FORM 10-KSB/A
AMENDMENT NUMBER 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No. 33-18461
JET SET LIFE USA, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-2195575
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
21935 Van Buren, Suite 4
Grand Terrace, California 92313
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 783-1800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock - $.0001 par value per share
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
twelve 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
State Issuer's revenues for the June 30, 1996 fiscal year:
$901,311.00 .
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form, and
no disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment. [X]
The aggregate market value of the common voting stock held
by non-affiliates as of June 30, 1996: Not Determinable.
Shares outstanding of the Registrant's common stock as of
September 30, 1997: 65,555,091 shares.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS.
Jet Set Life USA, Inc. (the "Company") was organized as a
Delaware corporation on February 17, 1987, under the name "Caravel
Corporation" to be a publicly-held shell corporation available to
be combined with a privately-held company that desired to become
publicly-held without offering its own securities to the public.
The Company had no business operations and had no planned business
activities except for the identification of and merger with a
privately-held company.
The Company was a wholly-owned subsidiary of ANova Ventures
Corporation ("ANova") until April 11, 1987, the declaration date of
a dividend of the Company's securities, consisting of common stock
and warrants to purchase common stock, to the stockholders of
ANova. On December 31, 1987, Liberty Military Sales, Inc. merged
into ANova and ANova's name was changed to Liberty Military Sales,
Inc.
On March 10, 1989, the Company acquired Jet Set Life, Inc., a
privately-held Nevada Corporation ("Subsidiary") in a business
combination accounted for as a reverse recapitalization. Jet Set
Life, Inc. became a wholly owned subsidiary of the Company through
the exchange of shares of the Company's common stock for all the
outstanding stock of Subsidiary. After the transaction the
shareholders of Subsidiary owned the majority of stock in the
Company and management of Subsidiary became management of the
Company.
As part of the stockholders' meeting approving the acquisition
of Jet Set Life, Inc., the stockholders' approved a 6 for 1 forward
stock split and the name change from Caravel Corporation to Jet Set
Life USA, Inc.
Thereafter the Subsidiary engaged in multi-level marketing
with two (2) programs: a nutrition and weight loss products line
and a video-audio subliminal reprogrammer (VSR). The Subsidiary
was not able to obtain a consistent source of VSR's for sale due
largely in part to flaws in the electronic components for the VSR.
The Subsidiary was not able to succeed financially and on
November 15, 1990, it filed a Voluntary Petition for relief under
Chapter 7 of the United States Bankruptcy Code with the U.S.
Bankruptcy Court for the District of Central California (the
"Bankruptcy Court"). As a result of the bankruptcy proceeding
Subsidiary ceased to exist on March 1, 1991.
The Company did not engage in any business from June, 1990
until 1996.
On June 30, 1996, the company acquired Jet Set Life
Technologies, Inc., a privately held Delaware corporation ("JSLT")
in a business combination accounted for as a pooling of interests.
JSLT became a wholly-owned subsidiary of the Company through the
exchange of shares of the Company's common stock for all the
outstanding stock of JSLT. After the transaction the shareholder
of JSLT owned the majority of stock in the Company. JSLT was
founded and wholly-owned by George French, who is president, a
director and controlling shareholder of the Company and was prior
the acquisition of JSLT. Also see Item 11(b).
JSLT engages in multi-level marketing selling motor oil
additives, fuel treatment devices and related products. The
Company has several wholly-owned foreign subsidiary corporations
who engage in the same business as JSLT. The Company operates in
the U.S., Canada, U.K., New Zealand, Australia and Germany.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Registrant does not presently have separate industry
segments.
(C) NARRATIVE DESCRIPTION OF THE BUSINESS
JSLT was started by George French in the summer of 1993 with
two products, a magnetic gasoline and diesel fuel treatment device
and an oil additive, both of which were purchased from outside
sources. JSLT subsequently acquired the rights to a catalytic
cartridge fuel saving device from a third party and a magnetic fuel
saving device from its President. JSLT combined these new
technologies into their product, the Triple Charger, which
management believes has the ability to treat gasoline or diesel
fuel as it passes through the device on its way to the engine
combustion chamber in such a way that mileage is increased.
The driving public, both individual and commercial, compose
the principal market for the products and services of JSLT. JSLT
has chosen direct sales through a multi-level marketing network of
independent distributors as the means to sell its products. In the
last six months JSLT has acquired world-wide distribution rights to
a new and improved motor oil additive.
JSLT hopes to start a major push to recruit many more
independent distributors. None of JSLT's products are covered by
patents, but are produced under conditions of trade secrecy by
JSLT.
