SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended February 29, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 000-27025
SPORTSPRIZE ENTERTAINMENT INC.
(Exact name of Registrant as specified in its charter)
Nevada 98-0207616
(Jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
13101 Washington Boulevard, Suite 131
Culver City, California 90066
(Address of principal executive offices)
Registrant's telephone number: (310) 566-7140
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, Par Value of $0.001 per Share
--------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The number of outstanding shares of the Registrant's Common Shares as of
May 31, 2000 was 17,585,374. The aggregate market value of the Registrant's
Common Shares held by non-affiliates as of May 31, 2000 was approximately US$7.3
million.
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TABLE OF CONTENTS
ITEM Page
PART I
ITEM 1. BUSINESS........................................................1
ITEM 2. PROPERTIES.....................................................36
ITEM 3. LEGAL PROCEEDINGS..............................................36
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............37
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS..........................................37
ITEM 6. SELECTED FINANCIAL DATA........................................38
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................45
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.......................45
ITEM 11. EXECUTIVE COMPENSATION ........................................48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT...............................................48
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K..........................................49
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Note Regarding Forward-Looking Statements
Except for statements of historical fact, certain statements in this
Annual Report on Form 10-K constitute "forward-looking statements" covered
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, including, without limitation, statements containing the words
"believes," "anticipates," "intends," "expects" and words of similar import, as
well as projections of future results. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results or achievements of the Registrant to be materially different from
any future results or achievements of the Registrant expressed or implied by
such forward-looking statements. Such factors include, but are not limited to,
the following: the Registrant's limited operating history; undercapitalization;
risks involving new product development; unpredictability of future revenues;
management of growth and integration; potential technological changes; the
Registrant's dependence on key personnel; marketing relationships and third
party suppliers; reliance on advertisers; potential new businesses, competition
and low barriers to entry; uncertain acceptance of the Internet as an
advertising medium; uncertain acceptance of the Registrant's SportsPrize
Tournament; limited experience in sales, marketing and advertising; dependence
on continued growth in use of the Internet; the Registrant's ability to protect
its intellectual property rights and uncertainty regarding infringing
intellectual property rights of others; potential capacity and systems
disruptions; liability for Internet content; government regulations; security
risks; and the other risks and uncertainties described under "Description of
Business - Risk Factors" in this Annual Report.
The Registrant's management has included projections and estimates in
this Annual Report, which are based primarily on management's experience in the
industry, assessments of the Registrant's results of operations, discussions and
negotiations with third parties and a review of information filed by its
competitors with the Securities and Exchange Commission. Investors are cautioned
against attributing undue certainty to management's projections.
Part I
Item 1: Business
General Overview
We, SportsPrize Entertainment Inc., are engaged in the business of
offering, marketing and promoting sports-related content, entertainment,
merchandise and other products on the Internet through our Web site at
http://www.sportsprize.com.
Our mission is to establish a leading Internet sports-based entertainment,
merchandising and community destination Web site. We intend to build an online
sports, entertainment and e-commerce community that appeals to sports fans from
around the world by providing three primary components on our Web site: (i)
sports-related content, (ii) the SportsPrize Tournament and (iii)
sports-oriented e-commerce.
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Content: We plan to offer the following sports-related content:
o Sporting news feeds;
o Sports trivia;
o Articles and sports commentary;
o Interviews with players, coaches and sports commentators;
o Player and team profiles;
o Team schedules and information;
o Ticket and sporting events information, and
o Chat rooms and message boards.
The SportsPrize Tournament: We have developed a proprietary, interactive
game called the "SportsPrize Tournament," which offers participants the
opportunity to compete in a multi-sport, predictive tournament where
participants answer weekly questions and accumulate points to win a wide variety
of prizes, as well as discounts on merchandise within our SportsPrize e-shopping
venues.
We expect that our SportsPrize Tournament will be the center-piece of the
SportsPrize.com(TM) Web site. The SportsPrize Tournament is designed to
integrate the excitement of sports-related content and information with the
communication and marketing capabilities of the Internet. We offer our
SportsPrize Tournament as free entertainment to visitors on our Web site who
become Registered Members on the site.
E-Commerce: Visitors to our Web site have the opportunity to purchase a
broad range of sports-related merchandise in our SportsPrize stores.
Based on our research, we believe that there are not any other
sports-oriented Web sites that currently provide all three components
(sports-related content, a multi-sport predictive tournament and sports-oriented
e-commerce), integrated into one comprehensive Web site. We believe that our
unique, multi-faceted Web site will become a destination for many sports fans on
the Internet. Our goal is to differentiate our Web site from our competitors'
Web sites through an aggressive marketing strategy. See "Marketing Strategy."
We intend to generate revenue by:
o Selling advertising and sponsorships on our Web site;
o Selling merchandise through our virtual SportsPrize e-commerce
shopping venues;
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o Licensing our content to other companies in the United States and
other countries; and
o Other marketing programs.
We are a development stage company, which means that we are in the process
of developing our business and we have limited revenue from our operations. We
have a history of losses, and as of February 29, 2000, we had an accumulated
deficit of $6,739,827, including $3,703,280 in non-cash compensation expenses
related to the issuance of stock and granting of stock options to certain of our
directors, employees and consultants. We incurred losses during the following
periods:
o $144,125 for the period from March 6, 1998 (inception) to February 28,
1999;
o $6,595,702 for the fiscal year ended February 29, 2000, including
$3,703,280 in non-cash compensation expenses related to the issuance
of stock and granting of stock options to certain of our directors,
employees and consultants.
We anticipate that we will continue to incur substantial losses for the
foreseeable future. Thus far, we have raised approximately $4,700,000 through
private placements to finance our business. We recently closed a private
financing transaction for gross proceeds of $1,050,000, and issued 9%
convertible debentures and warrants in connection with this transaction. We also
are in the process of seeking additional financing. We are attempting to raise
an additional $8,000,000 to fund our current plan of operation for fiscal year
ending February 28, 2001. See "Note Regarding Forward Looking Statements," and
"Plan of Operation." We cannot assure you that we will obtain additional
financing to implement our business plan on acceptable terms, if at all.
We launched the public version of our SportsPrize.com(TM) Web site on
December 29, 1999. Visitors to our SportsPrize.com(TM) Web site can play our
SportsPrize.com(TM) Tournament, access sports-related content and purchase
sports-oriented merchandise. Since the launch, we have test marketed the site
and built a total membership of approximately 14,000. However, we have not had
sufficient working capital to aggressively market and promote our Web site. We
cannot guarantee that our Web site will be commercially successful as planned or
that we will earn any revenue or profits from our operations.
We currently have relationships with DBC Sports to provide our
sports-related content and statistical information, as well as ShopSports.com to
provide merchandise and related order fulfillment services. We also have
established relationships with Boomer Esiason, James Worthy, Michael Buffer and
Steve Hartman to provide unique sports content and promote our Web site. See
"Sports Advisory Board." We are currently in the process of attempting to
establish other relationships with potential sports marketing groups, athletes
and content providers to provide additional content on our Web site, as well as
potential advertisers and sponsors to purchase advertising on our Web site. We
cannot assure you that we will successfully maintain our existing relationships
with DBC Sports, ShopSports.com or members
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of our Sports Advisory Board, or that we will enter into any new relationships
with vendors, athletes, content providers or advertisers.
We intend to compete in the highly-competitive Internet industry. Many of
our competitors have substantially greater financial, technical and other
resources than we have. Several competitors already have established Web sites,
brand names, strategic relationships with advertisers and other Web sites, and
user loyalty, all of which create a competitive advantage over us. We cannot
guarantee that we will be able to compete effectively or that we will ever
generate sufficient revenues from our operations to make our business
commercially viable.
Recent Developments
New Board of Director and Officer Appointments
Appointment of Michael Weisman as Director
On January 17, 2000, we appointed Michael Weisman as a member of our Board
of Directors. See "Directors and Officers of the Registrant."
Appointment of David Kenin as Chairman of the Board and Chief Executive
Officer
On April 17, 2000, we appointed David Kenin as our Chairman of the Board
and Chief Executive Officer. See "Directors and Officers of the Registrant."
Appointment of Alan Gerson as Vice Chairman of the Board
On April 17, 2000, we appointed Alan Gerson as Vice Chairman of the Board.
See "Directors and Officers of the Registrant."
Sports Advisory Board
During our fiscal quarter ended February 29, 2000, we entered into
agreements or arrangements with four sports celebrities to become members of our
"Sports Advisory Board" - Boomer Esiason, James Worthy, Michael Buffer and Steve
Hartman. The purpose of our Sports Advisory Board is to utilize sports
celebrities to provide unique and valuable insights about their careers and
respective sports, to develop compelling sports-related content for our site, as
well as generate highly-visible promotions for our site.
Boomer Esiason Service Agreement
We agreed to the principal terms of a service agreement, effective January
1, 2000, with Boomer Esiason, a former NFL quarterback and sports broadcaster.
The service agreement is anticipated to provide the following:
o Mr. Esiason would serve as a member of our Sports Advisory Board
for a term of two years, with an optional term of two additional
years at the mutual agreement of the parties;
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o Mr. Esiason would make an appearance at an introduction ceremony
and press conference for our Sports Advisory Board;
o We would have the limited right to use Mr. Esiason's name, image
and likeness for promotion of our business and our Web site;
o Mr. Esiason would promote our business and our Web site on his
radio show;
o Mr. Esiason would participate in an audio recording session to
produce radio advertising to promote our business and our Web
site;
o Mr. Esiason would participate in two appearances for our "Prizes
Money Can't Buy" program where he would meet with a winner of a
SportsPrize Tournament promotion;
o Mr. Esiason would provide content for our Web site, including
participating in sessions in our on-line chat rooms;
o Mr. Esiason would use his best efforts to promote the SportsPrize
Web site and our SportsPrize Tournament;
o Mr. Esiason would autograph memorabilia for prizes and promotions
for our SportsPrize Web site;
o We would grant Mr. Esiason options to acquire 110,000 shares of
common stock, exercisable at $0.01 per share pursuant to a
compensation plan;
o We would undertake to file a registration statement on Form S-8
to register the compensation plan; and
o We would pay expenses in connection with Mr. Esiason's services.
We are currently in the process of finalizing a definitive agreement with
Mr. Esiason and anticipate the agreement will be completed during our second
fiscal quarter of 2000. Thus far, Mr. Esiason has participated in one Prizes
Money Can't Buy in which we awarded a SportsPrize Tournament participant a trip
to Super Bowl 2000 and provided an opportunity for the participant to meet Mr.
Esiason, who broadcasted the Super Bowl for ABC Sports.
James Worthy Service Agreement
We entered into a service agreement effective March 1, 2000, with Big Game
James, Inc. for the services of James Worthy, a former NBA All-Star and current
broadcaster. The service agreement provided the following terms:
o Mr. Worthy would serve as a member of our Sports Advisory Board
for a term of one year, with an optional term of one additional
year;
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o Mr. Worthy would make an appearance at an introduction ceremony
and press conference for our Sports Advisory Board;
o We would have the limited right to use Mr. Worthy's name, image
and likeness for promotion of our business and our Web site;
o Mr. Worthy would participate in two appearances for our "Prizes
Money Can't Buy" program where he would meet with a winner of a
SportsPrize Tournament promotion;
o Mr. Worthy would provide content for our Web site, including
"Worthy's Best" and "Worthy's Worst" basketball memories and
participating in chat sessions on our on-line chat rooms;
o Mr. Worthy would use his best efforts to promote the SportsPrize
Web site and our SportsPrize Tournament;
o Mr. Worthy would autograph memorabilia for prizes and promotions
for our SportsPrize Web site;
o We would grant Mr. Worthy options to acquire 60,000 shares of
common stock, exercisable at $0.01 per share pursuant to a
compensation plan;
o We would undertake to file a registration statement on Form S-8
to register the compensation plan; and
o We would pay expenses in connection with Mr. Worthy's services.
Mr. Worthy has participated in one Prizes Money Can't Buy promotion, in
which we awarded a trip to a SportsPrize Tournament winner to attend the NCAA
men's national championship basketball tournament and provided the opportunity
to meet Mr. Worthy, who broadcasted some of the NCAA tournament games.
Michael Buffer Service Agreement
We agreed to the terms of a service agreement effective January 10, 2000,
with Michael Buffer and the Buffer Partnership for the services of Michael
Buffer, a very prominent sports announcer. The service agreement is expected to
provide the following terms:
o Mr. Buffer would serve as a member of our Sports Advisory Board
for a term of one year, with an optional term of one additional
year at the mutual agreement of the parties;
o Mr. Buffer would make an appearance at an introduction ceremony
and press conference for our Sports Advisory Board;
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o We would be permitted to use Mr. Buffer's name, image and
likeness as well as his trademark phrase "Let's get ready to
rumble" to promote our business and our Web site;
o Mr. Buffer would participate in an audio recording session to
produce radio advertising to promote our business and our Web
site;
o Mr. Buffer would participate in two appearances for our "Prizes
Money Can't Buy" where Mr. Buffer would meet with a winner of a
SportsPrize Tournament promotion;
o Mr. Buffer would provide content for our Web site, including
"Buffer's Best" and participating in sessions in our on-line chat
rooms;
o Mr. Buffer would use his best efforts to promote the SportsPrize
Web site and our SportsPrize Tournament;
o We would grant Mr. Buffer options to acquire 75,000 shares of
common stock, exercisable at $0.01 per share pursuant to a
compensation plan;
o We would undertake to file a registration statement on Form S-8
to register the compensation plan; and
o We would pay expenses in connection with Mr. Buffer's services.
Mr. Buffer has assisted us by recording promotional pieces for our Web
site.
Steve Hartman Service Agreement
We agreed to the terms of a service agreement effective January 10, 2000,
with 2 on 1 Sports for the services of Steve Hartman. The service agreement is
expected to provide the following terms:
o Mr. Hartman would serve as a member of our Sports Advisory Board
for a term of one year, with an optional term of one additional
year at the mutual agreement of the parties;
o Mr. Hartman would make an appearance at an introduction ceremony
and press conference for our Sports Advisory Board;
o Mr. Hartman would promote our business and our Web site on his
radio show, Time Out with Steve Hartman, in the Southern
California area;
o Mr. Hartman would participate in an audio recording session to
produce radio advertising to promote our Web site and our
business;
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o Mr. Hartman would participate in two appearances for our "Prizes
Money Can't Buy" where Mr. Hartman would meet with a winner of a
SportsPrize Tournament promotion;
o Mr. Hartman would provide content for our Web site, including
participating in sessions in our on-line chat rooms;
o Mr. Hartman would use his best efforts to promote the SportsPrize
Web site and the SportsPrize Tournament 2000;
o We would grant Mr. Hartman options to acquire 50,000 shares of
common stock, exercisable at $0.01 per share pursuant to a
compensation plan;
o We would undertake to file a registration statement on Form S-8
to register the compensation plan; and
o We would pay expenses in connection with Mr. Hartman's services.
We are currently in the process of finalizing the definitive agreement with
Mr. Hartman and anticipate that the agreement will be completed during the
second fiscal quarter of 2000. Thus far, Mr. Hartman has assisted us by
promoting our business and our Web site on his radio show.
Financing Transaction/Issuance of 9% Convertible Debentures/Warrants
On May 30, 2000, we issued two 9% Convertible Debentures, one in the amount
of $850,000 to Cutter Services Corp. and one in the amount of $200,000 to
Strathburn Investments Inc., for total gross proceeds of $1,050,000. We also
agreed to issue a warrant to Cutter Services to acquire 48,000 shares of our
common stock at $1.275 per share and a warrant to Strathburn Investments to
acquire 12,000 shares of our common stock at $1.275 per share. The warrants
expire on May 30, 2002. We paid Sonora Capital a finder's fee of $100,000 in
connection with the financing transaction. Cutter Services and Strathburn
Investments are non-U.S. persons, and the offer and sale were made outside the
United States in reliance on an exemption from registration under Regulation S
of the Securities Act of 1933, as amended.
The Debentures are convertible into shares of our common stock at the
lesser of $1.27 per share or 83% of the average of the three lowest consecutive
bid prices of our shares (as quoted on the NASD OTCBB) for the 30 days prior to
the date of conversion. If we complete a financing transaction with proceeds of
$1,000,000 or more, utilizing a convertible security (that is convertible into
common shares), which provides a minimum conversion price (or floor price), the
minimum conversion price of the Debentures shall be the lower of $1.00 or the
floor price of such securities issued in the subsequent offering. The Debenture
holders have piggyback registration rights with respect to the common shares
underlying the Debentures, and the Debentures accrue interest at the rate of 9%
per annum. We have the right to redeem the Debentures for 117% of the
outstanding balance, principal and accrued interest, at any time. The Debenture
holders are entitled to convert the Debentures at any time beginning August 31,
2000,
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provided that Cutter Services may convert no more than $283,333 of the principal
and interest during any 30-day period and Strathburn Investments may convert no
more than $66,667 of the principal and interest during any 30-day period. The
Debentures shall automatically covert to common stock on May 30, 2005. The
Debentures are secured by our assets, including our intellectual property,
software, technology and other assets.
Lock-up Agreement Among Certain Shareholders
Effective June 2, 2000, certain of the founding shareholders of
SportsPrize, Inc. and certain other shareholders of SportsPrize Entertainment,
Inc. entered into a 12-month lock up agreement as a condition to the 9%
convertible debenture financing arrangement. Under the terms of the lock up
agreement, these shareholders agreed to certain limitations related to the sale
of their SportsPrize shares, including an agreement that each participate will
be limited to selling each month the lesser of (a) five percent (5%) of the
SportsPrize shares held by such participant; (b) the number of shares equal to
such participant's pro rata share of 30% of aggregate number of shares of the
Company traded during the previous month, while the Company's shares continue to
be listed on the NASD OTCBB; or (c) 7,500 shares (the "Participant's Monthly
Eligibility"). The participant's "pro rata share" shall be determined by (i)
dividing the number of shares held by the participant by (ii) the total number
of Shares held by all Participants. In the event a participant materially
breaches these lock up restrictions, the participant has agreed to pay
SportsPrize liquidated damages in the amount of $5,000 for each violation, and
to contribute the entire proceeds from the sale of such shares in excess of the
Participant's Monthly Eligibility to SportsPrize.
