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 March 31, 2004
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 000-49698
AERO MARINE ENGINE, INC.
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(Exact name of registrant as specified in its charter)
Nevada 98-0353007
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(State or other jurisdiction of incorporation or organization)(IRS Employer
Identification No.)
New Address
2190 Smithtown Avenue, Ronkonkoma, New York 11779
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(Address of principal executive offices)
(631) 285-7101
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(Issuer's telephone number)
Former Address
200 Trade Zone Drive, Ronkonkoma, New York 11779
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(Address of principal executive offices)
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 X No
As of May 24, 2004, 54,134,923 shares of Common Stock of the issuer were
outstanding.
PART I. FINANCIAL INFORMATION
AERO MARINE ENGINE, INC.
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
QUARTER ENDED MARCH 31, 2004
AERO MARINE ENGINE, INC.
TABLE OF CONTENTS
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PAGE
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet at March 31, 2004 A-3
Consolidated Statement of Operations for the Three Months Ended
March 31, 2004, the Nine Months Ended March 31,
2004,and the period of December 30, 2002 (date of inception)
to March 31, 2004 A-4
Consolidated Statement of Cash Flows for the Nine Months Ended
March 31, 2004 and the period of December 30, 2002
(date of inception) to March 31, 2004 A-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A-6
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETAS OFMARCH 31, 2004
---------------------------------------------
(UNAUDITED)
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 33
Inventories 266,519
Prepaids and other current assets 25,670
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Total current assets 292,222
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $18,803 107,964
INTANGIBLE ASSETS, net of accumulated amortization of $20,037 174,963
DEPOSITS AND OTHER ASSETS 5,150
GOODWILL 526,384
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TOTAL ASSETS $ 1,106,683
============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 53,418
Accrued expenses 76,168
------------
Total current liabilities 129,586
DUE TO RELATED PARTIES 218,966
ADVANCES FROM SHAREHOLDERS 406,584
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Total liabilities 755,136
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STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value, 100,000,000 shares authorized,
none issued and outstanding -
Common stock, $0.001 par value, 100,000,000 shares authorized,
54,994,922 issued and outstanding 54,995
Paid in capital 4,491,982
Deficit accumulated during the development stage (4,195,430)
------------
Total stockholders' equity 351,547
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,106,683
============
The accompanying notes are an integral part of these consolidated financial
statements.
A-3
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
Period of
December 30, 2002
Three Months Nine Months (date of inception)
Ended Ended through
March 31, 2004 March 31, 2004 March 31, 2004
---------------- ---------------- ----------------
REVENUES $ - $ - $ -
---------------- ---------------- ----------------
OPERATING EXPENSES:
Selling, general and administrative 251,405 520,623 520,623
Consulting 3,353,749 3,354,145 3,355,270
Professional fees 11,111 133,600 269,757
Depreciation and amortization 13,952 38,840 38,840
---------------- ---------------- ----------------
Total operating expenses 3,630,217 4,047,208 4,184,490
---------------- ---------------- ----------------
OPERATING LOSS (3,630,217) (4,047,208) (4,184,490)
---------------- ---------------- ----------------
INTEREST EXPENSE (5,440) (10,940) (10,940)
---------------- ---------------- ----------------
LOSS BEFORE INCOME TAXES (3,635,657) (4,058,148) (4,195,430)
INCOME TAX PROVISION (BENEFIT) - - -
---------------- ---------------- ----------------
NET LOSS $ (3,635,657) $ (4,058,148) $ (4,195,430)
================ ================ ================
NET LOSS PER SHARE:
Basic $ (0.07) $ (0.08) $ (0.09)
================ ================ ================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 53,896,021 51,285,831 47,102,143
================ ================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
A-4
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
------------------------------------------------
Period of
December 30, 2002
Nine Months (date of inception)
Ended through
March 31, 2004 March 31, 2004
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,058,148) $ (4,195,430)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 38,840 38,840
Common stock issued for services 3,350,000 3,350,000
Changes in assets and liabilities (net of business acquisition):
Inventory 70 70
Prepaid expenses and other current assets (10,088) (2,471)
Deposits and other assets (5,150) (5,150)
Accounts payable and accrued liabilities 23,817 15,607
---------------- ----------------
Net cash used by operating activities (660,659) (798,534)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (26,767) (26,767)
Purchase of business - (1,018,814)
---------------- ----------------
Net cash (used in) investing activities (26,767) (1,045,581)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related parties 218,966 218,966
Proceeds from shareholders 406,584 406,584
Proceeds from sale of common stock and contributed capital - 1,218,598
---------------- ----------------
Net cash provided by financing activities 625,550 1,844,148
---------------- ----------------
(DECREASE)/INCREASE IN CASH (61,876) 33
CASH, BEGINNING OF PERIOD 61,909 -
---------------- ----------------
CASH, END OF PERIOD $ 33 $ 33
================ ================
The accompanying notes are an integral part of these consolidated financial
statements.
