U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999.
Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to ______ .
__________
March Indy International, Inc.
(Exact name of registrant as specified in its charter)
NEVADA 88-0339817
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
400 North Federal Highway
Hallandale, FL 33309
(Address of Principal Executive Offices and Zip Code)
Issuer's Telephone Number: (877) 996-2724
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
Indicate by mark (X) whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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 ___
(Cover page continued)
Indicate by mark (X) if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year: $0
Aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on March 31, 2000:
$18,827,000.
Number of shares outstanding of each of the registrant's classes of common stock
as of March 31, 2000 :
Common Stock 10,998,775
DOCUMENTS INCORPORATED BY REFERENCE:
List hereunder the following documents if incorporated by reference and the Part
of the 10-KSB into which the document is incorporated.
None
<PAGE>
MARCH INDY INTERNATIONAL, INC.
1999 FORM 10-KSB ANNUAL REPORT
Table of Contents
Page
Trademarks/Definitions
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 9. Directors and Executive Officers of the Registrant
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
PART IV
Item 13. Exhibits, Financial Statements, and Reports on Form 8-K
Signatures
<PAGE>
TRADEMARKS/DEFINITIONS
"March", 3"March Racing", "MarchRacing.com" and "March Indy" are trademarks and
service marks of March Indy International, Inc. All other trademarks, service
marks or tradenames referred to in this Form 10-KSB are the property of their
respective owners. Except as otherwise required by the context, all references
in this Form 10-KSB to (a) "we," "us," "our," "Company" or "March" refer to the
consolidated operations of March Indy International, Inc., a Nevada corporation,
and its wholly-owned subsidiary, March Indy International, Inc., a Delaware
corporation, (b) "you" refer to prospective investors in our common stock and
other readers of this Form 10-KSB, and (c) the "Web" refer to the World Wide
Web.
PART I
Item 1: Business
General
The Company is a development stage company currently in the process of
forming a motorsport racing team to compete in the Indy Racing League ("IRL")
series including the major event of the season the Indianapolis 500.
Underpinning the development of the team's formation is the accumulated
knowledge in automotive engineering technology and on-track competition
experience of the principal directors. The Company's racing team will serve as
the foundation of a business being structured to capitalize on its brand name
through the development of an Internet portal encompassing e-commerce, B2B
applications and motorsport content creation.
The Company intends to utilize its racing team as a platform to enhance and
develop its branding potential to attract sponsorship and endorsements and
marketing of its consumer goods, services, fan club, film and TV and video
products and technical products through the media including its Web site and the
Internet. The Company is in the development stage, and has not produced any
revenue to date.
The Company's "bricks and clicks" business plan incorporates a three
pronged approach in order to capture a significant market share of the
automobile sports industry. The synergistic structure is based on (1) the
Company's establishment of its brand name through its aspiring to the upper
echelon of racing; (2) vertical integration, through internal development or
acquisitions of branded engineering and chassis products; and (3) the continued
development of its planned Internet portal to expand and benefit from promoting
and merchandising the March brand name.
The Company
March Indy International, Inc. (the "Company"), was incorporated as N.E.C.
Properties Inc. in Nevada in 1995. In November, 1999, the Company changed its
name to March Indy International, Inc. after completing, on November 10, 1999,
the acquisition of all of the common stock of March Indy International, Inc., a
Delaware corporation ("March Delaware"). The merger was accounted for as a
reverse acquisition. The Company exists primarily as a stock holding company,
and accordingly, the operations described in this document, unless otherwise
specified, are those of the subsidiary, March Delware. The Company intends to
1
<PAGE>
engage in the business of designing, building and racing motor cars for Formula,
KART and Indy competition both in the United States and abroad. The Company also
plans to develop an Internet Web site in order to merchandise products related
to its racing efforts. The Company's product merchandising efforts are intended
to be "track side" on the Internet and in major sports shopping venues. The
Company was in the development stage as of December 31, 1999. For accounting
purposes, the acquisition had been treated as a reverse acquisition of the
Company by March Delaware. The historical statements presented herein prior to
November 10, 1999 are of the Nevada corporation.
The operating subsidiary, March Delaware was originally incorporated under
the laws of the State of Delaware on November 18, 1998. On January 7, 1999,
assets consisting of trademarks, trade names and other, intellectual property
rights, designs and technology were transferred by Thomas Megas and Peter Voller
in exchange for 100 percent of the stock in the Delaware corporation. After the
November 10, 1999 reorganization, March Delaware became the wholly-owned
subsidiary of the Company.
The Company will utilize its racing team as a platform to enhance and
develop its branding potential to attract sponsorship and endorsements and
marketing of its consumer goods, services, fan clubs, film and TV and video
products and technical products through the media including its Web site and the
internet.
