<PAGE> 1
Date Filed: April 7, 1997 SEC File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
AMERICAN TIRE CORPORATION
- ----------------------------------------------
(Name of small business issuer in its Charter)
Nevada 87-0535207
- ------------------------------ ----------------------
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
446 West Lake Avenue, Ravenna, Ohio 44266 (216) 296-8778
- -------------------------------------------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
3011
- --------------------------------------------------------
(Primary Standard Industrial Classification Code Number)
Copies to: Registered Agent:
Elliott N. Taylor, Esq. Laughlin Associates, Inc.
Taylor and Associates, Inc. 2533 North Carson Street
3090 East 3300 South, Suite 400 Carson City, Nevada 89706
Salt Lake City, Utah 84109 (800) 648-0966
Phone (801) 463-6080 ------------------------------------
Fax (801) 463-6085 (Name, address, including zip code,
and telephone number, including area
code, of agent for service)
Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this Registration Statement.
<TABLE>
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CALCULATION OF REGISTRATION FEE
Title of Each Proposed Maximum Proposed Maximum
Amount of
Class of Securities Amount to Offering Price Aggregate Offering
Registration
to be Registered be Registered per Share (1) Price (1)
Fee
- ------------------- ------------- ---------------- ------------------
- ------------
<S> <C> <C> <C> <C>
Shares of Common
Stock, $0.001 par
value 155,000 Shares $6.375 $988,125.00
$299.48
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457. This amount is based upon the average of the high and
low prices ($6.375) of the common stock of the Registrant as reported on the
NASD's OTC Bulletin board on April 4, 1997.
<PAGE> 2
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
The Registrant hereby amends this registration statement on such dates as may
be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section
8(a), may determine.
Exhibit Index appears on consecutively numbered page 67.
PAGE
<PAGE> 3
AMERICAN TIRE CORPORATION
Cross Reference Sheet Pursuant to Rule 404(a)
Cross reference between items of Part I of Form S-1 and the Prospectus filed
by American Tire Corporation, as part of the Registration Statement.
REGISTRATION STATEMENT ITEM NUMBER PROSPECTUS
AND HEADING HEADING
- ---------------------------------- ----------
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Front Cover
2. Inside Front and Outside Back Cover Page
of Prospectus.................................. Inside Front Cover and
Outside Back Cover
3. Summary Information; Risk Factors; and
Ration of Earnings to Fixed Charges............ INTRODUCTION; RISK
FACTORS; Not Applicable
4. Use of Proceeds................................ Not Applicable
5. Determination of Offering Price................ Not Applicable
6. Dilution....................................... Not Applicable
7. Selling Security Holders....................... SELLING
SHAREHOLDERS
8. Plan of Distribution........................... PLAN OF DISTRIBUTION
9. Legal Proceedings.............................. LITIGATION
10. Directors and Executive Officers............... MANAGEMENT
11. Security Ownership of Certain Beneficial
Owners and Management.......................... PRINCIPAL SHAREHOLDERS
12. Description of the Securities to
to be Registered............................... DESCRIPTION OF
CAPITAL STOCK
13. Interest of Named Experts and Counsel.......... EXPERTS and
LEGAL MATTERS
14. Statement as to Indemnification................ UNDERTAKINGS
15. Organization Within Five Years................. BUSINESS
16. Description of Business........................ BUSINESS
17. Description of Property........................ PROPERTY
(A) Description of Property-Issuers Engaged
In Significant Mining Operations.......... Not Applicable
(B) Supplementary Financial Information
About Oil and Gas Producing Activities.... Not Applicable
PAGE
<PAGE> 4
REGISTRATION STATEMENT ITEM NUMBER PROSPECTUS
AND HEADING HEADING
- ---------------------------------- ----------
18. Interest of Management and Others
in Certain Transactions........................ CERTAIN TRANSACTIONS
19. Certain Market Information..................... Not
Applicable
20. Executive Compensation......................... EXECUTIVE
COMPENSATION
21. Financial Statements........................... FINANCIAL STATEMENTS
PAGE
<PAGE> 5
PROSPECTUS
SUBJECT TO COMPLETION -- DATED APRIL 7, 1997
155,000 Shares
AMERICAN TIRE CORPORATION
Common Stock
All of the shares of Common Stock offered hereby are being sold by
certain shareholders of the Company (the"Selling Shareholders"). See SELLING
SHAREHOLDERS. The Company will not receive any proceeds from the sale of the
shares offered hereby.
The Common Stock of the Company is traded in the over-the-counter market
and is quoted on the National Association of Securities Dealers, Inc. OTC
Bulletin Board (the "OTC Bulletin Board") under the symbol "ATYR". On April
4, 1997, the last reported sales price of the Common Stock was $6.50 per
share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION; NOR HAS THE
COMMISSION PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING; NOR HAS ANY
STATE SECURITIES DIVISION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==============================================================================
Price to Underwriting Proceeds to Selling
Public Discounts (1) Shareholders (1)
- ------------------------------------------------------------------------------
Per Share............... $ $0.00 $
Total................... $ $0.00 $
==============================================================================
(1) Any commissions or discounts paid in connection with the sale of the
Common Stock will be paid by the Selling Shareholders and will be determined
through negotiations between them and the broker-dealer through or to which
the shares are sold and may vary depending on the broker-dealer's fee
schedule, the size of the transaction, and other factors. The Selling
Shareholders and any broker, dealer, or agent that participates with the
Selling Shareholders in the sale of the Common Stock may be deemed
"underwriters" within the meaning of the Securities Act of 1933, as amended
(the "Securities Act") and any commissions or discounts received by them and
any profit on the resale of the Common Stock purchased by them may be deemed
to be underwriting commissions under the Securities Act. See PLAN OF
DISTRIBUTION.
The date of this Prospectus is __________, 1997
PAGE
<PAGE> 6
No person has been authorized in connection with any offering made hereby
to give any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Common Stock offered by this Prospectus, nor does it
constitute an offer to sell or a solicitation of any offer to buy any Common
Stock offered hereby to any person in any jurisdiction where it is unlawful to
make such an offer or solicitation to such person. Neither the delivery of
this Prospectus nor any sale hereunder shall under any circumstances create
any implication that information contained herein is correct as of any time
subsequent to the date hereof.
Changes in the Offering which occur after the date hereof, if any, will
necessitate the filing with the Securities and Exchange Commission (the
"Commission") of an amendment to the registration statement of which this
Prospectus forms a part (the "Registration Statement") and review and
declaration of effectiveness by the Commission of such amendment. There can
be no assurance that any such amendment will become effective. Should the
Company file a post-effective amendment and such amendment is not declared
effective by the Commission, Selling Shareholders will be precluded from
making offers and from selling the Shares of Common Stock.
PAGE
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus.
The Company
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 the manufacturing,
marketing, distribution, licensing, and sales of airless "specialty" tires
utilizing a "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 (primarily chemical), the
liquid materials are transformed into a solid state. See BUSINESS.
The Company has spent extensive time analyzing the tire industry, its
perceived major competitors, potential markets, and its own strengths and
weaknesses. The Company believes that the tire industry is dominated by
several large competitors, has competitive pressures from cheaper imported
tires from the Pacific Rim, and maintains a commitment to the traditional
pneumatic tire with innovations focusing on tread design, not tire design.
The Company also feels that the tire industry can be divided into several
segments each with its own dynamics, dominant companies, target customers, and
competitive pressures. See BUSINESS.
The Company feels its strengths are in its technology and research and
development capabilities. Its weaknesses are in its size and financial
capabilities and in changing original equipment manufacturer ("OEM") and
consumer views on pneumatic tires and the advantages airless tires offer over
pneumatic tires. Based on this analysis of the tire industry by the Company,
a two-pronged approach has been formulated by the Company's management to
manufacture and market its airless tire concept.
First, the Company has identified certain industry segments where it
feels the cost of the tires, the consumer, and the competition will allow it
to compete effectively against existing pneumatic tires and the companies that
produce them. Second, in industry segments where the Company feels it will
not initially have the financial or manufacturing resources to compete
effectively, the Company will seek industry partners to manufacture and market
tires and tire-wheel assemblies developed from the Company's technology.
The Company believes that its two-pronged approach for manufacturing and
marketing its airless tire technology and products will be the most cost
effective means for the Company to be successful. The Company is in the
development stage and since its inception in January 1995 to December 31,
1996, the Company has had an operating loss of $1,231,453 due to the cost and
expenses associated with beginning operations. The report of the Company's
auditor at June 30, 1996 contains a going concern modification as to the
ability of the Company to continue. However, since that time, the Company has
obtained substantial equity funding which the Company believes is sufficient
to meet its working capital requirements. The Company is currently operating
at a loss of approximately $80,000 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 its products.
<PAGE> 8
The Company's principal offices are located at 446 West Lake Avenue,
Ravenna, Ohio 44266. The Company's telephone number is (216) 296-8778. See
RISK FACTORS and BUSINESS.
The Offering
Selling Shareholders................ 155,000 shares of Common Stock
Shares Outstanding as of
Prospectus Date.................... Common Stock: 4,546,748
Preferred Stock: -0-
Shares Outstanding after Offering... Common Stock: 4,546,748
Preferred Stock: -0-
Use of Proceeds..................... The Company will not receive any proceeds
from the sale of the Common Stock by the
Selling Shareholders.
Risk Factors........................ There are certain substantial risks
associated with an investment in the
Common Stock, including among others,
risks associated with the absence of
operating revenues or profitable
operations. See RISK FACTORS.
OTC Bulletin Board Symbol........... Common Stock: ATYR
PAGE
<PAGE> 9
Summary Financial Information
The following table sets forth selected summarized financial data for the
Company at the dates and for the periods indicated. The data should be read
in conjunction with the financial statements and notes thereto set forth
elsewhere in this Prospectus.
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<CAPTION>
From
For the Six For the
Years Inception on
Months Ended Years
Ended January 30,
December 31, June
30, 1995 through
------------------
- ------------------- December 31,
1996 1995 (2)
1996 1995 (2) 1996
---------- ---------- ----------
- ---------- ------------
<S> <C> <C> <C>
<C> <C>
STATEMENT OF OPERATIONS DATA:
- -----------------------------
Interest income................. $ 7,480 $ 4,655 $ 8,161
$ 3,611 $ 18,252
Operating Expenses.............. 394,213 275,068
604,251 252,241 1,250,705
Net Income (Loss)............... (386,733) (270,413)
(596,090) (248,630) (1,231,453)
Net Earnings (Loss) per share... (0.09) (0.07)
(0.16) (0.06) (0.30)
Weighted Average Number
of Shares Outstanding.......... 4,118,480(1) 3,840,642 3,840,642
3,800,000 4,118,480
Actual as of
---------------------
December 31 June 30
----------- -------
1996 (1) 1996
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
- ------------------
Cash, cash equivalent............ $ 634,337 $ 4,467
Working Capital (Deficit)........ 860,696 (385,521)
Total Assets..................... 1,542,795 921,119
Total Liabilities................ 68,895 664,348
Shareholders' Equity............. 1,473,900 256,771
(1) Does not give effect to the issuance of 200,000 shares of restricted
common stock and the payment of $400,000 in cash for the acquisition of UTI
Chemicals (Europe), Ltd., effective February 28, 1997; the issuance of 15,000
shares of common stock pursuant to the exercise of options granted under the
Company's 1997 Non Qualified Stock Option Plan dated January 29, 1997; or the
sale of 155,000 shares of restricted common stock and the receipt by the
Company of $930,000, the proceeds therefrom in February 1997.
(2) The Company was incorporated on January 30, 1995, therefore the six-month
period and fiscal year ended June 30, 1995 represent partial periods.
</TABLE>
PAGE
<PAGE> 10
RISK FACTORS
THE PURCHASE OF THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CONSIDER, IN ADDITION TO THE NEGATIVE
IMPLICATIONS OF ALL MATERIAL SET FORTH HEREIN, THE FOLLOWING RISK FACTORS.
RISK FACTORS RELATING TO THE BUSINESS OF THE COMPANY
Start-up or Development Stage Company
The Company has had limited operations since its organization and is a
"start-up" or "development stage" company. Although certain of the Company's
Officers have had prior experience in the business of developing,
manufacturing, and marketing tires and other products, no assurance can be
given that the Company will be able to compete with other manufacturers of
such products, virtually all of whom have substantially greater financial
resources than the Company. The purchase of the shares of Common Stock
offered hereby must be regarded as the placing of funds at a high risk in a
new or "start-up" venture with all the unforeseen costs, expenses, problems,
and difficulties to which such ventures are subject. Accordingly, the shares
of Common Stock offered hereby should not be purchased by persons who cannot
afford the loss of their entire investment. See BUSINESS.
Ability of Company to Continue as a Going Concern
The report of the Company's auditors at June 30, 1996, contains a
modification as to the ability of the Company to continue as a going concern.
However, since the date of that report the Company has obtained substantial
funding from the sale of its equity securities which the Company believes is
adequate to satisfy its current working capital requirements to continue in
business. See FINANCIAL STATEMENTS.
No Assurance of Profitability and Working Capital Deficit
The Company had an operating loss of $1,231,435 since its inception
through December 31, 1996 due to the costs and expenses associated with a
start-up operation. As of December 31, 1996, the date of the Company's most
recent financial statements included in this Prospectus, the Company has
experienced no revenues from the sale of any products, however the Company had
working capital of $860,696. The Company has only recently commenced the
commercial sale of its products and has not received substantial revenues from
operations. There can be no assurance the Company will be able to develop
into a successful or profitable business. See BUSINESS.
Dependence on Management and Key Personnel
The Company has been substantially dependent on the services of Richard
A. Steinke and Dennis S. Chrobak, two of the Company's Officers and Directors,
and for some time will be dependent on the general business acumen and
experience of all of its Officers and Directors and the application of such
skills to the business decisions required on behalf of the Company. The
Company has entered into employment agreements with Messrs. Steinke and
Chrobak for a three year period, however, the Company does not carry key-man
insurance on either Mr. Steinke or Mr. Chrobak, thus, the loss of a key
employee's services could have a material adverse effect on the Company's
operations. See MANAGEMENT.
PAGE
<PAGE> 11
Patents and Trademarks
The Company has acquired license rights to certain technology,
proprietary data, and know-how relating to both a method for manufacturing a
combined tire-wheel assembly ("DSS Technology") and for manufacturing a
non-pneumatic tire ("Airless Tire Technology") for which applications for
United States Letters Patent have been filed and are currently pending. The
DSS Technology and Airless Tire Technology were invented by affiliates of the
Company. The DSS Technology and the Airless Tire Technology were obtained by
the Company at no cost through technology license agreements with American
Mobility Systems ("AMS"), an entity controlled by Richard A. Steinke and
Dennis S. Chrobak. The DSS Technology agreement provides for a royalty
payment to AMS of either $1.00 for each unit of production manufactured and
sold directly by the Company or eight percent (8%) of any royalty the Company
should receive from third party licensees that utilize the DSS Technology.
The Company will pay AMS a royalty of $0.25 for each tire sold by the Company
utilizing the Airless Tire Technology. In addition, to the extent that such
technologies have not been developed to the point of practical application or
that the safety and efficiency of the technologies has not yet been
established, the Company has agreed to hold AMS harmless from all liabilities,
costs, and fees relating to any claim, demand, or suit and the defense thereof
arising from the use, sale, or license of the technologies. The DSS Technology
and the Airless Tire Technology agreements were not negotiated at arms length.