A-5
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED MARCH 31, 2004
----------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Princeton Ventures, Inc. (the "Company") was incorporated in the State of Nevada
on May 10, 2001. The Company had not commenced operations. On May 30, 2003,
the Company exchanged 37,944,922 shares of its common stock for all of the
issued and outstanding shares of Aero Marine Engine Corp. ("Aero"). Aero was
formed on December 30, 2002. Aero had no operations and was formed to acquire
the assets of Dyna-Cam Engine Corporation. The Company changed its name from
Princeton Ventures, Inc. to Aero Marine Engine, Inc.
At the time that the transaction was agreed to, the Company had 20,337,860
common shares issued and outstanding. In contemplation of the transaction with
Aero, the Company's two primary shareholders cancelled 9,337,860 shares of the
Company's common stock held by them, leaving 11,000,000 shares issued and
outstanding. As a result of the acquisition of Aero, there were 48,944,922
common shares outstanding, and the former Aero stockholders held approximately
78% of the Company's voting stock. For financial accounting purposes, the
acquisition was a reverse acquisition of the Company by Aero, under the purchase
method of accounting, and was treated as a recapitalization with Aero as the
acquirer. Accordingly, the historical financial statements have been restated
after giving effect to the May 30, 2003, acquisition of the Company. The
financial statements have been prepared to give retroactive effect to December
30, 2002, the date of inception of Aero, of the reverse acquisition completed on
May 30, 2003, and represent the operations of Aero. Consistent with reverse
acquisition accounting: (i) all of Aero's assets, liabilities, and accumulated
deficit, are reflected at their combined historical cost (as the accounting
acquirer) and (ii) the preexisting outstanding shares of the Company (the
accounting acquiree) are reflected at their net asset value as if issued on May
30, 2003.
Additionally, on June 30, 2003, the Company acquired the operating assets of
Dyna-Cam Engine Corp. ("Dyna-Cam"). Dyna-Cam was a development stage enterprise
developing a unique, axial cam-drive, free piston, internal combustion engine.
Dyna Cam intended to produce and sell the engine primarily for aircraft and
marine applications. Dyna-Cam had not generated significant revenues at the
time of the Company's acquisition.
The accompanying financial statements represent the consolidated financial
position and results of operations of the Company and include the accounts and
results of operations of the Company and Aero, its wholly owned subsidiary.
Because there were no operations in the period of January 1, 2003 through March
31, 2003, there are no comparative statements of operations and cash flows for
the three month period ended March 31, 2003. The purchase of the operating
assets of Dyna-Cam occurred on June 30, 2003, and the effect of that purchase is
included in the accompanying balance sheet at March 31, 2004. The consolidated
entity is considered a development stage enterprise as of March 31, 2004.
(See Subsequent Event Footnote.)
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
The Company faces many operating and industry challenges. The Company intends
to do business in a highly competitive industry. Future operating losses for
the Company are anticipated and the proposed plan of operations, even if
successful, may not result in cash flow sufficient to finance the initiation and
continued expansion of its business. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Realization of
assets is dependent upon continued operations of the Company, which in turn is
dependent upon management's plans to meet its financing requirements, as
discussed below, and the success of its future operations. The financial
statements do not include any adjustments that might result from this
uncertainty.
A-6
The Company, under its new management, has raised over $1,200,000 in cash to
effect the acquisition of Dyna-Cam. Management believes that significant
capital is required to adequately develop the Dyna-Cam engine and begin
operations. In the nine months ended March 31, 2004,
shareholders of the Company have contributed advances of approximately $407,000.