The Company has the benefit of the technology, experience and
knowledge-base of the original March racing team which fielded cars and racing
teams which during the 1970s and 1980s achieved 58 outright wins and over 120
second and third place finishes in Indy events, with drivers such as Emerson
Fittipaldi, Al Unser, Roger Penske, Paul Newman, Danny Sullivan, Mario Andretti,
A. J. Foyt and Rick Mears. The original March design team, of which Company
director Robin Herd was the head, produced in the 1970's and 1980's Formula
(F1), F2, F3 Indy and land speed record cars as well as product for the European
space program, and has worked with and designed product for every major auto
manufacturer, including contract work for Porsche, GM, Alfa Romeo, Honda,
Lamborghini, Volvo and McLaren. The Company believes that the brand and fan base
created by the original March continues to exist, and is targeted to be
harnessed by the Company's strategic design.
The Company intends to race a team in the Indianapolis 500 to be held in
May, 2000, which is a highly competitive event, against approximately 26 other
cars driven by many of the top race car drivers in the United States. This race
is part of the IRL circuit which consists of 16 races annually and is considered
one of the most prestigious racing circuits as well as one of the most
publicized, within the United States. The Company intends to enter other races
in the IRL series during the year 2000. The Company expects its racing cars and
team to become increasingly competitive as the number of races it hopes to enter
grows.
The Company intends to increase the number of events entered and eventually
participate in all major open wheel events, in the United States. including the
KART "Champ" series. The Company also intends to enter European and American
Sports car series as well as Formula 2 and 3 in Europe. All of their racing
series are highly competitive and there can be no assurance of achieving
immediate success in such events.
2
<PAGE>
The Motorsports Industry
Auto racing is the second most watched professional sport in the world
after soccer. In 1999, auto racing has an estimated aggregate worldwide
television audience of over seven billion people. In addition, professional auto
racing has been the fastest growing professional sport in North America over the
past five years based on spectator attendance and television viewership.
Motorsport fans tend to be loyal to their favorite driver or teams. These
fans offer demographic profiles, which attract significant corporate
sponsorship. Corporate sponsorships include (1) event sponsorship, (2) racing
team sponsorship and (3) broadcast television sponsorship. British American
Tobacco, Budweiser, DuPont, Federal Express, Kellogg's Marlboro, Mc Donald's,
Miller Brewing, Motorola, PPG Industries, Target Stores, Texaco/Havoline,
Valvoline and Winston and several "dot com" companies each have sponsored or
currently sponsor racing teams, series or events.
Auto racing consists of several distinct categories, each with its own
organizing body and racing events. Internationally, open-wheel racing is the
most recognized form of auto racing. Open-wheel racing utilizes an
aerodynamically designed chassis and technology advanced equipment. The most
established international open-wheel racing series are Formula One and KART
"Champ" Series. The IRL formed in 1995, competes directly with the KART Series,
with an all-oval race schedule including the Indianapolis 500. The largest auto
racing category in the United States, in terms of attendance and media exposure,
is stock car racing. Stock car racing utilizes equipment similar in appearance
to standard passenger automobiles and races are typically staged on oval
courses. The most prominent organizing body in stock car racing is National
Association of Stock Car Racing ("NASCAR"). Sports car racing, with various
series throughout the world, includes several different classifications. The
most prominent series are America LeMans Series (ALMS) founded in 1996 to bring
"LeMans style " racing to the United States. The other main series in the U. S.
is Grand-Am series, which includes the Daytona 24 hour. The other main series
which is based predominantly in Europe is the Sports Racing World Cup. In
addition, there are national GT series and the internationally renowned 24-Hour
race at LeMans. The Company intends to compete in the IRL and KART "Champ"
racing series.
Our Strategy
The first and foremost element of the Company's strategy is its racing
team, beginning with the Indianapolis 500 to be held, May 26 through May 28,
2000. The Company also intends to compete in the European championship races and
is preparing to participate in Formula 3, the European Championship series and
select races.
The second element of the strategy incorporates the application of the
March brand to core engineering products such as chassis, gear boxes, composites
and design solutions, licensing of products developed by the Company to other
businesses and manufacturers, and the provision of cars and chassis to other
racing teams in other formulas. This branding program is also proposed to
include the merchandising of consumer products that benefit from the publicity
and cachet of the Company's track activity.
The third element of the Company's planned strategy incorporates an
Internet web site designed to develop and capture the synergy of a class brand.
The Company's development of an interactive portal's design is intended to
facilitate and expand track side and merchandising activities through the
generation of e-commerce, business-to-business applications and the creation of
media content, while incorporating its participation in the world of high-end
auto racing.
