<PAGE> 1
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 September 30, 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)
(330) 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 [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, was 4,149,748 shares of common stock, par value $0.001, as of October
10, 1996.
<PAGE 2>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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.
The unaudited balance sheet of the Company as of September 30, 1996, and
the related audited balance sheet of the Company as of June 30, 1996, the
related unaudited statements of operations and cash flows for the three month
periods ended September 30, 1996 and 1995 and from January 30, 1995
(inception) through September 30, 1996; and the unaudited statement of
shareholders' equity for the period from January 30, 1995 (inception) through
September 30, 1996, are attached hereto and incorporated herein by this
reference.
Operating results for the quarter ended September 30, 1996, are not
necessarily indicative of the results that can be expected for the year ending
June 30, 1997.
<PAGE> 3
FINANCIAL STATEMENTS
AMERICAN TIRE CORPORATION
(A Development Stage Company)
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
SEPTEMBER 30,
1996 JUNE 30,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash....................................... $ 763,348 $ 4,467
Accrued interest receivable................ 11,707 -
Other receivables.......................... 26,635 22,767
Inventory.................................. 131,285 131,285
Prepaid royalties - related party.......... 17,725 17,725
Prepaid expenses 12,399 15,182
Deposits on inventory...................... 87,401 87,401
---------- ----------
Total current assets.................. 1,050,500 278,827
---------- ----------
Property, Plant and Equipment
Land....................................... 59,000 59,000
Building and building improvements......... 229,996 229,996
Equipment.................................. 228,069 225,968
Furniture and fixtures..................... 7,692 7,692
---------- ----------
524,757 522,656
Less: accumulated depreciation............ 50,169 39,299
---------- ----------
474,588 483,357
Other Assets:
Deposits................................... 2,379 1,834
Accrued interest receivable................ - 9,993
Deferred offering costs.................... - 147,108
---------- ----------
2,379 158,935
---------- ----------
$1,527,467 $ 921,119
========== ==========
(See accompanying notes to the financial statements)
<PAGE> 4
AMERICAN TIRE CORPORATION
(A Development Stage Company)
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30,
1996 JUNE 30,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
Current Liabilities:
Line of credit............................. $ - $ 299,838
Accounts payable and accrued expenses...... 14,569 98,680
Notes payable-officers and accrued interest 56,311 265,830
---------- ----------
Total current liabilities............. 70,880 664,348
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, 4,099,746 and 3,840,642
shares issued and outstanding, respectively 4,100 3,841
Additional paid-in capital.................. 2,529,531 1,182,650
Deficit accumulated during the
development stage............. ............ (992,044) (844,720)
--------- ----------
1,541,587 341,771
Less: Receivable-shareholder (officers) (85,000) (85,000)
--------- ----------
1,456,587 256,771
--------- ----------
$1,527,467 $ 921,119
========== ==========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 5
AMERICAN TIRE CORPORATION
(A Development Stage Company)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited)
From Inception
For the Three on January 30,
Months Ended 1995 Through
September 30, September 30,
------------------ ---------------
1996 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE:
Interest income.............. $ 1,717 $ 2,538 $ 13,489
--------- --------- ---------
1,717 2,538 13,489
--------- --------- ---------
EXPENSES:
Consulting................... - 8,000 179,079
Payroll and payroll taxes.... 66,503 48,707 319,077
Administrative............... 43,087 48,246 262,077
Travel and entertainment..... 5,836 19,095 102,164
Marketing consulting......... - - 13,300
Interest..................... 22,745 6,675 79,667
Depreciation................. 10,870 7,369 50,169
--------- --------- ---------
Total Expenses........... 149,041 138,092 1,005,533
--------- --------- ---------
LOSS BEFORE INCOME TAXES...... (147,324) (135,554) (992,044)
Income taxes................. - - -
--------- --------- ---------
NET LOSS...................... $(147,324) $(135,554) $(992,044)
========= ========= =========
NET LOSS PER SHARE............ $ (0.04) $ (0.04) $ (0.25)
========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING.................. 3,943,677 3,840,642 3,943,677
========= ========= =========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 6 AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (JANUARY 30, 1995) TO SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION> Accumulated
Deficit
Additional During Notes Total
Common Stock Paid-in Development Receivable Shareholders'
Shares Amount Capital Stage Shareholders Equity
---------- --------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, January 30, 1995
(Inception)............. - $ - $ - $ - $ - $ -
Sale of common stock for
cash of $.01 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)
---------- --------- ---------- ---------- ------------ ------------
