Edgar Filing: AMERICAN EAGLE MANUFACTURING CO

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-KSB

(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended June 30, 2004

|_| 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: 0-27323

AMERICAN EAGLE MANUFACTURING COMPANY
(Name of small business issuer in its charter)

Nevada 88-0429812
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2052 Corte Del Nogal, Carlsbad CA 92009
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (760) 804-1789

-----------------
Securities registered pursuant to 12(b) of the Act:

None

Securities registered pursuant to 12 (g) of the Act:

Common Stock
(Title of Class)
-----------------

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B and will not 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. |_|

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. Yes |X| No |_|

The issuer's revenues for its most recent fiscal year was $310,375. The
aggregate market value of the voting and non-voting common equity held by
non-affiliates as of October 1, 2004 is $2,613,390. For purposes of the
foregoing calculation only, directors and executive officers and holders of 10%
or more of the issuer's common capital stock have been deemed affiliates. The
number of shares outstanding of the Registrant's common stock as of October 1,
2004 was 3,306,685.

DOCUMENTS INCORPORATED BY REFERENCE

Transitional Small Business Disclosure Format: Yes |_| No |X|

AMERICAN EAGLE MANUFACTURING COMPANY

2003 FORM 10-KSB

TABLE OF CONTENTS

PAGE
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PART I

ITEM 1. BUSINESS 3

ITEM 2. PROPERTIES 4
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ITEM 3. LEGAL PROCEEDINGS 5
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 6
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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 7
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
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ITEM 7. FINANCIAL STATEMENTS 10
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES 23
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ITEM 8A. CONTROLS AND PROCEDURES 23

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT 24
---------------------------------

ITEM 10. EXECUTIVE COMPENSATION 24

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 25
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 25
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 25
--------------------------------

PART I

ITEM 1. BUSINESS

American Eagle Manufacturing Co. ("American Eagle") is the parent Company
of American Eagle Corp, a Nevada Corporation and American Eagle Motorcycles, a
California Corporation, which was formed to manufacture and market motorcycles
in the USA, as well as expanding on the Company's additional business
acquisitions. The manufacturing operations are conducted via the wholly-owned
subsidiary, American Eagle Motorcycles, a California Corporation. American Eagle
has a 35,000 Sq. Ft. facility in Carlsbad, California which serves as both the
corporate headquarters and manufacturing facility for American Eagle
motorcycles. American Eagle anticipates commencement of full production at the
facility in the 4th quarter of 2004. American Eagle plans to implement a
long-term manufacturing philosophy of an integrated production line that will
produce a standardized level of excellence at a controllable cost.

On September 30, 2003, American Eagle acquired the assets and
business of FunKarts La, (FunKarts). FunKarts manufactures pedal, electric and
gasoline powered mini-cars and go-carts. The product line includes racecar and
truck replicas as well as vintage automobile replicas. Traditionally, the
Company marketed its products as a promotional item for such sponsors as Nestle,
Amoco, Chevron and Napa Auto Parts. American Eagle intends to establish avenues
of distribution with several national retail chains and mass merchandisers of
non-branded FunKarts. FunKarts will operate as a division of American Eagle
Manufacturing Company.

THE MANUFACTURE FOR SALE OF MOTORCYCLES FROM COMPONENT PARTS.
--------------------------------------------------------------

American Eagle Motorcycles are handcrafted and hand-torqued to
specifications, with double powder coated frames available in "trick" paint
schemes. American Eagle sells its motorcycles to dealers at wholesale prices
which allows the dealer to offer the motorcycles at retail prices from $22,000
to $65,000, depending on the model and options. American Eagle Motorcycles are
listed in the NADA valuation Guide and Kelly Blue Book and are approved for
financing by some major banks and finance companies in the USA. We manufacture
motorcycles in four basic styles:

o Falcon M-S Sport Cruiser -technologically advanced sport cruiser

o Street Fighter -sport tail pro-street semi chopper;

o Raptor - retro design chopper

o The Raven - entry level retro style springer

SUPPLIES

We obtain our supplies from after market suppliers and other
manufacturers of motorcycle parts, such as Pro One, Bay Area Custom, J. Brake,
Arlen Ness and Performance Machine. These supplies are readily available.

DEPENDENCE ON MAJOR CUSTOMERS

We are currently dependent on several dealers which carry the American
Eagle line of motorcycles.

PATENTS, TRADEMARKS AND LICENSES

American Eagle has applied for a trademark for its new logo. The Company
has also applied for and received a trademark for its "TEVIS" System (Tunable,
Engine, Vibration, Isolation, System). The Company is also in the process of
applying for a patent for its new spring loaded "TEVIS" System.

