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Registration No. 33-__
As filed with the Securities and Exchange Commission on April ___, 2001
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FanZ Enterprises, Inc.
(Name of Small Business Issuer in Its Charter)
Delaware 711212 35-2123462
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
FanZ Enterprises, Inc.
3020-I Prosperity Church Road
Suite 293
Charlotte, North Carolina 28269-7197
(317) 815-1128
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(Address and Telephone Number of Principal Executive Offices)
FanZ Enterprises, Inc.
3020-I Prosperity Church Road
Suite 293
Charlotte, North Carolina 28269-7197
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(Address of Principal Place of Business or Intended Principal Place of
Business)
FanZ Enterprises, Inc. With a Copy to: Benesch, Friedlander, Coplan &
3020-I Prosperity Church Road Aronoff LLP
Suite 293 2300 BP Tower
Charlotte, North Carolina 28269-7197 200 Public Square
(317) 815-1128 Cleveland, Ohio 44114-2378
Attn: J. Roe Hitchcock (216) 363-4500
Attn: Leslie A. Drockton, Esq.
and
James M. Hill, Esq.
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(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] ____________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]________________________________
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
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Title Of Each Class Of Dollar Amount To Be Proposed Maximum Proposed Maximum Amount Of
Securities To Be Registered Offering Price Per Unit Aggregate Offering Registration Fee
Registered Price
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Common Stock $25,000,000.00 $10.00 $25,000,000.00 $6,250.00
$.01 par value
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The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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Preliminary Prospectus dated April __, 2001
FanZ Enterprises, Inc.
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Up to 2,500,000 shares of Common Stock
$.01 par value per share
We are a start-up Delaware corporation organized for the purpose of controlling
and managing (i) a multi-car National Association of Stock Car Racing ("NASCAR")
motorsports operation that will participate in NASCAR sanctioned events, and
(ii) a related merchandising operation.
This is an initial public offering of up to 2,500,000 shares of our common stock
at a price of $10.00 per share.
We will be selling a minimum of 1,000,000 of our shares and a maximum of
2,500,000 of our shares in a direct participation offering. The shares will be
sold by our officers and directors or, where required by state law, through
licensed broker-dealers. Until we have sold at least 1,000,000 shares, we will
not accept subscriptions for any shares. Each subscriber must purchase a minimum
of twenty-five (25) shares at an aggregate purchase price of $250.00. All
proceeds of this offering will be deposited in an interest-bearing escrow
account with Firstar Bank, N.A. We intend to break escrow once subscriptions for
the minimum number of our shares (1,000,000) are received and accepted and will
continue to sell our shares until all shares offered are sold or nine months
from the date of this Prospectus. If we are unable to sell at least 1,000,000
shares before this offering ends, we will return all funds, with interest, to
subscribers promptly after the termination of this offering. We may decide to
cease selling efforts prior to such date if we determine that it is no longer
beneficial to continue this offering.
Minimum Maximum
Per Share Total Total
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Public Price $10.00 $10,000,000.00 $25,000,000.00
Discounts/Commissions (1)(2) $.06 $60,000.00 $150,000.00
Proceeds to FanZ Enterprises, $9.94 $9,940,000.00 $24,850,000.00
Inc.
(1) We have decided not to use an underwriter for the distribution; however, in
some states, we may be required, under state law, to sell our shares through
licensed broker-dealers and have estimated the discounts and commissions we
might be required to pay. See "Plan of Distribution" beginning on page 44.
(2) The commissions shown do not include legal, accounting, printing, escrow
fees, and related costs incurred in connection with this offering, which will be
payable by us. These expenses are estimated at $747,060.
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This is a best efforts offering. This offering is made on a continuous basis
until the maximum number of shares are sold or nine months after the date of
this Prospectus unless we terminate this offering at an earlier date.
This is an initial public offering and prior to this there has been no public
market for the securities of FanZ Enterprises, Inc., nor can assurance be given
that a market will develop.
Proposed Trading Symbol on the Pink Sheets: ("FANZ"). There is no assurance that
this trading symbol will be assigned to our shares.
INVESTING IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK AND
SHARES OF OUR COMMON STOCK ARE HIGHLY SPECULATIVE. SEE "RISK FACTORS," BEGINNING
ON PAGE 3, TO READ ABOUT RISKS YOU SHOULD CAREFULLY CONSIDER BEFORE PURCHASING
OUR SHARES OF COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS SUBJECT TO COMPLETION AND/OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
THESE SECURITIES. THERE CANNOT BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
The date of this Prospectus is April __, 2001
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FanZ Enterprises, Inc.
Offering of up to 2,500,000 Shares of Common Stock
PROSPECTUS
April __, 2001
TABLE OF CONTENTS
Page
Summary......................................................................1
Risk Factors.................................................................3
Forward Looking Statements...................................................12
Use of Proceeds..............................................................13
Determination of Offering Price..............................................14
Dilution.....................................................................14
Capitalization...............................................................16
Description of Business......................................................17
Plan of Operation............................................................34
Description of Property......................................................37
Directors, Executive Officers, Promoters and Control Persons.................38
Security Ownership of Certain Beneficial Owners and Management...............41
Executive Compensation.......................................................42
Summary Compensation Table...................................................43
Plan of Distribution.........................................................43
Legal Proceedings............................................................47
Description of Securities....................................................47
Certain Relationships and Related Transactions...............................50
Market for Common Equity and Related Stockholder Matters.....................51
Legal Matters................................................................51
Experts......................................................................51
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities..........................................................51
Financial Statements.........................................................F-I
FanZ Enterprises, Inc. intends to become a reporting company and will file all
reports and other information as required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), with the Securities and Exchange
Commission ("SEC"). The public may read and copy, at certain prescribed rates,
such material at the Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20439. The SEC maintains a web site, which you can access at
http:www.sec.gov, that contains reports, proxy, other information statements and
other information regarding all issuers that file electronically. We anticipate
that our common stock
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will be traded through the Pink Sheets, a quotation service that collects and
redistributes market maker quotes in OTC (over-the-counter) securities.
We have a fiscal year that ends December 31 and we intend to furnish our
stockholders with annual reports containing audited financial information and,
for the first three quarters of each year, quarterly reports containing
unaudited financial information. Also, we will provide, at no cost to each
person who has received a Prospectus, a copy of any information that is
incorporated herein by reference. To request such information, call (317)
815-1128 or e-mail J. Roe Hitchcock at jroe@fanzenterprises.com or write to:
FanZ Enterprises, Inc.
5419 Cayman Drive
Suite 100
Carmel, IN 46033
Attn: J. Roe Hitchcock, Chief Executive Officer
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DEALER PROSPECTUS DELIVERY OBLIGATION
Until _____, 2001 (____ days after the commencement of this Offering),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the dealer's obligation to deliver a prospectus when acting as an
underwriter and with respect to unsold allotments or subscriptions.
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SUMMARY
The following summary highlights certain information found in more detail
elsewhere in this Prospectus. Before you decide to buy our common stock, in
addition to the following summary, you are urged to read the entire Prospectus
carefully, especially the risks of investing in our common stock as discussed
under "Risk Factors." (See "Risk Factors" beginning on page 3.)
SUMMARY, ADDRESS AND PHONE NUMBER
FanZ Enterprises, Inc. is a Delaware corporation formed on October 20, 2000. Our
sole stockholder is Jackson Roscoe Motorsports, LLC a Delaware limited liability
company formed on October 20, 2000. Our executive offices are located at 3020-I
Prosperity Church Road, Suite 293, Charlotte, North Carolina 28269-7197 and our
telephone number is (317) 815-1128. Our registered statutory office is located
at 1209 Orange Street, Wilmington, Delaware 19801.
We were formed for the purpose of controlling and managing a multi-car NASCAR
motorsports operation that will participate in NASCAR sanctioned events. It is
contemplated that we will initially enter a NASCAR series with a minimum of two
full-time race teams that will compete in NASCAR sanctioned races and may
originate up to a total of five teams. We will conduct our operations through
two wholly-owned subsidiaries: FanZ Racing, Inc. and FanZ Merchandising, Inc.;
both are Delaware corporations formed to own and manage our racing and
merchandising operations, respectively.
Currently Jackson Roscoe Motorsports, LLC owns all of the issued and outstanding
shares of our common stock. However, prior to the closing of this offering, we
will effect a 100,000 for 1 stock split and have granted an option to purchase
500,000 shares of our common stock at a price of $3.00 per share to Michael J.
Wurtsbaugh, our proposed Chief Financial Officer. If we issue the minimum number
of shares of our common stock (1,000,000) in this offering, and assuming the
full exercise of the options granted to Michael J. Wurtsbaugh, Jackson Roscoe
Motorsports, LLC would own approximately 86.95%, Michael J. Wurtsbaugh would own
approximately 4.35% and the public stockholders would own approximately 8.70%.
If we issue the maximum number of shares of our common stock (2,500,000) in this
offering, and assuming the full exercise of the options granted to Michael J.
Wurtsbaugh, Jackson Roscoe Motorsports, LLC would own approximately 76.92%,
Michael J. Wurtsbaugh would own approximately 3.85% and the public stockholders
would own approximately 19.23%. Additionally, we intend to reserve shares of our
common stock representing 10% of the issued and outstanding shares of our common
stock, after giving effect to this offering, to be issued in connection with the
exercise of stock options to be issued to our officers, directors, employees and
consultants under our stock option plans. (See "Description of Securities"
beginning on page 48.) Any issuance of shares of our common stock upon the
exercise of stock options will dilute all stockholders on a pro rata basis.
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THE OFFERING
Securities offered: A minimum of 1,000,000 shares of our common
stock and a maximum of 2,500,000 shares of our
common stock. (See "Description of Securities"
beginning on page 47.)
Authorized Capital
Stock: 20,000,000 shares of common stock, $.01 par
value per share, and 10,000 shares of preferred
stock, $.01 par value per share. All of the
preferred shares are issued and outstanding and
are owned by Jackson Roscoe Motorsports, LLC.
Common Stock
Outstanding Before
the Offering: 10,000,000 shares.
Common Stock
Outstanding After
the Offering: 11,000,000 shares (assuming the minimum offering
of 1,000,000 of our shares are sold) or
12,500,000 shares (assuming the maximum offering
of 2,500,000 of our shares are sold). We have
granted an option to purchase 500,000 shares of
our common stock to Michael J. Wurtsbaugh and
intend to reserve an amount equal to 10% of our
issued and outstanding shares after giving
effect to this offering to be issued under stock
option plans for the benefit of our officers and
directors.
Use of Proceeds: We plan to use the net proceeds of this offering
to originate up to five race teams that will
compete in NASCAR sanctioned races and to
establish our merchandising operations. The
proceeds will be used as follows: acquiring
assets, marketing and advertising, establishing
an office and a multi-car facility, hiring
personnel and consultants, paying organizational
expenses, obtaining working capital and other
general corporate purposes.
Trading Symbol: Proposed Pink Sheet trading symbol for the
common stock is "FANZ". There is no assurance
that this trading symbol will be assigned to our
shares.
Risk Factors: The shares of our common stock being offered are
speculative and involve a high degree of risk
and should not be purchased by investors who
cannot afford the complete loss of their entire
investment. (See "Risk Factors" beginning on
page 3.)
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RISK FACTORS
You should carefully consider the possibility that your entire investment may be
lost. As such, you are encouraged to evaluate the following risk factors and all
other information contained in this Prospectus before purchasing our common
stock. Our common stock involves a high degree of risk. Any of the following
risks could adversely affect our business, financial condition and results of
operations, and could result in complete loss of your investment.
FanZ Enterprises, Inc. Has No Operating History And Financial Results Are
Uncertain
We were only recently organized, have no operating history and must be
considered in the development stage. We have no history of earnings or profits
and there is no assurance that we will operate profitably in the future. There
is no meaningful historical financial data upon which to base planned operating
expenses. As a result of this limited operating history, it is difficult to
accurately forecast our potential revenue. Our business model contemplates that
we will develop a racing operation that is designed to run on a break-even basis
and a merchandising operation that will be our primary source of profits. Our
success is dependent on our ability to develop both of these operations. We have
not entered into any contractual arrangements with any sponsors, drivers, crew
chiefs, suppliers, distributors or manufacturers and intend to pursue these
arrangements upon successful completion of this offering.
At this time we have no racing or merchandising operations and intend to use the
proceeds of this offering to first develop the racing business and then the
merchandising business. It is our intention to use a portion of the proceeds to
acquire assets necessary to run the racing operations as well as hire crew
chiefs, drivers and other personnel. We have and will continue to enter into
consulting arrangements with experienced NASCAR personnel to assist in
assembling our racing operations. We have identified several potential
candidates with NASCAR experience to manage our racing operations. We are in
preliminary negotiations with potential management candidates and it is our
intention to enter into employment agreement(s) with individual(s) that will be
contingent upon the successful completion of this offering. We have not
purchased any of the assets necessary to operate either the racing or
merchandising operations and we have not had any significant discussions with
any potential drivers, crew chiefs or other personnel and intend to start these
discussions upon completion of this offering.
As we have indicated, our business model contemplates that we will develop a
racing operation that is designed to run on a break-even basis. One of the keys
to implementing this is our ability to attract sponsors for our teams. While we
believe that we will be able to attract sponsors, we have not had any
discussions with potential sponsors.
Relationship With NASCAR
To be successful, we need to create and maintain a good working relationship
with the sanctioning body of our racing events, particularly NASCAR. Our cars
will need to qualify for each NASCAR event entered. Additionally, our
merchandising operations will need to enter into license agreements with NASCAR.
While we believe we can create a good working relationship
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with NASCAR and enter into licensing agreements, we have not had any significant
discussions with NASCAR management and may not be able to establish such a
relationship or enter into licensing agreements on terms acceptable to us.
Competition
Racing events that our teams will enter compete not only with other sports and
recreational events scheduled on the same dates, but also with other racing
events sanctioned by various racing bodies such as Championship Auto Racing
Teams, Inc. ("CART"), the United States Auto Club ("USAC"), the Indy Racing
League (the "IRL"), the National Hot Rod Association ("NHRA"), Sports Car Club
of America ("SCCA"), the International Motor Sports Association ("IMSA"), the
Automobile Racing Club of America ("ARCA"), Formula 1, American Sportscar
Association ("ASA") and others. Racing events sanctioned by different
organizations often are held on the same dates, at different tracks, in
competition with the NASCAR events.
In addition to competing with other racing events, we will be competing for
entertainment and advertising dollars with other sports such as football,
baseball, basketball, hockey, tennis and golf and with other entertainment and
recreational activities. While NASCAR has been one of the fastest growing sports
in the country in recent years, there can be no assurance that such growth rates
will be maintained. In the event that fan interest levels off or declines,
NASCAR would not be as attractive to the television industry or sponsors, which
could have an adverse impact on our operations.
Our success will also depend upon the success of our individual teams. There can
be no assurance that our teams will be competitive or qualify for each, or any,
NASCAR sanctioned event entered. If we are not as successful competitively, we
will have a more difficult time attracting sponsors and quality drivers and
crews. We will compete with well-established teams and there can be no assurance
that we will be able to create or maintain a competitive position.
The motorsports collectible and consumer products markets are extremely
competitive. We will compete with major domestic and international companies,
some of which have greater market recognition and substantially greater
financial, technical, marketing, distribution, and other resources than we will
possess. Since there are no significant barriers to entry into the collectible
and consumer products industries, emerging companies may increase their
participation in these motorsports markets. Our ability to compete successfully
depends on a number of factors both within and outside our control, including:
the success of our teams; the quality, features, pricing, and diversity of our
products; the quality of our customer services; our ability to recognize
industry trends and anticipate shifts in consumer demands; our success in
designing and marketing new products; the availability of adequate sources of
manufacturing capacity and the ability of our third-party manufacturers to meet
delivery schedules; our efficiency in filling customer orders; the continued
popularity of the motorsports personalities with whom we have licensing
arrangements; our ability to renew existing licensing arrangements and enter
into new licensing arrangements; our ability to develop and maintain effective
marketing programs that enable us to sell our products to motorsports
enthusiasts; product introductions by our competitors; the number, nature, and
success of our competitors in a given market; and general
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market and economic conditions. Our promotional programs must compete for
limited advertising dollars against other specialty advertising programs and
media such as television, radio, newspapers, magazines, and billboards. We will
compete principally on the basis of the current popularity of motorsports, the
appeal of our teams, the appeal of our products, and the cost, design and
delivery schedules of our products. There can be no assurance that once we are
operational we will be able to compete successfully.
Dependence On Key Personnel
Our success depends upon the availability and performance of our officers and
senior management and other key personnel. Since our inception we have relied
heavily upon the expertise and energies of a relatively small core of
executives, none of whom have had any experience in running a public company.
These executives must properly develop and operate the business for us to be
successful. We currently have an employment agreement with Michael J.
Wurtsbaugh, our proposed Chief Financial Officer and Secretary, which will take
effect upon completion of this offering, and are in negotiations with candidates
to manage FanZ Racing, Inc. and FanZ Merchandising, Inc. . We have entered into
a consulting agreement with Michael J. Wurtsbaugh pursuant to which he will
provide us with his consulting services until his employment agreement is
effective, and have entered into consulting arrangements with other individuals
to assist us with the planning and implementation of both our racing and
merchandising operations. In the interim, we have entered into and will continue
to pursue consulting arrangements with experienced NASCAR personnel who can
assist us in assembling our racing operations. Upon completion of this offering,
we intend to hire additional personnel, which will include someone with prior
experience in a public company to serve as our director of finance. The loss of
the services of one or more of our key personnel could have a material adverse
effect on our operations. Although we intend to hire additional personnel upon
completion of this offering, there can be no assurance that we will be able to
attract and retain experienced personnel on acceptable terms.
Liability For Personal Injuries
Racing events can be dangerous to participants and to spectators. We will
maintain insurance policies that provide coverage within limits that in our
judgment are sufficient to protect us from material financial loss due to
liability for personal injuries sustained by, or death of, our personnel or
spectators in the ordinary course of our business. Our insurance may not be
adequate or available at all times and in all circumstances. Our financial
condition, results of operations and cash flows would be adversely affected to
the extent claims and associated expenses exceed insurance recoveries.
Industry Sponsorships And Government Regulations
The motorsports industry generates significant revenue each year from the
promotion, sponsorship and advertising of various companies and their products.
