U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2004.
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to ________
COMMISSION FILE NUMBER: 333-70932
THE JACKSON RIVERS COMPANY
(Name of small business issuer in its charter)
FLORIDA 65-1102865
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
27 RADIO CIRCLE, MOUNT KISCO, NEW YORK 10549
(Address of principal executive offices) (Zip Code)
(619) 615-4242
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of June 30, 2004, the
issuer had 99,982,750 shares of its common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets:
June 30, 2004 and December 31, 2003
Condensed Consolidated Statements of Losses:
Three and Six Months ended June 30, 2004 and 2003
For the Period May 8, 2001 (Date of Inception) through June 30, 2004
Condensed Consolidated Statement of (Deficiency in) Stockholders' Equity
For the period May 8, 2001 (Date of Inception) through June 30, 2004
Condensed Consolidated Statements of Cash Flows:
Six Months ended June 30, 2004 and 2003
For the Period May 8, 2001 (Date of Inception) through June 30, 2004
Notes to Unaudited Condensed Consolidated Financial Information:
June 30, 2004
Item 2. Management's Discussion and Analysis or Plan of Operation . . . . . . . . . . . 10
Item 3. Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 12
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. . . . . . . . . 14
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. . . . . . . . . 15
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. . . . . . . . . 16
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002. . . . . . . . . 17
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
ASSETS June 30, 2004 December 31, 2003
--------------- -------------------
Current assets:
Cash and cash equivalents $ 44,995 $ 14,820
Prepaid expenses and other 6,733 3,455
--------------- -------------------
Total current assets 51,728 18,275
Property, plant and equipment, net of accumulated depreciation of $1,272
and $341 at June 30, 2004 and December 31, 2003, respectively 9,217 3,756
--------------- -------------------
Total Assets $ 60,945 $ 22,031
=============== ===================
LIABILITIES AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 340,330 $ 15,529
Advances from related parties 100 100
--------------- -------------------
Total current liabilities 340,430 15,629
Commitments and contingencies - -
(Deficiency in) stockholders' equity (Note B):
Common stock, par value; $.001, authorized 100,000,000 shares; 99,982,750
and 39,432,750 shares issued and outstanding at June 30, 2004 and
December 31, 2003, respectively 99,983 39,433
Additional paid-in capital 2,165,847 843,747
Stock subscription receivable (Note B) - (59,500)
Deficit accumulated during development stage (2,545,315) (817,278)
--------------- -------------------
Total (deficiency in) stockholders' equity (279,485) 6,402
Total liabilities and (deficiency in) stockholders' equity $ 60,945 $ 22,031
=============== ===================
See accompanying notes to the unaudited condensed consolidated financial
information
4
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
For the three months ended June 30, For the six months ended June 30,
For the period
from May 8,
2001 (date of
inception)
through June
2004 2003 2004 2003 30, 2004
------------------- ------------------ ----------------- -------------------
Operating expenses:
Selling, general, and
administrative $ 737,455 $ 22,056 $ 1,477,109 $ 32,572 $ 2,306,443
Rescission of acquisition
(Note D) (1,000,000) - - - -
License fees (Note D) 250,000 - 250,000 - 250,000
Depreciation 524 141 931 282 1,696
------------------- ------------------ ----------------- ------------------- ----------------
Total operating expenses (12,021) 22,197 1,728,040 32,854 2,558,139
Income (loss) from operations 12,021 (22,197) (1,728,040) (32,854) (2,558,139)
Other income (expense):
Other income - 12,856 - 12,856 12,856
Interest income (expense) (3) - 3 - (32)
------------------- ------------------ ----------------- ------------------- ----------------
Total other income (expense) (3) 12,856 3 12,856 12,824
Net income (loss) before
provision for income taxes 12,018 (9,341) (1,728,037) (19,998) (2,545,315)
Provision for income taxes - - - - -
------------------- ------------------ ----------------- ------------------- ----------------
Net income (loss) $ 12,018 $ (9,341) $ (1,728,037) $ (19,998) $ (2,545,315)
=================== ================== ================= =================== ================
Earnings (losses) per share,
Basic and fully diluted $ 0.00 $ (0.00) $ (0.02) $ (0.00)
=================== ================== ================= ===================
Basic and diluted weighted
average number of shares
outstanding 95,040,992 17,632,750 76,190,168 17,632,750
See accompanying notes to the unaudited condensed consolidated financial
