
transaction was exempt from registration pursuant to Rule 506 of Regulation D.
In August 2003, the Registrant issued an aggregate of 75,000 shares of the
Registrant's common stock to an individual and an entity in consideration for an
introduction of the parties in connection with the Share Exchange Agreement.
The Registrant believes that the transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act as a transaction by an Issuer not
involving a public offering as the individual and entity have enough knowledge
and experience in finance and business matters to evaluate the risks and merits
of an investment in the Registrant and the individual and entity have access to
the type of information normally provided in a prospectus.
In September 2003, the Registrant issued an aggregate of 58,331 shares of the
Registrant's common stock to four individuals in connection with employment
agreements with the Registrant and its wholly-owned subsidiary. The Registrant
believes that the transaction was exempt from registration pursuant to Section
4(2) of the Securities Act as a transaction by an Issuer not involving a public
offering as the individuals have enough knowledge and experience in finance and
business matters to evaluate the risks and merits of an investment in the
Registrant and the individuals have access to the type of information normally
provided in a prospectus.
In October 2003, the Registrant issued an aggregate of 34,374 shares of the
Registrant's common stock to four individuals in connection with employment
agreements with the Registrant and its wholly-owned subsidiary. The Registrant
believes that the transaction was exempt from registration pursuant to Section
4(2) of the Securities Act as a transaction by an Issuer not involving a public
offering as the individuals have enough knowledge and experience in finance and
business matters to evaluate the risks and merits of an investment in the
Registrant and the individuals have access to the type of information normally
provided in a prospectus.
12
In November 2003, the Registrant issued an aggregate of 34,374 shares of the
Registrant's common stock to four individuals in connection with employment
agreements with the Registrant and its wholly-owned subsidiary. The Registrant
believes that the transaction was exempt from registration pursuant to Section
4(2) of the Securities Act as a transaction by an Issuer not involving a public
offering as the individuals have enough knowledge and experience in finance
and business matters to evaluate the risks and merits of an investment in the
Registrant and the individuals have access to the type of information normally
provided in a prospectus.
Item 5. Other Information
Robert E. Fyn, Murray H. Stark, Garth S. Bailey and Peter Mergenthaler own
majority control of Aero Marine Engine, Inc. as well as majority control of the
Registrant. Messrs. Fyn and Stark each own approximately 26% of Aero Marine
Engine, Inc. and Messrs. Bailey and Mergenthaler own approximately 13% of Aero
Marine Engine, Inc.
In November 2003, the Company agreed to provide a $1.5 million line of credit to
provide products and services to Aero Marine Engine, Inc. Pursuant to the
agreement between the Company and Aero Marine Engine, Inc., for every $2 paid to
the Company by Aero Marine Engine, Inc., the Company will extend $1 of credit,
up to a maximum of $1.5 million dollars.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
31.1 Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
31.2 Certification of Chief Financial Officer
pursuant Section 302 of the Sarbanes-
Oxley Act of 2002
32.1 Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
32.2 Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
b) Reports on Form 8-K
On August 14, 2003, the Registrant filed a report on Form 8-K relating to a
change in control.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PERMA-TUNE ELECTRONICS, INC.
Date: November 12, 2003
By: /s/ Peter Mergenthaler
------------------
Peter Mergenthaler
Chief Executive Officer
13
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Peter Mergenthaler, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Perma-Tune
Electronics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small
business issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect,
the small business issuer's internal control over financial reporting;
and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: November 12, 2003
By: /s/ Peter Mergenthaler
-------------------------------
Peter Mergenthaler,
Chief Executive Officer
14
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Paul M. Cervino, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Perma-Tune
Electronics, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small
business issuer and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small
business issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Paragraph omitted in accordance with SEC transition instructions
contained in SEC Release No. 33-8238;
c) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business
issuer's fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect,
the small business issuer's internal control over financial reporting;
and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: November 12, 2003
By: /s/ Paul M. Cervino
-------------------------------
Paul M. Cervino,
Chief Financial Officer
15
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
I, Peter Mergenthaler, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Perma-Tune Electronics, Inc. on Form 10-QSB for the quarterly period
ended September 30, 2003 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and that information contained
in such Form 10-QSB fairly presents in all material respects the financial
condition and results of operations of Perma-Tune Electronics, Inc.
By:/s/ Peter Mergenthaler
--------------------------
Name: Peter Mergenthaler
Title: Chief Executive Officer
November 12, 2003
16
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF TEHE SARBANES-OXLEY ACT OF 2002
I, Paul M. Cervino, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly
Report of Perma-Tune Electronics, Inc. on Form 10-QSB for the quarterly period
ended September 30, 2003 fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 and that information contained
in such Form 10-QSB fairly presents in all material respects the financial
condition and results of operations of Perma-Tune Electronics, Inc.
By:/s/ Paul M. Cervino
--------------------------
Name: Paul M. Cervino
Title: Chief Financial Officer
November 12, 2003
17