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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
Annual report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: May 31, 1998
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Commission File Number 33-96638-A
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U S Amateur Sports, Inc.
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(Name of Small Business Issuer as specified in its charter)
Florida 65-0538051
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8125 Monetary Drive, Suite H4
Riviera Beach, Florida 33404
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (561) 622-4395
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. __
Registrant's revenues for its most recent fiscal year were $149,582.
As of May 31, 1998, there were 11,894,600 shares of the registrant's $.0001
par value common stock issued and 11,892,600 shares outstanding.
Transitional Small Business Disclosure Format Used (Check one) Yes No X
This registration statement on Form 10-KSB is comprised of 26 sequentially
numbered pages, with the required exhibit index located at sequentially
numbered page 24.
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TABLE OF CONTENTS
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PART I
Item 1. Business of the Company 3
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters 10
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 7. Financial Statements 15
Item 8. Disagreements on Accounting and Financial Disclosures 16
PART III
Item 9. Directors and Executive Officers of the Registrant 16
Item 10. Executive Compensation 19
Item 11. Security Ownership of Certain Beneficial
Owners and Management 20
Item 12. Certain Relationships and Related Transactions 22
PART IV
Item 13. Exhibits, Financial Statements
and Reports on Form 8-K 24
Additional Information* 25
Signatures 26
* This document incorporates into a single document the requirements of the
Securities and Exchange Commission for the Annual Report to Stockholders and
the Form 10-KSB.
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Special Note Regarding Forward-Looking Statements
Certain statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures, the growth rate of the paintball
industry and electronic commerce, constantly changing technology and market
acceptance of the Company's products and services. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements, which may be made to reflect events of
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
PART I
ITEM 1. BUSINESS OF THE COMPANY
U S Amateur Sports, Inc. ("the Company") is a sports entertainment,
Internet marketing and sales company which was incorporated on June 14, 1994
in the State of Florida. Its principal offices are located at 8125 Monetary
Drive, Suite H4, Riviera Beach, Florida 33404, and its telephone number is
561-622-4395.
U S Amateur Sports, Inc. currently has three business units in operation
or under development.
USA Performance Products, Inc. (USAPP). USAPP is a wholly-owned
subsidiary of USAS that develops, manufactures and markets sports-related
products. This business unit was incorporated in the State of Florida as USA
Performance Products, Inc. on January 20, 1998. USAPP was established as a
wholly-owned subsidiary in order to formally segregate the business unit's
operations and accounts and to facilitate management's focus on development of
the Company's paintball business.
Paintball is a sport in which each contestant attempts to remove the
other contestants from the game by marking them with a capsule from the
paintball marker while at the same time trying to avoid being removed from the
game himself. The game can be played either indoors or outdoors and, except
for the paintball marker and face mask, it does not require extensive
equipment. There are many different ways to play paintball. In general, a
player uses the marker to "shoot" at other players or at specific targets. It
is most often played as a team event. Some universities such as Arkansas
State have adopted the sport as a course offering for the teaching of team
building skills. Corporations view the game as an opportunity for employees
to increase leadership and communication skills, to exercise and to have fun.
Paintball, conceived in 1981, is played in over 40 countries today and has its
own annual World Cup event.
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Through acquisition and redesign, USAPP obtained its first product, the
Viper M1 paintball marker, along with a line of associated parts and
accessories. In 1996 the Company entered into an agreement to purchase
certain assets of Performance Paintball Products, Inc. of Riviera Beach,
Florida. The Company acquired assets consisting of inventory, property and
equipment for $101,295. These assets include the tools and dies necessary to
conduct the business of manufacturing the Viper Ml paintball marker (gun) and
related accessories. The Company also has exclusive rights to the related
names and technology.
In connection with the asset purchase, the Company executed a note for
$101,295 with an interest rate of 10% per annum. This note was canceled on
July 21, 1997, and a new note was recorded which had a principal amount
remaining of $30,214 at May 31, 1998. Under the agreement, monthly payments
will continue until the final payment is made on September 21, 1998.
On January 10, 1998, the Company's Board of Directors approved an
agreement with Axis Enterprises, Ltd., a Bahamian corporation of Nassau,
Bahamas, to retain Axis for a period of three years to provide financing,
marketing and management services in support of USA Performance Products. In
exchange for performance of these services, Axis was granted 1,500,000 shares
of the Company's common stock. Services commenced on April 8, 1998.
(The following paragraph addresses a material subsequent event.)
Although the Company owns the tools and dies to produce the paintball
marker, it contracted with Micro Tool Engineering, Inc. to manufacture and
assemble the paintball products at Micro Tool's plant in Riviera Beach,
Florida. Management believes that this arrangement has been mutually
beneficial to both organizations in the start-up phases. However, the Company
has determined that Micro Tool does not have the capacity to produce the
paintball marker in quantities sufficient to meet demand. In order to
increase production quantities, the Company moved its headquarters from Palm
Beach Gardens, Florida to approximately 6,000 square feet of leased commercial
space in Riviera Beach, Florida. This relocation was completed on June 15,
1998. Management believes that this new facility will allow the Company to
conduct its own manufacturing operation, satisfy demand for its paintball
products for the foreseeable future and ensure the quality of its products by
in-house implementation of a comprehensive quality control program. Currently
the Company is offering a lifetime warranty on its Viper M-1 paintball marker
to the original registered purchaser. The warranty work continues to be
performed by Micro Tool at no cost to the Company. However, this function
will also be assumed by the Company in the near future. Management believes
that the in-house quality control and warranty program will reduce any future
liabilities associated with warranty requirements.
The Company's assumption of the assembly function has been slowed by
management's determination that the production drawings acquired in connection
with the acquisition of the Viper M1 required updating prior to initiation of
production. Axis Enterprises is providing the engineering services to
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accomplish this task. Management believes that in-house production will
commence in October 1998.
Having identified the rapidly-expanding paintball segment of the sports
market as an opportunity for consolidation, management believes that the
incorporation of USA Performance Products, the agreement with Axis and the
establishment of an in-house production capability along with the addition of
space for growth will accelerate development of the paintball business. In
addition to increasing the production of existing products, these measures
position the Company to enter into certain strategic alliances that will
enable it to penetrate the market segment with sales of paintball products
other than the Viper M1 marker.
The paintball industry's primary existing distribution channel is through
distributors and independent paintball dealers. Such dealers include retail
stores and paintball field operators. However, Brass Eagle (formerly "Daisy")
recently introduced paintball to a greatly enlarged market by placing its
paintball products in mass merchandisers such as Sports Authority, Wal-Mart
and Service Merchandise. Brass Eagle focuses on the lowest end of the market
with plastic markers that carry 90-day warranties. The Company welcomes their
entrance into the mass merchandisers because this will expand the market.
Management believes that a substantial percentage of new paintball players
introduced to the sport in this manner eventually will want to trade up to a
higher-quality marker such as the Viper M1.
Although the Company is committed to support of the dealer network, it
also markets the Viper M1 through the Internet on a factory-direct basis. In
fact, a majority of Viper M1 sales to date have been made through this medium.
Use of the Internet has been demonstrated to be a very effective, low-cost
method of selling the Viper M1. Information about the Company's paintball
products can be found through the USAS home page at http://www.usas.com.
USA SportsNet. A division of US Amateur Sports, Inc., USA SportsNet is
in transition from existing as a web site primarily used to market the Viper
M1 to being the first amateur sports network that will reach the market by
using the fastest growing mass medium in history. With close to 40 million
Internet users world-wide and expectations that this number will more than
triple by 2000, electronic commerce will continue to experience dramatic
growth.
Designed to serve the country's amateur, high school and youth athletic
organizations and the athletes themselves, USA SportsNet is building Sports
World, a 3D virtual reality amateur sports experience. Visitors enter this
sports world using Active Worlds virtual reality software designed by Circle
of Fire Studios. The software can be down-loaded by the user free of charge.
This cutting edge technology employs a 3D interface that allows users to speak
to others who are looking at the same information, providing a meeting place
for the exchange of ideas that is not limited by the bounds of physical space.
Any local community recreation department, youth league or school will be
empowered to log into a password-protected page to post scores, standings,
schedules and highlights free of charge. Other services offered will include
a coaches academy with on-line correspondence courses, background checks on
those volunteering to coach youth sports, a discount store and a site to buy
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or sell used equipment. Sports organizations can sell advertising on their
page to raise funds for their activities. Aspiring athletes will be able to
learn how to throw a curve ball, receive tips from the pros and even view film
of their own sports achievements. USA SportsNet will be a sports information
resource never available before.
Management believes that USA SportsNet will grow quickly by the
integration of existing web sites into an easily-accessible amateur sports
resource center. The Company has announced its intention to acquire or form
alliances with other sports-related web sites and is currently evaluating
responses to identify the strongest candidates to join the network.
With the integration of other web sites, USA SportsNet will be able to
implement a content development program structured on the work of independent
webmasters focused on their sites, but directed toward a common goal. A large
central staff will not be required. Instead, a core maintenance team
supplemented by local college students will perform centralized web tasks
under the direction of a "webmaster general." The Company has contracted with
Corinthian Media Services to oversee the layout and operation of USA SportsNet
with Corinthian's principal owner serving as the webmaster general.
Management believes that Corinthian is well-qualified to perform these
services. Among other successful projects, Corinthian developed the World and
Regional Paintball Information Guide which has become the world-recognized
standard on the Internet for locating information about the sport of
paintball. The site generates more than three million visits per month with
discussion forums, daily field and score reports from major tournaments and a
webcast paintball television show.
The marketing potential of the USA SportsNet concept is obvious. This
grass-roots approach, considering the number of communities across the nation
multiplied by the number of athletes and sports played, will attract millions
of visitors to USA SportsNet. A lucrative advertising medium will be created
for merchants who seek either net-wide or local coverage. The Company expects
to record revenues from the sale of this advertising combined with the sale of
merchandise and membership programs. Since expenses will be minimized by the
networked content development approach described above, management believes
that USA SportsNet will achieve profitability at an earlier point in its
development than has been true for other Internet concepts.
USA SportsNet is located at http://www.usasportsnet.com.
All American Sports Classics. All American Sports Classics is being
developed to present all-star games and championship team events designed to
showcase leading amateur athletes in a wide range of sports. Company-produced
events will provide content for the growing number of television sports
channels and for USA SportsNet.
The Company's first event in the series, the national high school
football All American Bowl, was played on July 5, 1997 and broadcast in over
40 million households across the nation via the Sunshine Network, Fox
SportsNet regional affiliates and other local networks. A severe storm that
hit the game site in Palm Beach Gardens, Florida disrupted sales of tickets,
programs, tee shirts and other memorabilia, and the event resulted in a
financial loss. However, the excitement of the game, which featured big plays
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and a close score (West 20, East 17), celebrity coaches (former NFL stars Greg
Pruitt and Mike Fowler), the top college football recruits in the nation and a
very professional presentation by the Sunshine Network, made the event an
artistic success.
Major sponsors of the All American Bowl included Coca-Cola, Adidas and
Schutt Sports. The very positive response to the game indicates that this
event will attract sufficient sponsorship in the future to contribute
significantly to Company profitability. However, to increase lead-time and
ensure that the event will be financially as well as artistically successful,
management decided to schedule the next All American Bowl in 1999. Some
sponsorship packages for the 1999 event already have been sold. Upon the
financially successful presentation of the All American Bowl, the Company will
implement its plan to expand the existing sponsorship base to include support
for other events in the All American Sports Classics series.
Business Segments
Note N (Business Segments) of notes to the financial statements (See Item
7.) is incorporated herein by reference.
Corporate Growth and Marketing Strategies
The sports and leisure industry already accounts for a large portion of
the world economy, and it continues to grow rapidly. As illustration, it is
estimated that annual expenditures for advertising during sports events and
for event sponsorship within the United States exceeds $10 billion. Licensed
sales of sports merchandise approximate $15 billion. Within this huge
industry, the US Amateur Sports mission is to identify niches that offer
strong growth potential, but lack dominant market leaders. Amateur athletics
offers an extremely large market with segments that are underdeveloped and
unthreatened by technology.
The Company leverages its participation in this fast-growing market by
emphasizing its use of the world's all-time fastest-growing mass communication
and marketing system - the Internet. With the success of the Company's sale
of paintball products as proof of the effectiveness of the Internet,
management believes that it can build on this experience to make USA SportsNet
the premier information resource center for amateur athletes which will in
turn create the ideal marketing vehicle for the amateur sports market.
Formation of alliances and acquisitions are key to the rapid growth of
the Company. With the steps currently being taken to overcome production
barriers that have limited the sales of the Viper M1, this product is viewed
by management to be the springboard to become a leader in the paintball market
through internal growth and acquisition. Management's strategy is to achieve
dominance not only by acquiring other manufacturers, but by acquiring or
allying with paintball playing facilities. The Company considers placement of
its products at these facilities to be an excellent way to gain the attention
of prospective customers.
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Acquiring or partnering with amateur sports-oriented web sites also is
considered essential to spur the growth rate of USA SportsNet. This approach
to construction of the network avoids the heavy cost of reliance on internal
content development. A major principle of the USA SportsNet development plan
is to avoid the path followed by other major Internet companies that has
resulted in revenue growth without profit.
Supplementing its use of the Internet, the Company reinforces its brand
recognition through placement of magazine advertising and use of television,
principally during broadcast of events produced within the All American Sports
Classics series.
Competition
Competing directly with USA Performance Products are the manufacturers
of approximately 28 other brands of paintball markers. Also, many markers are
custom-made for competitive players. Many of these competitive companies are
well established and have more financial resources than the Company. Some of
the major competitors are Brass Eagle (Daisy), Air Design, Worr Products,
Tippman, Kingman and various imports. The market is presently dominated by
these companies. Although Brass Eagle is the largest competitor, the majority
of its sales consist of low-priced products that attract new players to expand
the market, but will not draw the attention of experienced players who are
more likely to choose the Viper M1. Compared to all of these competing
products, management believes it has a superior product in the Viper M1's
combination of quality, features, durability and price.
USA SportsNet competes with a countless number of sports-related sites on
the Internet. The potential for growth that results from the combination of
the Internet with the public's interest in sports has not been overlooked.
ESPNET SportsZone and SportsLine USA have been two of the most popular sites
on the web. Fort Lauderdale-based SportsLine USA launched its service in
August 1995. In March 1997, it became CBS SportsLine when the television
network invested $100 million of on-air promotions and programming in return
for 22% of SportsLine's equity. USA SportsNet distinguishes itself from these
competitors by focusing on amateur sports and kids and by providing a service
to amateur athletes and their organizations at a grass roots level. There are
numerous sites on the Internet that provide information for amateur athletes.
