<PAGE>2
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: 6/30/00
OR
[ ]15,TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 000-27251
JARRETT/FAVRE DRIVING ADVENTURE, INC.
(Exact name of Small Business Issuer in its charter)
FLORIDA 59-3564984
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3660 Maguire Boulevard, Suite 101, Orlando Florida 32803
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (888) 467-2231
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.01 par value
Check whether the Company (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or such shorter period that the Company was
required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes __x__ No _____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Company'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.
[ x ]
The Company's revenues for its most recent fiscal year were $624,909.
As of June 30, 2000 the market value of the Company's voting $.0l par
value common stock held by non-affiliates of the Company was
$1,750,000 .
The number of shares outstanding of Company's only class of common
stock, as of June 30, 2000 was 12,448,500 shares of its $.01 par value
common stock. Check whether the Issuer has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the
Exchange Act after the distribution of securities under a plan
confirmed by a court.
Yes __x__ No _____
No documents are incorporated into the text by reference.
Transitional Small Business Disclosure Format (check one)
Yes No x
-------- --------
<PAGE>3
PART I
ITEM 1. BUSINESS
The Corporation was formed as a C corporation and incorporated November
24, 1998. The company is currently not involved with any
proceedings, bankruptcy or receiverships.
The Corporation is in the operational stage and offers entertainment
based oval driving schools and events. These classes are conducted at
various racetracks throughout the country.
The Corporation completed its first driving classes in Rockingham, NC
July of 1999. Since July 4th the Corporation has run classes, Bristol,
Darlington, Talladega, Nashville, Milwaukee, Lakeland, Charlotte,
Atlanta, Salem, Michigan, Birmingham and Chicago.
The Corporation currently owns ten(10) race cars. These race cars are
classified as stock cars and are equipped for oval or round tracks
only. They are fully loaded with brand new Jasper 550hp engines,
five(5) point harnesses, communications, track specific gears and
complete safety cages.
The Corporation has negotiated terms with over twenty(20) racetracks
where, for a fee ranging from $0 to $10,000 a day we can rent their
tracks. The agreement at Talladega is on a percentage of revenue
basis. These negotiated terms are presented as rental lease
agreements.
Products and Services. The Corporation offers five(5) types of ride
or drive programs for individuals and corporations. The "Qualifier" is
a three(3) lap ride with a professional driver which lasts about
five(5) minutes, depending on the length of the track. The "Season
Opener" is a half day training class culminating in the student driving
for ten(10) laps. The "Twin Ten" and "Happy Hour" are also half day
driving classes with the students driving twenty(20) or thirty(30) laps
respectively. The "Advanced Stock Car Adventure" is a full day
fifty(50) lap class.
The operation is similar to that of a traveling show in that we
transport the stock cars, the mechanics, the sales staff and the
instructors from event to event.
The main purpose of each event is the thrill of actually driving the
race car.
The Corporation's objective is to utilize this first "hub" of ten(10)
race cars on the east coast to their full potential. It is in the
company's plans that once this first hub becomes utilized at least
fifteen(15) days per month and is profitable, to then add another "hub"
on the West Coast. This would entail the purchase of another ten(10)
race cars and the support equipment necessary to maintain them.
The Corporation has purchased ten(10) stock cars at an approximate
price of $50,000 per car. Parts will be nominal due to the lack of
any sustained stress on the cars, approximately $10,000 per month per
site. Staffing costs will be approximately $40,000 per month at each
active "hub". The company has an operating lease for a Miller Tractor
Trailer to haul the cars from track to track. The transporting of
staff to the event and their food and lodging costs average $1000 per
day.
The Corporation also offers a number of add-on sale items including
videos from its Adventure Cam located in the car (split screen
cameras), clothing and souvenirs.
The Corporation is currently developing its logos and marketing
materials and will commence the trademarking process for its name and
various products and services.
Marketing. The Corporation offers its products and services at
various tracks throughout the country. The Corporation shall employ a
marketing manager. These individuals will primarily be responsible
with closing the prospects created through promotion. These services
will be sold as corporate outings and directly to the public through
various marketing and advertising mediums such as television, radio,
billboard, newspaper, direct mail and on-site marketing.
Promotional and Licensing Agreements. In December 1998, the
Corporation entered into promotional and licensing agreements with Dale
Jarrett, Ned Jarrett, Glenn Jarrett, Jason Jarrett and Brett Favre
<PAGE>4
(individually, the "Licensor") whereby these individuals have granted
the Corporation the use of their names and likeliness in advertising,
products and promotional materials, as well as an agreed upon number of
appearances per year and an agreed upon number of radio and/or
television commercials as set out in each agreement. Ned Jarrett is
the father of Dale Jarrett and Glenn Jarrett. Dale Jarrett is the
father of Jason Jarrett.
