UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

S	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934   for the three and nine month periods ended September 30, 2013

 

£	TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD ________TO ________

 

Commission File Number: 333-143672

 

SpeedSport Branding,, Inc.

(Exact name of small business issuer as specified in its charter)

 

Nevada	20-4168979
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

 

111 Sunrise Center Dr.

Thomasville, NC 27360

 (Address of principal executive offices)

 

(Registrant's telephone number, including area code (951) 656.1160

 

Indicate by check mark whether the issuer (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 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 T No £

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes T No £

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer £		Accelerated filer £
Non-accelerated filer £		Smaller Reporting Company T

 

Indicate the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

 

There were 16,827,505 shares of the registrant’s common stock, $0.001 par value per share, outstanding on October 31, 2013.

 

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

TABLE OF CONTENTS

 

 

Part I - FINANCIAL INFORMATION			3
	Item 1.	Condensed Financial Statements:	3
		Condensed Balance Sheets at September 30, 2013 (unaudited) and December 31, 2012	3
		Condensed Statements of Operations for the three and nine months ended September  30, 2013  and 2012 and the period from January 10, 2006 (Inception) to September 30, 2013 (unaudited)	4
		Condensed Statements of Stockholders’ Equity for the period from January 10, 2006 (Inception) through September 30, 2013   (unaudited)	5
		Condensed Statements of Cash Flows for the nine months ended September 30, 2013  and 2012 and the period from January 10, 2006 (Inception) to September 30, 2013   (unaudited)	6
		Notes to Condensed Financial Statements (unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	17
	Item 4.	Controls and Procedures	17
Part II - OTHER INFORMATION			18
	Item 1.	Legal Proceedings	18
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
	Item 3.	Defaults Under Senior Securities	18
	Item 4.	Mine Safety Disclosures	18
	Item 5.	Other Information	18
	Item 6.	Exhibits	18
		Signatures	19

 

 

  

Part I – FINANCIAL INFORMATION

 

ITEM 1. Condensed Financial Statements.

 

Speedsport Branding, Inc.

(A Development Stage Company)

BALANCE SHEETS

 

		September 30,				December 31,
		2013				2012
		(Unaudited)				(Audited)
ASSETS
Current assets
Cash		$	23,802			$	–
Total current assets			23,802				–
Fixed assets - net			186,667				32,000
Total Assets		$	210,469			$	32,000
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Bank overdraft		$	–			$	2,032
Accounts payable			8,740				14,766
Line of credit			8,321				9,201
Accrued interest payable			63				62
Accrued payables  - related parties			49,670				3,885
Total current liabilities			66,794				29,946
Total Liabilities			66,794				29,946
Stockholders' Equity
Preferred stock, $.001 par value; 10,000,000 shares authorized; none issued or outstanding			–				–
Common stock, $.001 par value; 100,000,000 shares authorized; 16,827,505  (2013)  and 16,535,838 (2012) shares issued and outstanding			16,829				16,537
Additional paid in capital			1,584,040				1,402,998
Deficit accumulated during the development stage			(1,457,194	)			(1,417,481	)
Total Stockholders' Equity			143,675				2,054
Total Liabilities and Stockholders' Equity		$	210,469			$	32,000

 

The accompanying notes are an integral part of the financial statements.

 

 

Speedsport Branding, Inc.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

 

																		Period From
																		Jan. 10, 2006
		Three Months				Three Months				Nine Months				Nine Months				(Inception)
		Ended				Ended				Ended				Ended				To
		Sept. 30, 2013				Sept. 30, 2012				Sept. 30, 2013				Sept. 30, 2012				Sept. 30, 2013
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues:
Consulting		$	350			$	20,000			$	350			$	50,000			$	96,480
Consulting - related party			15,500				60,400				33,500				60,400				102,150
Sponsorships			–				20,000				–				20,000				67,463
Race winnings			–				–				1,500				–				26,558
Lease income			–				–				–				–				17,379
Lease income - related party			–				–				–				–				42,424
			15,850				100,400				35,350				130,400				352,454
Operating expenses:
Amortization & depreciation			10,000				8,000				26,667				24,000				277,926
General and administrative-related party			4,000				40,000				9,620				40,000				247,356
General and administrative			33,463				90,886				54,175				112,550				1,204,230
			47,463				138,886				90,462				176,550				1,729,512
Operating - other:
Gain on asset sales			16,301				–				16,301				–				32,660
Gain (loss) from operations			(15,312	)			(38,486	)			(38,811	)			(46,150	)			(1,344,398	)
Other income (expense):
Interest income			–				–				–				–				1,286
Interest expense			(283	)			(321	)			(902	)			(906	)			(114,082	)
Income (loss) before provision for income taxes			(15,595	)			(38,807	)			(39,713	)			(47,056	)			(1,457,194	)
Provision for income tax			–				–				–				–				–
Net income (loss)		$	(15,595	)		$	(38,807	)		$	(39,713	)		$	(47,056	)		$	(1,457,194	)
Net income (loss) per share
Basic and fully diluted		$	(0.00	)*		$	(0.02	)		$	(0.00	)*		$	(0.03	)
Weighted average number of common shares outstanding Basic and fully diluted			16,827,505				1,653,838				16,660,838				1,653,838

