SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT No. 1 to
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): January 16, 2004
AMERICAN BUSING CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Nevada 000-50243 33-1025552
----------------------- --------------------- -------------------
(State of Incorporation (Commission File No.) (IRS Identification
or Other Jurisdiction) Number)
13134 State Route 62, Salem, Ohio 44460
----------------------------------------
(Address of principal executive offices)
(330) 332-8534
-------------------------------------------------
Registrant's telephone number including area code
-------------------------------------------------------------
(Former name or former address, if changed since last report)
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits.
Financial Statements and Pro Forma Financial Information
--------------------------------------------------------
In connection with the events reported in the Registrant's
Form 8-K filed with the Commission on January 23, 2004, the
Registrant is filing the following financial statements of its
subsidiary, W.W. Cycles, Inc. ("Cycles"), and certain pro forma
financial information, as required pursuant to Item 7 of Form 8-K
herewith:
(a) Audited Financial Statements of Cycles for the years
ended December 31, 2003 and 2002; and
(b) Pro forma financial information reflecting the
acquisition of Cycles by the Registrant, presented as required
pursuant to Article 11 of Regulation S-X.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
AMERICAN BUSING CORPORATION
By: /s/ Gregory A. Haehn
----------------------------
Gregory A. Haehn
President
Dated: As of March 31, 2004
FINANCIAL STATEMENTS
W. W. CYCLES, INC.
Years ended December 31, 2003 and 2002
- - - o o 0 o o - - -
C O N T E N T S
P A G E
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 1
BALANCE SHEETS 2-3
STATEMENTS OF OPERATIONS 4
STATEMENTS OF SHAREHOLDERS' EQUITY 5
STATEMENTS OF CASH FLOWS 6
NOTES TO FINANCIAL STATEMENTS 7-16
- - - o o 0 o o - - -
Report of Independent Certified Public Accountants
W. W. Cycles, Inc.
Salem, Ohio
We have audited the accompanying balance sheets of W. W. Cycles,
Inc. as of December 31, 2003 and 2002 and the related statements
of operations, shareholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of W. W. Cycles, Inc. as of December 31, 2003 and 2002 and the
results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted
in the United States of America.
BDO Seidman, LLP
Philadelphia, Pennsylvania
March 23, 2004
-1-
BALANCE SHEETS
W. W. CYCLES, INC.
December 31, 2003 and 2002
ASSETS
2003 2002
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 587,917 $ 780,372
Accounts receivable, net 1,285,106 917,214
Accounts receivable, affiliates 315,343 -
Inventories 10,986,080 7,319,486
Current portion of note receivable, officer 679,405 375,994
Prepaid expenses 8,000 31,712
----------- -----------
TOTAL CURRENT ASSETS 13,861,851 9,424,778
----------- -----------
PROPERTY AND EQUIPMENT, NET 425,177 462,170
----------- -----------
OTHER ASSETS
Accounts receivable, affiliate - 220,000
Note receivable, officer - 139,677
Deposits 16,000 16,000
----------- -----------
TOTAL OTHER ASSETS 16,000 375,677
----------- -----------
$14,303,028 $10,262,625
=========== ===========
See accompanying notes to financial statements
-2-
BALANCE SHEETS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
LIABILITIES AND SHAREHOLDERS' EQUITY
2003 2002
----------- -----------
CURRENT LIABILITIES
Lines of credit $ 450,000 $ 150,000
Notes payable, floor plans 11,575,660 7,662,177
Accounts payable, trade 675,042 682,126
Accrued expenses 258,412 229,377
Customer deposits 215,632 61,751
Current portion of long-term debt 97,073 113,413
----------- -----------
TOTAL CURRENT LIABILITIES 13,271,819 8,898,844
LONG-TERM DEBT, NET - 102,631
----------- -----------
TOTAL LIABILITIES 13,271,819 9,001,475
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock - no par value:
Authorized 750 shares; issued and
outstanding 100 shares 45,000 45,000
Retained earnings 986,209 1,216,150
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,031,209 1,261,150
----------- -----------
$14,303,028 $10,262,625
=========== ===========
See accompanying notes to financial statements
-3-
STATEMENTS OF OPERATIONS
W. W. CYCLES, INC.
Years ended December 31, 2003 and 2002
2003 2002
------------ ------------
OPERATING INCOME
Sales $ 45,217,270 $ 38,461,692
Finance, insurance and extended
service revenues 838,573 1,041,228
------------ ------------
TOTAL OPERATING INCOME 46,055,843 39,502,920
COST OF MERCHANDISE SOLD 41,229,644 34,357,908
------------ ------------
GROSS PROFIT 4,826,199 5,145,012
OPERATING EXPENSES
Selling expenses 2,513,276 2,564,627
General and administrative expenses 1,460,092 1,337,531
------------ ------------
3,973,368 3,902,158
------------ ------------
INCOME FROM OPERATIONS 852,831 1,242,854
------------ ------------
OTHER INCOME AND (EXPENSE)
Other income, net 6,608 15,987
Interest expense, net (300,937) (244,433)
------------ ------------
(294,329) (228,446)
------------ ------------
NET INCOME $ 558,502 $ 1,014,408
============ ============
See accompanying notes to financial statements
-4-
STATEMENTS OF STOCKHOLDERS' EQUITY
W. W. CYCLES, INC.
Years ended December 31, 2003 and 2002
Common Stock Retained
Shares Amount Earnings Total
------ ------- ----------- -----------
Balance, January 1, 2002 100 $45,000 $ 618,697 $ 663,697
Net income - - 1,014,408 1,014,408
Distributions - - (416,955) (416,955)
------ ------- ----------- -----------
Balance, December 31, 2002 100 45,000 1,216,150 1,261,150
Net income - - 558,502 558,502
Distributions - - (788,443) (788,443)
------ ------- ----------- -----------
Balance, December 31, 2003 100 $45,000 $ 986,209 $ 1,031,209
====== ======= =========== ===========
See accompanying notes to financial statements
-5-
STATEMENTS OF CASH FLOWS
W. W. CYCLES, INC.
Years ended December 31, 2003 and 2002
2003 2002
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 558,502 $1,014,408
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 74,564 64,912
Provision for doubtful accounts 6,295 3,542
Loss on sale of property and equipment 1,609 -
Increase in accounts receivable, net (374,187) (206,245)
Increase in inventories (3,666,594) (1,371,749)
Increase in floor plan liability 3,913,483 2,325,256
Decrease in prepaid expenses 23,712 50,582
Increase (decrease) in customer deposits 153,881 (105,239)
Increase (decrease) in accounts payable trade (7,084) 350,950
Increase in accrued expenses 29,035 11,566
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 713,216 2,137,983
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (89,420) (183,725)
Proceeds from sale of property and equipment 50,240 -
Increase in deposits - (14,300)
(Increase) decrease in accounts receivable
affiliates (95,343) (668,984)
Increase in notes receivable from officers (163,734) (133,442)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (298,257) (1,000,451)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings 300,000 -
Distributions (788,443) (416,955)
Payments on long-term debt (118,971) (112,427)
------------ ------------
NET CASH USED IN FINANCING ACTIVITIES (607,414) (529,382)
NET INCREASE (DECREASE) IN CASH
------------ ------------
AND CASH EQUIVALENTS (192,455) 608,150
CASH AND CASH EQUIVALENTS, beginning of Year 780,372 172,222
------------ ------------
CASH AND CASH EQUIVALENTS, end of Year $ 587,917 $ 780,372
============ ============
OTHER SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid during the year $ 293,887 $ 261,657
============ ============
See accompanying notes to financial statements
-6-
NOTES TO FINANCIAL STATEMENTS
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
W.W. Cycles, Inc. (the Company), doing business as Andrews
Cycles, was incorporated in Ohio in 1984 and operates a retail
dealer of motorcycles, all terrain vehicles, scooters and
personal watercraft in northeastern Ohio.