Pursuant to these agreements, the Corporation has issued an aggregate
of 5,500,000 Common Shares of the Corporation. The term of each
agreement is Ten (10) years unless sooner terminated by the occurrence
of any of the following:
(a) a material breach by the Corporation of the agreement which breach
has not been satisfied within thirty (30) days of receipt of written
notice from the Licensor;
(b) upon receipt of written notice from the Licensor if, as a result
of (i) any act or omission of the Corporation, (ii) any claim or charge
against the Corporation or (iii) any other occurrence or circumstances
involving the Corporation, the continued association of Licensor with
the Corporation would be detrimental to the value of the Licensed
Material or to Licensor's image or reputation;
(c) the failure of the Corporation to continually operate and manage
the business according to the policies, practices and standards agreed
to by the parties;
(d) the failure of the Corporation to raise the $100,000 in investment
capital; and
(e) the failure of the Corporation to comply with any laws and
regulations, the consequences of which are material adverse to the
Corporation.
During the term of the agreements, the Licensor agrees not to directly
or indirectly (whether for compensation or otherwise), provide
promotional appearances or services to any business which competes with
the Corporation's business of owning and managing driving schools.
The Corporation has also agreed not to issue any additional common
shares in the Corporation's stock to insiders, directors without the
Licensor's approval. Additionally, any and all future financings will
be offered to the Licensor prior to outside fullment. There will be
no issuance of preferred shares and/or warrants to insiders of the
Corporation for at least five (5) years from November 24, 1998.
Competition. The driving schools industry is currently experiencing a
limited degree of competition with regard to availability, price,
service, quality and location. There are two well-established market
leaders (Richard Petty Driving Experience and the Skip Barber Driving
School) that are nationally recognized and which possess substantially
greater financial, marketing personnel and other resources than the
Corporation. There are also a small number of local or regional
schools. Virtual reality driving experiences are also becoming more
and more realistic and therefore a growing competitor. It is also
likely that other competitors will emerge in the near future. There
is no assurance that the Corporation will compete successfully with
other established driving schools. The Corporation shall compete on
the basis of availability, price, service, quality and location.
Inability to compete successfully might result in increased costs,
reduced yields and additional risks to the investors herein.
Employees. The Corporation will employs seven full time employees
responsible for securing the Driving Adventure locations, procurement
of equipment, racecars, and the development and implementation of the
Corporation's marketing plan. Each active location will have up to
10 employees including but not limited to two mechanics, two driving
instructors, two administrators, a flagman, two salesmen, an accountant
and a site manager.
Additional employees and/or independent contractors will be obtained as
required.
<PAGE>5
Seasonal Nature of Business Activities. The Corporation's operations
shall not be seasonal, though some track locations may only operate on
certain days or certain times of the year. Primarily, this will be due
to the weather. It is the Corporation's plans to run more tracks in the
south during the winter. The Corporation expects a steady revenue stream
throughout the year.
Government Regulation. The Corporation does not currently need any
government approval of our services. The Corporation is not aware of any
existing or probable governmental regulations on our business or
industry. The Corporation is required to maintain a minimum of five
million dollars($5,000,000) of liability insurance, worker's compensation
and property and casualty insurance.
ITEM 2. PROPERTIES.
The Corporation's executive offices are located at 3660 Maguire
Boulevard, Suite 101, Orlando, Florida 32803. The Corporation leases
its office facilities under an operating lease through April 15, 2000.
These facilities consist of 2000 square feet and are leased at the
monthly lease rate of $2,300. The Corporation also leases a garage in
Denver, NC located at 6652 Denver Industrial Park, Denver, NC 28037.
ITEM 3. LEGAL PROCEEDINGS.
Global is not involved in any legal proceedings at this date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended June 30, 2000, no
matters were submitted to a vote of Jarrett/Favre's security holders,
through the solicitation of proxies.
<PAGE>6
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information. The Corporation began trading publicly on the
NASD Over the Counter Bulletin Board in June 22, 2000.
The following table sets forth the range of high and low bid quotations
for the Company's common stock as reported on the NASD Bulletin Board,
by Wienstock Securities, Paragon Securities, Sharpe Capital, Herzog
Securities, Nite Securities, Mayer Shweitzer, GVR Capital, Fleet
Securities and Program. The quotations represent inter-dealer prices
without retail markup, markdown or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
6/30/00 2 7/8 2
9/30/00 1 1/8 1 3/4
</TABLE>
The Corporation has never paid any cash dividends nor does it intend,
at this time, to make any cash distributions to its shareholders as
dividends in the near future.
As of August 31, 2000, the number of holders of Corporation's common
stock is 56.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Trends and Uncertainties. Demand for the Corporation's products will
be dependent on, among other things, general economic conditions which
are cyclical in nature. Inasmuch as a major portion of the
Corporation's activities will be the receipt of revenues from its
driving school services and products, the Corporation's business
operations may be adversely affected by the Corporation's competitors
and prolonged recessionary periods.
There are no known trends, events or uncertainties that have or are
reasonably likely to have a material impact on the corporation's short
term or long term liquidity. Sources of liquidity both internal and
external will come from the sale of the corporation's products as well as
the private sale of the company's stock. There are no material
commitments for capital expenditure at this time. There are no trends,
events or uncertainties that have had or are reasonably expected to have
a material impact on the net sales or revenues or income from continuing
operations. There are no significant elements of income or loss that do
not arise from the Corporation's continuing operations. There are no
known causes for any material changes from period to period in one or
more line items of the corporation's financial statements. The
Corporation does not anticipate any seasonality for its revenue stream.
The Corporation currently has classes planned through December, 2001.
Capital and Source of Liquidity. The Corporation currently has no
material commitments for capital expenditures. The Corporation has no
plans for future capital expenditures such as additional race cars at
this time.
