<PAGE>
As filed with the Securities and Exchange Commission on October 11, 2000
Registration No. 333-
-----
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA
(State or other jurisdiction of
incorporation or organization)
7941
(Primary Standard Industrial Classification Code Number)
33-0770630
(I.R.S. Employer Identification No.)
5222 BALBOA AVENUE, SUITE 24
SAN DIEGO, CALIFORNIA 92117-6951
(858) 581-2120
(Address, including ZIP code, and telephone number,
including area code, of registrant's principal executive offices)
----------
ROLLERCOASTER, INC.
5333 SOUTH ARVILLE STREET, SUITE 7A
LAS VEGAS, NEVADA 89118
(702) 966-0600
(Name, address, including ZIP code, and telephone
number, including area code, of agent for
service)
----------
COPIES TO:
LAWRENCE W. HORWITZ, ESQ.
HORWITZ & BEAM
2 VENTURE PLAZA, SUITE 350
IRVINE, CALIFORNIA 92618
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES
TO THE PUBLIC: As soon as practicable after this registration statement becomes
effective and the satisfaction or waiver of all other conditions to the merger
described in the Agreement dated as of November 30, 1999, by and between San
Diego Soccer Development Corporation and Rollercoaster, Inc.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
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(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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
REGISTERED TO BE MAXIMUM AGGREGATE REGISTRATION
REGISTERED OFFERING PRICE OFFERING PRICE FEE(3)
PER SHARE(2)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of common stock, no par value(1) 7,212,775 $0.35 $2,524,471.25 $664.46
----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 7,212,775 shares of common stock.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457 and based upon the last average
of the high and low prices for the common stock on October 5, 2000. We
expect that in the event that the registered shares are sold, such
shares will be sold at the then-current market price.
(3) The Exchange Act fee is computed based upon the last average of the
high and low value per share as quoted on the over the counter market
of $0.35 on October 5, 2000.
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>
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Confidential, for use of the Commission only
(as permitted by Rule 14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14(a)-11(c) or
Rule 14a-12
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
BOARD OF DIRECTORS OF SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / No fee required
/X/ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: common stock
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies: 7,212,775 shares
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
$0.35 per share, representing the average between the
high bid and low bid price on October 5, 2000
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
$2,524,471.25
--------------------------------------------------------------------------------
<PAGE>
(5) Total fee paid: $504.90
--------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials:
--------------------------------------------------------------------------------
/X/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
previously paid. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid: $664.46
--------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.: S-4
--------------------------------------------------------------------------------
(3) Filing party: San Diego Soccer Development Corporation
--------------------------------------------------------------------------------
(4) Date filed: October 11, 2000
--------------------------------------------------------------------------------
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
5222 BALBOA AVENUE, SUITE 24
SAN DIEGO, CALIFORNIA 92117-6951
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To all Shareholders of San Diego Soccer Development Corporation
A Special Meeting of shareholders of San Diego Soccer Development
Corporation ("SDSDC") will be held at the Sea Lodge, on La Jolla Shores
Beach, at 8110 Camino Del Oro, La Jolla, California 92037, on ________________,
2000 at 10:00 a.m., local time, for the purpose of considering and voting
upon the following proposal:
The merger of SDSDC and Rollercoaster, Inc.
("Rollercoaster") pursuant to the Agreement dated as of November 30, 1999, by
and between SDSDC and Rollercoaster.
Giving effect to the merger, SDSDC stockholders will receive a total
of approximately 7,212,775 shares of Rollercoaster common stock in the
merger, or approximately 74% of Rollercoaster's common stock, giving effect
to the merger. The Rollercoaster shareholders will own a total of
approximately 2,475,870 shares of Rollercoaster common stock after the
merger, or approximately 26% of SDSDC's common stock, giving effect to the
merger. The merger and the related transactions are more completely described
in the accompanying Proxy Statement and Prospectus and in the Agreement
attached as EXHIBIT 2.1 to the accompanying Proxy Statement, and Prospectus.
No other business may properly come before the special meeting, or
any adjournment(s) or postponement(s) thereof.
All stockholders who own shares of SDSDC stock on __, 2000 (the record
date) may vote at the special meeting, or any adjournment(s) or
postponement(s) thereof.
By Order of the Board of Directors,
/s/ Sarkis Kaloustian
---------------------
PRESIDENT
<PAGE>
[Date]
WHETHER OR NOT YOU PLAN TO ATTEND THE SDSDC SPECIAL MEETING, YOU
SHOULD COMPLETE, SIGN AND DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF SDSDC, AND RETURN IT TO SDSDC IN THE ENVELOPE PROVIDED
FOR THAT PURPOSE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE THE SDSDC
SPECIAL MEETING BY:
- WRITING TO THE SECRETARY OF SDSDC;
- SIGNING AND MAILING A LATER DATED PROXY; OR,
- ATTENDING THE SDSDC SPECIAL MEETING AND VOTING IN PERSON.
YOU CANNOT REVOKE A PROXY BY ATTENDING THE SDSDC SPECIAL MEETING WITHOUT
DOING ONE OF THE THREE THINGS ABOVE.
This information statement/prospectus is also Rollercoaster, Inc.'s
prospectus for the shares of Rollercoaster, Inc. common stock that it will
issue to SDSDC shareholders in the merger. Rollercoaster's common stock is
currently quoted on the over the counter market under the symbol "SDSD".
FOR RISKS ASSOCIATED WITH AN INVESTMENT IN UNITS OF ROLLERCOASTER, INC.
STOCK, SEE PAGES 7 TO 9 OF THIS INFORMATION STATEMENT/PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION, NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE MERGER OR THE SECURITIES TO BE
ISSUED UNDER THIS INFORMATION STATEMENT/PROSPECTUS OR DETERMINED IF THIS
INFORMATION STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
PROXY STATEMENT AND PROSPECTUS
OF
SAN DIEGO SOCCER DEVELOPMENT CORPORATION ROLLERCOASTER, INC.
We are furnishing this Proxy Statement and Prospectus to you in
connection with the merger of San Diego Soccer Development Corporation with and
into Rollercoaster, Inc. We anticipate that San Diego Soccer Development
Corporation and Rollercoaster, Inc. will mail this document and the accompanying
proxy card (for SDSDC shareholders) to you on or about ____________, 2000. SDSDC
shareholders are being asked to approve the merger. Rollercoaster shareholders
have already approved both the merger and the amendments to Rollercoaster's
Articles of Incorporation. Upon consummation of the merger:
- Rollercoaster, Inc. will be the surviving entity
- Rollercoaster, Inc., which has already changed its name to San
Diego Soccer Development Corporation, will operate as San Diego
Soccer Development Corporation.
The Boards of Directors of San Diego Soccer Development Corporation
and Rollercoaster, Inc. have unanimously approved the merger and the related
transactions.
San Diego Soccer Development Corporation was formed on August 29,
1997 to form and operate a professional soccer franchise. The Company holds
the territorial A-League franchise rights to the San Diego County area from
the United Soccer Leagues ("USL") for its professional soccer club, the San
Diego Flash. The Flash joined the United Soccer Leagues (USL) in December
1997. The franchise began its third season in Spring 2000.
Rollercoaster, Inc. is a Nevada corporation which has changed its
name to San Diego Soccer Development Corporation. Pursuant to the terms of
the merger agreement, SDSDC shareholders shall receive a total of
approximately 7,212,775 shares of common stock of Rollercoaster, Inc, or
approximately 74% of the common stock of Rollercoaster, Inc. Rollercoaster,
Inc. shareholders will retain 2,475,870 shares of common stock of
Rollercoaster, Inc, representing 26%.
On October 5, 2000, the closing sales price of the Rollercoaster
common stock (trading symbol: SDSDC) on the over the counter market was $0.25
per share.
This document also serves as a prospectus of Rollercoaster, Inc.
under the Securities Act of 1933 for the issuance of up to 7,212,775 shares
of Rollercoaster, Inc. common stock in the merger.
WE URGE YOU TO READ CAREFULLY THE "RISK FACTORS" SECTION BEGINNING
ON PAGE 7 WHERE WE DESCRIBE SPECIFIC RISKS ASSOCIATED WITH THESE SECURITIES
AND THE MERGER, TOGETHER WITH THIS DOCUMENT, BEFORE YOU MAKE YOUR INVESTMENT
DECISION.
--------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT, CONSENT SOLICITATION AND
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
The date of this document is October 5, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Important Information.....................................................................................1
Special Note Regarding Forward-Looking Statements.........................................................2
Incorporation of Certain Documents by Reference...........................................................3
Summary...................................................................................................4
The Companies.............................................................................................4
Rollercoater, Inc. ("Rollercoaster").............................................................4
San Diego Soccer Development Corporation ("SDSDC")...............................................4
The Rollercoaster Shareholder Consent.....................................................................4
Effective Time...................................................................................4
The SDSDC Special Shareholder Meeting.....................................................................5
Effective Time...................................................................................5
Record Date; Required Vote.......................................................................5
The Merger................................................................................................5
Form of the Merger...............................................................................5
What SDSDC Shareholders will Receive.............................................................5
Reasons for the Merger...........................................................................5
Opinion of Financial Advisor.....................................................................5
Ownership of New SDSDC Common Stock..............................................................5
Management and Operation of New SDSDC After the Merger...........................................5
Conditions to the Completion of the Merger.......................................................6
Conduct of Business Pending the Merger...........................................................6
Termination of the Merger Agreement..............................................................6
Risk Factors..............................................................................................7
Risk Factors Relating to the Merger..............................................................7
The Exchange Ratio for Rollercoaster Common Stock to be Received in the Merger is
Final and will not be Adjusted in the Event of any Change in Stock Price.........................7
Rollercoaster Shareholders will be Diluted by the Merger........................................7
Risk Factors Relating to the Business of New SDSDC...............................................7
Default on Outstanding Liabilities...............................................................7
Change in Control................................................................................7
Going Concern Issues.............................................................................7
Dependence on Key Personnel......................................................................7
Competition......................................................................................8
Dependence on Maintaining and Increasing the Fan Base............................................8
Reliance on the USL Franchise Agreement..........................................................8
Building of Soccer Stadiums......................................................................8
Control by Principal Stockholders, Officers, and Directors.......................................8
Pink Sheet Status................................................................................8
Payroll Tax Liability............................................................................8
Limited Operating History/Development Stage Company..............................................8
Loss of Control of Rollercoaster by Rollercoaster Shareholders...................................9
Potential Change in Relative Stock Prices; Share Price Fluctuations after the Merger.............9
Risk of Low Priced Stocks........................................................................9
Other Important Information..............................................................................10
Government and Regulatory Approval..............................................................10
Dissenters' Rights of Appraisal.................................................................10
Federal Income Tax Consequences.................................................................10
Limitation on Use of Net Operating Losses.......................................................10
Comparative Per Share Information........................................................................11
Comparative Share Prices.................................................................................11
Terms of the Merger Agreement.................................................................................12
Conditions to Completion of the Merger...................................................................12
<PAGE>
TABLE OF CONTENTS
PAGE
----
The Merger....................................................................................................12
Form of the Merger.......................................................................................12
What SDSDC Shareholders will receive.....................................................................13
Background of the Merger.................................................................................13
Recommendation of the Rollercoaster Board; Reasons of the Merger.........................................13
Advantages...............................................................................................13
Disadvantages............................................................................................14
Recommendations..........................................................................................14
Recommendation of the SDSDC Board; Reasons of the Merger.................................................14
Advantages...............................................................................................14
Disadvantages............................................................................................14
Recommendations..........................................................................................15
Interested Parties in the Merger.........................................................................15
Shogun Fee and Right of First Refusal....................................................................15
Ownership of New SDSDC Common Stock......................................................................15
Effective Time of the Merger.............................................................................15
Manner and Basis of Converting SDSDC Common Stock........................................................15
Conduct of Business Pending the Merger...................................................................16
Termination of Agreement.................................................................................16
Government and Regulatory Approvals......................................................................16
Accounting Treatment.....................................................................................16
Federal Income Tax Consequences..........................................................................16
Other Tax Considerations.................................................................................17
Comparison of Rights of Holders of Rollercoaster Common Stock and SDSDC Common Stock..........................18
Voting Rights............................................................................................18
Board of Directors.......................................................................................18
Shareholder Inspection Rights............................................................................18
Mergers, Consolidations, Dissolutions and Sale of Substantially All Assets...............................18
Dissenters' Appraisal Rights.............................................................................18
Amendments to Articles and Bylaws........................................................................18
Voting Rights............................................................................................19
Special Meetings.........................................................................................19
Board of Directors.......................................................................................19
Mergers, Consolidations, Dissolutions and Sale of Substantially All Assets...............................19
Dissenters' Appraisal Rights.............................................................................19
Advance Notice Provision for Shareholder Nomination and Shareholder Proposals............................19
Transaction with Directors and Officers..................................................................19
Description of New SDSDC Common Stock.........................................................................20
Preferred Stock..........................................................................................20
New SDSDC Common Shares..................................................................................20
Warrants.................................................................................................20
Options..................................................................................................20
Convertible Notes and Debentures.........................................................................20
Resale Restrictions......................................................................................21
Historical and Unaudited Pro Forma Financial Data.............................................................22
Summary Historical Financial Information.................................................................23
Unaudited Pro Forma Financial Data.......................................................................26
Legal Matters.................................................................................................32
Experts.......................................................................................................32
Other Proposals...............................................................................................32
Description of New SDSDC......................................................................................33
Business of the Company..................................................................................33
United States Professional Soccer........................................................................33
Sources of Revenue.......................................................................................33
Employees................................................................................................35
<PAGE>
TABLE OF CONTENTS
PAGE
----
Directors and Management of the New SDSDC.....................................................................35
Executive Compensation........................................................................................37
Summary of Compensation..................................................................................37
Compensation of Directors................................................................................37
Employment Agreements.........................................................................................38
Description of Properties.....................................................................................38
Legal Proceedings ............................................................................................38
Unaudited Historical Combined Condensed Financial Information.................................................39
Management's Discussion and Analysis of Financial Condition and Results of Operations.........................44
Overview................................................................................................44
Results of Operations...................................................................................44
Financial Conditions, Liquidity and Capital Resources...................................................45
Changes in and Disagreements with Accountants.................................................................46
Information About Shareholder Voting on the Merger............................................................47
The SDSDC Special Shareholders Meeting...................................................................47
Time, Place and Date............................................................................47
Purpose of the SDSDC Special Meeting............................................................47
Record Date; Voting Rights; Proxies.............................................................47
Solicitation of Proxies.........................................................................47
Quorum..........................................................................................47
Dissenters' Rights of Appraisal.................................................................48
The Rollercoaster Consent Solicitation...................................................................48
Post-Merger Operations of New SDSDC...........................................................................49
Headquarters of New SDSDC................................................................................49
Operations of New SDSDC..................................................................................49
Voting Securities and Principal Holders Thereof...............................................................49
Interests of Certain Persons in Matters to Be Acted Upon......................................................49
Certain Relationships and Certain Related Transactions........................................................50
Information Not Required in Prospectus........................................................................51
Indemnification of Directors and Officers................................................................51
Exhibits and Financial Statement Schedules...............................................................51
Undertakings..................................................................................................95
Signatures....................................................................................................97
</TABLE>
<PAGE>
IMPORTANT INFORMATION
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT THE COMPANY THAT IS NOT INCLUDED IN OR DELIVERED WITH THE DOCUMENT.
THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY HOLDERS UPON WRITTEN
OR ORAL REQUEST. PLEASE DIRECT ALL WRITTEN OR ORAL REQUESTS TO SARKIS
KALOUSTIAN, 5222 BALBOA AVENUE, SUITE 24, SAN DIEGO, CALIFORNIA 92117-6951,
TELEPHONE (858) 581-2120. IN ORDER TO OBTAIN TIMELY DELIVERY, SECURITY
HOLDERS MUST REQUEST THE INFORMATION NO LATER THAN FIVE (5) BUSINESS DAYS
BEFORE _____________.
ALL INFORMATION CONTAINED IN THIS DOCUMENT WITH RESPECT TO SDSDC HAS BEEN
PROVIDED BY SDSDC. ALL INFORMATION CONTAINED IN THIS DOCUMENT WITH RESPECT TO
ROLLERCOASTER, INC. HAS BEEN PROVIDED BY ROLLERCOASTER, INC.
SDSDC is a California corporation. SDSDC's principal executive offices are
located at 5222 Balboa Avenue, Suite 24, San Diego, CA 92117-6951, and its
telephone number is (858) 581-2120. Rollercoaster is a Nevada corporation.
Rollercoaster's principal executive offices are located at 5333 South Arville
Street, Suite 7A, Las Vegas, NV 89118, and its telephone number is (702)
966-0600. SDSDC (Commission File No. 000-27487) is subject to the
informational reporting requirements of the Exchange Act, and, in accordance
therewith, files reports (including Annual Reports on Form 10-KSB, Quarterly
Reports on Form 10-QSB and Current Reports on Form 8-K), proxy statements and
other information with the SEC. You can inspect and copy of all reports,
proxy statements and other information SDSDC has filed with the SEC at the
public reference room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. You can call the SEC at 1-800-732-0330 for further
information about the public reference rooms. SDSDC also is required to file
electronic versions of these documents with the SEC, which may be accessed
from the SEC's World Wide Web site at http://www.sec.gov. SDSDC is not
incorporating any documents by reference in this prospectus/proxy statement.
This information is available without charge to any Rollercoaster or SDSDC
stockholder, upon written or oral request to San Diego Soccer Development
Corporation, 5222 Balboa Avenue, Suite 24, San Diego, California 92117-6951
attention: Secretary, telephone number (858) 581-2120. You should rely only
on the information provided in this prospectus/proxy statement (including the
appendices) in considering how to vote your shares on the proposal discussed
herein. We have authorized no one to provide you with different information.
You should not assume that the information in this prospectus/proxy statement
is accurate as of any date other than the date on the front of this document.
No person is authorized to give any information or to make any
representation with respect to the matters described in this document other
than those contained herein or in the documents incorporated by reference
herein and, if given or made, such information or representation must not be
relied upon as having been authorized by Rollercoaster or SDSDC. This
document does not constitute an offer to sell, or a solicitation of an offer
to purchase, the securities offered hereby, nor does it constitute the
solicitation of a proxy, in any jurisdiction in which, or to any person to
whom, it is unlawful to make such offer or solicitation of an offer or proxy
solicitation. Neither the delivery of this document nor any sale made hereby,
under any circumstances, shall create any implication that there has been no
change in the affairs of Rollercoaster or SDSDC since the date hereof, or
that the information herein is correct as of any time subsequent to its date.
1
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS IN THE SUMMARY AND UNDER CAPTIONS "NEW SDSDC RISK
FACTORS," "THE MERGER--ADVANTAGES AND DISADVANTAGES; "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS," "PRO FORMA
FINANCIAL INFORMATION", AND "--OPINION OF FINANCIAL ADVISOR--SDSDC" AND
ELSEWHERE IN THIS STATEMENT CONSTITUTE FORWARD-LOOKING STATEMENTS. SUCH
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS
OF SDSDC, ROLLERCOASTER OR NEW SDSDC OR INDUSTRY RESULTS TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG
OTHERS, THE FOLLOWING: GENERAL ECONOMIC AND BUSINESS CONDITIONS, WHICH WILL,
AMONG OTHER THINGS, AFFECT MONEY AVAILABLE FOR CUSTOMERS TO PARTICIPATE IN
SPORTS ENTERTAINMENT; ADVERSE CHANGES IN THE INVESTMENT MARKETS INCLUDING,
AMONG OTHER THINGS, COMPETITION WITH OTHER COMPANIES; GOVERNMENTAL ACTIONS
AND INITIATIVES; AND OTHER CHANGES AND FACTORS REFERENCED IN THIS STATEMENT
AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. SEE " NEW SDSDC RISK
FACTORS."
The statements contained in this document that are not historical
facts are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995). We have tried to identify
forward-looking statements by using words such as "believes," "expects,"
"may," "will," "should" or "anticipates" or by discussions of strategy that
involve risks and uncertainties. We make forward-looking statements in our
public filings, in press releases and in oral statements made by or with the
approval of an authorized executive officer of Rollercoaster or SDSDC. These
forward-looking statements, such as statements regarding anticipated future
revenues, capital expenditures and other statements regarding matters that
are not historical facts, involve predictions and reflect the current
expectations of management of Rollercoaster and SDSDC. Rollercoaster's and
SDSDC's actual results, performance or achievements could be better or worse
than what is expressed or implied by these forward-looking statements. You
are urged to read carefully our public filings and the "Risk Factors" section
beginning on page 7 which discusses certain of potential risks and
uncertainties that could affect our future operating results. None of these
events can be predicted with certainty and, accordingly, are taken into
consideration in the making of the forward-looking statements contained in
this document. We make no assurance that the assumptions used in this
document are necessarily the most likely to occur. We are not required to
update any forward-looking statement to reflect actual results, changes in
assumptions or changes in other factors affecting such statement.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents and reports filed by SDSDC pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this document and prior to the
date of the ROLLERCOASTER special meeting shall be deemed to be incorporated
by reference in this document and to be a part hereof from the dates of
filing of such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this document to the extent that
a statement contained herein or in any other subsequently filed document
which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this document.
3
<PAGE>
SUMMARY
WE HAVE PREPARED THIS SUMMARY TO ASSIST YOU IN YOUR REVIEW OF THIS DOCUMENT.
WE HAVE HIGHLIGHTED IN THIS SUMMARY INFORMATION WHICH WE BELIEVE IS IMPORTANT
FOR YOUR REVIEW. HOWEVER, WE HAVE NOT INCLUDED ALL OF THE INFORMATION THAT
MAY BE IMPORTANT TO YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT
INCLUDING THE SPECIFIC RISKS DESCRIBED IN THE "RISK FACTORS" SECTION
BEGINNING ON PAGE 7 AND THE OTHER DOCUMENTS TO WHICH WE REFER. FOR MORE
INFORMATION ABOUT THE TWO COMPANIES, SEE "IMPORTANT INFORMATION" ON PAGE 1.
THE COMPANIES
ROLLERCOASTER, INC., ("ROLLERCOASTER") changed its name to San Diego Soccer
Development Corporation on December 29, 1999. Pending the completion of the
merger, it has no operations and assets.
Rollercoaster was incorporated as a Nevada corporation on December 12, 1995.
Rollercoaster commenced operations as a publicly traded company on January
11, 2000, under the symbol SDSD. Rollercoaster's office in the state of
Nevada is located at 5333 S. Arville Street, Suite 7A, Las Vegas, Nevada,
89118 and its telephone number is (702) 966-0600.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION ("SDSDC") is a 1934 Act reporting
company formed in August, 1997 to form and operate a professional soccer
franchise. SDSDC holds the territorial A-League franchise rights to the San
Diego County area from the United Soccer Leagues ("USL") for its professional
soccer club, the San Diego Flash. The Flash joined the USL in December 1997.
The franchise began its third season in Spring, 2000.
The USL, founded in 1986, is the largest system of national soccer leagues in
the United States with 134 teams in five leagues. Along with the A-League, it
governs the D-3 Pro League, The Premier Development League, the Super Y
(Youth) League, the I-League (indoor soccer) and the W-League (women's
professional soccer). The A-League, its top league, is classified by U.S.
Soccer as the Division II professional league. It includes 26 teams, three in
Canada and 23 teams in various-sized markets across the United States. 90% of
the USL is owned by Umbro, Ltd. and two of its subsidiaries. The remaining
10% is owned by the USL commissioner Francisco Marcos. While the USL is the
Division II professional league, Major League Soccer (MLS) is the Division I
professional soccer league in the United States, and has no common ownership
relationship to the USL.
The USL and MSL have a working agreement, which was recently extended to
2002, to voluntarily continue an exchange of players between the two leagues,
with compensation paid to USL clubs whose players move up to the MLS during
the course of the season or during the off-season.
SDSDC's primary business is professional sports entertainment, namely
professional soccer. SDSDC's current revenue sources derive solely from gate
sales, corporate sponsorships, merchandise sales and soccer camp income.
The original goal of SDSDC was to become San Diego's Division I. U.S.
professional soccer club. Currently in the United States, this means becoming
an MLS team. While this remains the ultimate goal, MLS's current structure
and league situation leaves SDSDC satisfied, in the short term, to remain a
Division II team.
SDSDC principal executive office is located at 5222 Balboa Avenue, Suite 24,
San Diego, California 92117-6951 and its telephone number is (858) 581-2120.
THE ROLLERCOASTER SHAREHOLDER CONSENT
EFFECTIVE TIME. Nevada law permits Rollercoaster to consent to the merger by
written consent. The board of directors of Rollercoaster unanimously
consented to the merger on December 3, 1999. The shareholders of
Rollercoaster unanimously consented to the merger effective December 28, 1999.
