SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________________
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ________
COMMISSION FILE NO. 333-70932
THE JACKSON RIVERS COMPANY
(Exact name of issuer as specified in its charter)
FLORIDA 65-1102865
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
27 RADIO CIRCLE DRIVE, MOUNT KISCO, NEW YORK 10549
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619)-615-4242
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of class)
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 during the preceding twelve months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
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-KSB or any amendment to
this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: None.
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of March 31, 2004: $0.055.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of March 31, 2004: 79,432,750.
Documents incorporated by reference: None.
TABLE OF CONTENTS
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 2. Description of Property.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote of Security Holders.. . . . . . . . . . . . . . . . . . . . 7
Item 5. Market for Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . . 8
Item 6. Management's Discussion and Analysis or Plan of Operation.. . . . . . . . . . . . . . . . . 9
Item 7. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. . . . 12
Item 8A. Controls and Procedures.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance With Section 16(a)
of the Exchange Act.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 10. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 12. Certain Relationships and Related Transactions. . . . . . . . . . . . . . . . . . . . . . . 16
Item 13. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 14. Principal Accountant Fees and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
PART I
ITEM 1. BUSINESS.
The Jackson Rivers Company was originally organized to provide short-term
loans to consumers wishing to finance funeral arrangements for their deceased
loved ones, while payment of benefits from insurance companies on the lives of
the deceased are pending. Due to a change in control of our company discussed
below and because of the difficulty in securing a line of credit or other
sources of funding to establish a loan portfolio large enough to support our
operations and return a profit, we abandoned our plans to pursue short-term
financing of funeral arrangements.
Through our wholly-owned subsidiary, Jackson Rivers Technologies, Inc., we
have entered the business of providing customized information management
systems. We expect to provide innovative solutions for integrating financial
and customer information; managing manufacturing processes; reducing inventory;
and standardizing human resource information. We have recently acquired
exclusive distribution rights to a product called STEPS (Straight Through
Enterprise Processing Systems). STEPS is a proprietary Java-based platform used
to create customized information management applications and information
management systems.
MARKETS AND MARKETING
We plan to market our business management software development platform
throughout the United States, Mexico and Canada by utilizing various business
software developers, solutions providers and system integrators. Our clients,
the solutions providers, are expected to develop customized business
applications, using our platform for their clients in less time and with fewer
programming, database management, and development resources. We hope to expand
our client base and win market share by offering established experts in the
various business functions such as supply-chain management and customer
relations management to bundle their expertise with our development platform to
deliver highly effective business management applications.
OUR ORGANIZATION
We were incorporated in Florida in May 2001. Our executive office is
located at 27 Radio Circle Drive, Mount Kisco, New York 10549. The number to
call for information is (619) 615-4242. We are a development stage
company and do not presently have any substantial assets or operating business.
To date, our activities have been limited to organization, business planning and
development, raising capital, and registration of our shares.
We have two wholly-owned subsidiaries, Jackson Rivers Technologies, Inc., a
Nevada corporation, and JRC Global Products, Inc., a Nevada corporation.
In this Form 10-KSB Annual Report, references to "us" refer to The Jackson
Rivers Company and our subsidiaries, unless the context indicates otherwise.
CHANGE IN CONTROL
As of September 30, 2003, we have settled all claims with our former
chairman and controlling stockholder, Mr. Don A. Paradiso, for approximately
$19,000. Effective June 19, 2003 Don A. Paradiso resigned as our director,
president, secretary and treasurer, and Dennis N. Lauzon was elected our
director, president, secretary and treasurer. At that time, Mr. Lauzon acquired
1,000,000 shares of our common stock, or approximately 5.67 percent of our
common stock, from Mr. Paradiso.
On February 23, 2004, Mr. Lauzon contributed to us all of the issued and
outstanding shares of Jackson Rivers Technologies, Inc., a Nevada corporation,
in exchange for a commitment by us that we would issue 80,000,000 shares of our
common stock to him once the shares became available. On February 23, 2004, our
authorized shares of common stock consisted of 100,000,000 shares, but we only
had 39,567,250 shares available to issue to Mr. Lauzon. We agreed that we would
issue 80,000,000 shares to Mr. Lauzon at the time we increase our authorized
shares of common stock to such a level so as to permit the issuance of the
shares needed to satisfy the remaining obligation to Mr. Lauzon. By virtue of
such contribution, Jackson Rivers Technologies became one of our wholly-owned
subsidiaries.
Likewise, on February 23, 2004, Mr. Lauzon contributed to us all of his
shares in JRC Global Products, Inc. as a contribution to our capital.
SUBSEQUENT EVENT
On February 24, 2004, Jackson Rivers Technologies, Inc. entered into an LLC
Interest Purchase Agreement with Multitrade Technologies LLC, a New York limited
liability company ("MTT") pursuant to which Jackson Rivers Technologies
purchased all of the assets of MTT which were related to MTT's business of
software development and the licensing to sell the software. We intend to use
the assets purchased from MTT to expand our customer base and product offerings.
In consideration of the transfer of the assets by MTT to Jackson Rivers
Technologies, we agreed to transfer to Joseph Khan, the sole owner of MTT,
20,000,000 shares of our common stock once they became available after we
increase our authorized shares of common stock. Following the closing of the
LLC interest purchase transaction, our president, Dennis Lauzon, was elected as
the chairman of the board of Jackson Rivers Technologies, responsible for sales
and marketing, and Mr. Khan was elected as a member of the board and its
president and chief executive officer, responsible for product delivery and
strategic alliances.
EMPLOYEES
As of December 31, 2003 we employed three full-time employees. None of
these employees are covered under a collective bargaining agreement.
RISK FACTORS
RISKS RELATING TO OUR BUSINESS
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF FUTURE FUNDING.
Our plan of operation calls for additional capital to facilitate growth and
support our long-term development and marketing programs. It is likely that we
will have to seek additional financing through future public or private sales of
our securities, including equity securities. We may also seek funding for the
development and marketing of our products through strategic partnerships and
other arrangements with investment partners.
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There can be no assurance, however, that such collaborative arrangements or
additional funds will be available when needed, or on terms acceptable to us, if
at all. Any such additional financing may result in significant dilution to
existing stockholders. If adequate funds are not available we may be required
to curtail one or more of our future programs.
SUBSTANTIAL DOUBT THAT WE CAN CONTINUE AS A GOING CONCERN.
We expect to incur significant capital expenses in pursuing our plans to
increase sales volume, expanding our product lines and obtaining additional
financing through stock offerings, or licensing agreements or other feasible
financing alternatives. In order for us to continue our operations, we will
require additional funds over the next 12 months. While we hope we will be able
to generate funds necessary to maintain our operations, without additional funds
there will be a reduction in the number of new projects that we could take on,
which may have an effect on our ability to maintain our operations. Additional
financing may not be available on terms favorable to us, or at all. If
additional funds are not available, we may not be able to execute our business
plan or take advantage of business opportunities. Our ability to obtain such
additional financing and to achieve our operating goals is uncertain. In the
event that we do not obtain additional capital or are not able to increase cash
flow through the increase of sales, there is a substantial doubt of our being
able to continue as a going concern.
Additionally, it should be noted that our independent auditors have
included a going concern opinion and related discussion in the notes to our
financial statements. The auditors have included the going concern provision
because we have incurred significant and recurring losses and have a large
working capital deficit that the auditors believe raises substantial doubt about
our ability to continue as a going concern. Until such time we receive
additional debt or equity financing, there is a risk that our auditors will
continue to include a going concern provision in the notes to our financial
statements.
PROPRIETARY RIGHTS.
We rely on contractual rights, trade secrets, trademarks, and copyrights to
establish and protect our proprietary rights in our products and our components.