The Corporation anticipates in addition to revenues to raise additional
capital to conduct operations during the next twelve(12) months. The
corporation intends to raise the necessary capital through the private
sale of stock. The Corporation believes that there will be sufficient
capital from revenues and the private sale of stock to conduct
operations for the next twelve(12) months.
Presently, the Corporation's revenue comprises eighty(80) percent of
the total cash necessary to conduct operations. The remaining
twenty(20) percent of the cash necessary to conduct operations will
come from the private sale of stock. Future revenues from classes and
events will determine the amount of offering proceeds necessary to
continue operations.
The board of directors has no immediate offering plans in place. The
board of directors shall determine the amount and type of offering as
the Corporation's financial situation dictates.
For the year ended June 30, 2000, the Corporation acquired plant and
equipment of $39,840 resulting in net cash used in investing activities
of $39,840.
For the period from inception to June 30, 1999, the Corporation
acquired plant and equipment of $333,370 resulting in net cash used in
investing activities of $333,370.
For the year ended June 30, 2000, the Corporation sold or subscribed
common stock for cash of $448,500. The Corporation repurchased
officers shares for $1,000. For the year ended June 30, 2000, the
<PAGE>7
Corporation received proceeds from officer advances of $50,000 and
repaid $5,000 of that advance. The Corporation repaid $4,086 of long-
term debt. As a result, the Corporation had net cash provided by
financing activities of $488,414.
For the period from inception to June 30, 1999, the Corporation sold
common stock for $690,000 and repaid $444 of long-term debt. As a
result, the Corporation had net cash provided by financing activities
of $689,556 for the period from inception to June 30, 1999.
On a long term basis, liquidity is dependent on continuation of
operation and receipt of revenues.
Results of Operations. For the year ended June 30, 2000, the
Corporation had sales of $624,909 with cost of sales of $489,295 for a
gross profit of $135,614.
For the year ended June 30, 2000, the Corporation had general and
administrative expenses of $1,743,054. These expenses consisted of
advertising expense of $77,802, amortization of service contracts of
$94,107, compensation of officers of $219,000, consulting expenses of
$765,000, depreciation of $88,126, printing costs of $5,291,
professional fees of $21,700, rent of $76,962, salaries and wages of
$270,679, telephone expense of $34,327, travel expenses of $9,983 and
other expenses of $80,077.
For the period from inception (November 24, 1998 to June 30, 1999, the
Corporation had sales of $1,098 with a cost of sales of $727 for a
gross profit of $371.
For the period from inception (November 24, 1998) to June 30, 1999, the
Corporation had general and administrative expenses of $357,512. These
expenses consisted primarily of advertising of $20,946, compensation of
officers of $65,000, consulting services of $12,080, legal services of
$15,000, payroll taxes of $7,633, printing costs of $24,836, accounting
fees of $10,950, salaries of $75,627, rent of $10,229, supplies of
$3,707, telephone of $5,083, travel costs of $28,744 and miscellaneous
expenses of $77,677.
The Corporation shall focus on limiting its administrative costs.
Plan of Operation. The Corporation may experience problems; delays,
expenses and difficulties sometimes encountered by an enterprise in the
Corporation's stage, many of which are beyond the Corporation's
control. These include, but are not limited to, unanticipated problems
relating to additional costs and expenses that may exceed current
estimates and competition.
The Corporation is not delinquent in any of its obligations even though
the Corporation has generated limited operating revenues. The
Corporation intends to market its products and services utilizing cash
made available from the private sale of its securities and operations.
The Corporation's management is of the opinion that the proceeds of the
sales of its securities and future revenues will be sufficient to pay
its expenses for the next twelve months.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The response to this item is being submitted as a separate section of
this report beginning on page 20.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have not been any changes in or disagreements with accountants
on accounting and financial disclosure.
<PAGE>8
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Board of Directors. The following persons listed below have been
retained to provide services as director until the qualification and
election of his successor. All holders of Common Stock will have the
right to vote for Directors of the Corporation. The Board of Directors
has primary responsibility for adopting and reviewing implementation of
the business plan of the Corporation, supervising the development
business plan, review of the officers' performance of specific business
functions. The Board is responsible for monitoring management, and
from time to time, to revise the strategic and operational plans of the
Corporation. Directors receive no cash compensation or fees for
their services rendered in such capacity.
Mr. Shannon, Mr. Rosenbloom and Mr. Glenn Jarrett are full time
employees of the Corporation.
The Executive Officers and Directors are:
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Timothy B. Shannon, age 39 President, Director Inception to Present
Chief Executive Officer
Brian C. Rosenbloom, age 40 Vice President Inception to Present
Secretary/Treasurer/Director
Chief Financial Officer
Glenn Jarrett, age 50 Chief Operating Officer Inception to Present
Director
</TABLE>
Resumes:
Timothy B. Shannon. Mr. Shannon has been President, Director and
Chief Executive Officer of the Corporation since its inception.
Previously, Mr. Shannon has been employed in the investors relations
industry and currently serves as Vice President and a principal of
Shannon/Rosenbloom Marketing, an Orlando, Florida investor relations
firm. From 1992 to 1994, Mr. Shannon was an investment advisor with
Great Western Financial Securities and Hearn Financial, a Corporation
that he co-founded. Mr. Shannon spent six years as a systems engineer
and marketing representative with IBM after graduating in 1983 from the
University of South Florida with a degree in Computer Science.