GOVERNMENT APPROVAL AND REGULATIONS

We do not need U.S. Department of Transportation or any other governmental
agency approval to build special construction motorcycles that are custom-made
to a customer's order, to rebuild motorcycles or to assemble a motorcycle from
component parts that are available in the open market. Our business is subject
to no government regulations other than those of the Environmental Protection
Agency or ("EPA"), regulating the disposal of oil, grease, tires, batteries and
the prevention of pollution. We believe we are in compliance with OSHA and EPA
regulations. All of our motorcycles are built by hand rather than in a moving
assembly line. Safety goggles are used when required, and fire extinguishers are
readily available. We dispose of pollutants by periodically taking them to
authorized disposal sites. The Company maintains a California Manufacturing
License, 05536, for the production and sale of our motorcycle line.

RESEARCH AND DEVELOPMENT

American Eagle continually designs, develops, and tests prototypes of new
motorcycle designs and many of its proprietary components. To complement
American Eagle's in-house engineering staff, consulting engineers are retained
for their specific areas of expertise. American Eagle will continue to develop
and refine the design and components of the existing and future production model
in parallel with commercial production. Current development efforts consist
primarily of creating mock-ups and prototypes of new models, making design
changes for future models, and conducting tests to improve the performance,
safety, and durability of the current product line.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-KSB under "Item 1. Business," and "Item
6. Management's Discussion and Analysis of Financial Condition and Results of
Operations" and elsewhere in this Form 10-KSB constitute "forward-looking
statements" which we believe are within the meaning of the Securities Act of
1933, as amended and the Securities Exchange Act of 1934, as amended. Also, when
we use words such as "believes", "expects", "anticipates" or similar
expressions, we are making forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance, or achievements of the Company
to be materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Some of the risks that
should be considered include:

(i) The fact that we compete with established competitors who have
substantially greater financial resources and longer operating
histories than us, which enables them to engage in heavy and
sustained discounting as well as substantial advertising and
promotion. While this competition is already intense, if it
increases, it could have an even greater adverse impact on our
revenues and profitability.

(ii) We will be unable to complete our business plan unless we are able
to raise additional funds.

ITEM 2. PROPERTIES

American Eagle has a 35,000 Sq. Ft. office and production facility located
at 2052 Corte Del Nogal, Carlsbad, California 92009. The production area of the
facility has adequate space to stock and store quantities of all parts and
components used in the manufacturing process of both motorcycles and Funkarts.

ITEM 3. LEGAL PROCEEDINGS

On December 20, 2001, American Eagle Corp and Don R. Logan entered into an
agreement to acquire certain assets from A.E. Technologies, Inc. and or Gregory
Spak. Only a small portion of the assets were delivered to American Eagle.
American Eagle elected to rescind the contract and return the assets. This
resulted in the following legal actions being filed: Gregory Spak vs. American
Eagle Motorcycles filed February 27, 2003, Case No. GIN 027138 in the Superior
Court of North San Diego County. The Court denied the claim finding for American
Eagle.

Comerica Bank vs. American Eagle and American Eagle vs. Gregory Spak and
A.E. Technologies, Inc. and Fastrak Motorcycles and Hellbent Motorcycles filed
suit on June 20, 2003, Case No. Gv-818041 in the Superior Court of Santa Clara
County. Comerica Bank is seeking to recover equipment that secured a loan to
A.E. Technologies and Gregory Spak. A portion of the equipment has been received
by American Eagle and is being stored awaiting instructions to return it to
Comerica Bank. Comerica Bank is seeking $689,335. The management of American
Eagle feels it has no liability in this case.

A.E. Technologies, Inc. and Gregory Spak vs. Aemrican Eagle Corporation,
Et Al filed November 6, 2003 Case No. 03CC00518 Superior Court of Orange County
California. Gregory Spak and A.E. Technologies, Inc. are suing to recover assets
and damages for the breach of the contract that was rescinded by American Eagle.
A.E. Technologies and Gregory Spak are seeking $15,750,000 in damages. American
Eagle Management feels that they have very little if any liability in this
matter. If the court should find American Eagle liable in either of these cases
it could require American Eagle to issue more shares of stock to pay the
damages. The Superior Court has ordered all action in this case stayed until the
case filed in Santa Clara county has been settled.

