UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(D) of The Securities Act of 1934
For the quarterly period ended: December 31, 2003
Commission file number: 005-78248
AUTOCARBON, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 33-0976805
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
126 E. 83rd Street, Suite 1B, New York, NY 10028
(Address of principal executive offices)
(212) 717-4254
(Issuer's telephone number)
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 and Exchange Act of 1934
during the preceding 12 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 |X| No |_|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.0001 par value 42,454,456
(Class) (Outstanding as of March 31, 2004)
AUTOCARBON, INC.
FORM 10-QSB
December 31, 2003
INDEX
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
REPORT OF INDEPENDENT ACCOUNTANT ...........................................F-1
FINANCIAL STATEMENTS
Balance Sheet as of December 31, 2003 .............................F-2
Statement of Operations for the three and nine months
ended December 31, 2003 and 2002 and for the period
June 26, 2001 (inception) to December 31, 2003 .................F-3-F-4
Statement of Stockholders' Deficit for the three
months ended December 31, 2003 ..................................F-5
Statement of Cash Flows for the three and nine months
ended December 31, 2003 and 2002 and for the period
June 26, 2001 (inception) to December 31, 2003 .................F-6-F-7
Notes to Financial Statements ....................................F-8-F-12
Item 2 Management's Discussion and Analysis or Plan of Operation............3
Item 3 Controls and Procedures..............................................9
Part II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................10
Item 2. Changes In Securities................................................10
Item 3. Defaults Upon Senior Securities......................................10
Item 4. Submission Of Matters To A Vote Of Security Holders..................10
Item 5. Other Information...................................................10
Item 6. Exhibits and Reports on Form 8-K....................................10
Signatures...................................................................11
Certifications...............................................................12
2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
AARON STIEN
CERTIFIED PUBLIC ACCOUNT
981 ALLEN LANE
P.O. BOX 406
WOODMERE, NY 11598
516-569-0520
To the Board of Directors and Stockholders'
Autocarbon, Inc.
I have reviewed the accompanying balance sheet of Autocarbon, Inc. (a
development stage company) as of December 31, 2003 and the related statements of
operations, stockholders' deficit and cash flows for the three months and nine
months ended December 31, 2003 and for the period from June 26, 2001 (date of
inception) to December 31, 2003. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my review in accordance with the standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of person responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, I do not express such an
opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a stockholders' deficit that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Aaron Stein CPA
Woodmere, New York
April 1, 2004
F-1
AUTOCARBON, INC.
(A Development Stage Company)
BALANCE SHEET
DECEMBER 31, 2003
(Unaudited)
ASSETS
Current Assets
Cash and Cash Equivalents $ 25
-----------
Total current assets $ 25
-----------
$ 25
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable - Discontinued Operations $ 129,090
Payment for Shares not Issued 1,200
-----------
Total current liabilities $ 130,290
STOCKHOLDERS' DEFICIT
Common Stock, $.0001 par value,
100,000,000 shares authorized,
1,278,935 issued and outstanding $ 128
Additional Paid-in Capital 921,344
Deficit Accumulated During the Development Stage (1,051,737)
-----------
Total Stockholders' Deficit (130,265)
-----------
$ 25
===========
See accompanying notes to financial statements
F-2
AUTOCARBON, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Three Months Three Months
Ended Ended
December 31, 2003 December 31, 2002
------------------ ------------------
(Unaudited) (Unaudited)
Revenues $ -- $ --
General and Administrative Expenses -- --
------------------ ------------------
Income (Loss) Before Discontinued
Operations Net of Income Taxes of $ -0- -- --
------------------ ------------------
Discontinued Operations, Net of Income
Taxes of $-0- -- (38,065)
Expenses (Income) in Connection With
Discontinued Operations, Net of Income
Taxes of $-0- -- --
------------------ ------------------
Net Loss $ -- $ (38,065)
================== ==================
Loss Per Share
Basic $ -- $ (0.1637)
================== ==================
Weighted Average Number of
Common Shares outstanding 1,402,122 232,564
================== ==================