We intend to contract with certain companies, however government regulation
could adversely impact the availability of this promotion, sponsorship and
advertising revenue. Advertising by the tobacco and liquor industries
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is generally subject to greater governmental regulation than advertising by
other sponsors. As a result of the recent settlement of litigation with various
states, the tobacco industry is significantly limited in its ability to sponsor
and advertise at sporting events. These restrictions could make it more
difficult for us to obtain promotion, sponsorship and advertising revenue from
companies in that industry.
Certain Factors That Could Adversely Affect Operating Results
A wide variety of factors could adversely impact our net sales and operating
results. These factors, many of which are beyond our control, include: the
success of our racing teams; our ability to attract and retain sponsors for our
teams; our ability to identify trends in the motorsports collectibles and
consumer markets and to introduce products which take advantage of those trends;
our ability to attract and retain popular motorsports personalities, including
the success of our own teams, and to enter into and maintain mutually
satisfactory licensing arrangements with them; our ability to design and arrange
for timely production and delivery of our products; market acceptance of our
products; the level and timing of orders placed by customers; seasonality; the
popularity and life cycles of and customer satisfaction with products designed
and marketed by us; the timing of expenditures in anticipation of orders; the
cyclical nature of the markets to be served by us; competition and competitive
pressures on prices; and general economic conditions.
Our ability to establish our sales and marketing efforts to stimulate customer
demand and our ability to monitor third-party manufacturing arrangements in
order to maintain satisfactory delivery schedules are important factors in our
long-term prospects. A slowdown in demand for our products as a result of
changing consumer tastes and spending patterns, lack of success of our teams,
the loss of, or inability to, attract sponsors for our teams, economic
conditions, or other broad-based factors could adversely affect our operating
results.
Recent restrictions on tobacco industry advertisements and any future
legislation to limit or prohibit advertisements of tobacco and alcohol products
at sporting events, including racing events, could ultimately reduce the
popularity of motorsports as a result of the significant amount of advertising
and promotional support of racing events, drivers, and car owners currently
provided by tobacco and alcohol companies. Any resulting reduction in the
current popularity of motorsports could have an adverse effect on us.
Dependence On License Arrangements
We will market our collectible and consumer products pursuant to licensing
arrangements with race car drivers, crew chiefs, car owners, race car sponsors,
and automobile manufacturers, including our own. We will also need to enter into
a licensing arrangement with NASCAR to enable us to use the NASCAR logo. These
licensing arrangements are typically limited in scope and duration and typically
authorize the sale of specified licensed products for a short period of time.
The success of any of our licensing arrangements depends on many factors,
including the reasonableness of license fees in relationship to revenue
generated by sales of licensed products, the continued popularity and
availability of licensees. The termination, cancellation, or inability
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to enter into or renew any licensing arrangements would have a material adverse
effect on us. While we believe that we will be able to enter into licensing
arrangements, we currently have none and we may not be able to enter into any
licensing agreements on terms acceptable to us. If we are unable to enter into
these licensing arrangements we would not be able to fully develop our
merchandising operations, which would have an adverse impact on our operations.
Rapid Market Changes
The markets for our products will be subject to rapidly changing customer
tastes, a high level of seasonality and competition, and a constant need to
create and market new products. Demand for motorsports collectible and consumer
products is influenced by the popularity of certain teams, cultural and
demographic trends, marketing and advertising expenditures, and general economic
conditions. Because these factors can change rapidly, customer demand also can
shift quickly. In many cases, new motorsports collectible and consumer products
can be successfully marketed for only a limited time. We may not always be able
to respond to changes in customer taste and demand because of the amount of time
and financial resources that may be required to bring new products to market. An
inability to respond quickly to market changes would have an adverse impact on
our operations.
Fluctuations In Sales
The second and third calendar quarters of each year generally have higher sales
of motorsports products due to the introduction of new race car models for the
racing season beginning in February. Seasonal fluctuations in quarterly sales
may require us to take temporary measures, including increased personnel,
borrowings and other operational changes, and result in unfavorable quarterly
earnings comparisons.
Dependence On Third Parties For Manufacturing
We will have third parties manufacture our motorsports collectibles and consumer
products. As a result, any difficulties encountered by the third-party
manufacturers that result in product defects, production delays, cost overruns,
or the inability to fulfill orders on a timely basis, could have a material
adverse effect on our operations.
We do not currently have any contracts with third-party manufacturers. Although
we believe that we will be able to secure acceptable arrangements with such
third-party manufacturers, our operations would be adversely affected if we
could not establish relationships with suppliers. We do not currently have an
inventory of merchandise and will not until this offering is completed and we
develop our merchandising operations.
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Dependence On New Products
Our operating results will depend to a significant extent on our ability to
develop and introduce new products on a timely basis which compete effectively
on the basis of price and which address customer requirements. The success of
new product introductions depends on various factors, including the success of
our teams, the popularity of drivers and crews we represent, new product
selection, successful sales and marketing efforts, timely and quality production
and delivery of new products and consumer acceptance of new products. There can
be no assurance that any new products will receive or maintain substantial
market acceptance. If we are unable to design, develop and introduce competitive
products on a timely basis, our operating results would be adversely affected.
Risks Related To The Business Of FanZ Enterprises, Inc.
In general, in order for us to succeed in today's competitive market, we must be
able to attract sources of revenue. A NASCAR racing operation relies principally
on three separate, but related, revenue sources for the funding of racing
activities, which include, sponsorship monies, race purse winnings and special
race bonus opportunities. There is no guarantee that we will be able to attract
or obtain any or all of these sources of revenue.
Our Success Will Depend Upon Our Ability To Attract Sponsors
Our ability to attract sponsors to defray the costs of operating the racing
operations is a significant factor to our success. Our racing operations will
not generate any significant profits, and therefore sponsor funds are key to
covering the operating costs of this piece of our business. Our business model
is based on the assumption that in order to be competitive, we will reinvest any
income generated by our racing operations, and merchandising operations will be
our main source of profits. Therefore, key to our business model is our ability
to attract sponsorship funds to allow our racing operations to run on a
break-even basis. The market for sponsorship money is very competitive as we
will compete with other NASCAR teams, and even other professional sports, for
sponsorship money. We have not entered into any sponsorship agreements and may
not be able to attract any sponsors to fund our teams.
We Will Have Broad Discretion In The Use Of The Net Proceeds From This Offering,
And We Might Use Them Ineffectively
We will have broad discretion over how we use the net offering proceeds, and we
could spend the proceeds in ways with which you might not agree. We cannot
assure you that we will use these proceeds effectively. We plan to use the
proceeds from this offering for:
- - creating up to five race teams to compete in NASCAR sanctioned races and
establishing our merchandising operations,
- - establishing our marketing services organization,
- - organizational expenses,
- - marketing and advertising,
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- - office and motorsport facilities,
- - personnel and consultants, and
- - working capital and general corporate purposes.
Our Existing Stockholder Will Be Able To Exercise Control of Our Common Stock
And May Make Decisions That Are Not In The Best Interest Of All Stockholders
At the completion of this offering, Jackson Roscoe Motorsports, LLC will own
approximately 86.95% of our issued and outstanding shares of common stock
(assuming the minimum offering of 1,000,000 of our shares and the full exercise
of the options granted to Michael J. Wurtsbaugh) or approximately 76.92%
(assuming the maximum offering of 2,500,000 of our shares and the full exercise
of the options granted to Michael J. Wurtsbaugh) and 100% of our issued and
outstanding shares of preferred stock. Accordingly, Jackson Roscoe Motorsports,
LLC, which is controlled by J. Roe Hitchcock and Frederick L. McDonald II, will
be able to control the election of directors and all other matters subject to
stockholder votes. This concentration of ownership may have the effect of
delaying or preventing a change in control of FanZ Enterprises, Inc., even if
this change in control would benefit stockholders.
We Might Only Sell The Minimum Number Of Shares Or Less Than The Minimum Number
Of Shares
We can have a closing and accept subscriptions for the sale of shares to
investors if at least 1,000,000 shares have been sold, which is the minimum
number of shares that may be sold in this offering. In the event such minimum
amount, or any amount which is significantly less than the maximum amount of
2,500,000 shares offered in this offering are sold, we may not be able to
assemble all five of our racing teams and/or establish our merchandising
operations.
We may also be unsuccessful in selling at least 1,000,000 shares in this
offering, particularly because our officers and directors are selling the shares
in a direct participation offering, and in certain cases where required by state
law, through licensed broker-dealers, without the use of an underwriter. If we
fail to sell at least 1,000,000 shares in this offering, we will be unable to
accept any subscriptions in this offering. We could also decide, in our
discretion, to not have a closing. Although your funds will be returned to you
promptly by our escrow agent, with interest, you will not have the use of these
funds for other purposes during the time period that your funds were held in
escrow, which could be in excess of nine months.
Payment Upon Dissolution, Liquidation Or Winding Up
Upon our dissolution, liquidation, or winding up, holders of any of our secured
debt will be paid in full first, and then all other unsecured creditors will be
paid in full. Any balance remaining will be used first to repay the holders of
our preferred stock the amount of their liquidation preference plus any
accumulated and unpaid dividends prior to and in preference to any distribution
to our other stockholders. The amount of the liquidation preference for the
preferred stock is $600,000 and such shares are entitled on an annual basis to a
10% cumulative dividend.
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Any remaining balance would then be distributed to our holders of common stock
on a pro rata basis.
The Shares You Purchase In This Offering Will Be Immediately And Significantly
Diluted
The initial public offering price is substantially higher than the net tangible
book value of each outstanding share of our common stock. Purchasers of our
common stock in this offering will experience immediate and substantial
dilution. Dilution represents the difference between the price of a share sold
in this offering and the pro forma net tangible book value per share after this
offering. The dilution will be $9.09 per share or 91% of the offering price per
share if the minimum number of 1,000,000 shares are sold in this offering and
$8.00 or 80% of the public offering price per share if the maximum number of
2,500,000 shares are sold in this offering.
Issuance Of Substantial Amounts of Additional Shares Upon The Exercise Of Stock
Options Will Dilute Our Stockholders
As of the date of this prospectus, we have an aggregate of 10,000,000 shares of
our common stock issued and outstanding. We have also granted options to
purchase 500,000 shares of our common stock at $3.00 per share to Michael J.
Wurtsbaugh, a Consultant for FanZ Enterprises, Inc. and our proposed Chief
Financial Officer, in connection with the closing of this offering, which shares
will be subject to a Non-Qualified Stock Option Agreement. In addition, as of
the date of this Prospectus, we will reserve an amount of shares equal to 10% of
our issued and outstanding common stock after giving effect to the closing of
this offering to be issued upon the exercise of stock options available for
grant under our stock option plans. While the stock option plans will be subject
to stockholder approval upon completion of this offering, once the plans are
approved all of such shares may be issued without any action or approval by our
stockholders. The issuance of these shares would dilute the percentage ownership
of our common stock held by all of our stockholders.
Our Shares Could Become A "Penny Stock"
The SEC has adopted rules that regulate broker-dealer practices in connection
with transactions in "penny stocks". Penny stocks generally are equity
securities with a price of less than $5.00, other than securities registered on
national securities exchanges or quoted on Nasdaq, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or quotation system. Prior to a transaction in a penny
stock, a broker-dealer is required to:
- deliver a standardized risk disclosure document that provides
information about penny stocks and the nature and level of risks
in the penny stock market;
- provide the customer with current bid and offer quotations for
the penny stock;
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- explain the compensation of the broker-dealer and its
salesperson in the transaction;
- provide monthly account statements showing the market value of
each penny stock held in the customer's account; and
- make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction.
These requirements may have the effect of reducing the level of trading activity
in the secondary market for a stock that becomes subject to the penny stock
rules. If our shares become subject to the penny stock rules, investors may find
it more difficult to sell their shares.
Repurchase Of Preferred Stock Held By Related Party
On February 23, 2001, we issued 10,000 shares of our preferred stock to Jackson
Roscoe Motorsports, LLC at an aggregate purchase price of $400,000. The
preferred shares are redeemable at any time, at our option, after six months
from the closing of this offering at an aggregate call price of $600,000.
FanZ Enterprises, Inc. May Need Additional Financing Which May Not Be Available,
Or Which May Dilute The Ownership Interests Of Investors
Our future success may depend on our ability to raise future capital,
particularly if we only raise the $10,000,000 minimum, including attracting
sponsors for our racing teams. No commitments to provide additional funds have
been made by management and no agreements with sponsors or other sources of
capital have been entered into. We have not investigated the availability,
source or terms that might govern additional financing. If additional capital is
needed, there is no assurance that funds will be available from any source or,
if available, that they can be obtained on terms acceptable to us. If not
available, our operations could be severely limited, and we may be unable to
implement our business plan.
Arbitrary Determination Of Offering Price.
The price of the shares being offered in this offering bears no relationship to
our assets, book value or net worth and should not be considered as an
indication of our actual value. The offering price of the shares was determined
arbitrarily by management.
Our Common Stock Has No Prior Market, And The Price May Decline After This
Offering.
There is no public market for our common stock, and no assurance can be given
that a market will develop or that any stockholder will be able to liquidate his
or her investment without considerable delay, if at all. The market price of our
common stock may decline below the
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offering price. If a market should develop, the price may be highly volatile. In
addition, an active public market for our common stock may not develop or be
sustained.
We Have No Agreements With Any Underwriters Or Broker-Dealers, And We May Not Be
Able To Attract Market Makers
There is currently no public trading market for the shares being offered. The
development of a public trading market depends upon not only the existence of
willing buyers and sellers, but also on market makers. We hope that a number of
broker-dealers may become market makers for our shares. Under these
circumstances, the market bid and asked prices for the shares may be
significantly influenced by decisions of the market makers to buy or sell the
shares for their own account, which may be critical for the establishment and
maintenance of a liquid public market in the shares.
Market makers are not required to maintain a continuous two-sided market and are
free to withdraw firm quotations at any time. Additionally, in order to be
traded on the Pink Sheets we need to have at least one registered and active
market maker. We currently have no market makers. No assurance can be given that
any market making activities of any market makers will commence.
The Value Of The Perks May Result In Taxable Dividend Income To You
We intend to provide our stockholders with a number of perks as more fully
described in the section titled "Description of Business" beginning on page 17.
The perks that we intend to provide to our stockholders, may result in taxable
dividend income to our stockholders. If the perks are treated as taxable
dividend income, a stockholder could incur a tax liability as a result of his or
her ownership of our common stock without receiving any cash from us to pay such
tax.
Investors May Face Significant Restrictions On The Resale Of Our Common Stock
Due To State Blue Sky Laws.
Each state has its own securities laws, often called "blue sky laws," which (i)
limit sales of securities to the residents of such state unless the security is
registered in such state or qualifies for an exemption from registration and
(ii) govern the reporting requirements for broker-dealers doing business
directly or indirectly in the state. There may be significant state blue sky law
restrictions on the ability of investors to sell, and on purchasers to buy, our
common stock. Accordingly, investors should consider the secondary market for
our common stock to be a limited one. Investors may be unable to resell their
stock, or may be unable to resell it without significant expense.
FORWARD LOOKING STATEMENTS
This prospectus includes "forward-looking statements." These statements involve
known and unknown risks, uncertainties and other factors which could cause
actual results, financial performance, operating performance or achievements
expressed or implied by such
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forward-looking statements not to occur or be realized. Such forward-looking
statements generally are based upon our best estimates of future results,
performance or achievement, based upon current conditions. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may," "will," "expect," "believe," "estimate," "anticipate," "continue," or
similar terms, variations of those terms or the negative of those terms.
Potential uncertainties include, among other things, the matters described in
this "Risk Factors" section and other sections of this Prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, we do not assume responsibility
for the accuracy or completeness of the forward-looking statements after the
date of this prospectus.
USE OF PROCEEDS
The net proceeds to us from the sale of up to 2,500,000 shares of our common
stock, after deducting estimated discounts and commissions and offering
expenses, are expected to be approximately $9,192,940 (if the minimum number of
1,000,000 shares are sold) or $24,102,940 (if the maximum number of 2,500,000
shares are sold).
We expect to use the net proceeds, listed in the order of priority, as follows:
*Minimum **Maximum
-------- ---------
Purpose Subscription Subscription
- ------- ------------ ------------
Purchase of Assets $3,000,000 $10,000,000
Personnel $2,000,000 $ 5,000,000
Marketing and Advertising $1,845,000 $ 3,945,000
Consulting Fee to Stillwater $ 750,000 $ 750,000
Licensing $ 350,000 $ 1,000,000
Working Capital $1,247,940 $ 3,407,940
---------- -----------
Totals $9,192,940 $24,102,940
========= ==========
* Assumes sale of 40% of the stock being offered
** Assumes sale of 100% of the stock being offered
We will utilize the funds from this offering to start up to two race teams that
will compete in NASCAR sanctioned races assuming the minimum number of shares
are sold and as many as five race teams assuming the maximum number of shares
are sold. We will utilize a portion of our proceeds to acquire certain assets
that will allow us to develop the various racing teams. Specifically, we will
need to purchase various parts for our race cars such as screws, shocks, bolts,
transmissions, gears, tires, etc. We will need to purchase engines either
through direct
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purchase or through an engine-leasing program from one of the other NASCAR teams
that maintain an in-house engine-building program. We will also purchase certain
raw materials, such as various metals and alloys, to manufacture our race cars.
Various race shop equipment will also be purchased including miscellaneous shop
tools, engine and chassis dynameters testing equipment, timing devices, shock
building equipment and testing, welding equipment, fabrication equipment, paint
booths, etc. Also, a tractor and trailer will need to be acquired or leased for
each race team in order to transport the race cars, equipment, tires, etc. to
each racing event and all testing sessions.
We will purchase or lease real property to house our corporate headquarters and
motorsport facilities, and will purchase general office equipment for our
corporate headquarters such as computers, facsimile machines, copy machines and
other office equipment and supplies. (See "Description of Property" beginning on
page 37.)
The foregoing represents our present intentions and best estimate with respect
to the allocations of the proceeds of this offering based upon our present plans
and business conditions. However, no assurances can be given that unforeseen
events or changed business or industry conditions will not result in the
application of the proceeds of this offering in a manner other than as described
herein. Consequently, future events, including changes in our business plan and
economic, competitive or industry conditions, may make shifts in the allocation
of funds necessary or desirable.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no trading market for our shares of
common stock. Consequently, the initial public offering price of our shares of
common stock was arbitrarily determined. The factors considered in determining
the offering price included our financial condition and prospects as well as the
general condition of the securities market. The offering price is not an
indication of and is not based upon the actual value of FanZ Enterprises, Inc.
