UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2002
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[ ] 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 registrant as specified in its charter)
Nevada 33-0967648
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9323 Vista Serena, Cypress, California 90630
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(Address of principal executive offices) (Zip Code)
(714) 220-1806
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(Registrant's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Act:
Title of each class registered: Name of each exchange on which registered:
------------------------------- ------------------------------------------
None None
Securities registered under Section 12(g) of the Act:
Common Stock, Par Value $.001
-----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $0.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) As of April 10, 2003, approximately $0.
As of April 10, 2003, there were 12,550,450 shares of the issuer's $.001 par
value common stock issued and outstanding.
Documents incorporated by reference. There are no annual reports to security
holders, proxy information statements, or any prospectus filed pursuant to Rule
424 of the Securities Act of 1933 incorporated herein by reference.
Transitional Small Business Disclosure format (check one):
[ ] Yes [X] No
1
PART I
Item 1. Description of Business.
--------------------------------
Our Background. We were incorporated in Nevada on April 9, 2001.
We have only generated minimal revenues to date. We were formed 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 2002, we decided to discontinue negotiating a definitive
agreement with LMI due to market conditions. Therefore, we terminated the letter
of intent and unwound the bridge financing transactions, which were reflected in
notes payable by us of $2,041,000 to two third parties, and a note receivable
from LMI in the amount of $2,000,000. In December 2002, we assigned our right to
collect $1,000,000 of the amount owed by LMI to us to one of the third-party
holders referred to above, while retaining the right to receive the interest due
to us from LMI through the date of that assignment. We assigned our right to
collect the remaining amount of $1,000,000 to the other third party holder,
without retaining any right to receive interest due as of the date of the
assignment. In exchange, both third parties holders agreed to release us from
all obligations that we had pursant to their respective notes.
Item 2. Description of Property.
---------------------------------
Property held by us. As of the date specified in the following table, we held
the following property:
============================================= ===============================
Property December 31, 2002
--------------------------------------------- -------------------------------
Cash $183
============================================= ===============================
Our Facilities. Our headquarters are located at 9323 Vista Serena, Cypress,
California 90630. Jack Muellerleile, our president, secretary and one of our
directors, currently provides office space to us at no charge. We do not have a
written lease or sublease agreement and Mr. Muellerleile does not expect to be
paid or reimbursed for providing office facilities.
Item 3. Legal Proceedings.
---------------------------
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
Item 4. Submission of Matters to Vote of Security Holders
----------------------------------------------------------
Not applicable.
PART II
Item 5. Market Price for Common Equity and Related Stockholder Matters.
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Reports to Security Holders. We are a reporting company with the Securities and
Exchange Commission, or SEC. The public may read and copy any materials filed
with the SEC at the SEC's Public Reference Room at 450 Fifth Street N.W.,
Washington, D.C. 20549. The public may also obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.
2
Prices of Common Stock. We participate in the OTC Bulletin Board, an electronic
quotation medium for securities traded outside of the Nasdaq Stock Market, and
prices for our common stock are published on the OTC Bulletin Board under the
trading symbol "FCTE". This market is extremely limited and the prices quoted
are not a reliable indication of the value of our common stock. Shares of our
common stock were last traded October 29, 2002. As of that date, we had a bid
price of $0.50 and an ask price of $1.00. Over the last 52 weeks, our common
stock had a low closing price of $1.00 per share and a high closing price of
$2.78 per share.
We are authorized to issue 50,000,000 shares of $.001 par value common stock,
each share of common stock having equal rights and preferences, including voting
privileges. As of December 31, 2002, 12,550,450 shares of our common stock were
issued and outstanding. We are also authorized to issue 5,000,000 shares of
$.001 par value preferred stock, none of which is issued and outstanding.
In November 2001, our registration statement on Form SB-2 to register 2,405,000
shares of common stock held by our shareholders was declared effective by the
SEC. The approximate number of holders of record of shares of our common stock
is thirty-seven. There are no outstanding options or warrants to purchase, or
securities convertible into, shares of our common stock. There are 125,504
shares that can be sold pursuant to Rule 144 promulgated pursuant to the
Securities Act of 1933. On June 17, 2002, we authorized a 2.09 to 1 split of our
common stock by means of a dividend of 1.09 shares of common stock for each
share of common stock for holders of record on June 21, 2002. As a result, we
have 12,550,450 shares of common stock issued and outstanding.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system). The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of securities' laws;
o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form (including language, type,
size and format), as the Securities and Exchange Commission shall
require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o monthly account statements showing the market value of each penny
stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.
