U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2005.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
COMMISSION FILE NUMBER: 333-70932
THE JACKSON RIVERS COMPANY
(Name of small business issuer in its charter)
FLORIDA 65-1102865
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
402 W. BROADWAY STE. 400 92101
SAN DIEGO, CA (Zip Code)
(Address of principal executive offices)
(619) 615-4242
(Issuer''s telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: As of May 3, 2005, the issuer
had 598,732,720 shares of its common stock issued and outstanding.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . .
Condensed Consolidated Balance Sheets:
March 31, 2005 and December 31, 2004
Condensed Consolidated Statements of Losses:
Three Months ended March 31, 2005 and 2004
Condensed Consolidated Statements of Cash Flows:
Three Months ended March 31, 2005 and 2004
Notes to Unaudited Condensed Consolidated Financial Information:
March 31, 2005
Item 2. Management's Discussion and Analysis or Plan of Operation. . . .
Item 3. Controls and Procedures. . . . . . . . . . . . . . . . . . . . .
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . .
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. . .
Item 3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . .
Item 5. Other Information. . . . . . . . . . . . . . . . . . . . . . . .
Item 6. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. . .
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002. . .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
THE JACKSON RIVERS COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS March 31, 2005 December 31.2004
---------------- ------------------
Current assets:
Cash and cash equivalents $ 6,950 $ 5,272
Accounts receivable, net of allowance for doubtful account of
2,900 at March 31, 2005 and December 31, 2004 21,905 37,800
Inventory, net 10,662 -
Prepaid expenses and other 15,397 6,954
---------------- ------------------
Total current assets 54,914 50,026
Property and equipment, net of accumulated depreciation of
2,935 and $2,357 at March 31, 2005 and December 31, 2004,
Respectively 8,624 9,202
---------------- ------------------
Total Assets $ 63,538 $ 59,228
================ ==================
LIABILITIES AND (DEFICIENCY IN)
STOCKHOLDERS' EQUITY
Current liabilities:
Cash disbursed in excess of available funds $ 4,874 $ 11,073
Accounts payable and accrued liabilities 403,943 361,186
---------------- ------------------
Total current liabilities 408,817 372,259
Commitments and contingencies - -
(Deficiency in) stockholders' equity:
Preferred stock, par value $.00001 per share, 1,000,000,000
shares authorized:
Series A preferred stock, par value $.00001 per share,
10,000,000 shares authorized; 960,000 and 980,000 shares
issued and outstanding at March 31, 2005 and December 31,
2004, respectively 10 10
Series B preferred stock, par value $.00001 per share,
10,000,000 shares authorized; none issued and outstanding at
March 31, 2005 and December 31, 2004 - -
Common stock, par value $.00001 per share, 5,000,000,000
shares authorized; 658,732,720 and 61,687 shares issued and
outstanding at March 31, 2005 and December 31, 2004,
respectively 6,587 1
Additional paid-in capital 6,753,098 5,630,360
Stock subscription receivable (7,800) (63,630)
Accumulated deficit (7,097,174) (5,879,772)
---------------- ------------------
Total (deficiency in) stockholders' equity (345,279) (313,031)
Total liabilities and (deficiency in) stockholders' equity $ 63,538 $ 59,228
================ ==================
See accompanying notes to the unaudited condensed consolidated financial
information
1
THE JACKSON RIVERS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
For the three months ended March 31,
2005 2004
------------------- ----------------------
Revenues:
Sales, net $ 7,907 $ -
Cost of sales 2,655 -
------------------- ----------------------
Gross profit 5,252 -
Operating expenses:
Selling, general, and administrative 1,222,085 739,654
Acquisition costs - 1,000,000
Depreciation 578 407
------------------- ----------------------
Total operating expenses 1,222,663 1,740,061
Loss from operations (1,217,411) (1,740,061)
Other income:
Interest income, net 9 6
------------------- ----------------------
Total other income 9 6
Net loss before provision for income taxes (1,217,402) (1,740,055)
Provision for income taxes - -
------------------- ----------------------
Net loss $ (1,217,402) $ (1,740,055)
=================== ======================
Loss per share, basic and assuming dilution $ (0.01) $ (60,693.23)
=================== ======================
Basic and diluted weighted average number of
shares outstanding 141,323,093 29
=================== ======================
See accompanying notes to the unaudited condensed consolidated financial
information
2
THE JACKSON RIVERS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended March 31,