Brian C. Rosenbloom. Mr. Rosenbloom has been Secretary/Treasurer,
Vice President, Chief Financial Officer and a Director of the
Corporation since its inception. Previously, Mr. Rosenbloom has been
in the investor relations industry and currently acts as President and
a principal of Shannon/Rosenbloom Marketing, an Orlando, Florida
investor relations firm. Prior to that, Mr. Rosenbloom has been
involved in the investment and finance industry working in various
capacities. Mr. Rosenbloom graduated from the University of Albany in
1982.
Glenn Jarrett. Mr. Jarrett has been Chief Operating Officer and a
Director of the Corporation since its inception. Mr. Jarrett works as
an auto racing announcer and consultant. Mr. Jarrett has been a senior
motorsports announcer for TNN since 1991. He is a motorsports
announcer (Pits) at contracted events and is the co-producer and co-
host of the "World of Racing" radio program on MRN radio which airs
weekdays. Mr. Jarrett has an extensive background in auto racing.
He drove in the NASCAR Busch Series from 1982 to 1988 and ran a total
of eighteen (18) NASCAR Winston Cup Races from 1977 to 1983. Mr.
Jarrett is the acting consultant and marketing coordinator for DAJ
Racing, Inc. and has been a guest speaker at many auto racing and
related functions. Mr. Jarrett graduated from the University of North
Carolina in 1972 with a Bachelor of Science degree in Business
Administration.
Indemnification. The Corporation shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State
of Florida, any person made, or threatened to be made, a party to an
action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or
officer of the Corporation, or served any other enterprise as director,
<PAGE>9
officer or employee at the request of the Corporation. The Board of
Directors, in its discretion, shall have the power on behalf of the
Corporation to indemnify any person, other than a director or officer,
made a party to any action, suit or proceeding by reason of the fact
that he/she is or was an employee of the Corporation.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the
Corporation, the Corporation has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Corporation of expenses incurred or paid
by a director, officer or controlling person of the Corporation in the
successful defense of any action, suit or proceedings) is asserted by
such director, officer, or controlling person in connection with any
securities being registered, the Corporation will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
ITEM 10. EXECUTIVE COMPENSATION
Since inception, the following cash compensation has been paid by the
Corporation to its officers and directors, during which there were
three (3) officers and three (3) directors.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted LTIP Other
and Compen- Stock Options/ Pay- Compen-
Principal Salary Bonus sation Awards SARs Outs sation
Position Year ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Timothy B. Shannon
President
Chief Executive Officer 1999 $60,000 $30,000(1)
2000 $60,000 (2)
Brian C. Rosenbloom
Vice President
Secretary/Treasurer
Chief Financial Officer 1999 $60,000 $30,000(1)
2000 $60,000 (2)
Glenn Jarrett(3)
Chief Operating Officer 1999 $35,000
2000 0
</TABLE>
(1) At inception, the Corporation issued 6,000,000 Common Shares valued
at $60,000 in lieu of cash payment for services to Mr. Shannon
($30,000) and Mr. Rosenbloom ($30,000).
(2)Mr. Shannon and Mr. Rosenbloom returned 50,000 shares each to the
Corporation for cash in the aggregate of $99,000.
(3)The Corporation has entered into an agreement with Glenn Jarrett
under which he will receive the option to purchase 250,000 Common
Shares of the Corporation at an option exercise price of $2.50 per
Common Share. The term of the option is ten years.
The Corporation retains the right to increase or decrease the cash
compensation of its employees as necessitated by business conditions.
The Corporation has not entered into Employment Agreements with its
officers.
<PAGE>10
Board of Directors Compensation. Currently board members receive no
special compensation for meetings or time incurred. Director
liability insurance may be provided to all members of the Board of
Directors. No differentiation shall be made for any further
compensation of "outside directors" and those officers of the
Corporation serving in that capacity.
Stock Option Plan. The Corporation shall implement an employee stock
option program. The specifics of the plan have yet to be determined.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following tabulates holdings of shares of the Corporation by each
person who, subject to the above, at the date of this prospectus, holds
of record or is known by Management to own beneficially more than 5.0%
of the Common Shares and, in addition, by all directors and officers of
the Corporation individually and as a group. Each named beneficial
owner has sole voting and investment power with respect to the shares
set forth opposite his name.
Shareholdings at Date of
This Prospectus
<TABLE>
<CAPTION>
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
Timothy Shannon 3,000,000 25.0%
3660 Maguire Blvd
Suite 101
Orland, Florida 32803
Brian Rosenbloom 3,000,000 25.0%
3660 Maguire Blvd
Suite 101
Orland, Florida 32803
Dale Jarrett 1,500,000 12.5%
3182 9th Tee Drive
Newton, NC 28658
Brett Favre 1,500,000 12.5%
132 Westover Drive
Hattiesburg, MS 39402
Ned Jarrett 1,000,000 8.0%
3182 9th Tee Drive
Newton, NC 28658
Glenn Jarrett 1,000,000 8.0%
3182 9th Tee Drive
Newton, NC 28658
All Directors & Officers
as a group (3 persons) 7,000,000 57.38%
</TABLE>
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Shannon/Rosenbloom Marketing will not conduct the promotion and marketing
for the Jarrett/Favre Driving Adventure, Inc. The Corporation has not
and does not intend to enter into any promotion agreement with any
company.
