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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
[ ] 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 number 0-19949
iRV, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1153522
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(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
5373 North Union Blvd, Suite 100, Colorado Springs, Colorado 80918
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 590-4900
_____________________________________________
(Former Name or Address if Changed Since Last Report)
Securities to be registered under Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.001 par value
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 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ x ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form, and no disclosure will be contained,
to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ x ]
The Issuer's revenues for the fiscal year ended March 31, 2000 were $596,055.
As of March 31, 2000 the aggregate market value of the Common Stock of the
Issuer based upon the average bid and asked prices of such Common Stock was
approximately $9,447,336. As of March 31, 2000, 8,110,470 shares of Common
Stock of the Issuer were outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The Registrant incorporates by this reference the following:
PART IV - EXHIBITS
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FORWARD LOOKING STATEMENTS
Certain statements made in this Annual Report are "forward-looking
statements" (within the meaning of the Private Securities Litigation Reform
Act of 1995) regarding the plans and objectives of management for future
operations. Such statements involve known and unknown risks, uncertainties and
other factors that may cause actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that might cause such a difference include, but are not limited to,
competitive pressures, changing economic conditions such as changes in
gasoline prices and the fluctuation of interest rates and the popularity of
product lines. The forward-looking statements made in this Report are based
on current expectations that involve numerous risks and uncertainties. The
Company's plans and objectives are based, in part, on assumptions involving
the growth and expansion of business. Assumptions relating to the foregoing
involve judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that its assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the forward-looking statements made in this Report will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements made in this Report, particularly in view of the
Company's early stage of operations, the inclusion of such information should
not be regarded as a representation by the Company or any other person that
the objectives and plans of the Company will be achieved.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background
iRV, Inc. (OTC BB: IRVV) is a development stage company that was formed
by the merger of iRV, Inc. into The Southshore Corporation, which
subsequently changed its name to iRV, Inc.
iRV, Inc. was a privately owned Colorado corporation that was formed in
July 1999. iRV, Inc. completed a $600,000 private placement in November 1999.
iRV, Inc. was initially formed in order to capitalize on the new economy's
synergy between the Internet and traditional brick and mortar companies in an
industry that had been slow to incorporate the Internet into many facets of
its business. iRV, Inc. was engaged in developing an Internet Web site for
RV enthusiasts and acquiring RV dealerships throughout the nation.
The effective date of the reverse merger between Southshore Corporation
and iRV, Inc. was February 2, 2000. On this date each shareholder of iRV,
Inc. received one (1) share of the common stock of The Southshore Company for
each share of iRV, Inc. common stock owned. The number of outstanding shares
of The Southshore Company increased from 2,610,470 to 8,110,470. The
5,100,000 shares of The Southshore Company's stock issued to the former
shareholders of iRV, Inc. represented, immediately after their issuance, 62.9%
of the total issued and outstanding shares of The Southshore Corporation's
common stock following the merger. When the merger was completed, the
directors and executive officers of The Southshore Corporation were
reconstituted. This reorganization has been accounted for as though it were a
re-capitalization of iRV and a sale of shares by iRV in exchange for the net
assets of The Southshore Corporation.
Overview
iRV, Inc. has two wholly owned subsidiaries: iRV.com, Inc. and iRV
Dealerships, Inc. iRV.com, Inc. operates the Internet Web site for RV
enthusiasts and iRV Dealerships was formed and organized to acquire and
operate RV dealerships.
iRV.com, Inc.
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iRV.com, Inc. has developed and launched a Web site for RV enthusiasts at
www.irv.com. The Web site went live in February 2000. The initial phase of
the Web site allowed consumers to purchase RVs from dealers across the nation.
Consumers have the opportunity to shop our Dealer Network, which consists of
over 100 participating RV dealers throughout the United States for the best
deal by telling iRV.com, through the Web site, exactly what model they are in
interested in purchasing.
Subsequent upgrades to the site have included real-time content including
RV specific news, national news, sports, weather, and free Web-based email
@irv.com. In addition consumers can now purchase warranties, insurance, and
finance their RVs through our Web site. We have out-sourced the functions of
selling warranties, selling insurance, and financing the purchase of an RV.
We receive either a flat-fee for each transaction completed by our partner or
a percentage of the total transaction depending on the vendor.
To date, iRV.com has not generated any material revenues.
iRV Dealerships, Inc.
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Due to the fragmentation of the RV industry we believe that there is an
opportunity to purchase multiple dealerships throughout the nation and offer
RV customers recognizable consistency in service throughout the nation as well
as operational economies of scale for iRV, Inc. Presently, there are
approximately 3,000 dealerships throughout the nation.
iRV, Inc., through a wholly owned subsidiary, iRV - Dealerships, attempts
to identify RV dealerships for acquisition. Different geographic markets
offer iRV, Inc. the opportunity to own dealerships that are affected
differently by seasonal change, and the changing economies of each unique
market.
In January 2000, iRV, Inc., through a wholly owned subsidiary, iRV -
Knoxville, Inc., iRV, Inc. began operating the Coach & Camper dealership
located in Knoxville, TN through a management contract. In March 2000 iRV -
Knoxville, Inc., successfully obtained wholesale floor financing and
transferred of the property's real estate lease into the iRV - Knoxville,
Inc.'s name. We have been operating the dealership since January, 2000 and
most recently changed the name of the dealership to Passport RV.
Since inception, we have identified and evaluated numerous other
dealerships but have not completed any additional transactions. While we
continue to evaluate acquisition opportunities, as of the date of this report
there exist no agreements, arrangements or understandings with respect to any
material acquisition.
Recreational Vehicle Industry
The recreation vehicle industry is an approximate $16 billion dollar a
year industry in the United States, according to the RECREATIONAL VEHICLE
INDUSTRY ASSOCIATION, or the RVIA, based in Reston, Virginia. According to the
RVIA, the RV industry caters to the travel and leisure-time needs of an
estimated 25 million RV enthusiasts through the sale and service of recreation
vehicles. According to the RVIA, 292,700 new RVs were shipped by manufacturers
to dealers in 1998 compared to 254,500 RVs in 1997, 247,500 in 1996, and
247,000 in 1995. Industry shipment peaked in 1976 through 1978 with 526,000 to
534,000 units.
According to RVIA, one in ten American families in the United States owns
a recreation vehicle, amounting to nearly nine million owners, and an
estimated 25 million Americans travel in RVs. There are approximately 170
vehicle manufacturers, 295 suppliers and in excess of 3,000 RV dealers in the
United States.
The types of recreation vehicles offered by us consist primarily of
travel trailers and towables, or fifth wheels, designed to be towed by another
vehicle, and motorized self-propelled units, built on automotive chassis, or
motorized vehicles, powered by gasoline or diesel motors.
Towable recreation vehicles consist of travel trailers, including
fifth-wheel travel trailers, folding camping trailers and truck campers -- a
recreation camping unit designed to be loaded on to, or affixed to, the bed or
chassis of a truck. Motorized recreation vehicles consist of conventional
motor homes, or Class A, van conversions, or Class B, mini-motor homes, low
profile motor homes and compact motor homes--all referred to as Class C.
Class A motor homes are constructed by the recreation vehicle manufacturer on
a chassis that already has the engine and drive components. Class B van
campers are panel type vans to which the recreation vehicle manufacturer adds
sleeping facilities, kitchen and toilet facilities, fresh water storage,
110-volt hook up and other items. Class C units are built on an automotive
manufactured van frame with an attached cab section, or on an automotive
manufactured cab and chassis. The recreation vehicle manufacturer completes
the body section containing the living area and attaches it to the cab
section. For the van conversion, the recreation vehicle manufacturer modifies
a completed van chassis aesthetically or decoratively in appearance for
transportation and recreational purposes.
Currently, there are many manufacturers of both towable and motorized
recreation vehicles. Although there are several sources for manufactured
conventional vans, including Ford Motor Company, General Motors Corporation,
Chrysler Corporation, and other foreign manufacturers, there are only four
major manufacturers in the United States supplying chassis with engine and
drive components to the recreational vehicle manufacturers: Workhorse Custom
Chassis, Ford Motor Company, Freightliner Corporation and Spartan Motors
Corporation. Ford Motor Company is the largest supplier of chassis to RV
manufacturers.
The fuel economy of motorized recreation vehicles has improved
substantially over the last several years. Diesel engines are growing in
popularity over gasoline engines, primarily in the larger bus-type vehicles.
Industry Outlook
The long-term prospects for the recreation vehicle industry appear to be
optimistic, based upon demographics and discounting the risks of general
economic trends. According to the FOURTH ANNUAL RECREATION VEHICLE OUTLOOK
(November, 1998), published by the CIT Group Economic Research Department, "In
the years to come, the recreation vehicle industry will benefit from the
confluence of forces including demographics and the industry's effort to
promote the RV lifestyle." THE CIT OUTLOOK concludes that the first group of
baby boomers (persons born between 1946 and 1964) will enter the 55-64 age
bracket as early as 2001 and that by 2010, the number of households in this
age group will have reached eight million. This represents a 65% increase from
current levels.
The U.S. Census Bureau confirms the expected high growth of the baby
boomers segment of the U.S. population. According to the Bureau, between 1997
and 2010, approximately 78 million Americans will move into their peak
earnings (and likewise, vacation) years. This age group will drive the 45-64
segment of the population up 42%. The Bureau also reports the population of 65
and older will increase 16% during this time period, while the general
population is expected to only grow just over 11% during this period.
Marketing
iRV.com
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We purchased all rights to the domain name "iRV.com" in November, 1999.
In addition, we have over thirty additional domain names that are associated
with the RV industry, however at the present time we only use "iRV.com."
We claim common law trademark interest in the trade name "iRV.com,"
however we have to date not been successful in obtaining a federal
registration of that trademark.
iRV Dealerships, Inc.
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In May, 2000, we renamed the dealership in Knoxville, Tennessee to
"Passport RV." We have adopted a strategy to rename all future dealerships
that we acquire as "Passport RV" in order to develop a brand name equity as
well as promoting marketing programs throughout our intracompany network of
dealerships, if and when those are successfully developed.
Advertising and Promotion
We advertise throughout the year in newspapers, direct mail, billboards,
yellow pages and radio. In addition, our dealership has its website,
www.passportrv.com. Throughout the year, we attend consumer shows organized
by trade groups and private companies. We also promote smaller product shows
at RV parks where existing RV owners are targeted. To date, our marketing,
advertising and public promotional efforts have been generated by our own
staff. We have not had the resources to hire professional marketing and
public relations firms, but will do so in the future if the working capital.
Customer Base
Industry statistics indicate that over eighty percent (80%) of RV owners
are married, approximately fifty percent (50%) are retired, approximately
twenty percent (20%) have "blue collar" occupations and thirty percent (30%)
are "white collar" and professionals.
