FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 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.)
212 North Wahsatch, Suite 205 Colorado Springs, Colorado 80903
-------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (719) 630-0980
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Shares, $.001 par value
------------------------------
Check whether the issuer (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 X No
---
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The Registrant's revenues for the most recent fiscal year were $289,180.
The aggregate market value of the 1,901,021 Common Shares held by nonaffiliates
of the Company as of July 25, 2000, was approximately $1,901,021 based upon the
last reported sale of the Company's Common Shares of $1.00 per share.
The total number of Common Shares outstanding as of July 25, 2000 was 7,647,513.
DOCUMENTS INCORPORATED BY REFERENCE:
None
Transitional Small Business Disclosure Format: Yes No X
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<PAGE>
PART III
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 1, 1998, Stephen K. Anderson resigned his position as officer,
director and employee of the Company, and returned 600,000 shares to the Company
treasury. Of the remaining shares, 95,000 were transferred to Bill M. Conrad, a
former director and former 5% beneficial owner of the Company and 5,000 shares
were retained by Mr. Anderson.
On April 1, 1999 options to purchase shares of Common Stock were granted to
the officers, directors and 5% beneficial owners to acquire shares of Common
Stock for the purchase price of $1.50 per share exercisable until June 30, 2007.
Roger K. Burnett, President and Director, was granted 200,000 options; Joseph F.
DeBerry, Vice President and Director was granted 200,000 options; J. Fischer
DeBerry, Vice President and Director was granted 25,000 options; Bill M. Conrad,
a former director and former 5% beneficial owner of the Company, was granted
200,000 options; and Raymond E. McElhaney, a former director and former 5%
beneficial owner of the Company was granted 25,000 options.
In July, 1998, Messrs. Joseph DeBerry and Burnett each acquired an
additional 4,618 shares of Common Stock of the Company in consideration for
services rendered to the Company in the months of May and June, 1998. Said
consideration was in lieu of salary payable under the Employment Agreements that
Messrs. Joseph DeBerry and Burnett have entered into with the Company.
In July, 1998, MCM Capital Management, Inc. acquired 5,625 shares of Common
Stock of the Company for consideration of service and satisfaction of accounts
payable under the Administrative Services Agreement. Mr. Conrad, a former
director and former 5% beneficial owner of the Company, and Mr. McElhaney, a
former director and former 5% beneficial owner of the Company, are also
officers, directors and principal shareholders of MCM Capital Management, Inc.
In 1999 our Administrative Services Agreement with MCM Capital Management,
Inc. of Colorado Springs expired and this agreement was not renewed. Under the
agreement MCM had assisted us with our bookkeeping, secretarial, and
administrative needs, provided storage and warehouse space as well as on an
as-needed basis for a period of one year at a rate of $2,500 per month beginning
January 1, 1998. During the years ended December 31, 1998 and 1999, $60,000 was
paid to MCM under this agreement. Mr. Conrad, a former director and former 5%
beneficial owner of the Company, and Mr. McElhaney, a former director and former
5% beneficial owner of the Company are also officers, directors and principal
shareholders of MCM Capital Management, Inc.
In 1999 our offices were located at 5525 Erindale Drive, Suite 200,
Colorado Springs, Colorado 80918, in space that was subleased from MCM for the
monthly rental of $2000. This rent was in addition to the fees paid for services
under the Administrative Services Agreement above. We signed a one year lease on
February 1, 1999 for this space, and did not renew this lease upon its
expiration. Commencing on February 1, 2000, we changed the location of our
principle offices to 212 N. Wahsatch Ave., Suite 205, Colorado Springs, Colorado
80903 and have executed a three year lease agreement for this location. The
offices are located in 6,000 square feet of office space and are leased from The
Landhuis Company for the monthly rental of $7,750 per month. We anticipate that
this office space will be adequate for the term of the lease.
1
<PAGE>
All these transactions were approved by a majority of the disinterested
directors at that time. The Board of Directors is of the opinion that each of
these transactions were no less favorable than could be obtained from an
unaffiliated third party.
