U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
Amendment #9
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
JANE BUTEL CORPORATION
______________________________________________
(Name of Small Business Issuer in its charter)
FLORIDA 65-0327060
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
125 Second Street NW
Albuquerque, NM 87102
________________________________________
(Address of principal executive offices)
Issuer's telephone number: (505) 243-2622
_________________________________________
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK
PART I
ITEM 1. BUSINESS.
We are filing this registration statement on Form 10-SB to register our common
stock and thus become a reporting company pursuant to Section 12(g) of the
Securities Exchange Act of 1934.
History
We were 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 and
we sold it 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.
Our Business
Through our wholly-owned subsidiary, Tex-Mex, Inc., we offer products and
services promoting the cuisine and lifestyle of the Southwest, including the
Jane Butel Cooking School in Albuquerque, New Mexico and Jane Butel's
Southwestern Kitchen television show. We market Jane Butel's Southwestern
cookbooks and videos and are the exclusive distributor of Pecos Valley spices.
We plan to develop additional products and services such as a cooking club and
publishing division and to establish the Jane Butel brand as the premier source
of high quality information related to Southwestern cuisine and lifestyle.
We depend on the leisure travel market for a good portion of our revenues and do
not have a consistent record of profitable operations. We had a loss of $105,411
in the fiscal year ended June 30, 2003 compared to net income of $4,315 for the
fiscal year ended June 30, 2002. Our independent auditor has modified its report
on our financial statements to express concern about our ability to survive as a
going concern.
Our offices are located at 125 Second Street NW, Albuquerque, New Mexico 87102
and our telephone number is 505-243-2622.
Although mainstream Americans seeking new and different tastes have made a
number of ethnic or regional cuisines popular beyond their origins, in the late
1970's, the Southwestern taste was a distant third in popularity to Italian and
Oriental (now Asian) cooking. The signs of the increasing popularity of
Southwestern foods attracted Jane Butel's interest in the late 1970's while she
was Vice President of Corporate Marketing at American Express. At that time she
had already written the manuscript for her first Tex-Mex cookbook, which was
published in 1980. She had been frequently tapped by food makers Ortega and Old
El Paso for marketing assistance. She left her position with American Express in
1978 to establish Pecos Valley Spice Co. and to begin writing, consulting and
teaching Southwestern cooking. In 1983, she opened the first vacation
full-participation Southwestern cooking school in Santa Fe, New Mexico and moved
it to Albuquerque, New Mexico in 1993.
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Jane has now written and published 16 Southwestern cookbooks and the Jane Butel
Cooking School has been cited as one of the four best in the world by Bon
Appetit magazine, with a circulation of 1,230,626 per month. As a result of
frequent appearances on such national TV shows as The Today Show, Good Morning
America and Live! with Regis her status as an authority on Southwestern
lifestyles and cooking has been established. Jane now has her own television
series, "Jane Butel's Southwestern Kitchen", launching in the fall of 2002, on
PBS. This show is offered to all PBS stations and is currently running on
stations averaging 41% of the U.S. population. No individual PBS station is
required to run our show.
Southwestern foods are now reported to be the most popular taste in America,
according to Cahners Business Information in November 1999. In the U.S.,
tortillas now outsell all classes of breads--including muffins and bagels.
Margaritas outsell all other cocktails. The Grocery Manufactures of America
reported in December 1999 that salsa is the second most popular condiment
(ketchup is number one) and grossed $1.6 billion in 1999, an increase of 196%
over 1983. Part of this popularity can be attributed to the healthful aspects of
salsas, tortillas and Southwestern foods in general. The increased popularity of
Southwestern foods may not impact our revenues.
Our objective is to become a leading supplier of products, services and
information related to Southwestern cuisine and lifestyle. Principal elements of
our strategy include the following:
o Expand awareness of the "Jane Butel" brand name as the premiere
source of high quality information and products related to the
Southwestern lifestyle and cuisine.
o Leverage the "Jane Butel" brand name across a range of products and
services related to the Southwestern lifestyle.
o Expand our current services and products and introduce new ones on a
timely basis.
We currently generate revenues from the following sources:
o Tuition from our cooking school programs
o Sale of Jane Butel cookbooks and videos
o Sale of Pecos Valley Spice Co. products which include spices and
utensils for Southwestern recipes, cooking kits, and other
Southwestern cooking products.
Our product sales are made at the cooking school, on our web sites and through
our mail order catalog. We also sell Jane Butel cookbooks through commercials
and promotions associated with our television shows.
Our Cooking School Programs
The Jane Butel Southwestern Cooking School has a variety of programs to teach
Southwestern cuisine preparation. We have programs for both amateurs and the
more experienced cooks. However, we are not a professional culinary arts
training school and our programs are not designed to train professional chefs.
Our courses teach both the history and techniques of Southwestern cuisine.
Our 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.
Our courses include a week long program which is ideal for those attending our
cooking school in conjunction with a vacation. The class meets three hours each
day for five days for hands on instruction and two evenings when the class dines
together at local restaurants in Albuquerque.
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Luncheon consists of the dishes prepared by the students each morning. The class
includes preparation of classic dishes as well as newer innovations and low-fat
methods. The advanced week long class is designed for the more serious cook and
features preparation of more complicated recipes in subjects such as menu
planning, party presentation, Southwestern ingredients, low-fat versions of
Southwestern favorites, plating and presentation and recipe development and
construction.
Our weekend course begins with a cocktail reception Friday evening followed by a
four hour full participation class and six hour sessions on the following
Saturday and Sunday.
Single day classes are offered in such subjects as culinary techniques and more
specialized techniques covering a single subject such as sauces, meats and
vegetables. Traditional New Mexican cooking, Southwestern grilling, Quick and
Easy and Lite cooking are also offered. We also teach the University of New
Mexico Continuing Education full participation classes. We also offer "lunch and
learn" programs which are demonstration programs rather than full participation
programs.
The following table sets forth the fees for the major programs we offer:
Course Days Tuition
______ ____ _______
Full Participation week long 5 $1995, includes 5 nights lodging
based on double occupancy ($2100 as of January 1, 2004)
Full Participation weekend 3 $ 995, includes 3 nights lodging
based on double occupancy ($1100 as of January 1, 2004)
Day class 1 $ 250
week long or weekend ($350 as of January 1, 2004)
Full participation session 1 $ 150
Demonstration classes 1 $40 to $55, depending on class
We have revised prices effective January 1, 2004 as indicated.
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.
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Additional programs
Besides our regularly scheduled courses, we also offer private group courses,
team building classes, visiting chef demonstrations and culinary tours. Our week
long courses are particularly geared towards vacationers seeking both
instruction in Southwestern cooking and sightseeing in Albuquerque and Sante Fe.
Because our classes are offered in the morning, this leaves time for such
additional activities.
Retail sales
Jane Butel has authored 16 books on Southwestern cooking which are available for
sale at our cooking school and our world wide website on the Internet. We
purchase these books at author's discount from the publishers who are
unaffiliated with Jane Butel Corporation. The retail area at the cooking school,
which we call the Pantry features pure Pecos Valley Spice Co., chiles, 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.
We also publish a catalog, which we call the Cookalog, which features most of
the items available in the Pantry.
Jane Butel Cooking Videos
We have produced and offer 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.
Jane Butel's Southwestern Kitchen TV Series
Cooking shows have proven to be a popular staple on television, particularly the
Public Broadcasting System stations, since the pioneering efforts of Julia
Child. More recently, cable television networks have begun to offer food related
programs, including at least one full time food channel and a number of
lifestyle channels which feature food programs along with other offerings.
Jane Butel's Southwestern Kitchen TV series was developed after requests from
public TV stations for Jane to do a show. The series features Jane's friendly,
approachable style - proven successful in the over 4 million cookbooks she has
sold and the reviews she received when the show was tested in Texas, Florida,
North Carolina and Pennsylvania. Thirty shows have been completed and are in
distribution.
The series was distributed first to America 1 Network, a 24 hour broadcast
network that provides western and equestrian lifestyle based programming to over
130 broadcast affiliate stations across the U.S. and streaming video on its
Internet site, starting December 1, 2001. PBS began airing the show September 7,
2002 and is currently covering 66% of the U.S. population.
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We are responsible for the cost of producing the series and own all the rights
to the shows. Under our agreement with America 1 Network, we receive 50% of
revenues from advertising after payment of sales commissions and agency fees
from sale of five minutes of commercial time on each half-hour show. Two minutes
of commercial time are provided the affiliate station airing the show. We
and the America 1 Network can sell the commercial time to sponsors and we
coordinate bookings to avoid conflicts. We have not received any revenues from
American 1 Network as of the date hereof.