Manufacturers
We currently market approximately 10 brands of recreational vehicles. We
sell new recreational vehicles manufactured by a number of companies,
including Keystone, Forest River, Georgie Boy, Sunline and Trail Manor. In
the opinion of management, the loss of any one brand of new recreational
vehicle would not materially or adversely affect us. However, the loss of our
three best selling brands would have a material adverse effect. We believe
that the loss of all three manufacturers is highly unlikely, since dealer
representation decisions for each brand is made at a separate manufacturer's
plant on a brand by brand basis, rather than centrally at each manufacturer's
corporate headquarters.
Floor Plan Financing
Substantially all new vehicles held in inventory are pledged as security
under floor plan contracts with financial institutions. Our floor plan
financing for both new and used vehicles is with Deutsche Financial Services.
Under this arrangement, the sale of a pledged vehicle to a consumer requires
payment to the lender in the amount, or release price, attributable to that
vehicle under the floor plan contract. Manufacturers have their respective
repurchase agreements in force with financial institutions with limited
repurchase indemnification to the lender against any default by us under the
floor plan contract. We believe that our floor plan financing arrangement is
standard for the industry.
Service and Parts
We maintain a service facility in Knoxville to handle virtually any type
of recreational vehicle. We are a factory designated warranty service center
for alla of the manufacturers that we carry, which reimburse us for warranty
services. Our service facilities are equipped to make a variety of repairs.
We offer service in connection with sales of our RVs as well as for other RVs
that we did not sell.
W e also have a parts department that supports our sales and service
functions. We stock both repair parts and accessory items usually sold to
recreational vehicle owners.
Employees
As of July 1, 2000, we had _____ full time and ___ part time employees.
We have no contracts or collective bargaining agreements with labor unions and
we have never experienced work stoppages. We consider our relations with our
employees to be good. At the Knoxville dealership, we have internal training
programs for our sales force as well as internal quality control programs and
a customer satisfaction feedback system. Support and service personnel are
usually hired from the local labor work force. Factory training programs are
generally available to employees and we try to take advantage of these
programs by sending our employees to manufacturer-supervised schools. We do
not have any written employment contracts with any of our employees.
Material Strategic Relationships
The Company has a material strategic relationship with the Rockies Fund,
Inc., a private investment fund whose president and director is Stephen
Calandrella. Mr. Calandrella is the direct an indirect beneficial owner of
8% of our outstanding shares of common stock. In order to permit us to secure
our floor plan financing in Knoxville, the Rockies Fund pledged a $300,000
letter of credit in favor of Deutsche Financial Services. In consideration of
that letter of credit, we agreed to issue to the Rockies Fund 2,500 warrants
to purchase shares of our common stock for each month that the letter of
credit is outstanding. The warrants are exercisable for three years to
purchase shares of our common stock at an exercise price of $2.00 per share.
In addition, the Rockies Fund has made available to us working capital
loans. There is no commitment to continue these advances. As of March 31,
2000, our loan balance on the Rockies Fund line of credit was $65,500. As of
July 1, 2000, the outstanding balance on the line of credit with Rockies Fund
was $320,940. We anticipate that the line of credit will be used to meet our
working capital needs as well as to fund future acquisitions, if we are able
to identify and consummate such a business transaction.
Further, the Rockies Fund has made office space available to the Company
in its executive office suite in Colorado Springs, Colorado. We do not pay
any rent or other administrative expenses to the Rockies Fund for this
occupancy. We are significantly dependent upon the Rockies Fund continuing
willingness to make advances under the revolving line of credit for our
working capital needs. Should the Rockies Fund withdraw its financial
support, we would lack sufficient capital to continue as a going concern.
Acquisition Strategy
We intend to capitalize upon what we believe to be significant
consolidation opportunities available in the recreational vehicle industry
which is highly fragmented. We will focus on well established in geographical
markets that we believe are underserved but that have strong demographics. We
will also consider an opportunity within a market if we believe operating and
marketing efficiencies can be gained by the addition of more dealerships.
We believe that we can attract acquisition opportunities by offering
dealership owners liquidity in the receipt of our stock or cash. However, we
are dependent upon the Rockies Fund for any cash portion of an acquisition
purchase price, since we lack working capital reserves of our own.
Seasonality
Although the RV business is generally year round, we experience
seasonality in Knoxville. We expect higher sales between April and October
with lower sales in the winter months. During low demand seasons, we will try
to reduce our inventories and cut back our operations to reduce the adverse
impact of seasonality on our operations. However, a substantial portion of
our expenses are fixed which will limit our ability to respond to this
seasonal effect.
Competition and Business Risk
Based upon statistics supplied by the RVIA, the recreation vehicle
industry in North America includes approximately 3,000 RV dealers and 170
vehicle manufacturers. Competition in the sale of new and used recreational
vehicles is intense. We compete with a large number of retailers, some of
which operate in more than one location, although most of our competitors
operate from a single location.
Significant competitive factors in the recreation vehicle sales and
service industry include vehicle availability, price, service, reliability,
quality of service, and convenience. Our management is of the opinion that it
is competitive in all factors listed above. Nevertheless, our management
anticipates it will continue to face strong competition in the future.
The recreation vehicle business is heavily dependent upon the
availability and terms of financing for the retail purchase of its products.
Consequently, changes in interest rates and the tightening or loosening of
credit by government agencies and financial institutions have dramatically
affected our business in the past and are likely to do so in the future.
Insurance Coverage
We have historically had little difficulty in obtaining insurance
coverage for our dealership operations. That insurance has been obtained
annually on a competitive bid basis, at what we believe to be reasonable
premium rates.
Government Regulations
Our service facilities are subject to federal, state and local laws and
regulations concerning environmental matters. These laws and regulations
affect the storing, dispensing and discharge of petroleum based products and
other waste, and affect us in the securing of permits for its full service
dealership operations and in the ongoing conduct of such operations. The
securing of permits and compliance with all laws and regulations can be
costly, and could affect our earnings. Further, each dealership must comply
with the requirements of local governmental bodies concerning zoning, land
use, and environmental factors. State and local laws and regulations also
require each dealership to obtain licenses to operate as a dealer in
recreational vehicles. We have obtained all necessary licenses and permits
and management believes we are in full compliance with all federal, state and
local laws and regulations. Furthermore, management is not aware of any
material capital expenditure necessary for compliance with any federal, state
or local laws and regulations.
Consultants
Due to the significant and material relationship between the Company and
Rockies Fund, Inc., we have relied upon the financial advisory services of
Rockies Fund and Mr. Calandrella to a significant degree. These services are
offered without compensation or commitment on the part of Rockies Fund or Mr.
Calandrella. The loss of these services would have a material adverse impact
upon the Company, its financial condition and results of operations.
We entered into a financial public relations arrangement with Access 1 in
January, 2000. In exchange for those services, we issued to Access 1
nonqualified options exercisable to purchase 200,000 shares of our common
stock at an exercise price of $3.25 per share. The options expire in January,
2001. Access 1 has ceased providing services and we do not expect to rely
upon their assistance in the future.
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ITEM 2. DESCRIPTION OF PROPERTIES
The corporate office is located in Colorado Springs, Colorado. iRV, Inc.
occupies office space provided by Rockies Fund without charge. The facilities
include individual offices and a conference room. The iRV.com, Inc.
subsidiary also occupies this office.
iRV, Inc. leased a residence and furniture on a temporary basis for a
former officer of the Company under a non-cancelable operating lease. The
lease required monthly payments of $1,700 and expired in May 2000.
iRV - Knoxville, Inc., leases three separate, yet adjoining, parcels of
land with I-40 and I-75 frontage consisting of a total of seven acres. The
facilities include a service center and gravel lot on which we have placed
temporary buildings. The leases provided for monthly rent of $6,600 and
expire July 31, 2003, with two (2) five year renewal terms available.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings. However, we have
been notified that the previous owners of the dealership in Knoxville,
Tennessee believe that there exist some unresolved issues concerning the
completion of that transaction. While we believe that we completed the
acquisition of that dealership in March, 2000 when we obtained our own floor
plan financing and executed new leases covering the physical facility, the
prior owners of the dealership believe that there are aspects of the
transaction that have not yet been completed. We have been involved in
discussions with these prior owners and believe that areas of disagreement can
probably be resolved to the mutual satisfaction of all parties. However,
until such time as this matter is resolved, our status with respect to this
transaction and the associated operations of the dealership are uncertain.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Subsequent to this reporting period, iRV, Inc. held a special meeting of
shareholders on April 18, 2000. The meeting was held in order for
shareholders to vote on the following:
- To approve the 2000 Equity Incentive Plan adopted by the Board of
Directors February 2000.
- To approve the change of name of The Southshore Corporation to iRV,
Inc.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The outstanding shares of the Company's common stock trades on the OTC
Electronic Bulletin Board. This is an electronic bulletin board.
The following table summarizes the reported high and low bid and ask
prices for the Company's Common Stock for the period April 1, 1999 through
March 31, 2000. Since the quotations do not include commissions or the
amounts that a dealer may mark-up or markdown the stock in a particular
transaction, quotations may not accurately reflect the actual transactions
that were completed during the fiscal year.
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<CAPTION>
Quarters Ended Bid
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Fiscal 1999 High Low
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<S> <C> <C> <C>
June 30,1998 .21 .12
September 30, 1998 .31 .06
December 31, 1998 .03 .03
March 31, 1999 .03 .03
Fiscal 2000
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June 30, 1999 .125 .0625
September 30, 1999 .375 .07
December 31, 1999 2.875 .25
March 31, 2000 4.6875 2.75
</TABLE>
As of June 19, 2000 iRV, Inc. had 165 shareholders of record. However,
since information on certain brokerage house clients is unavailable, we
believe the actual number of individual shareholders exceeds 500.
Dividend Policy
iRV, Inc. has never paid dividends on its common stock, and its Board of
Directors does not plan on issuing any dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
Overview
We offer retail sales of recreational vehicles ("RV") through our
dealership in Knoxville, Tennessee. Additionally, we have developed an
interactive Web site that enables nationwide shopping for RVs via the
Internet.
Since our inception in August 1999, our primary activities have consisted
of the following:
- assembling an experienced management team;
- raising equity capital;
- our development of an interactive Web site (www.iRV.com) that
offers nationwide shopping for RVs;
- our acquisition of an RV dealership in Knoxville, Tennessee;
and
- our completion of a merger with The Southshore Corporation.
