SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) March 1, 2000
THE AMERICAN SPORTS MACHINE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
FLORIDA
(State or other jurisdiction of incorporation or organization)
<S> <C>
0-26327. . . . . . . . . 65-0877744
(Commission File Number) (IRS Employer Identification Number)
</TABLE>
222 LAKEVIEW AVENUE, SUITE 160-146
WEST PALM BEACH, FLORIDA 33401
(Address of principal executive offices)
(561) 832-5698
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
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On March 1, 2000 the Company executed an Plan and Agreement of Merger among
the Company and SoftQuad Software, Ltd., a Delaware corporation.
On March 1, 2000 the Company executed an Agreement and Plan of
Reorganization among the Company SoftQuad Software, Ltd., a Delaware corporation
and the Stockholders of SoftQuad Software, Ltd.
On March 1, 2000 the Company filed a Certificate of Merger of SoftQuad
Software, Ltd. into the Company with the Secretary of State of Delaware.
On March 1, 2000 the Company filed an Articles of Merger of SoftQuad
Software, Ltd. into the Company with the Secretary of State of Florida.
Under the terms of the Agreement and Plan of Reorganization, the Company's
was the surviving corporation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ----------------------------------------------
Financial Statements
None
Exhibits
Exhibit A - Plan and Agreement of Merger
Exhibit B - Agreement and Plan of Reorganization
Exhibit C - Press Release
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE AMERICAN SPORTS MACHINE, INC.
By:/s/James D. Brock, Jr.
-------------------------
James D. Brock, Jr., President
Date: March 9, 2000
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (hereinafter referred to as this
"Agreement") dated as of March 1, 2000, is made and entered into by and between
The American Sports Machine, Inc., a Florida corporation (the "Company") and
SoftQuad Software, Ltd., a Delaware corporation ("SoftQuad USA").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, the Company is a corporation organized and existing under the laws
of the State of Florida; and
WHEREAS, SoftQuad USA was incorporated in Delaware on December 1, 1999; and
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
SoftQuad USA shall be merged into Company (the "merger") upon the terms and
conditions hereinafter set forth.
ARTICLE I
Merger
On March 1, 2000 as soon as practicable thereafter (the "Effective Date");
SoftQuad USA shall be merged into the Company, the separate existence of
SoftQuad USA shall cease and the Company (following the Merger referred to as
the "Combined Company") shall continue to exist under the name of "The American
Sports Machine, Inc.," by virtue of, and shall be governed by, the laws of the
State of Florida. The street address of the registered office of the Combined
Company shall be 222 Lakeview Avenue, Suite 160-146, West Palm Beach, Florida
33401, and the name of the registered agent of the corporation at that address
is Donald F. Mintmire.
ARTICLE II
Certificate of Incorporation of Combined Company
The Articles of Incorporation of the Company shall be the Articles of
Incorporation of the Combined Company as in effect on the date hereof without
change unless and until amended in accordance with applicable law.
ARTICLE III
By-Laws of Combined Company
The By-Laws of the Combined Company shall be the By-Laws of the Company as
in effect on the date hereof without change unless and until amended or repealed
in accordance with applicable law.
ARTICLE IV
Effect of Merger on Stock of Constituent Corporations
4.01 On the Effective Date, (i) each outstanding share of the Company
common stock, $.001 par value ("Company Common Stock") shall remain outstanding
and be converted into one who share of Combined Company common stock, $.001 par
value, ("Combined Company Common Stock") and (ii) each outstanding share of
Company Common Stock shall be retired and canceled.
4.02 All options and rights to acquire SoftQuad USA Common Stock under or
pursuant to any options or warrants which are outstanding on the Effective Date
of the Merger will automatically be converted into equivalent options and rights
to purchase that whole number of Combined Company Common Stock into which the
number of SoftQuad USA Common Stock subject to such options or warrants
immediately prior to the Effective Date would have been converted in the merger
had such rights been exercised immediately prior thereto (with any fractional
Combined Company Common Stock interest resulting from the exercise being settled
in cash in the amount such holder would have received for any such fraction in
the merger had he exercised such warrants or options immediately prior to the
Merger). The option price per share of Combined Company Common Stock shall be
the option price per share of SoftQuad Common Stock in effect prior to the
Effective Date. All plans or agreements of SoftQuad USA under which such
options and rights are granted or issued shall be continued and assumed by the
Combined Company unless and until amended or terminated in accordance with their
respective terms.
4.03 (a) Atlas Stock Transfer Company, 5899 South State Street, Salt Lake City,
UT 84107-8103. Attention: Pam Gray, shall act as exchange agent in the Merger.
(b) Prior to, or as soon as practicable, after the Effective Date, the
Company shall mail to each person who was, at the time of mailing or at the
Effective Date, a holder of record of issued and outstanding Company Common
Stock (i) a form letter of transmittal and (ii) instructions for effecting the
surrender of the certificate or certificates, which immediately prior the
Effective Date represented issued and outstanding shares of Company Common Stock
("Company Certificates"), in exchange for certificates representing Combined
Company Common Stock. Upon surrender of a Company Certificate for cancellation
to the exchange agent, together with a duly executed letter of transmittal, the
holder of such Company Certificate shall subject to paragraph (f) of this
section 4.03 be entitled to receive in exchange therefor a certificate
representing that number of Combined Company Common Stock into which the Company
Common Stock theretofore represented by the Company Certificate so surrendered
shall have been converted pursuant to the provisions of this Article IV; and the
Company Certificate so surrendered shall forthwith be canceled.
(c) No dividends or other distributions declared after the Effective Date
with respect to Company Common Stock and payable to holders of record thereof
after the Effective Date shall be paid to the holder of any unsurrendered
Company Certificate with respect to Company Common Stock which by virtue of the
Merger are represented thereby, nor shall such holder be entitled to exercise
any right as a holder of Company Common Stock; until such holder shall surrender
such Company Certificate. Subject to the effect, if any, of applicable law and
except as otherwise provided in paragraph (f) of this Section 4.03, after the
subsequent surrender and exchange of a Company Certificate, the holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which became payable prior to such surrender and exchange
with respect to Company Common Stock represented by such Company Certificate.
(d) If any stock certificate representing Combined Company Common Stock is
to be issued in a name other than that in which the Company Certificate
surrendered with respect thereto is registered, it shall be a condition of such
issuance that the Company Certificate so surrendered shall be properly endorsed
or otherwise in proper form for transfer and that the person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance to a person other than the registered holder of the Company Certificate
surrendered or shall establish to the satisfaction of the exchange agent that
such tax has been paid or is not applicable.
(e) After the Effective Date, there shall be no further registration of
transfers on the stock transfer books of the Company of the Shares of Company
Common Stock, or of any other shares of stock of the Company, which were
outstanding immediately prior to the Effective Date. If after the Effective
Date certificates representing such shares are presented to the transfer agent
they shall be canceled and, in the case of Company Certificates, exchanged for
certificates representing Combined Company Common Stock and, as provided in this
Article IV.
(f) No certificates or scrip representing fractional Combined Company
Common Stock shall be issued upon the surrender for exchange of Company
Certificates, no dividend or distribution of the Combined Company shall relate
to any fractional Company Common Stock interest, and no such fractional share
interest will entitle the owner thereof to vote or to any right of a stockholder
of the Combined Company. In lieu thereof, the Combined Company shall issue to
each holder of Company Common Stock convertible into a fractional interest in
Combined Company Common Stock the next highest whole number of Combined Company
Common Stock.
ARTICLE V
Corporate Existence, SoftQuad USA and Liabilities of SoftQuad USA
5.01 On the Effective Date, the separate existence of SoftQuad USA shall
cease. SoftQuad USA shall be merged with and into the Company, in accordance
with the provisions of this Agreement. Thereafter, the Combined Company shall
possess all the rights, privileges, powers and franchises as well of a public as
of a private nature, and shall be subject to all the restrictions, disabilities
and duties of each of the parties to this Agreement and all and singular; the
rights, privileges, powers and franchises of the Company and SoftQuad USA, and
all property, real, personal and mixed, and all debts due to each of them on
whatever account, shall be vested in the Combined Company; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter an effectually the property of the Combined Company, as they
were of the respective constituent entities, and the title to any real estate
whether by deed or otherwise vested in the Company and SoftQuad USA or either of
them, shall not revert to be in any way impaired by reason of the Merger; but
all rights of creditors and all liens upon any property of the parties hereto,
shall be preserved unimpaired, and all debts, liabilities and duties of the
respective constituent entities, shall thenceforth attach to the Combined
Company, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
5.02 The SoftQuad USA agrees that it will execute and deliver, or cause to
be executed and delivered, all such deeds, assignments and other instruments,
and will take or cause to be taken such further or other action as the Company
may deem necessary or desirable in order to vest in and confirm to the Combined
Company title to and possession of all the property, rights, privileges,
immunities, powers, purposes and franchises, and all and every other interest,
of SoftQuad USA and otherwise to carry out the intent and purposes of this
Agreement.
ARTICLE VI
Officers and Directors of Combined Company
6.01 Upon the Effective Date, the officers and directors of the Combined
Company shall be officers and directors of the Company in office at such date,
and such persons shall hold office in accordance with the By-Laws of the Company
or until their respective successors shall have been appointed or elected.
6.02 If, upon the Effective Date, a vacancy shall exist in the Board of
Directors of the Company, such vacancy shall be filled in the manner provided by
its By-Laws.
ARTICLE VII
Approval by Directors; Amendment; Effective Date
7.01 This Agreement and the Merger contemplated hereby have been approved
by the requisite vote of directors of the Company in accordance with applicable
Florida law. As promptly as practicable after execution of this Agreement by
the duly authorized officers of the respective parties, the parties shall make
and execute Articles of Merger and a Certificate of Merger and shall cause such
documents to be filed with the Secretary of State of Florida and the Secretary
of State of Delaware, respectively, in accordance with the laws of the States of
Florida and Delaware. The Effective Date of the Merger shall be the date on
which the Merger becomes effective under the laws of Florida or the date on
which the Merger becomes effective under the laws of Delaware, whichever occurs
later.
7.02 The Board of Directors of the Company and SoftQuad USA may amend this
Agreement at any time prior to the Effective Date, provided that an amendment
made subsequent to the approval of the merger by the shareholder of Company
shall not (1) alter or change the amount or kind of shares to be received in
exchange for or on conversion of all or any of the Company Common Stock (2)
alter or change any term of the Certificate of Incorporation of the Company, or
(3) alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of Company Common Stock.
ARTICLE VIII
Termination of Merger
This Agreement may be terminated and the Merger abandoned at any time prior
to the filing of this Agreement with the Secretary of State of Florida and the
Secretary of State of Delaware by the consent of the Board of Directors of the
Company and SoftQuad USA.
ARTICLE IX
Miscellaneous
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all such counterparts shall together constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, all as of the day and year first above
written.