In addition, the Company has not obtained an opinion of an independent third
party as to the fairness of the terms of the technology license agreements
with AMS. See CERTAIN TRANSACTIONS.
There can be no assurance that any patents relating to the DSS Technology
or the Airless Tire Technology will in fact be issued to AMS or, if issued,
that such patents will give the Company any protection against competitors or
that such patents will not be infringed upon or modified by others. The
Company has not retained intellectual property counsel to render an opinion
regarding the DSS Technology and the Airless Tire Technology as to whether the
Company is infringing on the intellectual property rights of others. In that
regard, the Company believes that the DSS Technology is unique. See BUSINESS.
Dependence on AMS for Technical Assistance
The Company has acquired its technology from AMS, a corporation
controlled by Richard A. Steinke and Dennis S. Chrobak, two of the Company's
Officers and Directors. It is probable that all new technology obtained by
the Company may originate from AMS and will be licensed to the Company for
development in exchange for the payment of a royalty. The Company will be
relying significantly on AMS to provide it with technical assistance, however,
any new technology developed by the Company's employees within the scope of
their employment or that otherwise relates to the nature of the Company's
business will be considered the Company's proprietary technology. The license
agreements between the Company and AMS may be terminated by AMS upon the
occurrence or continuance of any one or more events of default (e.g., failure
to pay royalties when due) following written notice from AMS and the Company's
failure to cure the default within 30 days of such notice. See CERTAIN
TRANSACTIONS.
<PAGE> 12
Product Liability Insurance
The sale of the Company's products may expose it to liability claims
resulting from the use of such products. Such claims may be expected to be
larger in the specialty tire manufacturing area, where product failure may
result in property and other damages, including injury to persons or loss of
life. The Company has obtained product liability insurance which it believes
to be sufficient to cover its existing product manufacturing requirements,
however, no assurance can be given that such insurance will be adequate to
cover potential claims or, that if a claim or claims are made, such insurance
will not be canceled.
Competition
The Company believes, that currently there are three foreign bicycle tire
manufacturers that utilize a liquid phase technology manufacturing process to
produce airless bicycle tires with only one marketing its tires in the United
States. In addition to manufacturers of airless bicycle tires, the Company
will be competing directly with firms that manufacture and/or market
pneumatic bicycle tires. The Company estimates that over 98% of all domestic
bicycle tire sales are pneumatic tires. The bicycle tire industry is highly
competitive and there are several of the Company's competitors that have
financial resources which substantially exceed those of the Company.
Currently, there are no spare, passenger car, light, medium or heavy
truck tire manufacturers that utilize the liquid phase technology
manufacturing process to produce tires. Should the Company obtain FMVSS 129
approval for its tire-wheel assembly and Hayes commences manufacturing and
selling such tire-wheel assemblies, the Company will be competing indirectly
with companies that manufacture and/or market pneumatic tires for passenger
vehicles and light trucks. Many of these companies have company owned outlets
or franchised stores that sell products manufactured by these companies. The
Company believes that the motor vehicle tire market will be highly competitive
and there could be several companies that manufacture pneumatic tires that
have financial resources which exceed those of Hayes. Although the Company's
tire-wheel assemblies will be unique in the tire marketplace, Hayes may be at
a disadvantage in competing with older, larger, and more established companies
while attempting to establish itself in the tire industry in general. See
BUSINESS.
Potential Conflicts of Interest
The Company has in the past engaged in various transactions with its
Officers, Directors, principal shareholders, and affiliates, including
obtaining short-term loans, purchasing the Company's manufacturing facility,
and obtaining licenses to certain technology. Consequently, it is possible
that potential conflicts of interest may arise in the future in connection
with the interpretation and/or enforcement of the underlying agreements. For
example, the Company has recently entered into agreements with AMS to license
certain technology. It is probable that all technology obtained by the
Company will originate from AMS and licensed to the Company for development of
the technology in exchange for the payment of a royalty. In addition, the DSS
Technology and Airless Tire Technology agreements provide that AMS be paid for
any technical assistance it provides the Company in further developing such
technologies, if any.
<PAGE> 13
The Company will be relying significantly on AMS to provide it with
technical assistance, however, any new technology developed by the Company's
employees within the scope of their employment or that otherwise relates to
the nature of the Company's business will be considered the Company's
proprietary technology. In this regard, Messrs. Steinke and Chrobak and/or
AMS could retain possible business opportunities for themselves at the
potential expense of the Company. As a result, the Company may experience
conflicts of interest relating to the appropriation of business opportunities
by its Officers and Directors, the payment of royalties due under the
agreement with AMS, and other matters. If conflicts do arise, they will not
be resolved through arms length negotiations, but through reliance on and
enforcement of employment and confidentiality and non-disclosure agreements
with Company employees and the exercise of management's judgment consistent
with its fiduciary responsibility to the Shareholders. All future
transactions with affiliates will be for a bona fide business purpose and be
on terms no less favorable than could be obtained from unaffiliated parties.
See CERTAIN TRANSACTIONS.
Limited Liability of Management
The Nevada Revised Statutes generally provide that a company's directors
shall have no personal liability to the company or its stockholders for
monetary damages for breaches of their fiduciary duties as Directors, except
for breaches of their duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, acts
involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. Accordingly, Shareholders may have no recourse against
Directors of the Company for bad business decisions. However, liability of
Directors for violation of the federal securities laws is not limited by these
provisions.
Regulation and Environmental Considerations
The Company is subject to various local, state, and federal laws and
regulations including, without limitation, regulations promulgated by federal
and state environmental, health, and labor agencies, and has engaged a
consultant to advise it with respect to compliance with applicable
environmental regulations. Prior to commencing operations the Company spent
$5,140 to comply with various environmental regulations and no additional
expenditures by the Company have been required. However, changes in the laws
and regulations governing the Company's business may impose an increased financi
al burden upon the Company that could adversely affect the Company's business
or operations. Actions by federal, state, and local governments concerning
environmental or other matters could result in regulations that could increase
the cost of producing the products to be manufactured and sold by the
Company.
Certain of the Company's operations will be subject to federal, state,
and local laws and environmental regulations that impose limitations on the
discharge of pollutants into the air and/or water. The Company believes that
it will be able to operate in compliance with such regulations. While the
Company has not had to make significant capital expenditures relating to
environmental compliance, the Company cannot predict with any certainty its
future capital expenditure requirements relating to environmental compliance
because of its limited operations and continually changing compliance
standards and technology. See BUSINESS.
<PAGE> 14
Lack of Insurance for Environmental Liabilities
The Company does not have insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future.
See BUSINESS.
Issuance of Additional Common Stock and Preferred Stock
The Company currently has authorized 25,000,000 shares of Common Stock,
par value $0.001 per share, of which 4,546,748 shares were issued and
outstanding prior to this Offering. The Company currently has authorized
5,000,000 shares of Preferred Stock, par value $0.001 per share, of which no
shares were issued and outstanding. Although the Company's Board of Directors
has no present intention to do so, the Board of Directors has authority,
without action by or vote of the Company's Shareholders, to issue all or part
of the authorized but unissued shares. In addition, the Company's Board of
Directors has authority, without action by or vote of the Company's Shareholders
, to fix and determine the rights, preferences, and privileges of the
Preferred Stock, which may be given voting rights superior to that of the
Common Stock, which power may be used to hinder or deter a takeover proposal,
should any occur. Any issuance of additional shares of Common Stock or
Preferred Stock will dilute the percentage ownership interest of Shareholders
and may further dilute the book value of the Company's shares. See
DESCRIPTION OF CAPITAL STOCK.
Common Stock Could Become a Designated Security/Penny Stock
Should the bid price for the Company's Common Stock fall below $5.00 per
share, the Company's Common Stock would become subject to special sales
practice requirements applicable to "designated securities" and "penny
stock". No assurance can be given that the bid price for the Company's Common
Stock will continue to be above $5.00 per share. If such $5.00 minimum bid
price is not maintained and another exemption is not available, the Company's
Common Stock would become subject to additional sales practice requirements
imposed on broker-dealers who sell the Common Stock to persons other than
established customers and accredited investors (generally institutions with
assets in excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse).
For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchaser and have received the
purchaser's written agreement to the transaction prior to the sale. These
rules may be anticipated to affect the ability of broker-dealers to sell the
Company's Common Stock, which may in turn be anticipated to have an adverse
impact on the market price for the Common Stock and the ability of purchasers
to sell their shares in the secondary market. The Company believes that if
the bid price should fall below $5.00 per share it would continue to be exempt
from the sales practice requirements because it would meet certain minimum
asset and net worth tests. No assurance can be given however, that the
Company will be able to meet the terms of such exemption or that, if met
initially, it would continue to meet the terms of such exemption in the
future.
Lack of Dividends
The Company has not paid, and does not plan to pay, dividends in the
foreseeable future even if the Company is profitable. Earnings, if any, are
expected to be used to expand the Company's operations and for general
corporate purposes, rather than to make distributions to Shareholders.
<PAGE> 15
Possible Sale of Common Stock Pursuant to Rule 144
The Company has previously issued shares of Common Stock that constitute
"restricted securities" as that term is defined in Rule 144 adopted under the
Securities Act. Subject to certain restrictions, such securities may
generally be sold in limited amounts two years after their acquisition.
The Commission has recently adopted a proposal to reduce the holding period
prior to which shares may be eligible for resale under Rule 144 from two years
to one year. The amendments to Rule 144 take effect on April 29, 1997, and
once effective, the rule will allow the above mentioned restricted securities
to be eligible for resale one year earlier.
The Company issued 2,510,000 shares of Common Stock to initial
Shareholders in connection with its organization. The Company issued an
additional 300,000 shares of Common Stock to various individuals for
professional and consulting services during February 1995. In April 1995, the
Company issued 170,000 shares to certain Officers and 100,000 shares for
professional services. In May 1995, the Company issued 720,000 shares in a
private placement. The shares issued to insiders (2,510,000 shares to
founders and 170,000 shares to other Officers) are currently eligible for
resale under Rule 144. However, in connection with the Company's initial
public offering, the Company's Officers, Directors, and Shareholders owning
more than 5% of the Company's issued and outstanding shares of Common Stock
agreed not to sell any shares owned directly or indirectly by them for a
period of up to four years, subject to the Company obtaining certain net
earnings requirements.
The 400,000 shares of Common Stock issued to consultants for professional
services in February and April 1995 were issued pursuant to an exemption from
registration available under Rule 701 of the Securities Act, and are now
eligible for resale pursuant to the resale limitations set forth in Rule
701(c) which provides that 90 days after the Company becomes subject to the
reporting requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 (i.e., May 28, 1996), securities issued in a Rule 701
transaction may be resold by persons other than affiliates in reliance on Rule
144, without compliance with (1) current information, (2) holding period, (3)
volume limitation, and (4) notice requirements of Rule 144; and by affiliates
without compliance with the holding period requirements of Rule 144.
The 720,000 shares of restricted Common Stock sold by the Company in the
May 1995 will become eligible for sale under Rule 144 in May 1997. Sales of
these restricted securities under Rule 144 or otherwise may have a depressive
effect on the price of the Company's Common Stock in any trading market that
may develop following this Offering. After the implementation of the
amendment to Rule 144, securities held for two years may be sold by
nonaffiliates without limitation. See PRINCIPAL SHAREHOLDERS and DESCRIPTION
OF CAPITAL STOCK.
PAGE
<PAGE> 16
PLAN OF DISTRIBUTION
Selling Shareholders
The Selling Shareholders may sell up to 155,000 shares of Common Stock
from time to time directly to purchasers. Alternatively, the Selling
Shareholders may, from time to time, offer the Common Stock to underwriters,
dealers, or agents, which may receive compensation in the form of underwriting
discounts, concessions, or commissions from the Selling Shareholders and/or
the purchasers of the Common Stock from whom they may act as agent, as the
case may be. The Selling Shareholders and any underwriters, dealers, or
agents that participate in the distribution of such securities, may be deemed
to be "underwriters," and any profits on the sale of these securities by them
and any discounts, commissions, or concessions received by any underwriters,
dealers, or agents may be deemed to be underwriting discounts and commissions
under the Securities Act.
The Common Stock may be sold by the Selling Shareholders, as the case may
be, from time to time, in one or more transactions at a fixed offering price,
which may be changed, or at varying prices determined at the time of sale or
at negotiated prices. The Company does not intend to enter into any
arrangements with any securities dealers concerning solicitation of offers to
purchase the Common Stock. The Selling Shareholders will pay all separate
expenses incurred by them incident to the offer and sale of the Common Stock,
including commissions and discounts to broker-dealers.
Commissions and discounts paid in connection with the sale of the Common
Stock by the Selling Shareholders will be determined through negotiations
between them and the broker-dealers through or to which the securities are to
be sold and may vary, depending on the broker-dealers fee schedule, the size
of the transaction, and other factors. The separate costs of the Selling
Shareholders will be borne by them. The Selling Shareholders and any
broker-dealer or agent that participates with the Selling Shareholder in the
sale of the Common Stock by them may be deemed "underwriters" within the
meaning of the Securities Act, and any commissions or discounts received by
them and any profits on the resale of Common Stock purchased by them may be
deemed to be underwriting commissions under the Securities Act.
The Company has agreed to pay all expenses incurred by the Company in
registering the Common Stock for resale by the Selling Shareholders. In
addition, the Company has agreed to utilize its best efforts to keep the
registration statement effective until February 16, 1998. The Company is
under no obligation to maintain the effectiveness of any registration
statement beyond February 16, 1998, or that date following the date on which
all the shares of Common Stock registered pursuant to this registration
statement have been sold by the Selling Shareholders, which ever occurs
first. PAGE
<PAGE> 17
SELLING SHAREHOLDERS
The following table provides certain information with respect to the
Common Stock held by each Selling Shareholder. None of the Selling
Shareholders has had a material relationship with the Company. The percent of
Common Stock is calculated on the number of the Company's shares issued and
outstanding as of the date of this Prospectus. None of the shares of Common
Stock may be offered and sold by the Selling Shareholders after February 16,
1998. The Common Stock offered by the Selling Shareholders under this
Prospectus may be offered from time to time by the following persons:
Name of Shareholder Number of Shares % of Common Stock
- ------------------- ---------------- -----------------
Lowell L. Leishman 12,000 .26
2156 Associates, a Utah partnership 20,000 .44
William L. Jiler 15,000 .33
Matthew L. & Erin S. Haynie, JTWRS 3,000 .07
Graphic Arts Management Profit Sharing Plan 15,000 .33
Frank Lankey 5,000 .11
Jay M. Grossman 3,000 .07
Richard K. & Janice S. Milne, JTWRS 5,000 .11
James & Carolee Okland, JTWRS 4,000 .09
Henry D. Moyle 20,000 .44
David P. Scheffenacker 4,000 .09
Theodore S. Green & Debra Beneck 3,000 .07
Adele Gilchrist 1,000 .02
Carol H. Tate 1,000 .02
Jeffrey W. Gold, IRA 6,000 .13
Jeffrey W. & Robyn Gold, JTWRS 14,000 .31
Louis M. Haynie 14,000 .31
Joseph S. Haynie 1,000 .02
Michael L. Haynie 3,000 .07
Gae B. Haynie 2,000 .04
Gary R. Howe, IRA 1,000 .02
Gary R. & Sharon F. Howe, JTWRS 3,000 .07
------------ ----------------
Totals 155,000 3.42
============ ================
PAGE
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
The Company's is engaged 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 "centrifugal molding machines" and other related
specialized manufacturing equipment to produce the airless bicycle tires. The
Company has utilized funds from its initial public offering to purchase
additional molding machines and related production equipment, which is
currently being installed and will be ready for production during April 1997.