We have incurred losses since commencing operations and as of March 31,
2000, we had an accumulated deficit of $2,175,595. We have yet to achieve
profitability since inception. We expect to continue to explore and complete
additional acquisitions of RV dealerships primarily in the Western and
Midwestern parts of the United States. As a result we expect to continue to
incur losses until we obtain sales levels sufficient to support the general
and administrative costs. Additionally, our profitability is also largely
dependent on interest rates and fuel costs, as increased in interest rates and
fuel costs typically have adverse impacts on our sales. We will need to
generate significantly higher revenues to support expected increases in
expenses and to achieve and maintain profitability.
We derive our revenues primarily from the sales of RVs and from revenues
associated with warranty repairs and service and sales of parts. We
anticipate increases in RV sales as our floor financing presently allows us to
borrow up to $2,000,000. Presently our floor financing payable is $680,000;
accordingly, we have the ability to increase our inventory which may allow us
to increase sales. Since the introduction of our Web site, www.iRV.com, we
have waived any fees associated with potential customers using the services we
provide to locate and purchase RVs. We waived these fees as a means to
attract new customers to our Web site. With the limited amount of funds that
we have, we do not anticipate that the Web site will generate any significant
revenues until we are in a position to market these Internet services on a
national basis. To date, we have yet to record any revenue from our Web site.
We incur cost of sales that consist of our cost of RVs that we purchase.
We have achieved a gross profit margin of approximately 15% for RV sales;
however, we will need to improve our gross profit to achieve and maintain
profitability.
We incur sales and marketing expenses that consist primarily of
commissions, consulting fees, tradeshow expenses, advertising and marketing
expenses. We intend to substantially increase our advertising expenses in
hopes of attracting new customers to our dealership in Knoxville, Tennessee.
We incur general and administrative expenses consisting primarily of
expenses for finance, office operations, administrative and general
activities, including legal, accounting and other professional fees, travel
expenses and other corporate expenses. We expect increase in general and
administrative expenses as we expand our operations and incur the costs of
being a publicly-held company.
In connection with our private placement in November and December of
1999, we recorded stock compensation expense in the amount of $1.4 million.
We sold stock in a private placement on the same day to two separate groups at
differing prices. This amount is based on the excess of the amount paid by the
original group of investors over the amount paid by the later group of
investors. In February 2000, we merged into a wholly owned subsidiary of The
Southshore Corporation ("Southshore"). With the completion of this merger,
the former directors of Southshore resigned and we appointed three new members
to the board of directors. We received 5,500,000 shares of Southshore common
stock and we recorded the transaction as a reverse acquisition.
Coach & Campers Acquisition
On January 25, 1999, we acquired the day-to-day control of Coach &
Campers of Knoxville, LLC ("Coach & Campers") and completed the acquisition on
March 8, 2000. We paid $662,000 in cash for the net assets of Coach & Campers
and accounted for the acquisition using the purchase method of accounting.
Accordingly, we recorded goodwill in the amount of $170,000. The amortization
of this goodwill will reduce our earnings and profitability for the next three
years, the period over which we are amortizing the goodwill. To the extent we
do not generate sufficient cash flow to recover the amount of the investment
recorded, the investment may be considered impaired and could be subject to
earlier write-off.
Since its inception in February 1998, Coach & Campers has incurred
significant operating losses. During the year ended December 31, 1999, Coach
& Campers recorded total revenue of $2.6 million, and recorded a net loss of
$125,000. During the period from January 25, 2000 through March 31, 2000, we
recorded total revenue of $596,000 and recorded a net loss of $141,000. Due
to the risks, difficulties and uncertainties surrounding the integration of
Coach & Campers into our business, we do not believe the historical financial
results to be indicative of the future financial results.
Results of Operations
Period August 1, 1999, inception through March 31, 2000
RV SALES AND SERVICE. Sales increased to $596,000 as the result of our
acquisition of Coach & Campers. Prior to the acquisition, we generated no
revenues. No customer accounted for more than 10% of revenues.
COST OF RV SALES AND SERVICE. Cost of sales and services increased to
$505,000 and consisted of the cost associated with our purchase of RVs for
sale. We achieved a gross profit level of 15%. We have a floor financing
agreement with Deutsche Financial Services whereby we may borrow up to $2.0
million to purchase inventory. We incurred interest expense in the amount of
$8,000 in connection with our floor financing.
STOCK COMPENSATION. Stock compensation expense increased to $1.4
million. We sold stock in a private placement on the same day to two separate
groups at differing prices. This amount is based on the excess of the amount
paid by the original group of investors over the amount paid by the later
group of investors.
GENERAL AND ADMINISTRATIVE. General and administrative increased to
$231,000. The increase relates to start up costs and the additional personnel
costs associated with the acquisition of Coach & Campers and the merger with
Southshore. Included in general and administrative expense is $33,421 that
represents legal fees paid to the firm our legal counsel. One of the partners
in this firm is a stockholder of our company. General and administrative
expenses are expected to continue to increase as we support a larger employee
base and the requirements of being a public company.
INTERNET WEB SITE DEVELOPMENT. Internet Web site development expenses
increased to $213,000. We expensed all of the costs associated with the
development of our Web site. We expect that expenses to enhance and maintain
our Web site will increase as more features are added to our Web site.
CONSULTING. Consulting expenses increased to $197,000. We paid amounts
to certain consultants for marketing and administrative services while we were
developing our business plan and raising our initial equity capital. Included
in consulting expense is $86,000 that was paid to consultants who either
became employees or stockholders of our company. We intend to continue to use
independent consultants to assist us in marketing and certain administrative
functions.
TRAVEL AND ENTERTAINMENT. Travel and entertainment increased to $83,240.
The increase relates primarily to travel costs incurred in connection with our
acquisition of Coach & Campers and our merger with Southshore. As we continue
to seek additional acquisitions of RV dealerships, we anticipate that travel
and entertainment expenses will continue to increase.
SALES AND MARKETING. Sales and marketing increased to $7,648. This
increase represents marketing and development activities that we incurred to
expand our sales.
RENT. Rent expense increased to $35,105. We leased temporary office
space for a short period and lease the facilities in Knoxville.
Income Taxes
We use the asset and liability method of accounting for income taxes as
prescribed by Statement of Financial Accounting Standard No.109, Accounting
for Incom Taxes. At March 31, 2000, we had a net operating loss forward for
federal tax purposes of approximately $733,000, which is available to offset
future taxable income, if any through 2015. We believe the utilization of the
carryforward may be limited by the Internal Revenue Code Section 382 relating
to certain changes in ownership that occurred when we merged with Southshore.
We have not recorded a deferred tax benefit for the net operating loss
carryforward.
Liquidity and Capital Resources
Since inception we have financed our operations primarily from the sales
of our common stock, our floor financing agreement with Deutsche Financial
Services and from proceeds from borrowings from related parties. Net cash
used by operating activities was $282,000.
Net cash used by investing activities was $794,000. Net cash used by
investing activities related primarily to the acquisition of Coach & Campers,
purchase of domain names, purchase of fixed assets, increase in deposits,
advances to related parties and an investment in restricted common stock. We
purchased common stock of a publicly trade company, Kinetiks.com, Inc. in a
private placement. The stock is restricted as to sale for a one-year period
of time and can only be sold pursuant to Rule 144. We recorded this
investment at our cost.
Net cash provided by financing activities was $1.1 million. Net cash
provided by financing activities consisted of net proceeds from our private
placement, the cash we received in the merger with Southshore, proceeds we
received from related parties and increases in our floor financing from
Deutsche Financial Services.
At March 31, 2000, we had cash and cash equivalent of approximately
$29,000. We will need to raise additional equity capital or increase our
borrowings in order to acquire any additional dealerships. We have relied on
advances from entities that are controlled by a stockholder and advances from
stockholders to fund our cash flow deficit.
We do not believe that our cash resources are sufficient to fund our
anticipated working capital and capital expenditures for the next twelve
months. We will need to obtain additional equity capital or additional
financing. Because of this uncertainty, our independent auditors qualified
their report sighting a substantial concern about our ability to continue as a
going concern. We have not made any adjustments to our financial statements
to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classifications of liabilities
that might result from the outcome of this uncertainty.
Quantitative and Qualitative Disclosures About Market Risk
At March 31, 2000, we had floor financing and notes payable in the
aggregate amount of $971,000 with interest rates ranging from prime plus 1%
(10.25% at March 31, 2000) to 10%. We may incur additional debt in the
future. A change in interest rates would not affect our obligations with
respect to the notes payable to related parties. However, an increase in
interest rates would cause us to pay additional interest expense for our floor
financing which would decrease our profitability.
Recent Accounting Pronouncements
In June 1998, the Financial Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which is effective, as amended, for all fiscal quarters
of fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments, including some
derivative instruments embedded in other contracts, and for hedging
securities. To the extent we begin to enter into such transactions in the
future, we will adopt the statement's accounting and disclosure requirements
in our financial statements.
Forward Looking Statements and Risk Factors
This Annual Report on Form 10-KSB includes forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward looking statements which reflect our current views with respect
to future events and financial performance. The words "believe," "project,"
"anticipates," "estimates," "expects," "most likely," "intends" and similar
expressions identify forward looking statements.
Any forward looking statements made by or on our behalf are subject to
uncertainties and other factors that could cause actual results to differ
materially from such statements. The uncertainties and other factors include,
but are not limited to, the factors listed below. Though we have attempted to
list the factors we believe to be important to our business, other factors may
prove to be important in affecting our results of operations. New factors
emerge from time to time and it is not possible for management to predict all
of such factors, nor can it assess the impact of each such factor on the
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from forward looking statements.
Investors are further cautioned not to place undue reliance on any
forward looking statements, as they speak only of our view as of the date the
statement was made. We undertake no obligation to publicly update or revise
any forward looking statements, whether as a result of new information, future
events, or otherwise.
Due to Our Limited Operating History It Is Difficult to Predict Our Future
Operating Results
Due to our limited operating history it is difficult or impossible to
predict future results of operations. For example, we cannot forecast
operating expenses based on our historical results because we have only
recently begun operations.
We Have a History of Operating Losses and May Continue to Incur Operating
Losses
We have incurred operating losses since our inception. Such losses are
attributed to initial costs of starting a business, expenditures made in
developing corporate relationships and in building our website. We continue
to incur expenses in excess of our operating revenues. We anticipate that
future losses will occur and there can be no assurance that we will generate
profitable operations in the future.
We Are Affected by General Economic Conditions and Our Sales Are Interest Rate
Sensitive
Our sales are affected by general economic conditions, including
employment rates, prevailing interest rates, inflation, and other economic
conditions affecting disposable consumer income generally. Weakness in the
economy could have a material adverse effect on our business. The majority of
our customers purchasing vehicles finance their purchase. Increases in
consumer interest rates could have an adverse effect on our ability to sell
vehicles. Furthermore, a general increase in commercial interest rates would
increase the rates paid by us on our floor plan contracts, thereby adversely
effecting our operating income.
