FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
Commission file number 0-24829
----------------
FULL TILT SPORTS, INC.
----------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1416864
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5525 Erindale Drive, Suite 201, Colorado Springs, Colorado 80918
- ---------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(719) 260-8509
--------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes No XX
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
Class of Stock Amount Outstanding
---------------- --------------------
$.001 par value 3,126,261 shares outstanding
Common Stock at December 7, 1998
<PAGE>
FULL TILT SPORTS, INC.
Index
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements...........................1-7
Item 2. Management's Discussion and Analysis Or
Plan of Operation..............................8-9
Part II - OTHER INFORMATION....................................10
SIGNATURES.....................................................11
ii
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Balance Sheets
________________________________________________________________________
Unaudited Audited
September December
30, 1998 31, 1997
ASSETS --------- --------
Current Assets
Cash $157,867 $26,291
Inventory 1,363 0
Stock Subscriptions Receivable 0 10,000
Deposits 50 50
-- --
Total Current Assets 159,280 36,341
------- ------
Property, Plant, and Equipment
Furniture and Equipment 6,845 2,396
----- -----
Total Property, Plant, and Equipment 6,845 2,396
Less Accumulated Depreciation (1,754) (799)
----- ---
Net Property, Plant, and Equipment 5,091 1,597
----- -----
Other Assets
Organizational Costs (Less amortization of $190
and $76) 571 686
--- ---
TOTAL ASSETS 164,942 38,624
======= ======
LIABILITIES
Current Liabilities
Accounts Payable 13,752 16,043
Accrued Salaries 2,500 2,500
Other Accrued Expenses 1,838 2,693
----- -----
Total Current Liabilities 18,090 21,236
------ ------
STOCKHOLDERS' EQUITY
Preferred Stock [Authorized 5,000,000 Shares,
Par Value $.01; 50,000 Shares Issued And
Outstanding (Unaudited); 0 Shares Issued and
Outstanding (Audited)] 500 0
Common Stock [Authorized 25,000,000 Shares, Par
Value $.001; 3,126,261 Shares Issued and
Outstanding (Unaudited); 3,500,000 Shares
Issued and Outstanding (Audited)] 3,126 3,500
Additional Paid In Capital 330,707 66,500
Retained Deficit (187,481) (52,612)
------- ------
Total Stockholders' Equity 146,852 17,388
------- ------
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $164,942 $38,624
======== =======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
1
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Income Statements
________________________________________________________________________________
Unaudited Unaudited Unaudited
Nine Month June 30, 1997 June 30, 1997
Interim Period (Inception) (Inception)
Ended Through Through
September September September
30, 1998 30, 1997 30, 1998
-------- -------- --------
REVENUE $5,128 $0 $5,128
------ -- ------
COST OF GOODS SOLD 4,622 0 4,622
----- - -----
GROSS PROFIT 506 0 506
--- - ---
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising 18,522 350 18,872
Amortization 114 0 190
Bank Charges 75 160 235
Administrative Services 22,500 2,500 25,000
Depreciation 956 0 1,755
Design Expense 2,440 0 2,440
Entertainment 953 87 953
Filing and Recording Fees 0 251 251
Offering Expense 0 14,877 14,877
Office Expense 3,309 462 4,960
Payroll Tax 3,934 256 5,700
Professional Fees 15,695 4,262 24,171
Promotion Expense 13,827 0 13,827
Salary 45,000 5,000 65,000
Samples Expense 483 0 483
Sponsorships 5,287 0 5,287