Cash and Cash Equivalents:
Cash and cash equivalents include amounts held in demand
deposit accounts and overnight investment accounts. The Company
considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Contracts in Transit:
Contracts in transit represent customer finance contracts
evidencing loan agreements or lease agreements between the
Company, as creditor, and the customer, as borrower, to acquire
or lease a vehicle whereby a third-party finance source has given
the Company initial, non-binding approval to assume the Company's
position as creditor. Funding and approval from the finance
source is provided upon the finance source's review of the loan
or lease agreement and related documentation executed by the
customer at the dealership. These finance contracts are
typically funded within ten days of the initial approval of the
finance transaction by the third-party finance source. The
finance source is not contractually obligated to make the loan or
lease to the customer until it gives its final approval and funds
the transaction. Until such final approval is given, contracts
in transit represent amounts due from the customer to the
Company. See Note B for additional information.
Allowance for Doubtful Accounts:
Accounts are written off when management determines that an
account is uncollectible. Recoveries of accounts previously
written off are recorded when received. An estimated allowance
for doubtful accounts is determined to reduce the Company's
receivables to their carrying value, which approximates fair
value. The allowance is estimated based on historical collection
experience, specific review of individual customer accounts, and
current economic and business conditions. Historically, the
Company has not incurred any significant credit related losses.
Revenue Recognition:
Vehicle Sales:
The Company records revenue when vehicles are delivered and
title has passed to the customer, when vehicle service or repair
work is performed and when parts are delivered. Sales promotions
that are offered to customers are accounted for as a reduction to
the sales price at the time of sale. Incentives, rebates and
holdbacks offered by manufacturers directly to the Company are
recognized at the time of sale if they are vehicle specific, or
as earned in accordance with the manufacturer program rules and
are recorded as a reduction of cost of merchandise sold.
-7-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (Continued):
Finance, Insurance and Extended Service Revenues:
The Company arranges financing for customers through various
financial institutions and receives a commission from the lender
equal to the difference between the interest rates charged to
customers and the interest rates set by the financing
institution. The Company also receives commissions from the sale
of various third party insurance products to customers and
extended service contracts. These commissions are recorded as
revenue at the time the customer enters into the contract. The
Company is not the obligor under any of these contracts. In the
case of finance contracts, a customer may prepay or fail to pay
their contract, thereby terminating the contract. Customers may
also terminate extended service contracts, which are fully paid
at purchase, and become eligible for refunds of unused premiums.
In these circumstances, a portion of the commissions the Company
receives may be charged back based on the relevant terms of the
contracts. The revenue the Company records relating to
commissions is net of an estimate of the ultimate amount of
chargebacks the Company will be required to pay. Such estimates
of chargeback experience is based on our historical chargeback
expense arising from similar contracts.
Fair Value of Financial Instruments:
Financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and debt, including floor
plan notes payable. The carrying amount of all significant
financial instruments approximates fair value due either to
length or maturity or variable interest rates that approximate
prevailing market rates.
Inventories:
Parts and accessories inventories are stated at the lower of
cost or market using the first-in, first-out method. Vehicle
inventories are stated at the lower of cost or market using the
specific identification method.
Concentration of Credit Risk:
Financial instruments that potentially subject the Company to
credit risk consist of cash equivalents and accounts receivable.
The Company's policy is to review the amount of credit
exposure to any one financial institution and place investments
with financial institutions evaluated as being creditworthy. In
the ordinary course of business, the Company has bank deposits
and overnight repurchase agreements that may exceed federally
insured limits.
-8-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk (Continued):
Concentration of credit risk, with respect to accounts
receivable-customers, is limited through the Company's credit
evaluation process. The Company reviews the credit history
before extending credit. Generally, the Company does not require
collateral from its customers.
Property and Equipment:
Property and equipment are stated at cost. Maintenance and
repairs that do not add materially to the value of the asset nor
appreciably prolong its useful life are charged to expense as
incurred. Gains or losses on the disposal of property and
equipment are included in the determination of income.