We Depend on Strong Sales in Our Second Fiscal Quarter
Our business, and the recreational vehicle industry in general, is very
seasonal. Our strongest sales period begins in April, because many recreation
vehicle shows are held in that month. Strong sales demand continues from
April through the summer months. Our sales are generally much lower in the
quarter ending December 31. Because of the difference in sales in the warm
spring and summer months versus the cold fall and winter months, if our sales
in the months of April through October are significantly lower than we expect,
we may not earn profits or we may lose money and have a net loss. This
experience may materially and adversely affected us.
Our Growth Depends Primarily on Our Ability to Acquire New Stores
We intend to grow rapidly, primarily through the acquisition of
recreation vehicle dealerships. Our growth strategy involves significant
risks. We expect our comparable store sales to fluctuate from the impact of
(i) changes in competition within each market we operate, (ii) the movement in
interest rates, (iii) the general market conditions in the areas in which our
stores are located, and (iv) when we acquire new dealerships in the same
general market of our existing dealerships. Although we expect our existing
stores to have sales growth and to remain profitable, we expect most of our
sales growth to come from newly added store locations and we may not be able
to continue to grow or purchase new store locations at a sufficiently rapid
pace or on terms and conditions favorable to us.
We intend to make acquisitions depending upon, among other things, the
availability of suitable acquisition opportunities and our ability to finance
these transactions. Our success in these acquisitions will depend on our
financial strength at the time of acquisition, our ability to hire and retain
qualified employees and our ability to identify markets in which we can
successfully sell our products. In addition, once we identify a store that
meets our criteria, our success will depend on our ability to sell the store's
remaining inventory and to attract new customers to the store after the
acquisition. Our inability to meet our planned growth potential will severely
impact our business, operating results and financial condition.
Our Success Will Depend on How Well We Manage Our Growth
Although we believe that our systems, procedures and controls are
adequate to support our desired growth, we cannot assure that this is the case
and we believe that as we integrate our first acquisitions, we will need to
make changes to theses systems, procedures and controls. In addition, our
growth will impose substantial added responsibilities on our existing senior
management including the need to identify recruit and integrate new senior
level managers. Management may not be able to oversee the growth efficiently
or to implement effectively our growth and operating strategies. Our inability
to manage our growth would result in a significant and severe financial impact
on our business, operating results and financial condition.
We Rely on Several Key Manufacturers for Almost All of Our Inventory Purchases
Our success depends, to a significant extent, on continued relationships
with five major manufacturers from which we purchase nearly all of our new
products. Cancellation or modification of the dealer agreements with these
two manufacturers could have material adverse effect on our revenue. However,
the loss of all the brands sold by these major manufacturers is highly
unlikely. Dealer representation decisions for manufacturer brands are made
at the manufacturer's plants on a brand-by-brand basis, rather than centrally
at each respective manufacturers corporate headquarters. We currently purchase
over ten brands of RVs from the five manufacturers.
We May Not Be Able to Respond Effectively to the Significant Competition We
Face
We operate in very competitive conditions. We must compete generally
with other businesses trying to sell discretionary consumer products and also
face intense competition from other recreation vehicle dealers for customers,
quality products, store locations and RV show space. We rely heavily on RV
shows to generate sales. If we are limited in or prevented from participating
in RV shows in our markets or in markets we are targeting, this limited
participation could have a negative effect on us.
Within our industry, our main competitors are single-and-multiple
location RV dealers. We compete with other dealers based on the quality of
available products, the price and value of the products and customer service.
To a lesser extent, we also compete with national specialty RV stores, catalog
retailers, sporting good stores and mass merchants, especially with respect to
parts and accessories. We face significant competition in the markets where
we currently operate and in the markets we plan to enter. We believe that the
trend in the RV industry is for manufacturers to include more features as
standard equipment on RVs and for other dealers to offer packages comparable
to our packages. Some of our competitors, especially those that sell RV
accessories, are large national or regional chains that have substantially
greater financial, marketing and other resources than we do.
We May Issue Additional Securities in Connection with Acquisitions That May
Dilute Our Current Shareholders and Impact Our Earnings per Share
If we choose to finance future acquisitions in whole or in part through
the issuance of common stock or debt instruments convertible into our common
stock, our existing shareholders could experience dilution and our earnings
per share could also be impacted by the issuance of additional shares of
capital stock in connection with those acquisitions.
Achieving Our Growth Strategy Is Subject to Obtaining Adequate Financing
Our growth strategies are dependent upon obtaining adequate financing for
the purchase of recreation vehicle dealerships. Financing must be obtained
for floor plan of new and used vehicles, purchase (or purchase and lease-back)
of real properties for dealerships operations, acquisition of common stock
from selling shareholders, working capital, and other capital needs. Our
inability to obtain adequate financing, at reasonable cost, would prevent us
from meeting our planned growth and potentially will severely impact our
business operating results and financial condition.
In the Past We Have Been Dependent Upon a Single Source for Our Working
Capital
In the past, we have relied upon loans from the Rockies Fund, Inc. to
satisfy our working capital requirements. If we continue to generate
operating losses, our reliance upon the Rockies Fund or some alternative
source of working capital will continue. We have no long term commitment from
the Rockies Fund to continue to extend us credit, and we have no commitment,
understanding or arrangement with any other party to provide us with the
working capital that we will need. If we are able to obtain additional
working capital, it may be upon terms that are unfavorable to our current
shareholders. If we are unable to obtain working capital, we may be unable to
continue as a going concern.
If Our Products Are Defective, We Could Be Sued
Because we sell and service RVs, motors and other RV equipment, we may be
exposed to lawsuits for personal injury and property damage if any of our
products are defective and cause personal injuries or property damage.
Manufacturers that we purchase product from generally maintain product and
general liability insurance and we carry third-party product liability
insurance. We have avoided any significant liability for these risks in the
past. However, if a situation arises in which a claim is not covered under our
insurance policy or is covered under our policy but exceeds the policy limits,
it could have a significant and material adverse effect on our financial
condition.
Our Stock Price May Be Volatile
The price of our common stock may be highly volatile for several reasons.
First, a limited number of shares of our stock are owned by the public. This
may affect trading patterns which generally occur when a greater number of
shares are traded. Second, the quarterly variations in our operating results,
as discussed above, may result in the increase or decrease of our stock price.
Third, independent parties may release information regarding pending
legislation, analysts' estimates or general economic or market conditions that
effect the price of our stock. Also, our stock price may be affected by the
demand and the market performance of small capitalization stocks. Any of these
situations may have a significant effect on the price of our common stock or
our ability to raise additional equity.
If Our Operations Become Widespread, Our Services Will Depend on Effective And
Centralized Management
If we are able to complete more acquisitions, our revenue will be
derived from geographically widespread dealerships making it difficult for our
top management to have a presence in all the dealerships on a regular basis.
As a result, we will be highly dependent upon each dealership's management for
the on-going operation of each respective center. Turnover of managerial
personnel at any center usually has an adverse effect on the sales and
profitability of the center. Turnover of managerial personnel at several of
our centers could have a material adverse effect on our sales and
profitability.
Our Sales Are Dependent on Fuel Pricing and Availability
Our business is automotive in nature and as such is dependent upon the
availability of fuel. A decrease in the availability of gasoline and our
inability to convert our vehicles to alternative fuels could have a material
adverse effect on our business. Historically, increases in the price of
gasoline have not had a material impact on our business, as long as there was
no concurrent decline in availability. However, future significant increases
in the price of gasoline or decreases in availability would have a material
effect on our business.
Our Operations Are Subject to Extensive Regulation, Supervision, and Licensing
under Various Federal, State, and Local Statutes, Ordinances, and Regulations
While we believe that we maintain all requisite licenses and permits and
are in compliance with all applicable federal, state, and local regulations,
there can be no assurance that we will be able to maintain all requisite
licenses and permits. The failure to satisfy those and other regulatory
requirements could have a material adverse effect on our business, financial
condition, and results of operations. The adoption of more stringent statutes
and regulations, changes in the interpretation of existing statutes and
regulations, or our entrance into jurisdictions with more stringent regulatory
requirements could curtail some of our operations, deny us the opportunity to
operate in certain locations, or restrict products or services offered by us.
Various federal, state, and local regulatory agencies, including the
Occupational Safety and Health Administration, the United States Environmental
Protection Agency, and similar federal and local agencies, have jurisdiction
over the operation of our dealerships, repair facilities, and other operations
with respect to matters such as consumer protection, workers' safety, and laws
regarding protection of the environment, including air, water, and soil.
As with vehicle dealerships generally, and parts and service operations
in particular, our business involves the use, handling, storage, and
contracting for recycling or disposal of hazardous or toxic substances or
wastes, including environmentally sensitive materials, such as motor oil,
waste motor oil and filters, transmission fluid, antifreeze, freon, waste
paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents,
gasoline, and diesel fuels, and other chemicals.
Accordingly, we are subject to regulation by federal, state, and local
authorities establishing requirements for the use, management, handling, and
disposal of these materials and health and environmental quality standards,
and related liability thereto, and providing penalties for violations of those
standards. We are also subject to laws, ordinances, and regulations governing
investigation and remediation of contamination at facilities we operate to
which we send hazardous or toxic substances or wastes for treatment,
recycling, or disposal. Noncompliance with or changes to these requirements
could adversely affect our business.
We do not believe we have any material environmental liabilities or that
compliance with environmental laws, ordinances, and regulations will,
individually or in the aggregate, have a material adverse effect on us. We
may in the future be required to remedy soil contamination, or remove
aboveground and underground storage tanks containing hazardous substances or
wastes. We monitor soil and groundwater as required by applicable state and
federal guidelines. In addition, it has been our practice and will be our
practice to have the shareholders of the acquired dealers indemnify us for
specific environmental issues identified on environmental site assessments
performed by us as part of the acquisitions.
Our customers and potential customers are subject to federal, state and
local statutes, ordinances and regulations regarding the ownership of
recreation vehicles and boats. The adoption of more stringent statutes,
ordinances and regulations effecting the consumer ownership of recreation
vehicles, could have an adverse effect on our ability to sell our products.
<PAGE>
<PAGE>
PART III
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective February 7, 2000, the Company's Board of Directors approved a
change in the Company's independent accountant. This event was reported on
Form 8-K February 7, 2000.