<PAGE>11
The Corporation has not acquired and does not plan to acquire any assets
from a promoter.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed as part of
this report:
Report of Independent Public Auditors..........
Balance Sheet..................................
Statement of Operations........................
Statement of Stockholder's Equity..............
Statement of Comprehensive Loss
Statement of Cash Flows........................
Notes to Financial Statements..................
Schedules Omitted: All schedules other than those shown have been
omitted because they are not applicable, not required, or the required
information is shown in the financial statements or notes thereto.
<PAGE>12
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
The Jarrett/Favre Driving Adventure, Inc.
We have audited the balance sheet of The Jarrett/Favre Driving
Adventure, Inc. as of June 30, 2000, and the related statements of
operations, stockholders' equity and cash flows for years ended
June 30, 2000 and 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
audits.
We conducted our audits 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 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 The
Jarrett/Favre Driving Adventure, Inc. as of June 30, 2000, and the
related statements of operations, stockholders' equity and cash
flows for the years ended June 30, 2000 and 1999, in conformity
with generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
September 22, 2000
<PAGE>13
The Jarrett/Favre Driving Adventure, Inc.
Balance Sheet
June 30, 2000
ASSETS
Current assets:
Cash $ 77,315
Accounts receivable 1,872
Inventory 13,141
Prepaid expenses 47,210
---------
Total current assets 139,538
Property and equipment, at cost, net of
accumulated depreciation of $72,423 378,997
Vehicles acquired from related party, at cost, net of
accumulated depreciation of $12,000 48,000
Other assets 9,760
---------
$ 576,295
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 5,696
Accounts payable 80,632
Accrued expenses 24,179
Accrued salaries - officers 120,000
Deferred revenue 108,462
Officer advances 45,000
----------
Total current liabilities 383,969
Long-term debt 21,020
Commitments and contingencies (Note 6)
Stockholders' equity:
Common stock, $.01 par value,
100,000,000 shares authorized,
12,448,500 shares issue and outstanding 124485
Additional paid-in capital 1,894,684
Subscriptions to common stock 895,000
Unearned services (779,169)
Deficit (1,963,694)
----------
171,306
----------
$ 576,295
See accompanying notes to consolidated financial statements.
<PAGE>14
The Jarrett/Favre Driving Adventure, Inc.
Statements of Operations
For The Years Ended June 30, 2000 and 1999
2000 1999
Sales $ 624,909 $ 1,098
Cost of sales and services 489,295 727
--------- -------
Gross profit 135,614 371
General and administrative expenses:
Advertising expense 77,802 40,421
Amortization of service contracts 94,107 45,833
Compensation of officers 219,000 65,000
Consulting expenses 765,000 -
Depreciation 88,126 1,581
Printing costs 5,291 24,836
Professional fees 21,700 25,950
Rent 76,962 14,059
Salaries and wages 270,679 75,627
Telephone expense 34,327 5,084
Travel expenses 9,983 28,743
Other 80,077 30,378
--------- -------
Total 1,743,054 357,512
--------- -------
(Loss) from operations (1,607,440) (357,141)
Other income and (expense):
Interest expense (2,175) (190)
Interest income 104 1,822
Other income 1,326 -
--------- -------
(745) 1,632
--------- -------
(Loss) before taxes (1,608,185) (355,509)
Income taxes - -
--------- -------
Net (loss) $(1,608,185) $(355,509)
Per share information:
Basic and diluted (loss) per share $ (0.13) $ (0.03)
Weighted average shares outstanding 12,424,00 10,859,000
See accompanying notes to consolidated financial statements.
<PAGE>15
The Jarrett/Favre Driving Adventure, Inc.
Statement of Changes in Stockholders' Equity
For The Years Ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Stock Unearned
ACTIVITY Shares Amount Capital Subscriptions Services Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for services at inception
at par value 6,000,000 $ 60,000 $ - $ - $ - $ - $ 60,000
Shares issued for service contracts 5,500,000 55,000 861,669 - (870,836) - 45,833
Shares issued for cash 695,000 6,950 688,050 - - - 695,000
Less expenses of offering (5,000) - - - (5,000)
Shares issued for services 5,000 50 4,950 - - - 5,000
Net loss for the year ended
June 30, 1999 - - - - - (355,509) (355,509)
-------- ------- -------- -------- ------- -------- --------
Balance June 30, 1999 12,200,000 122,000 1,549,669 - (870,836) (355,509) 445,324
Shares issued for cash 348,500 3,458 345,013 - - - 348,500
Common stock subscribed for
property and services - - 795,000 - - 795,000
Common stock subscribed for cash - - 100,000 - - 100,000
Repurchase of officers shares (100,000) (1,000) - - - - (1,000)
Amortization of unearned services - - - 91,667 - 91,667
Net loss for the year ended
June 30, 2000 - - - - (1,608,185) (1,608,185)
----------- -------- --------- --------- --------- ---------- ----------
Balance June 30, 2000 12,448,500 $ 124,485 $1,894,684 $ 895,000 $ (779,169) $(1,963,694) $171,306
</TABLE>
See accompanying notes to financial statements.
