**U.S.SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

**FORM10-QSB/A**

 

| ý                                                                                                                                                         | **Quarterly report under Section 13  or 15 9(d) of the Securities Exchange Act of 1934A** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|
|                                                                                                                                                           | ** **                                                                                |
| **For the quarterly period ended September 30, 2003**                                                                                                          |
|                                                                                                                                                           | ** **                                                                                |
| o                                                                                                                                                              | **Transition report under Section 13  or 15(d) of the Securities Exchange Act**           |
|                                                                                                                                                           | ** **                                                                                |
| **For the transition period from            to          ** |

 

**Commission file number 000-49738**

 

**CarrollShelby International Inc.**

(Exact Name of Small Business Issuer as Specified in Its Charter)

 

| **Nevada**                                                                          |
|-------------------------------------------------------------------------------------|
| (State or Other Jurisdiction of Incorporation or Organization)                      |
| ** **                                                                          |
| **86-1012155**                                                                      |
| (I.R.S. Employer Identification No.)                                                |
| ** **                                                                          |
| **11150 W. Olympic Boulevard, Suite 1050 Los Angeles,  CA 90064**                   |
| (Address of Principal Executive Offices)                                            |
|                                                                                |
| **(310) 914-1843**                                                                  |
| (Insurer’s Telephone Number, Including Area Code)                              |
|                                                                                |
| **Ginseng Forest, Inc.**                                                            |
| (Former Name, Former Address and Former Fiscal Year, If Changed Since  Last Report) |

 

Checkwhether the issuer: (1) filed all reports required to be filed bySection 13 or 15 (d) of the Exchange Act during the past12 months (or for such shorter period that the restraint was required tofile such reports), and (2) has been subject to such filing requirementsfor the past 90 days.  Yes  ý   No  o

 

**APPLICATION ONLY TO ISSUERS INVOLVED INBANKRUPTCY PROCEEDINGS DURING THEPRECEDING FIVE YEARS**

 

Check whether the registrantfiled all documents and reports required to be filed by Section 12, 13 or15 (d) of the Exchange Act after the distribution of securities under aplan confirmed by a court.

 

Yes  o   No  ý

 

**APPLICATION ONLY TO CORPORATE ISSUERS**

 

State the number of sharesoutstanding of each of the issuer’s classes of common equity, as of the latestpracticable date: 12,855,866 shares of common stock, $0.001 per value pershare, as of November 13, 2003. Transition Small Business DisclosureFormat (check one):

 

Yes  ý   No  o

 

 

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** **

**Part I. FINANCIAL INFORMATION**

 

**Item 1.Financial Statements**

 

**CARROLL SHELBY INTERNATIONAL INC.**

**CONTENTS**

 
| **FINANCIAL  STATEMENTS**                   | ** ** |
|---------------------------------------------|------------|
| Consolidated Balance Sheets                 | 3          |
| Consolidated  Statements of Operation       | 4          |
| Consolidated  Statements of Cash Flow       | 5          |
| Notes to  Consolidated Financial Statements | 6 - 11     |

 

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CARROLL SHELBYINTERNATIONAL, INC.

CONSOLIDATEDBALANCE SHEETS

 
| ** **                                                                                                                                                                                           | ** ** | **September 30,  2003** | ** ** | **December 31,  2002** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
|                                                                                                                                                                                                 |       | **(unaudited)**         |       |                   |       |
| ASSETS                                                                                                                                                                                               |       |                    |       |                   |       |
|                                                                                                                                                                                                 |       |                    |       |                   |       |
| CURRENT  ASSETS:                                                                                                                                                                                     |       |                    |       |                   |       |
| Cash and  cash equivalents                                                                                                                                                                           |       | $                       | 304,376    |                   | $          | 22,929 |   |
| Accounts  receivable                                                                                                                                                                                 |       | 92,000                  |       | 132,143                |       |
| Inventories                                                                                                                                                                                          |       | 678,333                 |       | —                 |       |
| Note  receivable, current portion                                                                                                                                                                    |       | 67,844                  |       | —                 |       |
| Prepaids                                                                                                                                                                                             |       | —                  |       | 7,321                  |       |
| Other  current assets                                                                                                                                                                                |       | 15,885                  |       | —                 |       |
| Total  current assets                                                                                                                                                                                |       | 1,158,438               |       | 162,393                |       |
| Property and  equipment, net                                                                                                                                                                         |       | 176,338                 |       | 219,994                |       |
| Other assets                                                                                                                                                                                         |       | 4,858                   |       | 8,282                  |       |
| Total assets                                                                                                                                                                                         |       | $                       | 1,339,634  |                   | $          | 390,669 |   |
|                                                                                                                                                                                                 |       |                    |       |                   |       |
| LIABILITIES  AND STOCKHOLDERS’ DEFICIT                                                                                                                                                          |       |                    |       |                   |       |
|                                                                                                                                                                                                 |       |                    |       |                   |       |
| CURRENT  LIABILITIES:                                                                                                                                                                                |       |                    |       |                   |       |
|                                                                                                                                                                                                 |       |                    |       |                   |       |
| Accounts  payable and accrued expenses                                                                                                                                                               |       | $                       | 453,666    |                   | $          | 148,609 |   |
| Customer  deposit                                                                                                                                                                                    |       | 457,015                 |       | —                 |       |
| Advances  from shareholder                                                                                                                                                                           |       | 136,434                 |       | 314,467                |       |
| Convertible  note payable to shareholder, net of unamortized beneficial conversion feature  of $162,500                                                                                              |       | 337,500                 |       | —                 |       |
| Notes  payable to shareholder                                                                                                                                                                        |       | 2,980,000               |       | —                 |       |
| Notes  payable                                                                                                                                                                                       |       | —                  |       | 83,167                 |       |
| Total  current liabilities                                                                                                                                                                           |       | 4,364,615               |       | 546,243                |       |
|                                                                                                                                                                                                 |       |                    |       |                   |       |
| COMMITMENTS  (Note 6)                                                                                                                                                                                |       |                    |       |                   |       |
| STOCKHOLDERS’  DEFICIT                                                                                                                                                                          |       |                    |       |                   |       |
| Common  stock-25,000,000 shares authorized, 12,982,666 issued and outstanding; $.001  par value as of September 30, 2003; 9,087,866 issued and outstanding; $.001  par value as of December 31, 2002 |       | 12,983                  |       | 1,000                  |       |
| Additonal  paid in capital                                                                                                                                                                           |       | (1,842,503              | )          | —                 |       |
| Accumulated  deficit                                                                                                                                                                                 |       | (1,195,461              | )          | (156,574               | )          |
| Total  stockholders’ deficit                                                                                                                                                                    |       | (3,024,981              | )          | (155,574               | )          |
| Total  liabilities and stockholders’ deficit                                                                                                                                                    |       | $                       | 1,339,634  |                   | $          | 390,669 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