The offering price bears no relationship to the book value, assets or earnings
of FanZ Enterprises, Inc. or any other recognized criteria of value. The
offering price should not be regarded as an indicator of the future market price
of the securities.
DILUTION
Our net tangible book value at January 31, 2001 is $[14,875] or $[.00] per
share of common stock. Net tangible book value per share represents the amount
of total tangible assets less liabilities, divided by 10,000,000 (the number of
shares of our common stock issued as of January 31, 2001 after giving effect to
a 100,000 for 1 stock split to be effected prior to the closing of this
offering).
MINIMUM OFFERING
After giving effect to a 100,000 for 1 stock split to be effected prior to the
closing of this offering, and the sale of 1,000,000 shares, in the event that
the minimum number of shares
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offered in this offering are sold, the as adjusted net tangible book value at
January 31, 2001 would be $9,985,125 or $.91 per share before deducting offering
expenses. This represents an immediate increase in net tangible book value of
$1.00 per share to the existing stockholder, and an immediate dilution of $9.09
per share to new investors. The tables below illustrate this per share dilution.
MAXIMUM OFFERING
After giving effect to a 100,000 for 1 stock split to be effected prior to the
closing of this offering, and the sale of 2,500,000 shares, in the event that
the maximum number of shares offered in this offering are sold, the as adjusted
net tangible book value at January 31, 2001 would be $24,985,125 or $2.00 per
share before deducting offering expenses. This represents an immediate increase
in net tangible book value of $2.50 per share to the existing stockholder, and
an immediate dilution of $8.00 per share to new investors. The tables below
illustrate this per share dilution.
Minimum Maximum
------- -------
Assumed public offering price per share of common stock offered in $10,000,000 $25,000,000
this offering before deduction of offering expenses
Net tangible book value per share before offering $[.00] $[.00]
Increase in book value per share attributable to new investors $10.00 $10.00
As adjusted net tangible book value per share after offering $.91 $2.00
Dilution per share to new investors $9.09 $8.00
Percentage that new investors' shares are diluted 91% 80%
The following table summarizes the relative investments of investors in this
offering and our current stockholder, assuming a per share offering price of
$10.00, before deduction of offering expenses:
Minimum Stockholders(1) Investors
------- ------------ ---------
Number of shares of common stock purchased 10,000,000(2) 1,000,000
Percentage of outstanding common stock after offering 90.91% 9.09%
Gross consideration paid $100,100(3) $10,000,000
Percentage of consideration paid .99% 99.01%
Average consideration per share of common stock $.01 $10.00
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Maximum
-------
Number of shares of common stock purchased 10,000,000(2) 2,500,000
Percentage of outstanding common stock after the offering 80% 20%
Gross consideration paid $100,100 $25,000,000
Percentage of consideration paid .40% 99.6%
Average consideration per share of common stock $.01 $10.00
(1) Includes Jackson Roscoe Motorsports, LLC.
(2) After giving effect to a 100,000 for 1 stock split to be effected prior
to the closing of this offering.
(3) Reflects $50,000 of consideration received subsequent to January 31,
2001.
CAPITALIZATION
The following table sets forth our capitalization at January 31, 2001, as
adjusted, to give effect to the sale of the minimum number of 1,000,000 shares
of our common stock and to give effect to the maximum number of 2,500,000 shares
of our common stock, at an assumed public offering price of $10.00 per share,
net of estimated offering costs and after application of the net proceeds of
such sale.
Actual Pro-Forma(1) Minimum Maximum
------ ------------ ------- -------
January 31, 2001
Common Stock, $.01 par value per
share; 3,000 shares authorized, 100
shares issued and outstanding;
20,000,000 shares authorized, as
adjusted to give effect to 100,000
for 1 stock split; 10,000,000
shares issued and outstanding, as
adjusted to give effect to 100,000
for 1 stock split; 11,000,000
shares issued and outstanding, as
adjusted assuming the minimum
number of shares are sold;
12,500,000 shares issued and
outstanding, as adjusted assuming
the maximum number of shares are
sold $1 $100,000 $110, 000 $125,000
Preferred stock, $.01 par value per
share; 10,000 shares authorized; 10,000
shares issued and outstanding
- 100 100 100
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Additional paid-in capital 50,099 400,000 9,582,940 24,477,940
Accumulated Deficit [64,975] [64,975] [64,975] [64,975]
-------- -------- ---------- -----------
Total Stockholders' [Deficit] Equity $[14,875] $435,125 $9,628,065 $24,538,065
======== ======== ========== ===========
(1) As adjusted to (i) give effect to a 100,000 for one stock split
effective April ___, 2001, (ii) give effect to an increase in the
number of authorized common shares to 20,000,000, which occurred on
February 23, 2001, (iii) give effect to $50,000 of consideration
received subsequent to January 31, 2001 as a capital contribution with
respect to the common stock owned by Jackson Roscoe Motorsports, LLC,
and (iv) give effect to the issuance of 10,000 shares of preferred
stock to Jackson Roscoe Motorsports, LLC in exchange for $400,000.
DESCRIPTION OF BUSINESS
BUSINESS OF ISSUER
We are a Delaware corporation formed on October 20, 2000 to control and manage a
multi-car motorsports operation that will participate in NASCAR sanctioned
events. We currently have no full-time employees. However, we have a consulting
agreement with Michael J. Wurtsbaugh, our proposed CFO and Secretary, and have
entered into an employment agreement with Michael J. Wurtsbaugh which will
become effective upon the closing of this offering. We have also entered into
consulting arrangements with certain other individuals to help us in the
planning and implementation of our racing and merchandising operations,
including Eddie Sharp who owns the facility we intend to lease initially. It is
contemplated that we will initially enter the NASCAR series with a minimum of
two full-time race teams and may originate up to a total of five full-time race
teams that will compete in NASCAR sanctioned races, including teams in the
Winston Cup, Busch Grand National and Craftsman Truck series, depending on the
amount of capital raised through this offering.
We believe that a tremendous opportunity exists to provide a unique and exciting
opportunity for existing NASCAR fans, as well as attract new fans to the sport.
We will utilize a network of dedicated racing fans and attract new fans to
NASCAR to serve as part owners in our operations. We will be able to offer each
stockholder a unique economic and racing opportunity to be part owner of what we
expect to be a top-tier NASCAR racing team and actually participate in what we
believe is the number one spectator sport in the country. This network of
stockholders will further allow us the opportunity to offer potential sponsors a
built-in owner fan base that will support and consume the various sponsors'
products. It is believed that this fan base will be a competitive advantage in
our attempt to attract top quality sponsorship monies to fund our racing
operations. To date, there are no other motorsports operations with such an
owner fan base.
We will actively manage and control substantially all of our merchandising
opportunities directly rather than the traditional industry practice of
utilizing third-party agents to mange and promote merchandising operations. This
should provide greater control over the quality and success of our merchandising
operations.
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Finally, FanZ Enterprises, Inc. will be a vehicle for its stockholders,
management and employees to actively help those in need. Specifically, we will
contribute money, physical and human resources and will leverage our publicity
to support the "Jackson Roscoe Foundation", a not-for-profit charitable
organization established in memory of Jackson Roscoe Hitchcock. Jackson is one
of the twins born to Joan and J. Roe Hitchcock, our principal founder, CEO and
Treasurer, on September 13, 1999. FanZ Enterprises, Inc., through its active
participation with the Jackson Roscoe Foundation and other charitable
organizations, will convey the values and principals of those involved by
donating money to programs and help families of sick children, including
children such as Jackson, who suffer from congenital heart diseases.
Summary of Opportunity
We will combine the interests of true racing enthusiasts by developing a wide
network of stockholders to participate in our business interests. We will allow
dedicated motorsports fans the opportunity to both own a piece of what
management believes will ultimately be a successful NASCAR motorsports operation
and participate economically in the business. We believe such an opportunity
will prove appealing to these fans' love of auto racing. In addition, we believe
our unique ownership opportunity and integrated business approach, coupled with
the increasing media exposure to NASCAR, will allow us to attract new fans to
the exciting sport of NASCAR racing. We are, to date, the only opportunity for
the average race fan to own an interest in a race team. We will utilize the
investment funds from the stockholders to start and/or purchase as many as five
race teams to compete in NASCAR sanctioned races, including the Winston Cup,
Busch Grand National and Craftsman Truck Series. We believe this wide network of
owner/investors enhances the success rate for obtaining top quality sponsors
which should further the opportunity for success in the racing and merchandising
operations. We believe most sponsors will find this captive stockholder network
a very attractive audience to market their respective products and services
given the typical NASCAR fan's loyalty to the various products of the sponsors
of their favorite team and driver. In addition to the economic opportunity of
ownership, we intend to offer each stockholder a variety of Perquisites
("Perks"). Our Perks may consist of some or all of the following:
- Autographed picture of one of the racing drivers and crew
chiefs.
- At each race we intend to randomly select twenty (20)
stockholders that will be eligible to be chosen to participate
in the non-over-the-wall pit crew. The non-over-the-wall pit
crew will perform pit crew functions behind a wall separating
it from the race car pit. We will pick four out of the twenty
(20) stockholders to actually participate in the
non-over-the-wall pit crew for each team's honorary pit crews.
- An annual 10% discount on all racing merchandise purchased
trackside at the merchandise trailers.
- Free access to all of FanZ Racing, Inc.'s driver, crew and
owner web pages with direct e-mail response from each
respective team member.
- Free webcasts from our racing team facility highlighting the
pre-race preparation of one of the race cars.
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We anticipate providing the stockholder Perks on an annual basis, which Perks,
we believe, will at some point have a value of at least equal to the minimum
investment of each individual stockholder.
We anticipate holding an annual stockholders' meeting and luncheon which will be
held in our team facility once we have established a permanent facility. The
stockholders will have exclusive access to the drivers, crewmembers and racing
personnel and our facilities during this meeting and luncheon.
Sponsorship Appeal
We believe the combination of racing and merchandising operations offered by us
will be an extremely unique and appealing opportunity for sponsors evaluating
participation in NASCAR sanctioned racing. Overall, the entire NASCAR
sponsorship opportunities should be extremely appealing as a marketing and
advertising tool for most major companies whose products and services are
purchased or consumed by the general public. Generic facts that make the
sponsorship of a NASCAR racing operation appealing to companies are summarized
as follows:
- NASCAR attendance has grown each year for eighteen (18)
consecutive years.
- NASCAR attendance growth for the Winston Cup Series has
outpaced any other sport. From 1990 to 1998, the Winston Cup
fan base increased from 3.3 million to 6.3 million, which
represents a 91% attendance growth rate.
- 38.5% of NASCAR fans over the age of 18 are women, making the
NASCAR fan base one of the most gender-neutral in professional
sports.
- 40.1% of NASCAR fans have attended college and almost half
earn over $40,000 per annum, creating a valued marketing
segment for most major consumer and service companies. The
chart below shows the audience income by sector.
[PIE CHART INSERTED HERE]
AUDIENCE INCOME
Under $20,000 19%
$20-$40,000 32%
$40-$60,000 23%
$60-$75,000 11%
$75,000 & Over 15%
- 62.5% of NASCAR fans are between the ages of 18 and 54. This
demographic group is the one most coveted by major sponsors.
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- The most telling and usually convincing fact: 72% OF NASCAR
FANS CONSCIOUSLY PURCHASE PRODUCTS AND SERVICES BASED ON A
SPECIFIC COMPANY'S INVOLVEMENT IN NASCAR. This conversion
ratio is twice the rate of audience brand loyalty that is
experienced by the National Football League ("NFL") and allows
NASCAR to offer America's most brand loyal fans. The graph
below shows the percent of the audience that consciously
purchases products based on the manufacturer's involvement in
the sport.1
[GRAPH INSERTED HERE]
AUDIENCE BRAND LOYALTY TO SPONSORS (1)
NASCAR 72%
Tennis 52%
Golf 47%
NBA 38%
MLB 38%
NFL 36%
Olympics 28%
- 40% of NASCAR Fans will switch to a product if it is a NASCAR
sponsor.
- 70% of the NASCAR Winston Cup races will be broadcast on
network television.
- Over 250 million fans worldwide tuned into NASCAR events in
1999.
Unlike most other sports, NASCAR teams, drivers and owners continuously promote
the sponsor at each race. It is not uncommon for the winning driver of each race
to officially thank the sponsors who ultimately are responsible for his or her
"ride."
We believe that our operations will create a very favorable investment
opportunity for most major companies, as it provides sponsors direct access to
the most diverse and passionate fans in the sporting universe. In addition to
the broad appeal of NASCAR, as highlighted above, our stockholder base will
provide potential sponsors with an immediate loyal foundation of fans and
potential consumers that are anticipated to be loyal to the sponsor's products.
This network of stockholder/owners is unique to NASCAR and should provide the
impetus for us to attract a high quality group of primary and associate sponsors
to our racing operations. Additionally, we intend to maintain a close working
relationship with each of our major sponsors by developing a comprehensive
marketing and promotional strategy promoting each sponsor at our trackside
merchandising venues, as well as through a variety of retail and mass merchant
outlets. Specific attractions beyond the prominent display of corporate colors
and logos on each race car, driver and team uniforms, equipment and transporter
will include:
________________
1 Source: 1997 Performance Research Study; 2000 Official Retail Resource Guide
of NASCAR
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- active "show car" program for each team that will operate
continuously throughout the year displaying and promoting at
the respective sponsors' locations;
- client hospitality tents will be prominently promoted at
trackside venues at events with driver, crew and owner
participation;
- employee entertainment packages for selected racing venues
that will include driver and crew participation and
involvement as a motivational tool to valued employees;
- promotional tie-ins may be developed, promoted and implemented
at selected trackside venues, as well as through various
national and regional multimedia by our drivers, crew chiefs
and owners; additionally, promotional tie-ins may be employed
throughout each sponsors' distribution channels;
- trackside sampling events may be established at selected
sponsor tents to highlight new and promotional sponsor
products and services; sampling events may be utilized to test
market the various sampled products with NASCAR fans and
media;
- product and service endorsements may be established for each
primary sponsor and selected associate sponsors featuring our
drivers, crew chiefs and owners;
- advertising space during the weekly webcast from the team's
facility;
- database marketing to the investor list; and
- additional advertising and potential product promotion at our
permanent race facility, once it is established, in and around
Charlotte, North Carolina.
History of the Industry
William H. G. France was a mechanic who migrated from New York to Daytona in the
early 1940's. He organized races on the beach in Daytona that eventually led to
more races and purses. He founded NASCAR in 1948 to organize and promote stock
car racing on racetracks throughout the southeastern United States. Other than
the creation of NASCAR, we believe the ascension of France's son, Bill Jr., to
the leadership role of NASCAR in 1972 is likely the most important event in
NASCAR's history. As the rule maker, promoter, ambassador and salesman, Bill Jr.
has set the standard by which all other forms of motorsports are measured and
compared. NASCAR's popularity during the 1970's and 1980's grew primarily on a
regional level, while Bill Jr. continued to work toward a vision of national
recognition for the sport of NASCAR.
In November of 2000, Bill Jr. stepped down as President of NASCAR, and was
replaced in that position by Mike Helton, who had been serving as NASCAR's
Senior Vice-President and Chief Operating Officer for the previous two years.
Despite the health problems that caused him to step-down as President, Bill Jr.
continues to influence the future of NASCAR as chairman of the Board of
Directors for NASCAR.
Current Status of NASCAR
Although NASCAR began with a southeastern motor racing focus, the sport, through
NASCAR's efforts, has grown to be a nationally recognized sport and is currently
promoting races in 23 of the 50 states throughout America from New Hampshire to
California and Oregon. Today, millions of fans each year pack NASCAR venues
across the country for what we believe is the most exciting form of motorsports
entertainment. In 1998, NASCAR celebrated its 50th
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anniversary by earning the distinction as the fastest growing sport in the
country. In an exclusive "Street & Smith's Sports Business Journal" survey,
NASCAR ranked ahead of every other sports property in marketability and sponsor
service. NASCAR's ascent to join the "Big Four" (football, baseball, basketball
and hockey) - now the "Big Five" - of professional sports is a recent testament
to the sport's success and popularity. Attendance at NASCAR Winston Cup races
has increased 97% since 1990 and 17 of the 20 best attended sporting events of
1999 were NASCAR Winston Cup races. Television ratings for NASCAR are second
only to the National Football League ("NFL"), and while ratings for most sports
properties have leveled off or declined, NASCAR's televised ratings have climbed
11% on network television and 31% on cable television since 1994. In 1999,
NASCAR licensed product retail sales topped $1.13 billion, which equates to a
growth rate of 1400% during the decade. We believe NASCAR is the most popular
form of auto racing in addition to being one of the most popular professional
sports in all of America. Annually, more than 200 million fans in the United
States watch televised NASCAR races with over 10 million fans coming out to the
various tracks to see, in person, the NASCAR Winston Cup Series, NASCAR Busch
Grand National Series and NASCAR Craftsman truck series.
In November of 1999, NBC, Fox and Turner Sports reportedly agreed to pay $2.4
billion over six years, beginning in 2001, for broadcasting rights to NASCAR's
Winston Cup racing series. Sources have reported that the $2.4 billion will be
distributed as follows: (i) 25% will go to the tracks earmarked for race purses;
(ii) 10% will go directly to NASCAR; and (iii) 65% will go to the tracks that
host the races. Under this agreement the networks will televise more than 70% of
NASCAR Winston Cup races.
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NASCAR has grown to the top of the sports rankings in terms of its estimated
economic impact. The graph below shows the Top 10 Professional Events in 2000,
followed by their estimated economic impact. It should be noted that 8 out of
the top 10 are motorsports and 7 out of the 10 are NASCAR races.