Neither the Company nor our property is a party to any known proceeding
that a governmental authority is contemplating.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

American Eagle Manufacturing Company common stock is quoted on the
Over-The-Counter Bulletin Board operated by the National Association of Security
Dealers, Inc. under the symbol "AEMF." The Company began trading on the
Over-The-Counter Bulletin Board in November of 2003 and accordingly did not
trade for a full fiscal quarter in 2003.

HOLDERS

As of October 1, 2004, the Company had approximately 473 holders of
record of its common stock. This number does not include beneficial owners whose
securities are held by brokers or in street name.

DIVIDENDS

The Company has never paid a cash dividend on its common stock and has no
present intention to declare or pay a cash dividend on the common stock in the
foreseeable future. The Company intends to retain any earnings that it may
realize in the future to finance its operations. Future dividends, if any, will
depend on earnings, financing requirements and other factors, and the payment of
cash dividends, if any, will be at the sole discretion of the Board of
Directors.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

There were no securities authorized for issuance under any equity compensation
plan as of June 30, 2004.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FINANCING OF THE COMPANY

American Eagle has financed its operational activities during the 1 year period
6/30/02-6/30/03 by the private sale of stock in the amount of $913,230 and the
issuance of notes to private individuals with conversion and warrant privileges
during the period 2003-2004.The company privately placed common stock in the
amount of $85,000 and secured additional financing through issuance of
convertible notes in the amount of $750,000. Of the convertible notes issued,
approximately 904,500 have been converted to equity.

DISCUSSION OF OPERATIONS COMPARING THE YEARS ENDED JUNE 30, 2003 AND
JUNE 30, 2004

REVENUES.

Revenues for the year ended June 30, 2004 were $310,375, which was an
increase of $310,375 when compared with revenue for the year ended June 30, 2003
as the company had not commenced shipping of motorcycles until November of 2003.

EXPENSES MANUFACTURING

The increase in the company's manufacturing expenses for the year ended
June 30, 2004 as compared to the year ending June 30, 2003 was $140,452. This
was due solely to an increase in production activity of motorcycles to increase
inventory and support sales.

COST OF SALES AND MARKETING

The decrease in the Company's cost of sales and marketing for the year
ended June 30, 2004 as compared to the year ended June 30, 2003, was $152,113.
This was due principally to the company attending 5 less promotional motorcycle
shows in 2004 than 2003 coupled with the reduction in print advertising. The
company's primary focus over the past fiscal year was concentrated on developing
new models to add to the already existing motorcycle line.

GENERAL AND ADMINISTRATIVE EXPENSES.

Comparing general and administrative expense for the year ended June 30,
2004 to the year ended June 30, 2003, the total increase of $447,410 was due
principally to the increase in legal, accounting and consulting fees associated
with the SEC filings and other regulatory issues and the activity of becoming a
publicly traded company.

INVENTORY

Inventory increased $109,493, from $563,673 on June 30, 2003 to $673,166 on
June 30, 2004. This is due to the additional motorcycle inventory and the
acquisition of Funkart's assets.

FIXED ASSETS

Comparing fixed assets for the year ended June 30, 2003 to the year ended
June 30, 2004, the total increase of $272,788 was related to an increase of
equipment in the amount of $345,082 due to the acquisition of Funkart's assets.
Offset by a disposal of idle equipment in vehicles of $22,500 due to the sale of
2 vehicles and depreciated values. The purchase of additional employee
work-stations of $1,200 for Furniture and fixtures.

CASH FLOWS

Cash and cash equivalents decreased from $82,582.00 for the year ended June
30, 2003 to ($6,927.00) for the year ended June 30, 2004, primarily due to
increase in receivables offset by the sale of common stock. The Company's
management believes that cash on hand will not be sufficient to satisfy cash
requirements over the next twelve months. See the section of this report below
entitled "Liquidity and Proposed Plans for the Next Twelve Months".

OFF-BALANCE SHEET ARRANGEMENTS.
------------------------------

The Company has no off-balance sheet arrangements.

LIQUIDITY AND PROPOSED PLANS FOR THE NEXT TWELVE MONTHS.
--------------------------------------------------------

The Company's plan of operation for the next twelve months is, first, to
realize positive cash flow at our Carlsbad, California facility. The Company
hopes to realize positive cash flow through increased sales to authorized
dealers. As of September 31st, 2004 the company has floored 14 various
motorcycle models. The Company further expects to increase its cash flow by
obtaining a flooring line provider in the forth quarter. The Company's
management believes it will be necessary to raise approximately $500,000.00 to
$700,000.00 to adequately fund operations to a level that is self supporting. As
of September 30th, 2004, the company believes that its majority shareholder, Bad
Toys Holdings, Inc., will supply the majority of the operating capital
necessary. Additionally, the Company also has the ability to raise capital from
traditional outside sources, including the issuance of stock and dept funding.
There can be no assurance, however, that we will be able to raise these funds
through a private offering of securities or otherwise. If the Company is unable
to raise these funds, we will not be able to increase our sales and production
activity to a self sustaining level.