3

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CARROLL SHELBY INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Nine Months Ended September 30, 2003 and 2002(unaudited)

 
| ** **                                                                 | ** ** | **For the  Three Months Ended  September 30,** | ** ** | **For the  Nine Months Ended  September 30,** | ** ** |
|----------------------------------------------------------------------------|------------|------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                 | ** ** | **2003**                                       | ** ** | **2002**                                      | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                 | ** ** | **(unaudited)**                                | ** ** | **(unaudited)**                               | ** ** | **(unaudited)** | ** ** | **(unaudited)** | ** ** |
| Revenues:                                                                  |       |                                           |       |                                          |       |   |   |   |   |
| Royalty  income                                                            |       | $                                              | 174,565    |                                          | $          | 195,733 |   | $ | 335,002 |   | $ | 398,488 |   |
| Automobile  and automobile products                                        |       | 849,906                                        |       | —                                        |       | 849,906 |   | — |   |
| Equipment  rental (related party)                                          |       | —                                         |       | 29,648                                        |       | — |   | 88,943 |   |
| Vintage  automobile sales, net                                             |       | —                                         |       | —                                        |       | 357,696 |   | — |   |
| Total  revenues                                                            |       | 1,024,471                                      |       | 225,381                                       |       | 1,542,604 |   | 487,431 |   |
| Cost of good  sold                                                         |       | 1,204,817                                      |       | —                                        |       | 1,432,792 |   | — |   |
| Gross profit  (loss)                                                       |       | (180,346                                       | )          | 225,381                                       |       | 109,812 |   | 487,431 |   |
| Expenses:                                                                  |       |                                           |       |                                          |       |   |   |   |   |
| Selling and  marketing                                                     |       | 141,309                                        |       | 78,865                                        |       | 328,345 |   | 299,165 |   |
| General and  administrative                                                |       | 556,781                                        |       | 402,649                                       |       | 792,133 |   | 782,539 |   |
| Total  expenses                                                            |       | 698,090                                        |       | 481,514                                       |       | 1,120,478 |   | 1,081,704 |   |
| Loss from  operations                                                      |       | (878,436                                       | )          | (256,133                                      | )          | (1,010,666 | ) | (594,273 | ) |
|                                                                       |       |                                           |       |                                          |       |   |   |   |   |
| Other income  (expense):                                                   |       |                                           |       |                                          |       |   |   |   |   |
| Sublease  rental income                                                    |       | 6,000                                          |       | 6,000                                         |       | 18,000 |   | 16,000 |   |
| Interest  expense                                                          |       | (44,006                                        | )          | (8,427                                        | )          | (45,422 | ) | (22,279 | ) |
| Total other  income (expense)                                              |       | (38,006                                        | )          | (2,427                                        | )          | (27,422 | ) | (6,279 | ) |
| Net loss  before provision for income taxes                                |       | (916,442                                       | )          | (258,560                                      | )          | (1,038,088 | ) | (600,552 | ) |
| Provision  for income taxes                                                |       | 800                                            |       | —                                        |       | 800 |   | 800 |   |
| Net loss                                                                   |       | $                                              | (917,242   | )                                             | $          | (258,560 | ) | $ | (1,038,888 | ) | $ | (601,352 | ) |
| Basic and  diluted net loss per share                                      |       | $                                              | (0.07      | )                                             | $          | (0.03 | ) | $ | (0.10 | ) | $ | (0.07 | ) |
| Weighted  average number of common shares outstanding - Basic and dilutive |       | 12,948,853                                     |       | 9,087,866                                     |       | 10,486,506 |   | 9,087,866 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

4

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CARROLL SHELBYINTERNATIONAL, INC.

CONSOLIDATEDSTATEMENTS OF CASH FLOWS

For the ninemonths ended September 30, 2003 and 2002

 
| ** **                                                                       | ** ** | **2003**   | ** ** | **2002**   | ** ** |
|----------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash Flow  from operating activities:                                            |       |       |       |       |       |
| Net loss                                                                         |       | $          | (1,038,888 | )          | $          | (601,352 | ) |
| Adjustments  to reconcile net loss to net cash used in net operating activities: |       |       |       |       |       |
| Depreciation  and amortization                                                   |       | 111,152    |       | 106,239    |       |
| Net gain on  sale of fixed asset                                                 |       | —     |       | —     |       |
| Non-cash  interest expense                                                       |       | —     |       | —     |       |
| Decrease  (increase) in receivables                                              |       | 40,144     |       | (236,437   | )          |
| Increase in  inventories                                                         |       | (678,333   | )          | —     |       |
| Increase in  prepaid expenses                                                    |       | (67,844    | )          | —     |       |
| (Increase)  decrease in other assets                                             |       | (12,461    | )          | 2,793      |       |
| Increase  (decreae) in payables and other accrued expenses                       |       | 307,057    |       | 313,307    |       |
| Increase in  customer deposits                                                   |       | 455,015    |       | —     |       |
| Net cash  flows used in operating activities                                     |       | (884,158   | )          | (415,450   | )          |
|                                                                             |       |       |       |       |       |
| Cash flows  from investing activities:                                           |       |       |       |       |       |
| Purchase of  property and equipment                                              |       | (84,802    | )          | (3,000     | )          |
| Sale of  fixed asset, net                                                        |       | 17,304     |       | —     |       |
| Net cash  flows used in investing activities                                     |       | (67,498    | )          | (3,000     | )          |
|                                                                             |       |       |       |       |       |
| Cash flows  from financing activities:                                           |       |       |       |       |       |
| Repayment of  notes payable                                                      |       | (83,167    | )          | —     |       |
| Note Payable  to shareholder and affiliates                                      |       | 1,480,000  |       | —     |       |
| Net  (payment) advances from shareholder                                         |       | (170,704   | )          | 378,028    |       |
| Redeemption  of warrants                                                         |       | 6,974      |       | —     |       |
| Repayment of  note payable                                                       |       | —     |       | (112,607   | )          |
| Net cash  flows provided by financing activities                                 |       | 1,233,103  |       | 265,421    |       |
| Net increase  (decrease) in cash and cash equivalents                            |       | 281,447    |       | (153,029   | )          |
| Cash and  cash equivalents, at beginning of period                               |       | 22,929     |       | 179,836    |       |
| Cash and  cash equivalents, at end of period                                     |       | $          | 304,376    |       | $          | 26,807 |   |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

 

5

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**Carroll Shelby International Inc.**

**Notes to the Consolidated Financial Statements**

**September 30, 2003**

 

**NOTE1—HISTORY AND ORGANIZATION OF THE COMPANY**

 

CarrollShelby International, Inc. (“CSI” or “the Company”) is the exclusiveholder of automotive manufacturer and entrepreneur Carroll Shelby’s trademarks,vehicle design rights and other intellectual properties, which include some ofthe world’s most famous muscle cars and high performance vehicles, includingthe car that brought home to the U.S. it first and only FIA World ManufacturersChampionship in 1965, the famous Shelby Cobra Daytona Coupe. Carroll ShelbyLicensing, Inc. (“CSL”) (a Texas corporation formed on April 18,1988) holds trade name and trademark rights for Shelby branded apparel,accessories and collectibles.

