UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934   for the three month period ended March 31, 2014

 

o	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 x No o

 

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 x No o

 

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

 

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o		Smaller Reporting Company x

 

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 April 25, 2014.

 

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
	Item 1.	Condensed Financial Statements:	3
		Condensed Balance Sheets at March 31, 2014 (unaudited) and December 31, 2013 (audited)	3
		Condensed Statements of Operations for the three months ended March  31, 2014  and 2013 and the period from January 10, 2006 (Inception) to March 31, 2014 (unaudited)	4
		Condensed Statements of Changes in Stockholders’ Equity for the period from January 10, 2006 (Inception) through March 31, 2014   (unaudited)	5
		Condensed Statements of Cash Flows for the three months ended March 31, 2014  and 2013 and the period from January 10, 2006 (Inception) to March 31, 2014   (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
	Item 1.	Legal Proceedings	17
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
	Item 3.	Defaults Under Senior Securities	17
	Item 4.	Mine Safety Disclosures	17
	Item 5.	Other Information	17
	Item 6.	Exhibits	18
		Signatures	18

 

 

Part I – FINANCIAL INFORMATION

 

ITEM 1. Condensed Financial Statements.

 

Speedsport Branding, Inc.

(A Development Stage Company)

CONDENSED BALANCE SHEETS

 

		(Unaudited)				(Audited)
		March 31,				December 31,
		2014				2013
ASSETS
Current assets
Cash		$	50,059			$	33,217
Total current assets			50,059				33,217
Property and equipment, net			166,667				176,667
Total Assets		$	216,726			$	209,884
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	23,566			$	22,466
Line of credit			8,137				8,246
Accrued interest payable			62				91
Accrued payables - related parties			86,224				74,724
Total current liabilities			117,989				105,527
Total Liabilities			117,989				105,527
Stockholders' Equity
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued or outstanding			–				–
Common stock, $0.001 par value; 100,000,000 shares authorized; 16,827,505 issued and outstanding			16,828				16,828
Additional paid in capital			1,584,041				1,584,041
Deficit accumulated during the development stage			(1,502,132	)			(1,496,512	)
Total Stockholders' Equity			98,737				104,357
Total Liabilities and Stockholders' Equity		$	216,726			$	209,884

 

 

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

 

 

Speedsport Branding, Inc.

(A Development Stage Company)

CONDENSED STATEMENTS OF OPERATIONS

(unaudited)

 

		For the three months ended March 31,								For the period from January 10, 2006 (Inception) To
		2014				2013				March 31, 2014
Revenue:
Consulting		$	–			$	18,000			$	96,130
Consulting - related party			22,000				–				171,650
Sponsorships			–				–				67,463
Race winnings			–				–				28,358
Lease income			–				–				17,379
Lease income - related party			–				–				42,424
Total revenue			22,000				18,000				423,404
Operating expenses:
Depreciation			10,000				8,000				297,927
General and administrative - related party			–				5,620				271,856
General and administrative			17,366				4,632				1,275,050
Total operating expenses			27,366				18,252				1,844,833
Operating - other:
Gain on asset sales			–				–				32,660
Income (Loss) from operations			(5,366	)			(252	)			(1,388,769	)
Other income (expense):
Interest income			–				–				1,286
Interest expense			(254	)			(305	)			(114,649	)
Total other income (expense)			(254	)			(305	)			(113,363	)
Income (loss) before provision for income taxes			(5,620	)			(557	)			(1,502,132	)
Provision for income tax			–				–				–
Net Income (Loss)		$	(5,620	)		$	(557	)		$	(1,502,132	)
Net loss per share (Basic and fully diluted)		$	(0.00	)*		$	(0.00	)*
Weighted average number of common shares outstanding			16,827,505				16,535,838

 

* Denotes a loss of less than $(0.01) per share.  

 

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

 

Speedsport Branding, Inc.

(Development Stage Company)

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the period from January 10, 2006 (inception) through March 31, 2014

(unaudited)

 

														Deficit Accumulated				Total
		Common Stock (1)								Additional				During The				Stock-
						Amount				Paid in				Development				holders'
		Shares				($.001 Par)				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				16,418				–				16,500
Net loss			–				–				–				(155,319	)			(155,319	)
Balances at December 31, 2011			16,535,838				16,536				1,402,999				(1,389,706	)			29,829
Net loss			–				–				–				(27,775	)			(27,775	)
Balances December 31, 2012			16,535,838				16,536				1,402,999				(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			–				–				–				(79,031	)			(79,031	)
Balances December 31, 2013			16,827,505				16,828				1,584,041				(1,496,512	)			104,357
Net loss			–				–				–				(5,620	)			(5,620	)
Balances March 31, 2014			16,827,505			$	16,828			$	1,584,041			$	(1,502,132	)		$	98,737

 

(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)

CONDENSED STATEMENTS OF CASH FLOWS

(unaudited)

 

