Amendment to Annual Report — Small Business — Form 10-KSB
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10KSB/A — Amendment to Annual Report — Small Business
Document Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 000-50104
JANE BUTEL CORPORATION
(Name of small business issuer in its charter)
Florida 65-0327060
----------------------------- --------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
620 North Denning Drive, Suite 100
Winter Park, FL 32789
(Address of principal executive offices)
(407) 622-5999
(Issuer's telephone number)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT: COMMON
STOCK
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
The Issuer had $221,771 in revenues for the fiscal year ended June 30, 2005.
As of June 30, 2005, the aggregate market value of the Issuer's common stock
held by non-affiliates was $2,100,000 (based on the closing price of $0.01 per
share of common stock on June 30, 2005 as reported by the Over-the-Counter
Bulletin Board).
As of June 30, 2005, we had 252,798 shares of common stock and 715,000 shares of
Class A preferred stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
[Download Table]
TABLE OF CONTENTS
PART I PAGE NO.
ITEM 1. DESCRIPTION OF BUSINESS. 1
ITEM 2. DESCRIPTION OF PROPERTY. 3
ITEM 3. LEGAL PROCEEDINGS. 3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 3
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. 4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. 4
ITEM 7. FINANCIAL STATEMENTS. 9
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. 19
ITEM 8A. CONTROLS AND PROCEDURES. 19
ITEM 8B. OTHER INFORMATION. 19
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. 20
ITEM 10. EXECUTIVE COMPENSATION. 20
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS. 21
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. 21
ITEM 13. EXHIBITS. 22
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. 23
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Overview
June and July of 2005 was a period of fundamental change for us. In the third
quarter, we faced substantial uncertainty. Our liabilities substantially
exceeded our assets and we had reduced our headcount as a result of not being
able to meet our escalating expenses. Additionally, we were not able to
consummate our Investment Agreement with Dutchess Private Equities Fund mainly
because the Registration Statement we filed with the Securities and Exchange
Commission was not declared effective. We attempted to locate other sources of
funds but we were not successful. As a result, we were unable to access
external funding and we could not pay our debts.
1
Additionally, in March 2005, one of our investors, 21st Century, demanded that
we issue warrants for 30,000,000 shares of our common stock pursuant to a
Warrant Agreement that we had with them. We did not issue the shares at that
time due to a disagreement in the calculation of the number of shares and
other terms in the Warrant Agreement. On May 4, 2005, a letter was issued from
the law offices of Dominic P. Gentile, Ltd. stating that we were in default of
the Warrant Agreement, as amended. The letter stated that we owed 21st Century
$3.1 million in cash. We attempted to negotiate a settlement with 21st Century
but we were not initially successful. However, in June 2005, we were able to
negotiate a settlement between our company, Dutchess Private Equities Fund II
and 21st Century. With the assistance of Dutchess, we were also able to
negotiate settlements for most of our other debts. As part of this process, we
agreed to transfer the remaining assets and certain liabilities in our company
to Jane Butel, an individual. Additionally, in late June, all of our original
board members resigned and they were replaced by Theodore Smith and Doug
D'Agata, who are affiliated with Dutchess. In June 2005, Jane Butel resigned as
our Chief Executive Officer and Doug D'Agata was appointed Interim Chief
Executive Offer. At June 30, 2005, the last day of our fiscal year, we had no
operations.
In July 2005, subsequent to the end of our fiscal year, we entered into an
Agreement and Plan of Reorganization with Bootie Beer, the owners of the
outstanding pre-merger shares of common stock of Bootie Beer, and Dutchess
Advisors, LLC. As a result of this agreement, we merged with Bootie Beer
Company, a Florida corporation.
History
We incorporated in the State of Florida in April 1992 under the name Institute
for Strategic Business Development, Inc. to engage in the business of providing
business consulting, planning and counseling services to small and medium sized
businesses and as a resource center for business consultants. In December 1996,
we acquired Earth Labs, Inc., a health and beauty aid company, and changed our
name to Earth Labs, Inc. in January 1997. We cancelled the acquisition of this
company later in 1997 with the consent of the shareholders of this company and
the shares we issued were returned and cancelled. In January 1999, we acquired a
majority interest in U'i Hawaii, Inc., a Hawaii corporation, which was seeking
to develop a line of skin care products. This company was unable to bring any
products to market due to insufficient working capital. We sold this company in
2002. In September 2002, we acquired Tex-Mex, Inc., a New Mexico corporation. In
October 2002, we changed our name to Jane Butel Corporation. In June 2005, our
liabilities substantially exceeded our assets and our primary investor demanded
repayment pursuant to a Warrant Agreement that we had with them. We were unable
to continue our business and, as a result, entered into a series of transactions
to settle our debts. Additionally, as part of those agreements, we transferred
our remaining assets and certain liabilities to Jane Butel, an individual. In
July 2005, subsequent to the end of our fiscal year, we entered into an
Agreement and Plan of Reorganization with Bootie Beer, the owners of the
outstanding pre-merger shares of common stock of Bootie Beer, and Dutchess
Advisors, LLC. As a result of this agreement, we merged with Bootie Beer
Company, a Florida corporation.
Our Discontinued Business
At June 30, 2005, we had no operations. In the fourth quarter, our major source
of revenue was from our cooking school. The sale of books, videos, and food
products accounted for a small portion of our revenue. We did not receive any
revenues from syndication or licensing rights for broadcast of our television
series.
The Jane Butel Southwestern Cooking School has a variety of programs to teach
Southwestern cuisine preparation. The cooking school is located in the La Posada
Hotel in Albuquerque, New Mexico, which has been designated as a National
Historic Landmark. We also use our cooking school location as the production
studio for our television programs. The following table sets forth the fees for
the major programs that the school offers:
[Download Table]
Course Days Tuition
______ ____ _______
Full Participation week long 5 $2100, includes 5 nights lodging
based on double occupancy
Full Participation weekend 3 $1100, includes 3 nights lodging
based on double occupancy
Day class 1 $350
week long or weekend
Full participation session 1 $150
Demonstration classes 1 $40 to $55, depending on class
2
All of our programs require payment in full prior to taking the course. We do
not offer financial aid. Our school features six cooking areas so we can
accommodate up to 18 students in each of our full participation courses. In our
full participation courses each student can produce each of our recipes since
there are no more than three students at each of our fully equipped cooking
areas. Our demonstration programs can accommodate up to 50 students.
Retail sales
Jane Butel has authored 16 books on Southwestern cooking which are available for
sale at our cooking school and our website. We purchased these books at author's
discount from the publishers who are unaffiliated with Jane Butel Corporation.
The retail area at the cooking school features pure Pecos Valley Spice Co.,
chilies, herbs, spices, corn products, and hard-to-find equipment and gadgets
for Southwestern cooking. Native pottery, Southwestern serving dishes and ready
to eat items such as salsas are also stocked, as well as the Jane Butel videos.
Also, we sell our food products, cookbooks and cooking videos at our website
www.janebutel.com and www.pecosvalley.com.
Jane Butel Cooking Videos
We have produced and offered for sale 12 videos each of which features
preparation of Southwestern traditional menus. Information about Southwestern
culture and history is presented along with preparation of the featured recipes.
Each video is sold for $19.95 and the entire video collection is available for
$199.95. They can be purchased at the school or on our web site. We pay the
production company 10% of our revenues from sales of the videos until we have
paid a total of $12,000.
The Company sold all assets and rights to the videos on June 21, 2005, to Jane
Butel, an individual. As such, the videos, and all related accumulated
amortization were written-off on June 21, 2005 as part of the sale of these
assets.
EMPLOYEES
On June 30, 2005, we had an Interim Chief Executive Officer and no other
employees.
ITEM 2. DESCRIPTION OF PROPERTY.
In March 2004, we entered into a three year lease with the Simms building for
corporate office space. The space consists of 3,684 square feet at $4,500 per
month. At June 30, 2005, we had entered into negotiations to terminate the
lease early. Currently, we have settled the lease and entered into a payment
plan with the landlord for a percentage of the remaining amount due on the
lease.
ITEM 3. LEGAL PROCEEDINGS.
On March 10, 2005, James Scott Clapp, a former instructor and manager at our
cooking school, filed a suit against us in the State of New Mexico, County of
Bernalillo, Second Judicial District Court (No. CV-200502007), alleging claims
for breach of contract, breach of the implied covenant of good faith and fair
dealing, fraud, intentional infliction of emotional distress, and constructive
discharge. In summary, the complaint alleges Mr. Clapp was not paid some of the
wages and moving expenses he thought he was owed, that he was promised some
10,000 shares of our stock, and that he was tricked out of some or all of these
things in an outrageous and malicious fashion. He seeks unspecified compensatory
and punitive damages, plus attorney's fees and interest. We dispute the claim
and intend to vigorously defend the same. We are also currently in negotiations
with Mr. Clapp to settle the claim on mutually acceptable grounds.
On April 1, 2005, Peter H. Rea, a former judge who surrendered and was disbarred
in Missouri on January 13, 1999, filed suit against us and Jane Butel personally
as well as over a dozen other named entities and up to 130 John Does in the
Circuit Court of Taney County, Missouri (Case No. 05AF-CV00292). His suit is
styled "A Petition for damages and punitive damages exceeding $15,000,000." The
complaint mentions an action for fraud and deceit, civil conspiracy, tortious
destruction of ownership interests in lands, contracts, security interest,
breach of contract, and violation of civil rights by the defendants acting in
concert. In summary, the complaint seeks to clear the former judge's good name
in relation to "the disappearance of funds from the Hedrick Estate," of which he
claims he was falsely accused, and he seeks recompense for being tricked into
certain loans and investments, the benefits of which he alleges were enjoyed in
part by us and others acting in concert. We dispute the claim and intend to
vigorously defend the same. Our defense will likely include a denial of any
material involvement with or connection with Mr. Rea or any of his interests in
Missouri. A motion for dismissal was filed May 11, 2005.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the period
covered by this report.
3
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Shareholders
As of June 30, 3005, there were approximately 90 holders of record of our common
stock.
Dividend Policy
We have never declared a cash dividend on our common stock and we do not
anticipate that we will pay cash dividends in the foreseeable future. Any future
determination to pay cash dividends will be at the discretion of our board of
directors and will depend upon our financial condition, operating results,
capital requirements, restrictions contained in our agreements and other factors
which our board of directors deems relevant.