Balance at June 30, 1995 3,800,000 3,800 940,439 (248,630) (93,900) 601,709
Repayment of notes
receivable by providing
services................ - - - - 8,900 8,900
Sale of common stock for
cash of $6.00 per share
pursuant to a private
placement............... 40,642 41 243,811 - - 243,852
Stock issuance costs..... - - (1,600) - - (1,600)
Net loss for the year - - - (596,090) - (596,090)
---------- --------- ---------- ----------- ----------- ------------
Balance at June 30, 1996 3,840,642 3,841 1,182,650 (844,720) (85,000) 256,771
Purchase shares per
recision offer.......... (34,977) (35) (209,827) - - (209,862)
Sale of common stock for
cash of $6.00 per share
pursuant to initial
public offering, net of
stock issuance costs of
$34,200................. 294,081 294 1,729,992 - - 1,730,286
Deferred Offering costs.. - - (173,284) - - (173,284)
Net loss for period
ended September
30, 1996................ - - - (147,324) - (147,324)
---------- --------- ---------- ----------- ----------- ------------
Balance at September 30,
1996 4,099,746 $ 4,100 $2,529,531 $ (992,044) $ (85,000) $ 1,456,587
========== ========= ========== =========== =========== ============
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 7
AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
From inception
FOR THE on January 30,
THREE MONTHS ENDED SEPT. 30, 1995 to
1996 1995 September 30, 1996
------------ ------------ ------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................... $ (147,324) $ (135,554) $ (992,044)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation................................ 10,870 7,369 50,169
Stock issued in lieu of cash payment for
certain services........................... - - 129,000
Services provided in lieu of cash payment
on receivables - officers - 8,900 35,000
(Increase) decrease in:
Other receivable............................ (3,868) (355) (26,635)
Inventory................................... - (125,267) (131,285)
Prepaid royalties........................... - (4,235) (17,725)
Prepaid expenses............................ 2,783 3,878 (12,399)
Deposits on inventory and other............. (545) 114,437 (89,780)
Accrued interest receivable................. (1,714) (1,898) (11,707)
Increase (decrease) in:
Accounts payable and accrued expenses....... (86,630) 8,528 16,880
Due to officer.............................. - (4,045) -
---------- --------- -----------
Net cash used by operating activities.... (226,428) (128,242) (1,050,526)
---------- --------- -----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property, plant and equipment.... (2,101) (105,868) (524,757)
---------- --------- -----------
Net cash used by investing activities.... (2,101) (105,868) (524,757)
---------- --------- -----------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Borrowing on line of credit.................. - 98,000 397,838
Repayment on line of credit.................. (299,838) - (397,838)
Proceeds from notes payable - officers....... 110,000 - 377,000
Repayment of notes payable - officers........ (317,000) - (323,000)
Proceeds from mortgage note payable.......... - - 188,000
Repayment of mortgage note payable........... - - (188,000)
Proceeds from issuance of common stock
(net of stock issuance costs of $114,071)... 1,730,286 125,900 2,666,777
Purchase stock per recision offer............ (209,862) - (209,862)
Deferred offering costs...................... (26,176) (17,052) (172,284)
---------- --------- -----------
Net cash provided by financing activities 987,410 206,848 2,338,631
----------- ---------- -----------
NET INCREASE (DECREASE) IN CASH............... 758,881 (27,262) 763,348
Cash at beginning of period................... 4,467 92,729 -
---------- --------- -----------
Cash at end of period......................... $ 763,348 $ 65,467 $ 763,348
========== ========= ===========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 8
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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 is engaged in
manufacturing, marketing, and distributing airless bicycle tires. The
Company's fiscal 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.
At September 30, 1996, through an initial public offering, the Company had
sold 294,081 shares of its common stock for gross offering proceeds of
$1,764,486. On October 10, 1996, the Company closed its initial public
offering having sold 344,083 shares of common stock for aggregate offering
proceeds of $2,064,498. The Company's continuation as a going concern is
dependent upon its ability to utilize the working capital from its initial
public offering to carry out its business plan and to commence and continue
operations.
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 September 30, 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, as follows:
Building 40 years
Equipment 5 years
Furniture and fixtures 7 years
DEFERRED OFFERING COSTS: At September 30, 1996, initial public offering costs
are netted against the offering proceeds received.
<PAGE> 9 AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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. At
September 30, 1996 and June 30, 1996, accrued interest receivable on these
notes amounted to $11,707 and $9,993, respectively. The promissory notes were
amended to become due no later than six months from the close of the Company's
initial public offering (April 10, 1997). At September 30, 1996, $85,000 was
owed under these notes, which has been presented as a reduction of
shareholders' equity.
