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 JUNE 30, 2005
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)
4702 Oleander Drive, Suite 200
Myrtle Beach, SC 29577
---------------------- -----
(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 |_|
State the number of shares outstanding of each of the issuer's classes of common
equities as of the latest practicable date: AS OF JANUARY 24, 2005 THERE WERE
499,139,950 OUTSTANDING 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 and competition, 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.
2
ITEM 1. FINANCIAL STATEMENTS
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARIES
(FKA ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEET
JUNE 30, 2005
(Unaudited)
ASSETS
CURRENT ASSETS
Cash
Accounts receivable $ 467,220
31,370
Total Current Assets 498,590
OTHER ASSETS
Deposits 35,000
Accounts receivable-related party 59,160
---------
$ 592,750
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - related parties 84,402
Accounts payable and accrued expenses 103,435
Total Current Liabilities 187,837
---------
MINORITY INTEREST 87,879
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY
Preferred stock 10,000,000 shares authorized at $0.001 par value;
No shares issued and outstanding --
Common stock 50,000,000 shares authorized at $0.001 par value;
49,139,950 shares issued and outstanding 49,140
Additional paid in capital 382,560
Retained earnings (114,666)
---------
Total Stockholders' Equity 317,034
---------
$ 592,750
=========
The accompanying notes are an integral part of these financial statements.
3
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARIES
(FKA ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
June 30, June 30,
2005 2004
------------ ------------
SALES $ 1,733,022 $ --
COST OF SALES 1,205,269 1,629
------------ ------------
Gross Profit 527,753 (1,629)
------------ ------------
EXPENSES
Consulting and professional fees 26,250 --
Administrative 87,162 28,801
------------ ------------
TOTAL EXPENSES 113,412 28,801
------------ ------------
Income (loss) from operations 414,341 (30,430)
OTHER INCOME (EXPENSE)
Interest Expense (112) (8,252)
Other income
-- (372)
------------ ------------
TOTAL OTHER (EXPENSE) (112) (8,624)
------------ ------------
Income (loss) - before minority interest 414,229 (39,054)
LESS MINORITY INTEREST 104,564 3,765
------------ ------------
Income (loss) - before provision for income taxes 309,665 (35,289)
Provision for income taxes -- --
------------ ------------
$ 309,665 $ (35,289)
============ ============
NET LOSS PER COMMON SHARE
$ 0.01 $ --
------------ ------------
AVERAGE OUTSTANDING SHARES
Basic and diluted 49,139,950 49,139,950
------------ ------------
The accompanying notes are an integral part of these financial statements.
4
ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARIES
(FKA ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
June 30, June 30,
2005 2004
------------ ------------
SALES $ 3,481,623 $ --
COST OF SALES 2,506,269 1,629
------------ ------------
Gross Profit 975,354 (1,629)
------------ ------------
EXPENSES
Consulting and professional fees 52,500 --
Administrative 119,962 55,123
------------ ------------
TOTAL EXPENSES 172,462 55,123
------------ ------------
Income (loss) from operations 802,892 (56,752)
OTHER INCOME (EXPENSE)
Interest Expense (9,806) (19,907)
Other income -- 2,778
------------ ------------
TOTAL OTHER (EXPENSE) (9,806) (17,129)
------------ ------------
Income (loss) - before minority interest 793,086 (73,881)
LESS MINORITY INTEREST 190,590 7,958
Income (loss) - before provision for income taxes 602,496 (65,923)
------------ ------------
Provision for income taxes -- --
------------ ------------
$ 602,496 (65,923)
============ ============
NET LOSS PER COMMON SHARE
Basic and diluted $ 0.01 $ (0.00)
------------ ------------
WEIGHTED AVERAGE OUTSTANDING SHARES
Basic and diluted 49,139,950 49,139,950
------------ ------------
The accompanying notes are an integral part of these financial statements.
5
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARIES
(FKA ALTRIMEGA HEALTH CORPORATION AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
June 30, June 30,
2005 2004
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 602,496 $ (65,923)
Adjustments to reconcile net loss to net cash provided by operating activities
Minority interest 55,591 (7,958)
Changes in operating assets and liabilities
Properties held for development or sale 1,612,448 (722,634)
Accounts receivable (29,531) --
Accounts receivable-related party -- 3,000
Accounts payable-related (192,456) 1,912
Accounts payable (56,308) 89,787
Cash overdraft -- 18,502
Net Cash from Operations 1,992,240 (683,314)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable, net of payments -- 681,575
Payments on notes payable (1,528,312) --
----------- ------------
Net cash provided (used) by financing activities (1,528,312) 681,575
----------- ------------
Net Increase (decrease) in Cash 463,928 (1,739)
Cash at Beginning of Period 3,292 1,739
----------- ------------
Cash at End of Period $ 467,220 $ --
=========== =============
Supplemental disclosure of cash flow information $ 19,907 $ 11,655
----------- ------------
Cash paid for income taxes $ -- $ --
The accompanying notes are an integral part of these financial statements.