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THE SDSDC SPECIAL SHAREHOLDER MEETING
EFFECTIVE TIME. We will hold the SDSDC special meeting at the Sea Lodge on La
Jolla Shores Beach, 8110 Camino Del Oro, La Jolla, California 92037, on
____________, 2000 at 10:00 a.m., local time. SDSDC shareholders will be
asked to approve the merger with Rollercoaster. See "the SDSDC Special
Shareholder Meeting - Purpose of the SDSDC Special Meeting" "Information
About Shareholder Voting on the Merger" on page and 47.
RECORD DATE; REQUIRED VOTE. You may vote at the SDSDC special meeting if you
owned shares of SDSDC common stock as of the close of business on
____________, 2000 (the SDSDC record date). To approve the merger
shareholders holding greater that 50% of the voting power of the outstanding
shares of SDSDC common stock must vote for the merger. Holders of SDSDC
common stock are entitled to one (1) vote per share owned by them.
The directors and executive officers of SDSDC can cast approximately 44% of
the votes entitled to be cast at the SDSDC special meeting. We expect that
they will vote all of their shares of SDSDC common stock in favor of the
merger. See "Information About Shareholder Voting on the Merger" on page 45
and "The SDSDC Special Shareholder Meeting--Record Date; Voting Rights;
Proxies" on page 45.
When originally approving the merger, SDSDC sought your approval without the
use of a proxy and these proxy materials. However, SDSDC became a reporting
company effective December 30, 1999. Accordingly, SDSDC was required to
comply with the proxy rules prior to seeking your approval. The proxy
statement is intended to provide you with the disclosure required by the
proxy rules and once again seek your approval of the merger with
Rollercoaster.
We urge you to vote your shares at the special meeting, even if you do not
own a lot of shares. You should sign, date and return your proxy card as soon
as possible, even if you do not attend the special meeting. No postage is
required if the proxy card is mailed in the United States. You may vote your
shares of SDSDC common stock in person even if you previously mailed your
proxy card to us. You should not send in certificates for your shares of
SDSDC common stock in connection with the merger until specifically requested.
THE MERGER
FORM OF THE MERGER. In the merger, SDSDC will merge with Rollercoaster.
Rollercoaster will be the surviving corporation, and the separate corporate
existence of SDSDC will cease. All of the assets and liabilities of SDSDC and
Rollercoaster will become assets and liabilities of New San Diego Soccer
Development Corporation (the renamed Rollercoaster, Inc., "New SDSDC") after
the merger. See "The Merger--Form of the Merger" on page 12.
WHAT SDSDC SHAREHOLDERS WILL RECEIVE. SDSDC shareholders will exchange each
share of common stock for one share of Rollercoaster common stock. After the
merger, former SDSDC common shareholders will hold approximately 74% and
current Rollercoaster shareholders will hold approximately 26% of the issued
and outstanding common stock of New SDSDC.
The Rollercoaster common shares issued upon the merger to the shareholders of
SDSDC will be registered under the Securities Act. Such shares may be traded
freely and without restriction by those shareholders not deemed to be
"affiliates" of SDSDC, or New SDSDC, as that term is used under federal
securities laws. "Affiliates" are generally defined as persons who control,
are controlled by or are under common control with an issuer.
REASONS FOR THE MERGER. For a detailed discussion of the factors considered
by the SDSDC Board of Directors and the Rollercoaster Board of Directors in
reaching their respective decisions, see "The Merger--Background of the
Merger" on page 13 "Recommendations of the Rollercoaster Board, and the SDSDC
Board; Reasons for the Merger" on page 13, and "-Recommendations of the SDSDC
Board; Reasons for the Merger" on page 14.
OPINION OF FINANCIAL ADVISORS. Due to the considerable cost that would have
been involved in obtaining a fairness opinion, neither Rollercoaster nor
SDSDC received the opinion of a financial advisor regarding the fairness of
the consideration to be issued in the merger to the Rollercoaster or SDSDC
shareholders from a financial point of view.
OWNERSHIP OF NEW SDSDC COMMON STOCK. As of September 26, 2000 (the
Rollercoaster record date), 2,475,870 shares of Rollercoaster common stock
were outstanding and held by 49 record holders. As of September 26, 2000 (the
SDSDC record date), 7,212,775 shares of SDSDC common stock were outstanding
and held by 869 record holders. As of the date of this prospectus and giving
effect to the merger, 9,688,645 shares of New SDSDC common stock will be
outstanding.
MANAGEMENT AND OPERATION OF NEW SDSDC AFTER THE MERGER. The primary purpose
of the merger is to enable New SDSDC to
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<PAGE>
continue the operations of SDSDC as a public company which it is believes
will provide SDSDC with enhanced access to capital markets. New SDSDC will
focus only on professional sports entertainment in the soccer arena.
The management of New SDSDC will be the present management of SDSDC. The
Board of Directors of New SDSDC will consist of Yan K. Skwara, Steven R.
Peacock, James Upton, Sarkis Kaloustian and Jeffrey Scott. These individuals
will hold the position of directors until removed or elected at the next
annual meeting of the board of directors of New SDSDC.
CONDITIONS TO THE COMPLETION OF THE MERGER. The events associated with
accomplishing the merger are as follows
- The Registration Statement is declared effective by the SEC.
- Rollercoaster will have filed Articles of Merger with the
Nevada Secretary of State;
- SDSDC will file Articles of Merger with the California
Secretary of State;
CONDUCT OF BUSINESS PENDING THE MERGER. Rollercoaster has agreed that, prior
to the merger effective time, it will conduct its business in the ordinary
course. See "Terms of the Merger -- Conduct of Business Pending the Merger"
on page 16.
TERMINATION OF THE MERGER AGREEMENT. The merger agreement may be terminated
at any time prior to the closing of the merger for certain reasons, including:
- failure to obtain required approvals; or,
- failure to obtain the approval of either the Rollercoaster stockholders
or the SDSDC shareholders.
See "Terms of the Merger -- Conditions to Completion of the Merger" on page 12.
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RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING NEW SDSDC FACTORS AND OTHER
INFORMATION IN THIS DOCUMENT BEFORE YOU MAKE YOUR DECISION WHETHER TO APPROVE
THE MERGER AND TO BECOME A ROLLERCOASTER STOCKHOLDER (FOR SDSDC STOCKHOLDERS).
RISK FACTORS RELATING TO THE MERGER
THE EXCHANGE RATIO FOR ROLLERCOASTER COMMON STOCK TO BE RECEIVED IN THE
MERGER IS FIXED AND WILL NOT BE ADJUSTED IN THE EVENT OF ANY CHANGE IN STOCK
PRICE. Upon completion of the merger, each share of SDSDC common stock will
be exchanged for one share of Rollercoaster common stock. This conversion
number is fixed and will not be adjusted as a result of any change in the
price of Rollercoaster common stock. Any change in the price of Rollercoaster
common stock will affect the value of the consideration that SDSDC
shareholders receive in the merger. Because the merger will be completed only
after all the conditions to the merger are satisfied or waived, there is no
way to be sure that the price of Rollercoaster common stock on the date of
the shareholder meeting will be the same as its price at the time the merger
is completed. The price of Rollercoaster common stock at the time that the
merger is completed may be higher or lower than its price on the date of this
document or the date of the SDSDC shareholders' meeting. You are encouraged
to obtain current market quotations for Rollercoaster common stock.
ROLLERCOASTER SHAREHOLDERS WILL BE DILUTED BY THE MERGER. The merger will
dilute the ownership position of the present shareholders of Rollercoaster.
On September 22, 2000 Rollercoaster had 2,475,870 outstanding shares of
common stock. Based on the number of shares of SDSDC common stock outstanding
as of September 22, 2000, Rollercoaster will issue to SDSDC shareholders
7,186,525 share of SDSDC common stock in the merger.
RISK FACTORS RELATING TO THE BUSINESS OF NEW SDSDC
DEFAULT ON OUTSTANDING LIABILITIES. On March 6, 2000 Peacock Financial
Corporation ("Peacock Financial") entered into a loan agreement with SDSDC.
Steven Peacock, President, CEO, Director and more than 5% shareholder of
Peacock Financial and James Upton, Executive Vice President and Director of
Peacock Financial are both directors of SDSDC and will be directors of the
New SDSDC. The agreement provides for a line of credit of up to $500,000 for
approved expenditures. An underwriting fee was paid to Peacock Financial
Corporation in the form of 1,000,000 restricted shares of SDSDC's common
stock. The advances bear interest at 10% per annum and the unpaid principal
and interest is due on December 31, 2000. In the event of default, Peacock
Financial has the option to terminate the agreement, declare the outstanding
balance to be due and payable, and convert that balance into common
restricted shares of the Company. Should the Company be unable to repay this
obligation and should Peacock Financial decide not to exercise its conversion
option, the Company would default on the loan and may be forced into
bankruptcy. See Certain Relationships and Related Transactions on page 50.
CHANGE IN CONTROL. In the event of default of the loan agreement between
Peacock Financial and SDSDC, Peacock Financial has the option to terminate
the agreement, declare the outstanding balance to be due and payable, and
convert that balance into common restricted shares of the Company. The loan
agreement provides that the new shares to be issued to Peacock Financial
would be the number necessary for Peacock Financial to have a cumulative
ownership position of 53% on a fully diluted basis. In connection with the
agreement, SDSDC also agreed to reconstitute its Board of Directors by
allowing Peacock Financial to nominate 3 of the 5 directors, to allow Peacock
Financial to approve budgets and significant expenditures, and to receive
monthly financial statements. In addition, the agreement provides that
Peacock Financial will provide certain accounting and senior management
overview services and public company reporting oversight in exchange for one
percent (1%) of gross revenues. A default in the loan agreement may result in
a change in the control of New SDSDC and will act to substantially dilute the
holdings of current SDSDC shareholders.
GOING CONCERN ISSUES. SDSDC incurred net losses of approximately $1.8 million
during 1999, and continues to experience losses and negative cash flows.
These conditions raise substantial doubt about New SDSDC ability to continue
as a going concern even after the consummation of the merger. While SDSDC
believes that revenue from operations and private sales of New SDSDC's
securities in the near term, will provide sufficient cash flows to fund its
remaining ongoing operations, there is no assurance that SDSDC efforts, as
New SDSDC, will be successful in the future.
DEPENDENCE ON KEY PERSONNEL. SDSDC's business and New SDSDC's business is
dependent upon the efforts of its key management personnel, specifically
Sarkis Kaloustian, Chief Executive Officer and Chief Operating Officer. SDSDC
is currently interviewing candidates to fill the roles Corporate Secretary
and of Chief Financial Officer. In order to retain its key management
personnel, such individual has have been provided with substantial stock
and/or options to acquire the SDSDC stock. SDSDC does not maintain key person
life insurance on its key employees. The loss of the services of any of its
officers, directors, or key employees or the inability to identify, hire,
train and retain other qualified personnel in the future could have a
material adverse effect on new SDSDC's business,
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<PAGE>
financial condition and operating results.
COMPETITION. SDSDC's major sources of revenue are gate receipts and
merchandising. New SDSDC will compete for such revenues with other sports
teams in the San Diego area including professional and college level sports.
While there are no other A-League outdoor soccer teams in the San Diego area
there are college soccer teams and non-professional soccer leagues that
compete for the SDSDC's spectators. Additionally, all sports teams compete
with other entertainment venues for consumers' disposable entertainment
income. While SDSDC believes that it offers an affordable alternative
entertainment to the consumer, a down-turn in the economy as a whole, and
accordingly a decrease in disposable income could affect New SDSDC's revenues.
DEPENDENCE ON MAINTAINING AND INCREASING THE FAN BASE. The success of New
SDSDC is dependent upon a growing fan base. The fan base is required to
generate the revenues currently contemplated by New SDSDC including ticket
sales, merchandise purchases, and concession revenues. Without an increasing
fan base, New SDSDC will not have sufficient revenues to operate and New
SDSDC could be forced to curtail operations or cease operating in its
entirety.
RELIANCE ON THE USL FRANCHISE AGREEMENT. SDSDC is presently a party to a
franchise agreement with the USL. This agreement permits the company to
operate an A-League soccer team in the San Diego area. If SDSDC were unable
to pay the franchise fees, or if New SDSDC were unable to negotiate a renewal
of the agreement at the end of its term, New SDSDC would be unable to operate
the club and thus would be unable to generate any revenues. If such should
occur, New SDSDC would be forced to substantially curtail operations or cease
operations all together.
BUILDING OF SOCCER STADIUMS. SDSDC's long term business plan contemplates
building soccer stadiums in the San Diego and Riverside areas. Sports
Stadiums are historically expensive and time consuming undertakings which
require not only sufficient funding, but public and/or governmental approval.
Even if New SDSDC can acquire sufficient funding for this project, and
approval by the applicable authorities, there is no guaranty that the
stadiums could be built in a timely fashion or that they would be profitable
once erected.
CONTROL BY PRINCIPAL STOCKHOLDERS, OFFICERS, AND DIRECTORS. Upon completion
of the maximum amount of this offering, SDSDC's officers, directors, and
greater-than-five percent stockholders (and their affiliates) will, in the
aggregate, beneficially own approximately 44% of the outstanding common
stock. As a result, these persons, acting together, will have the ability to
control the election and removal of directors and any merger, consolidation,
or sale of all or substantially all of SDSDC's assets) and to control New
SDSDC's management and affairs. Accordingly, this concentration of ownership
may have the effect of delaying, deferring, or preventing a change in
control, impeding a merger, consolidation, takeover, or other business
combination or discouraging a potential acquirer from making a tender offer
or otherwise attempting to obtain control of SDSDC, which in turn could
materially adversely affect the market price of the common stock. See "Voting
Securities and Principal Holders Thereof" beginning on page 49.
PINK SHEET STATUS. Assuming the merger is completed, New SDSDC would be
quoted on the "pink sheets". There is a limited ability to acquire quotes of
new SDSDC's shares listed on the pink sheets. In order to be quoted on the
over the counter bulletin board, or listed on a stock exchange, SDSDC must
fulfill certain requirements of the NASD and the SEC. There is no guarantee
that new SDSDC will fulfill these requirements at the time the merger is
completed or that even if it fulfills the requirements that it will be
approved for quotation or a listing. Continued quotation on the pink sheets,
and/or failure to acquire any other quotation or listing can, naturally
effect the liquidity of a person's investment in SDSDC.
PAYROLL TAX LIABILITY. SDSDC currently has an outstanding payroll tax
liability. While SDSDC is actively negotiating with the taxing authorities to
resolve this liability, there is still in excess of $55,000 owed. This
obligation will become that of New SDSDC. As revenues received must be used
to pay this obligation, New SDSDC may not have adequate funds to pursue the
revenue sources outlined in the "Description of New SDSDC" beginning on page
33.
LIMITED OPERATING HISTORY/DEVELOPMENT STAGE COMPANY. SDSDC was incorporated
in November 1997. It is a development stage company with a limited operating
history and will continue to be upon the merger. New SDSDC's success is
dependent upon the successful expansion and development of its market, as to
which there is no guarantee. New SDSDC may encounter unanticipated problems,
expenses, and delays in establishing its business and marketing and
developing services. These include, but are not limited to, competition, the
need to develop new technological capabilities, and setbacks in market
acceptance. The failure of New SDSDC to meet any of these conditions may
cause its business to suffer and may force New SDSDC to reduce or curtail
operations. We cannot be certain that New SDSDC will operate profitably.
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<PAGE>
LOSS OF CONTROL OF ROLLERCOASTER BY ROLLERCOASTER SHAREHOLDERS. Upon
consummation of the merger, former SDSDC common shareholders will own
approximately 74% and Rollercoaster's current shareholders will own
approximately 26% of the New SDSDC common stock. The Rollercoaster
shareholders will not control the activities of New SDSDC. All investment,
financing, borrowing and distribution policies of New SDSDC will be
determined by the Board of Directors of New SDSDC. The initial New SDSDC
board of directors will be comprised of two (2) SDSDC directors and no
Rollercoaster directors. Although it does not presently intend to do so, the
New SDSDC Board of Directors may amend or revise these policies at any time
at its discretion.
POTENTIAL CHANGE IN RELATIVE STOCK PRICES; SHARE PRICE FLUCTUATIONS AFTER THE
MERGER. In considering whether to approve the Merger, shareholders of
Rollercoaster and SDSDC should consider the risks associated with (a) a
potential change in the stock price of Rollercoaster common stock prior to
the merger, which would increase or decrease the value of the New SDSDC
common stock being received by the SDSDC shareholders and (b) a possible
reduction in the market price of New SDSDC common stock following the merger,
due to future sales of New SDSDC common stock. The market price of
Rollercoaster common stock ranged from $0.30 to $3.50 during 2000 up to the
date of filing.
RISK OF LOW PRICED STOCKS. Rollercoaster common stock is not currently listed
on a national securities exchange or on the Nasdaq Stock Market, and there
can be no assurance that Rollercoaster common stock or New SDSDC common stock
will ever be listed. Until such time as New SDSDC is able to satisfy listing
criteria, trading, if any, in the securities will continue to be conducted in
the over-the-counter market. Consequently, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the price of,
New SDSDC's common stock.
In the absence of a security being quoted on the Nasdaq stock market, or New
SDSDC having $2,000,000 in net tangible assets, trading in New SDSDC would be
covered by Rule 15c2-6 of the Exchange Act for non-Nasdaq and non-exchange
listed securities. Under such rule, broker/dealers who recommend such
securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with a net worth in excess of $1,000,000 or an annual income
exceeding $200,000 or $300,000, jointly with their spouse) must make a
special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities are
also exempt from this rule if the market price is at least $5.00 per share.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure related to the market for penny stocks and for trades
in any stock defined as a penny stock. Under SEC rules, "penny stock" is any
security that has a market price or exercise price of less than $5.00 per
share. In addition, unless exempt, the rules require the broker/dealer to
deliver, prior to any transaction involving a penny stock, a disclosure
schedule explaining important concepts involving the penny stock market, the
nature of such market, terms used in such market, the broker/dealer's duties
to the customer, a toll-free telephone number for inquiries about the
broker/dealer's disciplinary history, and the customer's rights and remedies
in case of fraud or abuse in the sale. The broker/dealer must disclose
commissions payable to both the broker/dealer and the registered
representative, current quotations for the securities, and if the
broker/dealer is the sole market-maker. Finally, monthly statements have to
be sent disclosing recent price information for a penny stock held in the
account and information on the limited market in penny stocks.
These rules have a substantial effect on the liquidation of Rollercoaster
common stock and, if the New SDSDC common stock trades at less than $5.00 per
share, on the New SDSDC common stock.
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OTHER IMPORTANT INFORMATION
GOVERNMENTAL AND REGULATORY APPROVALS. We cannot complete the merger unless
we file a certificate of merger with the Secretary of State of the states of
California and Nevada and comply with applicable federal and state securities
laws. We cannot be certain when or if we will be able to obtain them. See
"Terms of the Merger Agreement-- Government and Regulatory Approvals" on page
16.
DISSENTERS' RIGHTS OF APPRAISAL. SDSDC shareholders are entitled to statutory
rights of appraisal in connection with the merger under California laws.
These rights include the opportunity for common stock holders to have the
fair value of their stock appraised by a court and paid to them in cash. To
do this, the holders of SDSDC common stock must follow these required
procedures:
- You must deliver a written demand for appraisal, on or before
the date of the SDSDC special meeting is which will be on _______,
2000;
- You must not vote, or have voted, in favor of the merger agreement.
If you voted in favor of the merger agreement, by proxy or by
written consent, you will have waived your right of appraisal, even
if you previously filed a written demand for appraisal; and,
- You must continuously hold your shares of common stock from the
date of the making of the demand through the closing of the merger.
If you hold shares of common stock and you dissent from the merger and follow
the required formalities, your shares will not be converted into the right to
receive New SDSDC common stock in the merger. Instead, your only right will
be to receive the appraised value of your shares in cash as determined by a
court.
See "The Merger--Dissenters' Rights of Appraisal" on page 48 and "Comparison
of Rights of Holders of Rollercoaster, Inc. Common Stock and SDSDC Common
Stock--Appraisal/Dissenters' Rights" on page 18.
FEDERAL INCOME TAX CONSEQUENCES. The merger is intended to qualify as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code,
such that neither Rollercoaster, SDSDC nor their respective shareholders
would recognize taxable gain as a result of the Merger. See "The
Merger--Federal Income Tax Consequences" on page 17.
LIMITATION ON USE OF NET OPERATING LOSSES. SDSDC currently has net operating
losses of $1,894,213. Certain code sections and regulations of the Internal
Revenue Code limit the carry-over and use of operating losses of an acquired
entity. We cannot be certain that SDSDC's net operating losses can be used,
or if possible, to what extent they can be used by the New SDSDC.
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COMPARATIVE PER SHARE INFORMATION
The following summary presents (a) historical loss from continuing
operations per share of Rollercoaster common stock in comparison with the pro
forma loss from continuing operations per share after giving effect to the
proposed merger with SDSDC; (b) historical net loss per share of SDSDC common
stock in comparison with the pro forma net income attributable to one share
of Rollercoaster common stock which will be received for each share of SDSDC;
and (c) historical book values of Rollercoaster and SDSDC in comparison with
the pro forma book value giving effect to the proposed merger. The
information presented in this summary should be read in conjunction with the
pro forma financial information and the separate consolidated financial
statements of the respective companies and the notes thereto appearing
elsewhere in this Document.
<TABLE>
<CAPTION>
Six Months Ended Fiscal Year Ended
June 30, 2000 December 31, 1999
------------- -----------------
<S> <C> <C>
Loss from continuing operations per common share
ROLLERCOASTER 0 0
SDSDC (0.31) (0.50)
Pro Forma giving effect to the merger (0.20) (0.25)
Book values per share (at fiscal period end)
ROLLERCOASTER (0.17) (0.32)
SDSDC (0.18) (0.09)
Pro Forma giving effect to the merger (0.13) (0.05)
</TABLE>
COMPARATIVE SHARE PRICES
ROLLERCOASTER. Rollercoaster common stock commenced trading on January 11,
2000 under the symbol SDSD.
The following table sets forth the quarterly high and low sales prices per
Rollercoaster common share reported over the counter market:
SALES PRICE
PER SHARE
High Low
2000 ---- ---
Quarter 1 $3.50 $1.12
Quarter 2 $1.50 $0.625
Quarter 3 $1.00 $0.25
As of September 26, 2000, Rollercoaster's transfer agent reported 49 record
holders of Rollercoaster common shares.
SDSDC. The SDSDC common shares are not listed on any exchange. The last
private placement of its common stock was at $1.00 per share.
BECAUSE THE MERGER CONSIDERATION IS FIXED AND THE MARKET PRICE OF
ROLLERCOASTER COMMON SHARES IS SUBJECT TO FLUCTUATION, THE MARKET VALUE OF
NEW SDSDC THAT SDSDC COMMON SHAREHOLDERS WILL RECEIVE IN THE MERGER MAY
INCREASE OR DECREASE PRIOR TO AND FOLLOWING THE MERGER. SHAREHOLDERS ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR ROLLERCOASTER.
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TERMS OF THE MERGER AGREEMENT
WE ARE SUMMARIZING CERTAIN PROVISIONS OF THE MERGER AGREEMENT IN
THIS SECTION. A COPY OF THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO
THIS DOCUMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING SUMMARY
IS NOT COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MERGER
AGREEMENT. CAPITALIZED TERMS USED IN THIS SECTION BUT NOT DEFINED IN THIS
DOCUMENT HAVE THE MEANINGS SET FORTH IN THE MERGER AGREEMENT. WE URGE YOU TO
READ THE MERGER AGREEMENT CAREFULLY.
As of the date of this document, nothing has come to either of
Rollercoaster's or SDSDC's attention that has led it to believe that the
representations and warranties made by each of Rollercoaster and SDSDC in the
merger agreement are not true and correct in all material respects or that
the respective covenants of each party contained therein have not been
complied with in all material respects by the respective parties.
Accordingly, nothing has come to either of Rollercoaster's or SDSDC's
attention that has led it to believe that, if the SDSDC stockholders approve
the merger agreement, the other conditions to the merger will not ultimately
be satisfied. There can be no assurance, however, that such conditions will
be satisfied or that the merger will be completed.
CONDITIONS TO COMPLETION OF THE MERGER
The respective obligations of Rollercoaster and SDSDC to effect the merger
are subject to the following general conditions:
1. Completion of due diligence by each party into the financial
condition and business of the other;
2. Execution by both parties of the Plan of Merger and Articles of
Merger;
3. Shareholder and Director approval of both parties within 14 days
of the expiration of the due diligence period; and,
4. The completion of any filings required for the Merger with any
governmental agencies.