 

* denotes less than $(0.01) per share

 

The accompanying notes are an integral part of the financial statements.

 

 

Speedsport Branding, LLC

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

 

										Jan. 10, 2006
		Nine Months				Nine Months				(Inception)
		Ended				Ended				To
		Sept. 30, 2013				Sept. 30, 2012				Sept. 30, 2013
		(Unaudited)				(Unaudited)				(Unaudited)
Cash Flows From (Used In) Operating Activities:
Net income (loss)		$	(39,713	)		$	(47,056	)		$	(1,457,194	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Amortization & depreciation			26,667				24,000				277,926
Bad debt recovery			–				–				15,000
Stock issued for services			–				–				117,476
Gain (loss) on asset sales			(16,301	)			–				(32,660	)
Changes in operating assets amd liabilities:
Accounts recivable			–				28,374				(15,000	)
Accounts payable			(6,026	)			2,680				8,740
Accrued interest			1				99				80,596
Accrued payables - related parties			–				–				3,885
Net cash provided by (used for) operating activities			(35,372	)			8,097				(1,001,231	)
Cash Flows From (Used In) Investing Activities:
Fixed asset purchases			–				–				(11,314	)
Proceeds for the sale of fixed assets			16,301				–				148,701
Net cash provided by (used for) investing activities			16,301				–				137,387
Cash Flows From (Used In) Financing Activities:
Notes & loans payable - borrowings			1,102				846				713,452
Notes & loans payable - payments			(1,981	)			(3,934	)			(135,882	)
Repayments of related party advances			(102,996	)			(110,204	)			(1,541,386	)
Advances from related parties			148,780				81,830				1,721,462
Sales of common stock			–				–				130,000
Change in bank overdraft			(2,032	)			–				–
Net cash provided by (used for) financing activities			42,873				(31,462	)			887,646
Net Increase (Decrease) In Cash			23,802				(23,365	)			23,802
Cash At The Beginning Of The Period		$	–			$	23,377			$	–
Cash At The End Of The Period		$	23,802			$	12			$	23,802
Schedule Of Non-Cash Investing And Financing Activities
Debt converted to capital		$	–			$	–			$	490,000
Interest converted to capital		$	–			$	–			$	76,469
Related party debt converted to capital		$	–			$	–			$	409,061
Assets purchased by issuing related party notes		$	–			$	–			$	486,868
Assets purchased by issuing stock		$	200,000			$	–			$	200,000
Assets purchased by issuing notes		$	–			$	–			$	45,623
Sale of asset to related party for cancellation of stock		$	141,666			$	–			$	141,666
Forgiveness of debt - related party		$	–			$	–			$	36,529

 

During 2007, an asset with a net book value of $144,505 was transferred to a related party to settle outstanding debt of $181,034. Upon the transfer, the difference of $36,529 was deemed to be forgiveness of debt and was recorded as an additional paid in capital.

 

Supplemental Disclosure
Cash paid for interest		$	910			$	1,246			$	26,485
Cash paid for income taxes		$	–			$	–			$	–

 

The accompanying notes are an integral part of the financial statements.

 

 

Speedsport Branding, Inc.

