As filed with the Securities and Exchange Commission on December , 1998
REGISTRATION NO. 333-65573
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Pre Effective Amendment No. 1
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SPORTSMAN'S WHOLESALE COMPANY
(Name of Registrant as Specified in its Charter)
Nevada 5490 84-1408762
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Tax Identification
Number)
55 West 200 North, #3
Provo, Utah 84601
(801) 377-1758
(Address and Telephone Number of Registrant's Principal Place of Business)
Fred L. Hall
President, Sportsman's Wholesale Company
55 West 200 North
Provo, Utah 84601
(801) 377-1758
(Name, Address and Telephone Number of Agent for Service)
Copies to:
A. Robert Thorup, Esq.,
RAY QUINNEY & NEBEKER
7th Floor, 79 South Main Street
Salt Lake City, Utah 84111
(801) 323-3359
Approximate Date of As soon as practicable from time to time after
Proposed Sale to the Public: this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. If delivery of the prospectus is expected to be
made pursuant to Rule 434, please check the following box.
<TABLE>
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CALCULATION OF REGISTRATION FEE
- --------------------------------- -------------------- --------------------- --------------------- ------------------
Title of Each Class of Dollar Amount to Proposed Maximum Proposed Maximum Amount of
Securities to Be Registered be Registered offering Price Per Aggregate Offering Registration Fee
Unit
- --------------------------------- -------------------- --------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock 100,000 $1.50 $150,000.00 $44.25
- --------------------------------- -------------------- --------------------- --------------------- ------------------
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE>
100,000 Shares
Sportsman's Wholesale Company
Common Stock
Sportsman's Wholesale Company is offering you the opportunity to purchase some
of the 100,000 shares of its $.0001 par value common stock that is offering for
sale to the public at a price of $1.50 per Share. The price being offered for
the Shares has been arbitrarily determined by the Company and bears no necessary
relationship to assets, shareholders equity or any other recognized criteria of
value.
* Sportman's Wholesale Company is a new Nevada
corporation engaged in the wholesale
sporting goods business. All of its current
This Offering activities are conducted in its wholly owned
involves a subsidiary, Cap's Sporting Goods Wholesale,
significant degree Inc.
of risk.
* The Company wants to raise $150,000 from
Please read the this Offering.
entire
Prospectus,
particularly the * If the Company does not sell all 100,000 of
section called the Shares, any money received from you will
"Risks" at page be returned to you without any deduction or
__. the payment of an interest. The Company will
deposit your subscription money into an
escrow account at a national bank maintained
by an escrow agent retained for this purpose
within 24 hours of receiving your money. If
all 100,000 Shares are sold by 5:00 PM on
_____________, 1999, or _____________, 1999
if the Company extends this Offering, the
escrow will close and the Company will get
the money held in the escrow account. If all
100,000 Shares have not been sold by the
time the Offering closes, you will get your
subscription money back by First Class Mail
sent within 48 hours of the closing of the
Offering.
There has been no public market for Sportsman's Common Stock, and there can be
no assurance that a market will develop upon completion of this Offering. Even
if a market begins, there is no assurance that it will continue.
The officers of the Company will offer the Shares and will not be paid anything
extra for their selling efforts. They will claim an exemption from registration
as broker dealers or registered representatives.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES AGENCY, NOR HAS ANY FEDERAL OR
STATE REGULATORY AGENCY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Date of this Prospectus is December , 1998
<PAGE>
PROSPECTUS SUMMARY
THIS IS A BRIEF SUMMARY OF THE INFORMATION IN THIS PROSPECTUS. WE ENCOURAGE YOU
TO READ THE ENTIRE PROSPECTUS BEFORE YOU DECIDE WHETHER AND HOW MUCH TO INVEST
IN THE SHARES.
Tell me About the Company
Sportsman's Wholesale Company (the "Company") was organized as a Nevada
corporation in 1996 to engage in the wholesale sporting goods business. To date,
the Company has not had any business operations of any kind nor has it received
any revenues from its intended operations.
In April, 1998, the Company acquired all of the outstanding stock of
Cap's Sporting Goods Wholesale, Inc. ("Cap's"), a Utah corporation which was
organized for the same purpose as the Company. To date, Cap's also has not
engaged in any business operations nor earned any meaningful revenues. The
Company intends to develop and operate its wholesale sporting goods business
through Cap's. (In this Prospectus, the term "the Company" will mean Sportsman's
and Cap's together. (See "Information About the Company.")
The Company is a development stage company and has no revenues or
earnings from operations. As of September 30, 1998, total assets were $2,747.00
compared with total liabilities of $26,637.00. Shareholder equity was a negative
($23,890.00) at September 30, 1998, resulting in a negative ($0.02) per share
book value. (See "Financial Statements.")
Tell me About the Offering
You are being offered up to 100,000 shares of the Company's Common
Stock, $.0001 par value ("the Shares") at a purchase price of $1.50 per share.
All 100,000 of the Shares being offered must be purchased or your money will be
refunded and the Offering will be terminated. " (See "Plan of Distribution" and
"Description of the Securities Offered".
The officers of the Company will offer the Shares and will not use a
broker dealer for this purpose. Thus the Company intends to save the costs of
broker-dealer help.
The Offering will end at 5:00 PM Mountain Time on , 1999. The Company
may extend the Offering once, to , 1999 if the Company gives you notice of the
extension in writing.
Your purchase money will be held in escrow until all of the Shares are
purchased or the Offering ends, whichever is sooner. If all 100,000 of the
Shares are not sold before the end of the Offering, your purchase money, and
that of all investors, will be returned without interest or deduction of any
kind. See "Plan of Distribution"."
Who is the Escrow Agent
A. Robert Thorup, Esq. of the Ray Quinney & Nebeker law firm in Salt
Lake City, Utah will serve as escrow agent for the purchase money from this
Offering. Mr. Thorup will maintain this money in a separate account at First
Security Bank, N.A. in Salt Lake City, Utah.
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How Will the Company Use the Offering Proceeds
The Company will use the net proceeds from this Offering primarily to
acquire supplies and equipment, to pay for marketing and advertising the
Company's products and services, and to cover the initial operating expenses of
the Company.
Who is the Company's Transfer Agent
Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Salt
Lake City, Utah 84117, Telephone (801) 272-9294 is transfer agent for the
Company, and it will process all transactions and transfers in the Shares.
How Many Company Securities are Now Outstanding
The Company now has 1,503,500 shares of its Common Stock issued and
outstanding (at the date of this Prospectus). If all of the Shares in this
Offering are sold, the Company will have 1,603,500 shares issued and
outstanding.
The Company can issue up to 5,000,000 shares of preferred stock, the
rights and preferences of which may be designated in one or more series by the
Board of Directors. Preferred stock can be desginated and issued without
shareholder approval. The Board of Directors has not designated any series or
issued any shares of preferred stock. The designation and issuance of series of
preferred stock in the future would create additional securities which would
have dividend and liquidation preferences greater than those belonging to the
Shares in this Offering.
The Shares are a High Risk Investment
The Company is a new company with no operating history. An investment
in the Shares is highly speculative. You will suffer substantial dilution in the
book value your Shares compared to the purchase price. The Company could incur
substantial losses during the next year, and the Company could require
additional funding for which it has no commitments.
Until the Company generates sufficient revenue to pay management
salaries, management of the Company will serve on a part-time basis and will
have other interests which may conflict with the interests of the Company.
You should not invest in the Company if you cannot afford to risk loss
of your entire investment. See "Risk Factors."
How do I Become a Shareholder
You will be asked to complete and sign a Subscription Agreement and to
submit that with your purchase money for Shares. If your subscription is
accepted, you will receive a signed copy of your Subscription Agreement and an
acknowledgment letter along with your Share certificates.
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RISK FACTORS
AN INVESTMENT IN THE SHARES INVOLVES A HIGH DEGREE OF RISK AND YOU
SHOULD ONLY INVEST IF YOU CAN AFFORD TO LOSE YOUR ENTIRE INVESTMENT.
BEFORE PURCHASING SHARES, YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISK
FACTORS, IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS.
There are Risks Inherent in the Company
The Company has a Limited Operating History. The Company was recently formed,
and is in the development stages of its business plan. It has no significant
assets. There is no assurance that upon completion of this Offering the Company
will be able to continue successfully implementing its business plan or that it
will ever operate profitably.