- ------------------------------ ------------------------------------------ ----------------------------------------
EVENT LOCATION ESTIMATED ECONOMIC IMPACT
- ------------------------------ ------------------------------------------ ----------------------------------------
Indianapolis 500 Indianapolis Motor Speedway
Indianapolis, IN $336.6 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Daytona 500* Daytona International Speedway
Daytona Beach, FL $240 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Brickyard 400* Indianapolis Motor Speedway
Indianapolis, IN $219.5 million
- ------------------------------ ------------------------------------------ ----------------------------------------
SuperBowl XXXIV Georgia Dome
Atlanta, GA $215 million
- ------------------------------ ------------------------------------------ ----------------------------------------
SAP United States Grand Prix Indianapolis Motor Speedway
Indianapolis, IN $170.8 million
- ------------------------------ ------------------------------------------ ----------------------------------------
DirecTV 500* Texas Motor Speedway
Forth Worth, TX $165.2 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Goracing.com 500* Bristol Motor Speedway
Bristol, TN $119.6 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Food City 500* Bristol Motor Speedway
Bristol, TN $80.5 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Kentucky Derby Churchill Downs
Louisville, KY $60 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Winston 500* Talladega Speedway
Talladega, AL $42.4 million
- ------------------------------ ------------------------------------------ ----------------------------------------
Based on a formula from the National Association of Sports Commissions. Sources:
National Association of Sports Commissions, SportsBusiness Journal research,
Smith Travel Research, International Association of Convention & Visitors
Bureaus Foundation. As printed in the SportsBusiness Journal. (*) Denotes NASCAR
Events.
NASCAR oversees a variety of racing programs throughout the United States that
serve as proving grounds for young drivers and mechanics to gain experience and
improve their racing skills. It is our intention to participate in the top two
or three racing series as part of our business plan. The number one series is
the Winston Cup series of which we will focus our primary efforts. The other top
racing series within the NASCAR network are the Busch Grand National series
("Busch") and the Craftsman Truck series ("Truck"). Ultimately, we believe that
participation in both the Busch and Truck series is important in the overall
business plan in order to develop a form of "farm team" system, similar to Major
League Baseball. Our participation in multiple NASCAR series promotes
consistency among the team members and driver that is essential for success in
Winston Cup racing.
Team Profiles
As NASCAR continues to grow and expand into the future, the manner in which
drivers, crew chiefs, crews and car owners communicate and operate is changing.
Historically, NASCAR ownership has been from two primary sources (i) individual
owners that grew up in the racing industry and view ownership as a means to
continue to participate in the sport, or (ii) from
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wealthy individuals that enjoy motorsports and can afford to spend monies to
experience the thrill of owning a racing operation. Concurrently, this sport has
grown in terms of (i) competition and funding from sponsors, and (ii) race
purses, therefore, owning and operating a top-tier NASCAR Winston Cup racing
operation has become much more business oriented. As a result, the advent of the
multi-car team has only recently become popular.
The management of the multi-car team remains in an organizational structure in
which each team, including the driver and crew chief, are individually given
incentives and operate fairly autonomously from the other teams within the
multi-car operation. The era of the multi-car team has become almost a necessity
in order to pool financial resources, share information and fully utilize
expensive capital expenditures over a number of teams. Additionally, we believe
recruiting, managing and maintaining the best and brightest people has become
essential for the success of any top-tier racing operation. Identifying and
recruiting top drivers for the cars, crew chiefs, crewmembers, mechanics,
fabrication specialists, engine builders, and other specialists are all
essential ingredients to operating a successful racing operation. Management
believes the future opportunity in NASCAR ownership will rely less on the
owner's racing knowledge and experience and more on the ability to successfully
manage and operate a business with multiple divisions, or teams, that happen to
be in the racing industry.
Revenue Sources
A NASCAR racing operation relies principally on three separate, but related,
revenue sources for the funding of its racing activities: (i) sponsorship
monies, (ii) race purse winnings and (iii) special race bonus opportunities.
SPONSORSHIP MONIES: The primary funding source for any NASCAR racing operation
is sponsorship monies from primary sponsors and a host of associate sponsors. We
believe a top-tier NASCAR team that is competitive and has the opportunity to
run competitively and finish in the top 15 each week takes a minimum investment
of $6 million annually. Traditionally, the most successful teams have had annual
budgets that exceeded $12 million. As a result, obtaining a high quality and
well-capitalized primary sponsor for each team fielded by our racing operations
is the top priority for management. Management believes that the unique,
built-in stockholder network provided by us should be very attractive to
potential primary and associate sponsors.
RACE PURSE WINNINGS: As the sport has grown, NASCAR has become a nationally
recognized sporting event that is seen by millions of fans. As a result, winning
purses have also grown substantially. The top teams can easily earn in excess of
$2 million annually from race winnings alone, with the less successful teams
earning as little as $500,000. Television revenues are an indirect revenue
component. In November of 1999, NBC, Fox and Turner Sports reportedly agreed to
pay $2.4 billion over six years, beginning in 2001, for broadcasting rights to
NASCAR's Winston Cup racing series. It is believed, under the terms of the
agreement, the drivers and teams will participate in a portion of the earnings
through increases in race purses.
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SPECIAL RACE BONUS OPPORTUNITIES: Special race bonus opportunities are becoming
larger and more prevalent as various companies recognize the media exposure that
is available in the NASCAR venues. For example, R.J. Reynolds' Sports Marketing
Enterprises sponsors the "No Bull 5" driver bonus program, which offers one of
five qualified drivers the opportunity to win a $1 million bonus should they win
at a race that is tied into the "No Bull 5" program.
Racing Qualifications
NASCAR mandates, manages and monitors the qualifications at every NASCAR
sanctioned event. To participate in a NASCAR sanctioned event, each car must be
driven by a driver who has NASCAR experience and all cars must undergo a NASCAR
technical inspection. Prior to qualifying at each race, all of the participating
cars must undergo a pre-race technical inspection by the NASCAR officials. A
number of race cars also will be selected to undergo a further technical
inspection at the conclusion of the race to ensure the selected cars
participated within all of the NASCAR technical guidelines during the race.
NASCAR specifications exist for the entire race car (including aerodynamic
elements such as length of spoilers and air dams, engine characteristics, fuel,
chassis setup, shocks, tires, etc.) and typically vary by manufacturer (such as
Ford, General Motors, Dodge and Pontiac). These specifications can change
between races as NASCAR technical officials attempt to maintain equality of
competition between race teams and manufacturers. Teams, drivers and owners that
are caught violating NASCAR guidelines typically receive penalties ranging from
economic fines to loss of points gained unfairly in the Winston Cup Champion
points race, to suspensions from future NASCAR sanctioned events.
After passing the NASCAR technical inspection, a car has one attempt to achieve
one of the top 36 qualifying speeds of all the cars in order to qualify. The
fastest qualifying speed is awarded the pole position for the respective race.
The pole position starts on the inside of the front row and leads the rest of
the qualifying field to the green flag, indicating the beginning of each race.
Drivers and team owners covet the pole position due to the notoriety received by
the respective pole winner sponsors as well as the monetary rewards paid under
the "Bud Pole Award" promotion. Additionally, winning a pole award at any NASCAR
Winston Cup event throughout the season automatically qualifies the driver to
participate in a non-points race at the beginning of the following season in
Daytona that pays the participants prize money based on finish position. After
the pole position, the next 35 race cars earn their starting spots according to
the fastest qualifying speeds. In addition to the 36 fastest qualifiers for each
race, NASCAR reserves seven provisional positions bringing the total to 43 cars
that participate in each event. Positions 37 through 43 of each race are
provisional starters. The 43rd spot in a Winston Cup race is awarded to a past
champion of the Winston Cup series (if entered in the race and not otherwise
qualified). The 43rd spot in a Busch Grand National race is awarded to a past
champion of the Busch series (if entered in the race and not otherwise
qualified). If there is no past champion, or if no past champion needs a
provisional, the next team in owners' points is given the provisional.
Provisional spots are given to teams that are highest in owners' points but did
not make the race based on qualifying time. Drivers points do not have any
impact on provisionals. Teams are given a provisional based on the team's
position in the owners' points standings. Drivers points do not have any impact
on provisionals. During the first four races of each season, provisionals are
awarded based on the final owners' points standings of the previous year. At the
fifth race,
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the current year's owners points become the reference point. Each existing team
starts the season with four provisionals and earns one more after their 8th,
16th, and 24th, attempted race. However, any team that takes a provisional and
is in the top 25 in the owner's points is not charged with a provisional. If a
Winston Cup driver is 35th or higher in the Winston Cup standings he cannot take
a provisional in the Busch Series, unless he is a past champion in the Busch
Series.
FanZ Racing Strategy
Our racing strategy is to capitalize upon the evolution of NASCAR through a
multi-team business organization. We believe that a more participative
management structure, in which the teams of a multi-car operation are
compensated and given incentives based on individual as well as overall team
performance, could provide us a higher probability for success. Furthermore, it
is our intent to maximize the success of our racing operations by structuring
essentially a breakeven business operation. This strategy reinvests all purse
winnings and other revenue into the team through aggressive state-of-the-art
equipment and capital expenditures as well as through the recruitment and
maintenance of the top personnel in all aspects of the racing operations. To
accomplish this goal, we will seek to hire experienced people in the motorsports
business, specifically from the existing NASCAR participants, to serve as
management of our racing operations. These individuals will be responsible for
the day-to-day management of the racing operations in order to provide our
racing operations with the best opportunity to attract the top talent among
drivers, crew chiefs and the other racing professionals. We believe this
strategy will provide our racing operations with the greatest opportunity for
success and create the potential for becoming one of the premier motor sports
operations in NASCAR.
ANTICIPATED START-UP TIMELINE: Upon completion of this offering we will need to
undertake a variety of initiatives in order to successfully launch our racing
operations. It is anticipated that a minimum of ninety (90) days will be
required to assemble our racing operations. This process involves three primary
phases: (i) the hiring of experienced crew chief(s) and racing management
personnel, (ii) the hiring of the crew and the remainder of the race team, and
(iii) the complete assembly and preparation of car(s) for racing. Upon
completion of this offering, our management, and other racing professionals,
will begin to assemble the proper personnel to staff the racing operations.
INITIAL PHASE OF RACING START-UP OPERATIONS: During the initial thirty (30)
days, we will need to recruit a top-tier Winston Cup crew chief who has had
extensive experience as a crew chief for other Winston Cup racing operations.
Through our numerous contacts in the Winston Cup racing community, we initially
identified several potential candidates for the crew chief position, although we
have not had any significant discussions with any of these candidates. In
addition to the crew chief, we will seek to hire several engineers who will
assist in the building, testing and completion of race cars and begin assembling
a skeleton crew of personnel which we have preliminarily identified through our
experience and contacts in the industry.
In conjunction with the recruiting, management will also focus their efforts on
acquiring key assets for the racing operations. The key assets include the
selection of a car manufacturer, the
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ordering and procurement of a minimum of six race cars for each Winston Cup
racing team, the purchase of basic tools and equipment including the outfitting
of the shock room, the fabrication shop and the paint booths. We will focus our
attention on the selection of the available race engine options during this
initial period. Our emphasis will be to seek to procure a relationship with one
of the top engine building programs for Winston Cup racing in the hopes of
negotiating an acceptable engine leasing program for the first year of
operations. We will also begin negotiations to either lease or purchase a race
car transporter and will investigate the economic merits of both new and used
transporters. Securing a transporter is critical to ensuring that each
respective race team will have adequate transportation vehicles to transport the
race cars and equipment to the testing sessions and race event locations.
It is anticipated that all of the above items will be procured utilizing the
existing facility of Sharp Racing, Inc. in Concord, NC. Jackson Roscoe
Motorsports, LLC has entered into a non-binding letter of intent with Sharp
Racing, Inc. to house our racing operations on a temporary basis. The owner of
Sharp Racing, Inc., Eddie Sharp, is a Consultant of Jackson Roscoe Motorsports,
LLC and is one of the potential candidates that we are in discussions with to
join the management team of FanZ Racing, Inc. We are investigating the options
for leasing interim and long-term space to house all of our racing equipment and
race cars.
SECOND PHASE OF RACING START-UP OPERATIONS: During the next thirty (30) to sixty
(60) days, the management of FanZ Racing, Inc. will focus their efforts on
recruiting and hiring key remaining staff members who will make up the nucleus
of the initial racing operations. Specifically, we will interview and hire, at a
minimum, five fabrication shop employees, two engineers and three mechanics who
will comprise the nucleus of full-time racing shop personnel. In addition to the
personnel, the management of FanZ Racing, Inc. will monitor the progress of the
race car procurement process, finalize the details of an engine leasing or
purchase program, the construction and procurement of the various equipment that
is needed for the pit crew, and continue to search for and review various
facility options noted above.
FINAL PHASE OF RACING START-UP OPERATIONS: The final thirty (30) to sixty (60)
days of the start-up process will see the management of FanZ Racing, Inc. and
shop employees focus on fine tuning the various race cars, including all aspects
of the cars (from chassis design, body fabrication, shock building and testing,
etc.) A significant amount of time during this period will be used to focus on
training and developing the crews and shop employees, assigning duties and
responsibilities of the race teams and qualifying day setup. The race car
transporter(s) should arrive during this period and will be equipped and stocked
to ready the transport for race and testing periods. At the conclusion of the
first ninety (90) days to one hundred fifty (150) following this offering,
critical decisions will be made by our racing and executive management teams as
to the preparation of a testing schedule and the number, timing and location of
races in which to participate during the first year of operations. While we
anticipate that the organizational process for our racing operations will be
completed during this ninety-day period, there can be no assurance that we will
be fully operational at the end of such period due to unforeseen delays or
complications.
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Traditional NASCAR Merchandising
Historically, NASCAR drivers and team owners have turned to outside companies,
such as Action Performance Companies, Inc. (NASDAQ: ACTN), to manage and operate
the merchandising opportunities tied to the success and popularity of both the
sport and the individuals. Typically, a driver or team owner would sell
exclusive license deals with professional marketing and licensing companies
and/or receive a privately negotiated royalty for the use of their team name,
likeness or similar trait that is prominently displayed on a very wide variety
of merchandise (including shirts, hats, coats, children's clothing, toys,
die-cast scaled replicas of motorsports vehicles, computer programs, cups,
umbrellas, vehicle stickers, keychains and other traditional souvenirs, etc.).
Drivers, as a group, are typically much more concerned about their racing
careers and focus their attention on improving their racing careers and
generally lack the time, desire or management expertise to handle the in-house
merchandising opportunities that are ever present with the national NASCAR fan
base. Likewise, team owners have historically been either former race car
drivers and crew chiefs or independently wealthy entrepreneurs and business
executives that are either (i) focused exclusively on the success of their
respective racing operations and lack the desire, time and/or management skills
to effectively manage the myriad of merchandising opportunities or (ii) are
substantially committed to managing and operating their respective non-racing
related business(s) which does not allow them the time or management attention
to manage the merchandising side of the racing business. The merchandising
opportunities are almost endless in terms of products and services and apply to
everything from adult and children's clothing to corporate related gifts
depicting various auto racing teams and drivers. We believe the merchandise is
primarily manufactured by offshore sources due to lower labor and material
costs. Distribution of the products typically comes from a variety of channels
including specialty retailers, mass merchants, trackside merchandise sale
trailers, via electronic commerce through a variety of racing related web sites,
promotional programs for corporate sponsors, grocery chains, etc. As a result,
merchandising is a full time business that requires the necessary time and
management resources to effectively capitalize upon the demand from NASCAR race
fans, corporate sponsors, etc. According to the 2000 Official Retail Resource
Guide of NASCAR, NASCAR licensed product retail sales topped $1.13 billion in
1999, which equates to a 1400% growth rate since 1990.
FANZ MERCHANDISING STRATEGY: This part of our business strategy is unique and
vastly different from how most NASCAR team owners have traditionally managed and
capitalized upon the merchandising opportunities that exist. We believe that a
tremendous opportunity exists to professionally manage, market and distribute
substantially all of the related merchandise for our racing operations.
Furthermore, we expect to leverage and capitalize upon our infrastructure and
professional expertise to more efficiently manage merchandising operations for
other competing companies/teams, as an additional means to enhance revenues. We
will seek merchandising arrangements with drivers, crew chiefs and their
sponsors that will utilize our merchandising operation as their exclusive
merchandising arm. We will actively seek to manage and control a significant
part of our merchandising opportunities directly, which should provide greater
control over the quality and success of our merchandising operations. However,
we may also, on a limited basis, enter into arrangements with third parties
where it is economically beneficial to do so. In order to effectively distribute
and market all of the various merchandise offerings, the
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management of our merchandising operations intends to utilize the following
distribution and sales channels.
WEB SITE MERCHANDISING: We intend to utilize the web page of our racing
operations in a "pull strategy" to offer a broad selection of merchandise to
fans and other visitors to our web page. By "pull strategy" we mean that once
visitors have entered our web site, we will seek to pull them over to our
merchandising site. Our merchandising arm will oversee the development of the
electronic commerce layout and mechanics to browse, select and purchase products
off our home page.
WEB CAST MERCHANDISING: We intend to utilize a "push strategy" in our efforts to
attract and promote our merchandise utilizing a weekly series of electronic web
casts from our shop floor. By "push strategy" we mean that once visitors have
entered our web site, we will push merchandise in the form of banner ads,
commercials and other promotions. It is our intention that during the racing
season, our merchandising operations will establish a specific time each week
during the racing season in which it will offer to all stockholders free of
charge and other fans for a small fee a web cast that will involve at least one
team. The stockholders and fans will be able to dial into the racing operations
web page and actually watch and listen to the driver, crew and team members
prepare the car and it's components for the race, including a preliminary race
strategy. As part of this telecast via the internet, our merchandising
operations will offer banner ads for its sponsors as well as promote a wide
variety of team merchandise for all of our racing teams and sponsors through
specially discounted prices.
MAGAZINE MERCHANDISING: We intend to utilize a proprietary direct mail catalog
to our stockholders. The proprietary catalog will offer the complete line of
merchandise offerings for all of our teams and sponsors, including various
promotional and special offers for our stockholders. We also anticipate
utilizing various auto racing and NASCAR-licensed magazine publications to
further promote our merchandise offerings as well as our racing web page and web
casts.
DISTRIBUTION MERCHANDISING: We intend to market selected promotional items and
merchandise through the more traditional distribution channel of specialty
retailers, mass merchants and major toy and hobby stores throughout the world
directly or through a wholesale distributor network.
NASCAR-LICENSED TELEVISION MERCHANDISING: We intend to aggressively pursue the
various network and cable auto racing and NASCAR-licensed television broadcasts
throughout the racing season, as well as in the off-season, featuring its
respective teams' and sponsors' merchandise and collectibles and will work
closely with our racing operations to utilize the various drivers, crew chiefs
and team owners to gain exposure from negotiated appearances and interviews on
these telecasts.