See accompanying notes to financial statements
F-3
AUTOCARBON, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
June 26, 2001
Nine Months Ended (Inception) to
December 31, December 31,
2003 2002 2003
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
Revenues $ -- $ -- $ --
General and Administrative Expenses -- -- --
----------- ----------- -----------
Income (Loss) Before Discontinued
Operations Net of Income Taxes of $-0- -- -- --
----------- ----------- -----------
Discontinued Operations, Net of Income
Taxes of $-0- (9,129) (527,155) (1,015,915)
Expenses (Income) in Connection With
Discontinued Operations, Net of Income
Taxes of $-0- 9,400 -- 35,822
----------- ----------- -----------
Net Loss $ (18,529) $ (527,155) $(1,051,737)
=========== =========== ===========
Loss Per Share
Basic $ (0.0132) $ (2.2667) $ (0.7501)
=========== =========== ===========
Weighted Average Number of
Common Shares outstanding 1,402,122 232,564 1,402,122
=========== =========== ===========
See accompanying notes to financial statements
F-4
AUTOCARBON.COM, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' Deficit
(Unaudited)
Accumulated
Deficit
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage Total
---------- ---------- ---------- ---------- ----------
Common stock issued at inception -
for services rendered 170,000 $ 17 $ 56,933 $ -- $ 56,950
Issuance of common stock - private
placement July 1 - September 30, 2001 5,185 1 129,599 -- 129,600
Issuance of common stock - private
placement - November 1 - November 30, 2001 2,280 -- 57,000 -- 57,000
Issuance of common stock -
for services rendered 30,000 3 9,997 -- 10,000
Issuance of common stock -
for services rendered 1,200 -- 30,000 -- 30,000
Net loss - year ended March 31, 2002 -- -- -- (425,932) (425,932)
---------- ---------- ---------- ----------- ----------
Balance - March 31, 2002 208,665 21 283,529 (425,932) (142,382)
Common stock issued 8,800 1 219,999 -- 220,000
Issuanc of common stock -
for services rendered 12,900 1 317,499 -- 317,500
Common stock issued 1,200 -- 15,000 -- 15,000
Exercise of stock options 1,000 -- 12,500 -- 12,500
Issuance of common stock - private
placement - January 6 - January 30, 2003 993,520 99 49,577 -- 49,676
Net loss-year ended March 31, 2003 -- -- -- (607,276) (607,276)
---------- ---------- ---------- ----------- ----------
Balance-March 31, 2003 1,226,085 122 898,104 (1,033,208) (134,982)
Issuance of common stock-
for services rendered 25,000 3 13,243 -- 13,246
Common stock issued 200,000 20 9,980 -- 10,000
Rescission of common stock (172,150) (17) 17
Net loss-quarter ended June 30, 2003 -- -- -- (18,529) (18,529)
Net loss-quarter ended September 30, 2003 -- -- -- -- --
Net loss- quarter ended December 31, 2003 -- -- -- -- --
---------- ---------- ---------- ----------- ----------
1,278,935 $ 128 $ 921,344 $(1,051,737) $ (130,265)
========== ========== ========== =========== ==========
See accompanying notes to financial statements
F-5
AUTOCARBON.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Three Months Ended
December 31,
2003 2002
-------- --------
(Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Loss From Discontinued Operations $ -- $(38,065)
Adjustments to reconcile net loss to cash
used in operating activities
Issuance of common stock for services -- --
Depreciation -- 2,858
-------- --------
-- (35,207)
Changes in Assets and Liabilities
(Increase) decrease in:
Accounts Receivable -- 28,960
Increase (decrease) in:
Accounts Payable -- 4,391
Deferred Revenue -- --
Customer Deposits Payable -- --
-------- --------
Net Cash Used in Operating Activities -- (1,856)
-------- --------
Cash Flows from Investing Activities
Purchase of fixed assets - computer software -- --
Write-off of net assets of discontinued -
operation -- --
-------- --------
Net Cash Used in Investing Activities -- --
-------- --------
Cash Flows from Financing Activities
Proceeds from issuance of common stock and options -- --
Payment for shares not issued -- --
-------- --------
Net Cash Provided by Financing Activities -- --
-------- --------
Net increase in cash -- (1,856)
Cash at beginning of period 25 1,856
-------- --------
Cash at end of period $ 25 $ --
======== ========
See accompanying notes to financial statements
F-6
AUTOCARBON.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
June 26, 2001
Nine Months Ended (Inception) to
December 31, December 31,
2003 2002 2003
----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net Loss From Discontinued Operations $ (18,529) $ (527,155) $(1,051,737)
Adjustments to reconcile net loss to cash
used in operating activities
Issuance of common stock for services 13,246 317,500 427,696
Depreciation -- 8,574 8,575
----------- ----------- -----------
(5,283) (201,081) (615,466)
Changes in Assets and Liabilities
(Increase) decrease in:
Accounts Receivable -- 5,603 --
Increase (decrease) in:
Accounts Payable (4,976) 12,651 129,090
