DALE JARRETT RACING ADVENTURE INC - Recent Material Event

2 Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained hereof, and will not be contained, to will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated file" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [x] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x] State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. The market value of the registrant's voting $.0001 par value common stock held by non-affiliates of the registrant was approximately $698,651. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant's only class of common stock, as of March 15, 2010 was 24,510,502 shares of its $.0001 par value common stock. No documents are incorporated into the text by reference. 3 Dale Jarrett Racing Adventure, Inc. Form 10-K For the Fiscal Year Ended December 31, 2009 Table of Contents Part I ITEM 1. BUSINESS 4 ITEM 1A. RISK FACTORS 6 ITEM 1B. UNRESOLVED STAFF COMMENTS 6 ITEM 2. PROPERTIES 7 ITEM 3. LEGAL PROCEEDINGS 7 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 7 Part II ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 8 ITEM 6. SELECTED FINANCIAL DATA 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 14 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 32 ITEM 9A. CONTROLS AND PROCEDURES 32 ITEM 9B. OTHER INFORMATION 33 Part III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 34 ITEM 11. EXECUTIVE COMPENSATION 36 ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS 38 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 39 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 40 Part IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 41 4 PART I ITEM 1. BUSINESS The registrant was formed as a C corporation and incorporated November 24, 1998. The registrant is currently not involved with any proceedings, bankruptcy or receiverships. The registrant offers entertainment based oval driving schools and events. These classes are conducted at various racetracks throughout the country. The registrant completed its first driving classes in Rockingham, NC July of 1999. Since July 4th, 1999, the registrant has run classes at over forty NASCAR tracks. The registrant currently owns fifteen (15) race cars. These race cars are classified as stock cars and are equipped for oval or round tracks only. They are fully loaded with race engines, six (6) point harnesses, neck and head restraints, communications, track specific gears and complete safety cages. The registrant has negotiated terms with over forty (40) racetracks where, for a fee ranging from $0 to $10,000 a day, we can rent their tracks. On October 29, 2008, the registrant introduced its new World War II Adventure. Participants receive a three day opportunity to relive the experience of a B-17 aviator heading out on a bombing mission over enemy territory. Our debut adventure was February 27-March 1, 2009. Products and Services. The registrant offers five(5) types of ride or drive programs for individuals and corporations. The "Qualifier" is a three(3) lap ride with a professional driver which lasts about five(5) minutes, depending on the length of the track. The "Season Opener" is a half day training class culminating in the student driving for ten(10) laps. The "Rookie Adventure" and "Happy Hour" are also half day driving classes with the students driving twenty(20) or thirty(30) laps respectively. The "Advanced Stock Car Adventure" is a full day sixty (60) lap class. The operation is similar to that of a traveling show in that we transport the stock cars, the mechanics, the sales staff and the instructors from event to event. The main purpose of each event is the thrill of actually driving the race car. The registrant's objective is to utilize this first "hub" of fifteen (15) race cars on the east coast to their full potential. It is in the registrant's plans that once this first hub becomes utilized at least fifteen(15) days per month and is profitable, to then add another "hub" on the West Coast. This would entail the purchase of another ten(10) race cars and the support equipment necessary to maintain them. 5 The registrant has fifteen (15) stock cars, which had an original purchase price of approximately $50,000 per car. Parts are nominal due to the lack of any sustained stress on the cars, approximately $10,000 per month per site. Staffing costs are approximately $20,000 per month at each active "hub". The registrant owns a Miller Semi Tractor Trailer to haul the cars from track to track. The transporting of staff to the event and their food and lodging costs average $4,000 per day. The registrant is required to maintain a minimum of five million dollars($5,000,000) of liability insurance, worker's compensation and property and casualty insurance. The registrant also offers a number of add-on sale items including CDs from its Adventure Cam located in the car, clothing, souvenirs and photography. The registrant also offers a World War II Adventure. Participants receive a three day opportunity to relive the experience of a B-17 aviator heading out on a bombing mission over enemy territory. Vendor Agreement. During 2009, the registrant entered into an agreement with a vendor, who provides video equipment and video recording services, which enables the registrant to sell video recordings to its customers. Under the agreement, the registrant is entitled to a 60% allocation of revenue for all video products and services sold. The agreement is through December 31, 2011 and is renewable annually thereafter. Marketing. The registrant offers its products and services at various tracks throughout the country. The registrant employs a marketing director. This individual is primarily responsible with closing the prospects created through promotion. These services will be sold as corporate outings and directly to the public through various marketing and advertising mediums with an emphasis on radio and the Internet. Promotional and Licensing Agreements. In December 1998, the registrant entered into promotional and licensing agreements with Dale Jarrett, Ned Jarrett, Glenn Jarrett, Jason Jarrett and Brett Favre whereby these individuals have granted the registrant the use of their names and likeliness in advertising, products and promotional materials, as well as an agreed upon number of appearances per year and an agreed upon number of radio and/or television commercials as set out in each agreement. Ned Jarrett is the father of Dale Jarrett and Glenn Jarrett. Dale Jarrett is the father of Jason Jarrett. Pursuant to these agreements, the registrant had issued an aggregate of 5,500,000 Common Shares of the registrant. The term of each agreement was Ten (10) years and expired in December 2008. These individuals have verbally agreed to continue their relationship with the registrant without a written agreement and will be compensated for future services only when they are rendered. 