During the remainder of 2004 and beyond the Company will require additional
capital. Although the current majority stockholders of the Company, as well
as an affiliate, have made verbal commitments, with no guarantees, to continue
to fund the development and sales and marketing efforts of the Company, if
alternate financing cannot be obtained, 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 failure of the Company to obtain adequate additional
financing will require the Company to delay, curtail or scale back some or
all of its research and development programs, sales, marketing efforts
and manufacturing operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash includes all short-term highly liquid investments that are readily
----
convertible to known amounts of cash and have original maturities of three
months or less.
Principles of Consolidation: The consolidated financial statements include the
----------------------------
accounts of the Company and its wholly owned subsidiary, Aero Marine Engine
Corp. All significant intercompany accounts and transactions are eliminated.
Inventories consist of raw materials and purchased parts used in the
-----------
manufacturing of engines. The Company records its inventory at the lower of
cost (first-in, first-out) or market.
Property and equipment is stated at cost less accumulated depreciation.
----------------------
Depreciation is recorded on a straight-line basis over the estimated useful
lives of the assets ranging from three to seven years. The depreciation expense
for the three months ended March 31, 2004 was $6,586 and $18,803 for the nine
months ended March 31, 2004.
Income taxes: The Company provides for income taxes based on the provisions of
------------
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which, among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
financial statements.
Financial Instruments: Financial instruments consist primarily of cash and
---------------------
obligations under accounts payable and accrued expenses. The carrying amounts
of cash, accounts payable and accrued expenses approximate fair value because of
the short maturity of those instruments. The Company has applied certain
assumptions in estimating these fair values. The use of different assumptions or
methodologies may have a material effect on the estimates of fair values.
Net loss per share is calculated using the weighted average number of shares of
-------------------
common stock outstanding during the year as prescribed by the provisions of SFAS
No. 128 Earnings Per Share.
Use of Estimates: The preparation of financial statements in conformity with
------------------
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and 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.
A-7
Intangible Assets: Intangible assets are comprised of goodwill and certain
------------------
finite life intangible assets purchased in the acquisition of the Dyna-Cam
operating assets. These assets represent the value of the difference between
the purchase price of the acquired business and the fair value of the
identifiable tangible net assets. The Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 142, Goodwill and Other Intangible Assets. The
Company does not amortize goodwill but rather annually evaluates the carrying
value of goodwill for impairment, in accordance with the provisions of SFAS No.
142. The finite life of the intangibles will be amortized over 7 to 10 years.
The amortization expense for the three months ended March 31, 2004 was $6,679
and $20,037 for the nine months ended March 31, 2004.
Recently Issued Accounting Pronouncements:
-----------------------------------------
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
With Exit or Disposal Activities". This Standard requires costs associated with
exit or disposal activities to be recognized when they are incurred. The
requirements of SFAS No. 146 apply prospectively after June 30, 2003, and as
such, the Company cannot reasonably estimate the impact of adopting these new
rules.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 is effective October 1, 2002. The adoption
of SFAS No. 147 did not have a material effect on the Company's financial
statements.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities," effective for contracts entered
into or modified after June 30, 2003. This amendment clarifies when a contract
meets the characteristics of a derivative, clarifies when a derivate contains a
financing component and amends certain other existing pronouncements. The
Company believes the adoption of SFAS No. 149 will not have a material effect on
the Company's financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. SFAS No. 150 requires the classification as a
liability of any financial instruments with a mandatory redemption feature, an
obligation to repurchase equity shares, or a conditional obligation based on the
issuance of a variable number of its equity shares. The Company does not have
any authorized preferred shares or other financial instruments with a mandatory
redemption feature. The Company believes the adoption of SFAS No. 150 will not
have a material effect on the Company's financial statements.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 clarifies the
requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding. The initial recognition and initial
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective
for financial statements for periods ending after December 15, 2002. The
adoption of FIN 45 did not impact the Company's financial statements.
A-8
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities" (FIN 46). FIN No. 46 states that companies that have exposure to the
economic risks and potential rewards from another entity's assets and activities
have a controlling financial interest in a variable interest entity and should
consolidate the entity, despite the absence of clear control through a voting
equity interest. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. For variable interest entities that
existed prior to February 1, 2003, the consolidation requirements are effective
for annual or interim periods beginning after June 15, 2003. Disclosure of
significant variable interest entities is required in all financial statements
issued after January 31, 2003, regardless of when the variable interest was
created. The adoption of FIN No. 46 did not have a material impact on the
Company's financial statements.