3
Item 6. Management's Discussion and Analysis of Financial Condition or Plan
of Operation.
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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 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. No assurance can be
given 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.
Critical Accounting Policy and Estimates. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to them
consolidated financial statements included in our Annual Report on Form 10-KS
for the fiscal year ended December 31, 2002.
Liquidity and Capital Resources. We had cash of $183 as of December 31, 2002.
Our total current assets as of December 31, 2002 were $43,371, of which $7,880
was represented by prepaid expenses and $35,308 was represented by interest
receivable. Our total assets were $43,371 as of December 31, 2002. We have no
other property or assets. Our total current liabilities were $31,652 as of
December 31, 2002, which was represented by accounts payable and accrued
expenses. As of December 31, 2002, we had no other commitments or contingencies.
Results of Operations.
Revenues. For the year ending December 31, 2002, we realized no revenues from
providing consulting services. We do not believe we will be able to complete the
acquisition of LMI, and therefore we will attempt to generate revenues by
engaging clients to utilize our consulting services. In comparison, for the year
ended December 31, 2001, we generated $9,000 in revenues from our consulting
services.
4
Operating Expenses. For year ending December 31, 2002, our total operating
expenses were $97,627. Those expenses were represented by $9,104 in consulting
services, $84,503 in legal and professional fees, and $4,020 office expenses. We
also had $70,617 in interest income and $72,361 in interest expense, for net
other expense of $1,744. Therefore, for the year ending December 31, 2002, we
experienced a net loss of before extraordinary item of $99,371. After taking
into consideration our gain of $78,052 on the extinguishment of our debt, our
net loss was $21,319.
This is in comparison to the year ending December 31, 2001, where our total
operating expenses were $20,467. That amount was represented by $3,550 in
consulting services, $21,952 in legal and professional fees, and $3,965 office
expenses. Our net loss for the year ending December 31, 2001 was $20,467. The
increase in our operating expenses during the year ended December 31, 2002
compared to the prior year was due to the significant legal and professional
fees we incurred in connection with the preparations to acquire LMI.
Our Plan of Operation for the Next Twelve Months. In November 2002, we concluded
that we would 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 intend to continue
providing our business consulting services to the retail automotive fueling
industry.
We had cash of $183 as of December 31, 2002. In the opinion of management,
available funds are not sufficient to satisfy our working capital requirements,
however, we believe that our management will continue to pay our operating
expenses for 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 anticipate that we may need to raise additional capital to
continue operations. 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 expand our operations may
be adversely affected. If adequate funds are not available, we anticipate 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.
We have only generated $9,000 in revenues from our operations since our
inception. In our management's opinion, to effectuate our business plan in the
next twelve months, the following events should occur or we should reach the
following milestones in order for us to become profitable:
1. We must continue to market our consulting services and obtain
consulting agreements. We have provided proposed consulting service
contracts to several new client candidates, although none of those
agreements have been executed. Based on our meetings and discussions
with potential clients including those to whom we have forwarded
proposed consulting service contracts, we believe that some of those
potential clients will retain us to provide consulting services. Within
three to six months, we should be providing consulting services to
multiple clients.
2. We must continue to attend meetings with petroleum industry
professionals and develop relationships with those professionals. We
believe that major oil company executives can provide lists of
properties considered surplus along with the name of the client
candidate, which they believe may benefit from our services. Within
three to six months, we should have knowledge of several additional
properties considered surplus by major oil companies.
5
3. We must develop relationships with business brokers who advertise
locations for sale in newspapers and trade journals as well as real
estate brokers who list properties for sale. We believe that those
brokers will become sources of referrals. Within six to nine months, we
should have developed relationships with several brokers who will be
sources of referrals.
4. We must develop our website for use as a marketing tool to inform and
persuade customers to engage our services. Within six to nine months,
we should have developed our website to provide information about our
services as well as our beliefs about the industry.
5. We must seek joint venture partners for our development of
Superstations. We will seek partners who are willing to contribute
capital for the development of Superstations and we will furnish the
deal making and operational expertise. During the next twelve months,
we want to develop relationships with potential joint venture partners.