The Company has Limited Capital and May Need Additional Capital. With the
exception of a small amount of money raised from the founders and a few private
investors, the Company has no significant assets or operating capital. It is
totally dependent on the proceeds of this Offering to provide the working
capital necessary to continue the development of its business. Even so, upon
successful completion of the Offering, the working capital available to the
Company will be limited.
The Company has no commitments for additional cash funding beyond the proceeds
expected to be received from this Offering. In the event that the proceeds from
this Offering are not sufficient to allow the Company to become self sufficient
in operating capital, the Company may need to seek additional financing from
commercial lenders or other sources, including additional sales of equity, for
which it presently has no commitments or arrangements.
The Company has Never Paid Dividends. The Company does not currently intend to
pay cash dividends on its Common Stock and does not anticipate paying such
dividends at any time in the foreseeable future. At present, the Company will
follow a policy of retaining all of its earnings, if any, to finance development
and expansion of its business.
The Company does not Allow Cumulative Voting or Pre-emptive Rights. There are no
pre-emptive rights in connection with the Company's Common Stock. Cumulative
voting in the election of directors is not permitted. Accordingly, the holders
of a majority of the shares of Common Stock, present in person or by proxy, will
be able to elect all of the Company's Board of Directors. Even if all the shares
offered in this Offering are sold, the current shareholders will own a majority
interest in the Company. Accordingly, the present shareholders will continue to
elect all of the Company's directors and generally control the affairs of the
Company. See "Description of the Securities Offered."
The Company has Limited Management Resources. The Company will be substantially
dependent upon its current management team, which consists solely of Mr. Fred
Hall. (See "Management"). The stability of the Company would be significantly
compromised if Mr. Hall was unable or unwilling to continue to perform his
duties as President of the Company. The Company does not carry key person life
insurance with respect to Mr. Hall or any other employee, and has no employment
agreements.
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Management has Inherent Conflicts of Interest. Many of the services and goods
acquired by the Company have been and will likely come from sources connected in
some way with management. Mr. Hall has other interests which could give rise to
conflicts with respect to the amount of time devoted to the Company. There is no
assurance such conflicts of time and interests will be resolved favorably to the
Company.
The Company may use Offering Proceeds to Pay Finder's Fees to Management or its
Affiliates. Management does not currently intend to pay any finders fees from
the revenues or other funds of the Company. In the event that a person or entity
assists the Company in connection with the introduction to a prospective
business product opportunity which is ultimately consummated, such person or
entity may be entitled to receive, upon Board of Directors approval, a finder's
fee through the issuance of securities in consideration for such introduction.
Such person, who may be an affiliate of the Company, may be required to be
registered as, among other things, an agent or broker/dealer under the laws of
certain jurisdictions. The Company is not presently obligated to pay any
finder's fees. The executive officers, directors or affiliates of the Company
may be entitled to receive a finder's fee in the event they originate a
prospective business product or opportunity.
The Company May Need Additional Financing and May Not Be Able to Obtain It. The
Company has earned no substantial revenues to date and is entirely dependent
upon the proceeds of this Offering to continue operations relating to its
prospective business. Although the Company believes that the proceeds of this
Offering will be sufficient to implement its business plan, the Company cannot
ascertain with any degree of certainty the future capital requirements. In the
event that the net proceeds of this Offering prove to be insufficient to allow
the Company to pursue its business plan, the Company currently has no plans or
arrangements with respect to additional financing which may be required to
continue the operations of the Company. There can be no assurance that
additional financing will be available to the Company on acceptable terms, if at
all. The unavailability of additional financing when needed would have a
material adverse effect on the continued development or growth of the Company's
business.
There are currently no limitations on the Company's ability to borrow
money to implement its business plan. The amount and nature of any borrowings by
the Company will depend on numerous considerations, including the Company's
capital requirements, the Company's perceived ability to pay interest and
principal on such borrowings and the prevailing conditions in the financial
markets, as well as general economic conditions. There can be no assurance that
debt financing, if required or otherwise sought, would be available on terms
deemed to be commercially acceptable and in the best interests of the Company.
It is presently not contemplated that Mr. Hall or anyone affiliated
with him will be providing any loans or investment capital to the Company over
and above what they have already done. The inability of the Company to borrow
funds for an additional infusion of capital into the business may have material
adverse effects on the Company's financial condition and future prospects. To
the extent that debt financing ultimately proves to be available, any borrowings
may subject the Company to various risks traditionally associated with incurring
indebtedness, including the risks of interest rate fluctuations and
insufficiency of cash flow to pay principal and interest.
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<PAGE>
The Company Faces Date Change Risks. The Company faces risks from the Year 2000
computer problem in three areas: its own computer systems, its appliances and
equipment with embedded chips, and the possibly noncompliant systems of its
third party vendors and service providers. While the Company believes that its
own computerized information processing systems are "Y2K" compliant with four
digit dating and recognizing 2000 as a leap year, it is still in the early
stages of assessing its non-computer equipment for noncompliant embedded chips.
The Company is also in the very earliest stages of assessing and communicating
with its key vendors and service providers to determine their Y2K compliance. In
a worst case scenario, the Company may not be able to present its seminars
because of disruptions in transportation systems, building locations, or utility
services. In the event of significant economic turmoil from Y2K occurrences, the
demand for the Company's products may be significantly reduced. Suppliers of its
inventory products may not be able to ship sufficient quantities to meet the
Company's needs. The Company's own offices may be closed by equipment or utility
failures or possible civil unrest.
Risks related to the Nature of the Company's Proposed Business
There is Uncertain Market Acceptance for the Company's Products. The Company's
proposed business plan is based upon Mr. Hall's informal study of the wholesale
sporting goods market, and particularly his study of the sport club and shooting
club market. There are no assurances of general market acceptance of the
Company's products and services. The Company's business will be subject to all
the risks associated with breaking into established inventory and sales
channels. The Company has undertaken no independent market studies to determine
the acceptance of its proposed products and services.
The Company Faces Significant Competition. The Company will operate in a highly
competitive environment. Competition will come from a variety of larger,
national and regional sporting goods wholesalers, as well as large sporting
goods retail chains and other mass market stores (like Wal-Mart) with
significant buying power that approximates the pricing of a traditional
wholesaler. Most of the Company's competitors are larger and have significantly
greater financial resources, operating experience, management experience, and
other capabilities than the Company.
The Company Relies on Short Term Terminable Leases for Office Space. The Company
is leasing office and limited warehouse space on a month to month basis so as
not to incur excessive long term liabilities. It is foreseeable that this lease
could be terminated by the lessor as soon as the lessor found someone willing to
lease the property on a longer term basis. Should this be the case, the Company
will likely incur significant expense in searching for and configuring new
office space to meet its needs. Also, the Company could incur significant
inconvenience, loss of time and income, disruption of marketing and customer
service as well as loss of customer confidence if it is required to change
office and/or warehouse space on a frequent basis.
The Company has No Present Acquisition or Merger Transaction Contemplated. None
of the Company's officers, directors, promoters, their affiliates or associates
have had any preliminary contact or discussions with and there are no present
plans, proposals, arrangements for mergers, acquisitions or similar transactions
involving the Company.
The General Economic Situation will Affect the Company. The Company provides
products and services that are not essential to the support of life. In the
event of significant economic downturns in the United States or the World caused
by any or all of a number of potential causes, the demand for the Company's
seminars and products may be significantly reduced.
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Risks Related to the Offering
This is a Best Efforts Offering, and There is no Firm Commitment by Anyone to
Buy the Shares. The Company is offering the Shares on an "all or nothing" basis
with no underwriter assistance or firm commitment from any investor or dealer.
No assurance can be given that all of the Shares will be sold.
Your Purchase of Shares will Benefit Present Shareholders. Collectively the
existing shareholders now own 1,503,500 shares of the Company's Common Stock,
for which they paid an aggregate total of $4,125 in cash. If all 100,000 Shares
are sold, the current stockholders will still own approximately 94% of the
Common Stock, and you and the other purchasers in this Offering will own the
other 6%, for which they will have paid $150,000 cash. Thus, purchasers in this
Offering will contribute to the capital of the Company a disproportionately
greater percentage than the ownership they receive. Present stockholders will
benefit from a greater share of the Company if successful, while investors in
the Offering risk a greater loss of cash invested if the Company is not
successful. See "DILUTION --Comparative Data."
