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, 1999
------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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 200, Colorado Springs, Colorado 80918
- ---------------------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
(719) 535-0260
--------------
(Registrant's telephone number, including area code)
N/A
---
(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 XX No
------ ------
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 3,830,123 shares outstanding
Common Stock at November 18, 1999
<PAGE>
FULL TILT SPORTS, INC.
Index
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements 1-10
Item 2. Management's Discussion and Analysis Or
Plan of Operation 11-12
Part II - OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Balance Sheets
- ------------------------------------------------------------------------
Unaudited Audited
September December
30, 1999 31, 1998
-------- --------
ASSETS
Current Assets
Cash $58,003 $101,716
Accounts Receivable (Less an Allowance of $-0-) 38,894 10,303
Accounts Receivable - Employees 3,586 0
Accounts Receivable - Subscriptions 3,003 0
Accounts Receivable - Other 6,520 0
Inventory 153,576 8,573
Merchandise Deposits 41,162 0
Prepaid Design 9,370 0
Prepaid Supplies 0 1,464
Prepaid Personal Services 184,600 0
Prepaid Trade Agreements 46,120 0
Prepaid Salaries 25,000 0
------ -
Total Current Assets 569,834 122,056
------- -------
Property, Plant, and Equipment
Displays 7,079 0
Furniture and Equipment 20,592 6,845
Computer Software 4,870 0
----- -
Total Property, Plant, and Equipment 32,541 6,845
Less Accumulated Depreciation (6,140) (2,311)
Less Accumulated Amortization (144) 0
--- -
Net Property, Plant, and Equipment 26,257 4,534
------ -----
Other Assets
Deposits 3,116 50
Prepaid Personal Services 25,399 0
Prepaid Trade Agreements 7,188 0
Organizational Costs
(Less amortization of $342 and $228) 419 533
--- ---
Total Other Assets 36,122 583
------ ---
TOTAL ASSETS 632,213 127,173
======= =======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
1
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Balance Sheets
- ------------------------------------------------------------------------
Unaudited Audited
September December
30, 1999 31, 1998
-------- --------
LIABILITIES
Current Liabilities
Accounts Payable 91,509 18,600
Accrued Salaries 4,500 2,500
Preferred Dividends Payable 0 3,589
Deferred Income - Trade Agreements 46,120 0
Other Accrued Expenses 3,946 2,218
----- -----
Total Current Liabilities 146,075 26,907
------- ------
Long-Term Liabilities
Deferred Income - Trade Agreements 7,188 0
----- -
Total Long-Term Liabilities 7,188 0
----- -
TOTAL LIABILITIES 153,263 26,907
------- ------
STOCKHOLDERS' EQUITY
Preferred Stock [Authorized 5,000,000 Shares,
Par Value $.01; 50,000 Shares Issued
and Outstanding 500 500
Common Stock [Authorized 25,000,000 Shares,
Par Value $.001; 3,827,123 Shares Issued and
Outstanding at September 30, 1999; 3,136,261
Shares Issued and Outstanding at
December 31, 1998] 3,827 3,136
Additional Paid In Capital 1,338,503 335,697
Additional Paid In Capital - Stock Options 1,600 0
Retained Deficit (865,480) (239,067)
------- -------
Total Stockholders' Equity 478,950 100,266
------- -------
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $632,213 $127,173
======== ========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
2
<PAGE>
<TABLE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Income Statements
- ---------------------------------------------------------------------------------------
<CAPTION>
Unaudited Unaudited Unaudited
Nine Month Nine Month June 30, 1997
Interim Period Interim Period (Inception)
Ended Ended Through
September September September
30, 1999 30, 1998 30, 1999
-------- -------- --------
<S> <C> <C> <C>
REVENUE FROM OPERATIONS