Since our inception, we have marketed our services to owners and operators of
retail fueling stations who we believe are potential clients. Our belief that we
will engage clients is based on the discussions that we have had with petroleum
industry professionals. Our plan of operation is materially dependent on our
ability to generate revenues. Any additional revenues generated will be used to
expand our operations.
Item 7. Financial Statements
-----------------------------
The financial statements required by Item 7 are presented in the following
order:
6
FUEL CENTERS, INC.
REPORT AND FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
7
FUEL CENTERS, INC.
CONTENTS
PAGE
----
Independent Auditor's Report 9
Financial Statements
Balance Sheet 10
Statement of Operations 11
Statement of Changes in Stockholders' Equity 12
Statement of Cash Flows 13
Notes to Financial Statements 14
8
INDEPENDENT AUDITORS' REPORT
----------------------------
March 25, 2003
To the Stockholders of
Fuel Centers, Inc.
We have audited the accompanying balance sheet of Fuel Centers, Inc. as of
December 31, 2002, and the related statements of operations, changes in
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Fuel Centers, Inc. for the year ended
December 31, 2001, were audited by other auditors whose report dated February
12, 2002, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fuel Centers, Inc. as of
December 31, 2002, and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.
HALL & COMPANY
Irvine, California
9
FUEL CENTERS, INC.
BALANCE SHEET
DECEMBER 31, 2002
ASSETS
------
CURRENT ASSETS
Cash $ 183
Prepaid expenses 7,880
Interest receivable 35,308
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Total current assets 43,371
OTHER ASSETS ---
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Total assets $ 43,371
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 31,652
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Total current liabilities 31,652
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value;
Authorized shares-- 5,000,000
Issued and outstanding shares-- 0 ---
Common stock, $.001 par value;
Authorized shares-- 50,000,000
Issued and outstanding shares-- 12,550,450 12,550
Additional paid-in capital 40,955
Accumulated deficit (41,786)
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Total stockholders' equity 11,719
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Total liabilities and stockholders' equity $ 43,371
=============
See accompanying notes to financial statements.
10
FUEL CENTERS, INC.
STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002 AND THE PERIOD
APRIL 9, 2001 (INCEPTION) THROUGH DECEMBER 31, 2001
2002 2001
-------------- -------------
NET REVENUES $ --- $ 9,000
OPERATING EXPENSES
Consulting services 9,104 3,550
Legal and professional fees 84,503 21,952
Office expense 4,020 3,965
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Total operating expenses 97,627 29,467
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LOSS FROM OPERATIONS (97,627) (20,467)
OTHER INCOME (EXPENSE)
Interest income 70,617 ---
Interest expense (72,361) ---
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Total other income (expense) (1,744) ---
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LOSS BEFORE PROVISION FOR INCOME TAXES (99,371) (20,467)
PROVISION FOR INCOME TAXES --- ---
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NET LOSS BEFORE EXTRAORDINARY ITEM (99,371) (20,467)
GAIN ON EXTINGUISHMENT OF DEBT 78,052 ---
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NET LOSS $ (21,319) $ (20,467)
============= =============
NET INCOME PER COMMON SHARE-- BASIC AND DILUTED
$ --- $ ---
============= =============
WEIGHTED AVERAGE OF COMMON SHARES-- BASIC AND DILUTED
12,550,450 11,957,600
============= =============
See accompanying notes to financial statements.
11
FUEL CENTERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 2002 AND THE PERIOD
APRIL 9, 2001 (INCEPTION) THROUGH DECEMBER 31, 2001
COMMON STOCK ADDITIONAL
------------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------- ------------- ------------- ------------ --------------
Balance, April 9, 2001 --- $ --- $ --- $ --- $ ---
Issuances of common stock 6,005,000 6,005 18,145 --- 24,150
Expenses paid by officer --- --- 6,419 --- 6,419
Net loss/comprehensive loss --- --- --- (20,467) (20,467)
------------- ------------- ------------- ------------ --------------
Balance, December 31, 2001 6,005,000 6,005 24,564 (20,467) 10,102
Expenses paid by officer --- --- 22,936 --- 22,936
Issuance of forward common stock split
6,545,450 6,545 (6,545) --- ---
Net loss/comprehensive loss --- --- --- (21,319) (21,319)
------------- ------------- ------------- ------------ --------------
Balance, December 31, 2002 12,550,450 $ 12,550 $ 40,955 $ (41,786) $ 11,719
============= ============= ============= ============ ==============
See accompanying notes to financial statements.