Deferred Revenue -- 21,654 --
Customer Deposits Payable -- (10,524) --
----------- ----------- -----------
Net Cash Used in Operating Activities (10,259) (171,697) (486,376)
----------- ----------- -----------
Cash Flows from Investing Activities
Purchase of fixed assets - computer software -- (33,133) (34,300)
Write-off of net assets of discontinued -
operation -- -- 25,725
----------- ----------- -----------
Net Cash Used in Investing Activities -- (33,133) (8,575)
----------- ----------- -----------
Cash Flows from Financing Activities
Proceeds from issuance of common stock and options 10,000 247,500 493,776
Payment for shares not issued -- (211,460) 1,200
----------- ----------- -----------
Net Cash Provided by Financing Activities 10,000 36,040 494,976
----------- ----------- -----------
Net increase in cash (259) (168,790) 25
Cash at beginning of period 284 168,790 --
----------- ----------- -----------
Cash at end of period $ 25 $ -- $ 25
=========== =========== ===========
See accompanying notes to financial statements
F-7
AUTOCARBON, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Autocarbon, Inc. (formerly Autocarbon.com, Inc.) (the "Company") was
incorporated on June 26, 2001 under the laws of the State of
Delaware as Autocarbon.com, Inc. On October 25, 2002 Autocarbon,
Inc. was incorporated under the laws of the State of Delaware and
became a wholly owned subsidiary of Autocarbon.com, Inc. and was
merged into Autocarbon.com, Inc. on October 28, 2002. The surviving
corporation, Autocarbon.com, Inc. changed its name to Autocarbon,
Inc.
Business
The Company is engaged in the sale and marketing of carbon fiber and
composite products. The Company's focus has historically been on the
auto industry and the many different types of components consisting
of wheels and other body parts that are used in the production of
automobiles. The Company has marketed and sold products manufactured
for the Company by Rocket Composites, Ltd., a privately owned
company that was located in the United Kingdom that was wholly
owned, controlled and operated by the Company's Chairman, James
Miller, pursuant to a five-year distribution agreement. The
distribution agreement with Rocket has been terminated and Rocket
has been placed in liquidation. As a result, the Company has had to
secure other sources for product manufacturing. In order to do so,
the Company had entered into a share exchange agreement with
Autocarbon Ltd. and the shareholders of Autocarbon Ltd., pursuant to
which the Company had agreed to purchase all of the issued and
outstanding capital stock of Autocarbon Ltd. in exchange for an
aggregate of 9,447,160 shares of the Company. Autocarbon Ltd. is a
privately owned company located in the United Kingdom, in which
James Miller; the Company's Chairman is a minority shareholder. Due
to Autocarbon Ltd's inability to fulfill the terms of the share
exchange agreement on March 22, 2004, the Directors of the Company
have deemed this transaction null and void. As A result of the
aforementioned facts the Company has determined to discontinue
virtually all of its operations and will seek to effectuate an
acquisition or merge into another business entity. The Company is
presently negotiating settlement agreements with all of its
creditors.
F-8
AUTOCARBON, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Going concern considerations
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has no
operating history nor any revenues or earnings from operations. The
Company's continued existence is dependent upon its ability to
resolve its liquidity problems, principally by obtaining additional
debt financing and equity capital until such time the Company becomes
profitable or effectuates a merger or acquisition by or into a
profitable company. The lack of financial resources and liquidity
raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Significant accounting policies
USE OF ESTIMATES IN FINANCIAL STATEMENTS - Management uses estimates
and assumptions in preparing these financial statements in accordance
with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported
revenue and expenses. Actual results could vary from the estimates
that were used.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the
Company considers all cash accounts, which are not subject to
withdrawal restrictions or penalties, as cash and equivalents in the
accompanying balance sheet.
FIXED ASSETS - Fixed assets consists of CAD production software
stated at cost. Major expenditures that substantially increase the
useful lives are capitalized. Maintenance, repairs and minor renewals
are expensed as incurred. When assets are retired or otherwise
disposed of, their costs and related accumulated amortization are
removed from the accounts and resulting gains or losses are included
in income. Amortization will be provided on a straight- line basis
over the estimated useful lives of the assets.
