As filed on July 28, 2000 File No. 333-_______
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PROFORM GOLF, INC.
(Name of small business issuer in its charter)
DELAWARE 7999 84-1334921
(State of jurisdiction of Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
5335 WEST 48TH AVENUE, SUITE 200, DENVER, COLORADO 80212
(303) 458-1000
(Address and telephone number of principal executive offices)
5335 WEST 48TH AVENUE, SUITE 200, DENVER, COLORADO 80212
(Address or principal place of business or intended principal place of business)
WILLIAM D. LEARY, PRESIDENT AND TREASURER
PROFORM GOLF, INC.
5335 WEST 48TH AVENUE, DENVER, COLORADO 80212
(303) 458-1000
(Name, address and telephone number of agent for service)
Copies of all communications to:
John A. Hutchings, Esq.
Fay M. Matsukage, Esq.
Dill Dill Carr Stonbraker & Hutchings, P.C.
455 Sherman Street, Suite 300
Denver, Colorado 80203
(303) 777-3737; fax (303) 777-3823
Approximate date of proposed sale to public: As soon as practicable after the
effective date of the Registration Statement
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, 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, check the following box and list the
Securities Act registration statement 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. | | ______
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price per aggregate offering Amount of
registered registered share (1) price registration fee
<S> <C> <C> <C> <C> <C> <C>
Common stock to 747,800 shares $2.50 $1,869,500 $ 493.55
be issued as
payment on notes
Common stock to 202,000 shares $2.50 $505,000 $ 133.32
be issued upon
conversion of
Series C preferred
stock
Common stock to 600,000 $2.00 $1,200,000 $ 316.80
be issued upon
exercise of warrants
at $2.00 per share
Common stock to 600,000 $3.00 $1,800,000 $ 475.20
be issued upon
exercise of warrants
at $3.00 per share
Common stock held 690,000 $2.50(1)<F1> $1,750,000 $ 462.00
by selling security
holders
----------------------- ----------------------- ----------------------- ----------------------
Total 2,839,800 $7,124,500 $1,880.87
======================= ======================= ======================= ======================
<FN>
(1)<F1> Estimated solely for the purpose of calculating the registration fee.
</FN>
</TABLE>
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 said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
PROFORM GOLF, INC.
SHARES OF COMMON STOCK
---------------------
We will issue 747,800 shares of common stock as payment on our
promissory notes and 202,000 shares when holders convert our Series C preferred
stock into common stock and 1,200,000 shares of common stock issuable upon the
exercise of certain outstanding warrants. This prospectus covers the resale of
these shares of common stock. This prospectus also covers 690,000 shares owned
by twenty-five other stockholders. The holders of shares of common stock covered
by this prospectus may sell the common stock at any time at any price. We will
not receive any proceeds from the resale of these shares. We have agreed to pay
for all expenses of this offering.
No public market currently exists for our common stock. We expect
trading to commence in the OTC Bulletin Board after the date of this prospectus.
We intend to apply for quotation of our common stock on the NASDAQ SmallCap
Market once we meet listing standards.
---------------------
INVESTING IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. A
DETAILED EXPLANATION OF THESE RISKS IS INCLUDED IN ANOTHER SECTION OF THIS
PROSPECTUS, BEGINNING ON PAGE 5.
---------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
______________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PAGE
PROSPECTUS SUMMARY................................................................................................3
RISK FACTORS......................................................................................................5
CAPITALIZATION....................................................................................................9
DIVIDEND POLICY...................................................................................................9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..............................................................................................10
Overview ...............................................................................................10
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999...................................11
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998...................................11
Liquidity and Capital Resources.........................................................................12
Seasonality.............................................................................................13
BUSINESS ........................................................................................................13
Overview ...............................................................................................13
Corporate History.......................................................................................14
Industry Background.....................................................................................14
Strategy ...............................................................................................14
Destination Golf Schools................................................................................15
Acquisitions and Site Start-Up Costs....................................................................18
International Operations................................................................................18
Marketing...............................................................................................18
Competition.............................................................................................19
PROPERTY ........................................................................................................19
EMPLOYEES........................................................................................................19
MANAGEMENT.......................................................................................................19
Directors and Executive Officers........................................................................19
Key Employees and Consultants...........................................................................20
CERTAIN TRANSACTIONS.............................................................................................20
EXECUTIVE COMPENSATION...........................................................................................21
Stock Option Plans......................................................................................22
DESCRIPTION OF CAPITAL STOCK.....................................................................................23
Common Stock............................................................................................23
Preferred Stock.........................................................................................23
Section 203 of the Delaware General Corporation Law.....................................................24
Antitakeover Effects of Certificate of Incorporation, Bylaws and Delaware Law...........................24
Listing ...............................................................................................25
Transfer Agent and Registrar............................................................................25
SELLING STOCKHOLDERS.............................................................................................25
Repayment of Short-Term Debt............................................................................25
Series C Preferred Stock................................................................................27
Shares Owned by Other Stockholders......................................................................28
PLAN OF DISTRIBUTION.............................................................................................29
SHARES ELIGIBLE FOR FUTURE SALE..................................................................................30
LEGAL MATTERS....................................................................................................30
EXPERTS ........................................................................................................31
ADDITIONAL INFORMATION...........................................................................................31
REPORTS TO STOCKHOLDERS..........................................................................................31
FINANCIAL STATEMENTS............................................................................................F-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. You should carefully read this entire prospectus and the financial
statements contained in this prospectus before purchasing our securities.
PROFORM GOLF, INC.
We (PROform golf, inc., referred to sometimes as "PRO" or the
"Company") provide golf instruction through Destination Golf Schools located at
independent resorts, to which students generally travel for intensive one to
five-day programs. We target our sales to two audiences: individuals through
solicitation of direct retail sales and corporations through the sales of
"Premium Links(TM)" packages. We sell Premium Links(TM) packages through a
network of distributors located throughout the United States. We are presently
developing our distributor network and generate revenue from the sale of
territories to prospective distributors. As of June 30, 2000, we had
distributors in 36 of the 100 territories identified by management.
As of June 30, 2000, we had 26 Destination Golf Schools under
contract for full or partial year operation. Our arrangement with independent
resorts allows us to offer first-rate golf facilities at reasonable cost and
enables us to take advantage of the course's or resort's marketing efforts,
visibility, and facility quality.
We believe that we are distinguished from our competitors on the basis
of the quality of our facilities, our unique curriculum, and our experienced
management team and staff. Our curriculum is geared toward the marketing premise
that ideas accepted on the professional golf tours are accepted by recreational
golfers. Our teaching curriculum has been "recognized" by the Professional Golf
Association. This recognition allows us to provide PGA instruction by employing
PGA professionals who can work toward or maintain their status in the PGA
program. In the May 1999 issue of GOLF MAGAZINE, we were rated as one of the top
25 golf schools in America. The rating was based on the following criteria:
teaching curriculum, quality of facility, student-teacher ratio, faculty (i.e.,
PGA instructors), and the use of state of the art equipment, such as computer
and video equipment.
We were originally founded in Colorado in 1991 under the name World
Associates, Inc. and remained dormant until 1995. We formed a subsidiary in
Delaware in February 1996 originally called Team Family, Inc., which changed its
name to Proformance Research Organization, Inc. in January 1997. We merged into
this subsidiary effective July 31, 1998, thereby effecting a reincorporation,
changing us from a Colorado corporation to a Delaware corporation. On
July 25, 2000, we changed our name to "PROform golf, inc."
THE OFFERING
<TABLE>
<S> <C>
Securities offered ....................................... Resale of 747,800 shares of common stock issuable
upon payment of promissory notes
Resale of 202,000 shares of common stock issuable
upon conversion of Series C preferred stock
Resale of 690,000 shares of common stock owned by
twenty-five stockholders
Resale of 1,200,000 shares of common stock issuable
upon exercise of outstanding warrants
3
<PAGE>
Securities outstanding as of June 30, 2000................ 5,810,115 shares of common stock
202,000 shares of Series C preferred stock
Securities to be outstanding as of prospectus date........ 6,759,915 shares of common stock, including 747,800
shares issuable upon payment of promissory notes and
202,000 shares issuable upon conversion of the Series
C preferred stock.
</TABLE>
We will not receive any of the proceeds from the resale of these securities.
SUMMARY SELECTED FINANCIAL INFORMATION
You should review the information shown below together with our
historical audited financial statements appearing elsewhere in this prospectus.
Our results of operations for any interim period do not necessarily indicate our
results of operations for the full year. You should read this summary financial
data in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and our financial statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------------------------------ -----------------------------------------------
2000 1999 1999 1998
------------------------------------------ -----------------------------------------------
OPERATING DATA: (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues.............................. $ 536,696 $ 246,915 $ 418,813 $ 189,740
Gross profit (loss)................... $ 427,415 $ 186,807 $ 54,404 $ (163,528)
Net loss.............................. $ (195,311) $ (432,970) $ (3,539,280) $ (2,133,278)
Net loss per share.................... $ (0.04) $ (0.12) $ (0.81) $ (2.27)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31,
----------------------------------------- --------------------
ACTUAL AS ADJUSTED(1)<F1> 1999
-------------------- ------------------- --------------------
BALANCE SHEET DATA: (UNAUDITED)
<S> <C> <C> <C>
Working capital deficiency............ $ (2,657,561) $ (968,061) $ (3,206,485)
Total assets.......................... $ 158,473 $ 158,473 $ 102,412
Total liabilities..................... $ 3,155,193 $ 1,465,693 $ 3,673,861
Shareholders' deficiency (2)<F2>...... $ (2,996,720) $ (1,307,220) $ (3,571,449)
----------------
<FN>
(1)<F1>Adjusted to reflect the payment of $1,689,500 of outstanding debt through the issuance of 747,800 shares of
common stock.
(2)<F2>Does not reflect the sale of 125,000 shares of common stock for gross proceeds of $171,500, a portion of which
was non-cash consideration, subsequent to March 31, 2000.
</FN>
</TABLE>
4
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE PURCHASING ANY OF
OUR SECURITIES. THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVE
SUBSTANTIAL RISKS ASSOCIATED WITH US AND OUR BUSINESS INCLUDING, AMONG OTHERS,
RISKS ASSOCIATED WITH SUBSTANTIAL INDUSTRY COMPETITION, INSUFFICIENT REVENUES,
AND A LIMITED OPERATING HISTORY.
GOING CONCERN QUALIFICATION. As of March 31, 2000, we had an
accumulated deficit of $7,238,491 (unaudited) and a stockholders' deficiency of
$2,996,720 (unaudited). The report of our auditors on the financial statements
for the last fiscal year raised substantial doubt about our ability to continue
as a going concern. Our ability to continue as a going concern will depend upon
our success in obtaining additional capital, paying our obligations timely, and
ultimately achieving profitable operations. If we are unable to achieve these
goals, the company will fail and investors will lose their investment.
LACK OF WORKING CAPITAL TO MEET CURRENT LIABILITIES. As of March 31,
2000, we had a working capital deficit of $2,657,561 and current liabilities of
$2,713,782. Our ability to continue operations is dependent upon our creditors
accepting restructured payment terms on overdue accounts. If our creditors will
not agree to accept monthly payments in lieu of a single payment for the full
balance, we will have to seek additional capital to pay our liabilities and/or
cease operations. We cannot give you any assurance that we will be successful in
either i) convincing our creditors to accept monthly payments or ii) securing
additional capital for our operations. Even if we are able to achieve either of
the foregoing, the terms of any such financing or the restructuring of our
accounts payable may be on terms which are unfavorable to us and may result in
substantial dilution to our shareholders.
DEPENDENCE UPON ACQUISITIONS. Our business plan is dependent upon our
ability to acquire other golf schools. We have developed our business in a way
that we believe will benefit from economies of scale achieved through acquiring
other golf schools. At our present stage of development, our operations are too
small to benefit from these economies of scale. If we are unable to acquire
additional golf schools, we will need to revise our business plan and/or cease
operations.
We intend to acquire other golf schools using a combination of stock
and as little cash as possible. In order for other schools to be interested in
being acquired by us, we believe a trading market must exist for our common
stock. We believe that registering the shares offered hereby will assist in
creating a trading market for our stock.
PROFITABLE OPERATIONS UNCERTAIN. To date, we have never achieved an
operating profit. We have incurred substantial losses for each of the past five
years, including a net loss of $3,539,280 for 1999. For the three months ended
March 31, 2000, we incurred a net loss of $195,311. We made a strategic decision
to open several sites for our Destination Golf Schools, despite the significant
overhead expenses associated with opening multiple sites. The resulting overhead
expenses increase the amount of revenue required to achieve profitability. We
cannot give any assurance that we will ever achieve an operating profit in any
period, or that any profitability that may be achieved in the future can be
sustained. If we are unable to achieve profitable operations, the company will
ultimately fail.
CASH-ON-DELIVERY STATUS WITH GOLF COURSES. Due to our current financial
situation, we have been unable to pay outstanding invoices to certain golf
courses with which we do business. As a result, many of the courses with which
we do business require us to pay for use of the course prior to offering a
class. If we are unable to pay for the use of the course we cannot teach classes
at the course. In addition, if we are not able to pay our current outstanding
balances to the courses, they may terminate their contracts with us and not
allow us to use the courses in the future. If we are unable to offer classes due
to our inability to pay for use of the courses we may be forced to cease
operations.
5
<PAGE>
LAWSUITS FILED AGAINST US. We have recently had three lawsuits filed
against. Two of those lawsuits were filed by our creditors for failure to pay
outstanding invoices totaling $50,051. See "Legal Proceedings." We are
attempting to settle those two lawsuits. The third lawsuit was filed by a
company which claims we guaranteed a lease entered into by an employee. We do
not believe the suit has merit and intend to vigorously defend against the
lawsuit. Given our present financial situation, we cannot give any assurances
that there will not be additional lawsuits filed against us. In the event a
creditor obtains a judgement against us, and that creditor were to seek
enforcement of such judgement, that creditor could force us into bankruptcy
and/or we may be forced to cease operations. In addition, a group of creditors,
collectively, without obtaining a judgment, may be able to force us into
bankruptcy and/or to cease operations.
Also, if a creditor were to obtain a judgement against us, that
creditor may seek to satisfy the judgment from the funds we receive from
students purchasing our classes. In such an event, we may not have sufficient
cash to pay the golf course at which the class is to be offered and the course
may refuse to grant us access and we would not have sufficient funds to refund
the purchase price to the student. Any such action could cause us to lose
customers, revenues and course sites, and we could be forced to cease
operations.
SUBSTANTIAL COMPETITION IN OUR BUSINESS. The golf instruction market is
highly fragmented, with lessons available at a vast number of local golf
courses, driving ranges and golf shops, as well as a large number of destination
golf schools. We compete with all of these sources of golf instruction. Shaw
Guides (www.shawguides.com), an Internet travel information source that compiles
golf instruction facilities, lists hundreds of different sources of golf
instruction in the United States. Many of the local sites with which we compete
have greater local name recognition and resources than we do. Our Destination
Golf Schools compete with several destination golf schools operated throughout
the United States, including John Jacobs Golf Schools, David Leadbetter Golf
Academy, Nicklaus/Flick Game Improvement, Arnold Palmer Golf Academy, and Golf
Digest Schools. Many of these schools have greater resources, a larger number of
sites, more prestigious locations, or affiliations with well-known and respected
golfers or golf instructors than we do. While our management believes that our
program is unique in its emphasis on the mental approach to golf and its
emphasis on physical conditioning, there can be no assurances that we will be
able to compete in the marketplace.
SIGNIFICANT DEPENDENCE ON KEY PERSONNEL. We depend heavily on the
efforts of our president, William D. Leary, as well as other key employees and
consultants. Currently, Mr. Leary is responsible for identifying and contracting
with potential distributors. If we were to lose Mr. Leary's services, our
marketing efforts could be severely impacted. Although we have an employment
agreement with Mr. Leary, we cannot assure investors that we will be successful
in retaining Mr. Leary, or in attracting and retaining qualified personnel of
the requisite caliber or in the requisite numbers to enable us to conduct our
business as proposed. We are the beneficiary of a $1,000,000 general term life
insurance policy on Mr. Leary.
SEASONALITY AND RISK OF INCLEMENT WEATHER IMPACT OUR OPERATIONS.
Throughout much of the United States, the golf business is seasonal, operating
primarily in the summer and additionally in the spring and fall. However, in
much of the Southern United States, golf is played either year-round or all year
except for the summer. This is primarily due to an outdoor playing season
limited by inclement weather or excessive heat. We believe that business at our
Destination Golf Schools will be seasonal with increased activity in the winter
as students take winter vacations to warm weather destinations, and decreased
activity in the summer. In particular, management expects decreased revenues
from Destination Golf School operations in May and September each year. We close
down some of our warm weather sites in May, with the staff of those sites moving
to a summer site, and close our summer sites in September, with the staff
returning to their warm weather sites. In each case, we expect a one week lag
between the closing of one site and the opening of the other site. Of our 26
current Destination Golf Schools, 19 will be open from September to May, and 23
will be open from May to September. Also, our operations are subject to the
effects of inclement weather from time to time even during the seasons that they
are open. The timing of any new facility openings, the seasons our facilities
are open, the effects of unusual weather patterns and the seasons in which
students are inclined to attend golf schools are expected to cause our future
results of operations to vary significantly from quarter to quarter.