THE AMERICAN SPORTS MACHINE, INC.
a Florida corporation
By: /s/James D. Brock, Jr.
---------------------------
James D. Brock, Jr., President
SOFTQUAD SOFTWARE, LTD.
a Delaware corporation
By: Cameron Chell
----------------
Cameron Chell, President
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made and
entered into as of this 1st day of March, 2000, by and among The American Sports
Machine, Inc., a Florida corporation (hereinafter referred to as "ASM"),
SoftQuad Software, Ltd., a Delaware corporation (hereinafter referred to as
"SoftQuad USA"), and the undersigned stockholders ("Stockholders") of SoftQuad
USA.
R E C I T A L S:
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The Stockholders own all of the issued and outstanding shares of SoftQuad
USA's capital stock. ASM desires to acquire all of the issued and outstanding
capital stock of SoftQuad USA, making SoftQuad USA a wholly-owned subsidiary of
ASM, and Stockholders desire to exchange all of the shares of SoftQuad USA's
capital stock, for designated shares of ASM's capital stock to be issued. It is
the intention of the parties hereto that: (i) ASM shall acquire all of the
issued and outstanding capital stock of SoftQuad USA in exchange solely for the
number of designated shares of ASM's authorized but unissued capital stock set
forth below (the "Exchange"); (ii) the Exchange shall qualify as a tax-free
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended, and related sections thereunder; and (iii) the Exchange shall
qualify as a transaction in securities exempt from registration or qualification
under the Securities Act of 1933, as amended, and under the applicable
securities laws of each state or jurisdiction where Stockholders reside.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
hereto agree as follows:
1. EXCHANGE OF SHARES. ASM and Stockholders agree that on the Closing
Date (as hereinafter defined) Stockholders will exchange all of the issued and
outstanding shares of the capital stock of SoftQuad USA for shares (the
"Shares") of ASM's capital stock all as set out in Exhibit "A."
2. DELIVERY OF SHARES. On the Closing Date, Stockholders will deliver
to ASM the certificates representing all of the outstanding shares of SoftQuad
USA's capital stock, duly endorsed (or with duly executed stock powers) so as to
make ASM the sole owner thereof free and clear of all claims and encumbrances
except as specifically assumed by ASM. Simultaneously, on the Closing Date, ASM
will deliver the certificates representing the Shares to the Stockholders.
After delivery to ASM of certificates representing all outstanding shares of
SoftQuad USA and delivery of the Shares, the issued and outstanding shares of
ASM's capital stock will be held of record by the persons and in the amounts
described in Exhibit "A-1."
3. REPRESENTATIONS AND WARRANTIES OF SOFTQUAD USA. Subject as set out
in Section 10, the Stockholders severally, as a material inducement to ASM to
enter into this Agreement and consummate the transactions contemplated hereby,
make the following representations and warranties to ASM, which representations
and warranties are true and correct in all material respects on the Closing
Date, that to their actual knowledge:
3(a) Securities Holders. The Stockholders are the only owners, of
------------------
record, of all of the issued and outstanding shares of SoftQuad USA's capital
stock.
3(b) Financial Condition. Except as set forth in Exhibit "B",
--------------------
SoftQuad USA has no material assets or liabilities except a US$3 million
receivable from SoftQuad Software, Inc., an Ontario corporation.
3(c) Undisclosed Liabilities. Except as set forth in Schedule 1,
------------------------
at the Closing Date, SoftQuad USA: (i) will have no liabilities or obligations
of any nature, fixed or contingent, matured or unmatured, which are not shown or
otherwise provided for in Exhibit "B" except for liabilities and obligations
specifically assumed by ASM or arising in the ordinary course of business, none
of which is materially adverse; and (ii) all reserves established by SoftQuad
USA and set forth in Exhibit "B" will be adequate and there will be no material
loss contingencies (as such term is used in Statement of Financial Accounting
Standard No. 5 of the Financial Accounting Standards Board) which are not
adequately provided for.
3(d) Absence of Changes. Except as set forth in Schedule 2, since
------------------
the date of Exhibit "B", SoftQuad USA's business has been operated in the
ordinary course and there has not been:
(i) Any material adverse change in the condition (financial
or otherwise), assets, liabilities, earnings, net worth, business or prospects
of SoftQuad USA for such period, in the aggregate, or at any time during such
period;
(ii) Any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting SoftQuad USA, or its businesses;
(iii) Any declaration, setting aside, or payment of any
dividend or other distribution in respect of any shares of capital stock of
SoftQuad USA, or any direct or indirect redemption, purchase or other
acquisition of any such stock;
(iv) Any issuance or sale by SoftQuad USA or agreement to
sell any of its securities; or
(v) Any statute, rule, regulation or order adopted (including
orders of regulatory authorities with jurisdiction over SoftQuad USA or its
business) which materially adversely affects SoftQuad USA or its business.
3(e) Litigation, Etc. Except as set forth in Schedule 3, or in
----------------
Exhibit "B"; there are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings current or so far as the stockholders
are aware threatened against SoftQuad USA, its assets or business, whether at
law or in equity, or before or by any Federal, state, municipal, local, foreign
or other governmental department, commission, board, bureau, agency or
instrumentality.
3(f) Compliance; Governmental Authorizations. Except as set forth
---------------------------------------
in Schedule 4, SoftQuad USA has complied with all Federal, state, local or
foreign laws, ordinances, regulations and orders applicable to its business,
including without limitation, federal and state securities laws which, if not
complied with, would materially and adversely affect the business of SoftQuad
USA. SoftQuad USA has all Federal, state, local and foreign governmental
licenses and permits necessary in the conduct of its business, and such licenses
and permits are in full force and effect.
3(g) Due Organization, Etc. SoftQuad USA is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of Delaware.
SoftQuad USA has the power to own its properties and assets and to carry on its
business as now presently conducted.
3(h) Tax Matters. SoftQuad USA has filed all federal, state and
------------
local tax or related returns and reports due or required to be filed, which
reports accurately reflect in all material respects the amount of taxes due.
SoftQuad USA has paid all amounts of taxes or assessments which would be
delinquent if not paid as of the date of this Agreement, other than taxes or
charges being contested in good faith or not yet finally determined.
3(i) Agreements, Etc. Schedule 5 contains a true and complete
----------------
list and brief description of all material written or oral contracts,
agreements, mortgages, obligations, understandings, arrangements, restrictions,
and other instruments to which SoftQuad USA is a party or by which SoftQuad USA
or its assets may be bound. True and correct copies of all written agreements
set forth on Schedule 5 are appended in Exhibit "H." No event has occurred
which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default under any of the
agreements set forth in Schedule 5.
3(j) Title to Property and Related Matters. SoftQuad USA has good
-------------------------------------
and marketable title to all the properties, interests in properties and assets,
real and personal, reflected as being owned by it on the Financial Statements or
acquired by it after the date of the Financial Statements as itemized in
Schedule B, of any kind or character, free and clear of any liens or
encumbrances, except (i) those referred to in the notes to the Financial
Statements, (ii) those set forth in Schedule 6, and (iii) liens for current
taxes not yet delinquent. Schedule 6 contains a general description of all real
property of SoftQuad USA. Except as set forth in said Schedule 6 and except for
matters which may arise in the ordinary course of business, SoftQuad USA's
assets are in good operating condition and repair. To the best of knowledge of
Stockholders, there does not exist any condition which materially interferes
with the use thereof in the ordinary course of SoftQuad USA's business.
3(k) Corporate Records. The corporate records, minute books, and
------------------
other documents and records of SoftQuad USA are complete and correct. ASM shall
have the right to review all corporate records of SoftQuad USA prior to the
Closing Date.
3(l) Licenses; Trademarks; Trade Names; Etc. Schedule 7 contains
---------------------------------------
a true and complete list of all licenses and all trademarks, trade names,
service marks, copyrights, know-how, patents and applications for any of the
foregoing owned by or registered in the name of SoftQuad USA. There is no
current or so far as the stockholders threatened claim or litigation against
SoftQuad USA contesting the right to use any of the trademarks, trade names and
know-how or the validity of any of the licenses, copyrights and patents listed
on Schedule 7, or asserting the misuse of any thereof, nor has there ever been
any such claim or litigation.
3(m) Authorization by SoftQuad USA. This Agreement constitutes a
------------------------------
valid and binding agreement of Stockholders, enforceable in accordance with its
terms except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally; and neither the
execution and delivery of this Agreement nor the consummation by Stockholders of
the transactions contemplated hereby, nor compliance with any of the provisions
hereof, will violate any statute, law, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority enforceable against
Stockholders, or violate or conflict with or constitute a default under (or give
rise to any right of termination, cancellation or acceleration under) the terms
or conditions or provisions of any note, bond, lease, mortgage, obligation,
agreement, understanding, arrangement or restriction of any kind to which
SoftQuad USA or Stockholders is a party or by which SoftQuad USA, Stockholders
or their respective properties may be bound. No consent or approval by any
governmental authority is required in connection with the consummation of the
transactions contemplated hereby.
3(n) Capitalization. The authorized capitalization of SoftQuad
--------------
USA is as set forth in Schedule 8. Except as set forth in said Schedule 8,
there are no outstanding or presently authorized securities, warrants,
preemptive rights, subscription rights, options or related commitments of any
nature to issue any of SoftQuad USA's securities which are not reflected in the
Financial Statements or in Schedule 8.
3(o) Full Disclosure. The Stockholders have, and at the Closing
----------------
Date will have, disclosed to ASM all events, conditions and facts materially
affecting the business and prospects of SoftQuad USA; and that Stockholders have
not and will not have, at the Closing Date, withheld disclosure of any events,
conditions, and facts which it may have knowledge of, or have reasonable grounds
to know, may materially, adversely affect the business and prospects of SoftQuad
USA.
3(p) Brokerage or Finder's Fees. SoftQuad USA has not incurred,
----------------------------
nor will it incur, any liability for brokerage or finder's fees or similar
charges in connection with this Agreement or any of the transactions
contemplated hereby.
3(q) Share Ownership. The shares of SoftQuad USA's capital stock
----------------
to be exchanged for the Shares in the Exchange are owned, of record, by
Stockholders, free and clear of all liens and encumbrances of any kind and
nature.
3(r) Approvals Required. No approval, authorization, consent,
-------------------
order or other action of, or filing with, any person, firm or corporation or any
court, administrative agency or other governmental authority is required in
connection with the execution and delivery by Stockholders of this Agreement or
the consummation of the transactions described herein, except as disclosed
herein and, except to the extent that the parties are required to file reports
in accordance with relevant regulations under Federal and state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF ASM. Subject as set out in
Section 10 ASM, as a material inducement to Stockholders to enter into this
Agreement and consummate the transactions contemplated hereby, make the
following representations and warranties to Stockholders, which representations
are true and correct at this date, and will be true and correct on the Closing
Date as though made on and as of such date:
4(a) Shares of Capital Stock. The Shares to be delivered to
--------------------------
Stockholders at Closing will be valid and legally issued shares of capital
stock, free and clear of all liens, encumbrances, and preemptive rights, and
will be fully-paid and non-assessable shares.