ITEM 2. PROPERTIES.
The Company has eight full time employees. The Company
presently maintains its business office at 21935 Van Buren, Suite
4, Grand Terrace, California 92313, which is approximately sixty
miles east of Los Angeles. The Company leases 5,300 square feet in
a single story tilt-up industrial building. 2,000 feet is used for
office space and 3,300 feet is used for manufacturing and
warehouse. The lease is for two years and expires in February of
1998.
ITEM 3. LEGAL PROCEEDINGS.
There are not currently any material pending legal proceedings
to which the Registrant is a party and no such proceedings are
known to the Registrant to be threatened or contemplated by or
against it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of
the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(A) MARKET INFORMATION.
There is presently no established public trading market for
the Registrant's common stock. Present management is unaware of
any active trading within the past two years. The Company has made
unregistered issuances of its restricted common stock, see Item 12.
(B) HOLDERS.
The approximate number of record holders of the Registrant's
common stock as of May 17, 1997 is 289.
(C) DIVIDENDS.
The registrant has not paid any cash dividends to date and
does not anticipate or contemplate paying dividends in the
foreseeable future. It is the present intention of management to
utilize all available funds for the development of the Company's
business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS.
Jet Set Life Technologies, Inc. ("JSLT") was started in the
summer of 1993 with two products, a magnetic gasoline and diesel
fuel saving device, and an oil additive, both purchased from
outside sources. George French, the founder and president, had the
concept of giving the first sample of oil treatment free of charge
with the fuel saving device, hoping if the customer once started
using the additive they might continue using it.
The President of the company who had a background in
motorcycle and car speed equipment designing and manufacturing in
his younger years sought out a catalytic fuel saving device. This
device used a unique catalytic cartridge containing an alloy made
of precious, common and exotic metals which were treated with a
nine step chemical process. This cartridge technology was later
purchased from the inventor and combined with a magnetic technology
developed by the President to produce the Triple Charger.
Management believes the Triple Charger has the ability to treat
gasoline or diesel fuel as it passes through the device on its way
to the engine combustion chamber in such a way that mileage is
increased. 20% increase in gasoline mileage and 15% increase in
diesel fuel mileage is guaranteed by JSLT. Management believes the
Triple Charger also has the ability to lower emissions.
$242,000 in sales were realized during the fiscal year ending
June 30, 1995, $901,000 during fiscal year 1996 and $1,006,000
during the first three quarters of fiscal year ending June 30,
1997.
JSLT chose direct sales through a multi-level network of
independent distributors as the vehicle to launch Triple Charger
sales. The Triple Charger, now sells for $229.00 for cars, $699.00
for large diesel trucks and a new model ready for launch for larger
12 to 16 cylinder locomotive and industrial engines will sell in
the $2,500.00 range. Management felt direct sales by trained
individuals telling how well this device worked on their car or
truck would be a much more viable method of distribution for a
small under capitalized company. Since starting the Company has
opened wholly owned offices in Scotland, Australia, New Zealand,
Germany and Canada. They also have sales in a dozen other
countries.
In the last six months the Company has acquired world-wide
rights to sell a motor oil and motor oil additive.
With these three products, JSLT now plans to start a major
push to recruit many more independent distributors. With petrol
and diesel fuel prices as high at $4.00 to $5.00 per gallon in many
countries, and more and more emphasis being placed on motor vehicle
emissions, JSLT hopes to establish wholly-owned sales offices and
distribution centers in countries all over the world. JSLT hopes
to expand into ten new countries in fiscal year ending June 30,
1998, ten new countries during 1999 and another ten new countries
during 2000.
Other network marketing companies are already selling their
products in many countries. Most of these companies have extensive
product lines with many products of equal quality readily available
from other network marketing companies, or at the local super
market. This of course results in lots of competition and the
Company's sales can fluctuate wildly from year to year. Management
believes JSLT has a few exclusive products which for technical
reasons will be hard to copy by other companies, and a sales method
which management believes is becoming more desirable every day
because individuals can start a small home based business with less
than $50.00 being invested in a sales kit.
ITEM 7. FINANCIAL STATEMENTS.
Financial Statements examined and reported upon by Hansen,
Barnett and Maxwell, Independent Certified Public Accountants,
containing Balance Sheets at June 30, 1996, and Statements of
Operations, Shareholders Equity (Deficit) and Cash Flows for the
two fiscal years preceding June 30, 1996.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There have not been any disagreements between the Registrant
and its certifying accountants on any matter of accounting
principles or practices, financial statement disclosure or auditing
scope or procedure, or any other reportable event.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS.