Sales of Merchandise $133,913 $5,125 $152,919
Freight-Out 2,701 0 2,701
Advertising/Promotion Income 17,500 0 17,500
Trade Agreements Income 53,473 0 53,473
Miscellaneous Income 1,530 3 1,529
----- - -----
Total Revenue From Operations 209,117 5,128 228,122
------- ----- -------
COST OF GOODS SOLD
Cost of Merchandise Sold 84,147 4,480 99,273
Freight-In 1,783 142 2,280
----- --- -----
Total Cost of Goods Sold 85,930 4,622 101,553
------ ----- -------
GROSS PROFIT 123,187 506 126,569
------- --- -------
GENERAL AND ADMINISTRATIVE
EXPENSES - Schedule 1 755,955 137,280 997,872
INCOME (LOSS) FROM OPERATIONS (632,768) (136,774) (871,303)
------- ------- -------
OTHER INCOME (EXPENSE)
Interest Income 6,371 1,998 9,656
Interest (Expense) (16) (93) (244)
-- -- ---
Total Other Income (Expense) 6,355 1,905 9,412
----- ----- -----
INCOME (LOSS) BEFORE TAXES (626,413) (134,869) (861,891)
------- ------- -------
Provision for Income Taxes 0 0 0
- - -
NET (LOSS) ($626,413) ($134,869) ($861,891)
======== ======== ========
Preferred Stock Dividends Applicable
to the Period 0 0 (3,589)
Net (Loss) Applicable to Common Stockholders ($626,413) ($134,869) ($865,480)
======== ======== ========
Basic (Loss) Per Common Share ($0.17) ($0.04)
Diluted Earnings Per Common Share ($0.17) 0
Weighted Average Shares Outstanding 3,725,376 3,708,753
========= =========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
</TABLE>
3
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
General and Administrative Expenses - Schedule 1
- -------------------------------------------------------------------------------
Unaudited Unaudited Unaudited
Nine Month Nine Month June 30, 1997
Interim Period Interim Period (Inception)
Ended Ended Through
September September September
30, 1999 30, 1998 30, 1999
-------- -------- --------
GENERAL AND ADMINISTRATIVE EXPENSES
Administrative Services $22,500 $22,500 $55,000
Advertising 300,947 18,522 327,219
Amortization 258 114 486
Auto Expense 4,446 0 4,446
Bad Debt 997 0 997
Commission Expense 393 0 393
Compensation Costs 1,600 0 1,600
Consulting Expense 27,375 0 27,375
Contract Labor 3,611 0 3,610
Depreciation 3,830 956 6,140
Design Expense 1,074 2,440 3,614
Education/Reference 728 0 728
Entertainment 3,944 953 5,155
Filing and Recording Fees 7,101 385 7,737
Insurance 1,108 0 1,108
Listing Fees 3,975 0 3,975
Offering Expense 0 0 14,877
Office and Miscellaneous Expenses 10,955 2,999 17,153
Payroll Tax 10,357 3,934 17,205
Professional Fees 65,196 15,695 98,114
Promotion and Public Relations 79,549 13,827 100,185
Rent 16,000 0 16,000
Salary 135,477 45,000 215,477
Samples Expense 3,051 483 4,600
Sponsorships 3,144 5,287 8,431
Telephone 13,393 3,072 19,502
Trade Shows 24,444 0 24,444
Travel 10,502 1,113 12,301
------ ----- ------
Total General and Administrative Expense $755,955 $137,280 $997,872
-------- -------- --------
The Accompanying Notes Are An Integral Part of These Financial Statements.
4
<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, 1999 30, 1998
-------- --------
REVENUE FROM OPERATIONS
Sales of Merchandise $94,723 $833
Freight-Out 2,701 0
Trade Agreements Income 23,830 0
Miscellaneous Income 10 2
-- -
Total Revenue From Operations 121,264 835
------- ---
COST OF GOODS SOLD
Cost of Merchandise Sold 61,183 539
Freight-In 1,278 82
----- --
Total Cost of Goods Sold 62,461 621
------ ---
GROSS PROFIT 58,803 214
------ ---
GENERAL AND ADMINISTRATIVE
EXPENSES - Schedule 1 327,628 43,633
INCOME (LOSS) FROM OPERATIONS (268,825) (43,419)
------- ------
OTHER INCOME (EXPENSE)
Interest Income 1,069 1,826
Interest (Expense) (13) (38)
-- --
Total Other Income (Expense) 1,056 1,788
----- -----
INCOME (LOSS) BEFORE TAXES (267,769) (41,631)
------- ------
Provision for Income Taxes 0 0
- -
NET (LOSS) ($267,769) ($41,631)
======== =======
The Accompanying Notes Are An Integral Part Of These Financial Statements.
