EXHIBIT 99.1
PRESS RELEASE
March 27, 2002
For Immediate Release
Contact: Timotheus benHarold
Phone 985-747-1111
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KARTS INTERNATIONAL INCORPORATED ANNOUNCES
IT WILL NOT TIMELY FILE IT'S ANNUAL REPORT ON FORM 10-KSB
Roseland, Louisiana - March 27, 2002
The management of Karts International Incorporated announces that it will not
file it's Annual Report on Form 10-KSB by the deadline of March 31, 2002.
Timotheus benHarold, the Company's President, Chief Executive Officer, Chief
Accounting Officer and one of the Company's two remaining Directors stated that
the Company's financial condition and on-going negotiations with The Schlinger
Foundation, the Company's lead lender were contributing factors to this
situation. The Company has been notified by The Schlinger Foundation that it may
foreclose its security interest in substantially all of the Company's assets as
a result of defaults under the Company's $2,500,000 promissory note and related
agreements. The Company will strive to complete the required filing as soon as
practicable upon the conclusion of negotiations with The Schlinger Foundation.
If the negotiations with The Schlinger Foundation are unsuccessful, the Company
may have to seek protection under Chapter 11 of the Federal Bankruptcy Code.
The Company wishes to make the following unaudited financial information
available prior to the release of its audited financial statements:
(Unaudited)
December 31, December 31,
2001 2000
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Current Assets
Cash on hand and in banks $ 324,683 $ 232,593
Accounts receivable
Trade, net of allowance for doubtful accounts
of $290,000 and $45,250, respectively 666,088 2,392,290
Other -- 11,433
Inventory 2,296,612 4,113,038
Prepaid expenses 265,668 646,137
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Total current assets 3,553,051 7,395,491
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Net property and equipment 2,070,874 2,432,958
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Other Assets
Surplus assets held for sale 614,616 --
Other 210,251 310,179
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Total other assets 824,867 310,179
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Total Assets $ 6,448,792 $ 10,138,628
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- Continued -
Current Liabilities
Debenture payable to a related party $ 2,500,000 $ 2,500,000
Working capital advances 5,044,152 --
Notes payable to affiliates -- 150,000
Current maturities of long-term debt 47,982 56,025
Accounts payable - trade 1,409,664 2,940,788
Other accrued liabilities 704,395 1,005,473
Accrued interest payable 18,593 85,092
Accrued dividends payable 557,147 257,147
Accrued income and franchise taxes payable 45,672 45,100
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Total current liabilities 10,327,605 7,039,625
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Long-Term Liabilities
Long-term debt, net of current maturities 220,899 269,878
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Total liabilities 10,548,504 7,309,503
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Shareholders' Equity
Preferred stock - $0.001 par value
10,000,000 shares authorized
5,638,000 shares issued and outstanding 5,638 5,638
Common stock - $0.001 par value
14,000,000 shares authorized
8,079,642 and 7,498,392 shares
issued and outstanding 8,080 7,498
Additional paid-in capital 25,329,573 24,976,651
Accumulated deficit (29,443,003) (22,160,754)
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Total shareholders' equity (4,099,712) 2,829,125
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Total Liabilities and Shareholders' Equity $ 6,448,792 $ 10,138,628
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Year ended Year ended
December 31, December 31,
2001 2000
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Revenues
Kart sales - net $ 4,227,722 $ 8,854,343
Cost of Sales 6,616,596 10,918,625
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Gross Profit (2,388,874) (2,064,282)
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Operating Expenses
Research and development expenses 591,635 127,377
Selling expenses 242,563 488,564
General and administrative expenses
Salaries and related costs 1,259,906 1,317,476
Other operating expenses 1,147,346 1,329,276
Depreciation and amortization 202,341 182,885
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Total operating expenses 3,443,791 3,445,578
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Income (loss) from Operations (5,832,665) (5,509,860)
- Continued -
Other Income (Expenses)
Interest and other miscellaneous 36,037 51,850
Expiration of option to acquire another entity -- (138,001)
Write off of uncollectible note receivable -- (425,060)
Write off of obsolete inventory (53,186) (51,385)
Loss on consigned inventory (143,520) --
Loss on abandonment of fixed assets (5,218) (5,200)
Impairment of assets held for sale (127,189) --
Interest expense (670,455) (702,907)
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Loss before Income Taxes (6,796,196) (6,770,563)
Income Tax (Expense) Benefit (46,553) (52,304)
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Net Loss $(6,842,749) $(6,822,767)
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Loss per weighted-average share of
common stock outstanding - basic and fully diluted $ (0.88) $ (0.98)
=========== ===========
Weighted-average number of shares of
common stock outstanding - basic and fully diluted 7,791,406 6,956,046
=========== ===========
The Company experienced significant declines in revenues from approximately
$12,000,000 in Calendar 1999 to approximately $9,000,000 in Calendar 2000 to
approximately $4,000,000 in Calendar 2001. Further, the Company has limited
opportunity to reduce variable costs.
Management has identified various assets and designated them "Surplus and held
for sale"' including the Company's former production facility in Prattville,
Alabama and various non-utilized equipment.
Management notes that during the six years ended December 31, 2001, the Company
has experienced cumulative net losses from operations and has utilized cash in
operating activities of approximately $17,000,000. The Company's continued
existence is dependent upon its ability to generate sufficient cash flows from
operations to support its daily operations as well as provide sufficient
resources to retire existing liabilities and obligations on a timely basis.
To support operations during 2001, the Company received approximately $5,000,000
in non-interest bearing working capital advances from Morgan Creek Company, an
unaffiliated entity and experienced net reductions in accounts receivable
through cash collections of approximately $1,400,000. During 2000, the Company
supported operations and retired certain short-term lines of credit from a
non-financial institution lender with the receipt of approximately $615,000 and
$9,600,000 in private transactions from the sale of common and preferred stock,
respectively.
The Company restructured its management during the third and fourth quarter of
2000 and during the first quarter of 2001.
At the present time, the Company is not performing at levels significant enough
to support daily operations. The Company remains dependent upon additional
external sources of financing; however, there can be no assurance that the
Company will be able to obtain additional funding or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
The Company is in default on the debenture payable to The Schlinger Foundation.
A distinct possibility exists that The Schlinger Foundation may post a notice of
foreclosure on the secured Company assets. This action will significantly impair
the Company's ability to continue operations.
The Company's independent certified public accountants, S. W. Hatfield, CPA, has
notified the Company that its auditor's report on the 2001 consolidated
financial statements will contain a "going concern" opinion , as did their
opinion on the 2000 consolidated financial statements, which will state that
"substantial doubt about the Company's ability to continue as a going concern"
exists.