Impairment of long-lived assets is assessed by the Company for impairment
-------------------------------
whenever there is an indication that the carrying amount of the asset may not be
recoverable. Recoverability of these assets is determined by comparing the
forecasted undiscounted cash flows generated by those assets to the assets' net
carrying value. The amount of impairment loss, if any, is measured as the
difference between the net book value of the assets and the estimated fair value
of the related assets.
3. STOCKHOLDERS' EQUITY
The Company declared a 3.1126202 for 1 stock split effective June 30, 2003. The
number of shares presented in these financial statements has been retroactively
restated for all periods to reflect this stock split.
The Company issued 37,944,922 shares of its common stock in connection with the
acquisition of Aero Marine Engine Corp. Under reverse acquisition accounting,
these shares are reflected as issued on the date of inception and valued at the
book value of the net assets of as of the date of the transaction.
Aero was incorporated in contemplation of the reverse acquisition of the Company
as well as the Dyna-Cam acquisition. A total of 38,944,922 common shares were
issued in the reverse merger transaction. However, 1,000,000 of those shares
were designated for the Dyna-Cam acquisition. (See Subsequent Event Footnote.)
The Company raised $1,218,598 as
part of its initial capitalization. This capital was raised among four
individuals in contemplation of their receiving the 37,944,922 shares of the
Company's common stock in connection with the acquisition of Aero Marine Engine
Corp. The value of the 1,000,000 shares issued in connection with the Dyna-Cam
purchase was determined to be $0.032 per share, which is the price per share
paid by the investors that acquired the 37,944,922 shares for cash.
In connection with the reverse acquisition transaction with Aero, the Company's
two controlling shareholders at that time cancelled 9,337,860 shares of common
stock held by them. Upon completion of this cancellation, the Company had
11,000,000 shares of common stock remaining outstanding prior to the reverse
acquisition transaction.
During the quarter ended March 31, 2004, the Company issued 5,000,000 shares of
its common stock in exchange for consulting services rendered to the company
pursuant to an S-8 registration statement.
4. RELATED PARTY TRANSACTIONS
Certain of the Company's shareholders have advanced funds to the Company to
cover cash flow deficiencies. During the three and nine months ended March 31,
2004, these shareholders advanced $9,900 and $406,584, respectively, to the
Company. The advances have no stated repayment terms. The advances will bear
interest at the Federal Reserve prime rate plus 1.25% and interest will be
payable annually. In addition, an affiliated entity is providing office space
to the Company at no charge, and is providing funds for payroll, moving and
other general expenses. In the three and nine month periods ended March 31,
2004, the Company incurred and accrued $190,091 and $218,966, respectively, in
liabilities to this entity. The advances and funding are based on verbal
commitments with no guarantees of future advances or funding.
5. Subsequent Event
In April, 2004 the Company cancelled 860,000 shares of common stock related to
the Dyna-Cam acquisition due to non-performance.
* * * * * *
A-9
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, AS AMENDED AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH ON THE FORWARD LOOKING STATEMENTS AS A RESULT OF
THE RISKS SET FORTH IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION, GENERAL ECONOMIC CONDITIONS, AND CHANGES IN THE ASSUMPTIONS USED IN
MAKING SUCH FORWARD LOOKING STATEMENTS.
OVERVIEW
The Company was incorporated in the State of Nevada on May 10, 2001 under the
name Princeton Ventures, Inc. The Company owns 100% of the issued and
outstanding stock of Aero Marine Engine Corp., incorporated in the State of
Nevada on December 30, 2002 (hereinafter "Aero"). The Company acquired Aero in
a reverse merger during the fiscal year ended June 30, 2003. The Company has
not generated any revenues and is considered a development stage enterprise, as
defined in Financial Accounting Standards Board No. 7.
During the 2003 fiscal year, Aero acquired all of the tangible and intangible
assets regarding a proprietary internal combustion, gasoline powered engine (the
"Dyna-Cam Engine"). These assets, included, but were not limited to, three
Dyna-Cam Engines, all engineering plans, designs and drawings, system maps,
abstracts, blueprints, surveys and drawings relating thereto, materials to
assemble approximately twenty Dyna-Cam Engines, the tooling to manufacture the
Dyna-Cam Engine, the "Dyna-Cam" web site and all interest in and to the trade
name and trademarks and all other rights related to the use of the name
"Dyna-Cam" or any combination or variation thereof. The Company, through Aero,
is currently engaged in the development, manufacture and distribution of the
Dyna-Cam Engine.
