Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
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x ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2010
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or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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Commission File Number: 000-31683
MOTOR SPORT COUNTRY CLUB HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Nevada
(State or Other Jurisdiction of
Incorporation or Organization)
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98-0230423
(I.R.S. Employer Identification No.)
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11100 W 8th Avenue, Suite 200, Lakewood, CO 80215
(Address of principal executive offices) (Zip Code)
(866) 967-5552
(Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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None
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Securities registered pursuant to section 12(g) of the Act:
Title of class: Common Stock, par value $0.001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý
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Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act") 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. Yes o No ý
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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Large Accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company ý
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý
The aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $171,061 computed by reference to the closing price of the common stock on June 30, 2010. For purposes of the above statement only, all directors, executive officers and 5% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose.
As of April 13, 2011 the registrant had 25,358,935 shares of common stock, par value $0.001 per share outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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EXPLANATORY NOTE
Motor Sport Country Club Holdings, Inc. (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (the “Form 10-K Filing”), which was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 15, 2011, to amend and restate financial statements and other financial information for 2010. This Amendment reflects corrections to timing errors in our accounting for expenses associated with non-cash stock issuances and accounts payable and restates in its entirety Items 7, 8 and 9A of Part II and Item 11 of Part III. Item 10 of Part III is restated in its entirety to reflect corrections relating to committees of the Company’s board of directors and compliance by the Company’s officers and directors with Section 16(a) of the Securities Exchange Act of 1934, as amended. In addition, Item 15 of Part IV of the original Form 10-K Filing has been amended and restated to correct the exhibits listed and to include as exhibits new certifications by our principal executive officer in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended.
Except as expressly set forth herein, this Amendment does not reflect events occurring after the date of the original Form 10-K Filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the corrections discussed above and other corrections. Accordingly, this Amendment should be read in conjunction with the original Form 10-K Filing and the Company’s other filings with the SEC.
PART II
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Item 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, our financial statements (and notes related thereto) and other more detailed financial information appearing elsewhere in this Annual Report on Form 10-K. Consequently, you should read the following discussion and analysis of our financial condition and results of operations together with such financial statements and other financial data included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Recent Developments
On May 17, 2010, the Company entered into and closed a membership interest purchase agreement (“Exchange Agreement”) among the Company, Motorsports Country Club LLC, a Colorado limited liability company (“MSCC”) and Claus Wagner, our Chief Executive Officer and then sole unitholder of MSCC. Pursuant to the terms of the Exchange Agreement, all of the issued and outstanding membership interests of MSCC were exchanged for 20,800,000 shares of the Company’s common stock (the “Exchange”), representing 87.18% of our outstanding shares following the consummation of the transactions contemplated by the Exchange Agreement. As a result of the transaction, MSCC became our wholly-owned subsidiary, with Mr. Wagner acquiring a majority of the outstanding shares of our common stock.
On May 27, 2010, the Company filed articles of merger with the Secretary of State of the State of Nevada changing the Company’s name from “Victoria Industries, Inc.” to “Motor Sport Country Club Holdings, Inc.” This corporate action was approved by the Financial Industry Regulatory Authority and took effect at the open of business on October 21, 2010.
Overview
MSCC is a development stage company and has not commenced any operations other than initial corporate formation and capitalization, entry into a contract to purchase land (which has since terminated) and the development of our business plan. MSCC was formed to investigate the feasibility, the desirability and construction of a luxurious motor sport destination resort. Upon completion of due diligence, MSCC identified various sites for the planned projects throughout the world. In June 2007, just prior to MSCC being formed, Claus Wagner, who would become the original sole member of MSCC, entered into an agreement to acquire a parcel of land totaling 2,600 acres outside of Denver, Colorado. As the contemplated transaction had not yet closed, in March 2010, the agreement was extended through December 2010. MSCC obtained planning permits and other permissions for the resort master plan, excluding specific permissions for the residential unit component. The extension of this agreement expired as scheduled in December 2010 and has not been renewed at this time, as management believes that the contract is no longer in the Company’s best interest due to the state of the real estate market.
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MSCC contemplates that revenue will be derived from the following sources:
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· Initiation fees and annual dues – Rather than having to wait for a track event being organized by a car club, track time will be available to be booked online or via a call to the track concierge. Members will essentially have unlimited track time.
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· Non-member track rentals – Non-member track rental will be available but will be very limited.
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· Garage rental and sales – A number of members will have dedicated track cars that they will opt to leave at the club. Many race teams need to rent garage space to service their cars and for storage.
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· Residence rentals and sales – Members and their guests will likely stay at the resort for several days. A residence club is planned to accommodate their needs.
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· Other sources – Revenue will include sales generated by the driving school, service garage, pro shop, restaurants, and lodging.
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· Land sales – The Company has planned more than 1,000 acres designated for home sites, and an exclusive residential community.
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· Events – The Company anticipates that the club will bring in a major series event, as well as automobile manufacturers having launch events.
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MSCC executed membership agreements with approximately 30 individuals, and had a few of them canceled due to the financial crisis. In addition, the members that paid their Initiation Fees had these fees deposited in UMB Bank, the escrow agent (“Escrow Agent”). The Escrow Agent was to hold all funds until MSCC has achieved financial commitments of $5,000,000. If the financial commitment had not been achieved on or before December 1, 2010, the prospective members’ deposits were to be returned and there would be no further obligation between MSCC and the prospective members. The escrow agreement expired as scheduled on December 1, 2010 and the escrowed funds were returned to the depositors.
RESULTS OF OPERATIONS
Comparison of the Years Ended December 31, 2010 and 2009
Revenues
Revenues for the years ended December 31, 2010 and 2009 were $0 and $0, respectively, reflecting our startup nature.
Gross Profit
Gross profit for the years ended December 31, 2010 and 2009 were $0 and $0, respectively, reflecting our startup nature.
Operating Expenses
Operating expenses for the years ended December 31, 2010 and 2009 were $778,248 and $79,743, respectively. Operating expenses for the fiscal year ended December 31, 2010 primarily consisted of compensation and professional fees in the amount of $518,331, sales, general and administrative expenses in the amount of $40,033, advertising and promotion expenses of $39,884, and stock-based compensation of $180,000. Operating expenses for the fiscal year ended December 31, 2009 primarily consisted of compensation and professional fees in the amount of $48,131, sales, general and administrative expenses in the amount of $6,721 and advertising and promotion expenses of $24,891. The increase between the corresponding fiscal periods is primarily related to increased operating expenses associated with the Company continuing to develop its business plan.
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Net Loss
Our net loss for the years ended December 31, 2010 and 2009 amounted to $778,220 and $79,530, respectively, reflecting our startup nature.
Operations Plans
Management believes that the focus of our operations will be on the construction of a luxurious motor sport destination resort.