3
<PAGE>
In order to be able to quickly establish a racing team, the Company, on
March 21, 2000, entered into an agreement with the Sinden Racing Team, pursuant
to which the Company will race a car owned by Sinden at the Indy 500. Pursuant
to the agreement, the Company will pay Sinden $500,000 for the use of the car
plus 20% of all revenue from sponsors introduced to the Company by Sinden. The
Company has engaged Guy Smith, a highly-regarded driver, as the Company's driver
for the Indy 500.
The Company's sponsorship marketing efforts to date have produced a
corporate sponsor in Zoom2net.com. The Company's Web site, merchandising and
marketing efforts are intended to commence during the second quarter of 2000.
Competition
The Company will face both competition with other racing teams both on the
racing track and for sponsorship arrangements. While the Company expects its
main source of revenue will be from sponsorship arrangements and from the
licensing of the "March Indy" name, rather than from prize money won at races,
it will be important for the Company's racing team to compete well against other
teams, in order to establish the "March Indy" brand and to attract sponsorship
arrangements. The Company will race a team in the Indianapolis 500 to be held in
May, 2000, which is a highly competitive event against approximately 26 other
cars driven by many of the top race car drivers in the United States. This race
is part of the IRL circuit consisting of 16 races annually and is considered one
of the most prestigious racing circuits as well as one of the most publicized
within the United States. The Company intends to enter other races in the IRL
series during the year 2000. The Company expects its racing cars and team to
become more competitive as the number of races it hopes to enter grows.
Marketing Strategy
The Company's marketing strategy will be focused on optimizing its track
side merchandising operations, maximizing its exposure in the media,
particularly TV and the press and developing a highly interactive fan oriented
web site offering a menu of services and goods. The Company has signed a two
year agreement with Gary M. Reynolds & Associates, Inc. ("GMR") to provide
structure and continuity for its track side event marketing operation. GMR is a
division of the OMNICOM Group and a prominent event sports marketing firm. The
Company has signed an agreement with National Financial Communications Corp. to
run its public relations efforts. The Company has entered into an agreement with
IMEDIA, Inc. of Morristown NJ to manage part of its public relations and Web
site design. The Company has entered into a preliminary five-year strategic
alliance with Zoom2Net.com to provide domestic internet service provider (ISP)
services to its fans, scheduled to commence May 1, 2000. Under the terms of this
alliance, March can expect to receive $3.10 per month per user subscriber from
Zoom2Net.com as part of a marketing/sponsorship package.
Government Regulation
The Company's cost of complying with governmental environmental laws has
been negligible.
Employees
As of December 31, 1999, the Company employed three full-time equivalent
employees (FTE's) and three full time consultants.
We believe that the future success of the Company will depend in part on
our continued ability to attract, integrate, retain and motivate highly
qualified technical and managerial personnel, and upon the continued service of
our senior management and key technical personnel. The competition for qualified
personnel in our industry and geographic location is intense, and there can be
no assurance that we will be successful in attracting, integrating, retaining
and motivating a sufficient number of qualified personnel to conduct our
business in the future. From time to time, we may also employ independent
contractors to support our research and development, marketing, sales and
support and administrative organizations. We have never had a work stoppage, and
no employees are represented under collective bargaining agreements. We consider
our relations with our employees to be good.
4
<PAGE>
Subsidiaries
The Company has two wholly-owned subsidiaries, March Indy International,
Inc., a Delaware corporation and March Racing.com, Inc., a Florida corporation.
Forward-looking statements
The Company or management may make or may have made certain forward-looking
statements, orally or in writing, such as those within Management's Discussion
and Analysis contained in its various SEC filings. The Company wishes to ensure
that such statements are accompanied by meaningful cautionary statements, so as
to ensure to the fullest extent possible the protections of the safe harbor
established in the Private Securities Litigation Reform Act of 1995. Such
statements are therefore qualified in their entirety by reference to and are
accompanied by the following discussion of certain important factors that could
cause actual results to differ materially from those described in such
forward-looking statements.
The Company cautions the reader that this list of factors is not intended
to be exhaustive. The Company operates in a continually changing business
environment, and new risk factors emerge from time to time. Management cannot
predict such factors, nor can it assess the impact, if any, of such factors on
the Company's business or the extent to which any factors may cause actual
results to differ materially from those described in any forward-looking
statement. None of the Company's forward-looking statements should be relied
upon as prediction of actual results.
The Company faces risks and uncertainties that could render actual events
materially different than those described in our forward-looking statements.
These risks and uncertainties include, but not limited to, the risk the Company
would not be able to fund its working capital needs from cash flows; the risk
that the Company will not be able to raise money in sufficient amounts to fund
the Company's business plan, the risk that the Company cannot successfully
compete for sponsorship arrangements, the risk that the Company's merchandising
and marketing efforts will not succeed and the risk that the Company may
experience material fluctuations in future revenues and operating results on a
quarterly or annual basis resulting from a number of factors, including but not
limited to the risks discussed in the paragraph above.