Business Opportunities
The SportsPrize.com(TM) Community
Our goal is to build a community of loyal repeat visitors to our Web site
that will allow us to generate revenue from advertising, the sale of merchandise
and licensing of our proprietary content to other businesses. We anticipate that
visitors to our Web site will be able to enter an Internet community that allows
them to play our SportsPrize Tournament and monitor their Tournament rankings,
win prizes and discounts on merchandise in our e-shopping venues, view sporting
news feeds, check up-to-date sporting results, communicate with other
SportsPrize Members and sports enthusiasts in chat rooms, message boards, and
other forums. We do not charge visitors to enter the SportsPrize.com(TM)
community or to play our SportsPrize Tournament.
We anticipate that the SportsPrize.com(TM) community will be an online
community focused on sports-related games, news, events, e-commerce and
interactive products designed for people who love sports. We intend to develop
strategic relationships with content providers, fulfillment vendors,
manufacturers and marketers of sports-related products and services as well as
other Web sites to meet the needs of our users. Other than our contract to
obtain sports content and news feeds through DBC Corporation, content from
members of our Sports Advisory Board, and our merchandise and product
arrangements with ShopSports.com and Dreams Products, Inc., we have not entered
into any agreements to provide other content or merchandise.
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However, we anticipate that we will establish additional strategic relationships
with other content providers and merchandisers that will allow us to provide a
wide variety of diversified content and products on the SportsPrize.com(TM) Web
site.
By becoming part of the SportsPrize com(TM) community, we anticipate
visitors to our Web site will be able to share their sports interests in a
variety of ways, including playing in the SportsPrize Tournament and other
games, creating their own Tournament groups, sharing online shopping discounts,
exchanging news and views in chat rooms, and by using interactive services for
online access to experts such as athletes, coaches and commentators. We have
regular interaction with our Members and encourage them to provide feedback on
improving our Web site. In this way, we are able to understand and anticipate
the needs and interests of our Membership and help ensure that our overall
content and merchandising strategies will be attractive to our entire
Membership.
Our Sports Advisory Board is designed to help us create unique content
areas, prizes and special merchandising opportunities, and better promote our
business and our Web site. Current members of our Sports Advisory Board include
Boomer Esiason, James Worthy, Michael Buffer and Steve Hartman, and we are also
in the process of negotiating with other professional athletes to become members
of the Sports Advisory Board. Each member of the Sports Advisory Board has
agreed to provide content such as player tips, training techniques and
commentary on events and to participate in our chat rooms.
The online interactivity of the SportsPrize.com(TM) community is expected
to connect Members with each other and our sponsors and strategic associates on
many levels: global, regional, state or provincial and local. We plan to bring
the world of sports to Members' homes and offices and to enrich our Members'
world of sports with the communication powers of the Internet. We believe that
the SportsPrize.com(TM) community will allow Members to expand and enrich their
love of sports.
The SportsPrize Tournament
As part of our strategy to build and retain Membership in the
SportsPrize.com(TM) community, we have developed the SportsPrize Tournament, a
proprietary, interactive game that challenges and rewards players. The
SportsPrize Tournament allows sports enthusiasts and sports novices to compete
head to head in sports contests and predictive information-oriented games for
chances to win prizes and receive discounts on merchandise featured on our Web
site. Each week, the SportsPrize Tournament participants will answer brief
questions about upcoming sports events in a wide variety of sports. Winners of
the weekly SportsPrize Tournaments will qualify for prizes, including cash,
merchandise and discounts on sports-related-merchandise offered in our
SportsPrize e-shopping venues. Our goal is to use competition and the rewards of
the SportsPrize Tournament to attract visitors to our Web site and to keep
Members returning on a regular basis. We anticipate the SportsPrize Tournament
will offer a continuous stream of new weekly competitions covering sports from
around the world.
Registration to play in the SportsPrize Tournament requires Members to
provide us with certain demographic and other information including the
following:
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o Name;
o Gender;
o Age;
o E-mail address; and
o Zip code.
We may also gather other specific information that our advertisers and
sponsors may request.
A New Type of Online Competition
We believe the SportsPrize Tournament is a new type of online sports
entertainment experience. Our Members can play in the Tournament for free. We
designed the Tournament to incorporate a wide variety of sports information into
a game that challenges players with a series of questions related to various
sports from around the world. We believe this is a unique concept and one of the
primary features that distinguishes our SportsPrize Tournament from other games
and contests on the Internet.
Tournament Structure
SportsPrize Tournament participants are challenged to test their knowledge
of and insight into their favorite sports, teams, and athletes against other
participants. Each player who registers as a Member will be required to complete
a registration form to become a SportsPrize Tournament participant. Each Member
will automatically be entered in a series of pre-selected, public competitions
based on their geographic area.
We also encourage Members to form private competitions and to play against
their friends or co-workers. Members can structure private competitions for
associations with which they are affiliated, such as their school, social or
sports club, or neighborhood. A player must have at least five of his friends,
co-workers or other Members in order to register a private competition. We track
and report the results of these competitions.
Tournament Play
The SportsPrize Tournament combines the challenge of predicting the outcome
of an activity in a major sports event with the excitement of wagering credits
to win prizes. We have designed the Tournament to be simple and fun. Each
Wednesday morning a new weekly SportsPrize Tournament game begins. Active
players are automatically entered into these weekly competitions as well as the
ongoing monthly, quarterly and annual competitions.
We provide each player with 100 credits at the start of each weekly
Tournament. Each week, we create 10 to 30 questions relating to upcoming
sporting events for several different sports. A Tournament participant plays the
SportsPrize Tournament by submitting entry tickets
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with one to five questions selected per entry ticket. The more selections a
Tournament participant makes on an entry ticket, the more points the participant
can accumulate. If a Tournament participant answers all the questions correctly,
they will earn a certain number of points.
The Tournament questions provide a list of four athletes or teams to choose
from in a "multiple choice" format. Players may gather statistical information
about how the individuals or teams have performed by clicking on the "stats"
button. This button provides statistics about the individual player's or team's
performances in the sport last week, last month and year-to-date. This feature
is designed to level the playing field for all participants.
A Member may assign a portion or all of the 100 credits he receives in the
current week on any one question or allocate a portion of their 100 credits to
multiple questions regarding several sports events. Additionally, a Member is
able to increase the value of the points earned by answering more than one
question correctly on an entry ticket. Consequently, a player has the
opportunity to win points based upon several different strategies.
Players have the option of submitting entries from a single sport category
or from multiple sports categories, which is one of the features that
distinguishes this Tournament from other games on the Internet. Players may play
any category or categories they choose, and they may submit their tickets as
long as they have unused credits in their account.
The SportsPrize Tournament is designed to challenge players with multiple
layers of strategic choices, including selecting sports categories, the number
of questions to play within that entry and the number of credits to assign. Our
goal is to create an interactive environment, which will test knowledge and
intuition, and provide a multi-level competition with numerous chances to win.
We track and report Members' results from every competition on the "My
Standings" page, which contains statistical and performance information.
Winning Prizes
Members who play in the SportsPrize Tournament will have a chance to win a
wide variety of prizes and receive discounts on merchandise offered on our Web
site. We award prizes to the winners of the SportsPrize Tournament including:
o Cash;
o Merchandise such as TVs, VCRs, CD players and other electronic
devices;
o Trips and/or tickets to major sporting events;
o Sports memorabilia;
o Sportswear;
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o Sporting goods such as balls, rackets, golf clubs, athletic shoes
and other merchandise that is available from our SportsPrize
e-commerce shopping venues;
o Gift certificates from our SportsPrize e-commerce shopping
venues;
o SportsPrize t-shirts, caps, jackets and pennants; and
o Other prizes that may be offered by SportsPrize advertisers or
sponsors.
We also offer major prizes, which include automobiles, boats, all-terrain
vehicles, home gyms, as well as trips to the Super Bowl, NCAA Final Four,
Stanley Cup, NBA championship, World Series or other major sporting events. At
the end of the year, we plan to award the Annual Grand Prize of $1,000,000 in
the form of a 20-year annuity.
There are several different ways to win.
First, there are first, second and third place prizes awarded to the top
scorers in each weekly competition. Weekly, monthly, quarterly and annual
competition prizes include cash, merchandise, sporting event tickets and
SportsPrize t-shirts, caps and jackets.
Second, the top 100 weekly scorers are entered into the weekly sweepstakes
drawings for special prizes in the weekly competitions as well as the
monthly, quarterly and annual prize drawings in those competitions. Such
prizes include merchandise such as TVs, VCRs, CD players, other electronic
devices, home gyms and sport utility vehicles.
Third, "instant" prizes will also be awarded randomly every day, to add to
the fun and excitement of the SportsPrize Tournament. We anticipate that
instant prizes will consist of cash, merchandise, sporting event tickets
and SportsPrize t-shirts, caps, jackets and pennants.
Fourth, Tournament participants earn discounts on merchandise offered in
the Winners Store based on their scores in the Tournament. Weekly winners
will receive 5% to 35% discounts on a variety of products available in the
Winners Store.
Fifth, there will be an annual drawing to win a $1,000,000 Grand Prize,
payable as a 20-year annuity.
The more a player participates in the Tournament, the more chances the
player will have to win and qualify for our Annual Grand Prize drawing. Our
grand prize winner will be drawn from the top 100 weekly sweepstakes winners for
each week throughout the Tournament year. No purchase is necessary in order to
qualify for our prizes and discounts on merchandise.
We intend to motivate SportsPrize Members to encourage their friends to
play the SportsPrize Tournament by awarding Members Tournament credits for their
referrals. Additionally, we will award a SportsPrize.com(TM) hat to each Member
who gets five friends to join the Tournament; a SportsPrize.com(TM) T-shirt to
each Member who gets ten friends to join
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the Tournament; and a SportsPrize.com(TM) golf shirt to each Member who gets
twenty-five friends to join the Tournament.
We determine the specific prizes that will be awarded to winners for each
competition in advance of the competition. In the future, we anticipate we will
award products from the sponsors of our Web site as prizes. We currently do not
have any sponsors for our Web site, and we cannot assure you that we will
successfully secure any sponsorships for our Web site.
During our fiscal year ended February 29, 2000, we provided two major
prizes to participants in the SportsPrize Tournament:
1. A free trip to Super Bowl 2000 including a one-on-one visit with
Boomer Esiason, who broadcasted the game for ABC Sports;
2. A free trip to the NCAA men's national championship basketball
tournament including a one-on-one visit with James Worthy, who
broadcasted several tournament games for a variety of networks.
We expect to offer similar prizes for other major sporting events
throughout the year.
Revenue
We intend to generate revenue and profits from four primary sources: (i)
advertising and sponsorships, (ii) e-commerce, (iii) content licensing and (iv)
other marketing programs.
Advertising and Sponsorships
We intend to generate revenue by selling advertising and sponsorships to
merchandisers and manufacturers of goods, products and services. To date, we
have not entered into any agreements to sell advertising or sponsorships, and we
cannot assure you that we will successfully sell any advertising or
sponsorships. Internet advertising is highly competitive and many advertisers
require statistical verification of the demographic profiles and the number of
visits, impressions or page views that our Web site is delivering. Our limited
operating history and our lack of historical data has had an adverse affect our
ability to sell advertising and sponsorships or to enter into any revenue
generating relationships. Our inability to sell advertising or sponsorships may
have a material adverse effect on our business and results of operations.
Once we have sufficient resources to effectively promote and market our Web
site, we anticipate that our unique SportsPrize marketing system will allow us
to generate advertising revenues and the interest of advertisers. We believe
that our Web site is capable of generating multiple interactions between Members
of the SportsPrize.com(TM) community and advertisers and sponsors. When Members
visit, whether for SportsPrize Tournament play, sports news, chat or
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online shopping, they will be encouraged, through SportsPrize Tournament rewards
and other incentives, to view several advertiser pages.
The SportsPrize Tournament has been designed to be an Internet marketing
system with built-in features and incentives to attract players, build user
loyalty, and induce them to encourage their friends to visit our Web site and
play in the Tournament. These features and incentives include:
o A comprehensive prize program that includes weekly, monthly, quarterly
and annual prizes that are awarded based on Tournament success and
random drawings. At the end of the year, an Annual Grand Prize of
$1,000,000 will be awarded in the form of a 20-year annuity.
o Pop-up redemption notices that notify winners as they play and allow
them to continue playing and to claim their prizes later;
o Flexibility that allows players to create their own private pools,
which may generate opportunities for permission-based marketing, or
solicited advertising, as well as advertising or sponsorship
opportunities targeted at market segments in specific geographic
areas;
o A results and rankings system that informs players of their ranking in
a particular contest, which we believe will generate further marketing
and communications opportunities; and
o Rewards for logging on, such as being entered in "fantasy draws" for
instant prizes and discounts on merchandise.
These features are designed to create interest in the SportsPrize.com(TM)
Web site and attract visitors on a regular basis.
We intend to develop the SportsPrize Sponsorship Program, which we
anticipate will be an additional revenue source. We anticipate that sponsors
participating in the SportsPrize Sponsorship Program will place informational
and promotional links, product and sports information, advertising and other
sports-related information on our SportsPrize.com(TM) Web site. The program is
anticipated to include endorsements from advertisers and sports-related
merchandisers, equipment manufacturers, news organizations and sports event
promoters. We intend to charge fees to these sponsors for participation in the
program.
To date, we have not entered into any arrangements to sell advertising or
sponsorships. We cannot assure you that we will ever sell any advertising or
sponsorships.
E-Commerce
We offer shopping venues on our SportsPrize.com(TM) Web site that allow our
Members to purchase sports-related merchandise, goods and other products. Our
visitors and Members have
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the opportunity to purchase a wide range of merchandise, consisting of nearly
14,000 individual products in two SportsPrize e-shopping venues.
o Our SportsPrize SuperStore is designed to be an online sports
department store with a full range of sporting goods and apparel
offered at competitive prices. This e-commerce site is designed to be
a one-stop, online shopping destination for sports lovers. The
SportsPrize SuperStore is expected to present merchandise from
e-commerce companies that already sell sports merchandise online,
including ShopSports.com. We anticipate that we will share revenue or
profit equitably based on the traffic directed through and sales
generated in the SportsPrize.com(TM) Web site.
o Our Winners Store features select sports equipment, sportswear and
accessories, and sports-related merchandise offered directly by us or
our sponsors. SportsPrize Members will be offered discounts on
merchandise in this store based on their success in the SportsPrize
Tournament.
SportsPrize Members and SportsPrize Tournament Winners receive discounts on
selected merchandise in our e-shopping venues ranging from 5% to 35%.
Our inventory is owned and held by outside "merchandising and fulfillment
vendors" and shipped directly from these vendors to our customers. We entered
into a merchandising, distribution and customer service agreement with
ShopSports.com, related to merchandising, order fulfillment, packaging and
distribution of sports-related products ordered by our customers. Under our
Agreement, we share any profits equally with ShopSports.com on merchandise sold
through our e-shopping venues. ShopSports.com is our primary provider of
sports-related merchandise, product fulfillment and customer service. We began
selling merchandise to the public in January 2000, and believe that our revenues
will increase during our fiscal year ending February 28, 2001, as we increase
our marketing efforts and promotion.
We also have an agreement with Dreams Products, Inc. for order fulfillment
of sports-related memorabilia and sports collectibles. We have not yet begun to
offer sports-related memorabilia and sports collectible line of merchandise, but
expect to do so during our second fiscal quarter ending August 31, 2000. We
anticipate that we will obtain a substantial portion of our sports-related
memorabilia and sports collectibles as well as order fulfillment from Dreams
Products.
We update our site daily with inventory information received from our
vendors, which will enable our customers to check the availability of products
before ordering. We electronically transmit orders to our outside vendors at
least once a day and anticipate that orders will be shipped by these vendors
within one day after an order is placed. A customer's credit card is charged at
the time an order is shipped.
We have no fulfillment operation or warehouse facility of our own and,
accordingly, we are dependent on maintaining existing fulfillment relationships.
We cannot assure you that we will maintain our relationships with ShopSports.com
and Dreams Products or any other
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distributor capable of meeting our order fulfillment requirements beyond the
term of our existing agreements.
Except for our relationship with ShopSports.com and Dream Products, Inc.,
we have not entered into any other relationships with distributors,
merchandisers, manufacturers or other e-commerce companies related to offering
and selling products in any of our SportsPrize e-shopping venues. We cannot
assure you that we will successfully be able to continue to secure merchandise
that is attractive to our target market on acceptable terms or be able to offer
products at competitive prices. If we are unable to offer a broad range of
merchandise or to attract a broad range of e-commerce retailers to offer
merchandise and/or services on our SportsPrize.com(TM) Web site, our business
and results of operations will be adversely affected.
Content Licensing
The Company believes that its unique and proprietary Web site content is a
valuable asset that will be saleable to several Internet and media companies.
The Company intends on charging fees to license its content to a variety of
companies in the United States and foreign markets. To date, we have not entered
into any such relationships and there can be no assurance that the Company will
successfully make any content licensing arrangements with other companies.
Marketing Strategy
We do not plan to compete directly with existing sports and entertainment
Web sites. Instead, we anticipate SportsPrize.com(TM) will fill a complementary
market niche that is designed to combine the entertainment value of interactive
games and the challenge of sports competition with online merchandising,
promotion and marketing in an innovative way.
