<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 December 31, 1999
[ ] 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.)
705-B YUCCA STREET, 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 8,081,097 shares of common stock, par value $0.001, as of December
31,1999.
<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 December 31, 1999; the
related audited balance sheet of the Company as of June 30, 1999; the related
unaudited statements of operations and cash flows for the three and six months
period ended December 31, 1999 and 1998 and from January 30, 1995 (inception)
through December 31, 1999; and the unaudited statement of shareholders' equity
for the period from January 30, 1995 (inception) through December 31, 1999 are
attached hereto and incorporated herein by this reference
Operating results for the three and six month period ended December 31, 1999
is not necessarily indicative of the results that can be expected for the
Company's fiscal year ending June 30, 2000.
<PAGE>
<PAGE> 3
AMERICAN TIRE CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
DECEMBER 31, JUNE 30,
1999 1999
------------ ------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 39,873 $ 3,291
Accounts receivable 8,044 1,562
Inventory 367,968 40,313
Prepaid expenses 49,819 13,806
---------- ----------
Total Current Assets 465,704 58,972
---------- ----------
Property and Equipment
Land 59,000 59,000
Building and improvements 263,920 262,235
Equipment 1,087,735 1,070,881
Furniture and fixtures 7,692 7,692
Less: accumulated depreciation (574,512) (465,510)
---------- ----------
843,835 934,298
---------- ----------
Other Assets:
Patents 63,807 62,417
Deposits 153 15,854
---------- ----------
Total Other Assets 63,960 78,271
---------- ----------
TOTAL ASSETS $1,373,499 $1,071,541
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 4
AMERICAN TIRE CORPORATION
(A Development Stage Company)
BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, JUNE 30,
1999 1999
------------ ------------
(Unaudited)
Current Liabilities:
Accounts payable $ 363,338 $ 235,830
Accounts payable - related parties - 80,507
Accrued expenses 20,248 2,625
Note payable - related party - 6,000
Stock subscription deposit 215,641 39,500
---------- ----------
Total current liabilities 599,227 364,462
---------- ----------
TOTAL LIABILITIES 599,227 364,462
---------- ----------
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, 8,081,097 and 6,816,475
shares issued and outstanding, respectively 8,081 6,816
Additional paid-in capital 10,104,065 9,465,830
Stock subscription receivable (451,140) (434,000)
Related party prepaid compensation contracts - (30,000)
Deficit accumulated during the
development stage (8,886,734) (8,301,567)
---------- ----------
Total stockholders' equity 774,272 707,079
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,373,499 $1,071,541
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE 5>
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the For the
Three Months Three Months
Ended Ended
December 31, December 31,
1999 1998
------------ ------------
NET SALES $ 14,822 $ 12,138
COST OF SALES 38,201 13,948
------------ ------------
GROSS MARGIN (23,379) (1,810)
------------ ------------
EXPENSES
Consulting 28,250 25,000
Payroll and payroll taxes 70,213 173,718
Depreciation and amortization 54,501 53,585
Bad debt expense - -
Selling, general and administrative 128,468 69,094
------------ ------------
Total Expenses 281,432 321,397
------------ ------------
INCOME BEFORE OTHER INCOME (EXPENSES) (304,811) (323,207)
------------ ------------
OTHER INCOME (EXPENSES)
Other income - -
Interest income 10,442 873
Interest expense (2,625) (80,928)
Impairment loss - -
Inventory impairment loss - -
Loss on termination of employment agreement - -
Loss on disposition of assets - -
------------ ------------
TOTAL OTHER INCOME (EXPENSES) 7,817 ( 80,055)
------------ ------------
NET LOSS BEFORE DISCONTINUED OPERATIONS $ (296,994) $ (403,262)
============ ============
DISCONTINUED OPERATIONS
Loss from discontinued operations - (49,057)
Gain from disposition of subsidiary - -
------------ ------------
Net Discontinued Operations - (49,057)
------------ ------------
NET LOSS $ (296,994) $ (452,319)
------------ ------------
OTHER COMPREHENSIVE INCOME
Foreign currency adjustments - 757
------------ ------------
NET COMPREHENSIVE LOSS $ (296,994) $ (451,562)
============ ============
BASIC GAIN (LOSS) PER SHARE
Loss from operations $ (0.04) $ (0.08)
Discontinued operations - ( - )
------------ ------------
Basic Gain (Loss) Per Share $ (0.04) $ (0.08)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES 7,543,524 5,349,250
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From
For the For the Inception on
Six Months Six Months January 30,
Ended Ended 1995 Through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
NET SALES $ 19,982 $ 24,588 $ 102,938
COST OF SALES 49,713 27,898 196,188