PLAN OF OPERATIONS
The Company has verbal commitments to satisfy its cash requirements
for the next twelve months at current operating levels and to commence
production of the Dyna-Cam Engine. However, the commitments are not binding and
there can be no assurance that the Company will in fact receive such funding.
Currently, the Company is developing a spark-assisted version of the Dyna-Cam
Engine and researching a full diesel version. The Company intends to conduct
further research and development on the Dyna-Cam Engine regarding its chamber
design, cylinder heads, fuel delivery system and exhaust removal system.
The Company will need to acquire additional milling capacity and machining
equipment to achieve commercial levels of production. At this time, the Company
cannot determine with reasonable certainty the amount of equipment that it will
need. In January 2004, the Company moved its headquarters and future production
capabilities of the Dyna-Cam Engine to Ronkonkoma, New York.
The Company anticipates that it will need to hire several additional skilled
machinists to achieve commercial levels of production of the Dyna-Cam Engine.
The number of machinists hired will depend on the volume of production.
In January 2004, Richard Powers was appointed President and Chief Executive
Officer and serves as the sole director and Alan Cohen was appointed Executive
Vice President. In January of 2004, Garth S. Bailey resigned as Chief Executive
Officer, President and Director.
In February of 2004 the Company was an exhibitor at the Miami International Boat
Show. During this trade show the Company explored new marketing and sales
opportunities as well as new applications in the marine industry.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, 2004
REVENUES
The Company had no revenues for the three months ended March 31, 2004, and the
nine months ended March 31, 2004
COSTS AND EXPENSES
For the three months ended March 31, 2004 and nine months ended March 31, 2004,
the Company had costs and expenses of $3,635,657 and $4,058,148, respectively.
For the three months ended March 31, 2004, these expenses consisted of selling,
general and administrative ("SG&A") expenses of $251,405, consulting expense of
$3,353,749, professional fees of $11,111 and depreciation and amortization of
$13,952. The consulting expenses for the three months and nine months are
primarily a result of 5,000,000 shares issued in connection with consulting
services performed for the company and valued at market. For the nine months
ended March 31, 2004, these expenses consisted of selling, general and
administrative ("SG&A") expenses of $520,623 consulting expenses of $3,354,145,
professional fees of $133,600 and depreciation and amortization of $38,840.
LOSS FROM OPERATION AND NET LOSS
Loss from operations for the three months ended March 31, 2004 was $3,630,217
and $4,047,208 for the nine months ended March 31, 2004.
Net Loss
Net loss was $3,635,657 for the three months ended March 31, 2004 and $4,058,148
for the nine months ended March 31, 2004. Interest expense for the three months
and nine months ended March 31, 2004 was $5,440 and $10,940 respectively. The
Company did not recognize a deferred income tax provision or benefit.
Net Loss Per Share
The Company had a net loss per share of $0.07 for the three months ended March
31, 2004 and $0.08 for the nine months ended March 31, 2004.
Liquidity and Capital Resources
For the three months ended March 31, 2004 as well as the nine months ended March
31, 2004, the Company did not generate cash flow from its operations. As a
result, the Company requires additional working capital to develop its business
until the Company either achieves a level of revenues adequate to generate
sufficient cash flows from operations or obtains additional financing necessary
to support its working capital requirements.
As of March 31, 2004, the Company had accounts payable of $53,418, accrued
expenses of $76,168, and due to related parties of $218,966. The due to related
party of $218,966 is primarily a result of cash advances made from an affiliate
to fund the company's payroll, cash advances for expense's associated with the
Company's move to New York, trade show expenses, and funding development costs
in connection with the reconfiguration of the Dyna-Cam engine.
As of March 31, 2004, the Company had inventories of $266,519 and working
capital of $162,636.
The Company received financing from its majority shareholders in the amount of
$1,218,598 during the period from inception (December 30, 2002) through March
31, 2004. In addition, the Company secured financing in the amount of $2,500,000
from existing shareholders, to be advanced to the Company as unsecured
shareholder loans, of which $406,584 had been loaned as of March 31, 2004.