RECENT SALES OF UNREGISTERED SECURITIES
On June 10, 2005, we issued convertible debentures of $256,105 to Jane Butel,
and individual. The purchaser of the convertible debentures is entitled to
convert the face amount of the debentures plus accrued interest into our common
stock at 100% of the average closing bid prices on the day of conversion. The
debenture is only convertible at 1/24th of the Face Amount after twelve months
from the issuance date. The convertible debentures shall pay 6% cumulative
interest in cash or common stock, at the purchaser's option, at the time of each
conversion. The debentures are payable on June 10, 2008. Currently the balance
on the debenture is $231,105.
On June 16, 2005, we issued convertible debentures of $66,000 to Dutchess
Private Equities Fund, II, LP. The purchaser of the convertible debentures is
entitled to convert the face amount of the debentures plus accrued interest into
our common stock at $1.00 per share. The convertible debentures shall pay 10%
cumulative interest in cash or common stock, at the purchaser's option, at the
time of each conversion. The debentures are payable on June 16, 2008.
On June 21, 2005, we issued convertible debentures of $710,000 to 21st Century
Technologies. The purchaser of the convertible debentures is entitled to convert
the face amount of the debentures plus accrued interest into our common stock at
100% of the average closing bid prices on the day of conversion. The debenture
is only convertible at 1/12th of the Face Amount after twelve months from the
issuance date. The convertible debentures shall pay 8% cumulative interest in
cash or common stock, at the purchaser's option, at the time of each conversion.
The debentures are payable on June 21, 2008.
Common Equity
Our common stock began trading over the counter on July 14, 2004 and is quoted
on the OTC Bulletin Board under the symbol "JNBU".
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of our results of operations and liquidity and capital
resources should be read in conjunction with our Financial Statements and
related notes thereto appearing elsewhere.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING MATTERS
This report contains forward-looking statements that involve risks and
uncertainties. Forward-looking statements are those statements that are not
based on historical information but relate to future operations, strategies,
financial results or other developments. Forward-looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control. Certain statements contained in this Form
10-KSB, including, without limitation, statements containing the words
"believe,", "anticipate," "estimate," "intend," "expect," and words of similar
import, constitute forward-looking statements.
You should be aware that our actual results could differ materially from those
contained in the forward-looking statements due to a number of factors. You
should not place undue reliance on these forward-looking statements. We do not
intend to update any forward-looking statements as a result of new information,
future events or developments, except as required by law.
On June 21, 2005, we issued convertible debentures of $710,000 to 21st Century
Technologies. The purchaser of the convertible debentures is entitled to convert
the face amount of the debentures plus accrued interest into our common stock at
100% of the closing bid price on the day of conversion. The debenture is only
convertible at 1/12th of the Face Amount after twelve months from the issuance
date. The convertible debentures shall pay 8% cumulative interest in cash or
common stock, at the purchaser's option, at the time of each conversion. The
debentures are payable on June 21, 2008.
4
OVERVIEW
June and July of 2005 was a period of fundamental change for us. In the third
quarter, we faced substantial uncertainty. Our liabilities substantially
exceeded our assets and we had reduced our headcount as a result of not being
able to meet our escalating expenses. Additionally, we were not able to
consummate our Investment Agreement with Dutchess Private Equities Fund mainly
because the Registration Statement we filed with the Securities and Exchange
Commission was not declared effective. We attempted to locate other sources of
funds but we were not successful. As a result, we were unable to access external
funding and we could not pay our debts, and therefore discontinued our
operations.
Additionally, in March 2005, one of our investors, 21st Century, demanded that
we issue warrants for 30,000,000 shares of our common stock pursuant to a
Warrant Agreement that we had with them. We did not issue the shares at that
time due to a disagreement in the calculation of the number of shares and
other terms in the Warrant Agreement. On May 4, 2005, a letter was issued from
the law offices of Dominic P. Gentile, Ltd. stating that we were in default of
the Warrant Agreement, as amended. The letter stated that we owed 21st Century
$3.1 million in cash. We attempted to negotiate a settlement with 21st Century
but we were not initially successful. However, in June 2005, we were able to
negotiate a settlement between our company, Dutchess Private Equities Fund II
and 21st Century. With the assistance of Dutchess, we were also able to
negotiate settlements for most of our other debts. As part of this process, we
agreed to transfer the remaining assets and certain liabilities in our company
to Jane Butel, an individual. Additionally, in late June, all of our original
board members resigned and they were replaced by Theodore Smith and Doug
D'Agata, who are affiliated with Dutchess. In June 2005, Jane Butel resigned as
our Chief Executive Officer and Doug D'Agata was appointed Interim Chief
Executive Offer. At June 30, 2005, the last day of our fiscal year, we had no
operations.
In July 2005, subsequent to the end of our fiscal year, we entered into an
Agreement and Plan of Reorganization with Bootie Beer, the owners of the
outstanding pre-merger shares of common stock of Bootie Beer, and Dutchess
Advisors, LLC. As a result of this agreement, we merged with Bootie Beer
Company, a Florida corporation.
CRITICAL ACCOUNTING POLICIES
------------------------------
We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations are discussed
throughout this section where such policies affect our reported and expected
financial results. Our preparation of our Consolidated Financial Statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at
the date of our financial statements, and the reported amounts of revenue and
expenses during the reporting period. There can be no assurance that actual
results will not differ from those estimates.
Our accounting policies that are the most important to the portrayal of our
financial condition and results, and which require the highest degree of
management judgment relate to revenue recognition, the provision for
uncollectible accounts receivable, property and equipment, advertising and
issuance of shares for service.
Revenue Recognition
--------------------
We recognize income when the products are shipped, and when the service is
provided. We apply the provisions of the SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition in Financial Statements" which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements.
Bulletin No. 104 outlines the basic criteria that must be met to recognize
revenue and provides guidance for the disclosure of revenue recognition
policies. Our revenue recognition policy for sale of products is in compliance
with Bulletin No. 104. Revenue from the sale of products is recognized when a
formal arrangement exists, the price is fixed, or determinable, the delivery is
completed and collectibility is reasonably assured. Generally, we extend credit
to our customers and do not require collateral. We perform ongoing credit
evaluations of our customers and historic credit losses have been within
management's expectations.
Allowance for Doubtful Accounts
----------------------------------
We estimate the likelihood of customer payment based principally on a customer's
credit history and our general credit experience. To the extent our estimates
differ materially from actual results, the timing and amount of revenues
recognized or bad debt expense recorded may be materially misstated during a
reporting period.
Property and Equipment
------------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets, e.g.
computers (5 years), software (3 years), office equipment and furniture (3-7
years). Leasehold improvements are amortized over the remaining lease term at
the date of installation. Expenditures for maintenance and repairs are charged
to expense as incurred.
Advertising Costs
------------------
We expense advertising costs as incurred.
5
Stock-based Compensation
-------------------------
We account for the issuance of our common stock or other equity instruments to
acquire goods and services based on the fair value of the goods and services or
the fair value of the equity instrument at the time of issuance, whichever is
more reliably measurable.
Discontinued Operations
-------------------------
In 2005, the Company determined to discontinue its existing operations, and to
sell the assets to Jane Butel. On June 21, 2005, the Company completed the sale
of its assets for total cash proceeds of $500. The assets sold consisted
primarily of accounts receivable, inventories, property and equipment, and other
assets. The buyer also assumed certain accounts payable and accrued liabilities.
In 2005, the Company recognized a loss on disposal of $170,045 on the sale of
these assets.
Reclassifications of Prior Period Amounts
-----------------------------------------
Certain amounts in the prior period presented have been reclassified to conform
to the current period financial statement presentation. These reclassifications
have no effect on previously reported net income.
During the year ended June 30, 2005, the Company changed the presentation of
amounts which had been previously reported in 2004 as contributions to capital
($200,000) and warrants issued ($103,081) to long-term debt ($303,108).
Going Concern
--------------
Our audited financial statements for the twelve months ended June 30, 2005,
reflect a net loss of ($1,453,835) and negative cash flows from operations of
($426,176). These conditions indicate a need to acquire sufficient additional
funding or alternative sources of capital to meet our working capital needs. We
have raised capital by issuing convertible debentures and anticipate that we
will continue to be able to do so in the foreseeable future. Additionally, we
are currently raising capital by issuing convertible debentures and plan to
raise money through our Equity Line of Credit. We believe this will generate the
additional cash required to fund our operations and allow us to meet our
obligations.
YEAR ENDED JUNE 30, 2005 AS COMPARED TO YEAR ENDED JUNE 30, 2004
NET REVENUES FOR DISCONTINUED OPERATIONS
Net revenues for the year ended June 30, 2005 were $221,771 compared to $189,237
for the year ended June 30, 2004. The slight increase in revenue is due to an
increase in book sales for the year. In the fourth quarter, our major source of
revenue was from our cooking school. The sale of books, videos, and food
products accountant for a small portion of our revenue. We did not receive any
revenues from syndication or licensing rights for broadcast of our television
series. At June 30, 2005, we transferred or sold all of our assets.
OPERATING EXPENSES
Operating Expenses for the year ended June 30, 2005 were $1,394,041 compared to
$525,287 for the year ended June 30, 2004. The increase was due in large part to
an increase in officer compensation of $536,250. At June 30, 2005, we had only
one employee, our Interim Chief Executive Officer. Our Interim Chief Executive
Officer did not receive compensation during his tenure.
NET LOSS
Net Loss for the year ended June 30, 2005 was ($1,453,835) compared to
($460,615) for the year ended June 30, 2004 due to increased Operating Expenses
discussed above.
BASIC AND DILUTED LOSS PER SHARE
Our basic and diluted loss per share for the year ended June 30, 2005 was
($6.04) compared to ($2.03) for the year ended June 30, 2004. The increase is
due to the increase in officer compensation during 2005.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2005, our total current assets were $7,115 and our total current
liabilities were $181,455. Our Stockholder's Equity (Deficit) at June 30, 2005
was ($1,315,541).
As of June 30, 2005, we had debt of $1,141,201. We make annual or semi-annual
interest payments on the debt under our convertible notes, which are due in
2008. Our debt could limit our ability to obtain additional financing for
working capital, capital expenditures, debt service requirements, or other
purposes in the future, as needed; to plan for, or react to, changes in
technology and in our business and competition; and to react in the event of an
economic downturn.
