<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________.
Commission file number: 33-94318-C
-------------
AMERICAN TIRE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 87-0535207
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1643 Nevada Highway, Boulder City, Nevada 89005
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(702) 293-1930
---------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- ---------------------------------------------------------------------------
(Former name, former address, and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), Yes [X] No [ ] and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of common
stock, was 3,397,248 shares of common stock, par value $0.001, as of March 31,
1998.
PAGE
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
the financial position, results of operations, cash flows, and stockholders'
equity in conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a fair
presentation of the results of operations and financial position have been
included and all such adjustments are of a normal recurring nature.
The unaudited balance sheet of the Company as of March 31, 1998; the
related audited balance sheet of the Company as of June 30, 1997; the
related unaudited statements of operations and cash flows for the three and
nine month periods ended March 31, 1998 and 1997 and from January 30, 1995
(inception) through March 31, 1998; and the unaudited statement of
shareholders' equity for the period from January 30, 1995 (inception) through
March 31, 1998 are attached hereto and incorporated herein by this reference
Operating results for the three and nine month periods ended March 31,
1998 are not necessarily indicative of the results that can be expected for
the Company's fiscal year ending June 30, 1998.
PAGE
<PAGE> 3
FINANCIAL STATEMENTS
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
ASSETS
MARCH 31,
1998 JUNE 30,
(Unaudited) 1997
------------ ------------
Current Assets:
Cash and cash equivalents $ 298,547 $ 501,449
Accounts receivable 102,083 73,922
Accounts receivable - related party - 2,237
Inventory 283,268 303,704
Prepaid expenses 164,169 91,320
---------- ----------
Total Current Assets 848,067 972,632
---------- ----------
Property and Equipment
Land 59,000 59,000
Building and improvements 301,528 278,501
Equipment and vehicles 871,542 660,793
Furniture and fixtures 33,775 32,808
Less: accumulated depreciation (260,219) (150,627)
---------- ----------
1,005,626 880,475
---------- ----------
Other Assets:
Patents 46,921 24,822
Deposits 854 4,414
Goodwill and technology 1,422,228 1,694,111
---------- ----------
Total Other Assets 1,470,003 1,723,347
---------- ----------
TOTAL ASSETS $3,323,696 $3,576,454
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.PAGE
<PAGE> 4
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31,
1998 JUNE 30,
(Unaudited) 1997
------------ ------------
Current Liabilities:
Accounts payable $ 205,217 $ 69,077
Accounts payable - related parties 165,688 150,000
Accrued expenses - 16,032
Line of credit 95,199 55,380
Notes payable 1,025,000 -
---------- ----------
Total current liabilities 1,491,104 290,489
---------- ----------
TOTAL LIABILITIES 1,491,104 290,489
Stockholder Equity:
Preferred stock, par value $0.001,
5,000,000 shares authorized, 0 shares
issued and outstanding - -
Common stock, par value $0.001, 25,000,000
shares authorized, 3,397,248 and 4,561,748
shares issued and outstanding, respectively 3,397 4,562
Additional paid-in capital 5,703,491 5,582,811
Stock subscription receivable - (50,000)
Currency transactions adjustment 19,923 2,984
Deficit accumulated during the development stage (3,894,219) (2,254,392)
---------- ----------
Total stockholders' equity 1,832,592 3,285,965
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,323,696 $3,576,454
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 5
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
For the For the
Three Months Three Months
Ended Ended
March 31, March 31,
1998 1997
------------ ------------
NET SALES $ 93,686 $ 25,637
COST OF SALES 59,552 8,439
------------ ------------
GROSS PROFIT 34,134 17,198
------------ ------------
EXPENSES
Consulting 19,980 140,690
Payroll and payroll taxes 201,877 233,936