The Company is in the development stage and has only recently began
manufacturing operations. The Company has had an operating loss of $1,231,453
since its inception through December 31, 1996 due to the costs and expenses
associated with beginning operations. The Company's audited financial
statements at June 30, 1996, contained a going concern modification as to the
ability of the Company to continue. However, In October 1996, the Company
received $2,064,498 from its initial public offering, which the Company
believes will provide it with sufficient working capital to fund operations.
The Company is currently operating at a loss of approximately $80,000 per
month and expects operating losses to continue at such rate until such time as
the Company begins to receive revenues from the sale of its products.
At December 31, 1995, the Company had only been organized for eleven
months and had no significant operations, therefore management's discussion
and analysis of the prior period ended December 31, 1995 with the current
period ended December 31, 1996, would not be conducive to an understanding of
the Company and its fiscal condition or have any meaningful significance.
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 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. At December 31, 1996,
the Company had not made any draws against the line of credit.
On October 31, 1996, the Company approved the issuance of 27,000 shares
of the Company's restricted common stock in exchange for the cancellation of
approximately $56,735 in principal and accrued interest due certain of its
officers and directors.
In February 1997, the Company raised offering proceeds of $930,000 from
the sale of 155,000 shares of restricted common stock in a private placement.
The 155,000 shares of Common Stock sold in that private placement are the same
155,000 shares of Common Stock being offered hereunder by the Selling
Shareholders. See SELLING SHAREHOLDERS.
The Company will be relying on the proceeds from the Company's recent
securities offerings 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 operational needs.
<PAGE> 19
On January 2, 1997, the Company entered into an Agreement in Principle
with Coronel Investments Limited ("Coronel") to purchase all of Coronel's
ownership interest in the capital stock of UTI Chemicals (Europe) Ltd., a
United Kingdom company ("UTI-UK"), in exchange for 200,000 shares of the
Company's common stock and a cash payment of $400,000. UTI-UK is a
distributor of urethane products in the United Kingdom and Europe. Effective
February 28, 1997, the Company completed the acquisition of UTI-UK.
BUSINESS
Organization and Corporate History
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
several years experience in top-management positions in public companies
engaged in manufacturing products utilizing emerging technology and personally
holds patents on urethane products and processes. In addition, 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. However, the Company believes that the
experience and intellectual contributions of Mr. Steinke and Mr. Chrobak to
the Company are key components to the future success of the 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, and $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 an additional 40,642 shares in a private placement 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 have been subject to
a Recision Offer and in October 1996, the Company repurchased from investors
34,977 shares for an aggregate of $193,704, which amount includes all accrued
interest.
In October 1996, the Company completed an initial public offering of
344,083 shares of Common Stock at a purchase price of $6.00 per share for
gross offering proceeds of $2,064,498. The Company has used the proceeds from
the offering to initiate production of airless tires which will compete with
the traditional pneumatic tires (i.e., tires with an inner tube or tubeless
tires inflated with air), repurchase the shares of Common Stock subject to the
Recision Offer, repay loans from Officers, and for working capital.
Effective February 28, 1997, the Company completed the acquisition of all
of the capital stock of UTI-UK. The acqusition was made pursuant to a Share
Purchase Agreement, wherein the Company agreed to acquire UTI-UK from Coronel
in exchange for the payment of 200,000 shares of the Company's restricted
common stock and a cash payment of $400,000. The Company utilized proceeds
derived from the February 1997 private placement to make the cash portion of
the purchase price. The closing bid price for the Company's common stock on
February 28, 1997 (the "Closing Date") was $7.75.
<PAGE> 20
Based on the closing bid price for the Company's common stock and the
$400,000 cash, the purchase price of UTI-UK was valued at $1,950,000. For
purposes of accounting treatment, the acquisition of UTI-UK will be treated as
a purchase by the Company.
UTI-UK has since 1990 been a distributor of urethane bicycle, wheelchair
and other specialty tires in the United Kingdom and Europe. UTI-UK
distributes urethane bicycle tires under the trade name "Urathon TM" in
approximately 540 Michelin Tire Company owned ATS stores in England, Scotland
and Wales. UTI-UK also sells product in France, Denmark, Austria, the
Netherlands and Germany through independent representatives and distributors.
In connection with the acquisition of UTI-UK, the Company and Coronel
entered into a lock-up agreement, wherein Coronel agreed not to sell during
the 24 month period following the Closing Date (i.e., through March 1, 1999),
more than 50,000 shares of the Company's common stock acquired, provided
however, all such sales of the Company's common stock during the lock-up
period are made in a market transaction pursuant to an effective registration
statement or in reliance on an exemption from registration under the
Securities Act of 1933, as amended.
In addition, the Company entered into a management agreement with
Coronel, wherein Coronel has been retained to manage the day-to-day operations
of UTI-UK for a 12-month period beginning February 1, 1997, in exchange for a
monthly fee of US$9,990, and Hugh-Sims Hilditch, the principal shareholder of
Coronel was appointed to the Company's board of directors and to serve as
Managing Director for European Operation.
Business in General
The Company has spent extensive time analyzing the tire industry, its
perceived major competitors, potential markets, and its own strengths and
weaknesses. The Company believes that the tire industry is dominated by
several large competitors, has competitive pressures from cheaper imported
tires from the Pacific Rim, and maintains a commitment to the traditional
pneumatic tire with innovations focusing on tread design not tire design. The
Company also feels that the tire industry can be divided into several segments
each with its own dynamics, dominant companies, target customers, and
competitive pressures. The Company believes that its technology will allow it
to produce an airless tire which offers the same safety and ride as the
traditional pneumatic tire, at competitive prices, without the associated
problems resulting from a flat tire. The ability to avoid down time from flat
tires will be particularly appealing to industrial concerns where down time
can be readily equated into lost dollars.
The Company feels its strengths are in its technology and research and
development capabilities. Its weaknesses are in its size and financial
capabilities and in changing Original Equipment Manufacturer ("OEM") and
consumer views on pneumatic tires and the advantages of going airless. Based
on this analysis of the tire industry, a two-pronged approach has been
formulated by the Company's management to manufacture and market its airless
tire concept.
PAGE
<PAGE> 21
First, the Company has identified certain industry segments where it
feels the cost of the tires, the consumer, and the competition will allow it
to compete effectively against existing pneumatic tires and the companies that
produce them. These industry segments are segments the Company feels will be
accessible, its products will be readily acceptable, and the Company will not
be at an insurmountable competitive disadvantage. One such area is the
bicycle tire market where almost all tires are currently imported. The
Company feels it can offer the end user the advantage of not having to worry
about flats or leaks.
Second, in industry segments where the Company feels it will not
initially have the financial or manufacturing resources to compete
effectively, the Company will seek an industry partner to manufacture and
market tires products developed from the Company's technology. The Company
will, therefore, have a very fluid organization that will not be bound to the
traditional role as strictly a manufacturer and marketer of products, but
instead, a company exploring the non-traditional avenues, including joint
ventures for developing and licensing the Company's technology. The Company
feels that through these means, with respect to some products developed
utilizing the Company's technology, the Company will be able to attain broader
public recognition without incurring the additional equipment and related
costs and expenses associated with being strictly a manufacturer and marketer.
With respect to products developed through joint ventures and license
agreements, the Company will maintain a profit interest by having a royalty or
other carried interest in every unit of production sold through such
arrangements based on gross sales price.
Hayes Development and License Agreement
In September 1995, the Company and Hayes Wheels International ("Hayes")
entered into a Development and License Agreement (the "Hayes Development and
License Agreement") wherein the Company and Hayes have agreed to jointly
develop a prototype tire-wheel assembly utilizing the DSS Technology, together
with associated molds and equipment, for submission to the United States
Department of Transportation ("DOT") for DOT's approval under FMVSS 129. Under
the joint development aspect of the Hayes Development and License Agreement,
the Company will, at its cost, develop and manufacture the molds and process
for applying side coverings, elastomeric tread, and a cap stabilizer onto the
Hayes manufactured DSS. Hayes, at its cost, will develop and manufacture
molds and equipment to manufacture the steel portion of the DSS. FMVSS 129 is
the applicable U.S. safety standard for non-pneumatic tires used on passenger
vehicles and describes the energy cycle a non-pneumatic tire/wheel must absorb
to be provided for commercial sale in the United States. The Company has
received prototype wheels from Hayes, built the molds for applying the side
coverings, tread, and stabilizing cap, and produced several tire-wheel
assembly prototypes that have been delivered to an independent lab for testing
to ensure that the tire/wheel assembly complies with FMVSS 129. The Company
has submitted for testing 7 of 10 planned submissions to an independent
laboratory. The tests performed have been designed to provide the Company
with data relating to the dynamics, material composition, and performance of
the tire-wheel assembly. From the data developed from testing of the first
seven prototypes, the Company has established what the Company and Hayes
believe to be the best design and polymer compound for the tire-wheel assembly
to meet the requirements of FMVSS 129. The final three submissions will be
based on that design and polymer compound. Because of limited working capital,
the Company had suspended prototype testing until completion of its initial
public offering. The Company plans to resume prototype testing beginning in
May 1997.
<PAGE> 22
Airless Bicycle Tires
Airless bicycle tires differ from pneumatic tires in that pneumatic tires
are made from rubber and require an inner tube which is inflated with air,
while the Company's airless bicycle tires are manufactured from polyurethane,
have no inner tube (solid throughout), and do not require inflation. The
airless bicycle tire is mounted on the bicycle rim in much the same way a
pneumatic tire is mounted, with the assistance of a special tire lever. The
Company will provide with each tire, special tire levers, (about 12 inches
long to provide for sufficient leverage), to assist the cyclist in mounting
the tire to the wheel rim. The airless bicycle tires are approximately the
same weight as pneumatic tires and tubes and ride characteristics are
comparable. Apart from cleaning, the Company's bicycle tires are maintenance
free. This is of particular importance in relation to braking performance.
Pneumatic tires normally require regular attention to maintain full inflation
pressure to ensure correct brake operation. The Company's airless bicycle
tires eliminate tedious puncture repair or the need for a bicycle pump. They
are designed for use by "On/Off" road and "Highway" bicycles. The Company
will initially market the airless bicycle tires in two colors, fluorescent
yellow and conventional black, however, it may choose to introduce additional
colors in the future.
The Company's marketing strategy will be to initially introduce the
bicycle tires through sales to OEMs and direct advertising to consumers
through television commercials. The Company intends to target two main
consumer segments of the bicycle tire market:
(1) Original Equipment Manufacturers. Based on 1993 data, OEM purchases
of bicycle tires made up one-third of the total volume of the bicycle tire
market. By selling to OEM's, the Company believes it will be able to develop
product identification and consumer demand by emphasizing "Made in the USA,"
the "airless," "maintenance free," and "puncture proof" characteristics of the
bicycle tires while relying on the efforts of the OEM in marketing their
bicycles. The Company has made production molds to produce bicycle tires for
Huffy Bicycle, Celina, Ohio to produce eight lines in four sizes (i.e., 26",
24", 20", and 16" x 1.95") for use with Huffy's 1997 production bicycles.
Huffy has prepared its 1997 Bicycle Catalog featuring bicycles equipped with
the Company's airless tires. Huffy is marketing the airless tires as the
EnviroSafety Tire ("EST") that never goes flat and has placed an open order
with the Company to deliver 50,000 tires in varying sizes during 1997, subject
to meeting mutually agreeable pricing for the product.
(2) Direct Advertising. In April 1995, the Company entered into a
television commercial agreement with American Independent Network of Ft.
Worth, Texas ("AIN"), to air a commercial (the "Commercial") produced by the
Company for a one year period beginning as soon as airless bicycle tires are
available for shipment. AIN covers 129 stations, in 75 markets, covering
34,668,949 households. AIN will air the Commercial at times selected by it
and the Company at time slots between 6:00 AM and 12:00 Midnight on an average
of once an hour, with particular emphasis placed during the airing of
afternoon children's programs, news reports, and sports programming. The
total program will give the Company approximately 10 airings per day during
the one year term. The Company has established an 800 telephone number that
will allow customers to call the Company to make purchases direct from the
Company utilizing a credit card. The Company has agreed to pay AIN a
commission of $2.00 for each bicycle tire sold by the Company resulting from
direct advertising effort. The Company has not made any substantive studies
to determine the degree of market penetration it can reasonably expect to
obtain from the airing of the Commercial, nor has it established an exact date
to begin airing the Commercial.
<PAGE> 23
Competition
Currently, there are three tire manufacturers that utilize a liquid phase
technology manufacturing process to produce airless bicycle tires (Green Tire,
Norwich, UK; Woo Tire, Waihai, China; and Krypton-India, Calcutta, India), and
very limited numbers of their airless bicycle tires have been marketed in the
United States. The technology that these companies use to manufacture their
bicycle tires was originally developed by Vincent Panaroni, who has in the
past provided consulting services to the Company, and the co-inventor of the
Company's Airless Tire Technology. See MANAGEMENT.
The Company's Airless Tire Technology differs from the existing
technology in (1) the formulation of the polyurethane; (2) the manner in which
the polyurethane is distributed throughout the mold; (3) and implementation of
a circumferential steel cord; (4) the manner in which the tire seats in the
wheel rim; and (5) the manner in which the tire is manufactured to comply with
ISO and U.S. tire and rim specifications and U.S. truth-in-labeling laws. In
addition to manufacturers of airless tires, the Company will be competing
directly with firms that manufacture and market pneumatic bicycle tires.
The Company estimates that over 98% of all domestic bicycle tire sales
are pneumatic tires. The bicycle tire industry is highly competitive and
there are several of the Company's competitors that have financial resources
which substantially exceed those of the Company. In addition, many
competitors are large companies (i.e. Michelin [France], Kenda [Japan], and
Chengshin Rubber [China]) that have established name recognition of their
product, have established distribution networks for their products, and
developed consumer loyalty to such products. The Company knows of no domestic
manufacturer of pneumatic bicycle tires. Principal factors in marketing the
Company's bicycle tire will be that it is domestically produced with "airless"
and "puncture proof" characteristics. This may give the Company a competitive
advantage against pneumatic bicycle tires produced by foreign manufacturers
that are subject to puncture and loss of air.
Currently, there are no spare, passenger car, light, medium or heavy
truck tire manufacturers that utilize the liquid phase technology
manufacturing process to produce tires and the Company knows of no other
company that has developed a combined tire-wheel assembly for motor vehicles.
The Company is utilizing an established industry partner to bear the cost of
manufacturing and marketing spare, passenger car, and light truck tires
developed from DSS technology. Therefore, the Company will be competing
indirectly with companies that manufacture and/or market pneumatic passenger
vehicle and light truck tires [i.e., Goodyear, Michelin, and Bridgestone].
