UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
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 December 31, 2005
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to ________
AMERICAN RACING CAPITAL, INC.
------------------------------
(Exact name of registrant as specified in charter)
Nevada 87-0631750
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
P.O. Box 563, Zephyr Cove, NV 89448
-----------------------------------
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (800) 914-3177
Securities registered pursuant to Section 12(g) of the Act:
Title of each class None
Name of each exchange on which registered None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.001 per
share
Check whether the Issuer (1 ) filed all reports required to be filed by section
13 or 15 (d) of the Exchange Act during the past 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. 1. Yes |_| No |X|
2. Yes |_| No |X|
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant'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|
State Issuer's Revenues for its most recent fiscal year: $88,989
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days.
The market value of shares held by nonaffiliates is $239,281 based on the bid
price of $0.25 per share at August 29, 2006.
As of August 29, 2005, the Company had 27,791,398 shares of common stock issued
and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
PART I...............................................................................................1
ITEM 1. DESCRIPTION OF BUSINESS..................................................................1
ITEM 2. DESCRIPTION OF PROPERTIES................................................................5
ITEM 3. LEGAL PROCEEDINGS........................................................................5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS....................................5
PART II..............................................................................................6
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.................................6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION................................7
ITEM 7. FINANCIAL STATEMENTS....................................................................10
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE....10
ITEM 8A. CONTROLS AND PROCEDURES................................................................10
ITEM 8B. OTHER INFORMATION......................................................................10
PART III............................................................................................11
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT................................................................11
ITEM 10. EXECUTIVE COMPENSATION.................................................................12
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........................13
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................................14
ITEM 13. EXHIBITS...............................................................................15
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.................................................16
i
PART I
Forward-Looking Statements
This Form 10-KSB contains "forward-looking statements" relating to
American Racing Capital, Inc. (formerly Altrimega Health Corporation) (the
"Company") which represent the Company's current expectations or beliefs
including, but not limited to, statements concerning the Company's operations,
performance, financial condition and growth. For this purpose, any statements
contained in this Form 10-KSB that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "anticipation", "intend", "could", "estimate", or
"continue" or the negative or other comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, such as losses, dependence on management,
variability of quarterly results, and the ability of ARC to continue its growth
strategy and competition, certain of which are beyond the Company's control.
Should one or more of these risks or uncertainties materialize or should the
underlying assumptions prove incorrect, actual outcomes and results could differ
materially from those indicated in the forward-looking statements.
Any forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to update any
forward-looking statement or statements to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of
unanticipated events. 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 those
contained in any forward-looking statements.
ITEM 1. DESCRIPTION OF BUSINESS
History And Organization
General
American Racing Capital, Inc. (the "Company") incorporated under the laws
of the State of Nevada on September 8, 1998 as Mega Health Corporation. On June
23, 1999, the name of the corporation was changed to Altrimega Health
Corporation ("Altrimega"). On July 25, 2002, the Company entered into a
non-binding letter of intent with Creative Holdings, Inc., a South Carolina
corporation. Pursuant to that Letter of Intent and upon the consummation of a
definitive agreement, Altrimega was to acquire Creative Holdings, Inc. A Merger
Agreement was executed on August 15, 2002, between the Company, Altrimega
Acquisition Company, a Nevada corporation, Creative Holdings, Inc., a South
Carolina corporation and the shareholders of Creative Holdings, Inc. On
September 2, 2002, the Company, Creative Holdings and the shareholders of
Creative Holdings, Inc. amended the Merger Agreement and restructured the merger
into a stock exchange transaction, whereby Creative Holdings would become a
wholly-owned subsidiary of the Company. The share exchange was completed on
October 17, 2002, at which time, Creative Holdings, Inc. became a wholly owned
subsidiary of the Company.
Pursuant to the Share Exchange Agreement (effective retroactively as of
August 15, 2002), by and among the Company, Creative Holdings, Inc. and the
shareholders of Creative Holdings, Inc., the shareholders exchanged with and
delivered to the Company 100% of the issued and outstanding capital stock of
Creative Holdings in exchange for 20,000,000 shares of common stock of the
Company and 1,000,000 shares of Series A Convertible Preferred Stock of the
Company. Each share of Series A Convertible Preferred Stock was convertible into
300 shares of common stock of the Company. Between December 21, 2004 and January
5, 2005, the Company entered into releases with each holder of the Company's
1,000,000 shares of Series A Preferred Stock, which resulted in the cancellation
of all of the Company's outstanding shares of Series A Preferred Stock.
On October 17, 2005, the Company entered into a Share Exchange Agreement,
by and among the Company, American Racing Capital, Inc., a Nevada company
("ARCI") and the shareholders of ARCI, pursuant to which, the ARCI Shareholders
exchanged with, and delivered to the Company all of the issued and outstanding
common stock of ARCI in exchange for 150,000,000 shares of the Company's Common
Stock and 1,000,000 shares of Series A Preferred Stock, which can be converted
at any time into three hundred (300) fully paid, nonassessable shares of the
Company's Common Stock. As a result of the Share Exchange Agreement, on October
19, 2005, ARCI became a wholly-owned subsidiary of the Company.
1
On October 18, 2005, the Company entered into a Share Exchange Agreement,
by and among the Company, ARC Development Corporation, a Nevada corporation
("ARCD") and the shareholders of ARCD. Pursuant to the Share Exchange Agreement,
the ARCD Shareholders exchanged with, and delivered to, ARC the issued and
outstanding common stock of ARCD in exchange for 235,000,000 shares of the
Company's Common Stock, and 1,000,000 shares of Series A Preferred Stock, which
can be converted at any time into three hundred (300) fully paid, nonassessable
shares of the Company's Common Stock. As a result of the Share Exchange
Agreement, on October 19, 2005, ARCD became a wholly-owned subsidiary of the
Company.
As a result of the share exchange transactions, in October 2005, the
Company adopted a new strategy which seeks to integrate race track design and
development operations with a professional racing team and a national driving
school network to leverage the popularity and growth of the motor sports
industry.
On March 20, 2006, the Board of Directors of the Company, in lieu of a
special meeting and pursuant to unanimous written consent, approved a one for
one hundred (1-for-100) reverse stock split (the "Reverse Stock Split") of the
Company's issued and outstanding, which became effective on March 30, 2006 (the
"Effective Date"). On the Effective Date, the Company's issued and outstanding
Common Stock was reduced based on the 1-for-100 ratio and the new symbol for the
Company was changed to `ANRC'.
Business Operations
On October 17, 2005, the Company entered into a Share Exchange Agreement,
by and among the Company, ARCI and the shareholders of ARCI, pursuant to which,
the ARCI Shareholders exchanged with, and delivered to the Company all of the
issued and outstanding common stock of ARCI in exchange for 150,000,000 shares
of the Company's Common Stock and 1,000,000 shares of Series A Preferred Stock.
As a result of the Share Exchange Agreement, the shareholders of Fast One, Inc.,
DJ Motorsports, Inc. and ARCI became the controlling shareholders of the
Company. Fast One, Inc. and DJ Motorsports, Inc. were operating entities in the
race track design, development and track management.
In 2006, the Company intends to operate in the following areas of business
of the motor sports industry:
o Race track design and development;
o Race track management;
o Motor sports marketing, event hosting and sponsorship services;
o Product licensing;
o Driver development; and
o Education driving concepts.
Competition
There is increased competition in the field motor sports and motor sports
racing and entertainment. The field has in the recent past enjoyed vibrant
growth of interest. Management believes that increased popular interest in this
field has created demand for additional services, such as those provided or
intended to be provided by the Company. If these growth trends continue, the
Company believes that there should be adequate demand for the Company's
services.