4(b) Due Authorization, Etc. This Agreement has been duly
------------------------
authorized, executed, and delivered by ASM, and constitutes a legal, valid, and
binding obligation of ASM, enforceable in accordance with its terms; no consent
of any federal, state, municipal or other governmental authority is required by
ASM for the execution, delivery or performance of this Agreement by ASM; no
consent of any party to any contract or agreement to which ASM is a party or by
which any of its property or assets are subject is required for the execution,
delivery or performance of this Agreement by ASM.
4(c) Financial Statements. Exhibit "E" is a copy of ASM's audited
--------------------
financial statements at September 30, 1999, including balance sheets, income
statements and changes in financial position and its audited financial
statements at May 31, 1999 (collectively the "Statements"). The Statements
fairly and accurately reflect the financial condition of ASM as of the dates
thereof and the results of operations for the periods reflected therein. The
Statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, except as otherwise stated therein; and the
books and records, financial and others, of ASM are in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
4(d) Undisclosed Liabilities. Except as set forth in Schedule 9,
------------------------
ASM: (i) has no material liabilities or obligations of any nature, fixed or
contingent, matured or unmatured, which are not shown or otherwise provided for
in the Statements; and (ii) all reserves established by ASM and set forth in
the Statements are adequate and there are no material loss contingencies (as
such term is used in Statement of Financial Accounting Standard No. 5 of the
Financial Accounting Standards Board) which are not adequately provided for.
4(e) Material Adverse Change. Except as set forth in Schedule 10,
-----------------------
since the date of the Statements, there has not been, and as of the Closing Date
there shall not have been, any material changes in ASM's condition (financial or
otherwise), or liabilities (absolute, contingent or otherwise), whether or not
arising from transactions in the ordinary course of business; provided, however,
that the parties have agreed that the financial position of ASM will change to
the extent that ASM incurs costs in connection with the transactions
contemplated by this Agreement.
4(f) Litigation, Etc. Except as set forth in Schedule 11, or in
----------------
the Statements; there are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or threatened against ASM, its
assets or business, whether at law or in equity, or before or by any Federal,
state, municipal, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality; nor does ASM know or have any reason
to know of a threat of such litigation or any basis for any such action, suit,
claim, investigation or proceeding.
4(g) Due Organization, Etc. ASM is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Florida, is
qualified to business and in good standing in each state where it is required to
be qualified and such qualification is material and has the corporate power to
own its property and to carry on its business as now being conducted. The
Certificate of Incorporation and By-Laws of ASM, as will be in effect on the
Closing Date, are attached hereto as Exhibit "C" and are made a part hereof.
4(h) Tax Matters. By closing, ASM will have filed all Federal,
------------
state and local, tax or related returns and reports due or required to be filed,
which reports accurately reflect in all material respects the amount of taxes
due. By closing, ASM will have paid all taxes or assessments which have become
due, other than taxes or charges being contested in good faith or not finally
determined.
4(i) Agreements, Etc. ASM has not breached, nor is there any
----------------
pending or threatened claims or any legal basis for a claim that ASM has
breached, nor has an event occurred which with the passing of time would
constitute a breach of any of the terms or conditions of any agreements,
contracts or commitments to which ASM is a party or by which ASM or its assets
are bound. A list of all of ASM's material contracts, agreements or commitments
(whether oral or written) is set forth on Schedule 12 and true and correct
copies of all such contracts and agreements are appended as Exhibit "I." The
execution, delivery and performance of this Agreement by ASM will not be in
conflict with or constitute a default under any provisions of applicable law,
ASM's Certificate of Incorporation or By-Laws, or any agreement or instrument to
which ASM is a party or by which it or its assets are bound.
4(j) Capitalization. As of the date of this Agreement, the
--------------
capitalization of ASM consists of authorized common stock of 50,000,000 shares,
$.0001 par value per share, of which 5,600,000 are outstanding and 10,000,000
shares of preferred stock, without par value, of which 1,473,405 have been
designated as Class A Convertible Preferred Stock and 1,722,222 have been
designated as Class B Convertible Preferred Stock and of which are outstanding.
All outstanding shares of the Common Stock have been duly authorized, validly
issued, and are fully-paid and non-assessable, and all such shares were issued
in compliance with all applicable federal and state securities laws. Except for
the issuances of securities referred to in this Agreement, there are no
outstanding or presently authorized securities, warrants, preemptive rights,
subscription rights, options or related commitments of any nature to issue any
of ASM's securities.
4(k) Disclosure of Material Facts. ASM has, and at the Closing
-------------------------------
Date will have, disclosed to SoftQuad USA all events, conditions and facts
materially affecting the business and prospects of ASM; and ASM has not and will
not have, at the Closing Date, withheld disclosure of any events, conditions,
and facts which it may have knowledge of, or have reasonable grounds to know may
materially, adversely affect the business and prospects of ASM.
4(l) Corporate Records. The corporate financial records, minute
------------------
books, and other documents and records of ASM are to be available to SoftQuad
USA at the time of the Closing Date and turned over to new management in their
entirety at Closing. Such records are complete and correct and have been
maintained in accordance with good business and accounting practices.
4(m) Stockholders List. Exhibit "D" is a true, correct and
------------------
complete statement, dated not more than 10 days prior to the Closing Date,
setting forth the names and addresses of ASM's stockholders.
4(n) Title to Assets. Except as set forth in Schedule 13, ASM has
---------------
good and marketable title to all of its assets, free of any liens and
encumbrances.
4(o) Compliance; Governmental Authorizations. Except as set forth
---------------------------------------
in Schedule 14, ASM has complied in all respects with all Federal, state, local,
or foreign laws, ordinances, regulations, and orders applicable to its business,
including without limitation federal and state securities laws applicable to all
offerings prior to the Closing Date. ASM has all Federal, state, local and
foreign governmental licenses and permits material to and necessary in the
conduct of its business, and such licenses and permits are in full force and
effect, and no violations are or have been recorded in respect of any such
licenses of permits, and no proceedings are pending or threatened to revoke or
limit the use of such permits.
4(p) Brokerage Fees. ASM has not incurred, nor will it incur, any
--------------
liability for brokerage or finder's fees or similar charges in connection with
this Agreement or any of the transactions contemplated hereby.
4(q) SEC Filings. Exhibit "F" contains true, correct and complete
-----------
copies of Form 10-KSB filed by ASM in respect of the fiscal year ended September
30, 1999, such form was true and accurate when filed and remains true and
accurate except as set out in later filings and Schedule 10 contains a brief
summary of all material changes in ASM's financial position and prospects since
the date of the filing of Form 10-KSB. All required filings are current as of
the date of this Agreement.
5. AFFIRMATIVE COVENANTS OF ASM, SOFTQUAD USA AND STOCKHOLDERS. ASM,
SoftQuad USA and Stockholders, severally covenant to each other that:
5(a) Filing of Form 8-K. Immediately after the Closing Date, ASM will
---------------------
procure the prompt preparation and file with the Securities and Exchange
Commission appropriate notice describing this transaction on Form 8-K or other
applicable form, and otherwise comply with the provisions of the Securities
Exchange Act of 1934.
5(b) Preparation of Disclosure Statement. Immediately after the
--------------------------------------
Closing Date, the ASM will procure the preparation of a disclosure statement
containing the necessary information to comply with Rule 15(c)2(11) promulgated
by the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934 and file such forms with one or more firms who are members of the
National Association of Securities Dealers, Inc. ("NASD") and with NASD as are
necessary to continue the quotation of ASM's securities in the NASD Electronic
Bulletin Board System.
5(c) Future Stock Distributions. After the Closing Date, ASM will
---------------------------
use its reasonable best efforts to ensure that future issuance of ASM's capital
stock will be completed in conformity with federal and state securities laws and
regulations pertaining to registration; or, pursuant to an exemption from such
registration requirements.
5(d) Reincorporation, Merger and Change of Corporate Name.
-----------------------------------------------------------
Management of SoftQuad USA and ASM will promptly take the appropriate corporate
action to reincorporate ASM from the State of Florida into the State of
Delaware, merge SoftQuad USA with and into ASM and change the name of ASM to
SoftQuad Software, Ltd. or another appropriate name selected by management of
SoftQuad USA.
5(e) Waiver of Preemptive Rights. The Stockholders waive any
------------------------------
rights of preemption they may have in respect of the transfer of the capital
stock of SoftQuad USA whether arising under the Certificate of Incorporation of
SoftQuad USA or otherwise.
6. CLOSING. The Closing (the "Closing") shall take place upon such
date (the "Closing Date") as the parties hereto may mutually agree upon, but
shall be no later than March 1, 2000. The Closing shall take place at the
offices of Sonfield & Sonfield, 770 South Post Oak Lane, Suite 435, Houston,
Texas 77056, or at such place as may be mutually agreed upon by the parties.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SOFTQUAD USA AND
STOCKHOLDERS. All obligations of Stockholders under this Agreement are subject
to the fulfillment, prior to or on the Closing Date, of each of the following
conditions:
7(a) Truth of Representations and Warranties. The representations
--------- ------------------------------
and warranties by or on behalf of ASM contained in this Agreement or in any
certificate or document delivered to Stockholders pursuant to the provisions
hereof shall be true in all material respects at and as of the time of Closing
as though such representations and warranties were made at and as of such time.
7(b) Compliance with Covenants. ASM shall have performed and
---------------------------
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
7(c) Election of New Directors. The present Directors of ASM
----------------------------
shall have caused the appointment of the persons to the Board of Directors of
ASM as directed by SoftQuad USA and will have arranged for the resignation of
existing officers and directors.
7(d) Approval by Legal Counsel. All instruments and documents
----------------------------
delivered to SoftQuad USA and Stockholders pursuant to the provisions hereof
shall be reasonably satisfactory to legal counsel for SoftQuad USA and
Stockholders.
7(e) Opinion of Counsel. ASM shall have delivered to SoftQuad USA
-------------------
and to the Stockholders an opinion of ASM's counsel, dated the Closing Date, to
the effect that:
(i) ASM is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida;
(ii) ASM has the corporate power to carry on its business as
now being conducted;
(iii) This Agreement has been duly authorized, executed and
delivered by ASM and is a valid and binding obligation of ASM, enforceable in
accordance with its terms, except to the extent that enforcement is limited by
applicable bankruptcy, reorganization, insolvency, moratorium, or similar laws
affecting creditors' rights and remedies generally or by general equity
principles (and excepting specific performance as a remedy);
(iv) ASM has taken all corporate action necessary for its due
performance under this Agreement;
(v) The execution and delivery by ASM of this Agreement and
the consummation of the transactions contemplated hereby will not conflict with
or result in a breach of any provisions of, ASM's Certificate of Incorporation
or By-Laws or, to the best of such counsel's knowledge after inquiry and based
upon information provided by ASM, constitute a default under or give rise to a
right of termination, acceleration, or cancellation under any agreement under
which ASM or any of its properties are bound or violate any court order, writ or
decree of injunction applicable to ASM;
(vi) Such counsel does not know, after inquiry, of (a) any
actions, suits or other legal proceedings or investigations pending or
threatened against or relating to or materially adversely affecting ASM; and (b)
any unsatisfied judgments against ASM.
