<PAGE> 1
As filed with the Securities and Exchange Commission on April 10, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
--------------------------
LEVEL BEST GOLF, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 5091 59-320564
------- -------------------- ---------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or organization)
</TABLE>
14561 58th Street North, Clearwater, Florida 34620 (813) 535-7770
------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Mr. Fred L. Solomon, President
14561 58th Street North, Clearwater, Florida 34620 (813) 535-7770
------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's agent for service)
COPIES OF COMMUNICATIONS TO:
William C. Phillippi, P.A.
Broad and Cassel
201 South Biscayne Boulevard
Miami Center, Suite 3000
Miami, Florida 33131
Telephone: (305) 373-9400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the Securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Registered Offering Price Aggregate Registration
Per Share (1) Offering Price Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value per share 1,318,448 $2.50 $3,296,120 $1,087.72
=================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933 (the
"Securities Act").
Pursuant to Rule 429 under the Securities Act, this Registration
Statement shall also constitute Post-Effective Amendment No. 1 to
registrant's Registration Statement on Form S-1 (File No. 33-97770) with
respect to 265,000 outstanding Class A warrants, 275,000 Class B warrants
and 540,000 shares of Common Stock underlying those warrants.
================================================================================
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any state.
SUBJECT TO COMPLETION, APRIL 10, 1997
PROSPECTUS
LEVEL BEST GOLF, INC.
1,318,448 SHARES OF COMMON STOCK
This Prospectus offers an aggregate of 1,318,448 shares of Common
Stock, par value $.001 per share (the "Common Stock"), of Level Best Golf,
Inc., a Florida corporation (the "Company"), on behalf of certain selling
shareholders (the "Selling Shareholders"). The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Shareholders.
See "Selling Shareholders."
The Selling Shareholders may sell the Common Stock offered hereby for
their own accounts in open market or block transactions or otherwise in
accordance with the rules of the Nasdaq OTC Bulletin Board operated by the
Nasdaq Stock Market, Inc. (the "OTC Bulletin Board"), at prices related to the
prevailing market prices or at negotiated prices. The Selling Shareholders may
effect such transactions by selling shares to or through broker-dealers, and
such broker-dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders for whom such
broker-dealers may act as agent or to whom they sell as principal or both.
Upon any sale of shares of Common Stock offered hereby, the Selling
Shareholders and participating broker-dealers or selling agents may be deemed
to be "underwriters" as that term is defined in the Securities Act of 1933, as
amended (the "Securities Act"), in which event any discounts, concessions or
commissions they receive, which are not expected to exceed those customary in
the types of transactions involved, or any profit on resales of such Common
Stock by them, may be deemed to be underwriting commissions or discounts under
the Securities Act. The Company has been advised by the Selling Shareholders
that there currently are no underwriting arrangements with respect to the sale
of the shares of Common Stock. To the extent required, the specific shares of
Common Stock to be sold, names of the Selling Shareholders, purchase price,
public offering price, names of any such broker-dealers or selling agent and
any applicable discount or commission with respect to a particular offer will
be set forth in an accompanying Prospectus Supplement. See "Plan of
Distribution."
The Common Stock is listed for quotation of the OTC Bulletin Board
under the symbol "LBGF." On April 1, 1997 the closing price of the Common
Stock as reported by the OTC Bulletin Board was $2 1/2 per share. See "Price
Range of Common Stock."
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-----------------------------------
The date of this Prospectus is ________________, 1997.
2
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of those filings can be obtained from the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and may also be obtained from the
website that the Commission maintains at http://www.sec.gov.
The Company has filed with the Commission, Washington, D.C. office, a
Registration Statement on Form SB-2 under the Securities Act for the
registration of securities offered hereby. This Prospectus omits certain of
the information contained in the Registration Statement, and reference is
hereby made to the Registration Statement and exhibits and schedules relating
thereto for further information with respect to the Company and the securities
to which this Prospectus relates. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by
such reference. Items of information omitted from this Prospectus but
contained in the Registration Statement may be inspected without charge at the
Public Reference Room of the Commission, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549, and copies of such material can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549, at
prescribed rates.
3
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Except as otherwise indicated, the
information in this Prospectus does not give effect to 1,739,500 shares of
Common Stock issuable upon the exercise of outstanding options and warrants.
THE COMPANY
The Company markets unique, high-quality golf training and performance
products and accessories to domestic and foreign markets. With the cooperation
and support of several professional golfers and golf equipment manufacturers,
the Company offers a line of products aimed at improving the game of golfers at
any level and enhancing enjoyment of the game.
The Company was incorporated in Florida on October 1, 1993. Executive
offices are located at 14561 58th Street North, in Clearwater, Florida 34620.
The telephone number at that address is (813) 535-7770.
THE OFFERING
<TABLE>
<S> <C>
Common Stock
outstanding . . . . . . . . . . 4,725,340 shares
Common Stock offered by
Selling Shareholders . . . . . . 1,318,448 shares (1)
Use of Proceeds . . . . . . . . The Company will not receive any proceeds from the sale of the shares
of Common Stock by the Selling Shareholders. See "Use of Proceeds."
Risk Factors . . . . . . . . . . The shares of Common Stock offered hereby are speculative in nature
and involve a high degree of risk. See "Risk Factors."
Nasdaq OTC Bulletin Board
symbol . . . . . . . . . . . . LBGF
</TABLE>
- ----------------
(1) Includes 125,000 shares of Common Stock issuable upon the exercise
of warrants issued to a lender. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
PRIOR REGISTRATION STATEMENT
The Prospectus also cover 265,000 outstanding Class A warrants,
275,000 Class B warrants and 540,000 shares of Common Stock underlying those
warrants previously registered on a Registration Statement on Form S-1 (File
No. 33- 97770). Each Class A warrant is exercisable into one share of Common
Stock at an exercise price of $4.75 per share. Each Class B warrant is
exercisable into one share of Common Stock at an exercise price of $7.50 per
share. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
4
<PAGE> 5
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
===========================================================================================================
October 1, 1993 Year Ended Three Months Ended
Statement of (Inception) Through September 30, December 31,
Operations Data: September 30, 1994 1995 1995 1995 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 22,339 $ 98,474 $ 495,681 128,302 70,200
- -----------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 15,791 149,263 198,396 29,768 19,587
Common shares issued
for services 21,500 664,726 111,950 --- 92,043
General and
administrative 357,792 727,178 1,287,951 240,547 651,318
---------- ---------- ---------- --------- ---------
395,083 1,541,167 1,598,297 270,315 762,948
- ------------------------------------------------------------------------------------------------------------
Net loss from operations (372,744) (1,442,693) (1,102,616) (142,013) (692,748)
- ------------------------------------------------------------------------------------------------------------
Other income and
(expense):
Interest expense --- (10,175) (7,087) (5,311) (7,089)
Interest expense-related (12,382) (20,314) (35,492) --- (31,254)
party ---------- ---------- ---------- --------- ---------
- ------------------------------------------------------------------------------------------------------------
Net loss $ (385,126) $(1,473,182) $(1,145,195) (147,342) (731,091)
- ------------------------------------------------------------------------------------------------------------
Per share information:
- ------------------------------------------------------------------------------------------------------------
Weighted average number
of common shares 1,624,703 1,991,640 2,698,060 2,612,218 3,194,007
outstanding
- ------------------------------------------------------------------------------------------------------------
Net loss per share $ (.24) $ (.74) $ (.42) $ (.06) $ (.23)
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
September 30,
Balance Sheet Data: December 31, 1996
1995 1996
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 8,061 $ 46,923 ---
Accounts Receivable 202 13,138 $ 60,105
Prepaid expenses - 9,000 9,000
Inventory 156,657 156,356 358,043
-------- -------- -------
Total current assets 164,920 225,417 427,148
======== ======== ========
- --------------------------------------------------------------------------------------------------------------
Total Assets: $ 188,214 $ 454,515 $ 808,067
- --------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity: $ 188,214 $ 454,515 $ 808,067
==============================================================================================================
</TABLE>
FORWARD-LOOKING STATEMENTS
The Company cautions readers that certain important factors may affect
the Company's actual results and could cause such results to differ materially
from any forward-looking statements which may be deemed to have been made in
this Prospectus or which are otherwise made by or on behalf of the
5
<PAGE> 6
Company. For this purpose, any statements contained in this Prospectus that
are not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate"
or "continue" or the negative other variations thereof or comparable
terminology are intended to identify forward-looking statements. Factors which
may effect the Company's results include, but are not limited to, the risks and
uncertainties discussed in "Risk Factors" below, as well as those discussed
elsewhere in this Prospectus and in the Company's other filings with the
Commission.
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY IS
SPECULATIVE IN NATURE AND INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.
HISTORY OF LOSSES AND UNCERTAINTY OF FUTURE FINANCIAL RESULTS
The Company has experienced accumulated losses from operations to date
and future financial results are uncertain. As such, there can be no assurance
that the Company can be operated in a profitable manner. Profitability depends
upon many factors, including the success of the Company's marketing program,
the maintenance or reduction of expense levels and the success of the Company's
business activities. The Company has accumulated losses of $1,145,195 and
$1,473,182 during its fiscal years ended September 30, 1996 and 1995,
respectively and $692,748 and $142,013 during the quarters ended December 31,
1996 and 1995, respectively. From its inception on October 1, 1993 through
December 31, 1996, the Company has accumulated losses from operating activities
of $3,696,251. See "Financial Statements."
DOUBT ABOUT COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN
The auditors' report on the Company's financial statements contains an
explanatory paragraph indicating there is substantial doubt about the Company's
ability to continue as a going concern. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Financial
Statements."
POTENTIAL CONTINGENT LIABILITY REGARDING POSSIBLE SECURITIES LAW REGISTRATION
VIOLATIONS
The purchasers in a private offering of shares of the Company's Common
Stock during September through November 1996 may have certain rescission rights
pursuant to federal and state securities laws. Accordingly, the Company may
have a contingent liability for rescission of up to $524,000, plus interest at
12% per annum. The exercise of such rescission rights by a sufficient number
of the purchasers may have a material adverse effect upon the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
NEED FOR ADDITIONAL FUNDS
The Company requires additional funding of at least $2,000,000 to fund
its operations through September 30, 1997. The Company may also require
additional funds after such period or prior to the expiration of such period in
the event the Company experiences certain unforeseeable events or the Company's
products fail to achieve anticipated customer response. The Company has secured
6
<PAGE> 7
a $500,000 line of credit (the "Credit Facility") and is exploring other
sources of potential financing, including a private offering of its preferred
stock. There is no assurance however, that the Company will be able to secure
the necessary funds on terms acceptable to it or at all. Failure to secure
needed financing would have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
UNCERTAINTY OF CONTINUATION OF MATERIAL AGREEMENT
The Company has an exclusive marketing agreement with Marshall
Products, Inc.("Marshall Products"), regarding certain products developed by
Mr. Perry Marshall. Mr. Marshall individually holds the patents to those
products and, as a result, Marshall Products may not be able to meet its
contract obligations should Mr. Marshall decide to limit the use of his
products. See "Business - Products."
DISCRETIONARY CONSUMER SPENDING; SEASONALITY
Sales of golf equipment and training aids have historically been
dependent on discretionary consumer spending, which is affected by the
popularity of golf and may be affected by general economic conditions. There
can be no assurance that golf will continue to have the popularity that it has
had in recent years. In addition, the Company's business operations may be
adversely affected by prolonged recessionary periods that decrease the amount
of discretionary income available to consumers. Furthermore, sales of the
Company's products is seasonal in that the Christmas season and Father's Day
are two strong buying periods. The spring season also produces strong orders
in the first six months of each calendar year. See "Business-Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends upon the continued contributions of Fred
L. Solomon, President and a director of the Company, James G. ("Greg") Solomon,
Executive Vice President and a director of the Company, and Patricia Sanders,
Secretary and a director of the Company, each of whom are also principal
shareholders of the Company. Messrs. Solomon and Ms. Sanders currently devote
substantially all of their business time to the affairs of the Company. The
loss of services of, or a material reduction in the amount of time devoted to
the Company by, these individuals could adversely affect the business of the
Company. The Company may need to hire additional management personnel to
support its planned business growth and there can be no assurances qualified
personnel can be recruited and retained. The future success of the Company is
highly dependent upon the Company's ability to attract and retain qualified key
employees. The inability to attract and retain these individuals for the long
term would have a material impact upon the business of the Company. See
"Management."
LACK OF EXPERIENCE OF MANAGEMENT
The financial success of the Company is partly dependent upon the
management expertise and judgment of its officers regarding the promotion of
its products. The current officers all have prior management experience with
large and small businesses and devote all of their time to the affairs of the
Company. However, the current officers do not have prior experience in the
specific type of golf product promotion being conducted by the Company. The
officers and directors will have the exclusive authority to manage and control
and make all decisions regarding the business and affairs of the Company.
There can be no assurance that management will be able to successfully conduct
the operations of the Company due to this lack of experience.
7
<PAGE> 8
FUTURE INCREASE IN MANAGEMENT COMPENSATION TO REASONABLE LEVELS
Although currently, the officers and directors have received minimal
compensation for their services, the Company may, in the future, compensate the
Company's management with reasonable salaries and other benefits, which may be
substantial in amount or cost. Payment of such salaries and/or the provision
of such benefits may require the Company to have a greater gross profit margin
than it currently has in order to achieve profitable operations in the future.
Even though no compensation plan has been proposed or agreed upon, the payment
of future salaries and the costs of these benefits may be a burden on the
Company and may be a factor in limiting or preventing the Company from
achieving profitable operations in the future. However, the Company would not
continue to compensate management with such substantial salaries and other
benefits under circumstances where to do so would have a material negative
effect on the Company's financial condition. See "Management - Executive
Compensation."
COMPETITION
The Company will be competing with established companies and other
entities, many of which may possess substantially greater resources than the
Company. Almost all of the companies with which the Company competes are
substantially larger, have more substantial histories, backgrounds, experience
and records of successful operations, greater financial, technical, marketing
and other resources, more employees and more extensive facilities than the
Company now has, or will have in the foreseeable future. The golf industry has
been characterized by widespread imitation of popular products. Increased
competition generally, and the introduction or promotion of competing products
specifically, could adversely affect the Company's revenues and profitability
by exerting pricing pressure, reducing market share and creating other
obstacles. In the golf industry, a company's ability to compete is dependent
in part upon its ability to satisfy various subjective preferences of golfers,
including the look and "feel" of a golf product and the level of acceptance
that the product has achieved among professional and other golfers. The
subjective preferences of purchasers of golf training products may be subject
to rapid and unanticipated changes. There can be no assurance that the
Company's golf training products will maintain market acceptance. See
"Business - Competition."