2
<PAGE>
PART IV
ITEM 13. EXHIBITS, REPORTS ON FORM 8-K AND FINANCIAL STATEMENTS
(a) Exhibits.
Except as otherwise indicated, each of the following documents were
included as exhibits to the Company's Registration Statement on Form
10-SB filed under the Securities Act of 1934, File No. 0-24829 and are
incorporated herein by this reference.
Exhibit No.
2 Not applicable.
3.1 Articles of Incorporation of the Company as filed June 30,
1997 with the Secretary of State of the State of Colorado.
3.2 Articles of Amendment of the Articles of Incorporation of the
Company as filed April, 15, 1998 with the Secretary of State of
the State of Colorado.
3.3 Bylaws of the Company.
4.1 Form of Certificate for Common Shares, $.0001 par value per
share.
4.2 Not applicable.
9 Not applicable.
10.1 Employment Agreement, by and between the Company and Roger
K. Burnett, dated August 5, 1997
10.2 Employment Agreement, by and between the Company and Joseph F.
DeBerry, dated August 5, 1997
10.3 Non-Qualified Stock Option and Stock Grant Plan, dated July 1,
1998
10.4 Stock Option Agreement
*10.6 Lease Agreement, dated January 21, 2000
11 Not applicable.
13 Not applicable.
**16 Letter of Change in Certifying Accountant
18 Not applicable.
3
<PAGE>
21 Not applicable.
22 Not applicable.
23 Not applicable.
24 Not applicable.
*27 Financial Data Schedule
99 Not applicable.
(b) Reports on Form 8-K
We filed a report on Form 8-K, dated January 4, 2000, to report a
change in certifying accountants.
(c) Financial Statements and Schedules.
The Financial Statements filed herein are described in the Index to
Financial Statements following Part IV of this Report.
* included as exhibits to our Annual Report on Form 10-KSB, filed March 30,
2000, and incorporated herein by this reference.
** included as an exhibit to our Current Report on Form 8-K, dated January 4,
2000, and incorporated herein by this reference
4
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
As of and for the years ended
December 31, 1999 and 1998
and the period from June 30, 1997 (inception)
to December 31, 1999
<PAGE>
Full Tilt Sports, Inc.
(A Development Stage Company)
Table of Contents
Page
Report of Independent Auditors F-1
Balance Sheet F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 - F-15
<PAGE>
((LETTERHEAD))
((LOGO))
STARK TINTER & ASSOCIATES, LLC
--------------------------------------------------------------------------------
Certified Public Accountants
Financial Consultants
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Full Tilt Sports, Inc.
212 North Wahsatch, Suite 205
Colorado Springs, CO 80903
We have audited the accompanying balance sheet of Full Tilt Sports, Inc. (a
development stage company) as of December 31, 1999, and the related statements
of operations, changes in stockholders' equity, and cash flows for the years
ended December 31, 1999 and the period from June 30, 1997 (inception) to
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Full Tilt Sports, Inc. (a
development stage company) as of December 31, 1999, and the results of its
operations, and its cash flows for the years ended December 31, 1999 and the
period from June 30, 1997 (inception) to December 31, 1999, in conformity with
generally accepted accounting principles.
/s/ Stark Tinter, LLC
------------------------------
Stark Tinter & Associates, LLC
Denver, Colorado
February 25, 2000
7535 East Hampden Avenue, Suite 109 - Denver, Colorado 80231
(303) 694-6700 Fax (303) 694-6761
<PAGE>
Independent Auditors' Report
We have audited the accompanying balance sheet of Full Tilt Sports, Inc. ( a
development stage company), as of December 31, 1998, and the related statements
of income, shareholders' equity and cash flows, for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion , the financial statements referred to above present fairly, in
all material respects, the financial position of Full Tilt Sports, Inc. at
December 31, 1998 and the results of its operations and its cash flows for the
year ended in conformity with generally accepted accounting principles.
/s/ Kish, Leake & Associates, P.C.