(vii) The authorized and, to such counsel's best knowledge
after inquiry, outstanding capitalization of ASM is as set forth in Section
4(j), all of the outstanding shares of ASM's capital stock are validly issued,
fully-paid and non-assessable, without preemptive rights, and to the best of
counsel's knowledge after inquiry, there are no outstanding subscriptions,
options, rights, warrants or other transfer agreements (whether oral or
written), other than as set forth in Section 4(j) of this Agreement.
7(f) Officers' Certificate. There shall be delivered to
----------------------
Stockholders an officers' certificate, signed by James D. Brock, Jr., President
to the effect that all of the representations and warranties of ASM set forth
herein are true and complete in all material respects as of the Closing Date,
and that ASM has complied in all material respects with its covenants and
agreements set forth herein required to be complied with by the closing.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ASM. All obligations of ASM
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions:
8(a) Truth of Representations and Warranties. The representations
---------------------------------------
and warranties by Stockholders contained in Section 3 this Agreement or in any
certificate or document delivered to ASM pursuant to the provisions hereof shall
be true in all material respects at and as of the time of Closing as though such
representations and warranties were made at and as of such time.
8(b) Compliance with Covenants. The Stockholders shall have
---------------------------
performed and complied with all Covenants, agreements, and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing.
8(c) Delivery of Investment Letter Each of Stockholders shall
--------------------------------
have delivered to ASM an "investment letter" in the form attached as Exhibit
"G," setting out that the shares being acquired are restricted shares and are
being acquired for investment purposes only, and not with a view to public
resale or distribution.
8(d) Delivery of Exhibits and Schedules. The Stockholders shall
------------------------------------
have delivered all of the exhibits and schedules required herein to ASM and such
exhibits, schedules and Financial Statements shall have been acceptable to ASM,
in its sole and absolute discretion.
8(e) Opinion of Counsel. SoftQuad USA shall have delivered to ASM
------------------
an opinion of counsel, dated the Closing Date, to the effect that:
(i) SoftQuad USA is a corporation duly organized, validly
existing and in good standing under the laws of Delaware;
(ii) SoftQuad USA has the corporate power to carry on its
business as now being conducted;
(iii) Except as referred to herein, such counsel knows, after
inquiry, of (a) no actions, suit or other legal proceedings or investigations
pending or threatened against or relating to or materially adversely affecting
SoftQuad USA; and (b) no unsatisfied judgments against SoftQuad USA;
(iv) The authorized capitalization of SoftQuad USA is as set
forth in Section 3(n), all of the outstanding shares of capital stock of
SoftQuad USA are validly issued, fully-paid and non-assessable, without
preemptive rights, and to the best of counsel's knowledge, after inquiry, there
are no outstanding subscriptions, options, rights, warrants or other transfer
agreements (whether oral or written) obligating SoftQuad USA to issue or
transfer from treasury any of its securities except as set forth in Section 3(n)
of this Agreement. When duly transferred to ASM as provided herein, to the best
of such counsel's knowledge after inquiry, ASM will own all of the issued and
outstanding capital stock of SoftQuad USA subject to registration of the
transfer of such shares by the transfer agent of SoftQuad USA and due stamping
of the share transfer.
(v) SoftQuad USA is the owner of the intellectual property
described on Schedule 7 hereto free and clear of any claims liens or charges.
9. INDEMNIFICATION. Subject as set out in Section 10, each party to
this Agreement shall indemnify and hold harmless each other party to this
Agreement at all times after the date of this Agreement against and in respect
of any liability, damage or deficiency, all actions, suits, proceedings,
demands, assessments, judgments, costs and expenses including attorney's fees
(through all appeals) incident to any of the foregoing, resulting from any
misrepresentation or breach of warranty contained in Section 3 or 4 as
appropriate on the part of such party under this Agreement. Subject to the
terms of this Agreement, the defaulting party shall reimburse the other party or
parties, on demand, for any reasonable payment made by said parties at any time
after Closing, in respect of any liability or claim to which the foregoing
indemnity relates, if such payment is made after reasonable notice to the other
party to defend or satisfy the same and such party failed to defend or satisfy
same.
10. NATURE OF REPRESENTATIONS AND WARRANTIES. All of the parties
hereto are executing and carrying out the provisions of this Agreement in
reliance on the representations, warranties, covenants and agreements contained
in this Agreement or at the Closing of the transactions herein provided for, and
any investigation which they might have made or any other representations,
warranties, agreements promises or information, written or oral, made by the
other party or any other person shall not be deemed a waiver of any breach of
any such representation, warranty, covenant or agreement.
11. DOCUMENTS AT CLOSING. At the Closing, the following transactions
shall occur, all of such transactions being deemed to occur simultaneously:
11(a) Documents Delivered by the Stockholders. Stockholders will
----------------------------------------
deliver, or cause to be delivered, to ASM the following:
(i) stock certificates for the shares of stock of SoftQuad
USA being exchanged hereunder, duly endorsed or with stock powers attached in
blank but subject to a customary restrictive stock legend.
(ii) stock certificates for the shares of capital stock of
SoftQuad USA being returned for cancellation pursuant to paragraph 5(a) duly
endorsed or with stock powers attached in blank.
(iii) the opinion of counsel for SoftQuad USA as set forth
herein;
(iv) a certificate from the Secretary of State of Florida
dated not more than fifteen (15) days prior to the date of Closing to the effect
that SoftQuad USA is in good standing under the laws of the said state; and
(v) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement or which may be reasonably requested in furtherance of the provisions
of this Agreement;
11(b) Documents Delivered by ASM.ASM will deliver or cause to be
-----------------------------
delivered to Stockholders and SoftQuad USA:
(i) stock certificates for the Shares subject to a customary
restrictive stock legend;
(ii) all corporate records of ASM, including without
limitation corporate minute books (which shall contain copies of the Certificate
of Incorporation and By-Laws, as amended to the Closing), stock books, stock
transfer books, corporate seals, and such other corporate books and records as
may reasonably requested by the Stockholders and their counsel;
(iii) a certificate of ASM's officers to the effect that all
representations and warranties of ASM made under this Agreement are reaffirmed
on the Closing Date, as though originally given to Stockholders and SoftQuad USA
on said date;
(iv) the opinions of ASM's counsel set forth herein;
(v) a Certificate from the Secretary of State of Florida
dated at or about the date of Closing that ASM is in good standing under the
laws of said state; and
(vi) such other instruments and documents, if any, as are
required to be delivered pursuant to the provisions of this Agreement, or which
may be reasonably requested in furtherance of the provisions of this Agreement.
12. MISCELLANEOUS.
12(a) Further Assurances. At any time, and from time to time,
-------------------
after the Closing, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement;
12(b) Waivers. Any failure on the part of any party hereto to
-------
comply with any of its obligations, agreements or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
12(c) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested to
the following addresses, or such other addresses as are given to other parties
in the manner set forth herein.
ASM: The American Sports Machine, Inc.
222 Lakeview Avenue, Suite 160-146
West Palm Beach, Florida 33401
Attn: James D. Brock, Jr., President
Tel: (561) 832-5697
With a copy to: Mr. Donald F. Mintmire, Esq.
265 Sunrise Ave, Suite 204
Palm Beach, Florida 33480
Tel: (561) 832-5697
SoftQuad USA: SoftQuad Software, Ltd.
161 Eglinton Avenue, Suite 400
Toronto, Ontario M4P 1J5
CANADA
Attn: Cameron Chell, President
With a copy to: Robert L. Sonfield, Jr., Esq.
Sonfield & Sonfield
770 South Post Oak Lane, Suite 435
Houston, Texas 77056-1913
Tel: (713) 877-83333
12(d) Headings. The section and subsection headings in this Agreement
--------
are inserted for convenience and shall not affect in any way the meaning or
interpretation of this Agreement.
12(e) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. A facsimile
signature by any party on a counterpart of this Agreement shall be binding and
effective for all purposes. Such party shall, however, subsequently deliver to
the other party an original executed copy of this Agreement.
12(f) Governing Law. This Agreement shall be governed by the laws
--------------
of Delaware.
12(g) Binding Effect. This Agreement shall be binding upon the
---------------
parties hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
12(h) Entire Agreement. This Agreement is the entire agreement of
----------------
the parties covering everything agreed upon or understood in the transaction.
There are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof.
12(i) Time. Time is of the essence.
----
12(j) Severability. If any part of this Agreement is determined
------------
by a court of competent jurisdiction to be unenforceable, the balance of the
Agreement shall remain in full force and effect.
12(k) Default Costs. In the event any party hereto has to resort
--------------
to legal action to enforce any of the terms hereof, such party shall be entitled
to collect attorneys' fees and other costs from the party in default.
<PAGE>
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all such counterparts shall together constitute
one and the same instrument.
<TABLE>
<CAPTION>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
<S> <C>
ATTEST:. . . . . . . . . . . . . THE AMERICAN SPORTS MACHINE, INC.
By:/s/James D. Brock, Jr.. . . . By:/s/James D. Brock, Jr.
- -------------------------------- ---------------------------------
James D. Brock, Jr., Secretary James D. Brock, Jr., President
ATTEST:. . . . . . . . . . . . . SOFTQUAD SOFTWARE, LTD.
By:/s/David Bolink . . . . . . . By:/s/Cameron Chell
- -------------------------------- ---------------------------------
David Bolink, Secretary. . . . Cameron Chell, President
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STOCKHOLDERS OF SOFTQUAD SOFTWARE, LTD.
<S> <C>
VC ADVANTAGE LIMITED PARTNERSHIP
By VCA Management Ltd.
Its General Partner. . . . . . . . . Hammock Group Ltd.
By ________________________________. By: Voyageur Financial Services
Name _____________________________
Title ______________________________ By: _______________________________
Paul Lemmon, Administrator
Ashland Resources Inc.
