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, 2006
Commission File Number 0-29057
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________TO __________________
AMERICAN RACING CAPITAL, INC.
(Exact name of registrant as specified in charter)
NEVADA 87-0631750
------------------------ -----------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
920 Bollen Circle
Gardnerville, NV 89460 89448
---------------------- -----
(Address of principal executive offices) (Zip)
Issuer's telephone number, including area code (800) 914-3177
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 during the past twelve
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |_| No |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Sections 12, 13 or 15(d)of the Exchange Act subsequent to the
distribution of securities under a plan confirmed by a court.
|_| Yes |_| No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: AS OF AUGUST 29, 2006 -
27,791,398 SHARES OF THE ISSUER'S COMMON STOCK, $0.001 PAR VALUE PER SHARE.
----------------
Transitional Small Business Disclosure Format: Yes |_| No |X|
PART I
FINANCIAL INFORMATION
INTRODUCTORY NOTE
FORWARD-LOOKING STATEMENTS
This Form 10-QSB contains "forward-looking statements" relating to
American Racing Capital, Inc. ("ARC") which represent ARC's current expectations
or beliefs including, but not limited to, statements concerning ARC's
operations, performance, financial condition and growth. For this purpose, any
statements contained in this Form 10-QSB that are not statements of historical
fact are forward-looking statements. Without limiting the generality of the
foregoing, words such as "may", "anticipation", "intend", "could", "estimate",
or "continue" or the negative or other comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, such as losses, dependence on management,
variability of quarterly results, and the ability of ARC to continue its growth
strategy, certain of which are beyond ARC's control. Should one or more of these
risks or uncertainties materialize or should the underlying assumptions prove
incorrect, actual outcomes and results could differ materially from those
indicated in the forward-looking statements.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
1
ITEM 1. FINANCIAL STATEMENTS
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2006
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 267
---------
Total Current Assets 267
---------
PROPERTY AND EQUIPMENT, net 30
---------
TOTAL ASSETS $ 297
=========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable - related parties $ 61,514
Notes payable 27,500
Accounts payable and accrued expenses 108,701
---------
Total Current Liabilities 197,715
---------
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock 10,000,000 shares authorized at $0.001 par value;
2,000,000 shares issued and outstanding 2,000
Common stock 500,000,000 shares authorized at $0.001 par value;
4,991,398 shares issued and outstanding 4,991
Additional paid in capital (deficit) (3,849)
Accumulated deficit (200,560)
---------
Total Stockholders' Equity (Deficit) (197,418)
---------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY (DEFICIT) $ 297
=========
The accompanying notes are an integral part of these financial statements.
2
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(Unaudited)
March 31, March 31,
2006 2005
----------- -----------
SALES $ 880 $ 16,403
COST OF SALES -- --
----------- -----------
Gross Profit 880 16,403
----------- -----------
EXPENSES
Consulting and professional fees 1,563 15,855
Administrative 24,437 9,907
----------- -----------
TOTAL EXPENSES 26,000 25,762
----------- -----------
Income (loss) from operations (25,120) (9,359)
OTHER INCOME (EXPENSE)
Interest expense -- --
Other income -- --
TOTAL OTHER (EXPENSE) -- --
----------- -----------
Income (loss) from operations (25,120) (9,359)
----------- -----------
Income (loss) - before provision for income taxes (25,120) (9,359)
----------- -----------
Provision for income taxes -- --
----------- -----------
Net income (loss) $ (25,120) $ (9,359)
=========== ===========
NET LOSS PER COMMON SHARE
Basic and diluted $ (0.01) $ (0.02)
----------- -----------
WEIGHTED AVERAGE OUTSTANDING SHARES
Basic and diluted 4,991,398 491,398
----------- -----------
The accompanying notes are an integral part of these financial statements.
3
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2005
(Unaudited)
March 31, March 31,
2006 2005
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(25,120) $ (9,359)
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation 758 758
Changes in operating assets and liabilities
Accounts receivable -- --
Accounts receivable-related party -- --
Accounts payable-related -- --
Accounts payable 22,500 3,274
Cash overdraft -- --
Deposits -- --
Net Cash from Operations (1,862) (5,327)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable-related parties 750 7,000
Proceeds from notes payable 1,000 --
Payments on notes payable -- --
-------- --------
Net cash provided (used) by financing activities 1,750 7,000
-------- --------
Net Increase (decrease) in Cash (112) 1,673
Cash at Beginning of Period 379 551
-------- --------
Cash at End of Period $ 267 $ 2,224
======== ========
Supplemental disclosure of cash flow information
Cash paid for interest $ -- $ --
-------- --------
Cash paid for income taxes $ -- $ --
-------- --------
The accompanying notes are an integral part of these financial statements.