In respect to how the Company's competitive position as compared to other
motor sports development companies in this geographic region, management
believes that our position is considerably weaker than most other companies
because of our limited ability to raise funds. The lack of capital causes the
Company to not be able to participate in many projects that are identified.
Employees
Prior to the share exchange transactions with ARCI and ARCD in October
2005, the Company had one employee, John W. Gandy. Mr. Gandy served as the
Company's President and Chief Operating Officer until November 18, 2005.
As of August 29, 2006, the Company has two employees. Mr. D. Davy Jones is
the Company's President and Chief Executive Officer. Mr. Robert A. Koveleski is
the Company's Vice-President and Interim Principal Accounting Officer. As of
December 31, 2005, the Company did not enter into formal employment agreements
with Messrs. Jones and Koveleski. As of the date of the filing of this Amendment
No. 1 to the Annual Report, the Company has not yet entered into any definitive
employment agreements with Messrs. Jones and Koveleski, but it plans to do so in
the near future.
2
RISK FACTORS
Risks Related To Our Business
We are subject to various risks that may materially harm our business,
financial condition and results of operations. You should carefully consider the
risks and uncertainties described below and the other information in this filing
before deciding to purchase our common stock. If any of these risks or
uncertainties actually occurs, our business, financial condition or operating
results could be materially harmed. In that case, the trading price of our
common stock could decline.
We Have Historically Lost Money And Losses May Continue In The Future, And This
May Adversely Impact Our Business
Since our inception, through December 31, 2005 we have not been profitable
and have lost money on both a cash and non-cash basis. For the year ended
December 31, 2005, we recorded a loss of operations of $120,635. Our accumulated
deficit was $175,440 as of December 31, 2005. Future losses are likely to occur,
as we are dependent on spending money to evaluate and pursue motor sports
development projects. No assurances can be given that we will be successful in
reaching or maintaining profitable operations. Accordingly, we may continue to
experience liquidity and cash flow problems.
We Will Most Likely Need To Raise Additional Capital Or Debt Funding To Sustain
Operations, And Our Inability To Obtain Adequate Financing May Result In Us
Curtailing Our Business Operations
Unless we can become profitable with the existing sources of funds, we
will require additional capital to sustain operations and may need access to
additional capital or additional debt financing to grow. In addition, to the
extent that we have a working capital deficit and we will need to raise capital
to repay the deficit and provide more working capital to permit growth in
revenues. We cannot assure you that financing whether from external sources or
related parties will be available if needed or on favorable terms. Our inability
to obtain adequate financing will result in the need to reduce the pace of
business operations. Any of these events could be materially harmful to our
business and may result in a lower stock price.
We Have Been The Subject Of A Going Concern Opinion From December 31, 2005 From
Our Independent Auditors, Which Means That We May Not Be Able To Continue
Operations Unless We Can Become Profitable or Obtain Additional Funding
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with our financial statements for the year
ended December 31, 2005, which states that the financial statements raise
substantial doubt as to our ability to continue as a going concern. Our ability
to make operations profitable or obtain additional funding will determine our
ability to continue as a going concern. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty. We will
have to raise additional funds to meet our current obligations and to cover
operating expenses through the year ending December 31, 2006. If we are not
successful in raising additional capital we may not be able to continue as a
going concern.
We Are Subject To A Working Capital Deficit, Which Means That Our Current Assets
On December 31, 2005 Were Not Sufficient To Satisfy Our Current Liabilities
We had a working capital deficit of $173,465 at December 31, 2005, which
means that our current liabilities as of that date exceeded our current assets
on December 31, 2003 by $173,465. Current assets are assets that are expected to
be converted to cash within one year and, therefore, may be used to pay current
liabilities as they become due. Our working capital deficit means that our
current assets on December 31, 2005 were not sufficient to satisfy all of our
current liabilities on that date. We will have to raise capital or debt to fund
the deficit or cease operations.
Our Common Stock May Be Affected By Limited Trading Volume And May Fluctuate
Significantly, And This May Adversely Affect Your Investment
There has been a limited public market for our common stock and there can
be no assurance that a more active trading market for our common stock will
develop. An absence of an active trading market could adversely affect our
shareholders' ability to sell our common stock in short time periods, or
possibly at all. Our common stock has experienced in the past, and is likely to
experience in the future, significant price and volume fluctuations, which could
adversely affect the market price of our common stock without regard to our
operating performance. In addition, we believe that factors such as changes in
the overall economy or the condition of the financial markets could cause the
price of our common stock to fluctuate substantially. These fluctuations may
also cause short sellers to enter the market from time to time in the belief
that we will have poor results in the future. We cannot predict the actions of
market participants and, therefore, can offer no assurances that the market for
our stock will be stable or appreciate over time.
3
Our Common Stock Is Deemed To Be "Penny Stock," Which May Make It More Difficult
For Investors To Sell Their Shares Due To Suitability Requirements
Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934, as amended.
These requirements may reduce the potential market for our common stock by
reducing the number of potential investors. This may make it more difficult for
investors in our common stock to sell shares to third parties or to otherwise
dispose of them. This could cause our stock price to decline. Penny stocks are
stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the NASDAQ automated quotation system
(NASDAQ listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$10.0 million (if in continuous operation for less than three
years), or with average revenues of less than $6.0 million for the
last three years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.
Our Limited Operating History Makes It Difficult Or Impossible To Evaluate Our
Performance And Make Predictions About Our Future
Since October 2005, we have entered into discussions with third parties
with respect to several motor sports projects, yet no projects have been
finalized as of the date of this filing. Due to our limited operating history,
it is difficult to make an evaluation of our future performance can be made. You
should be aware of the difficulties normally encountered by motorsports
companies similarly situated to us and the high rate of failure of such
enterprises. If we do not successfully address the risks facing us, then our
future business prospects will be significantly limited and, as a result, the
trading price of our common stock would likely decline significantly. You should
consider the likelihood of our future success in view of our limited operating
history, as well as the complications frequently encountered by other companies
in the early stages of development. If we encounter problems, additional costs,
difficulties, complications or delays in connection with our motorsports
activities, it will have a material adverse effect on its business, results of
operations and financial condition, and as a result, its business could fail.
Additional Financing May Potentially Dilute The Value Of Our Stockholders'
Shares
We will need to raise additional capital to fund our anticipated future
expansion and implement our business plan. Any additional financing may also
involve dilution to our then-existing stockholders, which could result in a
decrease in the price of our common stock.
We Depend On Key Personnel And Our Failure To Attract Or Retain Key Personnel
Could Harm Our Business
Our success largely depends on the efforts and abilities of key executives
and consultants, including D. Davy Jones, our President and Chief Executive
Officer, and A. Robert Koveleski, our Vice-President and Interim Principal
Accounting Officer. The loss of the services of Messrs. Jones and Koveleski
could materially harm our business because of the cost and time necessary to
replace and train a replacement. Such a loss would also divert management
attention away from operational issues. We presently maintain a key-man life
insurance policy on Mr. Jones.