Accordingly, period-to-period comparisons will not necessarily be
6
<PAGE>
meaningful and should not be relied on as indicative of future results. In
addition, our businessand results of operations could be materially and
adversely affected by future weather patterns that cause our sites to be closed,
either for an unusually large number of days or on particular days on which we
had booked a special event or a large number of students. Because most of the
students at our Destination Golf Schools attend the school on vacation, the
student may not be able to or interested in rescheduling attendance at one of
our sites. As a result, student-days lost to inclement weather may truly
represent a loss, rather than merely a deferral, of revenue.
PROPER MANAGEMENT OF GROWTH CRITICAL TO OUR SUCCESS. We are currently
experiencing a period of rapid and substantial growth that has placed, and is
expected to continue to place, a strain on our administrative and operational
infrastructure. The number of employees has increased from 11 full-time
employees at January 31, 1996 to 15 full-time employees at July 5, 2000. The
number of sites has increased from one Destination Golf School in June 1997 to
26 Destination Golf Schools at June 30, 2000. We need continued improvement in
our operational, financial and management controls, and reporting systems and
procedures in order to manage our staff and growth effectively. In this regard,
we are currently updating our management information systems to integrate
financial and other reporting among our distributors. In addition, we intend to
continue to increase our staff and improve financial reporting and controls for
our operations. We cannot assure you that we will be able to implement
improvements to our management information and control systems in an efficient
or timely manner or that, during the course of this implementation, deficiencies
in existing systems and controls will be discovered. If our management is unable
to manage growth effectively, our business, results of operations and financial
condition will be materially and adversely affected.
LACK OF SUFFICIENT DISINTERESTED INDEPENDENT DIRECTORS. We have entered
into several transactions with our officers, directors, and principal
shareholders. Our board of directors, which authorized the transactions,
currently consists of Mr. Leary, our president, and one other director, who is
also a shareholder of the company. While we believe that these transactions were
on terms that were no less favorable to us than those that could have been
obtained from unaffiliated third parties, these transactions were not approved
by a majority of independent disinterested directors.
LACK OF PUBLIC MARKET FOR THE SECURITIES. There is currently no public
market for the shares and we cannot assure you that a market for our stock will
develop. Consequently, investors may not be able to use their shares for
collateral for loans and may not be able to liquidate at a suitable price in the
event of an emergency. In addition, investors may not be able to resell the
shares, or may not be able to sell their shares at or above the price they paid
for them.
POSSIBLE VOLATILITY OF STOCK PRICE. The stock market has from time to
time experienced significant price and volume fluctuations that may be related
or unrelated to the operating performance of particular companies. These broad
market fluctuations may adversely affect the market price of our stock if a
market develops. In addition, the market price of our stock may be highly
volatile. Factors such as a small market float, fluctuations in our operating
results, failure to meet analysts' expectations, announcements of major
developments by us or our competitors, developments with respect to our markets,
changes in stock market analyst recommendations regarding us, our competitors or
the industry generally, and general market conditions may have a significant
effect on the market price of our stock.
"PENNY STOCK" RULES MAY LIMIT THE MARKETABILITY OF OUR STOCK. Our stock
will be subject to SEC rules relating to "penny stocks," which apply to
non-NASDAQ companies whose stock trades at less than $5.00 per share or whose
tangible net worth is less than $2,000,000. These rules require brokers who sell
"penny stocks" to persons other than established customers and "accredited
investors" to complete required documentation, make suitability inquiries of
investors, and provide investors with specific disclosures concerning the risks
of trading in the security. These rules may restrict the ability of brokers to
sell the common stock and may reduce the secondary market for the common stock.
A limited secondary market may result in a decrease in the shareholder value
and/or a partial or total loss of an investor's investment.
7
<PAGE>
EXERCISE OF CONVERSION OF OUTSTANDING OPTIONS AND WARRANTS COULD RESULT
IN POTENTIAL DILUTION AND IMPAIR MARKET PRICE OF OUR STOCK. As of June 30, 2000,
we had outstanding options and warrants to acquire a total of 2,527,300 shares
of common stock, of which 1,200,000 are being registered by this prospectus. To
the extent that these outstanding options and warrants are exercised, existing
stockholders will experience dilution in their percentage ownership. So long as
these options and warrant are exercisable, the holders will have the opportunity
to profit from a rise in the price of our stock. The additional shares of common
stock available for sale in the market may have a negative impact on the price
and liquidity of the stock that is currently outstanding.
DEPENDENCE ON DESTINATION GOLF SCHOOL LEASES. As of June 30, 2000, we
had lease contracts with 26 Destination Golf Schools. Our revenue potential is
limited by the number of students we can accommodate at our sites. In addition,
we believe that location is the most important factor for a golfer in choosing a
golf school. If we would not be able to renew these leases, at all or on
favorable terms, our revenue potential could be greatly diminished, due to both
a reduction in the total number of students we could accommodate and a reduction
in the number and variety of sites we could offer. Inability to renew our site
leases on favorable terms or find suitable replacement facilities could have a
material adverse effect on our financial condition and results of operations.
POTENTIAL LOSS OF PGA OF AMERICA RECOGNITION. Our golf schools have
been recognized by the Professional Golf Association, which allows us to employ,
and in turn offer instruction by, PGA-accredited teachers. The PGA is entitled
to withdraw this recognition at any time, without cause, to impose conditions on
this recognition, or to change the terms of this recognition. Any change in the
status of PGA recognition of our golf schools could impair our ability to retain
qualified instructors in the numbers necessary to staff our Destination Golf
Schools, and could negate our ability to train golf instructors for PGA
certification. Loss, or change in the terms or status, of PGA recognition of our
golf schools could have a material adverse effect on our business, financial
condition and results of operations.
8
<PAGE>
CAPITALIZATION
The following table sets forth our current liabilities, long-term debt
and capitalization as of March 31, 2000, and as adjusted to give effect to (1)
the repayment of debt through the issuance of 747,800 shares and (2) the
conversion of the Series C preferred stock into common stock. You should read
this table in conjunction with the financial statements appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
MARCH 31, 2000
(UNAUDITED)
ACTUAL ADJUSTED
------------- -----------------
<S> <C> <C>
Current liabilities ..............................................$ 2,713,782 $ 1,024,282
============= =================
Long-term debt....................................................$ 441,411 $ 441,411
------------- -----------------
Stockholders' deficiency:
Preferred stock, Series A, convertible, cumulative, $.0001
par value per share, 500,000 shares authorized,
no shares issued and outstanding ........................... -- --
Preferred stock, Series B, convertible, cumulative,
$.0001 par value per share, 500,000 shares authorized,
no shares issued and outstanding............................ -- --
Preferred stock, Series C, convertible, cumulative,
$.0001 par value per share, 2,000,000 shares authorized,
202,000 shares issued and outstanding....................... 20 --
Common stock, $.0001 par value per share;
20,000,000 shares authorized, 5,685,115 shares issued,
6,634,915 issued as adjusted (1)<F1>........................ 569 663
Additional paid-in capital (1)<F1>............................. 4,241,182 5,930,608
Accumulated deficit............................................ (7,238,491) (7,238,491)
------------- -----------------
Total stockholders' deficiency (1)<F1>............................ (2,996,720) (1,307,220)
------------- -----------------
Total capitalization (1)<F1>......................................$ (6,151,913) $ (865,809)
--------------- ============= =================
<FN>
(1)<F1> Does not reflect the sale of 125,000 shares of common stock for gross
proceeds of $171,500, a portion of which was non-cash consideration,
subsequent to March 31, 2000.
</FN>
</TABLE>
DIVIDEND POLICY
We do not anticipate paying dividends on the common stock at any time
in the foreseeable future. Our board of directors plans to retain earnings for
the development and expansion of our business. The board of directors also plans
to regularly review our dividend policy. Any future determination as to the
payment of dividends will be at the discretion of our board of directors and
will depend on a number of factors, including future earnings, capital
requirements, financial condition and other factors as the board may deem
relevant. We are not restricted by any contractual agreement by paying
dividends.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Over the past three years, we have expanded from five Destination Golf
Schools to 26 Destination Golf Schools, which are under contract for full or
partial year operation. We had expected to be financed in May of 1999 and the
delay in financing created a cash-flow problem due to the financial commitments
that had been made to each of these facilities. We have tried to alleviate the
problem by reducing our expenses, asking our creditors to convert promissory
notes into equity investments, increasing our revenues, and seeking additional
equity investments.
Originally, most site contracts for our Destination Golf Schools
provided for a fixed amount of monthly rent. As of June 30, 2000, all of our
site contracts provide for rent on a per student basis, reducing our fixed
costs. In the future, we intend to negotiate only contracts which provide for
rent on a per student basis. We have also attempted to reduce our expenses by
reducing the number of full-time employees and relying upon distributors to
market and sell our products.
In order to develop our distributor network, we made a strategic
decision to open several sites for our Destination Golf Schools, despite the
fact that there are significant one-time and recurring expenses associated with
opening each site, and despite the fact that our existing sites were not
operating at capacity. As of June 30, 2000, we had 24 distributors covering 36
of 100 territories. We believe that adding additional sites makes our Premium
Links(TM) packages more valuable because it enables corporate purchasers to
redeem the lessons at locations nationwide.
For each Destination Golf School, we hire a site manager and a number
of certified instructors based on anticipated demand. We provide training for
our site managers and certified instructors at our expense. We believe these
steps are necessary to establish the infrastructure to achieve our goal of
becoming the world's largest golf school. Our business plan and infrastructure
have been developed in an attempt to capitalize upon economies of scale which we
believe we can achieve through acquisitions of additional golf schools. At our
present stage of development, our operations are too small to benefit from these
economies of scale. See "Risk Factors."
Management believes that there are many single-location golf school and
multiple-site golf school operations whose owners may see certain advantages to
being part of a larger organization with several locations. Management believes
that we can acquire such existing golf schools using a combination of stock and
as little cash as possible. We believe the acquisition of currently operating
golf schools will significantly increase our revenue base. We are currently in
various stages of discussions with approximately 45 companies that represent
almost 100 sites. However, as of the date of this prospectus, there are no
understandings, agreements, or arrangements for any acquisitions. If we are able
to secure the necessary financing, our plan is to expand to 200 Destination Golf
Schools over the next three years.
Our Destination Golf Schools have opened at varying times over the past
three years. Management expects decreased revenues from Destination Golf School
operations in May and September each year. We close down some of our warm
weather sites in May, with the staff of those sites moving to a summer site, and
close our summer sites in September, with the staff returning to their warm
weather sites. In each case, we expect a one week lag between the closing of one
site and the opening of the other site. As of June 30, 2000, we had 26
Destination Golf Schools under contract for full or partial year operation.
Also, our operations are subject to the effects of inclement weather from time
to time even during the seasons that they are open. As a result of changes in
the number of facilities open from period to period, closing certain of the
Destination Golf Schools during local off-seasons, and overall seasonality of
the golf business, results of operations for any particular period may not be
indicative of the results of operations for any other period.
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<PAGE>
In an effort to reduce interest expenses and debt payments, some of the
persons to whom we have issued promissory notes have agreed to convert those
notes into common stock, which is being registered by this prospectus.
QUARTER ENDED MARCH 31, 2000 COMPARED TO QUARTER ENDED MARCH 31, 1999
NET LOSS. We incurred a net loss of $195,311 for the quarter ended
March 31, 2000, as compared to a loss of $432,970 for the comparable 1999 fiscal
quarter, a decrease of approximately 55%. The decreased net loss is due
primarily to increased revenues and a resulting increased gross profit.
Operating expenses did not change significantly.
TOTAL REVENUE. We had total revenue of $536,696 for the quarter ended
March 31, 2000, compared to $246,915 of total revenue for the comparable 1999
fiscal quarter. The increase in total revenue was attributable primarily to the
development of our Corporate Sales, selling our Premium Links(TM) corporate golf
school packages, and the development of our distributor network.
COST OF REVENUE. Cost of revenues for the quarter ended March 31, 2000
was $109,281 or 20% of total revenue, compared to $60,108 or 24% of total
revenue for the 1999 quarter. Cost of revenues consists primarily of instructor
salaries and site fees (calculated on a "per head" basis). The decrease in cost
of revenues as a percentage of total revenue was due primarily to increased
revenues associated with having more schools operating during the 2000 period
and the decrease in cost of the site fees.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, consisting primarily of marketing and advertising
expenses, expenses associated with recruiting and training Destination Golf
School site managers and instructors, salaries for administrative, sales and
marketing staff, and rent at our headquarters, decreased slightly to $573,204
for 2000 from $582,826 for 1999.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
TOTAL REVENUE. We had total revenue of $418,813 for the year ended
December 31, 1999, compared to $189,740 of total revenue for the 1998 fiscal
year. The increase in total revenue was attributable primarily to the
development of our Corporate Sales, selling our Premium Links(TM) corporate golf
school packages, and the development of our distributor network During 1999, we
had contracted to operate at 18 Destination Golf Schools, as compared to five
Destination Golf Schools during 1998.
COST OF REVENUE. Cost of revenues for the year ended December 31, 1999
was $364,409 or 87% of total revenue, compared to $353,268 or 187% of total
revenue for the 1998 fiscal year. Cost of revenues consists primarily of
instructor salaries and site fees (calculated on a "per head" basis). The
decrease in cost of revenues as a percentage of total revenue was due primarily
to increased revenues associated with having more schools operating during the
1999 period and the decrease in cost of the site fees. In addition, during 1998,
the opening of several sites was delayed, and revenue at open sites was
negatively impacted by the effects of an unusually wet winter in January,
February and March 1998. See "Seasonality" below.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, consisting primarily of marketing and advertising
expenses, expenses associated with recruiting and training Destination Golf
School site managers and instructors, salaries for administrative, sales and
marketing staff, and rent at our headquarters, increased from $1,879,183 for
1998 to $3,544,407 for 1999. The increase was due primarily to expenses
associated with establishing our distributor network, such as increased
salaries, rent, and advertising expenses. We added more personnel, took on more
space, and generated sales materials and brochures. Also, shares issued as
inducements for loan funds received and shares issued as inducements for the
conversion of loans to stock are accounted for as a financing expense. The
amount charged to financing expense was approximately $1,005,751 for the year
ended December 31, 1999. During the 2000 fiscal year, management hopes to secure
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<PAGE>
financing for our operations which does not require us to issue share
inducements to our creditors; however, there are no assurances that we will be
able to obtain such financing.
LIQUIDITY AND CAPITAL RESOURCES
The cash requirements of funding our operations and expansion have
exceeded cash flow from operations. At March 31, 2000, our working capital
deficiency was $2,657,561, as compared to $3,206,485 at December 31, 1999. To
date, we have satisfied our capital needs primarily through debt and equity
financing.
At March 31, 2000, short-term notes payable and bonds was $1,868,844.
Of this amount, $1,544,797 will be paid by issuing 617,918 shares of common
stock.
We filed a registration statement for a public offering which was
declared effective in February 1999. Due to material changes during the term of
the offering, we did not complete that offering. Since we were in need of cash
for ongoing operations, we incurred additional short-term debt and sold Series C
preferred stock. We determined that it would be in our best interests not to
proceed with an initial public offering, but instead to register shares to be
issued to our creditors, holders of the Series C preferred stock, and certain
common shareholders.
Of the $441,411 in long-term debt outstanding at March 31, 2000,
$433,432 is payable to persons who are stockholders in the Company, and bears
interest at a fixed rate of 8%, is unsecured and is convertible (principal and
unpaid interest) into our common stock at a rate of $1.00 per share at anytime.
The notes are due on January 1, 2003; however, the holders of the notes may
require us to redeem the notes, in whole or in part, upon the first two
anniversary dates of the notes (January 1, 2001 and January 1, 2002), by giving
notice to us at least 90 days before the anniversary date. We are required to
register, under the Securities Act, the shares into which the notes may be
converted. The notes may be prepaid without penalty. If we default on the notes,
the holders are entitled to one share of our common stock for every $100 per
month for each month the notes are in default. The remainder of our long-term
debt relates to a note for an automobile which bears interest at the rate of
8.9% and is payable in 42 monthly installments. As of March 31, 2000, there were
22 remaining installments.
Since we have already received cash proceeds from the issuance of our
stock, our existing operations must be able to generate enough cash to cover
existing commitments and obligations, such as lease rent for the facilities,
instructors' salaries, and officers' salaries. We are obligated under a
five-year employment agreement to pay William D. Leary, our president, an annual
salary of $120,000.