We may not be able to meet our debt service obligations. If we are unable to
generate sufficient cash flow or obtain funds for required payments, or if we
fail to comply with covenants in our debt, we will be in default.
6
FINANCING ACTIVITIES
On June 10, 2005, we issued convertible debentures of $256,105 to Jane Butel, an
individual. The purchaser of the convertible debentures is entitled to convert
the face amount of the debentures plus accrued interest into our common stock at
100% of the closing bid price on the day of conversion. The debenture is only
convertible at 1/24th of the Face Amount after twelve months from the issuance
date. The convertible debentures shall pay 6% cumulative interest in cash or
common stock, at the purchaser's option, at the time of each conversion. The
debentures are payable on June 10, 2008.
On June 16, 2005, we issued convertible debentures of $66,000 to Dutchess
Private Equities Fund, II, LP. The holder of the convertible debentures can
convert the face value of the convertible debentures plus accrued interest into
shares of our common stock at $1.00 per share. The convertible debentures shall
pay 10% cumulative interest, payable in cash or common stock, at the purchaser's
option, at the time of each conversion. This debenture was issued at a discount
of $11,000. The discount is to be amortized over the five year term of the
convertible debentures. Amortization of $92 was recorded and included in
interest expense for the three months ended June 30, 2005. The debentures are
payable on June 16, 2010.
On June 21, 2005, we issued convertible debentures of $710,000 to 21st Century
Technologies. The purchaser of the convertible debentures is entitled to convert
the face amount of the debentures plus accrued interest into our common stock at
100% of the closing bid price on the day of conversion. The debenture is only
convertible at 1/12th of the Face Amount after twelve months from the issuance
date. The convertible debentures shall pay 8% cumulative interest in cash or
common stock, at the purchaser's option, at the time of each conversion. The
debentures are payable on June 21, 2008.
RISK FACTORS
WE EXPERIENCED A FUNDAMENTAL CHANGE IN OUR OPERATIONS AND WE MAY NOT BE ABLE TO
EXECUTE OUR NEW BUSINESS PLAN.
At June 30, 2005, which is the end of our fiscal year, we had sold or
transferred all of our assets and operations. In July 2005, subsequent to the
end of our fiscal year, we entered into an Agreement and Plan of Reorganization
with Bootie Beer, the owners of the outstanding pre-merger shares of common
stock of Bootie Beer, and Dutchess Advisors, LLC. As a result of this
agreement, we merged with Bootie Beer Company, a Florida corporation. We may
not be able to successfully execute our business plan with Bootie Beer.
BECAUSE WE HAVE HAD A FUNDAMENTAL CHANGE IN OUR BUSINESS, OUR EARNINGS AND
OPERATIONS WILL FLUCTUATE SIGNIFICANTLY AND OUR STOCK PRICE MAY DECLINE.
During the fourth quarter, we sold or transferred substantially all of our
assets. In the subsequent quarter, we merged with Bootie Beer. As part of
these transactions, we restructured our debt. Additionally, our revenues, if
any, will come from substantially different operations than we have had in the
past. Given these fundamental changes in our finances and operations, our
quarterly financial reports will most likely reflect substantial fluctuations.
These fluctuations may prevent us from attracting new investors and
shareholders. Additionally, our past financial and operational results can not
be used to predict our future results. As a result, our stock price may remain
low or even decrease.
WE HAVE SUBSTANTIAL AMOUNTS OF DEBT WHICH MAY PREVENT US FROM RAISING FUNDS OR
FROM REACTING TO CHANGES IN OUR BUSINESS.
As of June 30, 2005, we had outstanding debt of $1,141,201. We must make annual
or semi-annual interest payments on our convertible notes, which are due in
2008. Our debt could limit our ability to obtain additional financing for
working capital, capital expenditures, debt service requirements, or other
purposes in the future, as needed; to plan for, or react to, changes in
technology and in our business and competition; and to react in the event of an
economic downturn.
INSIDERS AND AFFILIATES WILL HAVE CONTROL OVER OUR POLICIES AND AFFAIRS FOR THE
FORESEEABLE FUTURE AND THESE STOCKHOLDERS MAY TAKE CORPORATE ACTIONS THAT COULD
NEGATIVELY IMPACT OUR BUSINESS AND STOCK PRICE.
Our officers, directors and affiliates own a majority interest in our stock.
These shareholders will continue to control our policies and affairs and all
corporate actions requiring shareholder approval, including election of
directors for the foreseeable future. Additionally, these holdings may delay,
deter or prevent transactions, such as mergers or tender offers, that would
otherwise benefit investors.
7
"PENNY STOCK" RULES MAY MAKE BUYING OR SELLING OUR SECURITIES DIFFICULT.
Trading in our securities is subject to the Securities and Exchange Commission's
"penny stock" rules and it is anticipated that trading in our securities will
continue to be subject to the penny stock rules for the foreseeable future. The
Securities and Exchange Commission has adopted regulations that generally define
a penny stock to be any equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. These rules require that any
broker-dealer who recommends our securities to persons other than prior
customers and accredited investors must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser's
written agreement to execute the transaction. Unless an exception is available,
the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks
associated with trading in the penny stock market. In addition, broker-dealers
must disclose commissions payable to both the broker-dealer and the registered
representative and current quotations for the securities they offer. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from recommending transactions in our securities,
which could severely limit the liquidity of our securities and consequently
adversely affect the market price for our securities.
OUR SECURITIES HAVE BEEN THINLY TRADED ON THE OVER-THE-COUNTER BULLETIN BOARD,
WHICH MAY NOT PROVIDE LIQUIDITY FOR OUR INVESTORS.
Our securities are quoted on the Over-the-Counter Bulletin Board. The
Over-the-Counter Bulletin Board is an inter-dealer, over-the-counter market that
provides significantly less liquidity than the NASDAQ Stock Market or national
or regional exchanges. Securities traded on the Over-the-Counter Bulletin Board
are usually thinly traded, highly volatile, have fewer market makers and are not
followed by analysts. The Securities and Exchange Commission's order handling
rules, which apply to NASDAQ-listed securities, do not apply to securities
quoted on the Over-the-Counter Bulletin Board. Quotes for stocks included on the
Over-the-Counter Bulletin Board are not listed in newspapers. Therefore, prices
for securities traded solely on the Over-the-Counter Bulletin Board may be
difficult to obtain and holders of our securities may be unable to resell their
securities at or near their original acquisition price, or at any price.
INVESTORS MUST CONTACT A BROKER-DEALER TO TRADE OVER-THE-COUNTER BULLETIN BOARD
SECURITIES. AS A RESULT, YOU MAY NOT BE ABLE TO BUY OR SELL OUR SECURITIES AT
THE TIMES THAT YOU MAY WISH.
Even though our securities are quoted on the Over-the-Counter Bulletin Board,
the Over-the-Counter Bulletin Board may not permit our investors to sell
securities when and in the manner that they wish. Because there are no automated
systems for negotiating trades on the Over-the-Counter Bulletin Board, they are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place market orders an order
to buy or sell a specific number of shares at the current market price it is
possible for the price of a stock to go up or down significantly during the
lapse of time between placing a market order and its execution.
WE DO NOT INTEND TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE; THEREFORE, YOU MAY
NEVER SEE A RETURN ON YOUR INVESTMENT.
We do not anticipate the payment of cash dividends on our common stock in the
foreseeable future. We anticipate that any profits from our operations will be
devoted to our future operations. Any decision to pay dividends will depend upon
our profitability at the time, cash available and other factors.
8
ITEM 7. FINANCIAL STATEMENTS.
JANE BUTEL CORPORATION
June 30, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
------------------------------
9175 Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Jane Butel Corporation
We have audited the accompanying consolidated balance sheet of Jane Butel
Corporation as of June 30, 2005, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flow for the year then
ended. 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 the standards of the Public Company
Accounting Oversight Board (United States) in accordance with auditing standard
No. 1 of the PCAOB. Those standards require that we plan and perform the audits
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 Jane Butel Corporation, at June
30, 2005, and the results of their operations and their cash flows for the year
then ended, in conformity with accounting principles generally accepted in the
United States.
The financial statements for the year ended June 30, 2004, were audited by other
accountants, whose report dated August 20, 2004 on those statements included an
explanatory paragraph describing conditions that raised substantial doubt about
the Company's ability to continue as a going concern.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's recurring losses from operations and its
difficulties in generating sufficient cash flow to meet its obligations and
sustain its operations raise substantial doubt about its 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.
/s/ Jaspers + Hall, PC
--------------------------
Jaspers + Hall, PC
Denver, Colorado
October 18, 2005
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JANE BUTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2005 and 2004
2005 2004
_________ _________
A S S E T S
CURRENT ASSETS
Cash $ 7,115 $ -
Inventory - 17,456
Accounts Receivable net of allowance for bad debt - 13,889
_________ _________
Total Current Assets 7,115 31,345
FIXED ASSETS
Equipment - 144,225
Leasehold Improvements - 97,159
Accumulated Depreciation - (209,015)
_________ _________
Total Fixed Assets - 32,369
OTHER ASSETS
Television Film Costs - 170,633
Websites, net of amortization - 22,178
Other Assets - 5,900
Videos, net of amortization - 41,715
_________ ______
Total Other Assets 7,115 240,426
_________ _________
Total Assets $ 7,115 $ 304,140
========= =========
L I A B I L I T I E S
CURRENT LIABILITIES
Cash Overdraft $ - $ 636
Accounts Payable 92,665 77,511
Deferred Income - 45,257
Other Current Liabilities 88,789 26,048
Notes Payable - 91,000
Accrued Settlements Payable - 13,600
_________ _________
Total Current Liabilities 181,455 254,052
LONG-TERM LIABILITIES
Notes Payable 910,096 421,425
Notes Payable - Related Party 231,105 240,850
_________ _________
Total Long-Term Liabilities 1,141,201 662,275
_________ _________
Total Liabilities 1,322,656 916,327
Commitments and Contingencies
S T O C K H O L D E R S ' E Q U I T Y
Preferred Stock 715,000 -
2,500,000 authorized shares, $1.00 par value, 715,000
shares issued and outstanding
Common Stock 253 227
20,000,000 authorized shares, $.001 par value
252,798 and 227,235 shares issued and outstanding
Additional Paid-in-Capital 110,417 74,962
Accumulated Deficit (2,141,211) (687,376)
_________ _________
Total Stockholders' Equity (Deficit) (1,315,541) (612,187)
_________ _________
Total Liabilities and Stockholders' Equity $ 7,115 $ 304,140
========= =========
<FN>
The accompanying notes are integral part of the consolidated financial statements.