6 The unearned services under the promotional and licensing agreements aggregated $25,000 at December 31, 2008 and is classified as a reduction of stockholders' equity. Services charged to expense during the year ended December 31, 2008 amounted to $ $25,000. The services were charged to expense ratably over the terms of the agreements. Competition. The driving schools industry is currently experiencing a limited degree of competition with regard to availability, price, service, quality and location. There is one well-established market leader (Richard Petty Driving Experience) that is nationally recognized and which possess substantially greater financial, marketing personnel and other resources than the registrant. There are also a small number of local or regional schools. Virtual reality driving experiences are also becoming more and more realistic and therefore a growing competitor. It is also likely that other competitors will emerge in the near future. There is no assurance that the registrant will compete successfully with other established driving schools. The registrant shall compete on the basis of availability, price, service, quality and location. Inability to compete successfully might result in increased costs, reduced yields and additional risks to the investors herein. Employees. The registrant employs seven full time employees responsible for securing the Driving Adventure locations, procurement of equipment, racecars, and the development and implementation of the registrant's marketing plan. Each active location has up to 25 contract personnel including but not limited to a mechanic, four to ten driving instructors, two administrators, a flagman and a site manager. Additional employees and/or independent contractors will be obtained as required. Seasonal Nature of Business Activities. The registrant's operations have shown to be seasonal partly because some track locations may only operate on certain days or certain times of the year. Primarily, this is due to the weather. It is the registrant's plans to run more tracks in the south during the winter. The registrant expects a steady revenue stream in the future. Government Regulation. The registrant does not currently need any government approval of our services. The registrant is not aware of any existing or probable governmental regulations on our business or industry. ITEM 1A. RISK FACTORS Not applicable to a smaller reporting company. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable. 7 ITEM 2. PROPERTIES The registrant's executive offices which consist of 1,500 square feet are located at 1313 10th Avenue Lane, SE, Hickory, North Carolina. In October 2009, the registrant entered into an operating lease for use of the offices. The lease requires a monthly payment of $1,830 and expires in November, 2012. Future minimum payments under this lease agreement are as follows: $21,960 in 2010, $21,960 in 2011, and $20,130 in 2012. The registrant's garage which consists of 7,500 square feet is located at 144 Allred Road, Lincoln, Alabama 35096. The registrant also leases various office and warehouse space on a month to month basis or under terms that are less than one year. Rent expense amounted to $55,800 and $38,765 for the years ended December 31, 2009 and 2008, respectively. ITEM 3. LEGAL PROCEEDINGS. The registrant is a defendant in litigation related to an alleged breach of contract. The case is currently pending in the circuit court of Talladega County, Alabama, and there is a possibility of a judgment against the Company with a range of $25,000 to $50,000. The registrant is contesting the claim and intends to vigorously defend its position, and as such, there have been no amounts reflected in the accompanying financial statements related to this matter. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Item 5(a) a) Market Information. The registrant began trading publicly on the NASD Over the Counter Bulletin Board on June 22, 2000 under the symbol "DJRT". The following table sets forth the range of high and low bid quotations for the registrant's common stock. The quotations represent inter- dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions. Quarter Ended High Bid Low Bid 3/31/08 .45 .15 6/30/08 .25 .11 9/30/08 .15 .09 12/31/08 .09 .03 3/31/09 .08 .04 6/30/09 .07 .04 9/30/09 .12 .03 12/31/09 .08 .04 b) Holders. At March 15, 2010, there were approximately 244 shareholders of the registrant. c) Dividends. Holders of the registrant's common stock are entitled to receive such dividends as may be declared by its board of directors. No dividends on the registrant's common stock have ever been paid, and the registrant does not anticipate that dividends will be paid on its common stock in the foreseeable future. d) Securities authorized for issuance under equity compensation plans. No securities are authorized for issuance by the registrant under equity compensation plans. e) Performance graph. Not applicable. f) Sale of unregistered securities. During April 2009, the registrant issued 400,000 shares of common stock to an officer for services valued at $16,000. The value assigned to the shares issued was based upon the trading value of the registrant's common stock at the date the shares were authorized by the registrant's board of directors. 9 Item 5(b) Use of Proceeds. Not applicable. Item 5(c) Purchases of Equity Securities by the issuer and affiliated purchasers. During the months of October through December 2009, the registrant purchased a total of 294,500 shares of its common stock for cash aggregating $17,867, which is classified as treasury stock in the accompanying balance sheet as of December 31, 2009. Subsequent to the balance sheet date, the registrant purchased an additional 201,250 shares of its common stock for cash aggregating $12,131. During 2008, the registrant repurchased 855,000 shares of common stock for cash aggregating $85,500. During January 2009, the registrant retired 885,000 shares of common stock. ITEM 6. SELECTED FINANCIAL DATA Not applicable to a smaller reporting company. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Trends and Uncertainties. Demand for the registrant's products are dependent on, among other things, general economic conditions which are cyclical in nature. Inasmuch as a major portion of the registrant's activities are the receipt of revenues from its driving school services and products, the registrant's business operations may be adversely affected by the registrant's competitors and prolonged recessionary periods. There are no other known trends, events or uncertainties that have or are reasonably likely to have a material impact on the corporation's short term or long term liquidity. Sources of liquidity both internal and external will come from the sale of the corporation's products as well as the private sale of the registrant's stock. There are no material commitments for capital expenditure at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations. There are no significant elements of income or loss that do not arise from the registrant's continuing operations. There are no other known causes for any material changes from period to period in one or more line items of the corporation's financial statements. The registrant currently has classes planned through December 2010. Capital and Source of Liquidity. The registrant currently has no material commitments for capital expenditures. The registrant has no plans for future capital expenditures such as additional race cars at this time. 10 The registrant believes that there will be sufficient capital from revenues to conduct operations for the next twelve(12) months. In 2009, the registrant's revenue comprised one hundred(100) percent of the total cash necessary to conduct operations. Future revenues from classes and events will determine the amount of additional financing necessary to continue operations. The board of directors has no immediate offering plans in place. The board of directors shall determine the amount and type of financing as the registrant's financial situation dictates. For the year ended December 31, 2009, the registrant acquired property and equipment of $96,381 resulting in net cash used in investing activities of $96,381. For the year ended December 31, 2008, the registrant acquired property and equipment of $286,644 resulting in net cash used in investing activities of $286,644. The registrant continues to look for ways to decrease its cash expenditures and still retain quality management and consultants. On October 22, 2004, the registrant's board of directors approved the issuance of options to certain officers and directors and a consultant for the purchase of 3,500,000 common shares at an exercise price of $.15 per common share for a period of 5 years. During April 2009, the registrant extended the expiration date of 3,500,000 outstanding options for an additional five years. The