MOBILE TRACKSIDE SOUVENIR TRAILERS: We intend to lease and/or operate a fleet of
tractor trailers that will travel to NASCAR sanctioned events and prominently
display and promote each respective team's merchandise including the driver,
crew chief and team owner and sponsor's products, promotional merchandise and
souvenirs. We also intend to utilize the mobile fleet of
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tractor trailers to make special merchandise promotional appearances at the
various sponsor locations.
FanZ MERCHANDISING, INC.'S GIFT SHOP: Once we have established a permanent
facility, it is our intention to have a fully stocked gift shop which will be
open to the public on a regular basis, offering the complete line of merchandise
and products for our racing operations, all of the respective teams and their
related sponsors. We will actively promote and advertise the opportunity for
stockholders, fans, sponsors, sponsor employees and customers and general racing
enthusiasts to visit our facility to see the home of our teams, drivers and team
members and to purchase related merchandise.
FanZ Merchandising Organization
In order to pursue our merchandising operations we will need to hire experienced
management as well as a merchandising, marketing and operations staff. Our
merchandising operations will initially be dependent on our race teams becoming
operational and obtaining sponsors for each of the teams. Upon the successful
launch of our racing operations, we will need to engage a merchandising staff to
develop and market products supporting our race teams and related sponsors. The
development of our merchandising operations will include product development and
sourcing, marketing the products and race teams through various distribution
channels including trackside promotional merchandise trailers and promoting the
sponsors through promotional events such as "Show Cars" which are replicas of
the actual race teams' cars that are used to draw fans to a sponsor's place of
business. Initially we expect to engage in each of these activities on a very
limited basis in connection with the promotion of our own teams and estimate the
expense associated with the above activities to approximate $600,000. We expect
to fully develop our merchandising operations during the 2002 racing season.
NASCAR Sponsorship
We believe sponsorship is the heart and soul of the success of NASCAR racing and
is an integral part of our business plan. One of the primary drawing cards for a
potential sponsor's interest in NASCAR is the very broad appeal to an extremely
wide audience of NASCAR fans.
Management believes that NASCAR provides sponsors access to the most diverse and
passionate fans in the sporting universe. NASCAR is being embraced by large
national and multi-national corporations that until recently had ignored the
sport as too regional, too downscale and too "country" to risk national funding
expenditures. Today NASCAR's teams are sponsored by companies such as Kodak,
Circuit City, Gatorade, Kellogg's, McDonald's, MCI WorldCom and True Value to
name a few. Ten years ago, the sport's top sponsors were mostly tobacco and beer
companies and their subsidiaries. Individual teams are also attracting new
benefactors outside racing's traditional categories including Lowe's, Phillips,
M&Ms, BellSouth, Hot Wheels(TM) and K-Mart. For sponsors, we believe NASCAR may
be the best buy in sports, primarily because "speed sells." NASCAR fans spend
freely to support companies and brands that back their favorite drivers and
teams. Coke has filled orders for 20,000 new NASCAR-themed vending
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machines.** Visa says it's running to keep up with demand for its new NASCAR
affinity cards.** Sales of Hot Wheels cars jumped 30% after the brand became
Kyle Petty's primary sponsor.** A primary sponsor will pay, on average, between
$5 million and $9 million to splash its logo across the car's hood and
television panel (the back of the trunk) and across the chest on the driver's
uniform. Associate sponsors pay between $75,000 and $1.5 million for various
portions of a race car's visual area including the B-post (between the two side
windows), behind the rear wheels and the rear quarter panels. We have identified
a list of over three hundred (300) potential preliminary sponsor candidates,
which we intend to pursue upon completion of this offering.
FanZ Sponsorship Strategy
Like our merchandising strategy, our sponsorship business strategy is unique and
vastly different from how most NASCAR team owners have traditionally pursued
sponsorship opportunities. We intend to develop a marketing services area that
will support and coordinate marketing programs with our sponsors. Depending upon
the sponsor, this group may have as many as three people per race team dedicated
to maximizing sponsor exposure and return on their sponsorship investment.
The employees in this group will interface directly with the sponsor to develop
advertising and promotional programs. This group will also be available to
develop promotions that will increase the sponsor's exposure to racing fans.
Again, our unique network of stockholders will allow us the opportunity to offer
potential sponsors a built-in owner fan base that will support and consume the
various sponsors' products. We believe this group will provide a competitive
advantage in increasing the sponsors' loyalty to us and result in satisfaction
with our program.
Web Site Operations
We intend to oversee the development of a centralized web site for both our
racing and merchandising operations. The web site will be utilized as a
strategic tool to promote our teams and sponsors as well as links to personal
web pages for all of our drivers, crew chiefs, team managers and team owners. In
addition, the web site will be utilized as a critical part of our electronic
commerce focus to advertise, sell and promote all of our merchandise,
promotional items and souvenirs. We anticipate that the web page will contain a
chat room that will offer the ability to communicate with one of the drivers,
crew chiefs, crewmembers, team owners or other racing personnel on a daily basis
for a designated hour of each day. It is our intention that a number of our
personnel will participate in the chat room, and a monthly schedule will be
available on the web page to allow stockholders, fans and general racing
enthusiasts to participate in the chat room of their choice. We anticipate that
a series of electronic web casts will be made from our shop floor each week
during the racing season and broadcast via the Internet. We will establish a
specific time each week during the racing season in which we will offer to all
interested fans and racing enthusiasts a web cast that will involve at least one
of our teams, as its driver and crew chief go through the pre-race preparation
for the respective week's
______________________
** Source: Fortune; "Speed Sells"; Johnson, Roy. S; April 12, 1999.
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race. It is our intention that the fan(s) will have the ability to dial into our
web page and actually watch and listen to the driver, crew and team members
prepare the car and its components for the race, including a preliminary race
strategy. A complete listing of racing information, news, race facts and human
interest stories will be available at all times on the web page to afford
stockholders and fans the most access to all of our drivers, crew chiefs, team
owners and the racing personnel and their families.
NASCAR Support
We believe that NASCAR will support us in our racing and merchandising plans.
This is based on the fact that NASCAR is privately held and prospers from the
success of the promotion of its racing operations. We believe NASCAR is
extremely aggressive and committed to cross-marketing and promotional events to
keep the NASCAR name prominently in the face of the American public. At the
forefront of NASCAR's support is the recent television contract that
substantially increases both the number of races and the television monies
received by the entire NASCAR community for the rights to broadcast the Winston
Cup racing events. Currently, NASCAR has five NASCAR-licensed television shows
and five licensed radio shows that offer insights into the sport. In addition,
seven licensed publications exist including consumer and automotive aftermarket
magazines and an extensive publishing program with Harper Collins Publishers for
books on the sport and its participants. NASCAR maintains a year-round ongoing
public relations blitz to keep the NASCAR name in the public eye with coverage
in major newspapers and magazines including The New York Times, Los Angeles
Times, Sports Illustrated, USA Today, Forbes, Fortune, Business Week, Time and
TV Guide. NASCAR is also aggressively pursuing "e-advertising" and marketing
programs with NASCAR Online (web site www.nascar.com) leading the pack in
cyberspace with 4.6 million unique users per month. NASCAR Online is referred to
as a "sticky" site, which means users tend to stay on for longer periods of
time. It is our understanding that users of this site stay on-line an average of
almost 9.1 minutes and amass nearly 43 million page views per month, which puts
the on-line site in the top five of all sports sites on the Internet.
FanZ Diversity
We are dedicated to the concept of diversity. Through our unique ownership
opportunity and operating strategy, we will actively and directly target
potential new NASCAR fans. This includes appeal to younger ("Generation-X,"
"Generation Y" and "Echo-Boom") generations, a proactive strategy for minority
ownership and direct participation in our corporate management, staff, racing
and merchandising operations, as well as targeted sponsorship opportunities. Our
strategy is harmonious with that of NASCAR's, in increasing the diversity in its
fan base. We will attempt to use companies owned by minorities and/or women as
much as possible to provide goods and services to us.
FanZ Management
Although our executive officers have extensive experience in developing,
managing, financing and operating various business interests in a wide variety
of industries and possess in excess of
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thirty two (32) years experience in the management, marketing, finance and
operations of various private and public companies, we are recruiting
experienced managers to manage and oversee the operations of FanZ Racing, Inc.
and FanZ Merchandising, Inc. Our strategy is to enter into consulting
arrangements with individuals and professional firms experienced in NASCAR
racing and merchandising, to further assist us in assembling our operations. We
realize the importance of attracting a talented management team for both the
racing and merchandising operations.
The organizational structure will consist of a small corporate staff at FanZ
Enterprises, Inc. comprised of J. Roe Hitchcock, Frederick L. McDonald II,
Michael J. Wurtsbaugh and a director of finance to oversee our finance and
accounting functions as well as several administrative and executive assistants
for coordination of sponsors and other important customers. The FanZ Racing,
Inc. operations will be managed and directed by its President/CEO. We are
currently pursuing individuals who possess an extensive background and
experience in managing and operating a professional NASCAR racing operation as
well as individuals with management experience in public companies. The
President/CEO of FanZ Racing, Inc. will have full and complete responsibility to
hire the crew chiefs and team managers for each respective team in addition to
the various engineering, engine, fabrication, etc. professionals for each
respective discipline. The FanZ Merchandising, Inc. operations will be managed
by its President/CEO. We are currently pursuing individuals who possessan
extensive background in all operational aspects of merchandising and retailing.
Other key personnel in the merchandising operations will be a seasoned buyer who
has extensive experience and contacts for sourcing various products offshore, as
well as a top marketing and advertising executive who will be responsible for
the promotional efforts and strategies in professionally managing the variety of
merchandising opportunities for each respective team and their primary and
associate sponsors. After our organization is fully operational, our
merchandising operations will look for opportunities to manage the merchandising
operations for other drivers and team owners.
To attract and retain top talent for both operations, we intend to offer a
competitive financial package including the opportunity for stock options to key
operational managers.
Available Information and Reports to Securities Holders
We have filed with the SEC a registration statement on Form SB-2 with respect to
the common stock offered by this Prospectus. This Prospectus, which constitutes
a part of the registration statement, does not contain all of the information
set forth in the registration statement or the exhibits and schedules which are
a part of the registration statement. For further information with respect to us
and our common stock, see the registration statement and the exhibits and
schedules thereto. Any document we file may be read and copied at the SEC's
Public Reference Room located at 450 Fifth Street N.W., Washington, D.C. 20549,
and the public reference rooms in New York, New York, and Chicago, Illinois.
Please call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. Our filings with the SEC are also available to the public from
the SEC's web site at http://www.sec.gov.
Upon completion of this offering, we will become subject to the information and
periodic reporting requirements of the Exchange Act and, accordingly, we will
file periodic reports, proxy
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statements and other information with the SEC. Such periodic reports, proxy
statements and other information will be available for inspection and copying at
the SEC's public reference rooms, and the web site of the SEC referred to above.
PLAN OF OPERATION
The following discussion should be read in conjunction with the Financial
Statements and accompanying notes and the other financial information appearing
elsewhere in this Prospectus. Also, due to our limited operating history, the
financial information presented is for the period October 20, 2000 (date of
inception) through January 31, 2001. Our fiscal year end is December 31.
Results of Operations
During the period from October 20, 2000 (date of inception) through January 31,
2001, we have engaged in no significant operations other than organizational
activities and preparation for registration of our securities under the
Securities Act. No revenues were received by the Company during this period.
For the current fiscal year, we anticipate incurring a loss as a result of
organizational expenses, expenses associated with registration under the
Securities Act, expenses incurred as a result of establishing the race teams and
expenses associated with setting up our infrastructure to begin implementing our
business plan. We anticipate that until these procedures are completed, we will
not generate revenues, and may continue to operate at a loss thereafter,
depending upon the performance of the business.
Profits
For the period ending January 31, 2001, we recorded an operating loss of
$64,975. This lack of profitability is largely attributable to expenses of
$64,975 associated with our start-up. We did not generate any revenues during
this period. We expect to continue to operate at a loss through fiscal year
ending December 31, 2001. Further, there can be no assurance that we will ever
achieve profitability or that a stream of revenue can be generated and sustained
in the future.
Capital Expenditures
We expended no amounts on capital expenditures for the period ended January 31,
2001. As part of the business plan, we plan on starting a minimum of two NASCAR
race teams that will require a minimum of $4.5 million in capital expenditures
for tools, racing equipment, motors, race cars and other equipment and the
personnel costs to recruit and employ the necessary racing personnel to
effectively establish the teams. These costs will be incurred in the first three
months after the proceeds from this offering are received. The anticipated
capital expenditure budget may be reduced if we are successful in attracting
sponsorship monies for the teams.
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Capital Resources and Liquidity
At January 31, 2001, we had total assets of $146,035. Net stockholder's deficit
in the Company is $14,875 at January 31, 2001. Subsequent to January 31, 2001,
we raised an additional $450,000 in exchange for preferred stock and additional
capital contributed with respect to our common stock from Jackson Roscoe
Motorsports, LLC to fund the expenses related to this offering.
To develop our business plan, we intend to recruit and employ a variety of
racing personnel including drivers, crew members, crew chiefs, engine builders,
fabricators, engineers, etc. to operate and manage our racing operations. The
recruiting and hiring of the racing personnel will begin immediately upon
raising the minimum subscription amount of $10,000,000.
The racing operations will require a budget of approximately $3.5 million per
Winston Cup team and approximately $1.2 million per Busch team to assemble the
required personnel and equipment in order to be "race ready". The detail of the
budgets for each respective team is detailed below. In order to participate in
the last third of the 2001 racing season with at least two Winston Cup teams and
one Busch team we will require approximately $8.2 million.
ESTIMATED WINSTON CUP START-UP BUDGET
Expense Category Amount
Personnel Payroll $575,000.00
Crew Chief Salary 200,000.00
Motor Program 750,000.00
Parts 175,000.00
Facility Rent (Race/Fab Shop) 150,000.00
10 Winston Cup Cars 1,000,000.00
Gears & Transmissions 50,000.00
NASCAR Fees 35,000.00
Insurance 50,000.00
Utilities 50,000.00
Miscellaneous (Supplies/Maint.) 50,000.00
Shop Equipment 250,000.00
Testing Expenses 200,000.00
-------------
Total Cash Outlays Start-Up $3,535,000.00
=============
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ESTIMATED BUSCH GRAND NATIONAL START-UP BUDGET
Expense Category Amount
Personnel Payroll $250,000.00
Crew Chief Salary 65,000.00
Motor Program 225,000.00
Parts 60,000.00
Facility Rent (Race/Fab Shop) 65,000.00
6 Busch Cup Cars 300,000.00
Gears & Transmissions 25,000.00
NASCAR Fees 20,000.00
Insurance 25,000.00
Utilities 25,000.00
Miscellaneous (Supplies/Maint.) 25,000.00
Shop Equipment 60,000.00
Testing Expenses 75,000.00
-------------
Total Cash Outlays Start-Up $1,220,000.00
=============
The foregoing budgets could be scaled back somewhat by reducing the number of
cars purchased per team, among other things, in the event that only the minimum
($10,000,000) is raised in this offering. While we believe that the minimum
proceeds from this offering, together with sponsorship funds, will be sufficient
to satisfy our cash requirements during the twelve (12) months following the
consummation of this offering to support two Winston Cup teams and one Busch
team, there can be no assurance that sponsorship funds will be available right
away or at all. Upon closing of the offering, it is our intention to start with
at least one team and we will seek sponsors to defray the costs of starting this
team. We will phase in additional teams as our budget will allow with an
aggressive campaign for sponsorship of the 2002 racing season. Therefore, we
will start with one Winston Cup team and phase-in additional teams as our cash
flow permits.
In addition to racing start-up costs, we will need to hire corporate staff for
FanZ Enterprises, Inc. to provide centralized human resources, accounting,
bookkeeping, travel, administrative assistance and other general corporate
services.
In order to pursue our merchandising operations we will need to hire management
as well as a merchandising, marketing and operations staff. Our merchandising
operations will initially be dependent on our race teams becoming operational
and consummating sponsorship for each of the teams. Upon the successful launch
of our race teams, we will need to engage a merchandising staff to develop and
market products supporting our race teams and related sponsors. This includes
product development and sourcing, marketing the products and race teams through
various distribution channels including trackside promotional merchandise
trailers and promotional events such as "Show Cars," which are replicas of race
cars in order to draw fans to a sponsor's place of business. We expect to engage
in each of these activities on a limited
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basis until we are fully operational at an estimated expense of approximately
$600,000. We expect to fully develop our merchandising operations during the
first full racing season.
We believe that the proceeds from the minimum subscription of this offering,
together with projected cash flows from operations (including sponsorship
monies), will be sufficient to satisfy contemplated cash requirements for at
least twelve (12) months following the consummation of this offering and will
enable us to establish two Winston Cup teams and one Busch Team. In the event
that plans change, assumptions prove to be inaccurate, or if the proceeds of
this offering prove to be insufficient to fund operations and fully implement
our business plan, we could be required to seek additional financing from
sources not currently anticipated. We have no current commitments or
arrangements with respect to, or immediate sources of, additional financing and
it is not anticipated that any existing stockholders or lenders will provide any
portion of future financing. Additionally, no assurances can be given that any
additional financing, when needed, will be available or available on acceptable
terms. Any inability to obtain additional financing when required could have a
material adverse effect on our operations, including requiring us to curtail
some of our business initiatives.
DESCRIPTION OF PROPERTY
We will ultimately locate our corporate headquarters in the greater Charlotte,
North Carolina area to ensure that our racing operations are strategically
located in the heart of NASCAR country. We believe it is imperative for our
racing and merchandising operations to be located in this area to ensure that we
are in close proximity to the other NASCAR race teams. This will allow us to
effectively attract the most qualified talent for our operations. We will
ultimately seek to construct an integrated multi-car facility that will house
all of our racing operations. We believe that it is imperative to house all of
the race teams in one central facility to foster cooperation and sharing of
information between all of the teams, drivers and crew chiefs. This is paramount
to our strategy to be competitive with competing multi-car teams and gain a
competitive edge on some of the less cooperative multi-car teams and single car
teams. In addition, this integrated facility, the equipment and personnel will
be utilized most effectively and therefore will be the most economical to the
racing operations.
