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 September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
Commission File No. 033-02441-D
Draco Holding Corporation
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(Name of Small Business Issuer in its Charter)
NEVADA 87-0638750
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(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
c/o Jump n' Jax, Inc.
511 East St. George Boulevard, Suite No. 3
St. George, Utah 84770
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(Address of Principal Executive offices)
Issuer's Telephone Number: (801) 209-0545
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 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.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date:
As of October 22, 2003 Draco Holding Corporation had 8,934,751 shares of its
$0.001 par value common stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Draco Holding Corporation, a
Nevada corporation, as of September 30, 2003 and the related audited
consolidated balance sheet as of December 31, 2002, the unaudited related
consolidated statements of operations for the three and nine month periods
ended September 30, 2003 and September 30, 2002, the unaudited related
consolidated statements of cash flows for the nine month periods ended
September 30, 2003 and September 30, 2002, and the notes to the financial
statements are attached hereto as Appendix "A" and incorporated herein by
reference.
The accompanying financial statements reflect all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of Draco consolidated with Jump'n Jax, Inc., its wholly owned
subsidiary. The names "Draco", "we", "our" and "us" used in this report refer
to Draco Holding Corporation.
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations. During the three months ended September 30, 2003,
Draco experienced a net loss of $4,293, or approximately ($0.00) per share,
which is $4,783 less than the $9,076 net loss, or approximately ($0.00) per
share, incurred for the three months ended
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September 30, 2002. For the nine months ended September 30, 2003, Draco
incurred a net loss of $20,006, or approximately ($0.00) per share, which is
$5,001 less than the $25,007 net loss, or approximately ($0.01) per share,
incurred during the nine months ended September 30, 2002. For the three months
ended September 30, 2003, Draco reported revenues of $1,815 which is $3,650
less than the revenues of $5,465 reported for the three months ended September
30, 2002. Draco's revenues are comprised entirely of income from the Jump'n
Jax, Inc. subsidiary business of equipment rental and leasing of inflatable
bounce houses for parties and entertainment. Revenues for the nine month
period ended September 30, 2003 were $7,906 which is $5,202 less than the
$13,108 of revenues reported for the nine month period ended September 30,
2002. The decrease in revenues is attributed to a decrease in business during
the later periods, which management believes is partially due to the fact that
the President of Jump'n Jax, Inc. had to seek full time employment elsewhere
and has had less time available to devote to Draco's business, and also due to
the unusually hot temperatures Southern Utah has experienced this year and
fewer rentals as a result of the unusually hot temperatures. Draco has been
engaged in active business operations through its wholly owned subsidiary,
Jump'n Jax, Inc., since approximately March 2000.
Expenses for the three months ended September 30, 2003 were $5,858, or
$8,167 less than the expenses of $14,025 incurred during the three month
period ended September 30, 2002. Expenses for the nine months ended September
30, 2003 were $27,204 or $8,395 less than the expenses of $35,599 incurred
during the nine month period ended September 30, 2002. All of the expenses
incurred during the three and nine month periods ended September 30, 2003 and
September 30, 2002 were from depreciation and general and administrative
expenses. The decrease in expenses for the three and nine month periods ended
September 30, 2003 are primarily due to a decrease in wages or payments to
independent contractors working in Draco's bounce house rental business.
Approximately one-half of the expenses incurred during the three and nine
month periods ended September 30, 2003, were primarily associated with legal
and accounting expenses. The remaining expenses were primarily related to
expenses of a recurring nature such as salaries, advertising, and other
general and administrative expenses.
Increased competition has had, and may continue to have, an adverse
affect on Draco's results of operations. It may affect Draco's ability to
increase and/or retain existing business. Increased competition could result
in price cutting and lower revenues. In order to compete effectively, Draco
may have to spend more funds on advertising or Draco may have to lower prices
or offer incentives such as free party supplies. All of this may adversely
affect Draco's results of operations.
Draco's business is seasonal. The St. George, Utah area has mild
winters, and Draco is able to engage in its business throughout the year.
Although summers bring very hot weather to the St. George, Utah area, Draco
experienced its largest sales revenues during summer months prior to 2003.
Draco attributes this historical increase in business during summer months to
an increase in children's entertainment while children are out of school. Many
summer rentals occur in the mornings and evenings.
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Due to continuing losses in Draco's business, management is evaluating
the possibility of terminating its business of equipment rental and leasing
inflatable bounce houses for parties and entertainment. Management is
evaluating other possible alternatives, although no commitments presently
exist to change the focus of Draco's business.
Balance Sheet Information
-------------------------
Assets
As of September 30, 2003, Draco reported total assets of $13,794 down
$4,727 from the $18,521 reported as of December 31, 2002. Current assets of
September 30, 2003 were $4,118, down $2,157 from the $6,275 reported as of
December 31, 2002. The change in total assets and current assets reflects
primarily the net loss generated by Draco during the nine months ended
September 30, 2003 partially offset by a $5,000 increase in loans made to
Draco by Draco's President and/or Secretary/Treasurer. Equipment (net) has
decreased from $12,246 at December 31, 2002 to $9,676 at September 30, 2003,
which reflects the $2,570 in accumulated depreciation during the period.
Liabilities
Draco's liabilities as of September 30, 2003 consist of $10,000 on notes
payable to Draco's President and/or Secretary/Treasurer, accrued interest on
related party loans of $708, and accounts payable of $4,265. The loans accrue
interest at 10% per annum and are due upon demand. The loans are unsecured.