12
FUEL CENTERS, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2002 AND THE PERIOD
APRIL 9, 2001 (INCEPTION) THROUGH DECEMBER 31, 2001
2002 2001
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (21,319) $ (20,467)
Adjustments to reconcile net loss to net cash used in operating activities
Gain on extinguishment of debt (78,052) ---
Expenses paid with common stock --- 5,050
Expenses paid by officer 22,936 6,419
Changes in operating assets and liabilities
(Increase) in prepaid expenses (7,880) ---
(Increase) in interest receivable (35,308) ---
Increase in accounts payable and accrued expenses 29,117 2,535
------------- -------------
Net cash used in operating activities (90,506) (6,463)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Payment in exchange of 8% convertible note receivable (2,000,000) ---
------------- -------------
Net cash used in investing activities (2,000,000) ---
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock --- 19,100
Proceeds from issuance of 8% convertible notes payable 2,041,000 ---
Assignment of 8% convertible note 37,052 ---
------------- -------------
Net cash provided by financing activities 2,078,052 19,100
------------- -------------
NET INCREASE (DECREASE) IN CASH (12,454) 12,637
CASH, beginning of period 12,637 ---
------------- -------------
CASH, end of period $ 183 $ 12,637
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid $ --- $ ---
============= =============
Interest paid $ --- $ ---
============= =============
See accompanying notes to financial statements.
13
FUEL CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
Note 1 - BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES
Business Description - Fuel Centers, Inc. (the "Company") was incorporated in
the state of Nevada on April 9, 2001. The Company is business consulting firm
that specializes in strategy and development of high-volume, multi-revenue
source, retail fuel service stations for the automobile industry. The Company is
headquartered in Cypress, California.
Cash Equivalents - For purposes of the balance sheet and statement of cash
flows, the Company considers all highly liquid debt instruments purchased with
maturity of three months or less to be cash equivalents. At December 31, 2002,
the Company had no cash equivalents.
Fair Value of Financial Instruments - The carrying amount of the Company's
financial instruments, which includes cash and accounts payable and accrued
expenses approximate their fair value due to the short period to maturity of
these instruments.
Recognition of Revenue - The Company records revenues of its consulting services
when they are complete, fee is fixed and determinable, and collectibility is
reasonably assured. The Company will also provide an allowance for returns when
experience is established.
Income Taxes - The Company recognizes deferred tax assets and liabilities based
on differences between the financial reporting and tax bases of assets and
liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. The Company provides a
valuation allowance for deferred tax assets for which it does not consider
realization of such assets to be more likely than not.
Net Loss per Common Share - The Company has adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
SFAS 128 requires the reporting of basic and diluted earnings/loss per share.
Basic loss per share is calculated by dividing net loss by the weighted average
number of outstanding common shares during the period.
Comprehensive Loss - The Company applies Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for the reporting and display of comprehensive income or
loss, requiring its components to be reported in a financial statement that is
displayed with the same prominence as other financial statements. For the period
ended December 31, 2002, the Company had no other components of its
comprehensive income or loss other than the net loss as reported on the
statements of operations.
Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities 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.
14
FUEL CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 2 - CONTINGENCIES
As shown in the accompanying financial statements, the Company has incurred a
net operating loss of $41,786 since inception through December 31, 2002.
Management's plans to mitigate its losses in the near term through the
significant reduction of legal and professional fees that were incurred upon
incorporation; for the presentation for the preparation of the Company's Private
Offering Memorandum; for the performance of audit and review services; and for
the negotiations with Linsang. By having completed its registration process over
the last twelve months. In addition, should management determine it necessary,
the Company will seek to obtain additional financing through the issuance of
common stock and increase of ownership equity, and from contributions of its
officers.
NOTE 3 - ACCRUED EXPENSES
Accrued Wages and Compensated Absences - The Company currently does not have any
employees. The majority of development costs and services have been provided to
the Company by the officers and outside, third party vendors. As such, there is
no accrual for wages or compensated absences as of December 31, 2002.
NOTE 4 - 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.
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 through 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.