Thus far, our focus has been on initial corporate formation and capitalization, the acquisition of the option to purchase land in Colorado and the development of our business plan. We plan the operations for the remainder of 2011 to be focused on the development of our race track. The completion of this task will require additional capital beyond what we currently have on hand.
MSCC contemplates that revenue will be derived from the following sources:
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·
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Initiation fees and annual dues – Rather than having to wait for a track event being organized by a car club, track time will be available to be booked online or via a call to the track concierge. Members will essentially have unlimited track time.
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·
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Non-member track rentals – Non-member track rental will be available but will be very limited.
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·
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Garage rental and sales – A number of members will have dedicated track cars that they will opt to leave at the club. Many race teams need to rent garage space to service their cars and for storage.
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·
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Residence rentals and sales – Members and their guests will likely stay at the resort for several days. A residence club is planned to accommodate their needs.
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·
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Other sources – Revenue will include sales generated by the driving school, service garage, pro shop, restaurants, and lodging.
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·
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Land sales – The Company has planned more than 1,000 acres designated for home sites, and an exclusive residential community.
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·
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Events – The Company anticipates that the club will bring in a major series event, as well as automobile manufacturers having launch events.
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For the next 12 months, we expect to pursue the implementation of our business plan, the building of our race track and the development and marketing of the resort and membership in our club. Our current cash position is not sufficient to fund our cash requirements during the next twelve months, including operations and capital expenditures. We intend to seek joint ventures or obtain equity and/or debt financing to support our current and proposed operations and capital expenditures. We cannot assure that continued funding will be available.
Our future financial results will depend primarily on our ability to (1) fully implement our business plan, (2) develop our race track and resort (3) generate revenue from membership interests and (4) develop our brand awareness. We cannot assure that we will be successful in any of these activities.
Liquidity and Capital Resources
At December 31, 2010, we had a working capital deficit of approximately $467,820, which consisted of current assets of approximately $32,737 and current liabilities of $500,557. We plan to continue to provide for our capital needs by borrowing from our principal shareholder or by issuing debt or equity securities.
Net cash used in operating activities
Net cash used in operating activities was $97,663 for the fiscal year ended December 31, 2010 as compared to $79,530 for the fiscal year ended December 31, 2009. The increase between the corresponding fiscal periods is primarily related to the increased expenditures in 2010 relating to development of the Company’s business plan.
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Net cash provided by financing activities
Net cash provided by financing activities was $72,677 for the fiscal year ended December 31, 2010 as compared to $111,705 for the fiscal year ended December 31, 2009. The decrease between the corresponding fiscal periods is primarily related to additional financing provided by Motor Sports Country Club, LLC’s sole member prior to the consummation of the exchange agreement on May 17, 2010.
We will require additional financing in order to complete our stated plan of operations for the next 12 months. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.
The downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.
We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.
To date, we have generated no revenues and have incurred operating losses in every quarter. Our registered independent auditors have stated in their report dated April 15, 2011 and May 24, 2012 that we have sustained operating losses and raised substantial doubt about our ability to continue as a going concern.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
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Item 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
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The full text of our audited consolidated financial statements as of December 31, 2010 and 2009 begins on page 13 of this Annual Report on Form 10-K.
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Item 9A.
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CONTROLS AND PROCEDURES.
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Evaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our Chief Executive Officer, who also serves as our principal financial officer, to allow timely decisions regarding required disclosure.
We carried out an evaluation under the supervision and with the participation of management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010, the end of the period covered by this report. Based on our evaluation, our Chief Executive Officer has concluded that, as of the end of the period covered by this Report, our disclosure controls and procedures were not effective due to their failure to adequately address a significant deficiency in our internal controls over financial reporting. The deficiency occurred when our Chief Executive Officer, the Company’s sole officer and employee, failed to provide certain invoices from vendors with charges that he disputed to the Company’s accountant, leaving estimated liabilities for those invoices unrecorded in the Company’s books. An additional issue arose when, due to conflicting understandings of our Chief Executive Officer and the Company’s accountant, the expense associated with shares of Company stock issued to a former (now deceased) Company officer was not recorded when the shares were issued. The Company’s disclosure controls and procedures failed to detect errors in disclosure arising from these unrecorded items and information included in the affected financial statements was thus incorrect.
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Our Chief Executive Officer has corrected the weakness in the disclosure controls and procedures and will provide the Company’s accountant with all invoices and information regarding stock issuances so that it can identify and record such transactions accordingly and ensure adequate and accurate disclosure of material information. Management will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing improvements as necessary.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, which consists of our Chief Executive Officer, we conducted an evaluation of the effectiveness of internal control over financial reporting based on criteria established in the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), as supplemented by the COSO publication Internal Control over Financial Reporting – Guidance for Smaller Public Companies. Based on his evaluation, and due to the issues discussed above in “Evaluation of Disclosure Controls and Procedures”, our Chief Executive Officer concluded that our internal control over financial reporting was not effective as of December 31, 2010. As discussed above, our Chief Executive Officer has addressed these issues and taken steps to prevent any future problems.
Changes in Internal Control over Financial Reporting
Except for changes occurring as a result of the remedial steps taken by our Chief Executive Officer described above, no changes in the Company's internal control over financial reporting have come to management's attention during the Company's last fiscal quarter that have materially affected, or are likely to materially affect, the Company's internal control over financial reporting.
The names, ages and positions of our directors and executive officer as of March 31, 2011, are as follows:
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Name
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Age
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Position
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Claus H Wagner
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49
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Chairman of the Board of Directors and Chief Executive Officer
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Patrick McDonald
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53
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Director
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Richard P. Dutkiewicz
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54
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Director
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The Company’s bylaws provide that directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Officers are to be elected by the Board of Directors (subject to the terms of any employment agreement) to hold such office until an officer’s successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board. Each of our directors has served in that capacity, and Mr. Wagner has served as an officer, since 2010.
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Background of Executive Officers and Directors
Claus H. Wagner - Since 2010, Mr. Wagner has been a director and Chief Executive Officer of the Company. Since 2007, Mr. Wagner has been Chief Executive Officer of MSCC, of which he was also the founder. Mr. Wagner has also been a consultant to various financial institutions on currency derivative risk management issues since 2001. From 1984 to 2000, Mr. Wagner held various senior positions in New York, Tokyo, London and Frankfurt for various financial institutions, including Dresdner Kleinworth Benson & Waterstein, Deutsche Bank AG and Citibank. Mr. Wagner’s close affiliation with the Company as its Chief Executive Officer and extensive financial background make him an important component of the Board of Directors.