5
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
General and Administrative Expenses - Schedule 1
- ---------------------------------------------------------------------------
Unaudited Unaudited
Three Month Three Month
Interim Period Interim Period
Ended Ended
September September
30, 1999 30, 1998
-------- --------
GENERAL AND ADMINISTRATIVE EXPENSES
Administrative Services $7,500 $7,500
Advertising 117,344 294
Amortization 182 38
Auto Expense 2,054 0
Bad Debt Expense 996 0
Commissions Expense 353 0
Compensation Costs 1,600 0
Consulting Expense 24,375 0
Contract Labor 2,585 0
Depreciation 1,498 556
Design Expense 350 0
Education/Reference 310 0
Entertainment 1,475 0
Filing and Recording Fees 980 0
Insurance 0 0
Listing Fees 0 0
Offering Expense 0 0
Office and Miscellaneous Expenses 4,825 2,089
Payroll Tax 1,322 956
Professional Fees 11,645 11,591
Promotion and Public Relations 52,357 3,600
Rent 6,000 0
Salary 52,000 15,000
Samples Expense 238 318
Sponsorships 2,544 0
Telephone 4,063 1,691
Trade Shows 24,444 0
Travel 6,588 0
----- -
Total General and Administrative Expense $327,628 $43,633
-------- -------
The Accompanying Notes Are An Integral Part Of These Financial Statements.
6
<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
November 3, 1998 Services
Valued @ $.50 Per Share 10,000 10 4,990 5,000
Preferred Dividends Declared (3,589) (3,589)
Net (Loss) December 31, 1998 (182,866) (182,866)
--------- ------ --- ----- ------ ------- ------- -------
Balance at December 31, 1998 3,136,261 50,000 500 3,136 49,500 286,197 (239,067) 100,266
January 2, 1999 Personal Service
Contracts @ $1 Per Share 150,000 150 149,850 150,000
January 2, 1999 Employment
Contract @ $1 Per Share 80,000 80 79,920 80,000
February 8, 1999 Trade Agreement
@ $1.50 Per Share 10,000 10 14,990 15,000
March 1, 1999 Trade Agreement
@ $1.50 Per Share 15,000 15 22,485 22,500
March 2, 1999 Personal Service
Contracts @ $1.50 Per Share 50,000 50 74,950 75,000
Stock Offering:
March 20, 1999 For Cash
@ $1.50 Per Share 239,518 240 359,037 359,277
(Less Deferred Offering Costs) (5,222) (5,222)
April 30, 1999 Warrants Exercised
@ $1.50 Per Share 2,500 2 3,747 3,749
May 3, 1999 Personal Service
Contract @ $3.50 Per Share 5,000 5 17,495 17,500
May 17, 1999 Personal Service
Contract @ $3.8125 Per Share 10,000 10 38,115 38,125
May 31, 1999 Warrants Exercised
@ $1.50 Per Share 2,500 2 3,747 3,749
June 16, 1999 Personal Service
Contract @ $3.25 Per Share 26,923 27 87,473 87,500
June 30, 1999 Warrants Exercised
@ $1.50 Per Share 1,500 2 2,249 2,251
July 14, 1999 Trade Agreement
@ $2.75 Per Share 1,000 1 2,749 2,750
July 20, 1999 Personal Service
Contract @ $3.125 Per Share 2,500 3 7,810 7,813
August 14, 1999 Trade Agreement
@ $1.875 Per Share 1,000 1 1,874 1,875
August 17, 1999 Personal Service
Contract @ $1.9375 Per Share 4,000 4 7,746 7,750
September 14, 1999 Trade Agreement
@ $1.25 Per Share 1,000 1 1,249 1,250
September 16, 1999 Warrants
Exercised @ $1.50 Per Share 88,421 88 132,542 132,630
Stock Options 1,600 1,600
Net (Loss) September 30, 1999 (626,413) (626,413)
Unaudited Balance at --------- ------ ---- ------ ------- ---------- -------- --------
September 30, 1999 3,827,123 50,000 $500 $3,827 $49,500 $1,290,603 ($865,480) $478,950
========= ====== ==== ====== ======= ========== ======== ========
The Accompanying Notes Are An Integral Part Of These Financial Statements.