Depreciation and amortization 131,422 14,015
Bad debt expense - -
Selling, general and administrative 186,233 31,789
------------ ------------
Total Expenses 539,512 420,430
------------ ------------
INCOME BEFORE OTHER INCOME (EXPENSES) (505,378) (403,232)
------------ ------------
OTHER INCOME (EXPENSES)
Other income - -
Interest income 2,205 6,012
Interest expense (161,267) (1,339)
Loss on disposition of assets - -
------------ ------------
TOTAL OTHER INCOME (EXPENSES) (159,062) 4,673
------------ ------------
NET LOSS $ (664,440) $ (398,559)
============ ============
NET LOSS PER SHARE $ (0.20) $ (0.09)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES 3,394,415 4,423,415
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 6
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
For the For the Inception on
Nine Months Nine Months January
30, Ended Ended 1995
Through
March 31, March 31, March 31,
1998 1997
1998 ------------ ------------
- ------------
NET SALES $ 314,845 $ 25,637 $ 384,363
COST OF SALES 221,754 8,439 269,636
------------ ------------ ------------
GROSS PROFIT 93,091 17,198 114,727
------------ ------------ ------------
EXPENSES
Consulting 88,020 140,690 572,812
Payroll and payroll taxes 563,793 344,253 1,338,140
Depreciation and amortization 384,076 37,508 612,938
Bad debt expense - - 21,112
Selling, general and
administrative 482,387 269,022 1,255,145
------------ ------------ ------------
Total Expenses 1,518,276 791,473 3,800,147
------------ ------------ ------------
INCOME BEFORE OTHER INCOME
(EXPENSES) (1,425,185) (774,275) (3,685,420)
------------ ------------ ------------
OTHER INCOME (EXPENSES)
Other income 442 - 56,538
Interest income 5,176 13,492 34,597
Interest expense (217,362) (24,508) (293,374)
Loss on disposition of assets (2,898) - (6,560)
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) (214,642) (11,016) (208,799)
------------ ------------ ------------
LOSS $ (1,639,827) $ (785,291) $ (3,894,219)
============ ============ ============
NET LOSS PER SHARE $ (0.43) $ (0.19)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES 3,798,326 4,175,731
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.PAGE
<PAGE> 7
<TABLE>
<CAPTION> AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Deficit
Accumulated
Additional Currency
Stock During the
Common Stock Paid-in Translation
Subscription Development
Shares Amount Capital Adjustment
Receivable Stage
---------- --------- --------- -----------
- ------------ -------------
<S> <C> <C> <C> <C>
<C> <C>
BALANCE, January 30, 1995
(Inception) - $ - $ - $ -
$ - $ -
Common stock issued for
cash during February
1995 at $0.001 per share 2,510,000 2,510 -
- - - -
Common stock issued for
services rendered in
February 1995 at $0.10
per share 300,000 300 29,700
- - - -
Common stock issued for
services rendered during
April 1995 at $1.00 per
share 100,000 100 99,900
- - - -
Common stock issued for
notes receivable valued
at $1.00 per share 170,000 170 169,830 -
170,000 -
Repayment of stock
subscriptions receivable
with cash or services
rendered - - - -
(76,100) -
Common stock issued for
cash at $1.00 per share 720,000 720 719,280
- - - -
Stock offering costs - - (78,271)
- - - -
Net loss for the period
ended June 30, 1995 - - -
- - - (248,630)
---------- --------- ---------- ----------
- ------------ ------------
Balance, June 30, 1995 3,800,000 3,800 940,439 -
93,900 (248,630)
Common stock issued for
cash at $6.00 per share 40,642 41 243,811
- - - -
Stock offering costs - - (1,600)
- - - -
Repayment of stock
subscriptions receivable
by providing services - - - -
(8,900) -
Net loss for the year
ended June 30, 1996 - - -
- - - (596,090)
---------- --------- ---------- -----------
- ------------ ------------
Balance, June 30, 1996 3,840,642 $ 3,841 $1,182,650 $ - $
85,000 $ (844,720)
---------- --------- ---------- -----------
- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 8
<TABLE>
<CAPTION> AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Additional Currency
Stock During the
Common Stock Paid-in Translation
Subscription Development
Shares Amount Capital Adjustment
Receivable Stage
---------- --------- --------- -----------
- ------------ -------------
<S> <C> <C> <C> <C>
<C> <C>
