UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
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Commission File Number: 000-33321
Fuel Centers, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 33-0967648
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9323 Vista Serena, Cypress, California 90630
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(Address of principal executive offices)
(714) 220.1806
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(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of November 19, 2002, there were
12,550,450 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
FUEL CENTERS, INC.
BALANCE SHEET
SEPTEMBER 30, 2002
(UNAUDITED)
ASSETS
------
Current assets
Cash $ 231
Prepaid expenses 7,880
Interest receivable 41,753
8% convertible note receivable 2,000,000
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Total current assets 2,049,864
Other assets ---
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Total assets $ 2,049,864
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 71,709
-------------
Total current liabilities 71,709
8% convertible notes payable 2,041,000
Stockholders' Deficit
Preferred stock, $.001 par value;
Authorized shares-- 5,000,000
Issued and outstanding share-- 0 ---
Common stock, $.001 par value;
Authorized shares-- 50,000,000
Issued and outstanding shares-- 12,550,450 6,005
Additional paid-in capital 39,343
Accumulated deficit (108,193)
---------------
Total stockholders' deficit (62,845)
---------------
Total liabilities and stockholders' deficit $ 2,049,864
===============
See accompanying notes to financial statements.
2
FUEL CENTERS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- ---------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net revenues $ --- $ --- $ --- $ ---
Operating expenses
Consulting services 18 --- 9,104 3,550
Legal and professional fees 57,539 4,683 74,499 13,365
Occupancy 605 605 1,815 1,150
Office supplies and expense 75 945 1,452 1,100
------------ ------------ ------------ ------------
Total operating expenses 58,237 6,233 86,870 19,165
Other income/(expense)
Interest income 40,000 --- 41,753 ---
Interest expense (40,820) --- (42,609) ---
------------ ------------ ------------ ------------
Total other income/(expense) (820) --- (856) ---
------------ ------------ ------------ ------------
Loss from operations (59,057) (6,233) (87,726) (19,165)
Provision for income tax expense
(benefit) --- --- --- ---
------------ ------------ ------------ ------------
Net loss/comprehensive loss $ (59,057) $ (6,233) $ (87,726) $ (19,165)
============ ============ ============ ============
Net loss/comprehensive loss per common
share --- basic and diluted
$ --- $ --- $ --- $ ---
============ ============ ============ ============
Weighted average of common shares ---
basic and diluted 12,550,450 6,005,000 8,354,650 5,570,165
============ ============ ============ ============
See accompanying notes to financial statements.
3
FUEL CENTERS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
APRIL 9, 2001 (INCEPTION) THROUGH SEPTEMBER 30, 2002
(UNAUDITED)
Common Stock Additional
------------ Paid-In Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, April 9, 2001 --- $ --- $ --- $ --- $ ---
Issuance of common stock,
April 10, 2001 5,050,000 5,050 --- --- 5,050
Issuance of common stock,
June 17, 2001 25,000 25 475 --- 500
Issuance of common stock,
June 28, 2001 930,000 930 17,670 --- 18,600
Cost of occupancy
contributed by officer --- --- 1,755 --- 1,755
Cost of legal fees
contributed by officer --- --- 4,664 --- 4,664
Net loss/comprehensive loss --- --- --- (20,467) (20,467)
----------- ----------- ----------- ----------- ------------
Balance, December 31, 2001 6,005,000 6,005 24,564 (20,467) 10,102
----------- ----------- ----------- ----------- -----------
Cost of occupancy
contributed by officer --- --- 1,815 --- 1,815
Cost of office supplies
contributed by officer --- --- 35 --- 35
Cost of legal fees
contributed by officer --- --- 12,929 --- 12,929
Issuance of 2.09:1 forward
common stock split,
June 24, 2002 6,545,450 --- --- --- ---
Net loss/comprehensive loss --- --- --- (87,726) (87,726)
----------- ----------- ----------- ----------- -----------
Balance, September 30, 2002 6,005,000 $ 6,005 $ 39,343 $ (108,193) $ (62,845)
=========== =========== =========== =========== ===========
See accompanying notes to financial statements.