We intend to closely monitor competing product introductions for any
infringement of our proprietary rights. We believe that, as the demand for
products such as those developed by us increase, infringement of intellectual
property rights may also increase. If certain industry competitors infringe on
our proprietary rights, they may have substantially greater financial,
technical, and legal resources than we, which could adversely affect our ability
to defend our rights. In addition, we could incur substantial costs in
defending our rights.
DEPENDENCE ON KEY EMPLOYEES.
Our business is dependent upon our senior executive officers, principally,
Dennis Lauzon, our president and chief executive officer, who is responsible for
our operations, including marketing and business development. Although we do
not have an employment agreement with Mr. Lauzon, he has indicated a desire to
continue his employment with us for the long term. Our business may be
adversely affected if Mr. Lauzon left our employ. In the event of future growth
in administration, marketing, manufacturing and customer support functions, we
may have to increase the depth and experience of our management team by adding
new members. Our success will depend to a large degree upon the active
participation of our key officers and employees. Loss of services of any of the
current officers and directors, especially Mr. Lauzon, could have a significant
adverse effect on our operations and prospects. There can be no assurance that
we will be able to employ qualified persons on acceptable terms to replace
officers who become unavailable.
NEED FOR ADDITIONAL SPECIALIZED PERSONNEL.
Although we are committed to the continued development and growth of our
business, the addition of specialized key personnel and sales persons to assist
us in our expansion of our national operations will be necessary. There can be
no assurance that we will be able to locate and hire such specialized personnel
on acceptable terms.
4
WE MAY FACE SIGNIFICANT COMPETITION.
There are numerous corporations, firms and individuals that are engaged in
the type of business activities in which we engage. Many of those entities are
more experienced and enjoy substantially greater financial, technical and
personnel resources than we possess. While we hope to be competitive with other
similar companies, there can be no assurance that such will be the case.
DEPENDENCE ON ABILITY TO MARKET PRODUCTS AND SERVICES.
Due to our limited resources, the sales and marketing of our products has
been limited to date. Our success is dependent upon our ability to market and
sell our products and services with such limited resources.
RISKS RELATING TO OUR STOCK
WE MAY NEED TO RAISE ADDITIONAL CAPITAL. IF WE ARE UNABLE TO RAISE NECESSARY
ADDITIONAL CAPITAL, OUR BUSINESS MAY FAIL OR OUR OPERATING RESULTS AND OUR STOCK
PRICE MAY BE MATERIALLY ADVERSELY AFFECTED.
Because we are a newly operational company, we need to secure adequate
funding. If we are unable to obtain adequate funding, we may not be able to
successfully develop and market our products and services and our business will
most likely fail. We do not have commitments for additional financing. To
secure additional financing, we may need to borrow money or sell more
securities, which may reduce the value of our outstanding securities. We may be
unable to secure additional financing on favorable terms or at all.
Selling additional stock, either privately or publicly, would dilute the
equity interests of our stockholders. If we borrow more money, we will have to
pay interest and may also have to agree to restrictions that limit our operating
flexibility. If we are unable to obtain adequate financing, we may have to
curtail business operations which would have a material negative effect on
operating results and most likely result in a lower stock price.
OUR COMMON STOCK HAS EXPERIENCED IN THE PAST, AND IS EXPECTED TO EXPERIENCE IN
THE FUTURE, SIGNIFICANT PRICE AND VOLUME VOLATILITY, WHICH SUBSTANTIALLY
INCREASES THE RISK THAT YOU MAY NOT BE ABLE TO SELL YOUR SHARES AT OR ABOVE THE
PRICE THAT YOU PAY FOR THE SHARES.
Because of the limited trading market for our common stock, and because of
the possible price volatility, you may not be able to sell your shares of common
stock when you desire to do so. During 2002 and 2003, and through the date of
this Annual Report, our common stock was sold and purchased at prices that
ranged from a high of $0.09 to a low of $0.01 per share. The inability to sell
your shares in a rapidly declining market may substantially increase your risk
of loss because of such illiquidity because the price for our common stock may
suffer greater declines due to its price volatility.
The price of our common stock that will prevail in the market may be higher
or lower than the price you pay. Certain factors, some of which are beyond our
control, that may cause our share price to fluctuate significantly include, but
are not limited to, the following:
- Variations in our quarterly operating results;
- Our ability to complete the research and development of our technologies;
- The development of a market in general for our products and services;
- Changes in market valuations of similar companies;
- Announcement by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- Loss of a major customer or failure to complete significant transactions;
5
- Additions or departures of key personnel; and
- Fluctuations in stock market price and volume.
Additionally, in recent years the stock market in general, and the OTC
Bulletin Board and technology stocks in particular, have experienced extreme
price and volume fluctuations. In some cases, these fluctuations are unrelated
or disproportionate to the operating performance of the underlying company.
These market and industry factors may materially and adversely affect our stock
price, regardless of our operating performance.
Over the past few months, there have been periods of significant increases
in trading volume of our common stock during which the price of our stock has
both increased and decreased. The historical trading of our common stock is not
necessarily an indicator of how it will trade in the future and our trading
price as of the date of this Annual Report does not necessarily portend what the
trading price of our common stock might be in the future.
Moreover, class action litigation has often been brought against companies
following periods of volatility in the market price of the common stock of those
companies. If we become involved in this type of litigation in the future, it
could result in substantial costs and diversion of management attention and
resources, which could have a further negative effect on your investment in our
stock.
OUR DIRECTORS HAVE THE RIGHT TO AUTHORIZE THE ISSUANCE OF PREFERRED STOCK AND
ADDITIONAL SHARES OF OUR COMMON STOCK.
Our directors, within the limitations and restrictions contained in our
articles of incorporation and without further action by our stockholders, have
the authority to issue shares of preferred stock from time to time in one or
more series and to fix the number of shares and the relative rights, conversion
rights, voting rights, and terms of redemption, liquidation preferences and any
other preferences, special rights and qualifications of any such series. We
have no intention of issuing preferred stock at the present time. Any issuance
of preferred stock could adversely affect the rights of holders of our common
stock.
Should we issue additional shares of our common stock at a later time, each
investor's ownership interest in our stock would be proportionally reduced. No
investor will have any preemptive right to acquire additional shares of our
common stock, or any of our other securities.
IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF BROKER-DEALERS TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN
THE SECONDARY MARKET.
Companies trading on the OTC Bulletin Board, such as we, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports under Section 13, in order to maintain price
quotation privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements, we could be removed from the OTC Bulletin Board. As
a result, the market liquidity for our securities could be severely adversely
affected by limiting the ability of broker-dealers to sell our securities and
the ability of stockholders to sell their securities in the secondary market.
OUR COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE
TRADING MARKET IN OUR SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.
The Securities and Exchange Commission has adopted Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes relevant to us,
as any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain
exceptions. Inasmuch as that the current bid and ask price of common stock is
less than $5.00 per share, our shares are classified as "penny stock" under the
rules of the SEC. For any transaction involving a penny stock, unless exempt,
the rules require:
- That a broker or dealer approve a person's account for transactions in
penny stocks; and
6
- The broker or dealer receives from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
In order to approve a person's account for transactions in penny stocks,
the broker or dealer must:
- Obtain financial information and investment experience objectives of the
person; and
- Make a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:
- Sets forth the basis on which the broker or dealer made the suitability
determination; and
- That the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more difficult
for investors to dispose of our common stock and cause a decline in the market
value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and about the commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.
ITEM 2. DESCRIPTION OF PROPERTY.