information
5
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF (DEFICIENCY IN) STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 8, 2001 (DATE OF INCEPTION) TO JUNE 30, 2004
Common Stock Additional Stock
Stock Amount Paid-In Capital Subscription
----------- -------- ---------------- --------------
BALANCE AT MAY 8, 2001 - $ - $ - $ -
Issuance of common stock in June 2001 in exchange for
cash at $.0015 per share, net of costs and fees 10,000,000 10,000 5,000 -
Net loss - - - -
----------- -------- ---------------- --------------
BALANCE AT DECEMBER 31, 2001 10,000,000 $10,000 $ 5,000 $ -
----------- -------- ---------------- --------------
Common stock subscription in February 2002 at $0.04 per share - - - 42,500
Common stock subscription in March 2002 at $0.04 per share - - - 29,500
Issuance of common stock for common stock subscribed in
February and March 2002 at $0.04 per share 1,800,000 1,800 70,200 (72,000)
Common stock subscription in April 2002 - - - 8,750
Issuance of common stock for common stock subscribed in
April 2002 at $0.04 per share 218,750 219 8,531 (8,750)
Rescission of common stock in August 2002 (62,500) (63) (2,437) -
Issuance of common stock in September 2002 in exchange
for cash at $.04 per share, net of costs and fees 250,000 250 9,750 -
Issuance of common stock in exchange for services in
September 2002 at $0.02 per share 2,500,000 2,500 47,500 -
Issuance of common stock in exchange for services in
November 2002 at $0.02 per share 2,926,500 2,927 55,603 -
Net loss - - - -
----------- -------- ---------------- --------------
BALANCE AT DECEMBER 31, 2002 17,632,750 $17,633 $ 194,147 $ -
=========== ======== ================ ==============
Issuance of common stock in exchange for services in
August 2003 at $0.03 per share 3,000,000 3,000 87,000 -
Issuance of common stock in exchange for options exercised
in August 2003 at approximately $0.03 per share 1,200,000 1,200 31,099 -
Issuance of common stock in exchange for services in
September 2003 at $0.06 per share 800,000 800 47,200 -
Issuance of common stock in exchange for options exercised
in September 2003 at approximately $0.05 per share 600,000 600 30,000 -
Issuance of common stock in exchange for options exercised
in October 2003 at approximately $0.06 per share 1,500,000 1,500 87,751 -
Issuance of common stock in exchange for options exercised
in October 2003 at approximately $0.03 per share 1,500,000 1,500 49,500 -
Issuance of common stock in exchange for services
in November 2003 at $0.04 per share 3,000,000 3,000 117,000 -
Issuance of common stock in exchange for options exercised
in November 2003 at approximately $0.03 per share 1,500,000 1,500 36,750 -
Issuance of common stock in exchange for services
in December 2003 at $0.03 per share 1,200,000 1,200 34,800 -
Issuance of common stock in exchange for options exercised
in December 2003 at approximately $0.03 per share 1,000,000 1,000 24,500 -
Issuance of common stock in exchange for options exercised
in December 2003 at approximately $0.01 per share 6,500,000 6,500 104,000 (59,500)
Net loss - - - -
----------- -------- ---------------- --------------
BALANCE AT DECEMBER 31, 2003 39,432,750 $39,433 $ 843,747 $ (59,500)
=========== ======== ================ ==============
Accumulated
Deficit Total
------------- ----------
BALANCE AT MAY 8, 2001 $ - $ -
Issuance of common stock in June 2001 in exchange for
cash at $.0015 per share, net of costs and fees - 15,000
Net loss (14,482) (14,482)
------------- ----------
BALANCE AT DECEMBER 31, 2001 $ (14,482) $ 518
------------- ----------
Common stock subscription in February 2002 at $0.04 per share - 42,500
Common stock subscription in March 2002 at $0.04 per share - 29,500
Issuance of common stock for common stock subscribed in
February and March 2002 at $0.04 per share - -
Common stock subscription in April 2002 - 8,750
Issuance of common stock for common stock subscribed in
April 2002 at $0.04 per share - -
Rescission of common stock in August 2002 - (2,500)
Issuance of common stock in September 2002 in exchange
for cash at $.04 per share, net of costs and fees - 10,000
Issuance of common stock in exchange for services in
September 2002 at $0.02 per share - 50,000
Issuance of common stock in exchange for services in
November 2002 at $0.02 per share - 58,530
Net loss (173,061) (173,061)
------------- ----------
BALANCE AT DECEMBER 31, 2002 $ (187,543) $ 24,237
============= ==========
Issuance of common stock in exchange for services in
August 2003 at $0.03 per share - 90,000
Issuance of common stock in exchange for options exercised
in August 2003 at approximately $0.03 per share - 32,299
Issuance of common stock in exchange for services in
September 2003 at $0.06 per share - 48,000
Issuance of common stock in exchange for options exercised
