[DESCRIPTION] American Tire Corp. Form 10-QSB, 3/31/96
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________.
Commission file number: 33-94318-C
AMERICAN TIRE CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 87-0535207
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
446 WEST LAKE STREET, RAVENNA, OHIO 44266
(Address of principal executive offices) (Zip Code)
(216) 296-8778
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since last
report.)
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), Yes [X] No [ ] and (2) has
been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
The number of shares outstanding of each of the issuer's classes of common
stock, was 3,840,642 shares of common stock, par value $.001, as of May 8, 1996.
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
Operating results for the quarter ended March 31, 1996, are not necessarily
indicative of the results that can be expected for the year ending June 30, 1996
<PAGE> 3
AMERICAN TIRE CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION> MARCH 31,
1996 JUNE 30,
(Unaudited) 1995
------------ ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash.......................................... $ 964 $ 92,729
Other receivable.............................. 5,008 4,419
Receivable - officers......................... - 50,000
Inventory..................................... 131,285 -
Prepaid royalties - related party............. 17,725 8,550
Prepaid expenses.............................. 18,058 19,563
Deposits on inventory......................... 87,401 201,838
---------- ----------
Total current assets....................... 260,441 377,099
Property, Plant and Equipment:
Land.......................................... 59,000 59,000
Building and building improvements............ 229,997 228,305
Equipment..................................... 214,859 73,906
Furniture and fixtures........................ 6,940 6,940
Construction in progress...................... - 14,000
---------- ----------
510,796 382,151
Less: accumulated depreciation............... 26,879 1,305
---------- ----------
483,917 380,846
Other Assets:
Deposits...................................... 1,854 1,854
Accrued interest receivable................... 8,298 2,991
Deferred offering costs....................... 117,077 71,824
---------- ----------
127,229 76,669
---------- ----------
Total Assets.................................... $ 871,587 $ 834,614
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Line of credit................................ $ 299,838 $ 201,838
Accounts payable and accrued expenses......... 46,659 24,908
Due to officer................................ - 6,159
Notes payable - officers and accrued interest. 99,646 -
---------- ----------
Total current liabilities.................. 446,143 232,905
Stockholder Equity:
Preferred stock, par value, $0.001, 5,000,000 shares
authorized, 0 shares issued and outstanding.. - -
Common stock, par value $0.001, 25,000,000 shares
authorized, 3,840,642 and 3,800,000 shares issued
and outstanding, respectively................ 3,841 3,800
Additional paid-in capital.................... 1,182,650 940,439
Deficit accumulated during the development stage (676,047) (248,630)
---------- ----------
510,444 695,609
Less: Receivable - shareholders (officers)....... (85,000) (93,900)
---------- ----------
Total shareholders' equity........................ 425,444 601,709
---------- ----------
Total liabilities and shareholders' equity........ $ 871,587 $ 834,614
========== ==========
</TABLE>
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AMERICAN TIRE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION> Three Months Nine Months Jan. 30, 1995
ended ended Jan. 30, 1995 (Inception) to
March 31, March 31, (Inception) March 31,
1996 1996 to 1996
(Unaudited) (Unaudited) June 30, 1995 (Unaudited)
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Income:
Interest..................................... $ 1,748 $ 6,403 $ 3,611 $ 10,014
Operating Expenses:
Consulting................................... 17,000 31,000 135,818 166,818
Payroll and payroll taxes.................... 60,121 159,184 29,817 189,001
Administrative............................... 56,735 152,188 28,126 180,314
Travel and entertainment..................... 7,826 45,348 40,774 86,122
Marketing consulting......................... - - 13,300 13,300
Interest 7,726 20,526 3,101 23,627
Depreciation................................. 9,344 25,574 1,305 26,879
---------- ----------- ---------- ----------
Total operating Expenses....................... 158,752 433,820 252,241 686,061
---------- ----------- ---------- ----------
Loss before income taxes....................... (157,004) (427,417) (248,630) (676,047)
Income taxes................................... - - - -
---------- ----------- ---------- ----------
Net (loss)..................................... $ (157,004) $ (427,417) $ (248,630) $ (676,047)
========== ========== ========== ==========
Weighted average number of shares outstanding.. 3,840,642 3,840,642 3,840,642 3,840,642
========== ========== ========== ==========
Net (loss) per share........................... $ (0.04) $ (0.11) $ (0.06) (0.17)
========== ========== ========== ==========
</TABLE>
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AMERICAN TIRE CORPORATION