Telephone 3,072 397 4,347
Travel 1,113 0 1,479
----- - -----
Total General and Administrative Expense 137,280 28,602 189,827
------- ------ -------
INCOME (LOSS) FROM OPERATIONS (136,774) (28,602) (189,321)
------- ------ -------
OTHER INCOME (EXPENSE)
Interest Income 1,998 0 1,998
Interest (Expense) (93) (55) (158)
-- -- ---
Total Other Income (Expense) 1,905 (55) 1,840
----- -- -----
INCOME (LOSS) BEFORE TAXES (134,869) (28,657) (187,481)
------- ------ -------
Provision for Income Taxes 0 0 0
- - -
NET (LOSS) ($134,869) ($28,657) ($187,481)
======== ======= ========
Basic (Loss) Per Common Share ($0.04) ($0.01)
Weighted Average Shares Outstanding 3,708,753 3,300,000
========= =========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
2
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Income Statements
____________________________________________________________________________
Unaudited Unaudited
Three Month Three Month
Interim Period Interim Period
Ended Ended
September September
30, 1998 30, 1997
-------- --------
REVENUE $835 $0
---- --
COST OF GOODS SOLD 621 0
--- -
GROSS PROFIT 214 0
--- -
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising 294 350
Amortization 38 0
Bank Charges 75 160
Administrative Services 7,500 2,500
Depreciation 556 0
Entertainment 0 87
Filing and Recording Fees 0 251
Offering Expense 0 14,877
Office Expense 2,014 462
Payroll Tax 956 256
Professional Fees 11,591 4,262
Promotion Expense 3,600 0
Salary 15,000 5,000
Samples Expense 318 0
Telephone 1,691 397
Total General and Administrative Expense 43,633 28,602
------ ------
INCOME (LOSS) FROM OPERATIONS (43,419) (28,602)
------ ------
OTHER INCOME (EXPENSE)
Interest Income 1,826 0
Interest (Expense) (38) (55)
-- --
Total Other Income (Expense) 1,788 (55)
----- --
INCOME (LOSS) BEFORE TAXES (41,631) (28,657)
------ ------
Provision for Income Taxes 0 0
NET (LOSS) ($41,631) ($28,657)
======= =======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
3
<PAGE>
<TABLE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Statement of Shareholders Equity
_______________________________________________________________________________________________________________________________
<CAPTION>
Preferred Stock Common Stock
Number of Number of Capital Paid Capital Paid
Common Preferred Preferred Common In Excess Of In Excess Of Accumulated
Shares Shares Stock Stock Par Value Par Value (Deficit) Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1997 0 0 $0 $0 $0 $0 $0 $0
Issuance Of Common Stock
July 5, 1997 For Cash
@ $.0071 Per Share 2,800,000 0 2,800 17,200 20,000
July 7, 1997 For Cash
@ $.02 Per Share 500,000 0 500 9,500 10,000
December 1997 For Cash
@ $.20 Per Share 200,000 200 39,800 40,000
Net (Loss)
December 31, 1997 (52,612) (52,612)
--------- --------- --------- --------- --------- --------- --------- --------
Balance At
December 31, 1997 3,500,000 0 0 3,500 0 66,500 (52,612) 17,388
April 14, 1998 For Cash
@ $1 Per Share 50,000 500 0 49,500 50,000
Private Stock Offering:
June 30, 1998 For Cash
@ $1 Per Share 211,400 211 211,189 211,400
(Less Deferred Offering
Costs) (11,928) (11,928)
June 30, 1998 Services
Valued @ $1 Per Share 14,861 15 14,846 14,861
August 1, 1998 Cancelled
Shares @ $.001 Per Share (600,000) (600) 600 0
Unaudited (Loss) At
September 30, 1998 (134,869) (134,869)
--------- --------- --------- --------- --------- --------- --------- ---------
Unaudited Balance at
September 30, 1998 3,126,261 50,000 $500 $3,126 $49,500 $281,207 ($187,481) $146,852
========= ====== ==== ====== ======= ======== ========== ========
</TABLE>
The Accompanying Notes Are An Integral Part Of These Financial Statements.