Patrick R. McDonald - Since 2004, Mr. McDonald has served as Chief Executive Officer, President and Director of Nytis Exploration Company, an oil and gas exploration company. From 1998 to 2003, Mr. McDonald served as President, Chief Executive Officer and Director of Carbon Energy Corporation, an oil and gas exploration and production company. From 1987 to 1997 Mr. McDonald served as Chief Executive Officer, President and Director of Interenergy Corporation, a natural gas gathering, processing, and marketing company. Prior to that he worked as an exploration geologist with Texaco International Exploration Company where he was responsible for oil and gas exploration efforts in the Middle East and Far East. He is a Certified Petroleum Geologist and is a member of the American Association of Petroleum Geologists. Mr. McDonald received a bachelor of science degree in geology and economics from Ohio Wesleyan University and an MBA in finance from New York University. Since 2004, Mr. McDonald has served as a director of Forest Oil Corp., a natural gas exploration company (NYSE: FST). The Company believes that Mr. McDonald’s extensive executive experience and professional network are valuable qualifications for service on the Board of Directors.
Richard P. Dutkiewicz - Since April 2010, Mr. Dutkiewicz has been executive vice president and chief financial officer of Real Mex Restaurants, Inc., a full service, casual dining Mexican restaurant company. From October 2003 until April 2010, Mr. Dutkiewicz was chief financial officer of Einstein Noah Restaurant Group, a franchising company (NASDAQ: BAGL). From May 2003 to October 2003, Mr. Dutkiewicz was Vice President-Information Technology of Sirenza Microdevices, Inc. In May 2003, Sirenza Microdevices, Inc. acquired Vari-L Company, Inc. From January 2001 to May 2003, Mr. Dutkiewicz was Vice President-Finance, and Chief Financial Officer of Vari-L Company, Inc. From April 1995 to January 2001, Mr. Dutkiewicz was Vice President-Finance, Chief Financial Officer, Secretary and Treasurer of Coleman Natural Products, Inc., located in Denver, Colorado. Mr. Dutkiewicz's previous experience includes senior financial management positions at Tetrad Corporation, MicroLithics Corporation and various divisions of United Technologies Corporation. Mr. Dutkiewicz began his career as an Audit Manager at KPMG LLP. Mr. Dutkiewicz received a B.B.A. degree from Loyola University of Chicago. Since February 2010, Mr. Dutkiewicz has served as a director of Fifth Street Finance Corp., a specialty finance company (NYSE: FSC). The Company believes that Mr. Dutkiewicz’s financial acumen, executive experience and professional network make him a valuable member of the Board of Directors.
Family Relationships
None.
Committees
Our business, property and affairs are managed by or under the direction of the board of directors. Members of the board are kept informed of our business through discussion with the chief executive officer, by reviewing materials provided to them and by participating at meetings of the board.
Our board of directors has no separate committees and it acts as the audit committee at this time.
Code of Ethics
We have adopted a formal Code of Ethics applicable to our Chief Executive Officer and, should we eventually fill those positions, Chief Financial Officer and Chief Accounting Officer. Our Code of Ethics was filed as an exhibit to our annual report on Form 10-K for the fiscal year ended December 31, 2009. The Company will provide a copy of our code of ethics to any person without charge, upon written request to the Company at 11100 W. 8th Avenue, Suite 200, Lakewood, CO 80215, Attn: Chief Executive Officer.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and directors, and persons who own more than 10 percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. During the fiscal year ended December 31, 2011, our officer and directors did not make any filings under Section 16(a) of the Securities Exchange Act of 1934.
Director Compensation
None of our directors were compensated during the fiscal year ended December 31, 2010.
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Item 11.
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EXECUTIVE COMPENSATION
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Summary Compensation Table
The table below sets forth, for the last two fiscal years, the compensation earned by our sole executive officer, who served as our principal executive officer during the last fiscal year (the “Named Executive Officer”). It also sets forth the compensation of Rob Newson, who served briefly as our Chief Operating Officer before he died in June of 2010.
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Name and Principal Position
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Year
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Salary
($)
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Stock Awards
($)
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Total
($)
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Claus Wagner
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2010
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$ | 138,250 | * | $ | 0 | $ | 138,250 | ||||||
| Chief Executive Officer |
2009
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$ | 0 | $ | 0 | $ | 0 | |||||||
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Rob Newson,
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2010
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$ | 0 | $ | 90,000 | $ | 90,000 | |||||||
| Chief Operating Officer (deceased) |
2009
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$ | 0 | $ | 0 | $ | 0 | |||||||
*Prorated for a partial year. Per the amendment to the employment agreement dated August 9, 2010 with Claus Wagner, all of his 2010 salary has been recorded as deferred compensation and will continue to be deferred compensation until such time as the Company secures additional funding.
Outstanding Equity Awards at Fiscal Year-End
There were no outstanding unexercised options, unvested stock, and/or equity incentive plan awards issued to our Named Executive Officer as of December 31, 2010.
We have entered into an employment agreement with Claus Wagner effective at the closing of the Exchange Agreement. The employment agreement has an initial term of five years from the date of execution and shall automatically renew for an additional 12 month term unless and until either party provides written notice of termination in accordance with the terms of the employment agreement. The employment agreement requires the executives to devote all of his time and attention during normal business hours to our business. The employment agreement provides that Mr. Wagner will receive an annual salary of $225,000 per year with an automatic increase to $250,000 after the second anniversary of the date of the employment agreement. In addition, Mr. Wagner is entitled to (a) be provided with an automobile and cell phone to be paid for by the Company, (b) receive a cash bonus in an amount determined by the board of directors and (c) receive additional shares of common stock of the Company if they meet or exceed certain mutually agreed upon performance goals. Finally, this employment agreement was amended on August 9, 2010 retroactively to June 1, 2010 such that all of Mr. Wagner’s cash compensation is being deferred until such time as the Company receives adequate funding.
The employment agreement provides for termination of an executive’s employment without any further obligation on our part upon the death or disability of the executive or for cause. In the event that the executive’s employment is terminated by him for reasonable cause, we are obligated to pay the executive (i) an amount equal to 12 months of his base salary if terminated within one year of the date of the employment agreement, or (ii) an amount equal to 24 months of his base salary, if terminated after the one year anniversary of the date of the agreement. Termination for cause means termination as a result of (v) the executive's conviction of a felony, any crime involving moral turpitude related to or the willful commission of any other act or omission involving dishonesty or fraud with respect to, an materially affecting the business affairs of, the Company (w) conduct tending to bring the Company into substantial public disgrace or disrepute the causes substantial and material injury to the business and operations of the Company, (x) substantial and repeated failure to perform duties of the office held by such executive as reasonably directed by the Board of Directors and such failure is not cured within 30 days written notice (y) gross negligence or willful misconduct with respect to the Company that causes substantial and material injury to the business and operations of the Company and (z) any material breach of the confidentiality agreement between the Company and the executive. Reasonable Cause means (i) material breach of our obligations under the employment agreement and the Company’s failure to cure upon 30 days written notice, (ii) a material reduction in the scope of the Executive’s title or duties without his consent or (iii) any requirement by the Company that the executive relocate his residence more than 50 miles from the Company’s headquarters.
