<PAGE>
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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No. 33-55254-17
-----------
FRC RACING PRODUCTS, INC.
----------------------------------------------------
(Exact name of small business issuer in its charter)
Nevada 87-0434298
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 NORTH INDUSTRIAL PARKWAY
WEST UNION, IOWA 52175
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (319) 422-6244
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[x] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by referenced in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [x]
State the issuer's revenues for the most recent fiscal year: $0.00
<PAGE>
As of June 18, 1996, the aggregate market value of the voting stock held by non-
affiliates of the registrant is indeterminate.(1)
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable dates.
Class Outstanding as of June 18, 1996
- ----------------------------------- -------------------------------
$.01 PAR VALUE CLASS A COMMON STOCK 12,652,060 SHARES
DOCUMENTS INCORPORATED BY REFERENCE
None
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: No
- ---------------------
(1) For purposes of the response to this item only, all directors of the
Registrant have been deemed affiliates of the Registrant. Further,
Registrant has been advised by two sources who have heretofore traded in the
stock of the Registrant that there is insufficient basis for establishing a
market.
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EXPLANATORY NOTE
Due to the late filing of this Form 10-KSB, the Company has elected to
disclose certain information and events occurring subsequent to June 30,
1995. Such disclosure is made to facilitate the reader's understanding of
the affairs of the Company. However, the reader is cautioned that this Form
10-KSB does not purport to fully disclose all reportable events subsequent to
June 30, 1995. The reader is directed to future filings for disclosure of all
reportable events after June 30, 1995.
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PART I
ITEM 1. BUSINESS.
FRC Racing Products, Inc. (the "Company" and unless otherwise
designated, including all subsidiaries) was originally incorporated in
February 1986, in the state of Utah under the name of Highland Mfg., Inc. In
December 1993 the Company re-domiciled as a Nevada corporation. The Company
was initially formed without any specific business plan other than to seek
potential business opportunities for acquisition and was essentially inactive
until 1995.
In April 1995, the Company issued 8,900,000 shares of its common stock
(representing a majority interest in the Company) in exchange for all the
outstanding common stock of FRC Racing Products, Inc., an Iowa corporation
and subsequently changed its name to FRC Racing Products, Inc. The reverse
acquisition transaction resulted in FRC Racing Products, Inc. (Iowa) becoming
a wholly owned subsidiary of the successor FRC Racing Products, Inc.
Pursuant to the acquisition, the Company, located at 101 North
Industrial Parkway, West Union, Iowa, is, or will be, engaged in the
manufacture and distribution of specialty automotive components for the
"short track" racing industry through a nationally distributed catalog. The
Company also provides general metal fabrication services. The Company has
approximately 35 full time employees, however, the number fluctuates with the
cyclical nature of its market.
The Company sells exclusively to the oval track racer and has spent in
excess of $100,000.00 in developing its products. Such costs are
incorporated in the Company's pricing structure. While some of its products
may be appropriate for and be purchased by participants in other racing
formats (such as drag, autocross, road and other types of racing), the
principal market focus is oval track racing. FRC's target market is made up
of approximately 130,000 drivers at the retail level (assuming a total
population of 385,000 drivers throughout the United States). This does not
include, however, other members of the racing team (such as mechanics, crew
chiefs, and others) who may also represent potential customers.
The Company applies many of the standard techniques and methods from its
conventional fabricating operations, which appear to be somewhat unique in
the racing business, not only to chassis manufacturing but also to other
components for racing car platforms. One such technique is the use of
computer-aided design for the design and fabrication of racing car frames and
components. At present, many car frames are custom fabricated by a local
welder for the individual driver. As such, there is very little consistency
and standardization requiring the fabrication of custom parts when making
repairs at considerable cost and time. The Company's chassis is consistent
and if replacement components are necessary, they can be taken from stock and
attached to the existing frame with little or no modification required.