(A) IDENTIFICATION OF DIRECTORS.
NAME AGE POSITION HELD
George French 66 Director and President
William Maass 45 Director and Secretary
(B) IDENTIFICATION OF EXECUTIVE OFFICERS
Same as above.
(C) SIGNIFICANT EMPLOYEES.
The Registrant has no significant employees other than its
executive officers.
(D) FAMILY RELATIONSHIPS.
None.
(E) BUSINESS EXPERIENCE.
(1) BACKGROUND.
GEORGE W. FRENCH, PRESIDENT AND DIRECTOR
George W. French, born in 1930 has spent most of his life in
engineering, sales, marketing and management. He attended La
Sierra University for three years but was drafted into the army
before he graduated, and after basic training served eighteen
months as an Army medic in Korea during the height of the Korean
war.
After returning from Korea he started his own business
designing and manufacturing motorcycle and automotive speed
equipment products. This business was sold so he could return to
San Bernadino Valley college to finish his degree in engineering.
Before he graduated he was offered a partnership in the purchaser
of his speed equipment business. His innovative designs become so
well known that he was invited to join American Honda Motor Company
as its first American employee. He spent three years at Honda as
National Sales Manager.
From 1964 to 1969 he worked for Ovation Cosmetics, a multi-
level marketing organization, where he rose to area coordinator for
Los Angeles County, California. Starting in 1969 he spent the next
twenty three years working for a religious institution working with
teenagers and an anti-drug program he developed.
He next founded Jet Set Life Technologies, Inc., The
Company's purpose was to produce and market a gasoline and diesel
fuel saving device.
WILLIAM MAASS, SECRETARY AND DIRECTOR
William D. "Bill" Maass, born in 1952, has been involved in
sales, marketing and business management from his late teenage
years. In business for himself, at eighteen, he operated a pool
service company and later became a contractor building pools. The
service company financed his education at L.A. Pierce College where
in 1974, he earned an Associate of Arts Degree. In 1980, after 14
years in contracting, Bill left the construction business to manage
a telemarketing satellite office for a supplier of industrial tools
and equipment. In 1984 he took a management/marketing position
representing materials testing equipment for quality control test
labs to commercial and government agencies. Then in 1991 he took
a position as regional manager with a specialty lubrication
manufacturer. In April, 1994 he was hired as National Marketing
Director for Company.
(2) DIRECTORSHIPS.
None.
(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
None.
(G) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Not applicable.
ITEM 10. EXECUTIVE COMPENSATION.
(A) CASH COMPENSATION.
During the last fiscal year, William Maass, who is the
Company's Secretary and a director was paid cash compensation of
approximately $33,000.00 which included salary and expense
reimbursement. Mr. Maass will be paid a comparable amount during
the current fiscal year. In the fiscal year ending June 30, 1995
and also the fiscal year ending June 30, 1996 the Company accrued
but did not pay a salary to its president in the amount of
$36,000.00 each year. The company is similarly accruing but not
paying the same amount as salary to its president during the
current fiscal year. No other officer or director received any
salary during the last fiscal year and the Company has no plans to
pay any during the current fiscal year.
(B) COMPENSATION PURSUANT TO PLANS.
Except as described in Item 10(c), there are presently no
retirement, stock option or other plans or arrangements pursuant to
which cash or non-cash compensation was paid or is proposed to be
paid or distributed in the future to any of the current executive
officers of the Registrant.
(C) OTHER COMPENSATION.
During the fiscal year ending June 30, 1994 and June 30, 1995
William Maass, Secretary and a Director of the Company agreed to
issue 500,000 and 250,000 respectively, restricted shares of the
Company's Common Stock in partial consideration of services
rendered to the Company. There are presently no plans to issue any
further shares to any officer or director.
(D) COMPENSATION OF DIRECTORS.
None other than as described under Item 10(a) and 10(c).
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.
The following tabulates holdings of Common Shares of the
Company as of June 30, 1996, held of record by all Directors,
Officers and Principal Shareholders individually and as a group.
Percent of
Names and Addresses of Number of Shares Common Stock
Officers and Director of Common Stock Owned (1)
George French 38,079,524 66%
William Maass 750,000 1%
All officers and
directors as a group (2 persons) 38,829,524 67%
(B) CHANGES IN CONTROL.