DEFERRED REVENUE - Deferred revenue represents amounts received from
customers for tooling costs that will be amortized over an estimated
number of units delivered pursuant to the customers purchase order.
F-9
AUTOCARBON, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: ORGANIZATION, BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES - Any provision (benefit) for income taxes is computed
based on the loss before income tax included in the Statement of
Operations. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. At present the Company
has a benefit due to a net tax loss carry forward. The benefit has
been fully reserved due to the uncertainty of its use. The company
has a tax net operating loss of $1,033,208 that may be carried over
and utilized against taxable income in future years.
EARNINGS PER COMMON SHARE - Basic earnings per share are computed
using the weighted average number of shares outstanding during the
year. Basic earnings per share also exclude any dilutive effects of
options, warrants and convertible securities. Diluted net loss per
share does not include options, warrants or convertible securities,
as they would be anti-dilutive.
NOTE 2: STOCKHOLDERS' EQUITY
Authorized Stock
The Company is authorized to issue 100,000,000 shares of common stock
with a par value of $0.0001 per share.
Private Placement
The Company, from July 1, 2001 through September 30, 2001 offered for
sale 40,000 Units at a value of $0.50 per Unit consisting of one
share of common stock and one warrant to purchase one additional
share of common stock at a value of $0.25 in a "private placement"
pursuant to Regulation D, Rule 506 of the Securities Act of 1933.
The Company, from November 1, 2001 through November 30, 2001 offered
for sale an additional 40,000 Units at a value of $0.50 per Unit
consisting of one share of common stock and one warrant to purchase
one additional share of common stock at a value of $0.25 in a
"private placement" pursuant to Regulation D, Rule 506 of the
Securities Act of 1933.
The Company, from January 6, 2003 through January 30, 2003 offered
for sale 20,000 Units at a value of $.05 per unit consisting of one
share of common stock and one common stock purchase warrant.
F-10
AUTOCARBON, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2: STOCKHOLDERS' EQUITY, CONTINUED
Common Stock Issued for Services
The Company issued common stock to various individuals and companies
(non- employees) in return for services rendered. 170,000 shares of
common stock along with warrants to acquire an additional 37,500
shares of common stock at a value of $0.25 were issued. On March 22,
2004 172,150 shares of post reverse split shares were rescinded.
The Company has determined that the value of the common stock issued
is more reliably determined based on the value of the services
rendered. All services were provided prior to the Private Placement.
The 170,000 shares of common stock were valued at $56,950.
Legal and consulting services valued at $10,000 were paid for with
the issuance of 30,000 shares of common stock and warrants to acquire
an additional 15,000 shares of common stock at a value of $0.25.
Additionally, $30,000 of marketing, and promotional expenses was paid
for with the issuance of 1,200 shares of common stock.
Consulting services valued at $317,500 were paid for with the
issuance of 12,900 shares of common stock.
The Company issued 200,000 shares of common stock to consultants for
$10,000 during the quarter ended June 30, 2003.
Consulting services valued at $13,246 were paid for with the issuance
of 25,000 shares of common stock during the quarter ended June 30,
2003.
F-11
AUTOCARBON, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2: STOCKHOLDERS' EQUITY, CONTINUED
Common Stock Issued for Services, Continued
Individuals who were both Officers and Directors received 66,850
shares of common stock valued at $22,395, individuals who were solely
Directors received 5,000 shares of common stock valued at $1,675, and
others who are neither Officer nor Directors received 98,150 shares
of common stock valued at $32,880.
Reverse Stock Split
Pursuant to the written consent of a majority of the stockholders
dated August 21, 2002, the Company effected a one-for-fifty reverse
stock split of the Company's Common Stock. All per share amounts have
been retroactively restated for the effect of this reverse split. All
information pertaining to shares issued pursuant to a private
placement or for services has been retroactively restated as well.
NOTE 3: SUBSEQUENT EVENT
On January 26, 2004 the Board of Directors by unanimous consent
elected a new President and appointed a new Secretary of the Company.
On January 19, 2004 the Company entered into a stock purchase
agreement and plan of reorganization to acquire all of the issued and
outstanding shares of New Concept Nutriceuticals, Inc. (NCN) in a
transaction intended to qualify as a tax-free exchange pursuant to
section 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended. NCN will be a wholly owned subsidiary.
