FORM 10-KSB
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, 1997.
[ ] 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 Identification No.)
incorporation or organization
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, 1997 fiscal year: $1,150,095.
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, 1997: Not Determinable.
Shares outstanding of the Registrant's common stock as of October 6,
1998: 66,126,792 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 lineand 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 to 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 and Australia.
(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. JSLT has
acquired distribution rights to a new and improved motor oil additive,
Oil Extreme.
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. JSLT is currently
negotiating a new 2 year lease.
ITEM 3. LEGAL PROCEEDINGS.
RECENT LITIGATION
JSLT was previously involved in a civil action entitled Neopost
Leasing Corporation v. Jet Set Life Technologies, Inc., Case No. SBCI
45518 wherein Neopost claimed and asserted a breach of a lease
agreement on certain mailing equipment. The amount demanded was
approximately $10,683.48. JSLT contended that the mailing equipment
did not operate or perform as represented. The case has been settled
pursuant to a Stipulation for Entry of Judgment in the amount of
$10,683.48. However, should monthly payments in the amount of $1,200
from July 1, 1998 through November 1, 1998 be timely made, the
settlement amount is reduced to $6,000 in full and final compromise of
the claim. Should a default occur, then $10,683.48 plus accrued
interest from October 8, 1997, will be entered as a judgment against
JSLT. Should payments be made pursuant to the terms of the Stipulation
for Entry of Judgment, judgment will not be entered and the case will
be dismissed upon payment of the last installment.
UNASSERTED AND ASSERTED CLAIMS
An individual has asserted a claim against JSLT and others wherein
it is contended that this individual loaned money to JSLT and that
he/she is entitled to stock and other forms of monetary compensation
and damages as a result of his/her dealings with JSLT and the conduct
of JSLT. JSLT denies liability and alleges that this individual dealt
with others in a series of transactions that did not directly involve
JSLT. Notwithstanding the contentions of the parties, JSLT views this
matter as a potential claim, and should this individual file a lawsuit,
he/she would possibly name JSLT as a defendant. This individual has
demanded the sum of $71,000 plus interest at 10% plus $2,000 in costs.
JSLT anticipates that should a civil complaint be filed, it would
include a variety of causes of action ranging from contract claims to
tort claims, some of which would include claims based on
misrepresentations of facts.
JUDGMENTS
The following judgments have been entered against Jet Set.
1. Elliott Group Pound 564.24 (Pounds Sterling)
2. Market Link Publishing Pound 3,065.58
3. Neat Ideas Pound 102.04
4. R.J. Stark Pound 450.00
5. Teet-Comm Pound 439.29
6. Chester Chronicle Pound 490.00
7. Rates (Taxes) Pound 2,240.45
8. CMYK Pound 161.38
9. Kings Manor Hotel Pound 125.25
TOTAL POUND 7,638.23
JSLT has plans of resolving these as soon as possible.
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 June 30, 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.
$901,000 in sales were realized during the fiscal year ending June 30,
1996 and $1,150,095 during the fiscal year ending June 30, 1997
representing a 28% increase which the Company attributes to its
expanded marketing efforts. During this same period, the Company's
cost of sales increased from $371,534 to $667,520 which represents a 80%
increase. The Company attributes this increase to the discontinuance
of the sale of a tire sealant product which resulted in higher product
costs. General and administrative costs increased from $285,407 to
$563,326 or 97% due primarily to increases in travel costs, legal and
professional services and supply costs. During the year ended June 30,
1997, the Company borrowed $344,186 from related parties, principally
Visioneering Trust of which the Company's president is a trustee,
compared to $49,180 borrowed from related parties in the prior year.
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, $799.00 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 offices in the U.K., Australia,
New Zealand, and is doing business in Canada. JSLT also has sales in a
number of other countries.
The Company has acquired certain 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 five new
countries in fiscal year ending June 30, 1999 and ten new countries
during 2000.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements are set forth immediately following the
signature page.
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 Bernardino 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.
RECENT LITIGATION
JSLT was previously involved in a civil action entitled Neopost
Leasing Corporation v. Jet Set Life Technologies, Inc., Case No. SBCI
45518 wherein Neopost claimed and asserted a breach of a lease
agreement on certain mailing equipment. The amount demanded was
approximately $10,683.48. JSLT contended that the mailing equipment
did not operate or perform as represented. The case has been settled
pursuant to a Stipulation for Entry of Judgment in the amount of
$10,683.48. However, should monthly payments in the amount of $1,200
from July 1, 1998 through November 1, 1998 be timely made, the
settlement amount is reduced to $6,000 in full and final compromise of
the claim. Should a default occur, then $10,683.48 plus accrued
interest from October 8, 1997, will be entered as a judgment against
JSLT. Should payments be made pursuant to the terms of the Stipulation
for Entry of Judgment, judgment will not be entered and the case will
be dismissed upon payment of the last installment.