Based upon the data available, it appears that there are few companies
in the marketplace that compete with the Company from a total product
manufacturing and distribution standpoint. The Company breaks down its
competition by product divisions; chassis building, bodies and interiors,
weld-on and bolt-on parts. In an attempt to research the list of competing
companies which FRC provided, it was noted that their competition was either
comprised of small, closely-
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held businesses or large companies that manufacture auto related parts as a
side business. None of the significant competitors are known to be publicly
owned or listed with the Securities and Exchange Commission. Therefore, no
financial statements are available for public use. Directories, registers,
hand-books, and other business references indicate that there are numerous
related businesses with identical Standard Industrial Classification ("SIC")
codes as the competing firms that were researched. It would appear, however,
that the SIC codes that encompass the Company's business are sufficiently
broad as to include many companies whose operations may merely touch upon
racing products. Overall, approximately 90% of the dealer market which
represents competition to the Company have annual sales of $1 million or
less. In short, the racing marketplace is highly fragmented and complex. In
situations like this, where the overwhelming number of players are small,
closely held entities, detailed industry and market information availability
is severally limited.
Based upon the information available to the Company, racing is a hobby
and drivers have a limited budget to spend on their cars, supplies, apparel,
and other racing paraphernalia which is required to actively pursue their
hobby. While racing cuts across all lines of age, gender, national origin, or
income, the average racer is a white, working man, 32 years old, with a
$40,000 annual income. An average driver is predicted to spend a minimum of
$5,000 per year on his race car; likely limiting his purchases to the
essentials such as tires, gas, suspension, and damaged parts. The automotive
racing market is characterized by small players, both from the customer and
supplier sides. The major customers are, by far, the individual or groups of
people that are the small track racers.
Based upon the data available, Management of the Company believes that
there is sufficient evidence to support a significant potential market for
the Company's products. The key success factors appear to be pricing and
customer relations. The significance of competitive pricing may have a
detrimental impact on the Company's ability to sustain large profit margins,
particularly on products that are not manufactured by FRC but are instead
sourced from other vendors and resold and distributed by FRC.
The Company anticipates having numerous suppliers, does not intend to
utilize scarce raw materials, and does not expect any governmental
regulations effecting the business.
ITEM 2. PROPERTIES.
In May, 1995, the Company acquired a 63,000 square foot warehouse,
office, and manufacturing facility at 101 North Industrial Parkway, West
Union, Iowa. The building currently houses the Company's corporate
headquarters and serves as a manufacturing facility for the Company's line of
racing products and chassis. The building was constructed in 1995 and is 85%
complete. Certain interior finishing items need to be completed and it is
anticipated that working capital will provide the necessary funds to complete
the construction. Approximately 35,000 square feet is devoted to
manufacturing, 13,000 square feet to office space, and 15,000 square feet to
warehousing. FRC is the sole occupant of the building. The building is
adequate for the Company's foreseeable operational needs and growth.
5
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The building is subject to a mortgage held by Farmers Savings Bank, West
Union, Iowa. The mortgage secures a $3,000,000 Revolving Note dated
September 5, 1995, amortized as follows:
a. $800,000 amortized for a period not to exceed 29 years, interest at
1.25% over prime adjusted quarterly;
b. $1,480,000 amortized for a period not to exceed 14 years, interest at
1.25% over prime adjusted quarterly; and
c. $720,000 amortized for a period not to exceed 6 years, interest at
1.25% over prime adjusted quarterly.
As of June 30, 1996, the outstanding principal balance is approximately $2.25
million. The Company has only drawn approximately $2.25 million of the $3
million Revolving Note.
There are also the following mechanic's liens on the Company's property:
Hudson Construction Services $1,472.00
Joe Lensing, d/b/a Joe's Construction $9,285.80
Lester Timp $1,984.04
All mechanic's liens were recorded in March, 1995. The Company disputes
these claims and no payment has been made toward these claimed obligations.