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION> Accumulated
Additional Deficit During Notes Total
Common Stock Paid-in Development Receivable Shareholders'
Shares Amount Capital Stage Shareholders Equity
--------- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, at January 30,
1995, (Inception).......... - $ - $ - $ - - -
Sale of common stock for
cash of $0.001 per share... 2,510,000 2,510 - - - 2,510
Common stock issued for
services in February 1995.. 300,000 300 29,700 - - 30,000
Common stock issued for
services in April 1995.... 100,000 100 99,900 - - 100,000
Common stock issued for
notes receivable, of which
$50,000 was paid in August
1995 and $50,000 included
in current assets at June
30, 1995.................. 170,000 170 169,830 - (120,000) 50,000
Repayment of notes
receivable by providing
services.................. - - - - 26,100 26,100
Sale of common stock for
cash of $1.00 per share
pursuant to a private
placement, net of stock
issuance costs of $78,271. 720,000 720 641,009 - - 641,729
Net loss for the period.... - - - (248,630) - (248,630)
---------- --------- ---------- ---------- ---------- ---------
Balances, at June
30, 1995.................. 3,800,000 3,800 940,439 (248,630) (93,900) 601,709
Repayment of notes
receivable by providing
services (unaudited) - - - - 8,900 8,900
Sale of common stock for
cash of $6.00 per share
pursuant to a private
placement (unaudited)..... 40,642 41 243,811 - - 243,852
Stock issuance costs
(unaudited)............... - - (1,600) - - (1,600)
Net loss for the period
ended March 31, 1996...... - - - (427,417) - (427,417)
---------- ---------- ---------- ---------- ---------- ---------
Balances at
March 31, 1996............ 3,840,642 $ 3,841 $1,182,650 $ (676,047) $ (85,000) $ 425,444
========== ========== ========== ========== ========== =========
</TABLE>
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AMERICAN TIRE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION> Three Months Nine Months January 30, January 30,
Ended Ended 1995 1995
March 31, March 31, (Inception) (Inception)
1996 1996 to June 30, to March 31,
(Unaudited) (Unaudited) 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................... $ (157,004) $ (427,417) $ (248,630) $ (676,047)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation............................. 9,344 25,574 1,305 26,879
Stock issued in lieu of cash payment for
certain services......................... - - 129,000 129,000
Services provided in lieu of cash payment
on receivables - officers................ - 8,900 26,100 35,000
(Increase) decrease in:
Other receivable......................... 435 (589) (4,419) (5,008)
Inventory................................ - (131,285) - (131,285)
Prepaid royalties........................ - (9,175) (8,550) (17,725)
Prepaid expenses......................... 3,919 1,505 (19,563) (18,058)
Deposits on inventory and other.......... - 114,437 (203,692) (89,255)
Accrued interest receivable.............. (1,695) (5,307) (2,991) (8,298)
Increase (decrease) in:
Accounts payable and accrued expenses.... 17,870 22,397 24,908 47,305
Due to officer........................... - (6,159) 6,159 -
----------- ---------- ---------- ----------
Net cash used by operating activities. (127,131) (407,119) (300,373) (707,492)
Cash flows from investing activities:
Purchase of property, plant and equipment. (5,064) (128,645) (382,151) (510,796)
----------- ---------- --------- ----------
Net cash used by investing activities. (5,064) (128,645) (382,151) (510,796)
Cash flows from Financing Activities:
Borrowing on line of credit............... - 196,000 201,838 397,838
Repayment on line of credit............... - (98,000) - (98,000)
(98,000)
Proceeds from notes payable - officers.... 99,000 99,000 - 99,000
Proceeds from mortgage note payable....... - - 188,000 188,000
Repayment of mortgage note payable........ - - (188,000) (188,000)
Proceeds from issuance of common stock
(net of stock issuance costs of $79,871.. - 292,252 644,239 936,491
Deferred offering costs................... (13,272) (45,253) (70,824) (116,077)
----------- ---------- --------- ----------
Net cash provided by financing
activities............................ 85,728 443,999 775,253 1,219,252
----------- ---------- --------- ----------
Net increase (decrease) in cash............ (46,467) (91,765) 92,729 964
Cash at beginning of period................ 47,431 92,729 - -
----------- ---------- --------- ----------
Cash at end of period...................... $ 964 $ 964 $ 92,729 $ 964
=========== ========== ========= ==========
</TABLE>
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AMERICAN TIRE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business: American Tire Corporation, a Nevada corporation ("the
Company"), was organized on January 30, 1995, to take advantage of existing
proprietary and non-proprietary technology available for the manufacturing of
specialty tires. The Company has had limited operations since its organization
and is a "development stage" company. The Company intends to engage in the
manufacturing, marketing, distribution, and sales of airless "specialty" tires
and tire-wheel assemblies utilizing "liquid phase" technology. Initially, the
Company will manufacture airless bicycle tires at the Company manufacturing
facility located in Ravenna, Ohio. The Company's year end is June 30.