2005 2004
------------------- ---------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss from operation $ (1,217,402) $ (1,740,055)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 578 407
Common stock issued in exchange for consulting services rendered 181,640 260,000
Common stock issued in exchange for employee services rendered and
related transaction costs 823,458 95,695
Employee compensation and transaction costs in connection with - 6,372
common stock subscribed
Common stock to be issued in exchange for acquisition costs - 1,000,000
Decrease in accounts receivable 15,895 -
(Increase) in inventory (10,662) -
(Increase) in prepaid expenses and other (8,443) (3,278)
(Decrease) cash disbursed in excess of available funds (6,200) -
Increase in accounts payable and accrued liabilities 42,756 5,274
------------------- ---------------------
Net cash (used in) operating activities (178,379) (375,585)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures - (6,392)
------------------- ---------------------
Net cash (used in) investing activities - (6,392)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock and common stock 180,057 467,432
------------------- ---------------------
subscribed, net of costs and fees
Net cash provided by financing activities 180,057 467,432
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,678 85,455
Cash and cash equivalents at beginning of period 5,272 14,820
------------------- ---------------------
Cash and cash equivalents at end of period $ 6,950 $ 100,275
=================== =====================
See accompanying notes to the unaudited condensed consolidated financial
information
3
THE JACKSON RIVERS COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
For the three months ended March 31,
2005 2004
------------------- -------------------
Supplemental Disclosure of Cash Flows Information:
Cash paid during the period for interest $ - $ -
Cash paid during the period for income taxes - -
Common stock issued in exchange for consulting services
rendered 181,640 260,000
Common stock issued in exchange for employee services
rendered and related transaction costs 823,458 95,695
Employee compensation and transaction costs in connection
with common stock subscribed - -
Common stock to be issued in exchange for acquisition costs - 1,000,000
Employee stock purchase plan:
Common stock issued under employee stock purchase plan 947,685 510,000
Add: common stock subscribed in prior period 63,630 53,127
Less: stock subscription receivable (7,800) -
Less: common stock retained by employees and related
transaction costs (823,458) (95,695)
------------------- -------------------
Net proceeds from the sale of common stock $ 180,057 $ 467,432
=================== ===================
See accompanying notes to the unaudited condensed consolidated financial
information
4
THE JACKSON RIVERS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2005
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
-------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the three-month period ended March
31, 2005, are not necessarily indicative of the results that may be expected for
the year ended December 31, 2005. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31, 2004
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
Business and Basis of Presentation
----------------------------------
The Jackson Rivers Company (the ""Company"") was incorporated on May 8, 2001
under the laws of the State of Florida. The Company was a ""development stage
enterprise"" (as defined in statement of Financial Accounting Standards No. 7)
until September 30, 2004. The Company is currently engaged in the business of
developing and providing customized information management systems. During the
first quarter 2005, the Company's wholly owned subsidiary, JRC Global Products,
Inc., began to market hair extension and replacement systems.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Jackson Rivers Technologies, Inc. and JRC Global
Products, Inc. Significant intercompany transactions and accounts have been
eliminated in consolidation.
Stock Based Compensation
--------------------------
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, this
statement amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company has chosen to continue to account
for stock-based compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related interpretations. Accordingly, compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the Company's stock at the date of the grant over the exercise price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its financial reports for the year ended December 31, 2004 and has
adopted the interim disclosure provisions for its financial reports for the
subsequent periods. The Company has no awards of stock-based employee
compensation outstanding at March 31, 2005 (Note C).