On June 30, 1996 the Company entered into a stock for stock
reorganization agreement with the stockholder of Jet Set Life
Technologies, Inc. ("JSLT"). As a result of the transaction JSLT
became a wholly-owned subsidiary of the Company through the
exchange of 13,369,124 shares of the Company's common stock for all
of the outstanding stock of JSLT. After the transaction the
stockholders of JSLT owned the majority of the stock in the Company
and management of JSLT became management of the Company. The
founder and sole stockholder of JSLT is George French, who was an
officer, a director and the controlling stockholder of the Company
prior to the acquisition of JSLT and remained so after the
acquisition.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Item 10(c) also.
During the fiscal year ending June 30, 1991 the Company agreed
to issue 50,000 shares of its restricted Common Stock to one
individual in partial consideration of a loan made to the Company
by that individual.
During the fiscal year ending June 30, 1994 the Company agreed
to issue 500,000 shares of its restricted Common Stock to William
Maass, its Secretary and a Director for services rendered to the
Corporation by Mr. Maass. In addition, the Corporation agreed to
issue a total of 4,120,000 shares of its restricted Common Stock to
nine individuals in partial consideration of loans made to the
Corporation, assets acquired by the Company or services rendered to
the Company.
During the fiscal year ending June 30, 1995 the Company agreed
to issue a total of 2,527,500 shares of its restricted Common Stock
to ten individuals in partial consideration of loans made to the
Company or services rendered for the Company.
During the fiscal year ending June 30, 1996 the Company agreed
to issue 250,000 shares of its restricted Common Stock to William
Maass, Secretary and Director, in partial consideration of services
rendered to the Company by Mr. Maass. In addition, the Company
agreed to issue a total of 340,000 shares of its restricted Common
Stock to seven individuals in partial consideration of services
rendered to the Corporation by those individuals.
During the current fiscal year the Company has agreed to issue
a total of 4,825,000 shares of its restricted Common Stock to a
total of nine individuals and one entity in partial consideration
of loans made to the Company, services rendered for the Company or
assets acquired by the Company. These included 583,427 shares
issued to a judgment creditor to settle a judgment obtained against
the Company.
On June 30, 1996 the Company entered into a stock for stock
reorganization agreement with the stockholder of Jet Set Life
Technologies, Inc. ("JSLT"). As a result of the transaction JSLT
became a wholly-owned subsidiary of the Company through the
exchange of 13,369,124 shares of the Company's common stock for all
of the outstanding stock of JSLT. After the transaction the
stockholders of JSLT owned the majority of the stock in the Company
and management of JSLT became management of the Company. The
founder and sole stockholder of JSLT is George French, who was an
officer, a director and the controlling stockholder of the Company
prior to the acquisition of JSLT and remained so after the
acquisition.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(A) Exhibits listed in the following index are included as
part of this report. Those documents which have previously been
filed as an exhibit to a registration statement or report under the
Securities Act or the Exchange Act are incorporated herein by
reference into such reports and are marked "previously filed."
EXHIBIT INDEX
No. Description
3.1 Articles of Incorporation Previously Filed
3.2 Articles of Amendment Previously Filed
3.3 By-Laws Previously Filed
4.1 Specimen Stock Certificate Previously Filed
SIGNATURES
Pursuant to the requirements of Section 13, or 15(d) of the
Securities and Exchange Act of 1934, the Registrant had duly caused
this Report to be signed on its behalf by the undersigned thereunto
duly authorized in the city of Salt Lake, State of Utah on this
8th day of October , 1997.
JET SET LIFE USA, INC.
By: /s/ George French
President, George French
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed by the following persons in the
capacities and on the dates indicated.
Date: /s/ George W. French
George W. French, President
and Director
Date: /s/ William Maass
Secretary/Treasurer and
Director
JET SET LIFE USA INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheet June 30,1996 2
Consolidated Statements of Operations for the Years
Ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the Years
Ended June 30, 1996 and 1995 5
Consolidated Statements of Stockholders' Deficit for
the Years Ended June 30, 1995 and 1996 6
Notes to Consolidated Financial Statements 7
<PAGE>
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
345 East 300 South
Salt Lake City, Utah 84111
(801) 532-2200
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors
Jet Set Life USA Inc.
We have audited the accompanying consolidated balance sheet of Jet Set Life
USA Inc. and Subsidiaries as of June 30, 1996, and the related consolidated
statements of operations, cash flows and stockholders' deficit for each of
the two years in the period ending June 30, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Jet Set
Life USA Inc. and Subsidiaries as of June 30, 1996, and the results of their
operations and their cash flows for each of the two years in the period ended
June 30, 1996, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 1 to the consolidated financial statements, the Company has had
reoccurring losses from operations and has a net capital deficiency that
raise substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1.