However, most of these sites are either sport-specific or are directed to a
specific aspect of amateur sports such as posting of league scores or tips on
coaching. Management is not aware of any other Internet company that provides
the comprehensive services to be offered within a network concept such as is
being developed by USA SportsNet.
Private online services such as America Online, CompuServe and Microsoft
are competitive in the way that they attempt to hold their customers hostage
within their sites. However, once Internet "surfers" enter the World Wide
Web, there is an opportunity to attract them to our site. A main source of
these connections is through "search engines" with which the Company is
registered. Also, proper links and listings with heavily traveled sites
produce visitors. The Company contracts with Corinthian Media Services, a web
consultant, to keep abreast of links and site management. E-mail is utilized
for immediate response to customers with product literature sent by e-mail,
fax or regular mail.
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The All American Sports Classics series must gain the attention of sports
fans who now can choose from a huge variety of sports events available locally
or accessed via television, radio or the Internet. However, the All American
Sports Classics are intended to spotlight athletes and teams who are
overlooked by these other events. The All American Bowl is the only national
football all-star game in the country for high school seniors. The only
competition for other national high school sports events known to management
is the McDonalds Boys Basketball and Nike Girls Basketball series. However,
there exist a number of regional and state all-star football games in various
parts of the country, some of which are televised on a local or regional
basis.
ITEM 2. PROPERTIES
(The following paragraph addresses a material subsequent event.)
The Company does not own any real property. On June 15, 1998, the
Company relocated to a commercial space in Riviera Beach, Florida consisting
of approximately 5,720 square feet. This location houses the offices of US
Amateur Sports and provides facilities for the manufacture and warehousing of
the Company's paintball products. The term of the lease is for three years
and one half month ending June 30, 2001. An initial rental rate of $5.66 per
square foot adjusts to $6.29 in the second year and $6.92 in the third year.
Management believes that these facilities will be adequate to satisfy the
Company's needs for the foreseeable future.
The Company maintains inventories which consist of merchandise acquired
for sale by USA SportsNet in addition to paintball markers (guns) and
accessories. The Company owns tools, dies and fixtures for the manufacturing
of paintball products. Other properties consist of computer hardware and
software and furniture, fixtures and equipment.
ITEM 3. LEGAL PROCEEDINGS
During the fourth quarter of the Company's fiscal year ended May 31,
1998, the Company reached an agreement to purchase certain previously leased
computer and telephone equipment in connection with a written lease, in which
the Company was named in a lawsuit filed by the former owner of the equipment.
The resolution of this matter should therefore not have any material adverse
effect on the Company or its business prospects.
The Company is not involved in any other material legal proceedings or
litigation and the officers and directors are aware of no other pending
litigation which would have a material, adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS
(a) Market forCommon Equity
On October 31, 1997, the OTC Compliance Unit of NASD Regulation, Inc.
cleared a request submitted by Equitrade Securities Corporation for quotation
on the OTC Bulletin Board of US Amateur Sports common stock. Equitrade,
located at 23736 Birtcher Drive, Lake Forest, California 92630, was
established as the lead market maker for the stock which trades under the
symbol USSP. Equitrade continues in this capacity although several additional
market makers have been added.
The stock has traded in a price range from a low of $.25 to a high of
$1.47. Trading activity peaked in the month of March during which shares in
excess of one million were traded.
(b) Security Holders
The Company has approximately 175 shareholders of record. Of 50,000,000
shares of common stock authorized, 11,894,600 shares have been issued. 2,000
shares have been repurchased as treasury stock, 2,160,600 shares consist of
free-trading stock, and the remaining 9,732,000 shares are comprised of stock
restricted in accordance with Rule 144.
(c) Dividends
There have been no cash dividends declared or paid since the inception of
the Company, and no cash dividends are contemplated to be paid in the
foreseeable future. The Company may consider a potential dividend in the
future in either common stock or the stock of future operating subsidiaries.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS AND PLAN OF OPERATION
Overview
At the conclusion of the prior fiscal year ended May 31, 1997, management
believed that the Company was emerging from the development stage and was
poised to generate significant revenues and profits. This projection was
based on the expectation that full production of the Viper M1 paintball marker
was about to commence and that 1,000 markers per month would be produced by
the close of the fiscal year ended May 31, 1998. During the year it became
apparent that the manufacturing subcontractor would be unable to meet its
delivery commitments at the desired levels of production. Management made the
difficult decision to shift away from reliance on this subcontractor even
though the transition to other sources would depress current production even
further. Axis Enterprises, Ltd. was retained to provide financing, marketing
and management services in support of the Viper M1 program. With the advice
of Axis, management determined that the best solution to the problem would be
to move production in-house. As a result, the Company has responded to the
challenge by establishing direct relationships with vendors of Viper M1
components and leasing sufficient space to establish the Company's own
production capability. Axis Enterprises and Company management believe that
these measures not only will enable the Company to meet its production goals,
but also will improve quality control and cut costs to increase profit
margins. (See Part I, Item 1, "Business of the Company," for additional
information.)
In pursuit of the Company's objective to develop USA SportsNet into a
profit center and to establish US Amateur Sports as a leading sports-related
Internet company, management has implemented a unique plan to achieve rapid,
low-cost growth into an Internet network that integrates existing amateur
sports-oriented web sites. Management believes that this network will provide
amateur athletes and their organizations with an Internet resource that will
attract repeated visits and become an effective advertising medium for
sports-related merchants. Alliances with Circle of Fire Studios, Corinthian
Media Services and a local college have been established to facilitate
internal content development. The Company has announced its intention to
acquire or form alliances with other sports-related web sites and is currently
evaluating responses to identify the strongest candidates to join the network.
(See Part I, Item 1, "Business of the Company," for additional information.)
During the first quarter of the year, the artistic success of the All
American Bowl demonstrated the Company's ability to produce a major sports
event in a professional manner. The event was considered to be developmental
in nature, and a financial loss was projected. However, the actual loss
incurred was greater than anticipated, and management decided that it would be
prudent to defer presentation of the next All American Bowl to 1999 in order
to ensure that the event would be financially as well as artistically
successful. (See Part I, Item 1, "Business of the Company," for additional
information.)
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The final major goal for the past year was to achieve trading status for
the Company's common stock. This was accomplished on October 31, 1997 when
the OTC Compliance Unit of NASD Regulation, Inc. cleared a request by
Equitrade Securities Corporation for quotation on the OTC Bulletin Board under
the symbol USSP. Equitrade was established as the lead market maker for the
stock. (See Part II, Item 5, "Market for the Company's Common Equity," for
additional information.)
Results of Operations
Revenue for the year ended May 31, 1998 was $149,582 compared to $48,381
of revenue recorded during the prior year. Of this increase, $17,289 was
attributable to sales of advertising, tickets and memorabilia related to the
1997 All American Bowl, and $80,000 was derived from barter transactions with
Itex Corporation through which advertising was sold in return for cash credits
to be used for the purchase of products and services provided by other Itex
clients. Other income of $3,504 resulted principally from renegotiation of a
note payable.
A net loss of $143,051 was posted during the year ended May 31, 1998
compared to a net loss of $240,018 for the prior year period. Although this
improvement approximates the increase in revenues, the reduced loss resulted
primarily from the efforts of management to reduce expenses enough to offset
$69,794 in costs recorded during the first quarter to produce and promote the
All American Bowl. (An additional $40,000 had been accrued at May 31, 1997 in
anticipation of the loss to be incurred in connection with this event.)
Significant reductions included advertising and promotion costs which were cut
by $36,827, travel expenses which dropped $13,133 and office, telephone and
other operating expenses which were lower by $41,129 compared to the prior
year. The reduction in office expenses was offset by an increase of $13,514
in rent which reflected a mid-year increase in space leased at the Company's
former location in Palm Beach Gardens, Florida.
Although the Company's debt grew during the current year, interest
expense was $1,311 lower than the prior year because interest-bearing debt was
replaced by notes with lower rates or non-interest-bearing stockholder loans.
In addition, at the end of the prior year, the Company's Chief Executive
Officer and Treasurer contributed to capital a total of $94,350 in stockholder
loans and $26,036 in amounts due for reimburseable expenses. Interest accrued
on the stockholder loans during the year ended May 31, 1997 contributed to the
decrease in year-to-year comparison of interest expense.
Liquidity and Capital Resources
At May 31, 1998, current assets had grown to $216,592 from a balance of
$83,820 at the prior year end. Cash and cash equivalents increased $88,732
with $80,000 of the increase consisting of cash credits received from barter
transactions. Accounts and advances receivable were $4,251 higher than the
balance at the prior year end. $2,505 of the difference was an amount due
from a party that had sublet space within the Company's office location in
Palm Beach Gardens. The remainder of the increase consisted of accounts
receivable from COD sales of the Viper M1. Inventories at the current year
end were $7,209 higher than the balance at the end of the prior year. The
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increase resulted from additions of All American Bowl memorabilia and
paintball inventory including work-in-process inventory obtained in
anticipation of the commencement of in-house assembly of the Viper M1.
Prepaid expense grew $32,580 over the prior year balance due mainly to
prepayment of advertising purchased at discount which will promote the Company
and its products during the new fiscal year.
Current liabilities include accounts payable with a current year end
balance of $131,704 compared to $79,461 at the prior year end. Of the $52,243
increase, $11,700 is professional fees owed, while $11,566 relates to an
obligation incurred in connection with the buy-out of a lease of computer
equipment and the Company's telephone system. The remainder of the difference
consists of amounts owed to Sunshine Network and other vendors who assisted
with presentation of the All American Bowl. Remaining current liabilities
consist of the current portion of long-term debt discussed below.
Net cash used by operating activities was $167,275 and $77,877 for the
years ended May 31, 1998 and 1997, respectively. The principal use of cash in
both periods was to fund the Company's net loss from operations. In the
current year, cash also was used to increase current assets and decrease
accrued expenses. In both years, net cash used was offset by increases in
accounts payable.
Net cash used in investing activities was $34,372 and $1,286 for the
years ended May 31, 1998 and 1997, respectively. All of this cash was used
for the acquisition of property and equipment.
Net cash provided by financing activities was $290,379 and $75,386 for
the years ended May 31, 1998 and 1997, respectively. Cash flows from
financing activities were derived from capital contributions, issuance of
notes payable and loans from stockholders.
Capital contributions amounted to $180,260. $120,475 of this amount was
derived from a private sale of restricted stock, and the balance resulted from
exchange of stock for services and debt.
Notes payable of $143,714 at May 31, 1998 represented an increase of
$74,519 over the prior year end. All notes payable recorded at the end of the
prior year were either paid off or reduced with the funds provided by a new
note in the amount of $100,000 payable to Stratex Corporation. The new note
bears interest at the rate of prime plus 6% and matures on September 1, 1998,
at which time all principal and interest is due.
Loans from stockholders grew from $66,000 at the prior year end to
$101,600 at May 31, 1998. None of these loans bear interest. Such loans will
continue to be a significant source of capital to fund the Company's
operations. However, management expects that revenues from operating
activities will reduce reliance on this source during the new fiscal year.
Management believes that the combination of revenues, loans from
stockholders and capital contributions will be sufficient to fund operations
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for the next twelve months. To the extent that the Company requires
additional funds to support its operations or the expansion of its business,
the Company may sell additional equity, issue debt or obtain credit facilities
through financial institutions. Any sale of additional equity securities will
result in dilution to the Company's shareholders. There can be no assurance
that additional financing, if required, will be available to the Company in
amounts or on terms acceptable to the Company.
Provision for Income Taxes
No provision for federal and state income taxes has been recorded as the
Company has incurred net operating losses since inception. The Company's net
operating loss carry-forwards as of May 31, 1998 total $545,921. These
carry-forwards will be available to offset future taxable income. If not
used, such operating loss carry-forwards will expire from 2010 to 2013.
Management does not believe that the realization of the related deferred
income tax assets meets the criteria required by generally accepted accounting
principles and, accordingly, deferred income tax assets have been reduced to
$0 as of May 31, 1998.
Year 2000 Issue
The Company is aware of the impact that the two-digit coding of dates in
many currently installed computer systems and software products will have in
the year 2000. Management does not believe that this issue will result in any
material adverse effect on the Company's financial condition or results of
operations.
Recent Accounting Pronouncements
In February 1997, SFAS No. 128, Earnings Per Share, was issued to be
effective for financial statements issued for periods ending after December
15, 1997. SFAS No. 128 has been adopted by the Company for the year ended May
31, 1998. SFAS No. 128 simplifies the methodology of computing earnings per
share, and requires the presentation of basic and diluted earnings per share.
Basic and diluted earnings (loss) per share are the same. The Company has
issued no securities such as options, warrants or convertible securities or
entered into any contingent stock agreements. Had the Company entered into
any such arrangements, the effect would have been anti-dilutive.
In June 1997, SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, was issued to be effective for financial statements
issued for periods beginning after December 15, 1997. Earlier application was
encouraged. The Company chose to adopt SFAS No. 131 for the year ended May
31, 1998. This statement establishes standards for reporting information
about operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Such information
has been disclosed in Note N to the Company's audited financial statements for
the year ended May 31, 1998.
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ITEM 7. FINANCIAL STATEMENTS
The audited consolidated balance sheet of the Company for its years ended
May 31, 1998 and 1997 and related consolidated statements of operations,
stockholders' equity and cash flows for the years ended May 31, 1998 and 1997
are included following Item 13, in sequentially numbered pages numbered F-1
through F-6. The page numbers for the financial statement categories are as
follows:
Index Page
Report of Independent Auditors F-1
Consolidated Balance Sheets as of May 31, 1998 and 1997 F-2
Consolidated Statements of Operations
for the Years Ended May 31, 1998 and 1997 F-3
Consolidated Statement of Stockholders' Equity
for the Years Ended May 31, 1998 and 1997 F-4
Consolidated Statements of Cash Flows
for the Years Ended May 31, 1998 and 1997 F-5
Notes to Consolidated Financial Statements F-6
Selected Financial Data
The following selected financial data should be read in conjunction with
the financial statements of the Company and the notes thereto included
elsewhere herein.
1995 1996 1997 1998
---- ---- ---- ----
Net Revenues $ 0 $ 3,448 $ 48,381 $ 149,582
Income/(loss) from Operations $(105,740) $ (57,112) $(240,018) $(143,051)
Income/(loss) from Operations
Per Share* $ (.018) $ (.010) $ (.040) $ (.019)
Total Assets $ 114,718 $ 233,574 $ 176,933 $ 323,561
Total Liabilities $ 51,754 $ 220,122 $ 279,513 $ 388,932
Stockholders' Equity (Deficit) $ 62,964 $ 13,452 $(102,580) $ (65,371)
___________
* Loss per share was calculated using the weighted average of common stock
issued and outstanding. Basic and diluted loss per share are the same.