Many of these companies have company owned outlets or franchised stores that
sell products manufactured by these companies. The Company feels that the car
and truck tire market will be highly competitive and there may be several
companies that manufacture pneumatic tires that have financial resources which
exceed those of the Company and its industry partners. Although the Company's
airless automobile and truck tires will be unique in the tire market place,
the Company will be at a disadvantage in competing with older, larger, and
more established companies while attempting to establish itself in the tire
industry in general.
PAGE
<PAGE> 24
Manufacturing, Supplies, and Quality Control
The Company manufactures the airless bicycle tires utilizing single
and/or multiple head, centrifugal molding machines. These machines
centrifugally mold elaster products, such as the bicycle tires, by pouring a
predetermined amount of polyurethane into a mold, which is then spread out in
the mold through centrifugal force. The molding process occurs when the
liquid polyurethane formula (made up of isocyanide and polyol) is combined
with a catalyst. This combination causes a chemical reaction that results in
the cross linking of the chemicals, which thereafter become solid. The mold
then moves to the next station where the tire is removed and the process
continues.
The Company has recently installed an additionaly 12-station carousel and
the Company estimates that a crew of three persons will be able to produce
approximately 4,000 tires in an 8 hour shift, or approximately 1,000,000 tires
per year utilizing the Company's existing production equipment. The Company
estimates that it could produce about 12 to 15 million tires per year without
expansion from its Ravenna facility. At that level of production, the Company
would require approximately 200 employees. The Company will train its
employees in the use of this specialized manufacturing equipment and process,
which will be utilized for other types of specialty tires as well. The
Company intends to utilize multiple suppliers to purchase polyurethane and
believes that it will be able to obtain significant quantities of polyurethane
and other chemicals without significant problems or delays.
All products produced by the Company will be inspected following the
manufacturing process and prior to shipment to ensure quality. Products
considered by the Company's quality control personnel to be defective could be
ground into pellets, which can be melted and reused in the Company's
manufacturing process to make new products and reduce waste of raw materials.
Patents
Dynamic Steerable Spring
On June 5, 1995, the Company entered into a technology license agreement
(the "DSS License Agreement") with American Mobility Systems, Inc., a Nevada
corporation ("AMS"), controlled by Dennis S. Chrobak and Richard A. Steinke,
affiliates of the Company, to develop DSS Technology. DSS Technology is a
combination of a spring compressively loaded and a one piece spiral hoop load
in tension. DSS Technology can be utilized in tire-wheel assemblies for many
types of mobile products including spare tires, passenger car tires, and
light, medium, and heavy truck tires. AMS is the owner of the DSS Technology
for which an application for United States Letters Patent has been filed and
issuance of a patent is pending. The term of the DSS License Agreement will be
for the life of the underlying U.S. patent when issued. The Company is
required to pay a royalty to AMS of either $1.00 for each unit of production
manufactured and sold directly by the Company or eight percent (8%) of any
royalty the Company should receive from third party licensees that utilize the
DSS Technology.
PAGE
<PAGE> 25
Airless Bicycle Tires
On October 27, 1995, the Company entered into a technology license
agreement (the "Airless Tire License Agreement") with AMS, to develop certain
technology relating to an airless bicycle tire for which AMS has filed an
application for United States Letters Patent and the issuance of a patent is
pending. The term of the Airless Tire License Agreement will be for the life
of the underlying U.S. patent when issued. The Company is required to pay a
royalty to AMS of $0.25 for each bicycle tire manufactured and sold by the
Company utilizing the technology.
The Company has not yet received from the United States Patent Office any
response passing on the patentability of the claims of the case with respect
to the either the DSS Technology or the Airless Bicycle Tire Technology. The
Company is unable to predict when any office action will be taken or a patent
issued. Although a patent has a statutory presumption of validity in the
United States, the issuance of a patent is not conclusive as to its validity,
nor as to the enforcement scope of the claims contained therein. The Company
intends to, but has not as of the date of this Prospectus, applied for patent
protection in other countries. The Company intends to vigorously police its
patent and there can be no assurance that its patent will not be infringed
upon or modified by others.
The Company has not retained intellectual property counsel to render an
opinion regarding the DSS Technology and the Airless Tire Technology as to
whether the Company is infringing on the intellectual property rights of
others. In that regard, the Company believes the DSS Technology is unique in
that the Company knows of no other manufacturer of airless passenger vehicle
tires or tire-wheel assemblies. With respect to the Airless Bicycle Tire
Technology, the Company believes that its technology substantially differs
from the existing technology currently being utilized to produce airless
bicycle tires. The Company believes that although its patents are important,
such factors as product innovation, technical expertise and experience, and
the confidentiality of proprietary data and trade secrets are equally as
important. The Company will attempt to preserve and protect its proprietary
technology principally through trade secret protection and has obtained
confidentiality/nondisclosure agreements with all of its employees.
Trademark
Through its wholly owned subsidiary UTI-UK, the Company owns the U.S.
registered trademark "Urathon TM" which has been utilized by UTI-UK on
urethane tire products distributed in the United Kingdom and Europe.
PAGE
<PAGE> 26
Regulation and Environmental Compliance
In connection with the manufacturing of airless bicycle tires, the
Company knows of no particular federal or state regulations applicable to its
manufacturing process. However, the Company intends to manufacture its
bicycle tires in compliance with any applicable ISO standards. Certain tire
wheel assemblies designed to be manufactured for use on passenger vehicles and
light trucks are required to meet certain Department of Transportation,
Federal Motor Vehicle Safety Standards ("FMVSS"), including FMVSS 129, which
applies to non-pneumatic tires for passenger cars. This standard specifies
tire dimensions and laboratory tests requirements for lateral strength,
endurance, and high speed performance, defines the tire load rating, and
specifies labeling requirements for non-pneumatic spare tires. All tire-wheel
assemblies for use in passenger car and light truck applications developed by
the Company will be engineered to meet applicable FMVSS standards.
The Company is subject to various local, state, and federal laws and
regulations including, without limitation, regulations promulgated by federal
and state environmental and health agencies, the federal Occupational Safety
and Health Administration, and laws pertaining to hiring, treatment, safety,
and discharge of employees. The Company's manufacturing operations must also
meet federal, state, and local regulatory standards in the areas of labor,
safety, and health. Since its inception, the Company has spent $5,140 to
comply with various environmental regulations and no additional expenditures
by the Company have been required. The Company believes that it will be able
to operate in compliance with such regulations, including laws related to the
handling and use of environmentally hazardous materials.
Employees
As of March 31, 1997, the Company had 16 full-time employees. All of the
Company's Officers and key personnel are employees at will, except Messrs.
Steinke and Chrobak. None of the Company's employees is represented by a
labor union. 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. The Company's manufacturing process does not require
special training, other than orientation to the Company's production
techniques and specific equipment.
PROPERTIES
Offices
The Company's 26,000 sq. ft. manufacturing/distribution/office facility
is located on 4.15 acres of real property at 446 West Lake Street, Ravenna,
Ohio, and consists of 1,000 sq. ft. of administrative offices and 25,000 sq.
ft. of manufacturing space. The facility is constructed of masonry and steel
and is equipped with a one-half ton chain hoist, overhead sprinkler system,
and two loading docks. The Ravenna facility will be utilized for tire
production and management of the Company believes that the Ravenna facility
will be sufficient to handle projected production needs for the next five
years. It is the opinion of management that the Company maintains adequate
insurance coverage for loss or damage to its facility under its existing
insurance policy.PAGE
<PAGE> 27
MANAGEMENT
Directors and Executive Officers
The following table sets forth as of March 31, 1997, the name, age, and
position of each executive officer and director and the term of office of each
Director of the Company.
Name Age Position Director or Officer Since
---- --- -------- -------------------------
Richard Steinke 54 Chairman, Director,
and C.E.O. January 1995
Dennis S. Chrobak 57 President and Director January 1995
Roger A. Fleming 56 Vice-President, Technology January 1997
Hugh Sims-Hilditch 58 V.P., European Operations
and Director February 1997
Ping Zhang 31 V.P., China Operations
and Director February 1997
David K. Griffiths 59 Treasurer February 1995
Marcy L. Janus 29 Secretary March 1997
The term of office of each Director is one year and until his successor
is elected and qualified at the Company's annual meeting, subject to removal
by the Shareholders. The term of office for each Officer is one year and
until a successor is elected at the annual meeting of the Board of Directors
and is qualified, subject to removal by the Board of Directors. The Company
will reimburse Directors for their expenses associated with attending
Directors' meetings. However, Directors have not, nor is it anticipated they
will, receive any additional compensation for attending Directors' meetings.
Biographical Information
Set forth below is certain biographical information for each of the
Company's Officers and Directors and other key personnel.
Richard Steinke is a founder of the Company and currently serves as its
Chairman and Chief Executive Officer. From January 1992 to December 1994, Mr
Steinke served as Chairman and C.E.O. of Alanco Environmental Resources, Inc.
[NASDAQ: ALAN], a manufacturer of environmental/pollution control equipment,
Salt Lake City, Utah. From June 1985 to December 1991, he was the Chairman
and C.E.O. of UTI Chemicals, Inc.[NASDAQ: UTEC], a developer and manufacturer
of urethane chemicals, El Toro, California. Mr. Steinke brings to the Company
several years of top level management experience in public companies involved
in the use of emerging technologies. Mr. Steinke received a B.A. in Political
Science and Economics from the University of Arizona, Tucson, Arizona, in
1967.
PAGE
<PAGE> 28
Dennis S. Chrobak is a founder of the Company and currently serves as its
President and is a Director. From January to December 1994, Mr. Chrobak was
self-employed as an engineer/consultant. Prior to his retirement in 1994, Mr.
Chrobak was employed by Goodyear Tire and Rubber Company, Akron, Ohio, for 33
years. During that time, Mr. Chrobak served in various employment capacities,
including Staff Engineer, 1962; Senior Project Engineer, 1963-1968; Section
Leader, Military Aircraft Tire Engineering, 1968-1970; Chief Engineer, Race
Tire Engineering, 1970-1974; General Manager, International Race Tyre
Division, UK, 1974-1979; Product Manager, New Passenger Tire Products, 1981 to
1983; Chief Engineer; Tire/Wheel Systems Engineering, 1983-1985; Chief
Engineer, Technology Forecasting, Planning, and Business Coordination, 1985
to 1987; and Chief Engineer, Specialty Tire Programs, 1987 to 1994. Mr.
Chrobak received a B.S. in Chemical Engineering, Case Institute of Technology,
Cleveland, Ohio, in 1961, and MBA (then Case-Western) in 1989. In addition,
Mr. Chrobak has received several certifications relating to additional
education and training in the chemical/tire industry. Mr. Chrobak is the
inventor of 9 patents relating to tire technology and has published several
papers relating to issues in the tire industry. Mr. Chrobak is active in his
church and community, including 40 years devoted to various positions in the
Boy Scouts.
Roger A. Fleming, joined the Company in February 1997 as its
Vice-President of Technology. Prior to joining the Company Mr. Fleming was a
senior engineer at Goodyear Tire & Rubber Company, Akron, Ohio, were Mr.
Fleming had worker for over 31 years. Mr. Fleming holds many patents in
product and process design and has managed the development of Goodyear's
liquid phase united spare tire. Mr. Fleming received a degree in Chemical
Engineering from North Carolina State University, Raleigh, North Caroline in
1963.
Hugh-Sims Hilditch joined the Company as its Vice-President of European
Operations and a Director in February 1997 in connection with the Company's
acquisition of UTI-UK. Mr. Sims-Hilditch has in excess of the past five years
served as the Manager of UTI-UK, Hilmarton, England, a distributor of urethane
products in the United Kingdom and Europe.
Ping Zhang was named the Company's Vice-President of China operations and
a director in February 1997. Mr. Zhang has for the past three years been
actively involved in promoting U.S.- China business and trade relationships.
Mr. Zhang received a Masters Degree in Manufacturing and Industrial Technology
from Arizona State University, Tempe, Arizona, in 1993, and a degree in
Mechanical Engineering from Shanghai Jiatong University, Shanghai, China, in
1991.
David K. Griffiths currently serves as the Company's Treasurer and
principal accounting officer and has since 1960 been self-employed as an
accountant/consultant for various small businesses. Mr. Griffiths offers the
Company 36 years experience in accounting and accounting related systems.
Marcy L. Janus currently serves as the Company's Secretary. In December
1989, Marcy received a B.A. in Communications from Kent State University,
Kent, Ohio. Ms. Janis brings to the Company seven years experience in
executive office management and computer services.
PAGE
<PAGE> 29
KEY EMPLOYEES
Shanley Brown joined the Company in January 1997 and serves as the
Company's domestic sales manager. Mr. Brown brings to the Company over 20
years of experience in both domestic and international sales for bicycles and
light duty pneumatic tires. From 1994 to 1996, Mr. Brown, was Vice President
of the Industrial Tire Division of Shinko USA, Carson City, California, a
division of Shin Hung Co., Ltd., Osaka, Japan. From 1991 to 1994, he was the
National Sales Manager for Kenda Tire USA, Columbus, Ohio. From 1984 to 1991,
Mr. Brown was the Midwest Regional Manager for Greenball Corporation, Long
Beach, California, a distributor of products for Cheng Shin Rubber, Taipei,
Taiwan and from 1976 to 1984, Mr. Brown was the District Manager for Carlisle
Tire and Rubber, Carlisle, Pennsylvania. Mr. Brown received an Associate
degree in Business Administration at Ohio University at Lancaster, Ohio in
1970.
Derek A. Bowers, joined the Company in June 1995. From May 1994 to June
1995, Mr. Bowers was employed by Huffy Bicycle Company, Celina, Ohio, as an
engineer. Mr. Bowers received a M.S. in Mechanical Engineering from Carnegie
Mellon University, Pittsburgh, Pennsylvania, in May 1994 and a B.S. in
Mechnical Engineering from Old Dominion University, Norfolk, Virginia, in May
1993.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Company is not subject to the requirements of Section 16(a) of the
Exchange Act.
PAGE
<PAGE> 30
EXECUTIVE COMPENSATION
The following tables set forth certain summary information concerning the
compensation paid or accrued for each of the Company's last two completed
fiscal years to the Company's or its principal subsidiaries chief executive
officer and each of its other executive officers that received compensation in
excess of $100,000 during such period (as determined at June 30, 1996, the end
of the Company's last completed fiscal year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
Other Restricted
Name and Annual Stock Options
LTIP All other
Principal Position Year Salary Bonus($) Compensation Awards /SARs
Payout Compensation
- ------------------ ---- ------ -------- ------------ ------ -------
- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Richard A. Steinke 1996 $-0- -0- -0- -0- -0-
- -0- -0-
C.E.O. and Chairman 1995 -0- -0- -0- -0- -0-
- -0- -0-
</TABLE>
Employment Agreements and Benefits
The Company has entered into Employment Agreements with Richard A.
Steinke, its Chief Executive Officer, and Dennis S. Chrobak, its President.