Depreciation of property and equipment and amortization of
leasehold improvements are provided using the straight-line
method over the following estimated useful lives:
Fixtures, and equipment............... 5-7 years
Vehicles.............................. 5 years
Leasehold Improvements................ 15 years
Impairment of Long-Lived Assets:
Long-lived assets are reviewed for impairment whenever events
such as product discontinuances, product dispositions or other
changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognized when the
carrying amount of a long-lived asset exceeds the sum of non-
discounted cash flows expected to result from the asset's use and
eventual disposition. An impairment loss is measured as the
amount by which the carrying amount exceeds its fair value, which
is typically calculated using discounted expected future cash
flows. The discount rate to these cash flows is based on the
Company's weighted average cost of capital, which represents the
blended after-tax costs of debt and equity. There were no
indications of impairments at December 31, 2003 or 2002.
Income Taxes:
The Company, with the consent of its shareholders, has
elected to have its income taxed as an S corporation under
Section 1362 of the Internal Revenue Code. As such, the Company
does not pay corporate income taxes and is not allowed net
operating tax loss carrybacks or carryovers as deductions.
Instead, the shareholders include their proportionate share of
the Company's taxable income or loss in their individual income
tax returns.
The book basis of net assets differ from the tax basis
primarily due to depreciation differences caused by accelerated
depreciation methods used for tax and certain accrued expenses
which are not deductible for tax until paid.
-9-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Product Warranty:
The Company sells both manufacturers and company warranties.
The anticipated costs related to company's product warranties are
accrued when units are sold. Product warranties are insignificant.
Advertising Costs:
Advertising costs are expensed when incurred. Charges to
operations amounted to
$752,371 in 2003 and $645,080 in 2002.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain 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.
-10-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE B - ACCOUNTS RECEIVABLE, NET
Accounts receivable, net consisted of the following:
2003 2002
----------- -----------
A/R-Customers and dealers $ 651,932 $ 365,168
A/R-Manufacturers 328,790 247,640
A/R-Employees 4,902 24,086
Contracts in transit 324,482 305,320
----------- -----------
1,310,106 942,214
Allowance for doubtful accounts 25,000 25,000
----------- -----------
$ 1,285,106 $ 917,214
=========== ===========
NOTE C - INVENTORIES
Inventories consisted of the following:
2003 2002
----------- -----------
Parts and accessories $ 736,308 $ 624,499
Vehicles 10,249,772 6,694,987
----------- -----------
TOTALS $10,986,080 $ 7,319,486
=========== ===========
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
2003 2002
----------- -----------
Fixtures and equipment $ 178,737 $ 135,561
Vehicles 234,558 260,898
Leasehold improvements 264,328 264,328
----------- -----------
677,623 660,787
Less accumulated depreciation 252,446 198,617
----------- -----------
NET PROPERTY AND EQUIPMENT $ 425,177 $ 462,170
=========== ===========
Depreciation expense charged to operations amounted to
$74,564 in 2003 and $64,912 in 2002.
NOTE E - NOTE RECEIVABLE OFFICER
Note receivable officer consisted of advances to an officer
and advances to companies that the officer owns bearing interest
at 6% with no stipulated repayment terms. Interest income on
these notes amounted to $13,364 in 2003 and $15,980 in 2002. The
notes are expected to be repaid within a year.
-11-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE F - LINES OF CREDIT
The following is a summary of the Company's line of credit
agreements:
2003 2002
----------- -----------
A $250,000 line of credit with one of its suppliers
bearing interest at 7.5%. The loan is collateralized
by substantially all of the Company's assets. The
outstanding principal balance is payable in full by
December 2004. The Company can re-borrow on
the line one month subsequent to payoff. $ 150,000 $ 150,000
A $300,000 revolving line of credit at a bank bearing
interest at a variable rate of prime plus one percent
(5% at December 31, 2003). The loan is collateralized by
substantially all the Company's assets and the building
owned personally by an officer. 300,000 0
----------- -----------
$ 450,000 $ 150,000
=========== ===========
NOTE G - NOTES PAYABLE - FLOOR PLANS
The Company has floor plan financing agreements for the
purchase of its new and used vehicle inventory. The floor plans
are collateralized by substantially all corporate assets. The
following is a summary of floor plan financing agreements:
2003 2002
----------- -----------
Kawasaki Motors Finance Company floor plan
agreement provides for borrowings up to
$1,240,010. Interest is payable monthly and
fluctuates with prime and varies based on the type
of unit financed and the length of time the unit
remains on the floor plan (ranging from 7% to 18%
at December 31, 2003). Principal payments are
due upon the sale of the specific units financed. $ 720,246 $ 1,126,763
American Honda Finance floor plan agreement
provides for borrowings up to $2,000,000.