NOTE C - TECHNOLOGY LICENSE AGREEMENT
- -------------------------------------
On June 5, 1995, the Company entered into a technology licensing agreement
with a related company owned by certain shareholders of the Company. This
agreement provides the Company the exclusive license to use, sell and license
the technology for manufacturing a wheel-tire assembly known as the "Dynamic
Steerable Spring". The agreement specifies that a royalty of either $1.00 per
unit sold directly by the Company or 8% percent of any royalty the Company
should receive from any third party licensee to be paid quarterly. At
September 30, 1996, $17,725 has been advanced pursuant to and in anticipation
of this agreement and is recorded in prepaid royalties.
NOTE D - RELATED PARTY TRANSACTIONS
- -----------------------------------
From February to September 1996, certain officers loaned the Company an
aggregate of $377,000. At September 30, 1996, the Company has repaid to its
officers and directors approximately $322,856 in principal and accrued
interest, so that the amount remaining payable on such date was approximately
$56,311.
NOTE E - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
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. In an effort to
reduce the Company's contingent liabilities the Company offered to repurchase
such shares sold in the September 1995 private placement at $6.00 per share
plus interest at a 12% annual interest rate from the date of original purchase
through the date of the repurchase of such shares. At September 30, 1996, the
Company had received notices of acceptance of the recision offer for an
aggregate of 34,977 shares and paid the rescinding purchasers $235,032
including accrued interest.
<PAGE> 10
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE F - EVENTS SUBSEQUENT TO SEPTEMBER 30, 1996
- ------------------------------------------------
On October 10, 1996, the Company closed its initial public offering. The
Company received gross offering proceeds of $2,064,498 in exchange for the
issuance of 344,083 shares of common stock.
On October 31, 1996, two of the Company's officers agreed to cancel
approximately $56,827 in principal and accrued interest due them under certain
promissory notes (See Note D) in exchange for the issuance of 27,000 shares of
the Company's restricted common stock at an exchange price of approximately
$2.10 per share.
On November 11, 1996, the Company received a commitment for a line of credit
of $500,000 from a commercial lender for working capital and equipment
purchases, limited by an advance rate of $100,000, plus 80% of eligible
receivables from sales to customers. The line of credit will bear an interest
rate of 3/4% over prime and will be secured by the Company's accounts
receivable, inventory, equipment and a first mortgage on the Company's
Ravenna facility.
<PAGE>
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 operates three single-station and one 6-station "centrifugal
molding machines" and other related specialized manufacturing equipment to
produce the airless bicycle tires. The 6-station unit will allow the Company
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 is utilizing approximately $350,000 of the initial public offering
proceeds to purchase a 12-station molding machine.
The Company believes that its two-pronged approach for manufacturing and
marketing its technology and products will be the most cost effective means
for the Company to be successful. The Company is in the development stage and
has only recently began manufacturing operations. The Company has had an
operating loss of $992,044 since its inception due to the cost and expenses
associated with beginning operations and the Company's audited financial
statements at June 30, 1996, contained 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 begins to receive
revenues from the sale of bicycle tires. The Company estimates that it will
need approximately $165,000 per month to fund the production of 50,000 bicycle
tires per month.
Because at September 30, 1995, the Company had only been organized for
eight months and had no significant operations, a comparison of the prior
period ended September 30, 1995, with the period ended September 30, 1996,
would not be conducive to an understanding of the Company and its fiscal
condition or have any meaningful significance.
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 June 30, 1996, the Company had drawn
$299,838 against the line. On September 26, 1996, the Company utilized
approximately $300,000 of the offering proceeds to pay off the line of credit.
To replace the above referenced line of credit, on November 11, 1996, the
Company received a commitment for a line of credit of $500,000 from a
commercial lender for working capital and equipment purchases. This new line
of credit will bear an interest rate of 3/4% over prime and will be secured by
the Company's accounts receivable, inventory, equipment and a first mortgage
on the Company's Ravenna facility.
<PAGE> 12
From February 1996 through September 1996, the Company had borrowed an
aggregate of $377,000 from certain of its officers. The Company used
approximately $322,856 from the proceeds of the offering to repay a portion of
the loans made from its Officers and on October 31, 1996, the Company approved
the issuance of 27,000 shares of the Company's restricted common stock in
exchange for the balance of approximately $56,827 in principal and accrued
interest, the balance due on the promissory notes.
At September 30, 1996, the Company had not commenced the commercial sale
of its products, specifically the airless bicycle tire. As a result, the
Company has not received revenues from operations. The delays in selling its
products have caused the Company's limited resources to be more depleted than
originally anticipated. The Company has now commenced commercial production
of its products, including production to fill an open purchase order from
Huffy Bicycle to deliver 50,000 tires by December 31, 1996.
The Company will be relying on the proceeds of the initial public
offering and the Company's line of credit 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 $285,000
of the offering proceeds to meet the Company's working capital requirements
for the next twelve months.