While it is not currently in the budget, we anticipate facilities in excess of
200,000 square feet to adequately house our operations, including a facility
that will be constructed in the future to house the general and administrative
offices of all of our operations. This additional facility is envisioned to
house corporate retreats for the sponsors and fans and will contain, among other
things, an observation deck overseeing all of the racing operations shop floor,
a theater area which can be utilized by our racing teams and for presentations
by our sponsors, a dining area that can be utilized to entertain existing and
prospective sponsors and their customers and employees, a gift shop offering the
latest merchandising products and souvenirs, a company-wide health and fitness
facility for the drivers, crew and other employees, and eventually a racing
museum housing our key assets.
In the interim, Jackson Roscoe Motorsports, LLC has entered into a letter of
intent agreement with Sharp Racing, Inc. to lease its racing shop and racing
equipment in the greater-Charlotte
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area, contingent upon the successful subscription for the minimum amount of
shares of this offering. The annual gross rent under this letter of intent is
$60,000 for the approximately 6,000 square foot facility and existing tools and
equipment. Sharp Racing is owned 100% by Eddie Sharp, a Consultant of Jackson
Roscoe Motorsports, LLC and one of the candidates that we are in negotiations
with to join the FanZ Racing, Inc. management team. The letter of intent terms
are believed to be at or below market rates for the same or similar facilities
and equipment. The facility is located in Concord, North Carolina, home of a
substantial amount of the race teams that compete in the Winston Cup and Busch
racing series. The facility is approximately 6,000 square feet and is believed
to be adequate to allow us to establish our initial racing operations. We
believe that we will need additional interim space to house all of our racing
operations. It is not anticipated that additional space will be difficult to
secure given the vast amount of race shops that exist in the area. We will lease
office space for our executive management and merchandising operations in the
greater Charlotte area until a permanent facility is located. We will also lease
a warehouse facility to store products for the merchandising operations. As set
forth above, it is our intention to relocate into a single facility that will
house all of our racing and merchandising operations including space for our
executive management.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the name, age and position of each of our
Directors and Executive Officers:
Name Age Position
---- --- --------
J. Roe Hitchcock 39 Chief Executive Officer,
Treasurer and Director
Frederick L. McDonald II 34 President and Director
J. Roe Hitchcock. Mr. Hitchcock has served as an officer and director of FanZ
Enterprises, Inc. since its inception. He is currently a Member of Jackson
Roscoe Motorsports, LLC, and Stillwater Capital Advisors, LLC, a financial
consulting firm. Prior to founding Jackson Roscoe Motorsports, LLC, Mr.
Hitchcock co-founded Cornerstone Equity Partners, LLC in May 2000, a private
equity partnership specializing in making controlling equity investments in
various manufacturing and distribution businesses. Prior to the founding of
Cornerstone, Mr. Hitchcock, during 1998, was an investment executive with
Questor Partners Fund, a $1.2 billion dollar private equity fund, founded by Jay
Alix and Dan Lufkin, focused on making controlling equity investments in
operationally and/or financially challenged companies with revenues of $100
million to $2 billion. Prior to serving with Questor, Mr. Hitchcock served from
1994 to 1997 as the Chief Executive Officer of Education Galore, Inc., an
educational retail business. Prior to Education Galore, Mr. Hitchcock from 1990
to 1993, served as an investment executive with the Oxford Investment Group, a
private equity investment firm making controlling equity investments. Prior to
the Oxford Investment Group, Mr. Hitchcock served as a Senior Accountant with
Arthur Andersen from 1984 to 1988. Mr. Hitchcock holds an MBA from the Harvard
Graduate School of Business Administration and a B.S. in Finance and Accounting
from
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Indiana University where he graduated Summa Cum Laude. Mr. Hitchcock is also a
Certified Public Accountant.
Frederick L. McDonald II. Mr. McDonald has served as an officer and director of
FanZ Enterprises, Inc. since its inception. He is currently a Member of Jackson
Roscoe Motorsports, LLC, and Stillwater Capital Advisors, LLC, a financial
consulting firm. Prior to founding Jackson Roscoe Motorsports, LLC, Mr. McDonald
co-founded Cornerstone Equity Partners, LLC in May 2000. Prior to founding
Cornerstone, Mr. McDonald was from 1995 to 2000 an investment executive with
Questor Partners Fund. While at Questor, Mr. McDonald served for a five month
period as Schwinn's interim COO, until a permanent COO was hired. Prior to
Questor, Mr. McDonald operated from 1991 to 1994 a management and operations
consulting firm, Arcana, Inc., which specialized in operational efficiency
studies and strategy development initiatives for middle market companies. Prior
to Arcana, Mr. McDonald served from 1988 to 1991 as an investment-banking
executive and was a federally licensed broker with Edward D. Jones & Co. Mr.
McDonald has served on the board of directors of several privately held
companies. Mr. McDonald holds an MBA/JD from the University of Michigan with
distinction and a B.A. in Banking and Finance from Morehouse College where he
graduated with departmental honors.
In addition to Messrs. Hitchcock and McDonald, Michael J. Wurtsbaugh has agreed
to serve as an Executive Officer and Director of our company upon the closing of
this offering.
Michael J. Wurtsbaugh. Mr. Wurtsbaugh is currently serving as a consultant to
FanZ Enterprises, Inc. and has agreed to serve as our Chief Financial Officer,
Secretary and Director upon the closing of this offering. Mr. Wurstbaugh has
served since 1997 as Vice-President of Finance and Acquisitions and Chief
Investment Officer for the Medve Group, Inc., a St. Louis, Missouri-based
private investment company and fully integrated developer-owner-manager of
commercial real estate on a national basis. Prior to joining the Medve Group,
Inc. (from 1993 to 1997), Mr. Wurtsbaugh was Vice-President/Sr. Relationship
Manager for Mercantile Bank of St. Louis, National Association, in St. Louis,
Missouri. Prior to Mercantile (1986-1993), Mr. Wurtsbaugh was in commercial
banking for regional commercial banks in the Chicago, Illinois Metro market and
was a Bank Liquidation Specialist for the Federal Deposit Insurance Corporation
("FDIC"). Mr. Wurtsbaugh earned an MBA from the Graduate School of Business,
Eastern Illinois University, Charleston, Illinois and a B.S. in Finance, with a
concentration in Accounting, from Indiana University, School of Business,
Bloomington, Indiana.
In addition to Messrs. Hitchcock, McDonald and Wurtsbaugh, the following
individuals have agreed to serve on our Board of Directors following the
completion of this offering: Mr. Walter B. Bowden, Mr. Arnold Busse, Mr. Anthony
J. Carbone and Mr. Eugene L. McKenzie. We intend to add at least one other
independent director to the Board of Directors upon the closing of this
offering. We will establish an Audit Committee after completion of this offering
to be comprised of independent members of the Board of Directors.
Walter B. Bowden. Mr. Bowden is currently the President and CEO of DBT Holding
Company, a bank holding company. Prior to joining DBT Holding Company, Mr.
Bowden served as the
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Vice President and Chief Financial Officer of Donald L. Moore, Jr., Inc., a
construction company. During this period from 1988-1995, Mr. Bowden was charged
with management duties and served as the primary marketing person for Donald L.
Moore, Jr., Inc. From 1984 to1988, Mr. Bowden served as the President of Bank
South of Savannah. Mr. Bowden graduated from the Stonier Graduate School of
Banking, Rutgers University and earned his bachelors degree in Economics from
the University of Florida.
Arnold G. Busse. From 1990 to present, Mr. Busse has managed his own investments
and served as a consultant for several private companies. Mr. Busse has been
involved in a variety of entrepreneurial ventures, including an educational
retail and wholesale company, an after-market computer hardware concern and a
consumer company involved in the manufacturing of firearms protection equipment.
From 1988 to 1991, Mr. Busse was the President of Cornelius Communication
Company. Prior to that, Mr. Busse was the President of Guarantee Auto Stores, a
$50 million automotive parts and service company which was later sold to
Nationwise Auto Parts. Prior to Guarantee Auto, Mr. Busse served as the
President of Haag Drug Company from 1972 to 1981. While at Haag Drug Company,
Mr. Busse served on the Board of the National Association of Chain Drug Stores.
Mr. Busse began his career as an accountant with Ernst & Young in Indianapolis
after receiving his accounting degree from Valparaiso University. Mr. Busse has
been the President and former Board Member of Southern Drug Stores Assoc.,
Affiliated Drug Stores Corp. and the Indiana Retail Council. Mr. Busse has
previously served on the following boards: The U.S. Division of J. W. Thornton
Company (a high end chocolate manufacturer based in England), National
Association of Chain Drug Stores, Valparaiso University (1976-1999), most
recently as its Vice Chairman, Voluntary Enterprises, Inc., Wishard Hospital
Foundation, Indianapolis Medical Management and Carmel Lutheran Church. Honors
Mr. Busse has received have been the Sagamore of Wabash in Indiana, Kentucky
Colonel and Honorary Attorney General in the State of Indiana. Mr. Busse is the
father-in-law of J. Roe Hitchcock.
Anthony J. Carbone. Mr. Carbone is the managing partner of the law firm of
Richards & O'Neil, LLP as well as the chairperson of the firms E-Commerce Group.
Mr. Carbone has been with Richards & O'Neil, LLP from 1990 to present. Mr.
Carbone has previously served as the President of the New York Chapter of the
Indiana University Kelley School of Business Alumni Association and now sits on
the Board of Directors of the school's alumni organization. Mr. Carbone is a
certified public accountant. Mr. Carbone received his LLM in Taxation in 1985
from New York University School of Law; his J.D. from Syracuse University Law
School in 1981; his M.S. in Accounting from Syracuse University in 1981; and his
B.S. from Indiana University Kelley School of Business in 1978.
Eugene L. McKenzie. Mr. McKenzie is currently the Director of Finance and
Information Technolgy for the national accounts division of the International
Paper Company's distribution arm, Xpedx. From 1996 to 1999 Mr. McKenzie owned
and operated L&G Holdings, Inc., an entrepreneurial business which acted as a
graphic design and advertising firm. From 1990 to 1996, Mr. McKenzie was a
Financial Manager for Atlantic Richfield Company, an oil and gas company which
was recently acquired by British Petroleum. From 1980 to 1990 Mr. McKenzie
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worked as a Senior Manager for Ernst & Young. Mr. McKenzie is a certified public
accountant with an MBA from the University of Denver.
We will form an active Board of Directors for FanZ Racing, Inc. and FanZ
Merchandising, Inc. We will utilize strategically selected members of each Board
to assist the companies in developing their business plans and implementing
their operational, sales and financial initiatives as well as to provide
guidance to the management and staff of each of the respective entities. The
composition for each respective board will be slightly different as FanZ
Enterprises, Inc. plans to seek internal and external board members that possess
a significant amount of experience in each respective company's operations. As a
result, FanZ Racing, Inc. will recruit individuals that possess experience,
contacts and relationships directly in the racing industry and FanZ
Merchandising, Inc. will focus on individuals that have substantial experience
in the retail and merchandising industries to assist the company in developing
it's merchandising operations.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of our common stock as
of January 31, 2001, and as adjusted to reflect (i) a 100,000 for 1 stock split
to be effected prior to closing this offering, (ii) the issuance of an option to
purchase 500,000 shares of common stock at an exercise price of $3.00 per share
to Michael J. Wurtsbaugh, and (iii) the sale of the maximum number of shares of
common stock (2,500,000) offered by this Prospectus, of each person known by us
to beneficially own 5% or more of the shares of outstanding common stock, each
of our executive officers and directors, and all of our executive officers and
directors as a group. Except as otherwise indicated, all shares are beneficially
owned, and investment and voting power is held by, the persons named as owners.
Percentage Percentage
Amount and Ownership of Ownership of
Name and Address of Nature of Common Stock Common Stock
Beneficial Owner Common Stock Before Offering After Offering
---------------- ------------ --------------- --------------
Jackson Roscoe Motorsports, LLC 10,000,000 95.24% 76.92%(1)
5419 Cayman Drive, Suite 100
Carmel, IN 46033
J. Roe Hitchcock 10,000,000(2) 95.24%(2) 76.92%(2)
3020-I Prosperity Church Road
Suite 293
Charlotte, NC 28269-7197
Frederick L. McDonald II 10,000,000(2) 95.24%(2) 76.92%(2)
3020-I Prosperity Church Road
Suite 293
Charlotte, NC 28269-7197
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Michael J. Wurtsbaugh 500,000(3) 4.76%(3) 3.85%(3)
3020-I Prosperity Church Road
Suite 293
Charlotte, NC 28269-7197
All Executive Officers and 10,500,000 100% 80.77%
Directors as a Group
(3 individuals)
(1) If the minimum number of shares (1,000,000) offered by this Prospectus
are sold and Mr. Wurtsbaugh exercises all of his options, the
Percentage Ownership of Common Stock after this offering for Jackson
Roscoe Motorsports, LLC, J. Roe Hitchcock, and Frederick L. McDonald,
II would be 86.95% and 4.35% for Michael J. Wurtsbaugh and 91.3% for
all executive officers and directors as a group.
(2) Represents shares owned by Jackson Roscoe Motorsports, LLC. Messrs.
Hitchcock and McDonald are the sole members of Jackson Roscoe
Motorsports, LLC.
(3) These shares will be issued to Mr. Wurtsbaugh upon the exercise of
non-qualified stock options granted to Mr. Wurstbaugh on February 28,
2001 at an exercise price of $3.00 per share. Only 250,000 of these
options are currently exercisable and the remaining 250,000 shall vest
in equal annual increments over the four-year period commencing on the
first anniversary of the date of grant.
In addition to the shares of common stock identified in the table above, as of
February 23, 2001, we had 10,000 shares of our preferred stock issued and
outstanding. All of these shares are owned of record by Jackson Roscoe
Motorsports, LLC.
Each of our officers will purchase 2,500 shares of our common stock at an
aggregate offering price of $25,000 in this offering. We also anticipate that a
majority of our directors will purchase 2,500 shares of our common stock at an
aggregate offering price of $25,000 in this offering.
EXECUTIVE COMPENSATION
We currently have an employment agreement with Michael J. Wurtsbaugh, our
proposed CFO and Secretary, which will take effect upon completion of this
offering, and are in negotiations with prospective candidates for the
President/CEO of FanZ Racing, Inc. and FanZ Merchandising, Inc. The table below
sets forth the compensation schedule for our officers upon completion of this
offering. We have two incentive compensation plans: (i) the 2001 Stock Option
Plan of FanZ Enterprises, Inc. and (ii) the 2001 Non-Employee Director Stock
Option Plan of FanZ Enterprises, Inc. that were adopted by our Board of
Directors on April ___, 2001 and are subject to stockholder approval upon
completion of this offering. These plans require us to reserve an amount equal
to 10% of our shares of common stock, after giving effect to this offering, for
issuance upon exercise of options. The 2001 Stock Option Plan of FanZ
Enterprises, Inc. must be approved by our stockholders within twelve (12) months
of its
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implementation. Directors will also be entitled to a stipend of $5,000 per board
meeting attended and $2,500 per committee meeting attended which is held on a
separate day from the regularly scheduled board meeting.
SUMMARY COMPENSATION TABLE
------------------------ --------- --------------------------------- --------------------------
Annual Compensation Long-Term Compensation
Awards
Name and Principal --------------------------------- --------------------------
Position Year Salary Securities Underlying
($) Options/SAR's
(#)
------------------------ --------- --------------------------------- --------------------------
J. Roe Hitchcock, 2001 150,000
Chief Executive
Officer, Treasurer
(1)(2)
------------------------ --------- --------------------------------- --------------------------
Frederick L. McDonald, 2001 150,000
II, President(1)(2)
------------------------ --------- --------------------------------- --------------------------
Michael J. Wurtsbaugh, 2001 175,000 500,000(3)
CFO, Secretary (1)
------------------------ --------- --------------------------------- --------------------------
(1) We intend to implement a bonus plan upon completion of this offering.
All of our officers will be entitled to participate in the bonus plan.
(2) J. Roe Hitchcock and Frederick L. McDonald will each devote a minimum
of eighty percent (80%) of their business time to our operations.
(3) All of these shares are subject to a Non-Qualified Option Agreement
dated February 28, 2001 and will be issued upon the exercise of the
option at an exercise price of $3.00 per share. The option is currently
exercisable for 250,000 with the remaining 250,000 vesting in equal
annual increments over a four-year period commencing on the first
anniversary of the date of grant.
The employment agreement with Mr. Wurtsbaugh, who is currently serving as a
consultant to FanZ Enterprises, Inc., has an initial term of three (3) years
from the completion of this offering, with automatic one-year extensions
thereafter. As compensation for his services as CFO and Secretary of FanZ
Enterprises, Inc., Mr. Wurtsbaugh will receive and annual base salary of
$175,000.00, periodic discretionary bonuses, travel expenses and health and
retirement benefits. Upon termination without cause or a change in ownership of
the company, he will be entitled to a severance equal to double his annual
salary for one year from the termination date.
PLAN OF DISTRIBUTION
We will sell a maximum of 2,500,000 shares of our common stock to the public on
a "best efforts" basis. There can be no assurance that any of these shares will
be sold. This is not an underwritten offering. We have not committed to keep the
registration statement effective for any set period of time. The gross proceeds
to us will be $25,000,000 if all the shares offered are
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sold. No public market currently exists for our shares of common stock, although
we intend to apply to have our shares quoted on the Pink Sheets under the symbol
("FANZ").
Regulation M of the Exchange Act (which replaced Rule 10b-6) may prohibit a
broker-dealer from engaging in any market making activities with regard to a
company's securities. Under Section 242.104 of Regulation M, stabilizing is
prohibited except for the purpose of preventing or retarding a decline in the
market price of a security. We do not plan to engage in any passive stabilizing
activities.
The shares of common stock represented by this offering are being registered
pursuant to Section 12 of the Exchange Act and Section 5 of the Securities Act,
for which an exemption from registration under Section 3 and Section 4 is not
available.
Limited State Registration
We will qualify or register the sale of our shares of common stock in a limited
number of states. We will not accept subscriptions from investors residing in
states other than those states where we have qualified or registered our shares.
If required by state laws, the shares will be offered or sold through registered
or licensed broker-dealers.
Terms of Sale of the Shares
We will be selling our shares through our officers and directors and, where
required by state law, registered or licensed broker-dealers who will be
offering our shares and distributing this Prospectus primarily at the locations
of the 2001 NASCAR sanctioned events and over the Internet.