exercise price remained at $.15 per share and the options now expire on October 21, 2014. The incremental cost of the extension of these options was $50,000 was charged to stock compensation expense during 2009. During the years ended December 31, 2009 and 2008, stock option activity is as follows: Stock Weighted-average Options Price per Share ------- --------------- Outstanding at Balance at December 31, 2007 4,928,571 $0.15 Expired (1,428,571) $0.14 --------- Balance at December 31, 2008 3,500,000 $0.15 --------- Balance at December 31, 2009 3,500,000 $0.15 ========= At December 31, 2009, the registrant has the following options outstanding all of which are exercisable: Exercise price: $0.15; Outstanding: 3,500,000; Contractual life: 4.8 years 11 For the year ended December 31, 2009, the registrant repaid long-term debt of $28,652. As a result, the registrant had net cash used in financing activities of $28,652. For the year ended December 31, 2008, the registrant reduced its outstanding debt by repaying shareholder advances of $210,922 and long- term debt of $28,647. For the year ended December 31, 2008, the registrant redeemed common shares for $85,500. As a result, the registrant had net cash used in financing activities of $325,069. On a long term basis, liquidity is dependent on continuation of operation and receipt of revenues. Results of Operations. For the year ended December 31, 2009, the registrant had sales of $2,810,541, which represented a 5% increase over the 2008 sales of $2,667,526. Cost of sales in 2009 increased 4% to $1,257,365 from 2008 cost of sales of $1,208,521. This resulted in a 6% increase in gross profit from $1,459,005 in 2008 to $1,553,176 in 2009. For the year ended December 31, 2009, the registrant had general and administrative expenses of $1,692,290. The percentage of general and administrative expenses to revenues for the year ended December 31, 2009 decreased to 60% from 66% for the year ended December 31, 2009 because of management's ongoing effort to maintain and/or reduce these types of expenses. Plan of Operation. The registrant may experience problems; delays, expenses and difficulties sometimes encountered by an enterprise in the registrant's stage, many of which are beyond the registrant's control. These include, but are not limited to, unanticipated problems relating to additional costs and expenses that may exceed current estimates and competition. Critical Accounting Policies Revenue Recognition In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenue streams of the Company: Revenue is recognized at the time the product is delivered or the service is performed. Deferred revenue is recorded for amounts received in advance of the time at which services are performed and included in revenue at the completion of the related services. Deferred revenue aggregated $1,153,313 and $946,469 at December 31, 2009 and 2008, respectively. 12 Property and Equipment Property and equipment are recorded at cost and are depreciated based upon estimated useful lives using the straight-line method. Estimated useful lives range from 3 to 10 years. Stock-Based Compensation The registrant records stock based compensation in accordance with FASB ASC 718, Stock Compensation. ASC 718 requires that the cost resulting from all share-based transactions be recorded in the financial statements. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share- based payment transactions. Recent Pronouncements The following Accounting Standards Codification Updates have been issued, or will become effective, after the end of the period covered by this discussion: Pronouncement Issued Title ASU No. 2009-13 October 2009 Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force ASU No. 2009-14 October 2009 Software (Topic 985): Certain Revenue Arrangements That Include Software Elements-a consensus of the FASB Emerging Issues Task Force ASU No. 2009-15 October 2009 Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing ASU No. 2009-16 December 2009 Transfers and Servicing (Topic 860): Accounting for Transfers and Financial Assets ASU No. 2009-17 December 2009 Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities ASU No. 2010-01 January 2010 Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash - a consensus of the FASB Emerging Issues Task Force 13 ASU No. 2010-02 January 2010 Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification ASU No. 2012-03 January 2010 Extractive Activities - Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures ASU No. 2010-04 January 2010 Accounting for Various Topics: Technical Corrections to SEC Paragraphs ASU No. 2010-05 January 2010 Compensation - Stock Compensation (Topic718): Escrowed Share Arrangements and the Presumption of Compensation ASU No. 2010-06 January 2010 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements ASU No. 2010-07 January 2010 Not-for-Profit Entities (Topic 958): Not-for-Profit Entities - Mergers and Acquisitions ASU No. 2010-08 February 2010 Technical Corrections to Various Topics ASU No. 2010-09 February 2010 Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements ASU No. 2010-10 February 2010 Consolidation (Topic 810): Amendments for Certain Investment Funds ASU No. 2010-11 March 2010 Derivatives and Hedging (Topic 815): Scope Exceptions Embedded Credit Derivatives The registrant has determined that the aforementioned recently issued accounting standards do not have a material impact on the financial statements or do not apply to its operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable 14 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Dale Jarrett Racing Adventure, Inc. Index to the Financial Statements Report of Independent Registered Public Accounting Firm 15 Financial Statements of Dale Jarrett Racing Adventure, Inc.: Balance Sheets as of December 31, 2009 and 2008 16 Statements of Operations For the Years Ended December 31, 2009 and 2008 17 Statements of Stockholders' Equity (Deficit) For the Years Ended December 31, 2009 and 2008 18 Statements of Cash Flows For the Years Ended December 31, 2009 and 2008 20 Notes to Financial Statements 22 15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Dale Jarrett Racing Adventure, Inc. We have audited the accompanying balance sheets of Dale Jarrett Racing Adventure, Inc. as of December 31, 2009 and 2008, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dale Jarrett Racing Adventure, Inc. as of December 31, 2009 and 2008, and the results of its operations, and its cash flows for the years ended December 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States of America. Kingery & Crouse, P.A. Certified Public Accountants Tampa, Florida April 6, 2010 16 Dale Jarrett Racing Adventure, Inc. Balance Sheets December 31, 2009 and 2008 2009 2008 ---- ---- ASSETS ------ Current assets: Cash and cash equivalents $ 544,563 $ 522,695 Accounts receivable 58,484 41,725 Note receivable - 10,000 Spare parts and supplies 149,844 86,204 Prepaid expenses and other current assets 64,494 60,201 ---------- ---------- Total current assets 817,385 720,825 ---------- ---------- Property and equipment, at cost, net of accumulated depreciation of $757,747 and $628,355 574,368 604,295 ---------- ---------- Other assets 3,600 6,684 ---------- ---------- $1,395,353 $1,331,804 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) --------------------------------------------- Current liabilities: Current portion of long-term debt $ 23,627 $ 28,634 Accounts payable 152,422 198,121 Accrued expenses 34,026 15,337 Deferred revenue 1,153,313 946,469 ---------- ---------- Total current liabilities 1,363,388 1,188,561 ---------- ---------- Long-term debt 48,182 71,827 ---------- ---------- Stockholders' equity (deficit): Preferred stock, $.0001 par value, 5,000,000 shares authorized, none issued - - Common stock, $.0001 par value, 200,000,000 shares authorized, 24,510,502 and 24,995,502 shares issued and 24,216,002 24,995,502 shares outstanding 2,451 2,500 Additional paid-in capital 6,184,480 6,118,431 Treasury Stock, 294,500 shares at cost (17,867) - Accumulated (deficit) (6,185,281) (6,049,515) ---------- ---------- Total stockholders' equity (deficit) (16,217) 71,416 ---------- ---------- $1,395,353 $1,331,804 ========== ========== See accompanying notes to financial statements. 