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 December 31, 2003
OR
[ ]TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE EXCHANGE ACT OF 1934
From the transition period from ___________ to ____________.
Commission File Number 000-49698
AERO MARINE ENGINE, INC.
------------------------
(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
200 Trade Zone Drive, 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
23960 Madison Street, Torrance, California 90505
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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 February 17, 2004, 54,994,922 shares of Common Stock of the issuer were
outstanding.
PART I. FINANCIAL INFORMATION
AERO MARINE ENGINE, INC.
CONSOLIDATED FINANCIAL STATEMENTS FOR THE
QUARTER ENDED DECEMBER 31, 2003
AERO MARINE ENGINE, INC.
TABLE OF CONTENTS
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PAGE
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet at December 31, 2003 A-1
Consolidated Statement of Operations for the Three Months Ended
December 31, 2003, the Six Months Ended December 31,
2003,and the period of December 30, 2002 (date of inception)
to December 31, 2003 A-2
Consolidated Statement of Cash Flows for the Six Months Ended
December 31, 2003 and the period of December 30, 2002
(date of inception) to December 31, 2003 A-3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A-4
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETAS OFDECEMBER 31, 2003
------------------------------------------------
(UNAUDITED)
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 28,645
Prepaids and other current assets 22,670
Inventories 266,519
-----------
Total current assets 317,834
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $11,530 115,237
INTANGIBLE ASSETS, net of accumulated amortization of $13,358 181,642
GOODWILL 526,384
-----------
TOTAL ASSETS $1,141,097
===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable $ 43,659
Accrued expenses 34,675
-----------
Total current liabilities 78,334
DUE TO RELATED PARTIES 28,875
ADVANCES FROM SHAREHOLDERS 396,684
-----------
Total liabilities 425,559
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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,
49,994,922 issued and outstanding 49,995
Paid in capital 1,146,982
Deficit accumulated during the development stage (559,773)
-----------
Total stockholders' equity 637,204
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,141,097
===========
The accompanying notes are an integral part of these consolidated financial
statements.
A-1
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
Period of
December 30, 2002
Three Months Six Months (date of inception)
Ended Ended through
December 31, 2003 December 31, 2003 December 31, 2003
REVENUES $ - $ - $ -
---------------- ------------------ -----------------
OPERATING EXPENSES:
Selling, general and administrative 156,759 269,218 269,218
Consulting 117 396 1,521
Professional fees 28,719 122,489 258,646
Depreciation and amortization 12,444 24,888 24,888
Total operating expenses 198,039 416,991 554,273
---------------- ------------------ -----------------
OPERATING LOSS (198,039) (416,991) (554,273)
---------------- ------------------ -----------------
INTEREST EXPENSE (5,500) (5,500) (5,500)
LOSS BEFORE INCOME TAXES (203,539) (422,491) (559,773)
INCOME TAX PROVISION (BENEFIT) - - -
---------------- ------------------ -----------------
NET LOSS $ (203,539) $ (422,491) $ (559,773)
================ ================== =================
NET LOSS PER SHARE:
Basic $ * $ * $ (0.01)
================ ================== =================
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 49,994,922 49,994,922 45,444,237
================ ================== =================
* - less than $0.01
The accompanying notes are an integral part of these consolidated financial
statements.
A-2
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
(UNAUDITED)
Period of
December 30, 2002
Six Months (date of inception)
Ended through
December 31, 2003 December 31, 2003
------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (422,491) $ (559,773)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 24,888 24,888
Changes in assets and liabilities (net of business acquisition):
Inventory 70 70
Prepaid expenses and other current assets (7,088) 529
Accounts payable and accrued liabilities (27,435) (35,645)
------------------- -------------------
Net cash used by operating activities (432,056) (569,931)
------------------- -------------------
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 28,875 28,875
Proceeds from shareholders 396,684 396,684
Proceeds from sale of common stock and contributed capital - 1,218,598
------------------- -------------------
Net cash provided by financing activities 425,559 1,644,157
------------------- -------------------
(DECREASE)/INCREASE IN CASH (33,264) 28,645
CASH, BEGINNING OF PERIOD 61,909 -
------------------- -------------------
CASH, END OF PERIOD $ 28,645 $ 28,645
=================== ===================
The accompanying notes are an integral part of these consolidated financial
statements.
A-3
AERO MARINE ENGINE, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2003
------------------------------------------
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 the date of inception is December 30, 2002, there are no comparative
statements of operations and cash flows for the period ended December 31, 2002.
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
December 31, 2003. The consolidated entity is considered a development stage
enterprise as of December 31, 2003.