Balance, June 30, 1996 3,840,642 $ 3,841 $1,182,650 $ - $
85,000 $ (844,720)
Cancellation of common
stock (34,977) (35) (209,827)
- - - -
Common stock issued for
cash at $6.00 per share
pursuant to public
offering 344,083 344 2,064,154
- - - -
Stock offering costs - - (307,509)
- - - -
Common stock issued in lieu
of debt at $6.00 per share
during November 1996 27,000 27 161,973
- - - -
Common stock issued for
cash at $6.00 per share
during January 1997 155,000 155 929,845
- - - -
Common stock issued to
acquire UTI Chemicals
(Europe) Limited at $7.75
per share 200,000 200 1,549,800
- - - -
Common stock issued for
services rendered at
$6.125 per share during
February 1997 15,000 15 91,860
- - - -
Common stock issued for
services rendered at
$7.99 per share during
June 1997 15,000 15 119,865
- - - -
Repayment of stock
subscriptions receivable
by providing services - - - -
(40,000) -
Interest accrual on stock
subscription receivable - - -
- - 5,000 -
Currency translation
adjustment - - -
2,984 - -
Net loss for the year
ended June 30, 1997 - - -
- - - (1,409,672)
---------- --------- ---------- ----------
- ------------ ------------
Balance, June 30, 1997 4,561,748 $ 4,562 $5,582,811 $ 2,984 $
50,000 $ (2,254,392)
---------- --------- ---------- ----------
- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 9
<TABLE>
<CAPTION> AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Continued)
Deficit
Accumulated
Additional Currency
Stock During the
Common Stock Paid-in Translation
Subscription Development
Shares Amount Capital Adjustment
Receivable Stage
---------- --------- --------- -----------
- ------------ -------------
<S> <C> <C> <C> <C>
<C> <C>
Balance, June 30, 1997 4,561,748 $ 4,562 $5,582,811 $ 2,984 $
50,000 $ (2,254,392)
Common Stock issued in
July 1997 for services
rendered by exercising
stock option issued at
$2.50 per share 5,500 5 13,745
- - - -
Cancellation of
common stock (1,270,000) (1,270) (228,730)
- - - -
Repayment of stock
subscription
receivable
with cash - - - -
(50,000) -
Common Stock issued for
Prepaid Interest on
Additional Borrowing 100,000 100 335,665
- - - -
Currency translation
adjustment (unaudited) - - -
16,939 - -
Net loss for the period
ended December 31, 1997
(unaudited) - - -
- - - (1,639,827)
---------- --------- --------- ---------
- ------------ -----------
Balance at
March 31, 1998
(Unaudited) 3,397,248 $ 3,397 $5,703,491 $ 19,923
$ - $(3,894,219)
========= ========= ========== =========
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 10
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (664,440) $ (398,559)
Adjustments to reconcile net (loss) to
Net cash (Used) by operating activities:
Depreciation and amortization 131,422 14,015
Bad debt expense - -
Loss on disposition of assets - -
Common stock issued for services - 91,875
Services provided in lieu of cash payment
on subscriptions receivable - -
Common stock issued in lieu of debt - -
Common stock issued for prepaid interest 173,890 -
Changes in Assets and Liabilities:
(Increase) decrease in accounts receivable (9,837) (45,966)
(Increase) decrease in inventory 7,881 (149,956)
(Increase) decrease in prepaid expenses (9,527) 68,211
(Increase) decrease in other assets - -
Increase (decrease) in accounts payable and
accrued expenses (89,960) 30,723
Increase (decrease) in accounts payable
related parties 84,356 -
------------- ------------
Net cash (Used) by operating activities (376,125) (389,657)
------------- ------------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property, plant and equipment (124,848) (62,343)
Purchase of investments - (400,000)
------------- ------------
Net cash (Used) in Investing activities $ (124,848) $ (462,343)
------------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 11
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock subscription receivable $ - $ -
Repurchase of common stock - -
Payment of stock offering costs - -
Borrowing on line of credit 12,864 -
Proceeds from notes payable 600,000 -
Payments made on notes payable - 930,000
Common stock issued for cash - 15,544
------------- ------------
Net cash provided (used) by
Financing activities 612,864 945,544
------------- ------------
NET INCREASE (DECREASE) IN CASH 111,801 93,544