To date, both parties have completed its due diligence as required by the
first condition. Both parties have executed the plan of merger and the
Articles of Merger. Rollercoaster has acquired both director and shareholder
approval of the merger and filed an amendment to its Articles of
Incorporation changing its name to "San Diego Soccer Development".
SDSDC has acquired director approval of the merger and in a meeting held on
February 10, 2000 acquired shareholder approval. However, as SDSDC became a
reporting company effective December 30, 1999, it was required to provide the
information contained in the proxy statement/prospectus prior to the February
10, 2000 meeting. As such, securities laws require SDSDC to provide the
information contained in this proxy statement/prospectus to its shareholders
prior to a vote approving the merger.
THE MERGER
WE ARE DESCRIBING CERTAIN ASPECTS OF THE MERGER AND THE MERGER AGREEMENT IN
THIS SECTION. THE FOLLOWING DESCRIPTION IS NOT COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE MERGER AGREEMENT WHICH IS ATTACHED AS
EXHIBIT 2.1 TO THIS DOCUMENT AND IS INCORPORATED HEREIN BY REFERENCE.
CAPITALIZED TERMS USED IN THIS SECTION BUT NOT DEFINED IN THIS DOCUMENT HAVE
THE MEANINGS SET FORTH IN THE MERGER AGREEMENT. WE URGE YOU TO READ THE
MERGER AGREEMENT CAREFULLY.
FORM OF THE MERGER
The primary purpose of the merger is to enable New SDSDC to continue the
operations of SDSDC as a public company which it is believed will provide
SDSDC with enhanced access to capital markets. New SDSDC will carry out the
business of SDSDC by focusing on professional sports entertainment, namely in
the field of professional soccer.
Upon the satisfaction of conditions of the merger agreement, SDSDC shall file
the Articles of Merger with the California Secretary of State in order to
effectuate the merger. New SDSDC shall survive as a Nevada corporation.
Rollercoaster's current Articles of Incorporation and Bylaws shall continue
until amended or modified in accordance with applicable Nevada law. Following
the merger, SDSDC will merge with Rollercoaster, with Rollercoaster being the
surviving corporation, and the separate corporate existence of SDSDC shall
cease. All of the assets and liabilities of SDSDC and Rollercoaster will
become assets and liabilities of New SDSDC after the merger. The name of New
SDSDC shall be "San Diego Soccer Development Corporation."
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WHAT SDSDC STOCKHOLDERS WILL RECEIVE
In consideration for entering into the merger, each outstanding share of
SDSDC common stock will be converted into one share of New SDSDC common
stock. As of the effective time of the merger, all shares of SDSDC common
stock will no longer be outstanding and will automatically be canceled and
retired, and each holder of a certificate representing shares of SDSDC common
stock will cease to have any rights associated with the SDSDC shares, except
the right to receive shares of Rollercoaster common stock.
After the merger, former SDSDC common stockholders will hold approximately
74% and current Rollercoaster shareholders will hold approximately 26% of the
issued and outstanding common stock of New SDSDC.
BACKGROUND OF THE MERGER
Beginning with its incorporation in 1995 and continuing through 1999,
Rollercoaster had no operations and incurred losses related solely to the
original expense of incorporating the company.
Following extensive discussions between the parties, in December, 1999, SDSDC
delivered a letter of intent to Rollercoaster which outlined the proposed
terms and conditions of a business combination. The Rollercoaster Board of
Directors met to discuss all aspects of the letter of intent, and the letter
of intent was subsequently executed.
On December 3, 1999, the Rollercoaster Board of Directors discussed the terms
of the merger agreement and unanimously approved the same, and authorized the
merger and the amendments to Rollercoaster's Articles of Incorporation be
submitted to shareholders for their approval. On December 23, 1999, the
shareholders of Rollercoaster unanimously approved the merger and amendment
of the Articles of Incorporation.
On December 3, 1999, the SDSDC Board of Directors discussed and unanimously
approved the terms of the merger agreement and authorized the merger be
submitted to stockholders for their approval.
On February 10, 2000, SDSDC held a special meeting of shareholders whereat
the merger was approved by shareholders holding a majority of the issued and
outstanding stock of SDSDC. As a result of filing a Form 10-SB in October,
1999, SDSDC became a reporting company under the Securities Act of 1934 in
December, 1999. As a reporting company, SDSDC is required to provide certain
information to its shareholders and comply with the proxy rules prior to
holding a vote on the merger. As such, SDSDC must provide the information
contained in this proxy statement/prospectus to its shareholders and hold the
special meeting seeking approval of the merger.
RECOMMENDATION OF ROLLERCOASTER BOARD; REASONS FOR THE MERGER The
Rollercoaster Board of Directors believes that the merger, including the
shares to be issued by Rollercoaster to SDSDC shareholders, is fair to and in
the best interests of Rollercoaster and its shareholders. Accordingly, the
Rollercoaster Board of Directors unanimously approved the merger, the
amendments to Rollercoaster's Articles of Incorporation and the other
transactions contemplated by the merger agreement and unanimously recommended
that the Rollercoaster shareholders approve the merger, the amendments to
Rollercoaster's Articles of Incorporation, and the other transactions
contemplated by the merger agreement. Due to the considerable cost that would
have been involved in obtaining a fairness opinion, Rollercoaster did not
receive the opinion of a financial advisor regarding the fairness of the
consideration to be issued in the merger to the Rollercoaster shareholders
from a financial point of view.
ADVANTAGES
The material factors that the Rollercoaster Board of Directors considered in
approving the merger and unanimously recommending approval of the merger
include the following:
- USE OF EQUITY RATHER THAN CASH. The Rollercoaster Board of
Directors viewed as favorable the fact that the merger could be effected by
issuing of new shares of Rollercoaster common stock rather than the using
cash or cash raised from debt offerings, which may or may not be available to
Rollercoaster.
- TERMS OF THE MERGER AGREEMENT. The Rollercoaster Board of
Directors reviewed the terms of the merger agreement with Rollercoaster's
management and its legal counsel. Based on that review, the Rollercoaster
Board of Directors believes the terms of the merger agreement to be fair to
Rollercoaster.
- TAX-FREE NATURE OF THE MERGER. For federal income tax purposes,
the merger will be a tax-free transaction for Rollercoaster, which the
Rollercoaster Board of Directors viewed as favorable because, no gain or loss
will be recognized by Rollercoaster in connection with the merger.
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DISADVANTAGES
The Rollercoaster Board of Directors considered disadvantages of the merger
which include, but are not limited to:
- COSTS. The significant costs involved in connection with the
merger especially if the merger is not consummated.
MANAGEMENT TIME. The substantial management time and effort required
to effectuate the merger.
- DILUTION OF ROLLERCOASTER INTEREST. The substantial dilution of
the ownership of the current Rollercoaster shareholders in New SDSDC.
- UNFULFILLED BENEFITS. The risk that the anticipated benefits of
the merger might not be fully realized.
However, the Rollercoaster Board of Directors did not believe that these
negative factors were sufficient, either individually or collectively, to
outweigh the advantages of the merger.
RECOMMENDATION
The Rollercoaster Board of Directors believed that the proposed transaction
was and remains fair to and in the best interests of Rollercoaster and its
shareholders. The Rollercoaster Board of Directors unanimously approved the
merger, the amendments to Rollercoaster's Articles of Incorporation and the
other transactions contemplated by the merger and unanimously recommended
that the Rollercoaster shareholders vote FOR the merger and the other
transactions contemplated by the merger.
On December 23, 1999, Rollercoaster's shareholders unanimously approved the
merger and amendment of the Articles of Incorporation.
RECOMMENDATIONS OF THE SDSDC BOARD, REASONS FOR THE MERGER
The SDSDC Board of Directors believes that the merger, including the
consideration to be paid by Rollercoaster, is fair and in the best interests
of SDSDC and its stockholders. As such, SDSDC's Board of Directors has
unanimously approved the merger and unanimously recommends approval of the
merger agreement by the shareholders of SDSDC. In reaching its determination,
the SDSDC Board of Directors consulted with SDSDC management, as well as its
financial advisor, legal counsel and accountants, and considered a number of
factors.
ADVANTAGES
The material factors that the SDSDC Board of Directors considered in
approving the merger and unanimously recommending approval of the merger
include the following:
- INCREASED ACCESS TO EQUITY AND DEBT MARKETS. The merger would
provide greater access to the public equity and debt markets and could
increase New SDSDC's ability to raise capital at reasonable rates.
- BEST ALTERNATIVE PROPOSAL. After reviewing SDSDC's strategic
alternatives, which included maintaining the status quo, raising capital
through a debt or equity offering, acquiring a competitor, and merging with
another company, the SDSDC Board of Directors determined that the merger was
the best alternative reasonably available to SDSDC's stockholders to maximize
SDSDC stockholder value. The SDSDC Board of Directors believed that, after
management's discussions with its financial advisor, no other prospective
purchasers were reasonably expected to make a proposal superior to that made
by Rollercoaster.
- TAX-FREE NATURE OF THE MERGER. The merger will be tax-free for
federal income tax purposes with respect to the SDSDC stockholders. SDSDC's
Board of Directors views this as favorable because no gain or loss would be
recognized by a stockholder of SDSDC.
DISADVANTAGES
The SDSDC Board of Directors also considered the following potentially
negative factors, which could arise from the merger:
BENEFITS NOT FULLY REALIZED. The risk that the anticipated benefits
from the merger may not be fully realized.
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DECREASE IN MARKET PRICE. The possibility that the market price of
Rollercoaster's common stock, and thus the consideration to be paid to the
SDSDC stockholders, may decrease in value prior to the time the merger
becomes effective.
COSTS OF THE MERGER. The significant costs involved in connection
with the consummation of the merger.
MANAGEMENT TIME AND EFFORT. The substantial management time and
effort required to effectuate the merger.
RECOMMENDATIONS
The SDSDC Board of Directors believes that the proposed merger is fair and in
the best interest of SDSDC and its shareholders. Accordingly, the SDSDC Board
of Directors has unanimously approved the merger, and unanimously recommends
that the shareholders of SDSDC vote FOR the merger.
In the event that the merger is not consummated for any reason, SDSDC will
continue to pursue its business objectives of continuing to operate a
professional soccer team and to expand the services and products it provides
to the public, explore possible debt or equity financing, and pursuing
discussions with other potential merger partners. Due to the considerable
cost that would have been involved in obtaining a fairness opinion, SDSDC did
not receive the opinion of a financial advisor regarding the fairness of the
consideration to be issued in the merger to the SDSDC shareholders from a
financial point of view.
INTERESTED PARTIES IN THE MERGER
SHOGUN FEE AND RIGHT OF FIRST REFUSAL. The terms of the merger agreement
provide for the payment of a consulting fee to Shogun Investment Group, Ltd.
of $200,000. $50,000 is payable within thirty days of the completion of the
merger and the remainder is payable in five equal monthly installments of
$30,000 each with 6% interest on the outstanding balance due and payable by
the 7th day of each month beginning on the month following the completion of
the merger. To date, SDSDC has paid $ 95,000 to Shogun in connection with the
merger.
Each of the Rollercoaster Board of Directors and the SDSDC Board of Directors
was aware of these benefits and considered them, among other things, in
making their respective decisions.
OWNERSHIP OF NEW SDSDC COMMON STOCK. As of September 26, 2000 (the
Rollercoaster record date), 2,475,870 shares of Rollercoaster common stock
were outstanding and held by approximately 49 record holders. As of September
26, 2000 (the SDSDC record date), 7,212,775 shares of SDSDC common stock were
outstanding and held by approximately 866 record holders. Immediately after
the merger, 9,688,645 shares of New SDSDC common stock will be outstanding.
EFFECTIVE TIME OF THE MERGER
If the merger is approved by the vote of the SDSDC stockholders and the
Rollercoaster shareholders, and the other conditions to the merger are
satisfied or waived, the merger will become effective immediately following:
- the acceptance for recording of the Articles of Merger by the
Nevada Secretary of State, or
- at a different time established in the Articles of Merger, not
to exceed 30 days after the Articles of Merger are accepted
for recording by the California Secretary of State.
It is presently anticipated that such filing and acceptance will be made with
the California Secretary of State on or about November 2000, and that the
merger effective time will occur on that date unless a different date is
specified in the Articles of Merger, as discussed above. There is no
assurance as to whether or when the Merger will occur. See "Conditions to the
Mergers" on page 12.
MANNER AND BASIS OF CONVERTING SDSDC COMMON STOCK
At the merger effective time, each certificate representing shares of
outstanding Rollercoaster common stock, will, without any shareholder action,
represent the same number of New SDSDC common stock.
At the merger effective time, each share of SDSDC common stock outstanding
immediately prior to the effective time will be converted into the right to
receive one New SDSDC common stock. As of the merger effective time, no SDSDC
common shares shall
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be outstanding, and all SDSDC common shares shall automatically be canceled
and retired and all rights with respect to those shares shall cease, except
the right to receive, upon surrender of their SDSDC common share certificate,
certificates representing the New SDSDC common shares to be delivered under
the Articles of Merger.
The issuance, terms and conditions of the New SDSDC common shares, is
governed by the Rollercoaster Articles of Incorporation and Bylaws. For a
detailed description of certain provisions of the New SDSDC Articles and
Bylaws, see "Comparison of Rights of Shareholders" on page 18.
Rollercoaster's current transfer agent, Holladay Stock Transfer, shall act as
transfer agent for the transfer of New SDSDC shares upon surrender of
certificates representing issued and outstanding SDSDC common shares. As soon
as reasonably practicable after the merger effective time, the transfer agent
will mail, to each SDSDC shareholder of record whose shares are to be
exchanged into the right to receive New SDSDC shares, a letter of transmittal
with instructions for surrendering the SDSDC share certificates for the New
SDSDC shares. Upon surrender of a certificate for cancellation to the
transfer agent, together with such other documents as may reasonably be
required by the transfer agent, the SDSDC shareholder shall be entitled to
receive the New SDSDC shares.
CONDUCT OF BUSINESS PENDING THE MERGER
Rollercoaster has agreed that, prior to the merger effective time, it will
conduct its business in the ordinary course.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the closing of
the merger for certain reasons, including:
- failure to obtain required approvals; or,
- failure to obtain the approval of either the Rollercoaster stockholders
or the SDSDC shareholders.
GOVERNMENTAL AND REGULATORY APPROVALS
Rollercoaster and SDSDC cannot complete the merger unless they file a
certificate of merger with the Secretary of State of the states of California
and Nevada and comply with applicable federal and state securities laws.
Rollercoaster and SDSDC cannot be certain when or if they will be able to
obtain them. Rollercoaster and SDSDC believe that the merger may be
consummated without notification being given or information furnished to the
Federal Trade Commission or the Antitrust Division of the Department of
Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and that no waiting period requirements under that Act are
applicable to the merger. However, at any time before or after the merger
effective time, either the Antitrust Division or the Federal Trade Commission
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, or certain other persons could take action
under the antitrust laws, including seeking to legally stop the merger.
Rollercoaster and SDSDC believe that consummation of the merger would not
violate any antitrust laws. However, there is no assurance that a challenge
to the merger on antitrust grounds will not be made or, if a challenge is
made, what the result will be.
ACCOUNTING TREATMENT
The merger of SDSDC with and into Rollercoaster will be accounted for
utilizing the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16. Pursuant to terms of the Merger Agreement,
if the merger is consummated, SDSDC shareholders would own approximately 74%
of the merged entity and Rollercoaster shareholders would own approximately
26%. Inasmuch as the former SDSDC shareholders would own a majority of
Rollercoaster stock after the merger, SDSDC is considered to be the acquiring
company for purposes of purchase accounting, and the predecessor entity to
New SDSDC for purposes of financial reporting. Although the merger is
structured as an acquisition of SDSDC by Rollercoaster, this "reverse-merger"
is accounted for as an acquisition of Rollercoaster by SDSDC. Accordingly, in
applying purchase accounting, the recorded book values of Rollercoaster
assets and liabilities are adjusted to fair values, and the recorded SDSDC
book values are not adjusted and the former SDSDC stockholders' interests
carryover. Subsequent to the merger, Rollercoaster's historical financial
statements will be those of SDSDC.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material United States federal
income tax consequences of the Merger. There is no assurance that the IRS
will agree with the following discussion and positions, or that the IRS will
not seek to challenge such positions.
The companies believe that:
- the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and Rollercoaster and SDSDC will each be a party
to such reorganization within the meaning of Section 368(b) of the code;
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- no gain or loss will be recognized by Rollercoaster as a
result of the Merger; and,
- no gain or loss will be recognized by the SDSDC common
shareholders upon the exchange of the SDSDC common shares solely for New
SDSDC common shares.
OTHER TAX CONSIDERATIONS
New SDSDC and its shareholders may be subject to state or local taxation in
various jurisdictions, including those in which they transact business or
reside. The state and local tax treatment of New SDSDC and its shareholders
may not conform to the federal income tax consequences discussed above.
Consequently, you should consult your own tax advisor regarding the effect of
state and local tax laws on the conversion of SDSDC shares into New SDSDC's
shares.
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COMPARISON OF RIGHTS OF HOLDERS OF ROLLERCOASTER COMMON STOCK AND
SDSDC COMMON STOCK
The following discussion summarizes certain significant differences between
the rights of shareholders under California law, the Articles of
Incorporation of SDSDC and the Bylaws of SDSDC and Nevada law, the Articles
of Incorporation of Rollercoaster and the Bylaws of Rollercoaster.
Upon the effective time of the merger, Rollercoaster's Articles, Bylaws and
Nevada law will govern New SDSDC.
VOTING RIGHTS
Under California law, the SDSDC Articles and the SDSDC Bylaws provide that if
an action, other than the election of directors, is to be taken by a vote of
the shareholders, it may be authorized by a majority vote of the
shareholders. Shareholders may also take an action by written consent by a
majority vote. California law and the bylaws of SDSDC permit cumulative
voting for directors. Rollercoaster actions including the election of
directors may be approved by a majority vote by the shareholders.
Rollercoaster actions may be taken by written consent by a majority vote.
Neither Nevada law nor Rollercoaster's bylaws provide for cumulative voting
unless stated in the bylaws.
BOARD OF DIRECTORS
NUMBER. The SDSDC Bylaws provide that the number of directors of SDSDC will
not be less than one or more than five. The Rollercoaster Bylaws provides
that the number of directors shall be between one and fifteen as determined
by the board of directors. The current number of Rollercoaster board members
is five.
REMOVAL. The SDSDC Bylaws provide that any director may be removed at any
time, at a special meeting, upon the vote of the holders of a majority of the
voting power of SDSDC, provided, however, that a director shall not be
removed if votes cast against removal wold be sufficient to elect such
director if voted cumulatively at an election of directors at which the same
total number of votes were voted. The Rollercoaster Bylaws permit removal of
a director, at a special meeting called for that purpose, upon the vote of a
two-thirds of the voting power of all shares of capital stock.
VACANCIES. Both the SDSDC and Rollercoaster Bylaws permit vacancies to be
filled by the majority vote of the board of directors.
SHAREHOLDERS' INSPECTION RIGHTS
The SDSDC Bylaws permit any shareholder to inspect the share register, any
bylaws, and the books of account and financial records of SDSDC. The
Rollercoaster Bylaws are silent as to shareholder inspection rights.
Nonetheless, the Rollercoaster shareholder list is available for inspection
at the office of Rollercoaster prior to any meeting.
MERGERS, CONSOLIDATIONS, DISSOLUTIONS AND SALE OF SUBSTANTIALLY ALL ASSETS
Both Nevada law and California law provides that a majority of
Rollercoaster's equity stock entitled to vote may approve any action to
merger or consolidate with or into any other corporation.
DISSENTERS' APPRAISAL RIGHTS
Nevada law does not provide appraisal rights for dissenting shares when the
exchange will result in the corporation being the surviving corporation, but
does provide appraisal rights if the total number of stock authorized will
change because of the exchange. California law provides for appraisal rights
to dissenting shareholders.
AMENDMENT TO ARTICLES AND BYLAWS
New SDSDC Articles reserve the right of the corporation to amend, alter, or
repeal the Articles. Nonetheless an amendment of the Articles requires the
approval of the board of directors and a majority vote of Shareholders. SDSDC
Bylaws may be amended, altered or changed by a vote of the board of
directors, or of the shareholders.
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VOTING RIGHTS
Except as otherwise provided by Nevada law, the new SDSDC Articles and Bylaws
provide shareholder actions may be taken by majority approval. Actions may be
taken by majority written consent.
SPECIAL MEETINGS
New SDSDC Bylaws provide that special meetings of stockholders may be called
only by the board of directors, the President, the Secretary, or shareholders
holding at least majority of all of the outstanding shares of New SDSDC
entitled to vote. The President or Secretary of New SDSDC gives notice of a
special meeting.
BOARDS OF DIRECTORS
NUMBER. New SDSDC Bylaws provide that the number of directors is between one
and fifteen as determined by the board of directors. The current number of
directors is five.
REMOVAL. New SDSDC Bylaws permit removal of a director, at a special meeting
called for that purpose, by a majority vote of all shares of capital stock.
VACANCIES. Vacancies may be filled by the majority vote of the board of
directors.
MERGERS, CONSOLIDATIONS, DISSOLUTION AND SALE OF SUBSTANTIALLY ALL ASSETS
Nevada law requires the affirmative vote of majority of all the votes
entitled to be cast on the matter to effectuate a merger, consolidation,
dissolution or sale of substantially all the assets of New SDSDC.
DISSENTERS' APPRAISAL RIGHTS
Normally, Nevada law does not provide appraisal rights for shares wherein the
exchange will result in the Corporation being the surviving corporation.
However, dissenters' rights are granted under certain circumstances when the
number of authorized shares will be increased after the merger.
ADVANCE NOTICE PROVISION FOR SHAREHOLDER NOMINATION AND SHAREHOLDER PROPOSALS
New SDSDC Bylaws establish an advance notice procedure for shareholders to
make nominations of candidates for election as directors or to bring other
business before an annual meeting of shareholders of New SDSDC.
This procedure provides that only persons who are nominated by, or at the
direction of, the New SDSDC Board of Directors, or by a shareholder who has
given timely written notice containing specified information to the Secretary
of New SDSDC prior to the meeting at which directors are to be elected, will
be eligible for election as directors of New SDSDC. At an annual meeting only
such business may be conducted as has been brought before the meeting by, or
at the direction of, the New SDSDC Board of Directors or by a shareholder who
has given timely written notice to the Secretary of New SDSDC of such
shareholder's intention to bring such business before the meeting.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Nevada law provides a safe harbor for certain transactions between a
corporation and one or more of its directors or officers. Such a transaction
with a conflicting interest may not be set aside, enjoined or give rise to
damages in a proceeding by a shareholder or the corporation if the person
interested in the transaction establishes any of the following:
- the transaction is fair to the corporation at the time it was
entered into;
- the material facts of the transaction and the directors or
officers' interests were disclosed or known to the board, a committee of the
board, or the independent director or directors, and the board, committee or
independent director or directors authorize, approve or ratify the
transaction; or
- the material facts of the transaction and the directors or
officers' interests were disclosed or known to the shareholders entitled to
vote and they authorized, approved or ratified the transaction.
For purposes of this provision, a transaction is authorized, approved or
ratified if it receives the affirmative vote of the majority of the directors
on the board who had no interest in the transaction, or all independent
directors who had no interest in the transaction, or the
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majority Shareholder approval.
The New SDSDC Articles provide that the Rollercoaster Board of Directors has
authority to cause New SDSDC to enter into an agreement or transaction with
officers and directors or affiliates of New SDSDC.
DESCRIPTION OF NEW SDSDC COMMON STOCK
THE FOLLOWING IS A SUMMARY OF THE TERMS OF THE NEW SDSDC COMMON SHARES. IT IS
NOT A COMPLETE NARRATIVE OF ALL THE RIGHTS ASSOCIATED WITH THESE SHARES. YOU
ARE ENCOURAGED TO READ THE ROLLERCOASTER ARTICLES AND BYLAWS, WHICH ARE FILED
AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS DOCUMENT IS A PART.
Rollercoaster is incorporated in the State of Nevada. Rights of stockholders
are governed by Nevada laws and by the Rollercoaster Articles and
Rollercoaster Bylaws.
The transfer agent for Rollercoaster is Holladay Stock Transfer.
Upon the Merger Effective Time, the total number of shares of all classes of
stock that New SDSDC shall have authority to issue is 100,000,000 common
shares, and 50,000,000 shares of preferred stock. In order to accommodate the
percentage ownership of current Rollercoaster shareholders and former SDSDC
shareholders in the New SDSDC, Rollercoaster shareholders approved an
increase in the number of authorized common stock of New SDSDC from
25,000,000 to 100,000,000.