4
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Securities and Exchange Commission requirements for
interim financial statements. Therefore, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements. The financial statements
should be read in conjunction with the Form 10-KSB for the year ended December
31, 2005 of American Racing Capital, Inc. and subsidiaries (collectively the
"Company").
The interim financial statements present the condensed balance sheet, statements
of operations and cash flows of the Company. The financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States.
The interim financial information is unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position of the
Company as of March 31, 2006 and the results of operations and cash flows
presented herein have been included in the financial statements. Interim results
are not necessarily indicative of results of operations for the full year.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has generated significant losses from operations.
In order to continue as a going concern and achieve a profitable level of
operations, the Company will need, among other things, additional capital
resources and developing a consistent source of revenues. Management's plans
include raising additional operating funds from the private placements of shares
of its common stock.
The ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plan described in the preceding paragraph
and eventually attain profitable operations. The accompanying financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Employee stock based compensation - In December 2004, the Financial Accounting
Standards Board issued SFAS No. 153, "Accounting for Stock-Based Compensation".
SFAS No. 153 amends the transition and disclosure provisions of SFAS No. 123.
This statement supersedes APB Opinion No.25, Accounting for Stock Issued to
employees, and its related implementation guidance. This Statement establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services. This Statement requires a public
entity to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award
(with limited exceptions). That cost will be recognized over the period during
which an employee is required to provide service in exchange for the award--the
requisite service period (usually the vesting period). For stock options and
warrants issued to non-employees, the Company applies Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation,
which requires the recognition of compensation cost based upon the fair value of
stock options at the grant date using the Black-Scholes Option Pricing Model.
The Company issued no stock and granted no warrants or options to employees for
compensation for the three months ended March 31, 2006.
5
3. RELATED PARTY TRANSACTIONS
Accounts payable - related parties - As of March 31, 2006, officers-directors,
and their controlled entities, have acquired 34.33% of the outstanding stock of
the Company and have made non-interest bearing, due on demand loans to the
Company totaling $61,514.
4. SIGNIFICANT EVENTS
On August 25, 2005, the Company filed a Certificate of Amendment to the Articles
of Incorporation of the Company with the Secretary of State of the State of
Nevada to increase the authorized number of shares of capital from 50,000,000 to
500,000,000. On October 3, 2005, the Company filed a Certificate of Amendment to
the Articles of Incorporation of the Company with the Secretary of State of the
State of Nevada to change the corporate name from `Creative Holdings & Marketing
Corporation' to `American Racing Capital, Inc.'
The Company entered into a Share Exchange Agreement, dated October 17, 2005, by
and among the Company, American Racing Capital, Inc., a Nevada corporation
("ARCI") and the shareholders of ARCI (the "ARCI Shareholders"). Pursuant the
Share Exchange Agreement, the ARCI Shareholders exchanged with, and delivered to
the Company all of the issued and outstanding common stock of ARCI in exchange
for 150,000,000 shares of the Company's common stock, par value $0.001 (the
"Common Stock") and 1,000,000 shares of Series A Convertible Preferred Stock,
par value $0.001 per share (the "Series A Preferred Stock"). The 1,000,000
shares of Series A Preferred Stock can be converted at any time into three
hundred (300) fully paid, nonassessable shares of the Company's Common Stock. As
a result of the Share Exchange Agreement, on October 19, 2005, ARCI became a
wholly-owned subsidiary of the Company.
On October 18, 2005, the Company entered into a Share Exchange Agreement, by and
among the Company, ARC Development Corporation, a Nevada corporation ("ARCD")
and the shareholders of ARCD (the "ARCD Shareholders"). Pursuant to the Share
Exchange Agreement, the ARCD Shareholders exchanged with, and delivered to, ARC
the issued and outstanding Common Stock of ARCD in exchange for 235,000,000
shares of the Company's Common Stock, and 1,000,000 shares of Series A Preferred
Stock, which can be converted at any time into three hundred (300) fully paid,
nonassessable shares of the Company's Common Stock. As a result of the Share
Exchange Agreement, on October 19, 2005, ARCD became a wholly-owned subsidiary
of the Company.