6
AMERICAN RACING CAPITAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
(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, 2004 of American Racing
Capital, Inc. and Subsidiaries (the "Company" or "ARC").
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 June 30, 2005 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. 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 six months ended June 30, 2005.
3. NOTES PAYABLE
As of June 30, 2005, the Company has no notes payable.
4. RELATED PARTY TRANSACTIONS
Accounts receivable - related party - As of June 30, 2005, the Company has
made a non-interest bearing, due on demand loan to the minority interest
holder of Sea Garden Funding, LLC, which as of June 30, 2005 totaled
$59,160.
Accounts payable - related parties - As of June 30, 2005,
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 $84,402.
7
Executive employment agreement - In 2003, the Company entered into an
employment agreement with John W. Gandy, then President and Chief
Executive officer, which provided for an annual salary of $100,000 with a
5% increase each year to a maximum of $125,000, provided the Company would
have a profit in the previous year. The employment agreement with John W.
Gandy was terminated on November 18, 2005, upon his resignation as
President and Chief Executive Officer of the Company.
5. EXCHANGE AGREEMENT
On December 17, 2004, the Company signed a definitive Share Exchange
Agreement to acquire all of the outstanding shares of common stock of Top
Gun Sports & Entertainment, Inc., ("Top Gun Sports") in exchange for the
issuance of 15,750,000 shares of the Company's common stock to the current
shareholders of Top Gun Sports. The closing of the transaction was
conditioned upon the Company's shareholders approving a change of the
Company's name to Top Gun Sports & Entertainment, Inc., a 1-for-1,000
reverse stock split, and Top Gun Sports receiving a minimum of $750,000
through a private placement of convertible debt.
On March 30, 2005, the parties to the Share Exchange Agreement
memorialized an amendment to the agreement, eliminating certain conditions
of closing to the transaction, including that the Company sell the assets
of the Creative Holdings, Inc. subsidiary and that Top Gun have obtained
lease agreements and permits prior to closing.
On May 9, 2005 the Company terminated the Share Exchange Agreement, dated
December 17, 2004, by and between the Company and Top Gun Sports &
Entertainment, Inc. based upon the terms of the Share Exchange Agreement.
The Board of Directors (the "Board") of the Company has determined that
the necessary approval of certain aspects of the transaction as
contemplated by the Share Exchange Agreement was not made in a timely
manner as set forth in the Share Exchange Agreement.
6. SUBSEQUENT 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, such that
one share of the Series A Preferred Stock is converted into three hundred
(300) fully paid, non-assessable shares of the Company's Common Stock. As
a result of the Share Exchange Agreement, and upon the filing of the
required Plan and Exchange with the Secretary of State of the State of
Nevada 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, such that one share of the Series A
Preferred Stock is converted into three hundred (300) fully paid,
non-assessable shares of the Company's Common Stock. As a result of the
Share Exchange Agreement, and upon the filing of the required Plan and
Exchange with the Secretary of State of the State of Nevada 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 Robert
Koveleski as 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.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
The following discussion and analysis should be read in conjunction with
the Consolidated Financial Statements, and the Notes thereto included herein.
The information contained below includes statements of ARC's or management's
beliefs, expectations, hopes, goals and plans that, if not historical, are
forward-looking statements subject to certain risks and uncertainties that could
cause actual results to differ materially from those anticipated in the
forward-looking statements. For a discussion on forward-looking statements, see
the information set forth in the Introductory Note to this Annual Report under
the caption "Forward Looking Statements", which information is incorporated
herein by reference.
Overview
In the second quarter of 2005, the Company continued to develop the Sea
Garden Town Home Community in North Myrtle Beach, South Carolina (the "Sea
Garden Project"). The Company was developing the project through its 80%
interest in Sea Garden Funding, LLC, the owner and developer of 27 units in a
173 unit, two-bedrooms, two-baths town home community approximately three blocks
from the Atlantic shoreline. The Company acquired the project from Sea Garden,
LLC on November 13, 2002 for the payment of $210,000 and the assumption of
$1,071,344.66 in mortgages on the real property held by Horry County State Bank.