Although the commitments mentioned above were made, the Company has not been
able to obtain such funding. If the Company receives funds, the advances will
bear interest at the Federal Reserve prime rate plus 1.25% and interest will be
payable annually. There is no repayment schedule at this time. As of March 31,
2004, interest expense of $10,940 has been accrued. In addition, Trans Max
Technologies has agreed to extend to the Company a $1.5 million credit line to
provide products and services to the Company as discussed below in Part II, Item
5, but this credit line requires the Company to spend money in order to receive
additional credit.
During the remainder of 2004 and beyond the Company will require additional
capital. Although the current majority stockholders of the Company, as well as
an affiliate, have made verbal commitments, with no guarantees, to continue to
fund the development and sales and marketing efforts of the Company, if
alternate financing cannot be obtained, 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 failure of the Company to obtain adequate additional financing will
require the Company to delay, curtail or scale back some or all of its research
and development programs, sales, marketing efforts and manufacturing operations.
The Company is currently dependant on receiving funding from its majority
shareholders and an affiliate with the same majority shareholders. If funding
were to stop or the Company could not raise additional capital, the Company
would not be able to continue operations beyond its current pay cycle.
Critical Accounting Estimates
As of March 31, 2004, the Company has goodwill and net intangible assets of
$526,384 and $174,963, respectively. In addition, the Company has a large Net
Operating Loss Carry-forward for income tax purposes which is fully reserved.
ITEM 3. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. Our chief executive
officer and our principal 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"), has
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 him 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 5. OTHER INFORMATION
Robert E. Fyn, Murray H. Stark, Garth S. Bailey and Peter Mergenthaler own
majority control of Trans Max Technologies, Inc. as well as majority control of
the Registrant. Messrs. Fyn and Stark each own approximately 29% of Trans Max
Technologies, Inc. and Messrs. Bailey and Mergenthaler own approximately 12% of
Trans Max Technologies, Inc.
In November 2003, Trans Max Technologies, Inc., formally Perma-Tune Electronics,
Inc agreed to provide a $1.5 million line of credit to provide products and
services to the Company. Pursuant to the agreement between the Company and
Trans Max Technologies, Inc., for every $2 paid to Trans Max Technologies, Inc.
by the Company, Trans Max Technologies, Inc. will extend $1 of credit, up to a
maximum of $1.5 million dollars.
In January 2004, our former Chief Executive Officer, President, and Director
resigned and Richard Powers became our Chief Executive Officer and Director. In
addition, Alan Cohen was elected as our Executive Vice President.
The Company has relocated to a temporary location it is sharing with Trans Max
Technologies, Inc., which is under common control with the Company
while renovation and possible purchase of a 65,000 square foot building
in Ronkonkoma, New York is pending.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit No. Description
31 Certificate of the Chief Executive
Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002 *
32 Certificate of the Chief Executive
Officer and Chief Financial Officer
pursuant to section 906 of the Sarbanes-
Oxley Act of 2002 *
* FILED HEREIN.
B) REPORTS ON FORM 8-K
The Company filed the following report on Form 8-K during the quarter covered by
this Report:
On January 15, 2004, a report on Form 8-K was filed announcing that Richard
Powers had become a Director and the Company's Chief Executive Officer.
EXHIBIT 31
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICIER PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Powers, certify that:
I have reviewed this quarterly report on Form 10-QSB of Aero Marine
Engine, Inc.
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;
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;
As the small business issuer's certifying officer, I am 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:
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under my supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to me by others within those entities,
particularly during the period in which this report is being prepared;
Paragraph omitted in accordance with SEC transition instructions contained in
SEC Release No. 33-8238;
Evaluated the effectiveness of the small business issuer's disclosure controls
and procedures and presented in this report my 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
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
I have disclosed, based on my 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 other employees who
have a significant role in the small business issuer's internal control over
financial reporting.
Date: May 24, 2004
By: /s/ Richard Powers
-------------------------------
Richard Powers,
Chief Executive Officer
EXHIBIT 32
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Powers, 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 Aero Marine Engine, Inc. on Form 10-QSB for the quarterly period ended
March 31, 2004 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 Aero Marine Engine, Inc.
Date: May 24, 2004
By: /s/ Richard Powers
-------------------------------
Richard Powers,
Chief Executive Officer and
Principal Financial Officer