The Company has issued no securities such as options, warrants or
convertible securities or entered into any contingent stock agreements.
Had the Company entered into any such arrangements, the effect would have
been anti-dilutive.
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ITEM 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
There have been no disagreements on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
The independent accounting firm of Hafer & Gilmer, Certified Public
Accountants, has audited the financial statements of the Company since
inception.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
The following sets forth the names and ages of all of the Directors and
Executive Officers of the Company, positions held by such person, length of
service, when first elected or appointed and term of office.
Position First Term of
Name Age With Company Appointed Office
David J. Panaia 59 Chief Executive June 18, 1994 (1), (2)
Officer, President
and a Director
Gerald V. Bergman 51 Treasurer and a June 26, 1995 (1), (2)
Director
Thomas J. Thomas 48 Secretary and a June 26, 1995 (1), (2)
Director
Rene LaCasse 64 Director January 5, 1996 (2)
Jack Enterline 55 Director January 5, 1996 (2)
____________
(1) Officers serve at the pleasure of the Company's Board of Directors.
(2) Each of these Directors was appointed to serve until the next Annual
Meeting of shareholders. The company currently intends to hold its next
annual meeting during October 1998.
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The Company's Board of Directors sets corporate policies which are
implemented by the Company's management. In the event that the Company's
Board of Directors determines that a member faces a conflict of interest, for
any reason, it is expected that the subject director will abstain from voting
on the matter which raised the issue.
(The following paragraph addresses a material subsequent event.)
During the fourth quarter of the Company's fiscal year, Gerald V. Bergman
tendered his resignation as Treasurer and Chief Financial Officer of the
Company, effective May 31, 1998, in order to pursue other business interests.
He retains his position as a member of the Board of Directors. Effective June
1, 1998, Mr. Panaia assumed the position of Treasurer, and the position of
Chief Financial Officer was assumed by Guy T. Lindley.
Guy T. Lindley, at age 51, joins the Company with extensive experience in
the management of corporate financial matters, a career interest that he
developed after receiving his diploma as an MD. From 1975 to 1985 he managed
the financial affairs of Fabritek/PBTI Group, a company that engaged in the
development and marketing of operating room infection control systems. In
1985 Mr. Lindley joined Medical Care Development Corporation and Doctors
Healthcare Group. There he managed all financial affairs of various
subsidiaries and served as the business manager for one of the first public
physician venture groups in partnership with a public foundation-controlled
hospital. From 1989 to 1992, and again from 1994 to 1998, he supervised all
corporate finance activities for the Wellman Family Group of Companies, a
privately-owned holding company with a public subsidiary, IASG. Wellman Group
subsidiaries are engaged in aircraft support and include a certified flag
carrier for air transport. From 1992 to 1994, he managed the financial
affairs of Sun Express Group, a public air transport management company that
formed a joint venture leading to the development of Conquest Sun Airlines,
subsequently known as Airtran and purchased by Valujet. Mr. Lindley will
serve full time as the Chief Financial Officer of the Company.
The Company's other directors and executive officers are:
David J. Panaia, President, Chief Executive Officer and Director, is the
founder of the Company and has served as Director and President since the
Company was incorporated in June 1994. Mr. Panaia previously founded several
other businesses, including Gold Cross Ambulance Service, Inc. and Gold Cross
Medical Services, Inc., and acquired several other companies which were
consolidated into Gold Cross, Inc., which provided ground and air ambulance
service, medical services, equipment and supplies. After operating for over
twenty years, Gold Cross was sold in 1982. Mr. Panaia then founded Biomedics
Corporation, a durable medical equipment dealer, which he operated until its
sale in 1988. Both corporations were privately owned. Since 1988, he has
served as a political and small business marketing consultant through his own
firm, Sunpoint Industries, Inc. Sunpoint offered political consulting
services to political candidates and medical equipment businesses located in
the United States. He served on the Board of Directors of two private
schools. Mr. Panaia is past President and current Treasurer of the Palm Beach
Gardens Youth Athletic Association and has served as President of the Palm
Beach Gardens Little League for several years. Mr. Panaia has attended
various sports conventions and seminars and has been a member of the
Sportsplex Owners and Directors Association (SODA). He concentrates full time
on his duties as the President of the Company.
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Gerald V. Bergman served as Treasurer and Director of the Company since
June 1994. Effective May 31, 1998, Mr. Bergman resigned from his position as
Treasurer in order to pursue other business interests. He continues to serve
as a Director of the Company. A CPA, Mr. Bergman joined Price Waterhouse &
Co. in 1975 where he was an audit manager. In 1980 he was appointed Director
of Corporate Planning and Analysis of the Red Lobster division of General
Mills. In 1984 through 1985 he served as Vice President and Controller of
J.L. Mason, Inc., a homebuilder. Mr. Bergman then became the Chief Financial
and Administrative Officer and a Director of Overseas Service Corporation, an
international manufacturers representative. He left Overseas Service
Corporation in May 1992 to form DBS Associates, a business consulting firm
that replaced a third party rendering financial and administrative services to
Overseas Service Corporation. DBS Associates became an inactive corporation
in 1995 in order to allow Mr. Bergman to serve full-time as Treasurer of the
Company. Mr. Bergman has extensive experience in support of community and
high school sports programs as a fund raiser and coach.
Thomas J. Thomas has served as Secretary and Director of the Company
since June 1994. Mr. Thomas is an attorney who has been a member of the
Florida Bar Association since 1982. He practices in the areas of business and
corporate law, business and individual income tax planning, estate planning,
probate, qualified pension and deferred compensation, corporate and
partnership law, and trust drafting and administration. He is admitted to
practice before the United States Tax Court and Court of Claims. He serves
part time as needed in his duties as Secretary of the Company.
Jack Enterline has served as a Director of the Company since December
1995. Mr. Enterline is an engineer with special training in cryogenics and
vacuum technology, and additional training in corporate and business
management. In 1968, Mr. Enterline joined Grumman Aircraft Engineering
Corporation, located at the John F. Kennedy Space Center, as Project Lead
Engineer on the launch team in support of the Apollo Lunar Landing Space
Craft. In 1973, Mr. Enterline founded World Energy Inc., a private
corporation which provided consulting services for in situ technology,
primarily coal gasification, and for which he served as President and
Director. In 1975, he founded Precision Metal Services, Inc. ("PMS"), an
independent engineering firm and fabricator of weldments and structural steel,
where he served as President and Director from 1975 until its dissolution in
1981. In 1980, he founded Cryomed Corporation, a privately-held company
engaged in the business of manufacturing and distributing home health care
liquid oxygen systems utilizing cryogenics and vacuum technology, where he
served as Chairman of the Board of Directors, President and Chief Executive
Officer from August, 1980 to January, 1981 when the business was merged into
Cryo2 Corporation. Mr. Enterline then continued to serve as President, Chief
Executive Officer and a Director of Cryo2 Corporation (which was engaged in
the same business as Cryomed Corporation) from January, 1981 to December, 1988
when the company's assets were purchased by CMT Corporation. In 1989 Mr.
Enterline cofounded Perry Oxygen Systems, Inc. (another privately-held company
engaged in the business of manufacturing and distributing home healthcare
liquid oxygen systems utilizing cryogenics and vacuum technology), and served
as its President and a Director until August 1, 1992, when the company's
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assets were purchased by Mobilite Corporation (a wholly-owned subsidiary of
Invacare Corporation), for which Mr. Enterline served as liquid oxygen
program manager and engineer from August, 1992 until December, 1993. In 1994,
he founded Trek Designs, Inc., a private consulting corporation with
specialties in engineering, finance and corporate management, and currently
serves as its President. Mr. Enterline is married to Karen Enterline, a 2.10%
shareholder of the Company.
Rene LaCasse has served as a Director of the Company since December 1995.
Mr. LaCasse is the founder of Micro Tool Engineering, Inc. located in Riviera
Beach, Florida and has served as its Chairman of the Board, President and
Chief Executive Officer since its inception. Since 1968 Mr. LaCasse has owned
and operated this tool and die production facility. Mr. LaCasse has an
extensive background in tooling, plant management, and mechanical engineering.
Mr. LaCasse is also the founder, developer and General Manager of Performance
Paintball Products, Inc. located in Riviera Beach, Florida and formed in July
1995.
The Company at this time has no insurance coverage for officers and
directors and has not expended any funds to obtain such insurance policies to
insure or indemnify directors or officers against any liabilities that may
occur in the registration, offering and sale of these securities. Management
reserves the right to obtain such insurance.
ITEM 10. EXECUTIVE COMPENSATION
1996, 1997, 1998 SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Name and Awards Awards LTIP All
Principal Restricted Restricted Pay- Other
Position Salary Bonus Other Stock Options outs Compensation
- ---------------- ------ ----- ----- ---------- ---------- ---- ------------
David J. Panaia,
Chief Executive
Officer 0 0 0 0 0 0 0
Gerald V. Bergman,
Chief Financial
Officer 0 0 0 0 0 0 0
None of the Company's executive officers and directors have employment
agreements or stock option arrangements with the Company. It is intended that
the directors be compensated at the rate of $4,000 per year, plus $100.00 per
meeting attended and reasonable travel expenses if cash flow permits. To
date, none of the officers or directors have received any salaries or other
cash compensation. When cash flow permits, it is anticipated that the
officers will be compensated in accordance with appropriate employment
contracts.
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To date, Mr. Thomas has received $2,500 in fees from the Company in
consideration for legal services rendered. He will not receive any
compensation for his position as Secretary of the Company.
The Company has not appointed a proposed Advisory Committee to make
recommendations to the Board of Directors regarding sports, fitness and
nutrition. It is planned that the membership of this committee will include
sports celebrities and experts in sports, fitness and nutrition. It is also
anticipated that the Board will establish an Audit Committee. The committee
members may be compensated on the same terms as the directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of the date of this report, the Company has a total of 50,000,000
Common Shares authorized at a par value of $.0001. 11,894,600 Common Shares
have been issued, and 2,000 Shares have been repurchased as treasury stock.
The following table sets forth information, as of such date, with respect to
the beneficial ownership of the Company's Common Shares by (a) each person
known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Shares, (b) the directors and officers of the
Company, and (c) the directors and officers of the Company as a group.
Number of % of Class
Shares 11,892,600
Name and Address Owned Shares 1
David J. Panaia 2,3,4,5,6,7,9 2,362,400 19.86
10 Wyndham Lane
Palm Beach Gardens, FL
Gerald V. Bergman 3,4,6,7,8,9 630,000 5.30
10692 Hidden Lake Circle
Palm Beach Gardens, FL
Thomas J. Thomas 3,4,10 660,000 5.55
3844 Dogwood Circle
Palm Beach Gardens, FL
Rene LaCasse 3,11 383,333 3.22
4388 Dawnridge Street
Palm Beach Gardens, FL
Karen Enterline 12 250,000 2.10
P.O. Box 12788
Fort Pierce, FL
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Jack J. Enterline 3 -0- -0-
P.O. Box 12788
Fort Pierce, FL
Linda C. Bergman 5,8 1,460,000 12.28
10692 Hidden Lake Circle
Palm Beach Gardens, FL
Axis Enterprises, Ltd. 5 1,500,000 12.61
P.O. Box N-1201
Nassau, Bahamas
All Officers and 5,745,733 48.31
Directors as a Group
- ---------------------
1 The percentages reflect holdings after an offering of 600 shares.
2 Includes 400,000 shares held in the name of the Panaia Family Trust of
which David J. Panaia as trustee is the record holder and the beneficial
owner.
3 Company's Directors.
4 Company's Officers.
5 Record owners of 10% or more of Common Stock.
6 Beneficial owner of 10% or more of Common Stock.
7 Company's Promoters.
8 Mr. Bergman is the beneficial owner of 30,000 shares held in the name of
three Bergman children. Linda C. Bergman is the wife of Gerald V. Bergman.
9 Business Address: 8125 Monetary Drive, Suite H4, Riviera Beach, Florida
33404.
10 Business Address: Suite 304, 14155 U.S. Highway One, Juno Beach, Florida
33408.
11 Business Address: 7575 Central Industrial Drive, Riviera Beach, Florida
33404.
12 Wife of Jack J. Enterline, Director.
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain transactions to which the Company is a party and certain matters
affecting the Company have or will result in a material benefit to certain of
the Company's directors and executive officers, or may create conflicts of
interest, as follows:
The Company's counsel, attorney Thomas J. Thomas, has provided legal
services to the Company, including, but not limited to, legal advice on this
Offering, formation of the Company, acquisition of certain assets and legal
advice to the Company in general. Mr. Thomas is a Director, Secretary of the
Company and the owner of 660,000 shares of the Company's Common Stock which
were issued in exchange for legal services rendered. Mr. Thomas has also been
reimbursed for various expenses incurred on behalf of the Company.
Rene LaCasse, a director of the Company, is President, Director and
stockholder of Micro Tool Engineering Inc. which has a manufacturing agreement
with the Company. The terms of the agreement provide that the Company must
reimburse Micro Tool for its services on a cost plus 15% basis. Billing is net
30 days. Management believes that this arrangement has been beneficial in the
development phases, but the agreement will be terminated after transition to
n-house production of the Viper M1. (See Part I, Item 1, "Business of the
Company, - USA Performance Products, Inc." for further discussion.)
On January 10, 1998, the Company's Board of Directors approved an
agreement with Axis Enterprises, Ltd., a Bahamian corporation of Nassau,
Bahamas, to retain Axis for a period of three years to provide certain
financing, marketing and management services in support of the Company's
subsidiary, USA Performance Products, Inc. In exchange for performance of
these services, Axis was granted 1,500,000 shares of common stock. Services
commenced on April 8, 1998.
Derek D. Panaia, son of David J. Panaia, CEO of the Company, was retained
as a consultant to provide management oversight of USA Performance Products.
In connection with this agreement, Derek Panaia was granted 400,000 shares of
common stock in return for his services.
On February 27, 1998, the Company acquired certain assets of Amateur
Athletes of America, Inc. in a tax-free exchange of assets for stock. The
Company acquired all rights to the ProCard and ComCard plus certain
Internet-based sports equipment exchange concepts in exchange for one million
shares of common stock. The ProCard and ComCard are prepaid telephone cards
with unique emergency medical features which are marketed through youth
athletic organizations. A portion of the stock was used for payment of a note
held by Amateur Athletes of America. Amateur Athletes of America, Inc. was a
private corporation owned by Linda C. Bergman, wife of Gerald V. Bergman,
former Treasurer and a member of the Company's Board of Directors.