5
THE JACKSON RIVERS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2005
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation (Continued)
---------------------------------------
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123R (revised 2004), "Share-Based Payment" which is a
revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation".
Statement 123R supersedes APB opinion No. 25, "Accounting for Stock Issued to
Employees", and amends FASB Statement No. 95, "Statement of Cash Flows".
Generally, the approach in Statement 123R is similar to the approach described
in Statement 123. However, Statement 123R requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro-forma disclosure is no longer
an alternative. On April 14, 2005, the SEC amended the effective date of the
provisions of this statement. The effect of this amendment by the SEC is that
the Company will have to comply with Statement 123R and use the Fair Value based
method of accounting no later than the first quarter of 2006. Management has
not determined the impact that this statement will have on Company's
consolidated financial statements.
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods'' data to
the current presentation. These reclassifications had no effect on reported
losses.
NOTE B - CAPITAL STOCK
The Company has authorized 100,000,000 shares of common stock, with a par value
$0.001 per share. In August 2004, the Company filed the Article of Amendment to
the Articles of Incorporation to increase the authorized shares to be
2,180,000,000, of which 1,980,000,000 shares shall be common shares with a par
value $0.001 per share, and 200,000,000 shares shall be preferred shares with a
par value $0.001 per share. In November 2004, the Company's board of directors
approved an amendment to the Articles of Incorporation to increase the
authorized common shares from 1,980,000,000 to 5,000,000,000 shares, with a par
value $0.00001 per share, and increase the authorized preferred shares from
200,000,000 to 1,000,000,000 shares, with a par value $0.00001 per share. In
November 2004, the Company effected a one one-for-one thousand reverse stock
split of its authorized and outstanding shares of common stock. In February
2005, the Company effected a one one-for-two thousand reverse stock split of its
authorized and outstanding shares of common stock. All references in the
financial statements and notes to financial statements, numbers of shares and
share amounts have been retroactively restated to reflect the reverse split in
November 2004 and February 2005. As of March 31, 2005 and December 31, 2004, the
Company has 658,732,720 and 61,687 shares of common stock issued and
outstanding, respectively.
Effective October 18, 2004, the Company designated 10,000,000 shares of its
preferred stock as the Series A Preferred Stock. Each share of the series A
preferred stock is convertible into 1,000 shares of the Company's common stock.
On all matters submitted to a vote of the Company's security holders, a holder
of the Series A Preferred Stock is entitled to the number of votes equal to the
number of shares of the Series A Preferred Stock held by such holder multiplied
by 2,000. Upon the dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, the holders of the then outstanding shares of
Series A Preferred Stock shall be entitled to receive out of the assets of the
Company the sum of $0.001 per share (the "Liquidation Rate") before any payment
or distribution shall be made on the common stock, or any other class of capital
stock of the Company ranking junior to the Series A Preferred Stock. As of March
31, 2005 and December 31, 2004, the Company has 960,000 and 980,000 shares of
Series A preferred stock issued and outstanding, respectively.
6
THE JACKSON RIVERS COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2005
(UNAUDITED)
NOTE B - CAPITAL STOCK (CONTINUED)
Effective October 18, 2004, the Company also designated 10,000,000 shares of its
preferred stock as the Series B Preferred Stock. Each share of the series B
preferred stock is convertible into shares of the Company's common stock at 80
percent of the OTCBB, (or such other exchange or market on which the Common
Stock is then listed, if the Common Stock is not listed on the OTCBB) five-day
average closing bid price for each share of the common stock for the five days
prior to the date of the conversion. Upon the dissolution, liquidation or
winding up of the Company, whether voluntary or involuntary, the holders
of the then outstanding shares of Series B Preferred Stock shall be entitled
to receive out of the assets of the Company the sum of $0.001 per share
(the "Liquidation Rate") before any payment or distribution shall be made on
the common stock, or any other class of capital stock of the Company ranking
junior to the Series B Preferred Stock. As of March 31, 2005 and December 31,
2004, the Company has no Series B preferred stock issued and outstanding.