------------ ------------ ------------
GROSS MARGIN (29,731) (3,310) (93,250)
------------ ------------ ------------
EXPENSES
Consulting 32,250 50,000 775,062
Payroll and payroll taxes 197,031 366,790 2,769,795
Depreciation and amortization 109,002 105,389 696,628
Bad debt expense - - 21,112
Selling, general and administrative 231,133 182,564 1,779,697
------------ ------------ ------------
Total Expenses 569,416 704,743 6,042,294
------------ ------------ ------------
INCOME BEFORE OTHER INCOME (EXPENSES) (599,147) (708,053) (6,135,544)
------------ ------------ ------------
OTHER INCOME (EXPENSES)
Other income - - 2,298
Interest income 20,646 2,173 90,697
Interest expense (6,667) (176,190) (626,556)
Impairment loss - - (1,694,111)
Inventory impairment loss - - (13,642)
Loss on termination of employment agreement - - (240,000)
Loss on disposition of assets - - (3,662)
------------ ------------ ------------
TOTAL OTHER INCOME (EXPENSES) 13,979 (174,017) (2,484,976)
------------ ------------ ------------
NET LOSS BEFORE DISCONTINUED OPERATIONS $ (585,168) $ (882,070) $ (8,620,520)
============ ============ ============
DISCONTINUED OPERATIONS
Loss from discontinued operations - (96,734) (495,108)
Gain from disposition of subsidiary - - 228,893
------------ ------------ ------------
Net Discontinued Operations - (96,734) (266,215)
------------ ------------ ------------
NET LOSS $ (585,168) $ (978,804) $ (8,886,735)
------------ ------------ ------------
OTHER COMPREHENSIVE INCOME
Foreign currency adjustments - 5,390 -
------------ ------------ ------------
NET COMPREHENSIVE LOSS $ (585,168) $ (973,414) $ (8,886,735)
============ ============ ============
BASIC GAIN (LOSS) PER SHARE
Loss from operations $ (0.08) $ (0.17)
Discontinued operations - (0.01)
------------ ------------
Basic Gain (Loss) Per Share $ (0.08) $ (0.18)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES 7,543,524 5,349,250
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 7
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Related Deficit
Party Accumulated
Additional Other Stock Prepaid During the
Common Stock Paid-in Comprehensive Subscription Compensation Development
Shares Amount Capital Income Receivable Contracts Stage
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <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 financial statements.
<PAGE>
<PAGE> 8
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Related Deficit
Party Accumulated
Additional Other Stock Prepaid During the
Common Stock Paid-in Comprehensive Subscription Compensation Development
Shares Amount Capital Income Receivable Contracts Stage
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <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 Urathon 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 financial statements.
<PAGE>
<PAGE> 9
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Related Deficit
Party Accumulated
Additional Other Stock Prepaid During the
Common Stock Paid-in Comprehensive Subscription Compensation Development
Shares Amount Capital Income Receivable Contracts Stage
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <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)
Exercise of options for
common stock at $2.50
per share 5,500 5 13,745 - - - -
Common stock repurchased
at $0.18 per share (1,270,000) (1,270) (228,730) - - - -
Common stock issued in lieu
of interest on promissory
notes at approximately
$3.24 per share 152,250 152 492,629 - - - -
Common stock issued in lieu
of notes payable at $1.00
per share 400,000 400 399,600 - - - -
Common stock issued as
prepaid salary under related
party compensation contracts
at $2.00 per share 305,000 305 609,695 - - (610,000) -
Common stock issued for
subscription receivable
at $2.00 per share 200,000 200 399,800 - (400,000) - -
Common stock issued for
services at $2.00 per
share 264,752 265 529,239 - - - -
Receipt of stock
subscriptions - - - - 50,000 - -
Currency translation
adjustment - - - 188 - - -
Amortization of prepaid
compensation contracts - - - - - 33,333 -
Net loss for the year
ending June 30, 1998 - - - - - - (4,267,829)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Balance, June 30, 1998 4,619,250 $ 4,619 $ 7,798,789 $ 3,172 $ (400,000)$ (576,667)$(6,522,221)
=========== =========== =========== =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 10
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Continued)
<TABLE>
<CAPTION>
Related Deficit
Party Accumulated
Additional Other Stock Prepaid During the
Common Stock Paid-in Comprehensive Subscription Compensation Development
Shares Amount Capital Income Receivable Contracts Stage
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 4,619,250 $ 4,619 $ 7,798,789 $ 3,172 $ (400,000) $(576,667)$(6,522,221)
Common stock issued for
cash at $0.50 per share 875,000 875 436,625 - - - -
Common stock issued in lieu
of interest on promissory
note at approximately $0.93