PREFERRED STOCK
The New SDSDC Board of Directors has the authority to issue shares of
preferred stock in one or more series and to fix the stock's rights,
preferences, privileges and restrictions without shareholder consent. The New
SDSDC Board of Directors could authorize the issuance of New SDSDC preferred
shares with terms and conditions which could have the effect of discouraging
a takeover or other transaction which holders of some, or a majority, of New
SDSDC common shares might believe to be in their interests or in which
holders of some, or a majority, of New SDSDC common shares might receive a
premium for their shares over the then market price of such shares. Currently
New SDSDC has no plans to issue any New SDSDC preferred shares.
NEW SDSDC COMMON SHARES
As of the Effective Date of the Merger, assuming all SDSDC's shareholders
exchange their shares 9,688,645 shares of common stock, 82,120 warrants to
purchase common stock, and 1,275,300 options to purchase Common Stock will be
outstanding. Holders of Common Stock are entitled to one vote per share. At
all elections of directors, stockholders with voting power are entitled to as
many votes as the number of shares held. Holders of Common Stock are entitled
to their pro rata share of any dividends declared by the Board of Directors.
In the event of liquidation, dissolution or winding up of New SDSDC, holders
of Common Stock are entitled their pro rata share of all assets remaining
after payment of liabilities. Common Stockholders have no right to convert
their stock into any other securities. The Common Stock has no cumulative,
preemptive or other subscription rights. There are no redemption or sinking
funds provision applicable to the Common Stock.
WARRANTS
SDSDC issued, as part of a private placement, warrants to purchase 183,320
shares of common stock at the price of $1.25 per share. 75,400 of these
warrants were exercised in 1998 and 13,000 were exercised in 1999. There are
82,120 warrants remaining. These warrants expire between October 2001 and
June 2003.
OPTIONS
As of June 30, 2000, there were 1,275,300 options outstanding. None of these
options have been exercised. All options are exercisable over the next 60
days.
CONVERTIBLE NOTES AND DEBENTURES
SDSDC issued convertible debentures in 1999, pursuant to two series of
promissory notes. A total of $733,950 was sold under the Series 99-1
Promissory Note. A total of $122,900 was sold under the Series 99-2
Promissory Note. The notes bear an 8% annual interest and are convertible
into common stock at one share per dollar at the option of the holder. As of
December 31, 1999, $404,850 has been converted into 404,850 shares of common
stock at one share per dollar. During 2000, the noteholders converted an
additional
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$190,600. At June 30, 2000, the Company had convertible promissory notes
outstanding which were convertible into 238,400 shares of common stock.
SDSDC entered into a separate Credit Line Loan arrangement with Ken Smith,
one of its existing shareholders, effective June 1, 2000. The arrangement
provides for a line of credit of up to $125,000 for approved expenditures.
The advances bear interest at 10% per annum and the unpaid principal and
interest is due on December 31, 2000. The balance outstanding at June 30,
2000 and December 31, 1999 was $100,542 and $-0-, respectively.
During 1999, certain officers of SDSDC formed another company to acquire and
operate a Las Vegas soccer franchise. SDSDC received loans from that company
which have accrued interest at 10%. The loans are due on demand. Additional
advances have been received from other related parties through June 30, 2000.
These amounts are non-interest bearing and due on demand.
RESALE RESTRICTIONS
The issuance of New SDSDC common shares to the current SDSDC shareholders,
upon consummation of the Merger, will be registered under the Securities Act.
Such shares may be traded freely and without restriction by those
shareholders not deemed to be "affiliates" of SDSDC or Rollercoaster as that
term is defined in the rules and regulations of the Securities Act.
"Affiliates" are generally defined as persons who control, are controlled by
or are under common control with an issuer. This Document does not cover any
resales of New SDSDC common shares received by affiliates of SDSDC.
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HISTORICAL AND UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION
We are providing the following financial information to aid you in your
analysis of the financial aspects of the Merger. The following Rollercoaster
data, insofar as it relates to each of the years 1999, 1998, 1997 and 1996,
has been derived from financial statements audited by Kurt D. Saliger,
C.P.A., which appear elsewhere in this document. The data for the six months
ended June 30, 2000 and 1999 has been derived from unaudited financial
statements also appearing herein and which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results of the unaudited interim
periods. The following SDSDC data, insofar as it relates to the year ended
December 31, 1999, and December 31, 1998, has been derived from financial
statements audited by Logan Throop & Co., LLP, and appear elsewhere in this
document. The data for the six months ended June 30, 2000 have been derived
from unaudited but reviewed financial statements and have been derived from
financial statements reviewed by HJ & Associates, LLP, the date for the six
months ended June 30, 1999 has been derived from unaudited financial
statements also appearing herein and which, in the opinion of management,
includes all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the results of the unaudited interim
periods. The information is only a summary and you should read it in
conjunction with our historical financial statements (and related notes)
attached to this document and as filed with the SEC. You should be aware that
results for interim periods cannot be used to project the results of any
other interim period or for the year as a whole. See "Important Information"
on page 1 and "Incorporation of Certain Documents by Reference" on page 3.
22
<PAGE>
SDSDC -- SUMMARY HISTORICAL FINANCIAL INFORMATION
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31, December 31,
2000 1999 1998
--------- ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 51,329 $ 50,253 $ 298
Employee advances 2,525 - 100
--------- ------------ ------------
Total Current Assets 53,854 50,253 22,725
--------- ------------ ------------
PROPERTY AND EQUIPMENT 25,639 18,119 9,695
--------- ------------ ------------
(Net) (Notes 1 and 2)
OTHER ASSETS
Receivable from shareholder 5,000 - -
Deposits 1,350 1,350 -
Soccer franchises, net (Note 3) 163,200 166,800 143,000
--------- ------------ ------------
Total Other Assets 169,550 186,269 152,695
--------- ------------ ------------
TOTAL ASSETS $ 249,043 $ 236,522 $ 175,818
========= ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 286,191 $ 102,005
Accrued expenses 263,283 255,247
Bank overdraft - 1,065
Loans from related parties 16,702 2,273
Deferred revenue 21,715 32,490
Credit lines payable (Note 4) 610,119 -
Convertible promissory notes (Note 6) 238,400 329,100
Notes payable (Note 5) 25,390 15,646
------------ ------------
Total Current Liabilities 1,461,800 737,826
------------ ------------
Total Liabilities 1,461,800 737,826
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 20,000,000 shares authorized of no
par value, 6,814,969 and 5,284,369 shares issued
and outstanding, respectively 3,005,898 2,000,298
Common stock subscribed 12,000 12,000
Additional paid-in capital 1,071,523 941,363
Stock subscriptions receivable (1,000) (48,000)
Accumulated deficit (5,301,178) (3,406,965)
------------ ------------
Total Stockholders' Equity (Deficit) (1,212,757) (501,304)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 249,043 $ 236,522
============ ============
</TABLE>
23
<PAGE>
STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
2000 1999 2000 1999
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Ticket sales $ 40,439 $ 19,170 $ 40,439 $ 19,170
Corporate sponsorships 32,995 177,629 32,995 177,629
Other revenue 7,331 1,902 9,218 2,561
--------- --------- ----------- ----------
Total Revenues 80,765 198,701 82,652 199,360
--------- --------- ----------- ----------
EXPENSES
General and administrative 419,551 347,416 809,062 461,048
Game and player expenses 132,886 160,449 188,418 215,347
Advertising and promotion 71,865 205,489 179,174 335,904
Depreciation and amortization 3,998 2,686 7,150 5,372
--------- --------- ----------- ----------
Total Expenses 628,300 716,040 1,183,804 1,017,671
--------- --------- ----------- ----------
Loss From Operations (547,535) (517,339) (1,101,152) (818,311)
--------- --------- ----------- ----------
OTHER INCOME (EXPENSE)
Gain (loss) on trading securities - 1,392 -- 26,343
Interest income 280 378 555 707
Loan underwriting fee (250,000) - (750,000) -
Interest expense (39,128) (1,947) (43,616) (3,211)
--------- --------- ----------- ----------
Total Other Income (Expense) (288,848) (177) (793,061) 23,839
--------- --------- ----------- ----------
NET LOSS $(836,383) $(517,516) $(1,894,213) $ (794,472)
========= ========= =========== ==========
BASIC LOSS PER SHARE $ (0.13) $ (0.11) $ (0.31) $ (0.17)
========= ========= =========== ==========
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (836,383) (517,516) (1,894,213) (794,472)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Depreciation and amortization 3,998 2,686 7,150 5,372
(Gain) loss on trading securities - (1,392) - (26,343)
Stock issued for loan underwriting fee 250,000 - 750,000 -
Stock issued for services - 206,908 11,000 350,108
Stock options issued for services 47,860 22,868 131,160 22,868
Changes in operating assets and liabilities:
(Increase) decrease in employee advances 600 (2,908) (2,525) (2,908)
(Increase) decrease in receivable
from shareholder - - (5,000) -
Increase (decrease) in accounts
payable 74,202 (22,389) 184,186 (16,309)
Increase (decrease) in deferred
revenue (21,714) (30,151) (10,775) (18,066)
Increase (decrease) in
accrued expenses 15,480 150,295 6,972 41,063
Increase (decrease) in bank overdraft - 43 - (7,828)
--------- --------- ----------- ----------
Net Cash (Used) by Operating Activities (465,957) (191,556) (822,045) (446,515)
--------- --------- ----------- ----------
</TABLE>
24
<PAGE>
STATEMENT OF OPERATIONS
(CONTINUED)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities -- -- 79,431
Purchase of fixed assets (986) (12,001) (11,071) (12,001)
--------- --------- --------- ---------
Net Cash (Used) by Investing Activities (986) (12,001) (11,071) 67,430
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash -- 48,800 101,000 305,800
Capital distributions (1,000) -- (1,000) --
Principle payments on convertible notes payable (23,000) -- (27,500) (10,440)
Cash received from notes payable 14,244 -- 14,244 --
Convertible promissory notes proceeds 74,000 151,075 122,900 151,075
Line of credit proceeds 368,359 -- 610,119 --
Due to related companies 14,429 (452) 14,429 (452)
--------- --------- --------- ---------
Net Cash Provided by Financing Activities 447,032 199,423 834,192 445,983
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH (19,911) (4,134) 1,076 66,898
CASH AT BEGINNING OF PERIOD 71,240 71,330 50,253 298
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 51,329 $ 67,196 $ 51,329 $ 67,196
========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 38,274 $ -- $ 38,274 $ --
Income taxes
NON-CASH FINANCING ACTIVITIES
Common stock issued for convertible promissory
notes $ 5,600 $ 190,600 $ -- $ --
Common stock issued in exchange for equipment $ 12,000
Common stock issued for trading securities $ -- $ -- $ -- $ 31,755
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following presents summary unaudited pro forma consolidated
financial information, which gives effect to the merger on the basis as
described in the "Historical and Pro Forma Financial Data" section included
elsewhere in this document. This summary pro forma financial information
should be read in conjunction with such Historical and Pro Forma Financial
Data, the financial statements and Management's Discussion and Analysis of
Operations and Financial Condition of SDSDC starting on page 43. Pro forma
information is presented based upon historical information and, accordingly,
is not necessarily indicative of future financial positions or results of
operations.
The merger will be accounted for utilizing the purchase method of
accounting. Pursuant to terms of the merger agreement, SDSDC stockholders
would own approximately 74% of the merger entity, and accordingly, SDSDC is
considered to be the acquiring company for purposes of purchase accounting.
The accompanying summary unaudited consolidated balance sheet is
presented as of December 31, 1999, and gives effect to the merger as if it
had occurred on that date. The accompanying unaudited consolidated statements
of operations are presented for the fiscal year ended December 31, 1999 and
the six months ended June 30, 2000, and gives effect to the merger as if it
had occurred at the beginning of the respective periods.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION AND SUBSIDIARY
Consolidated Proforma Balance Sheet
December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
San Diego Proforma
Soccer Roller Adjustments
Development Coaster, Increase Proforma
Corporation Inc. (Decrease) Consolidated
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 50,253 $ - $ - $ 50,253
----------- ------- ------- ---------
Total Current Assets 50,253 - - 50,253
----------- ------- ------- ---------
FIXED ASSETS
Computers and software 17,716 - - 17,716
Soccer equipment 6,000 - - 6,000
Accumulated depreciation (5,597) - - (5,597)
----------- ------- ------- ---------
Total Fixed Assets 18,119 - - 18,119
----------- ------- ------- ---------
OTHER ASSETS
Soccer franchises, net 166,800 - - 166,800
Deposits 1,350 - - 1,350
----------- ------- ------- ---------
Total Other Assets 168,150 - - 168,150
----------- ------- ------- ---------
TOTAL ASSETS $ 236,522 $ - $ - $ 236,522
========== ======= ======= =========
</TABLE>
26
<PAGE>
<TABLE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION AND SUBSIDIARY
Consolidated Proforma Balance Sheet (Continued)
December 31, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<CAPTION>
San Diego Proforma
Soccer Roller Adjustments
Development Coaster, Increase Proforma
Corporation Inc. (Decrease) Consolidated
----------- -------- ----------- ------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 103,070 $ - $ - $ 103,070
Accrued expenses 255,247 - - 255,247
Loans from related parties 2,273 - - 2,273
Deferred revenue 32,490 - - 32,490
Convertible promissory notes 329,100 - - 329,100
Notes payable 15,646 - - 15,646
----------- -------- ----------- ------------
Total Current Liabilities 737,826 - - 737,826
----------- -------- ----------- ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 50,000,000
shares authorized of $0.001
par value, 9,314,969 shares
issued and outstanding 2,000,298 2,500 (1,993,483) 9,315
Additional paid in capital 941,363 - 1,954,983 2,896,346
Common stock subscribed 12,000 - (12,000) -
Stock subscription receivable (48,000) - 48,000 -
Accumulated deficit (3,406,965) (2,500) 2,500 (3,406,965)
----------- -------- ----------- ------------
Total Stockholders' Equity
(Deficit) (501,304) - - (501,304)
----------- -------- ----------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT) $ 236,522 $ - $ - $ 236,522
=========== ======== =========== ============
</TABLE>
27
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION AND SUBSIDIARY
Consolidated Proforma Statement of Operations
For the Year Ended December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
San Diego Proforma
Soccer Roller Adjustments
Development Coaster, Increase Proforma
Corporation Inc. (Decrease) Consolidated
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 252,842 $ - $ - $ 252,842
---------------- --------------- --------------- ----------------
OPERATING EXPENSES
Advertising and promotion 630,097 - - 630,097
Depreciation and amortization 11,376 - - 11,376
Game and player expenses 641,575 - - 641,575
General and administrative 1,335,419 - - 1,335,419
---------------- --------------- --------------- ----------------
Total Operating Expenses 2,618,467 - - 2,618,467
---------------- --------------- --------------- ----------------
LOSS FROM OPERATIONS (2,365,625) - - (2,365,625)
---------------- --------------- --------------- ----------------
OTHER INCOME (EXPENSE)
Gain on trading securities 36,067 - - 36,067
Loss on abandoned equipment (6,400) - - (6,400)
Interest expense (17,870) - - (17,870)
---------------- --------------- --------------- ----------------
Total Other Income (Expense) 11,797 - - 11,797
---------------- --------------- --------------- ----------------
NET LOSS $ (2,353,828) $ - $ - $ (2,353,828)
================ =============== =============== ================
</TABLE>
28
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION AND SUBSIDIARY
Consolidated Proforma Balance Sheet
June 30, 2000
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
San Diego Proforma
Soccer Roller Adjustments
Development Coaster, Increase Proforma
Corporation Inc. (Decrease) Consolidated
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 51,329 $ - $ - $ 51,529
Employee advances 2,525 - - 2,525
---------------- --------------- --------------- ----------------
Total Current Assets 53,854 - - 53,854
---------------- --------------- --------------- ----------------
FIXED ASSETS
Computers and software 17,716 - - 17,716
Soccer equipment 15,684 - - 15,684
Accumulated depreciation (7,761) - - (7,761)
---------------- --------------- --------------- ----------------
Total Fixed Assets 25,639 - - 25,639
---------------- --------------- --------------- ----------------
OTHER ASSETS
Soccer franchises, net 163,200 - - 163,200
Receivable from shareholder 5,000 - - 5,000
Deposits 1,350 - - 1,350
---------------- --------------- --------------- ----------------
Total Other Assets 169,550 - - 169,550
---------------- --------------- --------------- ----------------
TOTAL ASSETS $ 249,043 $ - $ - $ 249,043
================ =============== =============== ================
</TABLE>
29
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION AND SUBSIDIARY
Consolidated Proforma Balance Sheet (Continued)
June 30, 2000
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
San Diego Proforma
Soccer Roller Adjustments
Development Coaster, Increase Proforma
Corporation Inc. (Decrease) Consolidated
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 286,191 $ - $ - $ 286,191
Accrued expenses 263,283 - - 263,283
Loans from related parties 16,702 - - 16,702
Deferred revenue 21,715 - - 21,715
Convertible promissory notes 238,400 - - 238,400
Lines of credit 610,119 - - 610,119
Notes payable 25,390 - - 25,390
---------------- --------------- --------------- ----------------
Total Current Liabilities 1,461,800 - - 1,461,800
---------------- --------------- --------------- ----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 100,000,000
shares authorized of $0.001
par value, 9,314,969 shares
issued and outstanding 3,005,898 2,500 (2,999,083) 9,315
Additional paid in capital 1,071,523 - 3,007,583 4,079,106
Common stock subscribed 12,000 - (12,000) -
Stock subscription receivable (1,000) - 1,000 -
Accumulated deficit (5,301,178) (2,500) 2,500 (5,301,178)
---------------- --------------- --------------- ----------------
Total Stockholders' Equity
(Deficit) (1,212,757) - - (1,212,757)
---------------- --------------- --------------- ----------------
TOTAL LIABILITIES AND
STOCKHOLDERS'
EQUITY (DEFICIT) $ 249,043 $ - $ - $ 249,043
================ =============== =============== ================
</TABLE>
30
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION AND SUBSIDIARY
Consolidated Proforma Statement of Operations
For the Six Months Ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
San Diego Proforma
Soccer Roller Adjustments
Development Coaster, Increase Proforma
Corporation Inc. (Decrease) Consolidated
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ 82,652 $ - $ - $ 82,652
---------------- --------------- --------------- ----------------
OPERATING EXPENSES
Advertising and promotion 179,174 - - 179,174
Depreciation and amortization 7,150 - - 7,150
Game and player expenses 188,418 - - 188,418
General and administrative 809,062 - - 809,062
---------------- --------------- --------------- ----------------
Total Operating Expenses 1,183,804 - - 1,183,804
---------------- --------------- --------------- ----------------
LOSS FROM OPERATIONS (1,101,152) - - (1,101,152)
---------------- --------------- --------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 555 - - 555
Loan underwriting fees (750,000) - - (750,000)
Interest expense (43,616) - - (43,616)
---------------- --------------- --------------- ----------------
Total Other Income (Expense) (793,061) - - (793,061)
---------------- --------------- --------------- ----------------
NET LOSS $ (1,894,213) $ - $ - $ (1,894,213)
================ =============== =============== ================
</TABLE>
31
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Merger will be passed upon for
SDSDC by Horwitz & Beam, Irvine, California.
EXPERTS
The consolidated financial statements as of December 31, 1999, 1998, 1997 and
1996 included in this document have been so included in reliance on the
report of Kurt D. Salinger, C.P.A., given on the authority of said firm as
experts in accounting and auditing.
The financial statements of SDSDC as of December 31, 1998 and December 31,
1999 have been so included in reliance on the report of Logan Throop & Co.,
LLP, certified public accountants, given on the authority of said firm as
experts in accounting and auditing.
The unaudited financial statement for the period ending June 30, 2000 and the
pro forma consolidated financial statements as of December 31, 1999 and June
30, 2000 have been prepared by HJ & Associates, LLP, given on the authority
of said firm as experts in accounting and auditing.
OTHER PROPOSALS
Neither SDSDC Board of Directors intend to bring before its special meeting
of shareholders any matters other than those set forth in its Notices of
Special Meeting, and they have no present knowledge that any other matters
will be presented for action at the meeting by others. If any other matters
properly come before the SDSDC special meeting, however, it is the intention
of the persons named in the enclosed form of SDSDC proxy to vote in
accordance with their best judgment.
32
<PAGE>
DESCRIPTION OF NEW SDSDC
BUSINESS OF THE COMPANY
SDSDC was formed as a California corporation in 1997 for the purpose of
acquiring and operating a professional soccer franchise in the San Diego,
California area. In December 1997, the Company entered into a franchise
agreement with USL to acquire and operate a USL A-League Franchise, the San
Diego Flash. The San Diego Flash has completed two seasons and is currently
involved in its third season under SDSDC's management. SDSDC intends to
create an entire entertainment and lifestyle package for its fan base.
UNITED STATES PROFESSIONAL SOCCER
Major League Soccer ("MLS") is currently the United State's Division I
professional soccer league. Formed in 1996, this league operates franchises
in major United States cities. The MLS has twelve teams which play 32 regular
season matches. The MLS features a single entity concept, where each team
operator owns a financial piece of the league, not an individual team. The
concept allows teams to operate autonomously in their markets, with the
incentive to see that all clubs are financially successful. In its sixth
year, the MLS averages approximately 14,000 fans per match, with a total
attendance for 1999 of 2,742,102. It possesses a television contract with
ABC, ESPN and Univision to broadcast over 60 matches on national television.
Major sponsors include Honda, AT&T, Budweiser, MasterCard, All Sports, Pepsi,
BIC, Pro Player, Kellogg's and Snickers. The value of the MLS' sponsorship
contracts is more than $100 million.
The USL was founded in 1986. It is the largest system of national soccer
leagues in the United States with 134 teams in five leagues. The USL operates
a variety of leagues of which the A-League is its premier professional
league. It also operates the D-3 Pro League, the Premier Development League,
the Super Y (Youth) League, the I-League (indoor soccer) and the W-league
(women's professional soccer.) The USL A-League acts as the "Division II"
professional league in the United States. The USL and MLS currently have an
agreement wherein the USL supplies players to the MLS. When a player is
"called up" to the MLS, the USL team is compensated for any lost player, if
the player is called up during the season. While there is a symbiotic
relationship, there is no common ownership between the USL and the MLS. As it
is not directly in competition with the MLS, the USL has been able to
capitalize on the marketing efforts and general exposure that the MLS has
generated. The USL's total attendance for 1999 was 1,989,126.
SOURCES OF REVENUE
SDSDC currently realizes revenue from the following sources:
TICKET SALES. In order to build a fan base, SDSDC has provided
complimentary tickets to a variety of groups in the San Diego area. Each
season, the number of complimentary tickets has been decreased
correspondingly increasing the number of paid admissions. SDSDC believes that
the San Diego area provides it with a fan base willing to support a
professional soccer franchise. San Diego's market has one of the largest
soccer playing populations in the United States. The region consists of large
ethnic communities such as Hispanic, Asian and European populations who have
come from countries where soccer is the major professional sport. Further,
the San Diego area has hosted major soccer events including the NASL Soccer
Bowl, the MLS All-Star Game, the CONCACAF Gold Cup, and U.S. and Mexican
national team matches. These factors as a whole suggest that San Diego is an
area with a population willing to support a professional soccer franchise.
SDSDC ticket sales include season tickets which entitle the bearer
to premier seating, a yearbook, discounts and game day notes. The current
price of season tickets are $375 for a family (2 adults and 2 youths); $125
for individual adults and $75 for youths, seniors and military personnel.
SDSDC's current marketing strategies as it relates to the immediate
need to increase the fan base is as follows:
- During the off-season, appearances with local soccer leagues and clubs are
increased to coincide with the youth leagues to operate between the months
of October and December. These appearances provide exposure in addition to
creating alliances with club directors, which can lead to large group
ticket sales.
- In March of each year SDSDC commences its promotional blitz to enhance team
awareness, ticket sales and
33
<PAGE>
schedule giveaways. To do this, SDSDC utilizes a number of efforts
including booths at Pacific Beach Street Scene manned by the Flash Girls,
the team mascot and team representatives.
- During the regular schedule, SDSDC schedules in the area of 20 to 25 games
including 15 regular season A-League games, 2 exhibition games, 3 U.S. Open
Cup matches and 4 playoff games. Each game has a number of potential events
attached to it such as league night, a corporate sponsor for the evening,
promotional giveaways, half-time and post-game events. The Flash mascot,
Flash Girls, inflatables, interactive games, raffles and fun zones for
children increases the total entertainment aspect of the games.