ITEM 7. FINANCIAL STATEMENTS

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH

INDEPENDENT AUDITORS' REPORT

YEARS ENDED JUNE 30, 2004 AND 2003

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES

TABLE OF CONTENTS

PAGE
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Auditors' Report 11
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Consolidated Balance Sheets as of June 30, 2004 12
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Consolidated Statements of Income (Losses) for the Years Ended
June 30, 2004 and June 30, 2003 13
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Consolidated Statements of Cash Flows for the Years Ended
June 30, 2004 and June 30, 2003 14
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Consolidated Statements of Changes in Stockholders'
Equity for the Years Ended June 30, 2004 and June 30, 2003 15
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Notes to the Consolidated Financial Statements 16-21
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Pollard-Kelley Auditing Services, Inc..........................................
Auditing Services 3250 West Market St, Suite 307,
Fairlawn, OH 44333 330-864-2265

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
American Eagle Manufacturing Co., and Subsidiaries
(A Development Stage Company)

We have audited the accompanying balance sheets of American Eagle Manufacturing
Co., and Subsidiaries (A Development Stage Company) as of June 30, 2004 and
2003, and the related statements of income, changes in stockholders' equity, and
cash flows for each of the two years in the period ended June 30, 2004. 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 audits.

We conduct our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 audits provide a
reasonable basis for our opinion.

The Company has not generated significant revenues or profits to date. This
factor among others may indicate the Company will be unable to continue as a
going concern. The Company's continuation as a going concern depends upon its
ability to generate sufficient cash flow to conduct its operations and its
ability to obtain additional sources of capital and financing. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company at June 30, 2004
and 2003, and the results of its operations and it cash flows for each of the
two years in the period ended June 30, 2004, in conformity with U.S. generally
accepted accounting standards.

Pollard-Kelley Auditing Services, Inc.

Fairlawn, Ohio
October 8, 2004

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)
C0NSOLIDATED BALANCE SHEETS
June 30, 2004 and 2003

ASSETS

2004 2003

----------- ----------
CURRENT ASSETS
Cash $ - $ 82,582
Accounts receivable - Trade 88,954 -
Accounts receivable - Other - 10,000
Accounts receivable - shareholder 300,203 70,230
Inventory 673,166 563,673
Prepaid interest - 84,750
Prepaid expenses 75,643 35,463

TOTAL CURRENT ASSETS 1,137,966 846,698

FIXED ASSETS
Furniture & fixtures 171,507 170,307
Equipment 441,205 96,123
Vehicles 53,580 76,080
Leasehold improvements 111,165 111,165
777,457 453,675
Less: Accumulated depreciation (114,513) (63,519)

662,944 390,156

OTHER ASSETS
Deposits 38,890 63,890
Trademarks & patents 25,354 25,354

64,244 89,244
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1,865,154 $1,326,098

See accompanying notes and accountant's report.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT OF INCOME
For the Years ended June 30, 2004 and 2003, and for the Period
from October 15, 2001 (Date of Inception) Through June 30, 2004
(Since Inception)

SINCE
2004 2003 INCEPTION
------------- ------------ --------------

REVENUES $ 310,375 $ - $ 310,375

EXPENSES
Manufacturing 579,162 438,710 1,040,473
Sales and marketing 105,818 257,931 382,472
General and administrative 869,076 405,916 1,349,224
1,554,056 1,102,557 2,772,169

OPERATING LOSS (1,243,681) (1,102,557) (2,461,794)

OTHER INCOME
Miscellaneous 4,397 756 5,299

TAX PROVISIONS - - (800)

NET LOSS $ (1,239,284) $ (1,101,801) $ (2,457,295)

LOSS PER SHARE ($0.49)

Average Share Outstanding 2,545,880

See accompanying notes and accountant's report.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED STATEMENT CHANGES OF STOCKHOLDERS' EQUITY
For the Period from October 15, 2001 (Date of Inception)
Through June 30, 2004 (Since Inception)

ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------- ---------- -------- ----------- ----------- -----------