Beginning October 1, 1996, the Employment Agreements call for Mr. Steinke and
Mr. Chrobak to be employed for a term of 36 months, with monthly compensation
of $10,000, each, subject to increase at the discretion of the Board of
Directors. The Company is to provide group health, medical, and life
insurance, similar to that which will be made available to all full time
employees and reimburse Messrs. Steinke and Chrobak for out-of-pocket expenses
incurred in connection with the Company's business. In the event of
termination of either Mr. Steinke's or Mr. Chrobak's employment, for reasons
other than cause, as defined in each employment agreement, the terminated
parties monthly salary would continue throughout the balance of the term of
the employment agreement. The Company does not have employment agreements
with any other officer and director or other key personnel.
At the request of Dennis Chrobak, the Company's President, the Company
has accrued his monthly employment compensation for October, November and
December 1996. Mr. Chrobak has requested the Company to continue to accrue
his monthly employment compensation until further notice. In January 1997,
the Company deposited $30,000 into a separate account and will continue to
deposit Mr. Chrobak's accrued employment compensation into this account until
such time as the Company receives notice from Mr. Chrobak that he desires to
receive it.
PAGE
<PAGE> 31
As a condition to employment, all the Company's managers and key
personnel are required to sign a nondisclosure and noncompetition agreement.
Under the terms of the nondisclosure and noncompetition agreement, employees
will not be able to provide services or information deemed confidential by the
Company to any other company or person which directly or indirectly competes
with the Company in the tire industry or an industry which at the time of the
employees' employment, the Company intended to enter. There is no time
limitation on the nondisclosure aspect of the agreement. The noncompetition
clause is for a period of two years and prevents a former employee or
consultant of the Company from acting as an employee, consultant or in any
other capacity for a competitor of the Company. Additionally, all employees
will be required, as a condition of their employment, to enter into a
nondisclosure agreement related to any information or process deemed
confidential by the Company.
Consulting Agreement with Vincent Panaroni
In August 1995, the Company entered into a consulting agreement with
Vincent Panaroni, wherein Mr. Panaroni has agreed to provide the Company with
technical advice relating to chemical formulations and the development of
polyurethane compounds for use in products manufactured or licensed by the
Company for manufacture by third parties. The term of the Company's
consulting arrangement with Mr. Panaroni is one year, subject to renewals for
like periods, and provides for monthly payments of $3,000. The consulting
agreement restricts Mr. Panaroni from disclosing to third parties proprietary
information regarding the Company's products and keeping confidential
information and knowledge gained as a result of the services provided. This
Agreement was terminated at July 31, 1996 and the Company and Mr. Panaroni
have agreed to utilize Mr. Panaroni's services on an ad hoc basis with Mr.
Panaroni's compensation to be determined on a project by project basis.
Pension Table
None.
Compensation of Directors
None.
Termination of Employment and Change of Control Arrangement
Unless otherwise disclosed above, there are no compensatory plans or
arrangements, including payments to be received from the Company, with respect
to any person named in Cash Compensation set out above which would in any
way result in payments to any such person because of his resignation,
retirement, or other termination of such person's employment with the Company
or its subsidiaries, or any change in control of the Company, or a change in
the person's responsibilities following a changing in control of the Company.
PAGE
<PAGE> 32
PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 31, 1997, the name and the
number of shares of the Company's Common Stock, par value $0.001 per share,
held of record or beneficially by each person who held of record, or was known
by the Company to own beneficially, more than 5% of the 4,546,748 issued and
outstanding shares of the Company's Common Stock, and the name and
shareholdings of each director and of all officers and directors as a group.
Security Ownership of Certain Beneficial Owners
Title
of Name and Address Amount and Nature of Percentage
Class Beneficial Owner Beneficial Ownership(1) of Class
- ----- ---------------- -------------------- ----------
Common Dennis S. Chrobak D 1,255,000 27.6
2914 Silver Lake Blvd. I (2) 50,000 1.1
Silver Lake, OH 44224
Common Richard A. Steinke I (3) 455,000 10.0
446 West Lake Street I (4) 800,000 17.6
Ravenna, OH 44266
Security Ownership of Management of the Company
Title
of Name and Position of Amount and Nature of Percentage
Class Officer and/or Director Beneficial Ownership(1) of Class
- ----- ----------------------- -------------------- ----------
Common Dennis S. Chrobak, President ---See Table Above---
and Director
Common Richard A. Steinke, C.E.O. ---See Table Above---
and Director
Common Hugh Sims-Hilditch, Director I (5) 245,000 5.4
Common Ping Zhang, Director D - -
All Officers and Directors
as a Group (7 person) D 1,275,000 28.0
I 1,550,000 34.1
--------- ----
Total Beneficial Ownership 2,825,000 62.1
========= ====
(1) Indirect and Direct ownership are referenced by an "I" or "D",
respectively. All shares owned directly are owned beneficially and of record
and such shareholder has sole voting, investment, and dispositive power,
unless otherwise noted.
(2) Represent shares owned beneficially and of record by Bonnie Chrobak, the
wife of Dennis S. Chrobak, and which Mr. Chrobak may be deemed to have
indirect beneficial ownership over such shares.
(3) Represent shares owned beneficially and of record by Gemini Funding
Services Profit Sharing Account, of which Richard A. Steinke is the principal
beneficiary.
[Footnotes continue on next page]
<PAGE> 33
(4) Represent shares owned beneficially and of record by S102 Irrevocable
Trust, for which Richard A. Steinke is the trustee.
(5) Represent shares owned beneficially and of record by Coronel Investments
Limited, a Jersey Corporation, of which Mr. Sims-Hilditch is the principal
owner.
CERTAIN TRANSACTIONS
Technology License Agreements
DSS License Agreement
On June 5, 1995, the Company entered into a technology license agreement
(the "DSS License Agreement") with AMS, an entity controlled by Dennis S.
Chrobak and Richard A. Steinke, affiliates of the Company. AMS is the owner
of certain technology known as the "Dynamic Steerable Spring" ("DSS") for
which an application for United States Letters Patent has been filed and is
currently pending. The License Agreement grants the Company an exclusive to
use, sell, license, or otherwise exploit the DSS Technology worldwide in
exchange for a royalty of either $1.00 for each unit of production produced
and sold by the Company or eight percent (8%) of any royalty the Company
should receive from third party licensees that utilize the DSS Technology.
Due to the relationship of Mr. Steinke and Mr. Chrobak with the Company, the
DSS License Agreement cannot be considered to have been negotiated at arm's
length.
Airless Tire License Agreement
On October 27, 1995, the Company entered into a technology license
agreement (the "Airless Tire License Agreement") with AMS. AMS is the owner
of certain technology for producing an airless tire for which an application
for United States Letters Patent has been filed and is currently pending.
The Airless Tire License Agreement grants the Company an exclusive license to
use, sell, license, or otherwise exploit the technology worldwide in exchange
for a royalty of $0.25 for each bicycle tire produced and sold by the Company
utilizing the technology. Due to the relationship of Mr. Steinke and Mr.
Chrobak with the Company, the Airless Tire License Agreement cannot be
considered to have been negotiated at arm's length.
Stock Subscriptions
In April 1995, the Company entered into subscription agreements with Gary
Dalton, Philip Chrobak, and David Griffiths, three of its Officers, to acquire
an aggregate of 170,000 shares of its Common Stock at a purchase price of
$1.00 per share, in exchange for promissory notes bearing interest at 8% per
annum, payable in 36 months. The promissory notes were subsequently amended
to become due on April 10, 1997. The Company has adopted a policy that any
future loans or similar arrangements to its officers, directors, or 5%
shareholders will not occur unless approved by a majority of the disinterested
directors and for a bona fide business purpose. Set forth below are the names
of the Officers, the number of shares issued, the consideration to be received
for such shares, and their relationship with the Company.
PAGE
<PAGE> 34
Number of Consideration Balance Relationship
Name of Shareholder Shares Issued to be Paid Due (3) to the Company
- ------------------- ------------- ------------- ------- --------------
Gary Dalton (1) 100,000 $100,000 $40,000 Former Officer
Philip J. Chrobak (2) 50,000 50,000 45,000 Former Officer
David Griffiths 20,000 20,000 -0- Officer
------- -------- -------
Totals 170,000 $170,000 $85,000
======= ======== =======
(1) As of March 31, 1997, Mr. Dalton had paid $50,000 cash and provided
services to the Company valued at $10,000, which amounts have been applied
against the principal and interest to be paid under the promissory note.
(2) As of March 31, 1997, Mr. Chrobak has provided services to the Company
valued at $5,000, which amount has been applied against the principal and
interest to be paid under the promissory note.
(3) Amount due does not include any accrued interest.
DESCRIPTION OF CAPITAL STOCK
Common Stock
The Company's Articles of Incorporation authorize 25,000,000 shares of
Common Stock, $0.001 par value per share. The shares of Common Stock have no
preemptive or other subscription rights, have no conversion rights, and are
not subject to redemption. All shares of Common Stock will be, when and if
issued, fully paid and nonassessable. No personal liability will attach to
the ownership thereof. The holders of Common Stock are entitled to one vote
for each share held. The Common Stock has noncumulative voting rights.
Preferred Stock
The Company's Articles of Incorporation authorize 5,000,000 shares of
Preferred Stock, $0.001 par value per share (the "Preferred Stock"). The
authority to issue the Preferred Stock is vested in the Board of Directors,
which has authority to fix and determine the powers, qualifications,
limitations, restrictions, designations, rights, preferences, or other
variations of each class or series within each class which the Company is
authorized to issue. The above described authority of the Board of Directors
to fix and determine may be exercised by corporate resolution from time to
time as the Board of Directors sees fit.
Shares Eligible for Future Sale
The Company has 4,546,748 shares of Common Stock issued and outstanding.
All of the 155,000 shares of Common Stock registered to be sold by Selling
Shareholders will be freely transferable by persons other than "affiliates" of
the Company, as that term is defined under the Securities Act, without further
registration under the Securities Act.
PAGE
<PAGE> 35
The Company has previously issued shares of Common Stock that constitute
"restricted securities" as that term is defined in Rule 144 adopted under the
Securities Act. Subject to certain restrictions, such securities may
generally be sold in limited amounts two years after their acquisition.
The Commission has recently adopted a proposal to reduce the holding period
prior to which shares may be eligible for resale under Rule 144 from two years
to one year. The amendments to Rule 144 take effect April 29, 1997 and once
effective, the rule will allow the above mentioned restricted securities to be
eligible for resale one year earlier.
The Company issued 2,510,000 shares of Common Stock to initial
Shareholders in connection with its organization. The Company issued an
additional 300,000 shares of Common Stock to various individuals for professiona
l and consulting services during February 1995. In April 1995, the Company
issued 170,000 shares to certain Officers and 100,000 shares for professional
services. In May 1995, the Company issued 720,000 shares in a private
placement. The shares issued to insiders (2,510,000 shares to founders and
170,000 shares to other Officers) are currently eligible for resale under Rule
144. However, in connection with the Company's initial public offering, the
Company's Officers, Directors, and Shareholders owning more than 5% of the
Company's issued and outstanding shares of Common Stock agreed not to sell any
shares owned directly or indirectly by them for a period of up to four years,
subject to the Company obtaining certain net earnings requirements.
The 400,000 shares of Common Stock issued to consultants for professional
services in February and April 1995 were issued pursuant to an exemption from
registration available under Rule 701 of the Securities Act, and are now
eligible for resale pursuant to the resale limitations set forth in Rule
701(c) which provides that 90 days after the Company becomes subject to the
reporting requirements of Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 (i.e., May 28, 1996), securities issued in a Rule 701
transaction may be resold by persons other than affiliates in reliance on Rule
144, without compliance with (1) current information, (2) holding period, (3)
volume limitation, and (4) notice requirements of Rule 144; and by affiliates
without compliance with the holding period requirements of Rule 144.
The 720,000 shares of restricted Common Stock sold by the Company in the
May 1995 will become eligible for sale under Rule 144 in May 1997. Sales of
these restricted securities under Rule 144 or otherwise may have a depressive
effect on the price of the Company's Common Stock in any trading market that
may develop following this Offering. After the implementation of the
amendment to Rule 144, securities held for two years may be sold by
nonaffiliates without limitation. See PRINCIPAL SHAREHOLDERS and DESCRIPTION
OF CAPITAL STOCK.
The Company is unable to estimate the total number of shares that may be
sold in the future by its existing Shareholders or the effect, if any, that
sales of shares by such Shareholders will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock by existing Shareholders could adversely affect prevailing market
prices.
PAGE
<PAGE> 36
Dividend Policy
The holders of Common Stock are entitled to dividends when, and if,
declared by the Board of Directors from funds legally available therefor,
subject to any preference on preferred stock, if applicable, which may then be
outstanding. The Company has not paid a dividend since its incorporation.
Because the Company is in the formative stage and will be engaged in start-up
operations for the next several years, it is not anticipated that funds will
be available for the issuance of dividends in the foreseeable future.
Transfer and Warrant Agent
The Company's transfer agent is Interwest Transfer Company, 1981 East
Murray-Holladay Road, Holladay, Utah 84117, Telephone (801) 272-9294.
LITIGATION
The Company is not a party to any pending legal proceedings and no such
action by or against it, to the best of its knowledge, has been threatened.
LEGAL MATTERS
Taylor and Associates, Inc., Attorneys and Counselors at Law, Salt Lake
City, Utah, counsel to the Company, will render an opinion that the Common
Stock being offered hereby, has been fully paid and nonassessable under the
corporate laws of the state of Nevada.
EXPERTS
The financial statements included herein and elsewhere in this
Registration Statement, to the extent and for the periods indicated in its
report, have been included in this Prospectus and the Registration Statement,
in reliance on the report of Saltz, Shamis & Goldfarb, Inc., Certified Public
Accountants, Akron, Ohio, given on the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed this Registration Statement on Form S-1 under the
Securities Act with the Commission with respect to the securities offered by
this Prospectus. This Prospectus omits certain information contained in the
Registration Statement. For further information, reference is made to the
Registration Statement and to the exhibits and other schedules filed
therewith. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and where
such contract or document is an exhibit to the Registration Statement, each
such statement is deemed to be qualified and amplified in all respects by the
provisions of the exhibit. Copies of the complete Registration Statement,
including exhibits, may be examined without charge at the Commission's
principal offices in Washington, D.C., and copies of all or any part of the
filed materials may be obtained from the Public Reference Section of the
Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549, on payment the
ususal fees for reproduction.