We lease office space at 27 Radio Circle Drive, Mount Kisco, New York,
10549 starting in February 2004. Our lease costs $900 per month and is scheduled
to expire on December 31, 2004. We also lease office space at 402 West Broadway,
Suite 400 San Diego, California 92101. The original six month lease was from
August 2003 through January 2004. The lease is currently month to month, at the
cost of $1,018 base rent per month and other monthly fixed office cost of $535.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"JRVR." Our stock was not actively traded until October 2002, and the following
table sets forth, for the fiscal quarters indicated, the high and low sales
prices. These quotations reflect inter-dealer prices, without mark-up,
mark-down or commission, and may not represent actual transactions.
CALENDAR YEAR 2002 HIGH LOW
First Quarter N/A N/A
Second Quarter N/A N/A
Third Quarter $ 0.01 $0.01
Fourth Quarter $ 0.09 $0.01
CALENDAR YEAR 2003 HIGH LOW
First Quarter $ 0.06 $0.03
Second Quarter $ 0.06 $0.03
Third Quarter $ 0.10 $0.03
Fourth Quarter $ 0.09 $0.02
CALENDAR YEAR 2004 HIGH LOW
First Quarter $0.08_ $0.01
We currently have 79,432,750 shares of our common stock outstanding. Our
shares of common stock are held by approximately 531 stockholders of record.
The number of record holders was determined from the records of our transfer
agent and does not include beneficial owners of common stock whose shares are
held in the names of various security brokers, dealers, and registered clearing
agencies.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
None.
RECENT SALES OF UNREGISTERED SECURITIES
None.
SECTION 15(g) OF THE EXCHANGE ACT
The shares of our common stock are covered by Section 15(g) of the Exchange
Act, and Rules 15g-1 through 15g-6 promulgated thereunder, which impose
additional sales practice requirements on broker-dealers who sell our securities
to persons other than established customers and accredited investors.
Rule 15g-2 declares unlawful any broker-dealer transactions in "penny
stocks" unless the broker-dealer has first provided to the customer a
standardized disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a
"penny stock" transaction unless the broker-dealer first discloses and
subsequently confirms to the customer the current quotation prices or similar
market information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing "penny stock"
transactions for a customer unless the broker-dealer first discloses to the
customer the amount of compensation or other remuneration received as a result
of the penny stock transaction.
Rule 15g-5 requires that a broker-dealer executing a "penny stock"
transaction, other than one exempt under Rule 15g-1, disclose to its customer,
at the time of or prior to the transaction, information about the sales person's
compensation.
8
Our common stock may be subject to the foregoing rules. The application of
the "penny stock" rules may affect our stockholders' ability to sell their
shares because some broker-dealers may not be willing to make a market in our
common stock because of the burdens imposed upon them by the "penny stock"
rules.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Statements included in this Management's Discussion and Analysis or Plan of
Operation, and in future filings by us with the Securities and Exchange
Commission, in our press releases and in oral statements made with the approval
of an authorized executive officer which are not historical or current facts are
"forward-looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. We wish
to caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. The following important
factors, among others, in some cases have affected and in the future could
affect our actual results and could cause our actual financial performance to
differ materially from that expressed in any forward-looking statement: (i) the
extremely competitive conditions that currently exist in the market for "blank
check" companies similar to us, and (ii) lack of resources to maintain our good
standing status and requisite filings with the Securities and Exchange
Commission. The foregoing list should not be construed as exhaustive and we
disclaim any obligation subsequently to revise any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
As of the end of 2003, we have abandoned our plans to pursue short-term
financing of funeral arrangements. We are now in the business of IT consulting
and providing customized information management systems. We plan to provide
innovative solutions for integrating financial and customer information;
managing manufacturing processes; reducing inventory; and standardizing human
resource information. We will use patented, proprietary software to offer
business management solutions that are customized for various business
environments.
Because we lack capital, an investment in us involves a very high degree of
risk.
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect our reported assets, liabilities,
revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical experience and on various
other assumptions we believe to be reasonable under the circumstances. Future
events, however, may differ markedly from our current expectations and
assumptions. While there are a number of significant accounting policies
affecting our consolidated financial statements, we believe the following
critical accounting policy involve the most complex, difficult and subjective
estimates and judgments.
STOCK-BASED COMPENSATION
In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure. This statement amends SFAS No. 123 -
Accounting for Stock-Based Compensation, providing alternative methods of
voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of
the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2002.
We elected to continue to account for stock-based compensation plans using
the intrinsic value-based method of accounting prescribed by APB No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for the difference between the fair value of the stock and the exercise price.
9
YEAR 2003 COSTS AND CHANGES IN FINANCIAL CONDITIONS
As of the date of this report, we have not engaged in any business
activities which provide cash flow, and have not recorded any revenues from
operations.
RESULTS OF OPERATIONS
During the year ended December 31, 2003, we incurred an operating loss of
$629,735 and no revenues. The loss featured, sales, marketing, general,
administrative and interest expenses. Interest income was $6.00 in 2003,
interest expense in 2002 was $42.00.
LIQUIDITY AND CAPITAL RESOURCES
As discussed by our accountants in the audited financial statements
included in Item 7 of this Annual Report on Form 10-KSB, our revenue is
currently insufficient to cover our costs and expenses.
To date, we have not generated any revenues. As a result of the operating
losses from our inception through December 31, 2003, we generated a cash flow
deficit of $333,013 from operating activities. As of December 31, 2003, our
current assets exceeded the current liabilities by $2,646. For the period from
inception through December 31, 2003, we have accumulated losses of $817,278.
Consequently, our operations are subject to all risks inherent in the
establishment of a new business enterprise.
Dennis N. Lauzon, our sole director and executive officer, continues to
provide us the funds needed to continue our development and operations. To the
extent our revenue shortfall exceeds Mr. Lauzon's willingness and ability to
continue providing us the funds needed, we anticipate raising any necessary
capital from outside investors coupled with bank or mezzanine lenders. As of
the date of this report, we have not entered into any negotiations with any
third parties to provide such capital.
We anticipate that our current financing strategy of private debt and
equity offerings will meet its anticipated objectives and business operations
for the next 12 months. We continue to evaluate opportunities for corporate
development. Subject to our ability to obtain adequate financing at the
applicable time, we may enter into definitive agreements on one or more of those
opportunities.
Our independent auditor's report on our December 31, 2003 financial
statements included in this Annual Report states that our lack of sources of
revenues raise substantial doubts about our ability to continue as a going
concern.
10
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which
one company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. We do not expect the adoption to have
a material impact to our financial position or results of operations.
11
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, Amendment of Statement No. 133 on Derivative Instruments and
Hedging Activities. SFAS 149 amends SFAS No. 133 to provide clarification on
the financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 did not
have a material impact on our results of operations or financial position.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 did not have a material impact on our results of
operations or financial position.
In December 2003, the FASB issued SFAS No. 132 (revised), EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS - AN AMENDMENT OF FASB
STATEMENTS NO. 87, 88, and 106. This statement retains the disclosure
requirements contained in FASB statement no. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which it replaces. It requires
additional disclosures to those in the original statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other define benefit postretirement plans. The required
information should be provided separately for pension plans and for other
postretirement benefit plans. The revision applies for the first fiscal or
annual interim period ending after December 15, 2003 for domestic pension plans
and June 15, 2004 for foreign pension plans and requires certain new disclosures
related to such plans. The adoption of this statement will not have a material
impact on the Company's results of operations or financial positions.
RECENT DEVELOPMENTS
Please see Item 1 of this Annual Report for the discussion of our proposed
operations going forward since February 24, 2004.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements and related notes are included as part of this
Annual Report as indexed in the appendix on page F-1 through F-18.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On September 16, 2003, we terminated the client-auditor relationship with
Michaelson & Co., P.A. Michaelson & Co., P.A.'s reports on the financial
statements for the year ended December 31, 2002 and the period May 8, 2001 (date
of inception) through December 31, 2002 did not contain an adverse opinion or
disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the year ended December 31, 2002
and the period May 8, 2001 (date of inception) through December 31, 2002, and
the subsequent interim period through September 16, 2003 the Company has not had
any disagreements with Michaelson on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Michaelson & Co., P.A.,
would have caused it to make reference to the subject matter of the
disagreements in connection with its reports on the financial statements for
such periods.