Our marketing strategy will be to target online sports enthusiasts who are
looking for both sports-related and entertainment content. We intend to use a
wide variety of promotions, including online promotions, print, radio, and
television promotions, and other promotions where SportsPrize. com(TM) visitors
have the opportunity to meet members of our Sports Advisory Board and to win
trips to major sporting events, to create interest in and awareness for our Web
site.
Online Marketing/Promotions
We intend to implement the following marketing strategies to attract our
target audience to the SportsPrize.com(TM) Web site:
Web Site Design: We designed our SportsPrize Tournament to encourage
players to return to our Web site frequently and to generate higher than
average page views per user. Additionally, the multiple components of our
Web site, including our Stats/Info Section, the SportsPrize e-shopping
venues and our community areas all create a one-stop opportunity for the
sports enthusiast. We also encourage Members to provide us with
comprehensive demographic information that may allow us to sell
advertising, sponsorships, as well as design personalized promotional
offers in the future based on the Member's individual interests and
preferences.
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Advertising Campaigns: We intend to implement online marketing campaigns on
a number of high traffic Web sites such as America Online, MSN, Yahoo! and
USA Today. We also will advertise on a wide variety of sports-related Web
sites to reach our targeted demographics. These campaigns are contemplated
to use a variety of online marketing techniques, including:
o Click-through advertisements that bring consumers directly to our
Web site;
o Advertising campaigns that collect the e-mail addresses of
visitors who wish to receive online promotions;
o Affiliate promotion campaigns; and
o Coupons, contests and other sponsorships.
We also will conduct special promotions at various times during the year,
such as the start of the baseball, football, basketball and hockey seasons
and during major sporting events. For example, we intend to create a
special contest on our Web site and special ticket give-aways for major
sporting events such as the Super Bowl, the NCAA Final Four, the Stanley
Cup, the Kentucky Derby, the NBA championship, the World Series, the U.S.
Opens and other major sporting events.
Affiliate Networks: We intend to develop an affiliate program that is
designed to enable other Web sites to create their own sports-related Web
site by linking directly to SportsPrize.com(TM). When visitors follow a
link to our SportsPrize e-shopping venues, the affiliated Web site receives
a commission ranging from approximately five percent to fifteen percent of
any referred sales. Since no payment is made to the affiliate unless a sale
is generated by the affiliate, the program is designed to be an efficient
means of acquiring new customers.
Direct Marketing Programs: We intend to use direct marketing to increase
purchases by existing customers of our SportsPrize e-shopping venues and
encourage our customers to refer visitors to our Web site by using email
promotional techniques, including providing special discounts for
purchases, special promotional offers, gifts and other specialized
marketing programs. In the future, we intend to:
o Conduct direct e-mail marketing campaigns to promote our Web
site;
o Offer discounts on targeted selections based on prior purchases;
o Offer gifts for referring new customers to our Web site; and
o Make additional purchases and reinforce our brand name.
The Internet is becoming increasingly crowded and the competition for
visitors is becoming more intense. Many Internet companies have very aggressive
marketing programs and have developed affiliations that drive traffic to their
Web sites. We cannot assure you that we
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will successfully market our Web site or attract a sufficient number of visitors
to implement our business plan. See "Note Regarding Forward Looking Statements."
Our inability to successfully market our Web site may have a material adverse
effect on our business and results of operations.
E-Commerce
We believe that the way in which certain products and services will be sold
in the future will increasingly shift toward the Internet. Businesses throughout
the world are developing their Web strategies to take advantage of this shift in
the way consumers search for product and service related information, and
purchase goods and services. We believe that an increasing percentage of
business advertising budgets will be allocated to Internet promotion and
marketing strategies. We believe advertisers are and will look for Web sites
that have the volume of users that match the demographic profile of their target
consumer. See "Note Regarding Forward Looking Statements."
We believe the growth in the Internet represents a substantial opportunity
for companies to conduct business online. Internet retailers are able to
communicate more effectively with customers by providing:
o Visual product presentations;
o Up-to-date pricing and product information in a consistent and
uniform format;
o Customer support, including opportunities for customer feedback;
o Product offerings tailored to customer preferences; and
o Electronic billing and payment systems.
We anticipate that our focus on sports entertainment and recreation will
create attractive demographic consumer profiles for merchandisers and marketers
of sports-related goods and services. As a result, we anticipate that we will be
able to sell advertising and sponsorships, and enter into promotional joint
ventures with a broad spectrum of sports-related businesses. We also anticipate
that our Web site will generate revenue from the sale of sports-related
merchandise through our virtual stores and through transactions facilitated
through our auction site. See "Note Regarding Forward Looking Statements."
Competition
We intend to compete in a highly competitive market. The competition among
Internet companies is fierce and there are many competitors that have
established brand names and users. We intend to compete with established Web
sites for advertising revenues, revenues from the sales of sports-related
merchandise and revenues from licensing content on our Web site.
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Advertising Revenue Competition
The online sports entertainment market in which we intend to compete is
comprised of many competitors, and we expect competition to increase. We also
intend to compete with other non-sports-related Internet sites for the time and
attention of consumers and for advertising and sponsorship revenue. Competition
among Internet sites is intense and is expected to increase significantly in the
future. Our Web site will also compete with a variety of companies that provide
similar offerings through one or more media, such as print, radio and
television. To compete successfully, we must develop and deliver popular,
original, entertaining, information and compelling product offerings. We have
not entered into any agreements to sell advertising on our Web site, and we
cannot assure you that we will sell any advertising in the near future, if at
all.
In our entertainment areas, including games, sports-related discussion
communities, sports merchandising and Internet shopping, we intend to compete
with various Internet sites, such as CBS SportsLine, ESPN.com, CNN/SI,
Sandbox.com and others. All of these competitors currently offer a wider range
of products, services, information and news than we contemplate offering. Their
products and services may be more attractive to Internet users than ours, and
may dissuade users from visiting our Web site.
We believe that our ability to compete will depend, to a great extent, upon
our ability to be a leader in the development and marketing of novel and unique
interactive sports-related entertainment games for our Web site and our ability
to offer a unique mix of sports-related information and merchandise. To be
successful, our Web site must be user friendly and we must respond effectively
to the challenges of technological changes and innovation by continually
enhancing our products and merchandise. The competitive factors affecting the
success of our Web site include product functionality, performance and
reliability, customer support, and cost effectiveness of our advertising
offerings.
We cannot assure you that our Web site content or our SportsPrize
Tournament will appeal to our target market, that we will generate sufficient
traffic on our Web site to sell advertising or that we will generate any
revenues from selling advertising on our Web site.
Retailing Merchandise Competition
The online market for retailing products and services on the Internet is
new and rapidly evolving. We expect to compete with traditional "bricks and
mortar" retail stores and other online retailers of sports-related products and
services. Our competitors include, among others:
o Online retailers, including FogDog.com, MVP.com, ShopSports.com, CBS
SportsLine, Gear.com and Justballs.com;
o Traditional retailers, including Oshman's SuperSports USA, Big 5
Sporting Goods, Gart Sports, The Sports Authority, Sportmart, Dick's
Sports and a variety of independent and regional retailers of
sports-related merchandise;
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o Specialty retailers of sports-related merchandise;
o Mail order retailers of sports-related merchandise; and
o Mass merchandisers and department stores, including Costco, Kmart,
Sears, Target and Wal-Mart.
Many of our competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial, marketing
and other resources than we have. To our knowledge, ShopSports.com, FogDog.com,
and SportsLine are market leaders in the sale of sports-related merchandise on
the Internet. Some of our competitors, like MVP.com, ShopSports.com, Gear.com,
Justballs.com, ESPN.com, CNN/SI, and CBS SportsLine, also may be able to secure
merchandise from vendors on more favorable terms, devote greater resources to
marketing and promotional campaigns, adopt more aggressive pricing or inventory
availability policies and devote substantially more resources to their Web sites
and systems development than we can. We believe that the principal competitive
factors the sale of sports-related merchandise on the Internet are:
o Product selection;
o Price;
o Timeliness of delivery;
o Ease of use and Web site convenience; and
o Brand recognition.
We cannot assure you that we will successfully compete against established
competitors or that we will generate sufficient revenues from the sale of
merchandise though our Web site to earn any profits.
Regulation
There are currently few laws or regulations directly applicable to access
to, or commerce on, the Internet. Due to the increasing popularity and use of
the Internet, it is possible that laws and regulations may be adopted, covering
issues such as user privacy, defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual property ownership and
infringement. Such legislation could expose us to substantial liability as well
as diminish the use of the Internet and decrease the acceptance of the Internet
as a communications and commercial medium. We may be required to incur
unanticipated expenses in complying with any new regulations and restrictions.
The European Union has recently adopted privacy and copyright directives
that may impose additional burdens and costs on international operations. In
addition, several telecommunications carriers, including America's Carriers'
Telecommunications Association, are seeking to have telecommunications over the
Internet regulated by the Federal
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Communications Commission, or FCC, in the same manner as other
telecommunications services.
Because the growing popularity and use of the Internet has burdened the
existing telecommunications infrastructure, many areas with high Internet usage
have begun to experience interruptions in phone services. Local telephone
carriers, such as Pacific Bell, have petitioned the FCC to regulate the Internet
and to impose access fees. Increased regulation or the imposition of access fees
could substantially increase the costs of communicating on the Internet,
potentially decreasing the demand for our content or the ability to access our
Web site.
A number of proposals have been made at the federal, state and local level
that would impose additional taxes on the sale of goods and services through the
Internet. Such proposals, if adopted, could substantially impair the growth of
e-commerce and could adversely affect us.
The United States recently passed the Digital Millennium Copyright Act,
which is intended to reduce the liability of online service providers for
listing or linking to third-party Web sites that include materials that infringe
copyrights. The United States also recently passed the Children's Online
Protection Act and the Children's Online Privacy Act, which will restrict the
distribution of certain materials deemed harmful to children and impose
additional restrictions on the ability of online services to collect user
information from minors. Further, the United States recently passed the
Protection of Children from Sexual Predators Act, which mandates that electronic
communication service providers report facts or circumstances from which a
violation of child pornography laws is apparent. We cannot currently predict the
effect, if any, that this legislation will have on our business. There can be no
assurance that this legislation will not impose significant additional costs on
our business or subject us to additional liabilities. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, copyright, defamation, obscenity and personal privacy is uncertain.
We may be subject to claims that our services violate rules, regulations or
applicable laws or the rights of third parties. Any new legislation or
regulation in the United States or abroad or the application of existing laws
and regulations to the Internet could damage our business.
In addition, our SportsPrize Tournament may be subject to state and local
laws related to sweepstakes and contests. We do not intend to charge any fees
for playing the SportsPrize Tournament or charge any fees or require any
purchases to be eligible to receive prizes or gifts. Although we do not believe
our SportsPrize Tournament violates any federal, state and local laws, there can
be no assurance that future federal, state or local legislation or regulations
will not adversely affect our operation of the SportsPrize Tournament. Any such
legislation may have a material adverse effect on our business and results of
operations.
Due to the global nature of the Internet, it is possible that the
governments of other states and foreign countries might attempt to regulate our
transmissions or prosecute us for violations of their laws. We might
unintentionally violate such laws. Such laws may be modified, or new laws may be
enacted, in the future. Any such development could damage our business.
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Research and Development
Our research and development program has consisted of developing
technologies related to our SportsPrize.com(TM) Web site and the SportsPrize
Tournament. As of February 29, 2000, we had spent $126,488 for research and
development, including expenses related to developing the SportsPrize Tournament
and other technological aspects of our Web site. Subsequent to the launch of the
Web site, we also conducted focus groups in March and in May 2000 to evaluate
the design, content and user experience on our Web site.
Trademarks and Patents
We have applied for trademark registration and protection for
"SportsPrize.com" in Canada and the United States. We have also applied for
patent protection in the United States for our system and method for delivering
targeted advertising through our SportsPrize Tournament marketing system.
However, we have not been granted any patents, copyrights or trademarks. In the
event we determine that we have created an asset whose value can be protected,
we will attempt to protect our proprietary assets by applying for patents,
copyrights or trademarks. In addition, we will endeavor to rely on trade secret
laws and non-disclosure and confidentiality agreements with our employees and
consultants who have access to our proprietary technology.
Employees or Consultants
As of February 29, 2000, we had fifteen employees or consultants. We
anticipate that we will hire an additional fifteen employees during fiscal year
ending February 28, 2001, including 5 content personnel, 5 technical personnel,
3 or 4 sales and marketing personnel and 1 or 2 administrative personnel. From
time to time, we may retain additional consultants and consulting firms to
provide us with special expertise in developing marketing, software and
telecommunications technologies.
History of Our Company
We were incorporated in the State of Nevada on August 25, 1995 as "Par
Golf, Inc." with an authorized share capital of 25,000,000 shares of common
stock with a par value of $0.001 per share.
We were generally inactive until August 1997. In August 1997, we commenced
the business of marketing advanced graphic technologies and services by offering
print and screen services to the wholesale and retail sectors of the screen,
print and publication industries. On August 21, 1997, we amended our Articles of
Incorporation and changed our authorized share capital to 25,000,000 shares,
consisting of 20,000,000 shares of common stock with a par value of $0.001 per
share and 5,000,000 shares of preferred stock with a par value of $0.001 per
share, and changed our name to "Kodiak Graphics Company". We did not generate
sufficient revenues to make this business plan commercially viable and abandoned
this business plan in the second quarter of 1999.
On May 14, 1999, we acquired all of the issued and outstanding shares of
SportsPrize Inc., a Nevada corporation, pursuant to a statutory share exchange.
SportsPrize Inc. was in the
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process of designing, developing, building and operating an Internet site
focused on the sports and entertainment sectors of the Internet market. In
connection with the share exchange, we amended our Articles of Incorporation to
change our name to "SportsPrize Entertainment Inc." on May 21, 1999.
At the time of the share exchange, we were a non-operating shell with no
revenues, expenses, assets or liabilities, and our book value was $1,440, which
was written down to zero at the time of the share exchange. Prior to our
acquisition of SportsPrize Inc., SportsPrize Inc. was engaged in the resource
exploration business. SportsPrize Inc. had an option to purchase mineral
property rights located in the Province of Alberta, Canada pursuant to an
agreement with Jody Dahrouge and Halferdahl & Associates, Ltd. SportsPrize Inc.
elected not to exercise the option, and the option expired unexercised on
February 11, 1999. In February 1999, SportsPrize Inc. shifted its business
strategy from resource exploration to developing an Internet business.
As a result of the share exchange, all of the assets of SportsPrize Inc.
became the assets of SportsPrize Entertainment Inc., and our historical and
ongoing operations are deemed to be those of SportsPrize Inc. for accounting
purposes. As such, we have presented our consolidated financial information for
the fiscal year ended February 29, 2000, and we have included the audited
financial statements of SportsPrize Inc. for the fiscal year ended February 28,
1999.
In June 1999, we amended our Articles of Incorporation to change our
authorized share capital to 105,000,000 shares consisting of 100,000,000 shares
of common stock with a par value of $0.001 per share and 5,000,000 shares of
preferred stock with a par value of $0.001 per share.
Our common stock is currently quoted on the National Association of
Securities Dealers' over-the-counter bulletin board and trades under the symbol
"JOCK".
SportsPrize Inc. is our sole subsidiary. We have not been subject to any
bankruptcy, receivership or other similar proceedings.
Risk Factors
We have included information in this Annual Report that contains "forward
looking statements." Our actual results may materially differ from those
projected in the forward looking statements as a result of risks and
uncertainties. Although we believe that the assumptions made and expectations
reflected in the forward looking statements are reasonable, we cannot assure you
that the underlying assumptions will, in fact, prove to be correct or that
actual future results will not be different from the expectations expressed in
this report. An investment in our securities is speculative in nature and
involves a high degree of risk. You should read this Annual Report carefully and
consider the following risk factors.
Insufficiency of current round of financing; our ability to carry out our
proposed business activities depends upon securing additional financing.
We are dependent upon the proceeds of additional financing in order to
implement our business plan. Unless we can obtain such financing, we will be
unable to conduct our business
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or to otherwise carry out all of our proposed business activities. There is no
assurance that we will be able to raise the funds sought in a timely manner, if
at all.
Our ability to fund our plan of operation depends on the securing of additional
capital in the amount of $8,000,000 or more through February 28, 2001.
We are attempting to raise additional capital in the amount of $8,000,000
or more during our fiscal year ending February 28, 2001, and no assurance can be
given that any additional financing would be available or, if available, that it
would be available on terms acceptable to us. See "Note Regarding Forward
Looking Statements" and "Plan of Operation." Furthermore, any issuance of
additional securities may result in dilution to the then existing shareholders.
If adequate funds are not available, we will lack sufficient capital to pursue
our business fully, which will have a material adverse effect upon our ability
to meet our business projections.
We may be required to sell additional common stock or parties may exercise
options and warrants that cause dilution of your shares.
The number of shares of our outstanding common stock held by non-affiliates
is large relative to the trading volume of our common stock. Any substantial
sale of our common stock or even the possibility of such sales occurring may
have an adverse effect on the market price of our common stock.
As of February 29, 2000, we had outstanding options to purchase an
aggregate of 3,825,000 shares of our common stock.
We also have reserved up to an additional 2,175,000 shares of common stock
for issuance upon exercise of options which have not yet been granted under our
stock option plan. Holders of the options are likely to exercise them when, in
all likelihood, we could obtain additional capital on terms more favorable than
those provided by the options. However, there can be no assurance that such
options will be exercised. Further, while our options are outstanding, our
ability to obtain additional financing on favorable terms may be adversely
affected.