9
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JANE BUTEL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended June 30,
______________________________
2005 2004
___________ ___________
REVENUES FROM DISCONTINUED OPERATIONS $ 221,771 $ 189,237
COST OF SALES 111,521 111,749
___________ ___________
Gross Profit 110,250 $ 77,488
EXPENSES:
Salaries 275,990 163,315
Rent 72,886 42,680
Professional Fees 42,403 51,002
Depreciation and Amortization Expense 37,961 117,410
Impairment Loss 12,515 17,878
Officer Compensation 536,250 -
Consulting Fees 154,031 -
Other Operating Expenses 192,084 133,002
___________ ___________
Total Expenses 1,324,120 525,287
Net Loss from Discontinued Operations(1,213,870) $ (447,799)
OTHER INCOME AND EXPENSES:
Barter Revenue - $ 16,656
Loss on sale of assets (170,045) -
Interest Expense (69,920) (29,472)
___________ ___________
Total Other Income and Expenses (239,965) $ (12,816)
Net loss from discontinued
operations before taxes (1,453,835) $ (460,615)
=========== ===========
PROVISION FOR INCOME TAXES:
Income Tax Benefit/(Expense) - -
___________ ___________
Net Loss (1,453,835) $ (460,615)
Basic Loss Per Common Share (6.04) (2.03)
___________ ___________
Diluted Loss Per Common Share (6.04) (2.03)
___________ ___________
Weighted Average number of Common Shares 240,602 226,708
used in basic per share calculations =========== ===========
<FN>
The accompanying notes are integral part of the consolidated financial statements.
10
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JANE BUTEL CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Preferred Stock $.001 par value Paid-In Deficit Stockholders'
Shares $1 par value Shares Common Stock Capital Accumulated Equity
__________ ___________ ________ ___________ _____________ ___________ _____________
Balance, June 30, 2001 -0- $-0- 218,235 $ 218 7,782 (71,130) (63,130)
========== =========== ========== ======== ======== ========= ==========
Issuance of Shares 1,000 1 61,488 - 61,489
for Services
Net Income (Loss) 11,972 11,972
__________ ____________ __________ ________ ________ _________ __________
Balance, June 30 2002 -0- $-0- 219,235 $ 219 69,270 $ (59,158) $ 10,331
========== ============ ========== ======== ======== ========= ==========
Stock Issued 7,000 7 693 700
Net Loss (167,603) (167,603)
__________ ____________ __________ ________ ________ _________ __________
Balance, June 30 2003 -0- $-0- 226,235 $ 226 $ 69,963 $(226,761) $ (156,572)
========== ============ ========== ======== ======== ========= ==========
Stock Issued 1,000 1 4,999 5,000
Net Loss (460,615) (460,615)
__________ ____________ __________ ________ ________ _________ __________
Balance, June 30 2004 -0- $-0- 227,235 $ 227 $ 74,962 $(687,376) $ (612,187)
========== ============ ========== ======== ======== ========= ==========
Issuance of Common Stock for
Consulting Services 19,038 19 152,127 154,031
Issuance of Common Stock for
Director's Fees 20 1 1,199 1,200
Issuance of Preferred
Stock For Officer
Compensation 715,000 $715,000 (178,750) 536,250
Issuance of Common Stock 6,325 6 42,494 42,500
for Cash
Beneficial Conversion 16,500 16,500
Feature Expense
Net Loss (1,453,835) (1,453,835)
_________ ____________ ___________ _________ _________ ___________ __________
Balance, June 30 2005 715,000 $715,000 252,798 $ 253 $ 110,417 $(2,141,211) $(1,315,541)
========= ============ =========== ========= ========= =========== ==========
<FN>
The accompanying notes are integral part of the consolidated financial statements.
11
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JANE BUTEL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended June 30,
_______________________________
2005 2004
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (1,453,835) $ (460,615)
Adjustments to reconcile net loss to net cash used
In operating activities:
Depreciation and Amortization 37,961 113,540
Officer Compensation 536,250 -0-
Loss on disposal of fixed assets 212,516 -0-
Beneficial Conversion Feature 16,500 -0-
Impairment Loss 12,515 17,878
Stock Issued for Services 155,231 5,000
Changes in operating assets and liabilities:
(Increase)/Decrease Account Receivable 13,889 (8,733)
(Increase)/Decrease Account Receivable Related Party -0- 12,894
Increase/(Decrease) in Inventory (41,680) 9,587
(Increase)/Decrease Prepaid Expenses -0- (5,900)
Television Film Costs -0- -
Deferred Revenue -0- 28,601
Increase/(Decrease) Accounts Payable 58,077 4,765
Increase/(Decrease) Deferred income (25,741) -
Increase/(Decrease) Accrued Settlements Payable (13,600) (16,599)
Increase/(Decrease) in Other Current Liabilities 62,741 (26,114)
__________ __________
Total Adjustments 1,024,659 134,919
__________ __________
Net Cash Used in Operating Activities (429,176) $ (325,696)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Received for Sale of Assets 500 -
Capital Expenditures -0- (30,130)
__________ __________
Net Cash Provided By Investing Activities 500 $ (30,130)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note Payable 419,671 348,780
Notes Payable Related Parties - 8,647
Contributions to capital 42,500 -
Payments on Notes Payable (25,744) -
__________ __________
Net Cash Provided from Financing Activities 436,427 $ 354,179
__________ __________
Net Increase (Decrease) in Cash 7,751 $ (1,647)
Cash Balance, Begin Period (636) 1,011
__________ __________
Cash Balance, End Period 7,115 $ (636)
========== ==========
Supplemental Disclosures:
Cash Paid for interest $ - $ 13,787
Cash Paid for income taxes $ - $ -
Non Cash Transactions:
Barter Revenue $ - 16,656
Stock Issued for Services 155,231 700
Stock Issued for Officer Compensation 536,250 $ 17,356
<FN>
The accompanying notes are integral part of the consolidated financial statements.
12
JANE BUTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2005 AND 2004
FOOTNOTE 1- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
------------
Jane Butel Corporation ("the Company") (formerly Earth Labs Inc.) was
incorporated under the laws of the State of Florida in April 1992 as the
Institute for Strategic Business Development, Inc. for the purpose of promoting
and carrying on any lawful business for which a corporation may be incorporated
under the laws of the State of Florida. The Company has a total of 202,500,000
authorized shares with a par value of $.001 per share and with 252,798 common
shares issued and outstanding as of June 30, 2005. The Company has designated
2,500,000 as preferred stock and 200,000,000 as common stock. There are 715,000
shares of preferred stock outstanding with a par value of $1.00 as of June 30,
2005. The Company's fiscal year end is June 30.
GOING CONCERN
---------------------
The accompanying financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America, which contemplates the continuation of the Company as
a going concern.
Our audited financial statements for the twelve months ended June 30, 2005,
reflect a net loss of ($1,453,835) and negative cash flows from operations of
($620,235). These conditions indicate a need to acquire sufficient additional
funding or alternative sources of capital to meet our working capital needs. We
have raised capital by issuing convertible debentures and anticipate that we
will continue to be able to do so in the foreseeable future. Additionally, we
are currently raising capital by issuing convertible debentures and plan to
raise money through our Equity Line of Credit. We believe this will generate the
additional cash required to fund our operations and allow us to meet our
obligations.
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.
PRINCIPLES OF CONSOLIDATION
-----------------------------
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Tex-Mex, Inc. All significant inter-company
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
----------------------------
The Company considers all highly liquid investments purchased with an original
maturity at date of purchase of three months or less to be cash equivalents.
Cash and cash equivalents are carried at cost, which approximates market value.
ACCOUNTS RECEIVABLE
--------------------
The Company maintains an allowance for doubtful accounts for estimated losses
that may arise if any of its customers are unable to make required payments.
Management specifically analyzes the age of customer balances, historical bad
debt experience, customer credit-worthiness, and changes in customer payments
terms when making estimates of the uncollectibility of the Company's trade
accounts receivable balances. If the Company determines that the financial
conditions of any of its customers deteriorated, whether due to customer
specific or general economic issues, increase in the allowance may be made.
Accounts receivable are written off when all collection attempts have failed.
PROPERTY & EQUIPMENT
----------------------
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets,
generally three to five years. Inventories consist of a variety of wholesale
goods purchase for individual resale and are stated at the lower of coast,
determine by the first-in, first out ("FIFO") method, or market.
IMPAIRMENT OF LONG-LIVED ASSETS
----------------------------------
The Company follows Statement of Financial Accounting Statements (SFAS) No. 144,
"Accounting for Impairment or Disposal of Long-Lived Assets. The Statement
requires that an impairment loss be recognized when the carrying value of long
lived assets (asset group) exceeds its fair value for long-lived assets,
liabilities and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Under SFAS
No. 144, the Company considered long-lived assets consisting primarily of
property and equipment and note receivable, website, videos, and other assets.
The Company has adopted its impairment and amortization policy based on SOP 00-2
and has estimated the ultimate revenue based upon cooking club video sales for a
five year period to be approximately six hundred and eighty-nine thousand
dollars ($689,238 i.e. the net present value discounted at 15% for future cash
flows). The ratio of actual sales to the ultimate estimated revenue will then be
applied to the unamortized balance of video costs. If actual sales fall below
expected amounts, the Company will adjust the amount of amortized video expense
meet the 80% requirement as specified in SOP 00-2. Management abandoned the
cooking school operations in June 2005, and has elected to record an impairment
loss of $12,515 for certain assets of the cooking school. A majority of the
assets of the Company were sold to Jane Butel, an individual, on June 21, 2005,
in accordance with the asset purchase agreement executed and outlined in
Footnote 7.
13
FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried at
cost, which approximates their fair value, due to the relatively short maturity
of these instruments. As of June 30, 2005 and June 30, 2004, the Company's notes
payable have stated borrowing rates that are consistent with those currently
available to the Company and, accordingly, the Company believes the carrying
value of these debt instruments approximates their fair value.