During the three months ended March 31, 2005, the Company issued an aggregate of
123,530,000 shares of common stock to consultants in exchange for $181,640 of
services rendered, which approximated the fair value of the shares issued during
the period the services were rendered. The Company issued an aggregate of
515,141,033 shares of common stock, valued at $939,885, to officers and
employees for stock options exercised (Note C). The Company received $180,057 of
proceeds in connection with common shares issued to employees for common stock
subscribed and stock options exercised, net of costs and fees. Stock
subscription of $7,800 was due to the Company at March 31, 2005 and compensation
and related transaction costs of $823,458 were charged to operations during the
period ended March 31, 2005. Additionally, the Company's President and CEO
converted 20,000 shares of the Series A preferred stock into 20,000,000 shares
of the Company's restricted common stock.
NOTE C - EMPLOYEE STOCK INCENTIVE PLAN
In August 2003, the Company established the 2003 Employee Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to provide officers and employees, who
make significant contributions to the long-term growth and performance of the
Company, with equity-based compensation incentives, and to attract and retain
quality employees. The Plan is administered by a Compensation Committee (the
"Committee") appointed by the board of directors of the Company. The number of
shares authorized under the Plan shall not be proportionately adjusted in the
event of any increase or decrease in the number of the issued shares of the
common stock which results from any stock split.
The maximum number of shares of common stock that may be awarded or issued under
the Plan was 17,000,000 shares. In January 2004, Company established the 2004
Employee Stock Incentive Plan and the maximum number of shares of common stock
that may be awarded or issued under the 2004 Plan is 50,000,000 shares. In
September 2004, the Company increased the maximum number of shares of
common stock that may be awarded or issued to 400,000,000 shares. In
December 2004, the Company increased the maximum number of shares of
common stock that may be awarded or issued to 800,000,000 shares.
The stock option plan provides for the issuance of incentive stock options at an
exercise price approximating 85% of the fair market value of the Company's
common stock on the date of exercise (or 110% of the fair market value of the
common stock on the date of the grant of the option, in the case of significant
stockholders). The maximum life of the options is ten years. An aggregate of
515,141,033 stock options were granted to employees during the period ended
March 31, 2005, and all options were exercised on the grant date (Note B). There
are no stock options outstanding at March 31, 2005.
NOTE D - SUBSEQUENT EVENTS
Subsequent to the date of financial statements, the Company canceled an
aggregate of 60,000,000 shares of common stock, valued at $7,800, issued to
employees in connection with stock options exercised in March 2005.
7
ITEM 2. MANAGEMENT''S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
FORWARD-LOOKING INFORMATION
Much of the discussion in this Item is ""forward looking"" as that term is
used in Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934. Actual operations and results may materially differ from
present plans and projections due to changes in economic conditions, new
business opportunities, changed business conditions, and other developments.
Other factors that could cause results to differ materially are described in our
filings with the Securities and Exchange Commission.
There are several factors that could cause actual results or events to
differ materially from those anticipated, and include, but are not limited to
general economic, financial and business conditions, changes in and compliance
with governmental laws and regulations, including various state and federal
environmental regulations, our ability to obtain additional financing from
outside investors and/or bank and mezzanine lenders and our ability to generate
sufficient revenues to cover operating losses and position us to achieve
positive cash flow.
Readers are cautioned not to place undue reliance on the forward-looking
statements contained herein, which speak only as of the date hereof. We believe
the information contained in this Form 10-QSB to be accurate as of the date
hereof. Changes may occur after that date. We will not update that information
except as required by law in the normal course of its public disclosure
practices.
Additionally, the following discussion regarding our financial condition
and results of operations should be read in conjunction with the financial
statements and related notes contained in Item 1 of Part I of this Form 10-QSB,
as well as the financial statements in Item 7 of Part II of our Form 10-KSB for
the fiscal year ended, 2 December 31, 2004.