We have a limited operating history and a history of losses, which makes our
ability to continue as a going concern questionable.
We have incurred net losses since our inception and anticipate that we will
continue to incur losses for the foreseeable future. As of February 29, 2000, we
had an accumulated deficit of $6,739,827, including $3,703,280 in non-cash
compensation expenses related to the issuance of stock and the grant of stock
options to certain of our directors, employees and consultants.
Due to a number of factors, we do not believe that our revenues will be
sufficient to support our operations in fiscal 2001. Therefore, in the
foreseeable future, we believe that such expenses will increase our net losses,
and we cannot assure you that we will ever be profitable.
As of February 29, 2000, we had approximately $485,000 in cash and cash
equivalents, and as of May 31, 2000, we had approximately $85,000 in cash and
cash equivalents. We are currently expending approximately $300,000 per month.
While we anticipate raising additional
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capital through issuance of our common stock or debt, we cannot assure you that
we will be able to obtain adequate financing or on terms favorable to us, to
support our operations. Our ability to continue as a going concern will depend
on our ability to obtain additional financing.
Because we have only recently begun operations, it is difficult to evaluate
our business and our prospects. Our revenue and income potential is unproven and
our business model is still emerging. We cannot assure you that we will attract
registered users, advertisers, consumers and network affiliates or achieve
significant revenues or operating margins in future periods. We cannot guarantee
we will ever achieve commercial success.
We do not intend to declare dividends, which may lower the market value of our
shares.
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
Broker-dealers may be discouraged from effecting transactions in our shares
because they are considered penny stocks and are subject to the penny stock
rules.
Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales
practice and disclosure requirements on NASD brokers-dealers who make a market
in "a penny stock." A penny stock generally includes any non-NASDAQ equity
security that has a market price of less than $5.00 per share. Our shares are
quoted on the OTCBB and the closing price of our shares on May 31, 2000 was
$0.4375 per share. As such, our shares will be deemed a penny stock for the
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed upon brokers-dealers may discourage broker-dealers from
effecting transactions in our shares, which could severely limit the market
liquidity of the shares and impede the sale of our shares in the secondary
market.
Under the penny stock regulations, a broker-dealer selling penny stock to
anyone other than an established customer or "accredited investor," generally,
an individual with net worth in excess of $1,000,000 or an annual income
exceeding $200,000, or $300,000 together with his or her spouse, must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the
broker-dealer or the transaction is otherwise exempt. In addition, the penny
stock regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Commission
relating to the penny stock market, unless the broker-dealer or the transaction
is otherwise exempt. A broker-dealer is also required to disclose commissions
payable to the broker-dealer and the registered representative and current
quotations for the securities. Finally, a broker-dealer is required to send
monthly statements disclosing recent price information with respect to the penny
stock held in a customer's account and information with respect to the limited
market in penny stocks.
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We lack current advertising agreements and our success depends on securing
relationships or agreements with a network of advertisers.
We currently have no relationships or agreements with advertisers, and we
believe that any relationships developed with advertisers will be terminable
within a short period of time. Consequently, our advertising customers, if any,
may move their advertising to competing Internet sites, or from the Internet to
traditional media, quickly and at relatively low costs, thereby increasing our
exposure to competing pressures and fluctuations in revenues and operating
results. In selling Internet-based advertising, we probably will depend on
advertising sales rep. firms, which will sell such advertising on our behalf.
Our ability to attract advertisers will depend on our ability to attract a
significant user base.
Our success will depend on our ability to convince advertisers and
advertising agencies of the benefits of advertising on our SportsPrize Web site,
and on our ability to retain, broaden and diversify our future base of
advertising customers. In order to generate significant advertising revenues, we
will depend on the development of a larger base of users possessing demographic
characteristics attractive to advertisers. If we are unable to attract and
retain paying advertisers or are forced to offer lower than anticipated
advertising rates, our business, financial condition and operating results will
be materially adversely affected and we may never achieve commercial success.
Our ability to secure and retain advertising revenues may depend on whether our
users actually access our advertisers' Internet sites.
Currently, we are seeking to negotiate advertising and sponsorship
arrangements with third parties to provide a variety of ad placements and
sponsorships on our Web site. In connection with these arrangements, we may
receive advertising and/or sponsorship fees as well as a portion of transaction
revenues received by sponsors in return for minimum levels of user impressions
or "click throughs" from our Web site to their Web sites. To the extent
implemented, these arrangements may expose us to potentially significant
financial risks, including the risk that we fail to deliver required minimum
levels of user impressions or click throughs, in which case, these agreements
typically provide for adjustments to the fees payable thereunder or "make good"
periods, and that third party sponsors do not renew the agreements at the end of
their terms. We anticipate that certain of these arrangements will require us to
integrate sponsors' content with our services, which may require the dedication
of resources and significant programming and design efforts to accomplish. We
cannot guarantee that we will be able to attract sponsors or that we will be
able to renew sponsorship arrangements, if any, when they expire.
Our ability to contract with advertisers may be materially limited by
exclusivity provisions of certain of our sponsors.
We anticipate that we will grant exclusivity provisions to certain of our
sponsors. Such exclusivity provisions may have the effect of preventing us, for
the duration of such exclusivity arrangements, from accepting advertising or
sponsorship arrangements within a particular subject
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matter in our Web site or across our entire service. Our inability to enter into
further sponsorships or advertising arrangements as a result of its exclusivity
arrangements could have a material adverse effect on our business, financial
condition and operating results.
Our success depends on the services of our Chief Executive Officer, our
President, Chief Financial Officer and Treasurer, our Senior Vice President of
Corporate Finance, our Senior Vice President and Controller, and our ability to
attract and maintain qualified, experienced personnel.
Our future success depends on the services of David Kenin, our Chief
Executive Officer, Bruce Cameron, our President, Chief Financial Officer and
Treasurer, Robert Hunziker, our Senior Vice President of Corporate Finance and
Donald MacKay, our Senior Vice President and Controller. The loss of these key
personnel could have an adverse effect on our operations, and we do not maintain
insurance to cover losses that may result from the death of any of our key
personnel. We also heavily rely upon consultants and advisors who are not
employees. Our ability to attract, train and retain qualified, experienced
personnel and management is uncertain. Competition for qualified employees is
intense, and an inability to attract, retain and motivate additional, highly
skilled personnel required for expansion of operations and development of
technologies could adversely affect our business, financial condition and
results of operations. Most of our officers and directors has been affiliated
with us for less than one year. We cannot assure you we will be able to retain
our existing personnel or attract additional, qualified persons when required
and on acceptable terms.
We have capacity constraints and system development risks that could damage our
customer relations or inhibit our possible growth, and we may need to expand our
management systems and controls quickly.
Our success and our ability to provide high quality customer service,
largely depends on the efficient and uninterrupted operation of our computer and
communications systems and the computers and communication systems of our third
party vendors in order to accommodate any significant numbers or increases in
the numbers of consumers and advertisers using our service. Our success also
depends upon us and our vendors' abilities to rapidly expand
transaction-processing systems and network infrastructure without any systems
interruptions in order to accommodate any significant increases in use of our
service. We have engaged Frontier/Global Center to provide Internet servers and
Internet connectivity for our Web site, and we are dependent on Frontier/Global
Center's ability to deliver such services.
Although we anticipate that we and our vendors will enhance and expand our
respective transaction-processing systems and network infrastructure as they
grow, we and our vendors may experience periodic systems interruptions and
infrastructure failures, which we believe may cause customer dissatisfaction and
may adversely affect our results of operations. Limitations of our technology
infrastructure and our vendors' technology infrastructures may prevent us from
maximizing our business opportunities.
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Our ability to adapt our management systems and controls quickly may depend on
the availability of certain employees or contractors.
In addition, we expect that many of our software systems and our vendors'
software systems may be custom-developed and that we and our vendors may rely on
employees and certain third-party contractors to develop and maintain these
systems. If certain of these employees or contractors become unavailable, we and
our vendors may experience difficulty in improving and maintaining these
systems. Furthermore, we expect that we and our vendors may continue to be
required to manage multiple relationships with various software and equipment
vendors whose technologies may not be compatible, as well as relationships with
other third parties to maintain and enhance their technology infrastructures.
Our failure and our vendors' failure to achieve or maintain high capacity data
transmission and security without system downtime and to achieve improvements in
our respective transaction processing systems and network infrastructure could
adversely affect our business and results of operations.
Our commercial viability depends on our ability to successfully develop our
SportsPrize Tournament and to successfully attract and retain users with
demographic characteristics valuable to advertisers.
We believe our commercial viability depends in large part upon our ability
to develop and provide the SportsPrize Tournament and our ability to
successfully attract and retain users with demographic characteristics valuable
to the various advertisers and advertising agencies. We cannot assure you that
our products and services will be attractive enough to a sufficient number of
Internet users to generate advertising revenues or that we will be able to
anticipate, monitor and successfully respond to rapidly changing consumer tastes
and preferences so as to attract a sufficient number of users to our SportsPrize
Web site within the demographics desirable to potential advertisers and
advertising agencies.
Internet users can freely navigate and instantly switch among a large
number of Internet sites, many of which offer competitive entertainment products
and services, making it difficult for us to distinguish our product offerings
and attract users. In addition, many other Internet sites offer very specific,
highly targeted single sports event media that may have greater appeal than the
sports categories that will be offered on our SportsPrize Web site. In addition,
users of the Internet who do not use the most recent browser or operating
software will have greater difficulty in accessing and navigating our
SportsPrize Web site than users who use the most recent versions of such
software. Such difficulty could cause Internet users to cease using our
SportsPrize Web site. If we are unable to develop original and compelling
Internet-based entertainment in a manner that allows us to attract, retain and
expand a loyal user-base targeted by advertisers and advertising agencies, then
we will be unable to generate sufficient advertising or subscription revenues,
and our business, financial condition and operating results will be materially
adversely affected.
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We anticipate expanding into new business areas that require significant
expenses and programming and that have no guaranteed market.
The success of our business strategy will depend to a significant extent on
our ability to successfully develop the SportsPrize Tournament and to expand our
offerings into other revenue generating areas such as subscription-based
products and services and other e-commerce opportunities. We cannot guarantee
that we will be able to develop the SportsPrize Tournament into a successful
game or that visitors or potential advertisers or sponsors will accept the
concept of the SportsPrize Tournament. We cannot assure you that we will
successfully expand into other areas, develop and launch any new entertainment
concepts or enhance existing ones.
Any expansion of product offerings or operations, or new games developed
and launched by us that are not favorably received by Internet users could
damage our reputation or the SportsPrize.com(TM) brand.
Expansion into new business areas or the development and launching of new
games also will require significant additional expenses and programming and
other resources and will strain our management, financial and operational
resources. Furthermore, any expansion of business areas and the developing and
launching of new games, as well as the enhancement of our contemplated
SportsPrize Tournament, will necessarily rely on untested business models. Our
failure to develop and launch the SportsPrize Web in a cost effective and timely
manner will have a material adverse effect on our business, financial condition
and operating results.
We cannot guarantee that our venture will ever achieve profitability, and a
failure by us to recover the substantial investment required to launch and
operate our Web site would have a material adverse effect on our business,
financial condition and operating results.
The e-commerce industry is highly competitive, and we cannot assure you that we
will be able to compete effectively.
The market for Internet-based products and services is relatively new,
intensely competitive and rapidly evolving. There are minimal barriers to entry,
and current and new competitors can launch new Internet sites at a relatively
low cost within relatively short time periods. In addition, we compete for the
time and attention of Internet users with thousands of non-profit Internet sites
operated by, among other persons, individuals, government and educational
institutions. Existing and potential competitors also include magazine and
newspaper publishers, cable television companies and start-up ventures attracted
to the Internet market. Accordingly, we expect competition to persist and
intensify and the number of competitors to increase significantly in the future.
Should we seek in the future to attempt to expand the scope of our Internet site
and product offerings, we will compete with a greater number of Internet sites
and other companies. Because the operations and strategic plans of existing and
future competitors are undergoing rapid change, it is extremely difficult for us
to anticipate which companies are likely to offer competitive products and
services in the future. We cannot guarantee that our SportsPrize Web site will
compete successfully. In addition, expansion into new business areas and new
entertainment offerings may bring us into direct competition with new
competitors.
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Due to the emerging nature of Internet commerce, we are unable to forecast our
expenses and revenues accurately, and should our expenses exceed our revenues,
we may never become profitable.
As a result of the emerging nature of the Internet, including
Internet-based advertising, services and electronic commerce, we are unable to
forecast our expenses and revenues accurately. We believe that due primarily to
the relatively brief time the Internet has been available to the general public,
there are several uncertainties related to the successful operation of any form
of Internet business. Our current and future estimated expense levels are based
largely on our estimates of future revenues and may increase considerably. Few,
if any, of our operating expenses can be quickly or easily reduced, such as the
laying off of personnel or reducing our commitment to our consultants and
service providers, in a manner which would not cause a material adverse effect
to our business, financial condition and operating results. In addition, we may
be unable to adjust spending in a timely manner to compensate for any unexpected
expenditures; and a shortfall in actual revenues as compared to estimated
revenues would have an immediate material adverse effect on our business,
financial condition and operating results.
Our ability to generate revenues will depend upon advertisers' acceptance of the
Internet as an advertising medium and upon the on the use of the Internet by
consumers.
Use of the Internet by consumers is at a very early stage of development
and market acceptance of the Internet as a medium for information,
entertainment, commerce and advertising is subject to a high level of
uncertainty. We believe that our success depends upon our ability to obtain
significant revenues from our Internet operations, which will require the
development and acceptance of the Internet as an advertising medium. We believe
that most advertisers and advertising agencies have limited experience with the
Internet as an advertising medium and neither advertisers nor advertising
agencies have devoted a significant portion of their advertising budgets to
Internet-related advertising to date. In order for us to generate advertising
revenues, advertisers and advertising agencies must direct a portion of their
budgets to the Internet as a whole, and specifically to our Web site. There can
be no assurance that advertisers or advertising agencies will be persuaded, or
able, to allocate or continue to allocate portions of their budgets to
Internet-based advertising, or if so persuaded or able, that they will find
Internet-based advertising to be more effective than advertising in traditional
media such as television, print or radio, or in any event decide to advertise on
our Internet sites. Moreover, we cannot assure you that the Internet advertising
market will develop as an attractive and sustainable medium that we will achieve
market acceptance of our products or that we will be able to execute our
business strategy successfully.
Acceptance of the Internet among advertisers and advertising agencies will
also depend on the level of use of the Internet by consumers, which is highly
uncertain, and on the acceptance of the alternative new model of conducting
business and exchanging information presented by the Internet. Advertisers and
advertising agencies that have invested resources in traditional methods of
advertising may be reluctant to modify their media buying behavior or their
systems and infrastructure to use Internet based advertising. Furthermore, no
standards to measure the effectiveness of Internet based advertising have yet
gained widespread acceptance, and we cannot
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assure you that such standards will be adopted or adopted broadly enough to
support widespread acceptance of Internet-based advertising. If Internet-based
advertising is not widely accepted by advertisers and advertising agencies, our
business, financial condition and operating results will be materially adversely
affected and we may cease to be a commercially viable enterprise.
Our business may be harmed if the recent growth in the use of the Internet is
limited by inadequate infrastructure, technology or standards and protocols.
Rapid growth in the use of and interest in the Internet is a recent
phenomenon, and we cannot assure you that acceptance and use of the Internet
will continue to develop or that a sufficient base of users will emerge to
support our business. Revenues from our Internet operations will depend largely
on the widespread acceptance and use of the Internet as a source of information
and entertainment and as a vehicle for commerce in goods and services. The
Internet may not be accepted as a viable commercial medium for a number of
reasons, including potentially inadequate development of the necessary
infrastructure, lack of timely development of enabling technologies or lack of
commercial support for Internet-based transactions and advertising. To the
extent that the Internet continues to experience an increase in users, an
increase in frequency of use or an increase in the bandwidth requirements of
users, there can be no assurance that the Internet infrastructure will be able
to support the demands placed upon it. In addition, the Internet could lose its
viability as a commercial medium due to delays in the development or adoption of
new standards and protocols required to handle increased levels of Internet
activity, or due to increased government regulation. Changes in or insufficient
availability of telecommunications services to support the Internet also could
result in slower response times and could adversely affect use of the Internet
generally and of our Internet sites in particular. If use of the Internet does
not continue to grow or grows more slowly than expected, or if the Internet
infrastructure does not effectively support growth that may occur, our business,
financial condition and operating results would be materially adversely
affected.
Our success may depend on successfully developing and defending intellectual
property rights without which competitors may copy aspects of our products or
services.
We anticipate our success will depend significantly on our proprietary
technology. We intend to rely primarily on a combination of patent, copyright,
trademark and trade secret laws, license agreements, non-disclosure agreements
and other contractual provisions to establish, maintain and protect our
proprietary rights in our products and technology, all of which afford only
limited protection. We have applied for intellectual property protection for our
SportsPrize marketing system technology, and we have put in place agreements
attempting to protect our intellectual property. There can be no assurance that
our intellectual property protection applications will be granted or that we
will be able to continue to successfully negotiate agreements protecting our
intellectual property. In addition, despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or services or to obtain and use information that we regard as
proprietary. Third parties may also independently develop similar technology
without breach of our proprietary rights. In addition, the laws of some foreign
countries do not protect the proprietary rights to the same extent as do the
laws of the United States.
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If we cannot protect our Internet domain name, our ability to conduct our
operations may be impeded.
We anticipate that the Internet domain name, "SportsPrize.com(TM)" will be
an extremely important part of our business. Governmental agencies and their
designees generally regulate the acquisition and maintenance of domain names.