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From time to time, David J. Panaia, President, Director and shareholder
of the Company and Gerald V. Bergman, Treasurer, Director and shareholder,
have provided bridge financing to the Company. During the years ended May 31,
1998 and 1997, these individuals contributed to capital a total of $0 and
$94,350, respectively, which had previously been recorded as loans from
stockholders. Of the balance of $101,600 in loans from stockholders as of May
31, 1998, $76,000 was owed to Axis Enterprises, Ltd., $13,000 was owed to
David Panaia, and the balance was owed to an unaffiliated stockholder. These
loans consist of advances that are unsecured and bear no interest or fixed
date of maturity.
Rene LaCasse and Jack Enterline are each owners of twenty-five percent
(25%) of the outstanding stock of Performance Paintball Products, the company
from which USAS purchased the tools and dies and technology necessary to
produce the Viper M-1 paintball marker. Pursuant to the terms of the
transaction, the Company issued a promissory note in favor of Performance
Paintball Products in the amount of $101,295. The parties subsequently agreed
to cancel this note and replaced it with a new note which had a principal
balance remaining of $30,214 at May 31, 1998. Under the new agreement,
monthly payments will continue until the final payment is made on September
21, 1998.
Except as described above, no director, officer or principal security
holder of the Company has or has had a direct or indirect material interest in
any transaction to which the Company is or was a party. The Company believes
that the terms of each of the transactions described above were no less
favorable to the Company than could have been obtained from third parties. In
addition, in the future the Company will not enter into additional
transactions with directors, officers or principal shareholders unless the
terms thereof are no less favorable to the Company than could be obtained from
third parties.
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PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) Index to financial statements and financial statement schedules
The audited balance sheet of the Company for its years ended May 31, 1998
and 1997 and related statements of operations, stockholders' equity and cash
flows for the years ended May 31, 1998 and 1997 follow in sequentially
numbered pages numbered F-1 through F-10. The page numbers for the financial
statement categories are as follows:
Page Description
F-1 Report of Independent Auditors - May 31, 1998 and 1997
F-2 Balance Sheets as of May 31, 1998 and 1997
F-3 Statements of Operations for the Years Ended May 31, 1998 and
1997
F-4 Statement of Stockholders' Equity for the Years Ended May 31,
1998 and 1997
F-5 Statements of Cash Flows for the Years Ended May 31, 1998 and
1997
F-6 Notes to Financial Statements
(b) 8-K Reports
No reports on Form 8-K were filed during the year ended May 31, 1998.
(c) Exhibits:
Exhibit Description
3.1 Articles of Incorporation (1)
3.2 By-laws (1)
10.1 Agreement for acquisition of assets of Performance Paintball
Products, Inc. (1)
10.2 Agreement for acquisition of rights to All American Bowl (2)
10.3 Personal services agreement with All American Bowl Executive
Director (2)
10.4 Promissory Note to Stratex Corporation dated August 12, 1997
10.5 Marketing and Management Agreement between Axis Enterprises, Ltd.
and Registrant dated January 10, 1998
10.6 Agreement for acquisition of assets of Amateur Athletes of America,
Inc.
10.7 Lease Agreement between Ryco Properties, Inc. and Registrant dated
May 4, 1998
11 Statement of Computation of Earnings per Share
21 Subsidiaries of the Company
27 Financial Data Schedule
- ----------
(1) Incorporated by reference to the Company's original registration
statement on Form 10 SB-1, Registration 33-96638-A, filed on September 6,
1995.
(2) Incorporated by reference to Exhibit 10.2 to Form 10-KSB for the year
ended May 31, 1997.
24
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ADDITIONAL INFORMATION
Corporate Headquarters
8125 Monetary Drive, Suite H4, Riviera Beach, Florida 33404
Telephone Number: (561) 622-4395; Fax Number: (561) 841-7422
Internet Address - http:// www.usas.com; E-mail Address - [email protected]
Special Securities Counsel
Krys, Boyle, Freedman & Sawyer, P.C.
Attorneys at Law
Dominion Plaza, Suite 2700 South Tower
600 Seventeenth Street
Denver, Colorado 80202-5427
Independent Public Accountants
Hafer & Gilmer
Certified Public Accountants
251 Royal Palm Way, Suite 302
Palm Beach, Florida 33480-4310
Transfer Agent
Florida Atlantic Stock Transfer, Inc.
5701 North Pine Island Road, Suite 310B
Tamarac, Florida 33321
Exhibits to the Form 10-KSB will be provided to shareholders of the
Registrant upon written request addressed to Thomas J. Thomas, Secretary, US
Amateur Sports, Inc., 8125 Monetary Drive, Suite H4, Riviera Beach, FL 33404.
Any exhibits furnished are subject to a reasonable photocopying charge.
The Securities and Exchange Commission has not approved or disapproved of
this Form 10-KSB and Annual Report to Shareholders nor has it passed upon its
accuracy or adequacy.
25
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CONTENTS
Auditors' Report . . . . . . . . . . . . . . . . . . . . . . .F-1
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . .F-2
Statements of Operations . . . . . . . . . . . . . . . . . . .F-3
Statement of Stockholders' Equity . . . . . . . . . . . . . .F-4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . .F-5
Notes To Financial Statements . . . . . . . . . . . . F-6 - F-10
26
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Report of Independent Auditors
Board of Directors and
Stockholders of U S Amateur Sports, Inc.
We have audited the consolidated balance sheets of U S Amateur Sports, Inc. as
of May 31, 1998 and 1997, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U S Amateur Sports, Inc. as
of May 31, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements the Company has incurred net losses since its inception and has
experienced liquidity problems. Those conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to those matters are described in Note O. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Hafer & Gilmer
July 31, 1998
F-1
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U S AMATEUR SPORTS, INC.
CONSOLIDATED BALANCE SHEETS
MAY 31, 1998 AND 1997
May 31, 1998 May 31, 1997
------------ ------------
Assets
Current assets
Cash and cash equivalents $ 89,542 $ 810
Accounts and advances receivable 7,315 3,064
Inventories 85,155 77,946
Prepaid expense 34,580 2,000
------------ -----------
Total current assets 216,592 83,820
Property and equipment 70,980 52,894
Rights to technology and associated trademarks 25,309 34,800
Deferred charges 2,818 5,419
Other assets 7,862 0
------------ -----------
Total assets $ 323,561 $ 176,933
============ ===========
Liabilities
Current liabilities
Accounts payable $ 131,704 $ 79,461
Accrued expenses 0 40,000
Current portion of notes payable 130,214 69,195
Current portion of accrued interest 10,600 24,857
------------ -----------
Total current liabilities 272,518 213,513
Loans from stockholders 101,600 66,000
Notes payable, less current portion 13,500 0
Accrued interest, less current portion 1,314 0
------------ -----------
Total liabilities 388,932 279,513
============ ===========
Stockholders' equity
Common stock, $.0001 par value:
Authorized - 50,000,000 shares;
Issued - 11,894,600 shares in 1998
and 6,000,600 shares in 1997 1,189 600
Additional paid-in capital 484,361 299,690
Accumulated deficit (545,921) (402,870)
Less treasury stock - at cost 2,000
shares at May 31, 1998 (5,000) 0
------------ -----------
Total stockholders' equity (65,371) (102,580)
------------ -----------
Total liabilities and stockholders' equity $ 323,561 $ 176,933
============ ===========
See notes to financial statements.
F-2
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 1998 AND 1997
Year Ended Year Ended
May 31, 1998 May 31, 1997
------------ ------------
Revenues
Net sales $ 146,078 $ 48,381
Other income 3,504 0
------------ -----------
Total revenues 149,582 48,381
Costs and expenses
Cost of products sold 25,414 25,078
Cost of event production and promotion 69,794 0
Freight 5,780 5,314
Payroll expense 7,856 0
Professional fees 53,560 49,445
Advertising and promotion 23,298 60,125
Travel 7,999 21,132
Rent 22,844 9,330
Office, telephone, and other operating expenses 30,196 71,325
Interest 17,514 18,825
Depreciation 16,286 15,733
Amortization 12,092 12,092
------------ -----------
Total costs and expenses 292,633 288,399
------------ -----------
Net loss $ (143,051) $ 240,018)
============ ===========
Net loss per common share $ (.019) $ (.040)
============ ===========
See notes to financial statements.
F-3
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1998 AND 1997
Common Stock
--------------------
Number of
Shares Additional Total
Issued and Paid-in Accumulated Stockholders'
Outstanding Amount Capital Deficit Equity
----------- ------ ---------- ----------- -------------
Balance at May 31,
1995 6,000,000 $ 600 $ 168,104 $(105,740) $ 62,964
Capital contributions - - 7,600 - 7,600
Return of stock to
Treasury (3,060,000) (306) - - -
Issuance of common
stock 3,060,000 306 - - -
Net loss, year ended
May 31, 1996 - - - (57,112) (57,112)
--------- ------- --------- ---------- ---------
Balance,
May 31, 1996 6,000,000 600 175,704 (162,852) 13,452
Capital contributions - - 120,386 - 120,386
Return of stock
to treasury (1,014,000) (101) - - -
Issuance of
common stock 1,014,600 101 3,600 - 3,600
Net loss, year ended
May 31, 1997 - - - (240,018) (240,018)
--------- ------- --------- ---------- ---------
Balance,
May 31, 1997 6,000,600 600 299,690 (402,870) (102,580)
Capital contributions - - - - -
Return of stock
to treasury (2,000) - (5,000) - (5,000)
Issuance of
common stock 5,894,000 589 184,671 - 185,260
Net loss, year ended
May 31, 1998 - - - (143,051) (143,051)
---------- ------- --------- ---------- ---------
Balance May 31, 1998 11,892,600 $ 1,189 $ 479,361 $ (545,921) $ (65,371)
========== ======= ========= =========== =========
See notes to financial statements.
F-4
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 1998 AND 1997
Year Ended Year Ended
May 31, 1998 May 31, 1997
------------ ------------
Cash flows from operating activities
Net loss $ (143,051) $ (240,018)
Reconciling adjustments:
Amortization 12,092 12,092
Depreciation 16,286 15,733
Decrease (increase) in receivables (4,251) 7,482
Decrease (increase) in inventories (7,209) 7,022
Decrease (increase) in prepaid expenses (32,580) 11,821
(Increase) in other assets (7,862) 0
Increase in accounts payable 52,243 49,167
Increase (decrease) in accrued expenses (40,000) 40,000
Increase (decrease) in accrued interest (12,943) 18,824
----------- -----------
Total changes to account balances (24,224) 162,141
----------- -----------
Net cash used by operating activities (167,275) (77,877)
----------- -----------
Cash Flows From Investing Activities
Acquisition of property and equipment (34,372) (1,286)
Net cash used by investing activities (34,372) (1,286)
Cash Flows From Financing Activities
Capital contributions 180,260 123,986
Notes payable 74,519 7,900
Loans from stockholders 35,600 (56,500)
----------- -----------
Net cash provided by financing activities 290,379 75,386
----------- -----------
Net increase (decrease) in cash 88,732 (3,777)
Cash balance, beginning of period 810 4,587
----------- -----------
Cash balance, end of period $ 89,542 $ 810
=========== ===========
See notes to financial statements.
F-5
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1998 AND 1997
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company maintains its accounts on the accrual basis of accounting. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Consolidation
The consolidated financial statements of the Company include the accounts of
USA Performance Products, Inc. The Company formed USA Performance Products,
Inc. as a separate wholly-owned subsidiary on January 20, 1998 and transferred
all assets related to the manufacture and sale of the Viper M1 paintball
marker and accessories to this new corporation. See note L.
Depreciation
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed using the straight-line
method for financial reporting purposes and an accelerated method for tax
purposes.
Amortization
Rights to technology and associated trademarks are amortized using the
straight-line method over five years.
Inventories
Inventories are stated at the lower of cost or market. See Note C.
NOTE B: CASH EQUIVALENTS
Cash equivalents consist of cash credits received in connection with the sale
of All American Bowl Sponsorship Promotional Packages to Itex Corporation.
These cash credits will be used for the purchase of products and services
provided by other Itex clients.
NOTE C: INVENTORIES
Inventories consist of merchandise acquired for sale by the Company's USA
SportsNet business unit in addition to paintball markers and accessories.
Inventories are carried at cost which is considered to be less than market
value.
NOTE D: PREPAID EXPENSE
Prepaid expense includes amounts paid for commercial insurance and advertising
which will benefit the Company during the fiscal year ending May 31, 1999.
F-6
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1998 AND 1997
NOTE E: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment recorded in the financial
statements at cost less depreciation as of May 31, 1998 and 1997:
May 31, 1998 May 31, 1997
Computer hardware $ 32,245 $ 10,542
Computer software 10,564 10,564
Furniture, fixtures and equipment 21,072 10,572
Tools, dies and fixtures 52,217 50,140
---------- ----------
Total cost 116,098 81,818
Less: accumulated depreciation (45,118) (28,924)
---------- ----------
Total net property and equipment $ 70,980 $ 52,894
========== ==========
The useful lives assigned to property and equipment to compute depreciation
are:
Computer hardware 5 years
Computer software 5 years
Furniture, fixtures and equipment 7 years
Tools, dies and fixtures 5 years
NOTE F: RIGHTS TO TECHNOLOGY AND ASSOCIATED TRADEMARKS
During the year ended May 31, 1996, the Company acquired the assets of
Performance Paintball Products, Inc. Included in the purchase were exclusive
rights to use of the Viper name and related technology used in the manufacture
of the Viper M1 paintball marker. These rights are valued at $47,455 less
accumulated amortization of $22,146 and $12,655 at May 31, 1998 and 1997,
respectively.
NOTE G: DEFERRED CHARGES
Deferred charges consist of organization costs in the amount of $13,004 less
accumulated amortization of $10,186 and $7,585, at May 31, 1998 and 1997,
respectively.
NOTE H: OTHER ASSETS
Other assets include deposits and an advance to an officer of the Company.
NOTE I: ACCOUNTS PAYABLE
Accounts payable consists of professional fees, trade payables and amounts
owed in connection with event production and promotion.
F-7
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1998 AND 1997
NOTE J: NOTES PAYABLE AND LOANS FROM STOCKHOLDERS
On July 21, 1997, the Company entered into an agreement with Performance
Paintball Products, Inc. to cancel a note payable recorded in connection with
the purchase of certain assets of Performance Paintball Products. A new note
was recorded which had a principal amount remaining of $30,214 at May 31,
1998. Under the agreement, monthly payments will continue until the final
payment is made on September 21, 1998.
On August 12, 1997, the Company borrowed $100,000 from Stratex Corporation.