4
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's corporate offices are located in the home of the Company's
president at Gardnerville, Nevada. The Company is currently seeking to relocate
into a new executive office.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On January 11, 2005, the Company submitted a Preliminary Information
Statement on Schedule 14C (the "Preliminary Information Statement") setting
forth the following three proposals: (1) an amendment to the Company's articles
of incorporation to change the name of the Company to `Top Gun Sports &
Entertainment, Inc.'; (2) a request to authorize a 1-for-1000 reverse stock
split of the Company's outstanding common stock as of the Record Date as set
forth in the Information Statement; and (3) the election of three directors to
the Board of Directors. However, after the filing of the Preliminary Information
Statement, the Company did not proceed with the filing on Definitive Information
Statement on Schedule 14C to formally adopt these proposals. On May 9, 2005, the
Board of Directors of the Company terminated that certain Share Exchange
Agreement, dated December 17, 2004, by and between the Company and Top Gun,
pursuant to which the Company filed the Preliminary Information Statement.
5
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock has been quoted on the NASD's OTC Bulletin Board since
November 1, 2000. The table below sets forth, for the respective periods
indicated, the prices for our common stock in the over-the-counter market as
reported by the NASD's OTC Bulletin Board.
As of August 29, 2006, the Company has 27,791,398 shares of common stock
and 2,000,000 shares of preferred stock outstanding. The Company's authorized
capital stock consists of 500,000,000 shares of common stock and 10,000,000
shares of preferred stock.
The following table reflects high and low quarterly bid prices for the
fiscal year ended December 31, 2005, and the subsequent period up to the filing
of this Amendment No. 1 to the Annual Report. This information has been provided
to the Company by Pink Sheets, LLC. These quotations reflect inter-dealer
prices, without retail mark-ups or mark-downs or commissions. These quotations
may not necessarily reflect actual transactions.
YEAR 2004 High Bid Low Bid
-------------------------------------------- --------- ---------
1st Quarter Ended March 31 $0.010 $0.0050
2nd Quarter Ended June 30 $0.005 $0.0020
3rd Quarter Ended September 31 $0.007 $0.0010
4th Quarter Ended December 31 $0.016 $0.0023
YEAR 2005 High Bid Low Bid
-------------------------------------------- --------- ---------
1st Quarter Ended March 31 $0.0045 $0.0023
2nd Quarter Ended June 30 $0.005 $0.0020
3rd Quarter Ended September 31 $0.082 $0.0033
4th Quarter Ended December 31 $0.110 $0.0071
YEAR 2006 High Bid Low Bid
-------------------------------------------- --------- ---------
1st Quarter Ended March 31 $0.013 $0.003
March 30 to March 31 (after 1 for 100 $0.310 $0.250
reverse split)
3rd Quarter Ended June 30, 2006 $0.300 $0.180
Period ended August 29, 2006 $0.350 $0.200
At August 29, 2006, we had approximately 93 shareholders of record.
Dividends
The Company has not declared or paid cash dividends since its inception
and do not anticipate paying such dividends in the foreseeable future. The
payment of dividends may be made at the discretion of the Board of Directors and
will depend upon, among other factors, on the Company's operations, capital
requirements, and overall financial condition.
Recent Sales of Unregistered Securities
During the year ended December 31, 2005, the Company issued the following
unregistered securities:
In connection with the consummation of the Company's share exchange
transactions with the shareholder of ARCI and ARCD, the Company issued
150,000,00 shares of common stock and 1,000,000 shares of Series A Convertible
Preferred Stock to the stockholders of ARCI, and 235,000,000 shares of common
stock and 1,000,000 shares of Series A Convertible Preferred Stock to the
stockholders of ARCD.
6
Securities Authorized For Issuance Under Equity Compensation Plan
The following table sets forth the securities that have been authorized
under equity compensation plans as of December 31, 2005.
Number
Of Securities
Remaining
Available
Number For Future
Of Securities Issuance
To Be Issued Weighted-Average Under Equity
Upon Exercise Exercise Price Compensation Plans
Of Outstanding Of Outstanding (Excluding
Options, Options, Securities
Warrants And Warrants And Reflected
Rights Rights In Column (a))
------------- -------------- ------------------
(a) (b) (c)
------------- -------------- ------------------
Equity compensation plans approved by security holders 0 -- 0
Equity compensation plans not approved by security holders 0 -- 0
TOTAL 0 -- 0
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
General
When used in this Form 10-KSB, the words "anticipated", "estimate",
"expect", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks, uncertainties and
assumptions including the possibility that the Company will fail to generate
projected revenues. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated or projected.
The following discussion of the financial condition, changes in financial
condition and results of operation of the Company for the fiscal years ended
December 31, 2005 and December 31, 2004 should be read in conjunction with the
financial statements of the Company and related notes included therein.
Going Concern
As reflected in the Company's financial statements for the twelve months
ended December 31, 2005, the Company's accumulated deficit of $175,440 and its
working capital deficiency of $173,465 raise substantial doubt about its ability
to continue as a going concern. The ability of the Company to continue as a
going concern is dependent on the Company's ability to raise additional debt or
capital. The financial statements for December 31, 2005 do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
Critical Accounting Policies And Estimates
Management's discussion and analysis of the Company's financial condition
and results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires that we make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses. At each
balance sheet date, management evaluates its estimates. The Company based its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions. The estimates
and critical accounting policies that are most important in fully understanding
and evaluating our financial condition and results of operations include those
listed below.
Revenue Recognition
The Company recognizes revenue when services have been provided and
collection is reasonably assured.
7
Stock-based compensation
The Company has traditionally accounted for stock-based compensation under
the recognition and measurement principles of APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. Accordingly, no
compensation cost is recognized in the financial statements, when options
granted under those plans have an exercise price equal to or greater than the
market value of the underlying common stock on the date of grant. The Company
issued no compensatory options to its employees during the years ended December
31, 2005 and 2004.
In December 2005, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123R, although this statement had no effect
on the Company's 2005 financial statements.
Principals of Consolidation
On October 17, 2005, the Company entered into a Share Exchange Agreement,
by and among the Company, ARCI and the shareholders of ARCI, pursuant to which,
the ARCI Shareholders exchanged with, and delivered to the Company all of the
issued and outstanding common stock of ARCI in exchange for 150,000,000 shares
of the Company's Common Stock and 1,000,000 shares of Series A Preferred Stock,
which can be converted at any time into three hundred (300) fully paid,
nonassessable shares of the Company's Common Stock. As a result of the Share
Exchange Agreement, on October 19, 2005, ARCI became a wholly-owned subsidiary
of the Company. The shareholders of Fast One, Inc., DJ Motorsports, Inc. and
ARCI became the controlling shareholders of the Company. Accordingly, the
financial statements of Fast One, Inc., DJ Motorsports, Inc. and ARCI are
presented as the historical financial statements of the Company. The
consolidated financial statements shown in this report include the historical
operating information of the Fast One, Inc., DJ Motorsports, Inc. and ARCI.
All intercompany transactions have been eliminated.
Results Of Operations For The Year Ended December 31, 2005, Compared To The Year
Ended December 31, 2004
Revenues
Revenue for the year ended December 31, 2005, was $88,989 an increase of
$47,063, or 12.25% as compared to $41,926 in revenue for the year ended December
31, 2004. The increase in revenues in 2005 was attributable to increased
contracts for consulting services in DJ Motorsports, Inc. The Company
anticipates revenues for the fiscal year ending 2006 to consist consulting fees
to the motor sports industry.
Operating Expenses. Operating expenses for the year ended December 31,
2005 were $209,624, or 235% of revenue as compared to December 31, 2004, where
operating expenses were $45,015, or 107% of revenue. Operating expenses in 2004
consisted of $49,650 in legal and professional fees, $25,000 in salaries and
wages and $131,940 in general and administrative expenses. The increase of
$164,509 from 2004 to 2005 was almost entirely attributable to increased
activity to develop our motor sports consulting business.