Balance at Inception - $ - - $ - $ - $ - $ -

Shares for assets contributed - - 20,000,000 20,000 90,000 - 110,000
Stock sales - - 1,294,342 1,294 645,877 - 647,171
Net Loss - - - - - (116,210) (116,210)
Balance at June 30, 2002 - - 21,294,342 21,294 735,877 (116,210) 640,961

Shares for services - - 85,424 85 42,627 - 42,712
Stock sales - - 1,165,711 1,166 912,064 - 913,230
Net Loss - - - - - (1,101,801) (1,101,801)
Balance at June 30, 2003 - - 22,545,477 22,545 1,690,568 (1,218,011) 495,102

Restatement for September 3,
2004 1:10 reverse split - - (20,290,929) (20,290) 20,290 - -
Acquisition of Fun Karts - - 211,982 212 429,710 - 429,922
Merger with public shell - - 98,300 98 - (130,098) (130,000)
Law suite settlement - - 10,000 10 99,990 - 100,000
Debt conversion - - 103,616 103 754,438 - 754,541
Stock for services - - 20,310 20 203,082 - 203,102
Stock sales - - 8,500 9 84,991 - 85,000
Net Loss - - - - - (1,239,284) (1,239,284)
- $ - 2,707,256 $ 2,707 $ 3,283,069 $(2,587,393) $ 698,383

See accompanying notes and accountant's report.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Years ended June 30, 2004 and 2003, and for the Period from October 15,
2001 (Date of Inception) Through June 30, 2004 (Since Inception)

SINCE
2004 2003 INCEPTION

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,239,284) $ (1,101,801) $ (2,457,295)
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities:
Depreciation 53,243 45,811 116,762
Common stock for services 203,102 42,712 245,814
Changes in Current assets and liabilities:
(Increase) in A/R - Trade (88,954) (88,954)
Decrease (Increase) in A/R - Other 10,000 (10,000) -
(Increase) in Inventories (5,446) (314,360) (569,119)
Decrease (Increase) in Prepaid interest 84,750 (84,750) -
(Increase) in Prepaid expenses (40,180) (24,472) (75,643)
Increase in Accounts payable 285,523 27,964 322,623
Increase in Accrued interest 19,667 20,583 40,250
Increase in Accrued warranty 15,000 15,000
Increase in Accrued wages 11,832 5,783 17,615
Increase in Accrued taxes 1,862 2,530 4,392
NET CASH (USED) BY
OPERATING ACTIVITIES (688,885) (1,390,000) (2,428,555)
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in Shareholder receivables (229,973) (67,650) (300,203)
(Decrease) Increase in deposits 25,000 (25,000) (38,890)
Increase in Trademarks - (3,099) (25,354)
Purchase of Fixed assets (30,651) (193,125) (374,326)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (235,624) (288,874) (738,773)
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common stock 85,000 913,230 1,645,401
Increase in Notes payable 750,000 765,000 1,515,000
NET CASH USED BY
FINANCING ACTIVITIES 835,000 1,678,230 3,160,401
NET INCREASE (DECREASE) IN CASH (89,509) (644) (6,927)
CASH AT BEGINNING OF PERIOD 82,582 83,226 -
CASH AT END OF PERIOD $ (6,927) $ 82,582 $ (6,927)

See accompanying notes and accountant's report.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Development Stage Company and History

American Eagle Manufacturing Co. and Subsidiaries (the Company) are a
development stage company as defined under Statements of Financial Accounting
Standards Number 7. The Company was incorporated in the state of Nevada on
October 15, 2001. On May 22, 2002 the Company formed American Eagle Motorcycle
Corporation a California corporation as a wholly owned subsidiary. On June 19,
2003 the Company formed American Eagle Manufacturing, GMBH a German Corporation
as a wholly owned subsidiary.

On September 30, 2003 the Company acquired all the assets of Fun Karts for
212,194 shares of the Company's common stock. The balance sheet at acquisition
was as follows:

Inventory $114,044
Equipment 315,878
-------

TOTAL $429,922

On November 25, 2003 the Company was acquired by American Eagle Manufacturing
Co., a Nevada corporation and formerly Harbor Front Holdings, Inc., a public,
reporting corporation. Harbor Front Holdings, Inc. was a shell at the time of
the acquisition and therefore the acquisition was treated as a reverse merger
whereby the acquired company is treated as the acquiring company for accounting
purposes.

On March 9, 2004 the Company settled a law suite of Harbor Front Holdings, Inc.
for $30,000 cash and 10,000 shares of the Company's common stock.