On February 15, 2004 two members of the Board of Directors resigned
their respective positions.
F-12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with our audited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward-looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or our behalf. We disclaim any obligation to update
forward-looking statements.
OVERVIEW
Autocarbon, Inc. (formerly Autocarbon.com, Inc.) (the "Company") was
incorporated on June 26, 2001 under the laws of the State of Delaware as
Autocarbon.com, Inc. On October 25, 2002 Autocarbon, Inc. was incorporated under
the laws of the State of Delaware and became a wholly owned subsidiary of
Autocarbon.com, Inc. and was merged into Autocarbon.com, Inc. on October 28,
2002. The surviving corporation, Autocarbon.com, Inc. changed its name to
Autocarbon, Inc.
Business
The Company is engaged in the sale and marketing of carbon fiber and composite
products. The Company's focus has historically been on the auto industry and the
many different types of components consisting of wheels and other body parts
that are used in the production of automobiles. The Company has marketed and
sold products manufactured for the Company by Rocket Composites, Ltd., a
privately owned company that was located in the United Kingdom that was wholly
owned, controlled and operated by the Company's Chairman, James Miller, pursuant
to a five-year distribution agreement. The distribution agreement with Rocket
has been terminated and Rocket has been placed in liquidation. As a result, the
Company has had to secure other sources for product manufacturing. In order to
do so, the Company had entered into a share exchange agreement with Autocarbon
Ltd. and the shareholders of Autocarbon Ltd., pursuant to which the Company had
agreed to purchase all of the issued and outstanding capital stock of Autocarbon
Ltd. in exchange for an aggregate of 9,447,160 shares of the Company. Autocarbon
Ltd. is a privately owned company located in the United Kingdom, in which James
Miller; the Company's Chairman is a minority shareholder. Due to Autocarbon
Ltd's inability to fulfill the terms of the share exchange agreement on March
22, 2004, the Directors of the Company have deemed this transaction null and
void. As a result of the aforementioned facts the Company has determined to
discontinue virtually all of its operations and will seek to effectuate an
acquisition or merge into another business entity. The Company is presently
negotiating settlement agreements with all of its creditors.
3
PRIOR TRANSACTIONS:
On January 3, 2003, Autocarbon, Inc. (the "Company") entered into a Share
Exchange Agreement with Autocarbon Limited, a United Kingdom registered company,
pursuant to which the Company has agreed to purchase all of the issued and
outstanding capital stock of Autocarbon Limited in exchange for an aggregate of
9,447,160 shares of common stock of the Company. The Share Exchange Agreement
contemplated that the closing of the Share Exchange Agreement would take place
on or about January 20, 2003. That closing date was subsequently postponed until
April 16, 2003. Autocarbon Limited agreed to provide the Company with historical
financial statements audited in accordance with US GAAP (the "Financial
Statements"). Both parties agree to amend the Share Exchange Agreement to
provide that the closing of the Share Exchange Agreement shall occur upon
receipt by the Company of the Financial Statements. On April 16, 2003,
Autocarbon Limited delivered to the Company the Financial Statements and the
Share Exchange Agreement was closed on the same date. Subsequent thereto, on or
about October 16, 2003, the Registrant declared the Agreement null and void
because the Registrant was unable to obtain the cooperation of Autocarbon
Limited in auditing the previously delivered financial statements in accordance
with US GAAP.
SUBSEQUENT TRANSACTIONS
On January 26, 2004 the Board of Directors by unanimous consent elected a new
President and appointed a new Secretary of the Company.
On January 19, 2004 the Company entered into a stock purchase agreement and plan
of reorganization to acquire all of the issued and outstanding shares of New
Concept Nutriceuticals, Inc. (NCN) in a transaction intended to qualify as a
tax-free exchange pursuant to section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended. NCN will be a wholly owned subsidiary.
On February 15, 2004 two members of the Board of Directors resigned their
respective positions, and Simon Thurlow was appointed the Sole Director.
Equipment and Employees
As of March 31, 2003, we had no operating business and thus no equipment and no
employees, other than our former Officers and Directors, who did not receive
salaries. Likewise, Mr. Thurlow, the new sole Executive President/Financial
Officer of the Company, do not receive any salary. We do not intend to develop
our own operating business but instead plan to merge with another company.