Aberdeen Avenue LLC
By: Voyageur Financial Services
By ________________________________
David Simms . . . . . . . . . . . . By: ________________________________
Title ______________________________ Paul Lemmon, Administrator
Striker Capital Limited
By: Voyageur Financial Services
By _________________________________
Paul Lemmon, Administrator
</TABLE>
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
SHARES OF SOFTQUAD USA TO BE EXCHANGED FOR SHARES OF ASM
NUMBER AND CLASS OF ASM
----------------------------------
NAME OF SOFQUAD USA NUMBER AND CLASS OF COMMON SHARES TO BE ISSUED IN
- ------------------------------------ ---------------------------------- ---------------------------------
SHAREHOLDER SOFTQUAD USA SHARES HELD EXCHANGE
- ------------------------------------ ---------------------------------- ---------------------------------
<S> <C> <C>
Aberdeen Avenue LLC. . . . . . . . . 491,135 Class A Conv. Preferred 491,135 Class A Conv. Preferred
245,567 Common 245,567 Common
Ashland Resources, Inc.. . . . . . . 491,135 Class A Conv. Preferred 491,135 Class A Conv. Preferred
245,568 Common 245,568 Common
Striker Capital Limited. . . . . . . 491,135 Class A Conv. Preferred 491,135 Class A Conv. Preferred
245,568 Common 245,135 Common
VC Advantage Limited Partnership . . 1,033,333 Class B. Conv. Preferred 1,033,333 Class B Conv. Preferred
Hammock Group Ltd. . . . . . . . . . 688,889 Class B Conv. Preferred 688,889 Class B Conv. Preferred
Thomson Kernaghan & Co. Limited,
as Agent for the Benefit of Others 1,000,000 Common 1,000,000 Common
</TABLE>
<PAGE>
EXHIBIT A-1
ASM SHAREHOLDERS ON CLOSING DATE AFTER EXCHANGE OF SHARES
<TABLE>
<CAPTION>
NAME NUMBER AND CLASS OF SHARES
- ---------------------------------- ---------------------------------
<S> <C>
Stephanie Acierno. . . . . . . . . 80,000 Common
Gretchen Dore. . . . . . . . . . . 80,000 Common
Thomas V. Flynn. . . . . . . . . . 80,000 Common
Gregg Houston. . . . . . . . . . . 80,000 Common
Kimberly Kelley. . . . . . . . . . 80,000 Common
Harold A. Munning. . . . . . . . . 80,000 Common
Kimberly Kelley. . . . . . . . . . 64,000 Common
Gretchen Dore. . . . . . . . . . . 64,000 Common
Thomas V. Flynn. . . . . . . . . . 64,000 Common
Gregg Houston. . . . . . . . . . . 64,000 Common
Harold A. Munning. . . . . . . . . 64,000 Common
Stephanie Acierno. . . . . . . . . 64,000 Common
James Donald Brock, Jr.. . . . . . 2,000,000 Common
Linear Strategies Ltd. . . . . . . 320,000 Common
Linear Strategies Ltd. . . . . . . 280,000 Common
Rodney Ford. . . . . . . . . . . . 80,000 Common
Anne-Marie Fourdan . . . . . . . . 40,000 Common
Kevin Coppe. . . . . . . . . . . . 80,000 Common
Jennifer Froehich. . . . . . . . . 80,000 Common
Mark Gallagher . . . . . . . . . . 80,000 Common
John Marratt . . . . . . . . . . . 80,000 Common
Mary Catherine McGowan . . . . . . 80,000 Common
Jeffrey Merback. . . . . . . . . . 80,000 Common
Douglas Paxton . . . . . . . . . . 80,000 Common
Sammy Peroulas . . . . . . . . . . 80,000 Common
William Ragsdale . . . . . . . . . 80,000 Common
Julie Watson . . . . . . . . . . . 80,000 Common
Rodney Ford. . . . . . . . . . . . 64,000 Common
Anne-Marie Fourdan . . . . . . . . 64,000 Common
Brian Jansma . . . . . . . . . . . 64,000 Common
Kevin Coppe. . . . . . . . . . . . 64,000 Common
Jennifer Froehich. . . . . . . . . 64,000 Common
Paul Safran, Jr. . . . . . . . . . 64,000 Common
Lisa Reisman . . . . . . . . . . . 64,000 Common
Mark Gallagher . . . . . . . . . . 64,000 Common
Amy Melice . . . . . . . . . . . . 64,000 Common
John Marratt . . . . . . . . . . . 64,000 Common
Jeffrey Merback. . . . . . . . . . 64,000 Common
Mary Catherine McGowan . . . . . . 64,000 Common
Felice Melice. . . . . . . . . . . 64,000 Common
Samuel Melice. . . . . . . . . . . 64,000 Common
Brandon Bell . . . . . . . . . . . 64,000 Common
Douglas Paxton . . . . . . . . . . 64,000 Common
Sammy Peroulas . . . . . . . . . . 64,000 Common
William Ragsdale . . . . . . . . . 64,000 Common
Julie Watson . . . . . . . . . . . 64,000 Common
Aberdeen Avenue LLC. . . . . . . . 491,135 Class A Conv. Preferred
245,567 Common
Ashland Resources, Inc.. . . . . . 491,135 Class A Conv. Preferred
245,568 Common
Striker Capital Limited. . . . . . 491,135 Class A. Conv. Preferred
245,135 Common
VC Advantage Limited Partnership . 1,033,333 Class B Conv. Preferred
Hammock Group Ltd. . . . . . . . . 688,889 Class B Conv. Preferred
Thomson Kernaghan & Co. Limited,
as Agent for the Benefit of Others 1,000,000 Common
</TABLE>
<PAGE>
EXHIBIT B
SOFTQUAD USA'S FINANCIAL CONDITION
As of February 28, 2000:
Additional assets:
- ------------------
Right to receive approximately $6.75 million net proceed from sale of Class
B Convertible Preferred and Common stock.
Rights under Soft Quad (Canada) Acquisition Agreement and Share
Purchase/Option Exchange Agreements with each securityholder of SoftQuad
Software, Inc., including the right to acquire all of the issued and outstanding
securities of SoftQuad Software, Inc. as set forth therein.
Rights under TK Engagement Letter dated December ___, 1999 and February
___, 2000.
Additional liabilities:
- -----------------------
Obligations under Common Stock, Class A Convertible Preferred and Class B
Convertible Preferred stock purchase agreements, including the warrants
(aggregate number of warrants being 1,878,368), registration rights agreements
and other documents referred to therein.
Obligations under SoftQuad (Canada) Acquisition Agreement and Share
Purchase/Option Exchange Agreements with each securityholder of SoftQuad
Software, Inc. and related documents.
Obligations under TK Engagement Letter dated December ___, 1999 and February
___, 2000.
Obligations to issue the special voting share in connection with the SoftQuad
Acquisition Agreement and related documents.
Obligations to issued Common Stock pursuant to existing warrants (1,878,368),
options (2,513,500) and rights to acquire Common Stock, including shares
issuable upon exercise of options to be granted under option exchange agreements
with optionholders of SoftQuad Software, Inc. (1,837,000), shares issuable to
certain shareholders of SoftQuad Software, Inc. pursuant to share purchase
agreements (3,435,670), and shares issuable upon exchange of exchangeable shares
of SoftQuad Acquisition Corporation issuable to certain shareholders of SoftQuad
Software, inc. under the share purchase agreements (5,792,605).
Obligations to pay organizational expenses, expenses incurred in the acquisition
of SoftQuad Software, Inc., expenses incurred in the issuance and sale of the
outstanding securities and expenses incurred in connection with this Agreement
and Plan of Reorganization, including accounting and legal expenses.
<PAGE>
EXHIBIT C
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION AND BY LAWS OF ASM
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE AMERICAN SPORTS MACHINE, INC.
Pursuant to the provision of section 607.1006, Florida Statutes, this
corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended,
added or deleted)
ARTICLE III. CAPITAL STOCK
--------------------------
The maximum number of shares of stock that this corporation is authorized
to have outstanding at any one time is 10,000,000 shares of common stock having
a par value of $.0001 per share.
TO BE CHANGED TO READ AS FOLLOWS:
ARTICLE III. CAPITAL STOCK
--------------------------
The maximum number of shares of stock that this corporation is authorized
to have outstanding at any one time is 50,000,000 shares of common stock having
a par value of $.0001 per share; and 10,000,000 shares of preferred stock, with
the specific terms, conditions, limitations, and preferences to be determined by
the Board of Directors without shareholder approval.
ADD:
ARTICLE VIII. SPECIAL AUTHORITY OF BOARD OF DIRECTORS AND WAIVER OF DISSENTERS
------------------------------------------------------------------------------
RIGHTS
------
The Board of Directors shall be and are hereby authorized to enter into on
behalf of the corporation and to bind the corporation without shareholder
approval, any and all acts approving (a) the terms and conditions of a merger
and/or a share exchange; and (b) divisions, combinations and/or splits of shares
of any class or series of stock of the corporation, whether issued or unissued,
with or without any change in the number of authorized shares; and shareholders
affected thereby, shall not be entitled to dissenters rights with respect
thereto under any applicable statutory dissenters rights provisions.
ADD:
ARTICLE IX. CONFLICT OF INTEREST
--------------------------------
Any related party contract or transaction must be authorized, approved or
ratified at a meeting of the Board of Directors by sufficient vote thereon by
directors not interested therein or the transaction must be fair and reasonable
to the Corporation.
ADD:
ARTICLE X. INDEMNIFICATION
----------------------------
The Corporation shall indemnify its Officers, Directors, Employees and Agents in
accordance with the following:.
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was otherwise serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct to be unlawful.
The termination of any action, suit or proceeding, by judgment, order,
settlement, conviction upon a plea of nolo contendere or its equivalent, shall
not of itself create a presumption that the person did not act in good faith in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
(b) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action or
suit by or in the right of the Corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to whether such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation, unless, and only to the extent that, the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
director, employee or agent is proper under the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for that purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Amended Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the heirs
and personal representatives of such a person.
ADD:
ARTICLE XI. LAW APPLICABLE TO CONTROL-SHARE VOTING RIGHTS.
----------------------------------------------------------
The provisions set forth in Fl. Stat. 607.0902 do not apply to
control-share acquisitions of shares of the Corporation.
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment itself, are as follows:
N/A
THIRD: The date of each amendment's adoption: DECEMBER 15, 1998
FOURTH: Adoption of Amendment(s) check one:
____x____ The amendment(s) was/were approved by the shareholders. The
number of votes cast for the amendment(s) was/were sufficient for approval.
________ The amendment(s) was/were approved by the shareholders through
voting groups.
The following statements must be separately provided for each voting
group entitled to vote separately on the amendment(s):
"The number of votes cast for the amendment(s) was/were sufficient for
approval by __________________________________________________________."
(Voting Group)
________ The amendment(s) was/were adopted by the board of directors without
shareholder action and shareholder action was not required.
________ The amendment(s) was/were adopted by the incorporators without
shareholder action and shareholder action was not required.
Signed this 28th day of January, 1999.
BY: _________________________________________
(By the Chairm and or Vice Chairman of the
Board of Directors, President, or other officer
if adopted by the shareholders)
OR
(By a director if adopted by the directors)
OR
(By an incorporator if adopted by the incorporators)
Angela Michelle Bartolotta
- ----------------------------
Typed or printed Name
President
- ---------
Title
<PAGE>
BY-LAWS
OF
THE AMERICAN SPORTS MACHINE, INC.