17 Dale Jarrett Racing Adventure, Inc. Statements of Operations For The Years Ended December 31, 2009 and 2008 2009 2008 ---------- ----------- Sales $2,810,541 $2,667,526 Cost of sales and services 1,257,365 1,208,521 ---------- ---------- Gross profit 1,553,176 1,459,005 ---------- ---------- General and administrative expenses 1,692,290 1,773,253 ---------- ---------- Income (loss) from operations (139,114) (314,248) Other income and (expense): Interest income 8,872 19,601 Interest expense - shareholders - (5,312) Interest expense (5,524) (6,082) ---------- ---------- Loss before taxes (135,766) (306,041) Income taxes - - ---------- ---------- Net income (loss) $ (135,766) $ (306,041) ========== ========== Per share information basic and diluted: Income (loss) per share $ (0.01) $ (0.01) ========== ========== Weighted average shares outstanding 24,410,502 24,995,502 ========== ========== See accompanying notes to financial statements. 18 Dale Jarrett Racing Adventure, Inc. Statement of Stockholders' Equity (Deficit) For the Years Ended December 31, 2009 and December 31, 2008 <TABLE> <CAPTION> Additional Common Stock Paid-in Unearned ACTIVITY Shares Amount Capital Services ---------- ---------- ---------- -------- <s> <c> <c> <c> <c> Balance December 31, 2007 24,995,502 2,500 $ 6,203,931 $ (25,000) Shares redeemed for cash - - (85,500) - Amortization of unearned services - - - 25,000 Net (loss) for the year ended December 31, 2008 - - - - ---------- ---------- ---------- -------- Balance December 31, 2008 24,995,502 2,500 6,118,431 - Shares issued for services 400,000 40 15,960 - Stock option based compensation - - 50,000 - Shares retired (885,000) (89) 89 - Purchase of treasury stock - - - - Net (loss) for the year ended December 31, 2009 - - - - ---------- ---------- ---------- -------- Balance December 31, 2009 24,510,502 $ 2,451 $6,184,480 $ - ========== ========== ========== ======== 19 Dale Jarrett Racing Adventure, Inc. (CONTINUED) Statement of Stockholders' (Deficit) For the Years Ended December 31, 2009 and December 31, 2008 Treasury Stock Accumulated -------------- ACTIVITY (Deficit) Shares Amount Total ----------- ------ ------ ----- Balance December 31, 2007 $(5,743,474) - $ - $ 437,957 Shares redeemed for cash - - - (85,500) Amortization of unearned services - - - 25,000 Net (loss) for the year ended December 31, 2008 (306,041) - - (306,041) ----------- ---------- -------- --------- Balance December 31, 2008 (6,049,515) - - 71,416 Shares issued for services - - - 16,000 Stock option based compensation - - - 50,000 Shares retired - - - Purchase of treasury stock - 294,500 (17,867) (17,867) Net (loss) for the year ended December 31, 2009 (135,766) - - (135,766) ---------- ---------- --------- -------- Balance December 31, 2009 $(6,185,281) 294,500 $(17,867) $ (16,217) ========== ========== ========= ======== </TABLE> See accompanying notes to financial statements. 20 Dale Jarrett Racing Adventure, Inc. Statements of Cash Flows For The Years Ended December 31, 2009 and December 31, 2008 2009 2008 ---------- ---------- Net income (loss) $ (135,766) $ (306,041) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 129,392 146,490 Common stock issued for services 16,000 - Stock option based compensation 50,000 - Loss on disposal of assets - 15,225 Interest added to officer loans - 5,312 Changes in assets and liabilities: (Increase) decrease in accounts receivable (16,759) 1,869 (Increase) decrease in inventories and supplies (63,640) 1,988 (Increase) decrease in prepaid expenses and other current assets (4,293) 12,534 (increase) decrease in note receivable 10,000 (10,000) Increase (decrease) in deferred revenue 206,844 114,302 Increase (decrease) in accrued salaries - officers - (100,000) Increase in accounts payable and accrued expenses (27,010) (70,486) ---------- --------- Total adjustments 300,534 117,234 ---------- ---------- Net cash provided by (used in) operating activities 164,768 (188,807) ---------- --------- Cash flows from investing activities: Acquisition of property and equipment (96,381) (286,644) ---------- --------- Net cash (used in) investing activities (96,381) (286,644) ---------- --------- Cash flows from financing activities: Repayment of shareholder advance - (210,922) Shares redeemed for cash - (85,500) Purchase of treasury stock (17,867) - Repayment of long-term debt (28,652) (28,647) ---------- --------- Net cash used in financing activities (46,519) (325,069) ---------- --------- Increase (decrease) in cash and cash equivalents 21,868 (800,520) Cash and cash equivalents, beginning 522,695 1,323,215 ---------- ---------- Cash and cash equivalents, ending $ 544,563 $ 522,695 ========== ========== 21 Dale Jarrett Racing Adventure, Inc. (CONTINUED) Statements of Cash Flows For The Years Ended December 31, 2009 and December 31, 2008 2009 2008 ---------- ---------- Supplemental cash flow information: Cash paid for interest $ 5,524 $ 3,865 ========= ========= Cash paid for income taxes $ - $ - ========= ========= Non-cash Investing and Financing Activities: Vehicles acquired for notes payable $ - $ 67,519 ========= ========= See accompanying notes to financial statements. 22 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 1. Organization and Significant Accounting Policies Dale Jarrett Racing Adventure, Inc. (referred to as "we", "us", "our" or the "Company") was incorporated in Florida on November 24, 1998. The Company offers the "NASCAR" racing school to the public. The Company owns fifteen "NASCAR" type racecars and has secured several racetrack locations at which it offers these services at various dates during the year. Reclassifications Certain amounts in the 2008 financial statements have been reclassified to conform to the current year presentation. Revenue Recognition In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. The following policies reflect specific criteria for the various revenue streams of the Company: Revenue is recognized at the time the product is delivered or the service is performed. Deferred revenue is recorded for amounts received in advance of the time at which services are performed and included in revenue at the completion of the related services. Cash and Cash Equivalents For purposes of the statement of cash flows, we consider all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Accounts Receivable Accounts receivable are stated at estimated net realizable value. Accounts receivable are comprised of balances due from customers net of estimated allowances for uncollectible accounts. In determining collectability, historical trends are evaluated and specific customer issues are reviewed to arrive at appropriate allowances. There was no allowance at December 31, 2009 and 2008. 23 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 1. Organization and Significant Accounting Policies (continued) Spare Parts and Supplies Spare parts and supplies include engine parts, tires and other supplies used in the racecar operation and are recorded at cost. Property and Equipment Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the respective assets, ranging from 3 to 10 years. Major additions are capitalized, while minor additions and maintenance and repairs, which do not extend the useful life of an asset, are expensed as incurred. Intangible Assets and Long Lived Assets The Company makes reviews for the impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when estimated future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. No such impairment losses have been identified by the Company for the years ended December 31, 2009 and 2008. Use of Estimates The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make certain 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 amount of revenues and expenses during the reporting period. Estimates which are critical to the financial statements include the recoverability of long-lived assets and the fair value of stock-based compensation. Actual results could differ from those estimates. Advertising Costs Advertising costs are charged to operations when the advertising first takes place. Advertising costs charged to operations were $476,011 and $564,609 for the years ended December 31, 2009 and 2008. 