 

Inaddition, the Company manufactures component cars (sometimes referred to as “kit”cars as they generally do not have engines or transmissions installed at timeof delivery to the customer) under the brand name “Shelby Cobra” at its whollyowned subsidiary Shelby Automobiles, Inc. (“Autos”) (a Nevada corporation formedin May, 2003) in Las Vegas, Nevada. It has begun manufacturing a new series ofthe CobraTM automobile to replicate the original CobraTM last produced in 1967and of which only approximately 1,000 units were ever produced. The company’sCobraTM will be substantially built to its original specifications forenthusiasts desiring a genuine replica of the first and only American producedsports car to claim the aforementioned championship. A significant enthusiastmarket exists in the United States for this historic automobile.

 

CSIwas originally organized under the laws of the State of Nevada onDecember 4, 2000 (date of inception) as Ginseng Forest, Inc. (“GFI”)GFI had no operations through June 23, 2003 and was considered adevelopment stage company in accordance with Statement of Financial AccountingStandards No. 7. On June 23, 2003, GFI acquired all of theoutstanding common stock of CSL and Autos, a recently formed entity, for9,087,866 shares of GFI common stock and a $2,000,000 secured promissory noteto Carroll Shelby. The Company recorded the offset of this Note Payable as adistribution. The exchange of stock constituted a reverse merger with CSL asthe acquiring company. GFI changed its name to Carroll ShelbyInternational, Inc. in September 2003.

 

CarrollShelby Licensing, Inc. was originally incorporated as O T C PackagingCompany in Texas on April 22, 1986. In June 1998, the Company becameShelby American Management, Inc. and a final name change to Carroll ShelbyLicensing, Inc. was approved in March, 1999. Carroll ShelbyLicensing, Inc. owns and licenses various trademarks and intellectualproperties for Carroll Shelby and related names.

 

CarrollShelby Licensing, Inc. revenues are substantially royalties derived fromlicensing agreements with domestic companies including manufacturers ofautomobiles and accessories, clothing, video games and miscellaneous items.

 

Asnoted above Shelby Automobiles Inc. (“Autos”) was incorporated as a Nevadacorporation in 2003 for the purpose of manufacturing high performance Shelbyvehicles under the guidance of Carroll Shelby and is involved in prototypemanufacturing, design and engineering projects. Auto’s plans to expand througha dealer network and direct sales under a license agreement with CSL.

 

Inthe second quarter of 2003 Autos began the production of Cobra automobiles dueto the financial failure of a licensee Shelby American Inc. (“SAI”) whowas engaged in manufacturing these component cars. SAI lost its license toproduce Shelby licensed automobiles due to its failure to make its requiredroyalty payments to CSL. Autos finished the production of the ordered ShelbyCobras in order to protect the Company’s brand name and maintain its customerloyalty. The Company believes these properties are the foundation of its futuredevelopment. Through the third quarter of 2003, Autos assumed approximately$519,000 of costs to continue the production of outstanding SAI automobileorders.

 

**NOTE2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

*InterimUnaudited Financial Information*

 

Theunaudited financial information furnished herein reflects all adjustments,consisting only of normal recurring adjustments, which in the opinion ofmanagement, are necessary to fairly state the Company’s financial position, theresults of operations, and cash flows for the periods presented. The results ofoperations for the three and nine months ended September 30, 2003 are notnecessarily indicative of results for the entire fiscal year endingDecember 31, 2003.

 

Theinformation with respect to the three and nine months ended September 30,2003 and 2002 is unaudited.

 

*RevenueRecognition*

 

Revenuefrom automobiles and accessories sales is recognized when the sale transactionis complete including physical delivery of the merchandise and/or transfer oftitle. Deposits received from customers for sales contracts are recorded as aliability pending completion of the sales transaction. CSL recognizes revenuefrom royalties when earned, in accordance with the terms of the licensingagreements with manufacturers of automobiles, accessories, clothing, videogames and other. For other product sales, revenue is recognized at the time ofshipment. All revenue is shown net of discounts and returns taken.

 

6

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*CashEquivalents*

 

Forpurposes of the statement of cash flows, the Company considers money marketfunds with maturities of three months or less to be cash equivalents.

 

*AccountsReceivable*

 

Avaluation allowance is provided on the Company’s accounts receivable inmanagement’s judgment that will not be collected. All accounts receivable are reviewedon a case by case basis for collectibility. There is no valuation allowance onthe accounts receivable as of September 30, 2003.

 

*Inventories*

 

Inventoriesas of September 30, 2003 are held by Autos for the production of Cobraautomobiles. Raw materials inventory represent automotive component parts andmaterials. Raw materials are stated at standard costs which are evaluatedperiodically. Work in process inventory represents unfinished Cobraautomobiles. Work in process inventory is accumulated at standard costs basedon estimated stage of completion for each Cobra automobile. Variances fromstandard costs are charged to cost of goods sold as incurred. As ofSeptember 30, 2003 inventories consisted of the following:

 
| Raw Materials        |   | $       | —  |   |
|----------------------|--------|---------|---------|--------|
| Work in process      |   | 678,333 |    |
| Finished automobiles |   | —  |    |
|                 |   | $       | 678,333 |   |

 

*Propertyand Equipment*

 

Allproperty and equipment are stated at cost. Depreciation is computed using thestraight-line methods over useful lives ranging from 3 to 10 years.

 

*ComprehensiveIncome*

 

TheCompany utilizes SFAS No. 130, “Reporting Comprehensive Income”. Thisstatement establishes standards for reporting comprehensive income and itscomponents in a financial statement.

 

Comprehensiveincome as defined includes all changes in equity (net assets) during a periodfrom non-owner sources. Examples of items to be included in comprehensiveincome, which are excluded from net income, include foreign currencytranslation adjustments and unrealized gains and losses on available-for-salesecurities. Comprehensive income is not presented in the Company’s financialstatements since the Company did not have any of the items of comprehensiveincome in any period presented.

 

*Impairmentof Long-lived Assets*

 

TheCompany reviews long-lived assets for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. If the sum of the expected future cash flows (undiscounted andwithout interest charges) is less than the carrying amount of the asset, the Companywould recognize an impairment loss based on the estimated fair value of theasset.