The decision to change accountants was recommended by our board of
directors.
Regulation S-K Item 304(a)(1)(v) is not applicable.
On September 22, 2003 we engaged Russell Bedford Stefanou Mirchandani LLP,
certified public accountants, as our independent accountants to report on our
balance sheet as of December 31, 2003, and the related combined statements of
income, stockholders' equity and cash flows for the year then ended. The
decision to appoint Russell Bedford Stefanou Mirchandani LLP was approved by our
board of directors.
During our two most recent fiscal years and any subsequent interim period
prior to the engagement of Russell Bedford Stefanou Mirchandani LLP, neither we
nor anyone on our behalf consulted with Russell Bedford Stefanou Mirchandani LLP
regarding either (i) the application of accounting principles to a specified
transaction, either contemplated or proposed, or the type of audit opinion that
might be rendered on our financial statements or (ii) any matter that was either
the subject of a "disagreement" or a "reportable event."
12
We have requested the former accountants to furnish us with a letter
addressed to the Commission stating whether it agrees with the statements made
by the registrant, and, if not, stating the respects in which they do not agree.
We included the former accountant's letter as Exhibit 16 of our Form 8-K/A filed
with the SEC on October 20, 2003.
ITEM 8A. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit 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. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
Evaluation of disclosure and controls and procedures. As of the end of the
period covered by this Annual Report, we conducted an evaluation, under the
supervision and with the participation of our chief executive officer and chief
financial officer, of our disclosure controls and procedures (as defined in
Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
Changes in internal controls over financial reporting. There was no change
in our internal controls, which are included within disclosure controls and
procedures, during our most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
controls.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Our sole director and executive officer is:
NAME AGE POSITION POSITION HELD SINCE
------------- --- -------------------------------------------- -------------------
Dennis Lauzon 48 Director, President, Secretary and Treasurer 2003
Dennis Lauzon has a B.S. degree from Springfield College. Mr. Lauzon has
served as president of Radel Marketing Corporation in Katonah, New York, since
its formation, in 1981. He was also the founder and principal owner of Updated
Profit Systems, a company providing computerized service system for the
automotive industry. Mr. Lauzon also served as a consultant for companies
developing various POS marketing and sales programs and coupon fraud protection
systems, such as Nabisco, HP, and Seagram's.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Exchange Act, our directors and certain of our
officers, and persons holding more than 10 percent of our common stock are
required to file forms reporting their beneficial ownership of our common stock
and subsequent changes in that ownership with the Securities and Exchange
Commission. Such persons are also required to furnish us with copies of all
forms so filed.
Based solely upon a review of copies of such forms filed on Forms 3, 4, and
5, and amendments thereto furnished to us, we believe that during the year ended
December 31, 2003, our executive officers, directors and greater than 10 percent
beneficial owners complied on a timely basis with all Section 16(a) filing
requirements.
13
COMMITTEES OF THE BOARD OF DIRECTORS
Compensation Committee. Our board of directors has created a compensation
committee. However, no members of the committee have been appointed and the
committee has not been formally organized. The compensation committee will make
recommendations to the board of directors concerning salaries and compensation
for our executive officers and employees. We have adopted a charter for the
compensation committee.
Audit Committee. Our board of directors has created an audit committee
which is directly responsible for the appointment, compensation, and oversight
of the work of any registered public accounting firm employed by us (including
resolution of disagreements between our management and the auditor regarding
financial disclosure) for the purpose of preparing or issuing an audit report or
related work. The audit committee will also review and evaluate our internal
control functions. However, no members of the committee have been appointed and
the committee has not been formally organized. We have adopted a charter for
the audit committee.
CHANGE IN CONTROL
On June 19, 2003, as a direct result of the transaction referred to in Item
1 hereof, Dennis Lauzon became a "control person" of The Jackson Rivers Company
as that term is defined in the Securities Act. Additionally, with the
consummation of the transactions referred to in Item 1 of this Annual Report,
Mr. Lauzon was elected the sole director and officer of The Jackson Rivers
Company.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. The code of ethics is
designed to deter wrongdoing and to promote:
- Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships;
- Full, fair, accurate, timely, and understandable disclosure in reports and
documents that we file with, or submits to, the SEC and in other public
communications made by us;
- Compliance with applicable governmental laws, rules and regulations;
- The prompt internal reporting of violations of the code to an appropriate
person or persons identified in the code; and
- Accountability for adherence to the code.
A copy of our code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions is attached to this Annual
Report as an exhibit. We have filed with the SEC a copy of the code of ethics
attached hereto. We have posted a copy of the code of ethics on our website at
www.jacksonrivers.com.
We will provide to any person without charge, upon request, a copy of our
code of ethics. Any such request should be directed to our corporate secretary
at 27 Radio Circle Drive, Mount Kisco, New York 10549, telephone number (619)
615-4242.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
None of our officers or directors received any compensation for services
from our date of inception (March 8, 2001) to December 31, 2003. Our sole
director has agreed to act without compensation until operations have commenced.
14
Employment Agreements
We do not have an employment agreement with our sole director and officer,
Dennis Lauzon, or with any of our other employees. However, we do have a
Consulting Services Agreement with Radel Marketing Corporation, a company which
is owned and controlled by Mr. Lauzon. Pursuant to the agreement we paid Radel
Marketing the sum of $87,000 in 2003.
Under the agreement with Radel, which is dated August 1, 2003, Radel is to
provide us various services which include:
- Business Solutions;
- Business Validation;
- Contract Negotiations; and
- Public Relations.
We were obligated to pay Radel $8,000 weekly commencing on September 24,
2003. The payment terms of the agreement expired on December 31, 2003.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2004, information
concerning ownership of our securities by:
- Each person who owns beneficially more than five percent of the outstanding
shares of our common stock;
- Each director;
- Each named executive officer; and
- All directors and officers as a group.
SHARES BENEFICIALLY OWNED (2)
-------------------------------
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT
------------------------------------------------------------ -------------- ---------------
Dennis Lauzon (3) . . . . . . . . . . . . . . . . . . . . . . 81,000,000 45.14%
Joseph Khan (4) . . . . . . . . . . . . . . . . . . . . . . . 20,000,000 11.15%
All directors and executive officers as a group (one person). 81,000,000 45.14%
===============
___________________
* Less than one percent.
(1) Unless otherwise indicated, the address for each of these stockholders is
c/o The Jackson Rivers Company, 27 Radio Circle Drive, Mount Kisco, New
York 10549. Also, unless otherwise indicated, each person named in the
table above has the sole voting and investment power with respect to our
shares of common stock which he or she beneficially owns.
(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. As of the date of this Annual Report,
there were issued and outstanding 79,432,750 shares of our common stock,
before giving any consideration to the issuance of the additional
100,000,000 shares we are obligated to issue
(3) The shares reflected as being owned by Mr. Lauzon take into consideration
the obligation we have to issue him an additional 80,000,000 shares of our
common stock as a result of the exchange by him of his shares of Jackson
Rivers Technologies, Inc. As of the date of this Annual Report, Mr. Lauzon
owns 1,000,000 shares of our common stock, while we have outstanding
79,432,750 shares of our common stock. See Item 1 of this Annual Report.
(4) Mr. Khan is entitled to receive 20,000,000 shares of our common stock as
soon as we can increase our authorized shares. See Item 1 of this Annual
Report.
There are no arrangements, known to us, including any pledge by any person
of our securities, the operation of which may at a subsequent date result in a
change in control of The Jackson Rivers Company.