You will experience immediate dilution in the book value of the Shares which you
may acquire in this Offering. The present shareholders of the Company acquired
their Common Stock at an aggregate average cost of $0.002 per share,
substantially less than the $1.50 per Share to be paid by Investors in this
Offering. Dilution may also occur if the Company issues additional shares at a
price lower than the offering price stated herein. A substantial portion of the
50,000,000 authorized shares of Common Stock of the Company will remain unissued
if all shares offered hereby are sold. The Board of Directors has the authority
to issue such shares without shareholder approval. Following the Offering, any
additional issuances of shares by the Company from its authorized but unissued
shares would have the effect of further diluting the book value of shares and
the percentage ownership interest of investors in this Offering.
The Company will Have Broad Discretion to Use Offering Proceeds. Management will
have wide discretion as to the allocation, priority and timing of the allocation
and spending of funds raised from this Offering. The uses of the proceeds of the
Offering may vary significantly from those outlined in this Prospectus depending
on numerous factors, including the success that the Company has testing and
marketing its products. Investors purchasing the Shares will be entrusting their
funds to the Company's management, upon whose judgement you must depend. (See
"Use of Proceeds" and "Management")
The Offering Price was Determined Arbitrarily by the Company. The public
offering price of the Shares offered hereby was arbitrarily determined by the
Company without the advice of an underwriter. The price bears no relationship to
the Company's assets, book value, net worth or other recognized criterion of
value. In no event should the public offering price be regarded as an indicator
of any future market price of the Shares.
The Future Price of the Shares May be Volatile. If a public market develops for
the Shares, many factors will influence the market prices. The Shares will be
subject to significant fluctuation in response to variations in operating
results of the Company, investor perceptions of the Company, supply and demand,
interest rates, general economic conditions and those specific to the industry,
developments with regard to the Company's activities, future financial condition
and management.
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There May Not Be A Public Trading Market for the Shares. Prior to this Offering,
there was no public market for the Company's Common Stock, and the offering
price for the Shares was determined arbitrarily by the Board of Directors.
See "Plan of Distribution - Determination of Offering Price."
The Company does not currently meet the numerical requirements (such as
income, stockholders' equity and number of public shares outstanding) to have
its shares listed on a United States stock exchange or quoted on the NASDAQ
over-the-counter market. As soon as it meets those requirements, the Company
intends to apply for a trading listing such that its Common Stock can be
followed on public information services over the Internet or in the financial
trade publications. Until any listing, the Company has not yet decided whether
to utilize the provisions of Rule 15c2-11 under the Securities Exchange Act to
enable limited public trading in its Common Stock. It is unlikely that
sufficient shares will be outstanding in the foreseeable future to support a
public market in the Company's Common Stock. The price of the Shares, after the
completion of this Offering, can vary due to general economic conditions and
forecasts, the Company's general business condition, the release of the
Company's financial reports and sales of shares which were outstanding prior to
this offering. See "Shares Eligible For Future Resale."
The Company May have Trouble with State Blue Sky Requirements; You May have
Problems with Resales of the Shares. The Company has not made application to
register the Securities in any states except Colorado and New York. The Company
will seek to obtain an exemption from registration to offer the Shares in
various state jurisdictions and may also make additional application to register
the Shares in some states. Purchasers of Shares in this offering must be
residents of such jurisdictions which either provide an applicable exemption or
in which the Shares are registered. In order to prevent resale transactions in
violations of states' securities laws, public stockholders may only engage in
resale transactions in the Shares in such jurisdictions in which an applicable
exemption is available or a blue sky application has been filed and accepted.
Such restriction on resales may limit your ability to resell the Shares that you
purchase in this Offering.
Several additional states may permit secondary market sales of the Shares (i)
once or after certain financial and other information with respect to the
company is published in a recognized securities manual such as Standard & Poor's
Corporation Records (ii) after a certain period has elapsed from the date
hereof; or (iii) pursuant to exemptions applicable to certain investors."
Some Shares Owned By Earlier Investors Could Be Sold After The Offering,
Affecting The Resale Price. Of the 1,503,500 common shares presently
outstanding, 500,000 shares were acquired by Fred Hall in a private placement
early in 1998. Mr. Hall acquired another 1,000,000 shares when Cap's was
acquired by the Company in April 1998. 3,500 additional common shares were
acquired by several other investors in a private offering in late June 1998. All
of these shares are "restricted securities" subject to the resale limitations
imposed by Rule 144. While these shares are not being offered for sale
presently, they may at some time in the future be sold, pursuant to Rule 144,
into any public market that may develop for the Company's Common Stock. Under
current rules of the Commission, substantially all of the currently outstanding
shares of Common Stock could be sold into a public market, if one exists, on and
after July 1, 1999. Future sales by current shareholders could depress the
market prices of the Common Stock in any such market. (See "Shares Eligible for
Future Resale.")
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Statutory And Charter Limitations Could Deter An Acquisition Of The Company. The
laws under which the Company is chartered deny voting rights to persons trying
to acquire control, subject to approval by the other shareholders. This could
deter an acquisition of the Company that might otherwise be of benefit to
shareholders who are not part of management. See "Description of Common Stock."
The Company will have Only Limited Reporting Requirements. Because the Company
is only subject to Section 15(d) of the Securities Exchange Act, it will not be
subject to the proxy rules, short-swing profits regulations, beneficial
ownership report regulations and the bulk of the tender offer regulations.
Therefore, the Company may only be required to file periodic reports for a
limited period of time. The Company does intend to provide its shareholders with
annual reports containing audited financial statements from independent
accountants and other periodic reports as the Company feels necessary. However,
in view of the fact that the Company may have limited reporting requirements,
the investor will have less information available with which to assess the
status of the Company.
The "Penny Stock" Rules Could Make Reselling Your Shares More Difficult. The
Company's common stock might be defined as a "penny stock" pursuant to Rule
3a51-1 under the Securities and Exchange of Act if the shares were to be traded
at a price less than $5.00 per share, if the Company had not yet met certain
financial size and volume levels, and if the shares were not registered on a
national securities exchange or quoted on the NASDAQ system. A "penny stock" is
subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Commission.
Those rules require securities broker-dealers, before effecting transactions in
any "penny stock," to (1) deliver to the customer, and obtain a written receipt
for a disclosure document set forth in Rule 15g-10. (Rule 15g-2); to disclose
certain price information about the stock (Rule 15g-3); to disclose the amount
of compensation received by the broker-dealer (Rule 15g-4) or any "associated
person" of the broker-dealer (Rule 15g-5); and to send monthly statements to
customers with market and price information about the "penny stock." (Rule
15g-6) The Company's common stock could also become subject to Rule 15g-9, which
requires the broker-dealer, in some circumstances, to approve the "penny stock"
purchasers account under certain standards and deliver written statements to the
customer with information specified in the rules. (Rule 15g-9) These additional
broker-dealers from effecting transactions and limit the ability of purchasers
in this offering to sell their shares into any secondary market for the
Company's Common Stock.
One Shareholder Will Control The Company. Fred Hall now owns 99.7% of the
outstanding common stock of the Company, and will own 93.5% of the total
outstanding shares even if this Offering is fully subscribed. With such
percentages of ownership, Mr. Hall could cause the election of all of the Board
of Directors, prevent approval of an acquisition of the Company or otherwise
exercise control of the Company.
Officers' And Directors' Liabilities Are Limited. The Nevada Revised Statutes
provides that the Company shall provide indemnification of officers and
directors and certain employees under certain circumstances and payment of
expenses outlined in the statute. The Bylaws of the Company provide that the
officers and directors of the Company shall be indemnified to the fullest extent
allowable under the statute.
The Company's articles of incorporation provide that the Company will
indemnify any officer, director or former officer or director, to the full
extent permitted by law. This could include indemnification for liabilities
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under securities laws enacted for shareowner protection, although, in the
opinion of the federal Securities and Exchange Commission, that indemnification
is against public policy.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being offered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Effect of Purchases of Shares By Officers, Directors and Affiliates. Officers
and Directors of the Company may purchase Shares sold in this Offering under the
same terms and conditions as the public investors. Such purchases, if made, will
be in compliance with rule 10b-6 and be for investment purposes only and not for
redistribution (i.e., no present intention to distribute or resell the
securities). To the extent of any such purchases for investment purposes only, a
portion of the Shares from this Offering will not enter the "public float." (The
public float is the amount of free-trading securities which are immediately
resalable in the trading market.) Such reduction means that there are less
securities for the public investors to purchase and resell and may cause a lack
of liquidity in any trading of the Company's shares. Also, such a reduction in
the public float may make possible the commitment of public investors in the
absence of public demand for the offering.