24 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 1. Organization and Significant Accounting Policies (continued) Fair Value of Financial Instruments The Company's short-term financial instruments consist of cash, accounts and notes receivable, accounts payable and accrued expenses and notes payable. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We continually monitor our positions with, and the credit quality of, the financial institutions in which we invest. As of December 31, 2009 and 2008, and periodically throughout such years, balances in various operating accounts exceeded federally insured limits. We have not experienced any losses in such accounts. We do not hold or issue financial instruments for trading purposes nor do we hold or issue interest rate or leveraged derivative financial instruments. The carrying value of our long-term debt approximated its fair value based on the current market conditions for similar debt instruments. Segment Information The Company follows Financial Accounting Standards Board (FASB) ASC 280- 10, Segment Reporting. Under ASC 280-10, certain information is disclosed based on the way management organizes financial information for making operating decisions and assessing performance. We currently operate in a single segment and will evaluate additional segment disclosure requirements as we expand its operations. Income Taxes We compute income taxes in accordance with FASB ASC Topic 740, Income Taxes. Under ASC-740, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. Also, the effect on deferred taxes of a change in tax rates is recognized in income in the period that included the enactment date. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. 25 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 1. Organization and Significant Accounting Policies (continued) Beginning January 1, 2007, we adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (ASC 740-10). The Interpretation prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Stock-Based Compensation The Company records stock based compensation in accordance with FASB ASC 718, Stock Compensation. ASC 718 requires that the cost resulting from all share-based transactions be recorded in the financial statements. It establishes fair value as the measurement objective in accounting for share-based payment arrangements and requires all entities to apply a fair-value-based measurement in accounting for share-based payment transactions with employees. The Statement also establishes fair value as the measurement objective for transactions in which an entity acquires goods or services from non-employees in share-based payment transactions. Net Income (Loss) Per Common Share We calculate net income (loss) per share in accordance with ASC Topic 260, Earnings per Share. Basic earnings (loss) per share are calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares and dilutive common stock equivalents outstanding. During periods in which we incur losses, common stock equivalents, if any, are not considered, as their effect would be anti-dilutive or have no effect on earnings per share. Recent Accounting Pronouncements The following Accounting Standards Codification Updates have been issued, or will become effective, after the end of the period covered by this discussion: Pronouncement Issued Title ASU No. 2009-13 October 2009 Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force 26 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 1. Organization and Significant Accounting Policies (continued) ASU No. 2009-14 October 2009 Software (Topic 985): Certain Revenue Arrangements That Include Software Elements-a consensus of the FASB Emerging Issues Task Force ASU No. 2009-15 October 2009 Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing ASU No. 2009-16 December 2009 Transfers and Servicing (Topic 860): Accounting for Transfers and Financial Assets ASU No. 2009-17 December 2009 Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities ASU No. 2010-01 January 2010 Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash - a consensus of the FASB Emerging Issues Task Force ASU No. 2010-02 January 2010 Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification ASU No. 2012-03 January 2010 Extractive Activities - Oil and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures ASU No. 2010-04 January 2010 Accounting for Various Topics: Technical Corrections to SEC Paragraphs ASU No. 2010-05 January 2010 Compensation - Stock Compensation (Topic718): Escrowed Share Arrangements and the Presumption of Compensation ASU No. 2010-06 January 2010 Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements ASU No. 2010-07 January 2010 Not-for-Profit Entities (Topic 958): Not-for-Profit Entities - Mergers and Acquisitions ASU No. 2010-08 February 2010 Technical Corrections to Various Topics 27 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 1. Organization and Significant Accounting Policies (continued) ASU No. 2010-09 February 2010 Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements ASU No. 2010-10 February 2010 Consolidation (Topic 810): Amendments for Certain Investment Funds ASU No. 2010-11 March 2010 Derivatives and Hedging (Topic 815): Scope Exceptions Embedded Credit Derivatives The Company has determined that the aforementioned recently issued accounting standards do not have a material impact on the financial statements or do not apply to its operations. Note 2. Property and Equipment Property and equipment consists of the following at December 31, 2009 and 2008: 2009 2008 ---- ---- Office furniture and equipment $ 54,593 $ 54,593 Software 26,398 26,398 Shop and track equipment 260,407 202,973 Race vehicles 611,390 569,359 Vehicles - other 379,327 379,327 --------- --------- 1,332,115 1,232,650 Less accumulated depreciation (757,747) (628,355) --------- --------- $ 574,368 $ 604,295 ========= ========= Depreciation charged to operations was $129,392 and $121,490 for the years ended December 31, 2009 and 2008, respectively, of which $114,274 and $108,136 is included in cost of sales and services for those years. Note 3. Long-term Debt At December 31, 2009 and 2008, long-term debt consists of obligations under vehicle purchase contracts having outstanding principal balances of $71,809 and $100,461, respectively. The loans are payable in 28 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 3. Long-term Debt (continued) monthly installments of $2,306, including interest at rates ranging from 5.0% to 7.5% through March 2013, and are collateralized by three support vehicles. Principal repayments are due as follows: $23,627 in 2010, $24,246 in 2011, $21,547 in 2012, and $2,389 in 2013. Note 4. Stockholders' Equity (Deficit) During the months of October through December 2009, the Company purchased a total of 294,500 shares of its common stock for cash aggregating $17,867, which is classified as treasury stock in the accompanying balance sheet as of December 31, 2009. During 2010, the Company purchased an additional 201,250 shares of its common stock for cash aggregating $12,131. During April 2009, the Company issued 400,000 shares of common stock to an officer for services valued at $16,000. The