RESULTS OF OPERATIONS
During the first quarter of the Registrant's fiscal year, ending December 31,
2003, the Registrant did not have an operating unit. Therefore a comparison of
sales to the previous year is not an accurate representation of the increase or
decrease of the revenues, costs and sales of the Registrant.
4
LIQUIDITY AND FINANCIAL RESOURCES
The Company incurred the same smaller net loss of $(18,529) for the quarter
ended December 31, 2003 and for the quarter ended September 30, 2002, incurred a
net loss of $(445,789), as a result of discontinued operations. As of December
31, 2003, current liabilities exceeded current assets by $(130,265).
These factors raise substantial doubt about the Company's ability to continue as
a going concern. It is the intention of the Company's management to improve
profitability by significantly reducing operating expenses and to increase
revenues significantly, through growth and acquisitions. The ultimate success of
these measures is not reasonably determinable at this time.
RISK FACTORS
Much of the information included in this statement includes or is based upon
estimates, projections or other "forward looking statements". Such forward
looking statements include any projections or estimates made by us and our
management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other "forward looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other "forward
looking statements".
We Have No Operating History or Basis for Evaluating Prospects
We were incorporated in June 2001 and we have currently have no operating
business or plans to develop one. We are currently seeking to enter into a
merger or business combination with another company. Our President/Chief
Financial Officer, Simon Thurlow, was only appointed in January 2004 and has had
a minimal period of time to evaluate the Company's merger prospects.
Accordingly, there is only a limited basis upon which to evaluate our prospects
for achieving our intended business objectives. To date, our efforts have been
limited to organizational activities and searching for merger targets.
We Have Limited Resources and No Revenues From Operations, and May Need
Additional Financing in Order to Execute our Business Plan; Our Auditors Have
Expressed Doubt as to our Ability to Continue Business as a Going Concern
We have limited resources, no revenues from operations to date, and our
cash on hand may not be sufficient to satisfy our cash requirements during the
next twelve months. In addition, we will not achieve any revenues (other than
insignificant investment income) until, at the earliest, the consummation of a
merger and we cannot ascertain our capital requirements until such time. Further
limiting our abilities to achieve revenues, in order to avoid status as an
"Investment Company" under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), we can only invest our funds prior to a merger in
limited investments which do not invoke Investment Company status. There can be
no assurance that determinations ultimately made by us will permit us to achieve
our business objectives. Our auditors have included an explanatory paragraph in
their report for the year ended March 31, 2003, indicating that certain
conditions raise substantial doubt regarding our ability to continue as a going
concern. The financial statements included in this Form 10-KSB do not include
any adjustment to asset values or recorded amounts of liability that might be
necessary in the event we are unable to continue as a going concern. If we are
in fact unable to continue as a going concern, shareholders may lose their
entire investment in our common stock.
6
We Will Be Able to Effect At Most One Merger, and Thus May Not Have a
Diversified Business
Our resources are limited and we will most likely have the ability
to effect only a single merger. This probable lack of diversification will
subject us to numerous economic, competitive and regulatory developments, any or
all of which may have a material adverse impact upon the particular industry in
which we may operate subsequent to the consummation of a merger. We will become
dependent upon the development or market acceptance of a single or limited
number of products, processes or services.
We Depend upon a Single Executive Officer and Director, Whose Experience Is
Limited and Who Makes All Management Decisions
Our ability to effect a merger will be dependent upon the efforts of
our President/Financial Officer and sole director, Simon Thurlow.
Notwithstanding the importance of Mr. Thurlow, we have not entered into any
employment agreement or other understanding with Mr. Thurlow concerning
compensation or obtained any "key man" life insurance on any of their lives. The
loss of the services of Mr. Thurlow will have a material adverse effect on our
business objectives. We will rely upon the expertise of Mr. Thurlow and do not
anticipate that we will hire additional personnel. While we have engaged certain
outside consultants who have and who will continue to assist us in evaluating
merger targets, we may not have the resources to retain additional personnel as
necessary.
Management Will Change Upon the Consummation of a Merger
After the closing of a merger, our current management will not
retain any control over the Company. Mr. Thurlow intends to resign as the
President/Financial Officer ands sole Director of the Company. It is impossible
to know at this time who the management of the Company will be after the close
of a merger.
"Penny Stock" Rules May Restrict the Market for the Company's Shares
Our common shares are subject to rules promulgated by the Securities
and Exchange Commission relating to "penny stocks," which apply to companies
whose shares are not traded on a national stock exchange or on the NASDAQ
system, trade at less than $5.00 per share, or who do not meet certain other
financial requirements specified by the Securities and Exchange Commission.