The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
March 31, 1997
<PAGE>
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
Total Current Assets
Cash $ 10,483
Accounts receivable 16,152
Inventory 73,738
----------
Total Current Assets 100,373
----------
Property and Equipment
Machinery and equipment 48,750
Computer equipment and software 76,454
Furniture and fixtures 4,776
Leasehold improvements 12,528
----------
Total Property and Equipment 142,508
Less: Accumulated Depreciation (44,260)
----------
Net Property and Equipment 98,248
----------
Other Assets
Deposits 1,000
Organization costs net of accumulated
amortization of $198 11,702
----------
Total Other Assets 12,702
----------
Total Assets $ 211,323
==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 152,782
Accrued liabilities 108,174
Interest payable 22,791
Note payable - related party 106,340
Notes payable - current portion 49,900
----------
Total Current Liabilities 439,987
----------
Long-Term Liabilities
Notes payable 7,668
----------
Total Liabilities 447,655
----------
Stockholders' Deficit
Common stock - $0.0001 par value; 100,000,000
shares authorized; 58,317,664 shares issued
and outstanding 5,832
Additional paid-in capital 159,715
Accumulated deficit (398,922)
Foreign currency translation adjustment (2,957)
----------
Total Stockholders' Deficit (236,332)
----------
Total Liabilities and Stockholders' Deficit $ 211,323
==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1996 1995
---------- ----------
Sales $ 901,311 $ 241,984
Cost of Goods Sold 371,534 119,087
---------- ----------
Gross Profit 529,777 122,897
---------- ----------
Operating Expenses
General and administrative expense 285,407 153,812
Sales and marketing 313,684 63,886
Depreciation and amortization 22,589 13,935
---------- ----------
Total Operating Expenses 621,680 231,633
Loss from Operations (91,903) (108,736)
---------- ----------
Interest Expense 20,977 38,790
---------- ----------
Net Loss $ 112,880) $ (147,526)
========== ==========
Net Loss Per Share $ (0.00) $ (0.00)
========== ==========
Weighted Average Common Shares
Used in Per Share Calculation 49,999,320 49,999,320
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995
1996 1995
Cash Flows From Operating Activities ---------- ----------
Net loss $ (112,880) $ (147,526)
Adjustment to reconcile net loss
to net cash provided by operating
activities:
Depreciation and amortization 22,589 13,935
Stock issued for services 5,900 --
Changes in certain current assets
and liabilities:
Accounts receivable (16,085) --
Inventory (42,077) (28,156)
Prepaid expenses -- 1,000
Accounts payable 120,714 22,540
Accrued liabilities 47,239 57,706
----------- ----------
Net Cash Provided By (Used In)
Operating Activities 25,400 (80,501)
---------- ----------
Cash Flows From Investing Activities
Purchase of equipment (58,999) (37,540)
Increase in other assets (11,900) (1,000)
---------- ----------
Net Cash Used In Investing Activities (70,899) (38,540)
---------- ----------
Cash Flows From Financing Activities
Borrowings under notes payable to
related parties 49,180 40,076
Borrowings under notes payable 20,550 92,002
Payments on notes payable (9,677) (13,000)
---------- ----------
Net Cash Provided By Financing Activities 60,053 119,078
---------- ----------
Effect of Exchange Rate Changes on Cash (3,052) 20
Net Increase in Cash and Cash Equivalents 11,502 57
Cash Overdraft At Beginning of Year (1,019) (1,076)
---------- ----------
Cash and Cash Equivalents (Cash Overdraft)
At End of Year $ 10,483 $ (1,019)
========== ==========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 17,079 $ 32,602
========== ==========
Supplemental Schedule of Noncash Investing and Financing
Activities - Note 6
The accompanying notes are an integral part of these financial
statements.