15
There are no arrangements or understandings among members of both the
former and the new control groups and their associates with respect to election
of directors or other matters.
The foregoing description of the transactions is qualified in its entirety
to the information contained in Item 1 of this Annual Report and the full text
of the LLC Interest Purchase Agreement, previously filed by us as an exhibit to
a Current Report on Form 8-K.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
As of September 30, 2003, we have settled all claims with our former
chairman and controlling stockholder, Mr. Don A. Paradiso, for approximately
$19,000. Effective June 19, 2003 Don A. Paradiso resigned as our director,
president, secretary and treasurer, and Dennis N. Lauzon was elected our
director, president, secretary and treasurer. At that time, Mr. Lauzon acquired
1,000,000 shares of our common stock, or approximately 5.67 percent of our
common stock, from Mr. Paradiso.
On February 23, 2004, Mr. Lauzon contributed to us all of the issued and
outstanding shares of Jackson Rivers Technologies, Inc., a Nevada corporation,
in exchange for a commitment by us that we would issue 80,000,000 shares of our
common stock to him once the shares became available. On February 23, 2004, our
authorized shares of common stock consisted of 100,000,000 shares, but we only
had 39,567,250 shares available to issue to Mr. Lauzon. We agreed that we would
issue 80,000,000 shares to Mr. Lauzon at the time we increase our authorized
shares of common stock to such a level so as to permit the issuance of the
shares needed to satisfy the obligation to Mr. Lauzon. By virtue of such
contribution, Jackson Rivers Technologies became one of our wholly-owned
subsidiaries.
Likewise, on February 23, 2004, Mr. Lauzon contributed to us all of his
shares in JRC Global Products, Inc. as a contribution to our capital.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Financial Statement Schedules.
None.
(b) Exhibits
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- --------------------------------------------------------------------------------------------------------
3.1 * Articles of Incorporation filed May 8, 2001 (incorporated by reference to Exhibit A filed with Form SB-2
October 4, 2001).
3.2 * Bylaws (incorporated by reference to Exhibit 3(ii) filed with Form SB-2 October 4, 2001).
10.1 ** Consulting Services Agreement dated August 1, 2003.
10.2 ** Amended LLC Interest Purchase Agreement dated February 24, 2004 between Multitrade Technologies LLC, Joe
Khan, Jackson Rivers Technologies, Inc., and The Jackson Rivers Company
14 ** Code of Ethics.
21 ** Subsidiaries.
23.1 Consent of Independent Auditors
23.2 Consent of Independent Auditors
31.1 ** Certification of Dennis Lauzon, President and Chief Executive Officer of The Jackson Rivers Company,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
31.2 ** Certification of Dennis Lauzon, Chief Financial Officer and Treasurer of The Jackson Rivers Company,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.302 of the Sarbanes-Oxley Act of 2002.
32.1 ** Certification of Dennis Lauzon, President and Chief Executive Officer of The Jackson Rivers Company,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
32.2 ** Certification of Dennis Lauzon, Chief Financial Officer and Treasurer of The Jackson Rivers Company,
pursuant to 18 U.S.C. Sec.1350, as adopted pursuant to Sec.906 of the Sarbanes-Oxley Act of 2002.
___________
* Previously Filed
** Filed Herewith
16
(c) Reports on Form 8-K.
Form 8-K filed on June 19, 2003 with respect to changes in control, the
resignation of Don A. Paradiso as our director, president, secretary and
treasurer and the election of Dennis Lauzon as our director, president,
secretary and treasurer.
Form 8-K filed on October 2, 2003 with respect to changes in our certifying
accountant.
Form 8-K/A filed on October 20, 2003 with respect to changes in our
certifying accountant.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth fees billed to us by our auditors during the
years ended December 31, 2003 and 2002 for: (i) services rendered for the audit
of our annual financial statements and the review of our quarterly financial
statements, (ii) services by our auditor that are reasonably related to the
performance of the audit or review of our financial statements and that are not
reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered.
December 31, 2003 December 31, 2002
------------------ ------------------
(i) Audit Fees $ 9,000 $ 9,700
(ii) Audit Related Fees 0 0
(iii) Tax Fees 500 500
(iv) All Other Fees 0 1,100
------------------ ------------------
Total fees $ 9,500 $ 11,300
================== ==================
---------------------------
AUDIT FEES. Consists of fees billed for professional services rendered for
the audit of Jackson Rivers Company's consolidated financial statements and
review of the interim consolidated financial statements included in quarterly
reports and services that are normally provided by our auditors in connection
with statutory and regulatory filings or engagements.
AUDIT-RELATED FEES. Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of Jackson Rivers Company's consolidated financial statements and are not
reported under "Audit Fees." There were no Audit-Related services provided in
fiscal 2003 or 2002.
TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning.
ALL OTHER FEES. Consists of fees for products and services other than the
services reported above. There were no management consulting services provided
in fiscal 2003 or 2002.
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT
SERVICES OF INDEPENDENT AUDITORS
The Company currently does not have a designated Audit Committee, and
accordingly, the Company's Board of Directors' policy is to pre-approve all
audit and permissible non-audit services provided by the independent auditors.
These services may include audit services, audit-related services, tax services
and other services. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of
services and is generally subject to a specific budget. The independent auditors
and management are required to periodically report to the Company's Board of
Directors regarding the extent of services provided by the independent auditors
in accordance with this pre-approval, and the fees for the services performed to
date. The Board of Directors may also pre-approve particular services on a
case-by-case basis.
17
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this Annual Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE JACKSON RIVERS COMPANY
Date: April 12, 2004
By /s/ Dennis Lauzon
-------------------------------------------
Dennis Lauzon,
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report has been signed by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
----------------- -------------------------- --------------
/s/ Dennis Lauzon President, Chief Executive April 12, 2004
---------------------
Dennis Lauzon Officer and Director
18
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 2002 AND 2001
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
THE JACKSON RIVERS COMPANY
INDEX TO FINANCIAL STATEMENTS
Page No.
----------
Reports of Independent Certified Public Accountants F-3 - F-4
Consolidated Balance Sheet:
December 31, 2003 F-5
Consolidated Statements of Losses:
For the years ended December 31, 2003 and 2002, and the period from May 8, 2001
(date of inception) through December 31, 2003 F-6
Consolidated Statements of Stockholders' Equity:
For the period from May 8, 2001 (date of inception) through December 31, 2003 F-7
Consolidated Statements of Cash Flows:
For the years ended December 31, 2003 and 2002, and the period from May 8, 2001
(date of inception) through December 31, 2003 F-8
Notes to Consolidated Financial Statements F-9 - F-18
RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors
The Jackson Rivers Company
Mt. Kisco, New York
We have audited the accompanying consolidated balance sheet of The Jackson
Rivers Company and its wholly-owned subsidiaries (the "Company"), a development
stage company, as of December 31, 2003 and the related consolidated statements
of losses, stockholders' equity, and cash flows for the year then ended and for
the period from May 8, 2001 (date of inception) through December 31, 2003.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
upon our audits.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 2003, and the results of its operations and its cash flows
for the year then ended and the period from May 8, 2001 (date of inception)
through December 31, 2003, in conformity with accounting principles generally
accepted in the United States of America. We express no opinion on the
cumulative period from inception through December 31, 2002.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in the Note
H to the accompanying consolidated financial statements, the Company is in the
development stage and has not established a source of revenues. This raises
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to this matter are described in Note H. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
---------------------------------------------
RUSSELL BEDFORD STEFANOU MIRCHANDANI LLP
Certified Public Accountants
McLean, Virginia
March 6, 2004
F-3
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders,
The Jackson Rivers Company
Pompano Beach, Florida
We have audited the accompanying balance sheets of The Jackson Rivers Company (a
Florida corporation and a development stage company) as of December 31, 2002 and
2001 and the related statements of operations, changes in stockholders' equity,
and cash flows for the periods from inception, May 8, 2001, through December 31,
2001 and 2002. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Jackson Rivers Company as
of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the period from inception, May 8, 2001, through December 31, 2002 and
2001, in conformity with accounting principles generally accepted in the United
States of America.