GENERAL
The Jackson Rivers Company was incorporated on May 8, 2001 under the laws
of the State of Florida. We were a ""development stage enterprise"" (as defined
in statement of Financial Accounting Standards No. 7) until September 30, 2004.
Beginning in 2004, we entered the business of developing and providing
customized information management systems. In 2005, JRC Global Products, our
wholly-owned subsidiary, has begun to market hair extension and replacement
systems.
RECENT EVENTS
During the first quarter of 2005, JRC Global Products, our wholly-owned
subsidiary, has hired a President and Vice President to head up efforts to
market and distribute the Raphael Basante Hair Systems' line of hair
products and services. We plan to market and distribute the patented
Raphael Basante hair extension and replacement
systems to the general salon market, distributors and train salon professionals
to use the system worldwide.
We plan to build brand awareness by exhibiting at trade shows and
conducting our own training classes in major market areas. We will focus on the
point of difference that our extensions have over others that are on the market.
We expect to penetrate the market through distribution. We will target major
distributors that we feel have product line synergies and with our help and
joint marketing effort we will enable them to do an effective job in expanding
their current client base. In turn, we will allow them to create trial
opportunities for this new and innovative product that does not hurt your hair
or scalp. We feel that there is an untapped market of potential extension users
who would never try extensions for fear of harming their hair.
Our marketing approach will be regional rollouts in order to effectively
work with our distributors without creating a strain on our educators and
support from our manufacturers. We expect to create a full line of POS materials
for the salons to generate interest in their clients while they are in the
salon. We are also developing a co-op marketing program for our distributors.
In conjunction, we are organizing joint promotions with other manufacturers
to help increase sales and trial for all parties involved in the promotion.
8
We will also support our marketing effort with trade ads, editorials and
third party testimonials. As a compliment to our unique line of extensions, we
will also carry a line of the conventional method of extensions. We feel that
this additional product offering is also superior to the extensions that are
currently on the market. This will allow the distributor's representative the
option - if his or her customer does not have time to train on the new system -
to sell them a better system than they are currently using.
JRC Global Products, dba Raphael Basante Hair Systems, made its debut
appearance April 17 through 19, exhibiting at the International Beauty Show at
the Jacob Javits Center in New York, NY. On display, and demonstrated, were the
Company''s breakthrough hair extension and replacement systems and products,
Visions, where the client's existing hair is pulled through openings in the
center of the base of the extension or hair replacement. In addition, the more
conventional method, called Vision Tips, was made available, where the hair is
glued with a heating device to the clients' existing hair.
CURRENT BUSINESS PLAN
Our current purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in business opportunities presented to us by
persons or firms who or which desire to seek the perceived advantages of a
corporation which is registered under the Securities Exchange Act of 1934, as
amended. We do not restrict our search to any specific business; industry or
geographical location and we may participate in a business venture of virtually
any kind or nature.
We may seek a business opportunity with entities which have recently
commenced operations, or which wish to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service or for other corporate purposes. We may acquire
assets and establish wholly owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
As part of our investigation of potential merger candidates, our officers
and directors will meet personally with management and key personnel, may visit
and inspect material facilities, obtain independent analysis or verification of
certain information provided, check references of management and key personnel
and take other reasonable investigative measures, to the extent of our financial
resources and management expertise. The manner in which we participate in an
opportunity will depend on the nature of the opportunity, the respective needs
and desires of us and other parties, the management of the opportunity, our
relative negotiation strength and that of the other management.
We intend to concentrate on identifying preliminary prospective business
opportunities that may be brought to our attention through present associations
of our officers and directors, or by our stockholders. In analyzing prospective
business opportunities, we will consider such matters as the available
technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the future;
nature of present and expected competition; the quality and experience of
management services which may be available and the depth of that management; the
potential for further research, development or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact our
proposed activities; the potential for growth or expansion; the potential for
profit; the perceived public recognition or acceptance of products, services or
trades; name identification; and other relevant factors.