LIMITED PUBLIC MARKET FOR COMMON STOCK
The Company's Common Stock is traded on the OTC Bulletin Board under
the symbol "LBGF". However, the market for the Common Stock is limited and
sporadic.
TRADING RESTRICTIONS ATTENDANT TO PENNY STOCK STATUS
A Commission rule imposes additional sales practice requirements on
broker-dealers who sell certain low-priced securities ("Penny Stock") in
transactions other than private offerings to persons other than established
customers and institutional accredited investors. For transactions covered by
the rule, the broker-dealer must make a special suitability determination for
the purchaser and receive the purchaser's written agreement to the transaction
prior to the sale. Consequently, the rule may affect the ability of
broker-dealers to sell the Company's securities and may require investors to
hold the Company's securities for a longer period of time than they desire.
Generally, a Penny Stock has a market price below $5.00 per share and does not
qualify for any of the other exceptions to that status. Although, as of the
date of this Prospectus, the Company's Common Stock is exempt from status as a
Penny Stock by virtue of Rule 3a51-1(f) of the Exchange Act, there can be no
assurance that the Common Stock will continue to meet the requirements of that
or any other exemption. Failure for the Common Stock to meet an exemption could
have a material adverse effect on liquidity of a market for the Common Stock.
8
<PAGE> 9
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, the Company has 4,725,340 shares of
Common Stock outstanding. Of these shares, 3,087,540 are deemed to be
"restricted securities" as that term is defined under Rule 144 promulgated
pursuant to the Securities Act. Of such shares, 1,193,448 shares are being
registered pursuant to the Registration Statement of which this Prospectus
forms a part and will generally be capable of public sale without restriction.
As of the date of this Prospectus, 1,455,040 of the remaining restricted shares
are presently eligible for sale in the public market pursuant to Rule 144 (as
in effect on April 29, 1997). The remaining 439,052 restricted shares will
become eligible for sale subject to the restrictions of Rule 144 (as in effect
on April 29, 1997), at varying times from April 1996 to March 1998. See "Shares
Eligible for Future Sale."
As of the date of this Prospectus, options and warrants to purchase
1,739,500 shares of Common Stock are issued and outstanding. An aggregate of
650,000 shares of the Common Stock issuable upon exercise of certain warrants
are hereby being or have previously been registered.
Any future sale of the shares of Common Stock held by existing
shareholders, or the perception that such sale may occur, could have an adverse
effect on the price of the Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Certain
Transactions," "Description of Securities" and "Shares Eligible for Future
Sale."
LACK OF DIVIDENDS
There can be no assurance that the continued operations of the Company
will result in any revenues or will be profitable. The Company has never paid
dividends to any of its shareholders. At the present time, the Company intends
to use any earnings which may be generated to fiance the growth of the
Company's business and continued growth. Accordingly, while payment of
dividends rests within the discretion of the Board of Directors, the Company
does not presently intend to pay dividends and there can be no assurance that
dividends will ever be paid. See "Dividend Policy."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS
This Prospectus contains certain forward-looking statements regarding
the plans and objectives of management for future operation, including plans
and objectives relating to the development of the Company's business. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based on a successful execution of the Company's business
strategy and assumes that the Company will be profitable, that the contract
manufacturing industry will not change materially or adversely, and that there
will be no unanticipated material adverse change in the Company's operations or
business. Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although
the Company believes that its assumptions underlying the forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this Prospectus will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
9
<PAGE> 10
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Shareholders. See "Selling Shareholders."
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
intend to pay dividends for the foreseeable future. The Company intends to
retain earnings, if any, to finance the development and expansion of its
business. Payment of dividends in the future will depend, among other things,
upon the Company's ability to generate earnings, its need for capital and its
overall financial condition.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been listed for trading on the OTC
Bulletin Board, under the symbol "LBGF" since the Company's last fiscal quarter
of 1996. The following table sets forth, for the calendar quarters indicated,
the range of high and low prices per share of Common Stock as reported by the
OTC Bulletin Board:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fourth Quarter 1996 (Ending September 30, 1996) . . . . . . . . . . . . . . 3 7/8 3 1/8
First Quarter (Ending December 31,1996) . . . . . . . . . . . . . . . . . . 4 7/8 3 1/16
----- ------
Second Quarter (Ending March 31, 1997) . . . . . . . . . . . . . . . . . . 3 7/16 2 5/16
</TABLE>
On April 1, 1997, the closing price of the Common Stock as reported
by the OTC Bulletin Board was $2 1/2 per share.
SELECTED FINANCIAL DATA
The following selected financial data of the Company for the period
October 1, 1993 (inception) through September 30, 1994, the years ended
September 30, 1995 and 1996, and as of September 30, 1993, 1994, 1995 and 1996
are derived from the Company's financial statements and have been audited by
Winter, Scheifley & Associates, P.C., independent certified public accountants.
The statement of operations data for the three months ended December 31, 1995
and 1996 and the selected balance sheet data as of December 30, 1996 are
derived from unaudited interim financial statements contained elsewhere herein.
The unaudited interim financial statements include all adjustments, consisting
only of normal recurring adjustments, which the Company considers necessary for
a fair presentation of the financial position and the results of operations for
these periods. Operating results for the three months ended December 31, 1996
are not necessarily indicative of the results that may be expected for the year
ending September 30, 1997. This financial data should be read in conjunction
with the financial statements and the notes thereto, the unaudited interim
financial statements and the other financial information appearing elsewhere in
this Prospectus.
10
<PAGE> 11
<TABLE>
<CAPTION>
===========================================================================================================
October 1, 1993 Three Months Ended
(Inception) Year Ended December 31,
Statement of Through September September 30,
Operations Data: 30, 1995 1996
1994 1995 1996
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue $ 22,339 $ 98,474 $ 495,681 128,302 70,200
- -----------------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of sales 15,791 149,263 198,396 29,768 19,587
Common shares issued
for services 21,500 664,726 111,950 --- 92,043
General and
administrative 357,792 727,178 1,287,951 240,547 651,318
---------- ---------- ---------- --------- ----------
395,083 1,541,167 1,598,297 270,315 762,948
- -----------------------------------------------------------------------------------------------------------
Net loss from operations (372,744) (1,442,693) (1,102,616) (142,013) (692,748)
- -----------------------------------------------------------------------------------------------------------
Other income and
(expense):
Interest expense --- (10,175) (7,087) (5,311) (7,089)
Interest expense-related
party (12,382) (20,314) (35,492) --- (31,254)
--------- --------- ---------
- -----------------------------------------------------------------------------------------------------------
Net loss $ (385,126) $(1,473,182) $(1,145,195) (147,342) (731,091)
- -----------------------------------------------------------------------------------------------------------
Per share information:
- -----------------------------------------------------------------------------------------------------------
Weighted average number
of common shares 1,624,703 1,991,640 2,698,060 2,612,218 3,194,007
outstanding
- -----------------------------------------------------------------------------------------------------------
Net loss per share $ (.24) $ (.74) $ (.42) $ (.06) $ (.23)
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
============================================================================================================
September 30,
Balance Sheet Data December 31, 1996
1995 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets:
Cash $ 8,061 $ 46,923 ---
Accounts Receivable 202 13,138 $ 60,105
Prepaid expenses - 9,000 9,000
Inventory 156,657 156,356 358,043
-------- -------- -------
Total current assets 164,920 225,417 427,148
======== ======== ========
- ------------------------------------------------------------------------------------------------------------
Total Assets: $ 188,214 $ 454,515 $ 808,067
- ------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity: $ 188,214 $ 454,515 $ 808,067
============================================================================================================
</TABLE>
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR FISCAL QUARTERS ENDED DECEMBER 31, 1996 AND 1995
The Company experienced a net operating loss of ($731,091) for the
quarter ended December 31, 1996 compared to ($147,324) for the quarter ended
December 31, 1995. Net sales and cost of sales for the quarter ended December
31, 1996 were $70,200 and $19,587, respectively, as compared to net sales of
$128,302 and cost of sales of $29,768 for the quarter ended December 31, 1995.
During the quarter the Company emphasized expansion of its product
line from 6 products to 14 and continuing development of its retail
distribution channels. Several presentations were made to top sporting goods
chains and other retailers with significant commitments from Service
Merchandise, The Sports Authority and Champs. Orders from these retailers are
anticipated during the first quarter of calendar 1997. Interest in the
Angleiron(TM) is particularly high. The Company introduced its complete
product line at the PGA show in Orlando, Florida in January, 1997 and presented
its product line at the Supershow in Atlanta in February, 1997.
Selling, general and administrative expenses for the quarter ended
December 31, 1996 were $651,318 as compared to selling, general administrative
expenses of $240,547 for the same period in 1995. The increase over last year
of $410,771 resulted primarily from monies expended in preparation of the
launch of the Company's product line. Some of the categories these monies were
for included advertising, sales promotion, public relations, trade shows, sales
related travel, point of purchase material, infomercial-related consulting and
professional endorsements. Additionally, $82,115 for accrued Officers'
salaries was included in selling, general and administrative expense. Stock
issued for services related to endorsements, consulting and compensation was
valued at approximately $92,043 for the quarter ended December 31, 1996. Stock
was not issued for services during the quarter ended December 31, 1995.
Net cash used in operations was ($458,300) for the quarter ended
December 31, 1996 as compared to ($96,540) for the same period in 1995. Notes
payable to affiliates increased by $136,877 and accrued officers' salaries
increased by $91,246 for the quarter ended December 31, 1996. Proceeds from
the issuance of Common Stock were $461,005 for the quarter ended December 31,
1996 as compared to $150,000 for the quarter ended December 31, 1995. Included
in the Common Stock proceeds for the quarter ended December 31, 1996 was the
conversion of the note payable to affiliates (including interest of $32,404) for
$571,915 and the conversion of accrued officers' salaries (including interest
of $21,871) for $559,929 to stockholder's equity.
RESULTS OF OPERATIONS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1996 AND 1995
The Company experienced a net operating loss of $1,145,195 for the
fiscal year ended September 30, 1996, compared to a net operating loss of
$1,473,182 for the fiscal year ended September 30, 1995, a decrease of 22.3%.
Net sales and cost of sales for the fiscal year ended September 30, 1996, were
$495,681 and $198,396, respectively, as compared to net sales of $98,474 and
cost of sales of $149,263 for the fiscal year ended September 30, 1995. The
sales increase resulted from a large sale to Best Buy for $265,000 and
increasing sales into retail of SCRATCH SCORE GOLF(TM) and ONE PUTT PERFECTOR.
Selling, general and administrative ("SGA") expenses for fiscal year 1996 were
$1,399,901, as compared to $1,391,904 for fiscal year 1995, an increase of only
0.6%. Included in SGA expenses is stock issued for services related to product
development and marketing of $111,950 for fiscal
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<PAGE> 13
year 1996 as compared to $664,726 for fiscal year 1995, a decrease of 83.2%.
The decrease was the result of the Company's ability to pay for services in
cash in lieu of stock.
Accrued officers' salaries increased by $287,548 in fiscal year 1996.
Net cash used in operations was $506,505 for fiscal year 1996, as compared to
$636,762 for fiscal year 1995. Notes payable to affiliates increased by
$272,233 for fiscal year 1996. Proceeds from the issuance of Common Stock were
$455,000 for fiscal year 1996 as compared to $609,177 for fiscal year 1995.
TRENDS AND UNCERTAINTIES
The Company is focusing its efforts on the retail market development
of its products through presentations to major sporting goods chains and other
retailers, tradeshows, and infomercials beginning in the second quarter of
1997. The Company seeks to maintain low operating costs and continues to
source high quality, low cost manufacturers for its products. However,
increased marketing expenses will probably occur in future periods as the
Company continues to increase its market penetration and operating revenues.
The sale of the Company's products are seasonal with Father's Day and
the Christmas season being two strong buying periods. Additionally, the spring
season produces strong orders well into the summer months. Major retailers
such as Service Merchandise and Sports Authority have expressed an interest in
carrying several of the Company's products in their stores. The continuation
of obtaining additional types of new business and markets is uncertain and the
continued success of any of the Company's new marketing strategies for
generating revenue is uncertain.
Inasmuch as a major portion of the Company's activities is in the
development and marketing of golf training aids, the Company's business
operations may be adversely affected by competitors and prolonged recessionary
periods.
The purchasers in a private placement of shares of the Company's
Common Stock during September through November 1996 may have certain rescission
rights pursuant to federal and state securities laws. Accordingly, the Company
may have a contingent liability for rescission of up to $524,000, plus interest
at 12% per annum. The exercise of such rescission rights by a sufficient
number of the purchasers may have a materially adverse effect upon the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company was in the developmental stage through the fiscal year
ended September 30, 1995. The Company will begin airing infomercials in the
first half of calendar 1997. The infomercials will emphasize the Company's
premier products, ANGLEIRON(TM) and SCRATCH SCORE GOLF, and provide brand
identification for the "Level Best Golf" product line.
In June 1996, the Company entered into a 3-year lease for its current
facility at a monthly rental rate of $6,000. Other than this lease, the
Company has no material commitments for capital expenditures. The Company has
an option to buy its current facility at a price of $600,000. The Company
intends to purchase its new facility when it can obtain acceptable mortgage
financing for not less than 80% of the purchase price. The Company may elect
to pay all or part of the purchase price with proceeds realized, if any, from
the sale of Common Stock pursuant to exercise of outstanding Warrants, although
there is no assurance that sufficient proceeds will be received from such
exercise for such purposes.
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<PAGE> 14
The Company has incurred an operating loss of $731,091 for the quarter
ended December 31, 1996 and has incurred operating losses of $1,145,195 and
$1,473,182, respectively, for the fiscal years ended 1996 and 1995. Through
the Company's first fiscal quarter of 1997, the Company has not generated
positive cash flow from operations.
At December 31, 1996, the Company had negative working capital of
$1,004,043. The Company's independent auditors had qualified their opinion of
the Company's financial statements for the fiscal year ended September 30,
1996, to the effect that there is substantial doubt about the ability of the
Company to continue as a going concern.
The Company requires additional funding of approximately $2,000,000 to
fund its operations through September 30, 1997. In April 1997, the Company
entered into an agreement for the Credit Facility in the principal
amount of $500,000, with a sublimit of $350,000 for purchase orders. The
lender will provide a maximum advance of 60% on all purchase orders approved by
it and a minimum advance equal to the Company's costs related to purchase
orders. The Company will pay interest on any outstanding loans at a rate of
20% per annum. The lender has been granted a first lien on all assets of the
Company, received a commitment fee equalling 3% of the principal amount of
the Credit Facility, and a 1% syndication fee. The lender was also granted
five year warrants to purchase 125,000 shares of the Company's Common
Stock, exercisable at $2.00 per share, subject to adjustment. The term of the
Credit Facility is one year commencing on April 4, 1997.