The year ended June 30, 2004 the Company converted $904,541 of convertible debt
and interest into 103,616 shares of the Company's common stock. In addition the
Company exchanged $203,082 of services for 20,310 shares of the Company's common
stock. Finally during the same fiscal year the Company sold 8,500 shares of its
common stock for $85,000.

On September 3, 2004 the Company reversed its outstanding common shares ten to
one. The share counts for all transactions and disclosures during the year ended
June 30, 2004 have been adjusted to reflect this reverse split.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The consolidated financial statements include the accounts of American Eagle
Manufacturing, American Eagle Corporation, and American Eagle Manufacturing,
GMBH. All significant inter-company accounts and transactions have been
eliminated in consolidation.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all
short-term debt securities to be cash equivalents.

Cash paid during the years for:
2004 2003
Interest $ 9,999 $ -0-
Income taxes $ -0- $ -0-

Inventories

Inventory costing uses the FIFO (first in, first out) method. Inventory
breakdown is as follows:

2004 2003
Raw Materials $235,476 $137,350
Work in Process 71,697 127,835
Finished Goods 365,993 298,260
------- -------
Total $673,166 $563,673
======= =======

Property and Equipment

Property and equipment are carried at cost. Maintenance, repairs and renewals
are expensed as incurred. Depreciation of property and equipment is provided for
on a straight line basis over their estimated useful lives as follows:

Furniture & fixtures 5-7 years
Equipment 7 years
Vehicles 5 years
Leasehold improvements 39 years

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Other Assets

The Company's other assets are made up of Deposits with the landlord for rent.
Trademarks & Patents represent the Company's outside costs of establishing their
product's trademarks and some initial third party costs for patent applications.
This cost will be amortized over the estimated useful life of the trademark or
patent once the Company starts to sell product. The Company has not yet
established as estimated useful life for their trademarks or patents at this
time.

Income Taxes

The Company accounts for income taxes under principals, which requires the
Company to recognize deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement carrying amounts and tax basis of the assets and liabilities using
enacted tax rates. The Company has no significant differences between book and
tax accounting. At June 30, 2004 the Company had an estimated tax loss
carryforward of approximately $2,200,000.

Use of Estimates

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

NOTE 2 - NOTES PAYABLE

On January 6, 2004 the Company entered into a $490,000 Convertible Promissory
Note with an individual. The loan is due upon demand. The interest rate is 10%.
The note is unsecured. The note is convertible at the holder's option after July
6, 2004 and before July 6, 2005 at a rate of 80% of the average selling price
per share over the previous 30 days. The note has not been converted. The
balance outstanding under this agreement at June 30, 2004 was $490,000.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 2 - NOTES PAYABLE - CONTINUED

On May 14, 2004 the Company entered into a $65,000 Demand Promissory Note with a
corporation. The note is due on demand, has a 7% interest rate and is secured by
all property, accounts receivable, inventories and general intangibles of the
Company. The Company has borrowed an additional $55,000 from this corporation
over an above the note agreement. The balance outstanding at June 30, 2004 was
$120,000.

During 2003 the Company entered into a series of notes with individuals. The
notes were due in either six or twelve months, had a 30% prepaid interest and
fees factor, bore interest at 7% to 15% and could be converted into shares of
the Company's common stock at the holder's option. Shares of the Company's
common stock also secure the notes. A summary of these note and their provisions
is as follows:

Date Amount Balance due Due date Interest rate Conversion rate
---- ------ ----------- -------- ------------- ---------------

12/11/02 $150,000 $150,000 12/11/03 7% $.50 per share and
warrants at $2.00 for
equal number of shares
02/05/03 $ 50,000 50,000 08/05/03 10% 80% of average price
02/28/03 $ 50,000 50,000 08/31/03 10% 80% of average price
03/31/03 $140,000 140,000 09/30/03 10% 80% of average price
05/31/03 $50,000 50,000 11/30/03 10% 80% of average price
05/31/03 $50,000 50,000 11/30/03 10% 80% of average price
05/31/03 $150,000 150,000 11/30/03 15% 80% of average price
05/01/03 $125,000 125,000 04/30/04 15% $2.00 per share
---------

TOTAL $765,000

These notes, with the exception of the note dated December 11, 2002 were
converted to the Company's common stock during the year ended June 30, 2004.

NOTE 3 - EQUITY

Common Stock

The Company had 200,000,000 common shares authorized and 2,707,256 and
212,545,477 shares issued and outstanding at June 30, 2004 and 2003
respectively. The shares outstanding at June 30, 2004 have been adjusted for the
September 3, 2004 ten to one reverse split. Par value per share at the end of
each year was $0.001.