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Florida shall be located
in the City of Palm Beach. The Corporation may have such other offices, either
within or without the State of Florida, as the business of the Corporation may
require from time to time.
The Registered Office of the Corporation may be, but need not be, identical with
its principal office in the State of Florida and the address of the Registered
Office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders shall be held at
such time and place each year as the Board of Directors shall determine for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held at
any annual meeting, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders to be
held as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders may be called
by the President, by the Board of Directors or by the holders of not less than
one-fifth (1/5) of the voting power of all shareholders of the Corporation.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place
within or without the State of Florida as the place of meeting for any annual
meeting, or any place either within or without the State of Florida as the place
of meeting for any special meeting called by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS AND WAIVER. Written or printed notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, the President, or the Secretary, or the officer or persons calling the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail in a sealed envelope addressed to the shareholder at
his address as it appears on the records of the Corporation, with postage
thereon prepaid. Notice of any shareholders' meeting may be waived in writing
by any shareholder at any time before or after the meeting.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall meet
at any time and place, either within or without the State of Florida, and
consent to the holding of a meeting, such meeting shall be valid without call or
notice, and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of
Directors of the Corporation may fix in advance a date, not exceeding sixty (60)
and not less than ten (10) days prior to the date of any meeting of
shareholders, or to the date for the payment of any dividend or for the
allotment of rights, or to the date when any exchange or reclassification of
shares shall be effective, as the record date for the determination of
shareholders entitled to receive payment of any such dividend or to receive any
such allotment of rights, or to exercise rights in respect of any exchange or
reclassification of shares; and the shareholders of record on such date shall be
the shareholders entitled to notice of and to vote at, such meeting, or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights in the event of an exchange or reclassification of shares,
as the case may be. If no record date is fixed by the Board of Directors, the
date on which notice of the meeting is mailed shall be deemed to be the record
date for the determination of shareholders entitled to vote at such meeting.
Transferees of shares which are transferred after the record date shall not be
entitled to notice of or to vote at such meeting.
SECTION 7. VOTING LISTS. The officer or agent having charge of the transfer
book for shares of the Corporation shall at least ten (10) days before each
meeting of shareholders, make a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address and the
number of shares held by each shareholder, which list, for a period of ten (10)
days prior to such meeting, shall be kept on file at the office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the meeting. The original share ledger or stock transfer
book, or a duplicate thereof kept in this State, shall be prima facie evidence
as to who are the shareholders entitled to examine such list or share ledger or
stock transfer book or to vote at any meeting of shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares of the Corporation,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders; provided, that if less than a majority of the outstanding shares
are represented at said meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy, and such proxy may be withdrawn at any time.
SECTION 10. VOTING OF SHARES. Each outstanding share of Common Stock shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name
of another corporation, domestic or foreign, may be voted by such officer, agent
or proxy as the By-Laws of such corporation may prescribe, or, in the absence of
such provision, as the Board of Directors of such corporation may determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator, or trustee may be voted by such fiduciary,
either in person or by proxy.
Shares standing in the name of a trustee may be voted by him, either in person
or by proxy, but no trustee shall be entitled to vote shares held by him without
a transfer of such shares into his name.
Shares standing in the joint names of four (4) or more fiduciaries shall be
voted in the manner determined by the majority of such fiduciaries, unless the
instrument or order appointing such fiduciaries otherwise directs.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so is contained in
an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
(except that if the right to vote be expressly given in writing to the pledgee
and notice thereof delivered to the Corporation in writing by the pledgee, the
shareholder shall not have the right to vote the shares so pledged) until the
shares have been transferred into the name of the pledgee, and thereafter the
pledgee or his nominee shall be entitled to vote the shares so transferred.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Unless prohibited by the Articles
of Incorporation, any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by the holders of a majority of the
issued and outstanding capital stock of the corporation.
SECTION 13. ADJOURNMENTS. If a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken. The Corporation
may transact any business which might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days or a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS AND EXECUTIVE COMMITTEE. The business and affairs of
the Corporation shall be managed by its Board of Directors. The Board of
Directors may, by resolution passed by a majority of the whole Board, designate
two (2) or more of its number to constitute an Executive Committee, who, to the
extent provided in the resolution, shall have and exercise the authority of the
Board of Directors in the management of the Corporation. The Board of Directors
may also, by resolution passed by a majority of the whole of the Board,
designate members to constitute other committees, who, to the extent provided in
the resolution, shall have and exercise the designated authority.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors which
shall constitute the whole Board of Directors shall be fixed from time to time
by resolution passed by the Board or by the shareholders (any such resolution of
either the Board of Directors or shareholders being subject to any later
resolution by either of them) but in no event shall such number be less than
one. No resolution shall have the effect of shortening the term of any
incumbent director. Directors shall be elected at the annual meeting of
shareholders and shall continue in office until their successors shall have been
elected and qualified. Directors need not be residents of Florida nor need they
be the holder of any shares of the capital stock of the Corporation.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Board of Directors shall
be held without other notice than this By-Law, immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Florida, for holding of additional regular meetings without other notice than
such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President or any
two (2) directors. The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the State of
Florida, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. NOTICE. Written notice of any special meeting shall be given to
each director at least two (2) days before the meeting, either by personal
delivery, telegram, cablegram, or facsimile. Any director may waive notice of
any meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, and a waiver of any and all objections to the
place of meeting, the time of meeting, or the manner in which it was called or
convened, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. The purpose of and the business to be transacted at any
special meeting of the Board of Directors must be specified in the notice or
waiver or notice of such a meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by or in the
manner prescribed in the By-Laws shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, provided, that if less
than a majority of the directors are present at that meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice.
SECTION 7. MANNER OF ACTING. The act of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Any action required to be taken at a
meeting of the Directors of a corporation or any action which may be taken at
such meeting may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by a majority of all directors and
such consent shall have the same effect as an actual vote.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors or in a
directorship to be filled by reason of an increase in the number of directors,
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
or until the next succeeding annual meeting of shareholders. Any directorship
to be filled by reason of an increase in the number of directors may be filled
by election by the Board of Directors for a term of office continuing until the
next election of the directors by the shareholders.
SECTION 10. COMPENSATION. Directors may by resolution of the Board of
Directors, establish a fixed sum and expenses of attendance, if any, for
attendance at each regular or special meeting of the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 11. REMOVAL. At a meeting of shareholders called expressly for that
purpose, directors may be removed, with or without cause, by a vote of the
majority of the shares then entitled to vote at an election of directors.
ARTICLE IV
OFFICERS
SECTION 1. CLASSES. The officers of the Corporation shall be a President, a
Treasurer, and a Secretary, and such other officers and assistant officers as
from time to time may be deemed necessary by the Board of Directors and elected
in accordance with the provisions of this Article. Any two (2) or more offices
may be held by the same person. The failure to elect a President, Secretary or
Treasurer shall not affect the existence of this Corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation shall
be elected annually by the Board of Directors at the first meeting of the Board
of Directors held after each annual meeting of shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as convenient. Vacancies may be filled or new offices created and
filled at any meeting of the Board of Directors. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death, his resignation or his removal from office in the manner
hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever, in its judgment,
the best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Board of Directors
for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal executive officer
of the Corporation and shall in general supervise and control all of the
business and affairs of the Corporation. He shall preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation thereunto authorized by the Board
of Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors have
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. VICE PRESIDENT. In the absence of the President or in the event of
his inability or refusal to act, the Vice President shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice President shall perform
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors.
SECTION 7. TREASURER. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine. He shall:
(a) have charge and custody of and be responsible for all funds and securities
of the Corporation; (b) receive and give receipts for monies due and payable to
the Corporation from any source whatsoever, and deposit all such monies in the
name of the Corporation in such banks, trust companies, or other depositories as
shall be selected in accordance with the provisions of Article V of these
By-Laws; and (c) in general perform all the duties from time to time assigned to
him by the President or the Board of Directors. Nothing herein shall require
the Board of Directors to require a bond.
SECTION 8. SECRETARY. The Secretary shall: (a) keep the minutes of the
shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under this seal is duly authorized in accordance with the provisions
of these By-Laws; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or Vice President, certificates for shares of the
Corporation, the issue of which shall have been authorized by resolution of the
Board of Directors; (f) sign with the President, or Vice President, certificates
for shares for the Corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (g) have personal charge of the stock
transfer books of the Corporation; and (h) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or the Board of Directors.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Secretaries, as and if
authorized by the Board of Directors, may sign with the President or Vice
President certificates for shares of the Corporation, the issue of which shall
have been authorized by a resolution of the Board of Directors. The Assistant
Treasurers and Assistant Secretaries in general shall perform such duties as
shall be assigned to them by the Treasurer or Secretary, respectively, or by the
President or the Board of Directors.
SECTION 10. SALARIES. The salaries of the officers shall be fixed from time to
time by the Board of Directors and no officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a director of the
Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECK AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instruments in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents, of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the President and Secretary.
All certificates for shares shall be consecutively numbered. The name of the
persons owning the shares represented thereby with the number of shares and date
of issue shall be entered on the books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in the case of a
lost, destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation shall be
made only by the registered holder thereof or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
share. The person in whose name shares stand on the books of the Corporation
shall be deemed the owner thereof for all purposes as regards the Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the resolution of the
Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law and its Articles of Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall if needed provide a corporate seal which shall be
in the form of a circle and shall have inscribed thereon appropriate wording.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions of
these By-Laws, or under the provisions of the Articles of Incorporation, or
under the provisions of the corporation laws of the State of Florida or other
jurisdiction, waiver thereof in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power and authority to alter, amend or
rescind the By-Laws of the Corporation at any regular or special meeting at
which a quorum is present by a vote of a majority or the whole Board of
Directors, subject to the power of the shareholders to change or repeal such
By-Laws at any annual or special meeting of shareholders at which a quorum is
present, by a vote of a majority of the stock represented at such meeting,
provided, that the notice of such meeting shall have included notice of any
proposed alteration, amendment or rescission.
I certify that these are the By-Laws adopted by the Board of Directors of the
Corporation.