Manufacturers at their discretion may increase the
borrowings. Interest is payable monthly and
fluctuates with prime and varies based on the type
of unit financed and the length of time the unit remains
on the floor plan (ranging from 4.5% to 6% at
December 31, 2003). Principal payments are due upon
the sale of the specific units financed. 3,706,011 2,238,128
----------- -----------
CARRIED FORWARD 4,426,257 3,364,891
-12-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE G - NOTES PAYABLE (CONTINUED)
2003 2002
----------- -----------
BROUGHT FORWARD $ 4,426,257 $ 3,364,891
Deutsche Financial Service floor plan agreement for
Yamaha units provides for borrowings up to $2,500,000.
Interest is payable monthly and fluctuates with prime
and varies based on the type of unit financed and the
length of time the unit remains on the floor plan
(ranging from 3.3% to 5.83% at December 31, 2003).
Principal payments are due upon the sale of the
specific units financed. 1,247,034 1,452,955
Deutsche Financial Service floor plan agreement for
Suzuki units provides for borrowings up to $1,000,000.
Manufacturers at their discretion may increase the
borrowings. Interest is payable monthly and fluctuates
with prime and varies based on the type of unit financed
and the length of time the unit remains on the floor plan
(ranging from 3% to 4.583% at December 31, 2003).
Principal payments are due upon the sale of the specific
units financed. 4,508,402 2,300,237
Deutsche Financial Service floor plan agreement for
Special Products provides for borrowings up to
$1,500,000. Interest is payable monthly and fluctuates
with prime and varies based on the type of unit financed
and the length of time the unit remains on the floor plan.
Principal payments are due upon the sale of the specific
units financed. 0 5,450
Polaris Acceptance floor plan agreement provides for
borrowings up to $325,000. Manufacturers at their
discretion may increase the borrowings. The agreement
is collateralized by specific units financed (ranging from
2.43% to 3.61% at December 31, 2003). Principal
payments are due the earlier of date of sale or one
year after financing. 398,230 220,234
Fifth Third Bank floor plan agreement provides for
borrowings up to $2,500,000. Interest is payable
monthly and fluctuates with prime and varies based
on the type of unit financed and the length of time
the unit remains on the floor plan (4% at
December 31, 2003). Principal payments are due
upon the sale of the specific units financed. 995,737 318,410
----------- -----------
TOTALS $11,575,660 $ 7,662,177
=========== ===========
-13-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE H - LONG-TERM DEBT
The following is a summary of long-term debt:
2003 2002
----------- -----------
Note payable to bank bearing interest at 6.85%,
payable in monthly installments of $1,635, through
July 2004, collateralized by vehicle. $ 11,186 $ 29,358
Noninterest bearing note payable to finance company,
payable in monthly installments of $518, through
November 2004, collateralized by vehicle. 5,177 11,389
Note payable to bank bearing interest at 5.75%,
payable in monthly installments of $7,576, through
November 2004, collateralized by second mortgage
on commercial real estate owned by a shareholder. 80,710 164,324
Note payable to bank bearing interest at 8.6%,
payable in monthly installments of $546, through
December 2005, collateralized by vehicle. 0 10,973
----------- -----------
97,073 216,044
Less current maturities 97,073 113,413
----------- -----------
TOTALS $ 0 $ 102,631
=========== ===========
NOTE I - RELATED PARTY TRANSACTIONS
Related Party Transactions:
Accounts receivable, affiliates consisted of the following:
2003 2002
----------- -----------
Noninterest bearing advances to and transfer of
product at cost to Andrews North, Inc., a corporation
in Cleveland, Ohio affiliated through common
ownership interest to be repaid within one year $ 220,000 $ 220,000
Non-interest bearing advances of $90,000 and sale
of product of $5,343 to individuals related to
the shareholders of the corporation to be repaid
within one year 95,343 0
----------- -----------
315,343 220,000
Less current maturities 315,343 0
----------- -----------
TOTALS $ 0 $ 220,000
=========== ===========
-14-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE I - RELATED PARTY TRANSACTIONS (CONTINUED)
Note receivable officer amounted to $679,405 at December 31,
2003 and $515,671 at December 31, 2002 (See Note E).