4
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Statements of Cash Flows
Unaudited Unaudited Unaudited
Nine Month June 30, 1998 June 30, 1997
Interim Period (Inception) (Inception)
Ended Through Through
September September September
30, 1998 30, 1997 30, 1998
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($134,869) ($28,657) ($187,481)
Adjustments to Reconcile Net Loss to Net
Cash Provided By Operating Activities
Items Not Affecting Cash Flows:
Depreciation Expense 955 0 1,755
Amortization Expense 114 0 190
(Increase) In Accounts Receivable 0 (568) 0
(Increase) Decrease In Stock
Subscriptions Receivable 10,000 0 0
(Increase) Decrease In Inventory (1,363) 0 (1,363)
(Increase) In Other Assets 0 (50) (812)
Increase (Decrease) In Accounts Payable (2,291) 8,137 13,752
Increase (Decrease) In Accrued Salaries 0 2,500 2,500
Increase (Decrease) In Other Accrued
Expenses (854) 824 1,838
Net Cash Used By Operating Activities (128,308) (17,814) (169,621)
------- ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (4,449) 0 (6,845)
----- - -----
Net Cash Used By Investing Activities (4,449) 0 (6,845)
----- - -----
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 214,333 30,000 284,333
Issuance of Preferred Stock 50,000 0 50,000
------ - ------
Net Cash Provided By Financing Activities 264,333 30,000 334,333
------- ------ -------
Net Increase In Cash 131,576 12,186 157,867
Cash At Beginning Of Year 26,291 0 0
------ - -
Cash At End Of Year $157,867 $12,186 $157,867
======== ======= ========
Non-Cash Activities:
Common Stock Issued For Services $14,861 $0 $14,861
======= == =======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
5
<PAGE>
Full Tilt Sports, Inc.
Notes to the Unaudited Financial Statements
For the Nine Month Period Ended September 30, 1998
- --------------------------------------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The information furnished herein was taken from the books and records
of the Company without audit. The Company believes, however, that it
has made all adjustments necessary to reflect properly the results of
operations for the nine month interim period ended September 30, 1998.
The adjustments consist only of normal reoccurring accruals. However,
the results of operations for the nine month interim period ended
September 30, 1998 are not necessarily indicative of the results to be
expected for the fiscal year ending December 31, 1998.
Note 2 - Financial Statements
- -----------------------------
Management has elected to omit substantially all footnotes relating to
the condensed financial statements of the Company included in this
Report. For a complete set of footnotes, reference is made to the
Company's Registration Statement on Form 10-SB dated August 24, 1998
as filed with the Securities and Exchange Commission and the audited
financial statements included therein.
Note 3 - Stock Offering
- -----------------------
In April 1998, the Company offered to sell up to 50,000 units (the
"Units") at $10.00 per Unit, or $1.00 per share, on a best efforts
basis. Each Unit is comprised of 10 shares of $.001 par value Common
Stock and 5 Common Stock purchase warrants (the "Warrants"). The
Warrants can be exercised at anytime after the offering to purchase 1
share of Common Stock for $2.00 until April 30, 1999. The minimum
offering was 15,000 Units and the maximum offering was 50,000 Units,
for a total offering of $500,000. The shares of Common Stock
contained in the Units were issued pursuant to an exemption from
registration under Section 3(b) and Regulation D, Rule 504, of the
Securities Act of 1933, as amended, and to an exemption to
registration provided by state securities law.
In June 1998, the Company completed the offering and sold 21,140
Units, including 211,400 shares of Common Stock and 105,700 Warrants
for $211,400. After deferred offering costs of $11,121, the Company
netted $200,068 from the offering.
In June 1998, the Company issued 14,861 shares of Common Stock valued
at $1 per share for services rendered to the Company.
Note 4 - Preferred Stock
- -------------------------
In April 1998, the Articles of Incorporation of the Company were
amended to authorize the issuance of 150,000 shares of Series A Voting
Convertible Preferred Stock to be issued at the discretion of the
6
<PAGE>
Board of Directors for $1 per share. The Series A Voting Convertible
Preferred Stock has preferential fixed dividends at the rate of 10%
per annum ($.10 per year) pro rated to the date of issuance, for a
period of 24 months after issuance, payable annually on or before
December 31 of each such calendar year before any dividend shall be
declared, or paid upon or set apart for the Common Stock. Beginning
on the first day of the 25th month and continuing until the expiration
of 60 months from the date of issuance, unless sooner converted, the
dividend shall be calculated as 3.75% of the "net profits" of the
Company and payable annually on or before 90 days from the closing of
the Company's fiscal year. The Series A Voting Convertible Preferred
Stock automatically converts to Common Stock in 5 years from the date
of issuance. The conversion rate will be subject to adjustments in
certain events, including stock splits and dividends.