The remaining 20% interest in Sea Garden Funding, LLC, is owned by an
unaffiliated party, Maxine Roe, a resident of Myrtle Beach, South Carolina.
The development consisted of traditional two-story townhouse units. The
Company acted as the developer, and hired independent contractors to provide all
of the construction services. By June 30, 2005, the Company had completed the
construction of the Sea Garden Town Homes and sold all remaining units.
On dated 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, such that one share of a Series A Preferred Stock is convertable by the
holder, 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, and
upon the filing of the required Plan and Exchange with the Secretary of State of
the State of Nevada 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, 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, such that one share of Series A Preferred Stock is
convertable by the holder, 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, and upon the filing of the required Plan and Exchange with
the Secretary of State of the State of Nevada on October 19, 2005, ARCD became a
wholly-owned subsidiary of the Company.
As a result of the share exchange transactions, the Board has focused on 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.
Critical Accounting Policies And Estimates
Management's discussion and analysis of our financial condition and
results of operations are based upon our 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. We base our 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.
9
Revenue Recognition
Gains from sales of operating properties and revenues from land sales are
recognized using the full accrual method provided that various criteria relating
to the terms of the transactions and any subsequent involvement by the Company
with the properties sold are met. Gains or revenues relating to transactions
which do not meet the established criteria are deferred and recognized when the
criteria are met or using the installment or cost recovery methods, as
appropriate in the circumstances. For land sale transactions under terms in
which the Company is required to perform additional services and incur
significant costs after title has passed, revenues and costs of sales are
recognized proportionately on a percentage of completion basis. Deposits
received prior to closing are recorded as a liability until the consummation of
the sale at which time such amounts are generally applied toward the purchase
price.
Cost of land sales is generally determined as a specific percentage of
land sales revenues recognized for each land development project. The cost
percentages used are based on estimates of development costs and sales revenues
to completion of each project and are revised periodically for changes in
estimates or development plans. The specific identification method is used to
determine cost of sales of certain parcels of land.
Properties
Properties under development are carried at cost reduced for impairment
losses, where appropriate. Properties held for sale are carried at cost reduced
for valuation allowances, where appropriate. Acquisition, development and
construction costs of properties in development and land development projects
are capitalized including, where applicable, salaries and related costs, real
estate taxes, interest and preconstruction costs. The pre-construction
development (or an expansion of an existing property) includes efforts and
related costs to secure land control and zoning, evaluate feasibility, and
complete other initial tasks, which are essential to development. Provisions are
made for potentially unsuccessful preconstruction efforts by charges to
operations.
Properties held for sale are carried at the lower of their carrying values
(i.e., cost less accumulated depreciation and any impairment loss recognized,
where applicable) or estimated fair values less costs to sell. Generally,
revenues and expenses related to property interests acquired with the intention
to resell are not recognized.
Stock-based compensation - The Company applies Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and Related
Interpretations, in accounting for stock options issued to employees. Under APB
No. 25, employee compensation cost is recognized when estimated fair value of
the underlying stock on date of the grant exceeds exercise price of the stock
option. For stock options and warrants issued to non-employees, the Company
applies 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.
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. SFAS No. 148 amends the transition and
disclosure provisions of SFAS No. 123. The Company is currently evaluating SFAS
No. 148 to determine if it will adopt SFAS No. 123 to account for employee stock
options using the fair value method and, if so, when to begin transition to that
method.
Principals Of Consolidation
The consolidated financial statements shown in this report excludes the
historical operating information of the parent before September 30, 2002, and
includes the operating information of the subsidiary, Creative Holdings, Inc.,
from July 3, 2002 (date of inception of the subsidiary), and the operating
information of Sea Garden Funding, LLC from November 2002 (the date of the
purchase of 80% of the LLC) to June 30, 2005.
All intercompany transactions have been eliminated.
Results Of Operations For The Three Months Ended June 30, 2005, Compared To The
Three Months Period Ended June 30, 2004
Revenues
Revenue for the three months ended June 30, 2005, was $1,733,032, an
increase of $1,733,032, or 100%, as compared to $0 in revenues for the same
period ended June 30, 2004. The increase in revenues in 2005 was attributable to
strong sales of units at the Sea Garden Project in the second quarter, where the
Company sold no units in 2004. We anticipate revenues for the fiscal year ending
2005 to consist mainly or completely of the sale of units at the Sea Garden
Project.
10
Cost of revenue. Cost of revenue for the three months ended June 30, 2005
was $1,205,269. These costs were associated with construction costs on units at
the Sea Garden Project. This represented an increase of 99.86% over the cost of
revenues for the same period ended June 30, 2004, which was $1,629, due to
limited construction activities and no construction revenues.