Accrual of interest commenced September 1, 1997 and continues until September
1, 1998, at which time all principal and interest is due. The note bears
interest at the rate of prime plus 6%. A portion of the proceeds from this
borrowing were used to reduce the balance of a loan from Derek Panaia, a
stockholder who is the son of David Panaia.
The remaining balances of notes payable and loans from stockholders consist of
miscellaneous amounts borrowed to finance the Company's operations.
NOTE K: COMMITMENTS AND CONTINGENCIES
The Company leases its manufacturing and office facilities under an operating
lease which expires June 30, 2001. Rent expense approximated $22,800 and
$9,300 for the years ended May 31, 1998 and 1997, respectively. Future
minimum operating lease payments as of May 31, 1998 are:
Year ended May 31, Total
------------------ ----------
1999 $ 31,482
2000 38,160
2001 41,976
----------
Total minimum lease payments $ 111,618
==========
From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. The
Company is not currently a party to any legal proceedings, the adverse outcome
of which, individually or in the aggregate, would have a material adverse
effect on the Company's financial position or results of operations.
NOTE L: ISSUANCE OF COMMON STOCK
During the year, the Board of Directors authorized the issuance of 5,999,400
ahares of common stock which increased the total shares of stock approved for
issue to 12,000,000. These newly-issued shares were designated to pay for
certain management, financial, marketing and other business related services,
to allow certain creditors of the Company to trade their debt for equity and
to effect a tax-free acquisition of the assets of Amateur Athletes of America,
Inc. 11,894,600 shares were issued as of May 31, 1998. 2,000 shares were
purchased for the treasury, leaving a balance of 11,892,600 outstanding. See
NOTE M.
F-8
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1998 AND 1997
NOTE M: RELATED PARTY TRANSACTIONS
On January 10, 1998, the Company's Board of Directors approved an agreement
with Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to
retain Axis for a period of three years to provide certain financing,
marketing and management services in support of the Company's subsidiary, USA
Performance Products, Inc. In exchange for performance of these services,
Axis was granted 1,500,000 shares of common stock. The final marketing and
management agreement was executed on April 8, 1998.
Derek D. Panaia, son of David J. Panaia, CEO of the Company, was retained as a
consultant to provide management oversight of USA Performance Products. In
connection with this agreement, Derek Panaia was granted 400,000 shares of
common stock in return for his services.
On February 27, 1998, the Company acquired certain assets of Amateur Athletes
of America, Inc. in a tax-free exchange of assets for stock. The Company
acquired all rights to the ProCard and ComCard plus certain Internet-based
sports equipment exchange concepts in exchange for one million shares of
common stock. The ProCard and ComCard are prepaid telephone cards with unique
medical features which are marketed through youth athletic organizations. A
portion of the stock was used for payment of a note held by Amateur Athletes
of America. Amateur Athletes of America, Inc. was a private corporation owned
by Linda C. Bergman, wife of Gerald V. Bergman, former Treasurer and a member
of the Company's Board of Directors.
NOTE N: BUSINESS SEGMENTS
The Company's reportable segments are strategic business units that offer
different products and services. The Company has three reportable segments:
paintball products, sports events, and Internet commerce. The paintball
segment produces a mid-priced paintball marker. The event segment has produced
the All American Bowl, a national high school football all-star game. The
Internet segment is developing an amateur sports network designed to attract
merchandisers of sports-related products and services.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. There have been no intersegment
sales or transfers. Revenues from sale of the Company's paintball products
over the Internet are reported within the paintball segment. Internet
revenues consist principally of advertising sold through barter transactions.
Following is a summary of segment activity:
Sports Internet All
Paintball Events Commerce Others(a) Totals
May 31, 1998 --------- --------- --------- --------- ---------
- ------------
Revenues $ 52,139 $ 17,289 $ 80,154 $ - $ 149,582
Interest expense 14,310 - - 3,204 17,514
Depreciation 10,063 - - 6,223 16,286
Amortization 9,492 - - 2,600 12,092
Segment profit (loss) (64,723) (64,894) 58,400 (71,834) (143,051)
Segment assets 76,676 - 80,123 166,762 323,561
F-9
<PAGE>
<PAGE>
U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTD.)
MAY 31, 1998 AND 1997
NOTE N: BUSINESS SEGMENTS (CONT'D)
Sports Internet All
Paintball Events Commerce Others(a) Totals
May 31, 1997 --------- --------- --------- --------- ---------
- ------------
Revenues $ 48,381 $ - $ - $ - $ 48,381
Interest expense 5,539 - - 13,286 18,825
Depreciation 10,029 - - 5,704 15,733
Amortization 9,492 - - 2,600 12,092
Segment profit (loss) (72,456) (48,800) (22,207) (96,555) (240,018)
Segment assets 75,663 - 76,915 24,355 176,933
(a) Includes amounts not allocated to operating segments.
Revenues from geographic areas outside of the United States are not material.
Barter transactions have been negotiated through a single broker, but there
are no customers that account for more than 10% of total revenues.
NOTE O: RECOVERABILITY OF ASSETS AND GOING CONCERN
The Company's financial statements have been presented on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company's continued existence is dependent upon its ability to secure
financing or its ability to generate sufficient cash flows through operations
to meet its operating costs and repay current obligations as they come due.
F-10
<PAGE>
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
U S AMATEUR SPORTS, INC.
September 3, 1998 By /s/ David J. Panaia
David J. Panaia, Chief Executive Officer
and Treasurer (Principal Executive Officer)
September 3, 1998 By /s/ Guy T. Lindley
Guy T. Lindley, Chief Financial Officer
(Principal Financial and Accounting Officer)
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
U S AMATEUR SPORTS, INC.
September 3, 1998 By /s/ David J. Panaia
David J. Panaia, Director
September 3, 1998 By /s/ Gerald V. Bergman
Gerald V. Bergman, Director
September 3, 1998 By /s/ Thomas J. Thomas
Thomas J. Thomas, Director
September 3, 1998 By ____________________________________________
Rene LaCasse, Director
September 3, 1998 By ____________________________________________
Jack J. Enterline, Director
PROMISSORY NOTE
$100,000.00 Springfield, MA
August 12, 1997
FOR VALUE RECEIVED, U. S. AMATEUR SPORTS, Inc.. a Florida corporation
with an usual place of business at RCA Blvd., Palm Beach Gardens, Florida,
promise to pay to STRATEX CORPORATION, a Florida corporation, having an usual
place of business in Palm Beach Gardens, Florida, or order, (hereinafter
collectively referred to as Lender) the principal sum of ONE HUNDRED THOUSAND
($100,000.00) DOLLARS in lawful money of the United States, together with
interest thereon, interest at the rate equal to the prime lending rate as
reported in the Wall Street Journal plus six (6%) percent, payable in monthly
installments of interest only commencing on September 1, 1997, and on the
first day of each month thereafter until September 1, 1998, at which time all
principal and interest is due.
There shall be a late charge in the amount of three {3.00%) percent of
any monthly installment received more than fifteen (15) days after its due
date.
At the option of the holder, the entire outstanding principal balance of
this Note and all accrued interest thereon shall become immediately due and
payable without notice or demand upon the occurrence at any time of any of the
following events, which events shall be referred to as an "Event of Default"
and the terms "Events of Default" or "Default" shall mean whenever they are
used in this Note, any one or more of the following events;
(1) Failure by the Borrower to make any loan payment of interest and/or
principal or any other payment required to be
<PAGE>
paid hereunder on the Mortgages and Security Agreement, or any other loan
documents executed in connection herewith or therewith (hereinafter sometimes
referred to as the "Loan Documents") within ten (10) days of its due date,
whether upon acceleration or otherwise. In the event no such failure has
occurred in the prior 12 month period. Borrower shall have an additional five
(5) days after written notice of such failure.
(2) Failure by the Borrower to observe or perform any other covenant,
condition, or agreement on its part to be observed or performed under any of
the Loan Documents for a period of thirty (30) days after written notice of
such failure has been given to the Borrower.
(3) Material inaccuracy or incompleteness of any representation or
warranty made by or on behalf of the Borrower in connection with this
transaction.
(4) The Borrower shall be involved in financial difficulties as evidenced
by:
(a) Commencement of a voluntary case under Title 11 of the United States
Code or the entry of an Order for Relief in any voluntary case commenced under
said Title 11;
(b) Admitting or falling to deny the material allegations of a Petition
filed against them or any of them commencing an Involuntary case under said
Title 11, or if such Petition or proceeding under said Involuntary Petition is
not dismissed within forty-five (45) days from the date on which it has been
filed or instituted;
(c) Seeking relief as a debtor under any applicable law of
2
<PAGE>
any jurisdiction relating to the liquidation or reorganization of debtors, or
to the modification a or alteration of the rights of creditors, or by its
consenting to,or acquiescing in such relief.
(d) Making an assignment for the benefit of or entering into a
composition with its creditors, or appointing or consenting to the appointment
of a receiver or other custodian for all or a substantial part of its
property, by the entry of an Order of any Court of competent jurisdiction,
including the Bankruptcy Court, finding it to be bankrupt or insolvent, or
ordering or approving its liquidation, reorganization or any modification or
alteration of the right. of its creditors, or assuming custody of or
appointing a receiver or other custodian for all or a substantial part of its
property.
(5) The occurrence of an Event of Default under the terms of the Loan
Documents or any other instrument now or hereafter securing this Note or
evidencing the indebtedness secured hereby, all of which ate hereby
incorporated herein as if set forth at length.
The makers and any endorsers and/or guarantors heroin severally waive
presentment, protest and demand, notice of protest, demand and of dishonor and
nonpayment of this Note and expressly agree that this Note or any payment
thereunder may be extended with or without consideration therefor, without ln
any way affecting the liability of the makers, endorsers and guarantors
hereof.
Any and all deposits or other sums at any time credited by or due from
the Holder hereof and all securities or other
3
<PAGE>
property in the possession of the Holder hereof belonging to the makers,
endorser and guarantor hereof shall be subject to a security interest in favor
of the Holder hereof and shall be treated as collateral to secure the payment
of this Note, performance of the obligations pursuant to this Note and the
payment and Performance of any and all other liabilities and obligations,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the aforesaid parties to the holder hereof,
and in the Event of Default, the Holder hereof may sell or dispose of any or
all of said securities or other property and may exercise any and all of the
rights accorded the Holder by the Uniform Commercial Code. The Holder hereof
may apply or set off such collateral against such obligations or liabilities
in tho Event of Default.
The Lender may transfer this Note and deliver to the transferee all or
any part of the property, if any, then held by it as security hereunder, and
the transferee shall become vested with all the powers and rights herein given
to the Lender with respect to the property, if any, so transferred, but the
Lender shall retain all rights and powers hereby given with respect to any
property, if any, not so transferred.
No delay or omission on the part of the Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
a waiver of any such right and/or remedy on any future occasion.
4
<PAGE>
The Lender is also hereby authorized, in its sole and exclusive
discretion, and without notice to the undersigned, to date this Note as of the
date when the loan is made; cause or permit one or more co-makers, endorsers,
guarantors, or other securities to be added, released, substituted, or
withdrawn as parties hereto, either before or after the making of the loan;
and to release, exchange, or substitute any collateral pledged, assigned,
mortgaged or secured to the Lender in connection herewith, by one or more
co-makers, endorsers, guarantors, or securities, and return the Note when paid
to any of the undersigned.
This Note has been executed in and shall be construed as a Florida
contract for all purposes, without exception.
In the event any payment of principal or interest received upon this
obligation and paid by the undersigned, or any guarantor, surety, co-maker or
endorser, shall be deemed by final order of a court of competent jurisdiction
to have been a voidable preference or fraudulent conveyance under the
bankruptcy or insolvency laws of the United States, or otherwise due to any
party other than the Lender, then in any such event, the obligation of said
undersigned, or any guarantor, surety, co-maker, or endorser shall, jointly
and severally, survive as an obligation due hereunder and shall not be
discharged or satisfied by said payment or payments, notwithstanding return by
the lender to said parties of the original hereof, or any guaranty,
endorsement, or the like.
All of the Lender's rights and remedies, whether evidenced
5
<PAGE>
hereby or by any other agreement, instrument or paper, shall be cumulative and
may be exercised singularly or concurrently.
It is not intended under this Note to charge interest at a rate exceeding
the maximum rate of interest permitted to be charged under applicable law, but
if, notwithstanding, interest exceeding said maximum rate shall be paid
hereunder, the excess shall be, at the Lender's option, either (i) deemed a
voluntary prepayment of principal of (ii) refunded to the undersigned.
The undersigned expressly warrant that the proceeds of the loan shall be
used solely for business purposes and that this transaction is not a consumer
transaction subject to M.G. L. c.140D, Federal Reserve Board Regulation Z, or
other "Consumer Protection" statutes, regulations, or restrictions, without
exception.
The forms and conditions of this Note and any agreement relating to the
collateral constitute the entire agreement and supersede any prior agreements
or undertakings, both written and oral, of the Lender and the undersigned with
respect to the subject matter hereof any may not be modified or amended except
in writing and signed by the Lender.
This Note is subject to prepayment without premium, in whole or in part.
The undersigned will pay on demand all costs of collection and reasonable
attorney's fees incurred or paid by the Holder in enforcing this Note or any
default.
The word "undersigned" where used herein shall mean the payer or other
endorsers, co-signers, sureties and any other
6
<PAGE>
person signing this note.
The word "Holder" where used herein shall mean the payee or other
endorsee of this Note who is in possession of it, or the bearer herein if this
Note is at the time payable to the bearer.
The undersigned agrees to be bound by the terms and conditions as stated
herein and acknowledged receipt of a completed copy of this Note.
This Note is secured by a security agreement in the assets and equipment
of U.S. AMATEUR SPORTS, INC.
Executed as a sealed instrument this 12th day of August, 1997.
U.S. AMATEUR SPORTS, INC., Borrower
Witnesseth: By: /s/ David J. Panaia
Its President 8/12/97
/s/ Gerald V. Bergman
7
MARKETING AND MANAGEMENT AGREEMENT
BETWEEN
US AMATEUR SPORTS, INC.
AND
AXIS ENTERPRISES, INC.
This Agreement is entered into on this 10th day of January, 1998, by and
between US Amateur Sports, Inc. ("USAS" or "the Company"), a Florida corporation
located at 3932 RCA Boulevard, Palm Beach Gardens, Florida 33410, and Axis
Enterprises, Ltd. (Axis), a Bahamian corporation located at 43 Elizabeth Avenue,
P.O. N-1201, Nassau, Bahamas.