Net Income. The Company had a net loss of $120,635 for the fiscal year
ended December 31, 2005, as compared to a net loss of $3,089 for the fiscal year
ended December 31, 2004. This increase of 380% was mostly attributable to
increased activity to develop the Company's motor sports consulting business.
Liquidity And Capital Resources
The Company's financial statements have been prepared on a going concern
basis that contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The Company's
incurred a net loss from operations of $120,635 and a net loss of $3,089 for the
years ended December 31, 2005 and December 31, 2004, respectively, and have an
accumulated deficit of $175,440 at December 31, 2005. As of December 31, 2004,
the Company's had assets of $1,167 and liabilities of $173,465, a difference of
$172,298. Management recognizes that the Company must generate or obtain
additional capital to enable it to continue operations. The realization of
assets and satisfaction of liabilities in the normal course of business is
dependent upon the Company's obtaining additional equity capital and ultimately
obtaining profitable operations. However, no assurances can be given that the
Company will be successful in these activities. Should any of these events not
occur, the accompanying consolidated financial statements will be materially
affected.
8
The Company incurred losses since inception until fiscal year ended
December 31, 2005. Since October 2005, any shortfall in working capital has been
met through advances from the Company's President, Davy Jones. Prior to October,
2005, other shareholders who have advanced funds to pay expenses incurred by the
Company from time to time.
As of December 31, 2005, the Company has notes payable totaling $60,764 to
Mr. Jones' affiliate entities for funds advanced. As of December 31, 2005, the
Company has a note payable in the amount of $10,127 to Fast One, Inc. and a note
payable in the amount of $50,637 to DJ Motorsports, Inc.
Cash used by operating activities was $37,630 for the year ended December
31, 2005, compared to cash provided of $4,888 for 2004. The increase in cash
used was due primarily to the development of our motor sports consulting
business.
Cash provided by financing activities was $38,377 during fiscal year 2005,
compared to cash provided by financing activities of $1,730 during the same
period in 2004. This difference was mainly due to an increase in loan proceeds
in 2005.
Subsequent to June 30, 2006, the Company secured funding through the
issuance of notes and warrants. On July 25, 2006, the Company entered into a
Securities Purchase Agreement with New Millennium Capital Partners II, LLC, AJW
Qualified Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (collectively,
the "Investors"). Under the terms of the Securities Purchase Agreement, the
Investors purchased an aggregate of (i) $2,000,000 in callable convertible
secured notes (the "Notes") and (ii) warrants to purchase 10,000,0000 shares of
our common stock (the "Warrants"). The Notes carry an interest rate of 6% per
annum and a maturity date of July 25, 2009. The notes are convertible into the
Company's common shares at fifty percent (50%) (the "Applicable Percentage") of
the average of the lowest three (3) trading prices for our shares of common
stock during the twenty (20) trading day period prior to conversion. However,
the Applicable Percentage shall be increased to (i) 55% in the event that a
Registration Statement is filed within thirty days of the closing and (ii) 60%
in the event that the Registration Statement becomes effective within one
hundred and twenty days from the Closing. In addition, the Company has granted
the investors a security interest in substantially all of its assets and
intellectual property as well as registration rights. In connection with the
Securities Purchase Agreement, the Company issued to the Investors seven year
warrants to purchase 10,000,000 shares of our common stock at an exercise price
of $.30.
Plan Of Operation for 2006
For the initial stages, we estimate a need for $3,500,000 to $4,000,000 to
fund the first year of event and administrative operations and provide working
capital. The Company's plan of operations which seeks to integrate race track
design and development operations with a professional racing team and a national
driving school network to leverage the popularity and growth of the motor sports
industry.
Recent Accounting Pronouncements
In May 2005, the Financial Accounting Standards Board, issued Statement of
Financial Accounting Standards ("SFAS, No. 154"), "Accounting Changes and Error
Corrections," which replaces Accounting Principles Board Opinion No. 20,
"Accounting Changes," and SFAS No. 3, "Reporting Accounting Changes in Interim
Financial Statements -- An Amendment of APB Opinion No. 28". SFAS No. 154
provides guidance on accounting for and reporting changes in accounting
principle and error corrections. SFAS No. 154 requires that changes in
accounting principle be applied retrospectively to prior period financial
statements and is effective for fiscal years beginning after December 15, 2005.
The Company does not expect SFAS No. 154 to have a material impact on our
consolidated financial position, results of operations, or cash flows.
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 153. This statement addresses
the measurement of exchanges of non-monetary assets. The guidance in APB Opinion
No. 29, "Accounting for Non-monetary Transactions," is based on the principle
that exchanges of non-monetary assets should be measured based on the fair value
of the assets exchanged. The guidance in that opinion; however, included certain
exceptions to that principle. This statement amends Opinion 29 to eliminate the
exception for non-monetary exchanges of similar productive assets and replaces
it with a general exception for exchanges of non-monetary assets that do not
have commercial substance. A non-monetary exchange has commercial substance if
the future cash flows of the entity are expected to change significantly as a
result of the exchange. This statement is effective for financial statements for
fiscal years beginning after June 15, 2005. Earlier application is permitted for
non-monetary asset exchanges incurred during fiscal years beginning after the
date of this statement is issued. Management believes the adoption of this
statement will have no impact on our financial statements.
9
In December 2004, the Financial Accounting Standards Board issued a
revision to Statement of Financial Accounting Standards No. 123R, "Accounting
for Stock Based Compensations." This statement supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and its related implementation
guidance. This statement establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services. It also addresses transactions in which an entity incurs liabilities
in exchange for goods or services that are based on the fair value of the
entity's equity instruments or that may be settled by the issuance of those
equity instruments. This statement focuses primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions. This statement does not change the accounting guidance for share
based payment transactions with parties other than employees provided in
Statement of Financial Accounting Standards No. 123. This statement does not
address the accounting for employee share ownership plans, which are subject to
AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans." Management believes the adoption of this statement will have
no impact our financial statements.
In November 2004, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 151, "Inventory Costs-- an
amendment of ARB No. 43, Chapter 4". This statement amends the guidance in ARB
No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that ". . .
under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. . . ." This statement requires that those
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management believes the adoption of this statement had no material impact on the
Company.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements of the Company are audited and
attached to this report. They are incorporated in this Item 7 by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
To the Company's knowledge, the Company has had no disagreements with its
certified public accountants with respect to accounting practices or procedures
of financial disclosure. For the year ended December 31, 2005, the Company
changed its accountants to Moore & Associates, Chartered, who serve as the
auditors for its newly acquired subsidiaries, Fast One, Inc., DJ Motorsports,
Inc. and ARC, Inc., from L. L. Bradford, LLC. The Company filed a corresponding
report on Form 8-K filed by the Company on December 9, 2005 pursuant to Item
4.01 (Changes in Registrant's Certifying Accountant) whereby the Company
disclosed the dismissal of L.L. Bradford & Company, LLC as the Company's
accountant and the engagement of Moore & Associates, Chartered, as the Company's
independent auditors.
ITEM 8A. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures:
As of the end of the period covered by this Report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Chief Executive Officer and Interim Principal Accounting Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. The Company's disclosure controls and procedures are
designed to produce a reasonable level of assurance of achieving the Company's
disclosure control objectives. The Company's Chief Executive Officer and
Interim Principal Accounting Officer have concluded that the Company's
disclosure controls and procedures were, in fact, adequate and effective to
ensure that material information relating to the Company that is required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in rules of the SEC and accumulated and communicated to the Company's
management, including its Chief Executive Officer and Interim Principal
Accounting Officer, to allow timely decisions regarding required disclosure.