										For the period from
		For the three months years ended								Jan. 10, 2006
		March 31,								(Inception) To
		2014				2013				March 31, 2014
Cash Flows From Operating Activities:
Net Income (Loss)		$	(5,620	)		$	(557	)		$	(1,502,132	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			10,000				8,000				297,927
Bad debt (recovery)			–				–				15,000
Stock issued for services			–				–				117,476
(Gain) Loss on asset sales			–				–				(32,660	)
Changes in operating assets and liabilities:
Accounts receivable			–				–				(15,000	)
Accounts payables			1,100				(2,501	)			23,566
Accrued interest			(29	)			–				80,594
Accrued payables - related parties			–				(3,885	)			3,885
Net cash provided by (used in) operating activities			5,451				1,057				(1,011,344	)
Cash Flows From Investing Activities:
Fixed asset purchases			–				–				(11,314	)
Fixed asset sales			–				–				148,701
Net cash provided by (used in) investing activities			–				–				137,387
Cash Flows From Financing Activities:
Notes & loans payable - borrowings			283				405				714,170
Notes & loans payable - payments			(392	)			(860	)			(136,785	)
Repayments on related party advances			(43,000	)			(12,975	)			(1,608,654	)
Advances from related parties			54,500				12,975				1,825,285
Bank overdraft			–				(602	)			–
Issuance of common stock			–				–				130,000
Net cash provided by (used in) financing activities			11,391				(1,057	)			924,016
Net Increase (Decrease) In Cash			16,842				–				50,059
Cash At The Beginning Of The Period			33,217				–				–
Cash At The End Of The Period		$	50,059			$	–			$	50,059
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
Assets purchased by issuing notes		$	–			$	–			$	45,623
Forgiveness of debt - related party		$	–			$	–			$	36,529
Sale of asset to related party for cancellation of stock		$	–			$	–			$	141,666
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		$	421			$	392			$	26,574
Cash paid for income taxes		$	–			$	–			$	–

 

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

 

Speedsport Branding, Inc.

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS (Unaudited)

As of March 31, 2014 and December 31, 2013

For the Three Month Periods Ended March 31, 2014 and 2013,

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

Through March 31, 2014

 

 

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 March 31, 2014 and December 31, 2013, the Company had no balance of accounts receivable and consequently no 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 month periods ended March 31, 2014 and 2013 and during the period from January 10, 2006 (inception) to March 31, 2014, 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, line of credit, accrued interest payable, and accrued payables – related parties 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 March 31, 2014 and December 31, 2013, 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 During the three month periods ended March 31, 2014 and 2013, there were no potentially dilutive shares issued or outstanding.

 

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 2014 from a small client base. During the three months ended March 31 2014, the Company earned revenue from one company which was related to the Company.

 

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.

 

Recent Accounting Pronouncements

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

 

Interim Financial Information

The interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) as promulgated in Item 210 of Regulation S-X.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position as of March 31, 2014, results of operations for the three months ended March 31, 2014, and cash flows for the three months ended March 31, 2014, as applicable, have been made.  The results for these interim periods are not necessarily indicative of the results for the entire year.  The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Form 10-K.

 

NOTE 2. PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

 

		March 31, 2014				December 31, 2013
Racecars		$	200,000			$	200,000
Truck and other vehicles			8,090				8,090
			208,090				208,090
Less accumulated depreciation			(41,423	)			(31,423	)
Total		$	166,667			$	176,667

 

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 March 31, 2014 and December 31, 2013, the outstanding balance was $8,137 and $8,246 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 March 31, 2014. Any amounts advanced accrue interest at 10% per annum and principal and interest are due at the end of each quarter. As of March 31, 2014 and December 31, 2013, 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 $8,978 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.

 

During the three months ended March 31, 2013, the Company incurred management fees payable to a related party, a company owned by a majority shareholder, in the amount of $5,620. There were no management fees incurred for the three months ended March 31, 2014.

 

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.

 

As of December 31, 2013, the Company owed a related party, a company owned by a majority shareholder, $74,724.

 

As of March 31, 2014, the Company owed a related party, a company owned by a majority shareholder, $86,224.

 

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 March 31, 2014 and December 31, 2013, there were 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 three months ended March 31, 2014 and 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, 2013, 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.

 

NOTE 7. INCOME TAXES

 

We did not provide any current or deferred US federal income tax provision or benefit for any of the periods presented in these financial statements because we have experienced losses since Inception (January 10, 2006). When it is more likely than not, that a tax asset cannot be realized through future income, the Company must record an allowance against any future potential future tax benefit. We provided a full valuation allowance against the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.

 

NOTE 8. SUBSEQUENT EVENTS

 

On April 1, 2014, the Company entered into a non-binding Letter of Intent (the “LOI”) with a non-related party, pursuant to which the Company would merge with a private company to be presented by the non-related party (the “Private Company”) pursuant to an Agreement of Merger and Plan of Reorganization (the "Transaction"). The Transaction is subject to the execution of definitive agreements and due diligence by the Company, the non-related party, and the Private Company.