On November 18, 2005, the Company's Board of Directors appointed D. Davy Jones
as President and Chief Executive Officer and Director and A. Robert Koveleski as
Vice-President, Secretary and Director. On November 18, 2005, John W. Gandy
resigned as President and Chief Executive Officer and Director of the Company.
Also on November 18, 2005, Ron E. Hendrix resigned as Secretary and Director and
John F. Smith, III resigned as Director of the Company.
On March 20, 2006, the Board of Directors of the Company, in lieu of a special
meeting and pursuant to unanimous written consent, approved a one for one
hundred (1-for-100) reverse stock split (the "Reverse Stock Split") of the
Company's issued and outstanding, which became effective on March 30, 2006 (the
"Effective Date"). On the Effective Date, the Company's issued and outstanding
Common Stock was reduced based on the 1-for-100 ratio and the new symbol for the
Company was changed to `ANRC'.
5. SUBSEQUENT EVENTS
On July 25, 2006, the Company entered into a Securities Purchase Agreement with
New Millennium Capital Partners II, LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and AJW Partners, LLC (collectively, the "Investors"). Under the
terms of the Securities Purchase Agreement, the Investors purchased an aggregate
of (i) $2,000,000 in callable convertible secured notes (the "Notes") and (ii)
warrants to purchase 10,000,0000 shares of the Company's Common Stock (the
"Warrants"). The Notes carry an interest rate of 6% per annum and a maturity
date of July 25, 2009. Pursuant to the Securities Purchase Agreement, the
Company must file a registration statement with the U.S. Securities and Exchange
Commission within forty-five (45) days of the execution of the Securities
Purchase Agreement. The notes are convertible into the Company's Common Stock at
the Applicable Percentage of the average of the lowest three (3) trading prices
for our shares of Common Stock during the twenty (20) trading day period prior
to conversion. The "Applicable Percentage" means 50%; provided, however, that
the Applicable Percentage shall be increased to (i) 55% in the event that a
registration statement is filed within thirty days of the closing and (ii) 60%
in the event that the registration statement becomes effective within one
hundred and twenty days from the Closing. In addition, the Company has granted
the investors a security interest in substantially all of its assets, as well as
intellectual property and registration rights. In connection with the Securities
Purchase Agreement, the Company issued to the Investors seven year warrants to
purchase 10,000,000 shares of the Company's Common Stock at an exercise price of
$.30.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements and Associated Risks. This Report contains
forward-looking statements. Such forward-looking statements include statements
regarding, among other things, (a) our growth strategies, (b) anticipated trends
in our industry, (c) our future financing plans, (d) our anticipated needs for
working capital, (e) our lack of operational experience, and (f) the benefits
related to ownership of our common stock. Forward-looking statements, which
involve assumptions and describe our future plans, strategies, and expectations,
are generally identifiable by use of the words "may," "should," "expect,"
"anticipate," "estimate," "believe," "intend," or "project" or the negative of
these words or other variations on these words or comparable terminology. These
forward-looking statements are based largely on the Company's expectations and
are subject to a number of risks and uncertainties, including those described in
"Business Risk Factors" of the Company's Form 10-KSB for the year ended December
31, 2005. Actual results could differ materially from these forward-looking
statements as a result of changes in trends in the economy and the industry,
demand for the Company's services, competition, reductions in the availability
of financing and availability of raw materials, and other factors. In light of
these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this Report will in fact occur as
projected. Any forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. New factors emerge from time to time and it is not
possible for management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
Overview
On October 17, 2005, American Racing Capital, Inc. (the "Company") entered
into a Share Exchange Agreement, by and among the Company, American Racing
Capital, Inc., a Nevada company ("ARCI") and the shareholders of ARCI, pursuant
to which, the ARCI Shareholders exchanged with, and delivered to the Company all
of the issued and outstanding common stock of ARCI in exchange for 150,000,000
shares of the Company's Common Stock and 1,000,000 shares of Series A Preferred
Stock, which can be converted at any time into three hundred (300) fully paid,
nonassessable shares of the Company's Common Stock. As a result of the Share
Exchange Agreement, on October 19, 2005, ARCI became a wholly-owned subsidiary
of the Company.