The Company believes that the property is adequately covered by insurance.
ITEM 3. LEGAL PROCEEDINGS.
As of June 30, 1995, to the knowledge of the Company, its officers and
directors, neither the Company nor any of its officers and directors, are a
party to any material legal proceeding or litigation which would impact the
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
By written action of the holders of a majority of the Company's Common
Stock, effective as of April 17, 1995, the Company's shareholders approved
the amendment of the Company's Articles of Incorporation to change the
Company's corporate name from Highland Mfg., Inc. to FRC Racing Products,
Inc.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.
The Company's common stock is traded on the over-the-counter market.
As of June 18, 1996, there were 789 record holders of the Company's
common stock. The Company has not previously declared or paid any dividends
on its common stock and does not anticipate declaring any dividends in the
foreseeable future.
The management of the Company has assembled the following range of high
and low bid information for the Company's common stock. Note, the Management
of the Company is not aware of any actual transactions, market for the
Company's stock, or pricing information prior to April 1, 1995, and does not
believe any exists. The information reflects actual transactions and does not
include commissions, retail pricing, or inter-dealer pricing:
PERIOD HIGH LOW
4/1/95- $8.00 $7.75
6/30/95
7/1/95- $8.75 $1.25
9/30/95
10/1/95 $4.25 $0.75
12/31/95
1/1/96 $1.75 $0.50
3/31/96
4/1/96 $1.50 $0.75
6/30/96
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The Company had no operating revenues as of June 30, 1995.
CASH REQUIREMENTS
With the Company's current plan of operations, it will need to raise
additional capital in order to allow it to purchase the level of inventory
required to service the Company's dealer network created as its distribution
channels. Once sufficiently capitalized, the Company is expected to operate
without additional operating capital needs as the cash flow should allow it to
continue to grow and gain a significant share of the market. However, there is
no assurances that
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the Company can raise additional capital or that operating revenues will be
sufficient to meet operating expenses. With the Company's mix of
manufactured parts as well as parts purchased from other manufacturers, the
Company's dealer network is predicted by Management to continue to grow as
the Company's reputation is recognized.
RESEARCH AND DEVELOPMENT
The racing industry thrives on new product development and innovation as
they continue to find ways to win. The Company has created a research and
development team to attempt to stay on the leading edge of technology and
performance. It is anticipated that the Company will continue to perform
additional research and development throughout the year as the Company
strives to be an industry leader. The Company's main focus will be on the
race car chassis and how it can be improved to perform at the optimum level
of performance for every type of track on which the Company's target market
competes. This dictates that the Company continually test and refine its
product on the track through the Company's test car programs, facilitating
the feedback necessary to make such improvements. The Company anticipates
continued costs related to its planned design and manufacturing of the
Company's own line of non-specific bolt-on parts which will compliment the
Company's chassis.
EXPECTED PURCHASE OF EQUIPMENT OR PLANTS
It is expected that the Company will have need for additional equipment
to produce the chassis and parts to supply to its dealer network as the
Company's market share grows. FRC has identified the equipment necessary to
produce the quantity of parts at the quality expected. It is anticipated
that once sales of non-specific bolt-on parts reaches a higher volume it will
become cost effective for the Company to purchase the necessary capital
equipment. Management believes that the equipment can either be purchased
through additional loan proceeds or can be leased through a leasing company.
EXPECTED CHANGES IN THE NUMBER OF EMPLOYEES
The Company expects to continue to add additional employees as demand
for its products and sales continues to increase. As both a manufacturer and
distributor of parts, the increase will likely come in terms of production
personnel. The Company does not expect any changes in the number of
administrative personnel over the next twelve months. The number of new
employees will vary directly with the growth of the Company's dealer network
and the gain in market share. Accordingly, it is difficult to predict with
any degree of accuracy the specific number of employees the Company will need
in the next twelve months.