per share 7,225 7 6,731 - - - -
Common stock issued in lieu
of notes payable at $1.00
per share 1,135,000 1,135 1,133,865 - - - -
Common stock issued in lieu
of notes payable at $0.50
per share 90,000 90 44,910 - - - -
Common stock issued for
services at $0.50 per
share 90,000 90 44,910 - - - -
Additional interest recorded
on subscription receivable - - - - (34,000) - -
Currency translation
adjustment - - - (3,172) - - -
Amortization of prepaid
compensation contracts - - - - - 306,667 -
Termination of employment
contract - - - - - (240,000) -
Net loss for the year
ending June 30, 1999 - - - - - - 1,779,346)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Balance, June 30, 1999 6,816,475 $ 6,816 $ 9,465,830 $ - $ (434,000)$ (30,000)$(8,301,567)
Common stock issued for
cash at $0.50 per share
(unaudited) 1,254,000 1,265 625,746 - - - -
Common stock issued for
services at $1.17 per
share (unaudited) 10,622 11 12,489 - - - -
Additional interest
recorded on subscription
receivable (unaudited) - - - - (17,140) - -
Amortization of prepaid
compensation contract
(unaudited) - - - - - 30,000 -
Net loss for the 6 months
ended December 31, 1999
(unaudited) - - - - - - (585,168)
----------- ----------- ----------- ----------- ----------- ----------- ---------
Balance at December 31,
1999 (unaudited) 8,081,097 $ 8,092 $10,104,065 $ - $ (451,140)$ - $(8,886,735)
=========== =========== =========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 11
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the For the
Three Months Three Months
Ended Ended
December 31, December 31,
1999 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (296,994) $ (403,262)
Adjustments to Reconcile Net (Loss) to
Net Cash (Used) by Operating Activities:
Depreciation and amortization 54,501 53,585
Bad debt expense - -
Loss on disposition of assets - -
Impairment loss - -
Inventory impairment loss - -
Gain on disposition of subsidiary - -
Loss on termination of employment contract - -
Loss from discontinued operations - 49,057
Common stock issued for services 8,334 -
Services provided in lieu of cash payment
on subscriptions receivable - -
Common stock issued in lieu of interest - -
Interest on subscription receivable 8,570 -
Changes in Assets and Liabilities:
(Increase) decrease in accounts receivable
and accounts receivable - related party (7,623) 2,005
(Increase) decrease in inventory (252,563) 5,283
(Increase) decrease in prepaid expenses (30,742) 58,255
(Increase) decrease in other assets (27,506) 300
Increase (decrease) in accounts payable and
accrued expenses 64,018 127,575
---------- ---------
Net Cash (Used) by Operating Activities (424,994) (204,402)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (18,539) (1,085)
Purchase of subsidiary - -
------------ -----------
Net Cash (Used) in Investing Activities $ (18,539) $ (1,085)
------------- -----------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 12
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
For the For the
Three Months Three Months
Ended Ended
December 31, December 31,
1999 1998
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock subscription receivable $ - $ -
Repurchase of common stock - -
Payment of stock offering costs - -
Proceeds from notes payable - 116,754
Cash received on stock subscription deposit 69,931 -
Payments made on notes payable and line of credit - -
Payments made to related parties - -
Common stock issued for cash 182,511 75,869
------------ ------------
Net Cash Provided (Used) by Financing
Activities 252,442 192,623
------------ ------------
NET INCREASE (DECREASE) IN CASH (191,091) (9,864)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 230,964 13,662
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39,873 $ 3,798
============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
CASH PAID FOR:
Interest $ - $ -
Income taxes $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for services rendered $ 8,333 $ -
Common stock issued in lieu of debt and interest $ - $ -
Common stock issued for acquisition of subsidiary$ - $ -
Common stock issued as prepaid salary $ - $ -
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 13
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Cash Flows, Continued
(Unaudited)
<TABLE>
<CAPTION>
From
For the For the Inception on
Six Months Six Months January 30,
Ended Ended 1995 Through
December 31, December 31, December 31,
1999 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (585,168) $ (882,070) $ (8,886,735)
Adjustments to Reconcile Net (Loss) to
Net Cash (Used) by Operating Activities:
Depreciation and amortization 109,002 105,389 696,628
Bad debt expense - - 21,112
Loss on disposition of assets - - 3,662
Impairment loss - - 1,694,111
Inventory impairment loss - - 13,642
Gain on disposition of subsidiary - - (228,893)
Loss on termination of employment contract - - 240,000
Loss from discontinued operations - 96,734 544,165