At March 31, 2000, our current liabilities exceeded current assets by
$2,657,561 and our total liabilities exceeded total assets by $2,996,720. As
stated in the auditors' report on the financial statements, we incurred a net
loss of $3,539,280 for the 1999 fiscal year, and at December 31, 1999, our
current liabilities exceeded current assets by $3,206,485 and our total
liabilities exceeded total assets by $3,571,449. Our ability to continue
operations is dependent upon our creditors accepting restructured payment terms
on overdue accounts. If our creditors will not agree to accept monthly payments
in lieu of a single payment for the full balance, we will have to seek
additional capital to pay our liabilities and/or cease operations. We cannot
give you any assurance that we will be successful in either i) convincing our
creditors to accept monthly payments or ii) securing additional capital for our
operations. Even if we are able to achieve either of the foregoing, the terms of
any such financing or the restructuring of our accounts payable may be on terms
which are unfavorable to us and may result in substantial dilution to our
shareholders. Furthermore, our business plan is dependent upon our ability to
acquire other golf schools. We have developed our business in a way that we
believe will benefit from economies of scale achieved through acquiring other
golf schools. At our present stage of development, our operations are too small
to benefit from these economies of scale. If we are unable to acquire additional
golf schools, we will need to revise our business plan and/or cease operations.
These factors, among others, raise substantial doubt about our ability to
continue as a going concern. See "Risk Factors" and the note entitled
"Continuing Losses, Deficit in Equity and Negative Working Capital" in the notes
to the financial statements.
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<PAGE>
In an effort to reduce our fixed expenses, on June 30, 2000, we reduced
our full-time staff by eight persons. We estimate the reduction in employees
will result in a savings of approximately $20,000 per month.
SEASONALITY
Throughout much of the United States, the golf business is seasonal,
operating primarily in the summer and additionally in the spring and fall.
However, in much of the Southern United States, golf is played either year-round
or all year except for the summer. This is primarily due to an outdoor playing
season limited by inclement weather or excessive heat. We believe that business
at our Destination Golf Schools will be seasonal with increased activity in the
winter as students take winter vacations to warm weather destinations, and
decreased activity in the summer. In particular, we expect decreased revenues
from Destination Golf School operations in May and September each year. We
anticipate the closing of our warm weather sites in May, with the staff of those
sites moving to a summer site, and anticipate closing our summer sites in
September, with the staff returning to their warm weather sites. In each case,
we expect a one week lag between the closing of one site and the opening of the
other site. For example, our site manager and certified instructors for Wildfire
will generally move to Pole Creek or Haymaker for the summer and the staff from
Rhodes Ranch in Las Vegas will move to Lake Okoboji, Iowa for the summer. Of our
26 current Destination Golf Schools, three facilities will close during the
summer, 19 will be open only during the summer, and the remaining four will be
open year-round.
Also, our operations are subject to the effects of inclement weather
from time to time even during the seasons that they are open. The timing of any
new facility openings, the seasons our facilities are open, the effects of
unusual weather patterns and the seasons in which students are inclined to
attend golf schools are expected to cause our future results of operations to
vary significantly from quarter to quarter.
Accordingly, period-to-period comparisons will not necessarily be
meaningful and should not be relied on as indicative of future results. In
addition, our business and results of operations could be materially and
adversely affected by future weather patterns that cause our sites to be closed,
either for an unusually large number of days or on particular days on which we
had booked a special event or a large number of students. Because most of the
students at our Destination Golf Schools attend the school on vacation, the
student may not be able to or interested in rescheduling attendance at one of
our sites. As a result, student-days lost to inclement weather may truly
represent a loss, rather than merely a deferral, of revenue.
BUSINESS
OVERVIEW
We provide golf instruction through Destination Golf Schools located at
independent resorts, to which students generally travel for intensive one to
five-day programs. We target our sales to two audiences: individuals through
solicitation of direct retail sales and corporations through the sales of
Premium Links(TM) packages. We sell Premium Links(TM) packages through a network
of distributors located throughout the United States. We are presently
developing our distributor network and generate revenue from the sale of
territories to prospective distributors. As of June 30, 2000, we had
distributors in 32 of the 100 territories identified by management.
As of June 30, 2000, we had 26 Destination Golf Schools under contract
for full or partial year operation. Our arrangement with independent resorts
allows us to offer first-rate golf facilities at reasonable cost and enables us
to take advantage of the course's or resort's marketing efforts, visibility, and
facility quality.
We believe that we are distinguished from our competitors on the basis
of the quality of our facilities, our unique curriculum, and our experienced
management team and staff. Our curriculum is geared toward the marketing premise
that ideas accepted on the professional golf tours are accepted by recreational
golfers. Our teaching curriculum has been "recognized" by the Professional Golf
Association. This recognition allows us to
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<PAGE>
provide PGA instruction by employing PGA professionals who can work toward or
maintain their status in the PGA program. In the May 1999 issue of GOLF
MAGAZINE, we were rated as one of the top 25 golf schools in America. The rating
was based on the following criteria: teaching curriculum, quality of facility,
student-teacher ratio, faculty (i.e., PGA instructors), and the use of state of
the art equipment, such as computer and video equipment.
CORPORATE HISTORY
We were originally founded in Colorado in 1991 under the name World
Associates, Inc. and remained dormant until 1996. We formed a subsidiary in
Delaware in February 1996 originally called Team Family, Inc., which changed its
name to Proformance Research Organization, Inc. in January 1997. We merged into
this subsidiary effective July 31, 1998, thereby effecting a reincorporation,
changing us from a Colorado corporation to a Delaware corporation. On
July 25, 2000 we changed our name to "PROform golf, inc."
We acquired our first golf school, which established our curriculum, in
September 1996. We then negotiated and signed agreements with various golf
courses to operate our golf schools at such courses, beginning with an agreement
in March 1997. As outlined above, we now have 26 Destination Golf Schools under
contract. As our business matures, we continue to modify and update our teaching
curriculum
INDUSTRY BACKGROUND
The National Golf Foundation, a non-profit golf research organization
(the "NGF"), conducts various surveys and studies of golfers in the United
States. According to excerpts from various studies by the NGF, there are
approximately 26.4 million golfers in the United States age 12 and over,
compared with 19.9 million golfers in 1986, an increase of 33%. Approximately
12.6 million of these golfers are between the age of 18 and 39, 5.0 million are
between age 40 and 49 and 6.7 million are over age 50. Approximately 5.6 million
U.S. golfers are "avid" golfers, defined as those who play at least 25 rounds of
golf per year. Today's typical golfer is male, 40 years old, has a household
income of $68,209 and plays 21.3 rounds per year. Golfers spend about $30
billion on equipment, related merchandise and playing fees, compared to $7.8
billion in 1986.
STRATEGY
We believe that the three most important criteria used by golfers to
select a school are: (1) location, (2) price, and (3) product. Key elements of
our strategy are (1) to increase the number of our Destination Golf Schools in
the United States through the acquisition of other golf schools; (2) to increase
the number of distributors selling our services; (3) to be price competitive
through the sale of Premium Links(TM) packages; and (4) to expand our marketing
programs. We cannot assure you that we will be able to execute our strategy
successfully.
o INCREASE THE NUMBER OF OUR DESTINATION GOLF SCHOOLS. We believe that
the most important consideration for a golfer deciding which golf
school to attend is location. We believe that we can attract more
students and sell more Premium Links(TM)packages by offering more
locations. We intend to expand by acquiring existing golf school
operations. In expanding to new locations, we intend to add sites that
are consistent with our current high quality of facilities. We believe
that our existing student booking and billing operations can service a
substantial increase in volume of students, and that economies of scale
can be achieved through the acquisition of existing golf schools. As of
June 30, 2000, we had 26 Destination Golf Schools under contract. We
have incurred significant expenses for site development and personnel
training which we believe will assist us in implementing our expansion
plans. We believe that placing an emphasis on development and training,
has enabled our staff to become familiar with our systems, which will
help us train new staff as we acquire additional schools.
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We are currently in various stages of discussions with approximately 45
companies that represent almost 100 sites. However, as of June 30,
2000, we had no understandings, agreements, or arrangements for any
acquisitions. We intend to acquire schools with sites in different
geographic regions with varying golf seasons, which we believe will
reduce the effect of seasonality on our business. We intend to acquire
other golf schools using a combination of stock and as little cash as
possible. In order for other schools to be interested in being acquired
by us, we believe a trading market must exist for our common stock. We
believe that registering the shares in this prospectus will assist in
creating a trading market for our stock.
O INCREASE THE NUMBER OF DISTRIBUTORS SELLING OUR SERVICES. To facilitate
the sales of packages of golf instruction into the corporate market
(called the Premium Links(TM)program), we intend to establish a network
of distributor members in defined geographic locations. These
distributors have non-exclusive marketing rights to our Premium
Links(TM)packages within their respective territories. For the
marketing rights to these programs, a distributor pays a one-time fee
of $35,000, which entitles the distributor to an extensive training as
well as the programs, products, and services that we have created. We
pay distributors commissions of up to 25% of the gross sales price on
the sale of Premium Links(TM)packages based on a rolling commission
schedule. In order to develop our distributor network, we made a
strategic decision to open several sites for our Destination Golf
Schools, despite the fact that there are significant one-time and
recurring expenses associated with opening each site, and despite the
fact that our existing sites were not operating at capacity. We believe
that adding additional sites makes our Premium Links(TM) packages more
valuable because it enables corporate purchasers, such as TCI, 3Com,
Oracle and Public Service of Colorado (all of which have purchased
Premium Links(TM)packages) to redeem lessons at locations nationwide.
As of June 30, 2000, we had 24 distributors in 36 of the 100
territories identified by management. Certain distributors have
purchased more than one territory.
o BE PRICE COMPETITIVE THROUGH THE SALE OF PREMIUM LINKS(TM) PACKAGEs.
Management believes that a significant market exists for the sale of
golf instruction to corporations, which can use them as incentives for
sales and employee performance. Our Premium Links(TM) packages are a
prepaid system in which the purchasing corporation receives a discount
from the direct retail price of a golf school. Corporations spend
millions of dollars on professional and collegiate sporting events,
travel, and entertainment. Premium Links(TM) was developed to capture a
piece of that market and combine the continually growing synergy of
golf and business.
o EXPAND OUR MARKETING PROGRAMS. We believe that we must create and
promote a new, memorable brand identity through multiple marketing
channels. Initially, PRO limited its marketing program to traditional
media, such as television and direct marketing. Management believes
that we must expand our marketing programs to include other
alternatives, including e-commerce and corporate direct marketing. We
believe we must build an identifiable brand identity and provide
education to our distributors about our marketing programs.
Although we intend to expand our marketing programs, we will rely
significantly upon our distributors to market our products and
services. Utilizing distributors will allow us to defer our marketing
costs, by giving up a portion of the revenue generated from
distributor's sales.
DESTINATION GOLF SCHOOLS
Retail fees for Destination Golf Schools are paid in advance and, as of
June 30, 2000, range from $275 for a 1-day school to $995 for a 4-day school. In
addition to our retail programs, we offer our Premium Links(TM) pre-paid
packages. Premium Links(TM) is an innovative package program that offers
discounted daily rates at package pricing. Premium Links(TM) packages are sold
primarily through our distributor network. Our Premium Links(TM) packages are
primarily targeted at corporate purchasers. The Premium Links(TM) packages can
be given to employees and/or clientele as incentives and can be redeemed at any
Destination Golf School nationwide. As of June 30, 2000, we offered three
Premium Links(TM) packages:
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Par Package - 22 student days for $5,000;
Birdie Package - 46 student days for $10,000; and
Eagle Package - 123 student days for $25,000.
Our strategy is to operate our Destination Golf Schools at high-quality
existing resorts that have golf facilities. As of June 30, 2000, we had 26
Destination Golf Schools under contract for operation during all or portions of
the year. Following is a list of our sites and sites under development, along
with the date the site became available to students and the season the site is
open.
Our schools have been recognized by the PGA of America, which allows us
to employ, and in turn offer instruction by, PGA-accredited teachers. At our
Destination Golf Schools, our instructors teach a curriculum called the "Optimum
Impact System" that combines instruction in all areas of golf technique with
instruction in mental aspects of the game and physical conditioning to improve
play. Instructors assess the student's skill level and learning style,
developing a personal golfer profile for individualized instruction. At our
Destination Golf Schools, access to a golf course on site is included in each
1-, 2-, 3- or 4-day package.
<TABLE>
<CAPTION>
Date
SITE NAME ADDRESS OPENED SEASON LEASE EXPIRES
--------- ------- ------ ------ -------------
<S> <C> <C> <C> <C>
The Bog 3121 County Highway 1 April 2000 April - October October 2000
P.O. Box 79
Saukville, WI 53080
Caledonia Golf & Fish 369 Caledonia Drive March 1999 Year round April 2000(1)
Club Pawleys Island, SC 29585
Brooks Golf Club 1405 Highway 71 June 1998 Mid-May to September 2000
Lake Okoboji, IA mid-September
The Cascades 16325 Silver Oaks Drive February Year round February 2001
Sylmar, CA 91342 2000
Cinnabar Hills Golf Club 23600 McKean Road August Year round August 2000
San Jose, CA 95141 1999
Fred Arbanus Golf Club 11100 View High Drive January April - October December 2001
Kansas City, MO 64134 2000
Geneva National Golf Club Geneva National Ave. So. November April - October October 2000
Lake Geneva, WI 53147 1999
Hamlet Windwatch 1715 Vanderbuilt Motors Pkwy. April 2000 April - October September 2004
Hauppauge, NY 11788
Haymaker Golf Course 34856 U.S. Hwy. 40-E May 1999 April - October October 2000
Steamboat Springs, CO 80477
Indian Tree Golf Club 7555 Wadsworth Blvd. April 1998 April - October October 2000
Arvada, CO 80003
Lake Spanaway Golf Club 15602 Pacific Avenue March 2000 April - October October 2000
Tacoma, WA 98444
Los Verdes 9200 East Iliff Avenue April 2000 April - October October 2000
Aurora, CO
The Mission Inn Golf & 10400 County Road 48 April 1998 November - April 2001
Tennis Resort Howie in the Hills, FL 54737 April
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<CAPTION>
SITE NAME ADDRESS OPENED SEASON LEASE EXPIRES
--------- ------- ------ ------ -------------
Paradise Point Golf Club 8212 Golf Course Road April 2000 April - October December 2001
Smithsfield, MO 64089
Persimmon Country Club 500 Southeast Butler Road April 2000 April - October April 2001
Gresham, OR 97080
Pole Creek Golf Club P.O. Box 3348
Winter Park, CO March 1999 April - October November 2000
Prairie Landing 2325 Longest Drive March 2000 April - October October 2000
West Chicago, IL 60165
Quicksilver Golf Club 2000 Quicksilver Drive April 2000 April - October October 2000
Midway, PA 15060
Rhodes Ranch 9020 Rhodes Ranch Pkwy March 1998 November - March 2000(1)<F1>
Las Vegas, NV April
Seven Springs Mountain No. 1 April 2000 April - October October 2000
Resort Golf Course Champion, PA 91935
Steele Canyon Golf Club 3199 Stonefield Drive November Year round November 2000
Jamul, CA 91935 1999
Tapawingo National 13001 Gary Player Drive February April - October April 2001
Saint Louis, MS 2000
Thunder Hill Golf Club 7050 Griswold Road April 2000 April - October October 2000
Madison, OH 44057
Waverly Woods 2100 Harwick Way April 2000 April - October October 2000
Mariottsville, MD 21104
Wildfire Golf Course at 5225 East Pathfinder September November - October 2000
Desert Ridge Phoenix, AZ 1997 April
The Woods Resort P.O. Box 5 November April - October December 2001
Hedgesville, WV 25427 1999
<FN>
(1)<F1> As of June 30, 2000, management was in the process of renegotiating
these contracts and we were operating on a month-to-month basis with
Rhodes Ranch and Caledonia Golf & Fish Club.
</FN>
</TABLE>
We contract with the owners of each facility to provide a golf school
at the existing golf facility and pay rent for the use of a portion of the
facility. Certain golf facilities prefer to outsource the golf school function
rather than be responsible for the overhead of establishing, maintaining and
marketing a golf school, and to date we have had success in negotiating site
agreements with 26 facilities. In addition, our operation of a golf school at an
existing facility provides the facility with higher visibility through our
advertising efforts and additional revenue through guest nights, rounds of golf,
meals, merchandise and other purchases by our golf school students. Due to this
mutually-beneficial arrangement, the rent charged us for using the facilities
has been relatively low, allowing us to maintain low operating costs while
offering our students high-quality facilities. In addition, this arrangement
permits us to offer first rate golf facilities at relatively low facilities cost
and enables us to take advantage of the course's or resort's marketing efforts,
visibility and facility quality without incurring the enormous capital
requirements and advertising budgets needed to establish, maintain and market
such facilities. Initially, we entered into leases that provided for fixed
monthly rental. We have restructured all of our leases to provide for rent based
on the number of students attending our golf school at the site, thereby
reducing our fixed expenses. As we expand our network of distributors throughout
the United States, we will increase the number of sites, basing our selection on
proximity to the distributor territories and the ability to provide for rent
based on usage.