Item 2: Properties
Beginning in April, 2000, our executive offices will be located at 400 N.
Federal Highway, Hallandale, Fl 33309, comprising of approximately 2,700 square
feet of office space. These facilities are leased pursuant to a lease agreement
expiring in March 31, 2003. The monthly rent is $2,850. We believe the leased
space will be adequate for our current needs.
Item 3: Legal Proceedings
None
Item 4: Submission of Matters to a Vote of Security Holders
No matters were submitted to the stockholders in the fourth quarter of
fiscal 1999.
5
<PAGE>
PART II
Item 5: Market for Registrant's Common Equity and Related Stockholder Matters
As of March 31, 2000, there were 215 stockholders of record. The Company
believes that it has approximately 325 beneficial stockholders.
The Company's common stock trades on the NASD's Over the Counter Bulletin
("OTCBB") Board under the symbol: INDQ.
Prior to the November, 1999 acquisition, the Company's stock was minimally
traded. The following table sets forth the range of high and low bid prices per
share of common stock for the last two fiscal years as provided by Prophet
Information Services, Inc. The quotations shown below reflect inter-dealer
prices, without mark-up, mark-down or commissions and may not present actual
transactions.
Quarter ended: Common stock
Low High
December 31, 1999 $3 7/8 $7
September 30, 1999 n/a n/a
June 30, 1999 n/a n/a
March 31, 1999 n/a n/a
December 31, 1998 n/a n/a
September 30, 1998 n/a n/a
June 30, 1998 n/a n/a
March 31, 1998 n/a n/a
The Company has applied for listing on the Frankfurt Exchange in Germany
where the "March" racing brand and name is recognized. There can be no assurance
that the Company will be able to achieve having its common stock listed on the
Frankfurt Exchange.
The Company has never declared, nor has it paid, any cash dividends on its
Common Stock. The Company currently intends to retain its earnings, if any, to
finance future growth and does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future.
Item 6: Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and related notes included elsewhere herein.
Historical results and percentage relationships are not necessarily indicative
of the operating results for any future period.
The following table sets forth certain data derived from the consolidated
statements of operations, expressed as a percentage of net revenues for each of
the years in the three-year period ended December 31, 1999.
For the Year Ended From November 24, 1998
(inception)
December 31, 1999 to December 31, 1999
------------------- ----------------------
Development Stage Revenues $0 $0
Development Stage Expenses (157,000) (157,000)
Deficit Accumulated During
Development Stage (157,000) (157,000)
Development Stage Revenues
The Company's operations have been devoted primarily to developing a
business plan, acquiring its March subsidiary, developing its racing team and
administrative functions. The Company intends to grow through internal
development and strategic alliances. The ability of the Company to achieve its
business objectives is contingent upon its success in raising additional capital
until adequate revenues are realized from operations.
6
<PAGE>
Development Stage Expenses
The Company's development stage expenses were $157,000 from November 24,
1998 (inception) to December 31, 1999. The expenses incurred were primarily due
to various consulting, managerial and professional services in pursuit of the
Company's objectives.
Future Financing
The Company is preparing for a private offering of common shares in order
to raise $7,500,000. If fully subscribed, this would fund a four race Indy
program, corporate operations, strategic marketing and the development of its
Web site. The Company has no assurances at this time as to the funding and there
are no assurances that if the funding is obtained that additional funding will
not be necessary. Furthermore, the Company's cash flow through operations are of
strategic importance, and although substantial planning and processes have been
designed and structured, there are no assurances as to the ability of the
Company to generate sufficient cash flow from operations. As of the date of this
Form 10-KSB, no money has been raised in this private offering.Item 7: Financial
StatementsIndex to
7
<PAGE>
Item 7: Financial Statements
MARCH INDY INTERNATIONAL, INC.
formerly N.E.C. Properties, Inc.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-2
Balance Sheet F-3
Statements of Operations F-4
Statements of Shareholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 - F-9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
March Indy International, Inc.
We have audited the accompanying consolidated balance sheet of March
Indy International, Inc. (A Development Stage Enterprise) as of December 31,
1999, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the years ended December 31, 1999 and
1998 and from November 24, 1998 (Inception) to December 31, 1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of March Indy
International Inc. (A Development Stage Enterprise) as of December 31, 1999, and
the consolidated results of its operations and its cash flows for the year ended
December 31, 1999 and 1998, and for the period November 24, 1998 (Inception)
through December 31, 1999, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepare assuming that the
Company will continue as a going concern. The Company incurred losses of
$157,000 for the year ended December 31, 1999. Additionally, the Company had a
working capital deficiency of $55,000 at December 31, 1999. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans with respect to these matters are also described in
Note 2 to the financial statements. The accompanying financial statements do not
include any adjustments that might result should the Company be unable to
continue as a going concern.