 

*IncomeTaxes*

 

Byvirtue of the exchange agreement, Carroll Shelby Licensing Inc. wasconverted from an S Corporation to a C Corporation. The impact on this conversionis not material to the financial position or statement of operations of theCompany.

 

SinceJune 23, 2003, the Company uses the asset and liability method ofaccounting for income taxes. The asset and liability method accounts fordeferred income taxes by applying enacted statutory rates in effect for periodsin which the difference between the book value and the tax bases of assets andliabilities are scheduled to reverse. The resulting deferred tax asset orliability is adjusted to reflect changes in tax laws or rates. Because theCompany has incurred loses from operations in prior years and through 2003, nobenefit is realized for the any tax assets.

 

Forthe nine months ended September 30, 2003, the tax provision on the Company’sstatement of operations represents the minimum state taxes due.

 

7

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*Income(Loss) per Share*

 

Basicincome (loss) per share is computed by dividing income (loss) available tocommon stockholders by the weighted-average number of common sharesoutstanding. Diluted income (loss) per share is computed similar to basicincome (loss) per share except that the denominator is increased to include thenumber of additional common shares that would have been outstanding if thepotential common shares had been issued and if the additional common shareswere dilutive. When the Company has incurred net losses, basic and diluted lossper share are the same.

 

*Estimates*

 

Thepreparation of financial statements in conformity with generally accepted accountprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements, as well as thereported amounts of revenues and expenses during the reporting period. Actualresults could differ from those estimates.

 

*Fair Valueof Financial Instruments*

 

Thecarrying amount of cash, accounts receivable, inventories and accounts payableand accrued expenses approximate fair value due to the short-term nature ofthose instruments.

 

*Statementof Cash Flow*

 

Inconnection with the acquisition of CSL and Autos the following non cashtransaction was recorded for the nine months ended September 30, 2003:

 
| Issuance of 3,768,000 share of common stock |   |   |      |
|---------------------------------------------|--------|--------|-----------|
| Issuance of Note Payable for common stock   |   | $      | 2,000,000 |   |
|                                             |        |        |           |  |

 

Duringthe nine months ended September 30, 2003, the Company recorded a beneficialconversion feature of $162,500 against the principal balance of a convertiblenote payable to a shareholder and shareholder affiliate.

 

Forthe three months ended September 30, 2003 and 2002 no income taxes werepaid. For the nine months ended September 30, 2003 and 2002 income taxespaid was $800. Interest paid for the three and nine months endedSeptember 30, 2003 was $800. Interest paid for the three and nine monthsended September 30, 2002 was $8,720 and $14,086, respectively.

 

*Reclassification*

 

Certainprior year items have been reclassified to conform to the current year’spresentation

 

**NOTE3—PROPERTY AND EQUIPMENT**

 

Propertyand equipment at September 30, 2003 and December 31, 2002 consistedof the following:

 
| ** **                       | ** ** | **2003**  | ** ** | **2002**  | ** ** |
|----------------------------------|------------|-----------|------------|-----------|------------|
| Truck with trailer               |       | $         | 478,079    |      | $          | 478,079 |   |
| Airplane                         |       | 310,382   |       | 300,000   |       |
| Automobiles                      |       | 212,031   |       | 306,587   |       |
| Furniture and equipment          |       | 44,170    |       | 37,553    |       |
| Machinery, tooling and equipment |       | 17,075    |       | —    |       |
| Leasehold improvements           |       | 56,702    |       | 11,557    |       |
|                             |       | 1,118,439 |       | 1,133,776 |       |
| Less accumulated depreciation    |       | (942,101  | )          | (913,782  | )          |
|                             |       | $         | 176,338    |      | $          | 219,994 |   |

 

Depreciationexpense for the three and nine months ended September 30, 2003 is $39,644and $111,152, respectively. Depreciation expense for the three and nine monthsended September 30, 2002 is $35,254 and $106,239, respectively.

 

**NOTE4—NOTES PAYABLE TO SHAREHOLDER**

 

Thefollowing notes are outstanding as of September 30, 2003:

 

Anotes payable for $2,000,000 payable to the Shelby Companies security holdersdue on December 31, 2003 and is non interest bearing.

 

OnJuly 1, 2003, the Company obtained a $980,000 bridge note payable from itsmajority shareholder. This note matures on January 1, 2004 and bearsinterest at 1.5% per month from the date the funds are advanced. If the note isnot paid by the maturity date the Company will issue 300,000 options topurchase common stock at $1.50 per share to the noteholder. The options willvest over a three year period.

 

Anote payable to shareholder affiliate consists of a $500,000 note payable,issued on September 30, 2003 to Carroll Shelby and Bill Murphy,

 

8

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due March 31, 2004 and bearing interestat 18% annually.

 

Thisnote is convertible at the option of the shareholder affiliate at any timeduring the term of the note into common stock of the Company at a conversionrate of $4.00 per share. The common shares have piggyback registration rights.

 

Ifthe note holder converts they shall receive one share of common stock at aconversion rate of $4.00 per share and one warrant to purchase a share ofcommon stock at an exercise price of $6.00 per share and shall mature3 years from issuance. The common stock underlying the Warrant haspiggyback registration rights.

 

Atthe time of issuance of this note the Company’s common stock market value was$4.50 per share, and accordingly this note had a deemed “beneficial conversionfeature” of $.50 per share associated with its issuance. In addition, theCompany included in the “beneficial conversion feature” the value of theunderlying warrants associated with the conversion. The warrants are valued at$120,000. The warrant’s value was calculated using the “Black Scholes Model”with assumptions of a 2.23% discount interest rate, 3 year term, 42% volatilityand a dividend rate of zero. The result of this beneficial conversion featureas of September 30, 2003 is to record $162,500 of additional paid in capitalwhile netting the unamortized beneficial conversion feature against theoutstanding principal balance.  Thebeneficial conversion feature will be amortized to interest expense over thematurity of the loan.

 

**NOTE5—RELATED PARTY TRANSACTIONS**

 

TheCompany’s principal shareholder holds the trademarks that are the subject ofits licensing agreement. The shareholder has assigned all rights andobligations of the trademarks to the Company and it enters into the relatedlicensing agreements directly. The Company has a non-exclusive licensingagreement for the trademarks with a related entity owned by its shareholder.The Company received nothing for the three and nine months endedSeptember 30, 2003. However, the Company received $30,000 and $165,000,respectively for the three and nine months ended September 30, 2002.

 

Inaddition, the Company rents certain of its transportation equipment to arelated entity partially owned by its principal shareholder. The Companyreceived no revenue from this lease in fiscal 2003. For the three and ninemonths ended September 30, 2002 the Company received $29,648 and $88,944,respectively.

 

TheCompany also subleases a portion of its office space to related entities. Duringthe three and nine months ended September 30, 2003 and 2002 it received$6,000 and $18,000, respectively and $6,000 and $16,000, respectively.