Common stock issued for services 12,500 - 927,759
Services provided in lieu of cash payment
on subscriptions receivable - - 75,000
Common stock issued in lieu of interest - 3,751 499,519
Interest on subscription receivable 17,140 - 51,140
Changes in Assets and Liabilities:
(Increase) decrease in accounts receivable
and accounts receivable - related party (6,482) (72,468) (29,156)
(Increase) decrease in inventory (327,655) 16,663 (367,968)
(Increase) decrease in prepaid expenses (36,013) 57,395 290,181
(Increase) decrease in other assets 27,170 300 (76,819)
Increase (decrease) in accounts payable and
accrued expenses 64,624 311,098 91,782
----------- ------------ ------------
Net Cash (Used) by Operating Activities (724,882) (363,208) (4,464,209)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (18,539) (91,549) (1,460,289)
Purchase of subsidiary - - (400,000)
------------- ------------ ------------
Net Cash (Used) in Investing Activities $ (18,539) $ (91,549) $ (1,860,289)
------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE> 14
AMERICAN TIRE CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From
For the For the Inception on
Six Months Six Months January 30,
Ended Ended 1995 Through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock subscription receivable $ - $ - $ 50,000
Repurchase of common stock - - (439,862)
Payment of stock offering costs - - (160,401)
Proceeds from notes payable - 128,993 2,298,838
Cash received on stock subscription deposit 158,992 - 198,492
Payments made on notes payable and line of credit (6,000) (25,000) (435,838)
Payments made to related parties - - (10,000)
Common stock issued for cash 627,011 75,869 4,863,142
------------ ------------ ------------
Net Cash Provided (Used) by Financing
Activities 780,003 179,862 6,364,371
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 36,582 (274,895) 39,873
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 3,291 278,693 -
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39,973 $ 3,798 $ 39,873
============ ============ ============
SUPPLEMENTAL SCHEDULE OF CASH FLOW ACTIVITIES
CASH PAID FOR:
Interest $ - $ 411 $ 56,449
Income taxes $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for services rendered $ 12,500 $ - $ 923,592
Common stock issued in lieu of debt and interest $ - $ 1,203,251 $ 2,841,019
Common stock issued for acquisition of subsidiary $ - $ - $ 1,550,000
Common stock issued as prepaid salary $ - $ - $ 610,000
</TABLE>
<PAGE>
<PAGE> 15
AMERICAN TIRE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Notes to the Unaudited Financial Statements
December 31, 1999
NOTE 1- CONDENSED FINANCIAL STATEMENTS
The accompanying 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 December 31, 1999 and 1998
and for all periods have been made.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's June 30, 1999 audited
financial statements included in its report on Form 10K-SB. The results of
operations for the periods ended December 31, 1999 and 1998 are not
necessarily indicative of the operating results for the full years.
<PAGE>
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding Forward-looking Statements
- ----------------------------------------------------------
This report may contain "forward-looking" statements. Examples of
forward- looking statements include, but are not limited to: (a) projections
of revenues, capital expenditures, growth, prospects, dividends, capital
structure and other financial matters; (b) statements of plans and objectives
of the Company or its management or Board of Directors; (c) statements of
future economic performance; (d) statements of assumptions underlying other
statements and statements about the Company and its business relating to the
future; and (e) any statements using the words "anticipate," "expect," "may,"
"project," "intend" or similar expressions.
Year 2000 Disclosure
- --------------------
The Company has worked to resolve any potential impact of the year 2000
on the ability of the Company's computerized information systems to accurately
process information that may be date-sensitive. Any of the Company's programs
that recognize a date using "00" as the year 1900 rather than the year 2000
could have resulted in errors or system failures. The Company utilizes a
minimum number of computer programs in its operations. The Company completed
its assessment, and believed it to be compliant. The Company believes the
cost of compliance did not have a material adverse impact on the Company's
financial position. However, if third parties upon which the Company relies
are unable to address this issue in a timely manner, it could result in a
material financial risk to the Company.
Results of Operations
- ---------------------
The Company manufactures the flat-free tires utilizing centrifugal
molding machines. These machines centrifugally mold elastomer 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 is repeated.