Our officers and directors will meet personally with management and key
personnel of the business opportunity as part of their investigation. We will
not acquire or merge with any company for which audited financial statements
cannot be obtained within a reasonable period of time after closing of the
proposed transaction, as required by the Exchange Act.
We will not restrict our search to any specific kind of firms, but may
acquire a venture which is in its preliminary or development stage, which is
already in operation, or which is in essentially any stage of its corporate
life. It is impossible to predict at this time the status of any business in
which we may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded or may seek other
perceived advantages which we may offer.
RECENT CHANGES IN OUR CAPITAL STRUCTURE.
9
In November 2004, our board of directors approved an amendment to the
Articles of Incorporation to increase the authorized common shares. Effective
January 31, 2005, we amended our articles of incorporation to authorize
5,000,000,000 shares of common stock, par value $0.00001 per share, and
1,000,000,000 shares of preferred stock, par value $0.00001 per share.
Effective February 1, 2005, we implemented a reverse split of our issued
and outstanding common stock on the basis of one post-consolidation share for
each 2,000 pre-consolidation shares
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
REVENUE
THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2004.
Total net sales and revenues were at $7,907 for the three months ended
March 31, 2004 compared to $0 for the prior period, an increase of 100 percent.
In the first quarter 2005, JRC Global Products, our wholly-owned subsidiary,
begun to market hair extension and replacement systems.
Our gross profit for the three months ended March 31, 2005 compared to 2004
increased to 5,252 from $0. Gross margin as a percentage of sales increased to
66 percent in 2005 from 0 percent in 2004. This was attributable to JRC
Global Products's sales in the first quarter 2005.
Total operating expenses for the three months ended March 31, 2005 compared
to 2004 decreased by $517,398 to $1,222,663 from $1,740,061 in the prior period.
Operating loss decreased to a loss of $1,217,411 from a loss of $1,740,061
for the three months ended March 31, 2005. This was primarily attributable to
$1,000,000 of acquisition costs recorded during the quarter ended March 31, 2004
in connection with an LLC Interest Purchase Agreement with Multitrade
Technologies LLC ("MTT") dated February 2004. In June 2004, the Company had
rescinded the Agreement.
10
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2005, we had a deficiency in working capital of $353,903
During the three months ended March 31, 2005 the Company has incurred a
operating cash flow deficit of $ 178,379. We met our cash requirements through
the issuance of common tock under our Employee Stock Incentive Plan as
registered on SEC Form S-8 of $ 180,057.
By adjusting our operations and development to the level of capitalization,
we believe we have sufficient capital resources to meet projected cash flow
deficits. However, if during that period or thereafter, we are not successful in
generating sufficient liquidity from operations or in raising sufficient capital
resources, on terms acceptable to us, this could have a material adverse effect
on our business, results of operations liquidity and financial condition.
While we have raised capital to meet our working capital and financing
needs in the past, additional financing is required in order to meet our current
and projected cash flow deficits from operations and development. We are seeking
financing in the form of equity in order to provide the necessary working
capital. We currently have no commitments for financing. There is no guarantee
that we will be successful in raising the funds required.
The effect of inflation on the Company's operating results was not
significant. The Company's operations are located in North America and there are
no seasonal aspects that would have a material effect on the Company's financial
condition or results of operations.
The Company's independent certified public accountant has stated in their
report included in the Company's December 31, 2004 Form 10-KSB, that the
Company has experienced difficulty in generating cash flow to meet its
obligations and sustain operations , and that the Company is dependent upon
management's ability to develop profitable operations. These factors among
others may raise substantial doubt about the Company's ability to continue as a
going concern.
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect our reported assets, liabilities,
revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our estimates and judgments on historical experience and on various
other assumptions we believe to be reasonable under the circumstances. Future
events, however, may differ markedly from our current expectations and
assumptions. While there are a number of significant accounting policies
affecting our consolidated financial statements, we believe the following
critical accounting policy involve the most complex, difficult and subjective
estimates and judgments.