The Company has No Commitment From Anyone to Purchase Shares. No commitment
presently exists by anyone to purchase any of the Shares offered. Consequently,
no assurance can be given that any Shares will be sold. Although no commitment
has been made, officers and directors may purchase in the Offering.
[This Space Left Blank Intentionally]
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USE OF PROCEEDS
The following table sets forth management's present estimate of the
allocation of net proceeds expected to be received from this Offering. Actual
expenditures may vary from these estimates. Pending such uses, the Company will
invest the net proceeds in investment-grade, short-term, interest bearing
securities.
Total Proceeds: $150,000
Less: Estimated Offering Expenses 25,000
Net Proceeds Available: $125,000
Use of Net Proceeds
Acquisition of Supplies $ 7,500
and Equipment(1)
Marketing (2) 25,000
Operating Expenses 25,000
Working Capital(3) 67,500
Total Use of Net Proceeds $125,000
(1) This is the approximate amount of net proceeds of the Offering
which the Company estimates will be used to purchase the equipment and
supplies necessary to operate the Company.
(2) This represents the amount the Company estimates it will expend
producing marketing literature, contacting potential clients, including
the placement of advertising materials indirect mail.
(3) The Company intends to use a significant portion of the net
proceeds to cover operating expenses and provide working capital during
the initial development phase of operations. The Company believes this
amount is sufficient to provide the operating capital necessary to
operate the business until anticipated operating revenues can support
the Company.
ORGANIZATION WITHIN LAST FIVE YEARS
The Company is a start-up company organized in 1996. It has no
operating history. As soon as the money from this Offering is made available,
the Company expects to make all arrangements necessary so that it can commence
operations.
DESCRIPTION OF BUSINESS
Company History
The Company was incorporated under the laws of the state of Nevada on
March 13, 1996 for the purpose of becoming a wholesaler of sporting goods,
primarily associated with the shooting sports. Because of a lack of funding, the
Company has not been able to commence operations. In April 1998, the Company
acquired all of the outstanding stock of Cap's Sporting Goods Wholesale, Inc.,
and thereby obtained the $3,007.55 in cash held in that company. The Company has
concluded to begin its wholesale sporting goods business through its new
operating subsidiary, Cap's. Since acquiring Cap's and undertaking to begin
business operations, the Company has raised a net $2,625 in new equity capital
in private offering in late June, 1998. The present
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Offering will provide further needed start-up and working capital to get the
Company started on its business plan. There is no assurance that the Company can
successfully commence operations or successfully implement its business plan.
The Sporting Goods Industry
According to the National Sporting Goods Association (the "NSGA"),
total U.S. retail sales of sporting goods (including sporting equipment,
athletic footwear and apparel, but excluding recreational transportation
products) were approximately $41.6 billion in 1996, an increase from $39.2
billion in 1995. The retail sporting goods industry is comprised of four
principal categories of retailers: (i) large format sporting goods stores, which
typically range from 30,000 to 80,000 square feet in size and emphasize high
sales volumes and a large number of SKUs in a warehouse-style store, (ii)
traditional sporting goods stores, which typically range in size from 5,000 to
20,000 square feet and carry a more limited assortment of merchandise and are
often viewed by their customers as convenient neighborhood stores, (iii)
specialty sporting goods stores, consisting of specialty stores and pro shops,
generally specializing in one product category of sporting goods, and (iv) mass
merchandisers, including discount retailers, warehouse clubs and department
stores, which although generally price competitive, have limited customer
service and a more limited selection.
Business Strategy
The Company is aiming its wholesale supplier concept at the third
category, the specialty stores and pro shops, particularly the organized
shooting sports and hunting clubs in the Western United States, initially
focusing on Utah, Wyoming and Nevada. The Company will likely offer a broad
selection of hunting and shooting supplies and accessories, including such top
brand names as: Laport, Benelli, Fiochi, Outlaw, Bushnell, Remington and
Winchester.
Management Issues
It is anticipated that the management of the Company will maintain
outside employment and devote only part time to the affairs of the Company
during the initial phases of the Company's business plan. The President
initially will be employed part time for a regular salary of $2,500 per month.
Officers and directors will be entitled to reimbursement of any reasonable out
of pocket expenses actually incurred on behalf of the Company. Assuming the
success of the Company's business plan, Fred Hall will eventually work full time
for the Company. The Company intends to hire other full- and part-time employees
as needed, but will not do so unless and until the Company's business operations
so justify. The exact amount of any compensation to be paid has not been
determined but management intends, to the extent possible, to only pay
compensation out of revenues and to keep payments to a minimum until operations
have fully commenced.
Competition
The Company intends to supply shooting clubs and hunting clubs with
ammunition, clay targets and related accessories and products. These clubs
resell such products to their members and guests, much in the way a golf course
or tennis court pro shop operates. Shooting and hunting clubs generally purchase
relatively small quantities of products because of their size. Thus they are an
economic combination of a wholesale purchaser and a retail customer. However the
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Company believes that the small size of the hunting club and shooting club
market has discouraged competitors aiming to service that market, like the
Company.
In many product areas, large mass merchandisers, like Wal-Mart, Costco,
Sam's Club and the like can offer products in bulk and at prices competitive
with traditional wholesalers. The study of the hunting and shooting club
industry informally conducted by the Company, indicates that not enough
purchasing of clay targets and other shooting sports products takes place at
mass retailers to allow for supplies and pricing that otherwise comes with such
mass retailers. The Company believes that service relationships and wholesale
pricing it intends to offer can effectively compete with mass retailers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Overview of Business Plan
The Company's purpose is to engage in the business of wholesale
sporting goods, primarily catering to the private shooting sports clubs by
providing high quality and cost-effective supplies of ammunition, clay targets
and related products such as shooting clothing. The Company believes that the
growth in organized shooting sports, particularly in the form of shooting clubs,
hunting clubs, etc. in the Western United States has not been met with the level
of organized wholesale marketing of shooting sports products that exists in the
Eastern United States, where organized shooting sports clubs is an older
industry.
The Company's own informal investigation indicates that several
manufacturers of shooting sports products and supplies are willing to sell to
new entrants into the wholesale market like the Company, although other
manufacturers require credit histories and financial support that the Company
will be unable to deliver at the beginning of its business operations.
Initially the Company has leased a small office with limited
warehousing space at a reasonable rate (currently $750 per month) from which to
operate its business. The Company plans on using shipment of products to its
customers directly from manufacturers, and therefore the Company does not
anticipate needing large warehouse space.
Inasmuch as there is no assurance that the Offering will be successful
or that the Company will receive any net proceeds therefrom, to date, the
Company has not entered into any contracts or commitments for leasing of
offices, purchasing of equipment, and buying customer databases. Therefore,
there is no assurance the Company will be able, with the proceeds of this
Offering, to lease adequate office space, acquire sufficient equipment, or
purchase sufficient potential client databases to commence operations.
Results of Operations
The Company has made no sales to date, and has earned no operating
revenues since its inception in early 1998. Still in its organizational stage,
the Company has used shareholder equity and borrowed funds to provide cash to
pay ongoing expenses. This has resulted in an accumulated year-to-date operating
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loss of ($28,015) as of September 30, 1998, which equates to a loss of ($0.03)
per share.
Financial Condition
The Company had cash of $1,425.00 at September 30, 1998, far less than
it requires to pay the expenses of this Offering and other operating costs
currently being incurred. The expenditure of borrowed funds to pay operating
costs has resulted in a negative shareholders equity of ($23,890.00) at
September 30, 1998. If the Company is unsuccessful at raising the $150,000
sought from this Offering, it appears to be unable to continue in the
development of its business without some other source of equity funding. It is
unlikely that further debt funding will be possible except from the limited
resources of Management.
