Motor Sport Country Club Holdings Inc - FORM 10-Q/A - November 29, 2011

 

 

 

 

 

 

 

 

 

 

 

ITEM 1 - NOTES TO FINANCIAL STATEMENTS

 

Basis of Presentation

The accompanying, unaudited, condensed financial statements are presented in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information, and instructions to the Quarterly Report on Form 10-Q.

 

In the opinion of management, these unaudited financial statements reflect a fair statement of the results of operations and financial condition of the Company for the periods and at the dates presented. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2010 (“2010 Form 10-K Report”).

Company organization and history

The Company was incorporated in the state of Nevada on January 25, 2000 under the name “Rolltech, Inc.”  On October 9, 2003, the Company filed an amendment to its articles of incorporation changing its name from “Rolltech, Inc.” to “Victoria Industries, Inc.”  On May 17, 2010, the Company entered into and closed a membership interest purchase agreement (“Exchange Agreement”) among the Company, Motorsports Country Club LLC, a Colorado limited liability company (“MSCC”) and the unitholders of MSCC (the “MSCC Unitholders”).  Pursuant to the terms of the Exchange Agreement, all of the issued and outstanding membership interests of MSCC were exchanged for 20,800,000 shares of the Company’s common stock (the “Exchange”), representing 87.18% of our outstanding shares following the consummation of the transactions contemplated by the Exchange Agreement and the Purchase Agreement (as described below).  As a result of the transaction, MSCC became our wholly-owned subsidiary, with MSCC’s former unitholders acquiring a majority of the outstanding shares of our common stock.  On May 27, 2010, the Company filed articles of merger with the Secretary of State of the State of Nevada changing the Company’s name from “Victoria Industries, Inc.” to “Motor Sport Country Club Holdings, Inc.”  This corporate action was approved by FINRA and took effect at the open of business on October 21, 2010. 

 

License Agreement with Perpetual Industries, Inc.

 

On July 31, 2011, the Company entered into an exclusive master license agreement for XYO Technology within the automotive industry (the “Agreement”) with Perpetual Industries Inc., a Nevada corporation (“Perpetual”) pursuant to which the Company will have exclusive rights in and to technology for the manufacture and use of certain products which utilize an automatic balancing system suitable in the balancing and stabilization of rotating systems (“XYO Technology”) in the automotive industry and (ii) rights with respect to the marketing, use, distribution and sublicense of such products utilizing the XYO Technology, including the XYO Racing Brand, in the automotive industry. The License Agreement shall have an initial term ending on July 31, 2021, unless terminated by either party for cause. In consideration for the grant of the exclusive license, the Company agreed to provide Perpetual with the following (i) a non-refundable cash fee of $500,000, contingent upon the Company raising at least $1,000,000 through offerings of its equity and/or debt securities after the date of the Agreement, (ii) 10,000,000 shares of the Company’s common stock and (iii) royalties on the sale of any products which utilize the XYO Technology in accordance with the following schedule:

 

 

 

The number of fulltime employees of the Company as at September 30, 2011 and December 31, 2010 amounted to 1 employee.

 

Going concern – The Company is a development stage company. The ability of the Company to meet its obligations is dependent on being able to raise the necessary financing to continue with the development of the company. The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Management remains committed to funding the exploration of the development phase of the Company through financing from related parties as has occurred during the course of this year. To implement its business plan, Management is currently seeking additional sources of permanent equity and/or debt capital.

 

Development Stage Company

               

The Company is considered to be in the development stage as defined in ASC 915, “Accounting and Reporting by Development Stage Enterprises”. The Company has devoted substantially all of its efforts to the corporate formation and the developing of the plans to bring the land they have an option on to its intended use.

 

 

Income Taxes

             

We follow FASB pronouncements governing Accounting for Income Taxes. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. No net provision for income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed likely to be realized.

 

 

 

 

 

 

 

 

 

 

 

 

ITEM 1 - NOTES TO FINANCIAL STATEMENTS (CONT.)