4
FUEL CENTERS, INC.
STATEMENT OF CASH FLOWS
SEPTEMBER 30, 2002
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------
2002 2001
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Cash flows from operating activities
Net loss $ (87,726) $ (19,165)
Adjustments to reconcile net loss to net cash used in
operating activities
Cost of consulting services paid with common stock --- 3,550
Cost of legal services paid with common stock --- 1,500
Occupancy cost contributed by officer 1,815 1,150
Computer expense contributed by officer 35 ---
Legal expense contributed by officer 12,929 ---
Changes in operating assets and liabilities
(Increase) in prepaid expenses (7,880) ---
(Increase) in interest receivable (41,753) ---
Increase in accounts payable and accrued expenses 26,565 ---
Increase in interest payable 42,609 1,035
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Net cash used by operating activities (53,406) (11,930)
Cash flows from investing activities
Payment in exchange of 8% convertible note receivable (2,000,000) ---
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Net cash used by investing activities (2,000,000) ---
Cash flows from financing activities
Proceeds from issuance of 8% convertible notes payable 2,041,000 ---
Proceeds from issuance of common stock --- 19,100
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Net cash provided by financing activities 2,041,000 19,100
Net increase (decrease) in cash (12,406) 7,170
Cash, beginning of period 12,637 ---
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Cash, end of period $ 231 $ 7,170
=============== ==============
Supplemental disclosure of cash flow information
Income taxes paid $ --- $ ---
=============== ==============
Interest paid $ 1,789 $ ---
=============== ==============
See accompanying notes to financial statements.
5
FUEL CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS
Fuel Centers, Inc. (the "Company") is a business consulting firm that
specializes in strategy and development of high-volume, multi-revenue source,
and retail fuel service stations for the oil and petroleum industry. The Company
was incorporated in the state of Nevada on April 9, 2001 and is headquartered in
Cypress, California.
NOTE 2 - BASIS OF PRESENTATION
The unaudited financial statements included herein have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months ended September
30, 2002 are not necessarily indicative of the results that may be expected for
the years ended December 31, 2002 and 2001. For further information, these
financial statements and the related notes should be read in conjunction with
the Company's audited financial statements for the period ended December 31,
2001 included in the Company's annual report on Form 10-KSB.
NOTE 3 - COMMON STOCK
On April 10, 2001, the Company issued 3,550,000 shares of its common
stock to an officer and founder for consulting services and 1,500,000 shares of
its common stock to various individuals for legal services rendered in
connection with the initial organization costs incurred. Since there was no
readily available market value at the time the services were rendered, par value
of $0.001 per share was considered as a reasonable estimate of fair value by all
parties. These amounts are shown in the accompanying statement of operations for
the period April 9, 2001 (inception) through June 30, 2001 and the consulting
services performed by the officer and founder are considered additional
contributions of capital by the Company.
On June 30, 2001, the Company completed a "best efforts" offering of
its common stock pursuant to the provisions of Section 4(2) of the Securities
Act of 1933 and Rule 506 of Regulation D promulgated by the Securities and
Exchange Commission. In accordance with the Private Placement Memorandum
Offering, which was initiated on June 11, 2001, the Company issued 955,000
shares of its common stock at $0.02 per share for a total of $19,100 from June
17th - June 30th 2001.
On June 17, 2002, the Company's board of directors declared a two and
nine hundredths to one (2.09:1) forward stock split to the stockholders of
record as of June 21, 2002. The stock dividend was paid on June 24, 2002 and
resulted in an increase of the Company's issued and outstanding common stock to
12,550,450 shares.
6
FUEL CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
NOTE 4 - RELATED PARTY TRANSACTIONS
On April 10, 2001, the Company issued 3,550,000 shares of its common
stock to a current officer for services as described in Note 3.
The Company occupies office space provided by its officer. Accordingly,
occupancy costs have been allocated to the Company based on the square foot
percentage assumed multiplied by the officer's total monthly costs. These
amounts are shown in the accompanying statements of operations for the three and
six months ended September 30, 2002 and 2001 and are considered additional
contributions of capital by the officer and the Company.