Michaelson & Company, P.A.
Certified Public Accountants
1655 Palm Beach Lakes Blvd., Suite 710
West Palm Beach, Florida 33401 (561) 683-6800
February 15, 2003
F-4
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2003
ASSETS
Current assets:
Cash and cash equivalents $ 14,820
Prepaid expenses and deposits 3,455
----------
Total current assets 18,275
Property, plant and equipment, net of accumulated depreciation of $341 3,756
Total Assets $ 22,031
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 15,529
Advances from related parties (Note D) 100
----------
Total current liabilities 15,629
Commitments and contingencies (Note G) -
Stockholders' equity (Note B):
Common stock, par value; $.001, authorized 100,000,000 shares; 39,433
39,432,750 shares issued and outstanding at December 31, 2003
Additional paid-in capital 843,747
Stock subscription (59,500)
Deficit accumulated during development stage (817,278)
----------
Total stockholders' equity 6,402
Total liabilities and stockholders' equity $ 22,031
==========
See accompanying notes to consolidated financial statements
F-5
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF LOSSES
For the year ended December 31, For the period from May 8,
2001 (date of inception)
2003 2002 through December 31, 2003
------------------ ----------------- -----------------
Operating expenses:
Selling, general, and administrative $ 642,257 $ 172,595 $ 829,334
Depreciation 341 424 765
------------------ ----------------- ----------------------------
Total operating expenses 642,598 173,019 830,099
Loss from operations (642,598) (173,019) (830,099)
Other income (Note D) 12,857 - 12,857
Interest income (expense) 6 (42) (36)
------------------ ----------------- ----------------------------
Net loss before provision for income taxes (629,735) (173,061) (817,278)
Provision for income taxes - - -
------------------ ----------------- ----------------------------
Net loss $ (629,735) $ (173,061) $ (817,278)
================== ================= ============================
Earnings (losses) per share, basic and fully $ (0.03) $ (0.01)
================== =================
diluted (Note F)
Basic and diluted weighted average number of 21,111,928 13,042,438
shares outstanding
See accompanying notes to consolidated financial statements
F-6
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 8, 2001 (DATE OF INCEPTION) TO DECEMBER 31, 2003
Common Stock Additional Stock Accumulated
Paid-In
------------
Stock Amount Capital Subscription Deficit Total
----------- -------- ------------ -------------- ------------- ----------
BALANCE AT MAY 8, 2001 - $ - $ - $ - $ - $ -
Issuance of common stock in June 2001 in exchange 10,000,000 10,000 5,000 - - 15,000
for cash at $.0015 per share, net of costs and
fees
Net loss - - - - (14,482) (14,482)
----------- -------- ------------ -------------- ------------- ----------
BALANCE AT DECEMBER 31, 2001 10,000,000 $10,000 $ 5,000 $ - $ (14,482) $ 518
=========== ======== ============ ============== ============= ==========
Common stock subscription in February 2002 at - - - 42,500 - 42,500
0.04 per share
Common stock subscription in March 2002 at $0.04 - - - 29,500 - 29,500
per share
Issuance of common stock for common stock 1,800,000 1,800 70,200 (72,000) - -
subscribed in February and March 2002 at $0.04
per share
Common stock subscription in April 2002 - - - 8,750 - 8,750
Issuance of common stock for common stock 218,750 219 8,531 (8,750) - -
subscribed in April 2002 at $0.04 per share
Rescission of common stock in August 2002 (62,500) (63) (2,437) - - (2,500)
Issuance of common stock in September 2002 in 250,000 250 9,750 - - 10,000
exchange for cash at $.04 per share, net of costs
and fees
Issuance of common stock in exchange for services 2,500,000 2,500 47,500 - - 50,000
in September 2002 at $0.02 per share
Issuance of common stock in exchange for services 2,926,500 2,927 55,603 - - 58,530
in November 2002 at $0.02 per share
Net loss - - - - (173,061) (173,061)
----------- -------- ------------ -------------- ------------- ----------
BALANCE AT DECEMBER 31, 2002 17,632,750 $17,633 $ 194,147 $ - $ (187,543) $ 24,237
=========== ======== ============ ============== ============= ==========
Issuance of common stock in exchange for services 3,000,000 3,000 87,000 - - 90,000
in August 2003 at $0.03 per share
Issuance of common stock in exchange for options 1,200,000 1,200 31,099 - - 32,299
exercised in August 2003 at approximately $0.03
per share
Issuance of common stock in exchange for services 800,000 800 47,200 - - 48,000
in September 2003 at $0.06 per share
Issuance of common stock in exchange for options 600,000 600 30,000 - - 30,600
exercised in September 2003 at approximately
0.05 per share
Issuance of common stock in exchange for options 1,500,000 1,500 87,751 - - 89,251
exercised in October 2003 at approximately $0.06
per share
Issuance of common stock in exchange for options 1,500,000 1,500 49,500 - - 51,000
exercised in October 2003 at approximately $0.03
per share
Issuance of common stock in exchange for services 3,000,000 3,000 117,000 - - 120,000
in November 2003 at $0.04 per share
Issuance of common stock in exchange for options 1,500,000 1,500 36,750 - - 38,250
exercised in November 2003 at approximately $0.03
per share
Issuance of common stock in exchange for services 1,200,000 1,200 34,800 - - 36,000
in December 2003 at $0.03 per share
Issuance of common stock in exchange for options 1,000,000 1,000 24,500 - - 25,500
exercised in December 2003 at approximately $0.03
per share
Issuance of common stock in exchange for options 6,500,000 6,500 104,000 (59,500) - 51,000
exercised in December 2003 at approximately $0.01
per share
Net loss - - - - (629,735) (629,735)
----------- -------- ------------ -------------- ------------- ----------
BALANCE AT DECEMBER 31, 2003 39,432,750 $39,433 $ 843,747 $ (59,500) $ (817,278) $ 6,402
=========== ======== ============ ============== ============= ==========
See accompanying notes to consolidated financial statements
F-7
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended December 31, For the period
from May 8, 2001
(date of inception)
through December
2003 2002 31, 2003
-------------- -------------- --------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss from operation $ (629,735) $ (173,061) $ (817,278)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 341 424 765
Common stock issued in exchange for consulting services rendered 294,000 108,530 402,530
(Note B)
Common stock issued in exchange for employee services rendered 67,624 - 67,624
(Note B and C)
Loss from disposal of equipment 1,272 - 1,272
(Increase) decrease in prepaid expenses 1,547 (5,000) (3,455)
Increase (decrease) in accounts payable and accrued liabilities, net 4,082 11,287 15,529
-------------- -------------- --------------------
Net cash (used in) operating activities (260,869) (57,820) (333,013)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,098) (1,696) (5,793)
-------------- -------------- --------------------
Net cash (used in) investing activities (4,098) (1,696) (5,793)
CASH FLOWS FROM FINANCING ACTIVITIES:
Related party advances, net of repayments (Note D) 100 - 100
Proceeds from the sale of common stock, net of costs and fees 250,276 88,250 353,526
-------------- -------------- --------------------
(Note B)
Net cash provided by financing activities 250,376 88,250 353,626
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (14,591) 28,734 14,820
Cash and cash equivalents at beginning of period 29,411 677 -
-------------- -------------- --------------------
Cash and cash equivalents at end of period $ 14,820 $ 29,411 $ 14,820
============== ============== ====================
Supplemental Disclosure of Cash Flows Information:
Cash paid during the period for interest $ - $ 42 42
Cash paid during the period for income taxes - - -
Common stock issued in exchange for consulting services rendered 294,000 108,530 402,530
(Note B)
Common stock issued in exchange for employee services rendered 67,624 - 67,624
(Note B and C)
Employee stock purchase plan (Note B and C):
Common stock issued under employee stock purchase plan 377,400 - 377,400
Less: stock subscription receivable (59,500) - (59,500)
Less: common stock retained by employees (67,624) - (67,624)
-------------- -------------- --------------------
Net proceeds from the sale of common stock $ 250,276 $ - $ 250,276
============== ============== ====================
See accompanying notes to consolidated financial statements
F-8
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows.