DESCRIPTION OF PROPERTY
The Company owns no real property. The Company currently leases a small
office at 55 West 200 North, Suite 3, in Provo, Utah. The Company will likely
use this or a similar size office as its principal executive offices until the
Company's business requires more extensive administrative facilities. At all
times, the Company intends to locate appropriate office space and negotiate
agreements to lease office space as business operations require and will support
such action.
MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
At present, the Company's Common Stock is not traded publicly. There is
no assurance that a trading market will develop, or, if developed, that it will
be sustained. A purchaser of Shares may, therefore, find it difficult to resell
such Shares should he or she desire to do so when eligible for public resales.
Furthermore, shares of the Company's Common Stock are not marginable, and it is
unlikely that a lending institution would accept the Company's Common Stock as
collateral for a loan.
Through this Prospectus, the Company proposes to publicly offer 100,000
shares of the Company's Common Stock. To date, no shares of Common Stock are
subject to outstanding options, warrants to purchase or securities convertible
into Common Stock.
EXECUTIVE COMPENSATION
To date, Fred Hall has been paid an average of $1785 per month by Cap's
since February 1998. The Company presently has no formal employment agreements.
The Company has agreed informally with Fred Hall to pay him $2,500 per month for
his services as Chief Executive Officer if this Offering is successful.
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DETERMINATION OF OFFERING PRICE
The offering price of the Shares was arbitrarily determined by the
Company. There is no relationship between the offering price of the Shares and
the Company's assets, earnings, book value, net worth or other economic or
recognized criteria or future value of the Company's shares.
DILUTION
As of September 30, 1998, the Company had 1,503,500 shares of Common
Stock issued and outstanding and a negative book value of ($0.015) per share.
This Offering will bring the outstanding shares of Common Stock to 1,603,500.
The net proceeds to the Company from this Offering are expected to be $125,000.
Adding these net proceeds to the September 30, 1998 book value and dividing by
the number of shares outstanding after the Offering discloses a per share book
value of approximately $0.063, adjusted for the Offering. Therefore, the
Investors who purchase in this Offering will suffer an immediate dilution in the
book value of their shares of approximately $1.437 or approximately 95.8%, and
the present shareholders will receive an immediate book value increase of
$0.078 per share.
"Dilution" means the difference between the price of the Shares
purchased by Investors in this Offering from the pro forma net book value per
share after giving effect to the offering. "Book value" is obtained by
subtracting the total liabilities from the total assets (total assets less
intangible assets and offering expenses). Book value per share is determined by
dividing the number of shares outstanding into net book value of shares
immediately after the Offering.
Comparative Data
The following table illustrates the pro forma proportionate ownership
in the Company, upon completion of this Offering, of present stockholders and of
investors in the Offering, compared to the relative amounts paid and contributed
to the capital of the Company by present stockholders and by Investors in this
Offering, assuming no changes in book value other than those resulting from the
Offering.
DILUTION TABLE
Shares Percent Cash
Owned Paid Price/Share
-----------------------------------------------
Present Shareholders 1,503,500 0.029% $0.002
New Investors 100,000 99.97% $1.500
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TERMS OF THE OFFERING
The Offering will not be sold through selling agents. The officers and
directors of the Company will sell the shares offered hereunder on a "best
efforts" basis. If the total 100,000 shares of Common Stock are not sold within
the 150 days (120 days from the date of this Prospectus, plus a possible
additional 30 days if elected by the Company) possible under this Offering, all
Investor funds will be refunded to the subscribing Investors without interest or
deduction of any kind.
Pending the closing of the Offering, all Investor funds will be held in
a separate escrow account maintained at a national bank by A. Robert Thorup of
Ray Quinney & Nebeker, 79 South Main Street, Salt Lake City, Utah 84111.
The Company will only accept cash or certified funds, which must be
accompanied by a completed subscription agreement in the form attached to this
Prospectus as Appendix A.
Investors must complete and submit the Subscription Agreement, the form
of which is attached to this Prospectus.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, THAT INFORMATION AND REPRESENTATIONS MUST
NOT BE RELIED ON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
IT OFFERS TO ANY PERSON IN ANY JURISDICTION IN WHICH THAT OFFER OR SOLICITATION
IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION IN
THIS PROSPECTUS IS CORRECT AS OF ANY DATE LATER THAN THE DATE OF THIS
PROSPECTUS.
THE SHARES HAVE NOT BEEN REGISTERED IN ANY STATE EXCEPT COLORADO AND NEW YORK,
AND MAY ONLY BE OFFERED OR TRADED IN SUCH OTHER STATES PURSUANT TO AN EXEMPTION
FROM REGISTRATION. PURCHASERS OF SHARES EITHER IN THIS OFFERING OR IN ANY
SUBSEQUENT TRADING MARKET WHICH MAY DEVELOP MUST BE RESIDENTS OF STATES IN WHICH
THE SECURITIES ARE REGISTERED OR EXEMPT FROM REGISTRATION. SOME OF THE
EXEMPTIONS ARE SELF-EXECUTING, THAT IS TO SAY THAT THERE ARE NO NOTICE OR FILING
REQUIREMENTS, AND COMPLIANCE WITH THE CONDITIONS OF THE EXEMPTION RENDER THE
EXEMPTION APPLICABLE. THE COMPANY WILL AMEND THIS PROSPECTUS FOR THE PURPOSE OF
DISCLOSING ADDITIONAL STATES, IF ANY, IN WHICH THE COMPANY'S SECURITIES WILL
HAVE BEEN REGISTERED OR AN EXEMPTION IS AVAILABLE. See "RISK FACTORS - State
Blue Sky Registration; Restricted Resales of the Securities."
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LEGAL PROCEEDINGS
To the knowledge of the officers and directors of the Company, neither
the Company nor any of its officers or directors is a party to any material
legal proceeding or litigation and such persons know of no material legal
proceeding or litigation contemplated or threatened. There are no judgments
against the Company or its officers or directors. None of the officers or
directors has been convicted of a felony or misdemeanor relating to securities
or performance in corporate office.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the directors, executive officers
promoters and control persons of the Company, their ages, and all offices and
positions held within the Company. Directors are elected for a period of one
year and thereafter serve until their successor is duly elected by the
stockholders and qualified. Officers and other employees serve at the will of
the Board of Directors.
Name of Officer or Director Age Term Served Positions with the
as Officer/Director Company
Fred Hall 32 3/96 - present President, Secretary,
Treasurer and
Director; President,
Secretary and
Director of Cap's
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table provides information known to the Company
concerning those persons who, as of the date of this Prospectus, were the
beneficial owners of 5% or more of the Company's Common Stock, which is the only
type of security the Company currently has issued and outstanding.
Name and Address Amount & Nature of % of
Beneficial Ownership(1) Class After Offering
Fred L. Hall 1,500,000 common shares 99.7% 93.5%
All officers and
directors as a group
(1 person) 1,500,000 common shares 99.7% 93.5%
(1) The term "beneficial owner" refers to both the power of investment
(the right to buy and sell) and rights of ownership (right to receive
distributions from the Company and proceeds from the sales of shares). Inasmuch
as these rights may be held or shared by more than one person, each person who
has a beneficial ownership interest in shares is deemed to be the beneficial
owners of the same shares because there is shared power of investment or shared
rights of ownership.
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DESCRIPTION OF THE SECURITIES OF THE COMPANY
The following summary describes the material provisions of the
Company's Articles of Incorporation and Bylaws relating to the securities being
offered hereby, copies of which documents will be furnished to an investor upon
written request therefor. Pursuant to the Company's Articles of Incorporation,
no director or officer shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
person as a director or officer. Notwithstanding the foregoing sentence, a
director or officer shall be liable to the extent provided by applicable law,
(I) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation of
applicable law. The foregoing limitations do not affect the standards to which
directors must conform in discharging their duties to stockholders or modify the
availability of equitable relief for breach of duty. Further, the foregoing
limitations do not affect the availability of relief under causes of action
based on Federal law, including the Federal securities laws. The shares being
registered pursuant to the registration statement of which this prospectus is a
part are shares of Common Stock, all of the same class, and entitled to the same
rights and privileges as all other shares of Common Stock.
Description of Common Stock.
The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock with a $.0001 par value. As of the date of this Registration
Statement, the Company has outstanding 1,503,500 shares of its Common Stock, all
of which have been validly issued, fully paid and nonassessable.