value assigned to the shares issued was based upon the trading value of the Company's common stock at the date the shares were authorized by the Company's Board of Directors. During 2008, the Company repurchased 855,000 shares of common stock for cash aggregating $85,500. During January 2009, the Company retired 885,000 shares of common stock. During October 2008, the Company amended its Articles of Incorporation to authorize 5,000,000 shares of $.0001 par value preferred stock and 200,000,000 shares of $.0001 par value common stock. The par value of the Company's outstanding common stock has been adjusted to reflect the change in par value. During December 1998, the Company negotiated personal service contracts with certain members of the Jarrett family and Brett Favre. The Jarretts and Favre have had a prior business relationship related to automobile racing. The contracts required the individuals to provide personal appearances and to participate in the advertising and promotional efforts of the Company for a period of ten years. The Company issued an aggregate of 5,500,000 shares in connection with the personal service contracts. Services charged to expense during the year ended December 31, 2008 amounted to $25,000. The contracts expired in December 2008. These individuals have verbally agreed to continue their relationship with the Company without a written agreement and will be compensated for future services only when they are rendered. 29 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 4. Stockholders' Equity (Deficit) (continued) The following table summarizes stock option activity during the years ended December 31, 2009 and 2008: Stock Weighted-average Options Price per Share ------- ---------------- Outstanding at Balance at December 31, 2007 4,928,571 $0.15 Expired (1,428,571) $0.14 --------- ----- Balance at December 31, 2008 3,500,000 $0.15 Expired - - --------- ----- Balance at December 31, 2009 3,500,000 $0.15 ========= On October 22, 2004, the board of directors approved the issuance of options to certain officers and directors and a consultant for the purchase of 3,500,000 common shares at an exercise price of $.15 per common share for a period of five years. During April 2009, the Company extended the expiration date of 3,500,000 outstanding options for an additional five years. The exercise price remained at $.15 per share and the options now expire on October 21, 2014. The incremental cost of the extension of these options was $50,000 and was charged to stock option based compensation expense during 2009. Note 5. Income Taxes Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classifications of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The Company had no significant deferred tax items arise during any of the periods presented. The Company has not provided for income taxes during any period presented as a result of operating losses. The Company has a net operating loss carryforward at December 31, 2009 of approximately $4,370,000 that will expire through 2030. The principal difference between the loss for financial reporting purposes and the loss for tax purposes results from stock based compensation. The Company has fully reserved the deferred tax asset that would arise from the loss carryforward since the Company believes that it is more likely than not 30 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 5. Income Taxes (continued) that future income from operations will not be available to utilize the deferred tax asset. The approximate deferred tax asset and the related reserve are as follows: Deferred tax asset Tax benefit of net operating loss $ 1,423,000 Less valuation allowance (1,423,000) ----------- Net deferred tax asset $ - =========== The increase in the reserve was approximately $23,000 during 2009. Since inception, we have been subject to tax by both federal and state taxing authorities. Until the respective statutes of limitations expire, we are subject to income tax audits in the jurisdictions in which we operate. We are no longer subject to U.S. federal tax examinations for fiscal years prior to 2005, and we are not subject to audits prior to the 2005 fiscal year for the state jurisdiction. Note 6. Commitments and Contingencies Operating Leases In October 2009, the Company entered an operating lease for use of a building in Hickory, North Carolina. The lease requires a monthly payment of $1,830 and expires in November, 2012. Future minimum payments under this lease agreement are as follows: $21,960 in 2010, $21,960 in 2011, and $20,130 in 2012. The Company also leases various office and warehouse space on a month to month basis or under terms that are less than one year. Rent expense amounted to $55,800 and $38,765 for the years ended December 31, 2009 and 2008, respectively. Employment Agreements During November 2008, the Company entered into an employment agreement with an officer for a period of five years at a salary of $110,000 per year. Vendor Agreement During 2009, the Company entered into an agreement with a vendor, who provides video equipment and video recording services, which enables the Company to sell video recordings to its customers. Under the agreement, the Company is entitled to a 60% allocation of revenue for all video products and services sold. The agreement is through December 31, 2011 and is renewable annually thereafter. 31 Dale Jarrett Racing Adventure, Inc. Notes to Financial Statements December 31, 2009 and 2008 Note 6. Commitments and Contingencies (continued) Litigation The Company is a defendant in litigation related to an alleged breach of contract. The case is currently pending in the circuit court of Talladega County, Alabama, and there is a possibility of a judgment against the Company with a range of $25,000 to $50,000. The Company is contesting the claim and intends to vigorously defend its position, and as such, there have been no amounts reflected in the accompanying financial statements related to this matter. Note 7. Related Party Transactions During the years ended December 31, 2009 and 2008, an officer of the Company paid approximately $114,000 and $128,000, respectively, of expenses for the Company and has been reimbursed for those payments. During 2008, the Company made cash repayments of shareholder advances totaling $210,922, including interest of $5,312. 32 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ITEM 9A. CONTROLS AND PROCEDURES Controls and Procedures. Evaluation of Disclosure Controls and Procedures: We maintain disclosure controls and procedures, as defined in Rules 13a- 15(e) and 15d-15(e) under the Exchange Act that are designed to insure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), or the persons performing similar functions, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our CEO and CFO, or the persons performing similar functions, our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, our CEO and CFO, or the persons performing similar functions, concluded that our disclosure controls and procedures were effective as of December 31, 2009. Management's Annual Report on Internal Control over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is the process designed by and under the supervision of our CEO and CFO, or the persons performing similar functions, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Management has evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control over Financial Reporting - Guidance for Smaller Public Companies. Under the supervision and with the participation of our CEO and CFO, or the persons performing similar functions, our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2008, and concluded that it is effective. This annual report does not include an attestation report of the registrant's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the registrant's registered public accounting firm 33 pursuant to temporary rules