As indicated above, during an eight hour shift, the Company's current
equipment has the capacity to produce 50,000 bicycle tires monthly or 600,000
annually. As the Company has had no significant prior sales, it cannot be
certain that it will be able to sell all the tires that it can produce. The
Company has allocated approximately $350,000 of the offering proceeds for
expansion of the airless bicycle tire line should demand for tires require an
increase in production capabilities.
The Company has obtained a license to exploit the DSS Technology for
which a patent application has been filed with the United States Trademarks
and Patents Office by AMS and is currently pending. The Company has entered
into a technology development and license agreements with Hayes Wheels
International, Inc. with respect to developing a tire-wheel assembly utilizing
the Company's DSS Technology. Other than the costs of obtaining Department of
Transportation approval of a tire-wheel assembly utilizing the Company's DSS
Technology, the Company does not anticipate performing any significant product
research and development during the next twelve months of operations.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
<PAGE> 13
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
- ------- -----------
10 Line of credit commitment letter, National City Bank,
Northeast, dated October 31, 1996
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
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: November 20, 1996 /S/DAVID K. GRIFFITHS
-----------------------------------
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000945828
<NAME> AMERICAN TIRE CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 763,348
<SECURITIES> 0
<RECEIVABLES> 38,342
<ALLOWANCES> 0
<INVENTORY> 131,285
<CURRENT-ASSETS> 1,050,500
<PP&E> 524,757
<DEPRECIATION> 50,169
<TOTAL-ASSETS> 1,527,467
<CURRENT-LIABILITIES> 70,880
<BONDS> 0
0
0
<COMMON> 2,533,631
<OTHER-SE> (992,044)
<TOTAL-LIABILITY-AND-EQUITY> 1,527,467
<SALES> 0
<TOTAL-REVENUES> 1,717
<CGS> 0
<TOTAL-COSTS> 126,296
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,745
<INCOME-PRETAX> (147,324)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147,324)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
EXHIBIT 10
NATIONAL CITY BANK, NORTHEAST
National City Center
1 Cascade Plaza
Akron, OH 44308
330 375-8034
Fax 330 375-8436
W. Michael Sweeney
Vice President
October 31, 1996
Mr. Richard Steinke, President
American Tire Corporation
446 West Lake Street
Ravenna, OH 44266
Dear Richard:
This will confirm the terms and conditions under which National City Bank,
Northeast will provide the following Credit Facility.
FACILITY I
Borrower: American Tire Corporation
Amount: $500,000.00
Purpose: 1) Working Capital
2) Equipment Purchases
Facility: Option of 1) Line of credit
2) Multiple draw term loan
Pricing: Prime rate + 3/4%
Doc/Facility Fees: $250 plus out of pocket expenses.
Collateral: 1st lien position in accounts receivable, inventory and
equipment; 1st mortgage on Ravenna real estate.
Advance: $100,000 plus 80% of eligible accounts receivable.
Guarantor(s): None
Reporting: Monthly borrowing base report when outstanding exceed
$100,000 to be received within 20 days after month end.
Miscellaneous: 1) Receipt of monthly internal financials starting in
February 1997 through June 1997 converting to quarterly
thereafter.
2) Receipt of annual independently prepared review quality
financial statements to be received within 90 days after
year end.
Page Two
The before mentioned commitment is conditional upon receipt of September 30,
1996 independently prepared balance sheet reflecting infusion on the equity
capital from the IPO and a minimum of $1,000,000 tangible net worth on the
balance sheet.
These Commitments are further conditioned upon no adverse change in the legal
or financial condition of the parties referenced herein and is subject to the
execution of all documents referenced herein in a form acceptable to the Bank.
Borrower shall have 15 business days from the date hereto to accept this
Commitment. Please indicate your acceptance of this Commitment by signing the
enclosed executed copy of this letter at the space indicated below and return
the copy and the $250.00 fee to the undersigned at National City Bank,
Northeast, One Cascade Plaza, 3rd Floor, Akron, Ohio 44308 prior to noon on
November 22, 1996. If this commitment is funded, the enclosed fee will be
subtracted from the total fees due with this Commitment. If this Commitment
is accepted, but not funded, this fee will go to the Bank to reimburse the
Bank for direct and indirect costs associated with providing this Commitment.
If written acceptance is not received by this date, this commitment will be
considered canceled and void. This Commitment is issued directly to and is
considered personal to Borrower and may not be assigned without the express
prior written consent of the Bank.
Very truly yours,
/S/ W. Michael Sweeney
- ----------------------
W. Michael Sweeney
Vice President
THE TERMS AND CONDITIONS OF THE FOREGOING COMMITMENT ARE HEREBY ACCEPTED ON
THIS 11TH DAY OF NOVEMBER 1996.
AMERICAN TIRE CORPORATION
BY: /S/ Richard A. Steinke, C.E.O.