(b) Changes In Internal Controls Over Financial Reporting:
In connection with the evaluation of the Company's internal controls
during the Company's last fiscal year, the Company's Chief Executive Officer
and Interim Principal Accounting Officer have determined that there are no
changes to the Company's internal controls over financial reporting that has
materially affected, or is reasonably likely to materially effect, the Company's
internal controls over financial reporting.
ITEM 8B. OTHER INFORMATION
None.
10
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
General
The following table sets forth certain information regarding the
current directors and executive officers of the Company:
Position(S)
Name Age With The Company Director Since
------------------------- -------- ------------------------------- --------------
D. Davy Jones 42 President, Chief Executive October 2005
Officer and Director
A. Robert Koveleski 52 Vice-President, Principal October 2005
Accounting Officer and Director
The following information is furnished for each of the executive officers and
directors:
D. Davy Jones serves as our President and Chief Executive Officer and is
the chairman of our board of directors since October 2005. With an 18-year
career in motorsports, Mr. Jones is a championship winning, professional racing
driver with an extensive background racing open wheel and sports cars. In 1996,
Mt. Jones' last full season of active competition, he drove for two of the
sport's most highly regarded teams. He placed second at the Indianapolis 500 for
Galles Racing International and he won the 24 Hours of LeMans driving for
Porsche Team Joest. From 1999 to December 2003, Mr. Jones developed and built
Davy Jones KartZone, an indoor karting and conference center in Houston, Texas.
From 2004 to December 2005 Mr. Jones owned and operated Fast One, Inc. Fast One
is a motorsport consultant and marketing group that specializes in track design,
driver development and sponsorship relations. In October 2005, Mr. Jones joined
American Racing Capital, Inc. as its President and Chief Executive Officer.
A. Robert Koveleski serves as our Vice-President and is a member of our
board of directors since October 2005. During the past five years, Koveleski has
worked full-time in the auto racing industry contracting and consulting with;
professional race teams, racing drivers, automotive manufacturers and automotive
after-market companies. Mr. Koveleski has 30 plus years in the advertising and
marketing end of the specialty automotive market. Utilizing his racing
background, he became vice president of operations at the AutoWorld catalog mail
order house. He was also president of Camaro Connection, a catalog company which
Mr. Koveleski created and managed. During this time, he dealt with over one
hundred suppliers and printed more than a quarter million automotive hobby and
racing catalogs a year. In 1980 he purchased half interest in a racing school at
Pocono International Raceway, where he brought in sponsors and manufacturers and
promoted road races at the track. In 1986, he purchased an ownership in a car
commercial/film company.
Family Relationships
There is no family relationship between or among any Officer and Director.
Term of Office
The directors named above will serve until the next annual meeting of our
stockholders. In absence of an employment agreement, officers hold their
positions at the pleasure of the Board of Directors.
Committees of the Board of Directors
During the year ended December 30, 2005, the Company did not establish any
committees.
The Company does not currently have an audit committee, and the Board of
Directors serves this function. Both Davy Jones and A. Robert Koveleski qualify
as audit committee financial experts, as defined by Regulation S-B Item 401.
Neither Mr. Jones nor Mr. Koveleski is an independent director, as that term is
defined under the Exchange Act.
11
Code Of Ethics
On May 10, 2004, the Board of Directors of the Company adopted a written
Code of Ethics designed to deter wrongdoing and promote honest and ethical
conduct, full, fair and accurate disclosure, compliance with laws, prompt
internal reporting and accountability to adherence to the Code of Ethics. This
Code of Ethics has been filed with the Securities and Exchange Commission as an
Exhibit to this Form 10-KSB.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded by the Company for
the fiscal years ended December 31, 2004, 2005 and 2006 to the following
executives (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------------------- ------------------------------------
AWARDS PAYOUTS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
----------------------- --------- ---------- -------- ------------- --------- ------------- -------- -------------
D. Davy Jones(1) 2006 $ 12,500 0 0 0 -- -- --
President and Chief 2005 $ 0 0 0 0 -- -- --
Executive Officer
A. Robert Koveleskis(2) 2006 $ 12,500 0 0 0 -- -- --
Vice President and 2005 $ 0 0 0 0 -- -- --
Interim Principal
Accounting Officer
John W. Gandy(3) 2005 $105,000 0 0 0 -- --
President and Chief 2004 $ 15,000 0 0 0 -- --
Executive Officer
Ron Hendrix(4) 2006 $ 0 0 0 0 -- --
Chief Financial Officer 2005 $ 0 0 0 0 -- --
(1) Mr. D. Davy Jones has served as the Company's President and Chief Executive
Officer since October 2005. In July 2006, Mr. Jones and the Company entered into
an oral agreement whereby Mr. Jones would receive an annual salary of $120,000,
which compensation would commence upon the Company's obtaining funding. On July
25, 2006, upon the Company obtaining funding, Mr. Jones received $12,500 in
compensation. The Company and Mr. Jones intend to enter into a definitive
employment agreement.
(2) Mr. A. Robert Koveleski has served as the Company's Vice-President and
Interim Principal Accounting Officer since October 2005. In July 2006, Mr.
Koveleski and the Company entered into an oral agreement whereby Mr. Koveleski
would receive an annual salary of $120,000, which compensation would commence
upon the Company's obtaining funding. On July 25, 2006, upon the Company
obtaining funding, Mr. Koveleski received $12,500 in compensation. The Company
and Mr. Koveleski intend to enter into a definitive employment agreement.
(3) Mr. John W. Gandy resigned as President and Director of the Company. During
Mr. Gandy's tenure with the Company, he served as the Company's President and
Chief Executive Officer. The Company entered into an employment agreement with
Mr. Gandy in 2003, which was subsequently terminated in 2005. Mr. Gandy was to
receive an annual salary of $100,000 with a 5% increase each year to a maximum
of $125,000, if the Company had a profit in the previous year. Beginning July 1,
2003, Mr. Gandy informed the Board of Directors that he would forego any
additional salary accruals until such time as the Company improved its financial
position. In 2004, the Board of Directors voted to reinstate Mr. Gandy's salary
beginning January 31, 2005 and to pay him an accrued salary of $15,000 for the
fourth quarter of 2004. In 2005, Mr. Gandy's salary was $105,000, of which he
received $26,250 per quarter, and a pro rata amount up to his resignation from
the Company. Mr. Gandy resigned as President and Director of the Company on
November 18, 2005.
(4) On November 18, 2005, Mr. Ron E. Hendrix resigned as Chief Financial Officer
and Director of the Company. During his tenure with the Company, Mr. Hendrix was
not compensated and spent a limited amount of time in the business.
Employment Agreements
We did not enter into any employment agreements during the year ended
December 31, 2005. As described above, the Company entered into an oral
agreement with Messrs. Jones and Koveleski. Since October 2005, Mr. D. Davy
Jones has served as the Company's President and Chief Executive Officer and Mr.
A. Robert Koveleski has served as the Company's Vice-President and Interim
Principal Accounting Officer. In July 2006, the Company entered into oral
agreements with Messrs. Jones and Koveleski, whereby each executive would
receive an annual salary of $120,000, which compensation would commence upon the
Company's obtaining funding. On July 25, 2006, upon the Company obtaining
funding, Mr. Jones and Mr. Koveleski each received $12,500. The Company intends
to enter into a definitive employment Messrs. Jones and Koveleski.