Basis of Presentation: The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has a
very limited operating history, has not generated operating revenues to date and
must be considered promotional and in its early development stages. The
corresponding three month period ending March 31, 1995 has not been included in
the presentation of the statements of operations or the statements of cash flows
because the Company had no operations during that period.
In April 1996, the Company entered into an agreement with two underwriters (the
"Underwriters"), whereby the Underwriters have agreed in principle to act as
underwriters in an initial public offering of up to 550,000 shares of the
Company's common stock (500,000 shares intended to be offered to the public and
50,000 shares for which the Underwriters have the option to purchase to cover
over-allotments, if any). In addition, the Underwriters have the option to
purchase up to 10% of the number of shares of common stock sold in the offering
at a price of 125% of the initial public offering price during a twelve month
period beginning one year from the effective date of the public offering.
The Company's continuation as a going concern is dependent upon its ability to
generate sufficient capital resources from its initial public offering or other
sources to carry out its business plan and to commence and continue operations.
There can be no assurance that the offering will be successful.
Revenue Recognition: The Company expects to recognize revenue upon the shipment
of product.
Inventory: Inventory is stated at the lower of cost or market, using the first-
in, first-out method. The inventory at March 31, 1996 consists of finished
goods purchased for resale.
Property, Plant and Equipment: Property, plant and equipment are recorded at
cost. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets.
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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes: Deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in the
financial statements and tax returns. The Company has provided a 100% valuation
allowance for the benefit associated with the Company's net operating loss
carryforward of approximately $670,000 and $246,000 at March 31, 1996 and June
30, 1995, respectively.
Deferred Offering Costs: The initial public offering costs have been deferred
pending completion of such offering at which time such costs will be netted
against the offering proceeds received. Should the offering be unsuccessful,
these costs will be expensed.
Net Loss Per Share: The net loss per share has been computed in accordance with
regulations of the Securities and Exchange Commission. Accordingly, stock
issued at prices less than the proposed offering price within one year of the
offering have been treated as outstanding for the period presented in the
accompanying statement of operations.
NOTE B - RECEIVABLES - OFFICERS
In April 1995, the Company entered into subscription agreements for three of its
officers to acquire an aggregate of 170,000 shares of common stock at a purchase
price of $1.00 per share in exchange for promissory notes bearing interest at 8%
per annum, principal and interest payable in April 1998. The officers provided
accounting and consulting services valued at $26,100 which have been charged to
operations during the period ended June 30, 1995, and offset against the amount
owed under the promissory notes. At June 30, 1995, the total amount receivable
was $143,900, of which $50,000 was classified as a current asset. This
represents cash received after June 30, 1995, but prior to issuance of the
financial statements, with the remaining $93,900 reflected as a reduction of
shareholders' equity, as the receivable was not paid prior to the issuance of
the financial statements. At June 30, 1995, accrued interest receivable on the
notes amounted to $2,991.
During the nine months ended March 31, 1996, an officer provided $8,900 of
accounting services, which were offset against the amounts owed under his
promissory note, and another officer paid $50,000 toward his note receivable. At
March 31, 1996, $85,000 was owed under these notes, which has been presented as
a reduction of shareholders' equity. At March 31, 1996, accrued interest
receivable on those notes amounted to $8,298.
NOTE C - DEPOSITS ON INVENTORY
At June 30, 1995, the Company had deposited $201,838 for purchase of bicycle
tires. This amount is recorded as a deposit on the June 30, 1995 balance sheet.
As of March 31, 1996, inventory of $114,437 has been received. The remaining
tires are expected to be received upon the availability of such tires from the
manufacturer after the completion of the initial public offering. In the event
the manufacturer is unable to provide the tires, the manufacturer will refund
such deposit to the Company.