On April 14, 1998, the Company sold 50,000 shares of Series A
Preferred Stock for $50,000 or $1.00 per share.
Note 5 - Subsequent Events
- --------------------------
The Company is negotiating for endorsement agreements with three
professional athlete members of the Denver Broncos football team. If
successful, the endorsing athletes shall receive shares of Common
Stock of the Company in exchange for appearances and endorsement of
the Company's products for a one year term.
7
<PAGE>
FULL TILT SPORTS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
Certain statements contained herein constitute "forward looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward looking statements include, without
limitation, statements regarding the Company's plan of business
operations, potential contractual arrangements, anticipated revenues
and related expenditures. Factors that could cause actual results to
differ materially include, among others, the following: acceptability
of the Company's products in the retail market place, general economic
conditions, tax legislation and the overall state of the retail
clothing industry. Most of these factors are outside the control of
the Company. Investors are cautioned not to put undue reliance on
forward looking statements. Except as otherwise required by
applicable securities statutes or regulations, the Company disclaims
any intent or obligation to update publicly these forward looking
statements, whether as a result of new information, future events or
otherwise.
Liquidity and Capital Resources
Full Tilt Sports, Inc. (the "Company") completed two private
placements during the nine months ended September 30, 1998. In April,
the Company sold 50,000 shares of a newly created series of Preferred
Stock to a single, accredited investor in a transaction exempt from
the registration requirements of the 1933 Act. The Series A Preferred
Stock was issued at a price of $1 per share and maintains a
preference in liquidation over the Common Stock equal to $1 per
share. The holders of the Preferred Stock will also share in any
profits of the Company beginning 2 years after issuance, if not sooner
converted.
The Company also completed a private placement to a small group
of investors pursuant to Regulation D, Rule 504 of the 1933 Act. The
Company sold an aggregate of 21,140 units ("Units") for aggregate
gross proceeds of $211,400. Each Unit sold in the offering consisted
of 10 shares of Common Stock and 5 Common Stock Purchase Warrants (the
"Warrants"). Each Warrant, in turn, enables the holder to acquire an
additional share of Common Stock for an exercise price of $2 per share
through and including April 30, 1999. As a result of these two
offerings, the Company received $265,140 from financing activities,
which offset the $128,308 in cash used in operations during the nine-
month period.
Total shareholder's equity has increased from $17,388 at fiscal
year end to $146,852 as of September 30, 1998 due to the
abovementioned private placements. From fiscal year end December 31,
1997 to September 30, 1998, the working capital of the Company
increased an aggregate of $126,085 as a result of cash raised in the
above mentioned private placements. At September 30, 1998, the
Company had working capital of $141,190, consisting of $159,280 of
current assets and $18,090 of current liabilities.
The Company's liquidity is high, with total current assets
comprised of $157,867 in cash and $1,363 in inventory, since it has
not yet incurred significant expenses or cash outlays in the promotion
8
<PAGE>
or production of its products. However, the Company's expenses are
expected to increase as the Company engages in increased marketing and
promotion of its products. It is also anticipated that cash
requirements for inventory will increase as orders for the Company's
products are received.
The Company shall attempt to conserve its cash by making payments
in stock in limited circumstances. The Company may use stock to
compensate professional athletes who endorse the Company's products
and is in the process of negotiating those agreements. However, to
meet the anticipated cash demands for the purchase of inventory, the
Company is negotiating for a line of credit, which shall also be
useful to demonstrate the financial strength of the Company to
potential purchasers of its products.
