U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
Commission File No. 033-02441-D
Draco Holding Corporation
______________________________________________
(Name of Small Business Issuer in its Charter)
NEVADA 87-0638750
_______________________________ __________________________
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
c/o Jump'n Jax, Inc.
511 East St. George Boulevard, Suite No. 3
St. George, Utah 84770
________________________________________
(Address of Principal Executive offices)
Issuer's Telephone Number: (801) 209-0545
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
(1) Yes [X] No [ ] (2) Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: As of August 5, 2003,
there were 8,934,751 shares of the Registrant's common stock issued and
outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited consolidated balance sheet of Draco Holding Corporation,
a Nevada corporation, as of June 30, 2003 and the related audited consolidated
balance sheet as of December 31, 2002, the unaudited related consolidated
statements of operations for the three and six month periods ended June 30,
2003 and June 30, 2002, the unaudited related consolidated statements of cash
flows for the six month periods ended June 30, 2003 and June 30, 2002, and the
notes to the financial statements are attached hereto as Appendix "A" and
incorporated herein by reference.
The accompanying financial statements reflect all adjustments which
are, in the opinion of management, necessary to present fairly the financial
position of Draco consolidated with Jump'n Jax, Inc., its wholly owned
subsidiary. The names "Draco", "we", "our" and "us" used in this report refer
to Draco Holding Corporation.
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations. During the three months ended June 30, 2003,
Draco experienced a net loss of $8,157, which is $437 more than the $7,720 net
loss incurred for the three months ended June 30, 2002. For the six months
ended June 30, 2003, Draco incurred a net loss of $15,713 which is $218 less
than the $15,931 net loss incurred during the six months ended June 30, 2002.
For the three months ended June 30, 2003, Draco reported revenues of $4,296
which is
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$102 less than the revenues of $4,398 reported for the three months ended June
30, 2002. Draco's revenues are comprised entirely of income from the Jump'n
Jax, Inc. subsidiary business of equipment rental and leasing of inflatable
bounce houses for parties and entertainment. Revenues for the six month
period ended June 30, 2003 were $6,091 which is $1,552 less than the $7,643 of
revenues reported for the six month period ended June 30, 2002. The decrease
in revenues is attributed to a decrease in business during the later periods,
which management believes is due to increased competition, as well as people
spending less on childrens' entertainment in a weak economy and also due to
fewer rentals experienced due to the unusually hot temperatures Southern Utah
has experienced this year. Draco has been engaged in active business
operations through its wholly owned subsidiary, Jump'n Jax, Inc., since
approximately March 2000.
Total expenses for the three months ended June 30, 2003 were $12,203,
or $1,085 more than the expenses of $11,118 incurred during the three month
period ended June 30, 2002. Total expenses for the six months ended June 30,
2003 were $21,346 or $228 less than the total expenses of $21,574 incurred
during the six month period ended June 30, 2002. All of the expenses incurred
during the three and six month periods ended June 30, 2003 and June 30, 2002
consisted of general and administrative expenses and depreciation. The small
increase in expenses for the three months ended June 30, 2003 and the small
decrease in expenses for the six months ended June 30, 2003, as compared to
the year earlier periods, are primarily due to a small increase or decrease in
wages or payments to independent contractors working in Draco's bounce house
rental business and/or differences in amounts of professional (legal and
accounting) fees incurred by Draco. Approximately one-half of the expenses
incurred during the three and six month periods ended June 30, 2003, were
primarily associated with recurring legal and accounting expenses. The
remaining expenses were primarily related to other expenses of a recurring
nature such as salaries, advertising, and other general and administrative
expenses.
Increased competition has had, and may continue to have, an adverse
affect on Draco's results of operations. It may affect Draco's ability to
increase and/or retain existing business. Increased competition could result
in price cutting and lower revenues. In order to compete effectively, Draco
may have to spend more funds on advertising or Draco may have to lower prices
or offer incentives such as free party supplies. All of this may adversely
affect Draco's results of operations.
Draco's business is seasonal. The St. George, Utah area has mild
winters, and Draco is able to engage in its business throughout the year.
Although summers bring very hot weather to the St. George, Utah area, Draco
has experienced its largest sales revenues during summer months. Draco
attributes this increase in business during summer months to an increase in
children's entertainment while children are out of school. Many summer rentals
occur in the mornings and evenings.
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Balance Sheet Information
-------------------------
Assets
As of June 30, 2003, Draco reported total assets of $14,463, down
$4,058 from the $18,521 reported as of December 31, 2002. Current assets of
June 30, 2003 were $3,931, down $2,344 from the $6,275 reported as of December
31, 2002. The change in total assets and current assets reflects primarily
the net loss generated by Draco during the six months ended June 30, 2003
partially offset by a $5,000 increase in a loan made to Draco by one of
Draco's officers. Equipment (net) has decreased from $12,246 at December 31,
2002 to $10,532 at June 30, 2003, which reflects an additional $1,714 in
accumulated depreciation booked during the six month period ended June 30,
2003.
Liabilities
Draco's liabilities as of June 30, 2003 consist of $10,000 on notes
payable to Draco's President and/or Secretary/Treasurer, approximately $458 in
accrued interest on the loans, and accounts payable of $1,641. The loans
accrue interest at 10% per annum and are due upon demand. The loans are
unsecured.
Total liabilities of Draco increased $3,445 from $8,654 as of December
31, 2002, to $12,099 as of June 30, 2003. The increase in total liabilities
reflects a $5,000 increase in the amount of the loans made by Draco's
President and/or Secretary/Treasurer to Draco together with an increase of
$458 in accrued interest, partially offset by a decrease of $2,013 in accounts
payable from the amount owed as of December 31, 2002.