<PAGE 9>
NOTE D - LINE OF CREDIT
The Company has entered into a line of credit agreement with a bank. Under the
terms of the agreement, the Company may borrow up to $300,000 at the interest
rate of prime plus 1%. This line is personally guaranteed either entirely or in
part by the Chief Executive Officer and the President of the Company and is
secured by the accounts receivable, inventory and equipment of the Company. At
March 31, 1996 and June 30, 1995, $299,838 and $201,838 was outstanding under
this agreement.
The weighted average interest rate during the nine month period ended March 31,
1996 and the period ended June 30, 1995 was 9.69% and 10%, respectively.
NOTE E - SHAREHOLDERS' EQUITY
Shareholders' equity is consists of the following at March 31, 1996 and June 30,
1995:
Preferred Stock: The Company has authorized 5,000,000 shares of $.001 par value
preferred stock. At March 31, 1996 and June 30, 1995, no shares of preferred
stock were issued or outstanding.
Common Stock: The Company was initially capitalized by issuing 2,510,000 shares
of $.001 par value common stock in exchange for a stock subscription receivable
in lieu of cash. The stock subscription receivable was paid on June 30, 1995.
In February 1995, the Company issued 300,000 shares of $.001 par value common
stock to certain individuals in lieu of cash payments for consulting services
provided to the Company by such individuals valued at $30,000. $29,000 has been
charged to operations during the period ended June 30, 1995. $1,000 has been
capitalized and is included in deferred offering costs at March 31, 1996
and June 30, 1995.
In April 1995, the Company issued 100,000 shares of $.001 par value common stock
to the spouses of two officers of the Company in lieu of cash payment for
consulting services provided to the Company by such individuals. The Company's
management has charged $100,000 to operations for the period ended June 30, 1995
for the services provided.
In April 1995, the Company entered into subscription agreements with three
officers for them to acquire an aggregate of 170,000 shares of $.001 par value
common stock at a purchase price of $1.00 per share, in exchange for promissory
notes bearing interest at 8% per annum, payable in April, 1998 (See Note B).
In May 1995, pursuant to a private placement, the Company issued 720,000 shares
of $.001 par value common stock for $1.00 per share, which resulted in proceeds
of $720,000. Stock issuance costs associated with this private placement
amounted to $78,271.
In September 1995, pursuant to a private placement, the Company issued 40,642
shares of $.001 par value common stock for $6.00 per share, which resulted in
proceeds of $243,852.
<PAGE> 10
NOTE F - RELATED PARTY TRANSACTIONS
The land and building of the Company were acquired personally by an officer of
the Company for $287,305. The officer was subsequently reimbursed at his cost
upon transfer of the title of the land and building to the Company.
In August, 1995, the Company entered into employment agreements with two of its
officers, which will not take effect until the proceeds of the initial public
offering have been received by the Company. The agreements are for 36 months at
a monthly compensation of $10,000 each upon the consummation of the proposed
public offering.
In October, 1995, the Company entered into an agreement with a related company
providing for a royalty of $.25 to be paid for each tire sold by the Company
utilizing the "airless tire technology" as defined by the agreement.
During February, March, and April, 1996, certain officers loaned the Company a
total of $167,000. These notes are due on demand and bear interest at the rate
of 9.5% per annum. At March 31, 1996, $99,000 has been loaned to the Company,
and accrued interest amounted to $646. The Company intends to repay these loans
from proceeds of the initial public offering.
NOTE G - RECISION OFFER
Due to the timing of the Company's September 1995 private placement during the
pendency of the Company's registration statement, the Company's reliance on an
exemption from registration could possibly be challenged. The Company is
offering to repurchase such shares sold in the September 1995 private placement
at the price originally paid plus interest at 12% per annum from the date of
original purchase through the date of the repurchase of such shares. The Company
estimates its obligation to such shareholders, if all shareholders request the
Company to reacquire all 40,642 shares, at $265,000. Payment of such obligation
of the Company has been personally guaranteed by the Chief Executive Officer and
the President of the Company.
<PAGE> 11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Organization and Corporate History
American Tire Corporation, a Nevada corporation (the "Company"), was
organized on January 30, 1995, by Richard Steinke and Dennis Chrobak to take
advantage of existing proprietary and non-proprietary technology available for
the manufacturing of specialty tires. Mr. Steinke has years of experience in
top-management positions in public companies engaged in manufacturing products
utilizing emerging technology and personally holds patents on urethane products
and processes. Mr. Chrobak has over 30 years of tire industry experience in
tire design, manufacturing, and marketing as an engineer for Goodyear Tire and
Rubber Company and personally holds patents on tire structures and manufacturing
processes. The Company has had limited operations since its organization and is
a "development stage" company.