These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
our common shares and may affect the secondary market for our common shares.
These rules could also hamper our ability to raise funds in the primary market
for our common shares.
7
Possible Volatility of Share Prices
Our common shares are currently publicly traded on the
Over-the-Counter Bulletin Board service of the National Association of
Securities Dealers, Inc. The trading price of our common shares has been subject
to wide fluctuations. Trading prices of our common shares may fluctuate in
response to a number of factors, many of which will be beyond our control. The
stock market has generally experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance
of companies with no current business operation. There can be no assurance that
trading prices and price earnings ratios previously experienced by our common
shares will be matched or maintained. These broad market and industry factors
may adversely affect the market price of our common shares, regardless of our
operating performance.
In the past, following periods of volatility in the market price of
a company's securities, securities class-action litigation has often been
instituted. Such litigation, if instituted, could result in substantial costs
for us and a diversion of management's attention and resources.
Indemnification of Directors, Officers and Others
Our By-Laws contain provisions with respect to the indemnification
of our officers and directors against all expenses (including, without
limitation, attorneys' fees, judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that the person is one of our officers or directors) incurred
by an officer or director in defending any such proceeding to the maximum extent
permitted by Nevada law.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of our company under Delaware law or otherwise, we have been advised the
opinion of the Securities and Exchange Commission is that such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.
Anti-Takeover Provisions
We do not currently have a shareholder rights plan or any
anti-takeover provisions in our By-laws. Without any anti-takeover provisions,
there is no deterrent for a take-over of our company, which may result in a
change in our management and directors.
Current Stockholders Will Be Immediately and Substantially Diluted upon a Merger
Our Certificate of Incorporation authorizes the issuance of
100,000,000 shares of Common Stock. There are currently approximately
42,454,456, issued and outstanding shares of common stock, leaving approximately
57,545,544 authorized but unissued shares of Common Stock available for
issuance. To the extent that additional shares of Common Stock are issued in
connection with a merger, our stockholders would experience dilution of their
respective ownership interests. Furthermore, the issuance of a substantial
number of shares of Common Stock may adversely affect prevailing market prices,
if any, for the Common Stock and could impair our ability to raise additional
capital through the sale of equity securities.
We Do Not Expect to Pay Cash Dividends
We do not expect to pay dividends and we have no cash reserves. The
payment of dividends after consummating a merger will be contingent upon the
incoming management's views and our revenues and earnings, if any, capital
requirements, and general financial condition subsequent to consummation of the
merger. We presently intend to retain all earnings, if any, for use in business
operations and accordingly, the Board does not anticipate declaring any
dividends in the foreseeable future. It is probable that any post-merger
arrangement will have a similar philosophy.
8
ITEM 3. CONTROLS AND PROCEDURES
The Registrant's principal executive officer/principal financial officer, based
on their evaluation of the registrant's disclosure controls and procedures (as
defined in Rules 13a-14 (c) of the Securities Exchange Act of 1934) as of April
1, 2004, have concluded that the Registrants' disclosure controls and procedures
are adequate and effective to ensure that material information relating to the
registrants and their consolidated subsidiaries is recorded, processed,
summarized and reported within the time periods specified by the SEC's rules and
forms, particularly during the period in which this quarterly report has been
prepared.
The Registrants' principal executive officers and principal financial officer
have concluded that there were no significant changes in the registrants'
internal controls or in other factors that could significantly affect these
controls subsequent to April 1, 2004, the date of their most recent evaluation
of such controls, and that there was no significant deficiencies or material
weaknesses in the registrant's internal controls.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no past, pending or, to our knowledge, threatened litigation or
administrative action which has or is expected by our management to have a
material effect upon our business, financial condition or operations, including
any litigation or action involving our officer, director or other key personnel.
There have been no changes in the company's accountants, or disagreements with
its accountants since its inception.
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.
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ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
31.1 Section 302 Certification
32.1 Section 906 Certification
------------
* These documents are hereby incorporated by reference to Form SB-2, as amended,
filed on August 17, 2001
(b) Reports on Form 8-K filed during the three months ended December 31, 2003.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: April 20, 2004
Autocarbon, Inc.
/s/ Simon Thurlow
------------------------------------------
Simon Thurlow, President/Financial Officer
10