15
FUEL CENTERS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 5 - INCOME TAXES
At December 31, 2002, the Company has available for federal income tax purposes
a net operating loss carryforward of approximately $80,000, expiring at various
times through 2002, that may be used to offset future taxable income. Therefore,
no provision for income taxes has been provided.
In addition, the Company has deferred tax assets of approximately $19,000 at
December 31, 2002. The Company has not recorded a benefit from its net operating
loss carryforward because realization of the benefit is uncertain and,
therefore, a valuation allowance of ($19,000) has been provided for the
deferred tax assets.
NOTE 6 - 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 4.
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 years
ended December 31, 2002 and 2001 and are considered additional contributions of
capital by the officer and the Company.
NOTE 7 - GAIN ON EXTINGUISHMENT OF DEBT
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. On November 19, 2002, the Company
terminated its negotiations for a definitive agreement with LMI. As a result, on
December 5, 2002, the Company assigned its interest in the bridge financing
transactions of a $2,000,000, 8% convertible note receivable and corresponding
8% convertible notes payable. In connection with these transactions, the Company
recorded an extraordinary gain of $78,052.
14
Item 8. Changes in and Disagreements with Accountants.
-------------------------------------------------------
On November 11, 2002, our Board of Directors, voted to replace our independent
accountant, Quintanilla Accountancy Corporation ("Quintanilla"). Effective
November 11, 2002, our new independent accountant is Hall & Company, certified
public accountants ("Hall & Company"). We retained the accounting firm of Hall &
Company on November 11, 2002, to make an examination of our financial statements
the 2002 fiscal year. We authorized Quintanilla to respond fully to any
inquiries from Hall & Company and to make its work papers available to Hall &
Company.
The reports of Quintanilla from April 9, 2001, the date of our inception,
through November 11, 2002, did not contain any adverse opinion, disclaimer of
opinion, or qualification or modification as to the certainty, audit scope or
accounting principles. During April 9, 2001 through November 11, 2002, there
were no disagreements between us and Quintanilla on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. During our two most recent fiscal years or any subsequent interim
period prior to engaging Hall & Company, we did not consult with Hall & Company
regarding any accounting or auditing concerns stated in Item 304(a)(2) of
Regulation S-B. In addition, during April 9, 2001 through November 11, 2002,
there were no "reportable events" within the meaning of Item 304 of the
Securities and Exchange Commission's Regulation S-K.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
----------------------------------------------------------------------
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could disrupt our operations, reduce profits and hinder future
development, if suitable replacements are not promptly obtained. We anticipate
that we will enter into employment agreements with each of our key executives.
We cannot guaranty that each executive will remain with us during or after the
term of his or her employment agreement. In addition, our success depends, in
part, upon our ability to attract and retain other talented personnel. Although
we believe that our relations with our personnel are good and that we will
continue to be successful in attracting and retaining qualified personnel, we
cannot guaranty that we will be able to continue to do so. Our officers and
directors will hold office until their resignations or removal.
15
Our directors and principal executive officers are as specified on the following
table:
======================== ================ =====================================
Name Age Position
------------------------ ---------------- -------------------------------------
Jack Muellerleile 60 president, secretary, director
------------------------ ---------------- -------------------------------------
K. John Shukur 31 treasurer, director
======================== ================ =====================================
Jack Muellerleile. Mr. Muellerleile is our president, secretary and one of our
directors since our inception. Mr. Muellerleile brings expertise and experience
in commercial real estate, business brokerage, franchising and entrepreneurship
and the oil business. From 1990 to the present, Mr. Muellerleile has been the
owner of Site Location Solutions, a firm specializing in the petroleum, food
service and entertainment industries. During the last ten years, he handled over
275 successful engagements acquiring a location or transaction in each target
area, whether purchase, lease, or joint venture. Mr. Muellerleile is an expert
in lease and purchase analyses and negotiations, major oil company management
thinking and supply contracts and competitive allowances and restaurant and
entertainment related transactions. Mr. Muellerleile enjoyed a distinguished
23-year career with Mobil Oil during which he held thirteen different positions
culminating in responsibility for all real estate activities throughout the
western two-thirds of the United States. He was responsible for the acquisition
and retention, by lease or purchase, of thousands of properties, several hundred
divestments, as well as numerous other business opportunity buy/sell agreements,
lease renewals, exercise of options, market evaluations, competitive analyses
and strategic decision making regarding wide-area distribution agreements.