For the PBS Network, we have signed a distribution agreement with Association
for Community Television on behalf of PBS station KUHT of Houston, Texas. KUHT
acts as the presenting station of our show and offers it to other PBS stations.
We are responsible for certain costs of promotion to the other PBS stations such
as press kits and station relations. Commercial time is not generally sold on
PBS stations. Rather, we offer a special edition of "Jane Butel's Southwestern
Kitchen" cookbook through a toll-free telephone number. We pay KUHT $3.00 for
each book sold until it has received $10,000 and then $1.50 until it has
received a total of $30,000. KUHT will also receive 5% of the per book price
which it remits to American Public Television. As of August 31, 2003, we have
sold 680 cookbooks through this program.Public television stations may show the
series for three years from the first release. We also pay $2.00 per book to a
non-affiliated lender to pay off a loan of $100,000 which we borrowed for
production of the TV series. We have agreed to pay an aggregate of $400,000 on
such loan. We also pay $5.00 per book to pay a total of two loans, a demand note
for $13,750 and a note for $13,250.
In February 2003, we filmed a single show for the Food Network, a cable TV
network. This show has aired on the Food Network a number of times.
We are in discussion with KNME, an Albaquerque, NM television station, for a new
Southwestern cooking show. There are currently no commitments for such show.
Plans for the future
We have plans to introduce new products and services in an effort to leverage
the "Jane Butel" brand name across a range of products and services related to
the Southwestern lifestyle. Our ability to introduce the following products and
services is dependent upon our securing additional working capital. We have no
definitive financing arrangements to obtain working capital for such projects.
Even if we are successful in introducing one or more of the following projects
into the marketplace, there can be no assurance that they will result in
revenues or profits to us.
Additional locations for our Cooking School
We are planning to offer our cooking school programs in Santa Fe, New Mexico and
other destination resorts. No commitments for such additional locations have
been made and there can be no assurance our expansion plans will be undertaken.
Jane Butel's Southwestern Cooking Club
Our proposed Cooking Club will offer kits on a subscription basis to be sent
every other month. Kits will start with a Jane Butel Cooking Video and the
ingredients to create the recipes in a video. For example, the Bowl O' Red video
will be coupled with the hard-to-find chiles, comino and blue corn flour--enough
to feed a party of 30 or to create several meals at home. We believe that this
program can join other successful subscription-based clubs and kits which are
currently available in such areas as gardening, wine, coffee and other food
products.
Do-it-yourself kits are a growing business nationwide. Martha Stewart Omnimedia
is known to be successful at selling millions of home decorating kits.
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Jane Butel's Southwestern Cooking Club will explore other venues such as,
children's cooking clubs, pet owner's clubs and clubs for other special interest
groups.
Publishing Division
We plan to establish a publishing division to secure publishing contracts from
major publishers, such as the Berkeley Publishing Group and Harmony, a division
of Random House, both of which have published Jane's books and have requested
more Jane Butel titles to publish. We are planning a series of cookbooks. Single
subject books as well as specialty and "favorites" cookbooks are being developed
from books and booklets Jane Butel has written but which are now out of print.
The cookbooks will take advantage of Butel's easy-to-follow style and
popularity. Six of Jane's cookbooks have sold over 100,000 copies, which confers
"best-seller" status. The expanded visibility from the television show and
increased publicity from the overall expansion of the business is projected to
attract publishers and book buyers.
Pecos Valley Spice Co.
Pecos Valley Spice Co. founded in 1978 by Jane Butel offers pure, highest
quality chiles, herbs, spices and hard-to-find ingredients and tools for
Southwestern cooking. Products are offered for retail sale through "The Pantry"
at the Cooking School and by mail order through the "Cookalog" and on the
Internet. An exclusive distribution agreement has been developed between Jane
Butel Corporation and Pecos Valley Spice for the production and marketing of
Pecos Valley's products. Under such agreement, Jane Butel Corporation is the
exclusive distributor for Pecos Valley Spice Company and purchases products at
wholesale prices which we sell at the Pantry on the Internet and by catalog.
Consumer interest in Southwestern food products is strong and continues to grow
as evidenced by The Internet Food Channel report in 1999 that states, "The
continued national interest in bold, regional American flavors (such as
Southwest, Cajun and Creole) by chefs, cookbook authors and consumers has helped
the condiment and spicy-foods market to grow like wildfire in recent years." We
believe Pecos Valley Spice Co. will benefit from this shift in American food
habits. Pecos Valley plans a line of finished foods to include salsa and snack
items. Kits, gift baskets and Southwestern seasoning mixes are also in
development.
We operate three Internet websites. They are for the Jane Butel Southwestern
Cooking School, Jane Butel's Southwestern Cooking Television show and Pecos
Valley Spice Co. We plan to expand them to increase marketing and sales as well
as develop more hyperlinks to related businesses.
Advertising and promotion
Our main method of promoting our products and services is through the continuing
publicity generated by the cooking school, television show, and personal
appearances of Jane Butel. Each person who has inquired about the school, the
products or the show is maintained in a data base for continuous marketing, as
well as the cross promotion of our various divisions, such as the offering of
books, classes and spices in conjunction with our television show.
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Competition
All of our current and proposed operations compete with numerous other similar
enterprises, including other cooking schools, food-related television shows and
cookbooks. We believe that we can successfully compete based on the interest in
Southwestern cuisine and Jane Butel's energy in promoting awareness of
Southwestern cuisine and our products and services.
Employees
We currently have five full-time employees and five part-time employees.
ITEM 2. PROPERTIES
Our facilities are at the La Posada Hotel, our five year lease expired in July
2002 and we are currently occupying the premises on a month-to-month basis at a
rental of $1,553.26 per month. We are seeking a larger facility for the school
and television set, a laboratory for teaching techniques classes and for recipe
and product development and space for all management to be housed in one
centralized facility, but there can be no assurance that such larger facility
will be available within our budget. If we lose our space at La Posada, we
believe we could replace it in nearby facilities at comparable rental.
ITEM 3. MANAGEMENTS DISCUSSION AND ANALYSIS
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.
Overview
Our major source of revenue is from our cooking school. The sale of books,
videos, and food products is a small portion of our revenue at the current time.
These additional revenue sources do serve to promote the cooking school and the
image of Jane Butel. We have not received any revenues from syndication or
licensing rights for broadcast of our television series but it is an important
promotional tool.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 2003 COMPARED TO JUNE 30, 2002
We had revenues of $220,748 during the fiscal year ended June 30, 2003 compared
to $330,063 in fiscal year ended June 30, 2002. This decrease was due partly to
our continuing lack of a full time salesperson available to convert leads and
inquiries concerning our cooking school into paid tuitions during the 2002-2003
period. Additionally, the economic downturn continued from 2002, resulting in a
decline in leisure travel and purchase of large ticket travel. Revenues from our
weekend full participation courses totaled $77,146.83 in the fiscal year ending
June 30, 2003, compared to $89,143 in the 2002 fiscal year, and continued to
outsell weeklong classes almost two to one. (Generally, weeklong classes account
for our largest sales.) Revenues from our week long courses in the year ending
June 30, 2003 were $48,645, contrasting with $111, 079 in year ended June 30,
2002. A great deal of the difference was due to the loss of the business of a
wholesale tour operator in 2002, due to the sale of their business. We did
increase demonstration classes, team building classes, culinary technique
classes, conducted a culinary tour to Mexico and consulting, which made up added
revenue of $46,279 to add revenue to assist with the lack of weeklong and
weekend sales. Sales of cookbooks and spices were $48,168 in the fiscal year
ended June 30, 2003 and $22,129 in the 2002 fiscal year.
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This decline in revenue was accompanied by an increase in operating expenses in
the 2003 period to $410,156 or 17 per cent higher than $340,063 in 2002 . The
increased costs we experienced in this period included $32,000 additional costs
in Professional fees for accounting, auditing and legal fees related to filing a
registration statement with the SEC. Depreciation and Amorization expense
accounted for $61,000 more than in the fiscal year ending June 30, 2002. These
two items more than account for the approximately $70,000 increase in expenses.
These two factors combined with the significant drop in sales due to the
economic climate, terrorist fears, and the war significantly reduced sales,
resulting in a net loss of $189,408 in cost of operations in the fiscal year
ended June 30, 2003 compared to only a net loss of $10,588 in fiscal 2002
There were one-time startup costs of $41,830 in the June 30, 2003 fiscal year
for the launch of the TV show. The biggest of those items in the cost of sales
were the cost of establishing a distribution center for the sale of cookbooks
costing $7,271 and the cost of dubbing the TV show to send for distribution of
$8,700. We had Payroll of $53,583 in the current fiscal year as opposed to
$49,043 in 2002.