----------------------------------
Kish, Leake & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
March 1, 1999
F-1
<PAGE>
FULL TILT SPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 1999
ASSETS
CURRENT ASSETS
Cash $ 5,687
Accounts receivable 82,449
Inventory 161,779
Prepaid expenses 198,509
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Total current assets 448,424
-------------
PROPERTY AND EQUIPMENT, net of depreciation 24,137
-------------
OTHER ASSETS
Deposits 3,117
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$ 475,678
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 64,418
Accrued expenses 6,063
Preferred dividends payable 5,000
Deferred income - trade agreements 21,520
Notes payable - related party 42,000
-------------
Total current liabilities 139,001
LONG-TERM LIABILITIES
Deferred Income - trade agreements 3,758
-------------
STOCKHOLDERS' EQUITY
10% Convertible preferred stock, Series A, $0.01 par
value, 150,000 shares authorized, 50,000 shares issued
and outstanding 50,000
Preferred stock, $0.01 par value, 4,850,000 undesignated
shares authorized -
Common stock, $0.001 par value, 25,000,000 shares
authorized, 3,939,722 shares issued
and outstanding 3,940
Additional paid in capital 2,034,632
Deficit accumulated during the development stage (1,755,653)
-------------
Total stockholders' equity 332,919
-------------
$ 475,678
=============
The Notes to Financial Statements are an integral part of these statements
F-2
<PAGE>
<TABLE>
<CAPTION>
FULL TILT SPORTS, INC.
(A DEVELOPMENTAL STAGE COMPANY)
STATEMENTS OF OPERATIONS
JUNE 30, 1997
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER DECEMBER DECEMBER
31, 1999 31, 1998 31, 1999
---------------- ---------------- ----------------
<S> <C> <C> <C>
REVENUES
Sales of merchandise $ 188,038 $ 19,003 $ 207,041
Advertising/Promotion income 17,500 - 17,500
Trade agreements 81,503 - 81,503
Miscellaneous 2,139 3 2,142
---------------- ---------------- ----------------
289,180 19,006 308,186
---------------- ---------------- ----------------
COST OF GOODS SOLD 89,905 15,622 105,527
---------------- ---------------- ----------------
GROSS PROFIT 199,275 3,384 202,659
---------------- ---------------- ----------------
GENERAL AND ADMINISTRATIVE EXPENSES 1,712,516 189,372 1,954,435
---------------- ---------------- ----------------
(LOSS) FROM OPERATIONS (1,513,241) (185,988) (1,751,776)
---------------- ---------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 6,418 3,285 9,703
Interest expense (4,763) (163) (4,991)
---------------- ---------------- ----------------
1,655 3,122 4,712
---------------- ---------------- ----------------
NET (LOSS) $ (1,511,586) $ (182,866) $ (1,747,064)
PREFERRED DIVIDENDS (5,000) (3,589) (8,589)
---------------- ---------------- ----------------
NET (LOSS) APPLICABLE TO COMMON STOCK $ (1,516,586) $ (186,455) $ (1,755,653)
================ ================ ================
PER SHARE INFORMATION:
WEIGHTED AVERAGE SHARES OUTSTANDING (BASIC AND DILUTED) 3,693,774 3,417,663 3,349,575
================ ================ ================
NET (LOSS) PER COMMON SHARE (BASIC AND DILUTED) $ (0.41) $ (0.05) $ (0.52)
================ ================ ================
</TABLE>
The Notes to Financial Statements are an integral part of these statements
F-3
<TABLE>
<CAPTION>
FULL TILT SPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
JUNE 30, 1997 (INCEPTION) THROUGH DECEMBER 31, 1999
Deficit
Accumulated
Number of Number of Capital Paid During the Total
Preferred Common Preferred Common In Excess Of Development Shareholders'
Shares Shares Stock Stock Par Value Stage Equity
--------- ---------- --------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 - - $ - $ - $ - $ - $ -
Stock issued for cash 3,500,000 - 3,500 66,500 70,000
Net (loss) for the period ended
December 31, 1997 (52,612) (52,612)
--------- ---------- --------- -------- ------------- ------------ -------------