 

TheCompany’s principal shareholder advances funds for operating capital from timeto time. These advances are non-interest bearing and do not have a due date.Repayments are made when working capital is adequate. The outstanding balancesof such advances as of September 30, 2003 and December 31, 2002 were$136,434 and $314,467, respectively.

 

Inconnection with the issuance of the $980,000 shareholder note payable describedin Note 4, a shareholder received a $50,000 financing fee during thequarter ended September 30, 2003.

 

SeeNote 4. Notes Payable to Shareholder.

 

TheCompany has a director whom also performs legal services for the Company. Forthe three and nine months ended September 30, 2003 and 2002, totalexpenditures related to this legal fees were $974 and $5,763, respectively and$1,517 and $6,544, respectively.

 

**NOTE6—COMMITMENTS**

 

TheCompany leases certain office space under the terms of a joint and severallease agreement with an unrelated cotenant. If the cotenant could not meet itsobligation under the lease, the Company would be required to assume additionalrental expenses.

 

**NOTE7—SHAREHOLDERS EQUITY**

 

InJuly 2003 the Company issued 126,800 shares of common stock from theexercise of a warrant. The value of this transaction, $6,974, was recorded topaid in capital and common stock.

 

**NOTE8—SEGMENT REPORTING**

 

Our business consists of threereportable segments: Royalty income generated from licensing (“CSL”), revenuegenerated from the production of automobiles and sale of automobile performanceparts (“Autos” and “SA”) and corporate headquarters (“CSI”). These businesssegments are distinct and separate. There are no allocations of costs amongstthese segments or intercompany revenues.  For the three and nine months ended September 30, 2002 the Companyoperated under one segment CSL.

 

Business segment informationfor the three and nine months ended September 30, 2003 and 2002 consists of:

 

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| ** **                      | ** ** | **For the three months ended** | ** ** | **For the nine months ended** | ** ** |
|---------------------------------|------------|--------------------------------|------------|-------------------------------|------------|
| ** **                      | ** ** | **2003**                       | ** ** | **2002**                      | ** ** | **2003** | ** ** | **2002** | ** ** |
|                            |       |                           |       |                          |       |   |   |   |   |
| Revenue:                        |       |                           |       |                          |       |   |   |   |   |
| CSL and CSI                     |       | $                              | 174,565    |                          | $          | 225,381 |   | $ | 692,698 |   | $ | 487,431 |   |
| Autos and SA                    |       | 849,906                        |       | —                        |       | 849,906 |   | — |   |
|                            |       |                           |       |                          |       |   |   |   |   |
| Operating  income (loss)        |       |                           |       |                          |       |   |   |   |   |
| CSL                             |       | 29,672                         |       | (256,133                      | )          | 171,872 |   | (594,273 | ) |
| Autos and SA                    |       | (811,111                       | )          | —                        |       | (1,067,166 | ) | — |   |
| CSI                             |       | (96,997                        | )          | —                        |       | (115,372 | ) | — |   |
|                            |       |                           |       |                          |       |   |   |   |   |
| Depreciation  and Amortization: |       |                           |       |                          |       |   |   |   |   |
| CSL                             |       | 23,556                         |       | 35,254                        |       | 95,064 |   | 106,239 |   |
| Autos and SA                    |       | 16,088                         |       | —                        |       | 16,088 |   | — |   |
| CSI                             |       | —                         |       | —                        |       | — |   | — |   |
|                            |       |                           |       |                          |       |   |   |   |   |
| Assets:                         |       |                           |       |                          |       |   |   |   |   |
| CSL                             |       | 187,823                        |       | 535,386                       |       | 187,823 |   | 535,386 |   |
| Autos and SA                    |       | (242,791                       | )          | —                        |       | (242,791 | ) | — |   |
| CSI                             |       | 1,394,602                      |       | —                        |       | 1,394,602 |   | — |   |
|                            |       |                           |       |                          |       |   |   |   |   |
| Capital  expenditures:          |       |                           |       |                          |       |   |   |   |   |
| CSL                             |       | —                         |       | 3,000                         |       | 10,384 |   | 3,000 |   |
| Autos and SA                    |       | 62,220                         |       | —                        |       | 74,418 |   | — |   |
| CSI                             |       | —                         |       | —                        |       | — |   | — |   |
|                                 |            |                                |            |                               |            |  |  |  |  |  |  |  |  |

 

**NOTE9—RESTATEMENT OF THE SEPTEMBER 30, 2003 FINANCIAL STATEMENTS**

 

The financial statements forthe three and nine months ended September 30, 2003 have been restated from theoriginally filed financial statements as follows:

 

•                  To reflect the proper accounting for the$2,000,000 note payable to the Shelby Companies (See Note 1 and 2).  On the original filing the Company recordedthe offset of the Note Payable as an intangible asset “Trademarks”.  Upon further review of this accounting theCompany has determined that offset of this Note Payable should be shown as adistribution of equity.

 

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•                  The Company included the activity of its Auto’ssubsidiary from its inception (May 2003) through June 30, 2003.  Thisactivity resulted in addition general and administrative expenses of $28,081and cost of goods sold of $227,975.

 

•                  To reflect the proper accounting for its NoteReceivable to affiliate $519,283.  Afterfurther review the Company determined that this amount was part of theproduction cost of automobiles in the manufacturing process and absorbed thesecosts to cost of goods sold (See Note1).

 

•                  To reflect the proper accounting for thebeneficial conversion feature associated with the $500,000 Note Payable to ashareholder affiliate.

 

•                  To reflect an adjustment of $144,956 todecrease cash resulting from the financial failure of SAI and the assumption ofoperations by Autos.

 

•                  To reflect an adjustment of $76,975 toincrease work in process inventory to reflect the proper accounting for work inprocess  that was misstated because ofthe financial failure of SAI and the assumption of operations by Autos.

 

•                  To reflect an adjustment of $64,703 for laborhours capitalized  in conjunction with afacility move originally capitalized to leasehold improvements.

 

•                  The Company restated the number of sharesoutstanding to properly reflect the reverse merger.

 

•                  The Company has updated its BusinessDescription, History and Organization (See Note 1) and Summary of SignificantAccounting Policies (See Note 2) of the Company footnote to accurately reflectthe description of the Company and its accounting policies.  In addition the Company has updated itsfootnotes to reflect segment reporting (see Note 8).

 

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**Item 2Management’s Discussion and Analysis or Plan of Operation.**

 

*CautionaryStatement*

 

Youshould read the following discussion and analysis in conjunction with theFinancial Statements and related Notes thereto contained elsewhere in thisForm 10-QSB (“Report”). The information in this Report is not a completedescription of our business or the risks associated with an investment in ourcommon stock. We urge you to carefully review and consider the variousdisclosures made by us in this Report and in our other reports filed with theSEC.