The independent accountant who was dismissed and had been previously
engaged as the principal accountant to audit the Company's financial
statements was Schumacher and Associates, Inc. There were no disagreements
with Schumacher and Associates, Inc. on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope and procedures
which, if not resolved to the satisfaction of Schumacher and Associates, would
have caused Schumacher and Associates, Inc. to make reference to the matter in
their report.
iRV, Inc. has retained the accounting firm of Gerald R. Hendricks & Co.,
P.C. to serve as the Company's independent accountant to audit iRV's financial
statements. The engagement was effective as of February 7, 2000.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Item 9. Directors, Executive Officers, Promoters, and Control Persons
The names ages, offices held, principle occupations during the last five
years, directorships, certain other affiliations, and other information for
the Registrant's Directors and Executive Officers are set forth below:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C> <C>
Dr. Robert A. Scott 61 Director
Clifford L. Neuman 52 Director
Dr. Wayne R. Kirschling 57 Director
Bradley-Alison Smith 44 Chief Financial Officer
Windy Haddad 28 Secretary
</TABLE>
Dr. Robert A. Scott, director since 2000 had been President, Chief
Executive Officer and Professor of Sociology and Anthropology at Ramapo
College of New Jersey from 1985 until June, 2000. Ramapo College is a
coeducational state-supported residential institution of undergraduate and
graduate liberal arts, sciences and professional studies. In June, 2000, Dr.
Scott took the position of President of Adelphi University located on Long
Island, New York. From 1979 to 1985, he served as Assistant Commissioner and
Director of Academic Affairs for the Indiana Commission for Higher Education,
where he was responsible for the coordination of state-wide higher education
strategic planning for both public and private institutions. From 1969 to
1979, he was Associate Dean and Senior Administrator of the College of Arts
and Sciences of Cornell University. Dr. Scott is a member of the Board of
Directors of USACENTER.COM, INC and a member of the Executive Committee of
Hillcrest Health Service Systems, Inc., a holding company for the Hackensack
University Medical Center teaching hospital and four other subsidiaries. Dr.
Scott is Past Chairman of the Commission on International Education of the
American Council on Education, a founding member of the Advisory Board of the
New Jersey Center for International Business Education and Research at Rutgers
University, Past Chairman of the College and University Educational Satellite
Services sponsored by the American Association of State Colleges and
Universities and Public Broadcasting System, Chairman of the Board of
Directors of the New Jersey Association of Colleges and Universities, and a
member of numerous additional professional associations. Dr. Scott received
his B.A. from Bucknell University and his Ph.D. in Sociology and
Organizational Ethnography from Cornell University.
Clifford L. Neuman has served as a Director of the Company since
February, 2000. Mr. Neuman is a licensed, practicing attorney and a managing
member of the law firm of Neuman & Drennen, LLC, located in Boulder, Colorado.
Mr. Neuman has served as legal counsel to the Company and its subsidiaries
since 1999. Mr. Neuman received his Bachelor of Arts degree from Trinity
College in 1970 and his Juris Doctorate degree from the University of
Pennsylvania School of Law in 1973.
Dr. Wayne R. Kirschling has served as a director of the Company since
February, 2000. Dr. Kirschling currently serves as a Corporate Vice President
of Ontario Corporation, a closely held Indiana corporation with corporate
headquarters in Muncie, Indiana. Ontario engages in the manufacture and
refurbishment of components used in jet engines; the manufacture and
refurbishment of components used in semiconductor process equipment; provides
metallurgical, chemical and environmental laboratory testing; develops
software and systems for enterprises involved in collections and accounts
receivable management; and is involved in the development of an industrial
park. From 1978-1986, Dr. Kirschling served as Deputy Commissioner of Higher
Education for the Indiana Commission for Higher Education located in
Indianapolis, Indiana, where he was responsible for working with the Governor,
the State Legislature and Indiana's public and private colleges on operating
and capital budget requests, student aid funding, and approval of new
institutions and new academic programs. From 1971-1978, he was Associate
Director of the National Center for Higher Education Management Systems
located in Boulder, Colorado, where he was responsible for working with public
and private colleges throughout the U.S. to develop and implement new
management techniques and for operating a visiting scholars program for
scholars drawn from American and foreign universities, industry and
government. From 1964-1969, Dr. Kirschling served as an officer in the U.S.
Air Force, including assignments with the Office of the Secretary of the Air
Force in Washington, D.C. and at the U.S. Air Force Academy located in
Colorado Springs, Colorado. He has taught at a number of colleges and
universities including the University of Colorado, Butler University, the
University of Indianapolis and the U.S. Air Force Academy. He received his
B.S. degree from the U.S. Air Force Academy, an M.S. in Industrial Engineering
from Stanford University and an M.B.A. and D.B.A. in Management Science from
the University of Colorado.
Bradley-Alison Smith has been Chief Financial Officer of the Company
since July, 1999. She holds an active CPA license in the state of Colorado
and has previously worked for the accounting firm of Deloitte and Touche. For
the five years prior to joining the Company, Ms. Smith acted as an
independent consultant to several public companies, for whom she was actively
involved in the preparation of SEC filings as well as merger and acquisition
activities. Previously, she was employed by the Haagen Daas Companies. She
is a graduate of Duke University and received a Master's of Business
Administration from the University of Colorado.
Windy Haddad has been Secretary of the Company since July, 1999. Prior
to joining the Company, she was an account executive for NetGrafx, an internet
development firm specializing in data base driven websites, e-commerce
solutions and intranet projects. For several years she served as Chief
Administrative Officer of the Rockies Fund, Inc., a private investment fund.
She received a degree in economics from Colorado College in 1993.
The Company has adopted a Formula Compensation Plan for outside
Directors. For their services, all outside Directors are paid a fee of $1,000
for each attended meeting. In addition to cash compensation, each outside
Director is entitled to receive non-qualified stock options exercisable to
purchase 50,000 shares of Common Stock, at an exercise price equal to the
market value on the date of grant, for the first two years of service, with
25,000 options, vesting immediately and the remaining 25,000 options vesting
on the first anniversary of the commencement of service as a director of the
Company.
Any transactions between iRV and its officers, directors, principal
shareholders, or other affiliates have been and will be on terms no less
favorable to iRV than could be obtained from unaffiliated third parties on an
arms-length basis and will be approved by a majority of the Company's
independent, outside disinterested directors.
Board Committees
The board appoints committees to help carry out its duties. In
particular, board committees work on key issues in greater detail than would
be possible at full board meetings. Each committee reviews the results of its
meetings with the full board. The board has established the following
committees.
Audit Committee
The audit committee is currently composed of the following directors:
Clifford L. Neuman
Wayne Kirschling
The Board of Directors has determined that the members of the audit
committee are "independent" within the meaning of the National Association of
Securities Dealers, Inc.'s listing standards. For this purpose, an audit
committee member is deemed to be independent if he does not possess any vested
interests related to those of management and does not have any financial,
family or other material personal ties to management. The Board of Directors
noted that Mr. Neuman has served as legal counsel to the Rockies Fund, Inc.,
a principal financial advisor and source of working capital to the Company.
In addition, Mr. Neuman's firm serves as legal counsel to several other
corporate organizations that are affiliated with Mr. Calandrella, president
and director of the Rockies Fund, Inc. Nevertheless, the Board of Directors
determines that these activities do not compromise Mr. Neuman's independence
for purposes of his eligibility to serve on our audit committee.
The audit committee met on one occasion during fiscal 2000. The committee
is responsible for accounting and internal control matters. The audit
committee:
- reviews with management, the internal auditors and the independent
auditors policies and procedures with respect to internal controls;
- reviews significant accounting matters;
- approves the audited financial statements prior to public
distribution;
- approves any significant changes in accounting principles or
financial reporting practices;
- reviews independent auditor services; and
- recommends to the board of directors the firm of independent
auditors to audit our consolidated financial statements.
In addition to its regular activities, the committee is available to meet on
all of the independent accountants, controller or internal auditor whenever a
special situation arises.
Report of Audit Committee
In connection with the preparation of the annual report on Form 10-KSB of
iRV, Inc., the audit committee certifies that it has:
- reviewed and discussed the audited financial statements with
management;
- discussed with the Company's independent auditors the matters
required to be discussed by the Statements of Auditing Standards 61;
- received the written disclosures and the letter from the independent
accountants required by the Independent Standards Board Standard No.
1, and has discussed with the independent accountant the independent
account's independence; and
- based on the review and discussions referred to above, the audit
committee has recommended to the Board of Directors that the audited
financial statements be included in the Company's annual report on
Form 10KSB.
The Audit Committee
Clifford L. Neuman
Wayne Kirschling
Compensation Advisory Committee
The compensation advisory committee is currently composed of the
following directors:
Robert Scott
Wayne Kirschling
Our chief financial officer, Bradley-Alison Smith, also serves as an ex
officio member of the compensation advisory committee. The compensation
advisory committee (including for purposes of administering our stock
compensation program) met on one occasion during fiscal 2000. The compensation
advisory committee:
- recommends to the board of directors the compensation and cash bonus
opportunities based on the achievement of objectives set by the
compensation advisory committee with respect to our chairman of the
board and president, our chief executive officer and the other
executive officers;
- administers our compensation plans for the same executives;
- determines equity compensation for all employees;
- reviews and approves the cash compensation and bonus objectives for
the executive officers; and
- reviews various matters relating to employee compensation and
benefits.
Board Compensation Advisory Committee Report on Executive Compensation
The compensation advisory committee of the board of directors consist of
two directors, Dr. Scott and Dr. Kirschling. The committee has the
responsibility to recommend to the board guidelines for administrating our
stock compensation program, and the compensation for our executive officers.
The primary function of the committee is to ensure our compensation program is
consistent with our values and aligned with the business strategy and goals.
The committee believes the compensation levels of our executives, who
provide leadership and strategic direction, should consist of (1) base
salaries that are, at a minimum, commensurate with executives of other
comparable public companies and (2) periodic cash bonuses based on the
achievement of specific objectives. These objectives are usually tied to a
percentage of our profitability. The chief financial officer's cash bonus is
at the discretion of the board and, if awarded, will be a percentage of the
executive's base salary.
The committee also believes it should provide executive officers with
significant stock-based incentive compensation, which increases in value in
direct correlation with improvement in our common stock price. Incentive or
non-qualified stock options are granted upon appoint of the executive as an
inducement for employment. Additional incentive or non-qualified stock options
are granted to the executive if specific goals are achieved.
Each of our executive officers are also eligible to participate in our
benefit plans offered to all employees.
The Compensation Advisory Committee
Dr. Robert A. Scott
Dr. Wayne Kirschling
Compliance with Section 16(a) of the Exchange Act
Under the Securities Laws of the United States, the Company's Directors,
its Executive (and certain other) Officers, and any persons holding more than
ten percent (10%) of the Company's common stock are required to report their
ownership of the Company's common stock and any changes in that ownership to
the Securities and Exchange Commission and the NASDAQ stock market. Specific
due dates for these reports have been established and the Company is required
to report in this Proxy Statement any failure to file by these dates.