We will reimburse our officers and directors for expenses incurred in connection
with the offer and sale of our shares, however, no sales commissions will be
paid to any of our officers or directors. Our officers and directors are relying
on Rule 3a4-1 of the Exchange Act as a "safe harbor" from registration as a
broker-dealer in connection with the offer and sales of the shares. In order to
rely on such "safe harbor" provisions provided by Rule 3a4-1, an officer or
director must be in compliance with all of the following:
- he or she must not be subject to a statutory disqualification;
- he or she must not be compensated in connection with such
selling participation by payment of commissions or other
payments based either directly or indirectly on such
transactions;
- he or she must not be an associated person of a broker-dealer;
- he or she must restrict participation to transactions
involving offers and sale of the shares;
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- he or she must perform substantial duties for the issuer after
the close of this offering not connected with transactions in
securities, and not have been associated with a broker or
dealer for the preceding 12 months, and not participate in
selling an offering of securities for any issuer more than
once every 12 months; and
- he or she must restrict participation to written
communications or responses to inquiries of potential
purchasers.
Our officers and directors intend to comply with the guidelines enumerated in
Rule 3a4-1. Each of our officers will purchase 2,500 shares of our common stock
at an aggregate offering price of $25,000 in this offering. We also anticipate
that a majority of our directors will purchase 2,500 shares of our common stock
at an aggregate offering price of $25,000 in this offering.
Prospective investors must purchase a minimum of 25 shares at an
aggregate-offering price of $250. Until we have sold at least 1,000,000 shares,
we will not accept subscriptions for any shares. All proceeds of this offering
will be deposited in an interest bearing escrow account with Firstar Bank, N.A.
We intend to break escrow once subscriptions for the minimum number of our
shares (1,000,000) are received and accepted and will continue to sell our
shares until all shares offered are sold or nine months from the date of this
Prospectus. If we are unable to sell at least 1,000,000 shares before this
offering ends, we will return all funds, with interest, to subscribers promptly
after the end of this offering. We have the right to completely or partially
accept or reject any subscriptions for shares in this offering, for any reason
or no reason. We may decide to terminate this offering at any time or cease
selling efforts at any time prior to such date if our board of directors
determines that there is a better use of funds and management time.
If this offering is not oversubscribed, within a reasonable time after
effectiveness, we plan to accept all subscriptions as soon as reasonably
practicable but in no event until we have received and accepted subscriptions
for the minimum number of shares (1,000,000). If this offering is
oversubscribed, we plan to allocate the shares among subscribers in our
discretion within a reasonable time after effectiveness of this offering. We
anticipate having one or more closings of this offering, the first of which
cannot be held until we are able to sell at least 1,000,000 shares. After that,
we could have multiple closings whenever we receive and accept new
subscriptions.
Investment Procedures
No one may purchase any shares in this offering until it has been declared
effective by the SEC and any applicable state securities commission. Following
the effectiveness of this offering, an investor must complete, date, execute and
deliver to us our subscription agreement together with a check in the amount
corresponding to the cost of the shares to be purchased made payable to "Firstar
Bank, N.A., Escrow Account for FanZ Enterprises, Inc." Once received, we will
forward all funds and a copy of the subscription agreement to our escrow agent
Firstar Bank, N.A.
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Internet Sales
We will post a copy of our final Prospectus, as filed with the SEC, on our web
site, located on the Internet at www.fanzenterprises.com, for investors to view
or download once we have been declared effective with the SEC. We will update
the web site to replace the online Prospectus with any post-effective
amendments.
If an investor indicates that he or she would like to receive any other
amendments to this prospectus electronically, we will e-mail a notice to the
investor that informs him or her that an amendment to this Prospectus has been
filed with the SEC, which will include a hyperlink to the web site as well as
its Internet address. Additionally, upon request, the investor will receive
paper copies of any or all documents from us.
Prior to effectiveness, no one may purchase any shares in this offering.
Following the effectiveness of this offering, in order to purchase shares in
this offering over the Internet, an investor must complete, date, execute and
deliver to us, either a paper copy of our subscription agreement, together with
either a check in the amount corresponding to the cost of the shares to be
purchased, made payable to "Firststar Bank, N.A., Escrow Account for FanZ
Enterprises, Inc.," or a wire transfer of funds for that amount or
alternatively, electronically, by clicking on the "I have read the final
prospectus and I agree to subscribe" button and forwarding the proper payment to
us. An investor may not necessarily be able to purchase all of or any of the
shares that he or she has requested, depending on availability, state blue sky
laws and our discretion. The address and wire transfer instructions for our
escrow agent is indicated in the subscription agreement. Following the
effectiveness of this offering, subscription agreements will be available as
follows:
- on the web site where we have posted our final prospectus;
- unless an investor has specifically requested electronic
delivery of the final prospectus, we will include the
subscription agreement together with a paper copy of the final
prospectus that we send to such investor; and
- an investor can request a paper copy of the subscription
agreement and prospectus by calling us, writing to us, or
e-mailing us at the number or address listed in this
prospectus or on our web site.
On our web site, www.fanzenterprises.com, we have posted our prospectus that
explains our subscription procedure.
Escrow Agreement
Under the terms of our proposed escrow agreement, proceeds from the sale of our
shares will be deposited into an interest bearing account until the minimum
number of shares (1,000,000) are sold. In the event the proceeds from investors
deposited into the escrow account is insufficient to meet our 1,000,000 share
minimum, proceeds will be returned directly to investors by the escrow agent
with interest. The proceeds for subscriptions for our shares which are placed in
escrow will not be subject to claims by our creditors, affiliates or associates
until the proceeds have been
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released to us under the terms of the escrow agreement. We intend to break
escrow and conduct an initial closing once we receive and accept subscriptions
for the minimum number of shares offered (1,000,000).
The securities regulatory authority of any state in which our offering is
registered has the right to inspect and make copies of the records of the escrow
agent relating to the escrowed funds in the manner described in the escrow
agreement.
LEGAL PROCEEDINGS
Neither FanZ Enterprises, Inc., nor any of its subsidiaries are parties to any
pending legal proceeding or litigation, and none of our property is the subject
of a pending legal proceeding.
However, our principals, J. Roe Hitchcock and Frederick L. McDonald II, are
parties to a lawsuit. On March 12, 2001, Durham Whitesell Capital Company, LLC,
Terry Whitesell and Timothy S. Durham filed a complaint in the Superior Court of
Marion County, Indiana against Trailer Equity Holdings, Inc., Fox Capital Fund I
L.P., J. Roe Hitchcock, John Rothschild, Cornerstone Capital Partners, LLC and
Frederick McDonald II alleging (i) default on the payment of certain notes
issued to the plaintiffs in connection with the sale of CT Acquisition Corp. and
its subsidiaries by the plaintiffs to the defendant Trailer Equity Holdings,
Inc., and (ii) fraud and misrepresentation on the part of all the defendants in
connection with the sale transaction. Messrs. Hitchcock, McDonald and
Rothschild, Fox Capital Fund I L.P. and Cornerstone Capital Partners, LLC were
all investors in the purchaser Trailer Equity Holdings, Inc. This action is
currently in the pleading stage and the defendants intend to defend these claims
vigorously and believe that the claims of fraud and misrepresentation are
without merit.
DESCRIPTION OF SECURITIES
The following description is a summary of the material terms of our capital
stock. This summary is subject to and qualified in its entirety by our Restated
Certificate of Incorporation and Bylaws, and by the applicable provisions of
Delaware law.
Capital Stock
Our authorized capital stock consists of 20,000,000 shares of common stock, par
value $.01 per share and 10,000 shares of preferred stock, par value $.01 per
share.
Common Stock
General. We have 20,000,000 authorized shares of common stock, par value $.01
per share, 10,000,000 of which are issued and outstanding. All shares which are
the subject of this Prospectus, when issued and paid for under this offering,
will be validly issued, fully paid and non-assessable.
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Voting Rights. Each share of our common stock entitles the holder to one vote,
either in person or by proxy, at meetings of stockholders. Our board of
directors is elected annually at each annual meeting of the stockholders. The
holders are not permitted to vote their shares cumulatively. Accordingly, the
holders of more than fifty percent (50%) of our voting power can elect all of
our directors.
Dividend Policy. All shares of common stock are entitled to participate ratably
in dividends when, as, and if declared by our board of directors out of the
funds legally available to distribute dividends, after all accrued and unpaid
dividends on the preferred stock have been paid. Any such dividends may be paid
in cash, property or additional shares of common stock. We have not paid any
dividends since our inception and presently anticipate that all earnings, if
any, will be retained for development of our business. We expect that no
dividends on the shares of common stock will be declared in the foreseeable
future. Any future dividends will be subject to the discretion of our board of
directors and will depend upon, among other things, our future earnings,
operating and financial condition, capital requirements, general business
conditions and other pertinent facts. There can be no assurance that any
dividends on the common stock will ever be paid.
Miscellaneous Rights and Provisions. Holders of common stock have no preemptive
or other subscription rights, conversion rights, redemption or sinking fund
provisions. In the event of the liquidation or dissolution, whether voluntary or
involuntary, of FanZ Enterprises, Inc., each share of common stock is entitled
to share ratably in any assets available for distribution to holders of the
equity of FanZ Enterprises, Inc. after satisfaction of all liabilities,
including the payment of the liquidation preference of $600,000 plus accrued and
unpaid dividends on the preferred stock.
Shares Eligible For Future Sale. Upon completion of this offering, we will have
a minimum of 11,000,000 shares of common stock outstanding if the minimum number
of shares offered in this offering are sold, or 12,500,000 shares of common
stock outstanding if the maximum number of shares offered in this offering are
sold. Of these shares, the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, except for
any shares purchased by an "affiliate" of FanZ Enterprises, Inc., and those held
by Jackson Roscoe Motorsports, LLC, which will be subject to the limitations of
Rule 144 adopted under the Securities Act. In general, a person who has a
control relationship with FanZ Enterprises, Inc. is defined as an "affiliate."
All of the remaining shares are deemed to be "restricted securities" as that
term is defined in Rule 144 under the Securities Act.
In general, under Rule 144, commencing 90 days after the date of this
Prospectus, a person, including an affiliate or persons whose shares are
aggregated, who has owned restricted shares of common stock beneficially for at
least one year, is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of one percent of the total number of
outstanding shares of the same class or the average weekly trading volume of our
common stock on all exchanges and/or reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the SEC. Sales
under Rule 144 are also subject to manner of sale provisions, notice
requirements and the availability of current public information about us. A
person who
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has not been an affiliate of FanZ Enterprises, Inc. for at least the three
months immediately preceding the sale and who has beneficially owned shares of
common stock for at least two years is entitled to sell such shares under Rule
144 without regard to the limitations described above.
Transfer Agent. The transfer agent for our common stock will be American Stock
Transfer and Trust Company.
Lock-up Agreement. Jackson Roscoe Motorsports, LLC will hold in the aggregate
upon completion of this offering 10,000,000 shares of our issued and outstanding
common stock and Michael J. Wurtsbaugh will have the right to acquire 500,000
shares of our common stock at an exercise price of $3.00 subject to certain
limitations. These shares of common stock (other than the restrictions
applicable to Mr. Wurtsbaugh's shares under the Non-Qualified Option Agreement)
are not subject to any contractual restriction on the sale of any such shares,
other than a Lock-up Agreement. Beginning on the day this offering is completed,
they are prohibited by the terms of the Lock-up Agreement from selling,
transferring or pledging all of their shares of common stock , although they
retain all of the voting rights attendant on these shares.
According to the terms of the Lock-up Agreement, it will terminate and the
shares will be freely tradeable upon the occurrence of any of the following:
(i) the second anniversary of the completion of this offering;
(ii) the date all funds have been returned to investors if this
offering is terminated; or
(iii) the date the shares become "covered securities" as defined in
Section 18(b)(1) of the Securities Act. These include shares
which are listed as authorized for listing on the New York
Stock Exchange, the Nasdaq National Market, or other national
securities exchanges which the SEC has determined have listing
standards substantially similar to the listing standards
applicable to these securities.
Lack of Public Market for Our Shares. There has not been a public market for our
common stock and the price of our shares may be very volatile. We are not sure
if and when the shares will start trading, and this may not occur until well
after the first closing of this offering. We could decide not to facilitate the
commencement or continuation of a trading market for the common stock for an
extended period. We cannot predict the extent to which investor interest in our
common stock will lead to the development of an active trading market or how
liquid that market might become. Because no underwriter has sold any shares to
their customers or received options, warrants or shares in this offering, there
is currently little incentive for a financial institution to provide aftermarket
support of the shares. Due to this lack of aftermarket support, the price of our
stock following this offering may decrease, and investors may be unable to
resell their shares at or above the initial public offering price.
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Preferred Stock
General. We have 10,000 authorized shares of preferred stock, par value $.01 per
share, 10,000 of which are issued and outstanding and held by Jackson Roscoe
Motorsports, LLC.
Voting Rights. The holders of our preferred stock shall not be entitled to any
voting rights except that an affirmative vote of at least two-thirds of the
issued and outstanding shares of preferred stock, voting as a class, shall be
required to amend any provision of our Restated Certificate of Incorporation
that would otherwise adversely affect the rights and preferences of the
preferred stock or authorize the creation of a new class of stock.
Dividend-Policy. The holders of our preferred stock shall be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefore, cumulative dividends at the rate of 10% per annum,
in preference to and in priority over any dividends upon the common stock.
Conversion and Liquidation Rights. Our preferred stock is not convertible into
shares of common stock. Upon our dissolution, liquidation, or winding up,
holders of our preferred stock will be entitled to receive, after payment or
provision for payment of all our debts and liabilities, prior to and in
preference to any distribution to our other stockholders including the holders
of common stock, the aggregate amount of $600,000 or $60 per share, plus an
amount equal to all accrued and unpaid dividends thereon to the date of
liquidation.
Redemption. We may redeem, at our option, at any time on or after the date which
is six months from the initial closing of this offering, in whole or in part,
the issued and outstanding preferred shares, at an aggregate redemption price of
$600,000 or $60 per share, out of funds legally available for such payment and
such redemption if not otherwise prohibited by the terms of any senior bank
financing. The holders of our preferred stock shall not be entitled to receive
any accrued and unpaid dividends in payment for their shares in the event we
exercise our right to purchase their shares pursuant to the redemption
provisions of our Restated Certificate of Incorporation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 15, 2000, in exchange for $100 in consideration, we issued 100
shares of our common stock to Jackson Roscoe Motorsports, LLC. On December 18,
2000, Jackson Roscoe Motorsports, LLC contributed an additional $50,000 to the
capital of FanZ Enterprises, Inc. for its shares of common stock. On February
23, 2001, Jackson Roscoe Motorsports, LLC contributed an additional $50,000 to
the capital of FanZ Enterprises, Inc., in the form of a Demand Note, for its
shares of common stock. On February 23, 2001, in exchange for $400,000 in
consideration, in the form of a Demand Note, we issued 10,000 shares of our
preferred stock to Jackson Roscoe Motorsports, LLC. Jackson Roscoe Motorsports,
LLC is an entity wholly owned and controlled by J. Roe Hitchcock and Frederick
L. McDonald, II. The preferred shares are redeemable at any time after six
months from the closing of this offering at a price of $600,000 subject to
applicable escrow provisions.
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On January 1, 2001, we entered into an agreement with Stillwater Capital
Advisors, LLC, a Delaware limited liability company, for consulting services. J.
Roe Hitchcock, our Chief Executive Officer, Treasurer and a director of FanZ
Enterprises, Inc., and Frederick L. McDonald, II, our President and also a
director of FanZ Enterprises, Inc., are members of Stillwater Capital Advisors,
LLC and together own a controlling interest in Stillwater Capital Advisors, LLC.
Consulting services will be provided to us for a period of twelve (12) months at
a flat fee of $750,000 to be paid in one lump sum payment.
FanZ Enterprises, Inc. will donate approximately two and one-half percent (2.5%)
of its yearly pre-tax profit to the Jackson Roscoe Foundation. The Jackson
Roscoe Foundation has been set up in memory of Jackson Roscoe Hitchcock. Jackson
was one of the twins born to Joan and J. Roe Hitchcock, our CEO and Treasurer,
on September 13, 1999. Jackson was diagnosed with transposition of the greater
vessels. The Jackson Roscoe Foundation will donate money to programs and help
families of sick children, specifically the children suffering from congenital
heart diseases. The Jackson Roscoe Foundation will be a 501(c)3 corporation and
therefore the donations will be a tax-deductible contribution. Joan Hitchcock
will serve as the President of the Board of Directors of the Jackson Roscoe
Foundation.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No established public trading market exists for our securities.
LEGAL MATTERS
The validity, authorization and issuance of the shares of our common stock
offered hereby will be passed upon for FanZ Enterprises, Inc. by Benesch,
Friedlander, Coplan & Aronoff LLP of Cleveland, Ohio.
EXPERTS
The consolidated financial statements of FanZ Enterprises and Subsidiaries
included in this prospectus and in the registration statement have been audited
by BDO Seidman, LLP, independent certified public accountants, to the extent and
for the period set forth in their report (which contains and explanatory
paragraph regarding the Company's ability to continue as a going concern)
appearing elsewhere herein, and are included in reliance upon such report given
upon the authority of said firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
Our Certificate of Incorporation provides that we will indemnify our officers
and directors to the fullest extent permitted by the Delaware General
Corporation Law ("DGCL"). Our Certificate of Incorporation provides that we will
indemnify and hold harmless each person who was or is threatened to be made a
party to or is otherwise involved in any threatened proceedings by reason
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of the fact that he or she is or was a director or officer of our company or is
or was serving at our request as an officer, director, partner, trustee,
employee, or agent of another entity, against all losses, claims, damages,
liabilities and expenses actually and reasonably incurred or suffered in
connection with such proceeding.
Insofar as indemnification for liabilities arising under the Securities Act, as
amended, may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
officer, director or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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FanZ Enterprises, Inc.
(a development stage company)
Financial Statements
Period from October 20, 2000 (Inception) to January 31, 2001
59
FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
Report of Independent Certified Public Accountants F-2
Financial Statements
Balance sheet F-3
Statement of loss F-4
Statement of cash flow F-5
Summary of significant accounting policies F-6
Notes to financial statements F-7-11
60
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
FanZ Enterprises, Inc.