in September 2003 at approximately $0.05 per share - 30,600
Issuance of common stock in exchange for options exercised
in October 2003 at approximately $0.06 per share - 89,251
Issuance of common stock in exchange for options exercised
in October 2003 at approximately $0.03 per share - 51,000
Issuance of common stock in exchange for services
in November 2003 at $0.04 per share - 120,000
Issuance of common stock in exchange for options exercised
in November 2003 at approximately $0.03 per share - 38,250
Issuance of common stock in exchange for services
in December 2003 at $0.03 per share - 36,000
Issuance of common stock in exchange for options exercised
in December 2003 at approximately $0.03 per share - 25,500
Issuance of common stock in exchange for options exercised
in December 2003 at approximately $0.01 per share - 51,000
Net loss (629,735) (629,735)
------------- ----------
BALANCE AT DECEMBER 31, 2003 $ (817,278) $ 6,402
============= ==========
See accompanying notes to the unaudited condensed consolidated financial
information
6
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF (DEFICIENCY IN) STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE PERIOD FROM MAY 8, 2001 (DATE OF INCEPTION) TO JUNE 30, 2004
Common Stock Additional Stock Accumulated
Stock Amount Paid-In Capital Subscription Deficit
---------- ------- --------------- -------------- -------------
BALANCE FORWARD 39,432,750 $39,433 $ 843,747 $ (59,500) $ (817,278)
========== ======= =============== ============== =============
Issuance of common stock in exchange for options exercised
in January 2004 at approximately $0.02 per share 6,000,000 6,000 114,000 - -
Issuance of common stock in exchange for services
in January 2004 at $0.02 per share 3,000,000 3,000 57,000
Issuance of common stock in exchange for options exercised
in February 2004 at approximately $0.02 per share 15,000,000 15,000 225,000 - -
Issuance of common stock in exchange for services
in March 2004 at $0.05 per share 4,000,000 4,000 196,000 - -
Issuance of common stock in exchange for options exercised
in March 2004 at approximately $0.01 per share 12,000,000 12,000 138,000 - -
Employee compensation and proceeds received for
common stock subscribed in December 2003 - - - 59,500 -
Issuance of common stock in exchange for options exercised
in April 2004 at approximately $0.03 per share 13,500,000 13,500 391,500 - -
Issuance of common stock in exchange for services
in April 2004 at $0.03 per share 6,500,000 6,500 188,500 - -
Issuance of common stock in exchange for services
in May 2004 at approximately $0.02 per share 550,000 550 12,100 - -
Net loss - - - - (1,728,037)
---------- ------- --------------- -------------- -------------
BALANCE AT JUNE 30, 2004 99,982,750 $99,983 $ 2,165,847 $ - $ (2,545,315)
========== ======= =============== ============== =============
Total
------------
BALANCE FORWARD $ 6,402
============
Issuance of common stock in exchange for options exercised
in January 2004 at approximately $0.02 per share 120,000
Issuance of common stock in exchange for services
in January 2004 at $0.02 per share 60,000
Issuance of common stock in exchange for options exercised
in February 2004 at approximately $0.02 per share 240,000
Issuance of common stock in exchange for services
in March 2004 at $0.05 per share 200,000
Issuance of common stock in exchange for options exercised
in March 2004 at approximately $0.01 per share 150,000
Employee compensation and proceeds received for
common stock subscribed in December 2003 59,500
Issuance of common stock in exchange for options exercised
in April 2004 at approximately $0.03 per share 405,000
Issuance of common stock in exchange for services
in April 2004 at $0.03 per share 195,000
Issuance of common stock in exchange for services
in May 2004 at approximately $0.02 per share 12,650
Net loss (1,728,037)
------------
BALANCE AT JUNE 30, 2004 $ (279,485)
============
7
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the six months ended June 30, For the period
from May 8, 2001
(date of inception)
through June 30,
--------------------
CASH FLOW FROM OPERATING ACTIVITIES: 2004 2003 2004
------------------ ------------------- --------------------
Net loss from operation $ (1,728,037) $ (19,998) $ (2,545,315)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 931 282 1,696
Common stock issued in exchange for consulting
services rendered (Note B) 467,650 - 870,180
Common stock issued in exchange for employee services
rendered and related transaction costs (Note B and C) 261,928 - 329,552
Employee compensation and transaction costs in connection
with common stock subscribed (Note B) 6,373 - 6,373
Loss from disposal of equipment - - 1,272
(Increase) decrease in prepaid expenses and other (3,278) 3,750 (6,733)
Increase (decrease) in accounts payable and accrued liabilities 324,801 5,592 340,330