PAGE
<PAGE> 37
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Title to Document Page
- ----------------- ----
Independent Auditor's Report of Saltz, Shamis & Goldfarb, Inc. 38
Balance Sheets as of June 30, 1996 and 1995 39
Statements of Operations for the year ended June 30, 1996 and
the period from January 30, 1995 (inception) to June 30, 1996
and 1995 41
Statements of Shareholders' Equity for the year ended June 30,
1996 and the period from January 30, 1995 (inception) to June
30, 1996 and 1995 42
Statements of Cash Flows for the year ended June 30, 1996 and
for the period from January 30, 1995 (inception) to June 30,
1996 and 1995 43
Notes to Financial Statements 44
Balance Sheet at June 30, 1996 and December 31, 1996 (Unaudited) 50
Statements of Operations for the three months ended December
31, 1996 and 1995, for the six months ended December 31, 1996
and 1995 and from January 30, 1995 (Inception) to December 31,
1996 (Unaudited) 52
Statements of Shareholders' Equity for the Period from January 30,
1995 (Inception) to December 31, 1996 (Unaudited) 53
Statements of Cash Flows for the three months ended December 31,
1996 and 1995, for the six months ended December 31, 1996 and
1995 and from January 30, 1995 (Inception) to December 31, 1996
(Unaudited) 54
Notes to the Financial Statements 55
PAGE
<PAGE> 38
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors
of American Tire Corporation
We have audited the accompanying balance sheets of American Tire Corporation
(a development stage company) as of June 30, 1996 and 1995, and the related
statements of operations, shareholders' equity, and cash flows for the year
ended June 30, 1996 and for the period from January 30, 1995 (inception) to
June 30, 1996 and 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Tire Corporation as
of June 30, 1996 and 1995, and the results of its operations and its cash
flows for the year ended June 30, 1996 and for the period from January 30,
1995 (inception) to June 30, 1996 and 1995, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As described in Note A to the financial
statements, the Company's ability to bring its product to market are dependent
on its successful obtainment of capital to fund its activities. In the event
the Company is unsuccessful in obtaining sufficient capital, there is
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/S/ SALTZ, SHAMIS & GOLDFARB, INC.
Akron, Ohio
October 9, 1996
<PAGE> 39
AMERICAN TIRE CORPORATION
(A Development Stage Company)
<TABLE>
<CAPTION>BALANCE SHEETS
JUNE 30, 1996 AND 1995
ASSETS
1996
1995 ---------
- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 4,467 $ 92,729
Other receivables 22,767 4,419
Receivable - officers - 50,000
Inventory 131,285 -
Prepaid royalties - related party 17,725 8,550
Prepaid expenses 15,182 19,563
Deposits on inventory 87,401 201,838
--------- ---------
Total Current Assets 278,827 377,099
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Land 59,000 59,000
Building and building improvements 229,996 228,305
Equipment 225,968 73,906
Furniture and fixtures 7,692 6,940
Construction in progress - 14,000
--------- ---------
522,656 382,151
Less: accumulated depreciation 39,299 1,305
--------- ---------
483,357 380,846
OTHER ASSETS:
Deposits 1,834 1,854
Accrued interest receivable 9,993 2,991
Deferred offering costs 147,108 71,824
--------- ---------
158,935 76,669
--------- ---------
$ 921,119 $ 834,614
========= =========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 40
AMERICAN TIRE CORPORATION
(A Development Stage Company)
<TABLE>
<CAPTION>BALANCE SHEETS
JUNE 30, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
1996
1995 ---------
- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Line of credit $ 299,838 $ 201,838
Accounts payable and accrued expenses 98,680 24,908
Due to officer - 6,159
Notes payable - officers and
accrued interest 265,830 -
---------- ---------
Total Current Liabilities 664,348 232,905
SHAREHOLDERS' EQUITY:
Preferred stock, par value $0.001,
5,000,000 shares authorized,
0 shares issued and outstanding - -
Common stock $.001 par value, 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 (844,720) (248,630)
--------- ---------
341,771 695,609
Less: Receivable - shareholder (officers) (85,000) (93,900)
--------- ---------
256,771 601,709
--------- ---------
$ 921,119 $ 834,614
========== =========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 41
AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
January 30, 1995
For the January
30, 1995 (Inception)
Year Ended
(Inception) to
June 30, to June
30, June 30,
1996
1995 1996
------------
- ------------ ------------
<S> <C>
<C> <C>
INCOME
Interest income $ 8,161 $
3,611 $ 11,772
------------
- ------------ ------------
EXPENSES:
Consulting 43,261
135,818 179,079
Payroll and payroll taxes 222,757
29,817 252,574
Administrative 190,864
28,126 218,990
Travel and entertainment 55,554
40,774 96,328
Marketing consulting -
13,300 13,300
Interest 53,821
3,101 56,922
Depreciation 37,994
1,305 39,299
------------
- ------------ ------------
Total Expenses 604,251
252,241 856,492
------------
- ------------ ------------
LOSS BEFORE INCOME TAXES (596,090)
(248,630) (844,720)
Income taxes -
- - -
------------
- ------------ ------------
NET LOSS $ (596,090) $
(248,630) $ (844,720)
============
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 3,840,642
3,800,000 3,840,642
============
============ ============
NET LOSS PER SHARE $ (0.16) $
(0.06) $ (0.22)
============
========== ============
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 42
AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (JANUARY 30, 1995) TO JUNE 30, 1996
<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
========== ========= ========== ===========
=========== ============
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 43
AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
January 30, 1995
For the January 30,
1995 (Inception)
Year Ended
(Inception) to
June 30, to June
30, June 30,
1996
1995 1996
------------
- ------------ ------------
<S> <C>
<C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (596,090) $
(248,630) $ (844,720)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 37,994
1,305 39,299
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 receivables (18,348)
(4,419) (22,767)
Inventory (131,285)
- - (131,285)
Prepaid royalties (9,175)
(8,550) (17,725)
Prepaid expenses 4,381
(19,563) (15,182)
Deposits on inventory and other 114,457
(203,692) (89,235)
Accrued interest receivable (7,002)
(2,991) (9,993)
Increase (decrease) in:
Accounts payable and accrued expenses 78,602
24,908 103,510
Due to officer (6,159)
6,159 -
------------
- ------------ ------------
NET CASH USED BY OPERATING ACTIVITIES (523,725)
(300,373) (824,098)
CASH FLOWS FROM (USED) IN INVESTING ACTIVITIES:
Purchase of property, plant and equipment (140,505)
(382,151) (522,656)
------------
- ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES (140,505)
(382,151) (522,656)
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)
Proceeds from notes payable - officers 267,000
- - 267,000
Repayment of notes payable - officers (6,000)
- - (6,000)
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 (75,284)
(70,824) (146,108)
------------
- ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 575,968
775,253 1,351,221
------------
- ------------ ------------
NET INCREASE (DECREASE) IN CASH (88,262)
92,729 4,467
CASH AT BEGINNING OF PERIOD 92,729
- - -
------------
- ---------- ------------
CASH AT END OF PERIOD $ 4,467 $
92,729 $ 4,467
============
========== ============
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 44
AMERICAN TIRE CORPORATION
(A Development Stage Company)
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.
Through an initial public offering the Company is offering at a cash price of
$6.00 per share, up to 550,000 shares (250,000 share minimum) of the Company's
common stock. 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.
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 June 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
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 $856,000 and $246,000 at June 30,
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.
<PAGE> 45
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ---------------------------------------------------------------
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 statements of operations.
CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject
the Company to concentrations of credit risk consist principally of temporary
cash investments. The Company places its temporary cash investments with
financial institutions and, although at times during 1996 they had balances in
excess of federal insurance limits, management does not feel the Company is
exposed to substantial credit risk.
RECENT PRONOUNCEMENTS: In March 1995, the FASB issued Statement No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of." SFAS 121 becomes effective for fiscal years
beginning after December 15, 1995 and addresses the accounting for the
impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used for long-lived assets and
certain identifiable intangibles to be disposed of. The Company believes this
pronouncement will not have a significant impact on the Company's financial
statements.
USE OF ESTIMATES: Management uses estimates and assumptions in preparing
these financial statement in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities,
and the reported revenues and expenses. Actual results could vary from the
estimates that were used.
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 settled prior
to the issuance of the financial statements. At June 30, 1996 and 1995,
accrued interest receivable on these notes amounted to $9,993 and $2,991,
respectively. The promissory notes were amended to become due no later than
six months from the close of the Company's initial public offering.
During the year ended June 30, 1996, an officer provided $8,900 of accounting
services, which were offset against the amounts owed under the promissory
note, and another officer paid $50,000 toward his note receivable. At June
30, 1996, $85,000 was owed under these notes, which has been presented as a
reduction of shareholders' equity.
<PAGE> 46
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
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 June
30, 1996 and June 30, 1995, $17,725 and $8,550, respectively, have been
advanced pursuant to and in anticipation of this agreement and is recorded in
prepaid royalties.
NOTE D - 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 June 30, 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.
NOTE E - 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 June 30, 1996 and 1995, $299,838 and $201,838, respectively
was outstanding under this agreement.
The weighted average interest rate during the year ended June 30, 1996 and the
period ended June 30, 1995 was 9.71% and 10%, respectively.
NOTE F - INCOME TAXES
- ---------------------
The Company's total deferred tax asset, deferred tax liability and valuation
allowance at June 30, 1996 and 1995 is:
1996 1995
-------- --------
Total deferred tax asset $308,000 $ 78,600
Total deferred tax liability (7,400) -
Valuation allowance for deferred taxes (300,600) (78,600)
-------- --------
Deferred taxes, net $ - $ -
======== ========
The deferred tax asset results from net operating loss carryforwards of
approximately $856,000 and $246,000 at June 30, 1996 and 1995, respectively,
<PAGE> 47
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
which begin to expire in 2010. The deferred tax liability results from the
use of accelerated methods of depreciation for tax purposes.
NOTE G - SHAREHOLDERS' EQUITY
- -----------------------------
Shareholders' equity is comprised of the following at June 30, 1996 and 1995:
PREFERRED STOCK: The Company has authorized 5,000,000 shares of $.001 par
value preferred stock. At June 30, 1996 and 1995, no shares of preferred
stock were issued or outstanding, respectively.
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 June 30, 1996
and 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 of
its 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 $79,871.
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.
NOTE H - 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.
<PAGE> 48
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
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.
From February 1996 to June 1996, certain officers loaned the Company a total
of $261,000. These notes are due on demand and bear interest at rates ranging
from 9.25% to 9.5% per annum. At June 30, 1996, accrued interest amounted to
$4,830 and is included with the notes payable - officers on the balance
sheet. The Company intends to repay a portion, if not all, of these loans
from the proceeds of the initial public offering.
In June 1996, the Company revised the promissory notes from certain officers
of the Company (see Note B) to be due no more than six months from the closing
date of the Company's initial public offering, rather than in April 1998.
NOTE I - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
As of June 30, 1995, the Company has entered into agreements to purchase
manufacturing equipment totaling $27,780. Deposits of $14,000 had been paid
on these commitments and are included in construction in progress. Payment in
full on this agreement was made during the year ended June 30, 1996, and is
included in equipment at June 30, 1996.
In April 1995, the Company entered into a television commercial agreement to
air an advertising commercial produced for the Company for a one year period
beginning as soon as the airless bicycle tires are available for shipment.
During this period, the Company will pay $2 for each bicycle tire sold through
its retail customers. The agreement can be extended for an additional year
upon the agreement of both parties.
In July 1995, the Company entered into a Trade Mark License agreement which
grants the Company the exclusive right to use the licensor's trade mark
"Urathon" in the territory, as defined by the agreement. The Company shall
pay the licensor a royalty of $.35 per airless bicycle tire sold during the
term of the agreement, which expires on December 31, 2005.
In August 1995, the Company entered into a consulting agreement with an
individual for a one year period, subject to one year renewals, which provides
for monthly payments of $3,000. The consulting agreement was terminated on
July 31, 1996.
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 has
offered to repurchase such shares sold in the September 1995 private placement
at the price originally paid plus interest at a 12% annual interest rate from
the date of original purchase through the date of the repurchase of such
shares. At June 30, 1996, the Company estimates its obligation to such
shareholders, if all shareholders request the Company to reaquire all 40,642
<PAGE> 49
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
shares, at $265,788. Payment of such obligation of the Company has been
personally guaranteed by the Chief Executive Officer and the President of the
Company. Included in accounts payable and accrued expenses at June 30, 1996,
is $21,936 of accrued interest related to the shares of common stock subject
to the recision offer.
NOTE J - SUPPLEMENTAL CASH FLOW INFORMATION
- -------------------------------------------
During the year ended June 30, 1996 and the period ended June 30, 1995, cash
paid for interest amounted to $26,654 and $1,828, respectively.
In February 1995, the Company issued 300,000 shares of common stock in lieu of
cash payment for consulting services valued at $30,000 of which $29,000 was
charged to operations during the period ended June 30, 1995, and $1,000 was
included in deferred offering costs.
In April 1995, the Company issued 170,000 shares of stock at $1.00 per share
in exchange for notes receivable. During the period ended June 30, 1995,
services were provided valued at $26,100, which were offset against the notes
receivable. During the year ended June 30, 1996, an additional $8,900 of
services were provided, which were offset against the notes receivable.
Additionally, in April 1995, the Company issued 100,000 shares of common stock
in lieu of cash payment for consulting services valued at $100,000 provided by
the spouses of two officers of the Company.