12
Compensation Pursuant To Plans
For the fiscal year ended December 31, 2005, and the subsequent period up
to the date of the filing of this Amendment No. 1 to the Annual Report, the
Company did not adopt any plans, and therefore there is no compensation to the
Company's executives pursuant to a stock option plan or any other plans.
Compensation Of Directors
For the fiscal year ended December 31, 2005, and the subsequent period up
to the date of the filing of this Amendment No. 1 to the Annual Report, the
Company did not compensate directors for their services.
Termination Of Employment And Change Of Control Arrangement
The Company does not have compensatory plans or arrangements, including
payments to be received from the Company, with respect to any persons which
would in any way result in payments to any person because of his/her
resignation, retirement, or other termination of such person's employment by the
Company, or any change in our control, or a change in the person's
responsibilities following a changing in the Company's control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership Of Certain Beneficial Owners
As of August 29, 2006, there were 27,791,398 shares of our common stock
issued and 2,000,000 shares of preferred stock issued and outstanding.
The table below sets forth information with respect to the beneficial
ownership of our common stock as of August 29, 2006, a date close to the filing
of this Amendment No. 1 to the Annual Report for (i) any person who we know is
the beneficial owner of more than 5% of our outstanding common stock; (ii) each
of our directors or those nominated to be directors, and executive officers; and
(iii) all of our directors and executive officers as a group.
----------------------------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
----------------------------------------------------------------------------------------------------------------------------
Name and Address Amount and Nature of Percentage
Title of Class of Beneficial Owner Beneficial Ownership(1) of Class(2)
-------------- ------------------- ----------------------- -----------
Fairhills Capital 8,000,000 28.79%
Common 1275 Fairhills Drive
Ossining, NY 10562
SW International LLC(2) 12,000,000 43.18%
Common 401 B Street, Suite 1200
San Diego, CA 92101
(1) Applicable percentage of ownership is based on 27,791,398 shares of
common stock outstanding as of August 29, 2006 for each stockholder.
Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting of investment power with respect to
securities. Shares of common stock subject to securities exercisable or
convertible into shares of common stock that are currently exercisable
or exercisable within 60 days of August 29, 2006 are deemed to be
beneficially owned by the person holding such options for the purpose
of computing the percentage of ownership of such persons, but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) A. Robert Koveleski, our Vice President, Interim Principal Accounting
Officer, and a member of the Board of Directors, is the Managing Member
of SW International, LLC and has sole voting and investment control
over the shares.
13
Security Ownership Of Management Of American Racing Capital, Inc. (Common and
Preferred Stock)
-------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
-------------------------------------------------------------------------------------------------------
Amount and
Nature of
Name and Position Beneficial Percentage
Title of Class of Officer and/or Director Ownership(1) of Class
----------------------- --------------------------------------------- ----------------- ------------
Common
D. Davy Jones, President, CEO and Director 1,500,000 5.40%
A. Robert Koveleski, Vice President,
Interim Principal Accounting Officer
and Director 13,350,000(2) 48.03%
---------- -----
All Officers and Directors as a Group (2 Persons) 14,850,000(3) 53.43%
========== =====
(1) Applicable percentage of ownership is based on 27,791,398 shares of common
stock outstanding as of August 29, 2006 for each stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes voting of investment power with respect to securities.
Shares of common stock subject to securities exercisable or convertible
into shares of common stock that are currently exercisable or exercisable
within 60 days of August 29, 2006 are deemed to be beneficially owned by
the person holding such options for the purpose of computing the
percentage of ownership of such persons, but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) A. Robert Koveleski, our Vice President, Interim Principal Accounting
Officer, and a member of the Board of Directors, is the Managing Member of
SW International, LLC and has sole voting and investment control over the
shares.
(3) This total includes the number of shares owned by SW International, LLC,
whose Managing Member is A. Robert Koveleski.
-------------------------------------------------------------------------------------------------------
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY (Preferred Stock)
-------------------------------------------------------------------------------------------------------
Amount and
Nature of
Name and Position Beneficial Percentage of
Title of Class of Officer and/or Director Ownership Class
----------------------- --------------------------------------------- ----------------- -------------
Preferred
D. Davy Jones, President, CEO and Director 1,000,000 50.00%
A. Robert Koveleski, Vice President,
Interim Principal Accounting Officer
and Director 1,000,000 50.00%
--------- ------
All Officers and Directors as a Group (2Persons) 2,000,000 100.00%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions With Management And Others
Except as indicated below, and for the periods indicated, there were no
material transactions, or series of similar transactions, since the beginning of
the Company's last fiscal year, or any currently proposed transactions, or
series of similar transactions, to which we were or are a party, in which the
amount involved exceeds $60,000, and in which any director or executive officer,
or any security holder who is known by us to own of record or beneficially more
than 5% of any class of our common stock, or any member of the immediate family
of any of the foregoing persons, has an interest.
As of December 31, 2005, the Company has notes payable totaling $60,764 to
Mr. Jones' affiliate entities for funds advanced. As of December 31, 2005, the
Company has a note payable in the amount of $10,127 to Fast One, Inc. and a note
payable in the amount of $50,637 to DJ Motorsports, Inc.
Indebtedness Of Management
There were no material transactions, or series of similar transactions,
since the beginning of our last fiscal year, or any currently proposed
transactions, or series of similar transactions, to which we were or are a
party, in which the amount involved exceeds $60,000 and in which any director or
executive officer, or any security holder who is known to us to own of record or
beneficially more than 5% of any class of our common stock, or any member of the
immediate family of any of the foregoing persons, has an interest.
Transactions With Promoters
There have no material transactions between us and our promoters or
founders.
14
ITEM 13. EXHIBITS
(a)(1) Financial Statements. The audited financial statements for 2005 and
2004 are attached to this report.
(a)(2) Exhibits. The following exhibits are included as part of this report:
(a) Exhibits:
Exhibit Number Title of Document Location
-------------- ------------------------------------------------------ ----------------------------------------
3.2 Certificate of Designation of the Series A Incorporated by reference as Exhibit 3.2
Convertible Preferred Stock of American Racing to Form 8-K filed on December 5, 2005
Capital, Inc.
10.1 Share Exchange Agreement, dated October 17, 2005, by Incorporated by reference as Exhibit 99.1
and among the Company, American Racing Capital, to Form 8-K filed on October 17, 2005
Inc., and the shareholders of American Racing
Capital, Inc.