RECITALS:
WHEREAS, USAS believes that it is in the Company's best interest to form a
new wholly owned subsidiary, USA Performance Products, Inc. (USAPP); and
WHEREAS, USAS believes that the retention of Axis for purposes of marketing
USAPP assets and business in various worldwide markets will greatly improve the
profitability of USAPP; and
WHEREAS, Axis has experience in establishing worldwide markets necessary for
the sale of USAPP products and desires to act as marketing and management
consultant for USAPP.
NOW, THEREFORE, for the mutual consideration set forth herein, the parties
agree as follows:
1. USAS hereby agrees to form a new corporation with the name USA
Performance Products, Inc., and to transfer certain assets related to the
Company's paintball marker and gun and other products. USAS hereby retains Axis
commencing on the date above for a period of three years, to perform certain
marketing and management services regarding the Company's prospective sale of
USAPP products to worldwide markets. Axis agrees to perform such services The
term of this Agreement shall commence on the date set forth above and shall
terminate three years from the date above, but may be mutually extended for
additional future three year periods.
2. Axis shall be paid 1,500,000 of the common shares of USAS stock for the
performance of its services as set forth above. USAS hereby represents and
warrants that it has 50 million shares of common stock authorized, with a par
value of $.0001. USAS further warrants that the 1,500,000 shares to be
transferred to Axis pursuant to this Agreement shall be fully paid and
nonassessable and are not subject to any restrictions except those set forth in
paragraph 4 below.
<PAGE>
<PAGE>
3. Axis shall perform these services on an independent contractor basis
and shall determine the places such services are to be rendered, and the amount
of time to devote to such services as an independent contractor. USAS and Axis
agree that the terms of this Agreement are solely as an independent contractor.
4. The sale, transfer and assignment of the 1,500,000 shares of USAS has
not been registered under the Securities Act of 1933, as amended. These shares
in USAS may not be sold, transferred, assigned, pledged or hypothecated unless
such transaction is duly registered under the Act or unless, in the opinion of
counsel for the Company, such transaction is exempt from the registration
provisions of the Act. The sale, if any, of these shares shall be governed by
the provisions of Rule 144 or any other rule promulgated by the Securities and
Exchange Commission under the Securities Act of 1933. as amended.
5. Axis agrees to provide the necessary funding for the successful
operation of USAPP and will manage USAPP's income and expenses subject to the
approval of the Board of Directors of USAS.
6. This Agreement may be amended only by mutual agreement in writing by the
parties hereto and is to be construed under the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have entered this Agreement as of the day
and year first above written.
US AMATEUR SPORTS, INC.
By: /s/ David J. Panaia
David J. Panaia, Chief Executive Officer
AXIS ENTERPRISES, LTD.
By: /s/ Roy Bouchier
Roy Bouchier, President
EXCHANGE OF ASSETS
OF AMATEUR ATHLETES OF AMERICA, INC.
FOR STOCK IN US AMATEUR SPORTS, INC.
THIS AGREEMENT is entered into to be effective on this 12th day of
January, 1998, by and between Amateur Athletes of America, Inc., a Florida
corporation ("AAA"), and US Amateur Sports, Inc., a Florida corporation
("USAS").
RECITALS
WHEREAS, the parties hereto believe the best business interests of both
corporations are served by allowing AAA to convey all of its assets to USAS in
exchange for certain common stock of USAS, as a tax free exchange under
Internal Revenue Code of 1986, as amended ("Code"), Section 368(a)c.
NOW, THEREFORE, for the valuable consideration set forth herein, the
parties hereto hereby agree as follows:
1. AAA hereby sells, transfers and assigns to USAS, all of the assets of
AAA. USAS agrees to give as consideration for the purchase of all the assets
of AAA, one million shares of common stock of USAS.
2. AAA hereby makes the following representations and warranties:
(a) AAA is a Florida corporation in good standing, and is authorized
to enter into this transaction.
(b) The assets conveyed by AAA to USAS herein shall be free from all
liens and shall vest in USAS ownership in all the assets of AAA.
(c) The assets obtained from AAA are attached as Exhibit "A" hereto.
The assets are considered by both parties to be of equal value to the shares
obtained from USAS.
3. USAS hereby makes the following representations and warranties:
(a) USAS is authorized to enter into this transaction and is a
corporation in good standing in the State of Florida.
(b) The shares of stock of USAS to be conveyed to AAA herein shall
not be subject to any liens or debts of USAS, and are deemed to be fully paid
for and nonassessable by USAS.
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4. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument
5. Headings.
The article and section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.
6. Governing Law and Venue.
This Agreement shall be construed and interpreted according to the laws
of the State of Florida. The sole venue for any and all actions, lawsuits,
arbitration hearings, and other legal proceedings shall be Palm Beach County,
Florida.
7. Disclosure and Restrictions.
AAA acknowledges that the certificates for the USAS securities comprising
USAS's common stock which AAA and its shareholders will receive will contain a
legend substantially as follows:
The sale, transfer, assignment, pledge or hypothecation of these shares
of US Amateur Sports, Inc. represented by this Certificate has not been
registered under the Securities Act of 1933, as amended. These shares in US
Amateur Sports, Inc. may not be sold, transferred, assigned, pledged or
hypothecated unless such transaction is duly registered under the Act or
unless, in the opinion of counsel for the Corporation, such transaction is
exempt from the registration provisions of the Act. The sale, if any, of these
shares represented by this Certificate in US Amateur Sports, Inc. shall be
governed by the provisions of Rule 144 or any other rule promulgated by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
effective as of the day and year first above written.
AMATEUR ATHLETES US AMATEUR SPORTS, INC.
OF AMERICA, INC.
By: /s/ Linda C. Bergman By: /s/David J. Panaia
Linda C. Bergman, David J. Panaia,
President Chief Executive Officer
COMMERCIAL LEASE
1. PARTIES/DATE
THIS LEASE is made this 4th day of May 1998, between RYCO PROPERTIES, INC., a
Florida Corporation, whose address is: 8049 Monetary Drive, Suite D-4, Riviera
Beach, FL 33404, herein called "LANDLORD" and US Amateur Sports, Inc. whose
address is: 8125 Monetary Drive, Suite H-4, Riviera Beach, FL 33404 herein
called "TENANT."
WITNESSETH
Landlord and Tenant, for and in consideration of their respective covenants
and obligations hereinafter contained, and other good and valuable
consideration, agree as follows:
2. LEASED PREMISES
A. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord,
certain Space No. G-4, G-5, H-4, & H-5 approximately 5,720 square feet of
rental space, hereinafter called the "PREMISES." Said Premises is more
particularly shown on the floor plan, a copy of which is attached hereto and
made a part hereof as Exhibit "A."
B. Landlord shall assign to Tenant, at no additional charge, four (4) parking
spaces subject, however, to the provisions of this Lease relating to parking.
3. TERM
The term of this Lease shall be for three (3) years and one half (1/2)
month(s) beginning June 15, 1998 and ending June 30, 2001. The term "lease
year" as used herein shall mean a period of twelve (12) consecutive calendar
months.
4. BASE RENT
Tenant agrees to pay Landlord the agreed total rental of THIRTY TWO THOUSAND
FOUR HUNDRED --- 00/100 ($32,400.00) per year in twelve (12) equal consecutive
installments of TWO THOUSAND SEVEN HUNDRED 00/100 ($2,700.00) plus sales tax
and use taxes now in existence or hereinafter imposed, in advance on the first
day of each calendar month during the term of this Lease. The first months
rent shall be due at the time of execution of this Agreement. The last
month's rent is due three (3) days after DJJ vacates premises.
5. USE, OCCUPANCY, INDEMNIFICATION AND MAINTENANCE
A. Tenant shall use and occupy the Premises only for distribution, office and
manufacturing and for no other purpose.
B. Tenant shall indemnify and hold Landlord harmless from all losses resulting
from any acts, omissions, neglect or fault of Tenant, its agents, servants,
employees, licensees, customers or invitees including, but not limited to
attorneys' fees through all trial and appellate levels and post judgment
proceedings and whether or not suit or any other proceedings is instituted.
The provisions of this paragraph shall survive the termination of this Lease.
6. ADJUSTED RENT:
The Base Rent shall be increased annually; in advance, effective on the first
day of each lease year; beginning with the second lease year by the following:
2nd year starting June 15, 1999 - $3,000.00 per month plus sales tax 3rd year
starting June 15, 2000 - $3,300.00 per month plus sales tax
7. COVENANT TO PAY RENT
Tenant shall pay to Landlord the Base Rent, as it may be adjusted, any and all
Additional Rent, and any and all other sums due hereunder as herein provided
at Landlord's above stated address, or at such other place as Landlord may
counterclaim, deduction, or setoff.
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LANDLORD will do the following at Landlord's expense:
1. Pain the interior walls in the office and warehouse.
2. Carpet office and vinyl floor in bathroom.
3. Add three (3) doors in office area. See Exhibit A. No drywall.
4. Tenant will pay for moving electric from new door openings.
8. DELIVERY OF PREMISES ALTERATIONS, ADDITIONS OR IMPROVEMENTS LANDLORD LIEN,
ASSIGNMENT OR SUBLETTING.
A. Tenant hereby accepts the Premises in the condition they are in at the
beginning of this Lease and agrees to maintain Premises in the same condition,
order and repair as they are at the commencement of said term, excepting only
reasonable wear and tear arising from the use thereof under this Agreement,
and to make good to Landlord immediately upon demand, any damage to water
apparatus, or electric lights, or any fixture, appliances or appurtenances of
Premises, or of the building caused by any act or neglect of Tenant, or of any
person or persons h~ the employ or under the control of the Tenant.
B. The Tenant shall not assign this Lease, nor sublet the Premises, or any
part thereof nor use the same, or any part thereof, nor permit the same, or
any part thereof, to be used for any other purpose than as above stipulated,
nor make any alterations therein, and all additions thereto, without the
written consent of the Landlord and all additions, fixtures, or improvements
which may be made by Tenant, except movable office furniture, shall become
property of the Landlord and remain upon the Premises as a part thereof, and
be surrendered with the Premises at the termination of this lease.
9. SIGNS
Tenant may erect signs similar to other Tenant's signs.
10. INSURANCE AND DAMAGE
A. Tenant's Coverage: effective on the commencement date of this Lease,
Tenant, at its own cost and expense, shall cause policies of insurance to be
written as follows:
(1) Tenant shall provide and keep in force comprehensive general public
liability insurance against claims for personal injury, bodily injury, death
or property damage occurring at any time during the term hereof on, in or
about the Premises, contractual, and automobile liability including non-owned
and hired, such insurance being a combined single limit policy to afford
minimum protection, throughout the term of this Lease of not less than Three
Hundred Thousand Dollars ($300,000). Tenant shall not be in violation of the
aforesaid minimum insurance policy limits if the aggregate of its primary and
excess coverage equals or exceeds the above minimums.
(2) Tenant shall provide and keep in force "Fire Legal Liability" insurance
against property damage to the Building occurring at any time during the term
of this Lease to afford minimum protection of not less than the product of (i)
the assessed value to the Building, and (ii) the fraction with a numerator of
the square footage of the Leased Premises and a denominator of the total
rentable square footage of the Building.
(3) Tenant shall maintain "All Risk" Property Coverage at all times during the
term of this Lease with respect to all improvements made by the Tenant to the
Premises and all personal property which Tenant may bring or maintain or
caused to be brought or maintained upon the Premises. Said insurance shall be
in an amount not less than one hundred percent (100%) of full replacement
value of the tenant improvements and personal property which Tenant may bring
or maintain upon the Premises.
(4) From the inception of any construction work which Tenant may effect on the
Premises and as often as Tenant may make a substantial alteration in the
Premises (although nothing in this sentence shall be deemed to permit such
construction work or alteration except to the extent otherwise provided
herein), Tenant will cause builder's risk insurance policies to be written in
compliance with the provision of this Article, as such Article relates to the
nature, minimum amount and naming of parties insured by such coverage.
(5) Tenant shall maintain at all times during the term of this Lease "Plate
Glass" insurance against damage to or breakage of any exterior glass of the
Leased Premises. Said insurance shall be in the amount not less than one
hundred percent ( 100%) of the full insurable value of all the exterior glass
of the Leased Premises.
(6) Tenant shall provide and keep in force such other insurance and in such
amounts as may from time to time be required by Landlord against such other
insurable hazards as at the time are commonly insured against in the case of
other premises similarly situated or similarly utilized or as may be required
by holders of a mortgage encumbering the Premises or any portion thereof.
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B. Policies: All insurance provided by Tenant as required by this Article
shall be carried in favor of Landlord, and such other named insureds as may be
designated by Landlord, and shall be payable jointly to said parties as their
respective interest may appear. All such policies shall be written as primary
policies, not contributing with and not in excess of coverage which Landlord
may carry. All such insurance shall be written by such responsible companies,
licensed to do business in the State of Florida, as Landlord shall approve and
certificates of the policies therefor shall at all times be held by Landlord
or by such other named insureds as may be designated by Landlord. If
certificates are held by other named insured, copies of the policies or
certificates of such insurance shall be delivered by Tenant to Landlord. All
such policies shall be non-assessable and shall require not less than thirty
(30) days notice by registered mail to Landlord and all other named insureds
of any cancellation thereof or change affecting Landlord's or such other named
insured's coverage thereunder.
C. Landlord's Option to Procure Insurance: Although nothing contained in this
Lease shall ever be construed as obligating Landlord to pay the premiums for
any such insurance which Tenant is obligated to carry this Lease, if, at any
time during the continuance of this Lease, Tenant fails to deliver such
policies, Landlord may, at Landlords option, procure the said insurance and
Tenant will owe Landlord reimbursement therefor immediately as Additional
Rent, but such facts will never be construed as constituting a waiver by
Landlord of the default hereunder committed by Tenant.
D. Activities Increasing Insurance Rates: Tenant shall not do or suffer
anything to be done on or about the Premises that will or may increase the
rate of insurance on the building. If, by reason of the failure of Tenant to
comply with the terms of this Lease, or by reason of Tenant's occupancy (even
though permitted or contemplated by this Lease), the insurance rate shall at
any time be higher, or notice is given that it shall be higher, than it would
otherwise be for comparable commercial space in the area of the Building,
Landlord, in its sole discretion, may require Tenant to reimburse Landlord for
that part of all insurance premiums charged because of such violation or
occupancy by Tenant, or Landlord may require Tenant to cease any such use
which causes such higher premium. Any such reimbursement shall be Additional
Rent hereunder.
E. Waiver of Subrogation: In any event of loss or damage to the Premises, and
for any contents, the Tenant hereto shall look first to any insurance in its
favor before making any claim against the Landlord. To the extent possible
without additional cost, Tenant shall obtain for each policy of such
insurance, provisions permitting waiver of any claim against the Landlord for
loss or damage within the scope of such insurance, and Tenant, to such extent
permitted, for itself and its insurers waives all such insured claims against
the Landlord.