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 186,437 634,337
FOREIGN CURRENCY EXCHANGE 309 -
------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 298,547 $ 727,881
============= ============
CASH PAID FOR:
Interest $ 1,028 $ -
Income Taxes $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for services rendered $ - $ -
Common stock issued in lieu of debt $ - $ -
Common stock issued for acquisition of
subsidiary $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 12
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
FROM
FOR THE FOR THE INCEPTION ON
NINE MONTHS NINE MONTHS JANUARY 30,
ENDED ENDED 1995 THROUGH
MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (1,639,827) $ (785,291) $ (3,894,219)
Adjustments to reconcile net (loss)
to net cash (Used) by operating
activities:
Depreciation and amortization 384,076 37,508 612,938
Bad debt expense - - 21,112
Loss on disposition of assets 2,898 - 6,560
Common stock issued for services 13,750 91,875 355,505
Services provided in lieu of cash
payment on subscriptions
receivable - - 75,000
Common stock issued in lieu of debt - - 162,000
Common stock issued for prepaid
interest 335,765 - 335,765
Changes in Assets and Liabilities:
(Increase) decrease in accounts
receivable (25,924) (53,197) (102,083)
(Increase) decrease in inventory 20,436 (149,956) (283,268)
(Increase) decrease in prepaid
expenses) (72,849) 63,815 (164,169)
(Increase) decrease in other assets (18,539) - (47,775)
Increase (decrease) in accounts
payable and accrued expenses 120,108 (30,156) 205,217
Increase (decrease) in accounts
payable related parties 15,688 - 165,688
------------ ------------ ------------
Net cash (Used) by Operating
Activities (864,418) (825,402) (2,551,729)
------------ ------------ ------------
CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES:
Purchase of property, plant and
equipment (240,242) (213,125) (1,123,464)
Purchase of investments - (400,000) (400,000)
------------ ------------ ------------
Net cash (Used) in Investing
activities $ (240,242) $ (613,125) $ (1,523,464)
------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 13
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
FROM
FOR THE FOR THE INCEPTION ON
NINE MONTHS NINE MONTHS JANUARY 30,
ENDED ENDED 1995 THROUGH
MARCH 31, MARCH 31, MARCH 31,
1998 1997 1998
------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from stock subscription
receivable $ 50,000 $ - $ 100,000
Repurchase of common stock (230,000) (209,862) (439,862)
Payment of stock offering costs - (127,201) (387,380)
Borrowing on line of credit 64,819 - 120,199
Proceeds from notes payable 1,000,000 (461,294) 1,962,838
Common stock issued for cash - 2,960,298 3,960,860
Payments made on notes payable - - (962,838)
------------ ------------ ------------
Net cash provided (used) by
Financing activities 884,819 2,161,941 4,353,817
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH (219,841) 723,414 278,624
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 501,449 4,467 -
FOREIGN CURRENCY EXCHANGE 16,939 - 19,923
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 298,547 $ 727,881 $ 298,547
============ ============ ============
CASH PAID FOR:
Interest $ 5,919 $ 4,891 $ 92,636
Income Taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for services
rendered $ 13,750 $ - $ 354,505
Common stock issued in
lieu of debt $ - $ - $ 162,000
Common stock issued for
acquisition of subsidiary $ - $ - $ 1,550,000
The accompanying notes are an integral part of these consolidated financial
statements.
PAGE
<PAGE> 14
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
March 31, 1998 and June 30, 1997
NOTE l- CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared by the
company without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at March 31, 1998 and
for all periods presented have been made.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's June 30, 1997
audited financial statements. The results of operations for the periods ended
March 31, 1998 and 1997 are not necessarily indicative of the operating
results for the full year.
NOTE 2- RELATED PARTY TRANSACTION
On August 19, 1997 the Company entered into Agreements of Settlement and
Mutual Release with two former officers and another employee of the Company.