of the Securities and Exchange Commission that permit the registrant to provide only management's report in this annual report. Evaluation of Changes in Internal Control over Financial Reporting: Under the supervision and with the participation of our CEO and CFO, or those persons performing similar functions, our management has evaluated changes in our internal controls over financial reporting that occurred during the fourth quarter of 2008. Based on that evaluation, our CEO and CFO, or those persons performing similar functions, did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Important Considerations: The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management. ITEM 9B. OTHER INFORMATION None 34 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Board of Directors. The following persons listed below have been retained to provide services as director until the qualification and election of his successor. All holders of common stock will have the right to vote for directors of the registrant. The board of directors has primary responsibility for adopting and reviewing implementation of the business plan of the registrant, supervising the development business plan, review of the officers' performance of specific business functions. The board is responsible for monitoring management and from time to time, to revise the strategic and operational plans of the registrant. Directors receive no cash compensation or fees for their services rendered in such capacity. Mr. Shannon is a full time employee of the registrant. The Executive Officers and Directors are: <TABLE> <CAPTION> Name Position Term(s) of Office <s> <c> <c> Timothy B. Shannon, age 48 President, Director Inception to Present Chief Executive Officer Chief Financial Officer June 1, 2005 to present Glenn Jarrett, age 58 Vice President Inception to Present Director Kenneth J. Scott, age 55 Director January 26, 2007 to present </TABLE> Resumes: Timothy B. Shannon. Mr. Shannon has been President, Director and Chief Executive Officer of the registrant since its inception in 1998. Mr. Shannon became Chief Financial Officer in June 2005. Mr. Shannon spent six years as a systems engineer and marketing representative with IBM after graduating in 1983 from the University of South Florida's Engineering College with a degree in Computer Science. From 1990 until 1994 Mr. Shannon was an investment advisor with Great Western Securities and Hearn Financial Services in Orlando, FL. In 1995, he co-founded Shannon/Rosenbloom Marketing with Brian Rosenbloom, a former director of Dale Jarrett Racing Adventure, Inc. Glenn Jarrett. Mr. Jarrett has been a Director of the registrant since its inception. Mr. Jarrett works as an auto racing announcer and consultant. Mr. Jarrett has been a senior motorsports announcer for TNN since 1991. He is a motorsports announcer (Pits) at contracted events and is the co-producer and co-host of the "World of Racing" radio program on MRN radio which airs weekdays. Mr. Jarrett has an extensive background in auto racing. He drove in the NASCAR Busch Series from 1982 to 1988 and ran a total of eighteen (18) NASCAR Winston Cup Races from 1977 to 1983. Mr. Jarrett is the acting consultant and marketing coordinator for DAJ Racing, Inc. and has been a guest speaker at many 35 auto racing and related functions. Mr. Jarrett graduated from the University of North Carolina in 1972 with a Bachelor of Science degree in Business Administration. Kenneth J. Scott. Since 1985, Mr. Scott has been President of Kenneth J. Scott, P.A., an accounting firm that provides financial, tax and advisory services to a wide range of businesses and not-for-profit organizations throughout the state of Florida. Mr. Scott has been a certified public accountant in the state of Florida since 1979. He graduated from Rollins College with a Bachelor of Arts degree in Business Administration in 1978. Section 16(a) Beneficial Ownership Reporting Compliance Under Section 16(a) of the Securities Exchange Act of 1934, as amended, an officer, director, or greater-than-10% shareholder of the registrant must file a Form 4 reporting the acquisition or disposition of registrant's equity securities with the Securities and Exchange Commission no later than the end of the second business day after the day the transaction occurred unless certain exceptions apply. Transactions not reported on Form 4 must be reported on Form 5 within 45 days after the end of the registrant's fiscal year. Such persons must also file initial reports of ownership on Form 3 upon becoming an officer, director, or greater-than-10% shareholder. To our knowledge, based solely on a review of the copies of these reports furnished to it, the officers, directors, and greater than 10% beneficial owners complied with all applicable Section 16(a) filing requirements during 2009. Code of Ethics Policy During July 2008, the registrant adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. Corporate Governance There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors. In addition to having no nominating committee for this purpose, we currently have no specific audit committee and no audit committee financial expert. Based on the fact that our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs. Indemnification The registrant shall indemnify to the fullest extent permitted by, and in the manner permissible under the laws of the State of Florida, any person made, or threatened to be made, a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he is or was a director or officer of the registrant, or served any other enterprise as director, officer or employee at the request of the registrant. The board of directors, in 36 its discretion, shall have the power on behalf of the registrant to indemnify any person, other than a director or officer, made a party to any action, suit or proceeding by reason of the fact that he/she is or was an employee of the registrant. Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceedings) is asserted by such director, officer, or controlling person in connection with any securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issues. INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE REGISTRANT FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS THEREFORE UNENFORCEABLE. ITEM 11. EXECUTIVE COMPENSATION The following table set forth certain information as to the compensation paid to our sole executive officer. Summary Compensation Table <TABLE> Name and Cash Stock Option All Other Principal Position Year Salary Awards Awards Compensation Total ($) ($) ($) ($) ($) ------------------- ---- ------- ------ ------ ------------- ------- <s> <c> <c> <c> <c> <c> <c> Timothy B. Shannon 2009 179,815 16,000 28,755 - 224,570 CEO, CFO 2008 154,481 - - 100,000 254,481 </TABLE> The cash salary amount for 2009 includes a base salary of $150,000 and commissions earned by Mr. Shannon during 2009 of $29,815. The cash salary amount for 2008 includes a base salary of $110,000 and commissions earned by Mr. Shannon during 2008 of $44,481. The stock awards compensation for 2009 includes the value of stock awards granted to Mr. Shannon by board of director's resolution on April 9, 2009. To calculate the fair value of the awards, the market price at the grant date is used in accordance with ASC 718-10-30. The market price at that date was $.04. 