------------------ ------------------- --------------------
Net cash (used in) operating activities (669,632) (10,374) (1,002,645)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,392) - (12,185)
------------------ ------------------- --------------------
Net cash (used in) investing activities (6,392) - (12,185)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party advances - - 100
Proceeds from the sale of common stock, net of costs
and fees (Note B) 706,199 - 1,059,725
------------------ ------------------- --------------------
Net cash provided by financing activities 706,199 - 1,059,825
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 30,175 (10,374) 44,995
Cash and cash equivalents at beginning of period 14,820 29,411 -
------------------ ------------------- --------------------
Cash and cash equivalents at end of period $ 44,995 $ 19,037 $ 44,995
================== =================== ====================
Supplemental Disclosure of Cash Flows Information:
Cash paid during the period for interest $ - $ - -
Cash paid during the period for income taxes - - -
Common stock issued in exchange for consulting services
rendered (Note B) 467,650 - 870,180
Common stock issued in exchange for employee services
rendered and related transaction costs (Note B and C) 261,928 - 329,552
Employee compensation and transaction costs in connection
with common stock subscribed (Note B) 6,373 - 6,373
Employee stock purchase plan:
Common stock issued under employee stock purchase plan 915,000 - 1,292,400
Less: stock subscription receivable - - (59,500)
Add: proceeds received from common stock subscribed 53,127 - 53,127
Less: common stock retained by employees and related
transaction costs (261,928) - (329,552)
------------------ ------------------- --------------------
Net proceeds from the sale of common stock $ 706,199 $ - $ 956,475
------------------ ------------------- --------------------
See accompanying notes to the unaudited condensed consolidated financial
information
1
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2004
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the six-month period ended June 30,
2004, are not necessarily indicative of the results that may be expected for the
year ended December 31, 2004. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31, 2003
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
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 June 30, 2004,
the Company has accumulated losses of $2,545,315.
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.
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 June 30, 2004.
2
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2004
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
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 June 30, 2004 and December 31, 2003, the Company has
99,982,750 and 39,432,750 shares of common stock issued and outstanding.
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
shareholder, an individual, was elected president of the Company and the former
majority shareholder resigned from the Company's board of directors.
3
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2004
(UNAUDITED)
NOTE B - CAPITAL STOCK (CONTINUED)
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.
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 employees for stock options exercised at a price
ranging from $0.02 to $0.06 per share for a total of $377,400. The Company
received $250,276 of proceeds, net of costs and fees. Stock subscription of
$59,500 is due to the Company and compensation expenses of $67,624 were charged
to income during the year ended December 31, 2003.
In January 2004, the Company received $53,127 of proceeds for the $59,500 of
common stock subscribed in December 2003, the remaining balance of $6,373 was
charged to operations as compensation and transaction costs in January 2004.
In January 2004, the Company issued an aggregate of 3,000,000 shares of common
stock to consultants in exchange for $60,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
In March 2004, the Company issued an aggregate of 4,000,000 shares of common
stock to consultants in exchange for $200,000 of services rendered, which
approximated the fair value of the shares issued during the period the services
were rendered.
In April 2004, the Company issued an aggregate of 6,500,000 shares of common
stock to an officer and consultants in exchange for $195,000 of services
rendered, which approximated the fair value of the shares issued during the
period the services were rendered.
In May 2004, the Company issued an aggregate of 550,000 shares of common stock
to consultants in exchange for $12,650 of services rendered, which approximated
the fair value of the shares issued during the period the services were
rendered.