11. DESTRUCTION OR PARTIAL DESTRUCTION
In the event the Premises shall be destroyed or so damaged or injured by fire
or other casualty during the life of this Lease, whereby the same shall be
rendered untenantable, then the Landlord shall have the right to render
Premises tenantable by repairs within ninety (90) days therefrom. If Premises
are not rendered tenantable within said time, it shall be optional with either
party to cancel this Lease, and in the event of such cancellation the rent
shall be paid only to the date of such fire or casualty. The cancellation
herein mentioned shall be evidenced in writing.
12. EMINENT DOMAIN
If the Premises, or any part thereof, or any estate therein, shall be taken by
eminent domain, which taking renders the Premises substantially unusable, this
Lease shall terminate at Tenant's election on the date when Tenant is required
to vacate the portion so taken, provided Tenant has given Landlord written
notice of such election within thirty (30) days after receipt by Tenant from
Landlord of written notice that the Premises are to be so taken. The rent,
including any adjusted rent and any Additional Rent, shall be apportioned as
of the termination date, and any rent paid for any period beyond that date
shall be refunded to Tenant. Any lesser taking shall not affect this Lease of
the rents owed hereunder. Tenant shall not be entitled to any part of
Landlord's award for any taking or any payment in lieu thereof, but Tenant may
seek damages against the condemning authority for any taking resulting from
Tenant's interest in the leasehold estate.
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13. COMPLIANCE WITH LAWS AND RULES AND REGULATIONS AND NO VARIANCE
A. During the Term hereof Tenant shall, at its own cost and expense, promptly
observe and comply with all present and future laws, ordinances, requirements,
orders, directions, rules and regulations of the federal, state, county and
municipal governments and of all insurance companies writing policies covering
the Premises, the Building, or any part thereof.
B. Tenant shall observe and comply with (i) all restrictions, limitations and
other matters now or hereafter of public record affecting all, or any portion,
of the Premises, Building or the land upon which it is situated; (ii) the
rules and regulations hereinafter set forth; (iii) such further or amended
rules and regulations as Landlord may prescribe, for the safety, care, and
cleanliness of the Building and Common Areas, and the comfort, quiet, and
convenience of other occupants of the Building. A copy of the rules and
regulations now existing is attached here to and made a part hereof as Exhibit
"B". Landlord reserves the right to amend and modify said rules and
regulations at any time as Landlord in its sole discretion may deem necessary.
Any such amendments shall be considered a part of this Lease as if originally
attached hereto.
C. Tenant agrees that it will not seek any variance from the use limitation
affecting said Premises by ordinance in writing, thereto, which consent may be
unreasonable withheld.
14. LIENS
A. Tenant shall, within fifteen (15) days after notice from Landlord,
discharge or bond off and indemnify Landlord, to Landlord's sole satisfaction,
against any mechanic's liens for material or labor claimed to have been
furnished to the Premises on Tenant's behalf. Tenant shall notify Landlord in
writing within twenty-four (24) hours after it has learned that such a lien
has been filed or may be filed.
B. Landlord shall have a first lien, paramount to all others, on every right
and interest of Tenant in and to this Lease and on the furnishings and
equipment, fixtures and personal property of every kind and on the equity
therein, brought on the Premises by Tenant pursuant to the terms of this Lease
and as part of the equipment used therein, which lien is granted for the
purposes of securing the payment of rents, taxes, and assessments herein
covenanted to be paid by Tenant, and for the purpose of securing the
performance of any and all of the covenants, conditions and obligations of
this Lease to be performed and observed by Tenant.
C. Notwithstanding anything contained herein to the contrary, the interest of
the Landlord in the property upon which the Building is situated, or any
portion thereof, including, but not limited to the Premises or any portion
thereof, shall not be subject to liens for improvements made by or for Tenant
or Tenant's successors, assigns and/or sublessees, whether or not the same
shall be made or done in accordance with any agreement between Landlord and
Tenant or Tenant's successors, assigns and/or sublessees or for any other
reason, it is specifically understood and agreed that in no event shall
Landlord or the interest of Landlord in said property or any portion thereof,
including, but not limited to, the Premises or any portion thereof, be liable
for or subject to any mechanic's, materialman's, or laborer's lien or liens
for improvements or work made by or for Tenant or Tenant's successors, assigns
and/or sublessees; and this Lease specifically prohibits the subjecting of
Landlord's interest in said property or any portion thereof including, but not
limited to, the Premises or any portion thereof, to any mechanic's
materialman's or laborer's lien or liens for improvements made by Tenant or
Tenant's successors, assigns and/or sublessees, is responsible for payment
under the terms of this Lease. All persons dealing with Tenant or Tenant's
successors, assigns, and/or sublessees, are hereby placed upon notice of this
provision. All memoranda and short forms of this Lease which shall be recorded
among any Public Records shall contain the provisions set forth above in this
Paragraph.
15. SERVICES FURNISHED
Landlord will furnish to Tenant during the Lease Term water and trash removal
services not to exceed normal, customary and reasonable quantities for same,
it being understood that the determination as to what constitutes normal,
customary and reasonable quantities shall be based on what is normal,
customary and reasonable for general use of premises similar in size and
geographical area to the Premises and not based on the particular use of the
Premises by Tenant even if such particular use is otherwise permitted
hereunder and any additional quantities used shall be charged as Additional
Rent. Tenant shall remove pallets and other large items at its expense from
the Premises. Pallets and other large items shall not be placed in the
dumpster. If placed in the dumpster Tenant shall be charged a dumping fee. It
is understood that Landlord
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does not warrant that any of the services referred to above, or any other
services that Landlord may agree to supply, will be free from interruption,
and Tenant acknowledges that one or more of such services may be suspended by
reason of accident or of repairs, alteration, or improvements being made, or
by strikes or lockouts, or by reason of operation of law, or causes beyond the
control of Landlord.
Tenant is responsible for any public utility charges separately metered or
charged to Tenant as contracted with local services and is to keep the charges
current.
16. ELECTRICAL AND OTHER EQUIPMENT
Tenant may install or maintain any electrically or other energy source
operated equipment, machinery, or heavy equipment or light office machines in
the similar to other Tenants as long as machinery is not too heavy for 4"
concrete floor.
17. COMMON AREA AND PARKING
A. Definition: All areas within the exterior boundaries of the Buildings which
are not now or hereafter or held for lease or occupation by Landlord
including, without limiting the generality of the foregoing, parking areas,
driveways, loading areas, sidewalks, landscaped and planted areas, to the
extent the foregoing may be applicable, and other areas and improvements
provided by Landlord for the common use of Landlord and Tenants and their
respective employees, and invitees, including Limited Common Areas, if any,
shall be deemed "Common Areas." Landlord may make changes at any time and from
time to time in the size, shape, location, number and extent of the Common
Areas or any of them and no such change shall entitle Tenant to any abatement
of rent.
B. Use: Tenant and its employees and invitees shall be entitled to use the
Common Areas during the Lease Term, in common with Landlord and with other
persons authorized by Landlord from time to time to use such Common Area,
subject to such reasonable rules and regulations relating to such use as
Landlord may from time to time establish. Notwithstanding the foregoing,
Tenant may not without the prior written consent of Landlord, which consent
may be withheld at Landlord's sole discretion, store any items, including but
not limited to, vehicles, trailers, crates and boxes outside the Building or
within the Common Areas. Additionally, Tenant may not without the prior
written consent of Landlord, which consent may be withheld at Landlord's sole
discretion engage in any work related activities outside of the Building or in
the Common Areas. No vehicle repairs or maintenance shall be allowed outside
of the Building or in the Common Areas.
C. Control by Landlord:
(1) Landlord shall operate, manage, equip, police, light, repair and maintain
the Common Areas in such manner as Landlord may in its sole discretion
determine to be appropriate. Landlord may temporarily close any Common Area
for repairs or alterations, for up to one ( I ) day in each calendar year to
prevent a dedication thereof or the accrual of prescriptive rights therein, or
for any other reason deemed sufficient by Landlord.
(2) Landlord shall at all times during Term of this Lease have the sole and
exclusive control of the Common Areas, all to the extent applicable, and may
at any time and from time to time during the Term hereof restrain any use or
occupancy thereof except as authorized by the rules and regulation for the use
of such areas established by Landlord from time to time. The rights of Tenant
in and to the Common Areas shall at all times be subject to the rights of
Landlord, the other tenants of Landlord in the Building and such others as the
Landlord may, in its sole description, permit to use the same in common with
Tenant and Tenant shall keep said areas free and clear of any obstructions
created or permitted by Tenant or resulting from Tenant's operation.
(3) When and to the extent parking spaces are to be furnished Tenant as herein
provided, Tenant and its invitees and licenses shall park their vehicles only
in those spaces in the parking areas as are from time to time designated for
that purpose by Landlord.
(4) In the event Landlord elects to limit or control parking by invitees or
licensees of the Building, whether by sticker, validated parking tickets, or
any other method of assessment, Tenant agrees to participate in such program
under such reasonable rules and regulations as are from time to time
established by Landlord with respect thereto.
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D. No Outside Storage Of Pallets, Drums, Or Any Other Item(s):
No outside storage of any pallets, drums, or any other items is permitted.
Landlord shall have the right to remove pallets, drums, or any other item(s)
left outside anywhere in the Common Area, and to charge the responsible Tenant
for the expense of removing said item(s), which shall be paid immediately by
said Tenant as Additional Rent. I 8. DEFAULT
If Tenant defaults in the performance or any term, covenant or condition
required to be performed by him under this Agreement, Landlord may, after not
less than three (3) days' notice to Tenant, seek any available remedy
available under the laws of the State of Florida, including, but not limited
to, eviction and an action at law for damages and enforcement of the
Landlord's lien.
19. NO WAIVER
The failure of Landlord to insist on strict performance of any covenant or
condition hereof, or to exercise any option herein contained, shall not be
construed as a waiver of such covenant, condition or option in any other
instance. This Lease cannot be modified or terminated orally.
20. SUBORDINATION OF LEASE
This Lease shall be subject and subordinate to all mortgages, deeds of trust,
ground leases and declaration of condominium that may now or hereafter affect
this Lease or the Subject Real Property of which the Premises for a part, and
also to all renewals, modifications, consolidation, amendments, and
replacements of such mortgages, deeds of trust, ground leases and/or
declarations or condominium. Although no instrument or act on the part of
Tenant shall be necessary to effectuate such subordination, Tenant shall,
nevertheless, execute and deliver such further instruments confirming such
subordination of this Lease as may be desired by the holders of such
mortgages, deeds of trust, ground leases or parties to such declaration of
condominium. Tenant hereby appoints Landlord its attorney-in-fact,
irrevocably, to execute and deliver any such instrument for Tenant.
Notwithstanding the foregoing, no such mortgage, deed of trust or ground lease
entered into after the date hereof shall require or permit the dispossession
of Tenant hereunder unless Tenant shall be in default hereunder or this Lease
shall have been terminated pursuant to the terms hereof.
21. NOTICES
Any notices required or permitted hereunder shall be in writing and sent by
United States registered or certified mail, return receipt requested, in a
postpaid envelope, addressed to Landlord or Tenant at their respective
addresses as set forth above or at such other address as Tenant or Landlord
may designate by proper notice hereunder. In addition any such notice to
Tenant shall be deemed to have been duly given personally to Tenant's address
set forth above or at such other address as Tenant may designate to Landlord
by proper notice hereunder or if delivered to or posted on the Premises.
22. RIGHT TO INSPECT AND REPAIR AND TO SHOW PREMISES
Landlord may enter the Premises at any reasonable times, on reasonable notice
to Tenant for the purpose of inspection or the making of such repairs,
replacements of addition in, to, on and about the Premises or the Building, as
Landlord deems necessary or desirable. For this purpose, Tenant shall always
supply Landlord with keys to all entry doors to the Premises. Tenant shall
have no cause of action of claim against Landlord by reason of such inspection
itself. Landlord may show the Premises to prospective purchasers and
mortgagees and, during the six (6) months prior to termination of this Lease,
to prospective tenants, during business hours.
23. NO OTHER REPRESENTATION
No representations or promises shall be binding on the Parties hereto except
those representations and promises contained herein or in some future writing
signed by the party such representations or promises.
24. TENANTS ACKNOWLEDGEMENT
Tenant shall, from time to time, on not than less than five (5) days' prior
written request by Landlord, execute, acknowledge, and deliver to Landlord a
written statement certifying that this Lease is unmodified and in full force
and effect, or that the Lease is in full
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force and effect as modified and listing the instruments of modification, the
dates to which the rents and other charges have been paid, and whether or not,
to the best of Tenant's knowledge, Landlord is in default hereunder and, if
so, specifying the nature of the default. It is intended that any such
statement delivered pursuant to this Article may be relied upon by a
prospective purchaser of Landlord's interest or assignee of any mortgage upon
Landlord's interest in the Building.
25. WAIVER OF JURY TRIAL
To the extent such waiver is permitted by law, the Parties waive trial by jury
in any action or proceeding brought in connection with this Lease or the
Premises.
26. ARTICLE AND PARAGRAPH HEADINGS
The Article and paragraph headings in this Lease shall not be taken into
consideration in any construction or interpretation of this Lease or a .y of
its provisions.
27. APPLICABILITY TO HEIRS, SUCCESSORS AND ASSIGNS
The provisions of this Lease shall apply to, bind, and inure to the benefit of
Landlord and Tenant, and their respective heirs, successors, legal
representatives, and assigns. Landlord shall be liable only to the extent of
its equity in the Premises for the performance of all covenants, and
obligations on the part of the Landlord contained in this Lease.
28. INDEMNITY AND ATTORNEY'S FEES
Tenant shall indemnify, defend and save Landlord harmless from suits, actions,
damages, liability and causes of action of every nature whatsoever arising or
growing out of or in any manner connected with the occupation or the use of
the Premises and the Building and every part thereof by Tenant and the
employees, agents, servants, guests or invitees of Tenant; including, but not
limited to, any claims, demands, and causes of action of every nature
whatsoever which may be made upon, sustained or incurred by Landlord by reason
of any breach, violation or omission or non-performance of any term, covenant
or condition hereof on the part of Tenant or the employees, agents, servants,
guests or invitees of Tenant; however, this indemnity shall not extend to
matters caused by Landlord's negligent or willful acts. In case Landlord shall
without fault on its part be made a party to any litigation commenced by or
against Tenant, Tenant shall indemnify, and defend and hold harmless Landlord
and shall pay all costs, expenses and reasonable attorney's fees through all
trial and appellate levels and post judgment proceedings. The provisions of
this Article shall survive the termination of this Lease.