During the past five years, Mr. Muellerleile has specialized in Superstation
developments that involve multiple profit centers and industry-leading revenues.
Mr. Muellerleile earned his Bachelor of Science degree in business from
University of Missouri in 1964. Mr. Muellerleile is not an officer or a director
of any other reporting company.
K. John Shukur. Mr. Shukur is our Treasurer and one of our directors since June
2001. Mr. Shukur has significant experience in the retail food industry. From
1994 to the present, Mr. Shukur has been the operator of Samurai Harry's, a
chain of Japanese-American food restaurants located in Southern California. Mr.
Shukur earned his Bachelor of Science degree in Environmental Analysis and
Design from University of California, Irvine in 1994. Mr. Shukur is not an
officer or a director of any other reporting company.
There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony,
nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.
Our directors will serve until the next annual meeting of stockholders. Our
executive officers are appointed by our Board of Directors and serve at the
discretion of the Board of Directors.
Section 16(a) Beneficial Ownership Reporting Compliance. Our officers,
directors, and principal shareholders have filed all reports required to be
filed on, respectively, a Form 3 (Initial Statement of Beneficial Ownership of
Securities), a Form 4 (Statement of Changes of Beneficial Ownership of
Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
Securities).
Item 10. Executive Compensation
--------------------------------
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our board of directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
16
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our Chief
Executive Officer and our other executive officers whose total annual salary and
bonus are anticipated to exceed $50,000 during the year ending December 31,
2002. Our Board of Directors may adopt an incentive stock option plan for our
executive officers which would result in additional compensation.
=============================== ====== =========== ============ ===================== =====================
Name and Principal Position Year Annual Bonus ($) Other Annual All Other
Salary ($) Compensation ($) Compensation
------------------------------- ------ ----------- ------------ --------------------- ---------------------
Jack Muellerleile - president, 2002 None None None None
secretary
------------------------------- ------ ----------- ------------ --------------------- ---------------------
K. John Shukur - treasurer 2002 None None None None
=============================== ====== =========== ============ ===================== =====================
Compensation of Directors. Our current directors are also our employees and
receive no extra compensation for their service on our board of directors.
Employment Contracts. We anticipate that we will enter into an employment
agreement with Jack Muellerleile, although we do not currently know the terms of
that employment agreement.
Stock Option Plan. We anticipate that we will adopt a stock option plan,
pursuant to which shares of our common stock will be reserved for issuance to
satisfy the exercise of options. The stock option plan will be designed to
retain qualified and competent officers, employees, and directors. Our Board of
Directors, or a committee thereof, shall administer the stock option plan and
will be authorized, in its sole and absolute discretion, to grant options
thereunder to all of our eligible employees, including officers, and to our
directors, whether or not those directors are also our employees. Options will
be granted pursuant to the provisions of the stock option plan on such terms,
subject to such conditions and at such exercise prices as shall be determined by
our Board of Directors. Options granted pursuant to the stock option plan shall
not be exercisable after the expiration of ten years from the date of grant.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
------------------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of April 10, 2003 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.
======================= =================================== ======================================= =======================
Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class
----------------------- ----------------------------------- --------------------------------------- ------------------------
Common Stock Jack Muellerleile 7,419,500 shares 59.12%
9323 Vista Serena,
Cypress, CA 90630 president, secretary, director
----------------------- ----------------------------------- --------------------------------------- -----------------------
Common Stock K. John Shukur 104,500 shares 0.83%
5 Hidalgo
Rancho Santa Margarita, CA 92688 treasurer, director
----------------------- ----------------------------------- --------------------------------------- -----------------------
Common Stock Brown Brothers Harriman & Co 1,194,999 shares 9.52%
140 Broadway
New York, NY 10274
----------------------- ----------------------------------- --------------------------------------- -----------------------
Common Stock All directors and named executive 7,524,000 shares 59.95%
officers as a group
======================= =================================== ======================================= =======================
(1) We have attempted to obtain information on the beneficial holders of the stock held by Brown Brothers Harriman & Co.
To the best of our knowledge, there are no beneficial owners of 5% or over holding stock in the name of Brown Brothers
Harriman & Co.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
17
Changes in Control. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.