TELEVISION FILM COSTS
-----------------------
The Company incurred costs in the production and the development of a television
series. These costs, including costs of production, have been capitalized in
accordance with Statement of Position 00-2 "Accounting by Producers or
Distributors of Films." These capitalized costs are amortized using the
individual film forecast method whereby capitalized costs are amortized in the
proportion that the current year's revenues from the series bears to
management's estimated revenues to be received from all sources for the series.
The Company had been using these television series masters for a public
television series as well as airing on America One. The Contract for PBS was
signed in April 2002 for a three year period and started running on public
television stations September 7, 2002. The Company will track sales from the
television series of books and other items. The America One Contract began on
December 1, 2001 and extends for two years. Revenue and costs forecasts for
television series are regularly reviewed by management and revised when
warranted by changing market conditions. Unamortized production costs are
compared to fair value for each reporting period. If estimated gross revenue is
not sufficient to recover the unamortized production costs, the unamortized
production costs are written down to their fair values. Amortization expenses
have been recorded since the series began airing in September 2002. Accordingly,
these costs will be amortized in related future periods with revenues that are
generated in accordance with SOP 00-2. Since the current contract for exhibition
with PBS is for three years, management's estimate of ultimate revenues (which
represents the net present value of the ultimate revenues ) is based upon a
three year forecast of the book sales, and other sales (i.e. classes, spices and
pantry items,) attributable to the series. The ratio of increased sales to
management's estimate of ultimate revenues will be applied to the remaining
unamortized TV series production costs. The Company sold all assets and rights
to the television series on June 21, 2005, to Jane Butel, an individual. As
such, the television film costs capitalized in prior years, and all related
accumulated amortization were written-off on June 21, 2005 as part of the sale
of these assets.
VIDEOS
------
The Company capitalized costs associated with the production of 12 cooking
videos averaging 40 minutes in length and has amortized these costs using the
individual film forecast method whereby expense is recognized in proportion to
the current years in accordance with Statement of Position 00-2 "Accounting by
Producers or Distributors of Films". The Company sold all assets and rights to
the videos on June 21, 2005, to Jane Butel, an individual. As such, the videos,
and all related accumulated amortization were written-off on June 21, 2005 as
part of the sale of these assets.
WEBSITE AND BARTERING TRANSACTIONS
-------------------------------------
In August 2000, the Company entered into an agreement with an unrelated
contractor under which the Company received web site development services in
exchange for the Company running promotional mentions on its America One
television series. A total of $0 and $16,656 is being recognized as other
income in the section of the Statement of Operations for the period ended June
30, 2005 and 2004, respectively. The Company amortized $0 and $26,074 of the
website cost in fiscal 2005 and 2004. The Company sold all assets and rights to
the videos on June 21, 2005, to Jane Butel, an individual. As such, the videos,
and all related accumulated amortization were written-off on June 21, 2005 as
part of the sale of these assets.
REVENUE RECOGNITION
--------------------
We recognize income when the products are shipped, and when the service is
provided. We apply the provisions of the SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition in Financial Statements" which provides guidance on the
recognition, presentation and disclosure of revenue in financial statements.
Bulletin No. 104 outlines the basic criteria that must be met to recognize
revenue and provides guidance for the disclosure of revenue recognition
policies. Our revenue recognition policy for sale of products is in compliance
with Bulletin No. 104. Revenue from the sale of products is recognized when a
formal arrangement exists, the price is fixed, or determinable, the delivery is
completed and collectibility is reasonably assured. Generally, we extend credit
to our customers and do not require collateral. We perform ongoing credit
evaluations of our customers and historic credit losses have been within
management's expectations.
The major sources of revenue for 2005 and 2004 were the three and five day
cooking school programs. The Company requires an advance registration and
payment prior to the start of the school. If the student wants to cancel the
school then a $150 cancellation fee is charged. The Company records the payment
received in advance as deferred revenue until the classes are held. As of June
21, 2005, the assets, rights to operate and deferred revenue/customer deposits
were sold by the Company to Jane Butel, an individual.
14
ADVERTISING COSTS
------------------
Advertising and promotional activities are expensed when incurred. Total
advertising costs for fiscal year 2005 were $9,403.
SHIPPING COSTS
---------------
Shipping and handling costs are expensed when incurred. Total shipping and
handling costs for fiscal year 2005 were $9,830.
INCOME TAXES
-------------
Deferred income tax assets and liabilities are computed annually for differences
between the financial statements and the tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted
laws and rates applicable to the periods in which the differences are expected
to affect taxable income.
BASIC AND DILUTED NET LOSS PER SHARE
------------------------------------------
Basic loss per share is computed on the basis of the weighted average number of
common shares outstanding. For the period ended June 30, 2005, all of the
Company's common stock equivalents were excluded from the calculation of diluted
loss per common share because they were anti-dilutive, due to the Company's net
loss in that year. At June 30, 2005 there were 715,000 shares of preferred stock
outstanding which would convert to 71,500,000 common shares which may dilute
future earnings per share.
STOCK-BASED COMPENSATION
-------------------------
The Company has adopted the disclosure provisions only of SFAS No. 123 and
continues to account for stock based compensation using the intrinsic value
method prescribed in accordance with the provisions of APB No. 25, "Accounting
for Stock Issued to Employees", and related interpretations. Common stock issued
for compensation is accounted for based on the market price of the underlying
stock, generally the closing bid price.
DISCONTINUED OPERATIONS
----------------------------
In 2005, the Company determined to discontinue its existing operations, and to
sell the assets to Jane Butel. On June 21, 2005, the Company completed the sale
of its assets for total cash proceeds of $500. The assets sold consisted
primarily of accounts receivable, inventories, property and equipment, and other
assets. The buyer also assumed certain accounts payable and accrued liabilities.
In 2005, the Company recognized a loss on disposal of $170,045 on the sale of
these assets.
OTHER COMPREHENSIVE INCOME
----------------------------
Statement of financial accounting standards No. 130, "Reporting Comprehensive
Income", (SFAS No. 130), establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting from
investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statements that is displayed with the same prominence as other
financial statements. The Company adopted this standard in 1998.
FOOTNOTE 2 - INCOME TAXES
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Components for the provision for income tax benefits (expense) are as follows:
Year Ended June 30,
------------------------
2005 2004
------ ------
Current:
Federal 504,489 149,561
State 66,771 20,728
Valuation Allowance (571,260) (170,289)
15
The above provision has been calculated on Federal and State statutory rates in
the adjusted rates of 34% for Federal and 4.5% for State tax rates adjusted by a
valuation allowance of deferred tax assets bringing the effective rate hereto.
SFAS 109 specifies that deferred tax assets are not to be reduced by a valuation
allowance if it is more likely than not that a portion of the deferred tax
assets will not be realized. The Company considered its historic lack of taxable
profits, its internal projections concerning future taxable profits, its
assumptions underlying such projections and the likelihood of achieving such
taxable profits. Based on such considerations the Company determined that
because of the historic lack of substantial operating profits, there is
sufficient uncertainty with the respect to its ability to achieve profitable
operations in future periods that the Company cannot justify the recording of an
income tax asset and, knowingly, the Company established a valuation reserve in
the full amount of the deferred tax assets in the fiscal years June 30, 2005 and
June 30, 2004. As of June 30, 2005, the Company had approximately $627,000 in
net operating loss forwards for federal income tax purposes. The loss carry
forwards expires beginning in 2013. The net operating carry forwards may be
available to affect taxable income within the carry forward, subject to
limitations of tax code.
FOOTNOTE 3 - ACCOUNTS PAYABLE & ACCRUED EXPENSES
As of June 30, 2005 accounts payable and accrued expenses consisted of the
following:
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Accounts Payable $ 92,665
Accrued Payroll Taxes 82,936
Accrued Sales Tax 5,854
--------
$181,455
========
FOOTNOTE 4 - NOTE PAYABLE - RELATED PARTIES
On June 10, 2005, we issued convertible debentures of $256,105 to Jane Butel, an
individual. The purchaser of the convertible debentures is entitled to convert
the face amount of the debentures plus accrued interest into our common stock at
100% of the average closing bid prices on the day of conversion. The debenture
is only convertible at 1/24th of the Face Amount after twelve months from the
issuance date. The convertible debentures shall pay 6% cumulative interest in
cash or common stock, at the purchaser's option, at the time of each conversion.
The debentures are payable on June 10, 2008. The Company currently makes
quarterly interest payments on the Debenture in the amount of $3,842. The
current balance on the Debenture is $231,105. In 2005, payments of $25,000 were
made against the principle balance of this Debenture.
FOOTNOTE 5 - NOTES PAYABLE
The Company executed a note payable on February 9, 2001 for $100,000 payable to
James and Lila Dickey at 6% interest per annum. Pursuant to the original terms
of the note, interest was due in monthly installments and the principal matured
on February 9, 2003. On November 28, 2001 the Company entered into a note for
$27,000 payable to James Dickey. Pursuant to the original terms, the note was a
demand note. The Company has been unable to make payment on either of these
notes in satisfaction of the terms of the notes. In July 2005, the two notes
were restructured as a $110,000 convertible debenture with interest payable at
6%, and are in good standing. This convertible debenture was recorded as such in
the June 30, 2005 balance sheet. The Company has agreed to make monthly payments
in the amount of $4,583.33 per month for the first twelve months from the
Issuance Date.
The Company entered in a note with Janet E. Freeman Trust in August 2002 in the
amount of $25,000. The note carries interest at the rate of 10% and matured in
February 2003. The Company has been unable to make payment on the note in
satisfaction of the terms of the note. In July 2005, the note was restructured
as a $25,625 convertible debenture with interest payable at 6%, and are in good
standing. This convertible debenture was recorded as such in the June 30, 2005
balance sheet.
On June 16, 2005, we issued convertible debentures of $66,000 to Dutchess
Private Equities Fund, II, LP. The holder of the convertible debentures can
convert the face value of the convertible debentures plus accrued interest into
shares of our common stock at the lesser of (i) $1.00 (ii) 100% of the average
of the five lowest closing bid prices for the 30 days immediately following the
first reverse stock split. The convertible debentures shall pay 10% cumulative
interest, payable in cash or common stock, at the purchaser's option, at the
time of each conversion. This debenture was issued at a discount of $11,000.