CONCESSION SALES. Food and non-alcoholic beverages are sold at each
game. SDSDC recently ended its relationship with its food concessionaire and
has entered into an agreement with a new concessionaire Ranch Catering. Under
the terms of this agreement, the food concessionaire realizes 75% of the
gross revenue produced by food and beverage sales while SDSDC receives the
remaining 25%.
MERCHANDISE SALES. SDSDC also sells a wide array of San Diego Flash
merchandise including T-shirts, embroidered polo shirts and hats, knit caps,
balls, lapel pins, yearbooks, media guides, schrunchies, replica jerseys,
sweatshirts, key chains, bumper stickers, mugs and other items. SDSDC
recently ended its relationship with its merchandise vendor, who was also the
former food concessionaire. SDSDC has decided not to enter into a
merchandizing agreement with a new vendor and instead has brought this
venture in-house. By bringing the operations in-house the company will
realize 100% of any profits generated by merchandise sales. SDSDC plans to
include licensed merchandise in the future.
SDSDC contemplates taking advantage of various other potential
sources of revenue. These include, but are not limited to the following:
A VERTICALLY INTEGRATED FARM SYSTEM. By taking an active part in
youth soccer camps, SDSDC hopes to develop a vertically integrated club
system that moves youth players through a professional development system and
eventually onto one of the Company's or other professional teams. SDSDC has
begun to move towards this goal by acquiring an interest in the Riverside
County Soccer Development Corporation. This entity will operate a D-3 league
team in the Riverside area. In order to take full advantage of the vertical
integration, SDSDC would need to establish the full range of USL teams,
including a Y-League and Premium Development League team. The most talented
players developed through this system would be signed to contracts which
would become part of the core Player Transfer Fee revenue source.
SOCCER CAMPS. SDSDC believes that it has a unique coaching
philosophy that lends it self to soccer academies and camps for both youths
and adults. SDSDC operates soccer camps during the summer and fall season.
As the teams progress, SDSDC's coaching philosophy as implemented in a camp
or academy setting could be franchised throughout the country. However, this
franchising opportunity has not been explored in great detail by SDSDC, and
accordingly there is no guarantee that such opportunity could or will develop.
MERCHANDISE SALES IN MALLS. Within the next year, SDSDC hopes to
sell its merchandise in San Diego area malls. The concept is to sell the
merchandise in mall kiosks. SDSDC has not entered into any negotiations or
discussions with local malls to sell its merchandise. There is no guarantee
that SDSDC will begin to sell its merchandise in malls, or that if it should
begin to offer its merchandise for sale, that it will be a profitable
enterprise.
SOCCER STADIUMS. In the long term, SDSDC hopes to build and develop
stadiums in both San Diego, for the San Diego Flash, and in Riverside County,
for the Riverside County Elite. These stadiums would be soccer specific,
styled after the best of the European facilities, and will seat between
10,000 to 13,000 fans. Although these venues would be primarily used by the
teams, SDSDC hopes to realize revenues from alternative uses. Such uses would
include other sports leagues including minor league pro football, lacrosse,
rugby, soccer tournament championships, local high school football and soccer
championships and such non-sport uses as concerts. SDSDC has entered into
discussions with both the San Diego or Riverside municipalities to build or
develop these stadiums. There is no guarantee that such stadiums will be
built or that they will be profitable once and if built.
SPONSORSHIPS. We currently enjoy sponsorship arrangements with over
50 Corporate Partners. These sponsorship arrangements permit the sponsors to
display their logos on the company web site and, at the stadium, in
34
<PAGE>
exchange for cash or trade. SDSDC hopes to better cross-market with its
sponsors within the international, national and local community, as well as
at games. Additionally, some of SDSDC's sponsors employ management with broad
management skills and techniques. SDSDC would like to take advantage of this
relationship to add these individuals to SDSDC's board of directors or an
Advisory Board.
INTERNATIONAL DIVISION. SDSDC is currently negotiating with several
overseas groups to develop and market the companies business development
strategies in key soccer markets worldwide. SDSDC believes that there are
several opportunities that exist overseas with the acquisition of established
franchises that can be bought and operated at a profit. SDSDC intends to
enter into a joint venture with a company based in Austria called SKM Inc. to
further develop the soccer camp/academy division. This partnership will bring
the European soccer expertise and strength to the table.
EMPLOYEES
As of August 31, 2000, SDSDC employed 6 full-time employees and 2
independent consultants. SDSDC has no collective bargaining agreements with
its employees. SDSDC believes that its employee relationships are
satisfactory. Due to its current level of growth, and anticipating that
funding will be available to permit, SDSDC anticipates increasing its number
of full-time employees to approximately 8 by the end of 2000.
DIRECTORS AND MANAGEMENT OF NEW SDSDC
The New SDSDC Board of Directors will consist of: Steven R. Peacock, Yan K.
Skwara, James Upton, Sarkis Kaloustian and Jeffrey Scott. The senior
management of New SDSDC will be drawn from the present management of SDSDC.
The following table sets forth the names, positions and, as of October 1,
2000 the ages of the executive officers and directors of New SDSDC.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Steven R. Peacock 55 Chairman of the Board of Directors
Sarkis Kaloustian 32 CEO/COO/Director
Yan Skwara 35 Director
James Upton 52 Director
Jeffrey Scott 37 Director
</TABLE>
The following is a biographical summary of the experience of the executive
officers and directors of New SDSDC.
SARKIS KALOUSTIAN, 32, CHIEF OPERATING OFFICER AND DIRECTOR. Mr.
Kaloustian was elected President, Chief Executive Officer and Chief Operating
Officer of the Company in September 2000. Prior to that date, Mr. Kaloustian
served as COO of the Company. Mr. Kaloustian is an attorney licensed to
practice law in the State of California and has been a legal practitioner in
a civil law firm predominantly engaged in business and corporate transaction
and litigation matters for the past six years. Prior to practicing law as a
civil trial attorney and joining Company's management team, Mr. Kaloustian
interned for the United States Attorneys' Office, the District Attorney's
Office as well as the San Diego Attorney's Office. He is currently a
volunteer and vice-president for the San Diego County Soccer League; a San
Diego based Premier amateur adult league. Mr. Kaloustian has also served as a
volunteer member for the City of San Diego Recreation Department Sports
Council for Mira Mesa from 1995 until present. Mr. Kaloustian has extensive
experience in corporate legal and management matters, as well as over twelve
years of experience in coordinating and operating soccer clubs and leagues.
Mr. Kaloustian has played soccer for over 21 years and has played
semi-professional soccer for club teams in both Los Angeles and Glendale,
California. He has also been coaching collegiate level players in San Diego
for the past seven years.
STEVEN R. PEACOCK, 55, DIRECTOR, CHAIRMAN OF THE BOARD. Mr. Peacock
is President, Director and founder of Peacock Financial Corporation which he
has worked for 22 years. He has extensive experience in real estate
development, property management and construction. His vision, creative mind,
persistence and direction have
35
<PAGE>
positioned Peacock Financial Corporation to take advantage of the upturn in
the real estate marketplace, but also to increase shareholder value through
the creation or acquisition of subsidiaries strategically positioned within
their own industries
YAN K. SKWARA, 35, DIRECTOR. Mr. Skwara is founder, of the Company
since its inception; he served as CEO and President of the Company until
September 2000. For the past 10 years, Mr. Skwara has been employed as an
investment banker. Mr. Skwara is currently employed full-time with Pacific
Capital Resources and brings his experience in the investment banking world
to the Company. Mr. Skwara has significant experience in management, product
support and overall knowledge in the investor relations arena. Mr. Skwara
also maintains a significant background in the soccer industry. He is a
student of the game and has been actively playing the game for 20 years and
began his professional career in soccer at age nineteen where he signed his
first professional contract with a club in Germany. Prior to playing
overseas, Mr. Skwara studied and played at California State University of Los
Angeles. He played in Germany for two years before coming back to the states
to finish his career in Los Angeles. After a professional career, Mr. Skwara
acquired his North Texas Soccer `D' Coaching License and also was founder and
partner of a semi-pro franchise in Dallas, Texas in 1994.
JAMES UPTON, 52, DIRECTOR. Mr. Upton is the Executive Vice President
of Peacock Financial Corporation, a company he has worked for since 1973. Mr.
Upton brings 27 years of general business and real estate development
experience to this team. Mr. Upton is experienced in closely monitoring every
aspect of Peacock's many investments utilizing computer-generated
management/administrative systems. Mr. Upton has an extensive background in
cost accounting, and has developed an operations audit management system that
is effective in insuring revenue streams for Peacock Sports investments and
soccer franchises. Mr. Upton provides significant managerial support, and
serves on the Board of Directors for various Companies in which Peacock has
acquired ownership positions. These companies are Peacock Financial
Corporation, Bay Area Soccer Development Corporation, Orange County Soccer
Development Corporation, Riverside Soccer Development Corporation
JEFFREY SCOTT, 37, DIRECTOR. Mr. Scott is the owner of Global Soccer
Concepts, Ltd., which is a consulting business he started. He is also is the
chairman of the board of the Soccer Council of San Diego. Prior to this, Mr.
Scott served for 13 years as the head professional coach for the Pensaquitos
Youth Soccer Association. During this time he also served on the club's Board
of Directors, first as the Director of Facilities and later as the Director
and Co-Founder of the club's annual tournament. Mr. Scott oversaw the
construction of several park projects and was responsible for maintenance and
scheduling. He also directed the fund raising activities for the Pensaquitos
Youth Soccer Association through the development of corporate sponsorship and
community relations. Mr. Scott's career as an educator began 12 years ago as
an instructional aide in a kindergarten classroom and culminated as a middle
school Physical Education instructor and Assistant Athletic Director.
The Company is presently in the process of interviewing candidates
to fill the positions of Corporate Secretary and Chief Financial Officer.
36
<PAGE>
EXECUTIVE COMPENSATION
(a) SUMMARY OF COMPENSATION
Set forth below is a summary of the Company's executive compensation
for fiscal year 2000. There are no annuity, pension or retirement benefits
proposed to be paid to officers, directors or employees of the Company in the
event of retirement at normal retirement date pursuant to any presently
existing plan provided or contributed to by the Company or its subsidiary.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other All Other
Name Annual Restricted Compensation
and Compens Stock Awards Options LTIP
Principal Position Year Salary Bonus ation SARs Payouts
Sarkis Kaloustian, 2000 $72,000 150,000(2)
President, CEO,
Director
Yan Skwara, Director 2000 $84,000(1) 150,000(2)
James Upton, Director 2000 0 0
Steve Peacock, 2000 0 0
Director
Steve Scott, Director 2000 0 0
All Officers and 2000 $168,000 300,000
Directors as a group
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
------------------------------------
(1) Mr. Skwara was President of the Company until September 19, 2000. While
Mr. Skwara is no longer an officer of the Company, effective October 1,
2000, the Company compensates Mr. Skwara pursuant to a consulting
services arrangement between the Company and Pacific Capital Relations,
an entity owned and operated by Mr. Skwara.
(2) On June 1, 2000 the Company granted to Mr. Skwara and to Mr. Kaloustian
each 150,000 options to purchase shares of common of the Company at an
exercise price of $0.25 per share. All options shall expire three years
after the grant date.
(b) COMPENSATION OF DIRECTORS
SDSDC's Bylaws permit the Directors of the Company to receive compensation
for their services. Mr. Skwara currently receives a salary of $7,000 a month
for consulting services rendered to the Company through Pacific Capital
Relations,an entity owned and operated by Mr. Skwara. New SDSDC may, by
resolution of the Board of Directors, provide a fixed sum and expense for
attendance at each regular and special meeting of the Board of Directors.
37
<PAGE>
(c) EMPLOYMENT AGREEMENTS
The Company maintains an employment agreement with Sarkis Kaloustian. Mr.
Kaloustian' s duties under the agreement include perform all those managerial
duties that are necessary for the daily operations of the Company. With the
exception of Mr. Kaloustian's employment agreement, the Company does not
maintain any other employment agreement. The Company had an employment
agreement with Yan Skwara, the former CEO and President of the Company but
this agreement was terminated upon Mr. Skwara' resignation from these
positions.
DESCRIPTION OF PROPERTY
SDSDC leases approximately 2,304 square feet of office space in San
Diego, California. All of the SDSDC operations are conducted from these
premises. The lease expires on July 14, 2002 and requires lease payments of
approximately $2,764 per month in the first year and $2,880 in the second
year. The lease provides for an option to renew the lease for the term of one
year.
LEGAL PROCEEDINGS
The Company is not currently subject to any legal proceeding.
Further, the Company is not aware of any contemplated action nor proceeding
by any governmental authority to which the Company is a participant.
38
<PAGE>
UNAUDITED HISTORICAL COMBINED CONDENSED FINANCIAL INFORMATION
We are providing the following financial information to aid you in
your analysis of the financial aspects of the Merger. The following
Rollercoaster data, insofar as it relates to each of the years 1999, 1998,
1997 and 1996, has been derived from financial statements audited by Kurt D.
Salinger, C.P.A., which appear elsewhere in this document. The data for the
six months ended June 30, 1999 and June 30, 2000 and has been derived from
unaudited financial statements also appearing herein and which, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results of the
unaudited interim periods. The following SDSDC data, insofar as it relates to
the year ended December 31, 1999, and December 31, 1998, has been derived
from financial statements audited by Logan Throop & Co., LLP, and appear
elsewhere in this document. The data for the six months ended June 30, 2000
have been derived from unaudited financial statements that have been reviewed
by HJ & Associates, LLP; and that also appear herein and which, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results of the
unaudited interim periods. The information should read it in conjunction with
other financial statements (and related notes) attached to this document and
as filed with the SEC. You should be aware that results for interim periods
cannot be used to project the results of any other interim period or for the
year as a whole. See "Important Information" on page 1.
<TABLE>
<CAPTION>
ROLLERCOASTER-- HISTORICAL FINANCIAL INFORMATION
BALANCE SHEET
Six Months Six Months Year Year Year Year
Ended Ended Ending Ending Ending Ending
6/30/00 6/30/99 12/31/99 12/31/98 12/31/97 12/31/96
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS 0 0 0 0 0 0
Cash
TOTAL CURRENT ASSETS 0 0 0 0 0 0
TOTAL ASSETS 0 0 0 0 0 0
CURRENT LIABILITIES 0 0 0 0 0 0
Accounts Payable 0 0 0 0 0 0
TOTAL CURRENT LIABILITIES 0 0 0 0 0 0
STOCKHOLDER'S EQUITY
Common Stock, $.001 par value 0 0 0 250 250 250
authorized 100,000,000 shares; issued
and outstanding 250,000 shares
2,500,000 2,500 2,500 2,500
Additional Paid in Cash 0 0 0 2,250 2,250 2,250
Deficit accumulated during (2,500) (2,500) (2,500) (2,500) (2,500) (2,500)
Development Stage
TOTAL STOCKHOLDER'S EQUITY 0 0 0 0 0 0
TOTAL LIABILITIES AND STOCKHOLDERS 0 0 0 0 0 0
EQUITY
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six Months Six Months Year Year Year Year
Ended Ended Ending Ending Ending Ending
6/30/00 6/30/99 12/31/99 12/31/98 12/31/97 12/31/96
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
INCOME - Revenue 0 0 0 0 0 0
TOTAL INCOME 0 0 0 0 0 0
EXPENSES - General & Administrative 0 0 0 0 0 2,500
TOTAL EXPENSES 0 0 0 0 0 2,500
NET PROFIT 0 0 0 0 0 (2,500)
NET PROFIT (LOSS) 0 0 0 0 0 (2,500)
NET PROFIT (LOSS) PER SHARE 0 0 0 0 0 (.010)
AVERAGE NUMBER OF SHARES OF COMMON 2,500,000 2,500,000 2,500,000 250,000 250,000 250,000
STOCK OUTSTANDING
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Six Months Six Months Year Year Year Year
Ended Ended Ending Ending Ending Ending
6/30/00 6/30/99 12/31/99 12/31/98 12/31/97 12/31/96
------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES 0 0 0 0 0 (2,500)
Net (Loss)
Accounts Payable 0 0 0 0 0 (2,500)
Issue Common Stock 0 0 0 0 0 0
Net increase (decrease) in cash 0 0 0 0 0 0
Cash, beginning of period 0 0 0 0 0 0
Cash, end of period 0 0 0 0 0 0
</TABLE>
40
<PAGE>
SDSDC -- HISTORICAL FINANCIAL INFORMATION
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, December 31, December 31,
2000 1999 1998
---- ------------ ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 51,329 $ 50,253 $ 298
Employee advances 2,525 - 100
--------------- ----------------
Trading Securities 22,725
----------------
Total Current Assets 53,854 50,253 $ 23,123
--------------- ---------------- ----------------
PROPERTY AND EQUIPMENT 25,639 18,119 9,695
--------------- ---------------- ----------------
(Net) (Notes 1 and 2)
OTHER ASSETS
Receivable from shareholder 5,000 - -
Deposits 1,350 1,350 -
Soccer franchises, net (Note 3) 163,200 166,800 143,000
--------------- ---------------- ----------------
Total Other Assets 169,550 168,150 152,695
--------------- ---------------- ----------------
TOTAL ASSETS $ 249,043 $ 236,522 175,818
=============== ================ ================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
June 30, December 31,
2000 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 286,191 $ 102,005
Accrued expenses 263,283 255,247
Bank overdraft - 1,065
Loans from related parties 16,702 2,273
Deferred revenue 21,715 32,490
Credit lines payable (Note 4) 610,119 -
Convertible promissory notes (Note 6) 238,400 329,100
Notes payable (Note 5) 25,390 15,646
----------------- -----------------
Total Current Liabilities 1,461,800 737,826
----------------- -----------------
Total Liabilities 1,461,800 737,826
----------------- -----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 20,000,000 shares authorized of no
par value, 6,814,969 and 5,284,369 shares issued
and outstanding, respectively 3,005,898 2,000,298
Common stock subscribed 12,000 12,000
Additional paid-in capital 1,071,523 941,363
Stock subscriptions receivable (1,000) (48,000)
Accumulated deficit (5,301,178) (3,406,965)
----------------- -----------------
Total Stockholders' Equity (Deficit) (1,212,757) (501,304)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 249,043 $ 236,522
================= =================
</TABLE>
41
<PAGE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Ticket sales $ 40,439 $ 19,170 $ 40,439 $ 19,170
Corporate sponsorships 32,995 177,629 32,995 177,629
Other revenue 7,331 1,902 9,218 2,561
--------- --------- ----------- ----------
Total Revenues 80,765 198,701 82,652 199,360
--------- --------- ----------- ----------
EXPENSES
General and administrative 419,551 347,416 809,062 461,048
Game and player expenses 132,886 160,449 188,418 215,347
Advertising and promotion 71,865 205,489 179,174 335,904
Depreciation and amortization 3,998 2,686 7,150 5,372
--------- --------- ----------- ----------
Total Expenses 628,300 716,040 1,183,804 1,017,671
--------- --------- ----------- ----------
Loss From Operations (547,535) (517,339) (1,101,152) (818,311)
--------- --------- ----------- ----------
OTHER INCOME (EXPENSE)
Gain (loss) on trading securities - 1,392 - 26,343
Interest income 280 378 555 707
Loan underwriting fee (250,000) - (750,000) -
Interest expense (39,128) (1,947) (43,616) (3,211)
--------- --------- ----------- ----------
Total Other Income (Expense) (288,848) (177) (793,061) 23,839
--------- --------- ----------- ----------
NET LOSS $(836,383) $(517,516) $(1,894,213) $ (794,472)
========= ========= =========== ==========
BASIC LOSS PER SHARE $ (0.13) $ (0.11) $ (0.31) $ (0.17)
========= ========= =========== ==========
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss (836,383) (517,516) (1,894,213) (794,472)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Depreciation and amortization 3,998 2,686 7,150 5,372
(Gain) loss on trading securities - (1,392) - (26,343)
Stock issued for loan underwriting fee 250,000 - 750,000 -
Stock issued for services - 206,908 11,000 350,108
Stock options issued for services 47,860 22,868 131,160 22,868
Changes in operating assets and liabilities:
(Increase) decrease in employee advances 600 (2,908) (2,525) (2,908)
(Increase) decrease in receivable
from shareholder - - (5,000) -
Increase (decrease) in accounts
payable 74,202 (22,389) 184,186 (16,309)
Increase (decrease) in deferred
revenue (21,714) (30,151) (10,775) (18,066)
Increase (decrease) in
accrued expenses 15,480 150,295 6,972 41,063
Increase (decrease) in bank overdraft - 43 - (7,828)
--------- --------- ----------- ----------
Net Cash (Used) by Operating Activities (465,957) (191,556) (822,045) (446,515)
--------- --------- ----------- ----------
</TABLE>
42
<PAGE>
STATEMENT OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities - - 79,431
Purchase of fixed assets (986) (12,001) (11,071) (12,001)
--------- --------- ----------- ----------
Net Cash (Used) by Investing Activities (986) (12,001) (11,071) 67,430
--------- --------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash - 48,800 101,000 305,800
Capital distributions (1,000) - (1,000) -
Principle payments on convertible notes payable (23,000) - (27,500) (10,440)
Cash received from notes payable 14,244 - 14,244 -
Convertible promissory notes proceeds 74,000 151,075 122,900 151,075
Line of credit proceeds 368,359 - 610,119 -
Due to related companies 14,429 (452) 14,429 (452)
--------- --------- ----------- ----------
Net Cash Provided by Financing Activities 447,032 199,423 834,192 445,983
--------- --------- ----------- ----------
NET INCREASE (DECREASE) IN CASH (19,911) (4,134) 1,076 66,898
CASH AT BEGINNING OF PERIOD 71,240 71,330 50,253 298
--------- --------- ----------- ----------
CASH AT END OF PERIOD $ 51,329 $ 67,196 $ 51,329 $ 67,196
========= ========= =========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 38,274 $ - $ 38,274 $ -
Income taxes
NON-CASH FINANCING ACTIVITIES
Common stock issued for convertible promissory
notes $ 5,600 $ - $ 190,600 $ -
Common stock issued in exchange for equipment $ 12,000
Common stock issued for trading securities $ - $ - $ - $ 31,755
</TABLE>
43
<PAGE>
NEW SDSDC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is management's discussion and analysis of SDSDC's financial
condition and results of operations. For detailed information you should read
the financials included in this Document. This section contains
forward-looking statements that involve risks and uncertainties, such as
statements of SDSDC's plans, objectives, expectations and intentions. The
cautionary statements made in this Document should be read as being
applicable to all related forward-looking statements wherever they appear in
this Document. See "Risk Factors" on page 7.
OVERVIEW
SDSDC was incorporated in 1997 for the purpose of acquiring and operating a
soccer club in the San Diego, California area. The company has a limited
operating history on which to evaluate its prospects. The risks, expense, and
difficulties encountered by start up companies must be considered when
evaluating SDSDC's prospects.
The operating expenses of SDSDC cannot be predicted with certainty. They will
depend on several factors, including the amount of marketing expenses, the
acceptance of the company's services in the market, and competition for such
services. Management may be able to control the timing of development
expenses in part by speeding up or slowing down marketing development and
expansion activities.
From its inception in 1997 to date, SDSDC has incurred costs associated with
the development of its markets and the operation of the soccer club.
SDSDC financed its expenditures primarily through the sale of its securities.
SDSDC's auditors have issued a going concern opinion. While SDSDC believes
that it should receive sufficient revenues from its operations and from the
private sale of its securities to continue as a going concern for at lease
the next fiscal year. There is no guaranty however that operating revenues
will increase or that private financing will be available or if available,
available on terms beneficial to or acceptable to SDSDC.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
The Company operates a top-ranked team in Soccer's A-League (Division II).
The Company's gate receipts for 1999 decreased by 28.7 % from 1998. Operating
costs of the Company increased by 69% from 1998 to 1999. It is important to
mention that the revenues in the 1998 season were not enough to cover
expenses and the Company experienced significant losses. This was also true
for 1999. The Company is working to build brand recognition of the San Diego
Flash in the community. The Company's efforts to build its fan base include
direct marketing to the youth soccer market, general advertising, and media
relations with all local sports media outlets. Another effort to improve
visibility and recognition of the team involves awarding complementary
tickets to potential fans that have yet to attend a game. The team plans to
reduce the number of complimentary tickets in the coming year, as the
visibility and recognition of the brand has increased. The Company sold
convertible debt securities in 1999, pursuant to two series of promissory
notes. As of December 31, 1999 a total of $719,950 was sold under the Series
99-1 Promissory Note. As of December 31, 1999, $390,850 has been converted
into common stock at 1 share per dollar held in the notes. $329,100 in said
note remained outstanding. The Series 99-1 Promissory Notes matured on
December 31, 1999. A total of $37,900 was sold under the Series 99-2
Promissory Note. These notes are convertible into common stock at 1 share per
dollar held in the notes. As of December 31, 1999, none of the Series 99-2
Promissory Notes had been converted. The Company, as part of its regular
business and promotion of its San Diego Flash brand name, currently sells
branded merchandise at its home games. Through the 1998 season and the 1999
season, the Company's merchandise was produced and sold through a local
vendor. This contract has recently been terminated, and the merchandise
operation has been brought in-house. The Company believes that this change
will allow it to make a greater margin on the sales of its merchandise, as
well as allowing greater control of price points, quality, and product mix.