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In connection with the employment agreement, Mr. Wagner entered into an employee confidentiality agreement which contain covenants (a) restricting the executive from engaging in any activity competitive with our business during the term of the employment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the executive from disclosing confidential information regarding us, and (c) soliciting our employees, customers and prospective customers during the term of the employment agreement and for a period of one year thereafter.
In May 2010 we entered into an employment agreement with Robert Newson to be the Company’s President and Chief Operating Officer. The employment agreement had an initial term of five years from the date of execution and would have automatically renewed for an additional 12 month term unless and until either party provided written notice of termination in accordance with the terms of the employment agreement. The employment agreement required Mr. Newson to devote all of his time and attention during normal business hours to our business as our President and Chief Operating Officer. The employment agreement provided that Mr. Newson would receive a sign on bonus of 1,500,000 shares of Company common stock, an annual salary of $225,000 per year with an automatic increase to $250,000 after the second anniversary of the date of the employment agreement. In addition, Mr. Newson was entitled to (a) be provided with an automobile and cell phone to be paid for by the Company, (b) receive a cash bonus in an amount determined by the board of directors and (c) receive additional shares of common stock of the Company if they meet or exceed certain mutually agreed upon performance goals.
The employment agreement provided for termination of the executive’s employment without any further obligation on our part upon the death or disability of the executive or for cause. In June of 2010, Mr. Newson died. Subsequent to his death, effective December 16, 2010, the Company issued the 1,500,000 shares to which Mr. Newson was entitled, valued at $180,000 ($0.12 per share, the quoted market value on the date of issuance), to Mr. Newson’s widow.
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as part of this Annual Report on Form 10-K.
1. Financial statements: see Part II, Item 8, which is incorporated herein by reference.
2. Financial statement schedules: none required or applicable.
3. Exhibits: as described in the following index:
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Exhibit Number
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Description
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2.1
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Membership Interest Purchase Agreement, dated May 17, 2010, by and between Victoria Industries, Inc., Motor Sport Country Club, LLC and the unitholder of Motor Sport Country Club (1)
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3.1
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Articles of Incorporation (1)
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3.2
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Articles of Merger changing the Company’s name to Motor Sport Country Club Holdings, Inc. (3)
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3.3
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By-laws (1)
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10.1
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Form of Membership Agreement (2)
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10.2
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Stock Escrow Agreement and Agreement to Cancel Shares, dated April 9, 2010 by and among Thor United Corporation, Berkshire International Finance, Inc., Victoria Industries, Inc., Motor Sport Country Club LLC and Jody M. Walker (2)
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10.3
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Employment Agreement, dated May 17, 2010, by and between the Company and Claus Wagner (2)
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10.4
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Amendment to Employment Agreement, dated August 9, 2010 by and between the Company and Claus Wagner
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10.5
|
Employment Agreement, dated May 17, 2010, by and between the Company and Rob Newson (2)
|
|
|
10.6
|
Employee Confidentiality Agreement, dated May 17, 2010, by and between the Company and Claus Wagner (2)
|
|
|
10.7
|
Employee Confidentiality Agreement, dated May 17, 2010, by and between the Company and Rob Newson (2)
|
|
|
21.1
|
List of Subsidiaries
|
|
|
31
|
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
32
|
Certification of the Principal Executive Officer and Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
(1) Incorporated by reference to the Registration Statement on Form SB-2, previously filed with the Securities and Exchange Commission on October 4, 2000.
(2) Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2010.
(3) Incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 27, 2010.
(b) See (a)(3) above.
(c) See (a)(2) above.
10
SIGNATURE
Pursuant to the requirements of Section 13 or Section 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.
|
MOTOR SPORT COUNTRY CLUB HOLDINGS, INC.
|
|||
|
Date: August 14, 2012
|
By:
|
/s/ Claus Wagner
|
|
|
Name: Claus Wagner
|
|||
|
Title: Chief Executive Officer
(Principal Executive, Financial and Accounting Officer)
|
|||
11
MOTOR SPORT COUNTRY CLUB HOLDINGS, INC.
|
Financial Statements for Fiscal Years ended December 31, 2010 and 2009
|
|
|||
|
|
Page
|
|||
|
Reports of Independent Registered Public Accounting Firm
|
|
13
|
|
|
|
Balance Sheets as of December 31, 2010 and 2009 - Restated
|
|
14
|
|
|
|
Statements of Operations for the years ended December 31, 2010 and 2009 - Restated
|
|
15
|
|
|
|
Statement of Cash Flows for the years ended December 31, 2010 and 2009 - Restated
|
|
16
|
|
|
|
Statements of Changes in Equity as of December 31, 2010, 2009 and 2008 - Restated
|
|
17
|
|
|
|
Notes to Financial Statements - Restated
|
18
|
|||
12
|
ABBM Group, Ltd LLP
|
||
|
Certified Public Accountants
|
||
|
9575 Katy Freeway, Suite 370
|
||
|
Houston, Texas 77024
|
||
|
(713) 552-9800
|
||
|
FAX (713) 552-9700
|
||
|
www.abbmgroup.com
|
||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Stockholders
Of Motor Sport Country Club Holdings, Inc.
We have audited the accompanying balance sheet of Motor Sport Country Club Holdings, Inc., (a Nevada corporation and a development stage company) as of December 31, 2010 and 2009, and the related statements of operations, changes in stockholders’ equity, and cash flows for each of the years in the two year period ended December 31, 2010, and for the cumulative period from August 23, 2007 (inception) through December 31, 2010. Motor Sport Country Club Holdings, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Motor Sport Country Club Holdings, Inc. (a development stage enterprise) as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the each of the years in the two year period ended December 31, 2010, and for the cumulative period from August 23, 2007 (Inception) through December 31, 2010, 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 1 to the financial statements, the Company is not currently engaged in a business, has suffered losses from development stage activities to date approximating $1,027,000, has negative stockholders’ equity of approximately $468,000, and is reliant on loans from related parties to finance its development stage activities. All of these matters raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As discussed in Note 2 to the financial statements, the 2010 financial statements have been restated to correct errors in accounting for expenses associated with stock based compensation and accounts payable.