BY: ___________________________________
James Donald Brock, Jr., Secretary
<PAGE>
EXHIBIT D
<TABLE>
<CAPTION>
ASM'S STOCKHOLDERS' LIST
SHAREHOLDER CLASS A CLASS B COMMON TOTAL
<S> <C> <C> <C> <C>
Aberdeen Avenue LLC
Ashland Resources, Inc. 491,135 245,567 736,702
Striker Capital Limited 491,135 245,568 736,703
VC Advantage Ltd. Pshp. 491,135 245,568 736,703
Hammock Group Ltd.. . . 1,033,333 1,033,333
TK as Agent for others. 688,889 688,889
James D. Brock, Jr. . . 1,000,000 1,000,000
Other ASM shareholders. 2,000,000 2,000,000
__________. . . . . __________ 3,600,000 3,600,000
--------- ---------
Totals. . . . . . . . . 1,473,405 1,722,222 7,336,703 10,532,330
</TABLE>
<PAGE>
EXHIBIT E
ASM'S FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999
DORRA SHAW & DUGAN
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
The American Sports Machine, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of The American Sports Machine,
Inc. (a Florida corporation) and (a development stage company) as of September
30, 1999, and the related statements of operations, accumulated deficit, cash
flows and changes in stockholders' equity for the period December 1, 1998 (date
of inception) to September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Sports Machine,
Inc. as of September 30, 1999 and the results of its operations and its cash
flows and changes in stockholders' equity for the period from December 1, 1998
(date of inception) to September 30, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Dorra Shaw & Dugan
- - -------------------------------
Certified Public Accountants
December 17, 1999
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 822-9955
Website: dsd-cpa.com
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
( A Development Stage Company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1999
ASSETS
<S> <C>
Current Assets:
Cash $ 2,711
TOTAL CURRENT ASSETS 2,711
$ 2,711
LIABILITIES
Current Liabilities:
Accrued expenses $ -
TOTAL CURRENT LIABILITIES -
-
STOCKHOLDERS' EQUITY
Common stock - $.0001 par value -
50,000,000 shares authorized 1,400,000
shares issued and outstanding 140
Preferred stock - No par value
- 10,000,000 shares authorized
No shares issued or outstanding -
Additional paid-in-capital 45,860
Accumulated deficit (43,289)
TOTAL STOCKHOLDERS' EQUITY 2,711
$ 2,711
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
( A Development Stage Company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the period October 1, 1998 (date of inception) to Serptember 30, 1999
Revenues $ -
Operating expenses:
Professional fees $ 39,657
Organization costs 2,632 42,289
Loss before income taxes
(42,289)
Income taxes -
Net loss
(42,289)
Accumulated deficit - October 1, 1998
(1,000)
Accumulated deficit - September 30, 1999 $ (43,289)
Net loss per share $ (0.03)
Weighted average shares of common stock $ 1,249,589
The accompanying notes are an integral part of the financial statements
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
( A Development Stage Company)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the period October 1, 1998 (date of inception) to Serptember 30, 1999
<S> <C>
Revenues $ -
Operating expenses:
Professional fees $ 39,657
Organization costs 2,632 42,289
Loss before income taxes
(42,289)
Income taxes -
Net loss
(42,289)
Accumulated deficit - October 1, 1998
(1,000)
Accumulated deficit - September 30, 1999 $ (43,289)
Net loss per share $ (0.03)
Weighted average shares of common stock $ 1,249,589
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statement of Cash Flows
For the period October 1, 1998 (date of inception) to September 30, 1999
- - ---------------------------------------------------------------------------
<S> <C>
Operating Activities:
Net loss $ (42,289)
Adjustments to reconcile net loss to net cash
used by operating activities:
Increase in:
Issuance of common stock for services 25,000
Net cash used by operating activities (17,289)
Financing activities:
Issuance of Common Stock 20,000
Net cash provided by financing activities 20,000
Net increase in cash 2,711
Cash - September 30, 1999 $ 2,711
The accompanying notes are an integral part of the financial statements
<PAGE>
The American Sports Machine, Inc.
Notes to Financial Statements
Note A - Summary of Significant Accounting Policies:
Organization
The American Sports Machine, Inc. (a development stage company) is a Florida
Corporation organized June 2, 1995 to build recreational centers for small
organized sports activities including basketball, handball, racquetball, as well
as video games and other computer board sports activities. The Company failed in
its attempt to implement its initial business plan and during June 1996
abandoned its efforts. The Company had no operations for the period prior to
June 1996. The Company was inactive and there were no transactions from June
1996 to the date of reinstatement by the State of Florida on December 1, 1998
that affect the balances reflected in the financial statements as of December 1,
1998.
The Company has a new business plan, which was adopted on or about December 1,
1998, which is to engage in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
assets of the Company will be used for its expenses of operation to implement
this plan.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a September 30 year end.
Start - Up Costs
Start - up and organization costs are being expensed as incurred.
Loss Per Share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note B - Stockholders' Equity:
On June 2, 1995, the Company issued 500,000 shares of common stock, in lieu of
cash, for the fair market value of services rendered by its initial officer -
stockholder. On or about December 1, 1998, third parties purchased the shares
from the initial officer - stockholder. On or about December 1, 1998, the
Company issued 500,000 shares of its common stock to its sole officer in
exchange for services valued at $25,000. Subsequently the same third parties
purchased at $0.05 per share, 400,000 shares of the common stock of the Company
in a private placement pursuant to Regulation D of the SEC. The $39,657 in
professional fees includes the costs and expenses (including legal fees)
associated with the preparation and filing of the registration statement.
Included in professional fees are additional legal fees of $34,157 for merger
and acquisition activities unrelated to the registration statement and $5,500
in auditing and accounting fees.
At September 30, 1999, the Company had authorized 50,000,000 shares of $.0001
par value common stock and had 1,400,000 shares of common stock issued and
outstanding. In addition, the Company authorized 10,000,000 shares of preferred
stock with the specific terms; conditions, limitations and preferences to be
determined by the Board of Directors. None of the preferred stock was issued and
outstanding as of September 30, 1999.
Note C - Income Taxes:
The Company has a net operating loss carry forward of $42,289 that may be offset
against future taxable income. If not used, the carry forward will expire in
2014.
The amount recorded as deferred tax assets, cumulative as of September 30,1999
is $8,400, which represents the amounts of tax benefits of loss carry-forwards.
The Company has established a valuation allowance for this deferred tax asset of
$8,400, as the Company has no history of profitable operations.
Note D - Going Concern:
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through September
30, 1999. It has not established revenues sufficient to cover operating costs
and to allow it to continue as a going concern. Management plans currently
provide for experts to secure a successful acquisition or merger partner so that
it will be able to continue as a going concern. In the event such efforts are
unsuccessful, contingent plans have been arranged to provide that the current
Director of the Company is to fund required future filings under the 34 Act, and
existing shareholders have expressed an interest in additional funding if
necessary to continue the Company as a going concern. The sole director/officer
of the Company has to acquire an additional $20,000 in stock of the Company on
or before February 1, 1999, if such funds are needed to continue the operations
of the Company.
<PAGE>
Exhibit B - Page 57
EXHIBIT F
FORM 10-KSB AND FORM 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ________________
Commission file no. 0-26327
---------------
American Sports Machine, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Florida 65-0877744
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Lakeview Avenue, Suite 160-146
West Palm Beach, FL
33401
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (561) 832-5698
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
None
- ----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
(Title of class)
-------------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
<PAGE>
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $0.00.
Of the 1,400,000 shares of voting stock of the registrant issued and
outstanding as of December 15, 1999, 900,000 shares are held by
non-affiliates. Because of the absence of an established trading market for
the voting stock, the registrant is unable to calculate the aggregate market
value of the voting stock held by non-affiliates as of a specified date within
the past 60 days.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The American Sports Machine, Inc. ("ASM") was organized on June 2, 1995,
under the laws of the State of Florida, having the stated purpose of engaging in
any lawful activities. ASM was formed with the contemplated purpose to build
recreational centers for small organized sports activities including basketball,
handball, racquetball, as well as video games and other computer board sports
activities. The business concept and plan was based upon information obtained
by the incorporator several years before while working for an unrelated company
with the same concept and business plan. The incorporator and sole shareholder
was unable to obtain the cooperation and assistance of workers and investors to
implement the proposed plan. The primary area of development was to be in
Florida, but was never brought to the development stage. After development of a
business plan and efforts to develop the business failed, all efforts were
abandoned in 1996. At that time ASM was unable to obtain the necessary
contracts, store locations, other facilities, and was unable to obtain the
necessary financing, therefore was unable to operate.
ASM never engaged in an active trade or business throughout the period from
June 1995 until just recently. The ASM charter was suspended (subject to
reinstatement) by the State of Florida in 1996 for inactivity and failure to pay
annual fees and costs. Its active status was reinstated on December 1, 1998,
upon payment of all past due fees and costs. On December 1, 1998, all of the
issued and outstanding shares of the common stock of ASM were acquired from
Joseph Ashley, its then sole shareholder. The shares were purchased from Mr.
Ashley on behalf of the investor group. Mr. Ashley distributed the shares
directly to each member of the investor group. The original incorporator and
shareholder agreed to exchange the 500,000 issued and outstanding shares held by
such shareholder to the new 25 member investor group in exchange for a
commitment by the new shareholder group to pay the cost of reactivating the
corporation, providing for its reinstatement, and bringing its books and records
up to date. The total of 500,000 shares was distributed 20,000 shares to each
of twenty-five (25) shareholders. In addition, ASM received gross proceeds in
the amount of $20,000 from the sale of a total of 400,000 shares of common
stock, $.0001 par value per share (the "Common Stock"), in an offering conducted
pursuant to Section 3(b) and 4(2) of the Securities Act of 1933, as amended (the
"Act"), and Rules 505 and 506 of Regulation D promulgated thereunder. This
offering was made in the State of Georgia and the State of Florida. ASM
undertook the offering of shares of Common Stock on December 1, 1998. Also on
December 1, 1998, ASM issued 500,000 shares of its Common Stock to Ms. Angela
Michelle Bartolotta, the President, Secretary and Treasurer of ASM in
consideration and in exchange for services valued at $25,000.00 in connection
with the re-organization of ASM. On March 12, 1999, Ms. Bartolotta resigned
her position due to personal conflicts and other personal reasons and tendered
her 500,000 shares of stock to ASM for cancellation. Such shares were in fact
canceled. The company issued 500,000 shares of its common stock to James Donald
Brock, Jr., in consideration and in exchange for services valued at $25,000.00
to complete the reorganization of ASM. James Donald Brock, Jr. was also elected
President, Secretary, Treasurer, and Director of ASM. (See "Recent Sales of
Unregistered Securities")
<PAGE>
ASM then began to consider and investigate potential business
opportunities. ASM is considered a development stage company and, due to its
status as a "shell" corporation, its principal business purpose is to locate and
consummate a merger or acquisition with a private entity. Because of ASM's
current status of having limited assets and no recent operating history, in the
event ASM does successfully acquire or merge with an operating business
opportunity, it is likely that ASM's present shareholders will experience
substantial dilution and there will be a probable change in control of ASM.
On December 1, 1998, ASM also determined it should become active in
seeking potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses.
Any target acquisition or merger candidate of ASM will become subject to
the same reporting requirements as ASM upon consummation of any such business
combination. Thus, in the event that ASM successfully completes an acquisition
or merger with another operating business, the resulting combined business must
provide audited financial statements for at least the two most recent fiscal
years, or in the event that the combined operating business has been in business
less than two years, audited financial statements will be required from the
period of inception of the target acquisition or merger candidate.
ASM's principal executive offices are located at 222 Lakeview Avenue, Suite
160-157, West Palm Beach, FL 33401 and its telephone number is (561) 832-5698.