Business and Basis of Presentation
--------------------------------------
The Jackson Rivers Company (the "Company") was incorporated on May 8, 2001 under
the laws of the State of Florida. The Company does not presently conduct
business operations and is in the process of raising capital and financing for
its future operations.
The Company is in the development stage, as defined by Statement of Financial
Accounting Standards No. 7 ("SFAS No. 7"). To date, the Company has generated
no sales revenues, has incurred expenses and has sustained losses. Consequently,
its operations are subject to all the risks inherent in the establishment of a
new business enterprise. For the period from inception through December 31,
2003, the Company has accumulated losses of $817,278.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Jackson Rivers Technologies, Inc. and JRC Global
Products, Inc. Significant intercompany transactions and accounts have been
eliminated in consolidation.
Revenue Recognition
--------------------
The Company will follow a policy of recognizing revenue when the products are
shipped or when services are provided to customers.
Advertising
-----------
The Company follows the policy of charging the costs of advertising to expenses
as incurred. The Company incurred no advertising costs for the years ended
December 31, 2003, 2002, and for the period from May 8, 2001 (date of inception)
to December 31, 2003.
Cash Equivalents
-----------------
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
Property and Equipment
------------------------
For financial statement purposes, property and equipment are recorded at cost
and depreciated using the straight-line method over their estimated useful
lives. Depreciation expense included as a charge to income amounted to $341,
$424 and $765 for the year ended December 31, 2003, 2002 and the period from May
8, 2001 (date of inception) to December 31, 2003, respectively.
F-9
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Income Taxes
-------------
Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes." Under this method deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be removed or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statements
of operations in the period that includes the enactment date.
Earnings Per Share
------------------
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share has
been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrants have been excluded as common stock
equivalents in the diluted earnings per share because they are either
antidilutive, or their effect is not material.
Impairment of Long-Lived Assets
----------------------------------
The Company has adopted Statement of Financial Accounting Standards No. 144
("SFAS 144"). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Events relating to recoverability may include
significant unfavorable changes in business conditions, recurring losses, or a
forecasted inability to achieve break-even operating results over an extended
period. The Company evaluates the recoverability of long-lived assets based
upon forecasted undercounted cash flows. Should an impairment in value be
indicated, the carrying value of intangible assets will be adjusted, based on
estimates of future discounted cash flows resulting from the use and ultimate
disposition of the asset. SFAS No. 144 also requires assets to be disposed of
be reported at the lower of the carrying amount or the fair value less costs to
sell.
Use of Estimates
------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
F-10
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Research and Development
------------------------
The Company accounts for research and development costs in accordance with the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 2 ("SFAS 2"), "Accounting for Research and Development Costs.
Under SFAS 2, all research and development costs must be charged to expense as
incurred. Accordingly, internal research and development costs are expensed as
incurred. Third-party research and developments costs are expensed when the
contracted work has been performed or as milestone results have been achieved.
Company-sponsored research and development costs related to both present and
future products are expensed in the period incurred. The Company incurred no
research and product development costs for the year ended December 31, 2003,
2002 and for the period from May 8, 2001 (date of inception) to December 31,
2003.
Concentrations of Credit Risk
-----------------------------
Financial instruments and related items which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
trade receivables. The Company places its cash and temporary cash investments
with credit quality institutions. At times, such investments may be in excess
of the FDIC insurance limit. The Company will periodically review its trade
receivables in determining its allowance for doubtful accounts.
Stock Based Compensation
--------------------------
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended December 31, 2003 and will
adopt the interim disclosure provisions for its financial reports for the
subsequent periods. The Company has no awards of stock-based employee
compensation outstanding at December 31, 2003.
Liquidity
---------
As shown in the accompanying financial statements, the Company has incurred a
net loss of $817,278 from its inception through December 31, 2003. The Company's
current assets exceeded its current liabilities by $2,646 as of December 31,
2003.
F-11
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Comprehensive Income
--------------------
Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting
Comprehensive Income," establishes standards for reporting and displaying of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements. The Company does not have any items of comprehensive
income in any of the periods presented.
a) Segment Information
-------------------
b) Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131") establishes
standards for reporting information regarding operating segments in annual
financial statements and requires selected information for those segments to be
presented in interim financial reports issued to stockholders. SFAS 131 also
establishes standards for related disclosures about products and services and
geographic areas. Operating segments are identified as components of an
enterprise about which separate discrete financial information is available for
evaluation by the chief operating decision maker, or decision-making group, in
making decisions how to allocate resources and assess performance. The
information disclosed herein materially represents all of the financial
information related to the Company's principal operating segment.
Reclassifications
-----------------
Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.
New Accounting Pronouncements
-----------------------------
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company includes another entity in its consolidated financial statements.
Previously, the criteria were based on control through voting interest.
Interpretation 46 requires a variable interest entity to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entity's activities or entitled to receive a majority of the
entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity. The
consolidation requirements of Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply to older entities in the first fiscal year or interim period beginning
after June 15, 2003. Certain of the disclosure requirements apply in all
financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. The adoption of FASB interpretation
no. 46 will not have a material impact on the Company's results of operations or
financial position.
F-12
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
-----------------------------------------
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 will not
have a material impact on the Company's results of operations or financial
position.
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 will not have a material impact on the Company's
results of operations or financial position.
In December 2003, the FASB issued SFAS No. 132 (revised), EMPLOYERS' DISCLOSURES
ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS - AN AMENDMENT OF FASB
STATEMENTS NO. 87, 88, AND 106. This statement retains the disclosure
requirements contained in FASB statement no. 132, Employers' Disclosures about
Pensions and Other Postretirement Benefits, which it replaces. It requires
additional disclosures to those in the original statement 132 about the assets,
obligations, cash flows, and net periodic benefit cost of defined benefit
pension plans and other defined benefit postretirement plans. The required
information should be provided separately for pension plans and for other
postretirement benefit plans. The revision applies for the first fiscal or
annual interim period ending after December 15, 2003 for domestic pension plans
and June 15, 2004 for foreign pension plans and requires certain new disclosures
related to such plans. The adoption of this statement will not have a material
impact on the Company's results of operations or financial positions.
NOTE B - CAPITAL STOCK
The Company has authorized 100,000,000 shares of common stock, with a par value
of $.001 per share. As of December 31, 2003, the Company has 39,432,750 shares
of common stock issued and outstanding.
F-13
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE B - CAPITAL STOCK (CONTINUED)
In June 2001, the Company issued an aggregate of 10,000,000 shares of common
stock to founders in exchange for $15,000 of cash, net of costs and fees.
On February 8, 2002, the Company's registration statement became effective. The
statement provided for the utilization of an escrow agent for the proceeds of an
offering of common stock, pending the sale of the minimum number of shares
(15,000,000). However, the bank which the Company believed had committed to
serve as escrow agent eventually declined to serve due to the small size of the
offering. The Company revised the subscription agreement, accepted
subscriptions made payable to the Company (instead of the escrow agent), and
deposited subscription funds received into the Company's operating account. The
Company then issued shares of stock to subscribers prior to receiving
subscriptions for the stated minimum of 15,000,000 shares. Management corrected
the subscription acceptance errors by closing the offering and extending a
rescission offer to all investors. A total of three investors accepted the
rescission offer; the investors' shares certificates were returned to the
Company and cancelled, and a total of $2,500 was refunded to the investors
(representing a total of 62,500 shares of common stock). As of December 31,
2002, the rescission offer had expired according to its express terms and no
further requests will be honored.