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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Mark Shelley CPA
110 S. Mesa Dr. #1
Mesa, Arizona 85210
(602) 833-4054
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
FRC Racing Products, Inc.
I have audited the accompanying balance sheet of FRC Racing Products,
Inc. as of June 30, 1995 and the related statement of stockholders' equity,
operations and cash flow for the year then ended. These financial statements
are the responsibility of the Company's management. My responsibility is to
express an opinion on these financial statements based on our audit. I did
not audit the years prior to the year ended June 30, 1995. Those years were
audited by other auditors.
I have conducted the audit in accordance with generally accepted
auditing standards. Those standards require that I 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 statements presentation. I believe that the audit provides
a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of FRC Racing
Products, Inc. as of June 30, 1995 and the results of its operations and cash
flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ Mark Shelley CPA
July 2, 1996
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FRC RACING PRODUCTS, INC.
Balance Sheet
as of June 30, 1995 and 1994
ASSETS
06/30/95 06/30/94
Cash 77,378 0
Miscellaneous Receivables 9,780 0
Inventory 142,908 0
Prepaid Expenses 2,546 0
--------- ------
Total Current Assets 232,612 0
--------- ------
Property, Plant and Equipment 995,234 0
CAD Patterns, Catalogue 152,907 0
Organizational Costs 84,246 0
Trade Name Development 34,580 0
--------- ------
Total Assets 1,499,579 0
--------- ------
LIABILITIES
Accounts Payable 135,979 0
Notes Payable Equipment & Vehicles 35,422 0
Accrued Interest Bank Loan 11,795 0
--------- ------
Total Current Liabilities 183,196 0
--------- ------
Bank Mortgage Loan 600,000 0
--------- ------
Total Liabilities 783,196 0
--------- ------
STOCKHOLDERS' EQUITY
Common Stock, 100,000,000 shares
authorized, 9,900,000 and 1,000,000
shares outstanding, par $.001 9,900 1,000
Paid in Capital 743,627 1,000
Retained Earnings (Loss) (37,144) (2,000)
--------- ------
Total Stockholders' Equity 716,383 0
--------- ------
Total Liabilities and
Stockholders' Equity 1,499,579 0
--------- ------
The accompanying notes are an integral part of these statements
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FRC RACING PRODUCTS, INC.
Statement of Stockholders' Equity
for the three years ended June 30, 1995
<TABLE>
<CAPTION>
Common Stock Paid in Retained Total
Shares Amount Capital Earnings
<S> <S> <C> <C> <C> <C>
Balance June 30, 1992 1,000,000 1,000 1,000 (2,000) 0
Retained Earnings (Loss) 0 0
----------------------------------------------------------------
Balance, June 30, 1993 1,000,000 1,000 1,000 (2,000) 0
Retained Earnings (Loss) 0 0
----------------------------------------------------------------
Balance, June 30, 1994 1,000,000 1,000 1,000 (2,000) 0
Sale of Stock 8,900,000 8,900 625,379 634,279
Donated Capital 117,248 117,248
Retained Earnings (Loss) (35,144) (35,144)
----------------------------------------------------------------
Balance June 30, 1995 9,900,000 9,900 743,627 (37,144) 716,383
----------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
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FRC RACING PRODUCTS, INC.
Statement of Operations
for the years ended June 30, 1995, 1994 and 1993
06/30/95 06/30/94 06/30/93
Sales 0 0 0
--------- --------- ---------
Expenses
General and Administrative 9,878
Depreciation Expense 12,050
Amortization Expense 14,302
---------
Total Expenses 36,230 0 0
--------- --------- ---------
Income before Provision for (36,230) 0 0
Income Taxes
Provision for Income Taxes 0 0
Miscellaneous Interest Income 1,086
---------
Net Income (35,144) 0 0
--------- --------- ---------
Earnings (Loss) per Common Share 0.01 0 0
--------- --------- ---------
Weighted Average Number 3,121,370 1,000,000 1,000,000
of Shares
The accompanying notes are an integral part of these statements
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FRC RACING PRODUCTS, INC.