Our impairment loss was approximately $11,000 less than in the past fiscal year.
We take impairment losses to reduce the value of assets when their book value
exceeds their fair value. Operating expenses were about $13,500 less than in
fiscal year 2002, due to less room costs because of less weeklong and weekend
sales.
LIQUIDITY AND CAPITAL RESOURCES
We have not had a consistent record of earnings and positive cash flow due to
several factors, including the general reduction in travel after 9/11/01 and the
investments we made in production of our videos, websites and television show.
As of June 30, 2003 our liabilities were $569,868 and our assets were $476,221.
We are seeking $500,000 to assure our ability to pay off our current contractual
obligations, including a defaulted loan that was restructured. We are also
seeking to raise $1,500,000 to $2,000,000 in equity capital to introduce
additional products and services as discussed in "Business - Plans for the
future". However, we have no definitive financing arrangements and there can be
no assurance that any new capital would be available to us or that adequate
funds for our operations either whether from our revenues or from new investors,
will be available when needed or on terms satisfactory to us. The failure to
obtain adequate additional financing may require us to curtail or scale back
some or all of our current operations, and delay or eliminate our ability to
introduce proposed new products and services. We may even be required to cease
operations entirely in the event that if we do not generate sufficient funds
from operations and investment to cover our short term capital needs, including
contractual obligations (as stated above) due in less than one year. Any
additional equity financing may involve substantial dilution to our current
shareholders. Although Jane Butel has indicated a willingness to make additional
interest free loans to the Company to support its capital needs in the next
twelve months, there is no binding commitment to provide such capital.
BARTER TRANSACTION
We exchanged promotional mentions on our America One television series for web
site development services from an independent web site developer. The
promotional mentions will run from December 2001 to November 2003. The web site
was substantially completed in Spring 2002. We recognized $15,664 of Other
Income/Barter Revenue in fiscal 2002 and $46,992 in fiscal 2003. We measured
such revenue on the basis of our estimate of the fair market value of the web
site we received of $78,320 which we based on our experience in negotiating for
web site development services from this and other web site developers on a cash
basis. We are recognizing such income ratably over a period of 20 months from
March 1, 2002 to November 1, 2003. We do not anticipate engaging in similar
transactions.
OBLIGATIONS AND COMMITMENTS
The following table reflects our contractual obligations and other commercial
commitments as of June 30, 2003. This table does not include trade payables and
other operating expenses not subject to written commitments such as salaries.
Our rent, currently at the rate of $1,553 per month, is on a month-to-month
basis.
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Payments Due By Period as of June 30, 2003
__________________________________________
Less Than
Total 1 Year 1-3 Years 4-5 Years
_______________________________________________________________________________
Short-Term Debt $185,199 $185,199(2)
_______________________________________________________________________________
Long-Term Debt-
Related Party(1) $269,313 $269,313
_______________________________________________________________________________
Total Contractual
Obligations $454,512 $185,199 $269,313
_______________________________________________________________________________
(1) represents a note in the amount of $244,098 due to Jane Butel plus interest
(2) does not reflect restructuring the payout on the loan discussed in "Legal
Proceedings"
RELATED PARTY TRANSACTIONS
We have a ten year agreement to be exclusive distributor of food and other
products produced by Pecos Valley Spice Co., which is owned by Jane Butel and
others. We are not required to purchase any minimum amount of product from Pecos
Valley and purchase only what we believe necessary to meet anticipated demand.
We pay Pecos Valley a fixed price for the products we purchase from them at a
level of 50% of our sales price. We hold a promissory note from Pecos Valley in
the amount of $12,894 which is due on demand or on June 30, 2003. We do not
charge interest on this note.
We owe Jane Butel $244,098 for money we borrowed from her. We issued a
promissory note payable on July 1, 2007 with interest at 6.97%.
Jane Butel and her spouse have each guaranteed $113,250 of our loans from
unaffiliated lenders which have been restructured after a default. See
"Litigation".
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The SEC has recently issued Financial Reporting Release No. 60, "Cautionary
Advice Regarding Disclosure About Critical Accounting Policies" ("FRR 60"),
suggesting companies provide additional disclosure and commentary on those
accounting policies considered most critical. A critical accounting policy is
one that is both very important to the portrayal of our financial condition and
results, and requires management's most difficult, subjective or complex
judgments. Typically, the circumstances that make these judgments difficult,
subjective and/or complex have to do with the need to make estimates about the
effect of matters that are inherently uncertain. We believe the accounting
policies below represent our critical accounting policies as contemplated by FRR
60.
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Allowances for refunds and product returns. We may grant our customers the right
to return products which they do not find satisfactory. Upon sale, we evaluate
the need to record a provision for product returns based on our historical
experience, economic trends and changes in customer demand.
Allowances for doubtful accounts receivable. We maintain allowances for doubtful
accounts to cover uncollectible accounts receivable, and we evaluate our
accounts receivable to determine if they will ultimately be collected. This
evaluation includes significant judgments and estimates, including an analysis
of receivables aging and a customer-by-customer review for large accounts. If,
for example, the financial condition of our customers deteriorates resulting in
an impairment of their ability to pay, additional allowances may be required.
Provisions for inventory obsolescence. We may need to record a provision for
estimated obsolescence and shrinkage of inventory. Our estimates would consider
the cost of inventory, the estimated market value, the shelf life of the
inventory and our historical experience. If there are changes to these
estimates, provisions for inventory obsolescence may be necessary.
Value of long lived assets. We capitalize and amortize the costs incurred in
developing our television show and cooking videos. We also carry other long
lived assets on our balance sheet. We evaluate the carrying values of such
assets and may be required to reduce the value in the event we determine if the
value is impaired from the current carrying among.
Risk Factors
We have identified the following as the major risks facing our business.
WE HAVE NO ARRANGEMENTS OR SOURCES OF ADDITIONAL CAPITAL AND MAY HAVE TO
CURTAIL OUR OPERATIONS IF ADDITIONAL CAPITAL IS NEEDED BUT IS NOT AVAILABLE.
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Although we had net income in fiscal 2002 we lost money in fiscal 2003. If
we were to continue to lose money due to reduced attendance at our cooking
school or increased expenses we would require additional capital to maintain
operations. There can be no assurance that we can obtain additional capital if
this pattern continues. We may have to curtail our operations if we do not have
sufficient funds to pay for the expenses of operating our business.
DEPENDENCE ON THE SERVICES AND IMAGE OF JANE BUTEL
Our operations are substantially reliant on the availability of the
services and image of Jane Butel. In the event she were unable to continue to
provide her services to us, we may not be able to continue our operations. We
have no employment contract with Jane Butel and do not have a life insurance
policy on her.
WE ARE DEPENDENT ON THE LEISURE TRAVEL MARKET
A number of our students attend our cooking school in conjunction with a
vacation. If the leisure travel market were to be disrupted due to economic
conditions or reluctance of people to travel due to hostilities or renewed
terrorism, our revenues would be reduced.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of July 2, 2003, the beneficial ownership
of our common stock by (i) the only persons who own of record or are known to
own beneficially, more than 5% of our common stock; (ii) each of our directors
and executive officers; and (iii) all directors and officers as a group.
Percent of
Number of Outstanding
Name Shares Common Stock
__________________________ __________ ____________
Jane Butel 13,512,450 60%
125 Second St., NW
Albuquerque, NM 89102
Barbera Venture Capital(1) 3,260,870 14.5%
1525 Fifth Street
Manhattan Beach, CA 90266
C. Rowland Hanson 2,608,695 11.6%
1525 Fifth Street
Manhattan Beach, CA 90266
All directors and officers
as a group (1 person) 13,512,450 60%
(1) The principal of Barbera Venture capital is Sal La Barbera.
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following are our directors and executive officers:
Name Position
____ ________
Jane Butel President and director
Jane Butel, age 65, has been President, CEO and director of Tex-Mex, Inc. since
June 1991. She has been president and director of Jane Butel Corporation since
September 2002.
Our directors are elected yearly and hold office until the next annual meeting
of shareholders and the election and qualification of their successors.
Our officers are elected annually by the board of directors and may be replaced
or removed by the board at any time. Our directors are elected by our
shareholders annually and serve until the election and qualification of their
successors or their earlier resignation or removal.
Board of Director Committees
Our board has not yet established any committees.
ITEM 6. 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 $100,000 or more
during any such year.