|
|
/s/ ABBM Group, Ltd LLP | ||
| ABBM Group, Ltd LLP | |||
Houston, Texas
April 15, 2011, except for the restatements to year 2010 financial
statements discussed in Note 2, as to which the date is May 24, 2012
13
|
MOTOR SPORT COUNTRY CLUB HOLDINGS, INC
|
||||||||
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||
|
BALANCE SHEET
|
||||||||
|
(Expressed in US Dollars)
|
||||||||
|
December 31,
|
||||||||
|
2010
|
2009
|
|||||||
|
(Restated)
|
||||||||
|
ASSETS
|
||||||||
|
CURRENT ASSETS
|
||||||||
|
Cash and cash equivalents
|
$ | 32,737 | $ | 57,723 | ||||
|
TOTAL ASSETS
|
$ | 32,737 | $ | 57,723 | ||||
|
CURRENT LIABILITIES
|
||||||||
|
Accounts payable
|
$ | 20,831 | ||||||
|
Short-term loans from related parties
|
341,476 | $ | - | |||||
|
Deferred compensation payable
|
138,250 | - | ||||||
|
Credit cards payable - American Express
|
- | - | ||||||
|
Total current liabilities
|
500,557 | - | ||||||
|
STOCKHOLDERS' EQUITY
|
||||||||
|
Common stock, $0.001 par value 75,000,000 shares authorized,
|
||||||||
|
shares authorized, 25,358,935 shares issued and outstanding
|
25,359 | - | ||||||
|
Member's equity
|
- | 307,341 | ||||||
|
Additional paid-in capital
|
534,659 | - | ||||||
|
Accumulated (deficit)
|
(1,027,838 | ) | (249,618 | ) | ||||
|
Total stockholders' equity
|
(467,820 | ) | 57,723 | |||||
|
TOTAL LIABILITIES AND
|
||||||||
|
STOCKHOLDERS' EQUITY
|
$ | 32,737 | $ | 57,723 | ||||
|
The accompanying notes are an integral part of the consolidated financial statements
|
||||||||
14
MOTOR SPORT COUNTRY CLUB HOLDINGS, INC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(Expressed in US Dollars, except share amounts)
|
August 23, 2007
|
||||||||||||
|
(Inception)
|
||||||||||||
|
Through
|
||||||||||||
|
For the year ended December 31,
|
December 31,
|
|||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
(Restated)
|
(Restated)
|
|||||||||||
|
OPERATING EXPENSES
|
||||||||||||
|
Advertising and Promotion
|
$ | 39,884 | $ | 24,891 | 137,867 | |||||||
|
Land option expense
|
- | - | 15,000 | |||||||||
|
Sales, general and administrative
|
40,033 | 6,721 | 83,571 | |||||||||
|
Compensation and professional fees
|
518,331 | 48,131 | 617,941 | |||||||||
|
Stock-based compensation
|
180,000 | - | 180,000 | |||||||||
|
Total operating expenses
|
778,248 | 79,743 | 1,034,379 | |||||||||
|
OPERATING (LOSS)
|
(778,248 | ) | (79,743 | ) | (1,034,379 | ) | ||||||
|
NON-OPERATING INCOME (EXPENSE)
|
||||||||||||
|
Interest income (expense)
|
28 | 213 | 6,541 | |||||||||
|
Net Income (Loss)
|
$ | (778,220 | ) | $ | (79,530 | ) | $ | (1,027,838 | ) | |||
|
BASIC LOSS PER SHARE
|
$ | (0.04 | ) | $ | (0.01 | ) | ||||||
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
18,928,487 | 10,558,836 | ||||||||||
The accompanying notes are an integral part of the consolidated financial statements
15
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||||||
|
STATEMENTS OF CASH FLOWS
|
||||||||||||
|
(Expressed in US Dollars)
|
||||||||||||
|
August 23, 2007
|
||||||||||||
|
(Inception)
|
||||||||||||
|
Through
|
||||||||||||
|
For the year ended December 31,
|
December 31,
|
|||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
(Restated)
|
(Restated)
|
|||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net income (loss)
|
$ | (778,220 | ) | $ | (79,530 | ) | $ | (1,027,838 | ) | |||
|
Adjustments to reconcile net loss from continuing
|
||||||||||||
|
operations to net cash in operating activities
|
||||||||||||
|
Stock-based compensation
|
180,000 | 180,000 | ||||||||||
|
Changes in current assets and liabilities:
|
||||||||||||
|
Increase in accounts payable
|
20,831 | 20,831 | ||||||||||
|
Increase in loans from related parties
|
341,476 | - | 341,476 | |||||||||
|
Increase in deferred compensation payable
|
138,250 | 138,250 | ||||||||||
|
Cash used in operating activities
|
(97,663 | ) | (79,530 | ) | (347,281 | ) | ||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Net cash investment by sole member prior to
|
||||||||||||
|
public merger on May 17, 2010
|
72,677 | 111,705 | 380,018 | |||||||||
|
Cash provided by financing activities
|
72,677 | 111,705 | 380,018 | |||||||||
|
INCREASE (DECREASE) IN CASH:
|
(24,986 | ) | 32,175 | 32,737 | ||||||||
|
CASH, at the beginning of the period
|
57,723 | 25,548 | - | |||||||||
|
CASH, at the end of the period
|
$ | 32,737 | $ | 57,723 | $ | 32,737 | ||||||
|
The accompanying notes are an integral part of the consolidated financial statements
|
||||||||||||
16
|
(A DEVELOPMENT STAGE COMPANY)
|
||||||||||||||||||||||||||||
|
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||
|
(Expressed in US Dollars, except share amounts)
|
||||||||||||||||||||||||||||
|
Deficit
|
||||||||||||||||||||||||||||
|
Motor Sport Country Club, LLC
|
Motor Sport Country Club Holdings, Inc.