Balance, December 31, 1997 - 3,500,000 - 3,500 66,500 (52,612) 17,388
Stock issued for cash 50,000 50,000 50,000
Stock issued for cash, net of
offering costs of $11,928 211,400 211 199,261 199,472
Stock issued for services 24,861 25 19,836 19,861
Cancelled shares (600,000) (600) 600 -
Preferred dividends declared (3,589) (3,589)
Net (loss) for the year ended
December 31, 1998 (182,866) (182,866)
--------- ---------- --------- -------- ------------- ------------ -------------
Balance, December 31, 1998 50,000 3,136,261 50,000 3,136 286,197 (239,067) 100,266
Stock issued for employment
contract 80,000 80 79,920 80,000
Stock issued for trade agreements 6,000 6 10,489 10,495
Stock issued for services 383,022 384 555,536 555,920
Stock issued for cash, net of
offering costs of $5,222 239,518 240 353,815 354,055
Stock warrants excercised 94,921 94 142,285 142,379
Preferred dividends declared (5,000) (5,000)
Stock options 606,390 606,390
Net (loss) for the year ended
December-31, 1999 - - - - (1,511,586) (1,511,586)
--------- ---------- --------- -------- ------------- ------------ -------------
Balance, December 31, 1999 50,000 3,939,722 $ 50,000 $ 3,940 $ 2,034,632 $(1,755,653) $ 332,919
========= ========== ========= ======== ============= ============ =============
</TABLE>
The Notes to Financial Statements are an integral part of these statements
F-4
<PAGE>
<TABLE>
<CAPTION>
FULL TILT SPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
JUNE 30, 1997
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER DECEMBER DECEMBER
31, 1999 31, 1998 31, 1999
-------------- ------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) $ (1,511,586) $ (182,866) $ (1,747,064)
Adjustments to reconcile net (loss) to net cash
flows from operating activities:
Amortization and depreciation 6,779 1,665 9,319
Stock issued for services, contracts,
and trade agreements 646,415 19,861 666,276
Stock option compensation costs 606,390 - 606,390
Changes in:
Accounts receivable (72,146) (10,303) (82,449)
Inventory (153,206) (10,037) (163,243)
Stock subscriptions receivable - 10,000 -
Prepaid expenses (197,045) - (197,045)
Other assets (3,067) - (3,879)
Accounts payable 45,818 2,557 64,418
Accrued salaries 2,826 - 5,326
Deferred income - trade agreements 21,520 - 21,520
Other accrued expenses 2,277 (475) 4,495
-------------- ------------- ---------------
Net cash (used in) operating activities (605,025) (169,598) (815,936)
-------------- ------------- ---------------
INVESTING ACTIVITIES
Acquisition of fixed assets (25,849) (4,449) (32,694)
-------------- ------------- ---------------
Net cash (used in) investing activities (25,849) (4,449) (32,694)
-------------- ------------- ---------------
FINANCING ACTIVITIES
Common stock issued, net of offering costs 496,434 199,472 765,906
Preferred stock issued - 50,000 50,000
Proceeds from note payable 42,000 - 42,000
Preferred dividends paid (3,589) - (3,589)
-------------- ------------- ---------------
Net cash provided by financing activities 534,845 249,472 854,317
-------------- ------------- ---------------
Net increase (decrease) in cash (96,029) 75,425 5,687
CASH AT BEGINNING OF YEAR 101,716 26,291 -
-------------- ------------- ---------------
CASH AT END OF YEAR $ 5,687 $ 101,716 $ 5,687
============== ============= ===============
SUPPLEMENTAL CASHFLOW INFORMATION:
Cash paid for:
Interest $ 4,763 $ 163 $ 4,991
============== ============= ===============
Income taxes $ - $ - $ -
============== ============= ===============
</TABLE>
The Notes to Financial Statements are an integral part of these statements
F-5
<PAGE>
FULL TILT SPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
On June 30, 1997 Full Tilt Sports, Inc. (the Company) was incorporated under the
laws the State of Colorado. The Company's primary purposes are to develop and
market the Full Tilt line of clothing apparel and secondly to organize and
develop one or more indoor multi-sport facilities in the United States.