UNASSERTED AND ASSERTED CLAIMS
An individual has asserted a claim against JSLT and others wherein
it is contended that this individual loaned money to JSLT and that
he/she is entitled to stock and other forms of monetary compensation
and damages as a result of his/her dealings with JSLT and the conduct
of JSLT. JSLT denies liability and alleges that this individual dealt
with others in a series of transactions that did not directly involve
JSLT. Notwithstanding the contentions of the parties, JSLT views this
matter as a potential claim, and should this individual file a lawsuit,
he/she would possibly name JSLT as a defendant. This individual has
demanded the sum of $71,000 plus interest at 10% plus $2,000 in costs.
JSLT anticipates that should a civil complaint be filed, it would
include a variety of causes of action ranging from contract claims to
tort claims, some of which would include claims based on
misrepresentations of facts.
JUDGMENTS
The following judgments have been entered against Jet Set.
10. Elliott Group Pound 564.24 (Pounds Sterling)
11. Market Link Publishing Pound 3,065.58
12. Neat Ideas Pound 102.04
13. R.J. Stark Pound 450.00
14. Teet-Comm Pound 439.29
15. Chester Chronicle Pound 490.00
16. Rates (Taxes) Pound 2,240.45
17. CMYK Pound 161.38
18. Kings Manor Hotel Pound 125.25
TOTAL POUND 7,638.23
JSLT has plans of resolving these as soon as possible.
(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, 1996, and also the fiscal year ending
June 30, 1997, the Company accrued but did not pay a salary to its
president in the amount of $36,000.00 each 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 1997, the Company issued 1,071,701 shares
of restricted common stock to George French, President of JSLT, in
partial satisfaction of previously accrued salary and advances.
(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, 1997, 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 39,151,225 59%
William Maass 750,000 1%
All officers and
directors as a group (2 persons) 39,901,225 60%
(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.
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
7th day of October, 1998.
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: October 7, 1998 /s/ George W. French
George W. French, President
and Director
Date: October 7, 1998 /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 30,1997 2
Consolidated Statements of Operations for the Years
Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the Years
Ended June 30, 1997 and 1996 5
Consolidated Statements of Stockholders' Deficit for
the Years Ended June 30, 1996 and 1997 6
Notes to Consolidated Financial Statements 7
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
(801) 532-2200
Member of AICPA Division of Firms Fax (801) 532-7944
Member of SECPS 345 East Broadway, Suite 200
Member of Summit International Associates Salt Lake City, Utah 84111-2693
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, 1997, and the
related consolidated statements of operations, cash flows and
stockholders' deficit for each of the two years in the period ending
June 30, 1997. 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 audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 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,
1997, and the results of their operations and their cash flows for
each of the two years in the period ended June 30, 1997, 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, 1998
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
ASSETS
Total Current Assets
Cash $ 10,322
Accounts receivable 25,858
Inventory 140,837
---------
Total Current Assets 177,017
---------
Property and Equipment
Machinery and equipment 58,803
Computer equipment and software 77,822
Furniture and fixtures 4,776
Leasehold improvements 12,528
---------
Total Property and Equipment 153,929
Less: Accumulated Depreciation (71,116)
---------
Net Property and Equipment 82,813
---------
Other Assets
Deposits 1,000
Organization costs net of accumulated
amortization of $2,578 9,322
---------
Total Other Assets 10,322
---------
Total Assets $ 270,152
=========
The accompanying notes are an integral part of these consolidated
financial statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
JUNE 30, 1997
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 181,975
Accrued liabilities 133,305
Note and advances payable - related parties 344,186
Notes payable - current portion 20,702
---------
Total Current Liabilities 680,168
---------
Contingent Liabilities
Stockholders' Deficit
Common stock - $0.0001 par value; 100,000,000
shares authorized; 66,126,792 shares issued
and outstanding 6,613
Additional paid-in capital 500,740
Accumulated deficit (917,122)