 

Thesection entitled “Risk Factors” set forth in this Report in our other SECfilings; discuss some of the important risk factors that may affect ourbusiness, results of operations and financial condition. You should carefullyconsider those risks, in addition to the other information in this Report andin our other filings with the SEC, before deciding to invest in our company orto maintain or increase your investment.

 

ThisReport contains forward-looking statements. These statements relate to futureevents or our future financial performance. In some cases, you can identifyforward-looking statements by terminology such as “may,” “will,” “should,” “except,”“plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,”the negative of such terms or other comparable terminology. These statementsare only predictions. These statements are not guarantees of future performanceand are subject to certain risks, uncertainties and assumptions that are difficultto predict.

 

Therefore,our actual results could differ materially and adversely from those expressedin any forward-looking statements as a result of various factors. Moreover,neither we nor any other person assumes responsibility for the accuracy andcompleteness of the forward-looking statements. We are under no duty to updateany of the forward-looking statements after the date of this report to conformsuch statements to actual results or to changes in our expectations.

 

*Overview*

 

TheCompany was originally organized on December 4, 2000 (Date of inception)under the laws of the State of Nevada, as Ginseng Forest, Inc. ThroughJune 23, 2003 the Company had no operations and in accordance with SFASNo. 7, the Company was considered a development stage company.

 

OnJune 23, 2003, the Company closed its previously announced agreement (the “ExchangeAgreement”) to acquire all of the outstanding common stock of Carroll ShelbyLicensing, Inc. and Shelby Automobiles, Inc. (the “Shelby Companies”)for 9,087,866 shares of Ginseng Forest, Inc. common stock and a promissorynote issued by Ginseng Forest, Inc. to the Shelby Companies securityholders in the amount of $2,000,000 due December 31, 2003.

 

Inthe second quarter of 2003 Autos began the production of Cobra automobiles dueto the financial failure of a licensee Shelby American Inc. (“SAI”) whowas engaged in manufacturing these component cars. SAI lost its license toproduce Shelby licensed automobiles due to its failure to make its requiredroyalty payments to CSL. Autos finished the production of the ordered ShelbyCobras in order to protect the Company’s brand name and maintain its customerloyalty. The Company believes these properties are the foundation of its futuredevelopment. Through the third quarter of 2003, Autos assumed approximately$519,000 of costs to continue the production of outstanding SAI automobileorders.

 

*Plan ofOperations*

 

TheCompany’s strategy is to aggressively pursue new licensing channels for itshistoric and prominent intellectual properties and hallmark brands such asShelby Cobra, 427 S/C, FIA 289, Cobra

 

Daytona Coupe, GT 350 and GT500. This process will be achieved through acquisitions and strategicalliances.

 

Inthe third quarter of 2003 the Company, through Autos has begun the productionof Cobra automobiles. The Company plans to expand its dealer network and directsales under a license agreement with CSL.

 

*Company’sDescription*

 

Carroll ShelbyLicensing Inc.

 

CarrollShelby Licensing, Inc. was originally incorporated as O T C PackagingCompany in Texas on April 22, 1986. In June 1998, the Company becameShelby American Management, Inc. and a final name change to Carroll ShelbyLicensing, Inc. was approved in March 1999. Carroll ShelbyLicensing, Inc. is the exclusive holder of automotive manufacturer andentrepreneur Carroll Shelby’s trademarks, vehicle design rights, and otherintellectual properties, which include some of the world’s most famous musclecars and high performance vehicles, including the car that brought home to theU.S. its first and only FIA World Manufactures Championship in 1965, the famous1965 Shelby Cobra Daytona Coupe. CSL also holds trademark rights forShelby-branded apparel, accessories and collectibles.

 

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CarrollShelby Licensing, Inc. revenues are substantially royalties derived fromlicensing agreements with foreign and domestic companies includingmanufacturers of automobiles parts and accessories, die-cast, plastic and othermodels of famous Shelby vehicles, clothing, computer and video games,collectables and various products.

 

Shelby Automobiles Inc.

 

ShelbyAutomobiles Inc. (“Autos”) was incorporated as a Nevada corporation in2003 for the purpose of manufacturing high performance Shelby vehicles underthe guidance of Carroll Shelby and is involved in prototype manufacturing,design and engineering projects. Autos plans to expand through a dealer networkand direct sales under a license agreement with CSL. In the second quarter of2003 Autos began operations.

 

*Revenues*

 

Totalrevenues increased by $1,055,173 or 216% from $487,431 for the nine monthsended September 30, 2002, to $1,542,604 for the nine months endedSeptember 30, 2003, and revenues increased by $799,090 or 355% from$225,381 for the three months ended September 30, 2002, to $1,024,471 forthe three months ended September 30, 2003. The overall increase in ourrevenues for the three and nine months ended September 30, 2003 versus thesame time period in 2002 is primarily due to the sales of Cobra cars beginningin the most recent quarter. Total revenue generated from car sales for the ninemonths ended September 30, 2003 increased $849,906. These revenues weregenerated from the sale of 9 Cobras and approximately $68,000 of Cobraperformance and other automobile products.

 

Royaltyand other revenues decreased $152,429 or 31% from $487,431 for the nine monthsended September 30, 2002, to $335,002 for the nine months endedSeptember 30, 2003, and revenues decreased by $50,816 or 23% from $225,381for the three months ended September 30, 2002, to $174,565 for the threemonths ended September 30, 2003. For the nine months endedSeptember 30, 2003, the decrease in revenues over the same period in 2002is primarily attributable to the decrease in rental revenues from a relatedentity under common control. Royalty revenue for the nine months endedSeptember 30, 2003 compared to the same period in 2002 decreased $63,486,from $398,488 in fiscal 2002 to $335,002 in fiscal 2003. The decrease inroyalty revenue for the nine months ended September 30, 2003 versus thesame period in 2002 is attributable to the loss of royalty income from certainrelated affiliates under common ownership. For the nine months endedSeptember 30, 2002 this affiliate accounted for $204,250 of the royaltyrevenue. However, in fiscal 2003, the Company is expanding and improving itsroyalty and licensee base by increasing the number of licensees and placingless reliance on revenue from these related entities.

 

Equipmentrental income is made up of a tractor-trailer display that is used to promotevarious Shelby licensed automobiles. In 2002 this equipment was being leased bya related entity for $88,943 for the nine months ended September 30, 2002and $29,648 for the three months ended September 30, 2002. In 2003, therelated entity was unable to pay its monthly lease payments and as a result norevenue was recorded for the nine and three months ended September 30,2003. The Company does not anticipate any significant revenue for the lastquarter of 2003 for the rental of this equipment.