Gross profit. Gross profit for the three months ended June 30, 2005 was
$527,753. The gross profit represented revenues received for sales of units at
the Sea Garden Project along with construction costs associated with building
and financing the units. There was no gross profit for the three months ended
June 30, 2004.
Operating expenses. Operating expenses for the three months ended June 30,
2005, were $113,412, as compared to $28,801, for the three months ended June 30,
2004. Operating expenses in 2005 consisted of $76,250 in consulting and
professional fees and $37,162 in general and administrative expenses. The
increase of $84,611, or 74.60%, from 2004 to 2005 was almost entirely
attributable to increased activity at the Sea Garden Project.
Other income (expense). Other income (expense) for the three months ended
June 30, 2005, was a net expense of $112, a decrease of $8,512, or 99.70%, as
compared to a net expense of $8,624 for the three months ended June 30, 2004.
The decrease in other expense in 2005 was primarily attributable to retirement
of debt in the quarter and the subsequent reduction in interest expense booked
in the current quarter.
Net income (loss). The Company had a net income before provision for
income taxes of $309,665 for the three months ended June 30, 2005, as compared
to a net loss of $35,289 for the three months ended June 30, 2004. The increase
of $344,954, or 111.39% was mostly attributable to strong sales at the Sea
Garden Project. There was no provision for income taxes in the period;
therefore, the net income after provision for income taxes was also $309,665.
Results Of Operations For The Period Ended June 30, 2005, Compared To The Period
Ended June 30, 2004
Revenues
Revenue for the six months ended June 30, 2005, was $3,481,623, an
increase of $3,481,623, or 100%, when compared to $0 in revenues for the six
months ended June 30, 2004. The increase in revenues in 2005 was attributable to
strong sales of units at the Sea Garden project in the first half of 2005, where
as the Company sold no units in 2004. We anticipate revenues for the fiscal year
ending 2005 to consist mainly or completely of the sale of units at the Sea
Garden Project.
Cost of revenue. Cost of revenue for the six months ended June 30, 2005
was $2,506,269, an increase of $2,504,640, or 99.9%, over the cost of revenue
for the same period in 2004. These costs were associated with construction costs
on units at the Sea Garden Project. There was $1,629 in cost of revenues for the
six months ended June 30, 2004, as there limited construction activities and no
construction revenues.
Gross profit. Gross profit for the six months ended June 30, 2005 was
$975,354. The gross profit represented revenues received for sales of units at
the Sea Garden Project along with construction costs associated with building
and financing the units. There was no gross profit for the six months ended June
30, 2004.
Operating expenses. Operating expenses for the six months ended June 30,
2005, were $172,462, as compared to $55,123, for the six months ended June 30,
2004. Operating expenses in 2005 consisted of $52,500 in consulting and
professional fees and $119,962 in general and administrative expenses. The
increase of $117,339, or 68%, from 2004 to 2005 was almost entirely attributable
to increased activity at the Sea Garden Project.
Other income (expense). Other income (expense) for the six months ended
June 30, 2005, was a net expense of $9,806, a decrease of $7,323, or 57.24%, as
compared to a net expense of $17,129 for the six months ended June 30, 2004. The
decrease in other expense in 2005 was primarily attributable to retirement of
debt in the quarter and the subsequent reduction in interest expense booked in
the current quarter.
11
Net income (loss). Altrimega had a net income before provision for income
taxes of $602,496 for the six months ended June 30, 2005, as compared to a net
loss of $(65,293) for the six months ended June 30, 2004. The increase of
$637,785, or 94.46%, was mostly attributable to strong sales at the Sea Garden
Project. Due to net operating loss carryovers, there was no provision for income
taxes in the period, therefore, the net income after provision for income taxes
was also $637,785.
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
incurred a net income of $602,496 and a net loss of $(65,293) for the six months
ended June 30, 2005 and June 30, 2004, respectively, and has an accumulated
deficit of $114,666 at June 30, 2005. As of June 30, 2005, we had assets of
$592,750 and liabilities of $187,837, a surplus of $317,034. Additionally, our
current assets were $498,950 and our current liabilities were $187,837, creating
a working capital surplus of $311,113. The majority of the assets, $467,220,
consist of cash.
The majority of our liabilities, $187,837, are account payables. Accounts
payable to related parties equal to $84,402 are also included in our
liabilities.
For the six months ended June 30, 2005, the Company provided net cash from
operations of $1,992,240, no cash was used in investing activities and had
$1,528,312 in cash used by financing activities in the repayment of notes
payable.