Item 12. Certain Relationships and Related Transactions.
---------------------------------------------------------
Related Party Transactions. There have been no related party transactions,
except for the following:
Jack Muellerleile, our president, secretary, and one of our directors, is the
father of Michael J. Muellerleile, one of our shareholders and an employee of MC
Law Group, which serves as our legal counsel.
Jack Muellerleile, our president, secretary and one of our directors, currently
provides office space to us at no charge.
With regard to any future related party transaction, we plan to fully disclose
any and all related party transactions, including, but not limited to, the
following:
o disclosing such transactions in prospectuses where required;
o disclosing in any and all filings with the Securities and Exchange
Commission, where required;
o obtaining disinterested directors consent; and
o obtaining shareholder consent where required.
Item 13. Exhibits and Reports on Form 8-K
------------------------------------------
(a) Exhibit No.
---------------
3.1 Articles of Incorporation*
3.2 Bylaws*
* Included in the registration statement on Form SB-2 filed on August 10, 2001.
(b) Reports on Form 8-K
-----------------------
No reports on Form 8-K were filed during the last quarter of the period covered
by this annual report on Form 10-KSB, except for the following:
On November 11, 2002, our Board of Directors, voted to replace our independent
accountant, Quintanilla Accountancy Corporation ("Quintanilla"). Effective
November 11, 2002, our new independent accountant is Hall & Company, certified
public accountants ("Hall & Company"). We retained the accounting firm of Hall &
Company on November 11, 2002, to make an examination of our financial statements
the 2002 fiscal year. We authorized Quintanilla to respond fully to any
inquiries from Hall & Company and to make its work papers available to Hall &
Company.
The reports of Quintanilla from April 9, 2001, the date of our inception,
through November 11, 2002, did not contain any adverse opinion, disclaimer of
opinion, or qualification or modification as to the certainty, audit scope or
accounting principles. During April 9, 2001 through November 11, 2002, there
were no disagreements between us and Quintanilla on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure. During our two most recent fiscal years or any subsequent interim
period prior to engaging Hall & Company, we did not consult with Hall & Company
regarding any accounting or auditing concerns stated in Item 304(a)(2) of
Regulation S-B. In addition, during April 9, 2001 through November 11, 2002,
there were no "reportable events" within the meaning of Item 304 of the
Securities and Exchange Commission's Regulation S-K.
18
Item 14. 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
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.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned in the City of Cypress, California, on April 10, 2003.
Fuel Centers, Inc.
a Nevada corporation
By: /s/ Jack Muellerleile
----------------------------------------
Jack Muellerleile
Its: principal executive officer
president, secretary, and a director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Jack Muellerleile April 10, 2003
--------------------------------------------
Jack Muellerleile
Its: principal executive officer
president, secretary and a director
By: /s/ K. John Shukur April 10, 2003
--------------------------------------------
K. John Shukur
Its: principal accounting officer
treasurer and a director
20
CERTIFICATIONS
--------------
I, John R. Muellerleile, certify that:
1. I have reviewed this annual report on Form 10-KSB of Fuel Centers, Inc.;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual report whether 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: April 10, 2003
/s/ John R. Muellerleile
------------------------
John R. Muellerleile
Chief Executive Officer
21
CERTIFICATIONS
--------------
I, K. John Shukur, certify that:
1. I have reviewed this annual report on Form 10-KSB of Fuel Centers, Inc.;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 annual 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 annual report (the "Evaluation Date"); and
c) presented in this annual 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
annual report whether 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: April 10, 2003
/s/ K. John Shukur
-----------------------
K. John Shukur
Chief Financial Officer
22
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fuel Centers, Inc. a Nevada corporation
(the "Company") on Form 10-KSB for the year ending December 31, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
John R. Muellerleile, Chief Executive Officer of the Company, certifies to the
best of his knowledge, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
/s/ John R. Muellerleile
--------------------------
John R. Muellerleile
Chief Executive Officer
April 10, 2003
23
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Fuel Centers, Inc. a Nevada corporation
(the "Company") on Form 10-KSB for the year ending December 31, 2002, as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
K. John Shukur, Chief Financial Officer of the Company, certifies to the best of
his knowledge, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
/s/ K. John Shukur
--------------------------
K. John Shukur
Chief Financial Officer
April 10, 2003
24