A portion of GAP insurance was purchased through a related
corporation. Charges to operations amounted to $-0- in 2003 and
$36,654 in 2002.
The Company leases a vehicle from a shareholder on a month-to-
month basis. Charges to operations amounted to $4,370 in 2003
and $9,014 in 2002.
The Company leases its retail facility from a shareholder
under a five-year agreement with two five year renewal terms.
The Company guarantees the debt on the building which amounted to
approximately $350,000 at December 31, 2003. In accordance with
Financial Accounting Standards Board Interpretation No. 46,
"Consolidation of Variable Interest Entities" ("FIN 46"), the
rental activities may qualify as a Variable Interest Entity and
need to be consolidated by the Company in the first quarter 2004.
The Company can not currently estimate the impact that this will
have on its financial statements.
Charges to operations amounted to $180,000 in 2003 and in
2002.
The following is a summary of future minimum lease payments
under operating leases that have initial or remaining
noncancellable terms in excess of one year as of December 31,
2003:
YEAR ENDING AMOUNT
----------- --------
2004 $180,000
2005 180,000
2006 180,000
2007 180,000
2008 180,000
--------
$900,000
========
NOTE J - EMPLOYEE BENEFIT PLANS
The Company sponsors a Simple Retirement Plan for all
eligible employees. The Company matches 100% of employee
contributions up to 3% of compensation. Charges to operations
amounted to $20,870 in 2003 and $24,092 in 2002.
-15-
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
W. W. CYCLES, INC.
December 31, 2003 and 2002
NOTE K - SUBSEQUENT EVENTS
On December 30, 2003, the shareholders of the Company entered
into a Stock Purchase and Reorganization Agreement in which
effective January 16, 2004 (the Closing Date) the Company was
issued an aggregate of 7,850,000 restricted shares of common
stock, $.001 par value, of American Busing Corporation in
exchange for all of the outstanding shares of the common stock of
the Company, resulting in the Company becoming a wholly-owned
subsidiary of American Busing Corporation, an inactive public
company. The acquisition was accounted for as a recapitalization
with the Company being the registrant subsequent to the merger.
The Company will continue to operate as a motorcycle dealership
in northeastern Ohio under the name of Andrews Cycles.
Effective January 1, 2004, the Company's election to be an S
Corporation was terminated.
On February 27, 2004, the shareholders of the Company signed
a letter of intent to purchase a motorcycle dealership in Chicago
currently operating as Chicago Cycles. The letter of intent is
subject to the performance of a due diligence review and the
ability to raise the financing needed to complete the
transaction. Upon completion of the acquisition, the Chicago
dealership will operate as a wholly owned subsidiary of American
Busing Corporation.
-16-
UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
On December 30, 2003, the shareholders of W.W. Cycles, Inc.,
an Ohio Corporation, (Cycles) entered into a Stock Purchase and
Reorganization Agreement in which the shareholders of Cycles were
issued 7,850,000 restricted shares of common stock, $.001 par
value, of American Busing Corporation, a Nevada Corporation,
(Registrant) in exchange for all of the issued and outstanding
common shares of Cycles. The transaction became effective on
January 16, 2004 (Closing date) and as a result, Cycles became a
wholly-owned subsidiary of American Busing Corporation. The
acquisition will be accounted for as a recapitalization whereby,
for accounting purposes, Cycles will be considered the accounting
acquirer and the historical financial statements of Cycles will
become the historical financial statements of the registrant.
On the Closing Date, in consideration of a payment of
$21,250, the Registrant acquired and subsequently retired all of
the shares of Common Stock (8,500,000 shares) of the Registrant
owned by the Registrant's sole director and officer. In
addition, loans from the former shareholder amounting to $30,000
were forgiven. The funds used to acquire the shares were loaned
to the Registrant by the majority shareholder of Cycles.