<TABLE>
<CAPTION>
Long Term Compensation
___________________________________________________________
Awards Payouts
______________________________ _______
Annual Compensation Securities
_________________________________ Underlying LTIP All Other
Name and Other Annual Restricted Options/SAR's Payouts Compensation
Principal Position Year Salary Bonus Compensation Stock Awards # ($) (*)
____________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jane Butel, President 2003 -0- -0- -0- -0- -0- -0- -0-
Tex-Mex, Inc. 2002 -0- $61,489(1) -0- -0- -0- -0- -0-
2001 -0- -0- -0- -0- -0- -0- -0-
<FN>
(1) paid in the form of 100,000 shares of common stock.
</FN>
</TABLE>
13
Director Compensation
No fees are paid for director services.
Executive Employment Agreements
We have no written employment agreements with our executive officer.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We purchase the cookbooks authored by Jane Butel from the various publishers of
such books at standard author's discount prices. Jane Butel receives royalties
from the publishers from the sales of such books to Jane Butel Corporation and
other purchasers from the publishers.
Pecos Valley Spice Co. is owned by Jane Butel and other persons. Pecos Valley
Spice Co. provides specialized ingredients and tops for Southwestern cooking
which Jane Butel Corporation sells as exclusive distributor. We have signed an
exclusive distribution agreement with Pecos Valley Spice Co. Such agreement has
a term of 10 years from October 5, 2002. Under the terms of this agreement, we
purchase products of Pecos Valley Spice Co. for specified prices. We also pay
Pecos Valley Spice Co. 5% of the revenues we receive from sales of their
products. Accordingly, Ms. Butel may benefit from her ownership in Pecos Valley
Spice Co. which does business with Jane Butel Corporation as discussed above. In
addition Jane Butel Corporation holds a promissory note from Pecos Valley Spice
Co. in the amount of $12,894.00 which is payable on demand or on June 30, 2003
which occurs earlier. We do not charge Pecos Valley Spice Co. any interest on
any such promissory note.
In September 2002 we issued 13,512,450 shares of our common stock to Jane Butel
in exchange for all the issued and outstanding shares of Tex-Mex, Inc. Jane
Butel's shares in Tex Mex, Inc. were received for services to the Corporation
valued at $69,489.00 and 10 years work in lieu of salary for periods prior to
the issuance of such shares.
We owe Jane Butel $244,098.00 for borrowed money. We issued a note to Jane Butel
on June 22, 2002. The note is payable on July 1, 2007 with interest at 6.97%.
We believe that all transactions with Jane Butel, Pecos Valley Spice Co., and
the publisher of Jane Butel's cookbooks were made on terms no less favorable to
us than those available from unaffiliated parties.
ITEM 8. DESCRIPTION OF SECURITIES.
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock, $001 par
value per share. The holders of common stock are entitled to one vote for each
share held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
Common stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. In the event of
liquidation, dissolution or winding up of the Company, the holders of Common
stock are entitled to share ratably in all assets remaining which are available
for distribution to them after payment of liabilities and after provision has
been made for payment of the rights of each class of outstanding preferred
stock, if any, having preference over the Common stock in the event of
liquidation. Holders of shares of Common Stock, as such, have no conversion,
preemptive or other subscription rights, and there are no redemption provisions
applicable to the Common Stock. All of the outstanding shares of Common stock
are fully paid and nonassessable.
14
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock, $1.00
par value per share, in one or more classes with the relative rights,
preferences and limitations of each class to be determined by the Board of
Directors at the time of authorization of any such class of preferred stock. As
of the date of this prospectus no shares of preferred stock have been issued.
The ability of the board of directors to issued preferred stock could have the
effect of making it more difficult for a third party to acquire, or discourage a
third party from attempting to acquire, control of Jane Butel Corporation if
shares of preferred stock were issued with rights which made it more difficult
for an acquirer of our common stock to gain control of the board of directors.
These provisions could limit the price that investors might be willing to pay in
the future for shares of our common stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
There is no public trading market for our common stock. Management's strategy is
to seek to have the common stock trade on the over-the-counter market and quoted
on the OTC Bulletin Board as soon as practicable. However, to date we have not
solicited any broker/dealers to become market- makers of our common stock. There
can be no assurance that an active trading market for the common stock will
develop or be sustained.
THE PENNY STOCK RULES
The Securities and Exchange Commission has adopted regulations which
generally define a penny stock to be any equity security that has a market price
less than $5.00 per share, subject to certain exceptions. If our shares fall
within the definition of a penny stock following the distribution, they will
become subject to rules that impose additional sales practice requirements on
broker- dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
15
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The penny stock rules may restrict the ability
of broker-dealers to sell our securities and may affect the ability of our
shareholders to sell our shares in the secondary market.
There are no restrictions on the payment of dividends. However we have not paid
any dividends and there is no present plan to do so.
As of September 15, 2003 there were approximately 82 holders of record of our
common stock.
Shares Eligible For Future Sale
We have 22,620,750 shares of Common stock outstanding, all of which are deemed
to be "restricted securities," as that term is defined under Rule 144, in that
such shares were issued and sold in private transactions not involving a public
offering and, as such, may only be sold pursuant to an effective registration
under the Securities Act, in compliance with the exemption procedures of Rule
144 or pursuant to another exemption under the Securities Act.
In general, under Rule 144 as currently in effect, a person, including an
affiliate of the company (or persons whose shares are aggregated with an
affiliate), who has owned restricted shares of common stock beneficially for at
least one year is entitled to sell in an unsolicated brokerage transaction or to
a market maker, within any three- month period, a number of shares that does not
exceed the greater of 1% of the total number of outstanding shares of the same
class or, the average weekly trading volume during the four calendar weeks
preceding the sale, provided there is available current public information about
the issuer and the seller give notice of such proposed sale on SEC Form 144. A
person who has not been an affiliate of the company for at least three months
immediately preceding the sale and who has beneficially owned shares of common
stock for at least two years is entitled to sell such shares under Rule 144
without regard to any of the limitations concerning manner of sale, volume,
notice or availability of information.
Shares acquired by promoters and/or affiliates in a blank check company are
not available for resale transactions under Rule 144 and would need to be
registered for resale. A blank check company is a company that is issuing penny
stock and is a development stage company that has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an undetermined company or companies or other entity in
determining whether a company is a blank check company, uncertainty and lack or
development of a proposed business plan may be commensurate in scope with the
uncertainty and lack of development ordinarily associated with blank check
companies.
Based on the foregoing criteria, approximately 808,300 shares of our common
stock are currently eligible for sale under Rule 144.
ITEM 2. LEGAL PROCEEDINGS.
On January 24, 2003 a suit was filed against us in Second Judicial District
Court, Bernalillo County, New Mexico by James Allen Dickey and Lila Dickey
seeking a judgement for two notes totalling $113,250 plus interest. We borrowed
such sums in 2001. We agreed to repay a $100,000 loan on February 9, 2003 and to
pay an additional $300,000 based on $2.00 per cookbook sold on our TV programs.
We agreed to pay a $13,250 loan on demand and pay an additional $13,750 based on
$5.00 per cookbook sold. Jane Butel and spouse guaranteed payment up to $113,250
each and were also named as defendants. On August 19, 2003 we agreed to
restructure such debt and pay it as follows: the principal due the lenders was
increased to $137,500 including past due interest and attorney fees. We pay a
monthly minimum payment of $610 per month starting September 15, 2003 plus $2.00
per cookbook we sell. After the entire $137,500 is paid, plus interest from
August 10, 2003, the cookbook payment increases to $5.00 per book until an
additional $300,000 is paid. Any balance on the $137,500 loan which has not been
paid by August 15, 2005 is due at that time.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities were issued within the last three years without
registration under the Securities Act of 1933.
In August 2002 Earth Labs, Inc., which is now named Jane Butel Corporation
issued 700,000 shares of our common stock to 16 persons who were minority
shareholders of shares of U'i Hawaii, Inc. When they purchased their shares in
U'i Hawaii, Inc. in a private placement in January 1999 their shares were to
convert to shares of Earth Labs, Inc. (now Jane Butel Corporation) and we
received the U'i Hawaii, Inc. shares from these shareholders. The U'i Hawaii,
Inc. shares were issued pursuant to an exemption from registration under the
Securities Act of 1933 under Section 4(2). The shareholders signed an investment
letter acknowledging their shares were not registered and were offered the
opportunity to meet with our officers and inspect the books and records. Such
shares contain a restricted legend referring to the restrictions on sale or
transfer and the transfer agent has been notified not to allow a transfer of the
shares.
In September 2002 we issued 13,512,450 shares of our common stock to Jane Butel
in exchange for all of the issued and outstanding shares of Tex-Mex, Inc. These
shares were issued without registration under the Securities Act of 1933
pursuant to the exemption from registration under Section 4(2) of the Act. In
connection with the issuance of these shares the shareholder was offered full
access to our books, records and financial information and had the opportunity
to discuss the investment with officers of the company. The shareholder
acknowledged that the shares were being acquired for investment and not for
distribution and that such shares would be issued without registration under the
Securities Act of 1933. The shareholder further agreed that the shares being
acquired would not be sold or transferred without being registered under the
Securities Act of 1933 or pursuant to an exemption from such registration. The
certificates for the shares contained a legend referring the restrictions on
sale or transfer and the transfer agent has been notified not to allow a
transfer of the shares.
