Item
4.
Description
Of Securities
General
The
current authorized capital stock of our Company consists of 33,333,333 shares
of
common stock, par value $0.001 per share and 666,666 shares of preferred stock,
par value $0.001 per share of which 33,333 shares are Series A Convertible
Preferred Stock. As of November 15, 2007, there were 13,563,285 shares of
common stock issued and outstanding and 500,000 shares of Series A Convertible
Preferred Stock issued and outstanding. The following description is a summary
of the capital stock of our Company and contains the material terms of our
capital stock. Additional information can be found in our Articles of
Incorporation (as amended) and our By-laws.
Common
Stock
The
Company is authorized to issue 33,333,333 shares of common stock, par value
$0.001 per share.
Holders
of our common stock are entitled to one vote for each share held on all matters
submitted to a vote of our shareholders. Holders of our common stock are
entitled to receive dividends ratably, if any, as may be declared by the board
of directors out of legally available funds, subject to any preferential
dividend rights of any outstanding preferred stock (there are none currently).
Upon our liquidation, dissolution or winding up, the holders of our common
stock
are entitled to receive ratably our net assets available after the payment
of
all debts and other liabilities and subject to the prior rights of any
outstanding preferred stock. Holders of our common stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of common
stock are fully paid and non-assessable. The rights, preferences and privileges
of holders of our common stock are subject to, and may be adversely affected
by,
the rights of holders of shares of any series of preferred stock which we may
designate and issue in the future without further shareholder
approval.
Preferred
Stock
We
have
authorized 666,666 shares of preferred stock, par value $0.001 per share, of
which 33,333 shares have been designated as Series A Convertible Preferred
Stock
and are issued and outstanding.
Our
Board
of Directors has the authority, without further action by the shareholders,
to
issue from time to time the preferred stock in one or more series for such
consideration and with such relative rights, privileges, preferences and
restrictions that the Board may determine. The preferences, powers, rights
and
restrictions of different series of preferred stock may differ with respect
to
dividend rates, amounts payable on liquidation, voting rights, conversion
rights, redemption provisions, sinking fund provisions and purchase funds and
other matters. The issuance of preferred stock could adversely affect the voting
power or other rights of the holders of common stock.
Each
share of Series A Convertible Preferred Stock is convertible, at the option
of
the holder and subject to a 65 day written notice to the Company, at any time
after the date of the issuance into three hundred (300) fully paid,
nonassessable shares of the Company\'s common stock. The Series A Convertible
Preferred shareholders have a priority over common stockholders upon
liquidation, dissolution or winding up. Series A Convertible Preferred
shareholders are entitled to vote on all matters upon which common shareholders
can vote and each holder of Series A Preferred Stock is entitled to one vote
for
each share of common stock into which the Series A Preferred Stock held by
such
holder is then convertible. Preferred shares are entitled to dividends on a
pro
rata basis.
Options
The
Company had no options outstanding prior to November 15, 2007. As of the
effective date, November 15, 2007, and for a term of one year, the Company
has
entered into five Advisory Board Agreements whereby the Company, in
consideration of services provided, shall grant the advisors options to purchase
a number of Option Shares at a par value of $0.001 per share, having a market
value as of the grant date equal to $50,000 with an exercise price equal
to the
Fair Market Value of the Common Stock as of the grant date.
Stock
Grants
The
Company had no stock grants outstanding as of November 15, 2007. As of
November 15, 2007, the grant date, the Company entered into five Advisory
Board
Agreements wherein the Company , in consideration of services provided, is
obligated to issue stock grants for each agreement, and wherein each agreement
shall be for a number of shares at par value of $0.001 per share, having
a Fair
Market Value as of the grant date equal to $65,000.
Warrants
As
of
November 15, 2007: On July 25, 2006, we entered into a Securities
Purchase Agreement ( the “Securities Purchase Agreement”) with New Millennium
Capital Partners, II, LLC, AJW Qualified Partners, LLC, AJW Offshore, Ltd.
and
AJW Partners, LLC (Collectively, the “Investors”). Under the terms of the
Securities Purchase Agreement, the Investors purchased an aggregate of (i)
$2,000,000 in callable convertible secured notes (the “Notes”) and (ii) warrants
to purchase 10,000,000 shares of our common stock (the “Warrants”).