<PAGE>16
The Jarrett/Favre Driving Adventure, Inc.
Statements of Cash Flows
For The Years Ended June 30, 2000 and 1999
2000 1999
Net (loss) $ (1,608,185) $ (355,509)
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 182,233 47,414
Common stock issued for services 765,000 65,000
Sponsorship revenue (82,830) -
Loss on sale of vehicle 582 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (1,872) -
(Increase) decrease in inventory 1,255 (14,396)
(Increase) in prepaid expenses (22,200) (25,010)
(Increase) in other assets - (12,200)
Increase in deferred revenue 108,462 -
Increase in accounts payable and
accrued expenses 160,276 64,535
---------- ----------
Total adjustments 1,110,906 125,343
---------- ----------
Net cash (used in)
operating activities (497,279) (230,166)
Cash flows from investing activities:
Acquisition of plant and equipment (39,840) (273,370)
Acquisition of vehicles from related party (60,000)
-------- ---------
Net cash (used in) investing activities
investing activities (39,840) (333,370)
Cash flows from financing activities:
Common stock sold or subscribed for cash 448,500 690,000
Repurchase of officers shares (1,000) -
Proceeds from officer advance 50,000 -
Repayment of officer advance (5,000) -
Repayment of long-term debt (4,086) (444)
------- -------
Net cash provided by
financing activities 488,414 689,556
------- -------
Increase (decrease) in cash (48,705) 126,020
Cash and cash equivalents,
beginning of period 126,020 -
------- -------
Cash and cash equivalents,
end of period $ 77,315 $ 126,020
See accompanying notes to consolidated financial statements.
<PAGE>17
The Jarrett/Favre Driving Adventure, Inc.
Statements of Cash Flows
For The Years Ended June 30, 2000 and 1999
2000 1999
Supplemental cash flow information:
Cash paid for interest $ 2,175 $ 190
Cash paid for income taxes $ - $ -
Non-cash Investing and Financing Activities:
Vehicles acquired for stock subscription $ 30,000 $ -
Vehicle acquired for note payable $ 26,717 $ 25,510
See accompanying notes to consolidated financial statements.
<PAGE>18
The Jarrett/Favre Driving Adventure, Inc.
Notes to Financial Statements
June 30, 2000
Note 1. Organization and Summary of Significant Accounting
Policies.
The Company was incorporated in Florida on November 24, 1998 and
has elected to be taxed as a "C" corporation. The Company offers
the "NASCAR" driving experience to the public. The Company owns
several 'NASCAR" type automobiles and has secured over sixteen(16)
racetrack locations at which it offers these services at various dates
during the year. The Company has chosen June 30th as the end of its fiscal
year. The Company was previously reported on as a development
stage company.
Inventory:
Inventory is valued at the lower of cost or market on a first-in
first-out basis and consists primarily of finished goods and
includes primarily promotional items that bear the Company's logo.
Property, Plant and Equipment:
Property, plant and equipment are recorded at cost and are
depreciated based upon estimated useful lives using the
straight-line method. Estimated useful lives range from 3 to 5
years for furniture and fixtures and from 5 to 10 years for
equipment.
Revenue Recognition:
Revenue is recognized at the time the product is delivered or the
service is performed. Provision for sales returns will be estimated
based on the Company's historical return experience, however sales
returns have not been significant due to the nature of the services
provided by the Company.
Intangible Assets and Long Lived Assets:
The Company makes reviews for the impairment of long-lived assets
and certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Under SFAS No. 121, an impairment loss would be
recognized when estimated future cash flows expected to result from
the use of the asset and its eventual disposition is less than its
carrying amount. No such impairment losses have been identified by
the Company for the period ended June 30, 2000.
Cash:
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
Estimates:
The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from these estimates.
Advertising costs:
Advertising costs are charged to operations when the advertising
first takes place. Advertising costs charged to operations were $
77,802 and $40,421 for the years ended June 30, 2000 and 1999,
respectively.
Fair value of financial instruments
The Company's short-term financial instruments consist of cash and
cash equivalents, accounts and loans receivable, and payables and
accruals. The carrying amounts of these financial instruments
approximates fair value because of their short-term maturities.
Financial instrument that potentially subjects the Company to a
concentration of credit risk consists principally of cash. During
the year the Company maintained cash deposits at financial
institutions in excess of the $100,000 limit covered by the Federal
Deposit Insurance Corporation. The Company does not hold or issue
financial instruments for trading purposes nor does it hold or
issue interest rate or leveraged derivative financial instruments
<PAGE>19
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No.
123 (FAS 123), Accounting for Stock-Based Compensation at its
inception. Upon adoption of FAS 123, the Company continued to
measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by
APB No. 25, Accounting for Stock Issued to Employees. The Company
paid stock based compensation during the period ended June 30, 2000
as described in Note 4.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes
guidelines for all items that are to be recognized under accounting
standards as components of comprehensive income to be reported in
the financial statements. The statement is effective for all
periods beginning after December 15, 1997 and reclassification
financial statements for earlier periods will be required for
comparative purposes. The adoption of SFAS No. 130 has had no
impact on the Company. The Company has not engaged in transactions
that would generate other comprehensive income as defined in the
statement and, therefore, there is no difference between the
Company's comprehensive income and net income.