|
Accumulated
|
||||||||||||||||||||||||||
|
Additional
|
During the
|
|||||||||||||||||||||||||||
|
Member Capital
|
Common Stock
|
Paid-in
|
Development
|
|||||||||||||||||||||||||
|
Contributions
|
Distributions
|
Shares
|
Amount
|
Capital
|
Stage
|
Total
|
||||||||||||||||||||||
|
Inception, August 23, 2007
|
$ | - | $ | - | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
|
Contributions
|
310,895 | 310,895 | ||||||||||||||||||||||||||
|
Distributions
|
(63,073 | ) | (63,073 | ) | ||||||||||||||||||||||||
|
Net loss for period
|
(76,805 | ) | (76,805 | ) | ||||||||||||||||||||||||
|
Balance, December 31, 2007
|
310,895 | (63,073 | ) | - | - | - | (76,805 | ) | 171,017 | |||||||||||||||||||
|
Contributions
|
125,960 | 125,960 | ||||||||||||||||||||||||||
|
Distributions
|
(178,146 | ) | (178,146 | ) | ||||||||||||||||||||||||
|
Net loss for the year
|
(93,283 | ) | (93,283 | ) | ||||||||||||||||||||||||
|
Balance, December 31, 2008
|
436,855 | (241,219 | ) | - | - | - | (170,088 | ) | 25,548 | |||||||||||||||||||
|
Contributions
|
418,316 | 418,316 | ||||||||||||||||||||||||||
|
Distributions
|
(306,611 | ) | (306,611 | ) | ||||||||||||||||||||||||
|
Net loss for the year
|
(79,530 | ) | (79,530 | ) | ||||||||||||||||||||||||
|
Balance, December 31, 2009
|
855,171 | (547,830 | ) | - | - | - | (249,618 | ) | 57,723 | |||||||||||||||||||
|
Contributions
|
181,256 | 181,256 | ||||||||||||||||||||||||||
|
Distributions
|
(20,386 | ) | (20,386 | ) | ||||||||||||||||||||||||
|
Net loss for period
|
(145,976 | ) | (145,976 | ) | ||||||||||||||||||||||||
|
Balance, March 31, 2010
|
1,036,427 | (568,216 | ) | - | - | - | (395,594 | ) | 72,617 | |||||||||||||||||||
|
Effect of reverse merger
|
||||||||||||||||||||||||||||
|
with Victoria Industries,
|
||||||||||||||||||||||||||||
|
Inc., the "legal" acquirer,
|
||||||||||||||||||||||||||||
|
on May 17, 2010
|
(1,036,427 | ) | 568,216 | 23,858,935 | 23,859 | 356,159 | 145,976 | 57,783 | ||||||||||||||||||||
|
Stock issued for services
|
1,500,000 | 1,500 | 178,500 | 180,000 | ||||||||||||||||||||||||
|
Net loss for period (Restated)
|
(778,220 | ) | (778,220 | ) | ||||||||||||||||||||||||
|
Balances, December 31, 2010
|
$ | - | $ | - | 25,358,935 | $ | 25,359 | $ | 534,659 | $ | (1,027,838 | ) | $ | (467,820 | ) | |||||||||||||
|
The accompanying notes are an integral part of the consolidated financial statements
|
||||||||||||||||||||||||||||
17
NOTES TO FINANCIAL STATEMENTS - RESTATED
NOTE 1 – NATURE OF OPERATIONS
Corporate History
The Company was incorporated in the state of Nevada on January 25, 2000 under the name “Rolltech, Inc.” On October 9, 2003, the Company filed an amendment to its articles of incorporation changing its name from “Rolltech, Inc.” to “Victoria Industries, Inc.” On May 17, 2010, the Company entered into and closed a membership interest purchase agreement (“Exchange Agreement”) among the Company, Motorsports Country Club LLC, a Colorado limited liability company (“MSCC”) and Claus Wagner, our Chief Executive Officer and then sole unitholder of MSCC. Pursuant to the terms of the Exchange Agreement, all of the issued and outstanding membership interests of MSCC were exchanged for 20,800,000 shares of the Company’s common stock (the “Exchange”), representing 87.18% of our outstanding shares following the consummation of the transactions contemplated by the Exchange Agreement. As a result of the transaction, MSCC became our wholly-owned subsidiary, with Mr. Wagner acquiring a majority of the outstanding shares of our common stock. On May 27, 2010, the Company filed articles of merger with the Secretary of State of the State of Nevada changing the Company’s name from “Victoria Industries, Inc.” to “Motor Sport Country Club Holdings, Inc.” This corporate action was approved by FINRA and took effect at the open of business on October 21, 2010.
Description of MSCC
As a result of the Exchange Agreement, the following is the corporate structure of the Company and its subsidiaries:
|
Motor Sport Country Club Holdings, Inc. (a Nevada corporation)
|
|||
|
Motor Sport Country Club, LLC (a Colorado LLC)
|
|||
Overview
Our operations are run out of our wholly-owned subsidiary Motor Sport Country Club, LLC. MSCC was incorporated in the State of Colorado on August 23, 2007 under the name Motor Sport Country Club, LLC. MSCC is a development stage company and has not commenced any operations other than initial corporate formation and capitalization, the acquisition of our land purchase option and the development of our business plan. MSCC was formed to investigate the feasibility, the desirability and construction of a luxurious motor sport destination resort. Upon due diligence, MSCC identified various sites for the planned projects throughout the world. In June 2007, just prior to MSCC being formed, the sole member of MSCC contracted to acquire a parcel of land totaling 2,600 acres outside of Denver, Colorado. In March 2010, the land option, which was expired, was extended through December 2010. MSCC has obtained planning permits and other permissions for the resort master plan, excluding specific permissions for the residential unit component. The extension of this land option expired as scheduled in December 2010 and has not been renewed at this time, as management believes that the contract is no longer in the Company’s best interest due to the state of the real estate market. Prior to 2010, prospective purchasers had placed in escrow with an independent bank trustee approximately $120,000 in deposits to secure future purchases. Those deposits were refunded to purchasers during 2010, with the final deposit of $10,000 returned in early January, 2011.
18
Basis of Presentation- The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles applicable to development stage enterprises. The financial statements have been presented in U.S. dollars, which is our functional currency.
Going concern – The Company is a development stage company. The ability of the Company to meet its obligations is dependent on being able to raise the necessary financing to continue with the development of the company. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management remains committed to funding the exploration of the development phase of the Company through financing from related parties as has occurred during the course of this year. To implement its business plan, Management is currently seeking additional sources of permanent equity and/or debt capital.
Development Stage Company
The Company is considered to be in the development stage as defined in ASC 915, “Accounting and Reporting by Development Stage Enterprises”. The Company has devoted substantially all of its efforts to the corporate formation and the developing of the plans to bring the land they have an option on to its intended use.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 materially from those estimates.
Concentration of Credit Risk
As of December 31, 2010, the Company is not subject to significant concentrations of credit risk from financial instruments due to the absence of any significant financial assets.
Allowances for Doubtful Accounts
Once it commences operation, the Company will maintain allowances for doubtful accounts for estimated losses resulting from the inability of its members to make required payments. The amount recorded as an allowance for doubtful accounts in each period will be based upon an assessment of the likelihood that the Company will be paid for outstanding accounts receivable, based on member-specific as well as general considerations. If the financial condition of the Company’s members should deteriorate, resulting in an impairment of their ability to make payments, additional allowances will be recorded. To the extent that the Company’s estimates prove to be too high, and the Company ultimately collects a receivable previously determined to be impaired, the Company will record a reversal of the provision in the period of such determination. As of December 31, 2010, no allowance for doubtful accounts was required due to the absence of any accounts receivable.
Property and Equipment
Property and equipment will be recorded at cost. The costs of additions and betterments will be capitalized and expenditures for repairs and maintenance will be expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated depreciation will be removed from the accounts and any gain or loss included in income. The Company will periodically evaluate the carrying amount of property and equipment for potential impairment by comparing the carrying amount to the undiscounted cash flows expected to result from the use and eventual disposition of the asset whenever events or circumstances indicate that its carrying amount may not be recoverable. The Company currently has no property or equipment.