/s/ Feldman Sherb Horowitz & Co., P.C.
Feldman Sherb Horowitz & Co., P.C.
Certified Public Accountants
New York, New York
March 28, 2000
F-2
<PAGE>
MARCH INDY INTERNATIONAL, INC.
formerly N.E.C. Properties, Inc.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
CURRENT ASSETS - Cash $ 200
EQUIPMENT 330,400
INTANGIBLE ASSETS 2,791,428
-----------
$ 3,122,028
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES - Accrued expenses $ 55,000
-----------
SHAREHOLDERS' EQUITY:
Common Stock, $.001 par value;
authorized 50,000,000 shares;
10,998,775 shares issued and
outstanding 10,999
Additional paid in capital 3,213,029
Deficit accumulated in the development stage (157,000)
-----------
TOTAL SHAREHOLDERS' EQUITY 3,067,028
-----------
$ 3,122,028
===========
See notes to financial statements
F-3
<PAGE>
MARCH INDY INTERNATIONAL, INC.
formerly N.E.C. Properties, Inc.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended November 24, 1998
December 31, (Inception)
1999 to December 31, 1999
REVENUES $ - $ -
COSTS AND EXPENSES:
General and administrative 157,000 157,000
--------- ---------
NET LOSS $(157,000) $ (157,000)
=========== =========
BASIC AND DILUTED LOSS
PER SHARE $ (0.01) $ (0.01)
=========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 10,998,775 10,998,775
=========== ==========
The Company was inactive from November 24, 1998 (Inception) to December 31,
1998. Accordingly, no operating results are presented.
See notes to financial statements
F-4
<PAGE>
MARCH INDY INTERNATIONAL, INC.
formerly N.E.C. Properties, Inc.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock, $.001 Par Value Additional in the
Shares Amount Paid-in Capital Development Stage
Balance, November 24, 1998 (Inception),
<S> <C> <C> <C> <C>
as reported 3,292,200 $ 3,292 $ - $ -
Acquisition of March Indy Internationl, Inc. 7,706,575 7,707 3,111,029 -
BALANCE, December 31, 1998, restated 10,998,775 10,999 3,111,029 -
Cancellation of debt by shareholders - - 102,000 -
Net loss - - - (157,000)
----------- ------------ ------------ -------------------
BALANCE, December 31, 1999 10,998,775 $ 10,999 $ 3,213,029 $ (157,000)
=========== ============ ============= ===================
</TABLE>
See notes to financial statements
F-5
<PAGE>
MARCH INDY INTERNATIONAL, INC.
formerly N.E.C. Properties, Inc.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended Nov. 24, 1998 Nov. 24, 1998
December 31, (Inception) (Inception)
1999 to Dec. 31, 1998 to Dec. 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(157,000) $ -- $(157,000)
Cancellation of shareholder debt
102,000 -- 102,000
Changes in assets and liabilities:
Accrued expenses 55,000 -- 55,000
--------- --------- ---------
NET INCREASE IN CASH FLOWS
FROM OPERATING ACTIVITIES -- -- --
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock and loans -- 200 200
--------- --------- ---------
NET INCREASE IN CASH FLOWS
FINANCING ACTIVITIES
-- 200 200
--------- --------- ---------
CASH - Beginning of period
200 -- --
--------- --------- ---------
CASH - End of period
$ 200 $ 200 $ 200
========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
No cash payments were made for income taxes or
interest during each of the above periods.
Non-cash investing and financing activities
Contribution by shareholders of operating
assets for common stock
Equipment $ 330,400 $ -- $ 330,400
Intangible assets 2,791,428 -- 2,791,428
--------- --------- ---------
$3,121,828 $ -- $3,121,828
========== ========= =========
</TABLE>
See notes to financial statements
F-6
<PAGE>
MARCH INDY INTERNATIONAL, INC.
------------------------------
formerly N.E.C. Properties, Inc.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1.THE COMPANY
March Indy International, Inc. (the "Company"), was incorporated in
Delaware on November 24, 1998. The Company intends to engage in the
business of designing, building and racing motor cars for formula, cart and
Indy competition both in the United States and abroad. The Company also
plans to develop an internet website in order to merchandise products
related to its racing efforts. March Indy's product merchandising efforts
are intended to be "track" side, on the internet and in major sports
shopping venues. The Company was in the development stage at December 31
1999.
2.GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company incurred a loss
of $157,000 for the year ended December 31, 1999. Additionally, the Company
had a net working capital deficiency of $55,000 for the year ended December
31, 1999. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plan with respect to
these matters include restructuring its existing debt, raising additional
capital through future issuances of stock and debentures and ultimately
developing a viable business. The accompanying financial statements do not
include any adjustments that might be necessary should the Company be
unable to continue as a going concern.