In addition, the Company is also seeking to sell up to $3,825,000 of 8%
Subordinated Convertible Debentures due March 31, 2000 (the "Debentures") in a
private offering. The Debentures, which are subordinated to substantially all
of the Company's indebtedness, are convertible into shares of Common Stock at a
conversion price of $2.00 per share at the option of the holder or the Company
on or after December 31, 1997. There can be no assurance that the Company can
sell any or all of the Debentures offered.
There can be no assurance that either the Credit Facility, the private
offering of Debentures or any other source of potential financing which the
Company is presently considering will provide sufficient funds through
September 30, 1997. The Company may also require additional funds after such
period or prior to the expiration of such period in the event the Company
experiences certain unforeseeable events or the Company's products fail to
achieve anticipated customer response. There is no assurance that additional
funds will be available to the Company on terms acceptable to it or at all.
Failure to secure needed financing would have a material adverse effect on the
Company.
14
<PAGE> 15
BUSINESS
PRODUCTS
The Company's flagship product is SCRATCH SCORE GOLF(TM). The product
consists of three, 2-hour videos that address almost every facet of the game.
It also comes with five training aids designed to work in conjunction with the
practice drills demonstrated on the videos. Tape 1--"The Clinic: The Full Fall
Swing"--gives easy-to-follow instructions that help the golfer feel the correct
swing motion for driver, fairway woods and long irons. Tape 2--"The Clinic:
The Short Game: Error Corrections and Misconceptions"--shows proper techniques
for chipping, pitching, sand shots and putting. Tape 2 also demonstrates
correction for hooks, slices and other problem shots. Tape 3--"Playing the
Course"--shows golfers how to not get bogged down with too many swing mechanics
and also how to manage the golf game on the course. Included is a 20-minute
segment with noted sports psychologist, Dr. David Cook. Throughout the videos,
there are training aids to convey easy-to-understand practice drills from which
to build a solid golf swing.
This product, initially called MAXIMIZING YOUR GAME(TM), was
introduced by another party in 1992 through an infomercial, which ran in 1993
and sold over 100,000 units at $149.95 per unit. During the second quarter of
1997, the Company will re-introduce the product into the retail market at a
price ranging between $39.95 and $49.95 and will simultaneously offer the
product via an infomercial at a price of $59.95.
In 1995, the Company acquired exclusive marketing rights to the
SCRATCH SCORE GOLF(TM) system. The contract is automatically renewed on a
year-to-year basis if annual payments of at least $20,000 are made to Gator
Golf Enterprises, Inc. ("Gator Golf"), a company controlled by Mr. Armstrong.
As of the date of this Prospectus, the agreement with Gator Golf is still in
effect. Under the terms of the Agreement, the Company pays 10% of the gross
collected revenue on SCRATCH SCORE GOLF(TM) to Gator Golf. Gator Golf may
terminate the Agreement upon written notice if timely payments are not made by
the Company or in the event the Company declares bankruptcy or is insolvent.
The Company would have 10 days to cure any default.
From SCRATCH SCORE GOLF(TM), the Company developed three individual
instructional videos, each packaged with a training aid. THE TEMPO BALL
focuses on the swing lesson, THE RULER focuses on alignments and the short
game, and THE HANGER focuses on the power lesson.
Each of these products has a selling price point of $19.95. This
price point targets not only the inexpensive self-purchase, but also the much
larger gift-buying audience and allows the products to enter into an expanded
distribution pattern. The promotional series has been available for general
retail since the fourth quarter of 1996.
The Company has an exclusive marketing agreement with Marshall
Products for the ONE PUTT PERFECTER and other golf related products currently
under review and development by Mr. Perry Marshall, its principal. The
agreement is for a term of five years from the effective date of January 1,
1994, with an option to renew the agreement for an additional five years. The
Company pays a royalty of 7.5% of net sales. In the event that net sales of
units shall not exceed in the aggregate, for a period of four years, 60,000
units, Marshall Products shall have the right to give the Company 30 days
notice of the termination of the exclusive character of the agreement, unless
the Company can show, to the satisfaction of Marshall Products that its failure
was attributable to facts beyond its control, such as market conditions,
failure of supply of needed raw materials or strike. Marshall Products may
terminate the Agreement upon written notice if timely payments of royalties are
not made by the Company or in
15
<PAGE> 16
the event the Company declares bankruptcy or is insolvent. The Company would
have 90 days to cure any default.
Mr. Marshall individually holds the patents relating to these
products. As result, Mr. Marshall could, in the future, limit the Company's
use of the products. However, Marshall Products is controlled by Mr. and Mrs.
Marshall and the Company does not foresee any limitations or possible breach of
contract by Marshall Products.
The ONE PUTT PERFECTER is a patented training aid designed to help
golfers of any skill level develop a pendulum putting stroke. The ONE PUTT
PERFECTER is a small plastic component. It attaches to the shaft of a putter
just above the head and has a small vial which assures that the ONE PUTT
PERFECTER is square to the club face of the putter in one plane, and is level
with the horizon when the golfer addresses the ball. Inside the body of the
ONE PUTT PERFECTER, a small white ball sits on the front end of the ONE PUTT
PERFECTER when the golfer is addressing a putt. When the golfer makes a
putting stroke, the white ball travels toward the rear of the ONE PUTT
PERFECTER and lands in one of the three pockets (similar to a pool table ball
and pocket). The center pocket is located directly behind the point where the
small white ball is located prior to making the stroke. If a proper straight
back and straight through the target stroke (pendulum stroke) is made, the
white ball will go into this pocket, which is centered between two other
pockets. If the white ball travels into either of the other pockets, it would
indicate the putter's stroke was incorrect by taking the putter path inside or
outside of the desired center line path and would indicate that correction is
needed. The 30-minute instructional video shows golfers how to attach and use
the ONE PUTT PERFECTER and how to make proper strokes and correct faults in
improper strokes.
The ONE PUTT PERFECTER is planned to retail at $19.95. The Company
will introduce this product in sporting goods stores in the second quarter of
1997.
The Company also has an exclusive, worldwide marketing agreement with
Automated Golf Training Aids, Inc. ("Automated Golf"), for the ANGLEIRON(TM).
The agreement is for a term of five years that began March 31, 1996. So long
as the Company has achieved the minimum royalty levels in each of the five
contract years, the agreement will continue from year to year thereafter. The
Company pays a royalty of 8% of ANGLEIRON(TM) net sales. The Company must make
minimum royalty payments of $50,000 in 1997 and of $100,000 for each of 1998
through 2000. If the Company has defaulted for at least 30 days on any payment
due under the agreement, Automated Golf may terminate the agreement by giving
10 days prior written notice to the Company. The Company has 30 days
thereafter to cure any defect.
The ANGLEIRON(TM) is a multi-purpose training club for all levels of
play. The ANGLEIRON(TM) is a single golf club that adjusts to a 3, 5, 7 or 9
iron or sand wedge setting that locks into place with a turn of a dial near the
foot of the club's shaft. This product will help any golfer develop a better
chipping, pitching and full swing motion. The ANGLEIRON(TM) will begin airing
on infomercial by the end of the Company's second fiscal quarter of 1997.
The Company has an exclusive marketing agreement with Innovative
Products, Inc., for the BALL BUTLER. The agreement is for a term of five years
beginning January 1, 1997. The Company pays a royalty of $3.50 per unit for
the first 10,000 units sold and 11% of gross sales for all subsequent units
sold. The Company is required to maintain minimum unit sales for each calendar
year of the agreement. The minimum for 1997 is 150,000 units; for 1998,
250,000 units; for 1999, 300,000 units; for 2000, 150,000 units; and for 2001,
100,000 units. The BALL BUTLER device hangs on either the inside or outside of
a golf bag, holds up to 12 golf balls at a time and provides easy access to
golf balls.
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<PAGE> 17
The BALL BUTLER will be distributed directly into the retail market beginning
in either the second or third quarter of 1997 and will be priced at
approximately $20.
The Company has entered into a licensing agreement with Plane Sight,
Inc. ("Plane Sight"), whereby the Company has the exclusive right to market the
PLANE SIGHT LASER or LASER TRACKER. The term of the agreement is 36 months
from the date of the first shipment of the product. Plane Sight has the right
to terminate the agreement if the Company fails to make a first shipment within
six months of January 25, 1997, or if the Company fails to maintain minimum
sales of the product of 25,000 units in the first 12 months, 40,000 units in
the second 12 months and 60,000 units in the third 12 months. The Company has
agreed to pay a 10% royalty to Plane Sight on quarterly net collected sales of
the product.
The LASER TRACKER or PLANE SIGHT LASER is a product made with high
quality laser technology. It is designed to help any golfer improve his/her
game by allowing the golfer to follow the line of his/her swing. The Company
has initiated negotiations to market the product and anticipates that the
product will be available in the United States by the end of the Company's
third fiscal quarter of 1997, although there is no assurance that it will be
available by then.
The Company has an exclusive, worldwide marketing agreement with
Donald Cofer for GOLF 21. The agreement is for a term of five years that began
in February 1996 with renewal options for an additional five years. The
Company issued Mr. Cofer 2,000 shares of its Common Stock and agreed to pay a
royalty of 7.5% of gross sales. The Company is required to maintain minimum
unit sales for each calendar year of the agreement. The minimum for the first
year is 10,000 units; for the second year, 20,000 units; for the third year,
30,000 units; for the fourth year, 40,000 units; and for the fifth year, 50,000
units. GOLF 21 is an indoor/outdoor putting game for all ages that not only
entertains, but also can improve putting skills. It is promotionally priced
and has been available since the fourth quarter of 1996.
The Company has negotiated with Bill and Nikki Coward ("BNC") the
rights to market and sell on an exclusive, worldwide basis, a patented golf bag
cover under the name of the CLUBS HOUSE (originally the CLUB PARKA). However,
BNC also retains the right to sell the product in green grass pro shops and
off-course golf shops. The Company is required to pay BNC 10% of gross
collected sales of the CLUBS HOUSE on a quarterly basis. The term of the
agreement is five years provided the Company sells 50,000 units in 1997, and
100,000 units for each of 1998 through 2001. This is a high quality, uniquely
designed golf bag cover for use in inclement weather. It is promotionally
priced, has a universal need and can be purchased for personal use or as a
gift.
The GOLFERS FIRST AID CADDY is an assortment of products (aspirin,
bandages, sunscreen, etc.) packaged as a gift for golfers. This product is
promotionally priced and packaged for impulse buying. This product is expected
to be available by the end of the third quarter of 1997, although there is no
assurance that it will be available by then.
The REACH VIDEO is a program of the National Association of Junior
Golfers, sponsored by the Company and produced in cooperation with the United
States Golf Association, the PGA and the Ladies Professional Golfers
Association of America. This one-hour video, which targets junior golfers,
highlights the Rules, Etiquette, Appreciation, Conduct and History of the game
of golf. The product was made available for general retail beginning in the
fourth quarter of 1996.
The Company is reviewing numerous products for market viability. The
Company is also evaluating other golf product companies for potential
acquisition. Currently, the Company has not
17
<PAGE> 18
targeted any specific acquisitions. The Company plans to finance any future
products or acquisitions by future revenue from operations and/or any proceeds
received from subsequent sales of the Company's debt or equity securities or
upon exercise of the Company's Warrants, if any. There is no assurance that
any financing for either of these purposes will be available.
MARKET
As of late 1994, the total U.S. golf market was estimated at 25
million people. The Japanese market provides an additional 17 million golfers
using courses, and another 20 million on off-course venues. U.K., Australian
and Asian markets are fairly well developed, while India and Western Europe are
in early growth stages.
The number of U.S. golfers is expected to grow by another 20 million
by the year 2000. The National Golf Foundation, as reported in Golf Magazine,
recently released the statistics from its five-year study of consumer spending
on golf. They reported that consumers (both golfers and non-golfers) spent in
excess of $16 billion on golf and golf-related products in 1994. The study
revealed "that the average occasional golfer (fewer than eight rounds per year)
spends $144 a year on equipment and merchandise. Moderate golfers (8 to 24
rounds a year) each spend $248 annually, and avid golfers (24 or more rounds
per year) spend over twice that, $548 a year." The market is growing at the
rate of 20% per year.
Aging baby boomers and successful women are playing the sport in
record numbers. Both groups spend significantly on leisure activities. Golf
instruction is one of the fastest growing segments of the golf industry. Given
that golfers tend to spend more as they get older, all of this is good news for
the golfing industry.
Capturing a large share of the U.S. market is the highest immediate
priority for the Company. International markets will be explored as the
Company cultivates these markets, with due diligence performed in each market,
and paced strategies for global expansion.
MARKETING STRATEGY
The Company's marketing strategy employs a multi-tier strategy of
direct response television, direct response print, event marketing and
television supported retail marketing through conventional distribution systems
and outlets. Direct response is when the customer responds to a television
commercial or print ad and places a credit card order with the Company.
A two-minute direct response television commercial and a one-minute
retail support commercial on the Company have been completed. The commercials
feature pro golfer Wally Armstrong and golf school owner Greg Ortman, and were
filmed at Grenelefe Resort near Orlando, Florida.
The Company intends to employ the development of a golf tips column by
Wally Armstrong and a series of three- minute instructional mini-programs to be
inserted into golf programs on the various broadcast and cable sports networks.
The Company has created an interactive golf product page featuring all
the Company's products, golf clubs and training and instruction aids. This
interactive web page can be found on the Internet at
http://www.levelbestgolf.com.
Editors and writers at both general consumer and specialty
publications have received complete information kits (news release, photos,
video and actual product samples). Articles are planned to
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<PAGE> 19
support the primary marketing thrust provided by direct response television.
The publicity effort is planned to include the use of a newspaper mat service.
Three different articles are planned to be distributed to small daily and large
weekly newspapers in wealthy suburban markets. These types of articles offer
advice and talk about the benefits of the Company's products. A toll-free
number appears in some articles, while others offer a free brochure.
Additionally, the Company's infomercial marketing strategy employs a
product tier approach consisting of primary infomercial products, secondary
infomercial products, mid-range price point products and promotional price
point products. Furthermore, the Company has identified three product
classifications consisting of learning/teaching, performance improvement and
accessories.
Primary infomercials will be produced by the Company and run on cable
and television. A primary infomercial is one in which a new product is being
introduced to the public and has neither been available at retail nor on
infomercial prior to the airing of the primary infomercial. The products will
range in retail price points from $69.95 to $149.95. The ANGLEIRON(TM) would
be an example of a primary infomercial product.
Secondary infomercials will be a "second" generation of a primary
infomercial running at a reduced retail price point. These infomercials
re-introduce products that have previously been introduced to the public at
retail or otherwise and will run in conjunction with retail placement at price
points from $59.95 to $99.95. SCRATCH SCORE GOLF(TM) would be an example of a
secondary infomercial product.