Effective December 31, 1998, the Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting
for Segments of a Business Enterprise. SFAS 131 establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements
and requires that those enterprises report selected information
about operating segments in interim financial reports. SFAS 131
also establishes standards for related disclosures about products
and services, geographic areas, and major customers. To date, the
Company has operated in one business segment as defined by the
statement.
Effective December 31, 1998, the Company adopted the provisions of
SFAS No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits ("SFAS 132"). SFAS 132 supersedes the
disclosure requirements in SFAS No. 87, Employers' Accounting for
Pensions, and SFAS No. 106, Employers' Accounting for Post-
retirement Benefits Other Than Pensions. The overall objective of
SFAS 132 is to improve and standardize disclosures about pensions
and other post-retirement benefits and to make the required
information more understandable. The Company has to date not
adopted benefit plans that would require the disclosures prescribed
by the statement.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133"), which is required to be adopted in years
beginning after June 15, 1999. SFAS 133 will require the Company to
recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives will
either be offset against the change in fair value of hedged assets,
liabilities, or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings.
Management believes that the adoption of SFAS No. 133 had no impact
on the Company, as the Company has not engaged in transactions that
would are whose accounting treatment is prescribed by the
statement.
<PAGE>20
Note 2. Property, Plant and Equipment.
Property, plant and equipment consists of the following at June 30,
2000:
Office furniture an equipment $ 22,226
Shop and track equipment 72,386
Race vehicles 378,338
Vehicles - other 38,470
---------
511,420
Less accumulated depreciation (84,423)
---------
$ 426,997
Depreciation charged to operations was $88,126 and $1,581 for the
years ended June 30, 2000 and 1999, respectively.
Note 3. Other Assets
Other assets at June 30, 2000 consist of principally of costs
associated with the development of the Company's internet web site
and the software component thereof which will enable the Company to
offer its services and arrange for payment therefore
electronically. The Company is amortizing these costs over a five-
year period that began at July 1, 1999. Amortization expense
recorded during the year ended June 30, 2000 amounted to $2,440.
Note 4. Stockholders' Equity
At inception, the Company issued an aggregate of 6,000,000 shares
of its common stock to two individuals who are officers and
directors of the Company in exchange for there services rendered in
connection with the formation of the Company. The shares were
valued at par value.
During December 1998 the Company negotiated personal service
contracts with certain members of the Jarrett family and Bret
Favre. The Jarretts and Favre have had a prior business
relationship related to automobile racing. The contracts require
the individuals to provide personal appearances and to participate
in the advertising and promotional efforts of the Company for a
period of ten years. The Company issued an aggregate of 5,500,000
shares in connection with the personal service contracts. The
shares issued for the services to be performed over the contract
terms were valued at $.1667 per share, which is the Company's
estimate of the fair vale of the stock.
The shares issued pursuant to the contracts are not subject to
vesting requirements or resale restrictions other than those
imposed under Rule 144 of the Securities Exchange Act.
At the time of the stock issuances, the Company was in its early
stages of formation and had not commenced its principal planned
operations. The negotiation of the services contracts was the only
major component of the Company's business plan that had been
completed at December 1998, however it was the basis for continuing
the implementation of the plan. Components of the plan that had not
been implemented at the time of the stock issuance include the
negotiation of track agreements, purchase of racecars, marketing
efforts. Additionally at that date, the Company had not begun its
capital formation effort. The relationship with the Jarrett family
has proved invaluable in advancing the plan subsequent to the
contract date and the Company began operations during July 1999.
The value of Favre's participation in marketing the Company's
services and the Jarrett family in assisting with the operation of
the business are expected to be of benefit to the Company after the
planned operations have begun and during the remaining contract
terms.
Based on the Company's stage of development at the contract dates,
the Company believes that its estimate of the value of the stock
issued under the service contracts is reasonable as it attempts to
assign an appropriate amount of expense to the future operating
statements of the Company for these services.
<PAGE>21
The unearned services under the contracts aggregate $779,169 at
June 30, 2000 and are classified as a reduction of stockholders'
equity. Services charged to expense during the years ended June
30, 2000 and 1999 amounted to $91,667 and $45,833, respectively.
The services will be charged to expense ratably over the remaining
terms of the contracts (8.5 years).
During March 1999, the Company commenced a private sale of its
common stock to a limited group of investors. The Company sold
695,000 shares of its common stock for gross proceeds of $695,000
and incurred direct expenses of the offering amounting to $5,000.
During April 1999, the Company issued 5,000 shares of its common
stock to an individual for services provided to the Company. The
shares were valued at $1.00 per share, which is consistent with the
price per share paid in cash by investors during the period.
During November 2000, the Company issued 348,500 shares of its
restricted common stock to a limited group of investors for cash at
$1.00 per share. Additionally during 2000, the Company authorized
the issuance of 765,000 shares of its common stock to employees,
consultants and others for services rendered to the Company during
the year.
The shares are valued at $1.00 per share, which the Company
believes is the fair value of its common stock at the date the
stock issuances were approved by the Board of Directors.