29. PARTIAL INVALIDITY
If any provision of this Lease be invalid or unenforceable, the remainder of
this Lease shall not be affected thereby.
30. CONDOMINIUM
In the event that Landlord shall submit the Premises to the condominium form
of ownership, Tenant agrees that they shall cooperate with such submission,
shall execute any joinders reasonably necessary and shall permit access to the
Premises for inspection and surveys at reasonable times.
31. BROKERS
Tenant represents and warrants that it has dealt with no real estate broker,
agent or other person, in connection with this Lease, excepting only, Ryco
Realty, Inc. , and Tenant agrees to hold harmless and indemnify Landlord from
and against any claims by any other broker, agent, or person claiming
compensation or commission by virtue of having dealt with Tenant in regard to
this Lease including, but not limited to, attorney's fees through all trial
and appellate levels and post judgment proceedings and whether or not suit or
any other proceeding is instituted. The provisions of this Article shall
survive the termination of this Lease.
32. HAZARDOUS WASTE AND INDEMNITY
A. Tenant represents and warrants to and covenants with Landlord that neither
Tenant nor any employee, agent, licensee, invitee, client or customer of
Tenant nor any party acting at the direction of or with the express or implied
consent of Tenant or any employee, agent, licensee, invitee, client or
customer of Tenant nor any party acting at the direction of or
7
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with the express or implied consent of Tenant or any employee or agent of
Tenant shall (i) dispose of on, bury beneath, or percolate beneath the Subject
Real Property or any portion thereof any hazardous waste; (ii) remove from the
Subject Real Property or any portion thereof and store off site of the Subject
Real Property or any hazardous waste; (iii) release or permit the release of
hazardous waste on or from the Subject Real Property or any portion thereof;
(iv) use or permit the use of the Subject Real Property or any portion thereof
for the handling, transportation or disposal of a hazardous waste; and waste
on the Subject Real Property or any portion thereof.
B. In addition to, and not in limitation of, the provisions contained in
Paragraph A above of this Article, Tenant shall, at all times during the Term
of this Lease and all renewals and extensions hereof, if any, comply with all
federal, state and local hazardous waste and environmental rules, regulations,
statutes, codes, ordinances and other laws including those hereafter enacted,
applicable to the Subject Real Property or any portion thereof including, but
not limited to, the Premises and/or Tenant's use of any of the foregoing,
including, but not limited to, the Comprehensive Environmental Response
Compensation and Liability Act of 190, as amended ("CERCLA"), and the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA").
C. Tenant shall fully and promptly pay, perform, discharge, de&nd, indemnify
and hold Landlord harmless from and against all claims, orders, demands,
actions, proceedings and/or suites, and all losses, costs, damages and
expenses (including, but not limited to, court costs, technical consultant
fees and expenses, and reasonable attorneys' fees, paraprofessional fees and
expenses at all trial and appellate levels and post judgment proceedings and
regardless of whether or not any action, proceeding or suit may be instituted)
arising or resulting from any act, occurrence or omission in violation of or
contrary to the covenants, representations and warranties made herein.
33. GOVERNING LAW
This Lease shall be governed by the State of Florida and venue shall be in
Palm Beach County.
34. LIMITATIONS OF RECORDING
Tenant shall not record or permit the recording of this Lease or any
memorandum thereof. Landlord may record the Lease on a memorandum thereof.
35. JOINT AND SEVERAL LIABILITY
In the event Tenant shall consist of more than one party, then each such party
shall be jointly and severally for any and all obligations of Tenant
hereunder.
36. ADDENDA
This Lease may, but not necessarily shall, contain additional provisions set
forth in one or more Addenda hereto. To the extent, if at all, any provisions
in any such Addenda, is applicable, conflict with the provisions in any such
Addenda shall control.
37. LATE PAYMENT
There will be a late charge of five percent (5%) of the monthly rent and sales
tax if the payment is not received within five (5) days from due date.
38. INTEREST
Interest of eighteen percent (18%) per annum will be added to all charges not
received within thirty (30) days from due date.
8
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39. RADON GAS
Radon is a naturally occurring radioactive gas that, when it has accumulated
in building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public
health unit.
40. MAINTENANCE AND REPAIR BY TENANT
During the original or extended term of this lease Agreement, Tenant will
maintain the interior of the Premises, excepting ordinary wear and tear or
repairs necessitated by the act or neglect of Landlord in good operating
condition, by conducting day to day maintenance and janitorial services
therein. Tenant shall not be responsible for any structural repairs and or
major repairs or replacements to the structure of the Premises, or the systems
serving the same, which shall be the responsibility of Landlord. Tenant shall
be responsible for any minor maintenance and minor repairs to the structure of
the Premises, or the systems serving the same. Tenant shall keep the fire
extinguisher(s) in good working order with a current inspection tag. Tenant
shall replace all light bulbs in the overhead office lights and warehouse.
Tenant shall keep all the fire exits and emergency lights in good working
order. Tenant shall repair the garage door at the Tenant's expense. Tenant
agrees to change the HVAC filter each month.
WITNESS WHEREOF, the parties hereto have executed this Lease the day, month
and year aforesaid.
Signed, sealed, and delivered in the presence of:
LANDLORD:
RYCO PROPERTIES, INC.
BY: /s/ H. Wade Riley, III
As President
TENANT:
US AMATEUR SPORTS, INC.
/s/ Gerald V. Bergman BY: /s/ David J. Panaia
David Panaia as President
9
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<PAGE>
EXHIBIT "B"
RULES AND REGULATIONS
1. Signs: Tenant shall not inscribe any inscription or post, place, or in any
manner display any sign, notice, pictures, placard or advertising matter
whatsoever any where in or about Premises at places visible (either directly
or indirectly as an outline or shadow on a glass panel from anywhere outside
of the Premises or from public and common areas within Premises without first
obtaining Landlord's written consent thereto and, if Landlord grants such
consent, Landlord may specify the color, size, style and material to be used.
2. Showcases: No showcase shall be placed in the common areas of the Premises
and Landlord reserves the right to remove all showcases so placed and all
signs other than those above provided for, without notice and at the expense
of the tenant responsible. Any such expense shall be Additional Rent due
immediately.
3. Telephone Connections: If Tenant desires telegraphic, cable television, or
telephone connections, Landlord will direct electricians where the wires are
to be introduced and without such direction no boring or cutting for wires
shall be permitted.
4. Submission of Plans: Tenant shall submit to Landlord for Landlord's written
approval a copy of Tenant's construction and equipment layout plan prior to
commencement of construction and Tenant shall not commence any such
construction unless and until it obtains such written approval, and a building
permit from Palm Beach CountY.
5. No Nuisances: Tenant shall not do or permit anything to be done in the
Premises which will be dangerous to life, or limb, or which will tend to
create a nuisance or injure the reputation of the Building(s). Tenant shall
not use burning fluid, camphine, alcohol, kerosene, or anything else in order
to light or heat the Premises except electricity. Tenant shall not bring into
the Premises or keep therein any heating or lighting apparatus other than that
provided by Landlord; or install any air conditioning or air cooling apparatus
without the written consent of Landlord; or in any way injure, or tamper with
any of such apparatus in any manner with any insurance policy upon said
Building(s) or any part thereof Tenant shall not do or permit to be done in
the Premises any activity in conflict with any of the laws, rules or
regulations of any governmental agency or municipality having jurisdiction, or
use the Premises for any illegal or immoral purpose. No beer, wine or
intoxicating liquor shall be sold on or about the Premises without the written
consent of Landlord in each instance.
6. Passageways: The sidewalks, passages, and driveways shall not be obstructed
by Tenant. If Tenant is using the driveways to load or unload the Tenant will
not unreasonable block the driveway that it prevents access by other Tenants
to the other Premises.
7. Water Closets: The Closets and other apparatus shall not be used for any
purpose other than those for which they were constructed, and no sweepings,
rubbish, rags or other substances shall be thrown therein. Any damage
resulting to them from misuse shall be borne by the tenant which causes same
and the cost thereof shall be paid immediately as Additional Rent.
8. No Defacing or Offensive Business: Tenant and its employees and guests
shall not injure or deface the Building(s) or the woodwork, or the walls of
the Premises, and shall not carry on upon the Premises any noisome, noxious,
noisy, or offensive business nor conduct an auction therein, nor interfere in
any way with other tenants or those having business with them.
9. No Lodging: No room or room on or about the Premises shall be occupied or
used as sleeping or lodging apartments.
10. Lock all Doors: Tenant shall, when leaving Premises at close of business,
or unoccupied at any time, lock all doors and windows and for any default or
tenants and by Landlord or by either
10
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of them, for damages resulting from such default or carelessness and the cost
thereof shall be paid immediately as Additional Rent.
11. No Animals: No animal or bird shall be allowed in any part of the Premises
or Building(s) without the written consent of Landlord.
12. No Accumulation of Rubbish: Tenant shall not accumulate or store on or
about the Premises any waste paper, discarded records, paper files, sweepings,
rags, rubbish or other combustible matter other than the normal accumulation
needed to conduct the Permitted Use of the Premises. Nothing shall be thrown
by Tenant, its employees or guests, out of the windows, doors, or garage doors
of the Building(s) or in the parking areas.
13. Exclusion of Peace Disturbers: Landlord reserves the right to exclude from
the Premises or Building(s) all drunken persons, idlers, diseased persons,
peddlers, solicitors, persons of a general character or conduct so as to
create a disturbance, and persons entering in crowds or in such unusual
numbers as to cause inconvenience to tenants of the Building(s).
14. Change to Rules: Landlord reserves the right to change these rules and to
make such other and funkier reasonable rules and regulations either as it
affects one or all tenants as in its judgment may from time to time be needed
for the safety, care and cleanliness of the Building(s) or any area
surrounding the Building(s), for the preservation of good order therein or for
any other cause. When such changes are made such modified or new rules shall
be deemed a pan hereof with the same effect as if written herein, when a copy
shall have been delivered to Tenant or left with some person in charge of the
Premises.
15. No Live Christmas Trees: No live or fresh cut Christmas Trees are
permitted on or about the Premises.
16. No Picnics: No outside picnics or barbecues are permitted without the
prior consent of Landlord.
17. No Outside Storage Of Pallets, Drums, Or Any Other Item(s): No outside
storage of any pallets, drums, or any other items is permitted. Landlord shall
have the right to remove pallets, drums, or any other item(s) left outside
anywhere in the Common Area, and to charge the responsible Tenant for the
expense of removing said item(s), which shall be paid immediately by said
Tenant as Additional Rent.
18. Storage: No item or any portion thereof shall be stored in or about the
Premises at a height which is higher than twelve (12) feet above the ground
level of the Premises. In the event of any violation of such height
restriction, Tenant, in addition to being in default under this Lease, shall
pay, or immediately reimburse Landlord as Additional Rent, all fines and
penalties imposed as a result thereof by any governmental authorities
including but not limited to, all applicable fire departments and fire
marshals.
19. Vehicles: Landlord shall have the right to remove abandoned or unlicensed
vehicles and vehicles that are unreasonably interfering with the use of the
parking lot by others, and to charge the responsible tenant for the expense of
removing said vehicles which shall be paid immediately by said tenant as
Additional Rent.
20. Late Payment: There will be a late charge of five percent (5%) of the
monthly rent and sales tax if payment is not received within (5) days from due
date.
21. Interest: Interest of eighteen percent (18%) per annum will be added to
all charges not received within shiny days (30) from due date.
22. Pallets and other large items: Tenant shall not throw pallets or any large
item into any of the dumpters. Tenant is responsible, at Tenant's expense, for
removing pallets and other large items from the Premises.
11
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SECURITY DEPOSIT ADDENDUM TO COMMERCIAL LEASE ("Lease")
DATED:
May 4, 1998 between
RYCO PROPERTIES, INC. ("Landlord") and
US Amateur Sports, Inc.
Tenant shall deposit with Landlord three (3) days after DJJ vacates Premises
the sum of Lease by Tenant the sum of TWO THOUSAND SEVEN HUNDRED -- 00/100
($2,700.00) ("Security Deposit") as security for the full and faithful
performance by Tenant of all of the Tenant's obligations under the Lease. If
Tenant is in default under the Lease, Landlord may use, apply or retain all or
any part of the Security Deposit for the payment of (i) any rent or any other
sum of money that Tenant was obligated to pay but did not pay together with
interest thereon as provided in the Lease and/or (ii) any damages suffered by
Landlord that are recoverable under the Lease. The use, application or
retention of the Security Deposit or any portion thereof by Landlord shall not
prevent Landlord from exercising any other rights or remedies provided for
under the Lease or by law or equity, and shall not limit any recovery to which
Landlord may otherwise be entitled. The Security Deposit shall bear no
interest and may be commingled with Landlord's other funds. If Tenant fully
complies with all of the terms of the Lease, said Security Deposit shall be
returned by Landlord to Tenant within thirty (30) days after the termination
of the Lease.
Tenant Initials /s/ DJP
Landlord Initials /s/ HWR III
US AMATEUR SPORTS, INC.
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
Net income(loss) available to common stockholder $ (143,051) $ (240,018)
Weighted average common shares outstanding 7,430,045 6,000,600
----------- -----------
Net loss per common share (a) $ (.019) $ (.040)
(a) Basic and diluted loss per share are the same. The Company has issued
no securities such as options, warrants or convertible securities or entered
into any contingent stock agreements.
US AMATEUR SPORTS, INC.
SUBSIDIARIES
as of May 31, 1998
State of Name Under Which
Subsidiary Name and Address Incorporation Business is Conducted
- --------------------------- ------------- ---------------------
USA Performance Products, Inc. Florida USA Performance Products
8125 Monetary Drive, Suite H4
Riviera Beach, Florida 33404
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages F-2 and F-3 of the Company's Form 10-KSB for the fiscal year ended May
31, 1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 89,542
<SECURITIES> 0
<RECEIVABLES> 7,315
<ALLOWANCES> 0
<INVENTORY> 85,155
<CURRENT-ASSETS> 216,592
<PP&E> 116,098
<DEPRECIATION> 45,118
<TOTAL-ASSETS> 323,561
<CURRENT-LIABILITIES> 272,513
<BONDS> 0
0
0
<COMMON> 1,189
<OTHER-SE> (66,560)
<TOTAL-LIABILITY-AND-EQUITY> 323,561
<SALES> 146,078
<TOTAL-REVENUES> 149,582
<CGS> 25,414
<TOTAL-COSTS> 292,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,514
<INCOME-PRETAX> (143,051)
<INCOME-TAX> 0
<INCOME-CONTINUING> (143,051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,018)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