On October 18, 2005, the Company entered into a Share Exchange Agreement,
by and among the Company, ARC Development Corporation, a Nevada corporation
("ARCD") and the shareholders of ARCD. Pursuant to the Share Exchange Agreement,
the ARCD Shareholders exchanged with, and delivered to, ARC the issued and
outstanding common stock of ARCD in exchange for 235,000,000 shares of the
Company's Common Stock, and 1,000,000 shares of Series A Preferred Stock, which
can be converted at any time into three hundred (300) fully paid, nonassessable
shares of the Company's Common Stock. As a result of the Share Exchange
Agreement, on October 19, 2005, ARCD became a wholly-owned subsidiary of the
Company.
As a result of the share exchange transactions, the Company adopted a new
strategy which seeks to integrate race track design and development operations
with a professional racing team and a national driving school network to
leverage the popularity and growth of the motor sports industry.
On March 20, 2006, the Board of Directors of the Company, in lieu of a
special meeting and pursuant to unanimous written consent, approved a one for
one hundred (1-for-100) reverse stock split (the "Reverse Stock Split") of the
Company's issued and outstanding, which became effective on March 30, 2006 (the
"Effective Date"). On the Effective Date, the Company's issued and outstanding
Common Stock was reduced based on the 1-for-100 ratio and the new symbol for the
Company was changed to `ANRC'.
Critical Accounting Policies And Estimates
Management's discussion and analysis of the Company's financial condition
and results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires that we make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses. At each
balance sheet date, management evaluates its estimates. The Company based its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. The estimates
and critical accounting policies that are most important in fully understanding
and evaluating our financial condition and results of operations include those
listed below.
7
Revenue Recognition
The Company recognizes revenue when services have been provided and
collection is reasonably assured.
Principles Of Consolidation
On October 17, 2005, the Company entered into a Share Exchange Agreement,
by and among the Company, ARCI and the shareholders of ARCI, pursuant to which,
the ARCI Shareholders exchanged with, and delivered to the Company all of the
issued and outstanding common stock of ARCI in exchange for 150,000,000 shares
of the Company's Common Stock and 1,000,000 shares of Series A Preferred Stock,
which can be converted at any time into three hundred (300) fully paid,
nonassessable shares of the Company's Common Stock. As a result of the Share
Exchange Agreement, on October 19, 2005, ARCI became a wholly-owned subsidiary
of the Company. The shareholders of Fast One, Inc., DJ Motorsports, Inc. and
ARCI became the controlling shareholders of the Company. Accordingly, the
financial statements of Fast One, Inc., DJ Motorsports, Inc. and ARCI are
presented as the historical financial statements of the Company. The
consolidated financial statements shown in this report include the historical
operating information of the Fast One, Inc., DJ Motorsports, Inc. and ARCI.
All intercompany transactions have been eliminated.
Results Of Operations
For The Three Months Ended March 31, 2006 Compared To The Three Months
Period Ended March 31, 2005
Revenues
Revenue for the three months ended March 31, 2006, was $880, a decrease of
$15,523, from $16,403 in revenues for the same period ended March 31, 2005. The
decrease of 94% in revenues in 2006 was attributable to management spending most
of its efforts on fund raising rather than consulting.
Operating expenses. Operating expenses for the three months ended March
31, 2006, were $26,000, as compared to $25,762, for the three months ended March
31, 2005, or a 0.9% increase. Operating expenses in 2006 consisted of $1,563 in
consulting and professional fees and $24,437 in general and administrative
expenses.
Net income (loss). The Company had a net loss of $25,120 for the three
months ended March 31, 2006, as compared to a net loss of $9,359 for the three
months ended March 31, 2005. The increased loss of $15,761, or 84%, was mostly
attributable to the lack of sales from consulting services.
Liquidity And Capital Resources
The Company's financial statements have been prepared on a going concern
basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The Company has
incurred losses since inception. The Company incurred a net loss of $25,120 and
a net loss of $9,359 for the three months ended March 31, 2006 and 2005,
respectively, and has an accumulated deficit of $200,560 at March 31, 2006. As
of March 31, 2006, we had assets of $297 and liabilities of $197,715 creating a
working capital deficiency of $197,418.