 

*Cost ofGoods Sold*

 

TheCompany did not previously have a cost of goods sold caption in its statementof operations for the 2002 year. Cost of goods sold for the three and ninemonths ended September 30, 2003 was 118% and 93% of total revenue. For 2003,cost of goods sold represents the costs of Cobra automobiles and performanceand other related automotive products sold. Cost of goods sold includesunabsorbed overhead expenses associated with the start up of the Cobra carproduction operation.  Total cost ofsales for the three and nine months ended September 30, 2003 is $1,204,817 and$1,432,792, respectively.  For the threeand nine months ended September 30, 2002 there were no automobile orperformance product sales.

 

*Sellingand Marketing Expense*

 

Sellingand marketing expense increased by $29,180 or 10% from $299,165 for the ninemonths ended September 30, 2002, to $328,345 for the nine months endedSeptember 30, 2003, and selling and marketing expenses increased by$62,444 or 79% from $78,865 for the three months ended September 30, 2002,to $141,309 for the three months ended September 30, 2003.

 

Sellingexpenses during the nine and three month periods ended September 30, 2003included CSL expenditures for transportation, depreciation, meals andentertainment, printing and reproduction, promotion and public relations,research, trademark support, travel and video duplication. Selling expenses forAutos during the three and nine month periods ended September 30, 2003 includedexpenditures for advertising, promotions and travel.

 

Theoverall increase in selling and marketing expense for the three and nine monthsended September 30, 2003 versus the same time period in 2002 isattributable to advertising, promotional and travel expenditures of $72,398associated with the beginning of operations at Autos in the third quarter of2003. The increase in overall selling and marketing expenses attributed toAutos was offset by a decrease in these expenditures at CSL. For the three andnine month period ended September 30, 2002, CSL was promoting the 40 thanniversary of the Shelby Cobra. In 2003 CSL did not having anyextraordinary marketing campaigns as it did in 2002. In addition, CSL’s sellingand marketing expense decreased in the third quarter of fiscal 2003 versus thesame period in fiscal 2002 because CSL was not required to make a payment fortrademark political support in the third quarter of 2003 as it did in the thirdquarter of 2002.

 

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*Generaland Administrative Expenses*

 

Generaland administrative expense increased by $9,594 or 1% from $782,539 for the ninemonths ended September 30, 2002, to $792,133 for the nine months endedSeptember 30, 2003, and general and administrative expenses increased by$154,132 or 38% from $402,649 for the three months ended September 30,2002, to $556,781 for the three months ended September 30, 2003.

 

Generaland administrative expenses during the three and nine months endedSeptember 30, 2003 and 2002 include expenditures from CSL and Autos forprofessional services, depreciation, utilities, payroll, bank services charges,office expenditures and property taxes.

 

Forthe three and nine months ended September 30, 2003 general andadministrative expenses included $411,882 associated with the beginning ofoperations at Autos in the third quarter of 2003. The increase in general andadministrative expenses attributable to Autos was offset by significant reductionsin legal expenditures at CSL during the same time period. The net result wasstill an overall increase in general and administrative expenses. Protection ofthe Company’s trade name and trademarks is paramount to the Company’sexistence. During fiscal 2002, the Company was incurring legal fees associatedwith its Superformance lawsuit. No significant expenditures for this lawsuitwere incurred in 2003. Through September 30, 2003, the Company has notincurred any significant fees for legal proceedings associated with CSL. Theincrease in general and administrative expenses for the three months endedSeptember 30, 2003 versus the same time periods in 2002 is primarily dueto the Autos operations and as noted above offset by reduced legal fees in CSL.

 

*OtherIncome and (Expense)*

 

Otherincome (expense) increased by $21,143 or 337% from expenses of $6,279 for thenine months ended September 30, 2002, to expenses of $27,422 for the ninemonths ended September 30, 2003, and other expense increased by $35,579 or1,466% from expense of $2,427 for the three months ended September 30,2002, to expenses of $38,006 for the three months ended September 30,2003.

 

Theincrease in other income (expense) for the three and nine months endedSeptember 30, 2003 versus the same time period for 2002 is primarilyattributable to the increase accrued interest expense associated with the NotesPayable from Shareholder.

 

*Provisionfor Income Taxes*

 

Theprovision for income taxes as of September 30, 2002 and 2003 reflects theminimum state tax due.

 

*Liquidityand Capital Resources*

 

Duringthe nine months ended September 30, 2003, cash used in operatingactivities was $884,158. The net cash used in operations is primarilyattributable to the Company’s loss before depreciation and amortization.Specifically, the loss incurred by the Company through the start up of its Auto’soperations in third quarter of 2003.

 

Duringthe nine months ended September 30, 2003, net cash used in investingactivities of $67,498 was primarily a result of the purchase of property andequipment associated with the start up of Autos.

 

Forthe nine months ended September 30, 2003, net cash provided by financingactivities of $1,233,103 which consisted primarily of funds from shareholdersnotes of $1,480,000. The proceeds of which were used to fund the start up ofoperations at Autos. Decreases in financing activities were attributable to thepayment of an installment note for CSL’s transportation equipment and paymentof certain short term shareholder advances.

 

InAugust 2003, the Company retained an investment banker to provide, amongother services, assistance with Company’s financing efforts as it attempts tosecure additional capital for product development, possible acquisitions andworking capital an assist the Company with general business strategy and adviceregarding listing on a national exchange.

 

Currently,the Company is dependent upon its majority shareholder to provide liquidityfrom any shortfall in cash provided by operations. If this shareholder does notcontinue to provide funding for the Company this will have an adverse materialimpact on the statement of financial position for the Company and itsoperations.

 

TheCompany believes that inflation has not had a material impact on it operations.

 

*OffBalance Sheet Arrangements*

 

CSI enters intoindemnification provisions under its agreements with other companies in itsordinary course of business. Under these provisions, CSI generally indemnifiesthe indemnified party for losses suffered or incurred by the indemnified partyas a result of CSI’s activities. These indemnification provisions generallysurvive termination of the underlying agreement. CSI has not incurred materialcosts to defend lawsuits or settle claims related to these indemnification agreements.As a result, CSI believes the estimated fair value of these agreements isminimal. Accordingly, CSI has no liabilities recorded for these agreements asof September 30, 2003.

 

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*CriticalAccounting Policies*

 

Our accounting policies aredescribed in Note 1 of the Consolidated Financial Statements. We prepare ourConsolidated Financial Statements in conformity with accounting principlesgenerally accepted in the United States, which require us to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosures of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the year.Actual results could differ from those estimates. In our financial statementfootnotes as of September 30, 2003 we summarize the policies and estimates thatwe believe to be most critical in understanding the judgments involved inpreparing our financial statements and the uncertainties that could affect ourresults of operations, financial condition and cash flows.