</TABLE>
7
<PAGE>
<TABLE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Statements of Cash Flows
- ---------------------------------------------------------------------------------------
<CAPTION>
Unaudited Unaudited Unaudited
Nine Month Nine Month June 30, 1997
Interim Period Interim Period (Inception)
Ended Ended Through
September September September
30, 1999 30, 1998 30, 1999
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ($626,413) ($134,869) ($865,480)
Adjustments to Reconcile Net Loss to Net
Cash Provided By Operating Activities
Items Not Affecting Cash Flows:
Depreciation Expense 3,830 955 6,140
Amortization Expense 258 114 486
Stock Issued for Services, Contracts,
& Trade Agreements 507,063 0 526,924
Stock Option Compensation Costs 1,600 0 1,600
(Increase) Decrease In Accounts Receivable (38,697) 0 (49,000)
(Increase) Decrease In Inventory (145,003) (1,363) (153,576)
(Increase) Decrease In Stock
Subscriptions Receivable (3,003) 10,000 (3,003)
(Increase) In Other Assets (340,442) 0 (342,716)
Increase (Decrease) In Accounts Payable 72,909 (2,291) 91,509
Increase (Decrease) In Accrued Salaries 2,000 0 4,500
Increase (Decrease) In Other Accrued Expenses 51,447 (854) 57,254
Net Cash Used By Operating Activities (514,451) (128,308) (725,362)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (25,696) (4,449) (32,541)
------ ----- ------
Net Cash Used By Investing Activities (25,696) (4,449) (32,541)
------ ----- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 496,434 214,333 765,906
Issuance of Preferred Stock 0 50,000 50,000
- ------ ------
Net Cash Provided By Financing Activities 496,434 264,333 815,906
------- ------- -------
Net Increase In Cash (43,713) 131,576 58,003
Cash At Beginning Of Year 101,716 26,291 0
------- ------ -
Cash At End Of Period $58,003 $157,867 $58,003
======= ======== =======
Non-Cash Activities:
Common Stock Issued For Services $0 $14,861 $19,861
Common Stock Issued For Personal Service Contracts 383,688 0 383,688
Common Stock Issued On Employment Contract 80,000 0 80,000
Common Stock Issued for Trade Agreements 43,375 0 43,375
Stock Options Compensations Costs 1,600 0 0
The Accompanying Notes Are An Integral Part Of These Financial Statements.
</TABLE>
8
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
For the Interim Period Ended September 30, 1999
- -----------------------------------------------
Note 1 - Unaudited Financial Information
- ----------------------------------------
The condensed financial information furnished herein was taken from the
books and records of the Company without audit and was prepared in
accordance with the instructions to Form 10-QSB. 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,
1999. The adjustments consist only of normal reoccurring accruals. The
results of operations for the nine month interim period ended September 30,
1999 are not necessarily indicative of the results to be expected for the
year ended December 31, 1999.
Note 2 - Financial Statements
- -----------------------------
Management has elected to omit substantially all footnotes relating to the
condensed financial statements of the Company included in the report. For
a complete set of footnotes, reference is made to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1998 as filed with
the Securities and Exchange Commission and the audited financial statements
included therein.
Note 3 - Stock Offering
- -----------------------
In January 1999, the Company offered to sell up to 500,000 shares of Common
Stock at $1.50 per share, on a best efforts basis. The shares of Common
Stock were issued pursuant to an exemption from registration under Section
3(b) and Regulation D, Rule 505, of the Securities Act of 1933, as amended,
and to an exemption to registration provided by state securities law. In
March, 1999, the Company completed the offering and sold 239,518 Common
Shares for gross proceeds of $359,277.
Note 4 - Advertising Expenses and Personal Services
- ---------------------------------------------------
Stock was issued to an employee and to various consultants in exchange for
services. The shares will be earned over a period of 12 months, and
therefore the total cost has been capitalized and expensed over this time
period to either advertising expenses or services.