Mid-range price products will be non-infomercial products (with
exceptions) with price points between $39.95 and $59.95, and are expected to be
the items most likely to appeal to large specialty and significant sporting
goods departments in general retail and catalog. SCRATCH SCORE GOLF(TM) will
be an example of a mid-range price product when it is re-introduced to the
retail market after the secondary infomercial stops airing.
Promotional price point products will be non-infomercial products
(with exceptions) with price points between $14.95 and $29.95, and an objective
of reaching mass market appeal. A retailer would purchase these products for
resale during seasonal periods. Examples of promotional price point products
would be the ONE PUTT PERFECTER, SCRATCH SCORE GOLF(TM) promotional series,
GOLF 21, BALL BUTLER, PERFORMANCE PACK, PARKA, GOLFERS FIRST AID CADDY and
REACH VIDEO.
DISTRIBUTION
The Company has developed the following to implement the distribution
and marketing plan of its products:
SALES TO NATIONAL CHAINS. The Company has contractual agreements with
12 independent representative organizations. This structure equates to 33
offices in 48 states with over 45 representatives calling on customers. These
representative organizations are known to have an excellent reputation within
the sporting goods industry with the ability over a period of time to present
the Company's product line-up to many retailers throughout the country.
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<PAGE> 20
SALES TO GOLF SHOPS. The Company is currently investigating the best
method by which to manage sales to both green grass golf pro shops and off
course golf pro shops. The Company believes that by the first half of 1997 it
will have a sales force in place to commence selling efforts in this business
segment, although there is no assurance that it will be accomplished by then.
OVERSEAS SALES. The Company has employed a representative
organization to pursue opportunities in Canada and the initial response has
generally been positive. The Company is currently discussing business
opportunities in Japan with a variety of agents, representatives and potential
customers. The Company believes that a relationship will be developed, and in
conjunction with its expanded product line-up, will be able to capitalize on
this opportunity during the first half of 1997, although there is no assurance
that it will occur by then.
INFOMERCIALS. The ANGLEIRON(TM) will be the Company's first vertical
(totally produced) infomercial. The creative/production process was started in
September 1996 and it is anticipated that the "roll out" will be in April of
1997. The Company is developing additional infomercials.
MANUFACTURING AND ASSEMBLY
The Company outsources all component manufacturing to proven reliable
sources and also has alternate sources available at similar costs. All
components except for curved glass vials and custom molded plastic bodies are
readily available from a number of suppliers. Dickson Tool and Mold, Inc.,
Brooksville, Florida, is the current source for glass curved vials. The
plastic molded bodies are also currently being provided by Dickson Tool and
Mold, Inc., Brooksville, Florida. The Company owns all tooling used in this
process.
UPARC, Inc., St. Petersburg, Florida, does the final assembly of some
components with quality surveillance being conducted by the Company's
personnel. The Company also has in-house capability to support near-term
requirements.
COMPETITION
The Company's current and future products compete in the recreation,
fitness, and sports training markets, which are highly competitive. Increased
competition generally, and the introduction or promotion of competing products
specifically, could adversely affect the Company's sales and profitability by
exerting pressure to reduce pricing and thereby gross margins, reducing market
share and creating other obstacles. In the golf industry, a distributor's
ability to compete is dependent in part upon its ability to satisfy various
subjective preferences of golfers, including the look and "feel" of a golf
product and the level of acceptance that the product has achieved among
professional and other golfers. The subjective preferences of purchasers of
golf training products may be subject to rapid and unanticipated changes.
The Company will be competing with established companies and other
entities, many of which may possess substantially greater resources than the
Company. Almost all of the companies with which the Company competes are
substantially larger, have more substantial histories, backgrounds, experience
and records of successful operations, greater financial, technical, marketing
and other resources, more employees and more extensive facilities than the
Company now has, or will have in the foreseeable future. It is also likely
that other competitors will emerge in the near future. There is no assurance
that the Company's products will compete successfully with other similar
products. The Company intends to compete on the basis of quality of its
products in addition to a price basis. Inability to compete successfully might
result increased costs and reduced yields.
20
<PAGE> 21
EMPLOYEES
As of the date of this Prospectus, the Company has 12 full-time
employees. None of the employees is subject to a collective bargaining
agreement. The Company believes that its relationship with its employees is
good. The Company will, as operations demand, sub-contract the balance of its
personnel through independent contractors or hire additional employees.
DESCRIPTION OF PROPERTY
The Company's executive offices are located at 14561 58th Street
North, Clearwater, Florida 34620. These offices consist of approximately 5,500
square feet of office space and approximately 60,000 square feet of warehouse
space on approximately 2.5 acres leased for three years and expiring on June
30, 1999, for $6,000 per month, plus applicable sales tax.
LEGAL PROCEEDINGS
The Company currently has no material pending or threatened legal
proceedings.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Pursuant to the Company's Articles of Incorporation, each director
serves until the annual meeting of the shareholders, or until his successor is
elected and qualified. Directors may be removed with or without "cause." The
term of office of each officer of the Company is at the pleasure of the
Company's Board.
The directors and principal executive officers of the Company are as
follows:
<TABLE>
<CAPTION>
==================================================================================================================
Name Age Current Company Positions Director Since
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
William E. Foley 49 Director 1996
- ------------------------------------------------------------------------------------------------------------------
Patricia A. Sanders 48 Director and Secretary 1993
- ------------------------------------------------------------------------------------------------------------------
Fred L. Solomon (1) 52 Director and President 1993
- ------------------------------------------------------------------------------------------------------------------
James G. ("Greg") Solomon (1) 43 Director and Vice President 1993
- ------------------------------------------------------------------------------------------------------------------
Donald E. Thompson 46 Director 1996
- ------------------------------------------------------------------------------------------------------------------
Curt L. Rodgers 48 Chief Financial Officer ----
==================================================================================================================
</TABLE>
(1) Messrs. Fred and James (Greg) Solomon are brothers.
WILLIAM E. FOLEY - Mr. Foley has been a Director of the Company since
December 4, 1996. From 1987 to 1996, Mr. Foley was an employee of
Vi - Tel Electronics, Inc., ("Vi-Tel"), a consumer electronics distributor.
From 1990 to 1996 Mr. Foley was Executive Vice President and Chief Operating
Officer. From 1994 to 1996, Mr. Foley was also President of Selectronics, a
consumer electronic manufacturer and subsidiary of Vi - Tel. Mr. Foley was
responsible for all facets of the business of Selectronics, with specific
emphasis on marketing and sales to the retail community. As President of
Selectronics, Mr.
21
<PAGE> 22
Foley was responsible for the start up, organization and expansion of this
business segment with a product line for direct sale to retailers. From 1981
to 1987, Mr. Foley was owner and president of two separate companies: G & S
Advertising, a full service advertising agency specializing in retail, and
Flick's N Fones, a six-store retail operation. Prior to 1981, Mr. Foley held
positions as Senior Vice President of Marketing and Advertising for Korvettes,
Inc., a 50 store, $600 million discount retailer; Vice President Advertising
for Vornado and Merchandise Manager for Mangurians Home Furnishings. Mr.
Foley's professional career started with the JC Penney Company. Mr. Foley
received a Bachelor of Science degree in Business Administration from Fairleigh
University in 1969.
Vi-Tel, Mr. Foley's former employer, filed a Chapter 11 proceeding on
January 16, 1996, in the Bankruptcy Court of the Federal District Court for New
Jersey, Case No. 96-20222.
PATRICIA A. SANDERS - Ms. Sanders has been a Director and the
Secretary of the Company since its October 1993 inception. From January 1989
to April 1993, Ms. Sanders worked as an executive assistant/corporate officer
to Paul L. Simmons in the following companies; (i) Viral Control Technology,
Inc. a public company located in Tampa, Florida, which marketed a line of
environmentally safe disinfectants; (ii) Fam-Pak, St. Petersburg, Florida, a
private company manufacturing Viral On-Guard, a disinfectant spray; (iii)
R.O.S.T., Inc., a Tampa research and development company of environmental
products and (iv) SanDesign, Inc., an environmental product design company.
From January 1979 to January 1989, Ms. Sanders was administrative assistant at
Nu-Room Company. Her responsibilities included marketing strategy, negotiating
contracts, processing mortgages, payroll, inventory and overseeing staff and
the production team.
FRED L. SOLOMON - Mr. Solomon has been a Director of the Company since
its October 1993 inception, its President since November 1994 and its
Controller since January 1996. From inception to November 1994, he was a Vice
President of the Company. From January 1993 to January 1994, Mr. Solomon was
Vice President of Power Generation for Nab Construction Company. He was
responsible for all aspects of the operation of power generation and mechanical
contracting for all projects. From October 1989 to November 1990, Mr. Solomon
was President of Southern Energy & Aerospace, Inc., a family-owned business
which fabricated and installed mechanical systems for the electric utility
power generation industry and which was acquired by JWP-Zack. Mr. Solomon's
responsibilities included total management of the Gary, Evansville and Tampa
Divisions which included sales, estimating, procurement and construction of the
mechanical systems. From April 1978 to August 1989 Mr. Solomon was President
of Specialty Maintenance & Construction, Inc., a general contractor with over
200 employees. Mr. Solomon performed a variety of sales, estimating,
accounting, purchasing, human resources, contract negotiations and executive
management services. Mr. Solomon received an Associates of Arts degree at
Daytona Community College in 1964 and a Bachelor of Arts degree at the
University of Florida in 1966.
JAMES G. ("GREG") SOLOMON - Mr. Solomon has been a Director of the
Company since its October 1993 inception and Vice President of the Company
since November 1994. He had served as President of the Company from inception
to November 1994. From October 1981 to July 1993, Mr. Solomon was Vice
President of Southern Energy & Aerospace, Inc., a family-owned business which
fabricated and installed mechanical systems for the electric utility power
generation industry. He was responsible for operations and achieving the goals
of the board of directors. He was also responsible for ensuring that critical
schedules and project budgets were achieved through proper utilization of
corporate resources. From November 1979 to September 1989, Mr. Solomon also
acted as Vice President of Specialty Maintenance & Construction, Inc., a
general contractor with over 200 employees. Mr. Solomon performed a variety of
sales, estimating, accounting, purchasing, human resources, contract
negotiations and executive management services.
DON E. THOMPSON - Mr. Thompson has served as a Director of the Company
since December 4, 1996. He provides consulting services to the Company in the
area of news media relations, as well
22
<PAGE> 23
as marketing and public relations. From 1986 to the present, Mr. Thompson has
been the President of Thompson Communications, a marketing and public relations
firm, with clients in the insurance, financial services, legal and accounting
professions.
CURT L. RODGERS - Mr. Rodgers has been the Chief Financial Officer of
the Company since November 1996. From 1994 to November 1996, Mr. Rodgers was
Executive Vice President and General Manager of Florida Directory Publishing,
Inc., located in St. Petersburg, Florida. Mr. Rodgers managed operations,
finance, systems, sales and human resources of this directory publisher owned
by the St. Petersburg Times. From 1988 to 1994, Mr. Rodgers was with Advo,
Inc., located in Tampa, Florida. Mr. Rodgers served in the capacity of Vice
President of Finance and Division Controller for Advo, Inc. from 1991 to 1994.
During that time, Mr. Rodgers managed financial reporting and analysis and
systems development for a $200 million division within this $1 billion
direct-mail advertising company and directed the activities of a financial
staff of 66 associates located in five regional offices.
KEY EMPLOYEES
JOSEPH RALPH ("BUTCH") PAUL, JR. - Mr. Paul, age 46, has over 20 years
experience in corporate and golf sales. Mr. Paul is the owner of Rutland
Travel Company, a $2 million in sales travel agency in Rutland, Vermont, which
he founded in 1986. He has been a featured speaker to corporate and golf
organizations and associations across the United States. He is a competitive
golfer with a USGA 3 handicap. In 1992, Mr. Paul was retained by the E.J.
Manely Company as a consultant to management and sales. His responsibilities
included training, organization and motivation, as well as dealing with service
and attitude. Since 1992, Mr. Paul has worked as a consultant to golf
companies that have included Active Sports, Copely, Inc., TEE Sports, and the
B.C. Open. In 1988, Mr. Paul helped found Mindset, Inc. As Mindset's
President, his responsibilities included daily operations and sales of
Mindset's Golf Workshops, which dealt successfully with the mental side of golf
and its relationship to business and life. Mr. Paul also directed all sales of
Mindset Golf Apparel, which grew to $2.3 million in sales in two years. Until
1988, he was employed by the Prudential Insurance Company, with both sales and
management responsibilities. In his tenure with Prudential, Mr. Paul was the
recipient of many national sales awards including: Prudential Academy of
Honor, the PRESTIGIOUS President Citation Award, the National Quality Award,
and the National Sales Achievement Award.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
information concerning compensation for fiscal year 1996 received by the Chief
Executive Officer (the "CEO"). No other executive officer's annual salary and
bonus exceeded $100,000 for fiscal year 1996 (collectively with the CEO, the
"Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
==============================================================================================================
Other Annual
Compensation (1) Securities Underlying
Name and Principal Position Year Salary ($) Bonus ($) ($) Options/SARS (#)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fred L. Solomon, 1996 125,000 (2) -0- -0- 200,000
Director and President 1995 80,000 (2) -0- -0- -0-
1994 80,000 (2) -0- -0- -0-
=============================================================================================================
</TABLE>
23
<PAGE> 24
(1) The table does not include amounts for personal benefits extended to
Mr. Solomon by the Company, such as health or life insurance. The
Company believes that the incremental cost of those benefits to Mr.
Solomon during any of fiscal 1994-1996 did not exceed the lesser of
$50,000 or 10% of his total annual salary and bonus.
(2) The figures in the table are the stated annual salary rates for the
fiscal years presented. Mr. Solomon received actual compensation of
only $14,468 in fiscal 1996, $17,300 in fiscal 1995 and $14,400 in
fiscal 1994. The Company accrued, but did not pay to Mr. Solomon, the
balance of his stated annual salary in each of those years ($110,532
in fiscal 1996, $62,700 in fiscal 1995 and $65,600 in fiscal 1994).
OPTIONS GRANTED DURING LAST FISCAL YEAR
The following table sets forth information concerning option grants
during the fiscal year ended September 30, 1996, to the Named Executive
Officer.
<TABLE>
<CAPTION>
=======================================================================================================
INDIVIDUAL GRANTS
Shares Underlying % of Total Options Exercise Price Expiration
Name Options Granted Granted to ($/Share) Date
($) Employee in Fiscal
Year
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred L. Solomon 200,000 (1) 18.64% 2.25 6/3/2001
=======================================================================================================
</TABLE>
(1) Amounts shown represent the number of non-qualified stock options,
without tandem stock appreciation rights ("SARs"), granted in fiscal
year 1996. Payment must be made in full upon exercise in cash or
Common Stock. The option holder may elect to have shares of Common
Stock issuable upon exercise withheld by the Company to pay
withholding taxes due.