Based solely on a review of the copies of such reports required by
Section 16(a), the Company believes that its officers, Directors, and
stockholders owning greater than 10% of the Common Stock of the Company
complied with all applicable Section 16(a) filing requirements during 1998.
ITEM 10. EXECUTIVE COMPENSATION
The following tables and discussion set forth information with respect to
all plan and non-plan compensation awarded to, earned by or paid to the Chief
Executive Officer ("CEO"), and the Company's four (4) most highly compensated
executive officers other than the CEO, for all services rendered in all
capacities to the Company and its subsidiaries for each of the last completed
fiscal year; provided, however, that no disclosure has been made for any
executive officer, other than the CEO, whose total annual salary and bonus did
not exceed $100,000.
<PAGE>
<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
------
----------------------------
Annual Compensation(1) Awards
Payouts
-------------------------- ----------------------------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
--------------- ------- -------- ----- --------- ------------------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Deufel, Chief 2000 _______ $0 ________ 100,000 50,000 $0 $0
Executive Officer and
President of the Company
and its subsidiaries
until April, 2000
---------------------------
</TABLE>
The following table sets forth certain information concerning the exercise of
incentive stock options during the last completed fiscal year by each of the
named executive officers and the fiscal year-end value of unexercised options
on an aggregated basis:
<TABLE>
TABLE 2
Option/SAR Grants for Last
Fiscal Year - Individual Grants
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
---------------------- ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
John Deufel 50k000 $1.00 February 1, 2005
---------------------
</TABLE>
<PAGE>
<TABLE>
TABLE 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
----------------------------------------------------
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($) (1)
Shares Acquired Value Realized Exercisable Exercisable/
Name on Exercise (#) ($) (Unexercisable) Unexercisable
---------------- --------------- -------------- ------------------ --------------
<S> <C> <C> <C> <C>
John Deufel 0 0 0 0
------------------------------
</TABLE>
(1) Value Realized is determined by calculating the difference between the
aggregate exercise price of the options and the aggregate fair market
value of the Common Stock on the date the options are exercised.
(2) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal year end and the exercise price of the options.
<PAGE>
<PAGE>
Employment Matters
Effective February 1, 2000, we entered into an employment agreement with
John Deufel pursuant to which he was retained to serve as president for a term
of one year. Under the agreement, Mr. Deufel was granted a restricted stock
award consisting of 500,000 shares of common stock, of which 100,000 shares
were vested immediately and the remaining 400,000 shares were subject to
vesting ratably over four years.
In April, 2000, Mr. Deufel resigned as a director and officer to pursue
other interests. Concurrently with the resignation, Mr. Deufel agreed to
surrender for cancellation 450,000 of his 500,000 restricted stock award. In
addition, we paid Mr. Deufel a lump sum and agreed to arrange through Mr.
Calandrella for the transfer to Mr. Deufel of 100,000 shares of the Company's
common stock. In addition, we transferred to Mr. Deufel several items of
personal property valued at approximately $15,000.
In consideration of his arranging for the transfer to Mr. Deufel of
100,000 of common stock, we agreed to issue to Mr. Calandrella 140,000
restricted shares of common stock. Subsequent to March 31, 2000, we recorded
a stock issuance expense of $156,800 in connection with this transaction.
Ms. Smith, our Chief Financial Officer, is paid through a controlled
consulting firm under the name The Labrador Group. During fiscal 2000, The
Labrador Group was paid $40,572 for her consulting services.
ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth information as to the shares of common
stock owned as of July 1 by:
(i) each person who beneficially owned more than five percent of our
outstanding common stock;
(ii) each director or director nominee;
(iii) each of the CEO and each of the other four most highly compensated
executive officers whose annual compensation exceeded $100,000; and
(iv) all directors, directors nominees and officers as a group.
Subject to community property laws where applicable, the person(s) as to
whom the information is given had sole voting and investment power over the
shares of common stock shown as beneficially owned. The share numbers and
percentages are calculated on the basis of the number of outstanding
securities on July 1, 2000, which was 8,110,470, plus securities underlying
each holder's options, warrants and securities convertible into common stock
which have been issued and were exercisable within sixty (60) days of July 1,
2000, in accordance with SEC Rule 13d-3. Unless a person beneficially owns
more than one percent of the outstanding common stock, no percentage is
presented in the
table.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner(1)(9) Number of Shares % of
Class
<S> <C> <C> <C>
Common Stock Clifford L. Neuman (2) 136,000 2.2%
Common Stock Robert Scott(3) 25,000 0.3%
Common Stock Wayne Kirschling (3) 25,000 0.3%
Common Stock Bradley Smith (4) 140,000 1.7%
Common Stock Windy Haddad (5) 20,000 0.2%
Common Stock Stephen G Calandrella (6) 650,000 8.0%
Common Stock Nannette Goldberg (7) 1,850,000 22.8%
Common Stock Kenneth M. Dalton 670,358 8.3%
Common Stock Dorothy Calandrella (8) 1,264,000 15.6%
Common Stock All other officers and directors
as a group (5 persons) 326,000 4.0%
</TABLE>
<PAGE>
<PAGE>
(1) The address of all persons listed is 5373 No. Union Blvd., Ste. 100,
Colorado Springs, CO 80918
(2) Includes 111,000 shares of Common Stock owned of record by Ratna
Enterprises, LLC, a limited liability company, of which Mr. Neuman is a
manager. Also includes Non-Qualified Stock Options exercisable to
purchase 25,000 shares of the company's common stock an exercise price of
$3.88 per share granted as compensation for services as an outside
director.
(3) Includes Non-Qualified Stock Options exercisable to purchase 25,000
shares of the company's common stock an exercise price of $3.88 per
share granted as compensation for services as an outside director.
(4) Includes Incentive Stock Options exercisable to purchase 40,000 shares of
the Company's common stock at an exercise price of $1.00 per share. Also
includes of 100,000 shares of Common Stock held of record by Mark Smith,
Bradley Smith's husband.
(5) Consists of incentive Stock options exercisable to purchase 20,000 of the
company's common stock at an exercise price of $1.00 per share.
(6) Includes 200,000 shares of Common Stock held of record by the Calandrella
Family Foundations, as to which Mr. Calandrella serves as a member of the
board of directors. Also includes 10,000 warrants exercisable at $2.00
per share held in the name of The Rockies Fund, Inc., a business
development company of which Mr. Calandrella is president and a director.
Includes 140,000 shares that iRV has agreed to issue to Mr. Calandrella
for services he provided related to Mr. Deufel's resignation. These
shares have not yet been issued and are therefore not reflected in the
total number of shares outstanding.
(7) Includes 700,000 shares of Common Stock owned of record by Malibu
Holdings, LLC, a limited liability company, of which Mrs. Goldberg is a
manager and 600,000 shares of Common Stock owned of record by NMG, LLC, a
limited liability company, of which Mrs. Goldberg is a manager.
(8) Includes 1,064,000 shares of Common Stock held of record by Triumph
Capital, Inc., a Colorado corporation, of which Mrs. Calandrella is the
sole director, executive officer and shareholder.
(9) Beneficial ownership is based on information provided to us, and the
beneficial owner has no obligation to inform us of or otherwise report
any changes in beneficial ownership indicated. Shares of stock that may
be acquired via exercise of options or warrants are deemed to be owned by
such person or group, but are not deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned
by any other person.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1999 The Rockies Fund loaned iRV, Inc. $65,500. As of June 30,
2000, The Rockies Fund had loaned iRV, Inc. $282,940. The loan bears
interest at 10% per year and is due on demand. In addition The Rockies Fund
provided a $300,000 certificate of deposit to obtain a Letter of Credit on
iRV's behalf. The Letter of Credit was necessary for iRV, Inc.'s wholly owned
subsidiary, iRV - Knoxville, Inc. to obtain wholesale floor financing. iRV,
Inc. has agreed to issue 2,500 warrants each month to The Rockies Fund that
are exercisable at $2.00 as payment to The Rockies Fund for posting the CD.
As of June 2000, The Rockies Fund is entitled to 10,000 warrants. iRV has
agreed to issue 140,000 shares of common stock to Mr. Calandrella for services
he provided related to Mr. Deufel's resignation. These shares have not yet
been issued and are therefore not reflected in the total number of shares
outstanding. Mr. Calandrella, the President of The Rockies Fund, certain
family members, and other entities that are controlled by Mr. Calandrella and
his family, own common stock and warrants exercisable to purchase common stock
representing 8.0% of iRV's outstanding common stock on a fully diluted basis.
A.B. Goldberg loaned iRV, Inc. $100,000 in February 2000. He is the
husband of Nanette Goldberg who beneficially owns 1,850,000 shares of iRV,
Inc. or 22.8% of the outstanding common stock.
Clifford L. Neuman, a member of the Board of Directors, as well as iRV's
legal counsel loaned iRV, Inc. $55,000. The loan bears interest at 10% per
year and is due on demand. The sum of $25,000 has been repaid to Mr. Neuman.
<PAGE>
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
Exhibit No. Title
(3.1) Articles of Incorporation, iRV, Inc., by reference from the
Form 8-K, February 2000.
(3.2) Bylaws, iRV, Inc., by reference from the Form 8-K, February
2000.
(4.1) Promissory Note dated March 1, 2000 issued to The Rockies Fund.
(4.2) Promissory Note dated March 1, 2000 issued to A.B. Goldberg.
(4.3) Promissory Note dated May 26, 2000 issued to Cliff Neuman.
(10.1) Merger Agreement dated February 2000 between iRV, Inc. and The
Southshore Corporation incorporated by reference from the Form
8-K February 2000.
(10.2) "2000 Equity Option Plan" dated February 2000, Warrants.
(10.3) Proxy Agreement dated February 2000 incorporated by reference
from the Form 8-K February 2000.
(10.4) Consulting Agreement, Access One Financial, February 2000.
(10.5) Management Agreement dated January 2000 between Coach & Campers
of Knoxville, LLC and iRV - Knoxville, Inc. incorporated by
reference from the Form 8-K, February 2000.
(10.6) Acquisition Agreement dated March 2000 of the Assets of Coach &
Campers of Knoxville, LLC by iRV - Knoxville, Inc. incorporated
by reference from the Form 8-K March 2000.
(10.7) Lease Agreement, iRV - Knoxville, Inc., February 2000
(10.8) Wholesale Floor Financing Agreement, iRV - Knoxville, Inc.,
March 2000.