NOTE K - EVENTS SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT AUDITOR
- ---------------------------------------------------------------------------
(UNAUDITED)
- -----------
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. In connection with the offering,
shareholders owning 34,977 shares elected to accept the Company's recision
offer and received an aggregate of $193,704. This amount includes all accrued
interest due them in connection with the recision offer.PAGE
<PAGE> 50
AMERICAN TIRE CORPORATION
(A Development Stage Company)
<TABLE>
<CAPTION>
BALANCE SHEETS
ASSETS
DECEMBER 31,
1996 JUNE 30,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
Current Assets:
Cash....................................... $ 634,337 $ 4,467
Trade receivables.......................... 26,570 22,767
Accrued interest receivable................ 13,420 -
Inventory.................................. 131,285 131,285
Prepaid royalties - related party.......... 17,725 17,725
Prepaid expenses 18,853 15,182
Deposits on inventory...................... 87,401 87,401
---------- ----------
Total current assets.................. 929,591 278,827
---------- ----------
Property, Plant and Equipment
Land....................................... 59,000 59,000
Building and building improvements......... 233,570 229,996
Equipment.................................. 373,176 225,968
Furniture and fixtures..................... 7,692 7,692
---------- ----------
673,438 522,656
Less: accumulated depreciation............ 62,793 39,299
---------- ----------
610,645 483,357
Other Assets:
Deposits................................... 2,559 1,834
Accrued interest receivable................ - 9,993
Deferred offering costs.................... - 147,108
---------- ----------
2,559 158,935
---------- ----------
$1,542,795 $ 921,119
========== ==========
(See accompanying notes to the financial statements)
<PAGE> 51
AMERICAN TIRE CORPORATION
(A Development Stage Company)
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
1996 JUNE 30,
(Unaudited) 1996
------------ ------------
<S> <C> <C>
Current Liabilities:
Line of credit............................. $ - $ 299,838
Accounts payable and accrued expenses...... 38,895 98,680
Notes payable-officers and accrued interest - 265,830
Accrued payroll - officer.................. 30,000 -
---------- ----------
Total current liabilities............. 68,895 664,348
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, 4,176,748 and 3,840,642
shares issued and outstanding, respectively 4,177 3,841
Additional paid-in capital.................. 2,786,176 1,182,650
Deficit accumulated during the
development stage............. ............ (1,231,453) (844,720)
--------- ----------
1,558,900 341,771
Less: Receivable-shareholder (officers) (85,000) (85,000)
--------- ----------
1,473,900 256,771
--------- ----------
$1,542,795 $ 921,119
========== ==========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 52
AMERICAN TIRE CORPORATION
(A Development Stage Company)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
(Unaudited)
From
For the Three For the
Six Inception on
Months Ended Months
Ended January 30,
December 31, December
31, 1995 through
------------------
- ------------------- December 31,
1996 1995 1996
1995 1996
---------- ---------- ----------
- ---------- ------------
<S> <C> <C> <C>
<C> <C>
REVENUE:
Interest income.............. $ 5,763 $ 2,117 $ 7,480
$ 4,655 $ 18,252
--------- --------- ---------
- --------- ---------
5,763 2,117
7,480 4,655 18,252
--------- --------- ---------
- --------- ---------
EXPENSES:
Consulting................... - 6,000 -
14,000 179,079
Payroll and payroll taxes.... 43,814 50,356 110,317
99,063 362,891
Administrative............... 173,124 47,206 216,211
95,453 435,201
Travel and entertainment..... 15,187 18,427 21,023
37,522 117,351
Marketing consulting......... - -
- - - 13,300
Interest..................... 424 6,125 23,169
12,800 80,091
Depreciation................. 12,623 8,861 23,493
16,230 62,792
--------- --------- ---------
- --------- ---------
Total Expenses........... 245,172 134,859 394,213
275,068 1,250,705
--------- --------- ---------
- --------- ---------
LOSS BEFORE INCOME TAXES...... (239,409) (134,859) (386,733)
(270,413) (1,231,453)
Income taxes................. - -
- - - -
--------- --------- ---------
- --------- ---------
NET LOSS...................... $(239,409) $(134,859) $(386,733)
$(270,413) $(1,231,453)
========= ========= =========
========= =========
NET LOSS PER SHARE............ $ (0.05) $ (0.04) $ (0.09)
$ (0.07) $ (0.30)
========= ========= =========
========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING.................. 4,176,748 3,840,642 4,118,480
3,840,642 4,118,480
========= ========= =========
========= =========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 53
AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS' EQUITY
FROM THE DATE OF INCEPTION (JANUARY 30, 1995) TO DECEMBER 31, 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 cost of $34,200) 344,083 344 2,029,954
- - - 2,030,298
Deferred offering costs.. - - (273,309)
- - - (273,309)
Common Stock issued for
debt at $2.10 per share. 27,000 27 56,708
- - - 56,735
Net loss for period
ended December
31, 1996................ - - -
(386,733) - (386,733)
---------- --------- ---------- -----------
- ----------- ------------
Balance at December 31,
1996 4,176,748 $ 4,177 $2,786,176 $(1,231,453) $
(85,000) $ 1,473,900
========== ========= ========== ===========
=========== ============
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 54
AMERICAN TIRE CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
From inception
FOR THE
FOR THE On January 30,
THREE MONTHS ENDED SIX
MONTHS ENDED 1995 through
DECEMBER 31,
DECEMBER 31, December 31,
1996 1995
1996 1995 1996
------------ ------------
- ------------ ------------ ------------
<S> <C> <C>
<C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................$ (239,409) $ (134,859) $
(386,733) $ (270,413) $(1,231,453)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation........................... 12,623 8,861
23,493 16,230 62,793
Stock issued in lieu of cash payment for
certain services...................... - -
- - - 129,000
Services provided in lieu of cash payment
on receivables - officers - 8,900
- - 8,900 35,000
(Increase) decrease in:
Other receivable....................... 65 (689)
(3,803) (1,024) (26,570)
Inventory.............................. - (6,018)
- - (131,285) (131,285)
Prepaid royalties...................... - (4,940)
- - (9,175) (17,725)
Prepaid expenses....................... (6,454) (6,292)
(3,671) (2,414) (18,853)
Deposits on inventory and other........ (180) -
(725) 114,437 (89,960)
Accrued interest receivable............ (1,713) (1,714)
(3,427) (3,612) (13,420)
Increase (decrease) in:
Accounts payable and accrued expenses.. 25,751 (4,001)
(60,879) 4,527 38,895
Due to officer......................... 30,000 (2,114)
30,000 (8,159) 30,000
---------- ---------
- ----------- ----------- -----------
Net cash used by
Operating activities............... (179,317) (142,646)
(405,745) (279,988) (1,232,578)
---------- ---------
- ----------- ----------- -----------
CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES:
Purchase of property, plant
and equipment.......................... (148,681) (17,713)
(150,782) (123,581) (673,438)
---------- ---------
- ----------- ----------- -----------
Net cash used by
Investing activities............... (148,681) (17,713)
(150,782) (123,581) (673,438)
---------- ---------
- ----------- ----------- -----------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Borrowing on line of credit............. - 98,000
- - 196,000 397,838
Repayment on line of credit............. - (98,000)
(299,838) (98,000) (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 $114,071)............ 300,012 157,452
2,030,298 292,252 2,969,524
Purchase stock per recision offer....... - -
(209,862) - (209,862)
Deferred offering costs................. (101,025) (14,929)
(127,201) (31,981) (273,309)
---------- ----------
- ----------- ----------- -----------
Net cash provided by
Financing activities............... 198,987 142,623
1,186,397 358,271 2,540,353
---------- ----------
- ----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH.......... (129,011) (18,036)
629,870 (45,298) 634,337
Cash at beginning of period.............. 763,348 65,467
4,467 92,729 -
---------- ----------
- ----------- ----------- -----------
Cash at end of period....................$ 634,337 $ 47,431 $
634,337 47,431 634,337
========== =========
=========== =========== ===========
</TABLE>
(See accompanying notes to the financial statements)
<PAGE> 55
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.
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 December 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, as follows:
Building 40 years
Equipment 5 years
Furniture and fixtures 7 years
NOTE B - RECEIVABLES - OFFICERS
- -------------------------------
In April 1995, the Company entered into subscription agreements with 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
December 31, 1996, accrued interest receivable on these notes amounted to
$13,420. 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 December 31, 1996, $85,000 was owed under these notes, which has
been presented as a reduction of shareholders' equity.
PAGE
<PAGE> 56
AMERICAN TIRE CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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
December 31, 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
- -----------------------------------
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 valued at approximately
$2.10 per share.
NOTE E - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
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. 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.
At the request of Dennis Chrobak, the Company's President, the Company has
accrued his monthly employment compensation for October, November and December
1996. Mr. Chrobak has requested the Company to continue to accrue his monthly
employment compensation until further notice. In January 1997, the Company
deposited $30,000 into a separate account and will continue to deposit Mr.
Chrobak's accrued employment compensation into this account until such time as
the Company receives notice from Mr. Chrobak that he desires to receive it.
NOTE F - EVENTS SUBSEQUENT TO DECEMBER 31, 1996
- ------------------------------------------------
On January 2, 1997, the Company entered into an Agreement in Principle with
Coronel Investments Limited ("Coronel") to purchase all of Coronel's ownership
interest in the capital stock of UTI Chemicals (Europe) Ltd., a United Kingdom
company ("UTI"), engaged in the distribution of urethane tires in the United
Kingdom and Europe. The terms of the Agreement in Principle require the
Company to issue 200,000 shares of its common stock and make a cash payment of
$400,000 to Coronel and is subject to and conditioned upon the Company and
Coronel entering into a definitive agreement with respect thereto.
PAGE
<PAGE> 57 BACK COVER
AMERICAN TIRE CORPORATION
155,000 Shares
Common Stock
PROSPECTUS
_________, 1997
No dealer, salesman or any other person has been authorized to give
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. Neither the delivery
of the Prospectus nor any sale made hereunder shall under any circumstances
create any implication that there has been no change in the affairs of the
Company since the date hereof. This Prospectus does not constitute an offer
to sell or the solicitation of an offer to buy any securities covered by this
Prospectus in any state or other jurisdiction to any person to whom it is
unlawful to make such offer in such state or jurisdiction.
Table of Contents
Section Page
- ------- ----
PROSPECTUS SUMMARY.........................................................
RISK FACTORS...............................................................
PLAN OF DISTRIBUTION.......................................................
SELLING SHAREHOLDERS.......................................................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................................
BUSINESS...................................................................
PROPERTY...................................................................
MANAGEMENT.................................................................
EXECUTIVE COMPENSATION.....................................................
PRINCIPAL SHAREHOLDERS.....................................................
CERTAIN TRANSACTIONS.......................................................
DESCRIPTION OF CAPITAL STOCK...............................................
LITIGATION.................................................................
LEGAL MATTERS..............................................................
EXPERTS....................................................................
ADDITIONAL INFORMATION.....................................................
INDEX TO FINANCIAL STATEMENTS..............................................
FINANCIAL STATEMENTS.......................................................
Until February 16, 1998, all dealers effecting transactions in the Common
Stock, whether or not participating in the distribution, may be required to
deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
PAGE
<PAGE> 58
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of the Nevada Revised Statutes confers on a director or
officer an absolute right to indemnification for expenses, including
attorneys' fees, actually and reasonably incurred by him to the extent he is
successful on the merits or otherwise in defense of any action, suit, or
proceeding. This section also entitles a director or officer to partial
indemnification against expenses to the extent that he has been successful in
defending any claim, issue, or matter asserted in such proceeding. The Nevada
indemnification section further permits the corporation to indemnify officers
and directors in circumstances where indemnification is not mandated by the
statute and certain statutory standards are satisfied. The Nevada statute
expressly makes indemnification contingent upon a determination that
indemnification is proper in the circumstances. Such determination must be
made by the board of directors, the shareholders, or independent legal
counsel. Nevada law also permits a corporation, in its articles of
incorporation, bylaws, or an agreement, to pay attorneys' fees and other
litigation expenses on behalf of a corporate official in advance of the final
disposition of the action upon receipt of an undertaking by or on behalf of
the corporate official to repay such expenses to the corporation if it is
ultimately determined that he is not entitled to be indemnified by the
corporation. The corporation may also purchase and maintain insurance to
provide indemnification. The Nevada statute also provides that
indemnification authorized by the statute is not exclusive of, but is in
addition to, indemnification rights granted under a corporation's articles of
incorporation, an agreement, or pursuant to a vote of shareholders or
disinterested directors.
The foregoing discussion of indemnification merely summarizes certain
aspects of indemnification provisions and is limited by reference to Section
78.751 of the Nevada Revised Statues.
The Company's articles of incorporation and bylaws do not contain
specific provisions relating to indemnification of directors, officers,
employees, and/or agents of the Company. However, it is anticipated that the
Company will indemnify its officers and directors to the full extent permitted
by the above referenced statute. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers, and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person in connection
with the securities being registered), the small business issuer will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by the Company is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of such
issue. (See "ITEM 28. UNDERTAKINGS.")
<PAGE> 59
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses(*) to the Company
in connection with the offering described in the Registration Statement:
Registration Fee............................................$ 299.43
Accounting Fees and Expenses................................ 2,500.00*
Legal Fees and Expenses..................................... 20,000.00*
Blue Sky Fees............................................... 3,725.00*
Printing and Engraving...................................... 2,500.00*
Transfer Agent Fees......................................... 1,000.00*
----------
Total Expenses..............................................$30,024.43
==========
(*) All figures are estimates.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Securities issued in the foregoing transaction were issued in reliance on
the exemption from registration and the prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), set forth in
Section 3(b) and/or Section 4(2) of the Securities Act, and Rule 701 and the
regulations promulgated thereunder. All of the individuals receiving shares
pursuant to Rule 701 did so pursuant to a written agreement relating to the
compensation of such persons. No cash consideration was received by the
issuer and the aggregate offering price for the securities was determined to
be the fair market value for the consulting services provided. None of the
purchasers were officers and directors of the issuer at the time of the
issuance of the securities.
In connection with the Company's organization the Company issued an
aggregate of 2,510,000 shares to its founders, Richard A. Steinke and Dennis
S. Chrobak. In February 1995, the Company entered into consulting agreements
with seven individuals to provided professional advice and services to the
Company in connection with developing the Company's business operations and
strategic planning. The Company issued an aggregate of 300,000 shares of
common stock for such services. The value of the services provided was
$30,000, resulting in a calculated per share value of 300,000 shares at $0.10
per share. Set forth below are the names of the individuals, the number of
shares issued, the value of the services provided, and a brief description of
the services provided to the Company.
Number Value of Description Relationship
of Services of Services to the
Name of Shareholder Shares Provided Provided Company
- ------------------- ------ -------- ----------- ------------
Bob L. McGiboney 100,000 $10,000 Financial Consultant
Jerry Burns 7,000 700 Financial Consultant
Todd Hooks 95,000 9,500 Marketing Consultant
Craig Hooks 30,000 3,000 Marketing Consultant
Hugh Sims-Hilditch 50,000 5,000 Technical Consultant
Brad Delp 8,000 800 Marketing Consultant
Elliott N. Taylor 10,000 1,000 Legal Legal Counsel
------- -------
Totals 300,000 $30,000
======= =======
<PAGE> 60
In April, 1995, the Company entered into consulting agreements with
Beverly J. Steinke, the former wife of Richard A. Steinke, C.E.O. of the
Company, and Bonnie Chrobak, wife of Dennis S. Chrobak, President of the
Company, to provide the Company with secretarial and media/graphic services,
respectively, during the Company's developmental stages. The Company paid
both Ms. Steinke and Mrs. Chrobak 50,000 shares each, valued at $1.00 per
share, for total consideration of $100,000.
In April, the Company entered into subscription agreements with Gary
Dalton, Philip Chrobak, and David Griffiths, three of its Officers, to acquire
an aggregate of 170,000 shares of its Common Stock at a purchase price of
$1.00 per share, in exchange for promissory notes bearing interest at 8% per
annum, payable in 36 months. The promissory notes were subsequently amended to
become due prior to April 10, 1997. The Company has adopted a policy that any
future loans or similar arrangements to its officers, directors, or 5%
shareholders will not occur unless approved by a majority of the disinterested
directors and for a bona fide business purpose. Set forth below are the names
of the Officers, the number of shares issued, the consideration to be received
for such shares, and their relationship with the Company.
Number of Consideration Balance Relationship
Name of Shareholder Shares to be Paid Due (3) to the Company
- ------------------- --------- ------------- ------- --------------
Gary Dalton (1) 100,000 $100,000 $40,000 Former Officer
Philip J. Chrobak (2) 50,000 50,000 45,000 Former Officer
David Griffiths 20,000 20,000 -0- Officer
------- -------- -------
Totals 170,000 $170,000 $85,000
======= ======== =======
(1) As of March 31, 1997, Mr. Dalton had paid $50,000 cash and provided
services to the Company valued at $10,000, which amounts have been applied
against the principal and interest to be paid under the promissory note. Mr.
Dalton resigned as an officer and director of the Company effective February
25, 1997.
(2) As of March 31, 1997, Mr. Chrobak had provided services to the Company
valued at $5,000, which amount has been applied against the principal and
interest to be paid under this promissory note. Mr. Chrobak resigned as an
officer of the Company effective February 25, 1997.
(3) Amount due does not include any accrued interest.