NOTE 5 - LETTER OF INTENT
On June 26, 2002, the Company entered into a Letter of Intent to
acquire all of the outstanding common stock of Linsang Manufacturing, Inc., a
Delaware corporation, ("LMI") in a tax-free reverse merger in exchange for
12,500,000 shares of common stock of the Company. The Letter of Intent is not
legally binding on either party and the transaction will not close until a
definitive agreement is reached; a private placement of the Company's common
stock is completed; due diligence has been completed by both parties; and, LMI
has fulfilled certain other contractual conditions.
NOTE 6 - 8% CONVERTIBLE NOTE RECEIVABLE
On June 26, 2002, the Company received a note from a Linsang
Manufacturing, Inc., a Delaware corporation, ("LMI") for cash in the amount of
$2,000,000. Per the terms of the note, the principal is due and payable on
October 15, 2002 together with interest at the annual rate of 8% and is
personally guaranteed by the chairman of the board of directors of LMI. If
payment in full is not received by the due date, the Company maintains the right
to convert its note into 800,000 shares of common stock of LMI at a per-share
price of $2.50 through November 15, 2002.
NOTE 7 - 8% CONVERTIBLE NOTES PAYABLE
On June 26, 2002, the Company received proceeds of $1,000,000 and
$1,041,000, or $2,041,000 in the aggregate, for issuance of two (2) convertible
notes payable to third party investors. Pursuant to the terms of the notes, the
principal is due and payable on July 1, 2003 together with interest at the rate
of 8% per year. The notes also contain automatic and voluntary conversion
features that will provide the holders with "conversion units" equivalent to
2,000 shares of the Company's common stock plus a warrant to purchase up to
1,667 additional shares of common stock should the Company receive future
financing. The total number of conversion units to the holders is to be
determined by the dollar amount of additional financing secured by the Company
of not less than $3,000,000 divided by the conversion unit price of $5.00 per
unit.
7
Item 2. Plan of Operation
--------------------------
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
We are a new business that has not generated any revenues to date. Our current
business is to offer a full range of business consulting services in the retail
automobile fueling industry. Our plan has been to offer advice and assistance on
issues of business strategy and development of high-volume, multi-revenue
source, retail automobile fueling centers or "Superstations". Superstations
typically include retail fueling facilities, quick service restaurants, car wash
facilities and a convenience store. We intended to provide services to owners of
existing fueling stations who desire to convert their facilities into a
Superstation, as well as to parties who are not currently engaged in the retail
sale of motor fuel but wish to establish fueling facilities. We anticipated that
a majority of our revenue would be derived from fees paid by clients for our
advice, services and business development products.
On June 26, 2002, we entered into a Letter of Intent with Linsang Manufacturing,
Inc., a Delaware corporation ("LMI") and certain of its shareholders wherein we
would acquire LMI in exchange for shares of our common stock, and as part of the
same transaction we would conduct a private placement of our equity securities,
and LMI would acquire contracts other business entities that would bring a
certain net value in revenues. As of November 19 2002, we expect that we will
not acquire LMI, and as such, we are no longer negotiating a definitive
agreement with LMI. We intend to terminate the letter of intent and unwind
the bridge financing transactions which resulted in our notes payable of
$2,041,000 and note receivable of $2,000,000. We anticipate that we will be able
to unwind these transactions in the next month.
Liquidity and Capital Resources. We had cash of $321 as of September 30, 2002.
Our total current assets as of September 30, 2002 were $2,049,864, of which
$7,880 was represented by prepaid expenses, $41,753 was represented by interest
receivable, and $2,000,000 was represented by an 8% convertible note receivable.
Our total assets were $2,049,864 as of September 30, 2002. We have no other
property or assets. Our total current liabilities were $71,709 as of September
30, 2002, which was represented by accounts payable and accrued expenses. We
also had $2,041,000 which was represented by 8% convertible notes payable. As of
September 30, 2002, we had no other commitments or contingencies.
8
Results of Operations.
----------------------
Revenues. For the nine month period ending September 30, 2002, we realized no
revenues from providing consulting services. We do not believe we will complete
the acquisition of LMI, and therefore we will attempt to generate revenues by
engaging clients to utilize our consulting services.