AGGREGATED OPTIONS EXERCISED DURING LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth information concerning the value of
unexercised stock options at the end of the fiscal year for the Named Executive
Officer.
<TABLE>
<CAPTION>
================================================================================================================
Number of
Unexercised Value of Unexercised
Options at Fiscal In-The-Money Options at
Shares Acquired Year End (1) Fiscal year End (5) (2)
Name on Exercise (%) Value Realized ($) Exercisable Exercisable
/Unexercisable /Unexercisable
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred L. Solomon 0 0 200,000/0 175,000/0
================================================================================================================
</TABLE>
(1) No SARs were outstanding at September 30, 1996.
(2) The value shown equals the difference between the exercise price of
unexercised in-the-money options and the closing market price of the
underlying Common Stock at September 30, 1996.
The Company has not entered into employment agreements with its Named
Executive Officers. The Company does have in place medical insurance for its
employees (insurance cost of approximately $1,066 every three months), however,
it does not have any retirement benefit programs or Section 401(k) benefit in
the compensation of "outside directors" and directors who are also officers of
the Company.
24
<PAGE> 25
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of the date of this Prospectus,
certain information regarding the Company's Common Stock owned of record or
beneficially by (i) each person who owns beneficially more than 5% of the
Company's outstanding Common Stock; (ii) each of the Company's Directors and
Named Executive Officers; and (iii) all Directors and executive officers as a
group.
<TABLE>
<CAPTION>
============================================================================================================
Amount and Nature of Percent
Name and Address of Beneficial Owner Beneficial Ownership of Class (1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
William E. Foley 70,000 (2) 1.5%
170 Berkshire Road
Hasbrouck Heights, NJ 07604
- ------------------------------------------------------------------------------------------------------------
Curt L. Rodgers 7,000 (3) 0.2%
15624 Indian Queen Drive
Odessa, FL 33556
- ------------------------------------------------------------------------------------------------------------
Patricia A. Sanders (4) 231,450 (5) 6.7%
11680 Shipwatch Drive
Villa 1452
Largo, FL 34644
- ------------------------------------------------------------------------------------------------------------
Fred L. Solomon (4) 693,343 (6) 20.1%
285 - 107th Ave., #801
Treasure Island, FL 33706
- ------------------------------------------------------------------------------------------------------------
James G.("Greg") Solomon (4) 691,178 (7) 20.1%
4101 Kipling Avenue
Plant City, FL 33567
- ------------------------------------------------------------------------------------------------------------
Donald E. Thompson 42,309 (8) 1.3%
3580 Lakemont Drive
Bonita Springs, FL 34134
- ------------------------------------------------------------------------------------------------------------
All Directors and executive officers 1,713,280 (9) 43.8%
as a group (six persons)
============================================================================================================
</TABLE>
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock beneficially owned by them.
(2) Includes options to purchase 50,000 shares of Common Stock at an
exercise price of $2.25 per share that were granted to Mr. Foley in
June 1996.
(3) Includes options to purchase 5,000 shares of Common Stock at an
exercise price of $3.50 per share that were granted to Mr. Rodgers in
November 1996.
(4) Pursuant to a Lock-up Agreement dated October 1, 1995, Fred L.
Solomon, James G. Solomon and Patricia A. Sanders have agreed that,
in the event any of them exercises any warrants, the stock issued
pursuant to the exercise will be restricted from trading for a period
of two years. They also agreed not to sell or otherwise transfer
their interest in the warrants except to an underwriter or other
market makers in the stock once a market is established. They further
agreed that the total value, in cash, or other consideration, paid by
the buyer to the seller in such circumstances will not exceed $.001
per warrant.
(5) Includes five-year options to purchase 200,000 shares of Common Stock
at an exercise price of $2.25 per share that were granted to Ms.
Sanders in June 1996. Excludes 18,000 shares of Common Stock owned by
the adult children
25
<PAGE> 26
of Ms. Sanders, as to which she disclaims any beneficial interest, and
20,047, 20,047 and 20,047 shares of Common Stock subject to Class A
Warrants, Class B Warrants and Class C Warrants, respectively, held by
Ms. Sanders and exercisable immediately on issuance and for a period
of 48 months, subject to redemption, because all of the outstanding
warrants are currently out-of-the-money.
(6) Includes five-year options to purchase 200,000 shares of Common Stock
at an exercise price of $2.25 per share that were granted to Mr. Fred
Solomon in June 1996. Excludes 109,367, 109,367 and 109,367 shares of
Common Stock subject to Class A Warrants, Class B Warrants and Class C
Warrants, respectively, held by Mr. Fred Solomon and exercisable
immediately on issuance and for a period of 48 months, subject to
redemption, because all of the outstanding warrants are currently
out-of-the money.
(7) Includes 30,000 shares of Common Stock owned by Mr. Greg Solomon's
wife and minor children and five-year options to purchase 200,000
shares of Common Stock at an exercise price of $2.25 per share that
were granted to Mr. Greg Solomon in June 1996. Excludes 109,367,
109,367 and 109,367 shares of Common Stock subject to Class A
Warrants, Class B Warrants and Class C Warrants, respectively, held by
Mr. Greg Solomon and exercisable immediately on issuance and for a
period of 48 months, subject to redemption, because all of the
outstanding warrants are currently out-of-the-money.
(8) Includes 21,795 shares of Common Stock jointly owned by Mr. Thompson
and his wife and five-year options to purchase 10,000 shares of Common
Stock at an exercise price of $2.25 per share that were granted to Mr.
Thompson in June 1996.
(9) Includes 665,000 shares of Common Stock subject to options.
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock by each Selling Shareholder as of the
date of this Prospectus, based on information made available to the Company by
the Selling Shareholders:
<TABLE>
<CAPTION>
================================================================================================================================
NUMBER OF SHARES
NUMBER OF SHARES NUMBER OF SHARES TO BENEFICIALLY OWNED
NAME OF SELLING SHAREHOLDER BENEFICIALLY OWNED(1) BE REGISTERED AFTER THE OFFERING(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Battle, Maxwell A. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Bell, Michael C. & Patricia F. 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Bennett, Paul 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Bentley, C. Mickler 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Black, Andrew L. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Black, Aaron G. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Bradshaw, Richard 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Bruss, Jeffery C. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Cass, Nancy, P.A. 3,000 3,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Cofer, Donald G. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Delporte, Cindy B. 25,000 25,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Dorow, Art 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Dupre, Madeleine 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 27
<TABLE>
================================================================================================================================
NUMBER OF SHARES
NUMBER OF SHARES NUMBER OF SHARES TO BENEFICIALLY OWNED
NAME OF SELLING SHAREHOLDER BENEFICIALLY OWNED(1) BE REGISTERED AFTER THE OFFERING(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Durr, Nicole 18,000 18,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Eastman, Esmeralda 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Elketon Trading Group 40,000 40,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Erker, Brenda E. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Executive Concepts 1,500 1,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Ferguson, James D. 3,000 3,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Filson, Alan 35,000 35,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Foley, William E. (3) 70,000 20,000 50,000
- --------------------------------------------------------------------------------------------------------------------------------
Fox, Linda B. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Frey, Tina 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Garvin, Lorraine 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Gillingham, Robert 35,000 35,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Graham, Andrew, P.A. 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Hansen, Jay & Stacy 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Hansen, William 17,000 17,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Harmon, Butch 2,500 2,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Hassler, Randy & Lynda K. 2,225 2,225 0
- --------------------------------------------------------------------------------------------------------------------------------
High Point Capital, LLC (4) 125,000 125,000 0
- --------------------------------------------------------------------------------------------------------------------------------
I. W. Miller & Co., Inc. 128,100 128,100 0
- --------------------------------------------------------------------------------------------------------------------------------
Jackson, Bob 20,000 20,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Paul, Joseph (5) 35,000 10,000 25,000
- --------------------------------------------------------------------------------------------------------------------------------
Kack, Joseph L. 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Koch, Gary 7,500 7,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Koch, Patricia 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Koch, Rachel 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Kreusch, Richard R. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Kruckemyer Trust, Martha Jean 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Kruckmeyer
- --------------------------------------------------------------------------------------------------------------------------------
Kucera, Jan, Jr. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Lawson, J. D. 87,000 87,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Lenz, Frederick 18,182 18,182 0
- --------------------------------------------------------------------------------------------------------------------------------
Lockwood, Thomas A. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
<TABLE>
<CAPTION>
================================================================================================================================
NUMBER OF SHARES
NUMBER OF SHARES NUMBER OF SHARES TO BENEFICIALLY OWNED
NAME OF SELLING SHAREHOLDER BENEFICIALLY OWNED(1) BE REGISTERED AFTER THE OFFERING(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lown, Robert W. & Christine R. 5,275 5,275 0
- --------------------------------------------------------------------------------------------------------------------------------
Madden, John F. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
McAlister, Mark 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
McGilvery, Polly Ann (6) 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
McGowan, Jared & Julie 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Medvedev, Alexander 44,000 44,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Meyers, Art 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Millennium Investments 36,364 36,364 0
- --------------------------------------------------------------------------------------------------------------------------------
Modrall, Janis M. 4,000 4,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Mould, Owen A. & Helen A. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Myers, Krause & Stevens Profit 5,000 5,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Sharing Savings Plan
- --------------------------------------------------------------------------------------------------------------------------------
Nagy, Emil & Marilyn S. 2,500 2,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Norris, James T. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
O'Brien, J. Barrett 2,500 2,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Pacific Communication 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Peterson, Pete 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Pomfret, Christopher 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Pomfret, David Wm. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Pomfret, Roland & Barbara B. 10,000 10,000 0
- --------------------------------------------------------------------------------------------------------------------------------
R. E. Hunt Trust, R. E. Hunt 2,000 2,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Ricci, Frank 18,000 18,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Rodgers, Curt (7) 7,000 2,000 5,000
- --------------------------------------------------------------------------------------------------------------------------------
Rothenberg, Fiona B. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Sanders, Christopher (8) 8,000 8,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Sanders, Douglas Wm. (8) 7,000 7,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Sanders, Patricia (9) 231,450 31,450 200,000
- --------------------------------------------------------------------------------------------------------------------------------
Schleitdt, Willi G. 2,500 2,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Schubert, Franz J. 1,500 1,500 0
- --------------------------------------------------------------------------------------------------------------------------------
Scmitz, Michael 3,000 3,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Seymour, Margie M. 1,000 1,000 0
- --------------------------------------------------------------------------------------------------------------------------------
Shannon & Rosenbloom 115,000 115,000 0
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
=================================================================================================================================
NUMBER OF SHARES
NUMBER OF SHARES NUMBER OF SHARES TO BENEFICIALLY OWNED
NAME OF SELLING SHAREHOLDER BENEFICIALLY OWNED(1) BE REGISTERED AFTER THE OFFERING(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sherlock, Robert & Pamela 4,000 4,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Sloo, Milo G.,III Family Trust, 10,000 10,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
G. Milo Sloo, III
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Matthew (10) 15,000 15,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Fred L. (11) 693,343 43,818 649,525
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Fred, Sr. (12) 7,000 7,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, James G. (13) 691,178 44,034 647,144
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Marshall (14) 15,000 15,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Michael Scott (14) 26,000 26,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Ronald (15) 3,000 3,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Solomon, Steven T. (16) 48,000 28,000 20,000
- ---------------------------------------------------------------------------------------------------------------------------------
Spitzer, Richard 2,500 2,500 0
- ---------------------------------------------------------------------------------------------------------------------------------
Stasulis, William C. 2,500 2,500 0
- ---------------------------------------------------------------------------------------------------------------------------------
Stephensen, Jan 1,000 1,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Storman, Brian 10,000 10,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Tincher-Evans, Ruth 14,000 14,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Tinter, Arnold 1,500 1,500 0
- ---------------------------------------------------------------------------------------------------------------------------------
Treloar, John C. 1,000 1,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Vigorite, Rocco 36,000 36,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Webb, Keith 10,000 10,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Whitbeck, Norman 1,000 1,000 0
- ---------------------------------------------------------------------------------------------------------------------------------
Wong, Johnny 3,000 3,000 0
=================================================================================================================================
</TABLE>
(1) Except as otherwise indicated, the persons named in this table have
sole voting and investment power with respect to all shares of Common
Stock listed. Includes shares of Common Stock that such persons have
the right to acquire a beneficial interest in within 60 days from the
date of this Prospectus.
(2) Assumes that all shares of Common Stock registered for the account of
Selling Shareholders are sold pursuant to this Prospectus.
(3) Mr. Foley is currently a director and the Chief Operating Officer of
the Company.
(4) Represents shares underlying warrants issued to lender of the
Company's Credit Facility.
(5) Mr. Paul is currently an employee of the Company.
(6) Ms. McGilvery is currently employed as the Administrative Assistant to
the Company's President and Secretary.
(7) Mr. Rodgers is the Chief Financial Officer and Chief Accounting
Officer of the Company.
29
<PAGE> 30
(8) Mr. Sanders is the son of Ms. Patricia Sanders, an executive officer
and director of the Company.
(9) Ms. Sanders is currently a director and the Secretary of the Company.
(10) Mr. Solomon is the son of Mr. James G. ("Greg") Solomon, an executive
officer and director of the Company.
(11) Mr. Solomon is currently a director and the President of the Company.
(12) Mr. Solomon, Sr. is the father of Messrs. James G. ("Greg") Solomon
and Fred L. Solomon, directors and executive officers of the Company.
(13) Mr. Solomon is currently a director and Executive Vice President of
the Company.
(14) Mr. Solomon is the son of the Company's President, Mr. Fred L.
Solomon.
(15) Mr. Solomon is the brother of Messrs. James G. ("Greg") Solomon and
Fred L. Solomon, directors and executive officers of the Company.
(16) Mr. Solomon is the son of the Company's President, Mr. Fred L.
Solomon, and is currently employed as the Company's lead marketing
representative.
CERTAIN TRANSACTIONS
During December 1993, the Company borrowed $177,000 from Southern
Energy & Aerospace, Inc. ("Southern Energy"), a corporation controlled by Fred
Solomon and Greg Solomon, two of the Company's Directors, executive officers
and largest shareholders. This loan had a balance of $162,805 during fiscal
year 1995. During fiscal year 1996, the Company borrowed an additional net
amount of $272,233, leaving a balance owed of $435,038 at September 30, 1996.
During the first quarter of fiscal year 1997, the Company borrowed an
additional $424,782, leaving a balance owed of $859,820 as of March 20, 1997.
The note bears interest, which is accrued, at prime plus 1.5% and is payable on
demand.