STOCK-BASED COMPENSATION
In December 2002, the FASB issued SFAS No. 148 - Accounting for Stock-Based
Compensation - Transition and Disclosure. This statement amends SFAS No. 123 -
Accounting for Stock-Based Compensation, providing alternative methods of
voluntarily transitioning to the fair market value based method of accounting
for stock based employee compensation. FAS 148 also requires disclosure of the
method used to account for stock-based employee compensation and the effect of
the method in both the annual and interim financial statements. The provisions
of this statement related to transition methods are effective for fiscal years
ending after December 15, 2002, while provisions related to disclosure
requirements are effective in financial reports for interim periods beginning
after December 31, 2002.
We elected to continue to account for stock-based compensation plans using
the intrinsic value-based method of accounting prescribed by APB No. 25,
""Accounting for Stock Issued to Employees,"" and related interpretations. Under
the provisions of APB No. 25, compensation expense is measured at the grant date
for the difference between the fair value of the stock and the exercise price.
RECENT ACCOUNTING PRONOUNCEMENTS
In November 2004, the Financial Accounting Standards Board (FASB) issued
SFAS 151, Inventory Costs- an amendment of ARB No. 43, Chapter 4. This
Statement amends the guidance in ARB No. 43, Chapter 4, ""Inventory Pricing,""
to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43,
Chapter 4, previously stated that ""under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal as to require treatment as current period charges."" This
Statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of ""so abnormal."" In addition,
this Statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. This Statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not believe the
adoption of this Statement will have any immediate material impact on the
Company.
In December 2004, the FASB issued SFAS No.152, "Accounting for Real Estate
Time-Sharing Transactions-an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments made by Statement 152 This Statement amends FASB Statement
No. 66, Accounting for Sales of Real Estate, to reference the financial
accounting and reporting guidance for real estate time-sharing transactions that
is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real
Estate Time-Sharing Transactions. This Statement also amends FASB Statement No.
67, Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental operations and (b) costs incurred
to sell real estate projects does not apply to real estate time-sharing
transactions. The accounting for those operations and costs is subject to the
guidance in SOP 04-2. This Statement is effective for financial statements for
fiscal years beginning after June 15, 2005. with earlier application encouraged.
11
We do not anticipate that the implementation of this standard will have a
material impact on its financial position, results of operations or cash flows.
On December 16, 2004, the Financial Accounting Standards Board ("FASB")
published Statement of Financial Accounting Standards No. 123 (Revised 2004),
Share-Based Payment ("SFAS 123R"). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of SFAS
123R are effective as of the first interim period that begins after June 15,
2005. Accordingly, the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment transactions under the provisions of APB 25, which does not necessarily
require the recognition of compensation cost in the financial statements.
Management is assessing the implications of this revised standard, which may
materially impact the Company's results of operations in the third quarter of
fiscal year 2005 and thereafter.
On December 16, 2004, FASB issued Statement of Financial Accounting
Standards No. 153, Exchanges of Nonmonetary Assets, an amendment of APB Opinion
No. 29, Accounting for Nonmonetary Transactions (" SFAS 153"). This statement
amends APB Opinion 29 to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. Under SFAS 153, if
a nonmonetary exchange of similar productive assets meets a commercial-substance
criterion and fair value is determinable, the transaction must be accounted for
at fair value resulting in recognition of any gain or loss. SFAS 153 is
effective for nonmonetary transactions in fiscal periods that begin after June
15, 2005. We do not anticipate that the implementation of this standard will
have a material impact on its financial position, results of operations or cash
flows.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 3. CONTROLS AND PROCEDURES.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission''s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and communicated to our management, including our
principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
Evaluation of Disclosure and Controls and Procedures. As of the end of the
period covered by this Quarterly Report, we conducted an evaluation, under the
supervision and with the participation of our chief executive officer and chief
financial officer, of our disclosure controls and procedures (as defined in
Rules 13a-15(e) of the Exchange Act). Based on this evaluation, our chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.