4
THE JACKSON RIVERS COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2004
(UNAUDITED)
NOTE B - CAPITAL STOCK (CONTINUED)
From January to June 2004, the Company issued an aggregate of 46,500,000 shares
of common stock to employees for stock options exercised at a price ranging
from $0.01 to $0.03 per share for a total of $915,000 (Note C). The Company
received $653,072 of proceeds, net of costs and fees, and compensation expense
of $261,928 were charged to operations during the period ended June 30, 2004.
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. In January 2004, Company established the 2004 Employee Stock
Incentive Plan and the maximum number of shares of common stock that may be
awarded or issued under the 2004 Plan is 50,000,000.
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. During the period
ended June 30, 2004, an aggregate of 46,500,000 options were granted and all
options were exercised on the grant date. There are no stock options outstanding
as of June 30, 2004.
5
NOTE D - ACQUISITION AND RESCISSION OF ACQUISITION AGREEMENT
In February 2004, the Company and its wholly owned subsidiary, Jackson Rivers
Technologies, Inc., ("JRT") entered into an LLC Interest Purchase Agreement
with Multitrade Technologies LLC, a Delaware 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").
MTT has no significant assets and the total consideration to be paid by the
Company in connection with the Acquisition consisted of 20,000,000 shares of
the Company's restricted common stock valued at $1,000,000. During the
three- month period ended March 31, 2004, the Company has accounted the shares
to be issued as common stock subscription payable and acquisition costs of
$1,000,000 were charged to operations.
In connection with the Agreement to acquire MTT, the Company was also
obligated to issue 80,000,000 shares of the Company's restricted common
stock to the Company's President once such shares become available after
the Company increases its authorized shares.
In June 2004, the Company and JRT rescinded the Acquisition and entered into a
Technology License Agreement ("Agreement") with MTT, whereby the Company has the
exclusive, worldwide sublicense to commercialize certain software technologies
from MTT. The Company and JRT also rescinded the previous arrangement in
connection with the Acquisition of issuing 80,000,000 shares of its common stock
to the Company's President.
Pursuant to the Agreement, the Company will make a one-time cash payment to MTT
in the amount of $200,000 and a one-time cash payment of $50,000 to the
Company's President. As of June 30, 2004, the Company charged the $250,000 of
fees to operations. The fees are unpaid and are included in accrued liabilities
as of June 30, 2004.
In connection with the Agreement, the Company is also obligated to pay to MTT
$20,000 per month of royalty and sales support fees during the first year of the
Agreement. Unpaid royalty and sales support fees at June 30, 2004 included in
accrued liabilities were $35,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING INFORMATION
Forward Looking Statements
--------------------------
This report may contain "forward-looking statements," which represent the
Company's expectations or beliefs, including, but not limited to, statements
concerning industry performance and the Company's results, operations,
performance, financial condition, plans, growth and strategies, which include,
without limitation, statements preceded or followed by or that include the words
"may," "will," "expect," "anticipate," "intend," "could," "estimate," or
"continue" or the negative or other variations thereof or comparable
terminology. Any statements contained in this report or the information
incorporated by reference that are not statements of historical fact may be
deemed to be forward-looking statements within the meaning of Section 27(A) of
the Securities Act of 1933 and Section 21(F) of the Securities Exchange Act of
1934. For such statements, the Company claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995. These statements by their nature involve substantial risks
and uncertainties, some of which are beyond the Company's control, and actual
results may differ materially depending on a variety of important factors, many
of which are also beyond the
6
Company's control. You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The Company does not
undertake any obligation to update or release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this report or to reflect the occurrence of unanticipated events, except to the
extent such updates and/or revisions are required by applicable law.
MANAGEMENT'S PLAN OF OPERATION
We were 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 were
pending. Due to a change in control of our company 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.
We have now entered the business of providing customized information
management systems. On June 23, 2004, we entered into a Technology License
Agreement with Multitrade Technologies LLC, a Delaware limited liability company
("MTT"), effective February 24, 2004, whereby we now have the exclusive,
worldwide sublicense to commercialize products using the STEPS(C) platform from
MTT. STEPS(C) (Straight Through Enterprise Processing Systems) is a proprietary
Java-based platform, built on patented technology, used to create customized
business management applications and information management systems. The
sublicensing of the software technologies from MTT will allow us to develop the
licensed product and expand our customer base and operations.