10.2 Share Exchange Agreement, dated October 18, 2005, by Incorporated by reference as Exhibit 99.1
and among the Company, ARC Development Corporation, to Form 8-K filed on October 19, 2005
and the shareholders of ARC Development Corporation
10.3 Securities Purchase Agreement dated July 25, 2006, Incorporated by reference as Exhibit 4.1
by and among the Company and New Millennium Capital to Form 8-K filed on August 4, 2006
Partners II, LLC, AJW Qualified Partners, LLC,
AJW Offshore, Ltd. and AJW Partners, LLC
10.4 Form of Callable Convertible Secured Note by and Incorporated by reference as Exhibit 4.2
among New Millennium Capital Partners II, LLC, AJW to Form 8-K filed on August 4, 2006
Qualified Partners, LLC, AJW Offshore, Ltd.
and AJW Partners, LLC
10.5 Form of Stock Purchase Warrant issued to New Incorporated by reference as Exhibit 4.3
Millennium Capital Partners II, LLC, AJW Qualified to Form 8-K filed on August 4, 2006
Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC
10.6 Registration Rights Agreement dated July 25, 2006 by Incorporated by reference as Exhibit 4.4
and among New Millennium Capital Partners II, LLC, to Form 8-K filed on August 4, 2006
AJW Qualified Partners, LLC, AJW Offshore,
Ltd. and AJW Partners, LLC
10.7 Security Agreement dated July 25, 2006 by and among Incorporated by reference as Exhibit 4.5
the Company and New Millennium Capital Partners II, to Form 8-K filed on August 4, 2006
LLC, AJW Qualified Partners, LLC, AJW
Offshore, Ltd. and AJW Partners, LLC
10.8 Intellectual Property Security Agreement dated July Incorporated by reference as Exhibit 4.6
25, 2006 by and among the Company and New Millennium to Form 8-K filed on August 4, 2006
Capital Partners II, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd. and AJW
Partners, LLC
15
Exhibit Number Title of Document Location
-------------- ------------------------------------------------------ ----------------------------------------
31.1 Certification by Chief Executive Officer pursuant to Provided herewith
15 U.S.C. Section 7241, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification by Interim Principal Accounting Provided herewith
Officer pursuant to 15 U.S.C. Section 7241, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification by Chief Executive Officer pursuant to Provided herewith
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification by Interim Principal Accounting Provided herewith
Officer pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Company incurred the following principal accounting fees for the year
ended December 31, 2005 and December 31, 2004.
Audit Fees. The aggregate fees billed for professional services rendered
was $10,000 each for the audits of the Company's annual financial statements for
the fiscal years ended December 31, 2005 and December 31, 2004, and the reviews
of the financial statements included in the Company's annual and quarterly
reports for those fiscal years.
Audit-Related Fees. No fees were billed in either of the last two fiscal
years for assurance and related services by the principal accountant.
Tax Fees. No fees were billed in either of the last two fiscal years for
tax compliance, tax advice of tax planning.
All Other Fees. No other fees were billed during the two fiscal years.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
September 7, 2006 AMERICAN RACING CAPITAL, INC.
By: /s/D. Davy Jones
-------------------------------------
D. Davy Jones
President, Chief Executive Officer,
and Director
By: /s/A. Robert Koveleski
-------------------------------------
A. Robert Koveleski
Vice-President, Interim Principal
Accounting Officer and Secretary
17
APPENDIX A
INDEX TO FINANCIAL STATEMENTS AND NOTES
Report of Independent Registered Public Accounting Firm................... F-1
Balance Sheets as of December 31, 2005 and 2004........................... F-2
Statements of Operations for the years ended December 31, 2005 and 2004 .. F-3
Statement of Stockholders' Equity (Deficit)............................... F-4
Statements of Cash Flows for the years ended December 31, 2005 and 2004... F-5
Notes to Financial Statements ............................................ F-6
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
American Racing Capital, Inc and subsidiaries
Las Vegas, Nevada
We have audited the accompanying balance sheet of American Racing Capital, Inc
and subsidiaries as of December 31, 2004 and 2005, and the related statements of
operations, stockholders' equity and cash flows through December 31, 2004 and
2005 and the years then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Racing Capital, Inc
and subsidiaries as of December 31, 2004 and 2005 and the results of its
operations and its cash flows through December 31, 2004 and 2005 and the years
then ended, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's net losses and accumulated deficit as of
December 31, 2004 and 2005 raises substantial doubt about its ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Moore & Associates, Chartered
Moore & Associates Chartered
Las Vegas, Nevada
August 17, 2006
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7511 Fax (702) 253-7501
F-1
AMERICAN RACING CAPITAL, INC.
Balance Sheets
ASSETS
December 31,
----------------------
2005 2004
--------- ---------
CURRENT ASSETS
Cash $ 379 $ 551
--------- ---------
Total Current Assets 379 551
--------- ---------
FIXED ASSETS, net 788 2,903
--------- ---------
TOTAL ASSETS $ 1,167 $ 3,454
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 86,201 $ 3,330
Notes payable 26,500 --
Notes payable - related parties 60,764 50,887
--------- ---------
Total Current Liabilities 173,465 54,217
--------- ---------
TOTAL LIABILITIES 173,465 54,217
--------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: 2,000,000 shares authorized;
$0.001 par value; 2,000,000 and -0- shares issued and
outstanding, respectively 2,000 --
Common stock; 25,100 shares authorized,
$1.00 par value; 4,042 shares
issued and outstanding -- 4,042
Common stock; 500,000,000 shares authorized,
$0.001 par value; 4,991,398 shares
issued and outstanding 4,991 --
Additional paid-in capital (deficit) (3,849) --
Deficit accumulated during the development stage (175,440) (54,805)
--------- ---------
Total Stockholders' Equity (Deficit) (172,298) (50,763)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,167 $ 3,454
========= =========
The accompanying notes are an integral part of these
financial statements.
F-2
AMERICAN RACING CAPITAL, INC.
Statements of Operations
For the Years Ended
December 31,
--------------------------
2005 2004
----------- -----------
REVENUES $ 88,989 $ 41,926
----------- -----------
OPERATING EXPENSES
Legal and professional 49,650 8,025
Depreciation 3,034 4,647
Salaries and wages 25,000 18,121
General and administrative 131,940 14,222
----------- -----------
Total Operating Expenses 209,624 45,015
----------- -----------
LOSS FROM OPERATIONS (120,635) (3,089)
----------- -----------
NET LOSS $ (120,635) $ (3,089)
=========== ===========
BASIC LOSS PER SHARE $ (0.03) $ (0.87)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,516,513 3,547
=========== ===========
The accompanying notes are an integral part of these
financial statements.
F-3
AMERICAN RACING CAPITAL, INC.
Statements of Stockholders' Equity (Deficit)
Preferred Stock Common Stock Additional
--------------------- --------------------- Paid In Accumulated
Shares Amount Shares Amount Capital Deficit
--------- --------- --------- --------- --------- ---------
Balance, January 1, 2004 -- $ -- 3,042 $ 3,042 $ -- $ (51,716)
Common shares issued -- -- 1,000 1,000 -- --
Net loss for the year ended
December 31, 2004 -- -- -- -- -- (3,089)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 2004 -- -- 4,042 4,042 -- (54,805)
Common shares issued -- -- 2,000 2,000 -- --
Recapitalization 2,000,000 2,000 4,985,356 (1,051) (3,849) --
Net loss for the year ended
December 31, 2005 -- -- -- -- -- (120,635)
--------- --------- --------- --------- --------- ---------
Balance, December 31, 2005 2,000,000 $ 2,000 4,991,398 $ 4,991 $ (3,849) $(175,440)
========= ========= ========= ========= ========= =========
The accompanying notes are an
integral part of these financial statements.
F-3
AMERICAN RACING CAPITAL, INC.
Statements of Cash Flows
For the Years Ended
December 31,
2005 2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(120,635) $ (3,089)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation expense 3,034 4,647
Changes in operating assets and liabilities:
Increase in accounts payable 79,971 3,330
--------- ----------
Net Cash Provided (Used) by Operating
Activities (37,630) 4,888
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (919) (6,565)
--------- ----------
Net Cash Used by Investing
Activities (919) (6,565)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - related parties 9,877 730
Proceeds from notes payable 26,500
- Common stock issued for cash 2,000 1,000
--------- ----------
Net Cash Provided by Operating
Activities 38,377 1,730
--------- ----------
NET (DECREASE) INCREASE IN CASH (172) 53
CASH AT BEGINNING OF YEAR 551 498
--------- ----------
CASH AT END OF YEAR $ 379 $ 551
========= ==========
CASH PAID FOR:
Interest $ -- $ --
Taxes $ -- $ --
The accompanying notes are an integral part of these
financial statements.