Statement of Cash Flow
for the three years ended June 30, 1995, 1994 and 1993
06/30/95 06/30/94 06/30/93
Cash Provided by Operations
Net Loss (35,144) 0 0
Depreciation Expense 12,050 0 0
Amortization Expense 14,302 0 0
Change in Receivables (9,780)
Prepaid Expenses (2,546)
Increase in Inventory (142,908)
Increase in Payables 147,774
Change in Organizational (88,680)
----------
Costs
Cash Provided by Operations (104,932) 0 0
---------- ------ ------
Cash Used for Investments
Purchase of Fixed (1,007,284)
Assets
Purchases of CAD (160,955)
Patterns, Catalogue
Trade Name (36,400)
----------
Development
Cash Invested (1,204,639) 0 0
---------- ------ ------
Cash Provided by Financing
Stock Sales 634,279
Donated Capital 117,248
Bank Financing 600,000
Equipment Financing 35,422
----------
Cash Provided by Financing 1,386,949 0 0
---------- ------ ------
Cash Difference 77,378 0 0
Beginning Cash Balance 0 0 0
---------- ------ ------
Ending Cash Balance 77,378 0 0
---------- ------ ------
The accompanying notes are an integral part of these statements.
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FRC RACING PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Business, History and Organization
FRC Racing Products, Inc., (the Company), was originally incorporated in
February 1986 in the State of Utah under the name Highland MFG., Inc., In
December 1993 the Company redomiciled as a Nevada corporation. The Company
initially was formed without any specific business plan other than to seek
potential business opportunities for acquisition and was essentially inactive
until 1995.
On April 4, 1995 the Company entered into a Stock Exchange Agreement
whereby it issued 8,9000,000 shares of its Common Stock (representing a
controlling interest in the Company) in exchange for all of the outstanding
shares of capital stock of FRC Racing Products, Inc., an Iowa corporation.
Immediately following, the Company changed its name (Highland MFG., Inc.) to
FRC Racing Products, Inc. The merger transaction resulted in FRC Racing
Products, Inc. (Iowa) becoming a wholly-owned subsidiary of the successor FRC
Racing Products, Inc. FRC Racing Products, Inc. (Iowa) was incorporated on
October 17, 1994 to manufacture, distribute and retain automotive chassis,
part and related supplies. As of April 4, 1995 the Company had not commenced
operations of its intended business and, as a result, had no operational
history. The transaction was a reverse acquisition whereby the stockholders
of FRC Racing Products, Inc. become the controlling stockholders of the
Company. This acquisition was recorded at the historical cost of the acquired
company.
In January 1995, the Company applied for a $3,000,000 loan to be
guaranteed in part by the Farmers Home Association (FMHA). The bank if
continuing to loan the Company funds based on a conditional commitment by FMHA.
Operations started during the last fiscal quarter of the fiscal year
ended June 30, 1995. However, no sales were made until the first quarter of
the fiscal year ended June 30, 1996.
Note 2. Summary of Significant Accounting Policies
BASIS OF ACCOUNTING
The Company and financial statements follow generally accepted accounting
principles.
REVENUE RECOGNITION
Revenue from sales is recognized when an order is made and the finished
product is shipped. For the year ended June 30, 1995 the Company had no
sales.
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INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in first-out method. Work in process utilizes
standard costing for labor and overhead applications.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred unless the
development can be specifically tied to a particular product or asset that is
being utilized. In that case, the development costs are capitalized and
amortized over the products useful life.
INCOME TAXES
The provision for income taxes is the total current income taxes payable
for the US and the net change in the deferred income taxes. At this time, the
Company does not have any exposure to foreign income taxes. Provision is made
for deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of income in the financial statements.
EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding for the period.