Development Stage
The Company is currently in the developmental stage and has no significant
revenues from operations to date.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in these financial statements and accompanying
notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considered demand
deposits and highly liquid-debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Inventory
Inventories are stated at the lower of cost or market using the weighted average
method.
Property and Equipment
Property and equipment are being depreciated using the straight-line method over
the estimated economic lives ranging from 3 to 5 years.
Financial Instruments
The carrying amounts for the company's cash and cash equivalents, accounts
receivable, accounts payable, accrued expenses and notes payable-related party
approximate fair value.
F-6
<PAGE>
Impairment Of Long-Lived Assets
The Company periodically reviews the carrying amount of property, plant and
equipment and its identifiable intangible assets to determine whether current
events or circumstances warrant adjustments to such carrying amounts. If an
impairment adjustment is deemed necessary, such loss is measured by the amount
that the carrying value of such assets exceeds their fair value. Considerable
management judgement is necessary to estimate the fair value of assets,
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell. As of December 31, 1999, management
does not believe there is any impairment of the carrying amounts of assets.
Revenue Recognition
The Company's revenue is generated by manufacturing and then distributing an
apparel line of sportswear. Sales are recognized upon shipment of product.
Advertising Costs
Advertising is expensed as incurred. Advertising costs expensed during years
ended December 31, 1999 and 1998, and the period June 30, 1997 (inception) to
December 31, 1999 were $416,799, $25,922, and $443,071, respectively. Prepaid
advertising costs reported as prepaid personal services asset at December 31,
1999 were $153,773.
Net Loss Per Common Share
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). Basic earnings per common share ("EPS")
calculations are determined by dividing net income by the weighted average
number of shares of common stock outstanding during the year. Diluted earnings
per common share calculations are determined by dividing net income by the
weighted average number of common shares and dilutive common share equivalents
outstanding. During the periods presented common stock equivalents were not
considered as their effect would be anti-dilutive.
Comprehensive income
The Company follows Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards for reporting
and displaying comprehensive income, its components and accumulated balances.
SFAS 130 is effective for periods beginning after December 15, 1997. The Company
adopted SFAS 130 in 1998.
F-7
<PAGE>
Segment Information
Effective in 1999, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." Certain information is disclosed, per
SFAS No. 131, based on the way management organizes financial information for
making operating decisions and assessing performance. The Company currently
operates in a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Stock-Based Compensation
The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net income (loss) had the fair value of the options been expensed.
The Company has elected to continue to apply APB 25 in accounting for its stock
option incentive plans.
Recent Pronouncements
The FASB recently issued Statement No 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
rule now will apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be adopted
in years beginning after June 15, 1999. The Statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined if it will early adopt and what the effect of SFAS No. 133 will
be on the earnings and financial position of the Company.
F-8
<PAGE>
Note 2 - Property and Equipment
The following is a summary of property and equipment as of December 31, 1999 at
cost less accumulated depreciation:
Furniture and fixtures $20,593
Computer equipment 4,870
Other 7,079
---------
32,542
Less accumulated depreciation (8,405)
---------
Net property and equipment $24,137
=========
Depreciation expense for the years ended December 31, 1999 and 1998, and the
period June 30, 1997 (inception) to December 31, 1999 was $5,544, $1,512 and
$7,855, respectively.
Note 3 - Equity
The Company has authorized 30,000,000 shares of stock, of which 25,000,000
shares are $.001 par value common stock and 5,000,000 shares are $.01 par value
preferred stock and. The Board of Directors is authorized to divide the class of
preferred shares into series and to fix and determine the relative rights and
preferences of those shares.
On July 5, 1997 the Company issued 2,800,000 shares of common stock for cash
aggregating $20,000 ($.007 per share) and on July 7, 1997 the Company issued
500,000 shares of common stock for cash aggregating $10,000 ($.02 per share).
On December 31, 1997 the Company issued 200,000 shares of common stock for cash
aggregating $40,000 ($.20 per share).