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ACQUISITIONS AND SITE START-UP COSTS
Our management believes that there are many single-location golf school
and multiple-site golf school operations whose owners may see certain advantages
to being part of a larger organization with several locations. Management
believes that we can acquire such existing golf schools using a combination of
stock and as little cash as possible. Acquisitions of currently operating golf
schools will significantly increase our revenue base. We are currently in
various stages of discussions with approximately 45 companies that represent
almost 100 sites; however, as of June 30, 2000, we had no understandings,
agreements, or arrangements for any acquisitions. We intend to acquire other
golf schools using a combination of stock and as little cash as possible. In
order for other schools to be interested in being acquired by us, we believe a
trading market must exist for our common stock. We believe that registering the
shares in this prospectus will assist in creating a trading market for our
stock. If we are able to secure the necessary financing, our plan is to expand
to 200 Destination Golf Schools over the next three years.
The expenses associated with acquiring golf schools and opening new
sites pertain to recruiting and training instructors and staff, rent, and
advertising. These start-up costs of establishing these new facilities are
incurred in advance of advertising the sites and booking students into the
sites. Having established an infrastructure for our Destination Golf School
operations, management believes that we can achieve economies of scale in
certain of our operations, in particular advertising, student bookings, and
billing, through the acquisition of additional schools.
INTERNATIONAL OPERATIONS
On May 6, 1997, we signed a five-year agreement with Sunkyong U.S.A.,
under which Sunkyong U.S.A. agreed to represent us in the Republic of Korea
(South Korea) on an exclusive basis and to provide introductions to parties on a
non-exclusive basis throughout the Pacific Rim relating to product sales, and
Destination Golf School opportunities at sites in the Pacific Rim. Details with
respect to each site and fees to be paid to Sunkyong U.S.A. are to be negotiated
on a site-by-site basis. This agreement provides that Sunkyong U.S.A. has the
option of purchasing up to 10,000 shares of our common stock at a price of $5.00
per share for each Destination Golf School site, up to 32 sites in total. Sites
are subject to our approval. If all 32 sites are opened within the 5-year term
of this agreement, we may be obligated to issue 320,000 additional shares of
common stock.
However, due to the current business and financial conditions in Asia
generally and South Korea in particular, we have done no significant business to
date under this agreement, and expect to do no significant business under this
agreement until such time as Asian business and financial conditions improve.
MARKETING
We market our products and services primarily through distributors who
promote PRO with advertising campaigns in various media. To date, we have had a
limited marketing budget. A key component of our strategy is to use available
working capital to stimulate additional awareness and recognition of us and our
services and products. We will rely significantly upon our distributors to
market our products and services. Utilizing distributors will allow us to defer
our marketing costs, by giving up a portion of the revenue generated from
distributors' sales.
Our marketing department has conducted research on the circulation,
reader characteristics, and editorial content of various golf publications. Our
advertising and article placement strategy is intended to provide national
exposure, credibility and demand in the golf market. Our marketing strategy is
intended to be broad based, combining advertising in golf publications, such as
Golf Digest, with crossover advertising in other media intended to reach
targeted demographic and psychographic groups. These media include, but are not
limited to, high-end business and travel publications as well as electronic
media, such as cable television network programming (the Golf Channel) and the
Internet. Available capital would be used for larger ads running for consecutive
months to
18
<PAGE>
establish some degree of name recognition with our targeted audience. In
addition, we hope to take advantage of the marketing efforts of the operators of
our Destination Golf School sites, as well as any future strategic alliances to
expose us to a wider audience at no cost to us.
One target of our marketing efforts relating to our Destination Golf
Schools is executive training programs for the corporate market. We have created
incentive packages for corporations to reward performance, entertain clients or
as incentives for sales projects. As of June 30, 2000, we had conducted hundreds
of such programs, with an average attendance of 5 to 10 people. Our marketing
staff attempts to make direct contact with the corporate market through
advertising in trade journals and appearances at trade shows.
We are also pursuing cross-marketing agreements with other golf related
companies and endorsements from golf associations.
COMPETITION
The golf instruction market is highly fragmented, with lessons
available at a vast number of local golf courses, driving ranges and golf shops,
as well as a large number of destination golf schools. Our Destination Golf
Schools compete with all of these sources of golf instruction. Shaw Guides
(www.shawguides.com), an Internet travel information source that compiles golf
instruction facilities, lists hundreds of different sources of golf instruction
in the United States. Many of the local sites with which our schools compete
have greater local name recognition and resources than us. Our Destination Golf
Schools compete with several destination golf schools operated throughout the
United States, including John Jacobs Golf Schools, David Leadbetter Golf
Academy, Nicklaus/Flick Game Improvement, Arnold Palmer Golf Academy and Golf
Digest Schools. Many of the schools with which our Destination Golf Schools
compete have greater resources, a larger number of sites, more prestigious
locations or affiliations with well-known and respected golfers or golf
instructors than we do. For example, John Jacobs Golf Schools has 30 schools and
Golf Digest Schools offer instruction at 15 sites. While management believes
that our program is unique in its emphasis on the distributor network for sales
to corporations and growth through acquisitions, we cannot assure you that we
will be able to compete in the marketplace.
PROPERTY
We lease approximately 7,800 square feet of space for administrative,
office, and marketing functions in Denver, Colorado, through November 30, 2002.
The Company believes that this property will be sufficient to meet our needs for
the duration of the lease.
EMPLOYEES
As of July 5, 2000, we had 15 full-time employees and one part-time
employee. None of our employees is represented by a labor union. We believe that
our relationship with our employees is good.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions
and ages are as follows:
NAME AGE POSITIONS
William D. Leary 42 President, Treasurer and Director
John C. Weiner 72 Director
19
<PAGE>
The Company's bylaws provide for a Board of Directors ranging from 1 to
9 members, with the exact number to be specified by the Board. The number is
currently fixed at two directors. All directors hold office until the annual
meeting of stockholders next following their election, and until their
successors have been elected and qualified. Officers serve at the discretion of
the Board of Directors.
There are no family relationships between any directors or executive
officers of the Company. Directors of the Company receive no compensation to
date for their service as directors. Set forth below are brief descriptions of
recent employment and business experience of the Company's officers and
directors.
WILLIAM D. LEARY. From January 1993 until the present time, Mr. Leary
has been the President of the Company. From May 1986 until January 1993, Mr.
Leary was the President and CEO of the Innova Corporation, a golf distribution
company. Mr. Leary was employed as a linebacker by the Denver Broncos of the
National Football League from May 1983 to December 1984. From January 1985
through May 1986, Mr. Leary was rehabilitating from an injury that ended his
football career and was employed as a golf teaching professional in the United
States, Japan, Austria and Switzerland. Mr. Leary graduated with a B.S. in
general education from Mesa College, Grand Junction, Colorado in May 1983.
JOHN C. WEINER. Mr. Weiner has been a director of the Company since
1995. Since 1982, Mr. Weiner has been Chairman of the Board of JCW Investments,
Inc. and JCW Ventures. From 1971 to 1982, Mr. Weiner was founder and President
of Trident Investment Management, Inc., a public and private pension and other
investment account management service. Mr. Weiner sold Trident Investment
Management to Pacific Inland Bancorp in 1982. From 1956 to 1969, Mr. Weiner was
employed by Moody's Investors Service, serving as President and Chief Executive
Officer from 1966 until 1969. Mr. Weiner studied engineering at Westminster
College and Yale University from 1945 to 1946; received a B.A. in pre-med and
finance from Ripon College in 1948; received a B.S. in finance and economics
from the University of Chicago in 1950; and studied finance at Northwestern
University from 1950 to 1952.
KEY EMPLOYEES AND CONSULTANTS
In addition to the foregoing directors and officers, the following
individuals are key employees of or consultants to the company:
CHARLES "VIC" KLINE. Mr. Kline is a former director of the PGA. He is
also a five-time Colorado PGA section president and five-time player of the
year. Mr. Kline is a past Colorado Open and Rocky Mountain Open champion. Mr.
Kline has agreed to join our board of directors when our stock is listed on an
exchange or is traded in the over-the-counter market.
NEAL LAURIDSEN. As one of the founding principals and former Vice
President and head of marketing for the Nike Corporation, Mr. Lauridsen has
agreed to join our board of directors when our stock is listed on an exchange or
is traded in the over-the-counter market, bringing 25 years of successful,
worldwide marketing, corporate development, and expansion expertise.
CERTAIN TRANSACTIONS
WEINER SUBSCRIPTION AGREEMENT. On July 15, 1998, we entered into a
binding subscription agreement with Proformance Research Organization/Weiner,
Inc. and/or Vanguard 21st Century Weiner Inc., referred to as "PROW." John C.
Weiner is president and the sole shareholder of PROW and is one of our
directors. Under this subscription agreement, PROW had agreed, on or before the
final day of the offering commenced in February 1999, to subscribe for and
purchase at $5.00 per share all shares not otherwise subject to subscriptions
accepted by us.
20
<PAGE>
The offering did not close. John C. Weiner has loaned us $125,000 during 1999
and 2000, which will convert into 50,000 shares of common stock, which are being
registered in this prospectus.
LEARY EMPLOYMENT AGREEMENT. We entered into an employment agreement
with William D. Leary, one of our officers and directors, dated July 1, 1998.
The employment agreement is for a five-year term and provides for salary to Mr.
Leary in the amount of $120,000 annually. Under the employment agreement, Mr.
Leary is prohibited from competing against us for a period of one year from the
date of termination of Mr. Leary's employment. A state court may determine not
to enforce or only partially enforce this non-compete provision. As of December
31, 1999, we had accrued $76,635 for unpaid salary owed to Mr. Leary. See "Item
6. Management's Discussion and Analysis or Plan of Operation."
ADVANCES TO OFFICER. During 1997 and 1998, we advanced varying amounts
to William D. Leary, our president. The balance of these advances at December
31, 1997 and 1998 were $60,165 and $40,300, respectively. At December 31, 1999,
any pending balances due from Mr. Leary for advances were offset against his
salary, resulting in a balance due from the Company to Mr. Leary in the amount
of $76,635. Mr. Leary executed a long-term convertible promissory note in lieu
of payment of these funds. The note is convertible into common stock at any time
at Mr. Leary's option. [NEED A LETTER FROM BILL THAT THE NOTE IS AMENDED NOT TO
CONVERT AUTOMATICALLY]. The advances were unsecured and had no set interest or
repayment terms. As indicated below in "EXECUTIVE COMPENSATION," Mr. Leary did
not receive any compensation during 1997. We made these advances to enable Mr.
Leary to cover certain personal expenses.
We believe that with the exception of the advances made to Mr. Leary,
the terms of the above-described transactions were no less favorable to us than
would have been obtained from a nonaffiliated third party for similar
consideration. However, we lacked sufficient disinterested independent directors
to ratify all of the transactions at the time the transactions were initiated.
All ongoing and future transactions between us and our officers, directors or 5%
shareholders will be made or entered into on terms that are no less favorable to
us than those that can be obtained from unaffiliated third parties, and all such
transactions (including forgiveness of any loans) will be approved by a majority
of the independent members of our board of directors who do not have an interest
in the transactions and who have access, at our expense, to our independent
legal counsel. We have agreed with certain state regulatory authorities that so
long as our securities are registered in such states, or one year from the date
of this prospectus, whichever is longer, we will not make loans to its officers,
directors, employees, or principal shareholders, except for loans made in the
ordinary course of business, such as travel advances, expense account advances,
relocation advances, or reasonable salary advances.
EXECUTIVE COMPENSATION
The following table sets forth information for the Chief Executive
Officer ("CEO") of the Company, William D. Leary. No disclosure need be provided
for any executive officer, other than the CEO, whose total annual salary and
bonus for the last completed fiscal year did not exceed $100,000. Accordingly,
no other executive officers of the Company are included in the table.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND ANNUAL STOCK OP- ALL OTHER
PRINCIPAL COMPEN- AWARD(S) TIONS/SARS LTIP COMPEN-
POSITION YEAR SALARY($) BONUS($) SATION ($) ($) ($) PAYOUTS ($) SATION ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William D. 1999 43,365(1)<F1> -0- -0- -0- -0- -0- -0-
Leary, 1998 60,000 -0- -0- -0- -0- -0- -0-
President 1997 -0- -0- -0- -0- -0- -0- -0-
21
<PAGE>
<FN>
(1)<F1> The Company and William D. Leary, an officer and director of the
Company, entered into an Employment Agreement dated July 1, 1998 (the
"Employment Agreement"). The Employment Agreement is for a five-year
term and provides for salary to Mr. Leary in the amount of $120,000
annually. As of December 31, 1999, there was an accrued wages expense
of $76,635.
</FN>
</TABLE>
The Company does not have any employment contracts with any of its
officers or directors, except for Mr. Leary. See "CERTAIN TRANSACTIONS." Such
persons are employed by the Company on an at will basis, and the terms and
conditions of employment are subject to change by the Company. Mr. Leary, the
Company's chief executive officer, was not granted any stock options during the
fiscal years ended December 31, 1999, 1998 or 1997. He had no stock options at
December 31, 1999.
The Company does not have any employment contracts with any of its
officers or directors, except for Mr. Leary. Such persons are employed by the
Company on an at will basis, and the terms and conditions of employment are
subject to change by the Company.
STOCK OPTION PLANS
The Company has no stock option plans.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding ownership
by each officer and director, and all officers and directors as a group, as well
as all persons who own greater than 5% of our outstanding shares, as of June 30,
2000, and as adjusted to reflect the issuance of the shares covered by this
prospectus:
<TABLE>
<CAPTION>
Percentage of Shares
Beneficially Owned (2)<F2>
-----------------------------------------
Number of Shares Before After
Name of Beneficial Owner (1)<F1> Beneficially Owned Issuance Issuance
<S> <C> <C> <C>
William D. Leary (3)<F3>...................... 1,933,335 32.8% 28.3%
William Childs (5)<F5>........................ 866,000 16.3% 14.0%
John C. Weiner (6)<F6>........................ 137,500 14.9% 12.8%
J. Paul Consulting (7)<F7>.................... 725,000 2.4% 2.0%
GM/CM Family Partnership, Ltd. (8)<F8>........ 625,000 9.9% 8.6%
All executive officers and directors as a
group (2 persons) (3)<F3>(4)<F4>(6)<F6>....... 2,070,835 34.9% 30.3%
---------------
<FN>
(1)<F1>To our knowledge, except as set forth in the footnotes to this table and
subject to applicable community property laws, each person named in the
table has sole voting and investment power with respect to the shares set
forth opposite such person's name. The address of each of the persons in
this table is as follows: c/o PROform golf, inc., 5335 West 48th Avenue,
Suite 200, Denver, Colorado 80212.
(2)<F2>Where persons listed on this table have the right to obtain additional
shares of common stock through the exercise of outstanding options or
warrants or the conversion of convertible securities within 60 days from
June 30, 2000, these additional shares are deemed to be outstanding for the
purpose of computing the percentage of
22
<PAGE>
common stock owned by such persons, but are not deemed to be outstanding
for the purpose of computing the percentage owned by any other person.
Based on 5,810,115 shares of common stock outstanding as of June 30,
2000, and 6,759,915 shares of common stock outstanding after the issuance
of 747,800 shares for debt, and 202,000 upon conversion of Series C
Preferred Stock.
(3)<F3>Includes 50,000 shares owned by Sean Leary and Keenan Leary, minor children
of William D. Leary and Leah Leary. Includes 896,200 shares owned by Leah
Leary, the wife of William D. Leary. William D. Leary has voting control
over the shares owned by Leah Leary pursuant to a Voting Trust Agreement.
Includes 76,635 shares issuable upon conversion of a promissory note
issued to Mr. Leary.
(4)<F4>Includes 50,000 shares owned by Sean Leary and Keenan Leary. Excludes
910,500 shares owned by William D. Leary. William D. Leary has voting
control over shares owned by Leah Leary pursuant to a Voting Trust
Agreement.
(5)<F5>Includes 356,000 shares issuable upon conversion of a convertible debenture.
(6)<F6>Before the issuance, Mr. Weiner owns 77,500 shares of common stock. He will be issued 50,000 shares of
common stock for debt conversion.
(7)<F7>Includes 700,000 shares issuable upon exercise of options.
(8)<F8>Includes 125,000 shares owned by Growth Ventures, Inc. Pension Plan & Trust
and Growth Ventures, Inc. Profit Sharing Plan & Trust, which are under
common control with GM/CM Family Partnership, Ltd.
</FN>
</TABLE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue up to 20,000,000 shares of common stock, par
value $0.0001 per share, and up to 3,000,000 shares of preferred stock, par
value $0.0001 per share.