Liquidity and Capital Resources - June 30, 2003
-----------------------------------------------
Draco has not yet established revenues sufficient to cover its
operating costs and allow it to continue as a going concern. Management's
goal is to increase operations and revenues through its wholly-owned
subsidiary. Draco has a significant working capital deficit, and Draco has
continued to generate losses. Draco believes that its liquid resources are
adequate to maintain operations through internally generated cash flows for a
period of approximately 6 months. Draco may seek such additional capital
either through loans from its officers and directors, or through possible
equity or debt financing. Two of Draco's officers and directors, Lane S.
Clissold and Steven D. Moulton, have committed to meet operating expenses for
at least the next 9 months. However, Draco has not identified any specific
source of long term liquidity. No assurance can be given that Draco's
resources will be adequate to take advantage of opportunities to expand the
business as they arise, or that any such expansion opportunities will
materialize.
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Item 3. Controls and Procedures.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our chief executive officer and chief financial officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic SEC
reports. It should be noted that the design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how remote.
In addition, there has been no change in our internal control over
financial reporting during the most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REPORT
REFLECT MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND
INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 2. Changes in Securities.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
Item 5. Other Information.
None; not applicable.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description
------ -----------
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
No Current Reports on Form 8-K were filed by Draco during the quarter
ended June 30, 2003.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
DRACO HOLDING CORPORATION
/s/ Lane Clissold
Date: August 6, 2003 By: _______________________________
Lane Clissold
Director and President
/s/ Steven D. Moulton
Date: August 6, 2003 By: _______________________________
Steven D. Moulton
Director and Secretary/Treasurer
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APPENDIX "A"
FINANCIAL STATEMENTS
DRACO HOLDING CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003 and December 31, 2002
8
DRACO HOLDING CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
ASSETS
June 30, December 31,
2003 2002
------------- -------------
(Unaudited)
CURRENT ASSETS
Cash $ 3,931 $ 6,275
------------- -------------
Total Current Assets 3,931 6,275
------------- -------------
EQUIPMENT
Equipment (net) 10,532 12,246
------------- -------------
Total Equipment 10,532 12,246
------------- -------------
TOTAL ASSETS $ 14,463 $ 18,521
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,641 $ 3,654
Note payable - related party 10,000 5,000
Accrued interest - related party 458 -
------------- -------------
Total Liabilities 12,099 8,654
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 500,000,000
shares authorized; 8,934,750 and 8,534,750
shares issued and outstanding, respectively 8,935 8,535
Additional paid-in capital 208,996 201,186
Accumulated deficit (215,567) (199,854)
------------- -------------
Total Stockholders' Equity 2,364 9,867
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 14,463 $ 18,521
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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DRACO HOLDING CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
REVENUES $ 4,296 $ 4,398 $ 6,091 $ 7,643
------------- ------------- ------------- -------------
EXPENSES
Depreciation 857 857 1,714 1,714
General and administrative 11,346 10,261 19,632 19,860
------------- ------------- ------------- -------------
Total Expenses 12,203 11,118 21,346 21,574
------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (7,907) (6,720) (15,255) (13,931)
------------- ------------- ------------- -------------
OTHER EXPENSE
Interest expense (250) (1,000) (458) (2,000)
------------- ------------- ------------- -------------
Total Other Expense (250) (1,000) (458) (2,000)
------------- ------------- ------------- -------------
NET LOSS $ (8,157) $ (7,720) $ (15,713) $ (15,931)
============= ============= ============= =============
BASIC LOSS PER SHARE $ (0.00) $ (0.01) $ (0.00) $ (0.01)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,622,630 1,341,599 8,578,949 2,034,750
============= ============= ============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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DRACO HOLDING CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
---------------------------
2003 2002
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (15,713) $ (15,931)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation 1,714 2,102
Contributed rent 1,500 -
Changes in operating assets and liabilities:
(Increase) decrease in accounts payable 4,697 (177)
Increase in accrued interest 458 2,000
------------- -------------
Net Cash Used by Operating Activities (7,344) (12,006)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES - -
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase note payable - related party 5,000 5,000
------------- -------------
Net Cash Provided by Financing Activities 5,000 5,000
------------- -------------
NET DECREASE IN CASH (2,344) (7,006)
CASH AT BEGINNING OF PERIOD 6,275 13,136
------------- -------------
CASH AT END OF PERIOD $ 3,931 $ 6,130
============= =============
Cash paid for:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Common stock issued in lieu of debt $ 6,710 $ -
The accompanying notes are an integral part of these
consolidated financial statements.
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DRACO HOLDING CORPORATION AND SUBSIDIARY
Notes to the Consolidated Financial Statements
June 30, 2003 and December 31, 2002
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted in accordance with such rules and regulations.
The information furnished in the interim condensed consolidated financial
statements include normal recurring adjustments and reflects all adjustments,
which, in the opinion of management, are necessary for a fair presentation of
such financial statements. Although management believes the disclosures and
information presented are adequate to make the information not misleading, it
is suggested that these interim condensed consolidated financial statements be
read in conjunction with the Company's most recent audited financial
statements and notes thereto included in its December 31, 2002 Annual Report
on Form 10-KSB. Operating results for the six months ended June 30, 2003 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2003.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using accounting principles
generally accepted in the United Stated of America applicable to a going
concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the Company
to continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company
is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, develop a reliable source of
revenues, and achieve a profitable level of operations the Company will need,
among other things, additional capital resources. Management's plans to
continue as a going concern include raising additional capital through sales
of common stock and continuing to develop and market its "bounce-house"
business. However, management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon
its ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain
profitable operations. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable to continue
as a going concern.
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NOTE 3 - SIGNIFICANT EVENTS
In June 2003, the Company issued 400,000 shares of its free-trading common
stock to its attorney as compensation for services rendered. The shares were
valued at $0.0167 per share.
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