 

The provision for refundable income tax consists of the following:

 

As of 9/30/11, we had a net operating loss carryover approximating $2,451,000, which will expire beginning in 2020. However, provisions of the Internal Revenue Code limit significantly that amount of that carryover that will be available, due to the change in control of the Company. There is no assurance that the Company will ever benefit from the net operating loss carryover.

 

 

SHORT TERM LOANS

 

Short-term loans as of September 30, 2011 in a total amount of $457,575 represent one non-interest bearing note payable to Claus Wagner, the Company’s majority shareholder in order to finance certain administrative expenses.

 

 

RELATED PARTIES

Related parties include shareholders, affiliates and entities under common ownership, over which the Company has the ability to exercise a significant influence and/or control.

 

Transactions with related parties are performed on terms that may differ from those that would be available to unrelated parties.

 

Short-term loans from related parties as of September 30, 2011 total $457,575 and represent one non-interest bearing note payable to Claus Wagner, the Company’s majority shareholder in order to finance certain administrative expenses.

 

 

 

 

 

 

SUBSEQUENT EVENTS

 

None

 

 

ITEM 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This Management's Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management's current views with respect to future events and financial performance. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or similar words.  Those statements include statements regarding the intent, belief or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

 

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations of the Company should be read in conjunction with the Consolidated Financial Statements and notes related thereto included in this Quarterly Report on Form 10-Q. Important factors currently known to Management could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences include, but are not limited to, expected market demand for our products, fluctuations in pricing for materials, and competition.

 

Recent Developments

 

License Agreement with Perpetual Industries, Inc.

 

On July 31, 2011, the Company entered into an exclusive master license agreement for XYO Technology within the automotive industry (the “Agreement”) with Perpetual Industries Inc., a Nevada corporation (“Perpetual”) pursuant to which the Company will have exclusive rights in and to technology for the manufacture and use of certain products which utilize an automatic balancing system suitable in the balancing and stabilization of rotating systems (“XYO Technology”) in the automotive industry and (ii) rights with respect to the marketing, use, distribution and sublicense of such products utilizing the XYO Technology, including the XYO Racing Brand, in the automotive industry. The License Agreement shall have an initial term ending on July 31, 2021, unless terminated by either party for cause. In consideration for the grant of the exclusive license, the Company agreed to provide Perpetual with the following (i) a non-refundable cash fee of $500,000, contingent upon the Company raising at least $1,000,000 through offerings of its equity and/or debt securities after the date of the Agreement, (ii) 10,000,000 shares of the Company’s common stock and (iii) royalties on the sale of any products which utilize the XYO Technology in accordance with the following schedule:

 

 

 

Exchange Agreement

 

On May 17, 2010, the Company entered into and closed a membership interest purchase agreement (“Exchange Agreement”) among the Company, Motorsports Country Club LLC, a Colorado limited liability company (“MSCC”) and the unitholders of MSCC (the “MSCC Unitholders”).  Pursuant to the terms of the Exchange Agreement, all of the issued and outstanding membership interests of MSCC were exchanged for 20,800,000 shares of the Company’s common stock (the “Exchange”), representing 87.18% of our outstanding shares following the consummation of the transactions contemplated by the Exchange Agreement and the Purchase Agreement (as described below).  As a result of the transaction, MSCC became our wholly-owned subsidiary, with MSCC’s former unitholders acquiring a majority of the outstanding shares of our common stock.

 

In connection with the acquisition of MSCC, on May 17, 2010, Oleg Batratchenko resigned as our chief executive officer, effective immediately and we appointed (i) Mr. Claus Wagner as our Chief Executive Officer and director and (ii) Mr. Robert Newson as our president and chief operating officer. Upon the expiration of the 10-day period following the delivery and/or mailing of the Schedule 14f-1 Information Statement to our stockholders in compliance with the provisions of Section 14(f) of the Act and Rule 14(f)-1 thereunder, the resignation of Mr. Batratchenko as a director of our Board, and the appointment of Robert Newson, Patrick R. McDonald, Richard P. Dutkiewicz and John Henry Schlie as members of our board of directors will also become effective.