The discount is to be amortized over the five year term of the convertible
debentures. Amortization of $92 was recorded and included in interest expense
for the three months ended June 30, 2005. The debentures are payable on June
16, 2010.
On June 21, 2005, we issued convertible debentures of $710,000 to 21st Century
Technologies. The purchaser of the convertible debentures is entitled to convert
the face amount of the debentures plus accrued interest into our common stock at
100% of the closing bid price on the day of conversion. The debenture is only
convertible at 1/12th of the Face Amount after twelve months from the issuance
date. The convertible debentures shall pay 8% cumulative interest in cash or
common stock, at the purchaser's option, at the time of each conversion. The
debentures are payable on June 10, 2008.
16
FOOTNOTE 6 - LEASE
The Company's subsidiary Tex-Mex occupied its office and cooking school space as
a tenant at will at the LaPosada Hotel in Albuquerque, New Mexico at the rate of
$1,500 per month. In 2005, the liability of the lease was transferred in the
sale of assets described herein.
On January 12, 2004, the Company signed a lease for office space with Simms
Building, Inc., a New Mexico Corporation, with monthly rents of $4,500
beginning March 1, 2004 for a 36 month period. Currently, the Company has
settled the lease and entered into a payment plan with the landlord for a
percentage of the remaining amount due on the lease.
FOOTNOTE 7 - SALE OF ASSETS TO JANE BUTEL, AN INDIVIDUAL
On June 21, 2005, Jane Butel Corporation sold certain assets and disposed of
certain liabilities related to its Tex-Mex, Inc. subsidiary, to Jane Butel, the
Company's former CEO and majority shareholder, for $500. The table below
outlines the significant assets sold and liabilities disposed of by Jane Butel
Corporation as a result of this transaction.
[Download Table]
Assets
-----------------------------
Inventories . . . . . . . . . $ 59,136
Machinery and equipment . . . 144,225
Kitchen improvements. . . . . 97,159
Accumulated depreciation. . . (221,928)
TV series production costs. . 152,289
Other assets. . . . . . . . . 8,103
----------
Total . . . . . . . . . . . $ 238,984
Liabilities
-----------------------------
Notes payable . . . . . . . . $ 6,000
Accounts payable and accruals 42,923
Customer deposits . . . . . . 19,516
----------
Total . . . . . . . . . . . $ 68,439
<FN>
A loss on the sale of these assets of $170,045 was recorded as a result of this
transaction.
FOOTNOTE 8 - CAPITAL STOCK
Common Stock, $.001 par value
-------------
During the year ended June 30, 2005, the following shares of common stock were
issued by the Company:
The Company issued 20,000 shares of the Company's common stock to its board of
Directors for directors' fees, valued at $1,200.
The Company issued 1,903,750 shares of the Company's common stock for consulting
servicing amounting to $154,031.
The Company issued 632,500 shares of the Company's common stock for $42,500.
The Company accounts for the issuance of equity instruments for services based
on the fair value of the services or the fair value of the equity instrument at
the time of issuance, whichever is more reliably measurable.
The Company effectuated the 100 to 1 reverse stock split on July 25, 2005. All
shares have been stated to retroactively affect this reverse stock split.
Preferred Stock, $1 par value
----------------
The Company issued 715,000 shares of preferred stock for officer compensation
valued at $536,250. One share of preferred stock is convertible into one
hundred shares of common stock.
17
FOOTNOTE 9 - INVESTMENT AGREEMENT
On December 23, 2004, the Company entered into an Investment Agreement with
Dutchess Private Equities Fund, II, LP. Pursuant to the investment agreement,
the Company may, at its discretion, periodically "put to" or require Dutchess to
purchase shares of our common stock. The Amount that the Company shall be
entitled to put to Dutchess in any single transaction pursuant to the Investment
Agreement will be equal to, at the Company's election, either: (A) 200% of the
average daily volume in the U.S. market for common stock for the 20 trading days
prior to the notice of our put, multiplied by the average of the three daily
closing Best Bid prices immediately preceding the date of the put, or (B)
$25,000; provided that in no event shall the amount of any single put be more
than $1,000,000. The aggregate amount that Dutchess is obligated to pay for the
Company's shares cannot Exceed $10 million. For each share of common stock
purchased under the Investment Agreement, Dutchess will pay 96% of the lowest
closing Best Bid prices as defined in the Agreement. The Company's ability to
put shares of common stock under the Investment Agreement is conditioned upon
several requirements regarding registering the shares of common stock with the
Securities and Exchange Commission. As of May 23, 2005. the Company had filed a
registration statement with the Securities and Exchange Commission, but it had
not been offered effective. On June 17, 2005, the Company requested that the
Securities and Exchange Commission consent to the withdrawal of its Registration
Statement.
FOOTNOTE 10 - SUBSEQUENT EVENTS
On July 27, 2005, Jane Butel Corporation consummated a stock exchange agreement
with the privately-held Bootie Beer Company. Under the terms of the agreement,
the Company issued 52,500,000 shares of common stock to the shareholders of
Bootie Beer Company in exchange for all of the outstanding shares of Bootie Beer
Company. The stock exchange has been accounted for as a reverse merger whereby
Bootie Beer Company became a wholly-owned subsidiary of the Company. This is
because the Company did not have operations immediately prior to the
transaction, and following the reorganization, Bootie Beer Company was the
operating company.
On July 25, 2005, the Company completed a reverse stock split, whereby one share
of common stock was exchanged for one hundred shares of common stock. All shares
have been stated to retroactively affect this reverse stock split.
FOOTNOTE 11 - FINANCIAL ACCOUNTING DEVELOPMENTS
Recently issued Accounting Pronouncements
--------------------------------------------
In February 2003, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity". SFAS 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. This
statement establishes new standards of how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. SFAS 150 requires that an issuer classify a financial instrument that is
within the scope of this statement as a liability because the financial
instrument embodies an obligation of the issuer. This statement applies to
certain forms of mandatorily redeemable financial instruments including certain
types of preferred stock, written put options and forward contracts. SFAS 150
did not materially effect the financial statements.
In December 2003, the FASB issued FASB Interpretation No. 146, (revised December
2003) "Consolidation of Variable Interest Entities" (FIN 146) which addresses
how a business enterprise should evaluate whether it has a controlling financial
interest in an entity through means other than voting rights and accordingly
should consolidate the entity. FIN No. 146R replaces FASB Interpretation No.
146, "Consolidation of Variable Interest Entities", which was issued in January
2003. Companies are required to apply FIN No. 146R to variable interests in
variable interest entities ("VIEs") created after December 31, 2003. For
variable interest in VIEs created before January 1, 2004, the Interpretation is
applied beginning January 1, 2005. For any VIEs that must be consolidated under
FIN No. 146R that were created before January 1, 2004, the assets, liabilities
and non-controlling interests of the VIE initially are measured at their
carrying amounts with any difference between the net amount added to the balance
sheet and any previously recognized interest being recognized as the cumulative
effect of an accounting change.
If determining the carrying amounts is not practicable, fair value at the date
FIN No. 146R first applies may be used to measure the assets, liabilities and
non-controlling interest of the VIE. The Company does not have any interest in
any VIE.
In March 2003, the FAS issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". SFAS 149 is effective for
contracts entered into or modified after June 30, 2003. This statement amends
and clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under SFAS
133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 149
did not materially effect the financial statements.
18
In December 2004, the FASB issued SFAS No. 123(R)(revised 2004), "Share Based
Payment" which amends FASB Statement No. 123 and will be effective for public
companies for interim or annual periods after January 15, 2005. The new standard
will require entities to expense employee stock options and other share-based
payments. The new standard may be adopted in one of three ways - the modified
prospective transition method, a variation of the modified prospective
transition method or the modified retrospective transition method. The Company
is to evaluate how it will adopt the standard and evaluate the effect that the
adoption of SFAS 123(R) will have on our financial position and results of
operations.
In November 2004, the FASB issued SFAS NO. 151, "Inventory Costs, an amendment
of ARB No 43, Chapter 4". This statement amends the guidance in ARB No. 43,
Chapter 4 Inventory Pricing, to clarify the accounting for abnormal amounts of
idle facility expense, freight, handling cost, and wasted material (spoilage).
Paragraph 5 of ARB No. 43, Chapter 4, previously stated that, "under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight and rehandling costs may be so abnormal as to require treatment as
current period charges." SFAS No. 151 requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of "so
abnormal". In addition, this statement requires that allocation of fixed
production overheads to the costs of conversion be based on the prospectively
and are effective for inventory costs incurred during fiscal years beginning
after June 5, 2005, with earlier application permitted for inventory costs
incurred during fiscal years beginning after the date this Statement was issued.
The adoption of SFAS No. 151 is not expected to have a material impact on the
Company's financial position and results of operations.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary
Assets, an amendment of APB Opinion No. 29. The guidance in APB Opinion 29,
Accounting for Non-monetary Transactions, is based on the principle that
exchange of non-monetary assets should be measured based on the fair value of
assets exchanged. The guidance in that Opinion, however, included certain
exceptions to that principle. This Statement amends Opinion 29 to eliminate the
exception for non-monetary exchanges of similar productive assets that do not
have commercial substance. A non-monetary exchange has commercial substance if
the future cash flows of the entity are expected to change significantly as a
result of the exchange. SFAS No. 153 is effective for non-monetary exchanges
occurring in fiscal periods beginning after June 15, 2005. The adoption of SFAS
No. 153 is not expected to have a material impact on the Company's financial
position and results of operations.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 8A. CONTROLS AND PROCEDURES.
Our management evaluated, with the participation of our Chief Executive Officer
and our Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Annual Report on Form
10-KSB. Based on this evaluation, our Chief Executive Officer and our Chief
Financial Officer have concluded that our disclosure controls and procedures are
effective to ensure that information we are required to disclose in reports that
we file or submit under the Securities Exchange Act of 1934 (i) is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms, and (ii) is accumulated and
communicated to our management, including our Chief Executive Officer and our
Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. Our disclosure controls and procedures are designed to
provide reasonable assurance that such information is accumulated and
communicated to our management. Our disclosure controls and procedures include
components of our internal control over financial reporting. Management's
assessment of the effectiveness of our internal control over financial reporting
is expressed at the level of reasonable assurance that the control system, no
matter how well designed and operated, can provide only reasonable, but not
absolute, assurance that the control system's objectives will be met.