We expect to provide innovative solutions for integrating financial and
customer information, managing manufacturing processes, reducing inventory and
standardizing human resource information. 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 the STEPS 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 technology subsidiary, Jackson Rivers Technologies
(JRT), plans to introduce its STEPS(TM) ERP software solution to United States
and Canadian markets. We have identified a highly focused market niche for our
initial STEPS roll-out, secured a strong intellectual property position, and
retained an international marketing firm to define the STEPS solution and create
industry awareness.
Because we lack capital, an investment in us involves a very high degree of
risk. To date, the Company has generated no sales revenues, has incurred
expenses and has sustained losses. We believe we will begin earning revenues
from operations in the last six months of our current fiscal year , as the
Company transitions from a development stage company to that of an active growth
and acquisition stage company.
THREE AND SIX MONTHS COSTS AND CHANGES IN FINANCIAL CONDITIONS
As of the date of this report, our subsidiary, JRT, has engaged in
business activities which we expect will provide cash flow in the third quarter
of 2004. However, as of June 30, 2004,, no revenues have been recorded from
JRT's operations.
RESULTS OF OPERATIONS
During the three and six months ended June 30, 2004, we incurred an
operating income of $12,018 and operating loss of $1,728,037, respectively, and
generated no revenues. The loss consists of sales, marketing, general, and
administrative expenses. During the three months ended June 30, 2004, we
incurred selling, general,
7
and administrative expenses of $737,455. However, in connection with the
rescission of acquisition of MTT in June 2004, we reversed $1,000,000 of
acquisition costs recorded in the first quarter 2004, and instead recognized
$250,000 of license fees pursuant to our new agreement with MTT.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2004, our current liabilities exceeded current assets in the
amount of $288,702. We generated a cash flow deficit from operations of
$669,632 for the six months ended June 30, 2004. Cash flow deficits from
operating activities for the six months ended June 30, 2004 is primarily
attributable to our net loss from operations of $1,728,037 adjusted primarily
for $729,578 of common stock issued to consultants and employees in exchange for
compensation, and approximately $320,000 of increase in accounts payable and
liabilities.
Cash flow provided from financing activities was $706,199 for the six
months ended June 30, 2004. This was mainly from proceeds of sales of common
stock, net of costs and fees during this period. All proceeds were used for
working capital.
As discussed by our accountants in the audited financial statements
included in Item 7 of our Annual Report on Form 10-KSB, our revenue is currently
insufficient to cover our costs and expenses 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.
While we have raised capital to meet our working capital and financing
needs in the past, additional financing is required in order to meet our current
and projected cash flow deficits from operations and development.
By adjusting our operations and development to the level of capitalization,
we believe we have sufficient capital resources to meet projected cash flow
deficits through the next 12 months. However, if thereafter we are not
successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, there could be a
material adverse effect on our business, results of operations, liquidity and
financial condition. We will 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 certified public accountants have stated in their report
included in our December 31, 2003 Form 10-KSB, that we have incurred operating
losses in the last two years, and that we are dependent upon management's
ability to develop profitable operations. These factors among others may raise
substantial doubt about our ability to continue as a going concern.
RECENT DEVELOPMENTS
On February 24, 2004, as previously reported by us, we entered into an
Amended LLC Interest Purchase Agreement with Multitrade Technologies LLC, a
Delaware limited liability company ("MTT") and Joseph Khan, the sole owner of
MTT.
On June 23, 2004, we announced that our board of directors formally
rescinded the previously announced Amended LLC Interest Purchase Agreement with
MTT and Joseph Khan, dated February 24, 2004. The rescission was the result of
our board's decision that the LLC interest purchase transaction, as originally
planned, was not in the best interests of our shareholders.
In lieu of purchasing the LLC interest from MTT, we and Jackson Rivers
Technologies, Inc., our wholly-owned subsidiary ("JRT"), entered into a
Technology License Agreement with MTT, effective February 24, 2004, whereby we
now have the exclusive, worldwide sublicense to commercialize certain software
technologies from MTT. MTT is currently licensing the software technologies
which are the subject of the Technology License Agreement from Kisnet
Corporation.