In connection with the Exchange Agreement, on April 9, 2010, the Sellers, the Company, Motorsports Country Club LLC (“MSCC”) and Jody M. Walker, Attorney at Law (“Stock Escrow Agent”) entered into that certain stock escrow agreement and agreement to cancel shares (“Escrow Agreement”) pursuant to which upon consummation of the Exchange Agreement, the Sellers (as defined below) returned for cancellation 7,499,991 shares of common stock of the Company.

 

 

Overview

 

The Company was incorporated in the state of Nevada on January 25, 2000 under the name “Rolltech, Inc.”  On October 9, 2003, the Company filed an amendment to its articles of incorporation changing its name from “Rolltech, Inc.” to “Victoria Industries, Inc.”  On May 17, 2010, the Company entered into and closed a membership interest purchase agreement (“Exchange Agreement”) among the Company, Motorsports Country Club LLC, a Colorado limited liability company (“MSCC”) and the unitholders of MSCC (the “MSCC Unitholders”).  Pursuant to the terms of the Exchange Agreement, all of the issued and outstanding membership interests of MSCC were exchanged for 20,800,000 shares of the Company’s common stock (the “Exchange”), representing 87.18% of our outstanding shares following the consummation of the transactions contemplated by the Exchange Agreement and the Purchase Agreement (as described below).  As a result of the transaction, MSCC became our wholly-owned subsidiary, with MSCC’s former unitholders acquiring a majority of the outstanding shares of our common stock.  On May 27, 2010, the Company filed articles of merger with the Secretary of State of the State of Nevada changing the Company’s name from “Victoria Industries, Inc.” to “Motor Sport Country Club Holdings, Inc.”  This corporate action was approved by FINRA and took effect at the open of business on October 21, 2010. 

 

The number of fulltime employees of the Company as at September 30, 2011 and December 31, 2010 amounted to 1 employee.

 

 

MSCC was formed to investigate the feasibility, the desirability and construction of a luxurious motor sport schemed destination resort. Upon due diligence, MSCC identified various sites for the planned projects throughout the world. In June 2007, just prior to MSCC being formed, the sole member of MSCC contracted to acquire a parcel of land totaling 2,600 acres outside of Denver, Colorado. In March 2010, the land option which was expired was extended through December 2010. This land option contract was not renewed in 2010, as management felt that the nature of the real estate market did not require continued maintenance of the land option contract to secure the land. MSCC has obtained full planning permits and other permissions for the resort master plan, excluding specific permissions for the residential unit component.

 

MSCC contemplates that revenue will be derived from the following sources:

 

 

 

 

 

 

 

 

 

Management believes that the focus of our operations will be on the construction of a luxurious motor sport destination resort.

 

Thus far, our focus has been on initial corporate formation and capitalization, the acquisition of the option to purchase land in Colorado and the development of our business plan. We plan the operations for the remainder of 2011 to be focused on the development of our race track. The completion of this task will require additional capital beyond what we currently have on hand.

  

For the next twelve months, we expect to pursue the implementation of our business plan, the building of our race track and the development and marketing of the resort and membership in our club. Our current cash position is not sufficient to fund our cash requirements during the next twelve months, including operations and capital expenditures. We intend to seek joint ventures or obtain equity and/or debt financing to support our current and proposed operations and capital expenditures. We cannot assure that continued funding will be available.

 

Our future financial results will depend primarily on our ability to (1) fully implement our business plan, (2) develop our race track and resort (3) generate revenue from membership interests and (4) develop our brand awareness. We cannot assure that we will be successful in any of these activities.

 

Results of Operations

 

For the three month periods ended September30 , 2011 and 2010, the Company showed a net loss of $65,411 and $127,476, respectively. The decrease between the corresponding fiscal periods is primarily related to more focused activity in exploration of the business plan, decreased sales, general and administrative expenses and advertising and promotion expense.

 

Revenues

 

Revenues for the three months ended September 30, 2011 and 2010 were $-0- and $-0-, respectively, reflecting our startup nature.