The majority of the Company's liabilities, $108,701, are accounts payable.
Notes payable to related parties of $61,514 are also included in the Company's
liabilities. As of March 31, 2006, the Company has notes payable totaling
$61,514 to Mr. Jones' affiliate entities for funds advanced. The Company has a
note payable in the amount of $10,877 to Fast One, Inc. and a note payable in
the amount of $50,637 to DJ Motorsports, Inc
For the three months ended March 31, 2006, the Company used net cash in
its operations of $1,862, no cash was used in investing activities and had
$1,750 in cash provided by financing activities in the proceeds of notes
payable.
8
Subsequent to March 31, 2006, the Company secured funding through the
issuance of notes and warrants. On July 25, 2006, the Company entered into a
Securities Purchase Agreement with New Millennium Capital Partners II, LLC, AJW
Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (collectively,
the "Investors"). Under the terms of the Securities Purchase Agreement, the
Investors purchased an aggregate of (i) $2,000,000 in callable convertible
secured notes (the "Notes") and (ii) warrants to purchase 10,000,0000 shares of
our Common Stock (the "Warrants"). The Notes carry an interest rate of 6% per
annum and a maturity date of July 25, 2009. The notes are convertible into the
Company's Common Stock at the fifty percent (50%) (the "Applicable Percentage")
of the average of the lowest three (3) trading prices for our shares of Common
Stock during the twenty (20) trading day period prior to conversion. The
Applicable Percentage means 50%; provided, however, that the Applicable
Percentage shall be increased to (i) 55% in the event that a Registration
Statement is filed within thirty days of the closing and (ii) 60% in the event
that the Registration Statement becomes effective within one hundred and twenty
days from the closing of the transaction. In addition, the Company has granted
the investors a security interest in substantially all of its assets, as well as
intellectual property and registration rights. In connection with the Securities
Purchase Agreement, the Company issued to the Investors seven year warrants to
purchase 10,000,000 shares of our common stock at an exercise price of $.30.
Plan Of Operation
The Company seeks to integrate race track design and development
operations with a professional racing team and a national driving school network
to leverage the popularity and growth of the motor sports industry.
For the next 12 months, the Company anticipates that it will need
$2,500,000 to fund event and administrative operations and provide working
capital, in addition to funding necessary to acquire and develop race track
projects. The Company will seek debt financing to launch any new race track
projects and will seek equity funding or a combination of debt/equity financing
for operations.
ITEM 3. CONTROLS AND PROCEDURES
(A) Evaluation Of Disclosure Controls And Procedures
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Principal Executive Officer and Interim Principal Accounting Officer
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. The Company's disclosure controls and procedures are
designed to provide a reasonable level of assurance of achieving the Company's
disclosure control objectives. The Company's Principal Executive Officer and
Interim Principal Accounting Officer have concluded that the Company's
disclosure controls and procedures are, in fact, adequate and effective to
ensure that material information relating to the Company that is required to be
disclosed by the Company in reports that it files or submits under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in Commission rules and
accumulated and communicated to the Company's management, including its
Principal Executive Officer and Interim Principal Accounting Officer , to allow
timely decisions regarding required disclosure
(B) Changes In Internal Controls Over Financial Reporting
In connection with the evaluation of the Company's internal controls
during the Company's fiscal quarter ended March 31, 2006, the Company's
Principal Executive Officer and Interim Principal Accounting Officer have
determined that there are no changes to the Company's internal controls over
financial reporting that has materially affected, or is reasonably likely to
materially effect, the Company's internal controls over financial reporting.
9
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 BE A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit Number Title of Document Location
-------------- -------------------------------------------------------------- -----------------------------------------
3.2 Certificate of Designation of the Series A Incorporated by reference as Exhibit 3.2
Convertible Preferred Stock of American Racing to Form 8-K filed on December 5, 2005
Capital, Inc.
10.1 Share Exchange Agreement, dated October 17, 2005, by Incorporated by reference as Exhibit 99.1
and among the Company, American Racing Capital, to Form 8-K filed on October 17, 2005
Inc., and the shareholders of American Racing
Capital, Inc.