The Company plans to expand its merchandise operation to include sales at
kiosk-based locations in selected malls in San Diego County. The plan is for
these kiosk outlets to sell Flash branded merchandise, as well as general
soccer merchandise and equipment. The Company plans to place kiosks in 3
major malls in the greater San Diego area. The Company believes that these
kiosks will prove to be revenue-producers, and also feels that they will
serve an important marketing function in increasing community awareness of
the San Diego Flash. Uncertainties in being able to accomplish this
merchandising plan include possible non-availability of space at local malls,
potential lack of public acceptance of the products sold, and potential
competition from other outlets. The Company's contract with a local food and
beverage concessionaire has also been terminated. The
44
<PAGE>
Company plans to contract with a professional caterer to service the food and
beverage needs of its fans, and believes that its revenue from food and
beverage will increase from this change. The Company has increased its ticket
sales distribution effort by hiring a ticket sales contractor, Sportix.net.
The contract calls for Sportix.net to provide telemarketing and sales
services to the Company in return for a commission on each ticket sold. The
Company believes that this contract will increase overall ticket sales.
Seasonality. Since the Company's team plays from April to September each
year, the business operations are highly seasonal. With the major sources of
revenue for the Company coming from team operations, this seasonality is
material.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
The Company operates a top-ranked soccer franchise in the Division II
A-League of the United Soccer Leagues, Inc. The company's various revenue
streams derive from multiple interrelated areas of operation, including
ticket sales, sponsorships, merchandise sales, game day concession sales and
soccer clinics and camps for youth soccer players.
During the periods of operation noted, the company pursued aggressive ticket
sales and marketing operations. The company enhanced its ticket distribution
channels by outsourcing its ticket sales operations, by emphasizing
television and radio promotions and by focusing sales to local youth soccer
clubs. Several youth clubs also cooperated in joint promotional events, which
in turn increased pre-game purchase and gate receipts. While promotional
ticket giveaways increased to complement the ads running on radio broadcasts,
overall complimentary tickets giveaways were reduced. Finally, increased
in-house sales complemented the company's enhanced marketing efforts. As a
result, revenues from both season ticket sales and per game and gate sales
more than doubled from $19,170 to $40,439.
However, this increase was offset by a marked decrease in revenues from
corporate sponsorships, as these revenues decreased from $177,629 to $32,995.
Revenues from sponsorships came as either cash contributions or goods and
services, whereby sponsors provided goods and services that the company would
have otherwise purchased for cash. Though the receipt of actual sponsorship
revenue decreased, management believes that this is attributable to the fact
during the current year sponsors' infusions of money occurred at a different
time relative to this reporting period. Other revenues increased from $2,561
to $9,218. Management believes that the increase was attributable to improved
marketing and sales efforts for merchandise and concession items.
Operational expenses increased from $1,017,671 to $1,183,804. The company
reduced advertising and promotion expenses from $335,904 to $179,174 and game
and player expenses from $215,347 to $188,418. The production cost of
printing tickets was significantly reduced by virtue of trade sponsorship
with various printing companies. However, these reductions were offset by a
marked increase in general and administrative expenses, which went from
$461,048 to $809,062. Management believes that this increase was primarily
due to the growth of the company and to the development and operation of the
company's soccer camps and clinics.
While for the six months ended June 30, 1999 the company posted other income
in the amount of $23,343, for the comparable period of 2000 the company
incurred a loss of $794,472. Management believes that this loss is mostly
attributable to debt financing operations that were necessary to sustain the
company's growth. In particular, the company spent $750,000 in a loan
underwriting fee and accrued $43,616 in interest expense.
As such, the net results from operations for the six months ended on June 30,
2000 was a loss of $1,894,213, which translated into a $0.31 loss per share.
Over the same period of 1999, the loss from operations had been $794,472,
with a loss per share of $0.17. Management believes that the continued
negative result is partially attributable to the fact that the company is
still in its development stage. However, management is also aware that a
continued loss from operations not only would affect the company's long term
prospects but would also diminish the company's present ability to secure
favorable financing and may eventually result in a change in control.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Cash used by operating activities approximate SDSDC's net loss for the
respective periods. Since inception, the company has funded its capital
requirements by financing activities, substantially through the sale of its
equity securities. It is anticipated that the company will require further
working capital to fund future operations. It is expected that such funds
will be obtained by the sale of additional capital stock of the company,
although there can be no assurance that SDSDC will be able to obtain such
funds.
45
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
On August 4, 2000 SDSDC engaged HJ & Associates, certified public
accountants, 50 S. Main, Suite 1450, Salt Lake City, Utah 84114 ("HJ &
Associates") as its independent accountants for all accounting purposes
related to the Company's business operations and SDSDC's reporting
requirements. HJ & Associates replaced Logan Throop & Co., Certified Public
Accountants, as the Company's principal accountants as of August 4, 2000
("Logan Throop") for this purpose. The principal accountants' report on the
financial statements of the Company contained no adverse opinion or a
disclaimer of opinion, or was qualified nor modified as to audit scope, or
accounting principles. The principal accountants' report included an
explanatory paragraph describing an uncertainty regarding the Company's
ability to continue as a going concern. The engagement of HJ & Associates was
approved by the Board of Directors.
During the Company's two most recent fiscal years and any subsequent interim
period preceding such registration, declination, or dismissal, there were no
disagreements with former accountants on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.
46
<PAGE>
INFORMATION ABOUT SHAREHOLDERS VOTING ON THE MERGER
THE SDSDC SPECIAL SHAREHOLDER MEETING
TIME, PLACE AND DATE. The SDSDC special shareholders meeting will be held on
_______________, 2000 at 10:00 a.m., local time, at the Sea Lodge in La Jolla
Shores located at 8110 Camino Del Oro, La Jolla, California, 92037.
PURPOSE OF THE SDSDC SPECIAL MEETING. The SDSDC special meeting has been
called to consider and vote on the approval and adoption of the merger
agreement.
THE SDSDC BOARD OF DIRECTORS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS
THAT THE SDSDC COMMON SHAREHOLDERS VOTE IN FAVOR OF THE MERGER.
The SDSDC Bylaws will not permit any business to be transacted at the SDSDC
special meeting except as referred to herein.
RECORD DATE; VOTING RIGHTS; PROXIES. If you are a SDSDC shareholder, you may
only vote if you owned your shares on ___________________ (the SDSDC record
date). Each SDSDC share is entitled to one (1) vote per share owned. As of
the close of business on September 28, 2000, SDSDC had outstanding 7,186,525
Common Shares.
When originally approving the merger, SDSDC sought your approval without the
use of a proxy and these proxy materials. However, SDSDC became a reporting
company effective December 30, 1999. Accordingly, SDSDC was required to
comply with the proxy rules prior to seeking your approval. The proxy
statement is intended to provide you with the disclosure required by the
proxy rules and once again seek your approval of the merger with
Rollercoaster.
To approve the merger SDSDC shareholders holding more than 50% of voting
power of the outstanding shares of SDSDC common stock must vote for the
merger and for the amendment of SDSDC's Articles of Incorporation. The vote
is made by either attending the meeting or sending in a proxy. Your proxy has
been delivered to you with this document. Your proxy may be revoked prior to
the meeting by giving written notice to SDSDC, by executing and delivering a
new proxy with a later date, or by attending the meeting and voting in
person. If the proxy form is signed and returned, the shares represented
thereby will be voted in accordance with the direction on the form, or in the
absence of a direction, they will be voted FOR the merger. The meeting may be
adjourned or postponed to solicit additional proxies if a quorum is not
present at the meeting or if sufficient proxies voted for the merger has not
been received.
The directors and executive officers of SDSDC can cast approximately 32.23%
of the votes entitled to be cast at the SDSDC special shareholders meeting.
We expect that they will vote all of their shares of SDSDC common stock in
favor of the merger.
SOLICITATION OF PROXIES. Solicitation of proxies will be made by preparing
and mailing this document and the proxy to you. These materials are expected
to be first mailed to shareholders on , 2000. The cost of making this
solicitation includes the cost of preparing and mailing these materials. Any
expenses incurred to solicit the vote of SDSDC shareholders will be paid by
SDSDC. In addition to the use of the mail, proxies may be solicited by
trustees, officers, or regular employees of SDSDC in person, by telecopy or
by telephone. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries to forward this document to the
beneficial owners of SDSDC common shares held of record by such persons.
SDSDC will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses. SDSDC will not use a third
party to solicit shares of SDSDC common stock.
QUORUM. In order to have a quorum under California law and the SDSDC Bylaws,
a majority of SDSDC shareholders must be present at the meeting, in person or
by proxy. Votes cast by proxy or in person at the meeting will be tabulated
and will determine whether or not a quorum is present.
47
<PAGE>
DISSENTERS' RIGHTS OF APPRAISAL
SDSDC shareholders, as shareholders of a California corporation, have the
right to vote against a merger and as a result receive payment of the fair
value of their stock. In order to receive the fair value of their shares,
dissenters must strictly comply with the provisions of California law. A
dissenter must deliver to SDSDC, before the shareholder's meeting which is no
sooner than ________________, 2000, written notice of his or her intent to
demand payment of his or her shares if the merger is approved; and must not
vote his or her shares in favor of the merger. A shareholder who does not
satisfy these requirements is not entitled to payment for his or her shares.
In order to satisfy these requirements, you must follow these procedures:
- You must deliver a written demand for appraisal, in the case of SDSDC
shareholders, on or before the vote is taken at the SDSDC special
meeting, which will be held on __________, 2000, at the Sea Lodge, on
La Jolla Shores Beach, at 8110 Camino Del Oro, La Jolla, CA 92037 at
10:00 a.m., local time.
- You must not vote in favor of the merger agreement. If you vote in
favor of the merger agreement, by proxy, by consent or in person, if
you return a signed proxy or consent and fail to vote against approval
or if you abstain from voting, you will have waived your right of
appraisal, even if you previously filed a written demand for appraisal.
- You must continuously hold your shares of common stock from the date
of the making of the demand through the closing of the merger.
If you hold shares of common stock and you dissent from the merger and follow
the required formalities, your shares will not be converted into the right to
receive New SDSDC common stock in the merger. Instead, your only right will
be to receive the appraised value of your shares in cash as determined by a
court.
See "Comparison of Rights of Holders of Rollercoaster Common Stock
--Dissenters' Appraisal Rights" on page 18 and 19.
THE ROLLERCOASTER CONSENT SOLICITATION
THE ROLLERCOASTER CONSENT. Nevada law permitted Rollercoaster to solicit the
consent of its stockholders by majority written consent. Rollercoaster
shareholders unanimously approved the merger on December 23, 1999.
48
<PAGE>
POST-MERGER OPERATIONS OF NEW SDSDC
HEADQUARTERS OF NEW SDSDC
After consummation of the Merger, the headquarters of New SDSDC shall be 5222
Balboa Avenue, Suite 24, San Diego, California 92117-6951.
OPERATIONS OF NEW SDSDC
Once the merger is effective, New SDSDC's operations will be those of SDSDC.
SDSDC's separate corporate status will cease and New SDSDC will continue to
operate SDSDC's business.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following tables represent the beneficial ownership of common stock of
officers and directors, and those shareholders who own, or will own, 5% or
more of the common stock of New SDSDC. In calculating the percentages for New
SDSDC it assumes that all SDSDC common stockholders exchange their shares for
Rollercoaster common stock. Unless otherwise noted, the following persons and
entities named below have sole voting and investment power of these shares.
<TABLE>
<CAPTION>
Name Shares Owned Present % (1) Post Merger (2)
---- ------------ ------------- ---------------
<S> <C> <C> <C>
Sarkis Kaloustian 771,428 (3) 10.41% 7.80%
Yan Skwara 1,467,856 (4) 19.53% 14.70%
James Upton 3,775 *(5) *(5)
Jeffrey Scott 0 0 0
Steven Peacock 83,358 (6) 1.16% 0.86%
Peacock Financial 1,980,000 27.45% 20.45%
Corporation(6)
All officer and directors 3,802,642 31.103% 23.36%
as a group
</TABLE>
(1) Present percentage ownership in SDSDC calculated with 7,212,775 shares of
SDSDC issued and outstanding.
(2) Post merger percentage ownership in NEW SDSDC calculated with 9,688,645
shares of NEW SDSDC issued and outstanding.
(3) This amount includes 571,428 shares of common stock and 200,000 options
to purchase shares of common stock.
(4) This amount includes 571,428 shares of common stock held by Trisha
Bollman, the wife of Yan Skwara, 25,000 shares of common stock held by Marta
Glodkowska, the mother of Yan Skwara and 300,000 options to purchase shares
of common stock granted to Yan Skwara.
(4) Less than 0.01%.
(5) This amount represents all shares held by Steven Peacock or by members of
his family.
(6) Steven Peacock is the beneficial owner of 6.96% of the outstanding shares
of Peacock Financial Corporation.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED THEREUPON
When considering the recommendations of SDSDC's board of directors, the
stockholders of SDSDC should be aware that some of the directors and officers
of SDSDC have interests in the merger that are different from, or are in
addition to, their interests. These interests include:
- options to purchase shares of SDSDC common stock, including those held
by officers and directors of SDSDC, will be assumed by New SDSDC and will
become options to acquire new SDSDC common stock; and
- the executive officers of SDSDC will become executive officers or key
employees of New SDSDC.
49
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All of the Company's officers and directors have been in the past and may
continue to be active in business with other companies and on their own
behalf. All officers and directors have retained the right to conduct their
own independent business interests; these activities may give rise to
conflicts of interest with the Company. The officers and directors have
orally agreed that if a business opportunity relating to the Company's
business comes to the attention of its officers or directors, such
opportunity will be made available to the Company and the Company shall have
the right of first refusal with regard to such opportunity, after full
disclosure of the opportunity to the Company. If an officer or director owes
a fiduciary duty to another entity similar to the duty owed to the Company,
it is possible that the conflict may be impossible to resolve in a manner
that is equitable to both entities.
A majority of disinterested directors may reject a corporate opportunity for
various reasons. If the Company rejects such opportunity, then any director
or officer may avail themselves of such opportunity. In addition, if an
opportunity is presented to the Company, and one or more of the Company's
officers or directors has an outside interest in the opportunity, the
opportunity will be reviewed at a meeting of the Board of Directors and the
interested director(s) will not vote on issues relating to such opportunity.
To the best ability and in the best judgment of the officers and directors of
the Company, any conflicts of interest between the Company and the personal
interest of the officers and directors of the Company will be resolved in a
fair manner which will protect the interests of the Company.
Steven Peacock, director of the Company, is also President, Chief Executive
Officer and Director of Peacock Financial Corporation, a venture capital
business ("Peacock Financial"). James Upton, director of the Company, is also
Executive Vice President and Director of Peacock Financial. On March 6, 2000
Peacock Financial entered into a loan agreement with SDSDC. The agreement
provided for a line of credit of up to $500,000 for approved expenditures.
The advances bear interest at 10%per annum and the unpaid principal and
interest is due on December 31, 2000. An underwriting fee was paid to Peacock
Financial Corporation in the form of 1,000,000 restricted shares of the
Company's common stock. On March 6, 2000, the Company's common stock closing
price was $1.70 per share. The balance on this loan, including principal and
interest accrued thereupon, at June 30, 2000 was $509,577. In connection with
the agreement, the Company also agreed to reconstitute its Board of Directors
by allowing the Lender to nominate 3 of the 5 directors, and to allow the
Lender to approve budgets and significant expenditures, and to receive
monthly financial statements. In addition, the agreement provides that the
Lender will provide certain accounting and senior management overview
services and public company reporting oversight in exchange for one percent
(1%) of gross revenues. In the event of default, Peacock Financial may
terminate the agreement, declare the outstanding balance to be due and
payable, and convert that balance into common restricted shares of the
Company. The new shares to be issued would be the number necessary for
Peacock Financial to have a cumulative ownership position of 53%of the then
issued and outstanding shares plus all unexecuted options and warrants. The
foregoing loan agreement is attached to this document as Exhibit 10.7 and is
hereby incorporated by reference in its entirety.
Yan Skwara, director of the Company, is also the owner of Pacific Capital
Relations ("PCR"), a consulting services business. On September 29, PCR and
the Company signed a letter of intent regarding the provision of consulting
services by PCR to the Company. According to the terms of this letter of
intent, beginning on October 1, 2000, PCR will provide investor relations
consulting and shareholders communications services to the Company for a 3
year term. The company will pay PCR $7,000 a month for the first year, $7,600
a month for the second year and $8,200 a month for the third year. PCR and
the Company intend to enter into a final written agreement which shall
include several terms that were contained into the CEO/President employment
agreement that Yan Skwara had with the Company until his resignation from
such positions ("Former CEO Agreement"). The foregoing letter of intent and
Former CEO Agreement are attached to this document as Exhibit 10.6 and
Exhibit 10.4 respectively and are hereby incorporated by reference in their
entirety. Yan Skwara is also a major shareholder of the Company. During 1999,
the Company traded shares of its stock for stock of a publicly trading
company's stock at a highly discounted rate in order to get cash for
operations.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
50
<PAGE>
ROLLERCOASTER, INC.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The laws of the State of Nevada and the New SDSDC's Bylaws provide
for indemnification of the New SDSDC's directors for liabilities and expenses
that they may incur in such capacities. In general, directors and officers
are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of the
New SDSDC, and with respect to any criminal action or proceeding, actions
that the indemnitee had no reasonable cause to believe were unlawful.
Rollercoaster and SDSDC have been advised that in the opinion of the
Securities and Exchange Commission, indemnification for liabilities arising
under the Securities Act is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
2.1 Agreement for Plan of Merger dated November 30, 1999
3.1 Articles of Incorporation of Rollercoaster
3.2 Amended Articles of Rollercoaster, Inc.
3.3 Bylaws of Rollercoaster
3.4 Articles of Incorporation of SDSDC
3.5 Bylaws of SDSDC
5.1 Opinion of Horwitz & Beam
10.1 Lease Agreement dated May 24, 2000 for SDSDC's offices in San Diego, California
10.2 USL Franchise Agreement
10.3 Player Contract for A-League Professionals
10.4 Yan Skwara's employment agreement with SDSDC dated July 17, 2000
10.5 Sarkis Kaloustian's employment agreement with SDSDC dated June 1, 2000
10.6 Letter of intent between SDSDC and Pacific Capital Relations for provision of consulting services dated
September 29, 2000
10.7 Loan agreement between SDSDC and Peacock Financial Corporation dated March 6, 2000
10.8 Franchise Purchase Agreement
10.9 Letter of Intent for Franchise Purchase dated October 17, 1997
23.1 Consent of HJ & Associates
23.2 Consent of Logan Throop & Co. LLP
23.3 Consent of Kurt D. Salinger, C.P.A.
27 Financial Data Schedule
</TABLE>
51
<PAGE>
ROLLER COASTER, INC.
FINANCIAL STATEMENTS
MAY 31, 1999
52
<PAGE>
ROLLER COASTER, INC.
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITOR'S REPORT 54
FINANCIAL STATEMENTS
BALANCE SHEET 55
STATEMENT OF OPERATIONS 56
STATEMENT OF STOCKHOLDERS' EQUITY 57
STATEMENT OF CASH FLOWS 58
NOTES TO FINANCIAL STATEMENTS 59
</TABLE>
53
<PAGE>
INDEPENDENT AUDITOR'S REPORT
BOARD OF DIRECTORS
ROLLER COASTER, INC.
LAS VEGAS, NEVADA
I HAVE AUDITED THE ACCOMPANYING BALANCE SHEETS OF ROLLER COASTER,
INC. (A DEVELOPMENT STAGE COMPANY), AS OF MAY 31, 1999; THE RELATED
STATEMENTS OF OPERATIONS, STOCKHOLDERS' EQUITY AND CASH FLOWS FOR THE FIVE
MONTH PERIOD ENDED MAY 31, 1999 AND THE YEARS ENDED DECEMBER 31, 1998;
DECEMBER 31, 1997 AND DECEMBER 31, 1996. THESE FINANCIAL STATEMENTS ARE THE
RESPONSIBILITY OF THE COMPANY'S MANAGEMENT. MY RESPONSIBILITY IS TO EXPRESS
AN OPINION ON THESE FINANCIAL STATEMENTS BASED ON MY AUDIT.
I CONDUCTED MY AUDIT IN ACCORDANCE WITH GENERALLY ACCEPTED AUDITING
STANDARDS. THOSE STANDARDS REQUIRE THAT I PLAN AND PERFORM THE AUDIT TO
OBTAIN REASONABLE ASSURANCE ABOUT WHETHER THE FINANCIAL STATEMENTS ARE FREE
OF MATERIAL MISSTATEMENT. AN AUDIT INCLUDES EXAMINING, ON A TEST BASIS,
EVIDENCE SUPPORTING THE AMOUNTS AND DISCLOSURES IN THE FINANCIAL STATEMENTS.
AN AUDIT ALSO INCLUDES ASSESSING THE ACCOUNTING PRINCIPLES USED AND
SIGNIFICANT ESTIMATES MADE BY MANAGEMENT, AS WELL AS EVALUATING THE OVERALL
FINANCIAL STATEMENT PRESENTATION. I BELIEVE THAT MY AUDIT PROVIDES A
REASONABLE BASIS FOR MY OPINION.
IN MY OPINION, THE FINANCIAL STATEMENTS REFERRED TO ABOVE PRESENT
FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL POSITION OF ROLLER COASTER,
INC. AT MARCH 31, 1999; DECEMBER 31, 1998; DECEMBER 31, 1997; AND DECEMBER
31, 1996 AND THE RESULTS OF THEIR OPERATIONS AND THEIR CASH FLOWS FOR THE
FIVE MONTH PERIOD ENDED MAY 31, 1999; AND YEARS ENDED DECEMBER 31, 1998;
DECEMBER 31, 1997; DECEMBER 31, 1996 IN CONFORMITY WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.
THE ACCOMPANYING FINANCIAL STATEMENTS HAVE BEEN PREPARED ASSUMING
THE COMPANY WILL CONTINUE AS A GOING CONCERN. AS DISCUSSED IN NOTE 3 TO THE
FINANCIAL STATEMENTS, THE COMPANY HAS HAD NO OPERATIONS AND HAS NO
ESTABLISHED SOURCE OF REVENUE. THIS RAISES SUBSTANTIAL DOUBT ABOUT ITS
ABILITY TO CONTINUE AS A GOING CONCERN. MANAGEMENT'S PLAN IN REGARD DO NOT
INCLUDE ANY ADJUSTMENTS THAT MIGHT RESULT FROM THE OUTCOME OF THIS
UNCERTAINTY.
/s/ KURT D. SALINGER, C.P.A.