The regulation of domain names in the United States and in foreign countries may
be subject to change in the near future. Governing bodies may establish
additional top-level domains, appoint additional domain name registrars or
modify the requirements for holding domain names. As a result, we may be unable
to acquire or maintain relevant domain names in all countries in which we
conduct business. Furthermore, the relationship between regulations governing
domain names and laws protecting trademarks and similar proprietary rights is
unclear. Therefore, we may be unable to prevent third parties from acquiring
domain names that are similar to, infringe upon or otherwise decrease the value
of our trademarks and other proprietary rights.
Our business may be harmed by claims that we have infringed intellectual
property rights of others.
Claims of infringement are becoming increasingly common as the software
industry develops and legal protections are applied to software products.
Litigation may be necessary to protect our proprietary technology, and third
parties may assert infringement claims against us with respect to their
proprietary rights. Any claims or litigation can be time-consuming and expensive
regardless of their merit. Infringement claims against us could cause product
release delays, require us to redesign our products or require us to enter into
royalty or license agreements, which agreements may not be available on terms
acceptable to us or at all.
Changing technology may render our equipment, software and programming obsolete
or irrelevant.
The market for Internet-based products and services is characterized by
rapid technological developments, frequent new product introductions and
evolving industry standards. The emerging character of these products and
services and their rapid evolution will require that we continually improve the
performance, features and reliability of our Internet-based products and
services, particularly in response to competitive offerings. There can be no
assurance that we will be successful in responding quickly, cost effectively and
sufficiently to these developments. In addition, the widespread adoption of new
Internet technologies or standards could require substantial expenditures by us
to modify or adapt our Internet sites and services and could fundamentally
affect the character, viability and frequency of Internet-based advertising,
either of which could have a material adverse effect on our business, financial
condition and operating results. In addition, new Internet-based products,
services or enhancements offered by us may contain design flaws or other defects
that could require costly modifications or result in a loss of consumer
confidence, either of which could have a material adverse effect on our
business, financial condition and operating results.
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Our business may encounter periodic system disruptions that may harm our ability
to attract and retain advertisers.
The satisfactory performance, reliability and availability of our
SportsPrize.com(TM) Web site and our computer network infrastructure are
critical to attracting Internet users and maintaining relationships with
advertising customers. Our Internet-based advertising revenues will be directly
related to the number of advertising impressions delivered by us. We have
engaged Frontier/Global Center to provide an Internet solution to meet our
systems requirements. System interruptions that result in the unavailability of
our Internet sites or slower response times for users would reduce the number of
advertisements delivered and reduce the attractiveness of our Internet sites to
users and advertisers. We may experience periodic systems interruptions from
time to time in the future.
Our Internet operations are vulnerable to interruption by fire, earthquake,
power loss, telecommunications failure and other events beyond our control. We
cannot assure you that interruptions in service will not materially adversely
affect our operations in the future. While we will carry business interruption
insurance to compensate us for losses that may occur, there can be no assurance
that such insurance will be sufficient to provide for all losses or damages
incurred by us.
If system constraints are exceeded, our operations may be subject to system
disruptions that harm our business.
Additionally, any substantial increase in traffic on our Internet site may
require us to expand and adapt our computer network infrastructure. Our
inability to add additional computer software, hardware and bandwidth to
accommodate increased use of our Internet sites may cause unanticipated system
disruptions and result in slower response times.
We cannot assure you that we will be able to expand our computer network
infrastructure on a timely basis to meet increased use. Any system interruptions
or slower response times resulting from the foregoing factors could have a
material adverse effect on our business, financial condition and operating
results.
We depend on third parties for uninterrupted Internet access and may be
harmed by the loss of any such service.
We are dependent on Frontier/Global Center, an Internet service provider
located in Sunnyvale, California, and on other third parties for uninterrupted
Internet access. In addition, we are dependent on various third parties for
substantially all of our information. Loss of such services from any one or more
of such third parties may have a material adverse effect on our business,
financial condition and operating results. We cannot guarantee whether, or on
what terms, we would be able to obtain such services from other third parties in
the event of the loss of any of such services.
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Increased security risks of online commerce may deter future use of our services
which may adversely affect our ability to generate revenues.
We intend to institute security measures designed to protect our Internet
site and other operations from unauthorized use and access. We have implemented
a firewall with a redundant backup to prevent all but standard Web traffic, with
the exception of a small opening for secure and encrypted terminal connections.
We also have isolated our database on a server that is sitting on a private
network. This means that someone would have to break into our firewall and
external network before trying to get into our database. Our servers are housed
in Frontier/Global Center's Sunnyvale Network Operations Center. Security
measures employed at this location include biometric hand scanners, ramming
ballards, laser sniffers and bullet proof glass. Such measures cannot guarantee
complete security, however, and a party who is able to circumvent our or our
vendors' security measures could misappropriate proprietary information or cause
interruptions in our Internet operations.
We may be required to expend significant capital and resources to protect
against the threat of such security breaches or to alleviate problems caused by
such breaches. Concerns over the security of Internet transactions and the
privacy of users may also inhibit the growth of the Internet generally,
particularly as a means of conducting commercial transactions. To the extent
that our activities or the activities of any third party contractors involve the
storage and transmission of proprietary information, such as computer software
or credit card numbers, security breaches could expose us to a risk of loss or
litigation and possible liability. We cannot guarantee that contractual
provisions attempting to limit our liability in such areas will be successful or
enforceable, or that parties will accept such contractual provisions as part of
our agreements.
In addition, while we believe that both our and our vendors' data
repositories, financial systems and other technology resources will be secure
from security breaches or sabotage, we cannot guarantee that this will continue
to be true as technology changes and becomes more sophisticated.
Our business may be subject to government regulation and legal uncertainties
that may increase the costs of operating our Internet site or limit our ability
to generate revenues.
As a publisher and a distributor of content over the Internet, we face
potential liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
that we publish or distribute. In addition, we could be exposed to liability
with respect to the content or unauthorized duplication of material indexed in
our search services. Our liability insurance may not cover potential claims of
this type or may not be adequate to indemnify us for all liability that may be
imposed. Any imposition of liability that is not covered by insurance or is in
excess of insurance coverage could have a material adverse effect on our
business, financial condition and operating results. There are currently few
laws and regulations directly applicable to the Internet, but it is possible
that new laws and regulations will be adopted covering issues such as, among
other things, pricing, characteristics and quality of Internet products and
services. As a provider of Internet-based products and services, we are subject
to the provisions of existing and future federal and local legislation that
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could be applied to our operation. Such legislation could also dampen the growth
of the Internet generally and decrease the acceptance of the Internet as an
advertising medium, and could, thereby, have a material adverse effect on our
business, financial condition and operating results.
Our SportsPrize Tournament may be subject to regulatory review under state and
federal gaming laws that may limit our ability to generate revenues.
There is substantial risk that our SportsPrize Tournament may be subject to
regulatory review by state and federal regulatory authority as the size of our
prizes grow. Although we will not charge visitors to the SportsPrize.com(TM) Web
any registration fees, require any purchase to play the SportsPrize Tournament,
charge any cost to deliver prizes or gifts or otherwise imply that a purchase is
required to play the SportsPrize Tournament, there can be no assurance that the
SportsPrize Tournament will not be subject to investigation or review by
federal, state local regulatory authorities.
Our business may be subject to sales and other taxes, which may cause
administrative difficulties and increase our cost of operations.
One or more states may seek to impose additional sales tax collection
obligations on companies such as ours that engage in or facilitate online
commerce. Several proposals have been made at the state and local level that
would impose additional taxes on the sale of goods and services through the
Internet. These proposals, if adopted, could substantially impair the growth of
electronic commerce, and could diminish our opportunity to derive financial
benefit from our activities. The U.S. federal government recently enacted
legislation prohibiting states or other local authorities from imposing new
taxes on Internet commerce until October 21, 2001. This tax moratorium will last
only for a limited period and does not prohibit states or the Internal Revenue
Service from collecting taxes on our income, if any, or from collecting taxes
that are due under existing tax rules. A successful assertion by one or more
states or any foreign country that we should collect sales or other taxes on the
exchange of merchandise on our system could harm our business and adversely
affect our results of operations.
Item 2: Properties
On September 27, 1999, we entered into a short-term lease agreement with
eOfficeSuites, Inc. for office space located at 13101 Washington Boulevard,
Suite 131, Culver City, California. The term of the lease was for two months
from October 1, 1999 through November 30, 1999, and has continued on a month to
month basis. Currently, the base rent is $9,000 per month, and we agreed to pay
additional rent of $2,000 per month for other services including furniture
rental, telephone instruments and voice mail, high speed Internet service and
parking.
We do not presently own or lease any other property or real estate.
Item 3: Legal Proceedings
As of the date hereof, there is no material litigation pending against the
Company. From time to time, the Company is a party to litigation and claims
incident to the ordinary course of its business. While the results of litigation
and claims cannot be predicted with certainty, the
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Company believes that the final outcome of such matters will not have a material
adverse effect on the Company's business, financial condition, operating results
and cash flows.
Item 4: Submission of Matters to a Vote of Security Holders
No meetings of security holders were held during the fourth quarter of our
fiscal year ended February 29, 2000.
Part II
Item 5: Market for Registrant's Common Equity And Related Stockholder Matters
Price Range of Common Shares
Our common stock is approved for trading on the OTCBB under the symbol
"JOCK". The following table sets forth, for the periods indicated, the range of
the high and low bid quotations as reported by NASD. There were no trades of our
securities on the OTCBB during the first quarter of 1999 prior to May 12, 1999.
The bid quotations set forth below, reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not reflect actual transactions:
OTCBB
--------------------------------------------------------------------------------
1999 High Low Volume
--------------------------------------------------------------------------------
First Fiscal Quarter $9.1875 $5.7500 836,600
---------------------------------------------- --------------- -----------------
Second Fiscal Quarter $5.9375 $2.8750 9,213,700
--------------------------------------------------------------------------------
Third Fiscal Quarter $4.00 $1.6250 2,909,400
--------------------------------------------------------------------------------
Fourth Fiscal Quarter $4.5625 $1.6250 6,976,860
--------------------------------------------------------------------------------
On February 29, 2000, the last reported sale price of our common stock on
the OTCBB was $2.4375 per share. On May 31, 2000, the last reported sale price
of our common stock on the OTCBB was $0.4375 per share.
As of February 29, 2000, we had approximately 1,500 registered shareholders
of record (including nominees and brokers holding street accounts), who held
approximately 1.5 million Common Shares.
We have not declared or paid any cash dividends on our common stock since
our inception, and our Board of Directors currently intends to retain all
earnings for use in the business for the foreseeable future. Any future payment
of dividends will depend upon our results of operations, financial condition,
cash requirements and other factors deemed relevant by our Board of Directors.
37
<PAGE>
Item 6: Selected Financial Data
Selected Financial Data
The following table sets forth selected financial data regarding our
consolidated operating results and financial position of our Company. The data
has been derived from our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The following selected financial data is
qualified in its entirety by, and should be read in conjunction with, the
consolidated financial statements and notes thereto included elsewhere in this
Annual Report.
<TABLE>
Fiscal Year Ended Fiscal Year Ended
February 29, 2000 February 28, 1999
--------------------- ---------------------
$ $
--------------------- ---------------------
<S> <C> <C>
Net Sales - -
Gross Profit - -
Total Operating Expenses 6,666,491 66,766
Net Loss (6,595,702) (144,125)
Net Loss per Share ($0.38) ($0.04)
</TABLE>
<TABLE>
At At
February 29, 2000 February 28, 1999
--------------------- ---------------------
<S> <C> <C>
Working Capital 193,148 66,477
Total Assets 1,118,924 103,202
Total Liabilities 376,941 3,331
Shareholders' Equity 741,983 99,871
Long-term Obligations - -
Cash Dividends - -
</TABLE>
Item 7: Management's Discussion and Analysis of Financial Condition
and Results of Operations
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward looking
statements. Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
forth in this Annual Report. Although management believes that the
38
<PAGE>
assumptions made and expectations reflected in the forward looking statements
are reasonable, there is no assurance that the underlying assumptions will, in
fact, prove to be correct or that actual future results will not be different
from the expectations expressed in this Annual Report.
Overview
In May 1999, we completed a statutory share exchange with SportsPrize
Inc. pursuant to the laws of the State of Nevada. With our acquisition of
SportsPrize Inc., we have implemented a new business strategy and plan, which is
building a Web-based entertainment company dedicated to creating an interactive
community on the Internet. Through our Web site, SportsPrize.com(TM), we intend
to provide a multi-faceted online sports entertainment community. We believe one
of the featured attractions will be the SportsPrize Tournament, a proprietary,
interactive sports game we developed to generate interest in our Web site. We
also intend to focus on retailing sports equipment, apparel, memorabilia and
other products through our various stores on our Web site.
At the time of the share exchange, we were a shell company with no
revenues, expenses, assets or liabilities, and our book value was $1,440, which
was written down to zero at the time of the share exchange. As a result of the
share exchange, all of the assets of SportsPrize Inc. became our assets, and our
historical and ongoing operations are deemed to be those of SportsPrize Inc. for
accounting purposes. The assets of SportsPrize Inc. consisted of cash and
investments of approximately $61,000, prepaid expenses and deposits of
approximately $26,000 and other assets of approximately $16,000. As such, we
have presented our consolidated financial information for the fiscal year ending
February 29, 2000, and we have included the audited financial statements of
SportsPrize Inc. for the fiscal year ended February 28, 1999.
Results of Operations
Results of Operations - Year Ended February 29, 2000
The fiscal year ended February 29, 2000, was the first year of operations
for the Company's Internet business. As a development stage enterprise, the
Company had no revenue during the year.
During the fiscal year, the Company incurred a total net loss of
$6,595,702. These losses are expected to continue in the foreseeable future. The
most significant expenses contributing to the loss were cash compensation costs
and consulting fees of $1,445,803, and non-cash compensation expense of
$3,703,280 related to the issuance of stock and stock option grants to our
directors, employees and consultants. The non-cash compensation expenses
associated with the issuance of stock and stock options are non-recurring.
The other material operating costs incurred by the Company during the year
were professional fees of $351,653, research and development costs of $126,488
and prizes of $175,985. The professional fees were primarily attributable to the
merger in May 1999, registration of the Company's Common Stock in accordance
with the Securities Exchange Act of 1934, and the SEC reports that the Company
filed during the year.
39
<PAGE>
Liquidity and Capital Resources
Since our Share Exchange with SportsPrize Inc., we have raised a total of
$4,550,000 less finder's fees of $198,000. We completed our initial funding at
the time of the Share Exchange by issuing 1,666,665 shares of our common stock
at a price of $1.50 per share, providing us with $2,500,000, less a finder's fee
of $70,000 paid to Sonora Capital. We also completed a private placement in July
1999 of 250,000 shares of our common stock at a price of $4.00 per share,
providing us with $1,000,000. We paid Sonora a finder's fee of $28,000 in
connection with this private placement.
On May 30, 2000, we completed a private placement of 9% convertible
debentures and warrants pursuant to a debenture purchase agreement dated May 30,
2000, for gross proceeds of $1,050,000. The finders fee associated with the
transaction was $100,000. See "Description of Business -- Recent Developments --
Financing Transaction/Issuance of 9% Convertible Debentures/Warrants."
As of February 29, 2000, we had working capital of $193,148. On May 31,
2000, we had working capital of approximately $350,000, after giving effect to
our private placement of the debentures. Our current working capital
requirements are approximately $300,000 per month. Assuming we raise $8,000,000
of planned financing, once we are fully staffed, our total monthly capital
requirement will increase to approximately $660,000. Our working capital
requirement related to financing fees and costs, content costs, and general and
administrative expenses is anticipated to increase to approximately $330,000 per
month. Our working capital requirement related to marketing expenses is expected
to increase to approximately $250,000 per month, provided we are able to obtain
sufficient financing to implement our marketing program. We also anticipate that
we will invest approximately $80,000 per month for capital expenditures
including Web site equipment and software, Web site design and development and
office equipment. See "Summary of Planned Operating Budget."
We are attempting to raise an additional $8,000,000 to fund our current
Plan of Operation through February 28, 2001. See "Note Regarding Forward Looking
Statements," and "Plan of Operation." We anticipate we will complete additional
private placements of our common stock or debt during our second, third or
fourth fiscal quarters to finance our operations. We cannot assure you that we
will successfully complete the planned additional private placements on
acceptable terms, if at all.
If we cannot raise additional financing, we anticipate that we will reduce
our projected expenditures related to marketing our SportsPrize.com(TM) Web site
and concentrate our resources on developing the technologies related to our
SportsPrize.com(TM) Web site and the SportsPrize Tournament, and building our
revenue streams. We have the following material financial obligations to
software and systems developers, content providers, Internet access providers,
investor relations providers, and other vendors:
40
<PAGE>
Vendor Obligation
------------------------------------------ -------------------------------------
Quad-Linq $15,000 per month
------------------------------------------ -------------------------------------
DBC Sports $20,000 per month through June 2002
------------------------------------------ -------------------------------------
Frontier/Global Center $4,000 per month
------------------------------------------ -------------------------------------
Focus Partners $6,000 per month
------------------------------------------ -------------------------------------
Office Leases $12,000 per month
------------------------------------------ -------------------------------------
Big Ballot.com $3,000 per month
------------------------------------------ -------------------------------------
In addition to these commitments, we have agreements with our employees and
consultants, which require us to make monthly payments totaling approximately
$100,000 per month. Our failure to meet these financial commitments and our
future obligations may have a material adverse effect on our business and
results of operations.