Additionally, the Company received subscriptions for an aggregate
of 100,000 shares of common stock for $ 100,000 in cash and 30,000
shares which will be issued for the purchase of additional race
vehicles. None of the subscribed shares had been issued at June
30, 2000.
During October 1999, the Company's Board of Directors approved the
repurchase of 50,000 shares each from two of its officers at a
price of $1.00 per share. The repurchased shares had been issued
to the officers at the inception of the Company at a value of $.01
per share. The Company has retired the repurchased shares and has
accounted for the difference between the issue price and the
repurchase price as additional compensation to the officers.
Additionally during the year ended June 30, 2000 the Company issued
options to purchase 400,000 shares of the Company's common stock to
four consultants in recognition of services performed at an
exercise price of between $1.00 and $2.00 per share. There was no
difference between the exercise price of the options and the fair
value of the stock at the vesting date signifying the completion of
the services as approved by the Company's Board of Directors.
The Company has an aggregate of 200,000 options to purchase common
stock at $1.00 per share and 200,000 options to purchase common
stock at $2.00 per share outstanding at June 30, 2000. No options
were exercised during the year ended June 30, 2000.
The weighted average fair value at the date of grant for options
granted during 2000 as described above was $.05 per option. The
fair value of the options at the date of grant was estimated using
the Black-Scholes model with assumptions as follows:
2000
Market value $1.00
Expected life in years 1 - 2
Interest rate 7.5%
Volatility 10%
Dividend yield 0.00%
Stock based compensation costs would have increased pretax losses
by $16,792 ($.01 per share) if the fair value of the options
granted during those years had been recognized as compensation
expense.
Note 5. Income Taxes.
Deferred income taxes may arise from temporary differences
resulting from income and expense items reported for financial
accounting and tax purposes in different periods. Deferred taxes
are classified as current or non-current, depending on the
classifications of the assets and liabilities to which they relate.
<PAGE>22
Deferred taxes arising from temporary differences that are not
related to an asset or liability are classified as current or non-
current depending on the periods in which the temporary differences
are expected to reverse. The Company had no significant deferred
tax items arise during any of the periods presented.
The Company has not provided for income taxes during the period
ended June 30, 2000 as a result of an operating loss. The Company
has a net operating loss carryforward at June 30, 2000 of
approximately $1,900,000 that will expire $350,000 in 2014 and
$1,550,000 in 2015. The Company has fully reserved the deferred
tax asset that would arise from the loss carryforward since the
Company believes that it is more likely than not that future income
from operations will not be available to utilize the deferred tax
asset. The deferred tax asset and the related reserve are as
follows:
Deferred tax asset
Tax benefit of net operating loss $ 646,000
Less valuation allowance (646,000)
---------
Net deferred tax asset $ -
During the year ended June 30, 2000 the valuation allowance for
deferred tax assets increased by $541,000.
Note 6. Long-term Debt
The Company has a vehicle purchase contract outstanding at June 30,
2000 having an outstanding balance at that date of $26,716. The
loan is due in monthly installments of $680 including interest at
10.2% through June 2004. The loan is collateralized by a support
vehicle. Principal repayments are due as follows: $5,696 in 2001,
$6,357 in 2002, $6,983 in 2003 and $7,730 in 2004.
Note 7. Commitments and contingencies
Operating leases:
The Company leases its office and garage facilities under
operating leases through April 15, 2000. Additionally, the Company
has an operating leases associated with vehicles with a terms
ending in April 2005. Minimum future rentals payable under the
leases are as follows:
Year Amount
2001 $ 71,238
2002 $ 35,897
2003 $ 34,574
2004 $ 27,960
2005 $ 9,320
9,320
Rent expense amounted to $76,962 and $14,059 for the years ended
June 30, 2000 and 1999, respectively.
Note 8. Related Party Transactions
During the year ended June 30, 2000, the Company's president
advanced $50,000 in cash to the Company of which $5,000 was repaid
prior to June 30, 2000. The advance does not bear interest and is
expected to be repaid currently.
At June 30, 2000, the Company had accrued salary for two of its
officers aggregating $120,000.
Note 9. Business Segments and Related Information
The Company offers a "NASCAR" type driving experience to the
general public at racetrack locations in the United States. To
date its revenues have consisted of sales from the driving program
and sales of promotional type apparel bearing the Company's logo.
The Company expects to continue sales of these items in conjunction
with its driving experience business and does not expect that such
sales will constitute a separate business segment. Sales of
promotional items amounted to $26,045 and $1,098 during the years
ended June 30, 2000 and 1999, respectively.
<PAGE>23
To date the Company has had no foreign sales and has no long-lived
assets outside of the United States.
(b) List of Exhibits
The following exhibits are filed with this report:
(27) Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.
Date: October 12, 2000 Jarrett/Favre Driving Adventure, Inc.
/s/ Timothy Shannon
------------------------------------
By: Timothy Shannon, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons
on behalf of the Company and in the capacities and on the dates
indicated.
<TABLE>
<S> <C>
/s/Timothy B. Shannon Principal Executive Officer October 12, 2000
------------------- Director
/s/Brian C. Rosenbloom Principal Financial Officer
Controller/Director October 12, 2000
/s/Glenn Jarrett Director October 12, 2000
-------------------
</TABLE>