Foreign currency translation adjustment (247)
---------
Total Stockholders' Deficit (410,016)
---------
Total Liabilities and Stockholders' Deficit $ 270,152
=========
The accompanying notes are an integral part of these consolidated
financial statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
----------- ----------
Sales $ 1,150,095 $ 901,311
Cost of Goods Sold 667,520 371,534
----------- ----------
Gross Profit 482,575 529,777
----------- ----------
Operating Expenses
General and administrative expense 563,326 285,407
Sales and marketing 375,312 313,684
Depreciation and amortization 29,200 22,589
----------- ----------
Total Operating Expenses 967,838 621,680
----------- ----------
Loss from Operations (485,263) (91,903)
Interest Expense 31,263 20,977
----------- ----------
Loss Before Taxes (516,526) (112,880)
Provision for Income Taxes 1,674 -
----------- ----------
Net Loss $ (518,200) $ (112,880)
=========== ==========
Net Loss Per Share $ (0.00) $ (0.00)
=========== ==========
Weighted Average Common Shares
Used in Per Share Calculation 63,690,486 50,530,164
=========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
JET SET LIFE USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
----------- ----------
Cash Flows From Operating Activities
Net loss $ (518,200) $ (112,880)
Adjustment to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 29,200 22,589
Stock issued for services and
distribution rights 97,500 5,900
Changes in certain current assets
and liabilities:
Accounts receivable (9,670) (16,085)
Inventory (67,099) (42,077)
Accounts payable 29,193 119,695
Accrued liabilities 97,131 47,239
----------- ----------
Net Cash Provided By (Used In)
Operating Activities (341,945) 24,381
----------- ----------
Cash Flows From Investing Activities
Purchase of equipment (11,421) (58,999)
Increase in other assets - (11,900)
----------- ----------
Net Cash Used In Investing Activities (11,421) (70,899)
----------- ----------
Cash Flows From Financing Activities
Proceeds from notes payable to related
parties 344,186 49,180
Proceeds from notes payable 17,702 20,550
Payments on notes payable (11,393) (9,677)
----------- ----------
Net Cash Provided By Financing Activities 350,495 60,053
----------- ----------
Effect of Exchange Rate Changes on Cash 2,710 (3,052)
----------- ----------
Net Increase (Decrease) in Cash (161) 10,483
Cash At Beginning of Year 10,483 -
----------- ----------
Cash At End of Year $ 10,322 $ 10,483
=========== ==========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 33,702 $ 17,079
=========== ==========
Supplemental Information of Noncash Investing and
Financing Activities - Note 5
The accompanying notes are an integral part of these consolidated
financial statements.
JET SET LIFE USA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1996 AND 1997
<TABLE>
<CAPTION>
Foreign
Common Share Additional Currency Total
-------------------- Paid-In Accumulated Translation Stockholders'
Shares Amount Capital Deficit Adjustment Deficit
---------- -------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1995 50,530,164 $ 5,053 $ 28,339 $ (286,042) $ (155) $ (252,805)
Conversion of accrued liabilities 3,907,500 391 38,684 - - 39,075
Conversion of accrued interest 340,000 34 3,366 - - 3,400
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) (2,801)
Net loss - - - (112,880) - (112,880)
---------- -------- ---------- ---------- ----------- ----------
Balance - June 30, 1996 58,317,664 5,832 159,715 (398,922) (2,957) (236,332)
Stock issued for accrued salary
and advances from Company's
president June 1997 - $0.20
per share 1,071,701 107 214,233 - - 214,340
Stock issued in legal
settlement April 1997 -
$0.11 per share 587,427 59 65,907 - - 65,966
Stock issued for distribution
rights April 1997 - $0.01
per share 3,500,000 350 34,650 - - 35,000
Stock issued for services
Various dates - $0.01 per share 2,650,000 265 26,235 - - 26,500
Foreign currency translation - - - - 2,710 2,710
Net loss - - - (518,200) - (518,200)
---------- -------- ---------- ---------- ----------- ----------
Balance - June 30, 1997 66,126,792 $ 6,613 $ 500,740 $ (917,122) (247) (410,016)
========== ======== ========== ========== =========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
JET SET LIFE USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997 AND 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES
Organization and Nature of Business - Caravel Corp. (Caravel) was
incorporated under the laws of the State of Delaware on February
17, 1987 and subsequently changed its name to Jet Set Life U.S.A.
(USA).
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, the
accompanying financial statements have been restated on a combined
basis for all periods prior to June 30, 1996.