There was no change in our internal control over financial reporting that
occurred during the year covered by this report that materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 8B. OTHER INFORMATION.
None.
19
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table sets forth the name, age, positions, and offices or
employments of our executive officers and directors for the past five years as
of June 30, 2005. Members of the board are elected and serve for one year terms
or until their successors are elected and qualified. All of the officers serve
at the pleasure of the Board of Directors of the Company.
NAME AGE POSITION
Douglas D'Agata 35 Interim Chief Executive Officer
and Director
Theodore Smith 28 Director
On June 10, 2005, our Board of Directors appointed Theodore Smith and Douglas
D'Agata to the Board of Directors and accepted the resignations of Bette
Clemens, Steven A. Jackson and Paul Butt. On June 11, 2005, our Board of
Directors accepted the resignation of Jane Butel as Chief Executive Officer and
Director and appointed Douglas D'Agata as Interim Chief Executive Officer. On
June 20, 2005, our Board of Directors accepted the resignation of Sidney
Kramer as Director.
THEODORE SMITH Mr. Smith serves as Executive Vice President of Dutchess Advisors
LLC, whom he joined in 1998 and is a liaison between Dutchess Capital
Management, LLC on behalf of Dutchess Private Equities Fund, LP and senior
management of companies in the Fund's portfolio. Prior to joining Dutchess in
1998, Mr. Smith was a principal at Geneva Atlantic Capital, LLC where he focused
on assisting corporate clients with SEC compliance matters, business plan
preparation and presentation and capital markets financing. Mr. Smith received
his BS in Finance and Marketing from Boston College. Mr. Smith has also served
as a director of several public as well as private companies. Currently, he
serves as director for Xtreme Companies and Newave, Inc.
DOUGLAS D'AGATA serves as research analyst for Dutchess Advisors. Mr. D'Agata
was a Financial Advisor for six years in the Private Client Group of Prudential
Securities where he advised individual and institutional investors. He continues
to hold Series 7, 63, and 65 licenses. He is a graduate of Phillips Academy and
received a BA in Political Science from Hobart College and earned his MS in
Finance with High Distinction from Bentley College.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our Corporate Code of
Conduct and Ethics is attached hereto.
ITEM 10. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth the total compensation paid to the persons who
served as our chief executive officer for the last three completed fiscal years.
No executive officer of the Company received compensation of $100,000 or more
during any such year.
[Enlarge/Download Table]
Long Term Compensation
___________________________________________________________
Awards Payouts
______________________________ _______
Annual Compensation Securities
_________________________________ Underlying LTIP All Other
Name and Other Annual Restricted Options/SAR's Payouts Compensation
Principal Position Year Salary Bonus Compensation Stock Awards # ($)
____________________________________________________________________________________________________________________________________
Douglas D'Agata 2005 -0- -0- -0- -0- -0- -0- -0-
Interim CEO,
Jane Butel Corp
Jane Butel, President (1) 2005 $78,000 -0- -0- 715,000(2) -0- -0- -0-
CEO, Jane Butel Corp 2004 $55,000 -0- -0- -0- -0- -0- -0-
Tex-Mex, Inc. 2003 -0- -0- -0- -0- -0- -0- -0-
<FN>
(1) We entered into a formal written Employment Agreement with Jane Butel, our
President, dated December 23, 2004 (the "Employment Agreement"), which provide
for, among other employment benefits, an annual salary of $126,000, and 32,500
shares of Class A Convertible Preferred Stock which is convertible into common
stock at a rate of one share of preferred to one hundred shares of common stock,
payable quarterly starting January 1, 2005 until 1,000,000 so designated shares
is depleted. The agreement commenced on January 1, 2005 and is for a ten-year
term. The company terminated Ms. Butel's employment agreement and has not
further obligations under agreement exist.
(2) We entered into a formal written Licensing Agreement with Jane Butel, our
President dated December 23, 2004 (the "Licensing Agreement"), which provide
for, among other benefits, the transfer to Jane Butel, as licensee, 650,000
shares of Class A Convertible Preferred Stock. This stock will be paid in
exchange for an exclusive license to use her name and likeness in association
with food products manufactured, distributed, marketed and sold, and services
provided by her. The license has been terminated the shares were sold to Geneva
Atlantic Capital Corp.
20
EMPLOYMENT AGREEMENTS
As of June 30, 2005, we had only one executive officer, Douglas D'Agata, who
served as our Interim Chief Executive Offer. Mr. D'Agata was not compensated
for his service.
All previous employment agreements were terminated with no further obligations
due from the Company.
DIRECTOR COMPENSATION
We compensated our directors in the form of shares of common stock, valued at
$1,200, during 2004. We may decide to compensate our directors in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information concerning the beneficial
ownership of our outstanding classes of stock as of June 30, 2005, by each
person known by us to (i) own beneficially more than 5% of each class, (ii) by
each of our Directors and Executive Officers and (iii) by all Directors and
Executive Officers as a group. Unless otherwise indicated below, to our
knowledge, all persons listed below have sole voting and investment power with
respect to their shares of common stock except to the extent that authority is
shared by spouses under applicable law.
[Download Table]
NAME AND TITLE OF BENEFICIAL OWNER COMMON SHARES PERCENTAGE
BENEFICIALLY OWNED (1)
OWNED
Theodore Smith (2) 71,500,000 73.9%
Douglas D'Agata -0- -0-
Two Directors as a group 71,500,000 73.9%
<FN>
(1) On June 30, 2005, 252,798 post-split shares of common stock were issued and
outstanding. Additionally, we had 715,000 shares of Series A Convertible
Preferred Stock outstanding. Each share of Series A Preferred Stock has 100
votes and votes with the Common Stock.
(2)Consists of 715,000 shares of Series A Preferred Stock. Each share of Series
A Preferred Stock can convert into 100 shares of common stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We entered into a ten year agreement to be exclusive distributor of food and
other products produced by Pecos Valley Spice Co., which was owned by Jane Butel
and others at the time of the transaction. We were not required to purchase any
minimum amount of product from Pecos Valley and purchase only what we believe
necessary to meet anticipated demand. We paid Pecos Valley a fixed price for the
products we purchase from them at a level of 50% of our sales price. We held a
promissory note from Pecos Valley in the amount of $12,894 which was due on
demand or on June 30, 2003. The note has been paid. We did not charge interest
on this note.
We entered into a formal written Employment Agreement with Jane Butel, who was
our President at the time of the transaction, dated December 23, 2004, which
provide for, among other employment benefits, an annual salary of $126,000, and
32,500 shares of Class A Convertible Preferred Stock which is convertible into
common stock at a rate of one share of preferred to one hundred shares of common
stock, payable quarterly starting January 1, 2005 until 1,000,000 so designated
shares is depleted. The agreement commences on January 1, 2005 and was
originally for a ten-year term. As a result of our restructuring in June 2005,
we terminated this agreement.
We entered into a formal written Licensing Agreement with Jane Butel, our Chief
Executive Officer, dated December 23, 2004, which provide for, among other
benefits, the transfer to Jane Butel, as licensee, 650,000 shares of Class A
Convertible Preferred Stock. This stock was paid in exchange for an exclusive
license to use her name and likeness in association with food products
manufactured, distributed, marketed and sold, and services provided by her. As a
result of our restructuring in June 2005, we terminated this agreement.
On June 10, 2005, Jane Butel, a New Mexico resident, sold 715,000 shares of our
Series A Convertible Preferred Stock to Geneva Atlantic Capital Corp. for
$5,000. Theodore Smith, a director of Jane Butel Corporation at the time of
the transaction, is the principal of Geneva Atlantic Capital Corp. Each
share of Series A Convertible Preferred Stock converts into 100 shares of
our common stock.
21
On June 10, 2005, we entered into a convertible debenture agreement with Jane
Butel. The principle amount of the convertible debenture is $256,105. We will
pay six percent interest, compounded annually, on the unpaid principle amount of
the convertible debenture. We will make payments in the total aggregate amount
of $50,000, based on the schedule outlined in the debenture. The holder has the
right to convert the debenture into shares of our common stock one year after
the closing date and before the close of business on June 10, 2008.
On June 21, 2005, we entered into an Agreement to sell substantially all of our
assets to Jane Butel for $500. Pursuant to the Agreement, Jane Butel agreed to
assume certain of our liabilities.
ITEM 13. EXHIBITS.
Exhibit No. Description
------------ ------------
2.1 Agreement and Plan of Reorganization between the Company and Bootie Beer,
the owners of the outstanding pre-merger shares of common stock of Bootie, and
Dutchess Advisors Ltd., dated July 19, 2005 (included as exhibit 2.1 to the
Form 8-K filed July 27, 2005, and incorporated herein by reference).
3.1 Amended and Restated Articles of Incorporation of Earth Labs, Inc.,
dated October 15, 2002 (included as exhibit 2.1 to the Form SB-2 filed December
29, 2004, and incorporated herein by reference).
3.2 By-Laws of Earth Labs, Inc. (included as exhibit 3.1 to the Form SB-2
filed December 29, 2004, and incorporated herein by reference).
3.3 Amendment to Articles of Incorporation, dated December 14, 2004
(included as exhibit 3.1 to the Form 8-K filed July 29, 2005, and incorporated
herein by reference).
3.4 Amendment to Articles of Incorporation, dated June 27, 2005
(included as exhibit 3.2 to the Form 8-K filed July 29, 2005, and incorporated
herein by reference).
3.5 Amendment to Articles of Incorporation, dated July 18, 2005 (included as
exhibit A to the Form PRE 14C filed August 1, 2005, and incorporated herein by
reference).
4.1 Share Exchange Agreement between Tex-Mex, Inc. and Earth Labs, Inc.,
dated July 2002 (included as exhibit 10.1 to the Form 10-SB12G filed November
21, 2002, and incorporated herein by reference).
4.2 Specimen Stock Certificate (included as exhibit 4.1 to the Form SB-2
filed December 29, 2004, and incorporated herein by reference).
4.3 Warrant Agreement between the Company and 21st Century Technologies,
Inc., dated April 23, 2004 (included as exhibit 10.1 to the Form 10-QSB filed
May 10, 2004, and incorporated herein by reference).