JUNE 17, 1999
54
<PAGE>
ROLLER COASTER, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
MAY 31, DEC. 31, DEC. 31, DEC. 31,
1999 1998 1997 1996
<S> <C> <C> <C> <C>
CURRENT ASSETS
CASH $0 $0 $0 $0
---------- ---------- ---------- ----------
TOTAL CURRENT ASSETS $0 $0 $0 $0
---------- ---------- ---------- ----------
TOTAL ASSETS $0 $0 $0 $0
========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $0 $0 $0 $0
---------- ---------- ---------- ----------
TOTAL CURRENT LIABILITIES $0 $0 $0 $0
---------- ---------- ---------- ----------
STOCKHOLDER'S EQUITY
Common Stock, $.001 par value authorized 50,000,000
shares; issued and outstanding 250,000 shares $250 $250 $250
2,500,000 shares $2,500
Additional Paid in Cash $0 $2,250 $2,250 $2,250
Deficit accumulated during
Development Stage ($2,500) ($2,500) ($2,500) ($2,500)
---------- ---------- ---------- ----------
TOTAL STOCKHOLDER'S EQUITY $0 $0 $0 $0
---------- ---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $0 $0 $0 $0
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
ROLLER COASTER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
JAN. 1 TO JAN. 1 TO JAN. 1 TO JAN. 1 TO DEC. 12, 1995
MAY 31, DEC. 30, DEC. 31, DEC. 31, (INCEPTION) TO
1999 1998 1997 1996 MAY 31, 1999
<S> <C> <C> <C> <C> <C>
INCOME
Revenue $0 $0 $0 $0 $0
----------- ---------- ----------- ----------- -----------
TOTAL INCOME $0 $0 $0 $0 $0
EXPENSES
General & Administrative $0 $0 $0 $2,500 $2,500
TOTAL EXPENSES $0 $0 $0 $2,500 $2,500
----------- ---------- ----------- ----------- -----------
NET PROFIT (LOSS) $0 $0 $0 ($2,500) ($2,500)
=========== ========== =========== =========== ===========
NET PROFIT (LOSS)
PER SHARE $0.0000 $0.0000 $0.0000 ($0.0100) ($0.0100)
=========== ========== =========== =========== ===========
AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING 2,500,000 250,000 250,000 250,000 2,500,000
=========== ========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
56
<PAGE>
ROLLER COASTER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
MAY 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK
(DEFICIT)
ACCUMULATED
ADDITIONAL DURING
NUMBER OF PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE
----------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
January 3, 1996
issued for cash (Note 2) 250,000 $250 $2,250
Net Income, 12-12-95
(inception) to 12-31-96 ($2,500)
----------- ---------- -------------- -------------
Balance, Dec. 31, 1996 250,000 $250 $2,250 ($2,500)
Net Income, 12-31-1998 $0
----------- ---------- -------------- -------------
Balance, Dec. 31, 1998 250,000 $250 $2,250 ($2,500)
May 27, 1999
10:1 Forward Stock Split 2,250,000 $2,250 ($2,250)
Net Income, 5-31-99 0 0 0 0
Balance, Dec. 31, 1998 250,000 $250 $2,250 0
May 27, 1999 10:1 Forward Stock Split 2,250,000 $2,250 $2,250) 0
Net Income, 05-31-99 $0
----------- ---------- -------------- -------------
Balance, May 31, 1999 2,250,000 $2,500 $0 ($2,500)
=========== ========== ============== =============
</TABLE>
See accompanying notes to financial statements.
57
<PAGE>
ROLLER COASTER, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
JAN. 1 TO DEC. 12, 1995
JAN. 1 TO DEC. 31, 1997 JAN. 1 TO (INCEPTION) TO
MAY 31, 1999 & 1998 DEC. 31, 1996 MAY 31, 1999
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) $0 $0 ($2,500) ($2,500)
Accounts Payable $0 $0 $0 $0
CASH FLOWS FROM OPERATING ACTIVITIES
Issue common stock $0 $2,500 $2,500
---------- ---------- ---------- ---------
Net increase (decrease) in cash $0 $0 $0 $0
Cash, Beginning of Period $0 $0 $0 $0
Cash, End of Period $0 $0 $0 $0
========== ========== ========== =========
</TABLE>
See accompanying notes to financial statements.
58
<PAGE>
ROLLER COASTER, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 12, 1995 (INCEPTION) TO MAY 31, 1999
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICIES
The Company was incorporated December 12, 1995 under the laws of the
State of Nevada. The Company was organized to engage in any lawful activity.
The Company currently has no operations and, in accordance with SFAS #7, is
considered a development stage company/
The Company has not determined its accounting policies and
procedures, except as follows:
1. The Company uses the accrual method of accounting.
2. Earnings per share is computed using the weighted average
number of shares of common stock outstanding.
3. The Company has not yet adopted any policy regarding payment
of dividends. No dividends have been paid since inception.
NOTE 2 - ISSUANCE OF COMMON STOCK
The Company issued 250,000 shares of common stock for cash of $2,500
on January 3, 1996.
The Company approved a 10:1 forward stock split of common stock
shares on May 27, 1999. The Company now has authorized 50,000,000 shares of
common stock and has issued and outstanding 2,500,000 shares.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company has no current source of
revenue. Without realization of additional capital, it would be unlikely for
the Company to continue as a going concern.
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any
additional shares of common stock.
59
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA - SAN DIEGO FLASH)
FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999
60
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 51,329 $ 50,253
Employee advances 2,525 -
------------ ------------
Total Current Assets 53,854 50,253
------------ ------------
PROPERTY AND EQUIPMENT (Net) (Notes 1 and 2) 25,639 18,119
------------ ------------
OTHER ASSETS
Receivable from shareholder 5,000 -
Deposits 1,350 1,350
Soccer franchises, net (Note 3) 163,200 166,800
------------ ------------
Total Other Assets 169,550 168,150
------------ ------------
TOTAL ASSETS $ 249,043 $ 236,522
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 286,191 $ 102,005
Accrued expenses 263,283 255,247
Bank overdraft - 1,065
Loans from related parties 16,702 2,273
Deferred revenue 21,715 32,490
Credit lines payable (Note 4) 610,119 -
Convertible promissory notes (Note 6) 238,400 329,100
Notes payable (Note 5) 25,390 15,646
------------ ------------
Total Current Liabilities 1,461,800 737,826
------------ ------------
Total Liabilities 1,461,800 737,826
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 20,000,000 shares authorized of no
par value, 6,814,969 and 5,284,369 shares issued
and outstanding, respectively 3,005,898 2,000,298
Common stock subscribed 12,000 12,000
Additional paid-in capital 1,071,523 941,363
Stock subscriptions receivable (1,000) (48,000)
Accumulated deficit (5,301,178) (3,406,965)
------------ ------------
Total Stockholders' Equity (Deficit) (1,212,757) (501,304)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 249,043 $ 236,522
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Ticket sales $ 40,439 $ 19,170 $ 40,439 $ 19,170
Corporate sponsorships 32,995 177,629 32,995 177,629
Other revenue 7,331 1,902 9,218 2,561
------------ ------------ ------------ ------------
Total Revenues 80,765 198,701 82,652 199,360
------------ ------------ ------------ ------------
EXPENSES
General and administrative 419,551 347,416 809,062 461,048
Game and player expenses 132,886 160,449 188,418 215,347
Advertising and promotion 71,865 205,489 179,174 335,904
Depreciation and amortization 3,998 2,686 7,150 5,372
------------ ------------ ------------ ------------
Total Expenses 628,300 716,040 1,183,804 1,017,671
------------ ------------ ------------ ------------
Loss From Operations (547,535) (517,339) (1,101,152) (818,311)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Gain (loss) on trading securities - 1,392 - 26,343
Interest income 280 378 555 707
Loan underwriting fee (250,000) - (750,000) -
Interest expense (39,128) (1,947) (43,616) (3,211)
------------ ------------ ------------ ------------
Total Other Income (Expense) (288,848) (177) (793,061) 23,839
------------ ------------ ------------ ------------
NET LOSS $ (836,383) $ (517,516) $ (1,894,213) $ (794,472)
============ ============ ============ ============
BASIC LOSS PER SHARE $ (0.13) $ (0.11) $ (0.31) $ (0.17)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional Stock
Accumulated Paid-In Subscriptions
Shares Amount Capital Receivable Deficit
---------- ------------ ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 3,801,484 $ 849,503 $ 91,660 $ (172,500) $ (1,053,137)
Common stock and warrants
issued for cash 16,000 16,000 - - -
Common stock issued for cash 196,300 196,300 - (48,000) -
Common stock issued through
exercise of warrants 13,000 6,500 - - -
Common stock issued for
services 273,600 273,600 - - -
Receipt of stock subscription
receivable - - - 172,500 -
Common stock issued in lieu
of accrued liabilities 194,000 155,200 - - -
Common stock issued for
trading securities 295,000 78,345 - - -
Common stock issued for
syndication costs 70,135 - - - -
Common stock issued for
equipment 20,000 20,000 - - -
Common stock issued in
conversion of promissory notes 404,850 404,850 - - -
Stock options issued - - 849,703 - -
Net loss for the year ended
December 31, 1999 - - - - (2,353,828)
---------- ------------ ----------- ------------- --------------
Balance, December 31, 1999 5,284,369 $ 2,000,298 $ 941,363 $ (48,000) $ (3,406,965)
---------- ------------ ----------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
64
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional Stock
Accumulated Paid-In Subscriptions
Shares Amount Capital Receivable Deficit
---------- ------------ ----------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 5,284,369 $ 2,000,298 $ 941,363 $ (48,000) $ (3,406,965)
Common stock issued for loan
underwriting fee (unaudited) 1,250,000 750,000 - - -
Common stock issued in
conversion of promissory notes
(unaudited) 190,600 190,600 - - -
Common stock issued for cash
(unaudited) 79,000 54,000 - - -
Common stock issued for
services (unaudited) 11,000 11,000 - - -
Stock options issued (unaudited) - - 131,160 - -
Receipt of stock subscription
receivable (unaudited) - - - 47,000 -
Distribution to shareholder
(unaudited) - - (1,000) - -
Net loss for the six months ended
June 30, 2000 (unaudited) - - - - (1,894,213)
---------- ------------ ----------- ------------- --------------
Balance, June 30, 2000
(unaudited) 6,814,969 $ 3,005,898 $ 1,071,523 $ (1,000) $ (5,301,178)
========== ============ =========== ============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
65
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (836,383) $ (517,516) $ (1,894,213) $ (794,472)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Depreciation and amortization 3,998 2,686 7,150 5,372
(Gain) loss on trading securities - (1,392) - (26,343)
Stock issued for loan underwriting fee 250,000 - 750,000 -
Stock issued for services - 206,908 11,000 350,108
Stock options issued for services 47,860 22,868 131,160 22,868
Changes in operating assets and liabilities:
(Increase) decrease in employee advances 600 (2,908) (2,525) (2,908)
(Increase) decrease in receivable from shareholder - - (5,000) -
Increase (decrease) in accounts payable 74,202 (22,389) 184,186 (16,309)
Increase (decrease) in deferred revenue (21,714) (30,151) (10,775) (18,066)
Increase (decrease) in accrued expenses 15,480 150,295 6,972 41,063
Increase (decrease) in bank overdraft - 43 - (7,828)
--------------- --------------- --------------- ---------------
Net Cash (Used) by Operating Activities (465,957) (191,556) (822,045) (446,515)
--------------- --------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities - - - 79,431
Purchase of fixed assets (986) (12,001) (11,071) (12,001)
--------------- --------------- --------------- ---------------
Net Cash (Used) by Investing Activities (986) (12,001) (11,071) 67,430
--------------- --------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash - 48,800 101,000 305,800
Capital distributions (1,000) - (1,000) -
Principle payments on convertible notes payable (23,000) - (27,500) (10,440)
Cash received from notes payable 14,244 - 14,244 -
Convertible promissory notes proceeds 74,000 151,075 122,900 151,075
Line of credit proceeds 368,359 - 610,119 -
Due to related companies 14,429 (452) 14,429 (452)
--------------- --------------- --------------- ---------------
Net Cash Provided by Financing Activities 447,032 199,423 834,192 445,983
--------------- --------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH (19,911) (4,134) 1,076 66,898
CASH AT BEGINNING OF PERIOD 71,240 71,330 50,253 298
--------------- --------------- --------------- ---------------
CASH AT END OF PERIOD $ 51,329 $ 67,196 $ 51,329 $ 67,196
=============== =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 38,274 $ - $ 38,274 $ -
Income taxes $ - $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Common stock issued for convertible promissory
notes $ 5,600 $ - $ 190,600 $ -
Common stock issued in exchange for equipment $ - $ - $ - $ 12,000
Common stock issued for trading securities $ - $ - $ - $ 31,755
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
San Diego Soccer Development Corporation, (the "Company") was
incorporated on August 22, 1997 in the State of California. The
Company is engaged in the management and marketing of a
professional soccer team. The majority of the Company's revenues
are currently generated from corporate sponsorships and ticket
sales.
b. Accounting Methods
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year
end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
d. Basic Loss Per Share
The computations of basic loss per share of common stock are based
on the weighted average number of common shares outstanding during
the period of the financial statements. Common stock equivalents,
consisting of stock options, warrants and conversion of notes have
not been included in the calculation as their effect is
antidilutive for the periods presented.
e. Property and Equipment
Property and equipment is recorded at cost. Major additions and
improvement are capitalized. The cost and related accumulated
depreciation of equipment retired or sold are removed from the
accounts and any differences between the undepreciated amount and
the proceeds from the sale are recorded as gain or loss on sale of
equipment. Depreciation is computed using the straight-line method
over the estimated useful life of the assets.
f. Provision for Taxes
At June 30, 2000, the Company has net operating loss carryforwards
of approximately $5,000,000 that may be offset against future
taxable income through 2019. No tax benefit has been reported in
the financial statements because the Company believes there is a
50% or greater chance the net operating loss carryforwards will
expire unused. Accordingly, the potential tax benefits of the net
operating loss carryforwards are offset by a valuation allowance
of the same amount.
68
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
h. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
i. Soccer Franchise
The membership in the United Systems of Independent Soccer Leagues
(USISL) represents the original purchase price of the franchise
recorded at cost and is amortized using the straight-line method
over a 25 year period. Each franchise is continuously evaluated by
management to determine if its carrying value will be realized
based upon the estimated discounted cash flow expected from the
franchise. Additional amortization will be recognized in a period
if a decline in value is identified.
j. Revenue and Expense Recognition
Revenue from ticket sales is recognized at the time the home game,
to which such proceeds relate, is played. Accordingly, advance
ticket sales for the next season are recorded as deferred revenues
and recognized ratably during the applicable season. Revenue from
advertising and promotions is recognized ratably during the season
the promotion relates to is played. Professional league team
expenses, principally player compensation, are recorded as expense
over the entire Professional Soccer League regular season.
Administrative, general, advertising and promotional expenses are
charged to operations as incurred.
k. Seasonal Fluctuations
The Company's primary business is the operations of the soccer
team from April to September each year. The Company derives all
its ticket and corporate sponsorship revenues during this period.
The current financial statements for the six months and three
months ended June 30, 2000 and 1999, therefore, reflects results
of operations during part of the Company's off-season, during
which it incurs expenses in preparation for its operating season.
69
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Stock Options
The Company has granted options to purchase common stock to
various individuals and officers of the Company in return for
various services rendered to the Company. Under the Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), the Company is recognizing the
compensation cost using the estimated fair value method. Under the
fair value method, total compensation cost is the estimated fair
value of the stock options at the grant date, less any amount paid
by the employee for the stock options.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Soccer equipment $ 6,000 $ 6,000
Promotional equipment 9,684 -
Computers and software 17,716 17,716
------------------ ------------------
33,400 23,716
Accumulated depreciation (7,761) (5,597)
------------------ ------------------
Net property and equipment $ 25,639 $ 18,119
================== ==================
</TABLE>
NOTE 3 - SOCCER FRANCHISES
During 1997, the Company purchased a soccer franchise to operate
the San Diego Flash in San Diego, California. The Company paid
cash and common stock for the franchise and the value of the stock
portion was determined based on the cash price of a 1998 A-League
franchise, which was the first season the Company could
participate in the league.
During 1999, the Company purchased a D-3 Pro League franchise for
$30,000. The new franchise is playing in Riverside and will serve
as a farm team for the San Diego Flash. The franchises have been
amortized as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Soccer franchises $ 180,000 $ 180,000
Accumulated amortization (16,800) (13,200)
------------------ ------------------
Net Soccer Franchises $ 163,200 $ 166,800
================== ==================
</TABLE>
70
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 4 - RELATED PARTY TRANSACTIONS
a. Credit Lines Payable
The Company entered into a Credit Line Loan Agreement with one of
it's shareholders effective March 6, 2000. The Agreement provides
for a line of credit of up to $500,000 for approved expenditures.
The advances bear interest at 10% per annum and the unpaid
principal and interest is due on December 31, 2000. An
underwriting fee was paid in the form of 1,250,000 restricted
shares of the Company's common stock. The balance on this Credit
Line at June 30, 2000 and December 31, 1999 was $509,577 and $-0-,
respectively.
In connection with the agreement, the Company also agreed to
reconstitute its Board of Directors by allowing the Lender to
nominate 3 of the 5 directors, and to allow the Lender to approve
budgets and significant expenditures, and to receive monthly
financial statements. In addition, the agreement provides that the
Lender will provide certain accounting and senior management
overview services and public company reporting oversight in
exchange for one percent (1%) of gross revenues.
In the event of default, the Lender may terminate the agreement,
declare the outstanding balance to be due and payable, and convert
that balance into common restricted shares of the Company. The new
shares to be issued would be the number necessary for the Lender
to have a cumulative ownership position of 53% of the then issued
and outstanding shares plus all unexecuted options and warrants.
The Company entered into a separate Credit Line Loan Agreement
with an individual effective June 1, 2000. The agreement provides
for a line of credit of up to $125,000 for approved expenditures.
The advances bear interest at 10% per annum and the unpaid
principal and interest is due on December 31, 2000. The balance
outstanding at June 30, 2000 and December 31, 1999 was $100,542
and $-0-, respectively.
b. Loans from Related Parties
During 1999, certain officers of the Company formed another
company to acquire and operate a Las Vegas soccer franchise. The
Company received loans from that company and have accrued interest
at 10%. The loan is due on demand. Additional advances have been
received from other related parties through June 30, 2000. These
amounts are non-interest bearing and due on demand.
c. Stock for Trading Securities
During 1999, the Company traded shares of its stock for stock of a
publicly trading company's stock at a highly discounted rate in
order to get cash for operations. The President of the publicly
traded company is also a major shareholder of the Company. During
1999, this shareholder also became a director of the Company.
71
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Note payable to an individual, interest at 10%
per annum, principal and interest due December
31, 2000, unsecured. $ 12,600 $ -
Note payable to an individual, interest at 10%
per annum, principal and interest due on
demand, unsecured. 12,790 15,646
------------------ ------------------
Total Notes Payable 25,390 15,646
Less: Current Portion (25,390) (15,646)
------------------ ------------------
Long-Term Notes Payable $ - $ -
================== ==================
</TABLE>
The aggregate principle maturities of notes payable are as
follows:
<TABLE>
<CAPTION>
Year Ended
December 31, AMOUNT
------------ ------------------
<S> <C>
2000 $ 25,390
2001 -
2002 -
2003 -
2004 -
2005 and thereafter -
------------------
Total $ 25,390
==================
</TABLE>
NOTE 6 - CONVERTIBLE PROMISSORY NOTES
In order to obtain "bridge" funds while a public offering is being
prepared, the Company issued convertible notes with a face amount
totaling $733,950 during 1999 and $122,900 during 2000. The notes
bear interest at 8% per annum and are convertible into common
stock at $1.00 per share at the option of the holder. The 1999
notes matured on December 31, 1999. During 1999, the noteholders
converted $404,850 of convertible notes into 404,850 shares of
common stock. During 2000, the noteholders converted an additional
$190,600 and paid $23,000 in cash. Of the remaining balance,
$196,500 was in default as of January 1, 2000, and the remaining
$41,900 matures July 1, 2000.
72
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 7 - LEASING ACTIVITIES
The Company leases its office facilities under an operating lease
that expires on January 16, 2002. The base rent under the lease is
$1,350 per month. The Company also leased a soccer field from a
local community college on an annual lease that expired at the end
of 1999. The base rent was $1,450 per home game. The Company has
one other operating lease for equipment.
The future annual minimum lease payments under operating leases at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, Amount
------------ ------------------
<S> <C>
2000 $ 17,628
2001 16,914
2002 -
2003 -
2004 -
2005 and thereafter -
------------------
Total $ 34,542
==================
</TABLE>
NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT)
a. Common Stock
During 1997, the Company prepared a private placement memorandum
offering 1,000,000 common shares (the Offering). The 1,000,000
common shares were offered at a price of $5.00 per unit. Each unit
included 5 common shares and entitled the investor to 2 warrants
to purchase additional shares of common stock for $0.50 per share.
The price per unit was allocated $4.00 to the shares and $1.00 to
the warrants. Under the Offering, the Company sold 458,300 common
shares and raised $425,050 net of syndication costs.
A second private placement memorandum dated February 3, 1999
(Second Offering) offered 1,000,000 common shares at a price of
$1.00 per share. Under the Second Offering, the Company raised
$148,300.
During the last quarter of 1998, the Company traded 650,000 shares
of its stock for stock of a publicly trading company's stock at a
highly discounted rate in order to get cash for operations. Most
of the stock received in the trade was liquidated, however, stock
valued at $22,725 was still held in trading securities at December
31, 1998. The President of the publicly traded company is also a
major shareholder of the Company. During 1999, this shareholder
also became a director of the Company.
During 1999, the Company traded an additional 200,000 shares with
the same publicly traded company, again at a highly discounted
rate, in order to get cash for operations. The Company further
traded 95,000 shares with another publicly traded company for
shares valued at $38,792 on the date of trade. All of the trading
securities were liquidated by the end of 1999.
73
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT)
b. Warrants
Warrants for 183,320 shares were issued along with the first
private placement. Warrants for 85,400 were exercised in total
during 1999 and 1998, leaving 97,920 outstanding at December 31,
1999. The warrants expire in 2001.
c. Convertible Promissory Notes
At June 30, 2000, the Company had convertible promissory notes
outstanding which were convertible into 238,400 shares of common
stock (see Note 6).
d. Stock Options
The Company had the following common stock option transactions
during the quarter ended June 30, 2000:
<TABLE>
<CAPTION>
Weighted Contractual
Average Life of
Exercise Options
Shares Price Outstanding
------------------ ------------------ ------------------
<S> <C> <C> <C>
Options outstanding at
January 1, 2000 1,085,300 $ 0.16 3.67 years
Options granted 190,000 $ 0.18 3.42 years
Options exercised - - -
Options forfeited or expired - - -
------------------ ------------------ ------------------
Options outstanding at
June 30, 2000 1,275,300 $ 0.17 3.42
================== ================== ==================
Options price range at end of year: $0.05 through $1.25
Exercisable at end of year 1,275,300
==================
</TABLE>
The fair value of the stock options are estimated on the date of
grant using the Black-Scholes option-pricing model. The estimated
fair value has been calculated ignoring the volatility factor. The
following assumptions were used to estimate the fair values of
options:
<TABLE>
<CAPTION>
<S> <C>
Risk free interest rate 5.5%
Expected life 4 years
Expected dividend yield 0%
</TABLE>
74
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
June 30, 2000 and December 31, 1999
NOTE 9 - GOING CONCERN
As reported in the financial statements, the Company has an
accumulated deficit of approximately $5,301,000 at June 30, 2000
and has incurred a loss from operations for the six months then
ended. In addition, the Company was not able to pay their
promissory notes when the notes matured on December 31, 1999. The
Company's shareholders' deficit was $1,212,757 and its current
liabilities exceeded its current assets by $1,408,000.
These factors create uncertainty about the Company's ability to
continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital it
could be forced to cease operations.
In order to continue as a going concern, develop and grow its game
attendance, revenues and achieve a profitable level of operations,
the Company will need, among other things, additional capital
resources. Management's plans to obtain such resources for the
Company include (1) raising additional capital through sales of
common stock, the proceeds of which would be used to build soccer
stadiums in both San Diego and Riverside County, hiring of
administrative, sales and marketing personnel; (2) continuing to
use stock options to pay for employee compensation and marketing
services; (3) converting promissory notes into common stock; (4)
expanding the revenue sources from corporate sponsors, television
and radio advertising, concessions, merchandise sales, soccer
camps, concerts and other stadium events. In addition, management
is continually seeking to improve the operations and grow the
business through a variety of venues. However, management cannot
provide any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans
described in the preceding paragraph and eventually secure other
sources of financing and attain profitable operations. The
accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
NOTE 10 - PROPOSED MERGER
During December 1999, the Company entered into negotiations to
merge with Roller Coaster, Inc. (a Nevada Corporation). Roller
Coaster, Inc. is a public shell with no activity other than
inception in December 1995 and a 1:10 stock split in October 1999.
The agreement was signed in the month of March 2000.
According to the merger agreement, the surviving corporation will
be named San Diego Soccer Development Corporation and will be a
Nevada Corporation. Shares will be exchanged 1:1 for the public
shell's shares. The merger will result in approximately 9,314,000
shares outstanding (2,500,000 shares pertaining to the former
Roller Coaster, Inc.) Shares authorized will be 100,000,000 common
stock at $0.001 par value and 50,000,000 preferred shares at
$0.001 par value. In connection with the merger, the Company
incurred $200,000 in consulting fees on the merger. The merger had
not been approved by the stockholders at June 30, 2000.
75
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Financial Statements
Years Ended December 31, 1999 and 1998
76
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Years Ended December 31, 1999 and 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 78
Financial Statements:
Balance Sheets 79
Statements of Operations 81
Statements of Stockholders' Deficit 82
Statements of Cash Flows 83
Notes to Financial Statements 85
</TABLE>
77
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
San Diego Soccer Development Corporation
San Diego, California
We have audited the accompanying balance sheets of San Diego Soccer
Development Corporation as of December 31, 1999 and 1998, and the related
statements of operations, stockholders' deficit and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits of the financial
statements 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 San Diego Soccer Development
Corporation as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company has sustained recurring losses and negative
cash flows since its inception in 1997 and it had a working capital
deficiency and was in default under the terms of its convertible promissory
notes at January 1, 2000. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 12 to the financial
statements. The financial statements do not include any adjustments relating
to the recoverability and classification of reported asset amounts and
classification of liabilities that might result from the outcome of this
uncertainty.