PAGE
<PAGE> 61
In May, 1995, the Company issued 720,000 shares of its Common Stock at
purchase price of $1.00 per share. Set forth below are the names of the
purchasers, the consideration paid, and the number of shares purchased:
Name of Shareholder Consideration Number of Shares
- ------------------- ------------- ----------------
John E. Roberts $ 10,000 10,000
Donald W. Kuchenbecker 10,000 10,000
Jon Orban 10,000 10,000
Robert Orban 35,000 35,000
Bob McGiboney 110,000 110,000
First London Securities Corporation 110,000 110,000
Edward J. Anderson 23,000 23,000
M. Priscilla Goodwyn 5,000 5,000
Michael K. MacCloskey 80,000 80,000
Mark MacCloskey 10,000 10,000
David R. Brod & Laurie A. Strickland, JTWRS 5,000 5,000
Michael P. & Debra B. Anderson 10,000 10,000
Corporacion de Inversiones Diversificadas 100,000 100,000
Vicent P. Menard 10,000 10,000
Jamie M. Nugent 10,000 10,000
Arnass Group, Ltd. 100,000 100,000
Everett Coon, Jr. 20,000 20,000
Drake, Goodwin & Co., Inc. 25,000 25,000
James Mathis 2,000 2,000
Delaware Charter Guarantee Trust Co.(1) 20,000 20,000
Dorothy D. Winchester Trust 15,000 15,000
------------ ----------------
Totals $ 720,000 720,000
============ ================
(1) Represents shares held in IRA Accounts at Delaware Charter Guarantee Trust
Co., FBO Robert M. MacCloskey, 3,000 shares; Karen L. MacCloskey, 2,000
shares; Mical Lee MacCloskey, 3,000 shares; Michael K. MacCloskey, 2,000
shares; and Rush B. Winchester, 10,000 shares.
First London Securities Corporation acted as placement agent in the
foregoing private placement and received a commission of $70,000 representing
10% of the offering proceeds from the sale of 700,000 shares. No commission
was paid in connection with the sale of 20,000 shares of the foregoing private
placement.
Securities issued in the foregoing transaction were issued in reliance
on the exemption from registration and the prospectus delivery requirements of
the Securities Act of 1933, set forth in either Rule 505 or 506 of Regulation
D and/or Section 4(2) thereof and the regulations promulgated thereunder. The
purchasers represented that they were "accredited investors" as that term is
defined under Rule 501 of Regulation D of the Securities Act. None of the
purchasers were Officers and Directors of the issuer at the time of the
issuance of the securities or currently hold such positions with the issuer.
Such purchasers were provided information regarding the Company and its
business and financial condition and met and/or were given opportunity to ask
questions of the Company's officers and directors. Subscription agreements
containing investment and suitability letters and representations were
executed by each of the purchasers in which they acknowledged that they were
acquiring "restricted securities" as defined in Rule 144 under the Securities
Act; that the securities could not be transferred without registration or an
exemption therefrom; that the securities were being acquired for investment;
and that the purchasers would not sell the securities without registration or
the availability of an exemption therefrom. No general advertising or
solicitation was used in connection therewith.
<PAGE> 62
The placement agent confirmed that solicitation of purchasers of the
securities were made through contacts by its registered representatives
without any form of general solicitation or general advertising, including,
but not limited to, any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio or any seminar or meeting whose attendees were invited by
any general solicitation or general advertising.
The Company sold 40,642 shares of Common Stock in September 1995, at a
purchase price of $6.00 per share. Set forth below are the names of the
purchasers, the consideration paid, and the number of shares purchased:
Name of Shareholder Consideration Number of Shares
- ------------------- ------------- ----------------
James A. & Mary Jo Chrobak $ 600 100
Rolyn, Inc. 5,556 926
Rebecca Ann Bradley 600 100
William B. & Paunez A. Howell 5,010 835
Lance R. or Laura MacKeown 600 100
Robert J. Kieres 1,200 200
Kurt R. or Zorianna M. Sterbenz 9,600 1,600
Eric R. Sterbenz 3,000 500
Patrick Kelble 600 100
Kevin Kelble & Dee Kennedy 7,200 1,200
Michael or Rosa Kelble 600 100
Shawn Kelble 1,200 200
Gerald D. Kelble, D.D.S. 18,000 3,000
Paine Webber IRA Custodian FBO Gerald Kelble 12,000 2,000
Richard or Esther Abramson 1,200 200
Dennis M. & Karen S. Jenkins 1,200 200
Joan E. Khatib 1,590 265
Sandra S. & Earl W. Crissman 1,800 300
Ann or Gary Tilly 1,800 300
Barbara A. Simpson 2,100 350
Christley, Harington & Pierce 2,400 400
Jason W. Sarnow 3,000 500
Ken Jones 3,000 500
Andy & Marcella Lantzman 4,998 833
Karen Schaefer 4,998 833
Andres & Anita Peterson 6,000 1,000
Wanda Sharrett, M.D. 6,000 1,000
Thomas H. & Mary Kaye Laabs-Johnson 18,000 3,000
John P. or Kathy M. Malik 12,000 2,000
Charles R. & Eileen C. Gant 18,000 3,000
Dr. Paul Schreibman 30,000 5,000
Paul Rush 60,000 10,000
------------ ----------------
Totals $ 243,852 40,642
============ ================
The foregoing shares of Common Stock were offered by the Company's
Officers and Directors and no commissions, directly or indirectly, were paid
in connection with their sale.
<PAGE> 63
Securities issued in the foregoing transaction were issued in reliance on
the exemption from registration and the prospectus delivery requirements of
the Securities Act of 1933, set forth in either Rule 505 or 506 of Regulation
D and/or Section 4(2) thereof and the regulations promulgated thereunder.
Fifteen of the thirty purchasers represented that they were "accredited
investors" as that term is defined under Rule 501 of Regulation D of the
Securities Act. None of the purchasers were Officers and Directors of the
Company at the time of the issuance of the securities or currently hold such
positions with the issuer. Such purchasers were provided information
regarding the Company and its business and financial condition and met and/or
were given opportunity to ask questions of the Company's Officers and
Directors.
Subscription agreements containing investment and suitability letters and
representations were executed by each of the purchasers in which they
acknowledged that they were acquiring "restricted securities" as defined in
Rule 144 under the Securities Act; that the securities could not be
transferred without registration or an exemption therefrom; that the
securities were being acquired for investment; and that the purchasers would
not sell the securities without registration or the availability of an
exemption therefrom. No general advertising or solicitation was used in
connection therewith.
The foregoing private placement was made at a time when the Company had a
registration statement on file with the Commission. Although the Company took
steps to ensure that the sale of the common stock would not become part of the
Company's proposed public offering, due to the timing of the private placement
during the pendency of the public registration process, the Company's reliance
on Section 4(2) possibly could have been challenged. In connection with the
Company's initial public offering, the Company made a recision offer to the
purchasers of the 40,642 shares of common stock in an effort to remove and
reduce as much as possible any liability the Company may have had or could
have incurred relating to the sale of the common stock. On termination of the
recision offer, the Company has received notices of acceptance of the recision
offer for an aggregate of 34,977 shares. The Company issued checks to the
rescinding purchasers in the aggregate of $193,704, which amount included all
accrued interest in connection therewith.
On October 31, 1996, Dennis S. Chrobak and Gary Dalton, two of the
Company's officers and directors, agreed to cancel approximately $56,735 in
principal and accrued interest due them under certain promissory notes in
exchange for the issuance of 27,000 shares of the Company's restricted common
stock at an exchange valued at approximately $2.10 per share.
Effective February 28, 1997, the Company completed the acquisition of UTI
Chemicals (Europe), Ltd, a United Kingdom corporation ("UTI-UK"), from Coronel
Investment Limited, a Jersey corporation ("Coronel"). The acquisition was
made pursuant to a Share Purchase Agreement, which provided that the Company
issue to Coronel 200,000 shares of the Company's restricted common stock as a
portion of the consideration for the purchase of UTI-UK. The shares issued to
Coronel were valued at $7.75 per share, the closing bid price for the
Company's common stock on February 28, 1997.
The securities issued in the foregoing transactions were issued in
reliance on the exemption from registration and the prospectus delivery
requirements of the Securities Act under section 4(2) thereof and the
regulations promulgated thereunder.
PAGE
<PAGE> 64
The Company sold 155,000 shares of Common Stock in February 1997, at a
purchase price of $6.00 per share. Set forth below are the names of the
purchasers, the consideration paid, and the number of shares purchased:
Name of Shareholder Consideration Number of Shares
- ------------------- ------------- ----------------
Lowell L. Leishman $ 72,000 12,000
2156 Associates, a Utah partnership 120,000 20,000
William L. Jiler 90,000 15,000
Matthew L. & Erin S. Haynie, JTWRS 18,000 3,000
Graphic Arts Management Profit Sharing Plan 90,000 15,000
Frank Lankey 30,000 5,000
Jay M. Grossman 18,000 3,000
Richard K. & Janice S. Milne, JTWRS 30,000 5,000
James & Carolee Okland, JTWRS 24,000 4,000
Henry D. Moyle 120,000 20,000
David P. Scheffenacker 24,000 4,000
Theodore S. Green & Debra Beneck 18,000 3,000
Adele Gilchrist 6,000 1,000
Carol H. Tate 6,000 1,000
Jeffrey W. Gold, IRA 36,000 6,000
Jeffrey W. & Robyn Gold, JTWRS 84,000 14,000
Louis M. Haynie 84,000 14,000
Joseph S. Haynie 6,000 1,000
Michael L. Haynie 18,000 3,000
Gae B. Haynie 12,000 2,000
Gary R. Howe, IRA 6,000 1,000
Gary R. Howe & Sharon F. Howe, JTWRS 18,000 3,000
------------ ----------------
Totals $ 930,000 155,000
============ ================
The foregoing shares of Common Stock were offered by the Company's
Officers and Directors and no commissions, directly or indirectly, were paid
in connection with their sale.
Securities issued in the foregoing transaction were issued in reliance on
the exemption from registration and the prospectus delivery requirements of
the Securities Act of 1933, set forth in Rule 506 of Regulation D and/or
Section 4(2) thereof and the regulations promulgated thereunder. The
purchasers represented that they were "accredited investors" as that term is
defined under Rule 501 of Regulation D of the Securities Act. None of the
purchasers were Officers and Directors of the Company at the time of the
issuance of the securities or currently hold such positions with the issuer.
Subscription agreements containing investment and suitability letters and
representations were executed by each of the purchasers in which they
acknowledged that they were acquiring "restricted securities" as defined in
Rule 144 under the Securities Act; that the securities could not be
transferred without registration or an exemption therefrom; that the
securities were being acquired for investment; and that the purchasers would
not sell the securities without registration or the availability of an
exemption therefrom. No general advertising or solicitation was used in
connection therewith.
<PAGE> 65
ITEM 27. EXHIBITS
Copies of the following documents have been included as exhibits to this
Registration Statement, pursuant to Item 601 of Regulation S-B. The index to
exhibits required by such item appears at consecutively numbered page 67.
SEC
Exhibit Reference
No. No. Title of Document Location
- ------- --------- ----------------- --------
1 3(i) Articles of Incorporation and Amendments Incorporated by
Reference (1)
2 3(ii) Bylaws Incorporated by
Reference (1)
3 5 Opinion of Taylor and Associates, Inc.
Attorneys and Counselors at Law This Filing
4 23 Consent of Saltz, Shamis & Goldfarb, Inc.,
Certified Public Accountants This Filing
5 23 Consent of Taylor and Associates, Inc.,
Attorneys and Counselors at Law This Filing
(1) Incorporated by reference to the Company's registration statement on Form
SB-2, SEC file no. 33-94318-C, and all amendments thereto.
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes that it will:
(1) File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to (i) include any
Prospectus required by Section 10(a)(3) of the Securities Act; (ii) reflect in
the Prospectus any facts or events which, individually or in the aggregate,
represent a fundamental change to the information in the Registration
Statement; and (iii) include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) For the purpose of determining liability under the Securities Act,
each post-effective amendment will be treated as a new Registration Statement
of the securities offered, and the offering of the securities at that time
shall be the initial bona fide offering.
(3) If, applicable, file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable.
PAGE
<PAGE> 66
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person in connection with the securities
being registered), the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by the
Registrant is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant under Rule 424(b)(1), or (4), or 497(h)
under the Securities Act as part of this Registration Statement as of the time
the Commission declared it effective.
(2) For determining any liability under the Securities Act, each post
effective amendment that contains a form of Prospectus will be treated as a
new Registration Statement for the securities offered in the Registration
Statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
PAGE
<PAGE> 67
AMERICAN TIRE CORPORATION
INDEX TO EXHIBITS
SEC
Exhibit Reference
No. No. Title of Document Location
- ------- --------- ----------------- --------
1 3(i) Articles of Incorporation and Amendments Incorporated by
Reference (1)
2 3(ii) Bylaws Incorporated by
Reference (1)
3 5 Opinion of Taylor and Associates, Inc.
Attorneys and Counselors at Law Exhibit No. 3
4 23 Consent of Saltz, Shamis & Goldfarb, Inc.,
Certified Public Accountants Exhibit No. 4
5 23 Consent of Taylor and Associates, Inc.,
Attorneys and Counselors at Law See Exhibit
No. 5
(1) Incorporated by reference to the Company's registration statement on Form
SB-2, SEC file no. 33-94318-C, and all amendments thereto.
<PAGE>
EXHIBIT NO. 3 & 5
TAYLOR AND ASSOCIATES, INC.
3090 East 3300 South, Suite 400
Salt Lake City, UT 84109
April 7, 1997
Board of Directors
American Tire Corporation
446 West Lake Street
Ravenna, Ohio 44266
Re: American Tire Corporation
Registration Statement on Form S-1
Gentlemen:
We have been retained by American Tire Corporation (the "Company") in
connection with the registration statement (the "Registration Statement") on
Form S-1 to be filed by the Company with the Securities and Exchange
Commission relating to the securities of the Company. You have requested that
we render our opinion as to whether or not the securities proposed to be sold
by the Seller Shareholders on the terms set forth in the Registration
Statement have been validly issued, fully paid, and nonassessable.
In connection with this request, we have examined the following:
1. Articles of Incorporation of the Company, and amendments thereto;
2. Bylaws of the Company;
3. Unanimous consent resolutions of the Company's board of directors;
4. The Registration Statement; and
5. The Stock Subscription Documents prepared by the Company and
executed by the Selling Shareholders in connection with their
purchase of the securities from the Company.
We have examined such other corporate records and documents and have
made such other examinations as we have deemed relevant.
Based on the above examination, we are of the opinion that the
securities of the Company to be sold by the Selling Shareholders pursuant to
the Registration Statement have been validly authorized and issued, fully
paid, and nonassessable under corporate laws of the state of Nevada.
This opinion is limited in scope to the shares being sold by the Selling
Shareholders pursuant to the Registration Statement and does not cover
subsequent issuance of shares to be made in the future. Such transactions
are
required to be included in either a new registration statement or a
post-effective amendment to the Registration Statement, including updated
opinions concerning the validity of issuance of such shares.
Further, we consent to our name, Taylor and Associates, Inc. being
included in the Registration Statement as having rendered the foregoing
opinion and as having represented the Company in connection with the
Registration Statement.
Sincerely,
TAYLOR AND ASSOCIATES, INC.
/S/Elliott N. Taylor
<PAGE>
EXHIBIT NO. 4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated October 9, 1996,
relating to the financial statements of American Tire Corporation, which
appear in such Prospectus. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
/S/ SALTZ, SHAMIS & GOLDFARB, INC.
308 North Cleveland-Massillon Road
Akron, Ohio 44333-9302
April 7, 1997