<PAGE>
JET SET LIFE USA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
JUNE 30, 1996
<TABLE>
<CAPTION>
Foreign
Additional Currency Total
Common Stock Paid-In Retained Translation Stockholders'
Shares Amount Capital Deficit Adjustment Deficit
---------- -------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1994 49,999,320 $ 5,000 $ 28,392 $ (138,516) $ -- $ (105,124)
Foreign currency translation -- -- -- -- (155) (155)
Net loss -- -- -- (147,526) -- (147,526)
Balance - June 30, 1995 49,999,320 5,000 28,392 (286,042) (155) (252,805)
Conversion of accrued
interest and other
liabilities 4,247,500 425 42,050 -- -- 42,475
Conversion of notes
payable 2,950,000 295 83,485 -- -- 83,780
Stock issued for services 590,000 59 5,841 -- -- 5,900
Foreign currency translation -- -- -- -- (2,802) (2,802)
Net loss -- -- -- (112,880) -- (112,880)
---------- -------- --------- ---------- -------- ----------
Balance - June 30, 1996 57,786,820 $ 5,779 $ 159,768 $ (398,922) $(2,957) $ (236,332)
========== ======== ========= ========== ======== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FS>
</TABLE>
<PAGE>
JET SET LIFE USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Organization -- Caravel Corp. (Caravel) was incorporated under the laws of
the
State of Delaware on February 17, 1987. On May 10, 1989, Caravel changed its
name to Jet Set Life U.S.A. (USA) and the shareholders approved the
acquisition of all of the outstanding common shares of Jet Set Life, Inc.
(Jet Set), a Nevada Corporation for 5,280,000 shares of USA common stock. The
acquisition was accounted for as a reorganization of Jet Set for accounting
purposes. The USA shareholders also approved a 6-to-1 forward stock split at
that same time. The accompanying financial statements present the stock split
for all periods presented. Jet Set filed for Chapter 7 bankruptcy in 1990,
with Jet Set dissolving. None of the operations of Jet Set prior to the
bankruptcy are included in these financial statements.
Jet Set Life Technologies, Inc. (Technologies), was incorporated in the state
of Delaware on May 19, 1994. Effective June 30, 1996, USA acquired all of the
outstanding shares of Technologies, which were owned by George French, for
13,369,124 shares of USA common stock. Since Mr. French controlled both
companies before and after the reorganization, this business combination has
been accounted for by the pooling-of-interests method. Accordingly all
financial statements presented herein have been restated on a combined basis
for all periods presented.
Jet Set Life Technologies UK Limited (UK) was formed on February 22, 1995
with its sole shareholder being USA. Jet Set Life Technologies Canada
Limited (Canada) was formed in May of 1996 and is also wholly owned by USA.
In November of 1995, Jet Set Life Barbados Limited (Barbados) was formed as
a wholly owned subsidiary of USA. The accompanying consolidated financial
statements include the accounts of USA and of all of its subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. USA, Technologies, UK, Canada, and Barbados are referred to as
the Company.
The Company is in the business of selling automotive products, which are
intended to increase fuel mileage and performance for both gas and diesel
vehicles. The products are marketed using a multilevel marketing system.
Basis of Presentation -- The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course
of business. As shown in the consolidated financial statements, during the
years ended June 30, 1996 and 1995, the Company incurred net losses of
$112,880 and $147,526, respectively, and as of June 30, 1996, the Company's
accumulated deficit totaled $398,922. At June 30, 1996, the Company had a net
capital deficiency of $236,332. These factors, among others, raise
substantial
doubt about the Company's ability to continue as a going concern for a
reasonable period of time. The Company's ability to continue as a going
concern is dependent upon its ability to generate sufficient cash flow to
meet
its obligations on a timely basis and ultimately attain successful
operations. Management is pursuing efforts to obtain additional financing
and
intends to organize the Company so as to generate sufficient cash flows
through future operations. The consolidated financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going
concern.
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 reported amounts in the financial statements.
Actual results could differ from those estimates.
Financial Instruments -- Cash equivalents include highly liquid short-term
investments with original maturities of three months or less, readily
convertible to known amounts of cash. The amounts reported as cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities and
notes payables are considered to be reasonable approximations of their fair
values. The fair value estimates presented herein were based on market
information and management's estimates as of June 30, 1996. The use of
different assumptions and/or estimation methodologies could have a material
effect on the estimated fair value amounts. The reported fair values do not
take into consideration potential expenses that would be incurred in an
actual
settlement.
Revenue Recognition -- Revenue from the sale of products is recognized at the
time the product is shipped and paid for by the distributor. The product is
usually not shipped until payment is received; therefore the Company has
minimal accounts receivable, and no collateral is required. No allowance for
bad debt is considered necessary, based on management's estimate and
subsequent collections.
Inventory -- Inventory is valued at the lower of cost or market, with cost
being determined using the first-in first-out method. Inventory consisted of
the following at June 30, 1996:
In process products $ 38,294
Finished products 35,444
------------
Total inventory $ 73,738
============
Property and Equipment -- Property and equipment are reported at cost. Major
additions and improvements are capitalized, while minor repairs and
maintenance costs are expensed when incurred. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful
lives of the related assets which are as follows:
Machinery and Equipment 7 years
Computer Equipment and Software 3-5 years
Furniture and Fixtures 7 years
Leasehold Improvements 7 years
Video Production 3 years
Depreciation expense was $22,391 and $13,935 for the years ended June 30,
1996
and 1995, respectively.