The accompanying consolidated financial statements include the
accounts of Jet Set Life USA, Inc. and its subsidiaries,
including: Jet Set Life Technologies Canada, Ltd., Jet Set Life
Barbados, Ltd, Jet Set Life Technologies Australia, Pty., Ltd.,
Jet Set Life Technologies New Zealand, Ltd, and Jet Set Life
Technologies, Ltd. (UK), collectively referred to as the Company.
All significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company is in the business of selling products which are
intended to increase fuel efficiency and reduce harmful emissions
of both gas and diesel vehicles including a motor oil additive and
a fuel treatment device. The products are marketed using a
network 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,
1997 and 1996, the Company incurred net losses of $518,200 and
$112,880, respectively, and, as of June 30, 1997, the Company's
accumulated deficit totaled $917,122. At June 30, 1997, the
Company had a net capital deficiency of $410,016. 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 - The amounts reported as cash, 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,
1997. 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, 1997:
Raw materials $ 12,269
In process products 30,276
Finished products 98,292
---------
Total Inventory $ 140,837
=========
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
Depreciation expense was $26,820 and $22,391 for the years ended
June 30, 1997 and 1996, respectively.
Long-Lived Assets - The Company periodically evaluates the
realizability of long-lived assets for indications of a possible
inability to recover the carrying amount. Such evaluation is based
on various analyses including cash flow and profitability
projections.
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, 1997 and 1996 was $2,380
and $198, respectively.
Advertising Costs - The Company expenses all advertising costs as
incurred. The Company incurred $47,572 and $88,121 in advertising
costs for the years ending June 30, 1997 and 1996, 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.
Export Sales - The Company had the following sales in foreign
countries as follows:
June 30, June 30,
1997 1996
--------- ---------
United Kingdom $ 136,229 $ 104,086
New Zealand 51,664 -
Australia 201,925 -
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 -
The Financial Accounting Standard Board (FASB) has issued SFAS 128
"Earnings per Share", which revises the manner in which earning
per share is calculated. The Company is required to adopt the new
standard during the quarter ended December 31, 1997. The Company
does not anticipate that this new standard will have a material
impact on its reported loss per share when adopted. Had the
Company adopted this standard for the year ended June 30, 1997 and
1996, its affect would have been inconsequential.
NOTE 2 - RELATED PARTY TRANSACTIONS
During June 1997, $106,340 of advances, $72,000 of back salary and
$36,000 of current salary due to the Company's president were
converted into 1,071,701 shares of common stock at $0.20 per
share. During the year ended June 30, 1997, the Company received
$339,194 from short-term, 6% interest bearing notes from a trust
fund for which the Company's president acts as trustee. These
notes are due on demand and secured by shares of the Company's
restricted stock. The president is also the majority shareholder
of the Company.
NOTE 3--NOTES PAYABLE
The following schedule summarizes the notes payable at June 30, 1997:
Notes payable to individuals; no stated interest rate;
currently due; unsecured. $ 14,000
Note payable to an individual; 20% stated interest rate;
currently due; unsecured. 6,702
---------
Total Notes Payable 20,702
Less Current Portion 20,702
---------
Long-Term Notes Payable $ -
=========
NOTE 4--LEASE COMMITMENTS
The Company leases a facility under an operating lease agreement
which extends through February 1999. Future minimum lease payments
required under the terms of the lease are as follows:
Year Ending June 30:
1998 $ 10,680
1999 7,120
---------
Total $ 17,800
=========
Rent expense relating to this operating lease was $10,680 and
$4,889 for the years ending June 30, 1997 and 1996, respectively.
NOTE 5-COMMON STOCK
During the year ended June 30, 1997, $214,340 of notes payable,
back salary and current year salary due to the Company's president
were converted into 1,071,701 shares of common stock at $0.20 per
share. The conversion ratio was based on repayment agreements
between the Company and the president. The Company issued
3,500,000 shares of common stock at $0.01 per share totaling
$35,000 which was the fair value of the common stock at the time
of issuance for distribution rights. In settlement of a judgement
against the Company in favor of a financial services company with
a principal balance of $43,175 and accrued interest of $22,791,
the Company issued 587,427 shares of common stock at $0.11 per
share.
The Company issued 2,650,000 shares of common stock for services
rendered to the Company in the amount of $26,500. These shares
were valued at $0.01 per share which was the fair value of the
common stock when the services were performed.