Recent Financings
Our current business activities and operations have been funded to date
through issuance of shares of our common stock and debentures in the following
transactions:
Summary of Transactions
<TABLE>
-----------------------------------------------------------------------------------------------------------
Number of Shares Total Consideration ($)
------------------ ---------------------
<S> <C> <C>
Equity
Private Placement at $1.50 per share 1,666,665 $2,500,000
Private Placement at $4.00 per share 250,000 1,000,000
Debentures
Private Placement 9% Convertible Debenture N/A $1,050,000
Total 1,916,665 $4,550,000
============= =============
</TABLE>
New Accounting Pronouncements
The recent and future accounting pronouncements do not and are not expected
to have any significant effect on our financial position or operating results.
Plan of Operation
Our plan of operation includes several important strategic initiatives and
is based on estimates of our senior management. A summary of our plan of
operation and planned operating budget for our business for the 12 months ending
February 28, 2001 is set forth below.
41
<PAGE>
Summary of Plan of Operation
The following is a summary of our corporate plan of operation through
February 28, 2001. For the period ending February 29, 2000, the primary focus of
our operating plan was to develop and launch our Web site and build the
necessary infrastructure to operate and market the site. We launched the public
version of our Web site on December 29, 1999. During our fiscal year ending
February 28, 2001, we plan to implement a major marketing program to build the
SportsPrize brand as well as the Web site audience. We also will continue
developing and enhancing the Web site during this period. During our fiscal year
ending February 28, 2001, we intend to allocate up to 40% of our operating
budget towards marketing and promotion to facilitate the aforementioned
marketing program. Our other primary operating objectives will be to continue
establishing strategic alliances with corporate advertisers, sponsors,
e-commerce associates, and other potential content and marketing associates. We
also intend to continue to build the SportsPrize community areas on the
SportsPrize.com(TM) Web site by increasing sports information, news and chat
room content, and sports celebrity-related content.
Our major strategic and business initiatives through February 28, 2001 are as
follows:
1. Raise sufficient capital to finance our business.
--------------------------------------------------------------------------------
2. Appoint or Recruit Senior Management:
i. Vice President of Content.
ii. Vice President of Technology.
iii. Vice President of Sales.
--------------------------------------------------------------------------------
3. Continue Development and Refinement of the SportsPrize.com(TM)Web site:
i. Refine the Home Page and Graphical User Interface for the site.
ii. Expand the Stats/Info component of the Web site.
iii. Develop a private label E-Shopping component of the Web site.
iv. Expand the Community component of the Web site, and
v. Develop new content areas on the site such as trivia and other unique
sports content.
--------------------------------------------------------------------------------
4. Develop comprehensive Web site monitoring/statistical software.
42
<PAGE>
5. Corporate Development:
i. Recruit Outside Directors to increase the Board of Directors to seven
Directors, including four Outside Directors.
ii. Expand the Sports Advisory Board to include representatives from each
of the major sports offered on our Web site.
--------------------------------------------------------------------------------
6. Enter into strategic relationships and/or international ventures for our
Web site.
--------------------------------------------------------------------------------
7. Implementation of Sales, Marketing and Business Development Plans:
i. Refine the initial sales, marketing and business development plans.
ii. Commence sales process to begin generating revenue.
iii. Commence the marketing and business development processes to build the
membership base, build the brand, and broaden the content offering on
the Web site
iv. Explore opportunities in foreign markets.
--------------------------------------------------------------------------------
8. Locate and lease a new corporate office in the Los Angeles area.
--------------------------------------------------------------------------------
9. Shareholder Relations and Investor Relations:
i. Update the database of shareholders and maintain communication with
them.
ii. Refine the brochures for and distribute them to prospective investors
to broaden our shareholder base and capital structure.
During our fiscal year ending February 28, 2001, we intend to concentrate
our efforts on marketing our Web site to users, sponsors and advertisers;
soliciting feedback on our content and technology offerings from our users,
sponsors and advertisers; selling advertising and sponsorships; increasing sales
of products offered through our SportsPrize e-shopping venues; building
additional strategic relationships; developing new content and technology
offerings; obtaining endorsements from professional athletes, coaches and sports
organizations; and enhancing and improving our Web site.
We cannot assure you that we will successfully complete all of the items
contemplated in our plan of operation on a timely basis, if at all. Our ability
to complete our plan of operation will be dependent on a number of factors, some
of which are beyond our control, including our ability to raise additional
financing on acceptable terms, our ability to develop our content and technology
on a timely basis, our ability to attract advertisers and sponsors, and the
acceptance of our SportsPrize.com(TM) Web site.
43
<PAGE>
Summary of Planned Operating Budget
Our planned operating budget for the fiscal year ending February 28, 2001,
is estimated to be approximately $8,000,000. See "Note Regarding Forward Looking
Statements." Our projected use of these funds is as follows:
Operating Expenses:
Financing Fees and Costs $ 400,000
Content Costs 500,000
General and Administrative 3,100,000
Marketing 3,000,000
-----------
Total Operating Expenses $ 7,000,000
-----------
Capital Expenditures:
Web Site Equipment/Software $ 150,000
Web Site Design/Development 500,000
Office Equipment/Software 150,000
Other 200,000
-----------
Total Capital Expenditures $ 1,000,000
-----------
Total Capital Required $ 8,000,000
===========
As of May 31, 2000, we had approximately $85,000 in cash and cash
equivalents. Currently we are expending approximately $300,000 per month. We
cannot assure you that our actual expenditures for during our fiscal year ending
February 28, 2001 will not exceed our estimated operating budget. We based our
projected costs on our results of operations, our current contractual
commitments, our discussions and negotiations with potential third party service
providers, public disclosure of our competitors of their historical costs for
similar operations, our discussions with consultants, our planned business
activities and our management's experience. See "Note Regarding Forward Looking
Statements." Actual expenditures will depend on a number of factors, some of
which are beyond our control, including, but not limited to, timing of changes
to our SportsPrize Web site, our ability to generate revenue from advertising,
sponsorships, e-commerce sales and our auction site; the availability of
financing on acceptable terms; reliability of the assumptions of management in
estimating costs and timing; certain economic and industry factors; the time
expended by consultants and professionals and fees associated with developing
strategic relationships related to our business plan; our ability to enter into
strategic relationships with third parties; the success of our SportsPrize
Tournament; and our ability to attract visitors to our SportsPrize Web site. You
are cautioned not to place undue certainty in management's assessments and
projections. If the actual expenditures for such costs exceed the estimated
costs or if we are incapable of generating revenues from our operations, we will
be required to raise additional financing or to defer certain expenditures.
We are attempting to raise an additional $8,000,000 to fund our current
plan of operation for fiscal year ending February 28, 2001. We intend to raise
additional financing to fund our operating budget by issuing equity or debt
through a combination of private and public financings. We cannot assure you
that we will successfully raise additional financing on
44
<PAGE>
acceptable terms, if at all. If we cannot raise additional financing, we
anticipate that we will reduce our projected expenditures related to marketing
the SportsPrize.com(TM) Web site and concentrate our resources on developing the
SportsPrize.com(TM) Web site and the SportsPrize Tournament, and building our
revenue streams. The failure to meet certain expenditures may cause us to
default on material obligations and such default may have a material adverse
effect on our business and results of operations.
Item 7A: Quantitative and Qualitative Disclosure About Market Risk
None.
Item 8: Financial Statements and Supplementary Data
Reference is made to the financial statements listed under the heading "(a)
Financial Statements" of Item 14 herein, which financial statements are
incorporated herein by reference in response to this Item 8.
Item 9: Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
PART III
Item 10: Directors and Officers of the Registrant
Directors and Officers
All of our directors are elected annually by the shareholders and hold
office until the next annual general meeting of shareholders or until their
successors are duly elected and qualified, unless they resign or cease to be
directors in accordance with our Articles and Bylaws. The date of our next
annual general meeting has yet to be determined. Our executive officers are
appointed by and serve at the pleasure of our Board of Directors.
As of May 31, 2000, the following persons were our directors and/or
officers:
<TABLE>
Director/Officer/
Name and present office held Employee since
====================================================================================================
<S> <C>
David Kenin, Director, Chairman of the Board April 17, 2000
Chief Executive Officer
----------------------------------------------------------------------------------------------------
Bruce Cameron, Director September 16, 1999
President, Chief Financial Officer and Treasurer
----------------------------------------------------------------------------------------------------
Robert Hunziker, Director August 16, 1999
Senior Vice President of Corporate Finance, Secretary
----------------------------------------------------------------------------------------------------
Jeffrey Paquin, May 14, 1999
Director
----------------------------------------------------------------------------------------------------
Alan Gerson, July 8, 1999
Director and Vice Chairman of the Board(1)
----------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE>
<TABLE>
Director/Officer/
Name and present office held Employee since
====================================================================================================
<S> <C>
----------------------------------------------------------------------------------------------------
Abe Carmel, July 8, 1999
Director
----------------------------------------------------------------------------------------------------
Michael Weisman, Director January 17, 2000
----------------------------------------------------------------------------------------------------
Donald MacKay, May 14, 1999
Senior Vice President and Controller
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Gerson served as our Chairman of the Board from November 1, 1999 to
April 17, 2000, and on April 17, 2000, he was appointed Vice Chairman of
the Board.
The following is a brief biographical information on each of the officers,
directors and significant employees listed:
David Kenin, age 58, was appointed as our Chairman of the Board and Chief
Executive Officer on April 17, 2000. Prior to joining us, Mr. Kenin has served
as an independent consultant for technology, sports rights and production
companies and international television through his consulting media firm, Kenin
Partners. Mr. Kenin also serves as member of the Board of Directors of the World
Wrestling Federation. From 1994 to 1996, Mr. Kenin was President of CBS Sports.
Prior to joining CBS Sports, Mr. Kenin served as Executive Vice President of USA
Networks, and was responsible for content and programming for both USA and the
Sci-Fi Channel.
Bruce Cameron, age 44, has served as our President, Chief Financial Officer
and Treasurer, and a Director since September 16, 1999. Prior to joining us, Mr.
Cameron was Executive Vice President and Chief Financial Officer of Hollywood
Online Inc., a movie-oriented Web publishing company. Prior to joining Hollywood
Online, Mr. Cameron served as Vice President and Manager at Imperial Bank and
First Interstate Bank. Prior to his banking experience, Mr. Cameron held a
senior management consulting position with Gorsey, Hanson & Company from 1986 to
1988. From 1978 to 1986, he worked in a variety of managerial roles at Price
Waterhouse. Mr. Cameron has a Bachelor of Arts Degree in Economics from the
University of California, Los Angeles and is a CPA.
Robert Hunziker, age 55, has served as our Senior Vice President of
Corporate Finance and a Director since August 16, 1999 and our Secretary since
March 10, 2000. Prior to joining us, Mr. Hunziker was a Limited Partner and
Associate Director of Bear Stearns & Company from 1984 to 1991 and a Vice
President and a Principal of Oppenheimer from 1975 to 1984. Since 1992, Mr.
Hunziker has been self-employed as a corporate advisor and financier. Mr.
Hunziker also serves on the board of directors of Advanced Gaming Technology,
Inc. and Chapleau Resources, Ltd. Mr. Hunziker has a M.A. degree in Economic
History from DePaul University in Chicago.
Jeffrey Paquin, age 37, has been a director since May 14, 1999 and was our
President from May 14, 1999 to September 15, 1999. Mr. Paquin is a lawyer and is
currently President of JD Paquin Personal Law Corporation. Mr. Paquin's
corporate experience includes directorships in the following emerging public
companies: Broadwater Development Inc., a natural resource exploration company
listed on the Vancouver Stock Exchange, from 1996 to 1997; Solar
46
<PAGE>
Pharmaceuticals Ltd., a manufacturer and supplier of medical devices and
services formally listed on the Vancouver Stock Exchange, from 1995 to 1998; and
Watson Bell Communications Inc., now Cosworth Ventures, listed on the Vancouver
Stock Exchange, from 1993 to 1995. Mr. Paquin was the President and Director of
SportsPrize Inc. from its inception to May 14, 1999.
Alan Gerson, age 53, has been a director since July 8, 1999 and the
Chairman of our Board from November 1, 1999 to April 17, 2000, when he was
appointed Vice Chairman of the Board. Mr. Gerson's experience includes broadcast
and cable television, e-commerce, live event marketing, and the Internet. Mr.
Gerson is a principal and President of Interactive Marketing Inc. Mr. Gerson was
a longtime senior executive at NBC, Inc. and from 1991 to 1994 was the Executive
Vice-President of the Home Shopping Network. In 1994, he consulted for various
media, Interactive Marketing Inc. and electronic commerce companies. In 1995,
Mr. Gerson joined Ticketmaster Corp. as Senior Vice-President of Television and
Business Development and oversaw Ticketmaster's Direct Marketing Division and
the launch of the Ticketmaster Online store. In 1996, Mr. Gerson held an
executive consulting position with Softbank Interactive Marketing. Prior to
establishing Interactive Marketing Inc., Mr. Gerson served as President and
Chief Executive Officer of WorldSite Networks, Inc. under an executive
consulting arrangement.
Abe Carmel, age 67, has been a director since July 8, 1999. Since 1986, Mr.
Carmel has lead Carmel Associates LLC, an international investment banking firm
which specializes in the financing and marketing of high technology, Internet
and telecommunications companies.
Michael Weisman, age 50, has served as a director of the Company since
January 17, 2000. Mr. Weisman is a sports production and broadcasting
professional specializing in creating original sports and entertainment
programming. Mr. Weisman is currently the producer of Major League Baseball for
Fox Television, NFL Football and NCAA Basketball for CBS and NBA Basketball for
the Turner Network. Mr. Weisman has won 17 Emmy awards and numerous other honors
for his roles in television production. Mr. Weisman served as President of
National Mobile Television from 1994 to 1998, President of Davis Sports
Entertainment from 1992 to 1994; Executive Producer of CBS Entertainment from
1990 to 1992; and Executive Producer for NBC's Sports Division from 1983 through
1990.
Donald MacKay, age 47, was our Chief Financial Officer from May 14, 1999 to
September 15, 1999 and our Treasurer from June 30, 1999 to September 15, 1999.
Mr. MacKay has been a Certified Management Accountant since 1991. On September
16, 1999, he was appointed Senior Vice President and Controller. Mr. MacKay was
the Chief Financial Officer of Advanced Gaming Technology, Inc. from 1995 to
1998; the manager of business analysis of TCG International Inc. from 1994 to
1995; and a senior financial accountant of GLENTEL Inc. from 1989 to 1993.
Members of the Board of Directors are elected by our shareholders. Our
Board of Directors meets periodically to review significant developments
affecting our company and to act on matters requiring Board approval. Although
the Board of Directors delegates many matters to others, it reserves certain
powers and functions to itself. Our audit committee is directed to review the
scope, cost and results of the independent audit of our books and records, the
results
47
<PAGE>
of the annual audit with management and the adequacy of our accounting,
financial and operating controls; to recommend annually to the Board of
Directors the selection of the independent auditors; to consider proposals made
by the Registrant's independent auditors for consulting work; and to report to
the Board of Directors, when so requested, on any accounting or financial
matters.
None of our directors or executive officers is a party to any arrangement
or understanding with any other person pursuant to which said he was elected as
a director or officer.
None of our directors or executive officers has any family relationship
with any other officer or director.
None of our officers or directors have been involved in the past five years
in any of the following: (1) bankruptcy proceedings; (2) subject to criminal
proceedings or convicted of a criminal act; (3) subject to any order, judgment
or decree entered by any court limiting in any way his or her involvement in any
type of business, securities or banking activities; or (4) subject to any order
for violation of federal or state securities laws or commodities laws.
Section 16 (a) Beneficial Ownership Reporting Compliance
The information set forth under the caption "Election of Directors",
"Executive Officers", and "Section 16(a) Beneficial Ownership Reporting
Compliance" in SportsPrize's definitive Proxy Statement for its 2000 Annual
Meeting of Shareholders, expected to be filed with the Securities and Exchange
Commission on Schedule 14A on or before June 28, 2000 is incorporated herein by
reference.
Item 11: Executive Compensation
The information set forth under the captions "Executive Compensation and
Other Information" and "Compensation of Directors" in SportsPrize's definitive
Proxy Statement for its 2000 Annual Meeting of Shareholders, expected to be
filed with the Securities and Exchange Commission on Schedule 14A on or before
June 28, 2000 is incorporated herein by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management
The information set forth under the captions "Securities Ownership of
Certain Beneficial Owners" and "Securities Ownership of Management" in
SportsPrize's definitive Proxy Statement for its 2000 Annual Meeting of
Shareholders, expected to be filed with the Securities and Exchange Commission
on Schedule 14A on or before June 28, 2000 is incorporated herein by reference.
Item 13: Certain Relationships and Related Transactions
The information set forth under the caption "Certain Relationships and
Related Transactions between Management and the Company" in SportsPrize's
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders, expected
to be filed with the Securities and Exchange Commission on Schedule 14A on or
before June 28, 2000 is incorporated herein by reference.
48
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
The following financial statements of the Registrant and the Report of
Independent Certified Public Accountants thereon are included herewith in
response to Item 8 above.
(a) Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statement of Changes in Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
(b) Exhibits:
The following Exhibits are filed as part of this report:
Exhibit
Number Description
------ -----------
2.1(1) Articles of Share Exchange
3.1(1) Articles of Incorporation of Par Golf, Inc. effective August 25,
1995
3.2(1) Articles of Amendment to Par Golf, Inc. effective August 21, 1997
3.3(1) Articles of Amendment to Kodiak Graphics Company effective May
21, 1999
3.4(1) Articles of Amendment to SportsPrize Entertainment Inc. effective
June, 1999
3.5(1) Bylaws of Par Golf Inc.