Organizational Costs -- The Company has capitalized $11,900 in organizational
costs. These costs are being amortized over a five-year period using the
straight-line method. Amortization expense for the period ending June 30,
1996
and 1995 was $198 and $0, respectively.
Advertising Costs -- The Company expenses all advertising costs as incurred.
The Company incurred $88,121 and $12,967 in advertising costs for the years
ending June 30, 1996 and 1995, respectively.
Loss Per Share -- The Company computes loss per share based upon the weighted
average number of common shares outstanding during the period. The number of
common shares was not increased by the number of shares issuable on the
exercise of warrants as they would have decreased the loss per share.
Foreign Currency Translation -- Foreign currency exchange gains and losses
have been reflected in the results of operations. The financial statements of
foreign subsidiaries were prepared using the local currency as the functional
currency. Those balance sheets were then translated into U.S. dollars at the
year-end rates of exchange and the statements of operations were translated
at the weighted average exchange rates during each year. The effects of
translating the financial statements into U.S. dollars were recorded as a
separate component of stockholders' deficit.
Income Taxes -- The Company recognizes a liability or asset for the deferred
tax consequences of all temporary differences between the tax bases of assets
and liabilities and their reported amounts in the consolidated financial
statements that will result in taxable or deductible amounts in future years
when the reported amounts of the assets and liabilities are recovered or
settled. These deferred tax assets or liabilities are measured using the
enacted tax rates that will be in effect when the differences are expected to
reverse.
Impact of the Adoption of Recently Issued Accounting Standards -- Effective
July 1, 1995, the Company adopted Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived
Assets to be Disposed of (SFAS 121). SFAS 121 requires that impairment losses
be recorded when indicators of impairment are present and undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The adoption of this standard did not have a material impact
on the Company's operating results, cash flows or financial position.
NOTE 2--RELATED PARTY TRANSACTIONS
During the years ended June 30, 1996 and 1995, the Company received $49,180
and 40,076, respectively, from short-term, non-interest bearing advances from
its president. The total amount owed to its president regarding these
advances
was $106,340 at June 30, 1996. These advances are due on demand and
unsecured.
The president is also the majority shareholder of the Company.
NOTE 3--NOTES PAYABLE
The following schedule summarizes the Company's long-term debt at June 30,
1996:
Note payable to an individual; no stated interest rate;
currently due; unsecured. $ 5,000
Note payable to an individual; monthly payments of $375 which
includes interest at 32% through September 1996; secured by
computer equipment. 9,393
Judgement payable to a corporation; accrued interest of
$22,791 is also currently due; see Note 9 for settlement
of this judgement. 43,175
Total Notes Payable 57,568
Less Current Portion 49,900
--------
Long-Term Notes Payable $ 7,668
========
Annual maturities of notes payable as of June 30, 1996 were as follows:
Year Ending June 30:
1997 $ 49,900
1998 2,366
1999 3,249
2000 2,053
NOTE 4--LEASE COMMITMENTS
The Company leases a facility under an operating lease agreement which
extends
through February 1998. Future minimum lease payments required under the terms
of the lease are as follows:
Year Ending June 30:
1997 $ 15,996
1998 10,664
Rent expense relating to this operating lease was $4,889 and $0 for the years
ending June 30, 1996 and 1995, respectively.
NOTE 5--COMMITMENTS
The Company has executed an employment agreement with its President under
which $36,000 of compensation expense was accrued during the years ended June
30, 1996 and 1995. The agreement is of a continuing nature and is anticipated
to be reviewed annually in the future.
NOTE 6-- SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During 1996, $83,780 of notes payable to individuals were converted into
2,950,000 shares of common stock at an average price of $0.03 per share. The
conversion ratio was based on repayment agreements between the Company and
the individuals. The Company issued 4,247,500 shares of common stock at
$0.01 per share totaling $42,475 for accrued interest and to settle other
liabilities.
Also during 1996, the Company issued 590,000 shares of common stock at $0.01
totaling $5,900 for services rendered. The $0.01 conversion ratio was based
on the fair value of the common stock on the date of conversion.
NOTE 7--STOCK WARRANTS
The Company issued 7,200,000 warrants in 1989 that are exercisable at $0.25
per share, expiring June 30, 1997.