16
ITEM 5. INDEMNIFICATION.
Since we are incorporated in the State of Florida, the Florida Business
Corporation Act governs the indemnification provisions of Jane Butel
Corporation.
Subsection (1) of Section 607.0850 of the Florida Business Corporation Act
("BCA") empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (including an employee benefit plan), against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Subsection (2) of Section 607.0850 of the BCA empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under similar standards, except that no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
corporation unless and only to the extent that the court in which such action or
suit was brought, or any other court of competent jurisdiction, shall determine
that despite the adjudication of liability, but in view of all of the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
BCA Section 607.0850 further provides that indemnification provided for by
Section 607.0850 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled and empowers the corporation to purchase and
maintain insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him and incurred by him in
the capacities set forth above, or arising out of his status as such, whether or
not the corporation would have the power to indemnify him against such
liabilities under Section 607.0850.
Our Articles of Incorporation and By-laws provide that we will indemnify those
persons entitled to be indemnified, to the fullest extent permitted by the BCA.
17
JANE BUTEL CORPORATION
June 30, 2003
Clyde Bailey, P.C.
Certified Public Accountant
10924 Vance Jackson #404
San Antonio, Texas 78230
CLYDE BAILEY P.C.
________________________________________________________________________________
Certified Public Accountant
10924 Vance Jackson #404
San Antonio, Texas 78230
(210) 699-1287(ofc.)
(888) 699-1287
(210) 691-2911(fax)
Member:
American Institute of CPA's
Texas Society of CPA's
Board of Directors
Jane Butel Corporation
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Jane Butel Corporation
(Company) (formerly Earth Labs Inc.) as of June 30, 2003 and 2002 and the
related statement of operations, statement of stockholders' equity, and the
statement of cash flows for the twelve month period ended June 30, 2003 and
2002. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing standards in
the United States. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and negative working capital that raise substantial doubt
about its ability to continue as a going concern. This is further explained in
the notes to financial statements.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of June 30, 2003 and
the results of its operations and its cash flows for the twelve month period
ended June 30, 2003 and 2002 in conformity with accounting principles generally
accepted in the United States.
Clyde Bailey P.C.
San Antonio, Texas
September 13, 2003
F-1
<TABLE>
<CAPTION>
JANE BUTEL CORPORATION
BALANCE SHEETS
__________________________
As of June 30
2003 2002
__________________________
A S S E T S
Current Assets
______________
<S> <C> <C>
Cash $ 1,011 $ -
Inventory 27,044 23,382
Accounts Receivable net of allowance for bad debt 5,156 8,817
Accounts Receivable - related party 12,894 12,894
_________ _________
Total Current Assets 46,105 45,093
Fixed Assets
____________
Equipment 114,095 114,095
Leasehold Improvements 97,159 97,159
Accumulated Depreciation (191,778) (165,197)
_________ _________
Total Fixed Assets 19,476 46,057
Other Assets
____________
Deferred Tax Benefit 61,933 7,629
Television Film Costs 240,862 280,789
Websites, net of amortization 48,252 74,319
Videos, net of amortization 59,593 76,689
_________ _________
Total Other Assets 410,640 439,426
_________ _________
Total Assets $ 476,221 $ 530,576
========= =========
L I A B I L I T I E S
Current Liabilities
___________________
Cash Overdraft - 2,690
Accounts Payable 72,745 25,874
Deferred Income 15,664 62,656
Other Current Liabilities 52,162 40,594
Notes Payable 155,000 130,000
Accrued Settlements Payable 30,199 13,600
_________ _________
Total Current Liabilities 325,770 275,414
Long-Term Liabilities
Notes Payable - Related Party 244,098 244,098
_________ _________
Total Long-Term Liabilities 244,098 244,098
-
_________ _________
Total Liabilities 569,868 519,512
Commitments and Contingencies - -
S T O C K H O L D E R S ' E Q U I T Y
Preferred Stock - -
5,000,000 authorized shares, $1.00 par value
none issued
Common Stock 22,621 21,921
50,000,000 authorized shares, $.001 par value
22,620,750 and 21,920,750 shares issued and
outstanding
Additional Paid-in-Capital 47,568 47,568
Accumulated Deficit (163,836) (58,425)
_________ _________
Total Stockholders' Equity (Deficit) (93,647) 11,064
_________ _________
Total Liabilities and Stockholders' Equity 476,221 530,576
========= =========
The accompanying notes are integral part of the consolidated financial statements.
</TABLE>
F-2
<TABLE>
<CAPTION>
JANE BUTEL CORPORATION
STATEMENT OF OPERATIONS
______________ ______________
For the For the
Year Year
Ending June 30 Ending June 30
______________ ______________
2003 2002
______________ ______________
Revenues:
_________
<S> <C> <C>
Revenues $ 220,748 $ 330,063
______________ ______________
Total Revenues $ 220,748 $ 330,063
Expenses:
Cost of Sales 83,670 85,161
Payroll Expenses 53,583 49,043
Occupancy Costs 19,713 21,697
Professional Fees 36,152 4,204
Interest Expense 32,193 31,836
Impairment Loss 24,199 35,400
Depreciation and Amortization Expense 102,722 41,945
Operating Expenses 58,624 71,365
______________ ______________
Total Expenses 410,856 340,651
Net Income (Loss) from Operations $ (190,108) $ (10,588)
Other Income and Expenses:
__________________________
Barter Revenue $ 46,992 $ 15,664
Other Expenses (16,599) -
______________ ______________
Total Other Income and Expenses $ 30,393 $ 15,664
Net Income before taxes $ (159,715) $ 5,076
Provision for Income Taxes:
___________________________
Income Tax Benefit/(Expense) 54,304 (761)
______________ ______________
Net Income (Loss) $ (105,411) $ 4,315
============== ==============
Basic and Diluted Loss Per Common Share (0.00) 0.00
______________ ______________
Weighted Average number of Common Shares 21,820,750 21,845,750
used in per share calculations ============== ==============
The accompanying notes are integral part of the consolidated financial statements.
</TABLE>
F-3
<TABLE>
<CAPTION>
JANE BUTEL CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
$.001 par value
Common Paid-In Deficit Stockholders'
Shares Stock Capital Accumulated Equity
__________ _______________ ________ ___________ _____________
<S> <C> <C> <C> <C> <C>
Balance, June 30, 2001 21,820,750 21,821 (13,821) (62,740) (54,740)
__________ _______________ ________ ___________ _____________
Issuance of Shares for Services 100,000 100 61,389 - 61,489
Net Income (Loss) 4,315 4,315
__________ _______________ ________ ___________ _____________
Balance, June 30 2002 21,920,750 21,921 47,568 $ (58,425) $ 11,064
Issuance of Shares 700,000 700 700
Net Income (Loss) (105,411) (105,411)
__________ _______________ ________ ____________ _____________
Balance, June 30 2003 22,620,750 $ 22,621 $47,568 $ (163,836) $ (93,647)
========== =============== ========= ============ =============
The accompanying notes are integral part of the consolidated financial statements.
</TABLE>
F-4
<TABLE>
<CAPTION>
JANE BUTEL CORPORATION
STATEMENT OF CASH FLOWS
__________ __________
For the For the
Year Ended Year Ended
June 30 June 30
__________ __________
2003 2002
__________ __________
Cash Flows from Operating Activities:
_____________________________________
<S> <C> <C>
Net Income (Loss) $ (105,411) $ 4,315
Changes in operating assets and liabilities:
Depreciation Expense 26,582 32,134
Amortization Expense 76,140 9,811
Impairment Loss 24,199 35,400
Shares Issued for Services 700 -
(Increase)/Decrease Account Receivable 3,661 13,130
(Increase)/Decrease Account Receivable Related Party - (12,894)
Increase in Inventory (3,662) (7,308)
(Increase)/Decrease Deferred Tax Benefit (54,304) 761
(Increase)/Decrease Prepaid Expenses - 8,900
Production of Videos & Website - (117,900)
Television Film Costs (13,095) -
Accrued Settlement Payable 16,599 -
Barter Revenue (non-cash) (46,992) (15,664)
Increase/(Decrease) Accounts Payable 46,871 (61,941)
Increase/(Decrease) in Other Current Liablities 7,413 (7,381)
__________ __________
Total Adjustments 84,112 (122,952)
__________ __________
Net Cash (Used in) Provided From Operating Activities $(21,299) $ (118,637)
Cash Flows from Investing Activities:
_____________________________________
Capital Expenditures - -
__________ __________
Net Cash Used in Investing Activities $ - $ -
Cash Flows from Financing Activities:
_____________________________________
Note Payable 25,000 99,829
Notes Payable Related Parties - (1,638)
__________ __________
Net Cash Provided for Financing Activities $ 25,000 $ 98,191
__________ __________
Net Increase (Decrease) in Cash $ 3,701 $ (20,446)
Cash Balance, Begin Period (2,690) $ 17,755
__________ __________
Cash Balance, End Period $ 1,011 $ (2,690)
========== ==========
Supplemental Disclosures:
Cash Paid for interest $ 7,559 $ 17,190
Cash Paid for income taxes $ - $ -
The accompanying notes are integral part of the consolidated financial statements.