10.2 Share Exchange Agreement, dated October 18, 2005, by Incorporated by reference as Exhibit 99.1
and among the Company, ARC Development Corporation, to Form 8-K filed on October 19, 2005
and the shareholders of ARC Development Corporation
10.3 Securities Purchase Agreement dated July 25, 2006, Incorporated by reference as Exhibit 4.1
by and among the Company and New Millennium Capital to Form 8-K filed on August 4, 2006
Partners II, LLC, AJW Qualified Partners, LLC,
AJW Offshore, Ltd. and AJW Partners, LLC
10.4 Form of Callable Convertible Secured Note by and Incorporated by reference as Exhibit 4.2
among New Millennium Capital Partners II, LLC, AJW to Form 8-K filed on August 4, 2006
Qualified Partners, LLC, AJW Offshore, Ltd.
and AJW Partners, LLC
10
Exhibit Number Title of Document Location
-------------- -------------------------------------------------------------- --------------------------------------------
10.5 Form of Stock Purchase Warrant issued to New Incorporated by reference as Exhibit 4.3
Millennium Capital Partners II, LLC, AJW Qualified to Form 8-K filed on August 4, 2006
Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC
10.6 Registration Rights Agreement dated July 25, 2006 by Incorporated by reference as Exhibit 4.4
and among New Millennium Capital Partners II, LLC, to Form 8-K filed on August 4, 2006
AJW Qualified Partners, LLC, AJW Offshore,
Ltd. and AJW Partners, LLC
10.7 Security Agreement dated July 25, 2006 by and among Incorporated by reference as Exhibit 4.5
the Company and New Millennium Capital Partners II, to Form 8-K filed on August 4, 2006
LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and AJW Partners, LLC
10.8 Intellectual Property Security Agreement dated July Incorporated by reference as Exhibit 4.6
25, 2006 by and among the Company and New Millennium to Form 8-K filed on August 4, 2006
Capital Partners II, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC
31.1 Certification by Chief Executive Officer pursuant to Provided herewith
15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification by Interim Principal Accounting Provided herewith
Officer pursuant to 15 U.S.C. Section 7241, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification by Chief Executive Officer pursuant to Provided herewith
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification by Interim Principal Accounting Provided herewith
Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
Current Report on Form 8-K filed by the Company on May 31, 2006, whereby
the Company disclosed that on March 20, 2006, the Company's Board of Directors
in lieu of a special meeting and pursuant to unanimous written consent, the
Reverse Stock Split of the Company's issued and outstanding, which became
effective on March 30, 2006. On the Effective Date, the Company's issued and
outstanding Common Stock was reduced based on the 1-for-100 ratio and the new
symbol for the Company was changed to "ANRC".
Current Report on Form 8-K filed by the Company on August 4, 2006, whereby
the Company disclosed that on July 25, 2006, the Company entered into a
Securities Purchase Agreement with the Investors. Under the terms of the
Securities Purchase Agreement, the Investors purchased an aggregate of (i)
$2,000,000 in callable convertible secured notes and (ii) warrants to purchase
10,000,0000 shares of our Common Stock. The Notes carry an interest rate of 6%
per annum and a maturity date of July 25, 2009. The notes are convertible into
the Company's Common Stock at the Applicable Percentage of the average of the
lowest three (3) trading prices for our shares of Common Stock during the twenty
(20) trading day period prior to conversion. The Applicable Percentage means
50%; provided, however, that the Applicable Percentage shall be increased to (i)
55% in the event that a Registration Statement is filed within thirty days of
the closing and (ii) 60% in the event that the Registration Statement becomes
effective within one hundred and twenty days from the Closing. In addition, the
Company has granted the Investors a security interest in substantially all of
its assets and intellectual property as well as registration rights. In
connection with the Securities Purchase Agreement, the Company issued to the
Investors seven year warrants to purchase 10,000,000 shares of our common stock
at an exercise price of $.30.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN RACING CAPITAL, INC.
August 31, 2006
By: /s/ D. Davy Jones
-------------------------------------
D. Davy Jones
President, Chief Executive Officer
and Director
By: /s/ A. Robert Koveleski
-------------------------------------
A. Robert Koveleski
Interim Principal Accounting Officer
and Secretary
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