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 3 - EQUITY - CONTINUED

During the year ended June 30, 2004, 35,000 shares of common stock were issued
with a guaranteed stock value in one year of $2.00 per share. The agreement
calls for an additional issue of common shares by the Company in the amount
necessary to cover the difference in value below $2.00 per share value.

PREFERRED STOCK
---------------

The Company had 25,000,000 and 10.000,000 shares authorized. There were no
shares outstanding at either June 30, 2004 or June 30, 2003. The terms of the
preferred stock are to be set by the board of directors when issued.

Warrants

The Company has issued warrants to purchase shares of stock for $2.00 per share.
The warrants were issued in December 2002, and continue up to the present. The
warrant holder has 24 months form the date of issue to exercise the warrant. At
June 30, 2004 the Company had issued 2,327,704 warrants effected by the 1:10
reverse split.

In addition during the year ended June 30, 2004 the Company issued 75,000
warrants to purchase shares of stock for $1.00 per share. 10,000 of these
warrants were exercised before June 30, 2004. The warrants expire in 12 months.
At June 30, 2004 there were 65,000 of these warrants outstanding and are
effected by the 1:10 reverse split.

NOTE 4 - RELATED PARTIES

The Company has from time to time made advances to its principal stockholder and
Chief executive officer. The advances are unsecured, and bear no interest.
Detail of the amounts outstanding at June 30, 2004 is as follows:

Balance due from June 30, 2003 $ 70,230
Loans made during the year 25,000
Net book value of vehicle converted 20,206
Funds for which the Company is
awaiting an accounting 184,767
-------
TOTAL $ 300,203

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 5 - COMMITMENTS

On February 27, 2002 the Company entered into a five-year lease for its present
manufacturing and administrative facilities. The lease began August 1, 2002.
Lease payments are on a sliding scale as follows:

Period Monthly Rent
Months 1-8 $11,580
Months 9-12 $18,515
Months 12-24 $19,260
Months 25-36 $20,030
Months 37-48 $20,830
Months 49-60 $21,670

The lease provides for an additional 60-month extension with proper notice. Rent
under the extension is at then current fair market value. The amount below for
fiscal 2008 is under this extension period and is estimated.

Future minimum payments due under this lease agreement are as follows:

Fiscal
2005 $239,530
2006 $249,430
2007 $259,420
2008 $269,000 estimated

The Company was four months behind in its payments to the landlord at June 30,
2004.

NOTE 6 - GOING CONCERN

AMERICAN EAGLE MANUFACTURING CO., AND SUBSIDIARIES
(A Development Stage Company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2004

NOTE 7 - LEGAL PROCEEDINGS

On June 20, 2003 a bank filed suit against the Company and a shareholder for
$689,335 and to recover equipment that secured a loan to a third party. A
portion of the equipment has been received by the Company and is being stored
awaiting instructions to return it to the Bank. Management feels it has no
liability in this case.

On November 6, 2003 a shareholder and a third party filed suit against the
Company to recover assets and damages for breach of contract that was rescinded
by the Company. The suit seeks $15,750,000 in damages. The Company rescinded the
contract because the sellers did not have clear title to the assets they were
selling to the Company. Management feels it has little or no liability in this
matter. Management also feels that if it should be found liable in this case, it
would be required to issue additional shares of it stock to satisfy the
liability.

NOTE 8 - SUBSEQUENT EVENTS

On August 8, 2004 the majority shareholder and CEO of the Company entered into a
Capital Stock Purchase agreement selling their holdings (approximately 73% of
the outstanding common stock) to a corporation.

On July 20, 2004 the Company adopted a Non-Qualified Stock Option Plan and
registered 5,500,000 shares for the plan's use. The plan is administrated by the
Board of Directors who has the sole discretion to grant options, authorize
purchases, and grant awards.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