During the year ended December 31, 2002, the Company received a total of $80,750
in deposits on thirty-seven subscription agreements for the purchase of an
aggregate of 2,018,750 shares of common stock at $0.04 per share. As of
December 31, 2002, the Company had received payment in full and had issued the
shares related to these subscriptions.
In September 2002, the Company issued an aggregate of 250,000 shares of common
stock to sophisticated investors for $10,000 of cash, net of costs and fees.
In September 2002, the Company issued an aggregate of 2,500,000 shares of common
stock to consultants in exchange for $50,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
In November 2002, the Company issued an aggregate of 2,926,500 shares of common
stock to consultants in exchange for $58,530 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
In June 2003, the former majority shareholder sold his 10,000,000 shares of
common stock to twelve investors in a private sale. As a result of this change
in ownership, a change in control was deemed to have occurred. The new majority
shareholder, an individual, was elected president of the Company and the former
majority shareholder resigned from the Company's board of directors.
In August 2003, the Company issued an aggregate of 3,000,000 shares of common
stock to consultants in exchange for $90,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
F-14
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE B - CAPITAL STOCK (CONTINUED)
In September 2003, the Company issued an aggregate of 800,000 shares of common
stock to consultants in exchange for $48,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
In November 2003, the Company issued an aggregate of 3,000,000 shares of common
stock to consultants in exchange for $120,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
In December 2003, the Company issued an aggregate of 1,200,000 shares of common
stock to consultants in exchange for $36,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
From August to December 2003, the Company issued an aggregate of 13,800,000
shares of common stock to officers and employees for stock options exercised at
a price ranging from $0.02 to $0.06 per share for a total of $377,400, which
approximated 85% of the fair value of the shares issued on the date of the
options were exercise (see Note C). The Company received $250,276 of proceeds,
net of costs and fees. Stock subscription of $59,500 is due to the Company and
compensation costs of $67,624 were charged to income during the year ended
December 31, 2003.
NOTE C - EMPLOYEE STOCK INCENTIVE PLAN
In August 2003, the Company established the 2003 Employee Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to provide officers and employees, who
make significant contributions to the long-term growth and performance of the
Company, with equity-based compensation incentives, and to attract and retain
quality employees. The maximum number of shares of common stock that may be
awarded or issued under the Plan is 17,000,000. The Plan will be administered by
a Compensation Committee (the "Committee") appointed by the board of directors
of the Company.
The stock option plan provides for the issuance of incentive stock options at an
exercise price approximating 85% of the fair market value of the Company's
common stock on the date of exercise (or 110% of the fair market value of the
common stock on the date of the grant of the option, in the case of significant
stockholders). The maximum life of the options is ten years. An aggregate of
13,800,000 options were granted and all options were exercised on the grant date
during the year ended December 31, 2003. There are no stock options outstanding
as of December 31, 2003.
NOTE D - RELATED PARTY TRANSACTIONS
In January 2002, the former majority shareholder of the Company loaned the
Company $4,000, all of which had been repaid as of December 31, 2002. The loan
was short-term in nature, for working capital purposes and bore interest of 9%
annually.
F-15
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE D - RELATED PARTY TRANSACTIONS (CONTINUED)
In June 2003, the former majority shareholder sold 10,000,000 shares of common
stock to twelve investors in a private sale. As part of the sale agreement, the
former majority shareholder agreed to forgive the service and facility costs
accrued from inception, and to accept consulting fees of $16,892 for services
provided through the date of the sale. As a result of the forgiveness of service
and facility costs, the Company recorded $12,857 in other income during the year
ended December 31, 2003.
An entity controlled by the Company's officer has advanced funds to the Company
for working capital purposes. The amount of the advances at December 31, 2003 is
$100. No formal repayment terms or arrangements exist.
NOTE E - INCOME TAXES
The Company has adopted Financial Accounting Standard number 109, which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of events that have been included in the financial statement or
tax returns. Under this method, deferred tax liabilities and assets are
determined based on the difference between financial statements and tax basis of
assets and liabilities using enacted tax rates in effect for the year in which
the differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes are
insignificant.
For income tax reporting purposes, the Company's aggregate unused net operating
losses approximate $817,000, which expires through 2023, subject to limitations
of Section 382 of the Internal Revenue Code, as amended. The deferred tax asset
related to the carry forward is approximately $277,000. Due to significant
changes in the Company's ownership, the Company's future use of its existing net
operating losses may be limited.
Components of deferred tax assets as of December 31, 2003 are as follows:
Non-Current:
Net operating loss carryforward $ 277,000
Valuation allowance (277,000)
----------
Net deferred tax asset $ -
==========
NOTE F - EARNINGS (LOSSES) PER COMMON SHARE
The following table presents the computation of basic and diluted earning (loss)
per share:
2003 2002
------------ ------------
Net income (loss) available for common shareholders $ (629,735) $ (173,061)
============ ============
Basic and fully diluted loss per share $ (0.03) $ (0.01)
============ ============
Weighted average common shares outstanding 21,111,928 13,042,438
============ ============
F-16
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE G - COMMITMENTS AND CONTINGENCIES
Lease Agreement
----------------
In August 2003, the Company entered into a six-months agreement leasing office
spaces in San Diego, California. Monthly rentals under the lease is $1,018 of
base rent and $535 of other fixed fees per month. Total rental expenses charged
to income were $5,780, $1,186 and $6,966 for the year ended December 31, 2003
and 2002, and for the period from May 8, 2001 (date of inception) to December
31, 2003, respectively.
Litigation
----------
The Company is subject to legal proceedings and claims, which arise in the
ordinary course of its business. Although occasional adverse decisions or
settlements may occur, the Company believes that the final disposition of such
matters should not have a material adverse effect on its financial position,
results of operations or liquidity.
NOTE H - GOING CONCERN MATTERS
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
financial statements during the period May 8, 2001 through December 31, 2003,
the Company has incurred a loss of $817,278. These factors among others may
indicate that the Company will be unable to continue as a going concern for a
reasonable period of time.
The Company's existence is dependent upon management's ability to develop
profitable operations and resolve its liquidity problems. Management
anticipates the Company will attain profitable status and improve its liquidity
through the continued developing, marketing and selling of its products and
additional equity investment in the Company. The accompanying financial
statements do not include any adjustments that might result should the Company
be unable to continue as a going concern.
In order to improve the Company's liquidity, the Company is actively pursuing
additional equity financing through discussions with investment bankers and
private investors. There can be no assurance the Company will be successful in
its effort to secure additional equity financing.
If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However, no
assurance can be given that management's actions will result in profitable
operations or the resolution of its liquidity problems.
NOTE I - SUBSEQUENT EVENTS
In February 2004, the Company's wholly owned subsidiary, Jackson Rivers
Technologies, Inc., ("JRT") entered into an LLC Interest Purchase Agreement
with Multitrade Technologies LLC, a New York limited liability company ("MTT")
pursuant to which JRT purchased all of the assets of MTT which were related to
MTT's business of software development and the licensing to sell the
software (the "Acquisition").
F-17
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
NOTE I - SUBSEQUENT EVENTS (CONTINUED)
The Company intends to use the assets purchased in the Acquisition to expand the
Company's customer base and product offerings. MTT has no significant assets
and the total consideration paid by JRT in connection with the Acquisition
consisted of 20,000,000 shares of common stock of JRC.
F-18