37 The option awards compensation for 2009 includes the fair value of the extended options described in Note 4 of the financial statements over the fair value of those options immediately preceding the extension as required by ASC 718-20-35-3. These options were valued using a risk- free rate of 1.9%, strike price of $.15, market price of $.04, volatility of 73%, and a life of .54 years immediately prior to the extension and 5.54 upon extension. The all other compensation amount for 2008 represents salary accrued by the registrant in prior years, but not paid to Mr. Shannon until 2009 and 2008. OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The following table sets forth the outstanding stock options to the registrant's sole executive officer: Option Awards Outstanding Equity Awards at December 31, 2009 <TABLE> <CAPTION> Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Option Options/ Options/ Exercise Expiration Name Exercisable Unexercisable Price Date ---- ----------- ------------- -------- ---------- <s> <c> <c> <c> <c> Timothy B. Shannon 2,000,000/2,000,000 2,000,000 $0.15 Oct. 21, 2014 </TABLE> DIRECTOR COMPENSATION FOR 2009 The following table sets forth the compensation to our directors for 2009: Name Total ---- ----- Timothy B. Shannon $0 Glenn Jarrett $0 Kenneth J. Scott $0 The registrant does not compensate its directors for their services as such. The registrant reimburses the directors for their reasonable out- of pocket expenses for attending meetings of the board of directors. 38 ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS The following tabulates holdings of shares of the registrant by each person who, subject to the above, holds of record or is known by management to own beneficially more than 5.0% of the common shares and, in addition, by all directors and officers of the registrant individually and as a group. Each named beneficial owner has sole voting and investment power with respect to the shares set forth opposite his name. Shareholdings at March 15, 2010 Percentage of Number & Class(1) Outstanding of Shares Common Shares Name and Address of Amount and Nature of Percent Beneficial Owner Beneficial Ownership of Class(2) -------------------- -------------------- -------- Timothy B. Shannon 3,983,333(1) 16.25% c/o Dale Jarrett Racing Adventure, Inc. 1313 10TH Avenue Lane, SE Hickory, NC 28602 Glenn Jarrett 2,000,000(3) 8.16% c/o Dale Jarrett Racing Adventure, Inc. 1313 10TH Avenue Lane, SE Hickory, NC 28602 Ned Jarrett 1,000,000 4.08% 3182 Ninth Tee Drive Newton, NC 28658 Dale Jarrett 1,500,000 6.12% 3182 Ninth Tee Drive Newton, NC 28658 Brett Favre 1,500,000 6.12% 132 Westover Drive Hattiesburg, MS 39402 Kenneth J. Scott 1,109,800(4) 4.53% c/o Dale Jarrett Racing Adventure, Inc. 1313 10TH Avenue Lane, SE Hickory, NC 28602 (1) Includes 1,983,333 common shares and immediately exercisable options to purchase 2,000,000 common shares by Mr. Shannon. (2) The percentages are based upon 24,510,502 issued and outstanding common shares. 39 (3) Includes 1,000,000 common shares and immediately exercisable options to purchase 1,000,000 common shares by Mr. Glenn Jarrett. (4) Includes 609,800 common shares and immediately exercisable options to purchase 500,000 common shares by Mr. Scott. The following information relates to the common shares beneficially owned by each of our directors and executive officers and all of our directors and executive officers as a group: Name and Address of Amount and Nature of Percent Beneficial Owner (1) Beneficial Ownership of Class ------------------- -------------------- --------- Kenneth J. Scott 1,109,800 (2) 4.53 (3) Glenn Jarrett 2,000,000 (4) 8.16 (5) Timothy B. Shannon 3,983,333 (6) 16.25 (7) All directors and executive officers as a group (3 persons) 7,093,133 (8) 28.94 (9) (1) The address for each of the persons listed above is c/o Dale Jarrett Racing Adventure, Inc., 1313 10TH Avenue Lane, SE, Hickory, NC 28602. (2) Includes 609,800 common shares and immediately exercisable options to purchase 500,000 common shares by Mr. Scott. (3) The percentage is based upon 24,510,502 issued and outstanding common shares and immediately exercisable options to purchase 500,000 common shares by Mr. Scott. (4) Includes 1,000,000 common shares and immediately exercisable options to purchase 1,000,000 common shares by Mr. Jarrett. (5) The percentage is based upon 24,510,502 issued and outstanding common shares and immediately exercisable options to purchase 1,000,000 common shares by Mr. Glenn Jarrett. (6) Includes 1,983,333 common shares and immediately exercisable options to purchase 2,000,000 common shares by Mr. Shannon. (7) The percentage is based upon 24,501,502 issued and outstanding common shares and immediately exercisable options to purchase 2,000,000 common shares by Mr. Shannon. (8) Includes 3,593,133 common shares and immediately exercisable option to purchase 3,500,000 common shares by the three named directors and officers. (9) The percentage is based upon 24,510,502 issued and outstanding common shares and immediately exercisable options to purchase 3,500,000 common shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. During the years ended December 31, 2009 and 2008, Timothy B. Shannon, an officer of the registrant paid approximately $114,000 and $128,000, respectively, of expenses for the registrant and has been reimbursed for those payments. During 2008, the registrant made cash repayments of shareholder advances totaling $210,922, including interest of $5,312. 40 Director Independence. The registrant's board of directors consists of Timothy Shannon, Dale Jarrett and Kenneth Scott. Neither Timothy Shannon nor Dale Jarrett is independent as such term is defined by a national securities exchange or an inter-dealer quotation system. During the fiscal year ended December 31, 2007, there were no transactions with related persons other than as described in the section above entitled "Item 11. Executive Compensation". ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Audit Fees. We paid aggregate fees and expenses of approximately $29,000 and $27,000 respectively, from Stark Winter Schenkein and Co., LLP for the 2009 and 2008 fiscal years. Such fees included work completed for our annual audits and for the review of our financial statements included in our Form 10-Q. It is estimated that Kingery & Crouse, P.A., our new principal accounting firm will invoice us approximately $19,000 in 2010 related to the audit of our financial statements for the years ended December 31, 2009 and 2008, which amount is not included in the above referenced fees. Tax Fees. We did not incur any aggregate tax fees and expenses from Stark Winter Schenkein and Co., LLP for the 2009 and 2008 fiscal years for professional services rendered for tax compliance, tax advice, and tax planning. All Other Fees. We did not incur any other fees from Stark Winter Schenkein and Co., LLP during fiscal 2009 and 2008. The board of directors, acting as the Audit Committee considered whether, and determined that, the auditor's provision of non-audit services was compatible with maintaining the auditor's independence. All of the services described above for fiscal years 2009 and 2008 were approved by the board of directors pursuant to its policies and procedures. 41 Part IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a)(1) List of Financial statements included in Part II hereof Balance Sheets, December 31, 2009 and 2008 Statements of Operations for the years ended December 31, 2009 and 2008 Statements of Stockholders' Equity for the years ended December 31, 2009 and 2008 Statements of Cash Flows for the years ended December 31, 2009 and 2008 Notes to the Financial Statements (a)(2) List of Financial Statement schedules included in Part IV hereof: None. (a)(3) Exhibits The following of exhibits are filed with this report: (31) 302 certification (32) 906 certification 42 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned duly authorized person. Date: April 6, 2010 Dale Jarrett Racing Adventure, Inc. /s/ Timothy Shannon ------------------------------ By: Timothy Shannon, President Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Corporation and in the capacities and on the dates indicated. /s/Timothy B. Shannon CEO/CFO April 6, 2010 ------------------- Controller/Director /s/Kenneth J. Scott Director April 6, 2010 ------------------- /s/Glenn Jarrett Director April 6, 2010 ------------------- Vice President </TEXT> </DOCUMENT>