</TABLE>
F-5
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
NOTE 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 50,000,000 authorized shares with a par value of
$.001 per share and with 22,620,750 common shares issued and outstanding as of
June 30, 2003. The Company has designated 5,000,000 as preferred stock with a
par value of $1.00. There is no preferred stock outstanding as of June 30, 2003.
The fiscal year-end will be June 30.
BASIS OF PRESENTATION
On August 26, 2002, the Company entered into a Share Exchange Agreement with
Tex-Mex Inc. (Tex-Mex), a New Mexico Corporation whereby Jane Butel exchanged
all of her shares in Tex-Mex Inc. for 13,512,450 shares of the Company. Jane
Butel now owns 60% of the Company. The exchange agreement will be accounted for
in a recapitalization of a subsidiary for accounting purposes and the assets and
liabilities being recorded at their net equity value. Although the Share
Exchange Agreement did not occur until August 26, 2002, these financial
statements have been retroactively restated to reflect the merger in the June
30, 2003 financial statements.
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 sister company Jane Butel Corporation a New Mexico corporation
(incorporation date: March 17, 2000). All significant inter-company transactions
have been eliminated in consolidation.
TELEVISION SERIES PRODUCTION
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 is 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
F-6
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
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. Management has estimated the ultimate revenues to be
three hundred and sixty seven dollars ($367,944). The ultimate revenues are
calculated based on expected increase of revenues in the amount of $503,432 over
a three year period and has been discounted at the rate of 15%. Based upon this
estimate of ultimate revenues the company will recognize amortization of
television production costs in future periods as follows:
_____________________________________________________________________
Year Ended June 30: 2004 2005
_____________________________________________________________________
Projected Amortization 74,119 65,393
_____________________________________________________________________
Unamortized Balance 139,570 74,117
_____________________________________________________________________
Per SOP 00-2.53, if the accumulative amortization at the end of the three year
period fails to meet the 80 percent requirement, the company will increase its
amortization expense in the fourth year to meet an amortization level of eighty
percent.
The company has adopted an impairment policy which identifies two events which
would trigger the recognition of an impairment loss: (1) the cancellation of the
PBS Contract, or (2) the projected sales falls significantly below (more than
25%) management projections. Given the occurrence of either event management
will considered this asset impaired and will recognize an impairment loss of the
unamortized production cost.
PBS CONTRACT
On April 1 2002 the Company entered into an agreement with the Association for
Community Television (ACT) on behalf of KUHT/Houston PBS in which KUHT will act
as the exclusive presenting station for the distribution of thirty (30)
thirty-minute (30:00) videotaped television programs on southwestern cooking. As
producer, the company is responsible for the timely production and delivery to
KUHT of each program in the series in the form of final master tapes and the
securing of releases including but not limited to talent music, location,
photographic or footage releases in a form satisfactory to KUHT. The Company has
met all these requirements and the shows started airing on September 7, 2002.
The company is required to pay to KUHT (presenter) a thirty thousand dollar fee
($30,000) fee based upon the sale of the special version of "Jane Butel's
Southwestern Kitchen" cookbook. The company is obligated to pay three dollars
($3.00) per cookbook until KUHT receives ten thousand dollars ($10,000) and one
dollar and fifty cents ($1.50) per cookbook until KUHT has received the balance
of the thirty thousand ($30,000) presenter fee. The company is also obligated to
pay an additional five percent (5%) of the net cost of each cookbook or 5% of
$22.00 or $1.10 to KUHT which will then be remitted to American Public
Television (APT). The series started running in September 2002.
F-7
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
AMERICA ONE CONTRACT
On December 1, 2002, a distribution contract went into effect enabling the
network to run the 30 shows of Jane Butel's Southwestern Kitchen for a period of
two years on a joint venture basis. They were to supply 50% of all advertising
revenue. To date they have sold none and have been put on notice that the
contract will not be renewed if no revenue is realized before the contract
renewal 90 days prior to December 1, 2003, or by August 1, 2003.
VIDEOS
The company has capitalized costs associated with the production of 12 cooking
video's 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 has evaluated the carrying
value of these assets and has determined that the fair value of the film is less
than the unamortized film cost and a 30% reduction should be recorded based on
the statement of operations. The Company has also evaluated the net realizable
value and obsolescence exposure of the videos. There are no participation costs
associated with these videos.
The company has adopted its impairment and amortization policy based upon SOP
00-2 and has estimated the ultimate revenue based upon cooking club video sales
for future periods (five years). Management has estimated the ultimate revenue
resulting from 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 to meet the 80% requirement as
specified in SOP 00-2. The following table presents the expected amortization to
recognize in future periods:
________________________________________________________________________________
Year Ended June 30: 2004 2005 2006 2007
________________________________________________________________________________
Amortization 12,970 12,638 11,061 9,010
________________________________________________________________________________
Unamortized Bal. 57,441 44,803 33,742 24,732
________________________________________________________________________________
Management recognized an impairment loss of $24,199 and $35,400 for the year
ending June 30, 2003 and 2002, respectively which was based upon sales not
meeting projected sales figures for 2002. Management's impairment policy has
identified three events that would trigger an additional impairment loss: (1)
the cancellation of the current PBS contract, (2) failure to meet projected
sales figures from the sale of videos, (3) higher attrition of cooking club
membership than the projected 25% rate. Given the occurrence of any of these
three events, management will recognize an impairment loss of the unamortized
balance of the production costs.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company follows SFAS No. 144, "Accounting for Impairment or Disposal of
Long-Lived Assets for the fiscal year ended June 30, 2003. 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.
F-8
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
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 assets not covered by SFAS 144 that are included in an asset group
are adjusted in accordance with other applicable accounting standards prior to
testing the asset group for recoverability. The recoverability of long-lived
assets is evaluated at the operating unit level by an analysis of operating
results and consideration of other significant events or changes in the business
environment. If an operating unit has indications of impairment, such as current
operating losses, the Company will evaluate whether impairment exists on the
basis of undiscounted expected future cash flows from operations before interest
for the remaining amortization period. If impairment exists, the carrying amount
of the long-lived assets is reduced to its estimated fair value.
In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of, and the accounting
and reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations for a Disposal of a Segment of a Business. The Company was required
to adopt SFAS 144 in the first quarter of 2002 and the Company does not expect
the adoption SFAS 144 to have a material effect on the Company's financial
statements. The asset groups not covered by SFAS 144 that are included in an
asset group are adjusted in accordance with other applicable accounting
standards prior to testing the asset group for recoverability. The Company has
categorized all of its long-lived assets as being held and used and not to be
sold.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting. Revenues are recognized when services and products have been
completed and delivered and expenses when incurred on the related services and
products. The major sources of revenue are the three and five day schools. 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 30, 2003, there were no advance
payments recorded. The other smaller components of revenue are the spice sales
and book and video sales. These sales are received from the web site and phone
orders. The Company replaces any problems with the orders, but does not have a
cancellation policy for these sale items. The Company is the primary obligor in
the transactions and it is responsible for fulfillment of the order and for the
customer's acceptance of the goods or services sold, the general industry risk,
and has reasonable latitude to establish the selling price and follows the
guidance of EITF 99-19 relating to the "gross" method of reporting revenue on
the cooking classes, sales of videos, books and spices. Also, relating to SOP
00-2 the company has not entered and does not plan to enter into any agreement
with the license arrangements with the sale of television show masters.
The contract with the Production Company for the videos has been revised. The
Production Company is not related in any way to Jane Butel or any of the
principals of the company. The production was completed in January, 1995, and it
is recognized that the remaining amount to be paid the production company is
$12,000 reduced from $60,000 which will be paid at a royalty rate of 10% of the
gross sales of videos until this amount is paid, at which time the Agreement is
considered complete and no further financial responsibility is due to the
Production Company. The fees will be accrued and paid quarterly.