The Company agreed to pay a total of $317,525 and 1,270,000 shares of the
Company's outstanding common stock were returned for cancellation. An
aggregate of $117,525 was paid to the parties on the date the agreements were
executed and the remaining $200,000 is being paid in twenty consecutive
monthly payments. At March 31, 1998 the remaining balance is $120,000.
NOTE 3- STOCK TRANSACTIONS
Pursuant to the Agreements of Settlement and Mutual Release, the Company
canceled 1,270,000 shares of its outstanding common stock during the quarter
ended September 30, 1997.
NOTE 4- STOCK OPTIONS OUTSTANDING
The Company's Board of Directors has authorized a Non-Qualified Stock Option
Plan that allows for the Company to issue options to purchase up to 35,000
shares of the Company's common stock that may be issued to consultants or
others that provide professional services to the Company. The stock options
have been valued at fair market value according to FAS 123, "Accounting for
Stock-Based Compensation.") Stock option activity for the period consisted of
the following:
Number of Weighted Average
Shares Price per Share
--------- ----------------
Outstanding at June 30, 1997 20,000 $ 2.07
Granted during the quarter - -
Exercised during the quarter (5,500)
2.50
--------- ----------------
Outstanding at March 31, 1998 14,500 $ 2.00
PAGE
<PAGE> 15
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
March 31, 1998 and June 30, 1997
NOTE 4- STOCK OPTIONS OUTSTANDING (Continued)
The 14,500 stock options outstanding at March 31, 1998 are summarized as
follows:
Date Number of Exercise Expiration
Issued Options Price Date
------------------ ------------- ----------- ------------------
May 31, 1997 14,500 $2.00 May 31, 1999
NOTE 5- SHORT-TERM DEBT FINANCING
The Company has received additional funds for use in its operations upon
issuing promissory notes with a maturity date of six months. Interest is
prepaid by issuing 5,000 shares of the Company's restricted common stock for
each $50,000 amount borrowed. The principal amount of the Note is payable on
the maturity date, subject to prepayment as set forth in the note. At the
election of the Company, it may satisfy the entire obligation for the payment
of the principal by issuance and delivery of one or more shares of Common
Stock of the Company at the rate of one share of Common Stock for every $1.00
of outstanding principal amount of the Note. The following data summarizes
amounts received.
Face Number of Value of
Date Amount Shares Issued Prepaid Maturity
Issued Of Notes For Interest Interest Date
- ------ -------- ------------- -------- --------
October 27, 1997 $ 150,000 15,000 $61,875 April 27, 1998
November 4, 1997 50,000 5,000 21,250 May 4, 1998
November 24, 1997 50,000 5,000 20,625 May 24, 1998
November 25, 1997 100,000 10,000 38,750 May 25, 1998
December 1, 1997 50,000 5,000 19,375 June 1, 1998
January 2, 1998 125,000 12,500 $39,063 July 2, 1998
January 5, 1998 100,000 10,000 30,000 July 5, 1998
January 6, 1998 50,000 5,000 13,438 July 6, 1998
January 7, 1998 50,000 5,000 13,750 July 7, 1998
January 8, 1998 25,000 2,500 7,031 July 8, 1998
January 12, 1998 75,000 7,500 20,625 July 12, 1998
January 21, 1998 75,000 7,500 20,156 July 21, 1998
February 4, 1998 25,000 2,500 6,391 August 4, 1998
March 4, 1998 25,000 2,500 9,687 Sept. 4, 1998
---------- ------- --------
Totals $1,000,000 100,000 $335,765
========== ======= ========
The $335,765 cost of this additional financing will be amortized over the
terms above.
PAGE
<PAGE> 16
AMERICAN TIRE CORPORATION AND SUBSIDIARY
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
March 31, 1998 and June 30, 1997
NOTE 6- SUBSEQUENT EVENTS
At the election of the Company, set forth in the table below is a list of
certain notes maturing subsequent to March 31, 1998 that have been satisfied
by the issuance and delivery of one share of the Company's restricted common
stock for every $1.00 of outstanding principal amount of the note.