We have audited the accompanying balance sheet of FanZ Enterprises, Inc. ( a
development stage company) as of January 31, 2001, and the related statements of
loss and cash flow for the period from October 20, 2000 (inception) to January
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FanZ Enterprises, Inc. as of
January 31, 2001, and the results of its operations and cash flows for the
period from October 20, 2000 (inception) to January 31, 2001 in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company's dependence on raising equity, its lack of working
capital and income sources as well as the inherent risks associated with a
start-up business raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Atlanta, Georgia
February 26, 2001
F-2
61
FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JANUARY 31, 2001
ASSETS
CURRENT:
Cash $ 50,100
Deferred offering costs..................................................... 95,935
------------
TOTAL ASSETS................................................................... $ 146,035
===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT:
Accrued expenses............................................................ $ 160,910
-----------
TOTAL LIABILITIES.............................................................. 160,910
-----------
COMMITMENTS
STOCKHOLDER'S DEFICIT
Common stock, $.01 par value - 3,000 shares authorized;
100 issued and outstanding................................................ 1
Additional paid-in capital.................................................. 50,099
Accumulated deficit during the development stage............................ (64,975)
-------------
TOTAL STOCKHOLDER'S DEFICIT.................................................... (14,875)
------------
$ 146,035
============
See accompanying summary of accounting polices and notes to financial
statements.
F-3
62
FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
PERIOD FROM OCTOBER 20, 2000 (INCEPTION) TO JANUARY 31, 2001
Revenues....................................................................... $ -
General and administrative expenses............................................ 64,975
------------
Net loss....................................................................... $ (64,975)
=============
Basic and diluted loss per share............................................... $ (649.75)
============
Basic and diluted weighted average shares outstanding.......................... 100
============
See accompanying summary of accounting polices and notes to financial
statements.
F-4
63
FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOW
PERIOD FROM OCTOBER 20, 2000 (INCEPTION) TO JANUARY 31, 2001
OPERATING ACTIVITIES
Net loss................................................................ $ (64,975)
Adjustment to reconcile net loss to cash used in
operating activities:
Change in current assets and liabilities:
Deferred offering costs........................................... (95,935)
Accrued expenses.................................................. 160,910
------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES -
------------
FINANCING ACTIVITY
Proceeds from the issuance of stock..................................... 50,100
------------
NET INCREASE IN CASH....................................................... 50,100
CASH, BEGINNING OF PERIOD.................................................. -
-----------
CASH, END OF PERIOD........................................................ $ 50,100
===========
See accompanying summary of accounting polices and notes to financial
statements.
F-5
64
FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
FanZ Enterprises, Inc. (a development stage company) (the "Company") is a
Delaware corporation which was formed on October 20, 2000 for the purpose of
controlling and managing a multi-car NASCAR motorsports operation that will
participate in NASCAR sanctioned events. The Company has selected a December
31st year end. The Company has two wholly-owned subsidiaries, also development
stage companies. FanZ Racing, Inc. will own and manage the racing operations
while FanZ Merchandising, Inc. will own, manage, market and distribute all of
the related merchandise for the racing operations. As of January 31, 2001, there
were no transactions in either subsidiary and there were no intercompany
accounts to eliminate.
The Company is in the development stage and its activities to date have seen
limited to organizational activities including developing and implementing its
business plan, hiring personnel, establishing business strategies and
formulating a strategy to raise equity.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash approximate fair value because of the short-term
nature of this item.
REVENUE RECOGNITION
Revenues are expected to be generated from a number of sources including
sponsorships, race purse winnings, race bonus opportunities and merchandise
sales. It is expected that sponsorship revenue will be recognized over the
period of the sponsorship agreement; race purse winnings and bonuses will be
recognized when receipt is assured; and merchandise sales will be recognized
upon shipment, less returns and allowances.
STOCK-BASED COMPENSATION
The Company plans to account for its stock option awards to employees and
directors under the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). Under the intrinsic value based method, compensation cost
is the excess, if any, of the quoted market price of the stock at grant date or
other measurement date over the amount the employee must pay to acquire the
stock. The Company plans to adopt the disclosure provisions of SFAS
123,"Accounting for Stock-Based Compensation" ("SFAS 123") and disclose the pro
forma amounts of net income (loss) as if the fair value based method of
accounting had been applied.
For options awarded to all others, compensation will be recognized for the fair
value of options granted in accordance with SFAS 123 and related
interpretations.
F-6
65
FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
Deferred tax assets and liabilities are recorded for the expected future tax
consequences of temporary differences between the tax basis of assets and
liabilities. Deferred tax assets of approximately $26,000 related primarily to
non-deductible accruals have been offset by a valuation reserve since the
utilization of this asset cannot be assured.
LOSS PER SHARE
Basic and diluted loss per share was computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share". Basic loss per
share is computed by dividing the net loss available to common shareholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period and excludes the effects of potentially dilutive
common shares. Diluted net loss per share gives effect to all potentially
dilutive common shares outstanding during a period. There were no potentially
dilutive common shares outstanding on January 31, 2001, thus basic and dilutive
loss per share are the same for the period presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the 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 period.
Actual results could differ from those estimates.
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FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. This basis of accounting contemplates the
recovery of the Company's assets and the satisfaction of liabilities in the
normal course of business. Since its inception on October 20, 2000, the Company
has been involved in organizational activities. The Company's ultimate ability
to attain profitable operations is dependent upon its obtaining adequate
capitalization to complete its development activities and implementation of its
business plan. The Company is currently preparing to file a registration
statement on Form SB-2 with the Securities and Exchange Commission which would
offer outside investors up to 2,500,000 common shares (after an anticipated
100,000 to 1 common stock split) in a direct participation offering. Monies
raised from this offering will be held in escrow until a minimum of 1,000,000
shares are sold. There can be no assurances as to if and when this registration
statement may become effective or what the ultimate net proceeds from such an
offering might be.
As a result of the foregoing, these circumstances raise substantial doubt about
the Company's ability to continue as a going concern. These financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
2. STOCKHOLDER'S DEFICIT
ISSUANCE OF COMMON STOCK
On October 20, 2000, the Company issued 100 shares of its $.01 par value stock
to Jackson Roscoe Motorsports, LLC (the "sole stockholder" or the "parent"). The
sole stockholder is owned in its entirety by two directors of the Company. As
consideration for the shares issued, the Company received $1 per share. On
December 18, 2000, the Company received additional consideration for these
shares in the amount of $50,000. Subsequent to January 31, 2001, the Company
received another capital contribution from its sole stockholder in the form of a
$50,000 note receivable.
Subsequent to January 31, 2001, the Company increased its authorization of
common stock to 20,000,000 shares in anticipation of the aforementioned 100,000
to 1 split. Had the split occurred on January 31, 2001, basic and diluted loss
per share would have been $(.01) per weighted share outstanding as compared to
the reported amount of $(649.75) per share.
PREFERRED STOCK
Subsequent to January 31, 2001, the company authorized and issued to its sole
stockholder ten thousand (10,000) shares of 10% Cumulative Preferred Stock (the
"Preferred Stock") at $40.00 per share. The par value was $0.01 per share. The
parent, as holder of the shares, is entitled to receive, at the discretion of
the Board of Directors, cumulative dividends at the annual rate of 10% ($4.00
maximum) per share, in priority over any dividends payable upon any of the
Common Stock. As consideration, the Company received a $400,000 note receivable
from the sole stockholder.
In the event of any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the
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FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Company, the holders of Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company that are available for distribution, an
amount in cash equal to $60 per share outstanding, plus an amount in cash equal
to all accrued but unpaid dividends thereon to the date fixed for liquidation.
If the assets of the Company are not sufficient for this, then the holders of
the Preferred Stock shall share ratably in the distribution of assets.
The Company may redeem the Preferred Stock at any time six months after the
closing of a Qualified Public Offering ("public offering"), in whole or from
time to time, at a redemption price of $60 per share (the "Redemption Amount").
A "Qualified Public Offering" in this case is defined as a public offering
registered under the Securities Act of 1933 which ultimately results in gross
proceeds to the Company of at least $10,000,000. The holders of the Preferred
Stock will only be entitled to receive the Redemption Amount, and not the amount
of any accrued and unpaid dividends.
STOCKHOLDER'S DEFICIT ACTIVITY
Accumulated
Common Stock Deficit
------------------------ Additional During the
Paid-In Development
Shares Amount Capital Stage Total
----------- ------------ ------------ ------------- -----------
BALANCE AT OCTOBER 20, 2000 $ - $ - $ - $ - $ -
Net loss - - - (64,975) (64,975)
Issuance of common stock 100 1 99 - 100
Capital contribution - - 50,000 - 50,000
-------- -------- -------- -------- --------
BALANCE AT JANUARY 31, 2001 100 $ 1 $ 50,099 $(64,975) $(14,875)
======== ======== ======== ======== ========
3. RELATED PARTY TRANSACTION
Effective January 1, 2001, the Company entered into a 12 month agreement for
consulting services with Stillwater Capital Advisors, LLC, a company partially
owned by the shareholders of the parent company. The amount accrued at January
31, 2001 under this agreement was $62,500. The Company is contractually
obligated to Stillwater Capital Advisors, LLC for an additional $687,500.
4. COMMITMENTS
Subsequent to January 31, 2001, the Company agreed in principle to lease land
and property to be used as its principal place of business for annual rent of
approximately $60,000 under a lease term of one year with an option to renew for
three consecutive periods of one year each. The lessor is a
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FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
consultant to the Company's parent and the commencement of this lease is
contingent upon the Company's closing of its public offering.
5. STOCK OPTIONS
Subsequent to January 31, 2001, the company adopted two stock option plans: the
2001 Stock Option Plan (the "Plan") and the 2001 Non-Employee Director Stock
Option Plan (the "Non-Employee Plan"). Under the terms of the Plan, a maximum of
9% of the number of outstanding shares of the Company's Common Stock, after
giving effect to the close of Company's public offering, may be granted to its
officers, key employees and consultants. Options granted under this Plan may be
(a) Incentive Stock Options, (b) Non-Qualified Stock Options or (c) a
combination of the foregoing. No Incentive Stock Options may be granted to a
person who is not an employee. The option price per share of any stock option
granted under the Plan shall not be less than the fair market value of the
Common Stock at the date of the grant. In the case of an Incentive Stock Option
grant, the option price per share shall not be less than 110% of the fair market
value of the shares at the date of grant should that employee hold more than 10%
of the total combined voting power of all classes of stock of the Company, its
parent or subsidiaries at the grant date. In general, the options shall be
exercisable for a term of not more than ten years.
Under the terms of the Non-Employee Plan, options may be granted equal to a
maximum of 1% of the number of outstanding shares of the Company's Common Stock,
after giving effect to the close of Company's public offering. The option price
shall be the fair market value at the date of grant, and shall, in general, be
exercisable for a term of not more than ten years.
Subsequent to January 31, 2001, (after giving effect to the anticipated 100,000
to 1 split discussed in Notes 1 and 2) the Company is expected to grant 500,000
options to a consultant, expected to become the Company's Chief Financial
Officer, at an exercise price of $3.00 per share of which 250,000 vest on the
grant date and the remaining vest over a four year period commencing on the
first anniversary of the grant date. In accordance with FAS 123 and related
interpretations, compensation expense for the fair value of these options will
be recognized over the period in which these options are earned. Assuming a fair
market value of $10 per share (the projected selling price of shares in the
aforementioned public offering), the Company, therefore, expects to incur
approximately $3,800,000 of non-cash compensation expense in the future. It is
expected that $1,900,000 will be recognized when the options are granted while
the remaining will be recognized ratably over the four year period from the
grant date. The fair value approach to the valuation of these options requires
that the unvested shares be "marked to market" at the end of each reporting
period. As such, if the fair value of the options change in the future, then
related current and future non-cash compensation expense will change
accordingly. When and if the consultant becomes an employee, a new measurement
date will be required resulting in a remeasurement of the value of the unearned
options using the intrinsic value method. This grant is separate and distinct
from either of the stock option plans described above.
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FANZ ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
6. EMPLOYMENT AGREEMENTS
The Company and its parent are committed to certain employment and consulting
contracts to multiple key individuals. All were executed subsequent to January
31, 2001 and the employment agreement requires the close of the Company's public
offering to become effective.
7. SEGMENT INFORMATION
The Company plans to adopt SFAS 131, which establishes standards for the way
that public business enterprises report information about operating segments in
their financial statements. The standard defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance.
The Company expects that it will have two reportable segments: the racing
segment which will operate the race teams and the merchandising segment which
will own, manage, market and distribute related merchandise.
8. CONCENTRATION OF CREDIT RISK
Financial instruments, which potentially subject the Company to concentration of
credit risk, consist primarily of cash. The Company's cash at January 31, 2001
was not deposited at a financial institution, therefore it was not FDIC insured
at that time. The Company has subsequently opened a bank account at a high
quality financial institution.
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PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification Of Directors And Officers
Our Restated Certificate of Incorporation provides that the liability of our
directors shall be eliminated or limited to the fullest extent permitted by the
DGCL. Under the DGCL, the directors have a fiduciary duty to us which is not
eliminated by this provision of our Restated Certificate of Incorporation and,
in appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available.
Section 145 of the DGCL empowers a corporation to indemnify its directors and
officers to cover liability arising out of their capacity or status as directors
and officers, provided that this provision shall not eliminate or limit the
liability of a director:
- for any breach of the director's duty of loyalty to us or our
stockholders;
- for acts or omissions which are found by a court of competent
jurisdiction to not be in good faith or which involve
intentional misconduct or a knowing violation of law;
- under Section 174 of the DGCL; or
- for any transaction from which the director derived an
improper personal benefit.
The DGCL provides further that the indemnification permitted thereunder shall
not be deemed exclusive of any other rights to which the directors and officers
may be entitled under the corporation's bylaws, any agreement, a vote of
stockholders or otherwise. Our Restated Certificate of Incorporation eliminates
the personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the DGCL and provides that we shall fully indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that that person is or was our director
or officer, or is or was serving at our request as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise. This indemnification shall be against expenses including
attorney's fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by the indemnities in connection with such action, suit or
proceeding.
At present, there is no pending litigation or proceeding involving any director,
officer, employee or agent as to which indemnification will be required or
permitted under our Restated Certificate of Incorporation or under the
indemnification agreements referred to above. We are not aware of any threatened
litigation or proceeding that may result in a claim for this type of
indemnification.
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Item 25. Other Expenses Of Issuance And Distribution
The securities are being registered in connection with the public offering of up
to 2,500,000 shares of our common stock, and all of the following expenses will
be borne by FanZ Enterprises, Inc. The amounts set forth are estimates except
for the SEC registration fee:
Amount To Be Paid
- -----------------
SEC registration fee $6,250.00
State Blue Sky Fees $67,310.00
Printing and engraving expenses $100,000.00
Attorneys' fees and expenses $210,000.00
Accountants' fees and expenses $50,000
Transfer agent's and registrar's fees and expenses(1) $303,500.00
Miscellaneous $10,000.00
-----------
Total $747,060.00
===========
- ------------------
(1) Transfer Agent fees are based on an estimate of $3,500 for services related
to this offering and one year of transfer agent services for 100,000
Stockholders at $.25 per month. This estimate does not include out-of-pocket
expenses incurred by the Transfer Agent.
Item 26. Recent Sales Of Unregistered Securities
On November 15, 2000, we issued 100 shares of our common stock to Jackson Roscoe
Motorsports, LLC for a total consideration of $100,100, $50,000 of which is
represented by a Demand Note. On February 23, 2001 we issued 10,000 shares of
our preferred stock to Jackson Roscoe Motorsports, LLC for total consideration
of $400,000, all of which is represented by a Demand Note. Both issuances were
private transactions that were exempt from the registration requirements of the
Securities Act, as amended, pursuant to the exemption found in Section 4(2) of
the Securities Act, as amended. On February 23, 2001 we increased the authorized
number of our common shares to 20,000,000. On April ___, 2001, we authorized a
100,000 for 1 stock split pursuant to which our stockholders received 100,000
shares of our common stock for every one share of common stock owned. This split
was also exempt from the registration requirements of the Securities Act, as
amended.
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Item 27. Exhibits
The following exhibits are filed as part of this Registration Statement.
Exhibit. Page
No. No. Description
--------- --- ------------
3(i) ____ Restated Certificate of Incorporation of
FanZ Enterprises, Inc., filed with the
Secretary of State of Delaware on February
23, 2001.
3(ii) ____ By-Laws of FanZ Enterprises, Inc. adopted on
November 15, 2000.
4 ____ Specimen Stock Certificate.
5 ____ Opinion Letter dated April 5, 2001.
10(i) ____ Form of Subscription Agreement.
10(ii) ____ 2001 Stock Option Plan of FanZ Enterprises,
Inc.
10(iii) ____ 2001 Non-Employee Director Stock Option Plan
of FanZ Enterprises, Inc.
10(iv) ____ Employment Agreement between FanZ
Enterprises, Inc. and Michael J. Wurtsbaugh.
10(v) ____ Option Agreement between FanZ Enterprises,
Inc. and Michael J. Wurtsbaugh.
10(vi) ____ Letter of Intent Agreement between Jackson
Roscoe Motorsports, LLC and Sharp Racing,
Inc.
10(vii) ____ Form of Lock-up Agreement.
10(viii) ____ Consulting Agreement between FanZ
Enterprises, Inc. and Stillwater Capital
Advisors, LLC.
21 ____ Subsidiaries of FanZ Enterprises, Inc.
23(i) ____ Consent of Certified Public Accountants
dated April 4, 2001.
23(ii) ____ Consent of Counsel (See Exhibit 5).
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23(iii) ____ Consent of Board Nominees.
99 ____ Escrow Agreement.
Item 28. Undertakings
The Registrant hereby undertakes that it will:
- File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
Include any prospectus required by Section 10(a)(3)
of the Securities Act;
Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental
change in the information in the registration
statement; and
Include any additional or changed material
information on the plan of distribution.
- File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of this
offering.
- For determining liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part
of the Registration Statement pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act as part of this
registration statement as of the time the SEC declared it
effective.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant,
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
In the event a claim for indemnification against such liabilities (other than
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the city of Ann Arbor, State of Michigan, on April 4, 2001.
FanZ Enterprises, Inc.
By: /s/ Frederick L. McDonald II
----------------------------
Frederick L. McDonald II, President
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated.
Signature Title Date
--------- ----- ----
/s/ J. Roe Hitchcock Chief Executive Officer, April 4, 2001
- -------------------- Treasurer, Director
J. Roe Hitchcock
/s/ Frederick L. McDonald II President, Director April 4, 2001
- ----------------------------
Frederick L. McDonald II
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