The Company's operations presently continued to use cash, rather
than provide cash from operations. Nonetheless, management is of the
opinion that the Company has sufficient working capital to continue
for the next twelve months. However, thereafter additional cash shall
be required. Therefore, the Company will remain dependent on
obtaining additional assets and achieving profitable operations and/or
obtaining additional debt or equity financing to continue as a going
concern.
Results of Operations
During the nine month period ended September 30, 1998, the
Company realized a net loss of $134,869 (or $0.04 per share) on
revenues of $5,128, compared to a net loss of $28,657 and no revenue
for the fiscal period June 30, 1997 through September 30, 1997.
Revenues increased from prior fiscal period ended September 30, 1997,
to the nine month period ended September 30, 1998 due to sale of the
Company's products at several promotional events, as well as the prior
period being shorter and the Company being relatively inactive during
this period.
The Company was incorporated and started operations on June 30,
1997. Accordingly, the nine-month fiscal period through September
30, 1998 is compared to the three-month fiscal period from June 30,
1997 (date of inception) through September 30, 1997. As the prior
period was of a shorter duration and the Company was relatively
inactive during this period, expenses during the prior period were
significantly less than the latter period.
During the prior fiscal period ended September 30, 1997, the
Company was only engaged in developing its products, exploring
manufacturing options and test marketing its product. In the first
three quarters of 1998, the Company became more aggressive in product
promotion, as reflected in the significant increases in advertisement
and promotion expenses. Advertising increased from $350 to $18,522 in
the first three quarters of fiscal 1998. This increased advertising
expense was due primiarily to radio advertisements. Promotion
expenses increased from $0 to $13,827 during this period as well.
These increased expenses associated with advertisement and promotion
9
<PAGE>
are considered by management to be normal anticipated start-up costs
associated with selling a new product line in the retail market.
Expenses associated with overhead also increased from the prior
fiscal period ended September 30, 1997 to first three quarters of
fiscal 1998. This increase was anticipated as the Company was
relatively inactive during the period. Administrative services
increased approximately $20,000 from the prior fiscal period. During
the prior period, the Company's employees were only employed part-
time. Therefore, salaries increased $5,000 to $45,000 during the
later period as full time employment was implemented. These
additional expenses in the latter period caused the Company to have a
net loss of $28,657 for prior fiscal period, when the Company's
activities were limited.
Management anticipates that the Company will continue losses
until such time, if ever, the Company generates revenues from retail
sales in an amount adequate to cover expenses.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No report required.
Item 2. Changes in Securities.
No report required.
Item 3. Defaults Upon Senior Securities.
No report required.
Item 4. Submission of Matters to a Vote of Security Holders.
No report required.
Item 5. Other Information.
No report required.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
None.
B. Reports on Form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
FULL TILT SPORTS, INC.
Date: December 14, 1998 By: /s/ Roger K. Burnett
--------------------- --------------------------------
Roger K. Burnett, President, Chief
Executive Officer, Chief Financial
Officer and Chairman of the Board
of Directors
(Principal Executive Officer)
Date: December 14, 1998 By: /s/ Joseph F. DeBerry
--------------------- --------------------------------
Joseph F. DeBerry, Vice-President,
Secretary, Treasurer and Director
(Principal Financial Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 9/30/98 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<CIK> 0001062663
<NAME> FULL TILT SPORTS, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 157,867
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,363
<CURRENT-ASSETS> 159,280
<PP&E> 6,845
<DEPRECIATION> 1,754
<TOTAL-ASSETS> 164,942
<CURRENT-LIABILITIES> 18,090
<BONDS> 0
0
500
<COMMON> 3,126
<OTHER-SE> 142,626
<TOTAL-LIABILITY-AND-EQUITY> 164,942
<SALES> 5,128
<TOTAL-REVENUES> 5,128
<CGS> 4,622
<TOTAL-COSTS> 137,280
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> (134,869)
<INCOME-TAX> 0
<INCOME-CONTINUING> (134,869)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134,869)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