COMMON STOCK
As of June 30, 2000, there were 5,810,115 shares of common stock
outstanding, which were held of record by approximately 290 stockholders. All of
such shares are "restricted securities" within the meaning of Rule 144 under the
federal securities laws and are subject to limitations on resale imposed by Rule
144. There will be 6,759,915 shares of common stock outstanding after giving
effect to the issuance of shares for debt repayment, and conversion of the
Series C preferred stock. In addition as of June 30, 2000, 433,000 shares of
common stock were issuable upon conversion of long-term debt (at the election of
the holders thereof) and there were outstanding warrants to acquire 2,527,300
shares of common stock.
The holders of the common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders. We do not
have cumulative voting rights in the election of directors, and accordingly,
holders of a majority of the shares voting are able to elect all of the
directors. Subject to preferences that may be granted to any then outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of funds legally
available therefor as well as any distributions to the stockholders. In the
event of a liquidation, dissolution or winding up of the company, holders of
common stock are entitled to share ratably in all of our assets remaining after
payment of liabilities and the liquidation preference of any then outstanding
preferred stock. Holders of common stock have no preemptive or other
subscription of conversion rights. There are no redemption or sinking fund
provisions applicable to the common stock.
23
<PAGE>
PREFERRED STOCK
Upon the conversion of the Series C preferred stock and according to
our certificate of incorporation, the board of directors will have the
authority, without further action by the stockholders, to issue up to 3,000,000
shares of preferred stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, any or all of which may be greater than the rights
of common stock. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and the likelihood that such holders
will receive dividend payments and payments upon liquidation and could have the
effect of delaying, deferring or preventing a change in control of the company.
We have no present plan to issue any shares of preferred stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to Section 203 of the Delaware corporate statutes which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested holder, (ii) upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (a)
by persons who are directors and also officers and (b) by employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder.
In general, Section 203 defines business combination to include: (i)
any merger or consolidation involving the corporation and the interested
stockholder, (ii) any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation involving the interested stockholder, (iii)
subject to certain exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder, (iv) any transaction involving the corporation that has the effect
of increasing the proportionate share of the stock or any class or series of the
corporation beneficially owned by the interested stockholder or (v) the receipt
by the interested stockholder of the benefit of any loss, advances, guarantees,
pledges or other financial benefits by or through the corporation. In general,
Section 203 defines interested stockholder as an entity or person beneficially
owning 15% or more of the outstanding stock of the corporation and any entity or
person affiliated with or controlling or controlled by such entity or person.
ANTITAKEOVER EFFECTS OF CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
As indicated above, our board of directors has the authority to issue
up to 3,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting and conversion
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of common stock will be subject to, and may be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future. In addition, the board of directors has the authority
to issue undesignated preferred stock and, subject to certain limitations, to
determine the rights, preferences, privileges and restrictions, including voting
rights, of such shares without any further vote or action by the stockholders.
The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the company.
24
<PAGE>
In addition, we are subject to the antitakeover provisions of Section
203 of the Delaware corporate statutes, which will prohibit us from engaging in
a "business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of the company. Further, certain provisions of
our certificate of incorporation and bylaws and of Delaware law could delay or
make more difficult a merger, tender offer or proxy contest involving us, which
could adversely affect the market price of our common stock.
LISTING
We expect trading to commence in the OTC Bulletin Board after the date
of this prospectus. We intend to apply for quotation of our common stock on the
NASDAQ SmallCap Market once we meet listing standards.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Corporate
Stock Transfer. Its address is 3200 Cherry Creek Drive South, #430, Denver,
Colorado 80209 and its telephone number is (303) 282-4800.
SELLING STOCKHOLDERS
REPAYMENT OF SHORT-TERM DEBT
The following table sets forth information regarding holders of
convertible promissory notes as of June 30, 2000. We are registering shares of
common stock to repay this debt. The shares are being registered to permit
public secondary trading of such shares, and each of the selling stockholders
may offer the common stock for resale as they wish. None of the selling
stockholders has had any position, office, or material relationship with us
within the past three years, except as indicated below:
<TABLE>
<CAPTION>
Common
Shares Issuable COMMON
Upon Payment SHARES TO BE PERCENTAGE
Amount of AND BEING TOTAL COMMON OWNED AFTER OWNERSHIP
SELLING STOCKHOLDER Debt REGISTERED SHARES OWNED SALE(7)<F7> AFTER SALE(8)<F8>
----------------------------- ---------------- ------------------ --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
D. Gene & Darlene $ 2,500 1,000 2,000 1,000 0.02%
Anderson
Barbara Brummet $ 5,000 2,000 4,000 2,000 0.03%
Robert J. Buckley $ 10,000 4,000 7,000 3,000 0.04%
John H. P. Chen $ 100,000 40,000 110,000 70,000 1.04%
Betty Davis $ 10,000 4,000 6,000 2,000 0.03%
Steven A. Dawes $ 50,000 20,000 33,000 13,000 0.19%
Henry Deyle $ 5,000 2,000 3,000 1,000 0.02%
Leon Duda $ 10,000 4,000 6,000 2,000 0.03%
Irvin & Dennis Geffre $ 60,000 24,000 37,000 13,000 0.19%
Mildred J. Geiss (3)<F3> $ 50,000 20,000 64,250 44,250 0.65%
John A. Geraghty $ 25,000 10,000 20,000 10,000 0.15%
Daryl C. Geyen $ 15,000 6,000 9,000 3,000 0.04%
Edward R. Giery $ 5,000 2,000 3,000 1,000 0.02%
Robert C. Gourlay $ 5,000 2,000 4,000 2,000 0.03%
Revocable Trust
Elgene Graves (4)<F4> $ 20,000 8,000 14,000 6,000 0.09%
Michael Grebin $ 15,000 6,000 17,500 11,500 0.17%
Kevin C. Gross $ 2,500 1,000 1,500 500 0.01%
25
<PAGE>
<CAPTION>
Common
Shares Issuable COMMON
Upon Payment SHARES TO BE PERCENTAGE
Amount of AND BEING TOTAL COMMON OWNED AFTER OWNERSHIP
SELLING STOCKHOLDER Debt REGISTERED SHARES OWNED SALE(7)<F7> AFTER SALE(8)<F8>
----------------------------- ---------------- ------------------ --------------- --------------- ----------------
Don Harper $ 20,000 8,000 19,500 11,500 0.17%
Todd P. Hayes $ 15,000 6,000 9,000 3,000 0.04%
Dr. Mark L. Hedlund $ 100,000 40,000 82,000 42,000 0.62%
Michael Hendricks $ 125,000 50,000 110,000 60,000 0.89%
Dennis Himler $ 5,000 2,000 3,000 1,000 0.02%
Dwight Hodges $ 25,000 10,000 27,500 17,500 0.26%
Gary D. Hodgkinson $ 2,500 1,000 1,500 500 0.01%
Hug Industries, Inc. $ 25,000 10,000 17,000 7,000 0.10%
Bonnie L. Johnson $ 10,000 4,000 6,000 2,000 0.03%
Monte Jones $ 10,000 4,000 6,000 2,000 0.03%
Dom Allen Kickbush $ 5,000 5,000 5,000 - 0.00%
Randall L. Larson $ 15,000 6,000 9,000 3,000 0.04%
Larry J. Laughlin $ 10,000 4,000 6,000 2,000 0.03%
Neal A. Lauridsen $ 100,000 100,000 133,000 33,000 0.49%
Frank Licata $ 5,000 2,000 3,000 1,000 0.02%
Robert N. Manniello $ 50,000 20,000 65,000 45,000 0.67%
James S. Manning $ 80,000 32,000 95,350 63,350 0.94%
John M. Manning II $ 10,000 10,000 10,000 - 0.00%
Joseph Masiak $ 10,000 4,000 8,000 4,000 0.06%
Michael Michog $ 10,000 4,000 7,000 3,000 0.04%
Carrol R. Moore $ 5,000 2,000 3,000 1,000 0.02%
Ross Morgan $ 10,000 4,000 12,000 8,000 0.19%
David M. Munch $ 37,500 15,000 30,000 15,000 0.22%
Geoff Murtha $ 2,000 800 1,600 800 0.01%
Wesley A. Olsen (5)<F5> $ 20,000 8,000 21,000 13,000 0.19%
Oriental New Investments $ 150,000 60,000 100,000 40,000 0.59%
Jason Pavlovic $ 5,000 5,000 5,000 - 0.00%
Richard Plahn $ 5,000 2,000 3,000 1,000 0.02%
Joseph B. Rogness $ 10,000 4,000 7,000 3,000 0.04%
Louis G. Royston, Jr. (1)<F1> $ 50,000 20,000 299,601 279,601 4.14%
Dale L. Severson $ 10,000 4,000 6,000 2,000 0.03%
Beverly S. Smith $ 5,000 2,000 4,000 2,000 0.03%
August M. Stoffel $ 10,000 4,000 6,000 2,000 0.03%
Paul Stoll (6)<F6> $ 5,000 2,000 10,000 8,000 0.19%
Alfred Supan $ 5,000 2,000 3,000 1,000 0.02%
Phillip Swan $ 60,000 24,000 48,000 24,000 0.36%
John P. Thimmesh $ 10,000 4,000 8,000 4,000 0.06%
James E. Torina $ 100,000 40,000 111,000 71,000 1.05%
Thomas Trainer $ 10,000 4,000 6,000 2,000 0.03%
Kenneth & Marjorie Utt $ 2,500 1,000 2,000 1,000 0.02%
Mark B. Ward $ 20,000 8,000 24,500 16,500 0.24%
Robert M. Ward $ 5,000 2,000 3,000 1,000 0.02%
John C. Weiner, Jr. (2)<F2> $ 125,000 50,000 137,500 87,500 1.29%
Jerry Yoder $ 5,000 2,000 3,000 1,000 0.02%
----------------------------- ---------------- ------------------ --------------- --------------- ----------------
TOTAL $ 1,689,500 747,800 1,818,301 1,070,501 15.72%
================ ================== =============== =============== ================
----------
<FN>
(1)<F1> Mr. Royston has been an employee of the company since December 1996.
26
<PAGE>
(2)<F2> Mr. Weiner has been a director of the company since 1995.
(3)<F3> Includes 39,000 shares owned by Andrew P. Geiss, the husband of Mildred J. Geiss.
(4)<F4> Includes 2,000 shares owned by Alan and Elgene Graves.
(5)<F5> Includes 4,000 shares owned by Wesley A. Olsen and Susan M. Olsen, the wife of Wesley A. Olsen.
(6)<F6> Includes 7,000 shares owned by James Stoll and Nancy Stoll, wife of James Stoll.
(7)<F7> Assuming that no additional shares are purchased by the shareholder(s) and that no other shares owned by
the shareholder(s) are sold.
(8)<F8> Based on 6,759,915 shares outstanding, including 747,800 shares
issuable upon payment of promissory notes, as set forth in this table,
and 202,000 shares issuable upon conversion of the Series C preferred
stock.
</FN>
</TABLE>
SERIES C PREFERRED STOCK
The following table sets forth information regarding beneficial
ownership of shares of our Series C preferred stock as of June 30, 2000. We are
registering shares of common stock issuable upon conversion of the Series C
preferred stock. The shares are being registered to permit public secondary
trading of such shares, and each of the selling stockholders may offer the
common stock for resale as they wish. None of the selling stockholders has had
any position, office, or material relationship with us within the past three
years, except as indicated below:
<TABLE>
<CAPTION>
Common
Series C Shares Issuable COMMON
Preferred Upon Conver- SHARES TO BE PERCENTAGE
Shares sion and Being TOTAL COMMON OWNED AFTER OWNERSHIP
SELLING STOCKHOLDER Owned Registered SHARES OWNED SALE AFTER SALE(1)<F1>
----------------------------- ---------------- ------------------ --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Stanford Baratz 40,000 40,000 60,000 20,000 0.30%
Revocable Trust
Gary Hansberger 20,000 20,000 30,000 10,000 0.15%
Gerald S. and Kristy L. 3,600 3,600 7,200 3,600 0.05%
John
Gerald S. and Kristy L. 4,400 4,400 8,800 4,400 0.07%
John, Trustees for the
Susanna G. John
Survivor's Trust
Josef F. and Roxanne 4,000 4,000 6,000 2,000 0.03%
Korzeniowski
Peter E. Phelps, Trustee for 40,000 40,000 60,000 20,000 0.30%
the Robert D. Phelps
Decedent's Trust dated
6/4/75
Eddy Wilkinson 40,000 40,000 62,000 22,000 0.32%
Kirkland C. Woodhouse 50,000 50,000 75,000 25,000 0.37%
----------------------------- ---------------- ------------------ --------------- --------------- ----------------
TOTAL 202,000 202,000 309,000 107,000 1.58%
================ ================== =============== =============== ================
<FN>
(1)<F1> Based on 6,759,915 shares outstanding, including 747,800 shares
issuable upon payment of promissory notes and 202,000 shares issuable
upon conversion of the Series C preferred stock, as set forth in this
table.
</FN>
</TABLE>
WARRANTS
The following table sets forth information regarding shares issuable
upon the exercise of certain warrants, which we have agreed to register. The
shares are being registered to permit public secondary trading of such shares,
and each of the selling stockholders may offer the common stock for resale as
they wish. None of the
27
<PAGE>
selling stockholders has had any position, office, or material relationship with
us within the past three years, except as indicated below:
<TABLE>
<CAPTION>
COMMON SHARES TOTAL COMMON
ISSUABLE UPON EXERCISE COMMON SHARES TO BE PERCENTAGE
OF WARRANTS AND BEING SHARES OWNED AFTER OWNERSHIP
SELLING STOCKHOLDER REGISTERED OWNED SALE AFTER SALE
----------------------------------- ----------------------------- --------------- ------------- ----------
<S> <C> <C> <C> <C>
J. Paul Consulting 700,000 725,000 - -
GM/CM Family Partnership, Ltd. 500,000 625,000(1)<F1> - -
----------------------------- --------------- ------------- ----------
TOTAL 1,200,000 1,350,000 - -
============================= =============== ============= ==========
<FN>
(1)<F1> Includes 125,000 shares owned by Growth Ventures, Inc. Pension Plan &
Trust and Growth Ventures, Inc. Profit Sharing Plan & Trust, which are
under common control with GM/CM Family Partnership, Ltd.
</FN>
</TABLE>
SHARES OWNED BY OTHER STOCKHOLDERS
In addition to the shares described above, we agreed to register the
shares owned by the following:
<TABLE>
<CAPTION>
COMMON
Common SHARES TO BE PERCENTAGE
Shares Being TOTAL COMMON OWNED AFTER OWNERSHIP
SELLING STOCKHOLDER Registered SHARES OWNED SALE AFTER SALE (4)<F4>
-------------------------------------------- ----------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
Dr. Christian J. Baddour 12,500 12,500 - -
Bleu Ridge Consultants, Inc. 25,000 25,000 - -
Benedetto and Christina Casale 25,000 25,000 - -
Co-Ligne, A.G. 70,000 70,000 - -
Heather M. Evans 10,000 10,000 - -
Thomas Allen Forti 25,000 25,000 - -
Bobbie J. Geske 5,000 5,000 - -
Growth Ventures, Inc. Pension
Plan & Trust and Growth - -
Ventures, Inc. Profit Sharing Plan 125,000 (1)<F1> 625,000 (2)<F2>
& Trust
J Paul Consulting Corp. 25,000 725,000 (3)<F3> - -
Jeff Jones 12,500 12,500 - -
Fairway Capital Partners LLC. 25,000 25,000 - -
Charles Kirby 25,000 25,000 - -
Frank J. Kostro 10,000 10,000 - -
John J. Kostro 10,000 10,000 - -
Neal A. Lauridsen 20,000 73,000 53,000 0.784%
The Earnest Mathis IRA Rollover 100,000 100,000 - -
Joseph O'Toole 10,000 10,000 - -
Owen & Associates, IBG, L.L.C. 25,000 25,000 - -
Owen & Associates, Inc. Profit
Sharing Plan 25,000 25,000 - -
David W. Packer 5,000 5,000 - -
J. J. Peirce 25,000 25,000 - -
James Scibelli 50,000 50,000 - -
Jerry Truman 20,000 20,000 - -
Mark B. Ward 5,000 21,000 16,500 0.244%
------------- --------------- ------------- ---------
TOTAL 690,000 1,959,000 69,500 1.028%
============= =============== ============= =========
28
<PAGE>
<FN>
(1)<F1> Including 100,000 shares of common stock held by Growth Ventures, Inc. Profit Sharing Plan & Trust.
and 25,000 shares held by Growth Ventures, Inc. Pension Plan & Trust. Growth Ventures, Inc. Profit
Sharing Plan & Trust and Growth Ventures, Inc. Pension Plan & Trust are under common control.