On October 26, 1994, the Board of Directors authorized the
distribution of 275,000 each of Class A and B Warrants to purchase shares of
Common Stock exercisable as follows:
$4.75 to exercise each Class A warrant for one share of Common
Stock; and
$7.50 to exercise each Class B warrant for one share of Common
Stock.
The warrants are exercisable for a period of 48 months from the date
of issue and are callable with 30 days notice at a price of $.001 per warrant.
These distributions were made to the owners of record of Common Stock on the
books of the Company as of January 2, 1995. Subsequent to the distributions,
10,000 Class A warrants were exercised.
During the fiscal year ended September 30, 1996, the Company accrued
$266,732 in unpaid salary due to Mr. Fred Solomon ($110,577), Mr. Greg Solomon
($88,462) and Ms. Sanders ($67,693). During the fiscal year ended September
30, 1995, the Company accrued $178,940 in unpaid salary due Mr. Fred Solomon
($74,900), Mr. Greg Solomon ($70,200) and Ms. Sanders ($33,840).
30
<PAGE> 31
DESCRIPTION OF SECURITIES
GENERAL
The following statements constitute brief summaries of the Company's
Articles of Incorporation and Bylaws, as amended. Such summaries do not
purport to be complete and are qualified in their entirety by reference to the
full text of the Articles of Incorporation and Bylaws.
The Company's Articles of Incorporation authorize it to issue up to
50,000,300 Shares of capital stock consisting of 50,000,000 Common Shares, par
value $.001 per share, and 300 shares of Class A Preferred Stock, par value
$1,000 per share.
COMMON STOCK
Holders of Common Stock of the Company are entitled to cast one vote
for each share held at all shareholders meetings for all purposes. Upon
liquidation or dissolution, each outstanding share of Common Stock will be
entitled to share equally in the assets of the Company legally available for
distribution to shareholders after the payment of all debts and other
liabilities. Common Stock does not have any cumulative or preemptive or other
right to subscribe to or purchase additional Common Stock in the event of a
subsequent offering. All outstanding Common Stock is, and the shares offered
hereby will be, legally issued, fully paid and non-assessable.
The Board of Directors of the Company may not declare dividends where
payment would render the Company insolvent or the Company is already insolvent.
The Company has not paid dividends to date and it is not anticipated that any
dividends will be paid in the foreseeable future. The Board of Directors
initially may follow a policy of retaining earnings, if any, to finance the
future growth of the Company. Accordingly, future dividends, if any, will
depend upon, among other considerations, the Company's need for working capital
and its financial conditions at the time.
COMMON STOCK PURCHASE WARRANTS
On October 26, 1994, the Board of Directors authorized the
distribution of 275,000 each of Class A and B stock purchase warrants
exercisable as follows:
$4.75 to exercise each Class A warrant for one share of Common
Stock; and
$7.50 to exercise each Class B warrant for one share of Common
Stock.
The warrants are exercisable for a period of 48 months from the date
of issue and are callable with 30 days notice at a price of $.001 per warrant.
These distributions were made to the owners of record of Common Stock on the
books of the Company as of January 2, 1995. Subsequent to the distributions,
10,000 Class A warrants were exercised.
PREFERRED STOCK
During October 1995, the Company authorized the issuance of 300 shares
of $1,000 par value of Preferred Stock. The Preferred Stock is convertible
into 1,000 shares of Common Stock for each preferred share at any time after
180 days (or as required by the Company) from the date of issue at the option
of the holder. The Preferred Stock does not have any vote on matters submitted
to shareholders and is not entitled to the payment of dividends and will be
deemed for the purpose of distribution of assets in liquidation to be converted
into Common Stock.
31
<PAGE> 32
TRANSFER AGENT
Florida Atlantic Stock Transfer Incorporated of Tamarac, Florida
serves as the Company's transfer agent.
CERTAIN FLORIDA LEGISLATION
Florida has enacted legislation that may deter or frustrate takeovers
of Florida corporations. The Florida Control Share Act generally provides that
shares acquired in a "control share acquisition" will not possess any voting
rights unless such voting rights are approved by a majority of the
corporation's disinterested shareholders. A "control share acquisition" is an
acquisition, directly or indirectly, by any person of ownership of, or the
power to direct the exercise of voting power with respect to, issued and
outstanding "control shares" of a publicly held Florida corporation. "Control
shares" are shares, which, except for the Florida Control Share Act, would have
voting power that, when added to all other shares owned by a person or in
respect to which such person may exercise or direct the exercise of voting
power, would entitle such person, immediately after acquisition of such shares,
directly or indirectly, alone or as a part of a group, to exercise or direct
the exercise of voting power in the election of directors within any of the
following ranges: (i) at least 20% but less than 33-1/3% of all voting power;
(ii) at least 33-1/3% but less than a majority of all voting power; or (iii) a
majority or more of all voting power. The Florida Affiliated Transactions Act
generally requires supermajority approval by disinterested shareholders of
certain specified transactions between a public corporation and holders of more
than 10% of the outstanding voting shares of the corporation (or their
affiliates). Florida law and the Company's Articles and Bylaws also authorize
the Company to indemnify the Company's directors, officers, employees and
agents. In addition, the Company's Articles and Florida law presently limit
the personal liability of corporate directors for monetary damages, except
where the directors (i) breach their fiduciary duties, and (ii) such breach
constitutes or includes certain violations of criminal law, a transaction from
which the directors derived an improper personal benefit, certain unlawful
distributions or certain other reckless, wanton or willful acts or misconduct.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, the Company has 4,725,340 shares of
Common Stock outstanding. Of these shares, 3,087,540 are deemed to be
"restricted securities" as such term is defined under Rule 144 promulgated
pursuant to the Securities Act.
In general, under Rule 144, if a period of at least one year (two
years until April 29, 1997) has elapsed since the later of the date the
"restricted shares" (as that phrase is defined in Rule 144) were acquired from
the Company and the date they were acquired from an Affiliate, then the holder
of such restricted shares (including an Affiliate) is entitled to sell a number
of shares within any three-month period that does not exceed the greater of 1%
of the then outstanding shares of the Common Stock or the average weekly
reported volume of trading of the Common Stock on the OTC Bulletin Board during
the four calendar weeks preceding such sale. The holder may only sell such
shares through unsolicited brokers' transactions or directly to market makers.
Sales under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning the Company. An "affiliate" of the Company, as
such term is defined in Rule 144 (an "Affiliate") may sell shares not
constituting restricted shares in accordance with the foregoing volume
limitations and other requirements but without regard to the one-year holding
period.
Under Rule 144(k), if a period of at least two years (three years
until April 29, 1997) has elapsed between the later of the date restricted
shares were acquired from the Company and the date they were
32
<PAGE> 33
acquired from an Affiliate, as applicable, a holder of such restricted shares
who is not an Affiliate at the time of the sale and has not been an Affiliate
for at least three months prior to the sale would be entitled to sell the
shares immediately without regard to the volume limitations and other
conditions described above.
Of the Company's 3,087,540 shares which are deemed to be "restricted
securities", 1,193,448 shares are being registered pursuant to the Registration
Statement of which this Prospectus forms a part and such shares together with
those shares of Common Stock which are also being registered hereunder,
generally will be capable of public sale without restriction. As of the date
of this Prospectus, 1,455,040 of the remaining restricted shares are presently
eligible for sale in the public market pursuant to Rule 144 (as in effect on
April 29, 1997), subject to the volume limitations and other restrictions
contained therein. The remaining 439,052 restricted shares will become
eligible for sale subject to the restrictions of Rule 144 (as in effect on
April 29, 1997) at varying times from April 1996 to March 1998.
The Company can make no predictions as to the effect, if any, that
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock in the public market, or the perception that such sales may
occur, could adversely affect prevailing market prices.
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Common Stock offered hereby for
their own accounts in open market or block transactions or otherwise in
accordance with the rules of The OTC Bulletin Board, or in private
transactions, at prices related to the prevailing market prices or at
negotiated prices. The Selling Shareholders may effect such transactions by
selling shares to or through broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the Selling Shareholders for whom such broker-dealers may act as agent or to
whom they sell as principal or both. Upon any sale of shares of Common Stock
offered hereby, the Selling Shareholders and participating broker-dealers or
selling agents may be deemed to be "underwriters" as that term is defined in
the Securities Act, in which event any discounts, concessions or commissions
they receive, which are not expected to exceed those customary in the types of
transactions involved, or any profit on resales of such Common Stock by them,
may be deemed to be underwriting commissions or discounts under the Securities
Act. The Company has been advised by the Selling Shareholders that there
currently are no underwriting arrangements with respect to the sale of the
shares of Common Stock. To the extent required, the specific shares of Common
Stock to be sold, names of the Selling Shareholders, purchase price, public
offering price, names of any such broker-dealer or selling agent and any
applicable discount or commission with respect to a particular offer will be
set forth in an accompanying Prospectus Supplement.
The Company has agreed to defray certain of the expenses of the
offering made hereby by the Selling Shareholders and to indemnify them against
certain liabilities arising under the Securities Act.
Pursuant to the provisions under the Exchange Act and the rules and
regulations thereunder, any person engaged in a distribution of the Common
Stock offered by this Prospectus may not simultaneously engage in market making
activities with respect to the Common Stock of the Company during the
applicable "cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Shareholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder including, without limitation, Rules 10b-6
and 10b-7, which provisions may limit the timing of purchases and sales of
Common Stock by the Selling Shareholders.
33
<PAGE> 34
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Broad and Cassel, a partnership including
professional associations, Miami, Florida.
EXPERTS
The financial statements and schedules included in this Prospectus and
elsewhere in the registration statement have been audited by Winter, Scheifley
and Associates, P.C., independent certified public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said report.
34
<PAGE> 35
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS OF LEVEL BEST GOLF, INC.
Report of Independent Certified Public Accountants . . . . . . . . . . . . . . . . . . . . . . . F-2
Balance Sheet
as of September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Statements of Operations
for the years ended September 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Statements of Shareholders' Equity
for the years ended September 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Statements of Cash Flows
for the years ended September 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Balance Sheet
as of December 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15
Statements of Operations
for the three months ended December 31, 1995 and 1996 (unaudited) . . . . . . . . . . . . . . . . F-16
Statements of Cash Flows
for the three months ended December 31, 1995 and 1996 (unaudited) . . . . . . . . . . . . . . . . F-17
Notes to Financial Statements (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-18
</TABLE>
F-1
<PAGE> 36
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Level Best Golf, Inc.
We have audited the accompanying balance sheets of Level Best Golf, Inc. as of
September 30, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the three 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 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 Level Best Golf, Inc. as of
September 30, 1996 and 1995, and the results of its operations, and its cash
flows for each of the three 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 discussed in Note 11 to the
financial statements, substantial doubt exists about the Company's continued
existence should it be unable to complete its proposed financing and market its
products. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
December 4, 1996
F-2
<PAGE> 37
Level Best Golf, Inc.
Balance Sheets
September 30,
<TABLE>
<CAPTION>
1996
----------
ASSETS
<S> <C>
Current assets:
Cash $ 46,923
Accounts receivable 13,138
Prepaid expenses 9,000
Inventory 156,356
----------
Total current assets 225,417
Property, plant and equipment,
at cost:
Office and production equipment 66,008
Less: accumulated depreciation 9,953
----------
56,055
Other assets:
Deposits 9,077
Product design and video production,
net of accumulated amortization
of $39,915 and $4,994 163,966
----------
173,043
----------
$ 454,515
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable (Note 5) $ 71,302
Accounts payable 223,108
Notes payable - affiliate (Note 5) 435,038
Accrued expenses - affiliates (Note 7) 468,683
Accrued expenses 10,281
Current portion of long-term debt (Note 6) 21,048
----------
Total current liabilities 1,229,460
Note payable - affiliate (Note 5) -
Long-term debt (Note 6) 47,380
Commitments and contingencies (Notes 7, 8, 9 and 10)
Stockholders' equity: (Notes 2 and 3)
Preferred stock, $1,000 par value,
convertible, 300 shares authorized -
Common stock, $.001 par value,
50,000,000 shares authorized,
3,051,174 and 2,612,218 shares
issued and outstanding 3,051
Paid in capital 1,113,415
Common stock subscriptions 100,000
Accumulated deficit (2,038,791)
----------
(822,325)
----------
$ 454,515
==========
</TABLE>
See the accompanying notes to the financial statements.
F-3
<PAGE> 38
Level Best Golf, Inc.
Statements of Operations
For the Years Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Revenue $ 495,681 $ 98,474
Costs and expenses:
Cost of sales 198,396 149,263
Common shares issued for services 111,950 664,726
General and administrative 1,287,951 727,178
----------- ------------
1,598,297 1,541,167
Net loss from operations (1,102,616) (1,442,693)
Other income and (expense):
Interest expense (7,087) (10,175)
Interest expense - related party (35,492) (20,314)
----------- ------------
Net loss $(1,145,195) $(1,473,182)
=========== ===========
Per share information:
Weighted average number of common
shares outstanding 2,698,060 1,991,640
=========== ===========
Net loss per share $ (.42) $ (.74)
=========== ===========
</TABLE>
See the accompanying notes to the financial statements.
F-4
<PAGE> 39
Level Best Golf, Inc.
Statement of Stockholders' Equity
For the Two Years Ended September 30, 1996
<TABLE>
<CAPTION>
Paid in Accumulated Stock
Common Stock Preferred Stock Capital Deficit Subscriptions
-------------------- ---------------- ---------- ---------- -------------
Shares Amount Shares Amount
------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash at
$1.00 per share 51,000 51 - - 51,949 - -
Shares issued for the
conversion of debt to
affiliate at $1.00 per
share 9,000 9 - - 8,991 - -
Shares issued pursuant to
a private placement at
$1.50 per share 377,067 377 - - 565,221 - -
Cost of private placement - - - - (8,422) - -
Shares issued for services and
inventory at $1.50 per
share 8,334 8 - - 12,492 - -
Shares issued for services
at $1.50 per share 275,000 275 - - 412,225 - -
Shares issued for services
at $1.50 per share 159,817 160 - - 239,566 - -
Reclassification of
S Corporation deficit to
paid in capital - - - - (964,712) 964,712 -
Net loss for the year - - - (1,473,182) -
--------- -------- --- ----- --------- --------- -------
Balance September 30, 1995 2,612,218 2,612 - - 542,972 (893,596) -
</TABLE>
F-5
<PAGE> 40
Level Best Golf, Inc.