In April 1998 the Company offered to sell up to 50,000 units at $10.00 per Unit,
based on a best efforts basis. Each Unit was comprised of 10 shares of $.001 par
value common stock and 5 common stock purchase warrants. The warrants can be
exercised at anytime to purchase 1 share of common stock for $1.50 until April
13, 2000. The minimum was 15,000 Units and the maximum 50,000 Units for a total
offering of $500,000. The shares of common stock contained in the Units were to
be 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 Section 11-51-308(l)(p) of the Colorado
Securities Act.
F-9
<PAGE>
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 cash aggregating
$211,400. After deducting offering costs of $11,928, the Company netted $199,472
from the offering.
During the year ended December 31, 1998, the Company issued 14,861 shares of
common stock for services valued at $14,861 ($1.00 per share) and 10,000 shares
of common stock for services valued at $5,000 ($.50 per share). The values
ascribed to the common stock corresponded with the fair market value of the
common shares on the respective dates the Company agreed to issue the shares.
In August 1998 a shareholder of the Company contributed 600,000 shares of common
stock to the Company at which time the shares were canceled.
In April 1998 the Company authorized the issuance of 150,000 shares of Series A
Voting Convertible Preferred Stock to be issued at the discretion of the Board
of Directors for $1 per share. The Series A Convertible Preferred Stock has
senior preferential fixed dividends at the rate of 10% per annum ($.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 Corporation and payable
annually on or before 90 days from the closing of the Corporation's fiscal year.
The Series A Convertible Preferred Stock is convertible into common stock at the
rate of one for one. The Series A 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.
During April, 1998, the Company sold 50,000 shares of Series A Convertible
Preferred Stock for cash aggregating $50,000.
At December 31, 1998 Preferred Dividends of $3,589 were declared.
During January, 1999 the Company issued 80,000 shares of common stock valued at
$80,000 ($1.00 per share) pursuant to an employment contract entered into by the
company. The value ascribed to the common stock corresponds with the fair market
value of the common shares on the date the Company agreed to issue the shares.
During the year ended December 31, 1999, the Company sold 239,518 shares of
common stock for cash aggregating $359,277 ($1.50 per share). After offering
costs of $5,222, the Company netted $354,055.
F-10
<PAGE>
During the year ended December 31, 1999, the Company issued 383,022 shares of
common stock for services valued at $555,920 ($1.00 per share to $3.81 per
share). The values ascribed to the common stock corresponded with the fair
market value of the common shares on the respective dates the Company agreed to
issue the shares.
During the year ended December 31, 1999, the Company issued 6,000 shares of
common stock pursuant to a trade agreement valued at $10,495 ($1.12 per share to
$2.75 per share). The values ascribed to the common stock corresponded with the
fair market value of the common shares on the respective dates the Company
agreed to issue the shares.
During the year ended December 31, 1999 the Company issued 94,921 shares of
common stock for cash aggregating $142,379 pursuant to the exercise of the above
described warrants.
At December 31, 1999 Preferred Dividends of $5,000 were declared.
Note 4 - Stock Options
At December 31, 1999 the Company had a Non-Qualified Stock Option and Stock
Grant Plan (the "Plan") which began in July, 1997. Under the Company's Plan, the
Company's Board of Directors has reserved 2,500,000 shares which may be granted
at the Board of Directors' discretion. No option may be granted after July 27,
2007 and the maximum term of the options granted under the Plan is ten years.
The effect of applying SFAS No. 123 pro forma net loss as stated below is not
necessarily representative of the effects on reported net income (loss) for
future years due to, among other things, the vesting period of the stock options
and the fair value of additional stock options in future years. Had compensation
cost for the Company's stock option plans been determined based upon the fair
value at the grant date for awards under the plans consistent with the
methodology prescribed under SFAS No. 123, the Company's net (loss) in would
have been approximately $2,353,442 or $.64 per share. The fair values of the
options granted during 1999 are estimated at $1.39 on the date of grant using
the Black-Scholes option pricing model with the following assumptions: no
dividend yield, volatility of 106%, a risk-free interest rate of 5.40%, and an
expected lives of 10 years from date of vesting.
During 1999, options to purchase 600,000 shares at an exercise price of $1.50
per share were granted to employees, (including two officers), which options
expire ten years after the grant date.