Total liabilities of Draco increased $6,319 from $8,654 as of December
31, 2002, to $14,973 as of September 30, 2003. The increase in total
liabilities reflects a $5,000 increase in the amount of the loans made by
Draco's President and/or Secretary/Treasurer to the Company together with an
increase of $708 in accrued interest, partially offset by an increase of $611
in accounts payable from the amount owed as of December 31, 2002.
Liquidity and Capital Resources - September 30, 2003
----------------------------------------------------
Draco has not yet established revenues sufficient to cover its operating
costs and allow it to continue as a going concern. Management's goal is to
increase operations and revenues through its wholly-owned subsidiary. Draco
has a significant working capital deficit, and Draco has continued to generate
losses. Draco believes that its liquid resources are adequate to maintain
operations through internally generated cash flows for a period of
approximately six months. Draco may seek such additional capital either
through loans from its officers and directors, or through possible equity or
debt financing. Two of Draco's officers and directors, Lane Clissold and
Steve Moulton, have verbally committed to meet operating expenses for at least
the next six months. However, Draco has not identified any specific source of
long term
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liquidity. No assurance can be given that Draco's resources will be adequate
to take advantage of opportunities to expand the business as they arise, or
that any such expansion opportunities will materialize.
Item 3. Controls and Procedures.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.
In addition, there has been no change in our internal control over
financial reporting during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REPORT
REFLECT MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Changes in Securities.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
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Item 5. Other Information.
None; not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description
-------- -----------
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by Draco during the
quarter ended September 30, 2003.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
DRACO HOLDING CORPORATION
Date: October 24, 2003 By: /s/ Lane S. Clissold
-----------------------------------
Lane S. Clissold
Director, President and Chief
Executive Officer
Date: October 24, 2003 By: /s/ Steven D. Moulton
-----------------------------------
Steven D. Moulton
Director, Secretary/Treasurer and
Chief Financial Officer
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APPENDIX "A"
FINANCIAL STATEMENTS
DRACO HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003 and December 31, 2002
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DRACO HOLDING CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2003 2002
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(Unaudited)
CURRENT ASSETS
Cash $ 4,118 $ 6,275
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Total Current Assets 4,118 6,275
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EQUIPMENT
Equipment (net) 9,676 12,246
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Total Equipment 9,676 12,246
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TOTAL ASSETS $ 13,794 $ 18,521
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 4,265 $ 3,654
Note payable - related party 10,000 5,000
Accrued interest - related party 708 -
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Total Liabilities 14,973 8,654
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STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value; 500,000,000
shares authorized; 8,934,750 and 8,534,750
shares issued and outstanding, respectively 8,935 8,535
Additional paid-in capital 209,746 201,186
Accumulated deficit (219,860) (199,854)
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Total Stockholders' Equity (Deficit) (1,179) 9,867
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
EQUITY (DEFICIT) $ 13,794 $ 18,521
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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DRACO HOLDING CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
2003 2002 2003 2002
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REVENUES $ 1,815 $ 5,465 $ 7,906 $ 13,108
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EXPENSES
Depreciation 856 856 2,570 2,570
General and administrative 5,002 13,169 24,634 33,029
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Total Expenses 5,858 14,025 27,204 35,599
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LOSS FROM OPERATIONS (4,043) (8,560) (19,298) (22,491)
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OTHER INCOME (EXPENSE)
Interest expense (250) (1,000) (708) (3,000)
Interest income - 484 - 484
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Total Other Income (Expense) (250) (516) (708) (2,516)
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NET LOSS $ (4,293) $ (9,076) $ (20,006) $ (25,007)
============= ============= ============= ==============
BASIC LOSS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.01)
============= ============= ============= ==============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,934,750 2,034,750 8,698,853 2,034,750
============= ============= ============= ==============
The accompanying notes are an integral part of these
consolidated financial statements.
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10
DRACO HOLDING CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
----------------------------
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (20,006) $ (25,007)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 2,570 2,570
Contributed rent 2,250 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts payable 7,321 2,093
Increase in accrued interest 708 1,314
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Net Cash Used by Operating Activities (7,157) (19,030)
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CASH FLOWS FROM INVESTING ACTIVITIES - -
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CASH FLOWS FROM FINANCING ACTIVITIES
Increase note payable - related party 5,000 10,000
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Net Cash Provided by Financing Activities 5,000 10,000
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NET DECREASE IN CASH (2,157) (9,030)
CASH AT BEGINNING OF PERIOD 6,275 13,136
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CASH AT END OF PERIOD $ 4,118 $ 4,106
============= ==============
Cash paid for:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Common stock issued in lieu of debt $ 6,710 $ -
The accompanying notes are an integral part of these
consolidated financial statements.
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DRACO HOLDING CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
September 30, 2003 and December 31, 2002
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim consolidated financial statements
include normal recurring adjustments and reflects all adjustments, which, in
the opinion of management, are necessary for a fair presentation of such
financial statements. Although management believes the disclosures and
information presented are adequate to make the information not misleading, it
is suggested that these interim consolidated financial statements be read in
conjunction with the Company's most recent audited financial statements and
notes thereto included in its December 31, 2002 Annual Report on Form 10-KSB.
Operating results for the nine months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using accounting principles
generally accepted in the United Stated of America applicable to a going
concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the Company
to continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company
is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, develop a reliable source of
revenues, and achieve a profitable level of operations the Company will need,
among other things, additional capital resources. Management's plans to
continue as a going concern include raising additional capital through sales
of common stock and continuing to develop and market its "bounce-house"
business. However, management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon
its ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain
profitable operations. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable to continue
as a going concern.
NOTE 3 - SIGNIFICANT EVENTS
In June 2003, the Company issued 400,000 shares of its free-trading common
stock to its attorney as compensation for services rendered. The shares were
valued at $0.0167 per share.
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