CONTINUATION AS A GOING CONCERN
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. It is management's opinion that
sufficient working capital can be raised from various sources to provide for
the on-going operation and development of the Company and allow it to develop
an effective marketing plan to achieve market penetration, provide for
continuing research and development, allow for growth to a profitable status
and acquire additional companies in related industries. However, no assurance
can be made that the necessary funding will in fact be achieved or that the
needed sales can be achieved.
ORGANIZATIONAL AND START UP COSTS
Costs incurred in connection with the incorporation and start-up of the
Company were deferred and are being amortized over five years.
PROPERTY, PLANT AND EQUIPMENT
The Company's property and equipment consists primarily of computers,
office furniture, design and layout patterns, shop machinery, equipment and a
sixty thousand square foot building. The property is stated at cost.
Depreciation expense is computed on a straight line method over the estimated
useful lives of the assets, which range from three to forty years.
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Note 3. Property and Equipment
Below is a summary of the Property, Plant and Equipment. The Company has
an option to purchase an adjacent 5 acres for $7,500 per acre.
Land, 5 acres 37,500
Building and Improvements 40 years 723,658
Machinery and Equipment 12 years 136,470
Stock Room Equipment 12 years 25,647
Office Equipment 3-7 years 42,639
Vehicles 5 years 41,370
---------
Total 1,007,284
---------
Accumulated Depreciation 12,050
---------
Net Amount 995,234
---------
Note 5. CAD Patterns, Catalogue
Below is a schedule of costs capitalized. These are amortized over their
estimated useful lives which is 5 years. Amortization is for April through
June of 1995. All Amounts represent actual expenditures.
Catalogue 66,500
Trade Show Booths and Set up 20,100
Purchased Customer Mailing Lists 12,200
Company Promotional Video 8,300
CAD Software Patterns 53,855
Total 160,955
Accumulated Amortization 8,048
-------
Net Catalogue, CAD Patterns 152,907
-------
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Note 6. Organizational Costs and Trade Name Development.
The organizational costs and trade name development costs are capitalized
and amortized over 5 years. All amounts represent actual expenditures.
Amortization is for April through June of 1995.
Organizational Costs 88,680
Accumulated Amortization 4,434
------
Net Organizational Costs 84,246
------
Trade Name Development 36,400
Accumulated Amortization 1,820
------
Net Trade Name Development 34,580
------
Note 7. Bank Debt.
The Company purchased its present building from the West Union
Development Corp. for $500,000 in April 1995. The Farmers Savings Bank of
West Union Iowa financed this purchase plus an additional $100,000 to begin
building improvements. These loans are interest only paid monthly for twelve
months. The amortization of the loan is for 30 years. The building is the
collateral for the loan.
Building Prime + 1.25% $500,000
Build Out Prime + 1.25% 100,000
Accrued interest 11,795
--------
Total Bank Debt $611,795
--------
Note 10. Related Party Transactions.
The Company purchases OEM subcomponents from a company owned by a
director. A director has loaned the Company funds prior to the obtaining of
the bank loan. Two officers and directors have $1,000,000 of file insurance
with the bank as the beneficiary as a requirement for the bank loan. Two
directors have personally guaranteed the bank loan.
Note 11. Subsequent events.
On June 29, 1996 the Company signed a letter of intent with X-L
Specialized Trailers, Inc. of Oelwein, Iowa to purchase 100% of their company
stock for $350,000 cash and 1,500,000 in Company restricted common stock. X-L
Specialized Trailers, Inc. manufactures flat-bed trailers and just recently
complete their first year of operation.
During the fiscal year 6/30/96 the Company borrowed from the bank an
additional $1,600,000 for the building improvements and equipment purchases.