Holders of the Company's Common Stock are entitled to receive dividends
when declared by the Board of Directors out of funds legally available
therefore. Any such dividends may be paid in cash, property or shares of the
Company's Common Stock. The Company has not paid any dividends since its
inception. All dividends will be subject to the discretion of the Company's
Board of Directors, and will depend upon, among other things, the operating and
financial conditions of the Company, its capital requirements and general
business conditions. Therefore, there can be no assurance that any dividends on
the Company's Common Stock will be paid in the future.
All shares of the Company's Common Stock have equal voting rights and,
when validly issued and outstanding, will have one vote per share on all matters
to be voted upon by the shareholders. Cumulative voting in the election of
directors is not allowed, and a quorum for shareholder meetings shall result
from a majority of the issued and outstanding shares present in person or by
proxy. Accordingly, the holders of a majority of the shares of Common Stock
present, in person or by proxy at any legally convened shareholders' meeting at
which the Board of Directors is to be elected, will be able to elect all
directors and the minority shareholders will not be able to elect a
representative to the Board of Directors.
Shares of the Company's Common Stock have no pre-emptive or conversion
rights, no redemption or sinking fund provisions, and are not liable for further
call or assessment.
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Each share of the Company's Common Stock is entitled to share pro rata
any assets available for distribution to holders of its equity securities upon
liquidation of the Company. During the pendency of the offering, subscribers
will have no rights as stockholders of the Company until the offering has been
completed and the Shares have been issued to them.
Description of Preferred Stock.
The Company is also presently authorized to issue 5,000,000 shares of
$.0001 par value Preferred Stock. Under the Company's Articles of Incorporation,
as amended, the Board of Directors has the power, without further action by the
holders of the Common Stock, to designate the relative rights and preferences of
the preferred stock, and issue the Preferred Stock in one or more series as
designated by the Board of Directors. The designation of rights and preferences
could include preferences as to liquidation, redemption and conversion rights,
voting rights, dividends or other preferences, any of which may be dilutive of
the interest of the holders of the Common Stock or the Preferred Stock of any
other series.
The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company without further shareholder action
and may adversely effect the rights and powers, including voting rights, of the
holders of Common Stock. In certain circumstances, the issuance of Preferred
Stock could depress the market price of the Common Stock. The Board of Directors
effects a designation of each series of Preferred Stock by filing with the
Nevada Secretary of State a Certificate of Designation defining the rights and
preferences of each such series. Documents so filed are matters of public record
and may be examined in accordance with procedures of the Nevada Secretary of
State, or copies thereof may be obtained from the Company.
Transfer Agent.
Interwest Transfer Company, Inc., 1981 East Murray-Holladay Road, Salt
Lake City, Utah 84117, Telephone (801) 272-9294 is the transfer agent and
registrar for the Company's outstanding securities.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The tax treatment to a holder of Common Stock may vary depending on
such holder's particular situation. Potential investors should consult their own
tax advisors as to the tax treatment that may be anticipated to result from the
ownership or disposition of common stock in their particular circumstances,
including the application of foreign, state or local tax laws or estate and gift
tax considerations.
INTEREST OF NAMED EXPERTS AND COUNSEL
None of the experts named herein was or is a promoter, underwriter,
voting trustee, director, officer or employee of the Company. Further, none of
the experts was hired on a contingent basis and none of the experts named herein
will receive a direct or indirect interest in the Company.
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Legal Matters
Certain legal matters will be passed upon for the Company by Ray
Quinney & Nebeker, of Salt Lake City, Utah. Attorneys at Ray Quinney & Nebeker
hold no shares in the Company and have no rights to acquire any such shares.
Accounting Matters
The June 30, 1998 financial statements included in this Prospectus and
elsewhere in the Registration Statement have been audited by Tanner + Co.,
Certified Independent Public Accountants, located in Salt Lake City, Utah, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports.
WHERE TO FIND ADDITIONAL INFORMATION
The Company has filed with the United States Securities and Exchange
Commission (the "Commission") a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended (the "Securities Act), with respect to the
securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus does not contain all of the information contained in
the Registration Statement. For further information regarding both the Company
and the securities offered hereby, reference is made to the Registration
Statement, including all exhibits and schedules thereto, which may be inspected
without charge at the public reference facilities of the Commission's
Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
may be obtained from the Washington, D.C. office upon request and payment of the
prescribed fee. The Company is an electronic filer. The Commission maintains a
Web site that contains a copy of this Prospectus and the related Registration
Statement, reports, proxy and information statements and other information
regarding issuers that file reports with the Commission. The Commission's Web
site address is (http:/www.sec.gov).
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited and reported upon by its
independent accounting firm and such other periodic reports as the Company may
determine to be appropriate or as may be required by law. As of the date of this
Prospectus, the Company became subject to the informational requirements of the
Exchange Act and, in accordance therewith, will file reports and other
information with the Commission. The Company will not file a Form 8-A or other
Registration Statement under the Securities Exchange Act in the near future, and
will only be subject to Section 15(d) of the Exchange Act following the
effective date of the Registration Statement. Therefore the Commission's proxy
rules, short-swing profits regulations, beneficial ownership reporting
regulations and the bulk of the tender offer regulations will not be applicable
to the Company.
Reports and other information filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act will be available
for inspection and copying at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,and at
the following regional offices of the Commission: New York Regional Office,
Seven World Trade Center, 13th Floor, New York, New York 10048; Chicago Regional
Office,500 West Madison Street, Chicago, Illinois 60661. Copies of such material
may be obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Copies of the
Company's Annual, Quarterly and other Reports which will be filed by the Company
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with the Commission commencing with the Quarterly Report for the first quarter
ended after the date of this Prospectus (due 45 days after the end of such
quarter).
Copies of Commission filings and other reports will also be available
upon request, without charge, by writing Sportsman's Wholesale Company, 55 West
200 North, Provo, Utah 84601.
UNTIL 90 DAYS AFTER THE EFFECTIVE DATE OF THIS PROSPECTUS, ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
FINANCIAL STATEMENTS
The audited financial statements of the Company appearing in the
Registration Statement have been examined by Tanner + Co., Certified Public
Accountants, as indicated in its report contained herein. The financial
statements are included in the Registration Statement in reliance upon the
report of that firm as an expert in auditing and accounting.
The unaudited financial information as of September 30, 1998 presented
here was prepared by Management.
[This Space Left Blank Intentionally]
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No dealer, salesman or other person is authorized to give any information or to
make any representations other than those contained in this Prospectus in
connection with the offer made hereby. If given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities covered hereby in any jurisdiction or
to any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, in any circumstances, create any implication that there has
been no change in the affairs of the Company since the date hereof.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY............................................................2
RISK FACTORS..................................................................4
USE OF PROCEEDS..............................................................11
ORGANIZATION WITHIN LAST FIVE YEARS..........................................11
DESCRIPTION OF BUSINESS......................................................11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION..........................15
DESCRIPTION OF PROPERTY......................................................14
MARKET FOR THE COMPANY'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS...........................................14
EXECUTIVE COMPENSATION.......................................................14
DETERMINATION OF OFFERING PRICE..............................................15
DILUTION.....................................................................15
TERMS OF THE OFFERING........................................................16
LEGAL PROCEEDINGS............................................................17
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS.......................................................17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.....................................................17
DESCRIPTION OF THE SECURITIES OFFERED........................................18
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS....................................19
INTEREST OF NAMED EXPERTS AND COUNSEL........................................19
WHERE TO GET ADDITIONAL INFORMATION..........................................20
FINANCIAL STATEMENTS.........................................................21
Sportsman's Wholesale Company
100,000 Shares of Common Stock
PROSPECTUS
December , 1998
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of the
registrant are insured or indemnified in any manner against any liability which
they may incur in such capacity are as follows:
(a) Section 78.751 of the Nevada Business Corporation Act provides that
each corporation shall have the following powers:
1. A corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with the action, suit or proceeding if he acted in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interest of the corporation; and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as to which such
a person has been adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable to the corporation or for
amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction, determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding refereed to in subsections 1 and 2,
above, or in defense of any claim, issue or matter therein, he must be
indemnified by the corporation against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
23
<PAGE>
4. Any indemnification under subsections 1 and 2, above,
unless ordered by a court or advanced pursuant to subsection 5, must be made by
the corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made: (a) By the stockholders; (b)
By the board of directors by majority vote of a quorum consisting of directors
who were not parties to the act, suit or proceeding; (c) If a majority vote of a
quorum consisting of directors who were not parties to the act, suit or
proceeding so orders, by independent legal counsel, in a written opinion; or (d)
If a quorum consisting of directors two were not parties to the act, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
5. The certificate or articles of incorporation, the
bylaws or an agreement made by the corporation may provide that the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding must be paid by the corporation as they are incurred and in advance
of the final disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount if it
is ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. The provisions of this subsection
do not affect any rights to advancement of expenses to which corporate personnel
other than directors or officers may be entitled under any contract or otherwise
by law.