Statement of Stockholders' Equity
For the Two Years Ended September 30, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Shares issued for cash
at $1,000 per share - - 300 300,000 - - -
Shares issued for services
at $1.50 per share 70,668 71 - - 105,929 - -
Shares issued for services
at $1.63 per share 1,000 1 - - 1,629 - -
Shares issued for services
at $1.44 per share 3,000 3 - - 4,317 - -
Shares issued for inventory
at $1.50 per share 14,288 14 - - 21,418 - -
Shares issued for inventory
at $2.75 per share 30,000 30 - - 82,470 - -
Shares issued for cash
at $2.75 per share 20,000 20 - - 54,980 - -
Common stock subscriptions
at $2.75 per share - - - - - - 100,000
Conversion of preferred
shares to common shares 300,000 300 (300) (300,000) 299,700 - -
Net loss for the year - - - (1,145,195) -
--------- ------- ---- --------- ---------- ----------- ---------
Balance September 30, 1996 3,051,174 $ 3,051 - $ - $1,113,415 $(2,038,791) $ 100,000
========= ======= ==== ========= ========== =========== =========
</TABLE>
See the accompanying notes to the financial statements.
F-6
<PAGE> 41
Level Best Golf, Inc.
Statements of Cash Flows
For the Years Ended September 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(1,145,195) $(1,473,182)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Amortization 34,721 3,084
Depreciation 5,934 2,794
Officers salary contributed to capital - -
Common stock issued for services and
other non-cash items 111,950 664,726
(Increase) in receivables (12,936) (202)
(Increase) in prepaid expenses (9,000) -
(Increase) decrease in inventory 104,233 (95,220)
(Increase) decrease in other assets (9,077) 3,926
Increase in due to affiliates 287,548 178,940
Increase in accounts payable and accruals 125,317 78,372
--------- -----------
Total adjustments 638,690 836,420
Net cash provided by (used in)
operations (506,505) (636,762)
--------- -----------
Cash flows from investing activities:
Acquisition of designs and video production (188,464) -
Acquisition of property and equipment (48,918) (3,831)
--------- -----------
Net cash provided by (used in)
investing activities (237,382) (3,831)
--------- -----------
Cash Flows from financing activities:
Increase (decrease) in due to affiliates - (30,942)
Increase (decrease) in notes payable -
affiliates 272,233 (13,795)
Proceeds from notes and long-term debt 71,302 100,000
Repayment of long-term debt (15,786) (15,786)
Proceeds from the issuance of stock 455,000 609,177
--------- -----------
Net cash provided by (used in)
financing activities 782,749 648,654
--------- -----------
Net increase (decrease) in cash and
cash equivalents 38,862 8,061
Beginning cash and cash equivalents 8,061 -
--------- -----------
Ending cash and cash equivalents $ 46,923 $ 8,061
========= ===========
Supplemental cash flow information:
Cash paid for: Income taxes $ - $ -
Interest $ 7,087 $ 28,735
Non-cash investing and financing activities:
Conversion of note payable - affiliate to
common stock $ - $ 9,000
Issuance of common stock for inventory $ 103,932 $ -
</TABLE>
See the accompanying notes to the financial statements.
F-7
<PAGE> 42
Level Best Golf, Inc.
Notes to Financial Statements
September 30, 1996
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on October 1, 1993, in the State of Florida. The
Company is in the business of developing and marketing golf training aids and
related products. The Company has chosen September 30, as a year end and prior
to the current fiscal year had been in the development stage.
Inventories: Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventory consists principally
of work in process and finished goods.
Fixed assets: The Company depreciates its office and production equipment
utilizing the straight line method over periods of five to seven years.
Net loss per share: The net loss per share is computed by dividing the net loss
for the period by the weighted average number of common shares outstanding for
the period. Common Stock equivalents are excluded from the computation as their
effect would be anti-dilutive.
Product design and video production: The Company amortizes its product designs
and video production over a period of 3 years using the straight line method.
Amortization charged to operations was $34,721 and $3,084 during 1996 and 1995.
Cash and cash equivalents: Cash and cash equivalents consist of cash and other
highly liquid debt instruments with original maturities of less than three
months.
Revenue recognition: The Company recognizes revenue from the sale of its
products upon shipment.
Advertising costs: Advertising costs, except for costs associated with direct
response advertising are charged to operations when incurred. The costs of
direct response advertising will be capitalized and amortized over the period
which future benefits are expected to be received if the Company has determined
that there are historical patterns of the results of direct advertising upon
which it can base its decision to capitalize these costs, otherwise these costs
will be charged to expense as incurred. Costs associated with product
endorsements are charged to expense when incurred. Advertising costs charged to
operations were $167,783 and $42,719 during 1996 and 1995.
Estimates: The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ
from these estimates.
F-8
<PAGE> 43
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
During December, 1994 the Company began offering shares of its Common Stock at
$1.50 per share pursuant to a private placement. Pursuant to this private
placement the Company issued 377,067 shares of Common Stock for cash
aggregating $565,598.
During November, 1994 the Company issued 51,000 shares of its Common Stock for
cash aggregating $52,000.
During January, 1995 the Company entered into an agreement to acquire certain
inventory and assume certain liabilities related to the operation of a golf
school which had been formed in December, 1994. Pursuant to the agreement the
Company agreed to pay the owner of the inventory cash aggregating $12,500 and
to issue 8,334 shares of its Common Stock valued at $12,500 to him. During
November, 1995 the Company rescinded the transaction. The operation of the golf
school was not material to the Company's operations during the period which it
was operated. The Company has accounted for its investment in the golf school
as a temporary investment and has charged the acquisition costs aggregating
$25,000 to operations during the year ended September 30, 1995.
During September, 1995 the Company issued 159,817 shares of its Common Stock to
certain employees for salaries and consultants for services related to product
development and marketing valued at $239,726.
During November, 1994 an affiliate of the Company converted a loan in the
amount of $9,000 into 9,000 shares of the Company's Common Stock (see Note 7).
During October, 1995 the Company filed a registration statement with the
Securities and Exchange Commission on Form S-1 whereby it registered 275,000
Class A Warrants, 275,000 Class B Warrants and 2,066,967 shares of Common
Stock (including the 550,000 shares of Common Stock underlying the Class A
and Class B Warrants).
During the year ended September 30, 1996 the Company issued 74,668 shares of
its Common Stock for services valued at $111,950 ($1.44 to $1.63 per share).
During January, 1996 and September, 1996 the Company issued 44,288 shares of
its Common Stock for inventory valued at $103,932 ($1.50 per share and $2.75
per share).
During September, 1996 the Company issued 20,000 shares of its Common Stock
for cash aggregating $55,000 and accepted subscriptions for 36,364 shares of
its Common Stock for cash aggregating $100,000.
F-9
<PAGE> 44
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Fair value of financial instruments: The Company's short term financial
instruments consist of cash and cash equivalents, receivables and accounts and
notes payable. The carrying amounts of such financial instruments approximates
fair market value because of the short term maturity of these instruments. The
carrying amount of long term debt also approximates fair market value based
upon the similarity of rates at which the Company could borrow funds with
similar maturities.
Note 2. STOCKHOLDERS EQUITY
Common stock:
At inception, the Company issued 1,418,162 shares of its Common Stock
to two of its officers and directors in exchange for cash of $4,094 and 129,900
shares of its Common Stock to an officer and director in exchange for cash of
$10,000.
During the year ended September 30, 1994 the Company issued shares of its
Common Stock to non-affiliates as follows:
97,338 shares for cash of $45,000
43,300 shares for cash of $25,000
43,300 shares for services related to product development and
marketing valued at $21,500
During October, 1994 the Company declared a 346.4 to 1 stock split. All shares
included in these financial statements have been adjusted to reflect this
split.
During October, 1994 the Company entered into a one year consulting agreement
with an entity whereby the entity would provide to the Company financial
consulting services. Pursuant to the agreement the entity agreed to assist the
Company in preparing a private placement memorandum to obtain equity or debt
financing in the amount of $525,000 and to assist the Company in completing the
offering. In exchange for these services the Company agreed to pay $17,500 in
cash and to issue 275,000 shares of its Common Stock valued at $412,500.
During October, 1994, the Company authorized the issuance of 275,000 each of A,
B, and C stock purchase warrants exercisable as follows:
$ 4.75 to exercise each A warrant for one share of Common Stock
$ 7.50 to exercise each B warrant for one share of Common Stock
$12.50 to exercise each C warrant for one share of Common Stock
The warrants are exercisable for a period of 48 months from the date of issue
and are callable with 30 days notice at a price of $.001 per warrant.
F-10
<PAGE> 45
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Preferred stock:
During October, 1995 the Company authorized the issuance of 300 shares of
$1,000 par value Preferred Stock. The Preferred Stock is convertible into 1,000
shares of Common Stock for each preferred share at any time after 4 months from
the date of issue at the option of the holder. The Preferred Stock shall not
have any vote on matters submitted to shareholders and shall not be entitled to
the payment of dividends and shall be deemed for the purpose of distribution of
assets in liquidation to be converted into Common Stock as described above.
During the period from January to March, 1996 the Company issued 300
shares of its Preferred Stock for cash aggregating $300,000. Subsequently these
preferred shares were converted into 300,000 shares of Common Stock.
During the periods covered by these financial statements the Company issued
shares of Common Stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales if
such exemptions were found not to apply.
Note 3. CONTRIBUTION TO PAID IN CAPITAL
During September, 1994, certain officers agreed to contribute $121,800 in
unpaid salaries to the capital of the Company.
Note 4. INCOME TAXES
The Company had elected to be an "S" corporation under the provisions of the
Internal Revenue Code and state statutes. Under these provisions, no income tax
is normally incurred at the corporate level. Instead the shareholder includes
his pro rata share of the corporation's income or loss on his personal tax
returns. During March, 1995 the number of shareholders in the Company exceeded
the maximum number of shareholders allowed for an "S" corporation and the
election was terminated. In addition, the Company had used December 31, as its
year end for income tax purposes. Effective April 1, 1995 the Company adopted
Financial Accounting Standards Board Statement No. 109, Accounting for Income
Taxes. Of the loss for the year ended September 30, 1995 approximately $893,596
will be available as an operating loss carryforward for the Company expiring
during 2010, and the balance was allocated to the shareholders. The accumulated
loss through the termination of the "S" election of $964,712 has been
reclassified to paid in capital in the accompanying financial statements. In
addition, the Company has a net operating loss carryforward for the year ended
September 30, 1996 of approximately $1,145,195 expiring in 2011.
F-11
<PAGE> 46
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classifications of the assets and liabilities to which they
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or non-current depending on
the periods in which the temporary differences are expected to reverse.
The Company is unable to predict future taxable income that would enable it to
utilize the deferred tax asset and therefore the deferred tax asset related to
its operating loss carryforward which expires in 2010 and 2011 is fully
reserved.
Note 5. NOTES PAYABLE
Bank:
During August, 1996 the Company arranged for a $75,000 bank line of credit due
on August 20, 1997 bearing interest at prime plus 2% (10.25% at September 30,
1996). At September 30, 1996 $71,302 was outstanding on the line and $3,698
remained unused.
Related parties:
During December, 1993 the Company borrowed $177,000 from an entity controlled
by its two largest shareholders. During 1994 and 1995 $14,195 had been repaid.
This note had a balance of $162,805 at September 30, 1995. During 1996 this
entity advanced an additional $272,233 bringing the balance to $435,038 at
September 30, 1996. The note bears interest at prime plus 1.5% (9.75% at
September 30, 1996)and is due on demand.
Note 6. LONG-TERM DEBT
During October, 1994 the Company obtained a U.S. Small Business Administration
loan in the amount of $100,000. This note is payable in installments of $1,754
plus interest at 11% per annum and is due on or before October 1, 1999. The
balance of this note was $68,428 and $84,214 at September 30, 1996 and 1995.
Maturity of long-term debt is as follows:
Year ended September 30, 1997: $21,048
1998: $21,048
1999: $26,332
F-12
<PAGE> 47
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Note 7. RELATED PARTY TRANSACTIONS
During the year ended September 30, 1994 certain officers and directors of the
Company and parties related to these individuals made advances to the Company
aggregating $42,137. During the year ended September 30, 1995 $9,000 of this
debt was converted into Common Stock (see Note 2) and $30,942 was repaid. In
addition, the Company accrued $178,940 in unpaid salary due these individuals
bringing the balance due to $181,145 at September 30, 1995. During 1996 the
Company accrued an additional $287,548 in salary due to these individuals
bringing the balance due to $468,683 at September 30, 1996.
Note 8. COMMITMENTS
In the normal course of its business operations the Company has entered into
several license agreements whereby its acquires licenses to market certain
products developed or owned by third parties. In exchange for these marketing
rights the Company agrees to make certain royalty payments and guarantee
certain minimum sales. In most cases should the minimum sales not be made and
the corresponding minimum license fee not be paid the licenser has the right to
cancel the agreement with no further payments due from the Company. In some
cases the Company guarantees minimum license payments which are payable
regardless of whether the Company makes sales of the licensed product or not.
Guaranteed minimum license payments are as follows:
1997: $50,000 1998: $100,000 1999: $100,000 2000: $100,000
Note 9. OPERATING LEASES
During June, 1996 the Company entered into a lease for its office facilities
expiring during June, 1999. The lease calls for monthly rental payments of
$6,000 to be adjusted annually for increases in the Consumer Price Index. In
addition the Company has the option to purchase the building for $600,000
adjusted for the increases in the Consumer Price Index described above.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of 1 year are as follows:
Year ended September 30, 1997: $ 72,000
1998: 72,000
1999: 54,000
--------
$198,000
========
Rent expense was $64,344, $18,181 and $8,922 for 1996, 1995 and 1994.
F-13
<PAGE> 48
Level Best Golf, Inc.
Notes to Financial Statements
(Continued)
Note 10. STOCK OPTIONS
At September 30, 1996 the Company has stock options outstanding as follows:
<TABLE>
<CAPTION>
Number of options Exercise price Expiration date
----------------- -------------- ---------------
<S> <C> <C>
868,000 $2.25 June 3, 2001
200,000 $3.00 July 1, 2001
</TABLE>
Note 11. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a "going concern"
basis which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business.
The Company has incurred an operating losses during the years ended September
30, 1996, 1995 and 1994 aggregating $1,145,195, $1,473,182 and $385,126 and has
negative working capital of $1,004,043 at September 30, 1996.
During the periods presented the Company has not generated positive cash flow
from operations and there can be no assurance that the trend will not continue.
Profitable operations are dependent upon, among other factors, the Company's
ability to obtain equity or debt financing and its ability to successfully
market its products.
In this regard the Company has undertaken the raising of additional equity
capital (see Note 2). In addition, the Company is seeking to expand its
customer base and attempting to lower its operating expenses. The Company's
continued operations are dependent upon obtaining financing and its ability to
market its products.
NOTE 12. SUBSEQUENT EVENT
During October and November 1996, the Company issued 134,182 shares of
its Common Stock for cash aggregating $369,000. In addition, the Company issued
the common shares which were included as stock subscriptions at September 30,
1996.