Following its organization, in May 1995 the Company completed a private
placement of 720,000 shares of Common Stock to a limited number of investors,
raising net proceeds of $641,729, after deducting sales commissions of $70,000,
which were paid to First London Securities Corporation for its services as the
placement agent, and after deducting $8,271 in offering expenses. The funds
received by the Company were utilized to purchase a manufacturing facility
in Ravenna, Ohio, and to purchase specialized manufacturing equipment.
In September 1995, the Company sold in a private placement an additional
40,642 shares, raising gross proceeds of $243,852. No commissions were paid,
directly or indirectly, in connection with the sale of those shares. The
proceeds from these prior offerings have been utilized by the Company to fund
its ongoing operations. The 40,642 shares of Common Stock sold in September
1995 are subject to a Recision Offer.
The Company has filed a registration statement with the Securities and
Exchange Commission (the "Commission") relating to (1) the public offering for
cash of 500,000 shares of Common Stock at $6.00 per share for gross offering
proceeds of $3,000,000, and (2) the offer to repurchase from shareholders
of the Company 40,642 shares of Common Stock at a repurchase price of $6.00 per
share. The registration statement was granted an effective date of February 28,
1996. However, on April 15, 1996, the Company filed a post-effective amendment
to the registration statement, which is now under review by the Commission.
The Company intends to use the net proceeds from the public offering to
initiate production of "airless" bicycle and other tires which will compete with
the traditional pneumatic tires (i.e., tires with an inner tube or tubeless
tires inflated with air), repurchase shares of Common Stock subject to the
Recision Offer, repay loans from Officers, and for working capital.
<PAGE> 12
Plan of Operation
The Company's initial plan is to engage in the manufacturing, marketing,
distribution, and sale of airless specialty tires utilizing "liquid phase"
technology. "Liquid Phase" technology refers to a production process where the
materials that are utilized in the process are initially in a liquid state and,
through a reaction (usually chemical), the liquid materials are transformed into
a solid state.
The Company has acquired three single-station and one 6-station centrifugal
molding machines and other related specialized manufacturing equipment to make
the airless bicycle tires, at a cost of $125,000. The 6-station unit currently
owned by the Company will allow it to produce approximately 50,000 bicycle tires
monthly or 600,000 bicycle tires annually, assuming one, eight-hour production
shift, 260 days per year. The Company will utilize approximately $1,000,000 of
the proceeds of the public offering to purchase two additional 12-station
molding machines and related production equipment, for a total of 33 stations.
Because the Company is in the development stage it has limited working
capital and limited internal financial resources. The Company has had an
operating loss of $676,047 since its inception due to the cost and expenses
associated with beginning operations and the report of the Company's auditor
contains a going concern modification as to the ability of the Company to
continue. The Company is currently operating at a loss of approximately $48,000
per month and expects operating expenses to continue at such rate until such
time as the Company commences bicycle tire production. Once bicycle tire
production commences, the Company estimates that it will need approximately
$165,000 per month to fund production.
In May 1995, the Company established a line of credit of $300,000 with a
commercial lender to help fund the Company's working capital requirements. The
line of credit is payable on demand and bears interest, payable monthly, at 1%
over prime. The line of credit is individually guaranteed by Richard A. Steinke
and Dennis S. Chrobak. At March 31, 1996, the Company had drawn $299,838 against
the line. As the Company has no income producing operations at this time there
is no assurance that the Company will be able to obtain additional debt
financing. If the Company is unable to obtain debt financing it may be
necessary to seek additional equity financing or seek additional capital
contributions from existing shareholders. At March 31, 1996, the Company had
borrowed an aggregate of $99,000 from certain of its officers, which amount, as
of April 30, 1996, had increased to $167,000. The Company intends to use
approximately $175,000 of the proceeds of the public offering to repay loans
made from its Officers. Other than the personal guarantees obtained by the
Company from Mr. Steinke and Mr. Chrobak and the recent loans from its officers,
the Company has not obtained commitments from any other sources of funding. The
Company is highly dependent upon receiving the proceeds of the public offering
to meet its working capital requirements.