(Development Stage Company)

STATEMENTS OF STOCKHOLDERS' EQUITY

For the period from January 10, 2006 (Inception) through September 30, 2013

 

														Deficit Accumulated
		Common Stock (1)												During The
						Amount				Additional				Development				Stockholders'
		Shares				($.001 Par)				Paid in Capital				Stage				Equity
Balances at January 10, 2006			–			$	–			$	–			$	–			$	–
Shares issued to founders for services at $0.001 per share			10,125,000				10,125				–				–				10,125
Recapitalization			150,000				150				29,850				–				30,000
Net loss			–				–				–				(653,409	)			(653,409	)
Balances at December 31, 2006			10,275,000				10,275				29,850				(653,409	)			(613,284	)
Forgiveness of debt - related party			–				–				36,529				–				36,529
Net loss			–				–				–				(322,544	)			(322,544	)
Balances at December 31, 2007			10,275,000				10,275				66,379				(975,953	)			(899,299	)
Shares issued in conversion of debt			5,095,983				5,096				1,067,434				–				1,072,530
Shares issued for services at $0.20 per share			25,000				25				4,975				–				5,000
Shares issued for services at $0.20 per share			44,890				45				8,933				–				8,978
Net loss			–				–				–				(132,018	)			(132,018	)
Balances at December 31, 2008			15,440,873				15,441				1,147,721				(1,107,971	)			55,191
Shares issued in conversion of debt			210,000				210				62,790				–				63,000
Net loss			–				–				–				(46,682	)			(46,682	)
Balances at December 31, 2009			15,650,873				15,651				1,210,511				(1,154,653	)			71,509
Shares issued for cash at $0.20 per share			250,000				250				49,750				–				50,000
Shares issued for services at $0.20 per share			125,000				125				24,875				–				25,000
Net loss			–				–				–				(79,734	)			(79,734	)
Balances at December 31, 2010			16,025,873				16,026				1,285,136				(1,234,387	)			66,775
Shares issued for cash at $0.20 per share			250,000				250				49,750				–				50,000
Shares issued for services at $0.20 per share			161,865				162				32,211				–				32,373
Shares issued for services at $1.25 per share			15,600				16				19,484				–				19,500
Shares issued for services at $0.20 per share			82,500				83				16,417				–				16,500
Net loss			–				–				–				(155,319	)			(155,319	)
Balances at December 31, 2011			16,535,838				16,537				1,402,998				(1,389,706	)			29,829
Net loss			–				–				–				(27,775	)			(27,775	)
Balances December 31, 2012			16,535,838				16,537				1,402,998				(1,417,481	)			2,054
Shares issued for purchase of assets at $0.20 per share			1,000,000				1,000				199,000				–				200,000
Sale of asset in exchange for cancellation of shares at $0.20 per share			(708,333	)			(708	)			(140,958	)			–				(141,666	)
Gain on sale of asset to a related party			–				–				123,000				–				123,000
Net loss (unaudited)			–				–				–				(24,118	)			(24,118	)
Balances at June 30, 2013			16,827,505				16,829				1,584,040				(1,441,599	)			159,270
Net loss (unaudited)			–				–				–				(15,595	)			(15,595	)
Balances at September 30, 2013			16,827,505			$	16,829			$	1,584,040			$	(1,457,194	)		$	143,675

 

(1) As adjusted for a 1 for 5 LLC interest for common share exchange in May 2008.

 

The accompanying notes are an integral part of the financial statements.

 

 

Speedsport Branding, Inc.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Month Periods Ended September 30, 2013 and 2012,

And For the Period From January 10, 2006 (Inception)

Through September 30, 2013

 

 

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Speedsport Branding, Inc. (the “Company”), was incorporated in the State of Nevada on January 10, 2006. The Company designs and modifies motorsport racecars for its own use, provides race consulting services to other race teams, and competes in organized racing events. The Company is currently considered to be in the development stage, and has generated only limited revenues from its activities in the racing business. Speedsport Branding, LLC was formed in the State of California on January 26, 2006. On May 15, 2008, in a merger classified as a transaction between parties under common control, the sole membership interest owner in Speedsport Branding, LLC exchanged 30,000 membership interests for 150,000 common shares in Speedsport Branding, Inc. Subsequent to the consummation of the merger Speedsport Branding, LLC ceased to exist. The results of operations of Speedsport Branding, Inc. and Speedsport Branding, LLC have been combined from January 26, 2006 forward through the date of merger.

 

Use of Estimates

 

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

 

Cash and cash equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents. The Company maintains cash with a commercial bank. The deposits are made with a reputable financial institution and the Company does not anticipate realizing any losses from these deposits.