We have incurred losses since inception until the last three quarterly
periods. Management believes that it will generate adequate capital to fund
overall Company operations for the next twelve months. The Company currently has
approximately $467,220 in cash and cash equivalents as of June 30, 2005.
Plan Of Operation
In October 2005, the Company entered into two share exchange transactions
with ARCI and ARCD, respectively. As a result of the share exchange
transactions, ARCI and ARCD became wholly-owned subsidiaries of the Company and
the Company's management focused on a different business model. ARCI, as a
holding company for motor sport industries, develops relationships with
companies that are seeking to utilize motor sports as a revenue generating,
promotional opportunity. ARCI consists of Fast One, Inc., a consulting group
dedicated to racetrack development and design and DJ Motorsports, a company with
plans to develop and operate competitive race teams.
On November 18, 2005, the Board appointed two new directors and the former
directors resigned from the Board. The new directors consisted of D. Davy Jones
and Robert Koveleski. John W. Gandy resigned as President and Director of the
Company, Ron E. Hendrix resigned as Secretary and Director and John F. Smith,
III resigned as Director of the Company. The Board also appointed new officers,
by appointing D. Davy Jones as President and Chief Executive Officer and Robert
Koveleski as Secretary.
The new Board has devised a new plan of operations 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.
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 Principal Financial 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 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
Principal Financial Officer, to allow timely decisions regarding required
disclosure
12
(B) Changes In Internal Controls Over Financial Reporting
In connection with the evaluation of the Company's internal controls
during the Company's quarter ended June 30, 2005, the Company's Principal
Executive Officer and Principal Financial 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.
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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
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
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 Chief Financial Officer pursuant to Provided herewith
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
14
(b) Reports on Form 8-K:
Current Report on Form 8-K filed by the Company on May 10, 2005 pursuant
to Item 1.02 (Termination of a Material Definitive Agreement) whereby the
Company reported that it had terminated the Share Exchange Agreement, dated
December 17, 2004, by and between the Company and Top Gun Sports based upon the
terms of the Share Exchange Agreement.
Current Report on Form 8-K filed by the Company on October 17, 2005
pursuant to Item 1.01 (Entry Into of a Material Definitive Agreement) whereby
the Company disclosed the entry into a Share Exchange Agreement, dated October
17, 2005, by and among the Company, ARCI and the shareholders of ARCI, whereby
the ARCI Shareholders exchanged with, and delivered to, the Company the issued
and outstanding common stock of ARCI in exchange for 150,000,000 shares of the
Company's Common Dtock, par value $0.001, and 1,000,000 shares of Series A
Convertible Preferred Stock, par value $0.001 per share, of the Company.
Additionally, the Company disclosed the corporate name change from "Creative
Holdings & Marketing Corporation" to "American Racing Capital, Inc." and the
increase in the number of authorized shares from 50,000,000 to 500,000,000.
Current Report on Form 8-K filed by the Company on October 18, 2005
pursuant to Item 1.01 (Entry Into of a Material Definitive Agreement) whereby
the Company disclosed the entry into a Share Exchange Agreement, dated October
17, 2005, by and among the Company, ARCD and the shareholders of ARCD, whereby
the ARCD Shareholders exchanged with, and delivered to, the Company the issued
and outstanding common stock of ARCI in exchange for 235,000,000 shares of the
Company's Common Stock, par value $0.001, and 1,000,000 shares of Series A
Convertible Preferred Stock, par value $0.001 per share, of the Company.
Current Report on Form 8-K filed by the Company on December 5, 2005
pursuant to Item 2.01 (Completion of Acquisition or Disposition of Assets)
whereby the Company reported the completion of the share exchange transactions
with ARCI and ARCD, as well as the unregistered shares of securities that were
issued in connection with the share exchange transactions. Additionally, the
Company disclosed the appointment of D. Davy Jones and Robert Koveleski to the
Board of Directors, and the resignation of John W. Gandy, Ron E. Hendrix and
John F. Smith, III from the Board of Directors.
Current Report on Form 8-K filed by the Company on December 9, 2005
pursuant to Item 4.01 (Changes in Registrant's Certifying Accountant) whereby
the Company disclosed the dismissal of L.L. Bradford & Company, LLC as the
Company's accountant and the engagement of Moore & Associated CHTD as the
Company's independent auditors.
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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.
January 24, 2006 AMERICAN RACING CAPITAL, INC.
By: /s/ Davy Jones
-----------------------------
Davy Jones
Chief Executive Officer,
President and Director
By: /s/ Robert Koveleski
-----------------------------
Robert Koveleski
Principal Financial Officer
and Secretary
16