REPORTS ON FORM 8-K
1) Report dated February 1, 2000:
Item 1: Change in Control
Item 7: Financial Statements and Pro Forma Financial
Information
2) Report dated February 7, 2000:
Item 4: Changes in Registrant's Independent Public Accountant
3) Report dated March 8, 2000:
Item 2: Acquisition of Assets
Item 7: Financial Statements and Pro Forma Financial
Information
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
iRV, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of iRV, Inc. as of
March 31, 2000, and the related consolidated statements of operations,
stockholders' deficit and cash flows for the period August 1, 1999 (inception)
through March 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of iRV, Inc. as of March 31,
2000, and the results of their operations and their cash flows for the period
August 1, 1999 (inception) through March 31, 2000, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that iRV, Inc. will continue as a going concern. As more fully described in
Note 1, the Company has incurred a net loss of $2,175,595 from inception
through March 31, 2000. This raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans with regard to
these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
July 10, 2000
Westminster, Colorado
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
iRV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, 2000
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents $ 28,835
Advances due from related parties 910
Inventory 755,025
--------
Total current assets 784,770
--------
Property and equipment, net 112,266
Intangible assets, net 212,989
Investment in restricted common stock 40,000
Other 16,000
--------
381,255
---------
Total assets $ 1,166,025
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Floor financing payable $ 679,809
Notes payable
Related parties 165,500
Other 125,525
Accounts payable-
Related parties 40,066
Other 149,454
Accrued liabilities 41,236
----------
Total current liabilities 1,201,590
Commitments -
Stockholders' deficit:
Preferred stock; $.01 par value; 50,000,000
shares authorized; no shares issued
and outstanding -
Common stock; $.001 par value; 100,000,000
shares authorized; 8,110,470 shares issued
and outstanding 8,111
Additional paid in capital 2,131,919
Accumulated deficit (2,175,595)
-----------
Total stockholders' deficit (35,565)
-----------
Total liabilities and stockholders'
deficit $ 1,166,025
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
iRV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 1, 1999 (INCEPTION)
THROUGH MARCH 31, 2000
<S> <C>
Revenue:
RV sales and service $ 596,056
Cost of RV sales and service 505,003
---------
Gross profit 91,053
---------
Operating expenses:
Stock compensation 1,400,000
General and administrative-
Related parties 33,421
Other 197,957
Internet website development 212,505
Consulting-
Related parties 86,285
Other 110,578
Travel and entertainment 83,240
Miscellaneous 62,293
Rent 35,105
Depreciation and amortization 28,422
Interest 9,194
Sales and marketing 7,648
-----------
Total operating expenses 2,266,648
-----------
Net loss $(2,175,595)
============
Basic loss per share $ (0.27)
============
Diluted loss share $ (0.27)
===========
Weighted average shares outstanding:
Basic 8,110,470
===========
Diluted 8,110,470
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
iRV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Additional
Common Stock Paid In
Shares Amount Capital Deficit Total
------- -------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C>
Balance, August 1, 1999
(inception) - $ - $ - $ - $-
Issuance of common stock for
cash at $.05 per share,
November and December
1999 3,000,000 3,000 147,000 - 150,000
Stock compensation in
connection with the
issuance of stock at
$.05 per share, November
1999 - - 1,050,000 - 1,050,000
Issuance of common stock for
cash at $.40 per share,
November and December
1999 1,000,000 1,000 399,000 - 400,000
Compensation expense
associated with the
issuance of common stock
for services November
1999 100,000 100 39,900 - 40,000
Debt converted into common
stock at $.05 per share,
November 1999 1,000,000 1,000 49,000 - 50,000
Stock compensation in
connection with the
conversion of debt,
November 1999 - - 350,000 - 350,000
Stock issued in connection
with reorganization 3,010,470 3,011 97,019 - 100,030
Net loss for the period - - - (2,175,595) (2,175,595)
----------- ----------- --------- ----------- -----------
Balance, March 31, 2000 8,110,470 $ 8,111 $2,131,919 $(2,175,595) $ (35,565)
=========== ============ =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
iRV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD AUGUST 1, 1999 (INCEPTION)
THROUGH MARCH 31, 2000
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,175,595)
------------
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 28,422
Stock compensation 1,400,000
Stock issued for services 40,000
Changes in operating assets and liabilities-
Inventory 194,230
Accounts payable 189,520
Accrued liabilities 41,237
-----------
1,893,409
-----------
Net cash used in operating activities (282,186)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition (662,277)
Purchase of property and equipment (14,473)
Purchase of intangible asset (60,300)
Purchase of restricted common stock (40,000)
Increase in other (16,000)
Increase in advances to related parties (156,139)
Collections from advances to related parties 155,229
-----------
Net cash used in investing activities (793,960)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in floor financing payable 289,451
Proceeds from borrowings from related parties 165,500
Proceeds from advances from related parties 62,879
Payments on advances from related parties 62,879
Proceeds from sale of stock, net of offering
costs 550,000
Cash received in restructuring 100,030
------------
Net cash provided by financing activities 1,104,981
------------
Net increase in cash and cash equivalents 28,835
Cash and cash equivalents, beginning -
Cash and cash equivalents, ending $ 28,835
-------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 9,194
=============
SUPPLEMENTAL DISCLOSURE OF NON CASH FINANCING
ACTIVITIES:
Conversion of debt into 1,000,0000 shares
of common stock $ 50,000
=============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<PAGE>
iRV, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Significant Accounting Policies
-----------------------------------------------------------
iRV, Inc. ("the Company") was incorporated in Colorado on August 1, 1999,
as RV Holiday.com, Inc. The Company changed its name to iRV, Inc. in December
1999. The Company is engaged in the retail sales of recreational vehicles
("RV") primarily in Tennessee, and the development of an interactive Web site
that enables nationwide shopping for RVs via the Internet.
Reorganization
--------------
On December 20, 1999, the Company entered into an Agreement and Plan of
Merger (the "Agreement") whereby the Company would merge into a wholly owned
subsidiary of The Southshore Corporation ("Southshore"). Pursuant to the
Agreement, the Company would receive 5,500,000 shares of Southshore stock.
The closing of the Agreement was contingent on the parties conducting due
diligence and among other things, the Company's completion of a private
offering of its common stock that grosses $600,000 and the acquisition of
certain URL names (Domain names). The Agreement required the resignation of
the current Southshore officers and directors and the appointment of three new
directors designated by the Company. On February 1, 2000, the Agreement was
completed and the Company received 5,500,000 shares of Southshore stock, and
the remaining net assets of Southshore that consisted of $100,030 in cash.
This reorganization has been accounted for as though it were a
recapitalization of the Company and a sale of shares by the Company in
exchange for the net assets of Southshore.
Basis of Presentation
---------------------
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
incurred a net loss of $2,175,595 from inception through March 31, 2000. This
raises substantial doubt as to the Company's ability to continue as a going
concern. Management is attempting to raise additional equity capital to
continue operation of its Internet Web site and continue the acquisitions of
RV dealerships. In order for the Company to continue as a going concern, the
Company must generate sufficient cash flows from its proposed Internet
activities and obtain the necessary sales levels at it RV dealership that will
enable the Company to achieve a level of operations sufficient to meet its
cash flow requirements. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiaries, iRV.com, Inc. and iRV-
Dealerships, Inc. Internet development activities are conducted through
iRV.com, Inc., while the acquisitions of RV dealerships is conducted through
iRV-Dealerships, Inc. All material intercompany accounts have been eliminated
in consolidation.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents.
Concentration of Credit Risk
----------------------------
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash equivalents, inventory
and investment in restricted common stock. All of the Company's cash
equivalents are held at high credit quality financial institutions. The
Company evaluates the carrying value of inventory and restricted common stock
and maintains reserves for potential impairments of its investment. To date
there has been no impairment loss recorded by the Company.
Revenue Recognition
-------------------
The Company records revenue on the sale of an RV when cash is received
and the customer takes physical possession of the unit. Other revenue
consists primarily of income earned from warranty repairs and service and the
sales of parts. The Company recognizes these revenues when the services are
performed or when the parts are sold.
Warranties
----------
The Company does not provide for additional warranties on new RVs other
than the warranty that is provided by the manufacturer. No warranties are
provided for on used RVs. The Company historically has not experienced any
losses associated with warranties.
Inventories
-----------
Inventories are stated at the lower of cost or market, using the specific
identification method. Management of the Company gives appropriate
consideration to deterioration, obsolescence and other factors in evaluating
net realizable value.
Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful life of three years.
Intangible Assets
-----------------
Intangible assets consist of the cost the Company incurred to acquire
various Internet domain names and the goodwill that was recorded in the
acquisition of the net assets of Coach & Campers of Knoxville, LLC (see Note
10). Amortization is computed using the straight-line method over the
estimated useful life of three years.
Impairment of Long-Lived Assets
-------------------------------
Management of the Company periodically reviews the carrying value of
long-lived assets for potential impairment by comparing the carrying value of
those assets with their related, expected future net cash flows. Should the
sum of the related, expected future net cash flows be less than the carrying
value, management would determine whether an impairment loss should be
recognized. An impairment loss would be measured by the amount by which the
carrying value of the assets exceeds the future discounted cash flows.
Management has not identified any impairment losses as of March 31, 2000.
Investment in Restricted Common Stock
-------------------------------------
Investment in restricted common stock consists of an equity investment in
Kinetiks.com, Inc., a publicly traded entity, and is recorded at cost, which
approximates the fair market value.
Stock-Based Compensation
-------------------------
The Company accounts for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to
Employees." Accordingly, no compensation expense is recorded for options
issued in fixed amounts and with fixed exercise prices at least equal to the
fair market value of the Company's common stock at the date of grant. The
Company does not include stock option or warrants in the computation of
earnings per share as their inclusion would be antidilutive.
Internet Web Site Development
-----------------------------
The Company expenses all costs associated with the development of its
Internet Web site in accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed." SFAS 86 requires capitalization of certain
software development costs subsequent to the establishment of technological
feasibility. Based upon the Company's product development process,
technological feasibility is established upon completion of a working model.
Income Taxes
------------
Income taxes are accounted for under Statement of financial Accounting
Standards No. 109 "Accounting for Income Taxes." Under this method, deferred
tax assets and liabilities are determined based on differences between the
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
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 of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reported period. Actual results could differ from those estimates.
Comprehensive Income
--------------------
The Company follows Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. There were no differences between reported net income
and comprehensive income.
Fair Value of Financial Instruments
-----------------------------------
Financial instruments that are subject to fair value disclosure
requirements are carried in the consolidated financial statements at amounts
that approximate fair value and include cash and cash equivalents,
inventories, investments in restricted common stock, floor financing payable,
notes payable and accounts payable. Fair values are based on quoted market
prices and assumptions concerning the amount and timing of estimated future
cash flows and assumed discount rates reflecting varying degrees of perceived
risk.