 

Accounts receivable

 

The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. Significant management judgment is required to determine the allowance for doubtful accounts. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired. At September 30, 2013 and December 31, 2012, the Company had no balance in its allowance for doubtful accounts.

 

 

Property and equipment

 

Property and equipment are recorded at cost and depreciated under the straight line method over each item's estimated useful life. The Company uses a five year life for racecars, vehicles and furniture and fixtures.

 

Long-Lived Assets

 

In accordance with FASB ASC 360, “Property, Plant, and Equipment” which establishes the accounting for impairment of long-lived tangible and intangible assets other than goodwill, the Company reviews for impairment when facts or circumstances indicate that the carrying value of long-lived assets to be held and used may not be recoverable. If such facts or circumstances are determined to exist, an estimate of the undiscounted future cash flows produced by the long-lived asset, or the appropriate grouping of assets, is compared to the carrying value to determine whether impairment exists. If an asset is determined to be impaired, the loss is measured based on various valuation techniques, including the discounted value of estimated future cash flows. The Company reports impairment cost as a charge to operations at the time it is identified. During the three and nine month periods ended September 30, 2013 and 2012 and during the period from January 10, 2006 (Inception) to September 30, 2013, the Company determined that there was no impairment of long-lived assets.

 

Financial Instruments

 

The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 825 “Financial Instruments”. The carrying values of its accounts payable, note payable (current portion), line of credit, accrued expenses, and other current liabilities approximate fair value due to the short-term maturities of these instruments.

 

Revenue recognition

 

Revenue from event consulting is recognized upon completion of the contracted services. Revenue from race sponsorships is recognized upon completion of the race for which the advertising was provided. Other revenue is recognized on an accrual basis as earned under contract terms.

 

Income tax

 

The Company accounts for income taxes pursuant to FASB ASC 740, “Income Taxes”. Under FASB ASC 740 deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

 

The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. At September 30, 2013 and December 31, 2012, there were no unrecognized tax benefits.

 

Net income (loss) per share

 

The Company utilizes FASB ASC 260, “Earnings per Share.” Basic earnings per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. There were no potentially dilutive securities outstanding in any of the periods presented in these financial statements.

 

Products and services, geographic areas and major customers

 

The Company earns revenue from race purses, race event consulting, the sale of advertising to racing sponsors, and the occasional lease of racecars, but does not separate sales of different activities into operating segments.

 

The Company had limited revenues in 2013 from a small client base.

 

Stock based compensation

 

The Company accounts for employee and non-employee stock awards under FASB ASC 718, “Compensation – Stock Compensation”, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

 

 

Reclassifications

 

Certain reclassifications have been made to the 2012 and January 10, 2006 (Inception) to September 30, 2013 financial statements to conform to the 2013 presentation.

 

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards that, if adopted, will have a material effect on our financial statements.

 

NOTE 2. PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

		September 30,				December 31,
		2013				2012
Racecars		$	200,000			$	160,000
Truck and other vehicles			8,090				53,713
			208,090				213,713
Less accumulated depreciation			(21,423	)			(181,713	)
Total		$	186,667			$	32,000

 

Depreciation expense was $10,000 (2012 - $8,000) and $26,667 (2012 - $24,000) for the three and nine months ended September 30, 2013 respectively.

 

The property and equipment is stored at a non-related party’s facility in North Carolina. No rent is charged by the owner as the space required for storage is minimal.

 

NOTE 3. LINE OF CREDIT

 

The Company has a line of credit with a bank for $9,600, which is guaranteed by a majority shareholder. Interest on the outstanding balance accrues at 13.75% per annum. As of September 30, 2013 and December 31, 2012, the outstanding balance was $8,321 and $9,201 respectively.

 

The Company has a line of credit with a related party, which is owned by a majority shareholder, for $450,000, which is secured by Company property. Under the agreement, disbursement of funds is not required and the related party has sole discretion to disburse any funds. The related party has agreed to advance up to $100,000, per each request of advance, if needed, as of September 30, 2013. Any amounts advanced accrue interest at 10% per annum and principal and interest are due at the end of each quarter. As of September 30, 2013 and December 31, 2012, there was no balance outstanding on this line of credit.

 

 

NOTE 4. RELATED PARTY TRANSACTIONS

 

In January 2006, the Company issued 10,125,000 shares of common stock to the founders of the Company with a value of $10,125 in payment of services.