The Company does not receive revenue from the airing of the television shows and
the production costs have been capitalized in the balance sheet. The television
shows produce sales of books, videos, classes, and pantry items. The Company is
F-9
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
using these masters for the public television series masters. The Contract was
signed in April 2002 for a three year period and started running on public
television stations. The Company is tracking sales resulting from the television
series. These assets are classified as being held and used and will be reviewed
by management for impairment purposes on a quarterly basis per the requirement
of SOP 00-2.
The Company adopted the U.S. Securities and Exchange Commission's ("SEC") Staff
Accounting Bulletin 101, "Revenue Recognition" ("SAB 101"), which provides
guidance on the recognition, presentation, and disclosure of revenue in
financial statements filed with the SEC. The adoption of SAB 101 did not have a
material effect on the Company's business, financial condition, results of
operations or cash flows. The Company believes that SAB 101 has been followed in
the recognition of revenues.
Fixed assets are stated at cost. Depreciation and amortization using the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. The periods of depreciation for each major class of
depreciable assets are as follows:
Equipment 5 Years
Leasehold Improvements 5 Years
Websites 3 Years
Inventory is valued at cost and charged to expense as sales are made at a unit
cost per item and carried at the lower of cost or market.
BARTER 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. The Company began broadcasting the promotional mentions in
December 2001 and they will continue to run on the remaining shows of the series
through November 2003. The shows run twice each week. The contractor completed
its website development in the spring of 2002. The Company consulted APB 29
which provides that such transactions be recorded at the fair value of the
assets or services given or received, whichever is more clearly evident. After
considering EITF 99-17, the Company based its estimate of the value of the
website based on its negotiations with the contractor and other website
developers concerning the cash cost of website development. After consulting SAB
101 the Company did not recognize any income or expense from this transaction
until the website was substantially completed, which occurred during the spring
of 2002. At that time the Company began recognizing barter revenue of $78,320 as
Other Income in its Statement of Operations based on its estimate of the value
of the website which the Company received. Such amount is being recognized
ratably from March 1, 2002 to November 1, 2003 or over 20 months. A total of
$46,992 and $15,664 is being recognized as other income in the section of the
Statement of Operations for the period ended June 30, 2003 and 2002,
respectively and the balance as deferred income. The Company amortized $26,967
and $4,001 of the website cost in fiscal 2003 and 2002 leaving a net asset value
of $48,252 as of June 30, 2003.
STOCK-BASED COMPENSATION PLANS
The Company accounts for all transactions under which employees, officers and
directors receive shares of stock or options in the Company in accordance with
F-10
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB 25"), under which no compensation cost is
recognized. The Company adopted Statements of Financial Accounting Standards No.
123 ("SFAS No. 123"), "Accounting for Stock-Based Compensation," for disclosure
purposes, and has adopted the proforma disclosure requirements of SFAS 123.
Accordingly, no compensation has been recognized in the results of operations
for the employee, officers and directors stock plan other than for options
issued at an exercise price below market price, to non- employees for consulting
services or to debt providers that had stock or options attached with the
exception for transactions with employees that are within the scope of APB 25,
all transactions in which goods or services are the consideration received for
the issuance of equity instruments are accounted for based on the fair value or
the consideration received or the fair value of the equity instruments issued,
whichever is a more reliable measure.
EARNINGS PER SHARE
The Company adopted Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share," which simplifies the computation of earnings per share requiring the
restatement of all prior periods.
Basic earnings per share are computed on the basis of the weighted average
number of common shares outstanding during each year.
Diluted earnings per share are computed on the basis of the weighted average
number of common shares and dilutive securities outstanding. Dilutive securities
having an anti-dilutive effect on diluted earnings per share are excluded from
the calculation. The Company does not have any dilutive securities as of June
30, 2003.
RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Company does not expect that there will be a
material impact from the adoption of SFAS No. 143 on its financial position,
results of operations, or cash flows.
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. It supersedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of", and the accounting and reporting
provisions of Accounting Principles Board Statement ("APB") 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business. The Company is
required to adopt SFAS No. 144 on October 1, 2002. The Company does not expect
that the adoption of SFAS No. 144 will have a material effect on its financial
position, results of operations or cash flows.
RESCISSION OF FASB STATEMENTS NO. 4,44 AND 64, AMENDMENT OF FASB STATEMENT NO.
13, AND TECHNICAL CORRECTIONS
F-11
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4,44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections".
SFAS No. 145 requires the classification of gains and losses from
extinguishments of debt as extraordinary items only if they meet certain
criteria for such classification in APB No. 30, "Reporting the Results of
Operations, Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions". Any
gain or loss on extinguishments of debt classified as an extraordinary item in
prior periods that does not meet the criteria must be reclassified to other
income or expense. These provisions are effective for fiscal years beginning
after May 15, 2002. Additionally, SFAS No. 145 requires sale-leaseback
accounting for certain lease modifications that have economic effects similar to
sale-leaseback transactions. These lease provisions are effective for
transactions occurring after May 15, 2002. The Company does not expect the
adoption of SFAS No. 145 to have a material effect on its financial position,
results of operations or cash flows.
ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
In July 2002, the FASB issued SFAS No. 146 , "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 replaces "Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)". SFAS No. 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. Examples of costs
covered by the standard include lease termination costs and certain employee
severance costs that are associated with a restructuring, discontinued
operation, plant closing, or other exit or disposal activity. SFAS No. 146 is to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. The Company does not expect the adoption of SFAS No. 146 to have a
material effect on its financial position, results of operations or cash flows.
NOTE 2 - COMMON STOCK
The Company has a total of 50,000,000 authorized shares of common stock with a
par value of $.001 per share and with 22,620,750 shares issued and outstanding
as of June 30, 2003. The Company has designated 5,000,000 as preferred stock
with a par value of $1.00.
In March of 2002, the Company issued another 100,000 shares to Jane Butel that
was recorded at $61,489. The amount recorded was for services rendered in the
development of the television programs that had been accrued in previous years.
The $61,489 was deducted from the accrued amount due Jane Butel. The services
rendered by Jane Butel in the production and development of the television
programs were reviewed and were considered to be general and administrative and
were not capitalized as television production costs. Per SOP 00-2, production
overhead should not include general and administrative expenses.
In August of 2002, the Company issued 700,000 shares to various individuals
prior to the share exchange agreement. The common shares were valued at $.001
because the Company was inactive and not trading.
On August 26, 2002, the Company entered into a Share Exchange Agreement with
Tex-Mex Inc. (Tex-Mex), a New Mexico Corporation whereby the Jane Butel
exchanged all of her shares in Tex-Mex Inc. for 13,512,450 shares of the
F-12
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
Company. After the agreement is completed she will own 60% of the Company. The
shares were recorded as the equity valued of the assets received in the Company
being $119,450.
NOTE 3 - NOTE PAYABLE - RELATED PARTIES
The Company entered into a promissory note payable with Jane Butel,
individually, on June 28, 2002 in the amount of $244,098. The note is for funds
loaned to the Company by the principal shareholder, Jane Butel. The note matures
on July 1, 2007 with accrued interest at the rate of 6.97% in the amount of
$25,215 as of June 30, 2003.
Pecos Valley Spice Co. produces all of the products which the Company purchases
at the Distributor Cost, which is 25% below wholesale. (Wholesale price is 50%
or half of the cost of retail.) The revenues for the sale of the product are
included in the June 30, 2003 Profit and Loss under Spice Division Internet
sales, Mail Order or Pantry sales. Pecos Valley Spice Co. records its costs
separately in its own accounting. Pecos Valley Spice Co. operates as its own
entity, creating its products and pricing. The Company operates as the exclusive
or Master Distributor. The Company is not the agent because the Company pays for
the product and then resells product to the public. Per EITF 99-19 the Company
reports these transactions under the "gross reporting" of revenues. The Company
supplies the marketing and distribution system for the products.
NOTE 4 - NOTES PAYABLE
The company executed a note payable on February 9, 2001 for one hundred thousand
dollars ($100,000) payable to James and Lila Dickey at six percent (6%) per
annum. Interest on the note is due in monthly installments and the principal
matures on February 7, 2003. An additional $300,000 is due based on $2.00 per
cookbook sold.
On November 28, 2001 the company entered into a note for $13,750 payable to
James Dickey. This note is a demand note. The company agreed to pay an
additional $13,750 based on $5.00 per cookbook of the JANE BUTEL'S SOUTHWESTERN
KITCHEN until the full amount has been paid.
As of June 30, 2003, the company is also indebted to two unrelated individuals
for $1,000 and $2,000 respectively.