F-4
AMERICAN RACING CAPITAL, INC. Notes to the
Financial Statements December 31, 2005 and 2004
NOTE 1 - NATURE OF ORGANIZATION
a. Organization and Business Activities
The Company was incorporated on June 23, 1999, in the State of
Nevada, as Mega Health Corporation. On June 23, 1999 the name of the
corporation was changed to Altrimega Health Corporation. On
September 30, 2005, the Company changed its name to Creative
Holdings & Marketing, Inc. Finally, on October 3, 2005 the Company
changed its name to American Racing Capital, Inc.
American Racing Capital, Inc. (ARC), is a holding company for
several companies within the autoracing/motorsports industry. The
Company specializes in race track management, design, and
development, and also performs motorsports marketing, product
licensing and driver development services.
These consolidated financial statements represent the results of
operations of American Racing Capital, Inc., and its wholly-owned
subsidiaries Fast One, Inc., DJ Motorsports, Inc., and ARC, Inc.
b. Depreciation
The cost of the Company's fixed assets is being depreciated over the
estimated useful lives of the assets, which ranges from five to
seven years. Depreciation is computed using the straight-line
method, and commences when the assets are placed in service.
The following is a summary of the Company's major categories of
property and equipment at December 31, 2005:
Office equipment $ 64,500
Less accumulated depreciation (63,712)
----------
$ 788
c. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31
year-end.
d. Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company
considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
e. Revenue Recognition
The Company recognizes revenue when services have been provided and
collection is reasonably assured.
F-5
AMERICAN RACING CAPITAL, INC. Notes to the
Financial Statements December 31, 2005 and 2004
NOTE 1 - NATURE OF ORGANIZATION (Continued
f. 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
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
g. Organization Costs
The Company has expensed the costs of its incorporation.
h. Advertising
The Company follows the policy of charging the costs of advertising
to expense as incurred.
i. Basic Loss Per Share
The Computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period.
For the year ended For the year ended
December 31, 2005 December 31, 2004
----------- -----------
Loss (numerator) $ (120,635) $ (3,089)
Shares (denominator) 4,516,513 3,547
----------- -----------
Per share amount $ (0.03) $ (0.87)
=========== ===========
j. Newly Issued Accounting Pronouncements
During the year ended December 31, 2005, the Company adopted the
following accounting pronouncements:
In May 2005, the Financial Accounting Standards Board, issued
Statement of Financial Accounting Standards ("SFAS, No. 154"),
"Accounting Changes and Error Corrections," which replaces
Accounting Principles Board Opinion No. 20, "Accounting Changes,"
and SFAS No. 3, "Reporting Accounting Changes in Interim Financial
Statements -- An Amendment of APB Opinion No. 28". SFAS No. 154
provides guidance on accounting for and reporting changes in
accounting principle and error corrections. SFAS No. 154 requires
that changes in accounting principle be applied retrospectively to
prior period financial statements and is effective for fiscal years
beginning after December 15, 2005. The Company does not expect SFAS
No. 154 to have a material impact on our consolidated financial
position, results of operations, or cash flows.
F-6
AMERICAN RACING CAPITAL, INC. Notes to the
Financial Statements December 31, 2005 and 2004
NOTE 1 - NATURE OF ORGANIZATION (Continued)
j. Newly Issued Accounting Pronouncements (Continued)
In February 2006, the FASB issued Statement No. 155, "Accounting for
Certain Hybrid Financial Instruments", an amendment of FASB Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" and
FASB Statement No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." This Statement
permits fair value remeasurement for any hybrid financial instrument that
contains an embedded derivative that otherwise would require bifurcation;
clarifies which interest-only strips and principal-only strips are not
subject to the requirements of Statement No. 133, establishes a
requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or that are hybrid
financial instruments that contain an embedded derivative requiring
bifurcation; clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives and amends Statement 140 to
eliminate the prohibition on a qualifying special-purpose entity from
holding a derivative financial instrument that pertains to a beneficial
interest other than another derivative financial instrument. This
Statement is effective for accounting changes and corrections of errors
made in fiscal periods that begin after September 15, 2006. Management
does not anticipate this Statement will impact the Company's consolidated
financial position or consolidated results of operations and cash flows.
In March 2006, the FASB issued Statement No. 156, "Accounting for
Servicing of Financial Assets", an amendment of FASB Statement No. 140,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This Statement amends Statement No. 140
with respect to the accounting for separately recognized servicing assets
and servicing liabilities. This Statement is effective for accounting
changes and corrections of errors made in fiscal periods that begin after
September 15, 2006. Management does not anticipate this Statement will
impact the Company's consolidated financial position or consolidated
results of operations and cash flows.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. The Company has generated significant losses from operations.
In order to continue as a going concern and achieve a profitable level of
operations, the Company will need, among other things, additional capital
resources and developing a consistent source of revenues. Management's
plans include raising additional operating funds from the private
placement of shares of its common stock.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plan described in the
preceding paragraph and eventually attain profitable operations. The
accompanying financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
F-7
AMERICAN RACING CAPITAL, INC. Notes to the
Financial Statements December 31, 2005 and 2004
NOTE 3 - SIGNIFICANT EVENTS
The Company entered into a Share Exchange Agreement, dated October 17,
2005, by and among the Company, American Racing Capital, Inc., a Nevada
corporation ("ARCI") and the shareholders of ARCI (the "ARCI
Shareholders"). Pursuant the Share Exchange Agreement, the ARCI
Shareholders exchanged with, and delivered to the Company all of the
issued and outstanding common stock of ARCI in exchange for 1,500,000
shares of the Company's common stock, par value $0.001 (the "Common
Stock") and 1,000,000 shares of Series A Convertible Preferred Stock, par
value $0.001 per share (the "Series A Preferred Stock"). The 1,000,000
shares of Series A Preferred Stock can be converted at any time into three
hundred (300) fully paid, nonassessable shares of the Company's Common
Stock. As a result of the Share Exchange Agreement, and upon the filing of
the required Plan and Exchange with the Secretary of State of the State of
Nevada on October 19, 2005, ARCI became a wholly-owned subsidiary of the
Company. On October 18, 2005, the Company entered into a Share Exchange
Agreement, by and among the Company, ARC Development Corporation, a Nevada
corporation ("ARCD") and the shareholders of ARCD (the "ARCD
Shareholders"). Pursuant to the Share Exchange Agreement, the ARCD
Shareholders exchanged with, and delivered to, ARC the issued and
outstanding common stock of ARCD in exchange for 2,350,000 shares of the
Company's Common Stock, and 1,000,000 shares of Series A Preferred Stock,
which can be converted at any time into three hundred (300) fully paid,
nonassessable shares of the Company's Common Stock. As a result of the
Share Exchange Agreement, and upon the filing of the required Plan and
Exchange with the Secretary of State of the State of Nevada on October 19,
2005, ARCD became a wholly-owned subsidiary of the Company.
The shareholders of ARCI and ARCD became the controlling shareholders of
the Company after the acquisitions. Accordingly, the acquisitions are
accounted for as a recapitalization of ARCI and ARCD, whereby the
historical financial statements of the ARCI and ARCD became the historical
financial statements of the company.
On March 15, 2006, the Company elected to reverse-split its common stock
on a 100 shares for one share basis. All references to common stock within
these financial statements have been retroactively restated so as to
incorporate the effect of this reverse stock-split.
F-8