F-14
<PAGE> 49
ITEM 1. FINANCIAL STATEMENTS.
Level Best Golf, Inc.
Balance Sheet
December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
1996
----
<S> <C>
ASSETS
Current assets:
Cash .................................................... $ --
Accounts receivable ..................................... $ 60,105
Prepaid expenses ........................................ $ 9,000
Inventory ............................................... $ 358,043
Total current assets ................................. $ 427,148
Property, plant and equipment, at cost:
Office and production equipment ......................... $ 104,020
Less: accumulated depreciation .......................... $ 13,989
$ 90,031
Other assets:
Deposits ................................................. $ 9,161
Product design and video production, net of
accum. amortization of $53,641 ........................... $ 281,727
$ 808,067
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable ............................................. $ 71,302
Notes payable - affiliate ................................. $ 571,915
Accounts payable .......................................... $ 533,052
Accrued expenses - affiliate .............................. $ 559,929
Loans - other ............................................. $ 75,000
Accrued expenses .......................................... $ 11,047
Current portion of long-term debt - related parties ....... $ --
Current portion of long-term debt ......................... $ 21,048
Total current liabilities ............................. $ 1,843,293
Long-term debt .................................................. $ 47,380
Stockholder's equity:
Preferred stock, $1000 par value, convertible,
300 shares authorized --
Common stock, $.001 par value, 50,000,000 shares
authorized, 3,246,042 and 2,612,218 shares
issued and outstanding ................................ $ 3,246
Paid in capital ................................................. $ 1,684,030
Accumulated deficit ............................................. $(2,769,882)
Total stockholder's equity ...................................... $ 982,606
Total liabilities and stockholder's equity ...................... $ 808,067
</TABLE>
F-15
<PAGE> 50
Level Best Golf, Inc.
Statements of Operations
For the three months ended December 31, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenue .......................................... $ 70,200 $ 128,302
----------- -----------
Costs and expenses:
Costs of sales ......................... $ 19,587 $ 29,768
Common shares issued for service ....... $ 92,043 $ --
General and administrative ............. $ 651,318 $ 240,547
----------- -----------
$ 762,948 $ 270,315
Net loss from operations ......................... $ (692,748) $ (142,013)
Other income and (expense):
Interest expense ....................... $ (7,089) $ (5,311)
Interest expense - related party ....... $ (31,254) $ --
----------- -----------
Net loss ................................ $ (731,091) $ (147,324)
Per share information:
Net loss per share ...................... $(0.23) $(0.06)
Weighted average number of
common shares outstanding ................ 3,194,007 2,612,218
</TABLE>
F-16
<PAGE> 51
Level Best Golf, Inc.
Statements of Cash Flows
For the Quarters Ended December 31, 1995 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by (used in) operations ................. $(458,300) $ (96,540)
Cash flows from investing activities:
Acquisition of designs and video production ....... $(131,488) $ --
Acquisition of property and equipment ............. $ (38,012) $ (21,248)
Net cash provided by (used in) investing activities ....... $(169,500) $ (21,248)
Cash flows from financing activities:
Increase (decrease) in due to affiliates .......... $ -- $ (27,596)
Increase (decrease) in notes payable-affiliates ... $ 136,877 $ (6,414)
Proceeds from notes and long-term debt ............ $ 75,000 $ --
Repayment of long-term debt ....................... $ -- $ (5,263)
Proceeds from the issuance of stock ............... $ 369,000 $ 150,000
Net cash provided by (used in) financing activities ....... $(580,877) $ 110,727
Net increase (decrease) in cash and cash equivalents ...... $ (46,923) $ (7,061)
Beginning cash and cash equivalents ....................... $ 46,923 $ 8,061
Ending cash and cash equivalents .......................... $ 0 $ 1,000
</TABLE>
F-17
<PAGE> 52
LEVEL BEST GOLF, INC.
Notes to Financial Statements (Unaudited)
Basis of presentation
The accompanying condensed unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustment) considered necessary for a fair presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's form
10-KSB filed for the year ended September 30, 1996.
Income (loss) per share was computed using the weighted average number
of common shares outstanding.
During the period ended December 31, 1996 the Company issued 134,182
shares of its common stock for cash pursuant to a private placement for cash
aggregating $369,000. Also, the Company issued 36,364 shares of Common Stock to
fulfill subscription agreements outstanding at September 30, 1996.
In addition, the Company issued 19,022 shares of its Common Stock as
compensation to consultants and employees for services having a fair value of
$92,043.
During the three months ended December 31, 1996 the Company borrowed
$75,000 from a bank. The loan was repaid during April 1997 with interest at 9%
per annum.
F-18
<PAGE> 53
<TABLE>
<S> <C>
========================================================== ===============================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED 1,318,448 Shares of Common Stock
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES TO WHICH IT RELATES IN ANY STATE TO
ANY PERSON WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH STATE. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY LEVEL BEST
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THEIR HAS GOLF, INC.
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------------
PROSPECTUS
-----------------
TABLE OF CONTENTS
Page
----
Available Information . . . . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . . . . . . . . 3
Summary Financial Information . . . . . . . . . . . . 4
Risk Factors . . . . . . . . . . . . . . . . . . . . 5
Use of Proceeds . . . . . . . . . . . . . . . . . . . 9 April ___, 1997
Dividend Policy . . . . . . . . . . . . . . . . . . . 9
Price Range of Common Stock . . . . . . . . . . . . . 9
Selected Financial Data . . . . . . . . . . . . . . . 9
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 11
Business . . . . . . . . . . . . . . . . . . . . . . 14
Management . . . . . . . . . . . . . . . . . . . . . 20
Principal Shareholders . . . . . . . . . . . . . . . 24
Selling Shareholders . . . . . . . . . . . . . . . . 25
Certain Transactions . . . . . . . . . . . . . . . . 29
Description of Securities . . . . . . . . . . . . . . 30
Plan of Distribution . . . . . . . . . . . . . . . . 32
Legal Matters . . . . . . . . . . . . . . . . . . . . 33
Experts . . . . . . . . . . . . . . . . . . . . . . . 33
Index to Financial Statements . . . . . . . . . . . . F-1
========================================================== ===============================================================
</TABLE>
<PAGE> 54
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Florida Business Corporation Act, the Company currently has
the power and authority to indemnify any person who is or was a director,
officer, employee or agent of the Company (or the affiliates of the Company) for
liability incurred in connection with any such action brought against such
person (other than an action by, or in the right of, the Company) if such person
acted in good faith and in a manner reasonably believed to be in, or not opposed
to, the best interests of the Company, and with respect to any criminal action
or proceeding, had no reasonable cause to believe that his conduct was
unlawful. The Company, pursuant to its Bylaws is required to indemnify any
such person who has complied with the foregoing standard. Under the Florida
Business Corporation Act, the Company also currently has the power and
authority to indemnify any such person for liability incurred in any action by,
or in the right of, the Company against the expenses and amounts paid in
settlement not exceeding, in the judgment of the Board of Directors, the
estimated expense of litigating the proceeding described above to its
conclusion, provided such expenses and amounts are actually and reasonably
incurred in connection with the defense or settlement of such proceeding,
including any appeal thereof. The Company's Bylaws require the Company to
indemnify any such person against the expenses and amounts paid in settlement
as described in the foregoing sentences.
ITEM 25.
OTHER EXPENSES OF
ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and distribution of the securities offered hereby.
The Company is responsible for the payment of all expenses in connection with
the offering.
<TABLE>
<S> <C>
Registration fee under the Securities Act of 1933 . . . . . . . . . . . . . . . . . $ 1,087
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Printing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Legal fees and disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000
Accounting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Total: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $29,087
======
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the year ended September 30, 1994 the Company issued shares of
its Common Stock to nonaffiliates as follows:
97,388 shares for cash of $45,000
43,300 shares for cash of $25,000
43,300 shares for services related to product development and
marketing valued at $21,500
During October 1994, the Company entered into a one-year consulting
agreement with an entity whereby the entity would provide financial consulting
services and assist in preparing and completing a private offering. In exchange
for these services the Company agreed to pay $17,500 in cash and to issue
275,000 shares of its Common Stock valued at $412,500 to the entity.
The warrants are exercisable for a period of 48 months from the date of
issue and are callable at a price of $.001 per warrant.
During the period from January to March 1996, the Company issued 300
shares of its Preferred Stock for cash aggregating $300,000. Subsequently these
preferred shares were converted into 300,000 shares of the Company's Common
Stock.
During September through November 1996, the Company issued a total of
191,568 shares of its Common Stock without registering them pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). The Company issued
170,546 of such shares in connection with a purchase of the Company's Common
Stock for $469,000 from a total of six persons; the Company obtained the
purchase price and issued the shares both in reliance upon the
II-1
<PAGE> 55
exemption from registration contained in Section 4(2) of the Securities Act.
The Company also issued 17,022 shares to four persons as compensation; 2,000
shares (1,000 each) to two new advisory board members; and 2,000 shares to the
Company's Chief Financial Officer as a signing bonus. In each of those four
instances, the Company also relied upon the exemption from registration
contained in section 4(2) of the Securities Act.
In March 1997, the Company issued a total of 72,000 shares of its
authorized but unissued Common Stock to certain employees and pursuant to other
contractual obligations, as compensation. Between January 1, 1997 and March
25, 1997, the Company issued 691,571 shares of its Common Stock as partial
payment for loans made to the Company by certain affiliates of the Company.
These above issuances of the Company's authorized but unissued shares
of Common Stock were made in reliance upon the exemption from registration
contained in Section 4(2) of the Securities Act. Although the Company believes
that the foregoing sales involved a public offering of its securities and that
the Company did comply with the "safe harbor" exemptions from registration, it
could be liable for recission of the sales if such exemptions were found not to
apply.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3. Articles of Incorporation, Amendments and ByLaws (Exhibit 3 as filed on the Company's Registration
Statement on Form S-1, File No. 33-97770 is hereby incorporated by reference [the "Form S-1"])
4.1 Specimen Certificate for Class A Warrants (Exhibit 4.1 as filed on the Company's Form 10-KSB for the
fiscal year ended September 30, 1996 is hereby incorporated by reference [the "Form 10-KSB"])
4.2 Specimen Certificate for Class B Warrants (Exhibit 4.2 to the Form 10-KSB is hereby incorporated by
reference)
4.4 Specimen Certificate for Class B Warrants (Exhibit 4.3 to the Form 10-KSB is hereby incorporated by
reference)
10.1 License and Technical Assistance Agreement dated January 1, 1994, between the Company and Marshall
Products, Inc. (Exhibit 10.1 to the Form S-1 is hereby incorporated by reference)
10.2 Agreement dated September 8, 1994, between the Company and Booklegger, Inc. (Exhibit 10.2 to the Form S-1
is hereby incorporated by reference)
10.3 Personal Services Agreement dated October 1, 1994, between the Company and Wally Armstrong (Exhibit 99.1 to
the Form S-1 is hereby incorporated by reference)
10.4 Real Property Lease dated June 28, 1996, between the Company and Douglas J. Ebbers and Laura G. Ebbers
(Exhibit 10.4 to the Form 10-KSB is hereby incorporated by reference)
10.5 Consulting Agreement dated October 24, 1994, between the Company and Pratt, Wylce and Lords, Ltd. (Exhibit
99.3 to the Form S-1 is hereby incorporated by reference)
</TABLE>
II-2
<PAGE> 56
<TABLE>
<S> <C>
10.6 Licensing Agreement dated September 5, 1996, between the Company and Innovative Products, Inc. (Exhibit
10.6 to the Form 10-KSB is hereby incorporated by reference)
10.7 Agreement dated March 17, 1995, between the Company and Gator Golf Enterprises, Inc. (Exhibit 10.7 to the
Form 10-KSB is hereby incorporated by reference)
10.8 Licensing Agreement dated March 31, 1996, between the Company and Automated Golf Training Aids, Inc.
(Exhibit 10.8 to the Form 10-KSB is hereby incorporated by reference)
10.9 Marketing Agreement dated February 9, 1996, between the Company and Golf 21 (Exhibit 10.9 to the Form 10-
KSB is hereby incorporated by reference)
10.10 Exclusive Marketing Agreement dated September 5, 1996, between the Company and Bill Coward and Nikki Coward
(Exhibit 10.10 to the Form 10-KSB is hereby incorporated by reference)
10.11 Licensing Agreement dated January 25, 1997, between the Company and Plane Sight, Inc. (Exhibit 10.11 to the
Company's Form 10-QSB for the quarter ended December 31,1996 is hereby incorporated by reference [the "Form
10-QSB"])
10.12 Endorsement Agreement dated January 14, 1997 between the Company and Butch Harmon (Exhibit 10.12 to the
Form 10-QSB is hereby incorporated by reference)
10.13 Endorsement Agreement dated January 8, 1997 between the Company and Andy North (Exhibit 10.13 to the Form
10-QSB is hereby incorporated by reference)
10.14 Credit Facility, dated April 2, 1997, between the Company and High Point Capital, LLC (1)
23.1 Consent of Broad and Cassel (included in its opinion to be filed) (1)
23.2 Consent of Winter, Scheifley & Associates, P.C. (2)
24.1 Power of Attorney (included on Page II-5 hereof)
</TABLE>
(1) To be filed by Amendment
(2) Filed herewith
II-3
<PAGE> 57
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together represent a
fundamental change in the information in the
Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(5) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 58
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Tampa, State of Florida on this 10th day of April, 1997.
LEVEL BEST GOLF, INC.
By: /s/ Fred L. Solomon
--------------------------------------
Fred L. Solomon, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Fred L. Solomon and Curt L. Rodgers, and each of them,
as true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorneys- in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents as purposes as he might and could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Fred L. Solomon Director, President (also Principal April 10, 1997
- ----------------------------- Executive Officer)
Fred L. Solomon
/s/ James G. Solomon Director, Executive Vice President April 10, 1997
- -----------------------------
James G. Solomon
/s/ Patricia A. Sanders Director, Secretary April 10, 1997
- ------------------------------
Patricia A. Sanders
/s/ William E. Foley Director, Chief Operating Officer April 10, 1997
- --------------------------------
William E. Foley
/s/ Don E. Thompson Director April 10, 1997
- -----------------------------
Don E. Thompson
/s/ Curt L. Rodgers Chief Financial Officer (also April 10, 1997
- --------------------------------- Principal Accounting Officer)
Curt L. Rodgers
</TABLE>
II-5
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form SB-2 dated
April 10, 1997 of our report dated December 4, 1996 relating to the financial
statements of Level Best Golf, Inc. as of September 30, 1996, and the reference
to our firm under the caption "EXPERTS" in the Registration Statement.
/s/ Winter, Scheifley and Associates, P.C.
Winter, Scheifley and Associates, P.C.
Certified Public Accountants
April 10, 1997
Englewood, Colorado