Revenue Recognition
Although the Company has not generated revenues to date, the Company anticipates the recognition of revenue from various sources. In general, the Company will record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the expected various revenue streams of the Company:
19
· Initiation fees and annual dues – the Company will record these fees in accordance with the terms of the Membership Agreement.
· Non-member track rentals – Non-member track rental will be very limited, however will be available. The non-member rentals will pay a per diem fee for use of the country club facilities.
· Garage rental and sales – A number of members will have a dedicated track car that they will opt to leave at the club. Many race teams need to rent garage space to service their cars and for storage. The storage fees will be charged in accordance with the unit size and location.
· Residence rentals and sales – Members and their guests will likely stay at the resort for several days. A residence club is planned to accommodate their needs. The fees generated for these units will also be charged in accordance with the unit size and location.
· Other sources – Revenue will include sales generated by the driving school, service garage, pro shop, restaurants, and lodging.
· Land sales – The Company has planned more than 1,000 acres designated for home sites, and have an exclusive residential community. Residents will pay a fee to acquire the land.
· Events – The Company anticipates that the club will bring in a major series event, as well as automobile manufacturers having launch events. The Company anticipates sponsorship revenue as well as concession revenue from these events.
Fair Value of Financial Instruments
The carrying amounts reported in the financial statements for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of their fair value.
Advertising Costs
The Company expenses the costs associated with advertising and promotion as incurred. Advertising and promotion expense of $39,884 and $24,891 is included in the statements of operations for the years ended December 31, 2010 and 2009, respectively.
Segment Information
The Company follows the provisions of ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”. This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions. The Company as of December 31, 2010 and for the full year only operated in one segment.
Recent Issued Accounting Standards
In September 2006, ASC issued 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of ASC 820 is not expected to have a material impact on the financial statements.
20
In February 2007, ASC issued 825-10, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of ASC 320-10, (“ASC 825-10”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. ASC 825-10 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
In December 2007, the ASC issued ASC 810-10-65, Noncontrolling Interests in Consolidated Financial Statements. ASC 810-10-65 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment. ASC 810-10-65 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Management is determining the impact that the adoption of ASC 810-10-65 will have on the Company’s financial position, results of operations or cash flows.
In December 2007, the Company adopted ASC 805, Business Combinations (“ASC 805”). ASC 805 retains the fundamental requirements that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. ASC 805 defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. ASC 805 will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition. ASC 805 will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date. ASC 805 will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met. Finally, ASC 805 will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date. This will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted and the ASC is to be applied prospectively only. Upon adoption of this ASC, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed. The adoption of ASC 805 is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.
In March 2008, ASC issued ASC 815, Disclosures about Derivative Instruments and Hedging Activities”, (“ASC 815”). ASC 815 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. ASC 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that ASC 815 will have an impact on their results of operations or financial position.
Effective April 1, 2009, the Company adopted ASC 855, Subsequent Events (“ASC 855”). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date – that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. Adoption of ASC 855 did not have a material impact on the Company’s results of operations or financial condition. The Company has evaluated subsequent events through March 31, 2011, the date the financial statements were issued.
In April 2008, the FASB issued ASC 350, “Determination of the Useful Life of Intangible Assets”. The Company adopted ASC 350 on October 1, 2008. The guidance in ASC 350 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption. The Company does not believe ASC 350 will materially impact their financial position, results of operations or cash flows.
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Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurement and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted market price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required for Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.
In January 2010, the Company adopted FASB ASU No. 2010-06, Fair Value Measurement and Disclosures (Topic 820)- Improving Disclosures about Fair Value Measurements (“ASU 2010-06”). These standards require new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. The standards also require new disclosures of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements. The standard also clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. These new disclosures are effective beginning with the first interim filing in 2010. The disclosures about the rollforward of information in Level 3 are required for the Company with its first interim filing in 2011. The Company does not believe this standard will impact their financial statements.
Other ASU’s that have been issued or proposed by the FASB ASC that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.
NOTE 2 - RESTATEMENT
In the course of our December 31, 2011 audit of our financial statements we determined that certain shares issued to Rob Newson, a former (and now deceased) executive officer of the Company, were issued in the fourth quarter of 2010 in connection with Mr. Newson’s employment agreement (see Note 5). As a result our actual shares outstanding as of December 31, 2010 were 1,500,000 higher than the number reported in our original 2010 annual financial statements. In addition, we noted certain invoices recorded in the first quarter of 2011 should have been recorded in the fourth quarter of 2010. These invoices, totaling approximately $20,000 for professional fees (and included in accounts payable), together with the stock compensation expense of $180,000 increases the Company’s net loss for 2010 by approximately $200,000 to a total of $778,220 from the previously reported amount of $577,389.
|
|
||||||||||||
|
|
||||||||||||
| Originally Reported | Adjustment | As Restated | ||||||||||
|
Cash
|
32,737 | - | 32,737 | |||||||||
|
Accounts Payable
|
- | (20,831 | ) | (20,831 | ) | |||||||
|
Short-term loans from related parties
|
(341,476 | ) | - | (341,476 | ) | |||||||
|
Deferred compensation payable
|
(138,250 | ) | - | (138,250 | ) | |||||||
|
Common Stock
|
(23,859 | ) | (1,500 | ) | (25,359 | ) | ||||||
|
Additional paid-in-capital
|
(356,159 | ) | (178,500 | ) | (534,659 | ) | ||||||
|
Accumulated deficit
|
827,007 | 200,831 | 1,027,838 | |||||||||
|
Advertising and promotion
|
39,884 | 39,884 | ||||||||||
|
Sales, general and administrative
|
37,095 | 2,938 | 40,033 | |||||||||
|
Compensation and professional fees
|
500,438 | 17,893 | 518,331 | |||||||||
|
Stock-based compensation
|
- | 180,000 | 180,000 | |||||||||
|
Interest Income
|
(28 | ) | (28 | ) | ||||||||
| Net loss | 577,389 | 200,831 | 778,220 | |||||||||
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NOTE 3- SHORT TERM LOANS
Short-term loans as of December 31, 2010 in a total amount of $341,476 represent one non-interest bearing loan, not evidenced by a written document to Claus Wagner, the Company’s majority shareholder in order to finance certain administrative expenses. Notes payable to investors that the Company decided not to accept as investment totaling $95,000 were repaid to the investors during the fourth quarter.
NOTE 4 – FEDERAL INCOME TAX
Income Taxes
We follow FASB pronouncements governing Accounting for Income Taxes. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.