 

As at the date of this report, there can be no guarantee that a definitive agreement will be concluded or that the Transaction will be completed.

 

In accordance with ASC 855-10, “Subsequent Events”, the Company has analyzed its operations subsequent to March 31, 2014 to the date these financial statements were issued on April 25, 2014, and has determined that, other than as disclosed above, it does not have any material subsequent events to disclose in these financial statements.

 

 

 

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 IMSA TUDOR United Sports Car Racing series (“TUDOR”) sanctioned events (formerly known as the Grand-Am Rolex Series) in Grand Touring (“GTD”) based road racing events. The TUDOR 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 “TUDOR Series GTD” and additional sanctioned IMSA events using TUDOR Series GTD (Grand Touring-Daytona) race-prepared production based automobiles. We participated in four road racing events in 2006, five in 2007, nine races in 2008, two races in 2012 and expect several IMSA sanctioned events in 2014.

 

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. In 2014, we expect to compete in several IMSA Super Trofeo racing events in North America.

 

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 TUDOR 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 TUDOR 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 TUDOR United Sports Car Racing event and from winning a share of the “cash purses” that are provided by the TUDOR 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 2013, most of our income was generated from providing consulting services. For 2014, we expect to generate both consulting and sponsorship income.

 

We had limited revenues in the three months ended March 31, 2014 and 2013. In the three months ended March 31, 2014, all of our revenues was derived from related party consulting income.

  

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 TUDOR 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; $5,000 for engineers and consultants; $30,000 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 March 30, 2014 Compared to the Three Months Ended March 30, 2013

 

Revenues

 

Total revenues for the three months ended March 30, 2014 were $22,000 compared to $18,000 for the same period ending March 30, 2013, representing an increase of 18% from the same period in 2013.  The increase in revenue for the quarter was due to an increase in industry related party consulting revenue for the quarter. 

 

Operating Expenses

 

Operating expenses for the three months ended March 30, 2014 were $27,366 compared to $18,252 for the same period ended March 30, 2013, an increase of 33%. The increase was due to an increase in general and administrative expenses, specifically legal expenses, and a slight increase depreciation expenses. 

 

Other Income (expense)

 

Other income (expense) for the three months ended March 30, 2014 was ($254) broadly similar to the ($305) for the three month period ended March 30, 2013.

 

Net Loss

 

Net loss for the three months ended March 30, 2014 was $(5,620) compared to a net loss of ($557) for the same period ended March 30, 2013 due to the factors discussed above.  

 

Cash Flows for the Three Months Ended March 30, 2014 Compared to the Three Months Ended March 30, 2013.

 

Net cash generated by operating activities for the three months ended March 30, 2014 was $5,451 compared to $1,057 generated by operating activities in the three months ended March 30, 2013. During the three months ended March 30, 2014, the Company recognized a loss of $5,620 which was offset for cash flow purposes by $10,000 of non-cash expenses and an increase in accounts payable of $1,100. By comparison during the three months ended March 31, 2013, the Company recognized a loss of $557 which was offset for cash flow purposes by $8,000 of non-cash expenses and increased by a $6,386 reduction in accounts payable and accrued payables – related parties.

 

No cash flow was used in or generated from investing activities during the three month periods ended March 30, 2014 or 2013. 

 

Net cash provided by financing activities was $11,391 for the three months ended March 30, 2014, compared to $(1,057) used in financing activities for the same period of 2013. During the three months ended March 31, 2014 we received a net of $11,500 by way of advances from related parties while in the three months ended March 31, 2013 we made net repayments of $455 in notes and loans payable and $602 in respect of a bank overdraft.

 

There was a net increase in cash of $16,842 for the three months ended March 30, 2014, as compared to no net change in cash for the same period in 2013.  

 

Stockholder Matters

 

Stockholders’ equity was $98,737 on March 31, 2014, or $ 0.006 per share outstanding.  As of December 31, 2013, stockholders’ equity was $104,357 or $ 0.006 per share outstanding.

 

LIQUIDITY AND CAPITAL RESOURCES

 

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 $5,620 and used cash in operating activities of $5,451 during the three months ended March 31, 2014.  These matters raise substantial doubt about the Company’s ability to continue as a going concern.  As of March 31, 2014, the Company had assets that exceeded liabilities by $98,737.

 

The Company’s current source of funds is capital raised for its operations and advances from a related party company. 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. Defaults Upon Senior Securities.

 

None 

 

ITEM 4. 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: April 25, 2014		/s/ Roy C. Montgomery
		Name: Roy C. Montgomery
		Title: President and Chief Executive Officer

 

 

Date: April 25, 2014		/s/ Timothy J. Koziol
		Name: Timothy J. Koziol,
		Title: Chief Financial and Accounting Officer