SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to __________
Commission file number O-23859
AMERICAN CUSTOM COMPONENTS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 81-0478643
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) identification No.)
3310 W. MacArthur Blvd.
Santa Ana, CA 92704
(Address of Principal Executive Offices)
(714) 662-2080
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Y ear,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date: As of February 26, 1999, there were 13,778,341 shares of
common stock outstanding.
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AMERICAN CUSTOM COMPONENTS, INC.
INDEX
Page
Part I Financial Information
Item 1. Financial Statements
Balance sheet as of December 31, 1998 (unaudited). . 3
Statements of operations for the nine months ended
December 31, 1998 and 1997 (unaudited) . . . . . . . . . 4
Statements of cash flows for the nine months ended
December 31, 1998 and 1997 (unaudited) . . . . . . . . . .5
Item 2. Managements Discussion and Analysis or Plan of
Operation . . . . . . . . . . . . . . . . . . . . . 6
Part II Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . 6
Item 2. Changes in Securities. . . . . . . . . . . . . . . . . 6
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders. . 7
Item 5. Other Information. . . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 7
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PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
AMERICAN CUSTOM COMPONENTS, INC.
<TABLE>
BALANCE SHEET
December 31, 1998
ASSETS
<S> <C>
Current Assets:
Cash $ 3,817
Accounts receivable, net 60,562
Inventories 140,944
Total current assets 205,323
Property and equipment, net 962,250
Other assets 310,375
Total assets 1,477,948
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable 753,978
Bank overdraft 0
Line of Credit 40,179
Notes payable, current 346,575
Income taxes payable 6,137
Total current liabilities 1,210,363
Notes payable, net of current portion 413,998
Total liabilities 1,560,860
Commitments and contingencies
Shareholders' equity (deficit)
Common stock ($0.001 par value; 25,000,000
shares authorized; 13,873,341 shares issued
and outstanding as of December 31, 1998) 13,873
Additional paid-in capital 1,801,927
Accumulated deficit <1,898,712>
Total shareholders' equity (deficit) <82,912>
Total liabilities and shareholders' equity (deficit) 1,477,948
</TABLE>
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AMERICAN CUSTOM COMPONENTS, INC.
<TABLE>
STATEMENTS OF OPERATIONS
Nine months ended Nine months ended
December 31, 1998 December 31, 1997
<S> <C> <C>
Net sales $ 1,004,309 2,153,090
Cost of sales 644,721 1,099,236
Gross profit 359,588 1,053,854
Operating costs and expenses:
Wages and salaries 339,355 389,892
Options compensation expense 0 0
Selling and promotion 46,025 51,796
Insurance 47,803 51,505
Professional fees 164,277 83,653
Depreciation and amortization expense 72,000 55,448
Research and development 0 0
Other operating expenses 266,028 269,905
Total costs and expenses 935,488 902,199
Income (loss) from operations <575,900> 151,655
Other expense:
Interest expense 44,980 44,525
Income (loss) before provision for taxes <620,880> 107,130
Provision for income taxes 800 800
Net income (loss) <621,680> 106,330
Earnings (loss) per share - basic <.05> .01
Weighted average number of shares
outstanding - basic 12,987,996 8,319,369
</TABLE>
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AMERICAN CUSTOM COMPONENTS, INC.
<TABLE>
STATEMENTS OF CASH FLOWS
Nine months ended Nine months ended
December 31, 1998 December 31, 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ <621,680> 106,330
Adjustments to reconcile income (loss)
to net cash provided by operating activities:
Depreciation and amortization 72,000 55,448
Uncollectible accounts receivable 0 0
Compensation expense resulting
from the granting of options 0 0
Decrease (increase) in assets:
Accounts receivable 419,325 <47,300>
Inventories 40,002 <105,536>
Other assets <111,518> <1,600>
Increase in liabilities
Accounts payable 499,820 15,450
Line of credit 0 0
Income taxes payable 6,137 0
Cash used in operating activities 526,942 22,792
Cash flows used in investing activities:
Acquisition of property and equipment <294,823> <276,556>
Increase in other assets 0 <191,655>
Cash used in investing activities <294,823> <468,211>
Cash flows provided by (used in) financing activities:
Principal reduction of notes payable <380,159> <270,535>
Proceeds from notes payable 14,899 146,125
Issuance of common stock 5,840 740,985
Cash provided by financing activities <359,420> 616,575
Net increase (decrease) in cash <127,301> 171,156
Cash, beginning of period 131,118 <47,735>
Cash, end of period 3,817 123,421
</TABLE>
<PAGE>
Item 2. Managements Discussion and Analysis or Plan of Operation
Results of Operations
During the first nine months of the Company's fiscal year,
the Company focused a significant amount of resources on recovering
from the loss of two major customers who experienced financial
difficulty. The loss of these two customers, as well as expansion
costs, resulted in a shortage of cash flow for the period.