49
<PAGE>
Exhibit
Number Description
------ -----------
10.1(1) Form of Stock Option Plan
10.2(1) Form of Stock Option Agreement
10.3(1) Agreement and Plan of Share Exchange by and between Kodiak
Graphics Company and SportsPrize Entertainment Inc. dated May 7,
1999
10.4(1) Escrow Agreement by and between Kodiak Graphics Company of the
first part, Randy Daggitt, Jeff Paquin, James Brown, Michael
Slater, Anthony Vecchio and Gang Consulting Inc. of the second
part and Clark, Wilson of the third part, dated May 7, 1999
10.5(1) Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Jeffrey D. Paquin, dated
March 1, 1999
10.6(1) Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and John Thompson, dated March 1,
1999
10.7(1) Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Donald MacKay, dated March 1,
1999
10.8(1) Service Agreement by and between SportsPrize Entertainment Inc.
and Olson Cove Consulting, dated March 1, 1999
10.9(1) Contract by and between SportsPrize Inc. and Quad-Linq Software
Inc., dated February 18, 1999 and Addendum thereto dated May 12,
1999
10.10(1) Acquisition Agreement by and between SportsPrize Inc. and Justin
Tighm Innovative Games Inc., dated March 1, 1999 and Addendum
thereto dated May 21, 1999
10.11(1) Marketing Consulting Agreement by and between Interactive
Marketing Inc. and SportsPrize Entertainment Inc., dated May 6,
1999
10.12(1) Agreement by and between Kaleidoscope Sports & Entertainment, LLC
and SportsPrize Entertainment Inc., dated May 1, 1999
50
<PAGE>
Exhibit
Number Description
------ -----------
10.13(1) Assignment and Assumption Agreement by and between Kaleidoscope
Sports & Entertainment, LLC and SportsPrize Entertainment Inc.
effective as of May 14, 1999
10.14(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated May 6,
1999
10.15(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated May 6,
1999
10.16(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated July 15,
1999
10.17(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated July 15,
1999
10.18(1) Data and Service Agreement by and between Las Vegas Sports
Consultants, Inc. (dba DBC Sports) and SportsPrize Entertainment
Inc., dated May 26, 1999
10.19(1) Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Michael Wiedder, dated June 17, 1999
10.20(1) Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Ronald Sheridan, dated July 1, 1999
10.21(1) Letter Agreement by and between Intershop Communications, Inc.
and SportsPrize Entertainment Inc., dated June 29, 1999
10.22(1) Master Service Agreement by and between Frontier Global Center
and SportsPrize Entertainment Inc., dated July 22, 1999
10.23(1) Letter Agreement by and between Kodiak Graphics Company and
Sonora Capital Corp., dated May 7, 1999
10.24(1) Investor Relations Agreement by and between SportsPrize
Entertainment Inc. and Sonora Capital Corp., dated May 21, 1999
51
<PAGE>
Exhibit
Number Description
------ -----------
10.25(1) Letter Agreement by and between SportsPrize Entertainment Inc.
and FOCUS Partners LLC, dated July 27, 1999
10.26(1) Internet Distribution and Marketing Agreement by and between
SportsPrize Entertainment Inc. and Dreams Products, Inc., dated
August 6, 1999
10.27(1) Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Bruce R. Cameron, dated September 16, 1999
10.28(1) Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Robert Hunziker, dated August 15, 1999
10.29(1) Addendum to Agreement and Contract for Services by and between
SportsPrize Entertainment Inc. and Michael Wiedder, dated August
30, 1999
10.30(1) Proposal Agreement by and between SportsPrize Entertainment Inc.
and ShopSports.com, dated September 17, 1999
10.31(1) Lease Agreement by and between eOfficeSuites Inc. and SportsPrize
Entertainment Inc., dated September 27, 1999
10.32(1) Amendment to Assignment and Assumption Agreement by and between
Kaleidoscope Sports and Entertainment, LLC and SportsPrize
Entertainment Inc., dated September 10, 1999
10.33(1) Agreement by and between Tridian Design and Development and
SportsPrize Entertainment Inc., dated August 2, 1999
10.34(1) Form of Confidentiality Agreement
10.35 Service Agreement by and between Big Game James, Inc. and
SportsPrize Entertainment Inc., dated March, 1, 2000
10.36 Share Contribution Agreement by and between SportsPrize
Entertainment Inc., and Pooling Shareholders, dated April, 7,
2000
52
<PAGE>
Exhibit
Number Description
------ -----------
10.37 Debenture Purchase Agreement dated May 30, 2000 among Cutter
Services, Corp., Strathburn Investments Inc. and SportsPrize
Entertainment Inc.
10.38 Form of 9% Convertible Debenture
10.39 Form of Warrant to Purchase Shares of Common Stock
10.40 Form of Lock Up Agreement effective June 2, 2000.
10.41 Executive Employment Agreement dated April 10, 2000 between
Sportsprize Entertainment, Inc. and David Kenin
21.1(1) List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
---------------------
(1) Previously filed on December 7, 1999.
53
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
Registrant caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: June 12, 2000
SPORTSPRIZE ENTERTAINMENT INC.
/s/ Bruce R. Cameron
----------------------------------------
Bruce R. Cameron
President and Chief Financial Officer
<PAGE>
SPORTSPRIZE ENTERTAINMENT INC.
(formerly Kodiak Graphics Company)
A Development Stage Company
CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000 and February 28, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants 3
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statement of Stockholders' Equity 6
Consolidated Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8
<PAGE>
Accountants and GRANT THORNTON [LOGO]
Management Consultants
Grant Thornton LLP
The US Member Firm of
Grant Thornton International
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders of
SportsPrize Entertainment Inc.
We have audited the consolidated balance sheet of SportsPrize Entertainment Inc.
as of February 29, 2000 and the related consolidated statements of operations,
cash flows and stockholders equity for the year then ended. 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform an 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 consolidated financial position of
SportsPrize Entertainment Inc. as of February 29, 2000, and the consolidated
results of its operations and its consolidated cash flows for the year then
ended in accordance with accounting principles generally accepted in the United
States of America.
The accompanying consolidated financial statements have been prepared assuming
the company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the company has no established source of
revenue and is dependent on its ability to raise substantial amounts of capital.
This raises substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Grant Thornton LLP
Irvine, California
March 17, 2000, except for Note 11
as to which the date is April 7, 2000
- 3 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
CONSOLIDATED BALANCE SHEETS
as of
<TABLE>
February 29, February 28,
2000 1999
----------------- -----------------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 484,906 $ 34,345
Portfolio investments (Note 3) 10,339 26,350
Prepaid expenses and other current 74,844 9,113
----------------- -----------------
570,089 69,808
----------------- -----------------
Capital Assets
Software development costs 393,997 -
Internet equipment 128,358 -
Office computers and equipment 53,994 3,649
Less: accumulated depreciation and amortization (36,741) (730)
----------------- -----------------
540,308 2,919
----------------- -----------------
Other
Organization costs, net - 13,475
Deposits 8,527 17,000
----------------- -----------------
8,527 30,475
----------------- -----------------
Total assets $ 1,118,924 $ 103,202
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 96,857 $ 2,847
Accrued liabilities 280,084 484
----------------- -----------------
376,941 3,331
----------------- -----------------
Commitments and Contingencies (Note 8) - -
Stockholders' Equity (Note 5)
Preferred stock - $0.001 par value
authorized 5,000,000 shares
none issued and outstanding - -
Common stock - $0.001 par value authorized
100,000,0000 shares; 19,480,374 and 7,622,110
issued and outstanding, respectively 19,480 7,622
Additional paid-in capital 8,053,227 236,374
Deferred compensation (590,897) -
Deficit accumulated during the development stage (6,739,827) (144,125)
----------------- -----------------
Total stockholders' equity 741,983 99,871
----------------- -----------------
$ 1,118,924 $ 103,202
================= =================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
- 4 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
CONSOLIDATED STATEMENTS OF OPERATIONS
for the periods from
<TABLE>
Cumulative Inception
from inception March 1, 1999 March 6, 1998
to February 29, to February 29, to February 28,
2000 2000 1999
------------------- ------------------ -------------------
<S> <C> <C> <C>
Operating expenses
General and administrative $ 6,568,079 $ 6,504,743 $ 63,336
Research and development 126,488 126,488 -
Depreciation and amortization 38,690 35,260 3,430
------------------- ------------------ -------------------
Loss from operations (6,733,257) (6,666,491) (66,766)
------------------- ------------------ -------------------
Other income (expense)
Interest income (expense) 60,255 60,618 (363)
(Loss) gain on sale of investments (60,362) 11,093 (71,455)
Other (6,463) (922) (5,541)
------------------- ------------------ -------------------
(6,570) 70,789 (77,359)
------------------- ------------------ -------------------
Net loss for the period $(6,739,827) $ (6,595,702) $ (144,125)
=================== ================== ===================
Basic and diluted loss per share $ (0.38) $ (0.04)
================== ===================
Weighted average shares outstanding 17,389,814 3,515,244
================== ===================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
- 5 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the period from inception (March 6, 1998) to February 29, 2000
<TABLE>
Common Stock Additional
--------------------------------- Paid-in
Date Shares Amount Capital
---------------------- ------------------ -------------- -------------------
<S> <C> <C> <C> <C>
Balance at inception - March 6, 1998 - $ - $ -
Issuance of common stock
for cash (net of share issuance March 1998-
costs of $26,187) February 1999 7,622,110 7,622 236,374
Net loss for the period - - -
------------------ -------------- -------------------
Balance - February 28, 1999 7,622,110 7,622 236,374
Issuance of common stock for cash March - April 1999 913,134 913 131,624
Issuance of common stock
as compensation for services March 1, 1999 1,464,465 1,465 211,035
------------------ -------------- -------------------
Subtotal - balance reflecting
common stock issued in
reverse merger (Note 5) 9,999,709 10,000 579,033
Common stock held by Kodiak at date of merger May 14, 1999 7,564,000 7,564 (7,564)
Options granted to IMI as compensation
for services (Note 6) May 6, 1999 - - 596,000
Issuance of common
stock for cash (net of share
issuance costs of $70,000) May 14, 1999 1,666,665 1,666 2,428,332
Issuance of common
stock for cash (net of share
issuance costs of $28,000) July 27, 1999 250,000 250 971,750
Compensation expense March 1999 -
for stock options February 2000 - - 2,962,676
Options granted to IMI as compensation
for services (Note 6) November 1999 - - 523,000
Net loss for the year - - -
------------------ -------------- -------------------
Balance - February 29, 2000 19,480,374 $19,480 $8,053,227
================== ============== ===================
</TABLE>
<TABLE>
Deferred
Compensation Deficit Total
----------------- --------------------- ------------------
<S> <C> <C> <C>
Balance at inception - March 6, 1998 $ - $ - -
Issuance of common stock
for cash (net of share issuance
costs of $26,187) - - 243,996
Net loss for the period - (144,125) (144,125)
----------------- --------------------- ------------------
Balance - February 28, 1999 - (144,125) 99,871
Issuance of common stock for cash - - 132,537
Issuance of common stock
as compensation for services - - 212,500
----------------- --------------------- ------------------
Subtotal - balance reflecting
common stock issued in
reverse merger (Note 5) - (144,125) 444,908
Common stock held by Kodiak at date of merger - - -
Options granted to IMI as compensation
for services (Note 6) - - 596,000
Issuance of common
stock for cash (net of share
issuance costs of $70,000) - - 2,429,998
Issuance of common
stock for cash (net of share
issuance costs of $28,000) - - 972,000
Compensation expense
for stock options (590,897) - 2,371,779
Options granted to IMI as compensation
for services (Note 6) - - 523,000
Net loss for the year - (6,595,702) (6,595,702)
----------------- --------------------- ------------------
Balance - February 29, 2000 $(590,897) $(6,739,827) $741,983
================= ===================== ==================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
- 6 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the periods from
<TABLE>
Cumulative Inception
from inception to March 1, 1999 to March 6, 1998 to
February 29, 2000 February 29, 2000 February 28, 1999
-------------------- ------------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,739,827) $ (6,595,702) $ (144,125)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 38,690 35,260 3,430
Loss (gain) on sale of investments 60,362 (11,093) 71,455
Issuance of common stock for compensation 212,500 212,500 -
Compensation expense for stock options 3,490,780 3,490,780 -
Other (9,875) 922 (10,797)
Change in operating assets and liabilities:
Prepaid expenses (74,884) (65,771) (9,113)
Deposits (8,527) 8,473 (17,000)
Organization costs - 13,475 (13,475)
Accounts payable 96,857 94,010 2,847
Accrued liabilities 280,084 279,600 484
-------------------- ------------------- ------------------
(2,653,840) (2,537,546) (116,294)
-------------------- ------------------- ------------------
Cash flows from investing activities:
Proceeds from sale of portfolio investments 231,195 73,401 157,794
Purchases of portfolio investments (290,207) (47,129) (243,078)
Software development costs (393,997) (393,997) -
Purchases of equipment (182,352) (178,703) (3,649)
-------------------- ------------------- ------------------
(635,361) (546,428) (88,933)
-------------------- ------------------- ------------------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,774,107 3,534,535 239,572
-------------------- ------------------- ------------------
Net increase in cash and cash equivalents 484,906 450,561 34,345
Cash and cash equivalents at beginning of period - 34,345 -
-------------------- ------------------- ------------------
Cash and cash equivalents at end of period $ 484,906 $ 484,906 $ 34,345
==================== =================== ==================
</TABLE>
The accompanying notes are an integral part of
these financial statements.
- 7 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 29, 2000 and February 28, 1999
1. Operations and Going Concern
The company was incorporated in the State of Nevada on August 25, 1995 as
"Par Golf, Inc." with an authorized share capital of 25,000,000 shares of
common stock with a par value of $0.001 per share.
The company was inactive until August 1997, when it commenced the business
of advanced graphic technologies and services marketing to the wholesale
and retail sectors of the screen, print and publication industries. On
August 21, 1997, the company amended its Articles of Incorporation and
changed its authorized share capital to 25,000,000 shares, consisting of
20,000,000 shares of common stock with a par value of $0.001 per share and
5,000,000 shares of preferred stock with a par value of $0.001 per share.
On this date, the company also changed its name to "Kodiak Graphics
Company" (Kodiak). This business plan was abandoned in the second quarter
of 1999.
On May 14, 1999, pursuant to a statutory share exchange, the company
acquired all of the issued and outstanding shares of SportsPrize Inc., a
Nevada corporation (Note 5). SportsPrize Inc. was in the process of
designing, developing, building and operating an Internet site focused on
the sports and entertainment sectors of the Internet market. In connection
with the share exchange, the company's Articles of Incorporation were
amended on May 21, 1999 to change its name from Kodiak Graphics Company to
"SportsPrize Entertainment Inc." (the "Company"). In June 1999, the Company
further amended its Articles of Incorporation to increase the number of
authorized common shares to 100,000,000 shares.
At the time of the share exchange, Kodiak was a non-operating shell with no
revenues, expenses, assets or liabilities. Prior to the acquisition,
SportsPrize Inc. was engaged in the mineral exploration business and had an
option to purchase mineral property rights located in the Province of
Alberta, Canada. SportsPrize Inc. elected not to exercise the option, and
the option expired unexercised on February 11, 1999. In February 1999,
SportsPrize Inc. shifted its business strategy from resource exploration to
developing an Internet business.
The Company commenced its Internet operations on May 14, 1999 through its
newly acquired subsidiary. However, it has not yet earned any revenue
therefrom, and the technologies and businesses that it intends to develop
will require cash significantly in excess of its current resources. The
ability of the company to develop these technologies into a profitable
Internet business is dependent on management's ability to obtain adequate
additional capital and develop a commercially successful product.
Management plans to raise approximately $1 million through a private
placement in June 2000 and will continue to pursue the additional financing
necessary to fund its operations.
- 8 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
2. Significant Accounting Policies
Consolidation
These financial statements include the accounts of the Company and its
wholly owned subsidiary, SportsPrize Inc. (a Nevada Corporation). All
significant intercompany transactions and balances have been eliminated.
Some balances from the prior year have been reclassified to conform to the
current year's presentation.
Software Development Costs
The Company has adopted AICPA Statement of Position 98-1 ("SOP 98-1")
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use". In accordance with SOP 98-1, the Company has expensed all
software development costs incurred while the internal use software was in
the preliminary project stage. All testing and design costs incurred up to
December 29, 1999 were capitalized and are included in capital assets as
capitalized software development costs. After the Internet site became
operational on December 29, 1999, the Company's policy has been to expense
all ongoing software upgrades and maintenance costs.
The capitalized software development costs are depreciated on a
straight-line basis over three years.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.
Capital Assets
Capital assets are recorded at cost less accumulated depreciation.
Depreciation is provided for all capital assets using the straight-line
method over three years.
- 9 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
2. Significant Accounting Policies - Continued
Accounting for Stock Options
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No.
123"), which requires entities to calculate the fair value of stock awards
granted to employees. This statement provides entities with the option of
either electing to expense the fair value of employee stock-based
compensation or continue to recognize compensation expense under previously
existing accounting pronouncements and provide pro forma disclosures of net
income and, if presented, earnings per share, as if the above-referenced
fair value method of accounting was used in determining compensation
expense.
The Company accounts for stock-based employee compensation arrangements in
accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB No. 25"). The Company has included the
additional disclosures about stock-based employee compensation plans
required by SFAS No. 123 in these consolidated financial statements.
Stock options issued to non-employees are recorded at the fair value of the
services received or the fair value of the options issued, whichever is
more reliably measurable. Compensation is charged to expense over the
shorter of the service or vesting period. Unearned amounts are shown as
deferred compensation in shareholders' equity.
Financial Instruments
The company has financial instruments that include cash, receivables, and
payables. The carrying value of these financial instruments approximates
their fair value.