NOTE 6--STOCK WARRANTS
The Company issued 7,200,000 warrants in 1989 to shareholders in
connection with the issuance of common stock that are exercisable
at $0.25 per share, with an original expiration date of June 30,
1997. These warrants were extended another 12 months to expire on
June 30, 1998.
NOTE 7--INCOME TAXES
The current provision for income taxes, classified by location of
payment, was as follows:
Current 1997 1996
--------- ---------
U.S. $ - $ -
Foreign 1,674 -
The major components of the net deferred tax asset as of June 30,
1997 were as follows:
Operating loss carry forwards $ 329,159
Less Valuation allowance (329,159)
---------
Net Deferred Tax Asset $ -
=========
The net change in the valuation allowance was $185,418 and $43,122
for the years ended June 30, 1997 and 1996, respectively. The
Company has U.S. operating loss carry forwards at June 30, 1997 of
$836,250 which expire in the years 2010 through 2012 if unused.
Under federal tax law, certain potential changes in ownership of
the Company may restrict future utilization of these carry
forwards. The Company also has foreign operating loss carry
forwards of $50,874.
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, 1997 and
1996:
1997 1996
---------- ---------
Income tax benefit at statutory rate $ (175,619) $ (38,379)
State tax, net of federal benefit (17,045) (4,210)
Benefits and taxes related to foreign operations 1,674 -
Change in effective rates 6,231 (1,318)
Change in deferred tax asset valuation allowance 185,418 43,122
Nondeductible expenses 1,015 785
---------- --------
Provision for income taxes $ 1,674 $ -
========== ========
NOTE 8--CONTINGENCIES AND COMMITMENTS
A third party has made a claim against the Company and its
president alleging to have made payments to Visioneering
International, a trust controlled by the Company's president
("Visioneering"), in exchange for 700,000 shares of free-trading
common stock of the Company, but that the common stock was not
received in full by the third party. The president of the Company
made an effort to settle the claim by offering to transfer 750,000
shares of restricted common stock of the Company to the third
party; however, the third party rejected the offer and has
demanded payment from the Company and/or its president in the
amount of $95,000. The Company asserts that the transaction was
between the third party and the Company's President or
Visioneering and not the Company. The Company's ultimate
liability in the matter cannot now be determined because of the
considerable uncertainties that exist as to how the liability, if
one materializes, will be allocated between the parties.
Therefore, it is possible that a loss within the range of $70,000
and $100,000 may exist; however, based on facts currently
available, management believes that the disposition of the matter
will not have a materially adverse effect on the future results of
operations or the financial position of the Company.
Legal counsel has advised the Company that there are various
judgments entered against the Company for failure to make payment
which total approximately $24,000 and which have been included as
liabilities in the accompanying financial statements. The Company
is in the process of negotiating settlement of these claims.
NOTE 9--TECHNOLOGY PURCHASE AGREEMENT
During the year ended June 30, 1997, the Company entered into an
agreement whereby the Company agreed to pay $3,000,000 to acquire
rights to certain technology relating to a catalytic cartridge
which is used in one of the Company's products. The agreement
called for $1,500,000 to be paid through the issuance of a
promissory note due October 2001 and $1,500,000 to 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 was at least $0.33 per share, otherwise the Company would
need to commence payments of $5,625 per month. The Company's stock
did not trade at the required price and the Company has not made
all the required payments, therefore the seller has not delivered
the technology to the Company. The parties consider that the
agreement is void, that the Company has no obligation to make
payments under the agreement and that the seller is free to market
the technology to others.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements as of June 30, 1997 and for the year then ended, and is
qualified in its entirety by reference to such.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 10,322
<SECURITIES> 0
<RECEIVABLES> 25,858
<ALLOWANCES> 0
<INVENTORY> 140,837
<CURRENT-ASSETS> 177,017
<PP&E> 153,929
<DEPRECIATION> (71,116)
<TOTAL-ASSETS> 270,152
<CURRENT-LIABILITIES> 680,168
<BONDS> 0
0
0
<COMMON> 6,613
<OTHER-SE> (416,629)
<TOTAL-LIABILITY-AND-EQUITY> 270,152
<SALES> 1,150,095
<TOTAL-REVENUES> 1,150,095
<CGS> 667,520
<TOTAL-COSTS> 967,838
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,263
<INCOME-PRETAX> (516,526)
<INCOME-TAX> 1,674
<INCOME-CONTINUING> (518,200)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (518,200)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