 

In February 2007, the Company signed an agreement to lease a race car from a related party, a majority shareholder. Under the terms of the agreement the Company leases the race car for specific races and pays $7,500 for each sprint race use and $15,000 for each endurance race use. The term is on a per event basis and has no end date. General and administrative expense on the statement of operations includes $37,500 at December, 31, 2008. The total amount owed at December 31, 2008 was $97,500. On September 1, 2009, the Company committed to issue 325,000 shares of common stock to settle this debt. In 2009, 175,000 common shares were issued to convert $52,500 of the debt. As of December 31, 2011, $45,000 was outstanding as stock subscription payable. In 2012, the Company paid $45,000 in cash to settle the remaining liability instead of issuing shares.

 

In March 2007, the Company signed an agreement to lease a truck to a related party, a majority shareholder. The amount of $866 per month is reflected as revenue on the statement of operations. The agreement ended in January 2011.

 

In 2007, the Company transferred a trailer with a net book value of $144,505 to a related party, a majority shareholder, in settlement of debt and related interest in the amount of $181,034. Related party forgiveness of debt in the amount of $36,529 was recorded as additional paid in capital.

 

In 2008, the Company rented pit equipment from a related party, a company owned by a majority shareholder, for a total of $10,500. On October 1, 2009, the Company issued 35,000 shares of common stock in payment of this obligation.

 

In 2008, the Company converted notes payable and related interest totaling $912,530 into 4,562,650 shares of common stock. Included in the transaction was $375,370 of related party notes payable and accrued interest due to its president and significant shareholders that were converted to 1,876,850 shares of common stock.

 

On December 31, 2008, the Company issued 44,890 shares of common stock valued at approximately $9,000 to a related party, the Company’s president, in payment of services rendered.

 

On December 31, 2008, the Company issued 533,333 shares of common stock valued at $160,000 to a related party, a company owned by a majority shareholder, in repayment of a loan created in the purchase of an asset.

 

In 2009, the Company borrowed $53,225 from two related parties, both of which are owned by a majority shareholder. The loans were due on demand, are unsecured and bear interest at 8%. In 2011, the loan was paid in full.

 

On October 20, 2010, the Company issued 125,000 shares of common stock to a related party, the father of the Company’s president, in payment of services rendered for $25,000.

 

 

In 2011, the Company had a related party receivable, with a company owned by a majority shareholder, in the amount of $32,257, which was reserved in case of non-repayment. In 2012, the Company collected the receivable and recorded bad debt recovery of $32,257.

 

As of December 31, 2012, the Company owed a related party, a company owned by a majority shareholder, $3,885. This amount was fully repaid in 2013.

 

The Company paid consulting fees to related parties during the three and nine months ended September 30, 2013 of $4,000 and $9,620 respectively. The consulting fees paid to related parties for the three and nine months ended September 30, 2012 were $40,000.

 

On June 20, 2013, the Company purchased a race car in exchange for 1,000,000 shares of common stock with a value of $200,000.

 

On June 25, 2013, the Company sold a race car to a shareholder in exchange for the cancellation of 708,333 shares of common stock. The stock had been originally issued at a value of $141,666 and was the sales value attributed to the sale. The sale resulted in a gain of $123,000 which has been recorded as additional paid in capital.

 

The Company received consulting fee revenues from related parties during the three and nine months ended September 30, 2013 of $15,500 and $33,500 respectively. The fees received from related parties for the three and nine months ended September 30, 2012 were $60,400. Fees received from one of the related during the three and nine months ended September 30, 2012 were $20,000 and $50,000, respectively, at which time that party was not related.

 

NOTE 5. STOCKHOLDERS’ EQUITY TRANSACTIONS (NON-RELATED PARTY)

 

Preferred Shares

 

The Company is authorized to issue 10,000,000 shares of preferred stock with such designations, voting and other rights ad preferences as may be determined by the Board of Directors. As of September 30, 2013, there are no preferred shares issued or outstanding.

 

Common Shares

 

In 2006, the Company sold 150,000 shares of common stock for cash of $30,000.

 

In 2008, the Company issued 25,000 shares of common stock with a fair value of $5,000 for services.

 

In 2010, the Company sold 250,000 shares of common stock for cash of $50,000.

 

In 2011, the Company sold 250,000 shares of common stock for cash of $50,000.

 

In 2011, the Company issued 259,965 shares of common stock with a fair value of $68,373 for services.