4.4 Letter Agreement between the Company and 21st Century Technologies,
Inc., dated September 15, 2004 (included as exhibit 10.5 to the Form 10-KSB
filed September 27, 2004, and incorporated herein by reference).
4.5 Registration Rights Agreement between the Company and Dutchess Private
Equities Fund, II, LP, dated December 23, 2004 (included as exhibit 10.4 to the
Form SB-2 filed December 29, 2004, and incorporated herein by reference).
4.6 Convertible Debenture Agreement between the Company and 21st Century
Technologies, Inc., dated June 21, 2005 (included as exhibit 4.1 to
the Form 8-K filed June 27, 2005, and incorporated herein by reference).
4.7 Certificate of Class A Convertible Preferred Stock, dated November 23, 2004
(included as exhibit 4.1 to the Form 8-K filed July 29, 2005, and incorporated
herein by reference).
4.8 Convertible Debenture Agreement between the Company and Jane Butel, an
individual, dated June 10, 2005 (filed as Exhibit 4.8 on the Company's Form
10K-SB filed on September 30, 2005).
4.9 Convertible Debenture Agreement between the Company and Dutchess Private
Equities Fund, II, LP dated June 16, 2005 (filed as Exhibit 4.9 on the Company's
Form 10K-SB filed on September 30, 2005).
10.1 Indemnification Agreement between Jane Butel, Tex-Mex, Inc., Earth
Labs, Inc., Labarbera Venture Capital, C. Rowland Hanson, Health-E, Inc., and J.
Scott Briggs, dated August 16, 2002 (included as exhibit 10.2 to the Form
10-SB12G filed November 21, 2002, and incorporated herein by reference).
10.2 Exclusive Distribution Agreement Pecos Valley Spice Co. and Tex-Mex,
dated July 15, 2002 (included as exhibit 10.3 to the Form 10-SB12G filed
November 21, 2002, and incorporated herein by reference).
10.3 Revised Video Agreement between Tex-Mex, Inc. and Preston-Turri
Productions, dated March 27, 2003 (included as exhibit 10.4 to the Form
10-SB12G/A filed April 25, 2003, and incorporated herein by reference).
10.4 Office Lease between the Company and Simms Building, Inc., dated March
1, 2004 (included as exhibit 10.2 to the Form 10-QSB filed May 10, 2004, and
incorporated herein by reference).
10.5 2004 Non-Qualified Stock Compensation Plan (included as exhibit 10.1 to
the Form S-8 filed October 26, 2004, and incorporated herein by reference).
10.6 Financial Advisory Services Agreement between the Company and Greentree
Financial Group, Inc., dated September 27, 2004 (included as exhibit 10.6 to the
Form SB-2 filed December 29, 2004, and incorporated herein by reference).
10.7 Employment Agreement between the Company and Jane Butel, dated December
27, 2004 (included as exhibit 10.1 to the Form SB-2 filed December 29, 2004, and
incorporated herein by reference).
10.8 Licensing Agreement between the Company and Jane F. Butel, dated
December 27, 2004 (included as exhibit 10.2 to the Form SB-2 filed December 29,
2004, and incorporated herein by reference).
10.9 Investment Agreement between the Company and Dutchess Private Equities
Fund, II, LP, dated December 23, 2004 (included as exhibit 10.3 to the Form SB-2
filed December 29, 2004, and incorporated herein by reference).
10.10 Placement Agent Agreement between the Company, Legacy Trading Co.,
LLC, and Dutchess Private Equities Fund, II, LP, dated December 23, 2004
(included as exhibit 10.5 to the Form SB-2 filed December 29, 2004, and
incorporated herein by reference).
10.11 Asset Sale Agreement between the Company and Jane Butel, an
individual, dated June 21, 2005 (included as exhibit 10.1 to the Form
8-K filed June 22, 2005, and incorporated herein by reference).
10.12 Settlement & General Release between the Company and 21st Century
Technologies, Inc., dated June 21, 2005 (included as exhibit 10.1 to
the Form 8-K filed June 27, 2005, and incorporated herein by reference).
10.13 Corporate Consulting Agreement between Bootie Beer Company, Inc. and
Mike
Novielli, dated May 23, 2005 (included as exhibit 10.1 to the Form
S-8 filed July 25, 2005, and incorporated herein by reference).
14.1 Corporate Code of Conduct and Ethics (filed as Exhibit 14.1 on the
Company's Form 10K-SB filed on September 30, 2005).
23.1 Consent of Auditors
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
22
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Jaspers + Hall, LP were our primary auditors for the fiscal year ended June 30,
2005. Clyde Bailey, PC performed the year end audit on Form 10-KSB for the year
ended December 31, 2004.
On June 24, 2005, our Board of Directors dismissed Clyde Bailey, PC as our
principal independent accountant. On the same date, our Board of Directors
appointed the firm Jaspers + Hall, PC to serve as our principal independent
accountants for the fiscal year ending June 30, 2005. The decision to change
principal independent accountants was recommended and approved by the Board of
Directors.
During our most recent two fiscal years and up until the date hereof, we had no
disagreements with Clyde Bailey, PC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to Clyde Bailey, PC's satisfaction, would have caused him to
make reference to the subject matter of such disagreements in connection with
his report on our consolidated financial statements for such year.
During the year ended December 31, 2004 and through the date hereof, we did not
consult with Jaspers + Hall, PC with respect to the application of accounting
principles to a specified transaction, either completed or proposed,
or the type of audit opinion that might be rendered on our financial statements.
Audit Fees
Clyde Bailey, PC, auditor of our annual financial statements and for their
review of our Quarterly Reports on Form 10-QSB, billed us a total of $8,700 for
the fiscal year ended June 30, 2004
For Jaspers Hall & Johnson audit of our annual financial statements and for
their review of our Quarterly Reports on Form 10-QSB, Jaspers + Hall LLP, Inc.
billed us a total of $17,000 for the fiscal year ended June 30, 2005.
Audit Related Fees
None.
Tax Fees
None.
All Other Fees
None.
The Board Of Directors Pre-Approval Policy And Procedures
We do not have a separate Audit Committee. Our full Board of Directors performs
the functions of an Audit Committee. During fiscal year 2004, the Board of
Directors adopted policies and procedures for the pre-approval of audit and
non-audit services for the purpose of maintaining the independence of our
independent auditors. We may not engage our independent auditors to render any
audit or non-audit service unless either the service is approved in advance by
the Board of Directors or the engagement to render the service is entered into
pursuant to the Board of Director's pre-approval policies and procedures. On an
annual basis, the Board of Directors may pre-approve services that are expected
to be provided to us by the independent auditors during the following 12 months.
At the time such pre-approval is granted, the Board of Directors must (1)
identify the particular pre-approved services in a sufficient level of detail so
that management will not be called upon to make judgment as to whether a
proposed service fits within the pre-approved services and (2) establish a
monetary limit with respect to each particular pre-approved service, which limit
may not be exceeded without obtaining further pre-approval under the policy.
The Board has considered whether the provision of the services described above
under the caption "All Other Fees" is compatible with maintaining Jaspers Hall &
Johnson LLP's independent audit.
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Winter Park, Florida on
October 18, 2005.
JANE BUTEL CORPORATION
(Registrant)
/s/ Tania Torruella
______________________
Tania Torruella
Chief Executive Officer
In accordance with the requirements of the Exchange Act, this report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Signature Title Date
______________ _____________________________ _______________
/s/ Tania Torruella Chief Executive Officer October 18, 2005
______________
Tania Torruella
/s/ Antonio R. Torruella Director October 18, 2005
_________________
Antonio R. Torruella
/s/ Stephanie Stans Warren Director October 18, 2005
_________________
Stephanie Stans Warren
/s/ Paul M. Beleckas Director October 18, 2005
_________________
Paul M. Beleckas
23
Dates Referenced Herein and Documents Incorporated by Reference
| This ‘10KSB/A’ Filing | | Date | | Other Filings |
|---|
| |  |
| | 6/16/10 |
| | 6/21/08 |
| | 6/16/08 |
| | 6/10/08 |
| Filed on: | | 10/18/05 | | 8-K/A |
| | 9/30/05 | | 10QSB, 8-K, NT 10-Q, NTN 10K, PRER14C |
| | 8/1/05 | | 3, 8-K, PRE 14C |
| | 7/29/05 | | 8-K, PRE 14C |
| | 7/27/05 | | 8-K |
| | 7/25/05 | | S-8 |
| | 7/19/05 | | 8-K, 8-K/A |
| | 7/18/05 |
| For Period End: | | 6/30/05 | | 10KSB, 8-K, NTN 10K, SC 13D |
| | 6/27/05 | | 4, 8-K |
| | 6/24/05 | | 8-K |
| | 6/22/05 | | 8-K |
| | 6/21/05 | | 8-K |
| | 6/20/05 |
| | 6/17/05 | | RW |
| | 6/16/05 |
| | 6/15/05 | | 3 |
| | 6/11/05 |
| | 6/10/05 | | 3, 4, 8-K |
| | 6/5/05 |
| | 5/23/05 |
| | 5/11/05 |
| | 5/4/05 |
| | 4/1/05 |
| | 3/10/05 |
| | 1/15/05 |
| | 1/1/05 |
| | 12/31/04 | | 10-Q, 10QSB/A |
| | 12/29/04 | | SB-2 |
| | 12/27/04 |
| | 12/23/04 |
| | 12/14/04 |
| | 11/23/04 | | DEF 14C, PREM14C |
| | 10/26/04 | | S-8 |
| | 9/27/04 | | 10KSB |
| | 9/15/04 |
| | 8/20/04 |
| | 7/14/04 |
| | 6/30/04 | | 10KSB |
| | 5/10/04 | | 10QSB |
| | 4/23/04 |
| | 3/1/04 |
| | 1/12/04 |
| | 1/1/04 |
| | 12/31/03 | | 10QSB |
| | 6/30/03 | | 10KSB, 10KSB/A, NT 10-K |
| | 6/15/03 |
| | 5/31/03 |
| | 4/25/03 | | 10SB12G/A |
| | 3/27/03 |
| | 2/9/03 |
| | 11/21/02 | | 10SB12G |
| | 10/15/02 |
| | 9/7/02 |
| | 8/16/02 |
| | 7/15/02 |
| | 12/1/01 |
| | 11/28/01 |
| | 6/30/01 |
| | 2/9/01 |
| | 1/13/99 |
| List all Filings |
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