 

 

Gross Profit

 

Gross Profit for the three months ended September 30, 2011 and 2010 were $-0- and $-0-, respectively, reflecting our startup nature.

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2011 and 2010 were $65,411 and $127,476, respectively. Operating expenses for the three months ended September 30, 2011 consisted of wage and professional fees in the amount of $61,678 and general and administrative expenses in the amount of $3,733.  Operating expenses for the three months ended September 30, 2010 consisted of wage and professional fees in the amount of $122,767, general and administrative expenses in the amount of $3,290 and advertising and promotion expenses in the amount of $1,420.  The decrease between the corresponding fiscal periods is primarily related to more focused activity in exploration of the business plan and decreased sales, general and administrative expense and advertising and promotion.

 

Net Loss

 

Our net losses for the three month periods ended September 30, 2011 and 2010 amounted to $65,411 and  $127,476, respectively, reflecting our startup nature.

 

 

 

Liquidity and Capital Resources

 

At September 30, 2011, we had working capital deficit of approximately $750,525, which consisted of current assets of approximately $35,600and current liabilities of $786,125.  We plan to continue to provide for our capital needs by loans from the Company’s majority shareholder as we pursue issuing debt or equity securities.

 

Net cash provided by operating activities

 

Net cash generated in operating activities was $2,863 for the nine months ended September 30, 2011 as compared to cash used in operating activities of $171,365 for the nine months ended September 30, 2010.  The decrease between the corresponding fiscal periods is primarily related to more focused activity in exploration of the business plan and decreased sales, general and administrative expenses and advertising and promotion expenses.

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Net cash provided by financing activities

 

Net cash provided in financing activities was $0 for the nine months ended September 30, 2011 as compared to $225,400 for the nine months ended September 30, 2010.  The decrease between the corresponding fiscal periods is primarily related to decreased financing provided by the Company’s majority shareholder.

 

We will require additional financing in order to complete our stated plan of operations for the next twelve months. We believe that we will require additional financing to carry out our intended objectives during the next twelve months. There can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. We currently have no firm commitments for any additional capital.

 

The downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

 

We presently do not have any available credit, bank financing or other external sources of liquidity. Due to our brief history and historical operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.

 

To date, we have generated no revenues and have incurred operating losses in every quarter.  Our registered independent auditors have stated in their report dated April 13, 2011, that we are an early exploration company and have not generated revenues from operations. These factors among others may raise substantial doubt about our ability to continue as a going concern.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2011, we had no off-balance sheet arrangements.

 

 

Application of Critical Accounting Policies

 

 

Use of Estimates

 

The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from these estimates.

 

 

 

 

 

Revenue Recognition

 

For revenue from product sales, the Company recognizes revenue based on four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured.

 

There was no revenue during the periods reported in this filing.

 

 

 ITEM 3. QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

 

ITEM 4.  CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

Under the supervision and with the participation of management, including our Principal Executive Officer and Principal Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon our evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2011.

 

Our management, including the Principal Executive Officer and Principal Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

 

Changes in internal control over financial reporting

 

During the quarter ended September 30, 2011, there were no changes in our internal controls that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

 

 

 

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not party to any legal proceedings, nor are we aware of any contemplated or pending legal proceedings against us.

 

 

 

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this item.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES

 

None.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4.  REMOVED AND RESERVED

 

 

ITEM 5.  OTHER INFORMATION

 

None

 

 

 

 

ITEM 6.  EXHIBITS

 

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Claus Wagner, certify that:

1. I have reviewed this Form 10-Q of Motor Sport Country Club Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

1. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
4. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.       The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

1. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 Date: November 14, 2011

 

 

/s/Claus Wagner
Claus Wagner
Chief Executive Officer (Principal Executive Officer and Principal Financial Officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the quarterly report on Form 10-Q of Motor Sport Country Club Holdings, Inc. (the “Company”) for the quarter ended September 30, 2011, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Claus Wagner, the Chief Executive Officer of the Company, do hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief that:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.