During the nine months ended December 31, 1998, net sales
decreased to $1,004,309 from $2,153,090 for the nine months ended
December 31, 1997. This decrease of 53% was attributed to the
Company's lack of financial resources to obtain materials to fulfill
its purchase orders. In addition, the Company did not have the
financial resources to expand its existing customer base. Gross
profit was $359,588 for the nine months ended December 31, 1998, or
36% of net sales. For the nine months ended December 31, 1997,
gross profit was $1,053,854, or 49% of net sales. This decrease of
13% was attributed to the front-end expenses related to several new
customers.
During the nine months ended December 31, 1998, accounts
payable increased 3135% to $499,820 as compared to $15,450 for the
nine months ended December 31, 1997. This increase is related to
the Company's purchase of materials used for programs which became
obsolete when the two major customers experienced financial
difficulties and ended their relationship with the Company, and
increased legal and accounting expenses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is presently, has been, and may from time to time
be involved in various claims, lawsuits, disputes with third
parties, actions involving allegations of discrimination, or breach
of contract actions incidental to the operation of its business.
The Company is not currently involved in any such litigation which
it believes could have a materially adverse effect on its financial
condition or results of operations.
Item 2. Changes in Securities
In October 1998, the Company sold an aggregate of 7,143
restricted shares of common stock under Rule 506 of Regulation D and
Section 4(2) of the Securities Act of 1933 to George Brook, a
sophisticated investor given full access to the Company's books and
records, for $0.70 per share, resulting in net proceeds to the
Company of $5,000.
In October 1998, the Company issued 200,000 shares of
restricted common stock to The Michelson Group, Inc., an accredited
investors, in consideration for the cancellation of outstanding open
account indebtedness. The issuance was exempt under Section 4(2) of
the Securities Act of 1933.
In November 1998, the Company sold an aggregate of 26,667
shares of common stock under Section 4(2) of the Securities Act of
1933 to Jeffrey Willmann, a sophisticated individual given full
access to the Company's books and records, at a price of $0.375 per
share, resulting in net proceeds to the Company of $10,000.
In November 1998, the Company issued 40,000 shares of common
stock to MRC Legal Services Corporation, an accredited entity, in
consideration for the cancellation of outstanding open account
indebtedness. This issuance was exempt under Section 4(2) of the
Securities Act of 1933.
<PAGE>
In November 1998, the Company sold an aggregate of 13,334
shares of common stock under Section 4(2) of the Securities Act of
1933 to Robert Karinchak, a sophisticated individual given full
access to the Company's books and records, at a price of $0.375 per
share, resulting in net proceeds to the Company of $5,000.
In November 1998, the Company issued 100,000 shares of common
stock to National Capital Merchant Group, Ltd., an accredited
entity, in accordance with the terms of an agreement. The issuance
was exempt under Section 4(2) of the Securities Act of 1933.
In November 1998, the Company issued 20,000 shares of common
stock to Prototype and Short Run Services, Inc., an accredited
entity, in consideration for the cancellation of outstanding open
account indebtedness. This issuance was exempt under Section 4(2)
of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities
As of December 31, 1998, the Company was in default under two
promissory notes to private individuals. In the aggregate, these
two notes represent an outstanding principal balance of $373,475,
plus unpaid interest and arreages of $34,278.50.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to the security holders for a vote.
Item 5. Other Information
There is no other information deemed material by management
for disclosure herein.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN CUSTOM COMPONENTS, INC.
Dated: February 26, 1999 /s/ John Groom
By: John Groom
Its: President