2. Inventories
------------
Inventories consist of the following at March 31, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
New RVs $611,214
Used RVs 141,224
Parts 2,587
-----------
$755,025
===========
</TABLE>
3. Property and Equipment
----------------------
Property and equipment consist of the following at March 31, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
Leasehold improvements $ 16,961
Equipment 19,530
Rental RV units 103,557
----------
140,048
Less accumulated depreciation (27,782)
----------
$ 112,266
==========
</TABLE>
Depreciation expense for the period ended March 31, 2000, was $11,460.
4. Intangible Assets
-----------------
Intangible assets consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Goodwill $169,652
Internet domain name 60,300
229,952
----------
Less accumulated amortization (16,963)
----------
$ 212,989
===========
</TABLE>
Amortization expense for the period ended March 31, 2000, was $16,962.
5. Floor Financing Payable
-----------------------
In February the Company executed a floor financing agreement with
Deutsche Financial Services, whereby the Company may draw up to $2,000,000 to
purchase inventory in connection with the operation of its RV dealership. The
financing agreement bears interest at prime plus 1% (10.25% at March 31, 2000)
and is collateralized by essentially all the assets of the Company. Interest
expense for the period ended March 31, 2000 was $6,438.
In connection with obtaining the floor financing, an entity controlled by
a stockholder of the Company provided an irrevocable letter of credit in favor
of Deutsche Financial Services in the amount of $300,000. In consideration of
providing the irrevocable letter of credit, the Company agreed to grant this
entity warrants to purchase 2,500 shares of the Company's common stock at
$2.00 per share for each month that the letter of credit is issued and
outstanding. The warrants are exercisable over a three-year period.
6. Notes Payable
-------------
Notes payable consist of the following at March 31, 2000:
<TABLE>
<CAPTION>
<S> <C> <C>
10% note payable to related party,
due on demand, without collateral $ 100,000
10% note payable to related party,
due on demand, without collateral 65,500
-----------
165,500
-----------
9.74% note payable to financial
institution, payable in monthly
installments of $705, due
September 2000, collateralized by
a recreational vehicle 65,796
9.75% note payable to financial
institution, payable in monthly
installments of $641, due
September 2000, collateralized by
a recreational vehicle 59,729
------------
125,525
------------
$ 291,025
</TABLE>
Interest expense for the period ended March 31, 2000 was $ 2,756.
7. Lease Commitment
----------------
The Company leased a residence and furniture on a temporary basis for a
former officer of the Company under a non-cancelable operating lease. The
lease required monthly payments of $1,700 and expired in May 2000. Rent
expense for the period ended March 31, 2000, was $9,432. The Company also
leased office space. The lease requires monthly payments of $4,174 and can be
canceled by the Company at any time by providing the landlord thirty days
notice of the Company's intent to vacate the premises. Rent expense for the
period ended March 31, 2000, was $13,673.
The Company leases land and a building under a noncancelable operating
lease. The lease requires monthly payments of $7,200 commencing in August
2000, and expires in August 2003. Additionally, the Company leases, on a
month-to-month basis, a trailer and requires monthly payments of $394. Rent
expense for the period ended March 31, 2000 was $12,000.
Future minimum payments under nonconcelable operating leases are as
follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C> <C>
2001 $ 73,200
2002 86,400
2003 36,000
----------
</TABLE>
8. Capital Structure
-----------------
In November and December 1999, the Company issued 3,000,000 shares of its
common stock in exchange for cash at $.05 per share and received net proceeds
of $150,000.
In November and December 1999, the Company issued 1,000,000 shares of its
common stock in exchange for cash at $.40 per share and received proceeds of
$400,000.
In connection with the issuance of 3,000,000 shares of the Company's
common stock, the Company recorded stock compensation in the amount of
$1,050,000. This amount represents the difference between the estimated fair
market value of the stock on the date of the sale and the consideration paid.
During August through October, a stockholder and an entity controlled by
a stockholder advanced funds to the Company for working capital purposes in
the amount of $26,448 and $23,552, respectively. The advances did not bear
interest, had no fixed repayment terms and were unsecured. In November 1999,
the Company converted these advances into 1,000,000 shares of the Company's
common stock at the rate of $.05 per share. In connection with this
conversion the Company recorded stock compensation in the amount of $350,000
which represents the difference between the estimated fair market value of the
stock issued and the debt converted into equity.
In December 1999, the Company granted 280,000 options to certain
employees to acquire shares of the Company's common stock at $1.00 per share,
which was in excess of the fair market value on the date of grant. These
options expire in December 2006.
On December 20, 1999, the Company's board of directors approved a stock
option plan (the "Plan") under which up to 1,000,000 shares of the Company's
common stock may be issued. Under the Plan, incentive and nonqualified stock
options may be granted to employees, directors, and consultants of the
Company. Incentive stock options are granted at an exercise price of not less
than 100% (110% for individuals owning 10% or more of the Company's common
stock at the time of grant) of the stock's fair market value at the time of
grant. Nonqualified stock options may be granted at an exercise price
determined by the Company.
In January 2000, the Company entered into a consulting agreement with
Access 1 Financial, a nonaffiliated, to serve as the Company's financial
advisor and provide public relations. In lieu of a consulting fee, the
Company paid to Access 1 Financial as full and complete consideration, stock
options to purchase up to 200,000 shares of the Company's common stock at an
exercise price of $3.25 per share, which exceeded the fair market value at the
date of grant. The shares are exercisable immediately and expire in January
2001.
In February 2000, effective August 31, 1999, the Company entered into an
employment agreement with an officer. The agreement provided for the issuance
of 500,000 shares of the Company's common stock of which 100,000 shares vested
immediately with the remaining shares vesting at the rate of 100,000 shares
per year commencing February 1, 2001 and expiring in February 2004. In
connection with the issuance of the initial 100,000 shares, the Company
recorded consulting expense in the amount of $40,000, which approximated the
fair market value on the date of grant (see Note 11).
In February 2000, the Company granted to certain directors, one of which
is a stockholder, options to acquire 150,000 shares of the Company's common
stock at an exercise price of $3.88, which approximated the fair market value
on the date of grant. The options expire February 2005.
The stock option activity under this Plan is set for the below for the
period August 1, 1999 (inception) through March 31, 2000:
<TABLE>
<CAPTION>
Shares Under Option
Option Price
------------- ------
<S> <C> <C> <C>
Granted 835,000 $1.00-$3.88
Forfeited (125,000) -
---------- -----------
Outstanding, March 31, 2000 710,000 $1.00-$3.88
========== ===========
</TABLE>
At March 31, 2000, 430,000 options were exercisable.
9. Related Party Transactions
--------------------------
In addition to the related party transactions discussed in Note 4 above,
the Company advanced funds in the amount of $156,139 50,912 to entities that
are controlled by a stockholder of the Company. The advances were made not
pursuant to any written agreement, bore no interest and had no fixed repayment
terms. These amounts, except for $910, were repaid in February 2000.
In March 2000, a stockholder advanced the Company, and was repaid,
$62,879. In April 2000, the Company advanced, and was repaid $15,000 to this
same stockholder.
The Company incurred legal expenses in the amount of $33,421 payable to
law firm that is owned by a stockholder of the Company. Of this amount,
$25,420 remains unpaid at March 31, 2000.
The Company paid to certain stockholders and officers $86,285 for
consulting services. Of this amount $4,224 remains unpaid at March 31, 2000.
10. Income Taxes
------------
Losses incurred from operations from August 1, 1999 (inception) through
March 31, 2000 have created deferred tax assets of approximately $249,000. A
valuation allowance was established for the full amount of these deferred tax
assets because the future realization of the cumulative tax benefits is not
assured. The Company has a net operating loss carryforward for Federal income
tax purposes of approximately $733,000 that expires in 2014.
As further described in Note 1, the Company entered into an Agreement and
Plan of Merger. When more than a 50% change in ownership occurs, over a
three-year period, as defined, the Tax Reform Act of 1986 limits the
utilization of net operating loss ("NOL") carryforwards in the years following
the change in ownership. Therefore, it is possible that the Company'
utilization of its NOL carryforwards may be partially reduced as a result of
the changes in stock ownership. No determination has been made as of March
31, 2000, as to what implications, if any, there will be in the net operating
loss carryforwards of the Company.
11. Acquisition
-----------
On January 25, 2000, the Company entered into a Management Agreement
with Coach & Campers of Knoxville, LLC ("Coach & Campers"), an RV dealership
located in Knoxville, Tennessee, whereby Coach & Campers retained the Company,
for a three months period, as business manager of Coach & Campers operations.
The Management Agreement provided that the Company would perform all the
business functions for and on behalf of Coach & Campers while the parties
negotiated a purchase contract for the assets of Coach & Campers.
On March 8, 2000, the Company executed an Asset Purchase and Sale
Agreement (the "Purchase Agreement") with Coach & Campers. In connection with
the Purchase Agreement, the Company paid approximately $662,000 in cash. The
Company accounted for the acquisition as a purchase and recorded approximately
$170,000 as goodwill, which represents the excess of the purchase price over
the net assets acquired. The results of operations of Coach & Campers have
been included in the consolidated financial statements since the date of
acquisition.
The following pro forma information reflects the operating results of the
acquisition as if it occurred at August 1, 1999, the inception of the Company.
<TABLE>
<CAPTION>
<S> <C> <C>
Revenues $1,707,830
Cost of goods sold 1,520,890
------------
Gross profit 186,940
General and administrative 2,363,453
------------
Net loss $(2,176,513)
============
Loss per share $ (0.27)
============
</TABLE>
12. Subsequent Event
----------------
In May 2000, the Company entered into a Settlement Agreement and Mutual
Release (the "Settlement Agreement") with the former president and director.
Pursuant to the Settlement Agreement the Company paid the former president
$55,000 in cash and conveyed title to an automobile and certain other
equipment. Additionally, the Company provided the former president with
100,000 freely tradable shares of the Company's common stock, which were
provided by a stockholder of the Company. The former president surrendered
500,000 shares of stock that were issued to him pursuant to his employment
agreement (see Note 7). The Company then reissued to the former president,
50,000 shares of restricted common stock. In connection with the issuance of
the 150,000 shares of common stock the Company recorded $168,750 of stock
issuance expense.
In connection with the Settlement Agreement, a stockholder and director,
who is also the Company's legal counsel, advanced $55,000 to the Company to
pay the cash portion of the Settlement Agreement. This advance is evidenced
by a note that is due on demand, bears interest at 9% and is without
collateral.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized.
iRV, INC.
Date: July 14, 2000 By: /s/ Bradley Smith
------------------------------
Bradley Smith, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Bradley Smith Chief Financial Officer July 14, 2000
-----------------
Bradley Smith
/s/ Robert Scott Director July 14, 2000
----------------
Robert Scott
/s/ Wayne Kirschling Director July 14, 2000
--------------------
Wayne Kirschling
/s/ Clifford L. Neuman Director July 14, 2000
----------------------
Clifford L. Neuman