During December 1999, the Company began marketing a line of bicycles
utilizing the Company's "flat-free" bicycle tires. There were nominal sales
of the bicycles made during the three month period ending December 31, 1999,
however; the Company committed the capital resources to produce tires for
10,000 bicycles. Other than the expected revenue source derived from the sale
of the bicycles, the Company knows of no other predictable events or
uncertainties that may be reasonably expected to have a material impact on the
net sales revenues or income from continuing operations other than the lack of
sufficient working capital.
In June 1999, due to lack of sufficient working capital to adequately
exploit the United Kingdom and European markets and in an effort to reduce
expenses, the Company's management decided to discontinue its distribution
operations in Europe. As a result of disposing of the Company's subsidiary,
the Company's results of operations for the three and six month periods ended
December 31, 1999, does not include the consolidated results of operations of
the Company and its former subsidiary for that period.
<PAGE>
<PAGE> 17
Three and Six Month Periods ended December 31, 1999 compared to Three and Six
Month Periods ended December 31, 1998
- ----------------------------------------------------------------------
Total revenues for the three months ended December 31, 1999 was $14,822
compared to $12,138 for the same period in 1998. Total revenues for the six
months ended December 31, 1999 was $19,982 compared to $24,588 for the same
period in 1998. The small increase in sales for the three month period in
1999 as compared to the prior year three month period is based on the
Company's shift in marketing from OEM to direct sales and the shift to the
introduction of bicycles during the period just ended. Costs of sales for the
three months ended December 31, 1999 were $38,201, or 258% of sales as
compared to $13,948, or 115% of sales for the quarter ended December 31, 1998.
Costs of sales for the six month period ended December 31, 1999 were $49,713,
or 249% of sales as opposed to $27,898, or 113% of sales for the corresponding
period in 1998. The increase in the cost of sales as a percent of sales for
fiscal year 1999 compared to fiscal year 1998 is due to the fact that the
Company has not had sales in sufficient quantities to offset minimum costs of
production. The Company believes that market acceptance or rejection of its
bicycle/tire-wheel assemblies may be reasonably expected to have a material
impact on the net sales revenues or income from continuing operations. Until
such time as the market acceptance or rejection is established, the Company
cannot predict what the effect on sales revenue or income will be.
Corporate Expense. For the three months ended December 31, 1999, total
operating expenses were $281,432, consisting of mainly of payroll and payroll
taxes of $70,213, depreciation and amortization of $54,501, and selling,
general and administrative expenses of $156,718, resulting in a loss from
operations of $(304,811). Total operating expenses for the three months ended
December 31, 1998 were $321,397, mainly consisting of payroll and payroll
taxes of $173,718, depreciation and amortization of $53,585, and selling,
general and administrative expenses of $ 94,094, resulting in a loss from
operations of $(323,207). For the six months ended December 31, 1999, total
operating expenses were $569,416, consisting of mainly of payroll and payroll
taxes of $197,031, depreciation and amortization of $109,002, and selling,
general and administrative expenses of $231,133, resulting in a loss from
operations of $(599,147). Total operating expenses for the six months ended
December 31, 1998 were $704,742, mainly consisting of payroll and payroll
taxes of $366,790, depreciation and amortization of $105,389 and selling,
general and administrative expenses of $182,564 resulting in a loss from
operations of $(708,053).
During the three and six months periods ended December 31, 1999, the
Company implemented several cost reduction measures to decrease the amount of
loss the Company was experiencing through operations until such time as sales
volume for its products increased to the point of offsetting such costs. For
the six month period ended December 31, 1999, the Company has reduced overall
operating expenses approximately 20% from the prior year comparative period.
For the remainder of fiscal year 2000, the Company expects operating expenses
to remain relatively constant at approximately $100,000 per month.
Interest Expense. Interest expense for the three months ended December
31, 1999 was $2,625 compared to $80,928 for the same period in 1998. Interest
expense for the six months ended December 31, 1999 was $6,667 compared to
$176,190 for the same period in 1998. The reduction in interest expense for
the three and six month periods in 1999 is directly attributable to the
conversion to equity of convertible promissory notes issued during previous
periods.
<PAGE> 18
The Company experienced a net comprehensive loss of $(296,994) for the
three month period ended December 31, 1999 compared a loss of $(451,562) for
the same period in 1998. The basic loss per share for the quarter was $(0.04)
in 1999 compared to $(0.08) for 1998, based on the weighted average number of
shares outstanding of 7,543,524 and 5,539,250, respectively.