Operating Expenses. For nine month period ending September 30, 2002, our total
operating expenses were $86,870. Those expenses were represented by $9,104 in
consulting services, $74,499 in legal and professional fees, and $1,815 in
occupancy expenses and $1,452 in office supplies expenses. For the nine month
period ending September 30, 2002, we experienced a net loss of $87,726. This is
in comparison to the nine month period ending September 30, 2001, where our
total operating expenses were $19,165. That amount was represented by $3,550 in
consulting services, $13,365 in legal and professional fees, and $1,150 in
occupancy expenses and $1,110 in office supplies expenses. We incurred
significant general and administrative expenses in connection with the
preparations to acquire LMI. In order to either continue operations or enter
into a similar agreement with another entity, we anticipate we will continue to
incur significant general and administrative expenses.
Our Plan of Operation for the Next Twelve Months. As of November 2002, we have
concluded that we will not be able to complete the transaction to acquire LMI as
described herein. We cannot guaranty that we will acquire any other third party
in lieu of LMI, or that in the event that we acquire another entity, this
acquisition will increase the value of our common stock. We hope to refocus our
business on providing business consulting services to the retail automotive
fueling industry.
We had cash of $231 as of September 30, 2002. In the opinion of management,
available funds will not satisfy our working capital requirements through the
next twelve months. Our forecast for the period for which our financial
resources will be adequate to support our operations involves risks and
uncertainties and actual results could fail as a result of a number of factors.
Because we were not able to complete the proposed acquisition of LMI as
described, we will need to raise additional capital to continue operations and
pay our current expenses. Such additional capital may be raised through public
or private financing as well as borrowings and other sources. We cannot guaranty
that additional funding will be available on favorable terms, if at all. If
adequate funds are not available, then our ability to continue operations may be
adversely affected. If adequate funds are not available, we hope that our
officers and directors will contribute funds to pay for our expenses, although
we cannot that guaranty that our officers will pay those expenses.
We are not currently conducting any research and development activities and do
not anticipate conducting such activities in the near future. We do not
anticipate hiring additional employees or independent contractors unless we are
able to expand our current operations. Until recently, we had been focusing our
efforts on completing the acquisition of LMI. We do not anticipate that we will
purchase or sell any significant equipment.
Item 3. Controls and Procedures
-------------------------------
(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
9
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed within 90 days of
the filing date of this report, our chief executive officer and the principal
financial officer concluded that our disclosure controls and procedures were
adequate.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
--------------------------
None.
Item 2. Changes in Securities.
------------------------------
None.
Item 3. Defaults Upon Senior Securities
----------------------------------------
None.
Item 4. Submission of Matters to Vote of Security Holders
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None.
Item 5. Other Information
--------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
------------------------------------------
On November 11, 2002, the Registrant's Board of Directors, voted to replace its
independent accountant, Quintanilla Accountancy Corporation ("Quintanilla").
Effective as of November 11, 2002, the Registrant's new independent accountant
is Hall & Company, certified public accountants ("Hall & Company"). The
Registrant retained the accounting firm of Hall & Company on November 11, 2002,
as the principal accountants to audit the Registrant's financial statements. The
Registrant authorized Quintanilla to respond fully to any inquiries from Hall &
Company and to make its work papers available to Hall & Company. A
correspondence from Quintanilla dated November 11, 2002, specifying that
Registrant's disclosures regarding the change in accountants are true and
correct was attached to the Report on Form 8-K as Exhibit 16.1.
10
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Fuel Centers, Inc.,
a Nevada corporation
November 19, 2002 By: /s/ John R. Muellerleile
-----------------------------------
John R. Muellerleile
Chief Executive Officer, President,
Secretary, Director
11
CERTIFICATIONS
--------------
I, John R. Muellerleile, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Fuel Centers, Inc.
2. Based on my knowledge, this quarterly 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 quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4.The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that
involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 19, 2002
/s/ John R. Muellerleile
------------------------
John R. Muellerleile
Chief Executive Officer and
Chief Financial Officer
12