 

*Risk Factors*

 

Youshould carefully consider the following risks and the other informationcontained in this Report and in our other filings with the Securities andExchange Commission before you decide to invest in us or to maintain orincrease your investment. The risks and uncertainties described below are notthe only ones facing us. Additional risks and uncertainties may also adverselyimpact and impair our business. If any of the following risks actually occur,our business, results of operations or financial condition would likely suffer.In such case, the trading price of our Common Stock could decline, and you maylose all or part of your investment.

 

•                  Our cash or cash equivalents reserves may notbe adequate to cover our costs of operations. To date, we have covered ouroperating losses through loans from our majority shareholder.

 

•                  It is likely that we will need to raiseadditional capital at some point in the future. If additional funds are raisedthrough the issuance of equity, our shareholders’ ownership will be diluted.There can be no assurance that additional financing will be available on termsfavorable to us or at all. If funds are not available or are not available onterms acceptable to us, we may not be able to continue the development of ourproduct, respond to our competitors or continue our business.

 

•                  Our business depends on the protection of ourintellectual property and may suffer if we are unable to protect adequately ourintellectual property.

 

•                  Our business is dependent on ourrelationships with other parties, specifically with Carroll Shelby. If we areunable to use the Carroll Shelby name this will have a material adverse impacton the financial position of the Company.

 

•                  Our future revenues and profitability areunpredictable.

 

•                  Our Common Stock is not widely traded, and,as a result, the prices quoted for our stock may not reflect its fair marketvalue. Because of the low volume of trading in our Common Stock, ourshareholders may find it difficult to sell their shares.

 

•                  Our principal shareholders can exercisesignificant control over us and could limit the ability of our othershareholders to influence the outcome of transactions requiring a shareholdervote. As of September 30, 2003 approximately 85% of our outstanding CommonStock is owned by our executive officers, directors and principal shareholders.These shareholders will have the ability to exercise influence over all mattersrequiring approval by our shareholders, including the election of directors andapproval of significant corporate transactions.

 

•                  Our Common Stock is currently quoted on theOTC Bulletin Board under the symbol: CSBI.

 

**Item 3.Controls and Procedures**

 

Management, including ourprincipal executive officer and principal financial officer, has evaluated, asof the end of the period covered by this report, the effectiveness of thedesign and operation of the Company’s disclosure controls and procedures withrespect to the information generated for use in this report. Based upon, and asof the date of that evaluation, the principal executive officer and principalfinancial officer concluded that the disclosure controls and procedures wereeffective to provide reasonable assurances that information required to bedisclosed in the reports filed or submitted under the Securities Exchange Actof 1934, as amended, is recorded, processed, summarized and reported within thetime periods specified in the rules and forms of the Securities and ExchangeCommission.

 

In designing and evaluatingthe disclosure controls and procedures, management recognized that any controlsand procedures, no matter how well designed and operated, can provide onlyreasonable, not absolute, assurance of achieving the desired control objectivesand management necessarily was required to apply its judgment in evaluating thecost-benefit relationship of possible controls and procedures. Based upon theabove evaluation, management believes that its controls do provide suchreasonable assurances. However, the Company currently has a small accountingdepartment and as a result segregation of duties is not always possible and theCompany has retained outside consultants to assist with the financial close andfinancial reporting.

 

There have been no changesin the Company’s internal control over financial reporting that occurred duringthe Company’s last fiscal quarter that have materially affected, or arereasonably likely to materially affect, the Company’s internal control overfinancial reporting.

 

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**PART II. OTHER INFORMATION**

 

**Item 1.Legal Proceedings.**

 

Thereare no known legal actions that are either pending or threatened against CarrollShelby International, Inc., nor are there any asserted or unassertedpotential claims of which management is aware. With respect to the wholly ownedsubsidiaries of Carroll Shelby International, Inc., specifically: CarrollShelby Licensing, Inc. and Shelby Automobiles, Inc., there are nopending or threatened legal actions of which management is currently aware.Contingent claims, however, have been asserted against Carroll ShelbyLicensing, Inc. by a representative of one of its former licensees, and certainshareholders and creditors of said former licensee (to wit: the companyformerly known as Shelby American, Inc., now American Inc.,Venture-Nevada LLC, Larry Winget and Venture Mold & Engineering).These contingent claims arise from allegations to the effect that the licenseagreement with the company formerly known as Shelby American, Inc. shouldnot have been terminated for lack of payment of royalties due under saidagreement. Management has investigated the basis under which Carroll ShelbyLicensing, Inc. terminated the license agreement with ShelbyAmerican, Inc. and has determined that there were in fact good, validlegal reasons for termination of said license agreement based upon, among otherreasons, the undisputed nonpayment of royalties over a 3-year time period of anamount in excess of $1 million. Furthermore the Company believes thatCarroll Shelby Licensing, Inc. has a good and valid legal claim againstthe company formerly known as Shelby American, Inc., for nonpayment ofroyalties in an amount in excess of $1 million. Collection of theseroyalties, however, would be dependent upon the outcome of future legalproceedings and the ability of Carroll Shelby Licensing, Inc. to collecton the assets of the company formerly known as Shelby American, Inc., aprivately held Texas corporation.

 

**Item 2.Changes in Securities and Use of Proceeds.**

 

None.

 

**Item 3.Defaults Upon Senior Debt.**

 

None.

 

**Item 4.Submission of Matters to a Vote of Security Holders.**

 

None.

 

**Item 5.Other Information**

 

None.

 

**Item 6.Exhibits and Reports on 8-K**

 

**Exhibits**

 
| **Number** | ** ** | **Description**                                                                                      |
|------------|------------|------------------------------------------------------------------------------------------------------|
| 31.1       |       | Certification of Chief  Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2       |       | Certification of Chief  Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1       |       | Certification of Chief  Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2       |       | Certification of Chief  Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

**Reports ofForm 8-K**

 

OnAugust 15, 2003, the Registrant filed a report of Form 8K disclosinga change in the Company’s auditors from Beckstead and Watts, LLP, CertifiedPublic Accountants to Spicer, Jeffries & Co., Certified PublicAccountants.

 

OnAugust 25, 2003, the Registrant filed a report of Form 8K/A amendingthe form 8K dated June 23, 2003. The purpose of this form 8-K/Ais to include the financial statements and financial information required as aresult of the closing of the Exchange Agreement between Ginseng Forest, Inc.and Carroll Shelby Licensing Inc. and Shelby Automobilies, Inc.

 

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**SIGNATURES**

 

Inaccordance with the requirements of the Exchange Act, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                    | CARROLL SHELBY  INTERNATIONAL INC.  (Registrant) |
|-------------------------|--------------------------------------------------|
| Date: November 15, 2004 | By:                                              | /s/   JOHN LUFT |   |
|                    |                                             | President and Director |   |
|                    |                                             |   |   |
| Date: November 15, 2004 | By:                                              | /s/   CARROLL  SHELBY |   |
|                    |                                             | Director |   |

 

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