F-11
<PAGE>
During 1999, options to purchase 435,000 shares at exercise prices of $1.13 to
$2.75 per share were granted to officers, directors, and consultants which
options expire ten years after the grant date.
The Company accounts for transactions with individuals other than employees in
which goods or services are the consideration received for the issuance of
equity instruments in accordance with the provisions of SFAS 123, based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable.
At December 31, 1999, stock option expense to non-employees totaled $606,390 and
was charged to general and administrative expenses.
Changes in options outstanding under the plan are summarized as follows:
Weighted Weighted
Average Average
Exercise Fair Value
Shares Price of Options
--------- --------- ------------
Granted in 1999 1,035,000 $1.50 $1.39
--------- --------- ------------
Balance December 31, 1999 1,035,000 $1.50 $1.39
========= ========= =============
The following table summarizes information about fixed-price stock options at
December 31, 1999:
Outstanding Exercisable
----------- -----------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
-------- ----------- ----------- -------- ----------- -----------
$1.50 1,035,000 9.2 years $1.50 1,035,000 $1.50
Note 5 - Stock Warrants
The following details the warrants outstanding as of December 31, 1999:
Underlying Exercise
Shares Price Expiration
1998 Warrants 10,779 $1.50 April 13, 2000
At December 31, 1999 the Company has reserved 10,779 shares of common stock for
stock warrants.
F-12
<PAGE>
Note 6 - Income Taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes", which requires use
of the liability method. FAS 109 provides that deferred tax assets and
liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
Income tax provision (benefit) for income taxes differs from the amounts
computed by applying the statutory federal income tax rate of 34% as a result of
the following:
Years ended December 31,
1999 1998
---------- -----------
Computed "expected" tax provision (benefit) ($308,738) ($62,174)
Valuation allowance 308,738 62,174
---------- -----------
$ - $ -
========== ===========
The net deferred tax assets as of December 31, 1999, in the accompanying balance
sheet includes the following components:
Deferred tax asset $228,706
Less valuation allowance (228,706)
----------
$ -
==========
The net change in valuation allowance for the year ended December 31, 1999 was
$181,674.
The types of temporary differences between the tax basis of assets and their
financial reporting amounts that give rise to a significant portion of the
deferred tax asset are as follows:
Temporary Tax
Difference Effect
Net operating loss carryforward: $1,143,530 $228,706
========== ===========
The net operating loss carry forward will expire in the years 2013 and 2014.
F-13
<PAGE>
Note 7 - Related Party Transactions
The Company has executed an Administrative Service Agreement with a company
owned by directors of the Company for $2,500 per month for a twelve year period
beginning January 1, 1999.
The Company has an option to acquire property purchased by an officer/director.
The Company entered into promissory note agreements for $22,000 with two members
of the board of directors. The initial terms stated that the full amount of the
note plus interest were due January 2000 but were subsequently extended to March
2000.
Note 8 - Subsequent Events
In January 2000 the Company signed an endorsement contract with a professional
athlete and issued 20,000 common stock shares in exchange for personal services
to be performed in 2000.
F-14
<PAGE>
SIGNATURE
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 in Colorado Springs,
Colorado on the 25th day of July, 2000.
FULL TILT SPORTS, INC.
By: /s/ Roger K. Burnett
--------------------------
Roger K. Burnett, President, Chief Financial Officer
and Director
Pursuant to the requirements of the Security Exchange Act of 1934, as
amended, this Report has been signed by the following persons in the capacities
and on the dates indicated.
Signatures Title Date
/s/ LeRoy Landhuis Chairman of Board of Directors July 25, 2000
----------------------- and Chief Executive Officer
LeRoy Landhuis
/s/ Roger K. Burnett President, Chief Financial Officer July 25, 2000
----------------------- and Director
Roger K. Burnett
/s/ J. Fisher DeBerry Executive Vice President and Director July 25, 2000
-----------------------
J. Fisher DeBerry
/s/ Joseph F. DeBerry Vice President, Secretary, Treasurer July 25, 2000
----------------------- and Director
Joseph F. DeBerry