NOTE 5 - RELATED PARTIES
There exist related party relationships with Jane Butel, principal stockholder
and officer, in the form of a Note Payable in the amount of $244,098.
Also, there exists a related party relationship with Pecos Valley Spice Company
in the form of a Note Receivable in the amount of $12,894 where the Company is
owed that amount from Pecos Valley for funds advanced to the Company. Jane
Butel, individually, owns 18.75% of Pecos Valley Spice Company.
NOTE 6 - NOTE RECEIVABLE - RELATED PARTY
The Company entered into a promissory note receivable with Pecos Valley Spice
Company in the amount of $12,894. The note is a demand note and matures on June
30, 2003.
F-13
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
NOTE 7 - LEASE
The Company entered into a lease agreement with the La Posada Hotel in
Albuquerque, New Mexico for 2,900 square feet office and cooking school space.
The lease was originally signed in June 1997 and covered the term from July 1,
1997 to June 30, 2002 at the rate of $1,500 per month. Since the lease has
expired, the Company is currently extending the lease on a month to month basis.
NOTE 8 - INCOME TAXES
Deferred taxes are classified as current or non-current, depending on the
classification of the assets and liabilities to which they relate. Deferred
taxes arising from timing differences that are not related to an asset or
liability are classified as current or non-current depending on the periods in
which the timing differences are expected to reverse. The Company's previous
principal temporary differences relate to revenue and expenses accrued for
financial purposes, which are not taxable for financial reporting purposes. The
Company's material temporary differences consist of bad debt expense recorded in
the financial statements that is not deductible for tax purposes and differences
in the depreciation expense calculated for financial statement purposes and tax
purposes.
The components of the provision for income tax benefits(expense) are as follows:
Year Ended June 30,
___________________
2003 2002
____ ____
Current:
Federal $ 54,128 $ ( 3,882)
State 7,510 ( 538)
___________ ____________
$ 61,638 $ ( 4,420)
___________ ____________
Such income tax benefits(expense) are included in the accompanying consolidated
financial statements as follows:
Year Ended June 30,
___________________
2003 2002
____ ____
Income from operations $ 61,638 ( $ 4,420)
Extraordinary Items -0- -0-
_________ ____________
$ 61,638 ( $ 4,420)
_________ ____________
The above provision has been calculated based on Federal and State statutory
rates in the adjusted rates of 34% for Federal and 4.5% for State tax rates.
Significant components of the Company's deferred tax assets and liabilities as
of June 30, 2003 and 2002 are a result of temporary differences related to the
items as described as follows:
<TABLE>
<CAPTION>
2003 2002
Deferred Tax Deferred Tax Deferred Tax Deferred Tax
____________ ____________ ____________ ____________
Assets Liabilities Assets Liabilities
____________________________________________________________________
<S> <C> <C> <C> <C>
Impairment Loss $ 8,936 -0- $ 13,073 -0-
Net Operating Loss 52,701 -0- -0- -0-
Other 3,971 -0- -0- 9,103
____________________________________________________________________
$65,608 -0- $ 13,073 $9,103
====================================================================
</TABLE>
SFAS 109 specifies that deferred tax assets are to be reduced by a valuation
allowance if it is more likely than not that some portion of the deferred tax
assets will not be realized. The Company has determined, based on its history of
operating earnings and expectations for the future, that it is more likely than
not that future taxable income will be sufficent to fully utilize the deferred
tax assets at June 30, 2003 and that no valuation allowance is needed at this
time. As of June 30, 2003, the Company had approxiamately $167,000 in net
operating loss carryforwards for federal income tax purposes. The loss
carryforwards expire beginning in 2013.
NOTE 9 - COMMITMENT AND CONTINGENCIES
The Company reached a settlement agreement with Peppercreek Farms Inc. in a
court case in Oklahoma City, Oklahoma. The settlement agreement calls for a
payment of $13,600 to be paid by January 5, 2003.
The Company has settled with the production company on the videos production in
the remaining amount of $12,000 is directly contingent upon the sale of videos
and, therefore the financial statements have not been revised to reflect this
obligation.
A judgment in the amount of $16,599 has been rendered against the Company by
World Wide Country Tours for classes that were cancelled. The Company intends to
try and settle this debt for smaller amount in the near future. This amount has
been recorded in the balance sheet under commitment and contingencies.
On January 24, 2003 a suit was filed against us in Second Judicial District
Court, Bernalillo County, New Mexico by James Allen Dickey and Lila Dickey
seeking a judgment in the amount of $127,000 plus interest. The Company borrowed
such sums in 2001. The Company agreed to repay a $100,000 loan on February 10,
2003 and to pay an additional $300,000 based on $2.00 per cookbook sold on our
TV programs. The Company agreed to pay a $13,750 loan on demand and pay an
additional $13,250 based on $5.00 per cookbook sold. Jane Butel and her spouse
guaranteed payment up to $113,250 each and were also named as defendants.
The additional liability is solely contingent upon the Company selling cookbooks
and has not been recorded in the financial statements as of June 30, 2003. A
settlement was reached on August 19, 2003 and detailed under Note 11.
NOTE 10 - WEBSITES
Costs are capitalized when it is probable that a website will be completed and
will be used to perform the function intended. When it is probable that upgrades
and enhancements will result in additional functionality such costs are
F-14
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
capitalized. Websites will be considered to be impaired when it no longer
provides substantial service potential, or significant changes occur in the
extent or manner in which the website is used. Impairment write off will be
recognized in the period when impairment is deemed by management to have
occurred.
The company capitalized its website development. It was engaged in the following
types of activities: creation of initial graphics, entering the initial content
of the website, creation of hypertext links to other websites and installation
of developed websites on web servers. These costs are to be capitalized as per
the guidance provided by SOP 98-1. The company has adopted the policy of
recording as expense in future period's activities such as; registering with web
site engines, creation of new links, backup costs, user administration.
The Company is actively pursuing web-site development. The Company has adopted
"Financial Accounting Standards Board Emerging Task Force Consensus 00-2 (FASB
EITF 00-2): Accounting for Website Development Costs." The adoption of this
procedure relates to the accounting for costs of internal software, requires
that costs of developing web applications and infrastructure, as well as cost of
graphic development, be capitalized, rather than the historical common practice
of same period expense. Costs of website planning and operation continue to be
expensed as normal. The website is being set up to be amortized over a three
year period on a straight line basis unless the website becomes impaired under
SFAS 144. Management has reviewed this long lived asset as being held and used
and noted no events that would indicate any impairment such as significant value
of the market value or a significant change in the extent or manner it was used.
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets to cover its operating costs and liabilities that raise substantial doubt
about its ability to continue as a going concern. The stockholder/officers/ and
director has indicated a willingness to support the capital needs of the Company
with further interest free loans to insure that the Company has enough operating
capital over the next twelve months. However there is no binding commitment to
provide such capital.
NOTE 11 - SUBSEQUENT EVENTS
On August 19, 2003, a "Settlement and Mutual Release" was signed between the
parties in the suit that was filed January 24, 2003 in Second Judicial District
Court, Bernalillo County, New Mexico by James Allen Dickey and Lila Dickey
seeking a judgment in the amount of $127,000 plus interest. The Company borrowed
such sums in 2001.
A summary of the settlement is as follows:
1. Total of $137,500 is due with attorney fees and past due
interest.
2. Interest to accrue at 6% on the original debt of $100,000, 10%
on $19,500, and no interest on the attorney fees and past due
interest.
3. Monthly payment of $610 per month plus $2.00 per cookbook sold
beginning September 15, 2003 and continuing until August 15,
2005 when the balance of the $137,500 is due.
4. After the entire $137,500 plus interest is paid, the cookbook
payment increases to $5.00 per book until an additional
$300,000 is paid.
F-15
JANE BUTEL CORPORATION
(FORMERLY TEX MEX INC.)
NOTES TO FINANCIAL STATEMENTS
AS OF JUNE 30, 2003
5. Mutual release of any and all other claims.
There are no other subsequent events that warrant disclosure in these financial
statements.
F-16
PART III
ITEM 1. INDEX TO EXHIBITS.
Exhibit No. Description
3.1 Amended and Restated Articles of Incorporation of registrant.
3.2 By-laws of registrant
10.1 Share exchange agreement between Jane Butel
and Earth Labs, Inc.
10.2 Indemnification Agreement between Earth Labs, Inc. and
certain shareholders.
10.3 Distribution Agreement with Pecos Valley Spice Co.
10.4 Revised Video Agreement
18
SIGNATURES
In accordance with Section 12, of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
JANE BUTEL CORPORATION
October 29, 2003 /s/ JANE BUTEL
_______________________________________
Jane Butel
President, Chief Executive
Officer and Chief Financial Officer
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