As
of
November 15, 2007, the Company had outstanding seven (7) year warrants to
purchase 10,000,000 shares of our common stock at an exercise price of $0.30
per
share.
In
addition, on June 20, 2007 the Company issued (i) to Besser Kapital Fund Ltd.
warrants to purchase up to an aggregate 600,000 shares of the Company’s common
stock at an exercise price equal to the lesser of $0.50 or 100% of the volume
weighted average price of the Company’s common stock on the date of issuance;
(ii) to J. Roebling Fund LP warrants to purchase up to an aggregate 400,000
shares of the Company’s common stock at an exercise price equal to the lesser of
$0.50 or 100% of the volume weighted average price of the Company’s common stock
on the date of issuance; (iii) to Gottbetter Capital Group Inc. warrants to
purchase up to 50,000 shares of the Company’s common stock at an exercise price
equal to the lesser of $0.50 or 100% of the volume weighted average price of
the
Company’s common stock on the date of issuance; and (iv) to Sam DelPresto
warrants to purchase up to 50,000 shares of the Company’s common stock at an
exercise price equal to the lesser of $0.50 or 100% of the volume weighted
average price of the Company’s common stock on the date of
issuance.
Callable
Secured Notes
On
July 25, 2006, the Company entered into a Securities Purchase Agreement
with New Millennium Capital Partners, II, LLC, AJW Qualified Partners, LLC,
AJW
Offshore, Ltd. and AJW Partners, LLC (collectively, the “
Investors
”).
Under
the terms of the Securities Purchase Agreement, the Investors purchased an
aggregate of (i) $2,000,000 in callable convertible secured notes (the
“
Notes
”).
The
Notes carry an interest rate of 6% per annum and a maturity date of
July 25, 2009. The Notes are convertible into shares of the Company’s
common stock at fifty percent (50%) (the “
Applicable
Percentage
”)
of the
average of the lowest three (3) trading prices for our shares of common stock
during the twenty (20) trading day period prior to conversion. In addition,
the
Company has granted the Investors a security interest in substantially all
of
the Company’s assets and intellectual property as well as registration rights.
As of March 14, 2007, the Company had convertible debt outstanding under
the Notes pursuant to Securities Purchase Agreement totaling
$1,000,000.
On
June
20, 2007 (the “
Closing
Date
”),
the
Company entered into that certain Securities Purchase Agreement (the
“
Securities
Purchase Agreement
”)
with
the Buyers set forth on
Schedule
I
attached
thereto (collectively the “
Buyers
”
and
together with the Company, the “
Parties
”).
Pursuant to the Securities Purchase Agreement, the Company sold to the Buyers
convertible notes (collectively, the “
Notes
”)
in the
aggregate principal amount of Five Hundred Thousand Dollars ($500,000), which
are convertible into shares of the Company’s common stock, par value $0.001 per
share at the Buyers discretion.
The
Notes
mature on December 20, 2007, accrue interest at an annual rate of twelve
percent (12%). At any time on or after 90 days following the Closing Date,
the
holders of the Notes may convert, on an aggregate basis, up to 50% of the
outstanding and unpaid principal and interest into the Company’s common stock,
including, but not limited to, the shares held in escrow pursuant to the Pledge
and Escrow Agreement, as described below. If the Notes are not paid in full
by
the maturity date, the holders of the Notes may convert any remaining unpaid
principal and interest into the Company’s common stock, convertible into shares
of the Company’s common stock at the option of the holder, in whole or in part
at any time and from time to time, at a conversion price equal to one hundred
percent (100%) of the average closing bid price of the Company’s common stock
during the five (5) trading days immediately preceding the date of conversion.
In addition, the Company granted piggy-back registration rights for the shares
of the Company’s common stock underlying the conversion of the
Notes.
Contemporaneously
with the execution and delivery of the Securities Purchase Agreement, the
Parties also executed a Security Agreement (the “
Security
Agreement
”)
pursuant to which the Company has agreed to provide to the Buyers a security
interest in Pledged Collateral (as such term is defined in the Security
Agreement) to secure the Company’s obligations under the Notes. In addition, the
Company, the Buyers, Stephen Schaeffer and Earl Ingarfield entered into a Pledge
and Escrow Agreement, whereby Messrs. Schaeffer and Ingarfield agreed to pledge
an aggregate of 2,000,000 shares of the Company’s common stock as a security
interest for the Company’s obligations under the Notes. The Company’s
subsidiaries, Motorsports and Entertainment of Tennessee, Inc. and ARC
Development Corporation, entered into a Guaranty, dated June 20, 2007,
guaranteeing all of the obligations of the Company under the Securities Purchase
Agreement, the Notes, and all other transaction documents in connection
therewith.