As of March 31, 1996, the Company has not commenced the commercial sale of
its products, specifically the airless bicycle tire. As a result, the Company
has not received revenues from operations and has a working capital deficit. The
delays in selling its products have caused the Company's limited resources to be
<PAGE> 13
more depleted than originally anticipated and management does not anticipate
commencing commercial production of its products until the completion of the
public offering when funds would be available to support manufacturing and sale
of its products.
The Company anticipated beginning manufacturing of its airless bicycle tire
in the fall of 1995. These plans were changed for two reasons: First, as the
Company conducted tests on its bicycle tires in conjunction with AMS (who
developed the technology for the Company's airless bicycle tire) the Company and
AMS believed they could improve the tire and manufacturing process beyond the
existing tire technology and the beta and proof concepts models previously
produced. AMS has filed an application for United States Letters Patent
regarding this technology which application is currently pending. The
improvements include modifications to the formulation of the polyurethane; the
manner in which the polyurethane is distributed throughout the mold; inclusion
of a circumferential steel cord; and the manner in which the tire seats in the
wheel rim. The Company has implemented the modifications to its production molds
to accommodate the changes in the manufacturing process. Given the Company's
limited resources, the Company elected to expend funds for improvement of the
tire and manufacturing process and delay commercial manufacturing and marketing
until completion of the public offering. This strategy, the Company hopes, will
allow it to market a product which is superior in quality to products that are
manufactured utilizing the previous technology, while preserving the Company's
limited financial resources.
As stated above, the Company has not received revenues from operations and
has a working capital deficit. The Company anticipates only having enough
working capital to meet operational needs through May 1996. As a result, the
Company's ability to continue operating as a going concern is dependent on the
Company's receipt of the net proceeds of the public offering by the end of May
1996 or, if such net proceeds are not received, on the Company's ability to
obtain additional equity or debt financing from other sources. If funds are not
received from the public offering by the end of May 1996, the Company will seek
funding from other sources, including loans from its officers and directors. As
of April 30, 1996, Company has received loans from its officers in the aggregate
principal amount of $167,000. Other than the recent loans made by the Company's
officers, the Company has not received any additional commitments for funding or
loans from any other sources.
The Company will be relying on the proceeds of this Offering to meet further
operating requirements should the Company fail to receive sufficient revenues
from the sale of products to meet its needs. The Company intends to reserve
approximately $1,020,000 of the Offering proceeds to meet the Company's working
capital requirements for the next twelve months.
As indicated above, the Company's current equipment has the capacity to
produce during an eight-hour shift, 50,000 bicycle tires monthly or 600,000
annually. As the Company has had no prior sales, it cannot be certain that it
will be able to sell all the tires that it can produce. The Company will reserve
approximately $1,000,000 of the proceeds of this Offering for expansion of the
airless bicycle tire line should demand for tires require an increase in
production capabilities.
<PAGE> 14
Once the Company begins full scale manufacturing operations, the Company
estimates that it will initially employ 100 employees, including 7
administrative and 93 supervisory and production employees. The Company
believes that it will be able to hire a sufficient quantity of qualified
laborers in the local area to meet the Company's employment needs.
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------
ITEM 2. CHANGES IN SECURITIES
- --------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- --------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- --------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------
ITEM 5. OTHER INFORMATION
- --------------------------------------------------------------------------------
None.
- --------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
<PAGE> 15
- --------------------------------------------------------------------------------
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 thereunto duly authorized.
AMERICAN TIRE CORPORATION
[Registrant]
Dated: May 10, 1996 /S/DAVID K. GRIFFITHS
---------------------------------------
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000945828
<NAME> AMERICAN TIRE CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 964
<SECURITIES> 0
<RECEIVABLES> 5008
<ALLOWANCES> 0
<INVENTORY> 131285
<CURRENT-ASSETS> 260441
<PP&E> 510796
<DEPRECIATION> 26879
<TOTAL-ASSETS> 871587
<CURRENT-LIABILITIES> 446143
<BONDS> 0
0
0
<COMMON> 3840642
<OTHER-SE> 425444
<TOTAL-LIABILITY-AND-EQUITY> 871587
<SALES> 0
<TOTAL-REVENUES> 6403
<CGS> 0
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<OTHER-EXPENSES> 433820
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20526
<INCOME-PRETAX> 0
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<NET-INCOME> (427417)
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