3.SIGNIFICANT ACCOUNTING POLICIES
a. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and disclosure of contingent assets
and liabilities at the date of the financial statements. Actual results
could differ from these estimates.
b. Income Taxes - Income taxes are accounted for under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
which is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's financial
statements or tax returns.
F-7
<PAGE>
c. Fair Value of Financial Instruments - The carrying amounts of the
assets and liabilities reported in the balance sheet approximate their fair
market value based on the short-term maturity of these instruments.
4.CONTRIBUTION OF OPERATING ASSETS
On January 7, 1999, Messrs. Voller and Megas, controlling
shareholders, transferred their ownership interests in certain names,
brands, designs and slot rights pertaining to the building and racing of
motor cars in exchange for all of the outstanding pre-merger shares of the
Company's common stock. Additionally, the transfer included a two wheeled
"Super Bike" capable of speeds up to 200 miles per hour which is intended
to be entered in competitive racing events. The assets are reflected in the
financial statements at the shareholders' basis which, at September 30,
1999, were as follows: equipment ("Super-Bike") $330,400; intangibles
consisting of brands, designs and slot rights $2,791,428. Depreciation and
amortization charges will commence when the Company becomes operational.
5.RECAPITALIZATION (REVERSE ACQUISITION)
On November 10, 1999, N.E.C. Properties, Inc. ("NECD"), a public
company, incorporated in Nevada, acquired all of the Company's outstanding
shares in exchange for 7,706,575 shares of NECD common stock. For
accounting purposes, the acquisition has been treated as a recapitalization
of the Company with the Company as the acquirer. The historical financial
statements prior to November 10, 1999 are those of the Company. NECD
concurrently effected a 1.77 to one forward stock split, which is
retroactively reflected in the financial statements.
6.CONSULTING AGREEMENT
The Company is obligated under consulting agreements with three
individuals commencing June 1, 2000 and expiring in the year 2008. The
consultants will receive combined aggregate annual compensation ranging
from $500,000 in year one to $1,250,000 in year eight.
F-8
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9: Directors and Executive Officers of the Registrant
The following table sets forth the names and positions of our directors and
executive officers:
NAME AGE POSITION
- ------------------------- --- ---------------------------------
Robin Herd 60 Chairman of the Board
Thomas Megas 56 President, CEO, Director
Marina Puig 50 Secretary, Treasurer, Director
Martin Duffy 55 Director
Damian Manestar 42 Director
Stefan Johansson 43 Director
The following sets forth biographical information concerning our directors
and executive officers for at least the past five years:
Robin Herd - Mr. Herd has been Chairman of the Board of the Company since
inception. Prior to his involvement with the Company, from 1990 to 1999, Mr.
Herd established RHL, a company, which provided consulting, and training for
Formula One-race car drivers. In 1970, Mr. Herd founded the original "MARCH"
team, which won numerous Indy and European championships as well as capturing
the Oldsmobile land speed record in 1987 with A.J. Foyt. Mr. Herd is noted for
his racing car designs as well as having designed the "Wings of the Concord" for
which he was awarded Britain's highest design award, the Edinburgh Design Trophy
in 1985. Mr. Herd was also awarded "Commander of the British Empire (C.B.E.) by
Queen Elizabeth in 1985 and was nominated for the Satellite Sports Oscar in 1993
for Eurosport Indy Series 1993. Mr. Herd earned his Engineering Degree in 1961
from St. Peters College at Oxford University.
Thomas Megas -Mr. Megas is one of the founders of the Company and has
served as President, Chief Executive Officer and a member of the Board of
Directors since inception. From 1992 to 1998, Mr. Megas served as Director of
March Europe and as consultant to companies in the design and development of
racing cars in Formula One and other Formula One competitors. Mr. Megas has
previously been involved in hotel ownership and commercial real estate
development in Europe from 1991 to 1999. Mr. Megas earned his B.A. from London
University in 1962 in Banking and Finance and his M.B.A. from the Wharton School
of the University of Pennsylvania in 1969.
Stefan Johansson - Mr. Johansson was appointed a Director and Director of
Racing in January 2000. For over two decades, Mr. Johansson has been one of the
top racing drivers in the world of international motorsports and has driven for
8
<PAGE>
some of the most prestigious teams and manufacturers including Ferrari, McLaren,
Porsche, Mercedes, Toyota, Nissan and Mazda. Mr. Johansson has been successful
in Formula One, Indy Cars and LeMans-style sports cars; with recent wins in the
12 hours of Sebring (Ferrari) in 1997 and in 1999 the 24-Hours of LeMans for
Porsche.