Dividends
The
Company has not declared or paid cash dividends on its Common Stock since its
inception and does not anticipate paying such dividends in the foreseeable
future. The payment of dividends may be made at the discretion of the Board
of
Directors at that time and will depend upon, among other factors, on the
Company’s operations.
Anti-Takeover
Effects Of Provisions Of The Articles Of Incorporation, By-laws And Nevada
Law
Authorized
but unissued shares of common stock and preferred stock would be available
for
future issuance without our stockholders’ approval. These additional shares may
be utilized for a variety of corporate purposes including, but not limited
to,
future public or direct offerings to raise additional capital, corporate
acquisitions and employee incentive plans. The issuance of such shares may
also
be used to deter a potential takeover of the Company that may otherwise be
beneficial to stockholders by diluting the shares held by a potential suitor
or
issuing shares to a stockholder that will vote in accordance with the desire
of
the Board of Directors. A takeover may be beneficial to stockholders because,
among other reasons, a potential suitor may offer stockholders a premium for
their shares of stock compared to the then-existing market price.
The
existence of authorized but unissued and unreserved shares of preferred stock
may enable the Board of Directors to issue shares to persons friendly to current
management, which would render more difficult or discourage an attempt to obtain
control of the Company by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of the Company’s
management.
Item
5.
Interests
Of Named Experts And Counsel
Not
applicable.
Item
6.
Indemnification
Of Directors And Officers
Our
Articles of Incorporation provide that, to the fullest extent permitted by
law,
none of our directors or officers shall be personally liable to us or our
shareholders for damages for breach of any duty owed to our shareholders or
us.
In
addition, we have the power, by our by-laws or in any resolution of our
shareholders or directors, to undertake to indemnify the officers and directors
of ours against any contingency or peril as may be determined to be in our
best
interest and in conjunction therewith, to procure, at our expense, policies
of
insurance. At this time, no statute or provision of the by-laws, any contract
or
other arrangement provides for insurance of any of our controlling persons,
directors or officers that would affect his or her liability in that
capacity.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small business
issuer has been advised that in the opinion of the SEC 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 us of expenses incurred or paid by our directors, officers
or controlling persons 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, we will, unless in the opinion
of our counsel the matter has been settled by controlling precedent, submit
to a
court of appropriate jurisdiction the question whether such indemnification
by
us is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issues.
Item
7. Exemption From Registration Claimed
Not
Applicable.
Item
8. Exhibits
|
Exhibit
No.
|
|
Description
of Exhibit
|
|
Location
|
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|
|
|
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4.1
|
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American
Racing Capital, Inc. 2007 Stock Incentive Plan
|
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Provided
herewith
|
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|
|
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|
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5.1
|
|
Opinion
re: legality of Cane Clark LLP
|
|
Provided
herewith
|
|
|
|
|
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23.1
|
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Consent
of Moore & Associates Chartered
|
|
Provided
herewith
|
|
|
|
|
|
|
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23.2
|
|
Consent
of Cane Clark LLP
|
|
Incorporated
by reference to Exhibit 5.1 herein
|
Item
9. Undertakings
(a)
We
hereby
undertake:
(1)
To
file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i)
To
include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii)
To
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
hereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement. Notwithstanding
the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low and high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a twenty percent (20%) change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective Registration Statement; and
(iii)
To
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to
such information in this Registration Statement;
PROVIDED,
HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by our Company pursuant to
Section 13 or 15(d) of the Securities Act that are incorporated by reference
in
this Registration Statement.
(2)
That,
for
the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering
thereof.
(3)
To
remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the
offering.
(b)
We
hereby
undertake that, for purposes of determining any liability under the Securities
Act, each filing of our Annual Report pursuant to Section 13(a) or 15(d) of
the
Securities Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(c)
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and persons controlling our company pursuant
to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for
indemnification against such liabilities (other than the payment by our Company
of expenses incurred or paid by a director, officer or controlling person of
our
company in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, our company will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by us
is
against public policy as expressed in the Securities Act and will be governed
by
the final adjudication of such issue.