6. The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to this section: (a) Does not
exclude any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under the certificate or articles of
incorporation or any bylaw, agreement, vote of stockholders of disinterested
directors or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection 2, above, or
for the advancement of expenses made pursuant to this subsection 5, may not be
made to or on behalf of any director or officer if a final adjudication
establishes that his acts or omissions involved intentional misconduct, fraud or
a knowing violation of the law and was material to the cause of action; (b)
Continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
7. The registrant's Articles of Incorporation limit
liability of its Officers and Directors to the full extent permitted by the
Nevada Business Corporation Act.
ITEM 25. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to be
paid by the Company in connection with the Offering described in the
Registration Statement.
Amount
SEC registration fee $ 44.25
Blue sky fees and expenses $ 1,000.00
Printing and shipping expenses $ 2,500.00
Legal fees and expenses $15,000.00
Accounting fees and expenses $ 5,000.00
Transfer, Escrow and Miscellaneous expenses $ 1,000.00
Total $26,544.25
24
<PAGE>
* All expenses except SEC registration fee are estimated.
ITEM 26. Recent Sales of Unregistered Securities
On June 30, 1998, the Company sold 3,500 shares of unregistered Common
Stock to investors at the offering price of $0.75 per share. This offering was
conducted in reliance on Section 4(2) of the Securities Act and state corollary
exemptions. Based on its investigation of the purchasers, the Company believes
that the persons who purchased these shares were sophisticated investors with
the economic ability to lose their entire investment without a material adverse
effect on the investor's ability to provide for himself or his family.
On May 25, 1998, 1,000,000 shares of unregistered Company Common Stock
were issued to Fred Hall in exchange for 1,000,000 shares of Cap's common stock,
in a one share per one share exchange pursuant to the Agreement and Plan of
Reorganization. These shares were issued in reliance on the exemption found in
Section 4(2) of the Securities Act and corollary state exemptions. Mr. Hall was
an officer and sole shareholder of both companies, and was in that capacity an
"accredited investor" with respect to these shares.
On February 5, 1998, 500,000 shares of unregistered Company common
stock were issued to Fred Hall for cash at $0.001 per share. This transaction
took place in reliance on Section 4(2) of the Securities Act and corollary state
law exemptions. Mr. Hall was an officer and sole shareholder of the Company, and
was in that capacity an "accredited investor" with respect to these shares.
ITEM 27. Exhibits
Index SEC Reference
Exhibit No. Document
3.1 Articles of Incorporation
3.2 By-Laws
4.1 Agreement and Plan of Reorganization with Cap's
5 Opinion on Legality
21 Subsidiaries of the small business issuer
24.1 Consent of Tanner + Co.
24.2 Consent of Counsel to Issuer (included in Exhibit 5)
27 Financial Data Schedule
29.1 Escrow Agreement
29.2 Subscription Agreement
25
<PAGE>
ITEM 28. Undertakings
Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the undersigned Registrant hereby undertakes to file with
the Securities and Exchange Commission such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the Commission heretofore or hereafter duly adopted pursuant to
authority conferred to that section.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to its Articles of Incorporation or provisions of the
Nevada Revised Statutes, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question, whether or not such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to: (i)
Include any prospectus required by section 10(a)(3) of the Securities Act; (ii)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and (iii) Include any additional
or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act treat
each post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it has met
all of the requirements of filing on Form SB-2 and has authorized this
Pre-Effective Amendment No. 1 to be signed on its behalf by the undersigned, in
Salt Lake City, Utah, on December 21, 1998.
Sportsman's Wholesale Company
By: /s/ Fred L. Hall
--------------------------------------------
Fred L. Hall, Chief Executive Officer,
Sole Director and President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to Registration Statement has been signed by the following persons in
the capacities and on the date indicated.
Signatures Title Date
/s/ Fred L. Hall President, Sole Director and December 21, 1998
- ---------------- Chief Executive Officer
Fred L. Hall (Principal Executive and
Financial/Accounting Officer)
27
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Financial Statements
September 30, 1998 (Unaudited) and June 30, 1998 (Audited)
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Index to Consolidated Financial Statements
Page
Report of Tanner + Co. F-2
Consolidated balance sheet F-3
Consolidated statement of operations F-4
Consolidated statement of stockholders' deficit F-5
Consolidated statement of cash flows F-6
Notes to consolidated financial statements F-7
F-1
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
Sportsman's Wholesale Company
We have audited the accompanying consolidated balance sheet of Sportsman's
Wholesale Company and Subsidiary (a development stage company), as of June 30,
1998 and the related consolidated statements of operations, stockholders'
deficit and cash flows for the period February 5, 1998 (date of inception) to
June 30, 1998. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated 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 significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Sportsman's
Wholesale Company and Subsidiary (a development stage company), as of June 30,
1998 and the results of their operations and their cash flows for the period
February 5, 1998 (date of inception) to June 30, 1998, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in note 1 to the
consolidated financial statements, there is substantial doubt about the ability
of the Company to continue as a going concern. Management's plans in regard to
that matter are also described in note 1. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
TANNER + CO.
Salt Lake City, Utah August 14, 1998, except for note 1 which is dated December
9, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Consolidated Balance Sheet
- -----------------------------------------------------------------------------------------------------------
Assets September 30,
1998 June 30,
(Unaudited) 1998
-----------------------------------
Current assets:
<S> <C> <C>
Cash $ 1,425 $ 3,510
Related party receivable - 127
-----------------------------------
Total current assets 1,425 3,637
Vehicle, net of accumulated depreciation of $178 and $89
at September 30, 1998 and June 30, 1998 1,322 1,411
-----------------------------------
$ 2,747 $ 5,048
===================================
Liabilities and Stockholders' Deficit
Current liabilities:
Accrued expenses $ 12,612 $ 943
Related party notes payable 14,025 9,500
-----------------------------------
Total current liabilities 26,637 10,443
-----------------------------------
Commitments - -
Stockholders' deficit:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.0001 par value, 50,000,000 shares
authorized, 1,503,500 shares issued and outstanding 150 150
Additional paid-in capital 3,975 3,975
Accumulated deficit (28,015) (9,520)
-----------------------------------
Total stockholders' deficit (23,890) (5,395)
-----------------------------------
$ 2,747 $ 5,048
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Consolidated Statement of Operations
- ----------------------------------------------------------------------------------------------------------
Period
February 5,
Period Period 1998 (Date of
February 5, July 1, 1998 to Inception) to
1998 (Date of September 30, September 30,
Inception) to 1998 1998
June 30, 1998 (Unaudited) (Unaudited)
-----------------------------------------------------
<S> <C> <C> <C>
Revenue $ - $ - $ -
General and administrative expenses 9,175 17,784 26,959
Interest expense 345 711 1,056
-----------------------------------------------------
Loss before income taxes (9,520) (18,495) (28,015)
Income tax benefit - - -
-----------------------------------------------------
Net loss $ (9,520) $ (18,495) $ (28,015)
=====================================================
Loss per share $ (.01) $ (.02) $ (.03)
=====================================================
Weighted average number of shares
outstanding 921,000 921,000 921,000
=====================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Consolidated Statement of Stockholders' Deficit
February 5, 1998 (Date of
Inception) to June 30,
1998 and July 1, 1998 to
September 30, 1998
(Unaudited)
- ---------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock Additional
------------------------------------------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
February 5, 1998 - $ - - $ - $ - $ -
Issuance of
common stock for
cash - - 503,500 50 3,075 -
Issuance of
common stock in
exchange for
subsidiary - - 1,000,000 100 900 -
Net loss - - - - - (9,520)
-------------------------------------------------------------------------------------
Balance at
June 30, 1998 - - 1,503,500 150 3,975 (9,520)
Net loss July 1,
1998 to
September 30,
1998 (unaudited) - - - - - (18,495)
-------------------------------------------------------------------------------------
Balance at
September 30,
1998 (unaudited) - $ - 1,503,500 $ 150 $ 3,975 $ (28,015)
=====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Consolidated Statement of Cash Flows
- ----------------------------------------------------------------------------------------------------------
Period
February 5,
Period Period 1998 (Date of
February 5, July 1, 1998 to Inception) to
1998 (Date of September 30, September 30,
Inception) to 1998 1998
June 30, 1998 (Unaudited) (Unaudited)
-----------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (9,520 $ (18,495) $ (28,015)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 89 89 178
Increase in accrued expenses 943 11,669 12,612
-----------------------------------------------------
Net cash used in
operating activities (8,488) (6,737) (15,225)
-----------------------------------------------------
Cash flows from investing activities:
Purchase of vehicle (1,500) - (1,500)
(Decrease) increase in related party
receivable (127) 127 -
-----------------------------------------------------
Net cash (used in) provided by
investing activities (1,627) 127 (1,500)
-----------------------------------------------------
Cash flows from financing activities:
Proceeds from related notes payable 9,500 4,525 14,025
Issuance of common stock 4,125 - 4,125
-----------------------------------------------------
Net cash provided by
financing activities 13,625 4,525 18,150
-----------------------------------------------------
Net increase (decrease) in
cash 3,510 (2,085) 1,425
Cash, beginning of period - 3,510 -
-----------------------------------------------------
Cash, end of period $ 3,510 $ 1,425 $ 1,425
=====================================================
</TABLE>
F-6
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Notes to Financial Statements
June 30, 1998
- --------------------------------------------------------------------------------
1. Summary of Organization and Principles of Consolidation
Significant Sportsman's Wholesale Company (Sportsmans) was
Accounting Incorporated under the laws of the state of Nevada in
Policies March of 1996. Cap's Sporting Goods Wholesale, Inc.