(2)<F2> Assuming the exercise of warrants held by GM/CM Family Partnership Ltd. to acquire 600,000 shares of
common stock which are being registered by this registration statement. Growth Ventures, Inc. Pension
Plan & Trust, Growth Ventures, Inc. Profit Sharing Plan & Trust, and GM/CM Family Partnership, Ltd.
are all under common control.
(3)<F3> Assuming the exercise of warrants to acquire 700,000 shares of common stock which are being registered
by this registration statement.
(4)<F4> Based on 6,759,915 shares outstanding, including 747,800 shares
issuable upon payment of promissory notes and 202,000 shares issuable
upon conversion of the Series C preferred stock.
</FN>
</TABLE>
We agreed to register the securities for resale by the selling
stockholders to permit them to sell the shares as they wish in the market or in
privately negotiated transactions. We have agreed to bear the expenses of
registering the common stock, but not broker discounts and commissions if the
selling stockholders resell the common stock.
PLAN OF DISTRIBUTION
All or a portion of the securities offered through this prospectus by
the selling stockholders may be delivered and/or sold in transactions from time
to time on the over-the-counter market, in negotiated transactions, or a
combination of such methods of sale. These transactions will be at market prices
prevailing at the time, at prices related to such prevailing prices, or at
negotiated prices. The selling stockholders may effect such transactions by
selling to or through one or more broker-dealers, and such broker-dealers may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling stockholders. The selling stockholders and any
broker-dealers that participate in the distribution may under certain
circumstances be deemed to be "underwriters" within the meaning of federal
securities laws. Any commissions received by such broker-dealers and any profits
realized on the resale of securities by them may be deemed to be underwriting
discounts and commissions under federal securities laws.
Any broker-dealer participating in such transactions as agent may
receive commissions from the selling stockholders and, if they act as agent for
the purchaser of the securities, from such purchaser. Broker-dealers may agree
with the selling stockholders to sell a specified number of securities at a
stipulated price per share. To the extent such a broker-dealer is unable to do
so acting as agent for the selling stockholders, it may purchase as principal
any unsold securities at the price required to fulfill the broker-dealer
commitment to the selling stockholders. Broker-dealers who acquire securities as
principal may then resell these securities in transactions which may involve
crosses and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above in the
over-the-counter market, in negotiated transactions or otherwise at market
prices prevailing at the time of sale or at negotiated prices. In connection
with such resales broker-dealers may pay to or receive from the purchasers of
these securities commissions computed as described above. To the extent required
under the federal securities laws, a supplemental prospectus will be filed,
disclosing
o the name of any such broker-dealers;
o the number of securities involved;
o the price at which such securities are to be sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable;
o that such broker-dealers did not conduct any investigation to verify
the information set out or incorporated by reference in this
prospectus, as supplemented; and,
o other facts material to the transaction.
29
<PAGE>
Under applicable rules and regulations under federal securities laws,
any person engaged in the distribution of the resale of securities may not
simultaneously engage in market making activities with respect to the securities
of our company for a period of two business days prior to the commencement of
such distribution. In addition, the selling stockholders will be subject to
applicable provisions of the federal securities laws, and the rules and
regulations under these laws, including Regulation M, which provisions may limit
the timing of purchases and sales of the securities by the selling stockholders.
The selling stockholders will pay all commissions and other expenses
associated with the sale of the common stock by them. The shares of common stock
offered through this prospectus are being registered because of our contractual
obligations with the selling stockholders, and we have paid the expenses of the
preparation of this prospectus.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of common stock after the date
of this prospectus could adversely affect the market price of the common stock
and could impair our ability to raise additional capital through the future sale
of equity securities. After the issuance of shares to repay debt and the shares
issuable upon conversion of the Series C preferred stock we will have 6,759,915
shares of common stock outstanding. In addition, we will have outstanding
warrants to purchase 2,527,300 shares of common stock, of which 1,200,000 shares
of common stock are being registered by this registration statement, and 433,432
shares of common stock will be issuable upon conversion of certain long-term
debt, at the election of the holders thereof. Under our agreement with Sunkyong
U.S.A., we may also become obligated to issue up to 320,000 shares of common
stock. Of the 6,759,915 shares to be outstanding, the 949,800 shares issued for
debt repayment and preferred stock conversion and the 690,000 shares being
registered by holders of our common stock will be freely tradeable without
restriction under federal securities laws unless they are held by our
"affiliates," as that term is used in Rule 144 under the Securities Act. In
addition, 1,200,000 issuable upon the exercise of certain warrants, which are
being registered by this registration statement, will be freely tradeable
without restriction under federal securities laws unless they are held by our
"affiliates," as that term is used in Rule 144 under the Securities Act.
The remaining 5,120,115 outstanding shares are "restricted securities"
within the meaning of Rule 144 and may be resold only in compliance with that
Rule. In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year, is entitled to sell, within any three-month period, that number
of shares that does not exceed the greater of (a) one percent of the then
outstanding shares or (b) the average weekly trading volume of the then
outstanding shares during the four calendar weeks preceding each such sale.
Furthermore, a person who is not deemed an "affiliate" of us and who has
beneficially owned shares for at least two years is entitled to sell such shares
under Rule 144 without regard to the volume limitations described above.
There has been no public market for our common stock, and any sale of
substantial amounts in the open market may adversely affect the market price of
the common stock.
LEGAL MATTERS
Dill Dill Carr Stonbraker & Hutchings, P.C., Denver, Colorado, has
given an opinion on the validity of the securities.
30
<PAGE>
EXPERTS
We have included the financial statements of the company as of and for
the two years ending December 31, 1999, in reliance upon the report of Stark
Tinter & Associates, LLC, independent public accountants, whose report has been
included in this prospectus upon the authority of that firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have been subject to the reporting requirements under federal
securities laws since February 1999. We have filed with the SEC a registration
statement on Form SB-2 and amendments to the registration statement with respect
to the securities offered through this prospectus. This prospectus does not
contain all of the information set forth in the registration statement and the
exhibits and schedules that are part of the registration statement. For further
information about the securities and us, you should review the registration
statement and the exhibits and schedules. Statements made in this prospectus
regarding the contents of any contract or document filed as an exhibit to the
registration statement are not necessarily complete. You should review the copy
of such contract or document so filed.
You can inspect the registration statement, as well as the exhibits and
the schedules, filed with the SEC without charge, at the SEC's office at
Judiciary Plaza, 450 Fifth Street, NW, Washington, D.C. 20549. You can also
obtain copies of these materials from the SEC's Public Reference Section at 450
Fifth Street, NW, Washington, D.C. 20549, at prescribed rates. The SEC maintains
a web site on the Internet that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
REPORTS TO STOCKHOLDERS
As a result of filing the registration statement, we are subject to the
reporting requirements of the federal securities laws, and are required to file
periodic reports, proxy statements, and other information with the SEC. We will
furnish our shareholders with annual reports containing audited financial
statements certified by independent public accountants following the end of each
fiscal year, proxy statements, and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year following
the end of such fiscal quarter.
31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Proformance Research Organization, Inc.
We have audited the accompanying balance sheet of Proformance Research
Organization, Inc. (fka World Associates Inc.) as of December 31, 1999, and the
related statements of operations, stockholders' deficiency, and cash flows for
each of the years ended December 31, 1999 and 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Proformance Research
Organization, Inc. (fka World Associates Inc.) as of December 31, 1999, and the
results of its operations, and its cash flows for each of the years ended
December 31, 1999 and 1998, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As shown in the financial statements,
the company incurred a net loss of $3,539,280 for 1999 and has incurred
substantial net losses for each of the past five years. At December 31, 1999,
current liabilities exceed current assets by $3,206,485 and total liabilities
exceed total assets by $3,571,449. These factors, and the others discussed in
Note 13, raise substantial doubt about the company's ability to continue as a
going concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the company
cannot continue in existence.
/S/STARK TINTER & ASSOCIATES, LLC
Stark Tinter & Associates, LLC
Denver, Colorado
March 31, 2000
F-1
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets
Due from employees $ 2,264
Note receivable 6,000
Prepaid expenses 16,500
----------
Total current assets 24,764
Property and equipment - net of accumulated depreciation 66,285
Other assets 11,363
----------
$ 102,412
==========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities
Bank overdraft $ 2,808
Accounts payable and accrued expenses 571,126
Accrued interest 177,285
Current portion of long term debt 7,733
Related party payable 25,839
Notes and bonds payable 85,000
Notes and bonds payable, related party 1,949,500
Deferred revenue and deposits payable 411,958
----------
Total current liabilities 3,231,249
----------
Long term debt
Notes and bonds payable 9,180
Notes payable, related party 76,635
Bonds payable, related party 356,797
----------
442,612
----------
Stockholders' (deficiency)
Preferred stock, Series C, convertible, cumulative,
$.0001 par value per share, 2,000,000 shares authorized,
190,000 shares issued and outstanding- 19
Common stock, $.0001 par value per share, 10,000,000
shares authorized,4,999,114 shares issued and outstanding 500
Additional Paid-In Capital 3,471,212
Accumulated deficit (7,043,180)
-----------
Total stockholders' (deficiency) (3,571,449)
-----------
$ 102,412
===========
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Statements of Operations
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revenue $ 418,813 $ 189,740
Cost of revenues 364,409 353,268
------------ ------------
Gross profit (loss) 54,404 (163,528)
------------ ------------
Operating expenses
Sales, general and administrative 3,544,407 1,879,183
Depreciation 14,858 8,810
------------ ------------
Total operating expenses 3,559,265 1,887,993
------------ ------------
Operating (loss) (3,504,861) (2,051,521)
Interest expense 114,742 78,694
------------ ------------
(Loss) from continuing operations (3,619,603) (2,130,215)
Provision for income taxes (benefit) (16,065) -
------------ ------------
Discontinued operations
(Loss) from operations of Team Family
segment - (3,063)
------------ ------------
Extraordinary Items
Gain on early extinguishment of debt,
net of income taxes of $16,065 64,258 -
------------ ------------
Net (Loss) $(3,539,280) $(2,133,278)
============ ============
Per share information-basic and fully diluted
Weighted average shares outstanding 4,351,131 939,287
============ ============
(Loss) per common share
(Loss) from continuing operations $ (0.83) $ (2.27)
(Loss) from discontinued operations - -
(Gain) from extraordinary items 0.02 -
------------ ------------
Net (loss) per common share $ (0.81) $ (2.27)
============ ============
See accompanying notes to financial statements
</TABLE>
F-3
<PAGE>
<TABLE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Statement of Stockholders' (Deficiency)
For the years ended December 31, 1998 and 1999
<CAPTION>
Preferred Stock Preferred Stock Preferred Stock
Common Stock Series A Series B Series C Additional
-------------------- ---------------------- -------------------- ---------------- Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Total
--------- ---------- --------- ------------ --------- ---------- ------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1998 897,534 $ 90 116,900 $ 12 185,200 $ 19 - $ - $ 879,274 $(1,370,622) $( 491,227)
Issuance of
stock for
cash at
$5.00
per share 96,300 10 481,490 481,500
Stock issued
in consid-
eration for
loans re-
ceived at
$4.00 per
share 12,500 1 49,999 50,000
Conversion
of shares
upon the
Company's
merge into
its wholly
owned
subsidiary 1,638,061 164 533,000 53 463,000 46 (263) -
Issuance of
stock for
cash at
$1.43 per
share 41,650 4 59,496 59,500
Debt con-
verted to
stock at
$1.43 per
share 70,000 7 99,993 100,000
Stock issued
in con-
sideration
for loans
received at
$1.43 per
share 100,213 10 143,294 143,304
Stock issued
in consid-
eration for
services
rendered
at $1.43
per share 2,502 - 3,578 3,578
Net (loss)
for 1998 (2,133,278) (2,133,278)
--------- ---------- --------- ------------ --------- ---------- ------- -------- ----------- ------------ ------------
Balance at
December
31, 1998 2,650,810 265 857,850 86 648,200 65 - - 1,716,861 (3,503,900) (1,786,623)
Issuance of
stock for
cash at
$2.50 per
share 190,000 19 474,981 475,000
Conversion
of Series
A to common
shares 857,850 86 (857,850) (86) -
Conversion
of Series
B to common
shares 648,200 65 (648,200) (65) -
Stock issued
in con-
sideration
for loans
received at
$1.67 per
share 531,214 53 887,074 887,127
Stock issued
in con-
sideration
for Series
C stock
purchased 95,000 9 (9) -
Stock issued
in con-
sideration
for distri-
butorship
agreements
at $2.50
per share 38,000 4 94,996 95,000
Stock issued
in con-
sideration
for ser-
vices
rendered at
$1.67 per
share 178,040 18 297,309 297,327
Net (loss)
for 1999 (3,539,280) (3,539,280)
--------- ---------- --------- ------------ --------- ---------- ------- -------- ----------- ------------ ------------
Balance at
December
31, 1999 4,999,114 $ 500 - $ - - $ - 190,000 $ 19 $3,471,212 $(7,043,180) $(3,571,449)
========= ========== ========= ========= ============ ========== ======= ======== =========== ============ ============
See Accompanying Notes to Financial Statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Statements of Cash Flows
For the years ended December 31, 1999 and 1998
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(3,539,280) $(2,133,278)
Adjustments to reconcile net (loss)
to net cash (used in) operating
activities:
Depreciation and amortization 14,858 8,810
Common stock issued for inducements - 96,653
Write off of deferred financing costs 96,653 -
Changes in assets and liabilities:
(Increase) decrease in due from employees 3,945 (6,209)
(Increase) decrease in note receivable 12,000 (18,000)
(Increase) decrease in deferred offering
costs 34,626 (34,626)
Decrease in prepaid expenses (16,500) -
(Increase) decrease in other assets (6,700) 504
Increase in accounts payable and accrued
expenses 641,971 340,761
Increase in accrued interest 50,433 -
Increase in related party payable 7,315 18,524
Increase in deferred revenue and deposits
payable 166,517 234,330
(Decrease) in liabilities of discontinued
operations (41,102) (14,038)
------------ ------------
Total adjustments 964,016 626,709
------------ ------------
Net cash (used in) operating activities (2,575,264) (1,506,569)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (12,661) (59,411)
------------ ------------
Net cash (used in) investing activities (12,661) (59,411)
------------ ------------
Cash flows from financing activities:
Increase in bank overdraft 2,808 -
Proceeds from notes and bonds payable 697,127 299,166
Proceeds from notes and bonds payable,
related party 1,782,797 1,035,500
Payment on notes and bonds payable, related
party (365,000) (407,000)
Net proceeds from issuance of preferred
stock series A - 641,000
Net proceeds from issuance of preferred
stock series C 475,000 -
Payments on note and bonds payable (9,577) (2,677)
------------ ------------
Net cash provided by financing activities 2,583,155 1,565,989
------------ ------------
Net increase (decrease) in cash (4,770) 9
Beginning - cash 4,770 4,761
------------ ------------
Ending - cash $ - $ 4,770
============ ============
Supplemental cash flow information:
Non-cash transactions:
Common stock issued in consideration for
loans $ 887,127 $ 193,305
Common stock issued in consideration for
distributorship agreements $ 95,000 $ -
Common stock issued in consideration for
services rendered $ 297,327 $ 3,578
Cash paid for:
Interest $ 4,548 $ 1,043
Income taxes $ - $ -
</TABLE>
See Accompanying notes to financial statements
F-5
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated in 1993 in Colorado under the name of World
Associates, Inc. On July 31, 1998, the Company merged into Proformance Research
Organization, Inc. ("PRO"), a Delaware corporation, with PRO surviving (see Note
3).
The Company conducts destination golf schools by contracting with existing
facilities to provide instruction. The Company also earns annual license fees
from distributors in exchange for certain non-exclusive rights.
Revenue recognition
Revenues are recognized in the period when the student attends the golf
school. Revenues collected in advance of attendance are deferred. Revenue from
license fees collected pursuant to distributor agreements is deferred until the
Company fulfills all requirements of the agreement.
Depreciation
The cost of equipment is depreciated over the estimated useful lives (5
years) of the related assets. Depreciation is computed on the straight-line
method for financial reporting purposes.
Use of estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions the affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the balance sheet date and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Net loss per share
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). Basic earnings per common share ("EPS")
calculations are determined by dividing net loss by the weighted average number
of shares of common stock outstanding during the year. Diluted earnings per
common share calculations are determined by dividing net income by the weighted
average number of common shares and dilutive common share equivalents
outstanding.
Cash and Cash Equivalents
For purposes of balance sheet classification and the statements of cash
flows, the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
F-6
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
Stock-Based Compensation
The Company accounts for stock based compensation in accordance with SFAS
No. 123, "Accounting for Stock-Based Compensation." The provisions of SFAS No.
123 allow companies to either expense the estimated fair value of stock options
or to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net income (loss) had the fair value of the options been expensed.
The Company has elected to continue to apply APB 25 in accounting for its stock
option incentive plans.