Changes in Internal Controls Over Financial Reporting. There was no change
in our internal controls, which are included within disclosure controls and
procedures, during our most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
controls.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Effective January 31, 2005, our majority stockholder voted to:
- Ratify the November 22, 2004 amendment to our articles of incorporation to
change the par value of our common and preferred stock from $0.001 per
share to $0.00001 per share;
- Ratify the November 22, 2004 reverse split of our common stock on the basis
of one post-consolidation share for each one thousand pre-consolidation
shares;
- Approve an amendment to our articles of incorporation to increase the
authorized number of shares of our common stock from 1,980,000,000 to
5,000,000,000 shares;
- Approve an amendment to our articles of incorporation to increase the
authorized number of shares of our preferred stock from 200,000,000 to
1,000,000,000 shares;
- Grant discretionary authority to our board of directors to implement a
reverse split of our common stock on the basis of one post-consolidation
share for up to each 2,000 pre-consolidation shares to occur at some time
within 12 months of the date of this information statement, with the exact
time of the reverse split to be determined by the board of directors; and
- Approve the following Stock Plans of The Jackson Rivers Company (the
""Stock Plans""):
a) Employee Stock Incentive Plan for the Year 2004 No. 3, adopted by the
directors on August 9, 2004 with 150,000,000 shares available for issuance under
the Plan;
b) Non-Employee Directors and Consultants Retainer Stock Plan for the
Year 2004 No. 3, adopted by the directors on August 9, 2004, with 49,000,000
shares available for issuance under the Plan;
c) Employee Stock Incentive Plan for the Year 2004 No. 4, adopted by the
directors on September 8, 2004 with 400,000,000 shares available for issuance
under the Plan; and
d) Non-Employee Directors and Consultants Retainer Stock Plan for the
Year 2004 No. 4, adopted by the directors on September 8, 2004, with 99,000,000
shares available for issuance under the Plan
Dennis N. Lauzon, our president, chief executive officer and director, held
42,000,000 shares of our common stock and 960,000 shares of our Series A
preferred stock on the record date for the above-described actions. Each share
of our common stock is entitled to one vote on all matters brought before the
stockholders and each share of our Series A preferred stock outstanding entitles
the holder to 2,000 votes of the common stock on all matters brought before the
stockholders. Therefore, Mr. Lauzon had the power to vote 1,982,000,000 shares
of the common stock, which number
13
was sufficient to approve each of the corporate actions described above without
the concurrence of any of our other stockholders.
ITEM 5. OTHER INFORMATION.
The offices located at 27 Radio Circle, Mount Kisco, NY, were closed
effective April 30, 2005.
ITEM 6. EXHIBITS.
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -------------------------
3.1** Articles of Incorporation.
3.2** Articles of Amendment to Articles of Incorporation.
3.3** Articles of Amendment to Articles of Incorporation
3.4** Articles of Amendment to Articles of Incorporation
3.5** Certificate of Designation establishing our Series A Preferred Stock.
3.6** Certificate of Designation establishing our Series B Preferred Stock.
3.7** Amended and Restated Bylaws.
10.1** Consulting Services Agreement.
10.2** Technology License Agreement.
31.1* Certification of Dennis N. Lauzon, President, Chief Executive Officer, Chief Financial Officer
and Director of The Jackson Rivers Company, pursuant to 18 U.S.C. Sec.Sec.1350, as adopted
pursuant to Sec.Sec.302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of Dennis N. Lauzon, President, Chief Executive Officer, Chief Financial Officer
and Director of The Jackson Rivers Company, pursuant to 18 U.S.C. Sec.Sec.1350, as adopted
pursuant to Sec.Sec.906 of the Sarbanes-Oxley Act of 2002.
__________
* Filed herewith.
** Previously Filed
14
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The Jackson Rivers Company
Dated May 23, 2005.
By /s/ Dennis N. Lauzon
---------------------
Dennis N. Lauzon, President, Chief Executive Officer,
Chief Financial Officer and Director
15