8
On June 23, 2004, our board of directors also formally rescinded its
previously announced plans to issue 80,000,000 shares of our common stock to
Dennis N. Lauzon in exchange for the contribution by Mr. Lauzon of all of the
issued and outstanding shares in JRC Global Products, Inc., and JRT, owned by
him. We will still accept the contribution of all of Mr. Lauzon's issued and
outstanding shares in JRC Global Products, Inc. and JRT, but no shares of our
stock will be issued to Mr. Lauzon in consideration for such contribution.
Instead, we will pay Mr. Lauzon a one-time cash payment of $50,000. This payment
will represent his contribution of his personally owned shares in JRT and JRC
Global Products and for his negotiating services for the Technology License
Agreement between MTT, JRT, and Jackson Rivers Company.
The consideration for the rights granted by MTT to us and JRT under the
Technology License Agreement will be paid in the form of a one-time
non-refundable cash payment in the amount of $200,000.00 to be delivered by us
to MTT. In addition, we will pay to MTT the fees as set forth in Section VIII of
the Kisnet-MTT Exclusive Distribution Agreement for STEPS(C), attached to the
Technology License Agreement, which is an exhibit to this Quarterly Report on
Form 10-QSB.
The initial term of the Technology License Agreement shall be one year from
the Effective Date of February 24, 2004. Thereafter the Technology License
Agreement will automatically renew each year for a total term of five years
unless terminated as specified in the Termination section XI of the Kisnet-MTT
Exclusive Distribution agreement for STEPS(C).
Following the closing of the LLC interest purchase transaction, our
president, Dennis N. Lauzon, was elected as the chairman of the board of Jackson
Rivers Technologies, responsible for sales and marketing, and Mr. Khan was
elected president and chief executive officer, responsible for product delivery
and strategic alliances.
On July 20, 2004, JRC announced new developments relating to Jackson Rivers
Technologies (JRT) to relay to the public that JRT will initially market its
open-architecture STEPS ERP solution to small-and medium-sized enterprises
(SMEs) in the Logistics, Distribution and Supply-Chain Management sector in the
United States and Canada. JRT is now moving to finalize the functional
specification for this application and recruit additional domain expertise. As
reported in previous public announcements, a STEPS ERP solution has already
successfully penetrated the distribution/logistics sector in the Latin American
market.
Also announced on July 20, in order to provide strategic product
positioning and market awareness, we have retained McQuerter, Inc., a San
Diego-based international marketing firm that specializes in introducing
innovative technology platforms to business-to-consumer and business-to-business
enterprises.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 3. 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 Quarterly 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
9
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 II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
As of the date of this report, we are not involved in any legal
proceedings.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -------------------------------------------------------------------------------------------
3.1** Articles of Incorporation
3.2** Bylaws
10.1** Technology License Agreement.
Certification of Dennis N. Lauzon, 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
31.1* 2002.
Certification of Dennis N. Lauzon, Chief Financial 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
31.2* 2002.
Certification of Dennis N. Lauzon, 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
32.1* 2002.
Certification of Dennis N. Lauzon, Chief Financial 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
32.2* 2002
---------------
* Filed herewith.
** Previously filed.
(b) Reports on Form 8-K.
On May 12, 2004, we filed a Current Report on Form 8-K, reporting the
execution of the Amended LLC Interest Purchase Agreement between us, Jackson
Rivers Technologies, Inc., a Nevada corporations, Joseph Khan and Multitrade
Technologies, LLC ("MTT").
10
As the acquired assets did not meet the minimum significance tests under
Regulation S X, financial statements regarding the acquired assets were not
required to be provided.
On June 23, 2004, we filed an Amended Current Report on Form 8-K/A
reporting the rescission of the Amended LLC Interest Purchase Agreement between
us, Jackson Rivers Technologies, Inc., Joseph Khan and MTT, the cancellation of
the plans to issue 80,000,000 shares of our common stock to Dennis N. Lauzon in
exchange for Dennis N. Lauzon's contribution of his shares in JRC Global
Products, Inc., and JRT, owned by him, and the Technology License Agreement
between us, MTT and JRT.
On June 28, 2004, we filed an Amended Current Report on Form 8-K/A
reporting the revisions in the consideration to be paid to MTT in connection
with the Technology License Agreement between us, MTT and JRT
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE JACKSON RIVERS COMPANY
Dated: August 13, 2004
By /s/ Dennis N. Lauzon
-----------------------------------------------
Dennis N. Lauzon,
President and Chief Executive Officer
11