In connection with the merger, the Registrant issued to a
financial advisor, warrants to purchase up to 1,000,000 shares of
the Common Stock in consideration for financial advisory services
provided to the Registrant and Cycles in connection with the
merger. The Warrants are exercisable for a period of six years
after their date of issuance, at an exercise price of $1.00 per
share, provided that the Warrants may not be exercised prior to
the first anniversary date of issuance.
The following Pro Forma Consolidated Balance Sheet presents
Cycles' Consolidated Balance Sheet at December 31, 2003 as if the
merger had taken place on that date. The Pro Forma Consolidated
Statements of Operations were omitted due to the fact that the
operations of American Busing Corporation are insignificant and
the pro forma operating results would essentially be the same as
Cycles' historical results.
-17-
AMERICAN BUSING CORPORATION
UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET
BALANCE SHEET
----------------------------------------
American
W. W. Cycles, Inc. Busing Corporation
December 31, 2003 August 31, 2003 ADJUSTMENTS TOTAL
------------------ ------------------ ----------- -------------
ASSETS
CURRENT ASSETS
Cash $ 587,917 $ 1,706 $ - $ 589,623
Accounts receivable, net 1,285,106 1,285,106
Accounts receivable affiliates 315,343 315,343
Inventories 10,986,080 10,986,080
Current portion of note receivable officer 679,405 679,405
Prepaid expenses and other current assets 8,000 8,000
Deferred income taxes - 35,700 e 35,700
------------- ------------ ----------- -------------
TOTAL CURRENT ASSETS 13,861,851 1,706 35,700 13,899,257
PROPERTY AND EQUIPMENT, NET 425,177 9,166 434,343
OTHER ASSETS 16,000 16,000
------------- ------------ ----------- -------------
$ 14,303,028 $ 10,872 $ 35,700 $ 14,349,600
============= ============ =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 12,025,660 $ - $ - $ 12,025,660
Accounts payable and accrued expenses 933,454 7,841 941,295
Loans from shareholder - 30,000 (30,000) b 21,250
21,250 b
Customer deposits 215,632 215,632
Current portion of long-term debt 97,073 97,073
------------- ------------ ----------- -------------
TOTAL CURRENT LIABILITIES 13,271,819 37,841 (8,750) 13,300,910
DEFERRED INCOME TAXES 20,700 e 20,700
------------- ------------ ----------- -------------
TOTAL LIABILITIES 13,271,819 37,841 11,950 13,321,610
------------- ------------ ----------- -------------
STOCKHOLDERS' EQUITY
Common stock 45,000 11,075 (37,150) a 10,425
(8,500) b
Additional paid-in capital - 5,250 37,150 a 1,017,459
17,240 b
15,000 c
(43,390) d
971,209 e
15,000 e
Retained earnings (deficit) 986,209 (43,390) 43,390 d -
(15,000) e
(971,209) e
Other accumulated comprehensive income - 106 106
------------- ------------ ----------- -------------
1,031,209 (26,959) 23,740 1,027,990
Less: share subscription receivable - 10 (10) b -
------------- ------------ ----------- -------------
TOTAL SHAREHOLDERS' EQUITY 1,031,209 (26,969) 23,750 1,027,990
------------- ------------ ----------- -------------
14,303,028 10,872 35,700 14,349,600
============= ============ =========== =============
a = Issuance of 7,850,000 shares of American Busing Corporation in
exchange for all of the 100 shares of W.W. Cycles, Inc.
b = Repurchase and retirement of 8,500,000 shares of American Busing
Corporation in exchange for payment of $21,250 that was loaned to
the Company by its majority shareholder. Cancellation of all
outstanding loans from a former shareholder of the Registrant
totaling $30,000.
c = Issuance of warrants to the financial advisor. The warrants were
valued at fair value ($.015) of the underlying common stock at the
date of issuance.
d = Elimination of accumulated deficit of American Busing Corporation.
e = Effect of change from an S Corporation to a C Corporation.