Marina Puig - Ms. Puig has served as a Director of the Company since its
inception. From 1989 to 1992, Ms. Puig served as a Director of March Racing in
the United Kingdom, which was involved in motorsport racing, designing and
building Formula one race chassis and race cars for the top Formula One
competitors. Prior to her involvement in the racing industry, she was a race car
enthusiast and professional homemaker. Ms. Puig received a B.A. in Education
from Harrow College of Further Education in 1970 and an M.A. degree from Hendron
College of Technology in 1972.
Martin Duffy - Mr. Duffy has been involved in auto racing chassis design
and construction since 1992 when he became a Director of March, Europe. Mr.
Duffy is a banker by profession and from 1990 to 1995 was a Director of RA
Coleman International, an investment-banking group in the U.K. From 1961 to
1981, Mr. Duffy served as Bank Manager and Financial Consultant for National
Westminster Bank PLC. Mr. Duffy completed his education in Banking with National
Westminster Bank in 1960.
Damian Manestar - Mr. Manestar has been a Director of the Company since
January, 2000 and since 1980 has been President and Chief Operating Officer of
Manester Enterprises, Ltd. which designs and develops sports complexes, sports
and fitness centers and facilities. Mr. Manester attended the Zagreb Institute
of Further Education in Yugoslavia in 1997 and has attended various seminars and
monitored courses in EC.
Item 10: Executive Compensation
Thomas Megas, the President and Chief Executive Officer of the Company
received no compensation during 1999.
There were no salaries paid to any executives of the Company earned in
excess of $100,000 in salary and bonus for services rendered to us during the
year ended December 31, 1999:
No options were granted to any executives during 1999.
The Company, during 1999, executed employment agreements with the
following executives:
Robin Herd - a three (3) year employment agreement, which is extendable by
the parties for an additional two (2) year term and then additional one (1) year
terms thereafter with compensation to begin June 1, 2000 at a rate of $250,000
per year, to be increased by $50,000 after the first year, by an additional
$100,000 after the second year, by an additional $100,00 after the third year
and ten percent (10%) per year increases thereafter. Pursuant to the agreement,
Robin Herd is to be granted options to purchase 400,000 shares of
9
<PAGE>
common stock, at a price of one ($1.00) dollar per share, such options to vest
as follows: 100,000 to vest on June 1, 2000, 50,000 to vest on November 30,
2000, 50,000 to vest on May 31, 2000, 50,000 to vest on November 30, 2001 and
150,000 to vest on May 31, 2002.
Thomas Megas - a three (3) year employment agreement, which is extendable
by the parties for an additional two (2) year term and then additional one (1)
year terms thereafter with compensation to begin June 1, 2000 at a rate of
$250,000 to be increased by $125,000 after the first year, by an additional
$225,000 after the second year and after the third year by ten percent (10%) per
year increases thereafter. Pursuant to the agreement, Mr. Megas is to be granted
options to purchase 400,000 shares of common stock, at a price of one ($1.00)
dollar per share, such options to vest as follows: 100,000 to vest on June 1,
2000, 50,000 to vest on November 30, 2000, 50,000 to vest on May 31, 2000,
50,000 to vest on November 30, 2001 and 150,000 to vest on May 31, 2002.
Stefan Johansson - a four (4) year employment agreement with compensation
to begin June 1, 2000 at a rate of $125,000 in the first year, $175,000 in the
second year, $200,000 in the third year, $250,000 in the fourth and fifth years
and a ten percent (10%) increase for any years thereafter. In addition, Mr.
Johansson is entitled to certain commissions on the sales of sponsorships.
Pursuant to the agreement. Mr. Johansson is to be granted options to purchase
150,000 shares of common stock, at a price of one ($1.00) dollar per share, such
options to vest as follows: 25,000 to vest on June 1, 2000, 25,000 to vest on
November 30, 2000, 25,000 to vest on May 31, 2000, 25,000 to vest on November
30, 2001 and 50,000 to vest on May 31, 2002.
Item 11: Security Ownership of Certain Beneficial Owners and Management
The following table shows all persons known to the Company to be the
beneficial owner of more than five percent of the Company's common stock.
Nameand Address Amount and Nature Percent
of Beneficial Owner of Beneficial Ownership of Class
Directors and Officers
Tom Megas 2,200,453 20.84%
Officer and Director
Robin Herd 1,400,882 13.27%
Officer and Director
Stefan Johansson 300,000 2.84%
Director
Marina Puig 235,000 2.23%
Secretary, Treasurer
and Director
10
<PAGE>
Damian Manestar 300,000 2.84%
Director
Martin Duffy 100,000 0.95%
Director
All Directors and
Executive Officers
as a Group 4,536,335 42.96%
Other Shareholders
of 5% or More
Stewart Sytner 859,046 8.14%
All Directors and
Executives Officers
and 5% Shareholdersas
a Group 5,395,381 51.09%
Item 12: Certain Relationships and Related Transactions
On January 7, 1999, assets consisting of trademarks, trade names and other,
intellectual property rights, designs and technology were transferred by Thomas
Megas and Peter Voller in exchange for 100 percent of the stock in March Indy
International, Inc. (Delaware). Prior to the November 10, 1999 reorganization,
Peter Voller sold his interest in March Indy International, Inc. (Delaware) to
various other individuals.