Comprehensive Income
There were no items of comprehensive income for the years ended December
31, 1999 and 1998, and thus net loss is equal to comprehensive loss for those
years.
Advertising Costs
Advertising is expensed as incurred. Advertising costs expensed during
years ended December 31, 1999 and 1998 were $130,009 and $129,644, respectively.
Product Concentration
The Company currently derives most of its revenues from destination golf
schools. The Company expects that these revenues will continue to account for
substantially all of the Company's revenues for the foreseeable future. As a
result, the Company's future operating results are dependent upon continued
market acceptance of destination golf schools and enhancements thereto. There
can be no assurance that these golf schools will achieve continued market
acceptance. A decline in demand for, or market acceptance of, destination golf
schools as a result of competition, technological change or other factors could
have a material adverse effect on the Company's business, operating results and
financial condition.
Impairment Of Long-Lived Assets
The Company periodically reviews the carrying amount of property, plant and
equipment and its identifiable intangible assets to determine whether current
events or circumstances warrant adjustments to such carrying amounts. If an
impairment adjustment is deemed necessary, such loss is measured by the amount
that the carrying value of such assets exceeds their fair value. Considerable
management judgement is necessary to estimate the fair value of assets,
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell. As of December 31, 1999, management
does not believe there is any impairment of the carrying amounts of assets.
F-7
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 1999. The
respective carrying value of certain on-balance-sheet financial instruments
approximate their fair values.
These financial instruments include cash, notes receivable, amounts due from and
payable to related parties, accounts payable, accrued expenses and notes and
bonds payable. Fair values of the short-term financial instruments were assumed
to approximate carrying values for these financial instruments because they are
short term in nature and are due or payable on demand. The fair value of the
Company's long-term notes and bonds payable approximate its carrying value based
on the current rates offered to the Company for debt of the same remaining
maturities.
Recent Pronouncements
The FASB recently issued Statement No 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
rule now will apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be adopted
in years beginning after June 15, 1999. The Statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined if it will early adopt and what the effect of SFAS No. 133 will
be on the earnings and financial position of the Company.
NOTE 2. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation at December 31, 1999:
<TABLE>
<S> <C>
Furniture and fixtures $32,201
Leasehold improvements 8,252
Equipment 29,403
Vehicle 32,313
-------
102,169
Less: Accumulated depreciation 35,884
-------
Total $66,285
=======
</TABLE>
F-8
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
For the years ended December 31, 1999 and 1998, depreciation expense charged to
operations was $14,858 and $8,810, respectively.
NOTE 3. MERGER
On July 31, 1998, the Company merged into PRO, its subsidiary, with PRO
surviving. On that date, each issued and outstanding share of the Subsidiary's
Series A Convertible Preferred Stock was converted into 3.5 shares of Series A
stock of PRO. Also, each issued and outstanding share of the Subsidiary's Series
B Convertible Preferred Stock was converted into 3.5 shares of Series B of PRO.
Each share of the Subsidiary's issued and outstanding Common Stock was converted
into 2.8 shares common stock of PRO. The currently issued and outstanding shares
of PRO held by the Subsidiary were cancelled on the effective date of the
merger.
NOTE 4. LEASE OBLIGATION
The Company leases office space under an operating lease arrangement for $6,500
per month. The lease expires on October 31, 2003.
Minimum future lease payments on the office lease are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
------ --------
<S> <C>
2000 $ 78,000
2001 78,000
2002 78,000
2003 65,000
--------
Totals $299,000
========
</TABLE>
For the years ended December 31, 1999 and 1998, the amounts charged to
operations for rent expense were $67,815 and $54,086, respectively.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company entered into an employment agreement for the position of President
and Chief Executive Officer on July 1, 1998. The agreement has a five-year term
which expires on June 30, 2003. The base compensation is a minimum of $120,000
per year. In addition to the base compensation incentive compensation will be
determined by the Compensation Committee of the Board of Directors and begins on
January 1, 1999. During the term of employment and in the event of termination
of employment the employee cannot directly or indirectly own or manage a similar
business within a four hundred-mile radius. As of December 31, 1999 $76,635 of
salaries are due to this officer.
F-9
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
NOTE 6. NOTES AND BONDS PAYABLE
The following are summaries of notes and bonds payable at December 31, 1999:
SHORT-TERM:
8% promissory notes payable, principal and
interest due July 4, 1999 and July 15, 1999,
(in default) warrant inducements (see Note 8),
unsecured $ 60,000
10% promissory note payable, principal and
interest due July 4, 1999 (in default), unsecured 10,000
12% convertible bonds payable, interest
payable semi-annually, convertible at any time
into Series A Convertible Preferred Stock at
rate of $5 per share, annually redeemable on
the anniversary date of issuance at the holders
option, (in default) unsecured 5,000
12% convertible bonds, interest payable semi-
annually (in default), convertible at any time
into Series A Convertible Preferred Stock at
rate of $5 per share, annually redeemable on
the anniversary date of issuance at the holders
option, unsecured 10,000
--------
$ 85,000
========
F-10
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
SHORT-TERM, RELATED PARTY:
12% convertible bonds payable to
stockholders, interest payable semi-annually,
convertible at any time into Series A
Convertible Preferred Stock at rate of $5 per
share, annually redeemable on the anniversary
date of issuance at the holders option, (in
default) unsecured $ 25,000
8% promissory notes payable to stockholders,
principal and interest due within five business
days of first available proceeds from the
Company's public offering, common stock and
warrant inducements (see Notes 7 and 8),
unsecured 535,000
8% convertible notes payable to stockholders,
convertible within in five days of the
Company's public offering, into Common Stock
at rate of $2.50 per share, common stock and
warrant inducements (see Notes 7 and 8),
unsecured 1,239,500
10% promissory notes payable to
stockholders, principal and interest due within
five business days of first available proceeds
from the Company's public offering, stock
inducements (see Note 7), unsecured 25,000
12% convertible bonds payable to
stockholders, interest payable semi-annually
(in default), convertible at any time into Series
A Convertible Preferred Stock at rate of $5 per
share, annually redeemable on the anniversary
date of issuance at the holders option,
unsecured 125,000
----------
$1,949,500
==========
F-11
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
LONG-TERM:
8.90% note payable, principal and interest
of $744 due in 42 monthly installments beginning
August 1998, collateralized by vehicle $16,913
-------
Less current portion 7,733
-------
$ 9,180
=======
LONG-TERM, RELATED PARTY:
8% convertible notes payable to stockholders
due January 1, 2003, convertible at any time
subsequent to the Company's public offering,
into Common Stock at rate of $1.00 per share,
(see Note 7), unsecured $76,635
=======
LONG-TERM, RELATED PARTY:
8% convertible bonds payable to stockholders
due January 3, 2003, convertible at any time
subsequent to the Company's public offering,
into Common Stock at rate of $1.00 per share,
common stock and warrant inducements
(see Notes 7 and 8), unsecured $356,797
========
NOTE 7. STOCKHOLDERS' EQUITY
Classes of preferred stock
The Company's Series A and Series B have no voting rights and pay cumulative
dividends at the rate of 0.000492% per share of the Company's pre-tax profits
until such time as the holder shall have received $5 per share. Thereafter, the
dividend rate is 0.00005% per share of the Company's pre-tax profits. The
dividend on the Series B stock shall be junior in preference to the dividend
payable on the Series A stock and no dividends shall be paid on the Series B
stock until the dividend payable on the Series A stock shall have been declared
and paid or a sum sufficient for payment thereof set apart. There have been no
dividends accrued for 1999 or 1998.
Series A stock and Series B stock is convertible into one share of common stock
at any time at the option of the holder after the date of issuance. Series A
stock was automatically converted into one share of common stock in February
1999, when the Company's offering document became effective.
F-12
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
In September 1999 the Company authorized the issuance of 2,000,000 shares of
Series C Preferred Stock to be issued at the discretion of the Board of
Directors for $2.50 per share. The Series C Preferred Stock has no dividends.
The Series C Preferred Stock is convertible into common stock at the rate of one
share of preferred stock for one share of common stock. The Series C Convertible
Preferred Stock automatically converts to common stock pursuant to a
successfully filed registration statement. The conversion rate will be subject
to adjustments in certain events, including stock splits and dividends.
Common and preferred stock issuances
During 1998, the Company issued 96,300 shares of Series A at $5.00 per share for
cash of $481,500.
During 1998, the Company issued 12,500 shares of Common Stock at $4.00 per share
as inducements for loan funds received. The value of the inducements of $50,000
has been charged to operations.
Upon the merger taking place on July 31, 1998 (see Note 3), the Company issued
1,638,061 shares of Common Stock, 533,000 shares of Series A and 463,000 shares
of Series B.
During 1998, the Company issued 41,650 shares of Series A at $1.43 per share for
cash of $59,500.
During 1998, the Company converted $100,000 in debt to 70,000 shares of Series
A.
During 1998 the Company issued 100,213 shares of Common Stock at $1.43 per share
as inducements for loan funds received. The value of the inducements of $143,304
has been charged to operations.
During 1998, the Company issued 2,502 shares of Common Stock at $1.43 per share
for consulting services rendered. The value of the services of $3,578 has been
charged to operations.
During 1999, the Company issued 190,000 shares of Series C at $2.50 per share
for cash of $475,000.
During 1999, the Company converted 857,850 shares of Series A to 857,850 shares
of Common Stock.
During 1999, the Company converted 648,200 shares of Series B to 648,200 shares
of Common Stock.
During 1999 the Company issued 531,214 shares of Common Stock at $1.67 per share
as inducements for loan funds received. The value of the inducements of $887,127
has been charged to operations.
F-13
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
During 1999 the Company issued 95,000 shares of Common Stock as an inducement
for purchase of Series C preferred stock. The value of the inducements of
$158,650 has been charged to stockholders' (deficiency).
During 1999 the Company issued 38,000 shares of Common Stock at $2.50 per share
as inducements for distributor funds received. The value of the inducements of
$95,000 has been charged to operations.
During 1999, the Company issued 178,040 shares of Common Stock at $1.67 per
share for consulting services rendered. The value of the services of $297,327
has been charged to operations.
NOTE 8. STOCK WARRANTS
During the year ended December 31, 1999, the Company issued 587,300 common stock
warrants as loan inducements to non-employees, exercisable at $6.00 per share.
The maximum term of the warrant is five years. There was no expense related to
these issuances.
Common stock warrant activity is as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
Outstanding at January 1, 1999 123,000 $6.00
Granted 587,300 $6.00
Exercised - -
Forfeited - -
------- -----
Outstanding at December 31, 1999 710,300 $6.00
======= =====
Options exercisable at December 31, 1999 710,300
=======
Weighted average fair value of options
granted during year $ -
===
</TABLE>
The status of all options outstanding at December 31, 1999 is 710,300 options
with an exercise price of $6.00, a weighted average remaining contractual life
of 4 years for options granted in 1998 and 5 years for options granted in 1999
and a weighted average exercise price of $6.00. All of these options are
exercisable at December 31, 1999 at a weighted average exercise price of $6.00.
F-14
<PAGE>
Proformance Research Organization, Inc.
(fka World Associates Inc.)
Notes to Financial Statements
NOTE 9. DISCONTINUED OPERATIONS
On December 31, 1996, the company adopted a formal plan to dispose of the Team
Family segment of the business, a system of parenting and family development on
videotape and in a booklet. As of December 31, 1998 the disposal has been
completed. The Company recorded a loss from the operation of this segment of
$3,063 in 1998. No gain or loss on the disposition has been recognized.
NOTE 10. EXTRAORDINARY ITEM-GAIN ON EXTINGUISHMENT OF DEBT
In 1999 the Company negotiated with several creditors which resulted in a
settlement of debt. The $64,258 gain, net of income taxes of $16,065 was
recorded as an extraordinary item.
NOTE 11. DESTINATION GOLF SCHOOL AGREEMENTS
The Company has agreements with golf courses located in Arizona, California,
Colorado, Florida, Iowa, Nevada and Wisconsin. In exchange for $65,000 in annual
license fees and other miscellaneous fees varying from course to course, the
Company received supplies, storage and access to golf facilities. The Company's
golf school revenues are generated from schools taught at these locations and
these costs are included in cost of revenues on the income statement.
NOTE 12. INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes", which requires use
of the liability method. FAS 109 provides that deferred tax assets and
liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
Income tax provision (benefit) for income taxes differs from the amounts
computed by applying the statutory federal income tax rate of 34% as a result of
the following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DEC. 31, 1999 DEC. 31, 1998
------------- -------------
<S> <C> <C>
Computed "expected" tax (benefit) ($1,203,355) ($725,315)
Valuation allowance 1,203,355 725,315
------------ ----------
$ - $ -
============ ==========
</TABLE>
F-15
<PAGE>
The net change in valuation allowance for the year ended December 31, 1999 was
$707,856.
The types of temporary differences between the tax basis of assets and
their financial reporting amounts that give rise to a significant portion of the
deferred tax asset are as follows:
<TABLE>
<CAPTION>
TEMPORARY TAX
DIFFERENCE EFFECT
---------- ------
<S> <C> <C>
Net operating loss carryforward: $7,043,180 $1,408,636
========== ==========
</TABLE>
The net operating loss carry forward will expire in the years through 2019.
NOTE 13. GOING CONCERN CONSIDERATION
The financial statements have been prepared in conformity with generally
accepted accounting principles, which contemplates continuation of the company
as a going concern. However, the Company has sustained substantial operating
losses in recent years. In addition, the Company has used substantial amounts of
working capital in its operations. Further, at December 31, 1999, current
liabilities exceeded current assets by $3,206,485 and total liabilities exceed
total assets by $3,571,449.
These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The ability of the Company to continue operations
as a going concern is dependent upon its success in (1) obtaining additional
capital; (2) paying its obligations timely; and (3) ultimately achieving
profitable operations. Management's plans include raising additional equity
capital and the restructuring or deferral of debt. The financial statements do
not include any adjustments which might result from the outcome of these
uncertainties.
F-16
<PAGE>
Proformance Research Organization, Inc.
Balance Sheet
March 31, 2000
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets
Cash $ 27,376
Note Receivable 6,000
Due from employees 6,345
Prepaid Expenses 16,500
------------
Total current assets 56,221
------------
Property and equipment - net of accumulated depreciation 87,889
Other assets 14,363
------------
$ 158,473
============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable $ 226,503
Accrued expenses 253,654
Current portion of long term debt 8,933
Related party payable 25,839
Notes and bonds payable 85,000
Notes and bonds payable, related party 1,783,844
Deferred revenue and deposits payable 330,009
------------
Total current liabilities 2,713,782
------------
Long term debt
Convertible notes payable, related party 356,797
Notes and bonds payable 7,979
Bonds payable, related party 76,635
------------
Total Long term debt 441,411
------------
Commitments and contingencies
Stockholders' deficiency
Preferred stock, Series A, convertible, cumulative, .0001 par value
per share, 1,000,000 shares authorized, no shares issued and
outstanding -
Preferred stock, Series B, convertible, cumulative, .0001 par value
per share, 1,000,000 shares authorized, no shares issued and
outstanding -
Preferred stock, Series C, convertible, cumulative, $.0001 par value
per share, 2,000,000 shares authorized, 202,000 issued and
outstanding 20
Common stock, $0.0001 par value, 20,000,000 shares authorized,
5,685,115 shares, issued and outstanding 569
Additional Paid-In Capital 4,241,182
Accumulated deficit (7,238,491)
------------
Total stockholders' deficiency (2,996,720)
------------
$ 158,473
============
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
Proformance Research Organization, Inc.
Statements of Operations
For the three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
------------ ------------
Revenues $ 536,696 $ 246,915
Cost of revenues 109,281 60,108
------------ ------------
Gross (loss) profit 427,415 186,807
------------ ------------
Operating expenses
Sales, general and administrative 573,204 582,826
Depreciation 3,705 4,205
------------ ------------
Total operating expenses 576,909 587,031
------------ ------------
Operating (loss) (149,494) (400,224)
Interest expense 45,817 31,046
------------ ------------
(Loss) from continuing operations (195,311) (431,270)
Discontinued operations
(Loss) from operations of Team Family segment, estimated
to be disposed of on or before December 31, 1999 - (1,700)
------------ ------------
Net (Loss) $ (195,311) $ (432,970)
============ ============
Per share information - basic
Weighted average shares outstanding 5,298,448 3,742,593
============ ============
(Loss) per common share
(Loss) from continuing operations $ (0.04) $ (0.12)
(Loss) from discontinued operations - -
------------ ------------
Net (loss) per common share $ (0.04) $ (0.12)
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
Proformance Research Organization, Inc.