The Company experienced a net comprehensive loss of $(585,168) for the
six month period ended December 31, 1999 compared a loss of $(978,804) for the
same period in 1998. The basic loss per share for the six months was $(0.08)
in 1999 compared to $(0.17) for 1998, based on the weighted average number of
shares outstanding of 7,543,524 and 5,539,250, respectively.
Liquidity and Capital Resources
- ---------------------------------
During the six month period ended December 31, 1999, the Company issued
1,254,000 shares of its common stock for cash at $0.50 per share, for
aggregate cash proceeds of $627,011. In addition, the Company issued 10,622
shares of its common stock, valued at $1.17 per share, for services totaling
$12,500.
The Company had current assets of $465,704 and current liabilities of
$599,227, for a working capital deficit of $(133,523) at December 31, 1999.
The Company had cash and cash equivalents of $39,873 and accounts receivable
of $8,044 for the same period. Net cash used in operations for the three
months ended December 31, 1999 was $424,994 and $204,402 for the comparative
period ended December 31, 1998. Net cash used in operations for the six month
period ended December 31, 1999 was $724,882 and $363,208 for the comparative
period ended December 31, 1998. Cash used in operations for the three and six
months ended December 31, 1999 was funded primarily by cash received from the
sale of common stock.
At December 31, 1999, the Company had net property and equipment of
$843,835, after deduction of $574,512 in accumulated depreciation, The
Company's property and equipment consists mainly of land ($59,000), building
and improvements ($263,920), and equipment ($1,095,427). At December 31,
1999, the Company has an accumulated deficit during the development stage of
$(8,886,734), has a working capital deficit and limited internal financial
resources. The report of the Company's auditor for the Company's fiscal year
end at June 30, 1999, contains a going concern modification as to the ability
of the Company to continue. During fiscal 1999, the Company continued to
effect measures to reduce cash outflows and increase working capital through
the issuance of additional shares of common stock for services and conversion
of debt.
The Company is aware of its ongoing cash requirements and has implemented
a cash flow plan, including continued reduction in its general and
administrative expenses. Additionally, the Company has developed an overall
strategy and certain financing options to meet its ongoing needs through June
30, 2000. Due to the need for working capital, the Company will continue to
seek additional debt and/or equity financing from existing shareholders and
other investment capital resources. At December 31, 1999, the Company had
received $175,919 under a Share Purchase Agreement with an affiliate. The
Company has received $250,000 under a private placement offering conducted
under Rule 506 of Regulation D of the Securities Act of 1933, and expects to
raise an additional $250,000 by March 1, 2000. The Company has no other
commitments for any additional debt or equity financing at this time and no
assurance can be given that the Company will be able to obtain any such
commitments.
<PAGE> 19
Because of the Company's limited financial resources, the Company does
not anticipate expending any substantial sums for new research and development
during the fiscal year ended June 30, 2000.
Impact of Inflation
- -------------------
The Company does not anticipate that inflation will have a material
impact on its current or proposed operations.
Principal Customers
- -------------------
During the three and six month periods ended December 31, 1999, the
Company had no individual customer that accounted for more than 10% of the
Company's revenues.
Seasonality
- -----------
Management of the Company knows of no seasonal aspects relating to the
nature of the Company business operations that had a material effect on the
financial condition or results of operation of the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
EXHIBIT
NO. DESCRIPTION Location
- ------- ----------- --------
27 Financial Data Schedule This Filing
(b) REPORTS ON FORM 8-K.
None.
<PAGE>
<PAGE> 20
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: February 2, 2000 /S/DAVID K. GRIFFITHS
-----------------------------------
Principal Accounting Officer
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<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 39,873
<SECURITIES> 0
<RECEIVABLES> 8,044
<ALLOWANCES> 0
<INVENTORY> 367,968
<CURRENT-ASSETS> 465,704
<PP&E> 843,835
<DEPRECIATION> (574,512)
<TOTAL-ASSETS> 1,373,499
<CURRENT-LIABILITIES> 599,227
<BONDS> 0
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<COMMON> 9,661,006
<OTHER-SE> (8,886,734)
<TOTAL-LIABILITY-AND-EQUITY> 1,373,499
<SALES> 19,982
<TOTAL-REVENUES> 19,982
<CGS> 49,713
<TOTAL-COSTS> 569,416
<OTHER-EXPENSES> 13,979
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,667)
<INCOME-PRETAX> (585,168)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
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<EXTRAORDINARY> 0
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