ITEM 8A. CONTROLS AND PROCEDURES

In accordance with Item 307 of Regulation S-B promulgated under the
Securities Act of 1933, as amended, as of December 31, 2003, the Chief Executive
Officer and Chief Financial Officer of the Company (the "Certifying Officers")
have conducted evaluations of the Company's disclosure controls and procedures.
As defined under Sections 13a-14(c) and 15d-14(c) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), the term "disclosure controls and
procedures" means controls and other procedures of an issuer that are designed
to ensure that information required to be disclosed by the issuer in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed by an issuer in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the issuer's management,
including its principal executive officer or officers and principal financial
officer or officers, or persons performing similar functions, as appropriate to
allow timely decisions regarding required disclosure. The Certifying Officers
have reviewed the Company's disclosure controls and procedures and have
concluded that those disclosure controls and procedures are effective in causing
information to be recorded, processed, summarized and reported within the time
periods specified in the Commission's rules and forms and communicated to
management of the Company to allow timely decisions regarding the Company's
public disclosures. In compliance with Section 302 of the Sarbanes-Oxley Act of
2002, (18 U.S.C. 1350), each of the Certifying Officers executed an Officer's
Certification included in this Annual Report on Form 10-KSB.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Don Logan beneficially owns 20,000,000 shares of Common Stock, $0.001 par
value, of American Eagle Manufacturing Co. with his wife Barrie Logan as joint
tenants with right of survivorship. The shares of Common Stock beneficially
owned by Mr. Logan constitute approximately 73.3% of the total number of shares
of Common Stock of American Eagle Manufacturing Co.

(b) Mr. Logan has shared power to vote or to direct the vote, and shared
power to dispose or to direct the disposition of, the shares beneficially owned
by Mr. Logan. Mr. Logan shares such power with his wife Barrie Logan.

Barrie Logan's business address is 2052 Corte Del Nogal, Carlsbad,
California 92009. Ms. Logan is the Vice President and Secretary of American
Eagle Manufacturing Co. Ms. Logan is also the Vice President and Secretary of
American Eagle Corp. ("Eagle Corp."),a wholly owned Nevada subsidiary of
American Eagle Manufacturing Co. Ms. Logan also serves as a Director of both
American Eagle Manufacturing Co. and Eagle Corp.

ITEM 10. EXECUTIVE COMPENSATION

The following table is a summary of the compensation earned for the last
fiscal year for services in all capacities by each of the persons who qualified
as a "named executive officer" under item 402(a)(3) of Regulation S-B.

LONG-TERM
COMPENSATION
--------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS $
--------------------- ------- -----------
OTHER SECURITIES LTIP ALL
YEAR SALARY BONUS $ ANNUAL UNDERLYING PAYOUTS OTHER
NAME AND PRINCIPAL COMPEN- OPTIONS ($) COMPENSATION
POSITION(2) SATION ($) ($) ($)
------------------------ ---------- ----------- ----------- -------------

Don Logan 2004 130,000 -- 100,000 -- -- --
President and Chief
Executive Officer

Barrie Logan 2004 75,000 -- 50,000 -- -- --
Vice President and
Secretary

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of October 1, 2004
relating to the beneficial ownership of the common stock by (a) all persons
known by us to beneficially own more than 5% of the outstanding shares of the
common stock, (b) each director, director nominee and executive officer and, (c)
all officers and directors as a group. We had 3,306,685 shares outstanding as of
October 1, 2004.

NAME AND NUMBER OF SHARES PERCENTAGE
ADDRESS OF BENEFICIALLY OF SHARES
BENEFICIAL OWNER(1)(2) OWNED OUTSTANDING
---------------------- ---------------- -----------

BadToys
2344 Woodridge Avenue, Kingsport, TN 37664 1,999,000 60.5%

Robert Cashman
2164 N. Glassell, Orange, Ca 92865 200,000 6.04%

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the past two years the Company had made advances to Don Logan the
Company's former principal shareholder, Director and Chief Executive Officer.
These advances are unsecured, bear no interest and are not believed by present
management to have been properly authorized. The Board of Directors has formed a
committee and engaged a forensic auditor to investigate the entire dealings of
Mr. Logan with the Company. The present estimated aggregate amount of
transaction between the Company and Mr. Logan is approximately $300,000.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

No reports were filed on Form 8-K during the last quarter of the period
covered by this report.

a) Exhibit 31.1 and 31.2 - Certifications pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002

Exhibit 32.1 and 32.2 - Certifications pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002

b) None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Carlsbad, State of California on October 13, 2004.

BAD TOYS, INC.

By: /s/ Larry N. Lunan
----------------------------------
Larry N. Lunan

President and Chief Executive Officer

Pursuant to requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons on behalf of the Company and in
the capacities indicated on October 13, 2004.

Signature Title

/s/ Roger A. Warren Treasurer and Chief Financial Officer and Director
------------------- TPrincipal Financial and Accounting Officer
Roger A. Warren

/s/ Larry N. Lunan President, Chief Executive Officer and
------------------ Chairman of the Board of Directors
Larry N. Lunan Principal Executive Officer)

/s/ Clinton L. Hubbard Director
----------------------
Clinton L. Hubbard