Statements of Cash Flows
For the three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (195,311) $ (432,970)
Adjustments to reconcile net loss
to net cash (used in) operating
activities:
Depreciation and amortization 3,705 4,205
Non-cash charge for loan and conversion inducements 40,040 143,644
Changes in assets and liabilities:
(Increase) in due from employees (4,081) (612)
(Increase) in deferred offering costs - (50,000)
(Increase) in prepaid expenses - (10,000)
Decrease in deferred financing costs - (23,495)
(Increase) in other assets (3,000) (3,023)
Increase(decrease) in accounts payable and accrued expenses (268,254) 102,595
(Decrease) in related party payable - (13,048)
Increase(decrease) in deferred revenue and deposits payable (81,949) 59,707
Increase in current portion of debt 1,200 -
------------ ------------
Total adjustments (312,339) 209,973
------------ ------------
Net cash (used in) operating activities (507,650) (222,997)
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (25,309) (565)
------------ ------------
Net cash (used in) investing activities (25,309) (565)
------------ ------------
Cash flows from financing activities:
Proceeds from notes and bonds payable, related party 202,000 12,500
Payment on notes and bonds payable, related party (268,857) (16,966)
Common stock issued for inducements -
Net proceeds from issuance of common stock 600,000 -
Net proceeds from issuance of preferred stock series C 30,000 -
Proceeds from note and bonds payable 237,788
Payments on note and bonds payable (7,077)
------------ ------------
Net cash provided by financing activities 563,143 226,245
------------ ------------
Net increase (decrease) in cash 30,184 2,683
Beginning - cash (2,808) 4,770
------------ ------------
Ending - cash $ 27,376 $ 7,453
============ ============
Supplemental Cash Flow Information:
Non-cash financing activities excluded above
Common stock issued for conversion of notes and bonds
payable related parties $ 100,000 $ -
Common stock issued for loan and conversion inducements 40,040 143,644
------------ ------------
$ 140,040 $ 143,644
============ ============
</TABLE>
See accompanying notes to financial statements
F-19
<PAGE>
Proformance Research Organization, Inc.
Notes to Unaudited Financial Statements
ACCOUNTING POLICIES
Basis of presentation - The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Item 310 (b) of regulation S-B. 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 only of normal recurring adjustments)
necessary for a fair presentation of the financial information for the periods
indicated 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.
Net loss per share - The net loss per share amounts are based on the weighted
average number of common shares outstanding for the period. Potential common
shares and the computation of diluted earnings per share are not considered, as
their effect would be anti-dilutive.
NOTES AND BONDS PAYABLE, RELATED PARTY
Pursuant to agreements entered into $1,544,797 of the notes and bonds payable
will convert to the Company's $0.0001 par value common stock upon the effective
date of an offering allowing for the public trading of the $0.0001 par value
common stock.
STOCKHOLDERS' EQUITY
Preferred Stock
During the three months ended March 31, 2000 the Company issued 12,000 shares of
its $.0001 par value preferred stock series C for $30,000 in cash. There were no
issuance costs.
Common Stock
During the three months ended March 31, 2000 the Company issued 588,000 shares
of its $0.0001 par common stock for $600,000 in cash. There was no issuance
cost. Additionally, the Company issued 28,000 shares of its $0.0001 par value
common stock valued at $1.43 per share as inducements for loan funds received
and the agreement to convert certain loans to common stock.
During the three months ended March 31, 2000 the holder of a $100,000 note
payable to related party converted the note into 70,000 shares of $0.0001 par
value common stock.
F-20
<PAGE>
Proformance Research Organization, Inc.
Notes to Unaudited Financial Statements
(continued)
CONTINUING LOSSES, DEFICIT IN EQUITY AND NEGATIVE WORKING CAPITAL
The financial statements have been prepared in conformity with generally
accepted accounting principles, which contemplates continuation of the company
as a going concern. However, the Company has sustained substantial operating
losses in recent years. In addition, the Company has used substantial amounts of
working capital in its operations. Further, at March 31, 2000, current
liabilities exceeded current assets by $2,657,561 and total liabilities exceed
total assets by $2,996,720.
These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The ability of the Company to continue operations
as a going concern is dependent upon its success in (1) obtaining additional
capital; (2) paying its obligations timely; and (3) ultimately achieving
profitable operations. The financial statements do not include any adjustments,
which might result from the outcome of these uncertainties.
SUBSEQUENT EVENTS
The Company is in the process of registering shares of its $0.0001 par value
common stock to allow public trading of those securities registered.
F-21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the General Corporate Law of the State of
Delaware, the Registrant has broad powers to indemnify its directors and
officers against liabilities they may incur in such capacities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
The Registrant's Bylaws (Exhibit 3.2 hereto) also provide for mandatory
indemnification of its directors and executive officers, and permissive
indemnification of its employees and agents, to the fullest extent permissible
under Delaware law.
The Registrant's Amended and Restated Certificate of Incorporation
(Exhibit 3.1 hereto) provides that the liability of its directors for monetary
damages shall be eliminated to the fullest extent permissible under Delaware
law. Pursuant to Delaware law, this includes elimination of liability for
monetary damages for breach of the directors' fiduciary duty of care to the
Registrant and its Stockholders. These provisions do not eliminate the
directors' duty of care and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for any transaction from which the director derived
an improper personal benefit, and for payment of dividends or approval of stock
repurchases or redemptions that are unlawful under Delaware law. The provision
also does not affect a director's responsibilities under any other laws, such as
the federal securities laws or state or federal environmental laws.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses to be paid by the Registrant in connection with the
distribution of the securities being registered, other than Placement Agent
discounts and commissions, are as follows:
<TABLE>
<CAPTION>
AMOUNT*
<S> <C>
Securities and Exchange Commission Filing Fee................. $1,880.87
NASD Filing Fee...............................................
Accounting Fees and Expenses..................................
Blue Sky Fees and Expenses....................................
Placement Agent Expenses......................................
Legal Fees and Expenses.......................................
Transfer Agent and Registrar Fees and Expenses................
Printing Expenses.............................................
Indemnification Insurance Premium.............................
Miscellaneous Expenses........................................
---------
Total.................................................... $1,880.87
=========
* All amounts are estimates except the SEC filing fee and the NASD filing fee.
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since August 1995, the Registrant has issued and sold the unregistered
securities set forth in the tables below. The information has been adjusted to
reflect the conversion ratios of 3.5-to-1 for the Series A and B Preferred
Stock.
COMMON STOCK:
<TABLE>
<CAPTION>
DATE PERSONS OR CLASS OF PERSONS NUMBER OF SHARES OFFERING PRICE CONSIDERATION
<S> <C> <C> <C> <C>
07/11/96 - Louis G. Royston, Jr. 15,400 $.0036/share accounting services
06/30/97 (Employee) valued at $55
04/14/98 - Louis G. Royston, Jr., 3 135,178 $1.43/share loan inducements valued
12/31/98 Royston family members (all at $193,305
of whom are accredited investors)
4 Global Financial customers
(all of whom are accredited
investors), and 25 other accredited
investors (4 of whom are past or
present business associates of
employees of the registrant)
10/02/98 1 individual acting as 2,502 $1.43/share services rendered valued
consultant at $3,578
01/20/99 - 18 individuals in 38,000 $2.50/share distributorship
09/22/99 consideration for entering inducements valued at
into distributor agreements $95,000
10/08/99 - 3 individuals - 2 trusts and a 95,000 $.0001/share inducement to purchase
11/12/99 corporation series "c" preferred
stock
II-2
<PAGE>
<CAPTION>
DATE PERSONS OR CLASS OF PERSONS NUMBER OF SHARES OFFERING PRICE CONSIDERATION
<S> <C> <C> <C> <C>
01/04/99 - 87 individuals (all of whom 531,214 $1.67/share loan inducements valued
12/31/99 were accredited investors) in at $887,127
consideration for loans made
to the registrant
01/01/99 - 12 individuals 178,040 $1.67/share services rendered valued
12/31/99 at $297,327
01/28/00 - 16 individuals (all of whom 270,000 $1.00/share $270,000 cash
04/11/00 were accredited investors)
01/28/00 - 8 corporations or trusts (all 350,000 $1.00/share $350,000 cash
04/11/00 of which are qualified
investors)
03/31/00 Co-Lique A.G. 70,000 $1.43/share conversion of note in the
amount of $100,000
01/20/00 - 8 individuals 37,000 $1.43/share inducement to convert
06/22/00 52,910
06/22/00 1 individual 20,000 $1.43/share inducement for loan
extension
01/20/00 - 4 individuals and 1 10,000 $2.50/share distribution
04/07/00 corporation as distributor
04/01/00 Neal Lauridsen 2,000 $2.50/share distribution
04/01/00 Neal Lauridsen 40,000 $1.43/share consulting services
01/19/00 2 individuals, 1 trust 10,000 $.0001/share inducement for series
"c" preferred stock
II-3
<PAGE>
</TABLE>
SERIES A PREFERRED STOCK:
NOTE: The Series A Preferred Stock has been converted to shares of Common Stock.
<TABLE>
<CAPTION>
DATE PERSONS OR CLASS OF PERSONS NUMBER OF SHARES OFFERING PRICE CONSIDERATION
<S> <C> <C> <C> <C>
09/18/97 - 2 individuals (brother of an 24,500 $1.43/share conversion of
09/22/97 employee of the registrant debentures in the total
and distributor of the amount of $35,035
Company's products)
07/01/97 - 55 individuals, comprised of 382,200 $1.43/share $546,546 cash
10/13/98 Global Financial Group, Inc.
customers (all of whom are
accredited investors), other
accredited investors, family
members of Louis G.
Royston, Louis G. Royston,
and business associates of
employees of the registrant
03/31/98- 26 individuals (customers of 196,000 $1.43/share $280,000 cash
07/10/98 Global Financial Group, Inc.
all of whom are accredited
investors)
12/31/98 1 vendor 70,000 $1.43 conversion of $100,000
notes
</TABLE>
SERIES B PREFERRED STOCK:
NOTE: The Series B Preferred Stock has been converted to shares of Common Stock.
<TABLE>
<CAPTION>
DATE PERSONS OR CLASS OF PERSONS NUMBER OF SHARES OFFERING PRICE CONSIDERATION
<S> <C> <C> <C> <C>
07/1/97 - Louis G. Royston, Jr. 91,700 $0.36/share $33,012 cash
07/31/97 (Employee), 2 Royston
family members
</TABLE>
SERIES C PREFERRED STOCK:
<TABLE>
<CAPTION>
DATE PERSONS OR CLASS OF PERSONS NUMBER OF SHARES OFFERING PRICE CONSIDERATION
<S> <C> <C> <C> <C>
10/08/99 - 5 individuals 117,600 $2.50/share $ 294,000 cash
01/01/00
10/01/99 - 3 trusts 84,400 $2.50/share $211,000 cash
01/01/00
</TABLE>
II-4
<PAGE>
CONVERTIBLE DEBENTURES:
<TABLE>
<CAPTION>
DATE PERSONS OR CLASS OF PERSONS PRINCIPAL AMOUNT CONVERSION
<S> <C> <C> <C>
07/01/97 - $188,000 Convertible into shares of Series A
05/18/98 Louis G. Royston, Jr. Preferred Stock at a conversion price of
(Employee), 2 business $1.43 per share
associates of employees of
the registrant (all of whom
are accredited), a distributor
of the registrant's products,
and 3 other individuals who
were accredited and/or had
made similar types of
investments
</TABLE>
COMMON STOCK PURCHASE WARRANTS:
<TABLE>
<CAPTION>
NUMBER OF
DATE PERSONS OR CLASS OF PERSONS WARRANTS EXERCISE PRICE CONSIDERATION
<S> <C> <C> <C> <C>
03/31/98 - 45 individuals 132,500 $6.00 per share bridge loan inducement
04/12/00
09/14/98 - Mark L. Hedlund 40,000 $1.43 per share bridge loan inducement
03/24/99
08/31/99 Ronald M. Frumkin 40,000 $2.50 per share bridge loan inducement
10/15/99 - 59 individuals 627,800 $6.00 per share inducement to
06/22/00 convertible promissory
note holders
12/31/99 Global Financial Group, Inc. 200,000 $1.43 per share inducement to
convertible promissary
note holders
0/4/12/00 J Paul Consulting Corp. 350,000 $2.00 per share services rendered
04/12/00 J Paul Consulting Corp. 350,000 $3.00 per share services rendered
04/12/00 GM/CM Family Partners, 250,000 $2.00 per share services rendered
Ltd.
04/12/00 GM/CM Family Partners, 250,000 $3.00 per share services rendered
Ltd.
10/14/99 - 7 individuals and 1 trust 202,000 $6.00 per share inducement to purchase
01/19/00 series "c" shares
12/31/99 Lou Royston 85,000 $1.67 per share reduction of debt
</TABLE>
The sale and issuance of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2). Appropriate legends were affixed to the stock certificates issued
in the above transactions. Similar legends were imposed in connection with any
subsequent sales of any such securities. The securities were offered and sold by
the registrant without any underwriters, except for the Global
II-5
<PAGE>
Financial Group, Inc. assistance noted above. All of the purchasers were deemed
to be sophisticated with respect to an investment in securities of the
registrant by virtue of their financial condition and/or relationship to members
of management of the registrant. For sales made with the assistance of Global
Financial Group, Inc., Global was paid a cash sales commission of 10% of the
cash consideration received by the registrant and the warrants described above.
II-6
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DOCUMENT
<S> <C>
3.1 Amended and Restated Certificate of Incorporation(1)<F1>
3.1a Articles of Amendment dated July 25, 2000
3.1b Statement of Series C Preferred Stock
3.2 Bylaws(1)<F1>
3.2a Amendment to Section 3.1 of the Company's Bylaws
4.1 Reference is made to Exhibits 3.1(1)<F1>, 3.1a, 3.1b, 3.2(1)<F1> and 3.2a
5.1 Opinion of Dill Dill Carr Stonbraker & Hutchings, P.C.(2)<F2>
10.1 Distribution Agreement between the Company and Dave Bisbee, dated August 22, 1996(1)<F1>
10.2 Distribution Agreement between the Company and William D. Leary(1)<F1>
10.3 Lease between Fernal Inc. and William D. Leary and the Company, dated May 1, 1997, as
amended by an Addendum to Lease between Mach One and World Associates, Inc. dated April 4,
1998(1)<F1>
10.4 Common Stock Purchase Agreement with Proformance Research Organization/Weiner, Inc. dated
July 15, 1998(1)<F1>
10.5 Sublease dated April 21, 1998 between Mach One Corporation and Proformance Research
Organization, Inc.(1)<F1>
10.6 Employment Agreement between the Company and William D. Leary dated July 1, 1998(1)<F1>
10.7 Consulting Services Agreement between Sunkyong U.S.A., Inc. and the Company dated May 6,
1997(1)<F1>
10.8 Amendment to Common Stock Purchase Agreement with Proformance Research
Organization/Weiner, Inc. dated November 2, 1998(1)<F1>
10.9 Consulting Agreement between the Company and J. Paul Consulting dated March 1, 2000.
10.10 Convertible Promissory Note dated November 9, 1999 between the Company and John C. Weiner.
10.11 Convertible Promissory Note dated December 31, 1999 between the Company and William D.
Leary, as amended.
10.12 Convertible Promissory Note dated March 27, 2000 between the Company and John C. Weiner
10.13 Form of Distribution Agreement
23.1 Consent of Dill Dill Carr Stonbraker & Hutchings, P.C. Reference is made to Exhibit 5.1(2)<F2>
23.2 Consent of Stark Tinter & Associates, LLC
II-7
<PAGE>
<CAPTION>
EXHIBIT
NO. Document
27 Financial Data Schedule(3)<F3>
-----------------
<FN>
(1)<F1> Incorporated by reference to the exhibits to the registration statement on Form SB-2, file number 333-61533.
(2)<F2> To be filed by amendment.
(3)<F3> Incorporated by reference to the exhibit to the registrant's Quarterly Report for the period ended March 31,
2000 on Form 10-QSB, File No. 333-61533.
</FN>
</TABLE>
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes to provide the Placement Agents at the
closing specified in the Placement Agent Agreement certificates in such
denominations and registered in such names as required by the Placement Agents
to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act") may be permitted to directors, officers and
controlling persons of the issuer pursuant to the foregoing provisions, or
otherwise, the issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the issuer 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
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant hereby undertakes that:
(1) For determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this Registration Statement as
of the time the Commission declared it effective.
(2) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial BONA FIDE
offering of those securities.
The Registrant hereby undertakes to:
(1) 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.
II-8
<PAGE>
(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) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Denver,
State of Colorado on the 28th day of July, 2000.
PROFORM GOLF, INC.
By:/S/ WILLIAM D. LEARY
------------------------------------
William D. Leary
PRESIDENT, TREASURER AND DIRECTOR
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the
capacities and on the dates stated:
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE TITLE DATE
President, Treasurer and Director
(Principal Executive, Financial and
/S/ WILLIAM D. LEARY Accounting Officer)
------------------------------------------------ July 28, 2000
William D. Leary
/S/ JOHN C. WEINER Director
------------------------------------------------ July 28, 2000
John C. Weiner
</TABLE>
II-10
<PAGE>