Logan Throop & Co., LLP
San Diego, California
February 28, 2000
78
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Balance Sheets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash $ 50,253 $ 298
Shareholder advances -- 100
Trading securities -- 22,725
--------------------------------------------------------------------------------
Total current assets 50,253 23,123
--------------------------------------------------------------------------------
Other assets
Deposit 1,350 --
Property and equipment, net 18,119 9,695
Soccer franchises, net 166,800 143,000
--------------------------------------------------------------------------------
Total other assets 186,269 152,695
--------------------------------------------------------------------------------
Total assets $236,522 $175,818
================================================================================
</TABLE>
See accompanying notes and Independent Auditors' Report
79
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Balance Sheets (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank overdraft $ 1,065 $ 7,871
Accounts payable 102,005 40,138
Accrued liabilities 42,483 177,912
Accrued payroll and payroll taxes 212,764 154,236
Loans from affiliated company 2,273 --
Stockholder loans -- 45,090
Note payable 15,646 16,979
Convertible promissory notes 329,100 --
Deferred revenue 32,490 18,066
--------------------------------------------------------------------------------
Total current liabilities 737,826 460,292
--------------------------------------------------------------------------------
Stockholders' deficit
Common stock, no par value, 20,000,000 shares
authorized, 5,284,369 and 3,801,484 shares
issued and outstanding at December 31, 1999
and 1998, respectively 2,000,298 852,703
Common stock subscribed, 12,000 shares 12,000 --
Stock subscriptions receivable (48,000) (172,500)
Additional paid in capital 941,363 88,460
Accumulated deficit (3,406,965) (1,053,137)
--------------------------------------------------------------------------------
Total stockholders' deficit (501,304) (284,474)
--------------------------------------------------------------------------------
Total liabilities and stockholders' deficit $ 236,522 $ 175,818
================================================================================
</TABLE>
See accompanying notes and Independent Auditors' Report
80
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Statements of Operations
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Ticket sales $ 58,789 $ 82,534
Corporate sponsorships 183,829 199,489
Other revenue 10,224 10,361
--------------------------------------------------------------------------------
Total revenue 252,842 292,384
--------------------------------------------------------------------------------
Operating expenses
General and administrative 1,346,795 504,738
Game and player expenses 641,575 458,418
Advertising and promotion 630,097 311,124
--------------------------------------------------------------------------------
Total operating expenses 2,618,467 1,274,280
--------------------------------------------------------------------------------
Loss from operations (2,365,625) (981,896)
--------------------------------------------------------------------------------
Other income (loss)
Gain (loss) on trading securities 36,067 (25,136)
Loss on abandoned equipment (6,400) --
Interest expense (17,870) (4,832)
--------------------------------------------------------------------------------
Total other income (loss) 11,797 (29,968)
--------------------------------------------------------------------------------
Net loss $(2,353,828) $(1,011,864)
================================================================================
Loss per share $ (0.50) $ (0.35)
Average number of shares outstanding 4,692,432 2,906,987
</TABLE>
See accompanying notes and Independent Auditors' Report
81
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Statements of Stockholders' Deficit
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Total
------------------------ Stock Accumulated Stockholders'
Shares Amount subscriptions Deficit equity (deficit)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 2,352,284 187,893 -- (41,273) 146,620
Issuance of stock and warrants for cash 354,300 354,300 -- -- 354,300
Issuance of stock for services 100,000 80,000 -- -- 80,000
Issuance of stock for trading securities 650,000 118,770 -- -- 118,770
Warrants exercised 72,400 36,200 -- -- 36,200
Stock subscriptions receivable 172,500 172,500 (172,500) -- --
Issuance of stock for syndication cost 100,000 -- -- -- --
Syndication costs paid -- (8,500) -- -- (8,500)
Net loss -- -- -- (1,011,864) (1,011,864)
-----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 3,801,484 941,163 (172,500) (1,053,137) (284,474)
-----------------------------------------------------------------------------------------------------------------------------
Issuance of stock and warrants for cash 16,000 16,000 -- -- 16,000
Issuance of stock for cash 148,300 148,300 -- -- 148,300
Warrants exercised 13,000 6,500 -- -- 6,500
Stock subscriptions payable -- -- 12,000 -- 12,000
Issuance of stock for services 273,600 273,600 -- -- 273,600
Stock subscription receivable satisfied
by receipt of services -- -- 110,500 -- 110,500
Issuance of stock to satisfy accrued
liabilities 194,000 155,200 -- -- 155,200
Issuance of stock for trading securities 295,000 78,345 -- -- 78,345
Payment stock subscriptions receivable -- -- 62,000 -- 62,000
Stock subscriptions receivable 48,000 48,000 (48,000) -- --
Issuance of stock for syndication cost 70,135 -- -- -- --
Issuance of stock for equipment 20,000 20,000 -- -- 20,000
Issuance of stock for converted notes 404,850 404,850 -- -- 404,850
Stock options issued -- 849,703 -- -- 849,703
Net loss -- -- -- (2,353,828) (2,353,828)
-----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 5,284,369 2,941,661 (36,000) (3,406,965) (501,304)
=============================================================================================================================
</TABLE>
See accompanying notes and Independent Auditors' Report
82
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Statements of Cash Flows
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,353,828) $(1,011,864)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 11,376 8,020
(Gain) loss on trading securities (36,067) 25,136
Loss on abandoned fixed assets 6,400 --
Stock issued for services 384,100 80,000
Stock options issued for services 671,718 --
Corporate sponsorship for trading securities -- (35,537)
(Increase) decrease in deposits (1,350) --
Proceeds from sale of trading securities 137,137 106,558
Increase (decrease) accounts payable 61,867 42,504
Increase (decrease) bank overdraft (6,806) 7,871
Increase (decrease) accrued liabilities 246,284 302,036
Increase (decrease) deferred revenue 14,424 18,066
--------------------------------------------------------------------------------
Net cash (used) by operating activities (864,745) (457,210)
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of soccer franchise (20,000) --
Purchase of property and equipment -- (5,716)
--------------------------------------------------------------------------------
Net cash provided(used) by investing activities (20,000) (5,716)
--------------------------------------------------------------------------------
</TABLE>
See accompanying notes and Independent Auditors' Report
83
<PAGE>
San Diego Soccer Development Corporation
dba San Diego Flash
Statements of Cash Flows (Continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock, net issuance costs 182,800 382,000
Proceeds from stock subscription receivable 62,000 --
Proceeds from promissary notes 733,950 --
Payment of notes payable (1,333) --
Payment of obligation for soccer franchise -- (30,000)
Proceeds from note payable -- 10,920
Proceeds from related party loans, net 2,273 --
Proceeds from shareholder loans, net (44,990) 32,541
--------------------------------------------------------------------------------
Net cash provided by financing activities 934,700 395,461
--------------------------------------------------------------------------------
Net increase(decrease) in cash 49,955 (67,465)
Cash at beginning of period 298 67,763
--------------------------------------------------------------------------------
Cash at end of period $ 50,253 $ 298
================================================================================
Supplemental disclosures:
Interest paid $ 6,277 $ --
Noncash financing and investing activities:
Stock issued in exchange for equipment $ 20,000 $ --
Stock issued in exchange for trading securities $ 78,345 $ 118,770
Stock subscription receivable $ 48,000 $ --
Stock issued for settlement of accrued liabilities $ 155,200 $ 172,500
Stock issued for syndication costs $ 70,135 $ 80,000
Stock issued for convertible promissory notes $ 404,850 $ --
Stock options for accrued liabilities $ 177,985 $ --
Soccer franchise financed $ 10,000 $ --
</TABLE>
See accompanying notes and Independent Auditors' Report
84
<PAGE>
1. ORGANIZATION AND OPERATIONS
ORGANIZATION
San Diego Soccer Development Corporation, (the "Company"), was
incorporated on August 22, 1997 in the state of California. The Company
is engaged in the management and marketing of a professional soccer
team. The majority of the Company's revenues are currently generated
from corporate sponsorships and ticket sales. The Company exited the
development stage and held its first game during 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TRADING SECURITIES
Equity securities are classified as Trading Securities and are
available-for-sale to support current operations. These securities are
stated at estimated fair value based upon market quotes. Unrealized
gains and losses are recognized as income or loss during the current
period. Realized gains and losses are recognized using the weighted
average cost method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (one to five years) using the
straight-line method.
SOCCER FRANCHISE
The membership in the United Systems of Independent Soccer Leagues
(USISL) represents the original purchase price of the franchise
recorded at cost and is amortized using the straight line method over a
25 year period. Each franchise is continuously evaluated by management
to determine if its carrying value will be realized based upon the
estimated discounted cash flow expected from the franchise. Additional
amortization will be recognized in a period a decline in value is
identified.
85
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE AND EXPENSE RECOGNITION
Revenue from ticket sales is recognized at the time the home game, to
which such proceeds relate, is played. Accordingly, advance ticket
sales for the next season are recorded as deferred revenues and
recognized ratably during the applicable season. Revenue from
advertising and promotions is recognized ratably during the season the
promotion relates to is played. Professional league team expenses,
principally player compensation, are recorded as expense over the
entire Professional Soccer League regular season. Administrative,
general, advertising and promotional expenses are charged to operations
as incurred.
INCOME TAXES
Deferred income taxes are provided for the estimated tax effects of
timing differences between income for tax and financial reporting. A
valuation allowance is provided against deferred tax assets, where
realization is uncertain. The income tax provision or credit is the tax
payable or refundable for the period plus or minus the change during
the period in deferred tax assets and liabilities.
Temporary differences are differences between the tax basis of assets
and liabilities and their reported amounts in the financial statements
that will result in taxable or deductible amounts in future years. The
Company's temporary differences consist primarily of net operating
losses and depreciation.
NET EARNINGS PER COMMON SHARE
Net earnings (loss) per common share are based on the weighted
average number of common shares outstanding during each period. The
calculation of diluted earnings (loss) per common share is similar
to that of basic earnings (loss) per common share, except that the
numerator and denominator are adjusted to reflect the decrease in
earnings per share or the increase in loss per share that could
occur if securities or other contracts to issue common stock, such
as stock options and convertible notes, were exercised or converted
into common stock that then shared in the Company's earnings or
loss.
86
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET EARNINGS PER COMMON SHARE (CONTINUED)
The Company was required to compute primary and diluted loss per
share amounts for 1999 and 1998 pursuant to SFAS 128. Since the
Company had losses applicable to common stock in 1999 and 1998, the
assumed effects of the exercise of outstanding stock options and
conversion of notes were anti-dilutive and, accordingly, dilutive
per share amounts have not been presented in the accompanying
statements of operations.
STOCK OPTIONS
The Company has granted options to purchase common stock to various
individuals and officers of the Company in return for various services
rendered to the Company. Under the Statement of Financial Accounting
Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS
123"), the Company is recognizing the compensation cost using the
estimated fair value method. Under the fair value method, total
compensation cost is the estimated fair value of the stock options at
the grant date, less any amount paid by the employee for the stock
options.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3. TRADING SECURITIES
Following is a summary of trading securities:
<TABLE>
<CAPTION>
December 31, 1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C>
Aggregate cost $ 0 $ 37,819
Gross unrealized holding loss (0) (15,094)
------------------------------------------------------------------------------------------------
Aggregate fair value $ 0 $ 22,725
------------------------------------------------------------------------------------------------
</TABLE>
4. PROPERTY AND EQUIPMENT
Depreciation expense for the years ended December 31, 1999 and 1998
were $5,176 and $2,050, respectively. Property and equipment consist of
the following:
<TABLE>
<CAPTION>
December 31, 1999 1998
---------------------------------------------------------------------------------------
<S> <C> <C>
Soccer equipment $ 6,000 $ 6,000
Computers and software 17,716 5,715
---------------------------------------------------------------------------------------
23,716 11,715
Less accumulated depreciation (5,597) (2,020)
---------------------------------------------------------------------------------------
$ 18,119 $ 9,695
---------------------------------------------------------------------------------------
</TABLE>
5. SOCCER FRANCHISES
During 1997, the Company purchased a soccer franchise to operate the
San Diego Flash in San Diego, California. The Company paid cash and
common stock for the franchise and the value of the stock portion was
determined based on the cash price of a 1998 A-League franchise, which
was the first season the Company could participate in the league.
During 1999, the Company purchased a D-3 Pro League franchise for
$30,000. The new franchise is playing in Riverside and will serve as a
farm team for the San Diego Flash. The franchises have been amortized
as follows:
<TABLE>
<CAPTION>
December 31, 1999 1998
--------------------------------------------------------------------------------------------
<S> <C> <C>
Soccer Franchises $ 180,000 $ 150,000
ACCUMULATED AMORTIZATION (13,200) (7,000)
--------------------------------------------------------------------------------------------
$ 166,800 $ 143,000
--------------------------------------------------------------------------------------------
</TABLE>
87
<PAGE>
6. RELATED PARTY TRANSACTIONS
STOCKHOLDER LOANS
Certain stockholders of the Company paid game and player expenses on
behalf of the Company. As of December 31, 1998 the amount owed was
included in the ending balance payable to stockholders. The balances
payable to stockholders were due on demand and accrued interest at 8%.
Accrued interest was included in the ending balance. The balance was
completely paid off during 1999.
LOANS FROM AFFILIATED COMPANY
During 1999, certain officers of the Company formed another company to
acquire and operate a Las Vegas soccer franchise. The Company received
loans from that company and have accrued interest at 10%. The loan is
due on demand.
STOCK FOR TRADING SECURITIES
The Company traded shares of its stock for stock of a publicly trading
company's stock at a highly discounted rate in order to get cash for
operations. The President of the publicly traded company is also a
major shareholder of the Company. During 1999 this shareholder also
became a director of the Company. (See note 10)
7. NOTE PAYABLE
The Company has a note payable to an individual bearing interest at
10%. The note is due on demand.
88
<PAGE>
8. CONVERTIBLE PROMISSORY NOTES
In order to obtain "bridge" funds while a public offering is being
prepared, the Company issued convertible notes with a face amount
totaling $733,950 during 1999. The notes bear interest at 8% per annum
and are convertible into common stock at $1.00 per share at the option
of the holder. The notes matured on December 31, 1999. During 1999, the
noteholders converted $404,850 of convertible notes into 404,850 shares
of common stock. The remaining balance of $329,100 is in default as of
January 1, 2000.
9. LEASING ACTIVITIES
The Company leases its office facilities under an operating lease that
expires on January 16, 2002. The base rent under the lease is $1,350
per month. The Company also leased a soccer field from a local
community college on an annual lease that expired at the end of 1999.
The base rent was $1,450 per home game. The Company has one other
operating lease for equipment. Operating lease expense for 1999 and
1998 was $59,247 and $40,103 respectively.
The future annual minimum lease payments under operating leases at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------------------------------------------------------------------
<S> <C>
2000 $ 17,628
2001 16,914
------------------------------------------------------------------------------------
Total Minimum Lease Payments $ 34,542
------------------------------------------------------------------------------------
</TABLE>
89
<PAGE>
10. STOCKHOLDERS' DEFICIT
COMMON STOCK
During 1997, the Company prepared a private placement memorandum
offering 1,000,000 Common Shares (the Offering). The 1,000,000
common shares were offered at a price of $5.00 per unit. Each unit
included 5 common shares and entitled the investor to 2 warrants to
purchase additional shares of common stock for $.50 per share. The
price per unit was allocated $4.00 to the shares and $1.00 to the
warrants. Under the Offering the Company sold 458,300 common shares
and raised $425,050 net of syndication costs.
A second private placement memorandum dated February 3, 1999 (Second
Offering) offered 1,000,000 common shares at a price of $1.00 per
share. Under the Second Offering, the Company raised $148,300.
During the last quarter of 1998 the Company traded 650,000 shares of
its stock for stock of a publicly trading company's stock at a highly
discounted rate in order to get cash for operations. Most of the stock
received in the trade was liquidated, however, stock valued at $22,725
was still held in trading securities at December 31, 1998. The
President of the publicly traded company is also a major shareholder of
the Company. During 1999 this shareholder also became a director of the
Company.
During 1999 the Company traded an additional 200,000 shares with the
same publicly traded company, again at a highly discounted rate, in
order to get cash for operations. The Company further traded 95,000
shares with another publicly traded company for shares valued at
$38,792 on the date of trade. All of the trading securities were
liquidated by the end of 1999.
WARRANTS
Warrants for 183,320 shares were issued along with the first private
placement. Warrants for 85,400 were exercised in total during 1999 and
1998, leaving 97,920 outstanding at December 31, 1999. The warrants
expire in 2001.
90
<PAGE>
10. STOCKHOLDERS' DEFICIT (CONTINUED)
CONVERTIBLE PROMISSORY NOTES
At December 31, 1999 the Company had convertible promissory notes
outstanding which were convertible into 329,100 shares of common stock.
(See note 8)
STOCK OPTIONS
The Company had the following common stock option transactions during
the year ended December 31, 1999:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Contractual life
Shares or price Weighted average of Options
per share exercise price Outstanding
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding at
January 1, 1999 0 0 0
Options granted 985,300 $.05 3.67 years
Options granted 100,000 $1.25 3.67 years
Options exercised 0 0 0
Options forfeited or expired 0 0 0
-------------------------------------------------------------------------------------------------------------
Options outstanding at
December 31, 1999 1,085,300 $.16 3.67 years
-------------------------------------------------------------------------------------------------------------
Options price range at end of year $.05 through $1.25
-------------------------------------------------------------------------------------------------------------
Exercisable at end of year 1,085,300
-------------------------------------------------------------------------------------------------------------
</TABLE>
91
<PAGE>
10. STOCKHOLDERS' DEFICIT (CONTINUED)
STOCK OPTIONS (CONTINUED)
The fair value of the stock options are estimated on the date of grant
using the Black-Scholes option-pricing model. The estimated fair value
has been calculated ignoring the volatility factor which is allowed for
a non-public company. The following assumptions were used to estimate
the fair values of options:
<TABLE>
<CAPTION>
<S> <C> <C>
Risk free interest rate 5.5%
Expected life 4 years
Expected dividend yield 0%
</TABLE>
The weighted average fair value at the grant date of the options
awarded during the year was $0.78.
11. INCOME TAXES
At December 31, 1999, the Company had federal and state tax net
operating loss carryforwards of approximately $3,156,000. The federal
and state tax loss carryforwards will expire at various dates through
year 2019 unless previously utilized and may be significantly limited
in use as a result of changes in ownership of the Company.
Significant components of the Company's deferred tax assets are shown
below. A valuation allowance of $1,041,000 has been recognized to
offset the deferred tax assets as realization of such assets is
uncertain. The valuation allowance increased during 1999 and 1998 by
$728,000 and $299,000, respectively.
<TABLE>
<CAPTION>
December 31, 1999 1998
------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets computed at 34%:
Net operating loss carryforwards $ 1,041,000 $ 274,000
Accrued bonus compensation 0 39,000
------------------------------------------------------------------------------------------------
Net deferred tax assets 1,041,000 313,000
Valuation allowance for deferred tax asset (1,041,000) (313,000)
------------------------------------------------------------------------------------------------
Total deferred tax assets $ 0 $ 0
------------------------------------------------------------------------------------------------
</TABLE>
12. CONTINGENCIES - GOING CONCERN
As reported in the financial statements, the Company has an accumulated
deficit of approximately $3,407,000 at December 31, 1999 and has
incurred a loss from operations for the year then ended. In addition,
the Company was not able to pay their promissory notes when the notes
matured on December 31, 1999. The
92
<PAGE>
Company's shareholders' deficit was $501,304 and its current
liabilities exceeded its current assets by $687,573.
These factors create uncertainty about the Company's ability to
continue as a going concern. The ability of the Company to continue as
a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital it could be forced to cease
operations.
In order to continue as a going concern, develop and grow its game
attendance, revenues and achieve a profitable level of operations, the
Company will need, among other things, additional capital resources.
Management's plans to obtain such resources for the Company include (1)
raising additional capital through sales of common stock, the proceeds
of which would be used to build soccer stadiums in both San Diego and
Riverside County, hiring of administrative, sales and marketing
personnel; (2) continuing to use stock options to pay for employee
compensation and marketing services; (3) converting promissory notes
into common stock; (4) expanding the revenue sources from corporate
sponsors, television and radio advertising, concessions, merchandise
sales, soccer camps, concerts and other stadium events. In addition,
management is continually seeking to improve the operations and grow
the business through a variety of venues. However, Management cannot
provide any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually secure other sources of financing
and attain profitable operations. The accompanying financial statements
do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
13. SUBSEQUENT EVENTS
COMMON STOCK (UNAUDITED)
As of March 1, 2000 the Company has issued 12,000 common shares for
marketing services and 2,000 shares for bonus compensation pertaining
to the year 2000.
CONVERTIBLE PROMISSORY NOTES (UNAUDITED)
In order to obtain bridge funds while in the process of completing a
formal registration with the Security Exchange Commission, the Company
has issued
93
<PAGE>
convertible notes with a face amount totaling $54,900 as of March 1,
2000. The notes bear interest at 8% per annum and are convertible into
common stock at $1.00 per share at the option of the holder. The notes
mature on July 1, 2000.
MERGER (UNAUDITED)
During December 1999 the Company entered into negotiations to merge
with Roller Coaster, Inc. (a Nevada Corporation). Roller Coaster,
Inc. is a public shell with no activity other than inception in
December 1995 and a 1:10 stock split in October 1999. The merger was
consummated in the month of March 2000.
According to the merger agreement the surviving corporation will be
named San Diego Soccer Development Corporation and will be a Nevada
Corporation. Shares will be exchanged 1:1 for the public shell's
shares. The merger will result in approximately 7,784,000 shares
outstanding (2,500,000 shares pertaining to the former Roller
Coaster, Inc.) Shares authorized will be 100,000,000 common stock at
$.001 par value and 50,000,000 preferred shares at $.001 par value.
In connection with the merger, the Company incurred $200,000 in
consulting fees on the merger. The merger is expected to be
accounted for as a pooling-of-interests.
94
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth 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 and 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 twenty percent (20%) change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (ii) do not apply if
the registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Company pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Company undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately
95
<PAGE>
preceding, or (ii) that purports to meet the requirements of Section 10(a)(3)
of the Securities Act of 1933 and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the Registration Statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions set forth in response to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1993 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
96
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of San
Diego, State of California, on October 6, 2000.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
/s/ SARKIS KALOUSTIAN
-----------------------------------------------------------
BY: SARKIS KALOUSTIAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR
POWER OF ATTORNEY
Each person whose signature appears appoints Sarkis Kaloustain, in the
alternative, as his agents and attorneys-in-fact, with full power of
substitution to execute for him and in his name, in any and all capacities, all
amendments (including post-effective amendments) to this Registration Statement
to which this power of attorney is attached. 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>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sarkis Kaloustian Chief Operating Officer October 6, 2000
--------------------------
Sarkis Kaloustian
/s/ Steven Peacock Chairman of the Board October 6, 2000
--------------------------
Steven Peacock
/s/ James Upton Director October 6, 2000
--------------------------
James Upton
/s/ Jeffrey Scott Director October 6, 2000
--------------------------
Jeffrey Scott
/s/ Yan Skwara Director October 6, 2000
--------------------------
Yan Skwara
</TABLE>
97
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Las
Vegas, Nevada , on October 6, 2000.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION,
FORMERLY ROLLERCOASTER, INC.
/s/ SARKIS KALOUSTIAN
-----------------------------------------------------------
BY: SARKIS KALOUSTIAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR
POWER OF ATTORNEY
Each person whose signature appears appoints Sarkis Kaloustian, in the
alternative, as his agents and attorneys-in-fact, with full power of
substitution to execute for him and in his name, in any and all capacities, all
amendments (including post-effective amendments) to this Registration Statement
to which this power of attorney is attached. 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>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sarkis Kaloustian Chief Operating Officer October 6, 2000
--------------------------
Sarkis Kaloustian
/s/ Steven Peacock Chairman of the Board October 6, 2000
--------------------------
Steven Peacock
/s/ James Upton Director October 6, 2000
--------------------------
James Upton
/s/ Yan Skwara Director October 6, 2000
--------------------------
Yan Skwara
/s/ Jeffrey Scott Director October 6, 2000
--------------------------
Jeffrey Scott
</TABLE>
98