Statement of Cash Flows
For the purpose of the statement of cash flows, the Company considers cash
on hand and balances with banks and highly liquid temporary money market
instruments with original maturities of three months or less as cash or
cash equivalents.
- 10 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
2. Significant Accounting Policies - Continued
Deferred Income Taxes
Deferred income taxes are provided for temporary differences between the
tax basis of an asset or liability and its reported amount in the financial
statements that will result in taxable or deductible amounts in future
periods. Deferred tax assets or liabilities are determined by applying the
presently enacted tax rates and laws. A valuation allowance is required
when it is more likely than not that some portion or all of the deferred
tax asset will not be realized.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during
the year. Actual results could differ from these estimates.
3. Portfolio Investments
All marketable securities were reclassified from the category "Available
for Sale" at February 28, 1999 to "Trading Securities". There were no
unrealized gains or losses recorded as of the reclassification date.
Therefore, there was no accounting impact on the Statement of Operations
for the reclassification. Future unrealized gains and losses will be
reported in the Statement of Operations. Realized gains and losses are
recorded by using the specific identification method.
4. Re-capitalization
Kodiak Graphics Company, a Nevada corporation ("Kodiak Graphics"), entered
into a merger agreement to acquire all the outstanding common stock of
SportsPrize Inc., a Nevada corporation, in a transaction described for
legal purposes as a reverse merger. The merger became effective on May 14,
1999. The surviving entity, Kodiak Graphics, changed its name to
SportsPrize Entertainment Inc.
For reporting purposes, the historical information disclosed in the
accompanying consolidated financial statements is that of SportsPrize Inc.,
the accounting acquirer. However, the capital structure is that of the
legal acquirer, Kodiak Graphics. All shares listed in the Statement of
Stockholders' Equity prior to the reverse merger represent those of
SportsPrize Inc., and have been converted at the conversion rate described
below.
- 11 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
4. Re-capitalization - Continued
Immediately prior to the merger, Kodiak Graphics was a non-operating shell
with no net assets and 7,564,000 shares of common stock outstanding. As
part of the re-capitalization, Kodiak Graphics issued an additional
9,999,709 shares in exchange for all of the shares of SportsPrize Inc.
(5,804,000) at a conversion rate of 1.7229 shares of Kodiak Graphics for
each share of SportsPrize Inc. Approximately 57% of the shares outstanding
in SportsPrize Entertainment Inc. were held by the former shareholders of
SportsPrize Inc. immediately following the transaction.
5. Stockholders' Equity
Common Stock
The Company's Articles of Incorporation authorize the issuance of up to
100,000,000 shares of common stock, $0.001 par value per share, of which
19,480,374 and 7,622,110 shares were outstanding as of February 29, 2000
and February 28, 1999, respectively. Holders of shares of common stock are
entitled to one vote for each share on all matters to be voted on by the
stockholders, have no cumulative voting rights, and are entitled to share
ratably in dividends, if any, as may be declared from time to time by the
Board of Directors. In the event of liquidation, dissolution or winding up
of the Company, the holders of shares of common stock are entitled to share
pro rata all assets remaining after payment in full of all liabilities.
Holders of common stock have no preemptive rights to purchase the Company's
Common Stock. All of the outstanding shares of common stock are fully paid
and non-assessable.
On March 1, 1999, the Company executed agreements to issue 650,000 shares
of common stock to employees and 200,000 shares of common stock to an
outside consultant for services. The total compensation expense recorded
for these transactions was $212,500. The value per share was based on
equivalent shares issued in conjunction with a private placement financing
occurring in the same period. The shares were subsequently converted into
1,464,465 shares of common stock based on the exchange rate of 1.7229 in
connection with the aforementioned reverse merger (Note 4).
As a result of the acquisition of SportsPrize Inc. and of the private
placements on May 14, 1999 and July 27, 1999, the Company issued 11,916,374
restricted shares as defined under the Securities Act of 1933. These shares
may be sold only in compliance with Rule 144 of the Act, pursuant to a
registration statement filed under the Act, or other applicable exemptions
from registration thereunder.
- 12 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
6. Stock Options and Warrants
The Company established a stock option plan effective June 21, 1999, and
amended it October 6, 1999. The plan originally allowed issuance of up to
3,000,000 shares of common stock as incentive stock options to current and
future key employees and consultants. The amended plan increased the
options issuable to 6,000,000. The Board of Directors or a committee of two
or more outside directors on the Board administers the Plan. The Board of
Directors has the authority to determine the terms and restrictions on all
options, as well as to construe and interpret any provision of the Plan.
The options can be granted for periods up to ten years, or five years for
Incentive Stock Options granted to optionees possessing more than 10% of
the total combined voting power of all classes of stock. Unless extended by
the Plan administrators, the right to exercise an option terminates 90 days
after the termination of an optionee's relationship with the Company. If
the optionee dies or becomes disabled, the option will remain exercisable
for one year.
The Company accounts for its stock option plan in accordance with the
provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees.
Had compensation cost for the stock option plan been determined based on
the fair value at the grant date consistent with the method of SFAS No.
123, Accounting for Stock-Based Compensation, the Company's net loss and
net loss per share would have been the pro forma amounts indicated below:
For the year ended
February 29, 2000
----------------------
Actual net loss $ 6,595,702
Pro forma net loss $ 6,932,687
Actual net loss per share $ (.38)
Pro forma net loss per share $ (.40)
The fair value of each option grant was estimated at the grant date using
the Black-Scholes option-pricing model for the year ended February 29,
2000, assuming a risk-free interest rate ranging from 5.27% to 6.36%,
volatility of 30% to 105%, zero dividend yield, and an expected life of 2
to 4 years.
-13-
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
6. Stock Options and Warrants - Continued
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options and warrants which have no
vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions,
including the expected stock price volatility. Because the Company's
employee stock options and warrants have characteristics significantly
different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate,
in management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its employee stock options.
A summary of the status of the company's options as of February 29, 2000
and changes during the period from March 6, 1998 (inception) to February
29, 2000 is presented below.
<TABLE>
Weighted
Exercise Price Average
Per Share Exercise Price Shares
-------------------- ---------------------- ------------------
<S> <C> <C> <C>
Granted
Below FMV $.01-2.53 $.74 2,688,000
At FMV $.25-2.00 $.76 1,137,000
------------------
Options outstanding at February 29, 2000 $.75 3,825,000
==================
Options exercisable at February 29, 2000 $.50 3,016,000
==================
Weighted-average fair value of
options granted during the year $1.33 3,825,000
==================
</TABLE>
- 14 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
6. Stock Options and Warrants - Continued
The following table summarizes information concerning options outstanding
at February 29, 2000:
<TABLE>
Total Outstanding Exercisable
---------------------------------------------------------- --------------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Prices of Shares Life Price Of Shares Price
--------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C>
$.01 - .25 2,180,000 2.00 $ .18 2,169,000 $ .18
$.50 - .75 525,000 2.00 $ .56 482,000 $ .56
$1.00-2.53 1,120,000 2.00 $1.95 365,000 $2.33
----------------- ------------------
3,825,000 3,016,000
================= ==================
</TABLE>
For the year ended February 29, 2000, compensation expense recognized for
stock based employee compensation related to the grant of options was
$1,397,850.
The Company granted options to purchase 1,113,000 shares of the Company's
common stock to non-employees during the year ended February 29, 2000 and
recognized expense related to these options of $973,930. The expense amount
was determined by the fair value of the options issued calculated using the
Black-Scholes model.
On May 6, 1999, the Company executed a strategic marketing and consulting
agreement with Interactive Marketing Inc. ("IMI"). IMI agreed to provide
overall strategic and tactical marketing as well as operational strategy.
In exchange for services, IMI received fully vested, non-cancelable options
to purchase 400,000 shares of SportsPrize Entertainment Inc. unregistered
common stock. IMI can exercise these options upon demand for a period of up
to one year. The Company recorded $596,000 of compensation expense during
the year ended February 29, 2000 based on the fair value of the options,
because the services were performed in the current period.
In November 1999, IMI received additional fully vested, non-cancellable
options to purchase an additional 200,000 shares of SportsPrize
Entertainment Inc. unregistered common stock. IMI can exercise these
options upon demand for a period of up to one year. The Company recorded
$523,000 of compensation expense, based on the fair value of the options,
in connection with the continuation of the IMI agreement.
- 15 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
7. Loss Per Share
The Company follows Statement of Financial Accounting Standard No. 128, to
calculate Earnings Per Share. Basic loss per share is computed using the
weighted effect of all common shares issued and outstanding. The following
table sets forth the computation of basic and diluted earnings per share.
Options to purchase 3,825,000 shares of common stock ranging from $0.01 -
$2.53 a share were outstanding at February 29, 2000. Such options were not
included in the computation of diluted earnings per share because they were
antidilutive.
<TABLE>
From Inception
Year Ended March 6, 1998
February 29, 2000 to February 28, 1999
------------------------ ----------------------------
<S> <C> <C>
Net loss: ($6,595,702) ($144,125)
======================== ============================
Denominator:
For basic and diluted 17,389,814 3,515,244
loss per share - weighted
average shares outstanding
Basic and diluted loss per common share ($0.38) ($0.04)
</TABLE>
8. Commitments and Contingencies
Employment and Consulting Agreements
The company has entered into various employment and consulting agreements
that contemplate specific future payments as follows:
Year ending February 28,
------------------------
2001 $658,000
2002 350,000
2003 60,000
--------------------
$1,068,000
====================
- 16 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
Sports Tournament
The Company operates a multi-sport proprietary tournament through its
Internet site, and awards weekly, monthly, quarterly and annual monetary
and merchandise prizes to its tournament participants. For its Tournament
2000, the Company has committed to award approximately $1,600,000 in prizes
during the calendar year. The $1,000,000 Annual Grand Prize will be awarded
as a twenty-year annuity that will result in annual payments to the winner
of $50,000 for 20 years. This annuity is expected to cost approximately
$490,000.
During the calendar year, the Company will incur approximately $1,100,000
in expenses associated with its prizing program. Accordingly, the Company
has accrued approximately $176,000 as of February 29, 2000 in connection
with this program.
9. Income Taxes
No provision was made for Federal income tax since the Company has
significant net operating loss carryforwards. Through February 29, 2000,
the Company incurred net operating losses for federal income tax purposes
of approximately $4,080,000. Differences between financial statement and
tax losses consist primarily of compensation expense recorded as a result
of stock options issued to employees and consultants. The federal net
operating loss carryforwards may be used to reduce taxable income through
the year 2020. Net operating loss carryforwards for the State of California
are approximately $2,040,000 and are generally available to reduce taxable
income through the year 2005. The availability of the Company's net
operating loss carryforwards are subject to limitation if there is a 50% or
more change in the ownership of the company's stock.
The gross deferred tax asset balance as of February 29, 2000 was
approximately $2,513,000. A 100% valuation reserve has been established
against the deferred tax assets as the utilization of the loss
carryforwards cannot reasonably be assured.
10. Related Party Transactions
During the year, the Company had the following related party transactions:
Legal fees paid to a firm for which the Corporate
Secretary is a principal $ 89,512
Consulting fees and value of stock options paid to a
company for which one of the directors is a principal $ 1,389,000
- 17 -
<PAGE>
SportsPrize Entertainment Inc.
(formerly Kodiak Graphics Company)
A Development Stage Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
February 29, 2000 and February 28, 1999
11. Subsequent Events
On March 1, 2000, the Company signed a Services and Promotional Agreement
with a sports broadcaster and former professional athlete. In
consideration, the Company has granted this sports broadcaster and former
professional athlete an option to purchase up to 60,000 shares of the
Company's common stock at $0.01 per share. These options vest immediately
and expire in one year. The Company is also obligated to pay a commission
equal to 3% of the value of consideration paid to or by any corporate
sponsor that this former athlete facilitates during the term of the
agreement.
On April 7, 2000, the founders agreed to return and the Company cancelled
1,895,000 shares of the Company's common stock. These shares were cancelled
in connection with the issuance of 1,895,000 stock options (of which
600,000 options were issued to IMI - see Note 6) that were previously
issued to certain employees and consultants. Consequently, the Company's
total outstanding common shares decreased from 19,480,374 to 17,585,374.
- 18 -
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------ -----------
2.1(1) Articles of Share Exchange
3.1(1) Articles of Incorporation of Par Golf, Inc. effective August 25,
1995
3.2(1) Articles of Amendment to Par Golf, Inc. effective August 21, 1997
3.3(1) Articles of Amendment to Kodiak Graphics Company effective May
21, 1999
3.4(1) Articles of Amendment to SportsPrize Entertainment Inc. effective
June, 1999
3.5(1) Bylaws of Par Golf Inc.
10.1(1) Form of Stock Option Plan
10.2(1) Form of Stock Option Agreement
10.3(1) Agreement and Plan of Share Exchange by and between Kodiak
Graphics Company and SportsPrize Entertainment Inc. dated May 7,
1999
10.4(1) Escrow Agreement by and between Kodiak Graphics Company of the
first part, Randy Daggitt, Jeff Paquin, James Brown, Michael
Slater, Anthony Vecchio and Gang Consulting Inc. of the second
part and Clark, Wilson of the third part, dated May 7, 1999
10.5(1) Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Jeffrey D. Paquin, dated
March 1, 1999
10.6(1) Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and John Thompson, dated March 1,
1999
10.7(1) Service Agreement by and between SportsPrize Inc. (formerly
SportsPrize Entertainment Inc.) and Donald MacKay, dated March 1,
1999
10.8(1) Service Agreement by and between SportsPrize Entertainment Inc.
and Olson Cove Consulting, dated March 1, 1999
10.9(1) Contract by and between SportsPrize Inc. and Quad-Linq Software
Inc., dated February 18, 1999 and Addendum thereto dated May 12,
1999
10.10(1) Acquisition Agreement by and between SportsPrize Inc. and Justin
Tighm Innovative Games Inc., dated March 1, 1999 and Addendum
thereto dated May 21, 1999
<PAGE>
Exhibit
Number Description
------ -----------
10.11(1) Marketing Consulting Agreement by and between Interactive
Marketing Inc. and SportsPrize Entertainment Inc., dated May 6,
1999
10.12(1) Agreement by and between Kaleidoscope Sports & Entertainment, LLC
and SportsPrize Entertainment Inc., dated May 1, 1999
10.13(1) Assignment and Assumption Agreement by and between Kaleidoscope
Sports & Entertainment, LLC and SportsPrize Entertainment Inc.
effective as of May 14, 1999
10.14(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated May 6,
1999
10.15(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated May 6,
1999
10.16(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Lamplighter Investments Ltd., dated July 15,
1999
10.17(1) Private Placement Subscription Agreement by and between Kodiak
Graphics Company and Strathburn Investments Inc., dated July 15,
1999
10.18(1) Data and Service Agreement by and between Las Vegas Sports
Consultants, Inc. (dba DBC Sports) and SportsPrize Entertainment
Inc., dated May 26, 1999
10.19(1) Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Michael Wiedder, dated June 17, 1999
10.20(1) Agreement and Contract for Services by and between SportsPrize
Entertainment Inc. and Ronald Sheridan, dated July 1, 1999
10.21(1) Letter Agreement by and between Intershop Communications, Inc.
and SportsPrize Entertainment Inc., dated June 29, 1999
10.22(1) Master Service Agreement by and between Frontier Global Center
and SportsPrize Entertainment Inc., dated July 22, 1999
10.23(1) Letter Agreement by and between Kodiak Graphics Company and
Sonora Capital Corp., dated May 7, 1999
10.24(1) Investor Relations Agreement by and between SportsPrize
Entertainment Inc. and Sonora Capital Corp., dated May 21, 1999
<PAGE>
Exhibit
Number Description
------ -----------
10.25(1) Letter Agreement by and between SportsPrize Entertainment Inc.
and FOCUS Partners LLC, dated July 27, 1999
10.26(1) Internet Distribution and Marketing Agreement by and between
SportsPrize Entertainment Inc. and Dreams Products, Inc., dated
August 6, 1999
10.27(1) Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Bruce R. Cameron, dated September 16, 1999
10.28(1) Executive Employment Agreement by and between SportsPrize
Entertainment Inc. and Robert Hunziker, dated August 15, 1999
10.29(1) Addendum to Agreement and Contract for Services by and between
SportsPrize Entertainment Inc. and Michael Wiedder, dated August
30, 1999
10.30(1) Proposal Agreement by and between SportsPrize Entertainment Inc.
and ShopSports.com, dated September 17, 1999
10.31(1) Lease Agreement by and between eOfficeSuites Inc. and SportsPrize
Entertainment Inc., dated September 27, 1999
10.32(1) Amendment to Assignment and Assumption Agreement by and between
Kaleidoscope Sports and Entertainment, LLC and SportsPrize
Entertainment Inc., dated September 10, 1999
10.33(1) Agreement by and between Tridian Design and Development and
SportsPrize Entertainment Inc., dated August 2, 1999
10.34(1) Form of Confidentiality Agreement
10.35 Service Agreement by and between Big Game James, Inc. and
SportsPrize Entertainment Inc., dated March, 1, 2000
10.36 Share Contribution Agreement by and between SportsPrize
Entertainment Inc., and Pooling Shareholders, dated April, 7,
2000
<PAGE>
Exhibit
Number Description
------ -----------
10.37 Debenture Purchase Agreement dated May 30, 2000 among Cutter
Services, Corp., Strathburn Investments Inc. and SportsPrize
Entertainment Inc.
10.38 Form of 9% Convertible Debenture
10.39 Form of Warrant to Purchase Shares of Common Stock
10.40 Form of Lock Up Agreement effective June 2, 2000.
10.41 Executive Employment Agreement dated April 10, 2000 between
Sportsprize Entertainment, Inc. and David Kenin
21.1(1) List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
---------------------
(1) Previously filed on December 7, 1999.