NOTE 8--INCOME TAXES
The major components of the net deferred tax asset as of June 30, 1996 were
as follows:
Accrued salaries $ 28,080
Operating loss carry forwards 115,661
Less Valuation allowance (143,741)
---------
Net deferred tax asset $ --
=========
The net change in the valuation allowance was $43,122 and $57,387 for the
years ended June 30, 1996 and 1995, respectively. The Company has operating
loss carry forwards at June 30, 1996 of $296,568 which expire in the years
2009 through 2011 if unused. Under federal tax law, certain potential changes
in ownership of the Company may restrict future utilization of these carry
forwards.
The components of the provision for income taxes were immaterial for all
periods presented. The following is a reconciliation of the income tax at a
federal statutory tax rate of 34% with the provision for income taxes for
the years ended June 30, 1996 and 1995:
1996 1995
---------- ----------
Income tax benefit at statutory rate $ (38,379) $ (50,159)
Benefit of current operating loss not recognize 25,354 37,790
Change in deferred tax asset valuation
allowance, excluding net operating losses 12,240 12,240
Nondeductible expenses 786 129
---------- ----------
Provision for income taxes $ -- $ --
========== ==========
NOTE 9--SUBSEQUENT EVENTS
Subsequent to June 30, 1996, the Company has committed to issue 2,650,000
shares of its common stock for service rendered to the Company. These shares
were valued at $0.01 per share which was market value when the commitment
was made (Unaudited).
In settlement of a judgement against the Company in favor of Financial
Sciences of America, with a principal balance of $43,175 and accrued interest
of $22,791, the Company has agreed to issue 1% of the outstanding shares of
Jet Set Life U.S.A. as of June 30, 1996 and 1% of any shares subsequently
issued for the next two years. Under the agreement, for a two-year period
commencing June 30, 1996 and ending June 30, 1998, the Company has the
option to repurchase all shares issued to Financial Services of America for
$100,000. Subsequent to June 30, 1996, 587,427 shares have been issued to
settle this liability. (Unaudited).
Subsequent to June 30, 1996, the Company entered into an agreement whereby
the Company will pay $3,000,000 to acquire the rights to certain technology
relating to a catalytic cartridge which is used as part of one of the
Company's products. $1,500,000 due under this agreement will be paid by
issuance of a promissory note which is due and payable in cash or shares at
the sellers option by October 2001; interest will accrue at 4.50 % payable
annually with the first payment due October 1998. The agreement provides that
the remaining $1,500,000 will be paid by the issuance of 1,500,000 shares of
the Company's common stock, provided the bid price of the stock in a public
market at June 27, 1997 is at least $0.33 per share. If this is not the case,
the Company must pay $5,625 per month until the Company's common stock
reaches a bid price of $0.33 per share. (Unaudited).
In October 1996, the Company entered into an agreement whereby the Company
will issue 2,000,000 shares of the Company's common stock for exclusive
worldwide distribution rights for an oil additive. (Unaudited).
Subsequent to June 30, 1996, the Company entered into an agreement with an
individual, whereby the Company agreed to issue 500,000 shares of common
stock to the individual. In return, the individual will attempt to promote
the Company, will attempt to keep market makers up to date on Company
developments and will be available for additional general consulting. The
market value of the shares at the time of the commitment was $0.01 per share.
The related
compensation will be expensed in the subsequent period. (Unaudited).
Subsequent to June 30, 1996, the Company has expanded its operations into New
Zealand, Australia and Germany through the establishment of subsidiary
companies in those countries. (Unaudited).
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheet as of June 30, 1996, and statements of operations for the
fiscal year ended June 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1996
<CASH> 10,483
<SECURITIES> 0
<RECEIVABLES> 16,152
<ALLOWANCES> 0
<INVENTORY> 73,738
<CURRENT-ASSETS> 100,373
<PP&E> 142,508
<DEPRECIATION> (44,260)
<TOTAL-ASSETS> 211,323
<CURRENT-LIABILITIES> 439,987
<BONDS> 0
0
0
<COMMON> 5,832
<OTHER-SE> (242,164)
<TOTAL-LIABILITY-AND-EQUITY> 211,323
<SALES> 901,311
<TOTAL-REVENUES> 901,311
<CGS> (371,534)
<TOTAL-COSTS> (621,680)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (91,903)
<INTEREST-EXPENSE> (20,977)
<INCOME-PRETAX> (112,880)
<INCOME-TAX> 0
<INCOME-CONTINUING> (112,880)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (112,880)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