Date Maturity Note Shares
Issued Date Principal Issued
- ------ -------- --------- ------
October 27, 1997 April 27, 1998 $150,000 150,000
November 4, 1997 May 4, 1998 50,000 50,000
-------- -------
Totals $200,000 200,000
======== =======
The Company has received additional funds for use in its operations upon
issuing promissory notes with a six month maturity date. Interest is prepaid
by issuing 5,000 shares of the Company's restricted common stock for each
$50,000 amount borrowed. The principal amount of the Note is payable on the
maturity date, subject to prepayment as set forth in the Note. At the
election of the Company, it may satisfy the entire obligation for the payment
of the principal by issuance and delivery of one or more shares of restricted
common stock of the Company at a rate of one share of common stock for every
$1.00 of outstanding principal amount of the Note. The following summarizes
the amounts received subsequent to March 31, 1998.
Face Number of Value of
Date Amount Shares Issued Prepaid Maturity
Issued Of Notes For Interest Interest Date
- ------ -------- ------------- -------- --------
May 8, 1998 $ 50,000 5,000 $ 12,188 Nov. 8, 1998
May 19, 1998 50,000 5,000 11,250 Nov. 19, 1998
---------- ------- --------
Totals $1,000,000 100,000 $ 23,438
========== ======= ========
PAGE
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company is engaged in the development and manufacturing of
"flat-free" bicycle and other specialty tires which compete with the
traditional pneumatic tires (i.e., tires with an inner tube or tubeless tires
inflated with air).
The Company is in the development stage and has had an operating loss
since inception of $(3,894,219). The Company has been in the pre-production
stage and during this the period ended March 31, 1998 commenced commercial
sales of its products with net sales of $93,686 during the three month period
ended March 31, 1998, as opposed to net sales of $ 25,637 during the three
month period ended March 31, 1997. A majority of the sales during the
reporting period were attributed to the operations of its wholly owned
subsidiary Urethon Limited (formerly known as UTI-UK). Urethon Limited is a
wholly owned subsidiary of the Company and is a distributor of low density
foam bicycle, wheelchair and other specialty tires in the United Kingdom and
Europe. Urethon Limited distributes flat-free tires under the trade name
"Urathon TM" in approximately 540 Michelin Tire Company owned ATS stores in
England, Scotland and Wales. Urethon Limited also sells products in France,
Denmark, Austria, the Netherlands and Germany through independent
representatives and distributors.
During the three months ended March 31, 1998, the Company had a net loss
from operations of $(664,440) or approximately $(0.20) per share. The Company
is currently operating at a loss of approximately $(125,000) per month and
expects operating expenses to continue at such rate until such time as the
Company's marketing efforts develop increased revenues from the sale of its
products. At March 31, 1998, the Company had current assets of $848,067, and
current liabilities of $1,491,1044, resulting in working capital deficit of
$643,037. The Company has limited working capital and limited internal
financial resources and the report of the Company's auditor for the Company's
fiscal year end at June 30, 1997, contained a going concern modification as to
the ability of the Company to continue.
During October 1997, the Company borrowed $50,000 from a banking
institution for working capital and equipment purchases. The loan has terms
of interest at prime plus 3/4%. The Company's collateral gives the banking
institution a first lien position in accounts receivable, inventory and
equipment, and a first mortgage on the Company's real estate. During October
1997, the Company authorized the issuance of a series of promissory notes for
the purpose of raising up to $1,000,000 for use in its operations (the
"Notes"). The Notes have a maturity date of six months from the date of issue
and interest on the Notes is to be prepaid by the Company issuing 5,000 shares
of its restricted common stock for each $50,000 amount borrowed. At March 31,
1998, the Company had issued $1,000,000 in such Notes. The principal amount of
the Notes is payable on the maturity date, subject to prepayment as set forth
in the Note. At the election of the Company, it may satisfy the entire
obligation for the payment of the principal by issuance and delivery of one or
more shares of Common Stock at the rate of one share of Common Stock for every
$1.00 of outstanding principal amount of the Note. Subsequent to March 31,
1998, the Company authorized the issuance of an additional $500,000 of such
Notes. (See ITEM 1. FINANCIAL STATEMENTS: Notes to the Unaudited Consolidated
Financial Statements, Note 5 and Note 6.)PAGE
<PAGE> 18
The Company's production equipment consists of several "centrifugal
molding machines" and other related specialized manufacturing equipment to
produce low density foam and shell elastomer polyurethane, flat-free tires.