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Note 12. Donated Capital
As part of the economic development program of Fayette County the Company
was given $117,248 to refurbish their building. These funds were paid to
subcontractors to improve the building and are listed on the depreciation
schedule with the building. These funds were booked as Property, Plant and
Equipment and Paid in Capital on the Balance Sheet.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Coopers & Lybrand L.L.P. resigned in June, 1996. Management of the
Company has subsequently engaged Mark Shelly, CPA, 110 South Mesa Drive, #1,
Mesa, Arizona 85210 (see attached audited financial statements) as of June 1,
1996. Prior to resignation, Coopers & Lybrand recommended to the Company that
it employ a controller with SEC experience. The Company anticipates retaining
such a qualified controller.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH 16(A) OF THE EXCHANGE ACT.
The following table shows the positions held by the Company's officers
and directors. The directors were appointed at inception and will serve until
the next annual meeting of the Company's stockholders, and until their
successors have been elected and have qualified. The officers were appointed
to their positions, and continue in such positions, at the discretion of the
directors.
Name Age Position Term Period Served
---- --- -------- ----- -------------
Brent A. Johnson 36 Director, CEO 4/4/95 to present
Blaine J. Blessing 35 Director, President(1) 4/4/95 to present
Robert J. Swenson 54 Director 4/4/95 to 3/11/96
John P. Shaw 32 Director, President,
CFO, and COO 5/1/96 to present
(1) Mr. Blessing resigned as President effective May 1, 1996.
BRENT JOHNSON. Mr. Johnson currently holds several business interests in
the medical and service industries. His company, Main Street Ventures
Holdings, has an interest in developing small businesses with the assistance
of Main Street's managerial and financial resources. Mr. Johnson is expected
to bring financial planing and strategic management to the Company.
BLAINE BLESSING. Mr. Blessing began in his own steel fabrication
business in 1988. Since then, Blessing Industries has grown to a 22,500
square foot production facility and is one of the largest employers in Iowa's
Fayette County. Blessing Industries produces many key components for several
fortune 500 Companies, and has received numerous quality awards. Mr. Blessing
has over ten years of race car driving experience in the short oval dirt track
circuit.
19
<PAGE>
ROBERT SWENSON. Mr. Swenson spent more than twenty years with Northwest
Airlines in various management and supervisory positions, as well as planning
new financial ventures. He is expected to contribute to the management and
personnel strategies of the Company.
JOHN SHAW. Mr. Shaw is President of the Company and serves a dual role
as Chief Financial Officer and Chief Operating Officer at the Company. He is
a graduate of the University of Iowa MBA program and has expertise in
corporate finance, business management, and strategic planning. Mr. Shaw has
worked in the investment banking and retail industries, and has over ten years
of management experience at companies including Walgreens and Metropolitan
Life.
ITEM 10. EXECUTIVE COMPENSATION.
The following tables sets forth Executive Compensation:
<TABLE>
<CAPTION>
NAME AND YEAR SALARY BONUS ($) OTHER RESTRICTED SECURITIES LTIP OTHER
PRINCIPAL ($) ANNUAL STOCK UNDERLYING PAYOUT
POSITION COMP. ($) AWARDS ($) OPTIONS/SAR
- --------- ---- ------ --------- --------- ---------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BRENT 1994
JOHNSON -
CEO
1995
1996
BLAINE 1994
BLESINGS,
DIR. 1995
1996
JOHN SHAW, 1994 N/A N/A *5,OOO * *2%
CFO, COO SHARES A CAPITAL
1995 N/A N/A MONTH RAISED
1996 42,000 UNTIL APRIL,
1998
</TABLE>
* Since these shares are restricted and there is no readily available market
and the fair market value is difficult to determine. However, the management
of the Company estimates that the current fair market value of the shares are
$.75 per share. As of June 30, 1996, John Shaw owns 110,000 restricted
shares. The Company does not anticipate paying dividends on any restricted
shares in the foreseeable future.
** The Company has an informal letter employment arrangement with John Shaw
that provides, in addition to 5,000 shares a month, in outline fashion, for a
bonus to be paid quarterly based upon the amount of new capital raised by the
Company. The final and complete details of this employment and equity interest
with the Company have yet to be completely finalized and negotiated. However,
such compensation will not exceed 2% of additional capital raised by the Firm.