On November 10, 1999, the Company acquired all of the outstanding shares of
March Indy International, Inc. (Delaware), in exchange for 7,706,575 shares of
the Company's common stock.
PART IV
Item 13: Exhibits, Financial Statements, and Reports on Form 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements
The following consolidated financial statements of March Indy International,
Inc., and subsidiaries, and the Independent Auditors' Report issued thereon, are
incorporated by reference in Part II, Item 7:
11
<PAGE>
Independent Auditors' Report.
Consolidated Balance Sheets, as of December 31, 1999 and 1998.
Consolidated Statements of Operations, for each of the years in the three-year
period ended December 31, 1999.
Consolidated Statements of Stockholders' Equity, for each of the years in the
three-year period ended December 31 1999.
Consolidated Statements of Cash Flows, for each of the years in the three-year
period ended December 31, 1999.
Notes to Consolidated Financial Statements.
2.Exhibits
The following exhibits are filed as part of, or incorporated by reference
into, this Report:
2(a) Agreement and Plan of Reorganization dated October 25, 1999 by and between
N.E.C. Properties, Inc., March Indy International, Inc., Tom Megas and
Peter Voller.**
3(a) Certificate of Incorporation*
3(b) Amendment dated November 11, 1999, to Certificate of Incorporation*
3(c) By-Laws of Registrant.*
4(a) Form of Stock Certificate*
10(a)Agreement and Plan of Reorganization dated October 25, 1999 by and between
N.E.C. Properties, Inc., March Indy International, Inc., Tom Megas and
Peter Voller.*
10(b)Employment Agreement with Thomas Megas*
10(c)Employment Agreement with Stefan Johansonn*
10(d)Employment Agreement with Robin Herd*
10(f)Agreement with Zoom2Net.com. Inc.*
10(g)Agreement with Gary M. Reynolds & Associates, Inc*
10(h)Agreement with IMEDIA, Inc.*
10(i)Agreement with Sinden Racing Team*
21. Subsidiaries of the Registrant
27. Financial Data Schedule - for SEC filing only
* To be filed by amendment.
** Incorporated into this Report by reference to the Registrant's Form 10-QSB
for the period ended September 30, 1999.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MARCH INDY INTERNATIONAL, INC.
(Registrant)
/s/ Thomas Megas
By___________________________
(Thomas Megas, President, CEO and Director)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated below.
Signature Title Date
/s/ Thomas Megas President, CEO and 4/12/00
------------ Director
(Thomas Megas)
/s/ Robin Herd Director 4/12/00
------------
(Robin Herd)
/s/ Marina Puig Secretary, Treasurer, 4/12/00
------------ and Director
(Marina Puig)
13
<PAGE>
/s/ Martin Duffy Director 4/12/00
------------
(Martin Duffy)
/s/ Damian Manestar Director 4/12/00
------------
(Damian Manestar)
/s/ Stefan Johansson Director 4/12/00
------------
(Stefan Johansson)
14
<PAGE>
EXHIBIT INDEX
2(a) Agreement and Plan of Reorganization dated October 25, 1999 by and between
N.E.C. Properties, Inc., March Indy International, Inc., Tom Megas and
Peter Voller.**
3(a) Certificate of Incorporation*
3(b) Amendment dated November 11, 1999, to Certificate of Incorporation*
3(c) By-Laws of Registrant.*
4(a) Form of Stock Certificate*
10(a)Agreement and Plan of Reorganization dated October 25, 1999 by and between
N.E.C. Properties, Inc., March Indy International, Inc., Tom Megas and
Peter Voller.*
10(b)Employment Agreement with Thomas Megas*
10(c)Employment Agreement with Stefan Johansonn*10(d) Employment Agreement with
Robin Herd*
10(f)Agreement with Zoom2Net.com. Inc.*
10(g)Agreement with Gary M. Reynolds & Associates, Inc*10(h) Agreement with
IMEDIA, Inc.*
10(i)Agreement with Sinden Racing Team*
21. Subsidiaries of the Registrant
27. Financial Data Schedule - for SEC filing only
* To be filed by amendment.
** Incorporated into this Report by reference to the Registrant's Form 10-QSB
for the period ended September 30, 1999.
March Indy International, Inc., a Delaware corporation
March Racing.com, a Florida corporation
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