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-4
The Company, under its new management, has raised over $1,200,000 (see #3) in
cash to effect the acquisition of Dyna-Cam. Management believes that it has the
ability to raise additional capital adequate to complete the development of the
Dyna-Cam engine and begin revenue generating operations. In the six months
ended December 31, 2003, shareholders of the Company have contributed advances
of approximately $397,000.
Management believes the Company's capital restructuring and financing plans
along with the expected sale of engines will allow the Company to obtain
sufficient capital for operations and to continue as a going concern.
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 December 31, 2003 was $5,765 and $11,530 for the six
months ended December 31, 2003.
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.
A-5
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.
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 December 31, 2003 was $6,679
and $13,358 for the six months ended December 31, 2003.
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.
A-6
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.
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. 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.
A-7
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.
The Company issued 5,000,000 shares of its common stock in January 2004 pursuant
to an S-8 registration statement. These shares are reflected as issued on the
date of issuance.
4. RELATED PARTY TRANSACTIONS
Certain of the Company's shareholders have advanced funds to the Company to
cover cash flow deficiencies. During the six month period ended December 31,
2003, these shareholders advanced $396,684 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
* * * * * *
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.
-1-
PLAN OF OPERATIONS
The Company has obtained financing commitments to satisfy its cash requirements
for the next twelve months at current operating levels and to commence
production of the Dyna-Cam Engine.
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 production of the
Dyna-Cam Engine to Long Island, New York to a 65,000 square foot facility.
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.
The Company met with representatives of several consulting and engineering firms
in the Middle East in December of 2003 and discussions continue,
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.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2003
REVENUES
The Company had no revenues for the three months ended December 31, 2003, and
the six months ended December 31, 2003
-2-
COSTS AND EXPENSES
For the three months ended December 31, 2003 and six months ended December 31,
2003, the Company had costs and expenses of $198,039 and $416,991 respectively.
For the three months ended December 31, 2003, these expenses consisted of
selling, general and administrative ("SG&A") expenses of $156,759, consulting
expenses of $117, professional fees of $28,719 and depreciation and amortization
of $12,444. For the six months ended December 31, 2003, these expenses consisted
of selling, general and administrative ("SG&A") expenses of $269,218, consulting
expenses of $396, professional fees of $122,489 and depreciation and
amortization of $24,888.
LOSS FROM OPERATION AND NET LOSS
Loss from operations for the three months ended December 31, 2003 was $198,039
and $416,991 for the six months ended December 31, 2003.
Net Loss
Net loss was $203,539 for the three months ended December 31, 2003 and $422,491
for the six months ended December 31, 2003. Interest expense for the three
months ended December 31, 2003 and for the six months ended December 31, 2003
was $5,500. 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 $0.00 for the three months ended
December 31, 2003 and $0.00 for the six months ended December 31, 2003.
Liquidity and Capital Resources
For the three months ended December 31, 2003 as well as the six months ended
December 31, 2003, 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 December 31, 2003, the Company had accounts payable of $43,659, accrued
expenses of $34,675, and due to related parties of $28,875. The due to related
party of $28,875 is a result of cash advance's made from an affiliate for
expense's associated with the Company's move to New York. (see item #5)
As of December 31, 2003, the Company had cash held in trust of $23,000, and
inventories of $266,519. The Company has working capital of $239,500.
The Company received financing from its majority shareholders in the amount of
$1,218,598 during the period from inception (December 30, 2002) through December
31, 2003. 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 $396,684 had been loaned as of December
31, 2003. 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 December 31, 2003, interest expense of $5,500 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.
-3-
Critical Accounting Estimates
As of December 31, 2003, the Company has goodwill and intangible assets of
$526,384 and $181,642, respectively. In addition, the Company has a large Net
Operating Loss Carryforward 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 30% of Trans Max
Technologies, Inc. and Messrs. Bailey and Mergenthaler own approximately 13% of
Trans Max Technologies, Inc.
-4-
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.
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 TWO REPORTS ON FORM 8-K DURING THE QUARTER
COVERED BY THIS REPORT:
(1) Form 8-K/A Amendment No. 1 filed on October 14, 2003, to amend the Form 8-K
filed on July 8, 2003.
(2) Form 8-K/A Amendment No. 2 filed on November 26, 2003, to amend the Form
8-K filed on July 8, 2003 and the Form 8-K/A Amendment No. 2 filed on
October 14, 2003, by providing pro forma financial information.
-5-
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:
1. I have reviewed this quarterly report on Form 10-QSB of Aero Marine
Engine, 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. 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:
a. 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;
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 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
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. 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: February 17, 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
December 31, 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 Aero Marine Engine, Inc.
Date: February 17, 2004
By: /s/ Richard Powers
-------------------------------
Richard Powers,
Chief Executive Officer and
Principal Financial Officer