20
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of June 30, 1995, there were no beneficial ownership of Shares by each
person known by the Companies to own five percent or more of the outstanding
Shares, by each of the directors and by the officers and directors as a group.
The following table sets forth information regarding the beneficial
ownership of Shares by each person known by the Companies to own five percent
or more of the outstanding Shares, by each of the directors and by the
officers and directors as a group, AFTER June 30, 1995.
<TABLE>
<CAPTION>
Name and Address Amount of
Title of Class of Beneficial Owner Beneficial Ownership % of Class
- -------------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock Brent Johnson(1) 1,293,560 10.2%
15004 Keller Lake Drive
Burnsville, Minnesota 55306
</TABLE>
(1) Main Street Ventures Holdings, Inc. is a private corporation. The
majority of its shares (94%) are owned by Mr. Brent Johnson. Mr. Johnson
beneficially owns shares owned by Main Street Venture Holdings, Inc. in that
he has the power to vote or direct voting of the shares and the power to
dispose of or to direct the disposition of shares. Similarly, Home Care
Helping Hands, Inc. is a private corporation in which Mr. Johnson owns 94% of
the shares. Mr. Johnson beneficially owns shares owned by Home Care Helping
Hands, Inc. in that he has the power to vote or direct voting of the shares
and the power to dispose of or to direct the disposition of shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
No officer, director, nominee for election as a director, or associate of
such officer, director or nominee is or has been in debt to the Company.
However, Brent Johnson, the Company's principal shareholder, has made an
undertaking, although no assurances can be made that these loans will
continue, to make loans to the Company in amounts sufficient to enable it to
satisfy its vital obligations, and to commence, on a limited basis, the
process of developing the Company's business. The loans will be interest
bearing and are intended to be repaid at a future date. The loans are
intended to provide the payment of on-going operating expenses.
In addition, the Company has had the following transactions:
a. Effective April 4, 1995, the Company entered into a Stock Exchange
Agreement whereby the Company issued 4,450,000 common shares to
Brent Johnson and Blaine Blessing, respectively, in exchange for
all the outstanding common shares of FRC Racing Products, Inc. (Iowa).
b. Effective April 6, 1995, the Company issued 200,000 common shares to
Brent Johnson and Blaine Blessing, respectively, in consideration for
organization and founding efforts by Johnson and Blessing.
21
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
Financial Statements - June 30, 1995, 1994 and 1993
REPORTS ON FORM 8-K.
There was one report on Form 8-K filed during the fiscal year ending
June 30, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FRC RACING PRODUCTS, INC.
By: /s/ Brent A. Johnson
Brent A. Johnson, Chief Executive Officer
DATE: July 11, 1996
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 date indicated.
FRC RACING PRODUCTS, INC.
By: /s/ Brent A. Johnson
Brent A. Johnson, Director, Chief Executive
Officer
By: /s/ Blaine J. Blessing
Blaine J. Blessing, Director
By: /s/ John P. Shaw
John P. Shaw, Director, Chief Financial
Officer, Chief Operations Officer
DATE: July 11, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 77,378
<SECURITIES> 0
<RECEIVABLES> 4,780
<ALLOWANCES> 0
<INVENTORY> 142,908
<CURRENT-ASSETS> 232,612
<PP&E> 995,234
<DEPRECIATION> 12,050
<TOTAL-ASSETS> 1,499,579
<CURRENT-LIABILITIES> 183,196
<BONDS> 0
0
0
<COMMON> 9,900
<OTHER-SE> 743,196
<TOTAL-LIABILITY-AND-EQUITY> 1,499,579
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 36,230
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (36,230)
<INCOME-TAX> 0
<INCOME-CONTINUING> (36,230)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,230)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