 

 

NOTE 6. GOING CONCERN

 

The Company has suffered recurring losses from operations which raises substantial doubt about the Company’s ability to continue as a going concern. Continued losses could cause the Company to be unable to continue in the racing industry or to meet debt obligations. The Company believes that racing requires significant capital outlays on a continual basis to successfully fund operations, but with adequate funding that profitable operations can be achieved. Without proper capitalization the Company could discontinue operations. The Company has generated no significant operating revenue during the nine months ended September 30, 2013, but are making efforts to attract financing for operations and anticipates generating more revenue in the next 12 months, and more specifically during the racing season from February through November, through increased racing activities, event consulting and sponsorships. The Company's assets are very specialized, and any value recovery should the Company cease operations may be minimal, and insufficient to meet debt obligations.

 

Because of the Company’s history of net losses and negative working capital position, its independent auditors, in their report on the financial statements for the year ended December 31, 2012, expressed substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that could result from the outcome of this uncertainty.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Safe Harbor for Forward-Looking Statements

 

When used in this report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act of 1933 and Section 21e of the Securities Exchange Act of 1934 regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position.  Persons reviewing this report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual result may differ materially from those included within the forward-looking statements as a result of various factors.  Such factors are discussed under the “Item 2.  Management’s Discussion and Analysis of Financial Condition or Plan of Operations,” and also include general economic factors and conditions that may directly or indirectly impact the Company’s financial condition or results of operations.

 

Description of Business:

 

Speedsport Branding, Inc. (the “Company”, “SpeedSport” or “we”) is a development stage company operating as a small motorsports organization which was organized in 2006 to participate in the United Sports Car Racing series (“USC”) sanctioned events (formerly known as the Grand-Am Rolex Series) in Grand Touring (“GT”) based road racing events. The United Sport Car Racing series was established in 1999 to organize, sanction, and sponsor professionally race prepared “Sports Car” automobile road racing in North America. We participate in the “Rolex Series GT” events using Rolex Series GT (Grand Touring) race-prepared production based automobiles. We participated in four road racing events in 2006, five in 2007, nine races in 2008 and in no races thereafter.

 

In 2012, we attended and provided consulting services at United Sports Car Racing series road racing events at Road America in Elk Harte Lake, Wisconsin and in the inaugural Brickyard Grand Prix at Indianapolis Motor Speedway. We received associated sponsorship and consulting income from marketing partners and clients for both events in 2012.

 

We have utilized leased race cars to participate in the racing events we have scheduled. In December of 2008, we purchased a racecar from P-1, Inc. (“P-1“) as an alternative to leasing. Kevin P. O’Connell, who is our majority shareholder, is also the majority shareholder of P-1, Inc.

 

In June of 2013, we sold our Porsche 997 Cup Car (the "Porsche") to P-1, Inc., a related party, in exchange for cancellation of 708,333 shares of our common stock held by P-1, Inc.  We sold the Porsche because it was no longer in compliance with new racing rules instituted by the United Sports Car Series. The new racing rules were instituted as a result of the merger of the American LeMans Series with the Grand Am Rolex Series (now operating under the name "United Sports Car Series"). The Porsche would not be permitted to compete under United Sports Car Series rules.

 

Also in June of 2013, we acquired a 2012 Ford BOSS Mustang R (the "Mustang") from Rick Ware Racing (‘RWR”) for a purchase price of $200,000. We paid the $200,000 by issuing 1 million shares of our common stock to Rick Ware Racing   The Mustang is compliant with the new technical rules and is able to compete in races sanctioned by the United Sports Car Series.       

 

We will decide in the future whether to lease a racecar or to enter the vehicle we have purchased from RWR. In the past, and possibly in the future, we intend to lease our race cars for United Sports Car Racing events. This could be from outside vendors or from P-1.

 

We expect the majority of our revenue to be derived from the sale to sponsors of advertising space on each vehicle we enter in a United Sports Car Racing event and from winning a share of the “cash purses” that are provided by the United Sports Car Racing series event sponsors. Secondarily, we expect to utilize our race cars to provide marketing and public corporate branding services to clients desiring to use our cars and equipment to market their product or service by having our vehicles promote their brand by carrying their logo. Our ability to attract sponsors will, in part, be dependent upon the success of our racecars in the races we may decide to enter. We believe that if we win, or finish within the top 10 finishing places in a race, our ability to attract sponsors will be enhanced. Further, our past record of sporadic "Top 10" finishing places has diminished our ability to attract sponsors.