(Caps) was incorporated under the laws of the state
of Utah in February 1998.
From March 1996 until February 5, 1998 (date of
inception) Sportsmans was an inactive company. On
February 5, 1998, Sportsmans became a development
stage enterprise as defined in Statement of Financial
Accounting Standards No. 7, "Auditing and Reporting
by Development Stage Enterprises."
On April 30, 1998, Sportsmans and Caps entered into
an agreement and plan of share exchange, whereby the
sole shareholder of Caps would exchange all of the
issued and outstanding common stock held in Caps, for
common stock of Sportsmans. At the time of the
exchange both Sportsmans and Caps were owned by the
same individual, therefore the plan of share exchange
is treated as a combination of entities under common
control and all assets and liabilities are stated at
historical value. The exchange resulted in 1,000,000
shares of Caps common stock being exchanged for
1,000,000 shares of Sportsmans common stock.
The consolidated financial statements consists of
Sportsmans and its wholly owned subsidiary Caps (the
Company), from February 5, 1998 (date of inception)
to June 30, 1998, as any transactions from February
5, 1998 to April 30, 1998 for the companies were
immaterial. All significant intercompany balances and
transactions have been eliminated.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will
continue as a going concern. As of June 30, 1998, the
Company had a deficit in working capital of $6,806,
and an accumulated deficit of $9,520 and incurred a
loss of $9,520 for the period February 5, 1998 (date
of inception) to June 30, 1998. These conditions
raise substantial doubt about the ability of the
Company to continue as a going concern. The
consolidated financial statements do not include any
adjustments that might result from the outcome of
this uncertainty.
F-7
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Summary of Going Concern - Continued
Significant The Company's ability to continue as a going concern
Accounting is subject to the attainment of profitable operations
Policies or obtaining necessary funding from outside sources.
Continued Management is in the process of an offering of its
common stock to increase equity and is also pursuing
business opportunities to provide sufficient cash
flows to meet the Company's obligations. It is not
known whether management will be successful in these
endeavors.
Concentration of Credit Risk
The Company maintains its cash in bank deposit
accounts which, at times, may exceed federally
insured limits. The Company has not experienced any
losses in such accounts and believes it is not
exposed to any significant credit risk on cash and
cash equivalents.
Cash and Cash Equivalents
For purposes of the statement of cash flows, cash
includes all cash and investments with original
maturities to the Company of three months or less.
Vehicle
The Company's vehicle is recorded at cost less
accumulated depreciation. Depreciation is provided
using the straight-line method over the estimated
useful life. Expenditures for maintenance and repairs
are expensed when incurred and betterments are
capitalized.
Income Taxes
Deferred income taxes are provided in amounts
sufficient to give effect to temporary differences
between financial and tax reporting.
Revenue Recognition
Revenue from direct sales is recognized upon shipment
of the product consigned inventory is recognized as
revenue when the inventory is purchased from the
consignee by a consumer.
Loss Per Common and Common Equivalent Share The
computation of basic loss per common share is
computed using the weighted average number of common
shares outstanding during the period.
- --------------------------------------------------------------------------------
F-8
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
1. Summary of Loss Per Common and Common Equivalent Share Significant Continued
Accounting The computation of diluted loss per common share is Policies based
on the weighted average number of shares Continued outstanding during the
period plus common stock
equivalents which would arise from the exercise of
stock options and warrants outstanding using the
treasury stock method and the average market price
per share during the year. Common stock equivalents
are not included in the diluted loss per share
calculation when their effect is antidilutive.
Use of Estimates in Financial Statements The
preparation of financial statements in conformity
with generally accepted accounting principles
requires management to make estimates and assumptions
that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements.
Actual results could differ from those estimates.
Unaudited Financial Information
The unaudited financial statements include the
accounts of the Company and include all adjustments
(consisting of normal recurring items), which are, in
the opinion of management, necessary to present
fairly the financial position of the Company as of
September 30, 1998 and the results of operations and
cash flows for the three months then ended and the
cumulative amounts from February 5, 1998 (date of
inception) through September 30, 1998. The results of
operations for the periods ended September 30, 1998
are not necessarily indicative of the results to be
expected for the entire year.
2. Income The benefit for income taxes is different than Taxes amounts which
would be provided by applying the
statutory federal income tax rate to loss before
benefit for income taxes for the following reasons:
Federal income tax benefit at
statutory rate $ 1,000
Change in valuation allowance (1,000)
-----------
$ -
-----------
- --------------------------------------------------------------------------------
F-9
<PAGE>
SPORTSMAN'S WHOLESALE COMPANY
(A Development Stage Company)
Notes to Financial Statements
Continued
- --------------------------------------------------------------------------------
2. Income Deferred tax assets (liabilities) are comprised of
Taxes the following:
Continued
Net operating loss carryforwards $ 1,000
Valuation allowance (1,000)
------------
$ -
------------
At June 30, 1998, the Company has a net operating
loss carryforward available to offset future taxable
income of approximately $9,000, which will begin to
expire in 2018. The utilization of the net operating
loss carryforward is dependent upon the tax laws in
effect at the time the net operating loss
carryforwards can be utilized. The Tax Reform Act of
1986 significantly limits the annual amount that can
be utilized for certain of these carryforward as a
result of the change in ownership.
3. Related The related party receivable consists of an unsecured Party note from
an officer/shareholder. The note is due on Transactions demand and bears
interest at 12%.
The related party notes payable consists of notes
payable to an entity owned by the spouse of an
officer/shareholder. The notes are due on demand and
bear interest at 12%. At June 30, 1998, the Company
had accrued interest payable and recognized interest
expense of $345 related to these notes.
4. Supplemental There were no amounts paid for interest or income Cash Flow
taxes for the period February 5, 1998 (date of Disclosure capital
contribution) to June 30, 1998.
5. Common The Company is in the process of preparing an Stock Offering offering
to sell to up 100,000 shares of common stock
for $1.50 per share in a public offering.
- --------------------------------------------------------------------------------
F-10
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement on Form
SB-2 of our report dated August 14, 1998, relating to the financial statements
of Sportsman's Wholesale Company, and to the reference to our Firm under the
caption "Experts" in the Prospectus.
TANNER + CO.
Salt Lake City, Utah
December 18, 1998