The Company has utilized substantial portions of its working capital to
purchase molding machines and related production equipment and at March 31,
1998, the Company had $1,005,626 in property and equipment (net of accumulated
depreciation). The Company is currently utilizing proceeds from the Notes to
acquire additional pouring equipment for producing shell elastomer flat-free
tires and to complete a sufficient quantity of production molds to produce
those tires. The Company is producing low density foam bicycle tires (26" x
1.95" and 26" x 1.75") at its Ravenna, Ohio facility; and had expected to be
producing shell elastomer bicycle tires (20" x 1.95") during February 1998.
However, limited working capital and shipping delays have caused expected
production dates for shell elastomer bicycles tires to be moved into June
1998. The Company is producing a low density foam tire for the front deck of
riding lawn mowers and has developed for testing a shell elastomer rear tire
which the Company expects to be producing in commercial quantities during the
Summer 1998, in lieu of Spring 1998.
Until the Company begins to receive substantial proceeds from the sale of
its products to meet operational needs, the Company will be relying on the
proceeds from the issuance of the Notes or other debt or equity financing that
may be available to meet operating requirements for the balance of the fiscal
year ending June 30, 1998. However, there can be no assurance that additional
Notes will be sold or that any additional debt or equity financing will be
obtained by the Company or that if such financing is obtained, that it will be
sufficient to sustain the Company's operational requirements.
Because of the Company's limited financial resources, the Company does
not anticipate expending any substantial sums for new research and development
during the balance of the fiscal year ending June 30, 1998. However, the
Company will continue to utilize its engineering and testing resources to
develop additional technology relating to "flat-free" shell elastomer tires
and other polyurethane product concepts, within the limited working capital
resources available.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1 Certificate of Incorporation on Change of Name (Urathon)
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TIRE CORPORATION
[Registrant]
Dated: May 22, 1998 /S/DAVID K. GRIFFITHS
-----------------------------------
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000945828
<NAME> AMERICAN TIRE CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 298,547
<SECURITIES> 0
<RECEIVABLES> 102,083
<ALLOWANCES> 0
<INVENTORY> 283,268
<CURRENT-ASSETS> 848,067
<PP&E> 1,265,845
<DEPRECIATION> (260,219)
<TOTAL-ASSETS> 3,323,696
<CURRENT-LIABILITIES> 1,491,104
<BONDS> 0
0
0
<COMMON> 5726811
<OTHER-SE> (3,894,219)
<TOTAL-LIABILITY-AND-EQUITY> 3,323,696
<SALES> 314,845
<TOTAL-REVENUES> 320,459
<CGS> 221,754
<TOTAL-COSTS> 1,518,276
<OTHER-EXPENSES> (2,898)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (217,362)
<INCOME-PRETAX> (1,639,827)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,639,827)
<EPS-PRIMARY> (0.43)
<EPS-DILUTED> (0.43)
</TABLE>
<PAGE> 1
Exhibit 1
Form 10-QSB for period ended March 31, 1998
[Seal of the Registrar]
CERTIFICATE OF INCORPORATION
ON NAME CHANGE
COMPANY NO. 2546817
The Registrar of Companies for England and Wales hereby certifies that
UTI CHEMICALS (EUROPE) LIMITED
Having by special resolution changed its name, is now incorporated under
the name of:
URATHON LIMITED
Given at Companies House, Cardiff, the 11th November 1997.
/S/ E.P. Owen
Mrs. E.P. Owen
For the Registrar of Companies
[Symbol]
COMPANIES HOUSE