 

We have conducted limited operations to date and our operations will continue to be limited until such time as we are able to obtain additional funds to carry out our business plans. We received consulting income during periods in which we have not entered in racing events. In 2012, most of our income was generated from providing consulting services. For 2013, we expect to generate both consulting and sponsorship income.

 

We had limited revenues in 2013 and 2012 from a small client base.

 

 

Revenue is expected to be derived from the sale of advertising space from sponsors on each vehicle we enter in a United Sports Car race and from winning a share of cash purses that are provided by USC event sponsors. In addition, we intend to utilize professionally race prepared Sports Cars to provide marketing and public relations services to clients desiring to use our racing sports cars to market their products or services by having our vehicles promote their brand by carrying their logo. However, we have had no advertisers, sponsors or public relations clients to date, and there are no present commitments from advertisers, sponsors, or public relations clients. There can be no assurance that we will be able to obtain any such advertising revenue, sponsorships or public relations clients in the future. We have conducted limited operations to date, and our operations will continue to be limited until such time as we are able to obtain additional funds to carry out our overall business plans.

 

Management expects to raise $125,000 in capital through the issuance of debt and equity and believes it will be able to raise sufficient capital over the next twelve months to finance operations. However, there can be no assurances that the Company will be successful in this regard or will be able to eliminate its operating losses. The accompanying financial statements do not contain any adjustments which may be required as a result of this uncertainty.

 

For the next fiscal year, management estimates that the cost of operating the business will continue to require additional capital of up to One Hundred Twenty Five Thousand dollars ($125,000) consisting of: $5,000 for primary support personnel and drivers registration and licenses required for entry in select sanctioned racing events; $10,000 for travel and lodging consisting of ground and air travel expenses, rental cars fees, local bus transportation and hotel expenses; $3,000 for marketing and promotion; $20,000 for legal and accounting; $10,000 for engineers and consultants; $25,000 for replacement parts, $15,000 for fuels, lubricants and tires; $7,000 for event day racecar tractor and transporter rental; $15,000 for service of all of the Companies unsecured debt, and $15,000 in miscellaneous expenses consisting of specialty vinyl and lettering services and apparel for competition vehicles, crew members and drivers expenses; fees for utilization of tracks for testing, non- race day fuel and tires, potential marketing costs for sponsors admission fees credentials and hosting costs. If we are able to obtain additional funding, we will be unable to enter additional United Sports Car racing events, obtain various types of equipment, hire, on a consultative basis, engineers and professionals that we will need to enter events, and to purchase the replacement parts that we may need in the event of mechanical failures throughout a racing event.

 

Three Months Ended September 30, 2013 Compared to Three Months Ended September 30, 2012

 

Revenues

 

Total revenues for the three months ended September 30, 2013 were $15,850 compared to $100,400 for the same period ending September 30, 2012, representing a decrease of 84% from the same period in 2012.  The decrease in revenue for the quarter was due to decreases in industry consulting revenue, related party revenue and no sponsorship revenue for the quarter.    

 

Operating Expenses

 

Operating expenses for the three months ended September 30, 2013 were $47,463 compared to $138,886 for the same period ended September 30, 2012, a decrease of $91,423 or 66%.  The decrease was due to a decrease in in both related and non-related party general and administrative expenses.   Depreciation and amortization expenses for the three months ended September 30, 2013 was $10,000; compared to $8,000, a difference of $2,000 for the same period in 2012. 

 

Gain on Asset Sale

 

During the three months ended September 20, 2013, the Company sold a fully depreciated truck to an unconnected third party for net proceeds of $16,301.

 

 

Interest and Financing Costs

 

Interest and financing costs for the three months ended September 30, 2013 were ($283) compared to ($321) for the period ended September 30, 2012.  The decrease for the three month period ended September 30, 2013 as compared to the same period in 2012 was due to an decrease in the indebtedness of the Company.

 

Net Loss

 

Net loss for the three months ended September 30, 2013 was $(15,595) compared to a net loss of ($38,807) for the same period ended September 30, 2012.  The net loss for this period in 2013 is due to a decrease in sponsorship revenue and related party consulting revenue for the quarter compared to the same period in 2012. 