Note 5 - Prepaid Services
- -------------------------
Certain agreements were reached with various other businesses where the
Company will trade services for certain advertising and an automobile. The
value has been capitalized and will be written off over the period of time
that the services are received with an offset to revenue for the value of
the services given.
9
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
For the Interim Period Ended September 30, 1999
- -----------------------------------------------
Note 6 - Common Stock Options
- ------------------------------
At September 30, 1999, the Company had outstanding options to purchase
853,000 shares of common stock at prices ranging from $1.50 to $2.75, with
expiration dates between February 28, 2004 and February 28, 2009. During
the nine months ended September 30, 1999, no options were exercised.
Included in the Company's net income for the quarter ended September 30,
1999, is a charge of approximately $1,600 which is a result of applying
Statement of Financial Accounting Standards No. 123, Accounting for Stock
Based Compensation.
Note 7 - Earnings Per Share
- ---------------------------
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, Earnings per Share, (SFAS No. 128) effective with the
year ended December 31, 1998. SFAS No. 128 requires the presentation of
basic and diluted earnings per common share. The following table provides a
reconciliation of the numerator and denominator of basic and diluted net
income per common share:
Nine Months Ended September 30, 1999
------------------------------------
Net Weighted
Loss Average Shares Per Share
---- -------------- ---------
Earnings Per Common Share
- -------------------------
Basic loss per share ($626,413) 3,725,376 ($0.17)
Effect of dilutive securites
options 1,600 3,000
Diluted earnings per share ($624,813) 3,728,376 ($0.17)
-------- --------- -----
10
<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, the availability of
working capital 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
During the quarter ended September 30, 1999, Full Tilt Sports, Inc.
(the "Company") continued efforts to obtain additional funding to meet its
capital needs. While the Company's financial condition improved from year-
end December 31, 1998, it has declined during the latter half of calendar
1999. As a result, the Company is dependent on receipt of funding from
outside sources to meet its revenue objectives and continue as a going
concern.
As of the date of filing this Report, the Company has no fixed capital
obligations other than general and administrative expenses and payment of
outstanding liabilities. However, in order to meet its revenue objectives,
the Company requires outside funding to acquire inventory, finance accounts
receivable and pay general and administrative expenses. Toward that end,
representatives of the Company have negotiated with representatives of
various capital sources in an effort to structure a private placement of
the Company's equity securities. While such sources have shown a genuine
interest in the Company, no agreements have been reached and the Company
continues efforts to obtain that funding.
During the nine month period ended September 30, 1999, the Company's
operations have utilized in excess of $500,000 in cash. Substantially all
of those operations have been financed through the sale of Common Stock.
During the corresponding nine month period, the Company raised
approximately $500,000 through the sale of its Common Stock in transactions
exempt from the registration requirements of Federal and state securities
laws. Management anticipates that private equity financing will remain the
primary means of funding operations pending positive cash flow. However,
there is no assurance when, if ever, revenue will be sufficient to offset
operating and overhead expenses.
11
<PAGE>
At September 30, 1999, the Company had working capital of $423,759, an
increase of $328,608 from December 31, 1998. However, the Company requires
cash. A substantial portion of the current assets existing at September
30, 1999 consisted of prepaid services which cannot be converted to cash.
Excluding these prepaid items from the calculation, the Company would be
left with approximately $158,000 of working capital at September 30, 1999.
A substantial portion of the remaining working capital, in turn, is in the
form of inventory awaiting shipment for a substantial purchase order
received by the Company.
To alleviate its short-term need for working capital, the Company has
negotiated a revolving credit arrangement with a private, related party.
However, due to the costs inherent in such arrangement, management would
prefer to finance cash needs through additional equity financing. The
success of management in obtaining an agreement for equity financing will
determine the need for additional debt financing.
Results of Operations
During the nine month period ended September 30, 1999, the Company
realized a net loss of $624,813 (or $.17 per share) on revenues of
$209,117. This compares to a net loss of $134,869 (or $.04 per share) on
revenues of $5,128 for the nine month period ended September 30, 1998.