Through the date of the merger on May 17, 2010, MSCC was a single member LLC, so all income for that period will be taxable to Claus Wagner, the sole member. The provision for refundable income tax consists of the following:
|
Year Ended 12/31/10
|
||||
|
Current operations allocated amount (5/17-12/31/10)
|
$ | (166,471 | ) | |
|
Less, Nondeductible expenses
|
2,030 | |||
|
Less, Change in valuation allowance
|
164,441 | |||
|
Net refundable amount
|
$ | - | ||
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
| Year Ended 12/31/10 | ||||
| Deferred tax asset attributable to: | ||||
| Net operating loss carryover | 746,042 | |||
| Less, Valuation allowance | (746,042 | ) | ||
| Net deferred tax asset | - | |||
As of December 31, 2010, we had a net operating loss carryover approximating $2,194,241, which will expire beginning in 2020. However, provisions of the Internal Revenue Code limit significantly that amount of that carryover that will be available, due to the change in control of the Company. There is no assurance that the Company will ever benefit from the net operating loss carryover.
NOTE 5 - RELATED PARTIES
Related parties include shareholders, affiliates and entities under common ownership, over which the Company has the ability to exercise a significant influence and/or control. Transactions with related parties are performed on terms that may differ from those that would be available to unrelated parties. Short-term loans from related parties as of December 31, 2010 total $341,476 and represent one non-interest bearing note payable to Claus Wagner, the Company’s majority shareholder in order to finance certain administrative expenses. Notes payable to investors that the Company decided not to accept as investment totaling $95,000 were repaid to the investors during the fourth quarter.
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We have entered into an employment agreement with Claus Wagner effective at the closing of the Exchange Agreement. The employment agreement has an initial term of five years from the date of execution and shall automatically renew for an additional 12 month term unless and until either party provides written notice of termination in accordance with the terms of the employment agreement. The employment agreement requires the executives to devote all of his time and attention during normal business hours to our business. The employment agreement provides that Mr. Wagner will receive an annual salary of $225,000 per year with an automatic increase to $250,000 after the second anniversary of the date of the employment agreement. In addition, Mr. Wagner is entitled to (a) be provided with an automobile and cell phone to be paid for by the Company, (b) receive a cash bonus in an amount determined by the board of directors and (c) receive additional shares of common stock of the Company if they meet or exceed certain mutually agreed upon performance goals. Finally, this employment agreement was amended on August 9, 2010 retroactively to June 1, 2010 such that all of Mr. Wagner’s cash compensation is being deferred until such time as the Company receives adequate funding.
The employment agreement provides for termination of an executive’s employment without any further obligation on our part upon the death or disability of the executive or for cause. In the event that the executive’s employment is terminated by him for reasonable cause, we are obligated to pay the executive (i) an amount equal to 12 months of his base salary if terminated within one year of the date of the employment agreement, or (ii) an amount equal to 24 months of his base salary, if terminated after the one year anniversary of the date of the agreement. Termination for cause means termination as a result of (v) the executive's conviction of a felony, any crime involving moral turpitude related to or the willful commission of any other act or omission involving dishonesty or fraud with respect to, an materially affecting the business affairs of, the Company (w) conduct tending to bring the Company into substantial public disgrace or disrepute the causes substantial and material injury to the business and operations of the Company, (x) substantial and repeated failure to perform duties of the office held by such executive as reasonably directed by the Board of Directors and such failure is not cured within 30 days written notice (y) gross negligence or willful misconduct with respect to the Company that causes substantial and material injury to the business and operations of the Company and (z) any material breach of the confidentiality agreement between the Company and the executive. Reasonable Cause means (i) material breach of our obligations under the employment agreement and the Company’s failure to cure upon 30 days written notice, (ii) a material reduction in the scope of the Executive’s title or duties without his consent or (iii) any requirement by the Company that the executive relocate his residence more than 50 miles from the Company’s headquarters.
In connection with the employment agreement, Mr. Wagner entered into an employee confidentiality agreement which contains covenants (a) restricting the executive from engaging in any activity competitive with our business during the term of the employment agreement and in the event of termination, for a period of one year thereafter, (b) prohibiting the executive from disclosing confidential information regarding us, and (c) soliciting our employees, customers and prospective customers during the term of the employment agreement and for a period of one year thereafter.
In May 2010 we entered into an employment agreement with Robert Newson to be the Company’s President and Chief Operating Officer. The employment agreement had an initial term of five years from the date of execution and would have automatically renewed for an additional 12 month term unless and until either party provided written notice of termination in accordance with the terms of the employment agreement. The employment agreement required Mr. Newson to devote all of his time and attention during normal business hours to our business as our President and Chief Operating Officer. The employment agreement provided that Mr. Newson would receive a sign on bonus of 1,500,000 shares of Company common stock, an annual salary of $225,000 per year with an automatic increase to $250,000 after the second anniversary of the date of the employment agreement. In addition, Mr. Newson was entitled to (a) be provided with an automobile and cell phone to be paid for by the Company, (b) receive a cash bonus in an amount determined by the board of directors and (c) receive additional shares of common stock of the Company if they meet or exceed certain mutually agreed upon performance goals.
The employment agreement provided for termination of the executive’s employment without any further obligation on our part upon the death or disability of the executive or for cause. In June of 2010, Mr. Newson died. Subsequent to his death, effective December 16, 2010, the Company issued the 1,500,000 sign on shares, valued at $180,000 ($0.12 per share, the quoted market value on the date of issuance), to Mr. Newson’s widow.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
Litigation – The Company has been the subject of legal proceedings and adjudications from time to time, none of which has had, individually or in the aggregate, a material adverse impact on the Company.
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NOTE 7 – ISSUANCE OF SHARES
Prior to November 30, 2007, Victoria Industries, Inc. had been an operating company. Effective November 30, 2007, Victoria disposed of its operations, and returned to the development stage. Since returning to the development stage, Victoria, now renamed Motor Sport Country Club Holdings, Inc., has issued shares of its stock as follows:
|
Price Per
|
||||||||||||||
|
Date
|
Description
|
Shares
|
Share
|
Amount
|
||||||||||
|
11/30/07
|
Balance of shares outstanding upon entry to development stage
|
10,558,836 | ||||||||||||
|
05/17/10
|
Shares issued in reverse merger with Motor Sport Country Club, LLC
|
13,300,099 | $ | .02800 | $ | 380,018 | ||||||||
|
12/16/10
|
Compensation – R. Newson
|
1,500,000 | $ | .12000 | 180,000 | |||||||||
|
12/31/10
|
Cumulative Totals
|
25,358,935 | $ | 560,018 | ||||||||||
Effective December 16, 2010 the Company issued 1,500,000 shares of common stock, valued at $180,000 to Robert Newson as a sign on bonus to accept the position of the Company’s President and Chief Operating Officer (see Note 5).
NOTE 8 - SUBSEQUENT EVENTS
Subsequent events have been evaluated by management through the date of the report of the independent auditors, which is the date the financial statements were available to be issued. Material subsequent events, if any, are disclosed in a separate footnote to these financial statements.
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