  

Nine Months Ended September 30, 2013 Compared to Nine Months Ended September 30, 2012

 

Revenues

 

Total revenues for the nine months ended September 30, 2013 were $35,350 compared to $130,400 for the same period ending September 30, 2012, representing a decrease of 73% from the same period in 2012. The decrease in revenue for the nine months was primarily a result of a decrease in related party consulting revenue, sponsorship revenue and industry consulting revenue.

 

Operating Expenses

 

Operating expenses for the nine months ended September 30, 2013 were $90,462 compared to $176,550 for for the same period ended September 30, 2012, a  decrease of $86,088 or 48%.  The decrease was due to an overall decrease in related party general and administrative expenses and general and administrative expenses.  Depreciation and amortization expenses for the nine months ended September 30, 2013 was $26,667 compared to $24,000 for the same period in 2012. 

  

Gain on Asset Sale

 

During the three months ended September 20, 2013, the Company sold a fully depreciated truck to an unconnected third party for net proceeds of $16,301.

 

Interest and Financing Costs

 

Interest and financing costs for the nine months ended September 30, 2013 were $(902) broadly comparable to the $(906) for the period ended September 30, 2012.   

 

Net Loss

 

Net loss for the nine months ended September 30, 2013 was $(39,713) compared to $(47,056) a decrease of 16% for the same period ended September 30, 2012.  The decrease in the net loss for this period in 2013 is due to a decrease in related party general and administrative expenses and a decrease in overall consulting revenue.  

 

Cash Flows for the Nine Months Ended September 30, 2013.

 

Net cash used in operating activities for the nine months ended September 30, 2013 was $35,372 compared to $8,097 generated by operating activities in the nine months ended September 30, 2012. During the nine months ended September 30, 2013, the Company recognized a loss of $39,713 and used a further $6,025 in reducing operating liabilities, partially offset by net non cash items of $10,366. During the nine months ended September 30, 2012, the Company recognized a loss of $47,056 which was partially offset by non cash items of $24,000 and additional cash of $31,153 was generated through the reduction of accounts receivable and the increase of accounts payable.

 

 

Net cash of $16,301 was generated from investing activities during the nine months ended September 30, 2013 from the sale of a truck. No cash was generated or used in investing activities during the nine months ended September 30, 2012.

 

Net cash provided by financing activities was $42,873 for the nine months ended September 30, 2013, compared to $31,462 used in financing activities for the same period of 2012. 

 

There was a net increase in cash of $23,802 for the nine months ended September 30, 2013, as compared to a net decrease in cash of $(23,365) for the same period in 2012.  

 

Stockholder Matters

 

Stockholders’ equity was $143,675 on September 30, 2013, or $ 0.009 per share outstanding.  As of September 30, 2012, stockholders’ equity was $2,054 or $ 0.0001 per share outstanding.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash

 

Our primary source of liquidity is cash provided by operating, investing, and financing activities. Net cash used in operations for the nine months ended September 30, 2013 was $35,372 as compared to $8,097 generated from operations for the period ended September 30, 2012.     

 

Liquidity

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $39,713 and used cash in operating activities of $35,372 during the nine months ended September 30, 2013.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  As of September 30, 2013, the Company had assets that exceeded liabilities by $143,675.

 

The Company’s current source of cash is capital raised for its operations and proceeds from the sale of its common stock.  The Company will continue to explore other sources of capital to expand and fund its current operations.

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.

 

As a “smaller reporting company,” we are not required to provide the information under this Item 3.

 

ITEM 4. Controls and Procedures.

 

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

 

(b) Changes in internal controls. There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter 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 know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or material pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.

 

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.

 

As a “smaller reporting company,” we are not required to provide the information under this Item 3.

 

ITEM 4. Controls and Procedures.

 

(a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective.

 

(b) Changes in internal controls. There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 4. Mine Safety Disclosures.

 

Not applicable.

 

ITEM 5. Other Information.

 

None. 

 

ITEM 6. Exhibits.

 

Exhibit Number		Description of Exhibits
31.1		Certification of Chief Executive Officer and Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer and Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema Document*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB		XBRL Taxonomy Extension Label Linkbase Document*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document*

________________

* Filed herewith.

 

 

SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

 

Date: November 14, 2013		/s/ Roy C. Montgomery
		Name: Roy C. Montgomery
		Title: President and Chief Executive Officer

 

 

Date: November 14, 2013		/s/ Timothy J. Koziol
		Name: Timoty J. Koziol,
		Title: Chief Financial and Accounting Officer