Revenues increased 3900%, while the net loss increased 360%. The increase
in revenue is due to the fact that the Company has only recently began
selling its merchandise following intensive marketing efforts. The
increase in the net loss reflects the substantial general and
administrative expenses experienced by the Company in 1999, including a
substantial increase in advertising.
Sales during the nine month period ended September 30, 1999 produced a
gross margin of 59%. This figure reinforces management's confidence in the
Company's business plan. However, revenues for that nine month period were
insufficient to defray costs of goods sold and general and administrative
expenses, and accordingly, the Company realized a net loss for the period.
General and administrative expenses for the nine month period ended
September 30, 1999 totaled $754,355. Substantial expenses within that
category include advertising ($300,000), professional fees ($65,196),
promotion ($79,549) and salaries. Advertising increased dramatically from
the nine month period ended September 30, 1998 to the comparable period
ended 1999, from $18,522 to $301,000. This increase is attributable to
expenses associated with professional athlete endorsement contracts
executed by the Company and paid with equity securities. Professional fees
increased approximately $50,000 from the nine month period ended September
30, 1998 to the comparable period ended 1999 as a result of the significant
number of equity transactions in which the Company has engaged and auditing
fees associated with its status as a publicly-traded entity. Promotion
increased from 1998 to 1999 approximately $66,000 as a result of the
Company's efforts to obtain additional markets for its products. Finally,
salary increased approximately $90,000 commensurate with an increase in
employees necessary to manage increased operations.
12
<PAGE>
Interest in the Company's products has increased dramatically during
1999, attributable in part to the advertising and promotion conducted by
the Company. In addition to the substantial increase in revenues which the
Company realized during 1999, numerous other merchandisers have contacted
the Company expressing an interest in selling its products. Management
anticipates, although there is no assurance, that such contact will result
in increased sales in the year 2000. However, the Company will continue to
incur losses until such time, if ever, its gross profit from sales is
sufficient to cover general and administrative expenses. Based on existing
orders for products, management is unable to predict with any degree of
certainty when that may occur.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
No report required.
Item 2. Changes in Securities.
(a) and (b) No report required.
(c) During the fiscal quarter covered by this Report, the
Company sold 88,421 shares pursuant to the exercises of outstanding
warrants under the exemption provided by Regulation D, Rule 504 of the 1933
Act. The warrants were exercised at various times through September 16,
1999 for a price of $1.50 per share. No underwriter or sales agent was
employed by the Company in connection with the exercise of the warrants.
The warrants were originally issued in connection with an offering exempt
under Rule 504 and accordingly, the exercise of the warrant was similarly
exempt. Each of the individuals participating in that offering was
provided information regarding the Company in the form of the most recent
prospectus filed with the Securities and Exchange Commission, together with
interim reports filed since that date.
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.
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits:
None.
B. Reports on Form 8-K:
None.
14
<PAGE>
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: November 19, 1999 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: November 19, 1999 By: /s/ Joseph F. DeBerry
--------------------- ---------------------------------
Joseph F. DeBerry, Vice-President,
Secretary, Treasurer and Director
(Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 9/30/99 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB.
</LEGEND>
<CIK> 0001062663
<NAME> FULL TILTS SPORTS, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 58,003
<SECURITIES> 0
<RECEIVABLES> 52,003
<ALLOWANCES> 0
<INVENTORY> 153,576
<CURRENT-ASSETS> 569,834
<PP&E> 32,541
<DEPRECIATION> 6,140
<TOTAL-ASSETS> 632,213
<CURRENT-LIABILITIES> 146,075
<BONDS> 0
0
500
<COMMON> 3,827
<OTHER-SE> 474,623
<TOTAL-LIABILITY-AND-EQUITY> 632,213
<SALES> 133,913
<TOTAL-REVENUES> 209,117
<CGS> 84,147
<TOTAL-COSTS> 85,930
<OTHER-EXPENSES> 755,955
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16
<INCOME-PRETAX> (626,413)
<INCOME-TAX> 0
<INCOME-CONTINUING> (626,413)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (626,413)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
</TABLE>