Business of Issuer
ASM has no recent operating history and no representation is made, nor is
any intended, that ASM will be able to carry on future business activities
successfully. Further, there can be no assurance that ASM will have the ability
to acquire or merge with an operating business, business opportunity or property
that will be of material value to ASM.
Management plans to investigate, research and, if justified, potentially
acquire or merge with one or more businesses or business opportunities. ASM
currently has no commitment or arrangement, written or oral, to participate in
any business opportunity and management cannot predict the nature of any
potential business opportunity it may ultimately consider. Management will have
broad discretion in its search for and negotiations with any potential business
or business opportunity.
SOURCES OF BUSINESS OPPORTUNITIES
ASM intends to use various sources in its search for potential business
opportunities including its officer and director, consultants, special advisors,
securities broker-dealers, venture capitalists, member of the financial
community and others who may present management with unsolicited proposals.
Because of ASM's limited capital, it may not be able to retain on a fee basis
professional firms specializing in business acquisitions and reorganizations.
Rather, ASM will most likely have to rely on outside sources, not otherwise
associated with ASM, that will accept their compensation only after ASM has
finalized a successful acquisition or merger. ASM will rely upon the expertise
and contacts of such persons, will use notices in written publications and
personal contacts to find merger and acquisition candidates, the exact number of
such contacts dependent upon the skill and industriousness of the participants
and the conditions of the marketplace. None of the participants in the process
will have any past business relationship with management. To date, ASM has not
engaged nor entered into any definitive agreements nor understandings regarding
retention of any consultant to assist ASM in its search for business
opportunities, nor is management presently in a position to actively seek or
retain any prospective consultants for these purposes.
<PAGE>
ASM does not intend to restrict its search to any specific kind of industry
or business. ASM may investigate and ultimately acquire a venture that is in
its preliminary or development stage, is already in operation, or in various
stages of its corporate existence and development. Management cannot predict at
this time the status or nature of any venture in which ASM may participate. A
potential venture might need additional capital or merely desire to have its
shares publicly traded. The most likely scenario for a possible business
arrangement would involve the acquisition of, or merger with, an operating
business that does not need additional capital, but which merely desires to
establish a public trading market for its shares. Management believes that ASM
could provide a potential public vehicle for a private entity interested in
becoming a publicly held corporation without the time and expense typically
associated with an initial public offering.
EVALUATION
Once ASM has identified a particular entity as a potential acquisition or
merger candidate, management will seek to determine whether acquisition or
merger is warranted or whether further investigation is necessary. Such
determination will generally be based on management's knowledge and experience,
(limited solely to working history - See "Item 5. Directors, Executive
Officers, etc.") or with the assistance of outside advisors and consultants
evaluating the preliminary information available to them. Management may elect
to engage outside independent consultants to perform preliminary analysis of
potential business opportunities. However, because of ASM's limited capital it
may not have the necessary funds for a complete and exhaustive investigation of
any particular opportunity. Management will not devote full time to finding a
merger candidate, will continue to engage in outside unrelated activities, and
anticipates devoting no more than an average of five (5) hours weekly to such
undertaking.
In evaluating such potential business opportunities, ASM will consider, to
the extent relevant to the specific opportunity, several factors including
potential benefits to ASM and its shareholders; working capital, financial
requirements and availability of additional financing; history of operation, if
any; nature of present and expected competition; quality and experience of
management; need for further research, development or exploration; potential for
growth and expansion; potential for profits; and other factors deemed relevant
to the specific opportunity.
Because ASM has not located or identified any specific business opportunity
as of the date hereof, there are certain unidentified risks that cannot be
adequately expressed prior to the identification of a specific business
opportunity. There can be no assurance following consummation of any
acquisition or merger that the business venture will develop into a going
concern or, if the business is already operating, that it will continue to
operate successfully. Many of the potential business opportunities available to
ASM may involve new and untested products, processes or market strategies which
may not ultimately prove successful.
FORM OF POTENTIAL ACQUISITION OR MERGER
Presently ASM cannot predict the manner in which it might participate in a
prospective business opportunity. Each separate potential opportunity will be
reviewed and, upon the basis of that review, a suitable legal structure or
method of participation will be chosen. The particular manner in which ASM
participates in a specific business opportunity will depend upon the nature of
that opportunity, the respective needs and desires of ASM and management of the
opportunity, and the relative negotiating strength of the parties involved.
Actual participation in a business venture may take the form of an asset
purchase, lease, joint venture, license, partnership, stock purchase,
reorganization, merger or consolidation. ASM may act directly or indirectly
through an interest in a partnership, corporation, or other form of
organization, however, ASM does not intend to participate in opportunities
through the purchase of minority stock positions.
Because of ASM's current status and recent inactive status for the prior
two (2) years, and its concomitant lack of assets and relevant operating
history, it is likely that any potential merger or acquisition with another
operating business will require substantial dilution to ASM's existing
shareholders interests. There will probably be a change in control of ASM, with
the incoming owners of the targeted merger or acquisition candidate taking over
control of ASM. Management has not established any guidelines as to the amount
of control it will offer to prospective business opportunity candidates, since
this issue will depend to a large degree on the economic strength and
desirability of each candidate, and the corresponding relative bargaining power
of the parties. However, management will endeavor to negotiate the best
possible terms for the benefit of ASM's shareholders as the case arises.
Management may actively negotiate or otherwise consent to the purchase of any
portion of their common stock as a condition to, or in connection with, a
proposed merger or acquisition. In such an event, existing shareholders may not
be afforded an opportunity to approve or consent to any particular stock buy-out
transaction. However the terms of the sale of shares held by present management
of ASM will be extended equally to all other current shareholders.
<PAGE>
Management does not have any plans to borrow funds to compensate any
persons, consultants, or promoters in conjunction with its efforts to find and
acquire or merge with another business opportunity. Management does not have
any plans to borrow funds to pay compensation to any prospective business
opportunity, or shareholders, management, creditors, or other potential parties
to the acquisition or merger. In either case, it is unlikely that ASM would be
able to borrow significant funds for such purposes from any conventional lending
sources. In all probability, a public sale of ASM's securities would also be
unfeasible, and management does not contemplate any form of new public offering
at this time. In the event that ASM does need to raise capital, it would most
likely have to rely on the private sale of its securities. Such a private sale
would be limited to persons exempt under the Commissions's Regulation D or other
rule, or provision for exemption, if any applies. However, no private sales are
contemplated by ASM's management at this time. If a private sale of ASM's
securities is deemed appropriate in the future, management will endeavor to
acquire funds on the best terms available to ASM. However, there can be no
assurance that the Company will be able to obtain funding when and if needed, or
that such funding, if available, can be obtained on terms reasonable or
acceptable to them. ASM does not anticipate using Regulation S promulgated
under the Securities Act of 1933 to raise any funds any time within the next
year, subject only to its potential applicability after consummation of a merger
or acquisition.
In the event of a successful acquisition or merger, a finder's fee, in the
form of cash or securities of ASM, may be paid to persons instrumental in
facilitating the transaction. ASM has not established any criteria or limits
for the determination of a finder's fee, although most likely an appropriate
finder's fee will be negotiated between the parties, including the potential
business opportunity candidate, based upon economic considerations and
reasonable value as estimated and mutually agreed upon at that time. A finder's
fee would only be payable upon completion of the proposed acquisition or merger
in the normal case, and management does not contemplate any other arrangement at
this time. Current management has not in the past used any particular
consultants, advisors or finders. Management has not actively undertaken a
search for, nor retention of, any finder's fee arrangement with any person. It
is possible that a potential merger or acquisition candidate would have its own
finder's fee arrangement, or other similar business brokerage or investment
banking arrangement, whereupon the terms may be governed by a pre-existing
contract; in such case, ASM may be limited in its ability to affect the terms of
compensation, but most likely the terms would be disclosed and subject to
approval pursuant to submission of the proposed transaction to a vote of ASM's
shareholders. Management cannot predict any other terms of a finder's fee
arrangement at this time. If such a fee arrangement was proposed, independent
management and directors would negotiate the best terms available to ASM so as
not to compromise the fiduciary duties of the representative in the proposed
transaction, and ASM would require that the proposed arrangement would be
submitted to the shareholders for prior ratification in an appropriate manner.
Management does not contemplate that ASM would acquire or merge with a
business entity in which any officer or director of ASM has an interest. Any
such related party transaction, however remote, would be submitted for approval
by an independent quorum of the Board of Directors and the proposed transaction
would be submitted to the shareholders for prior ratification in an appropriate
manner. ASM's management has not had any contact, discussions, or other
understandings regarding any particular business opportunity at this time,
regardless of any potential conflict of interest issues. Accordingly, the
potential conflict of interest is merely a remote theoretical possibility at
this time.
POSSIBLE BLANK CHECK COMPANY STATUS
While ASM may be deemed a "shell" company at this time, it does not
constitute a "blank check" company under pertinent securities law standards. A
"blank check" company under pertinent securities law standards is a company
whose business plan is to primarily pursue a merger or acquisition candidate
(i.e. no specific business plan), and which files a Registration Statement under
the 1933 Act and at such time priced its shares at less than $5.00 per share
while it continued to have no specific business plan. Accordingly, ASM is not
subject to securities regulations imposed upon companies deemed to be "blank
check companies." If ASM were to file a registration statement under Securities
Act of 1933 and, at such time, priced its shares at less than $5.00 per share
and continued to have no specific business plan, it would then be classified as
a blank check company.
<PAGE>
If in the future ASM were to become a blank check company, adverse
consequences could attach to ASM. Such consequences can include, but are not
limited to, time delays of the registration process, significant expenses to be
incurred in such an offering, loss of voting control to public shareholders and
the additional steps required to comply with various federal and state laws
enacted for the protection of investors, including so-called "lock-up"
agreements pending consummation of a merger or acquisition that would take it
out of blank check company status.
Many states (excluding Florida where ASM is incorporated) have statutes,
rules and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not intend to
undertake any efforts to cause a market to develop in the companies securities
or to undertake any offering of ASM's securities, either debt or equity, until
such time as ASM has successfully implemented its business plan described
herein. In the event ASM undertakes the filing of a registration statement
under circumstances that classifies it as a blank check company the provisions
of Rule 419 and other applicable provisions will be complied with.
RIGHTS OF SHAREHOLDERS
ASM amended its Articles of Incorporation on March 10, 1999, to expressly
provide that the Board of Directors is authorized to enter into on behalf of the
corporation and to bind the corporation without shareholder approval, any and
all acts approving the terms and conditions of a merger and/or a share exchange,
and shareholders affected thereby, shall not be entitled to dissenters rights
with respect thereto under any applicable statutory dissenters rights provision.
This provision expressly eliminates shareholder participation in the merger
and/or share exchange contemplated by ASM and expressly eliminates any
shareholders dissenters rights. ASM does not intend to provide its shareholders
with complete disclosure documentation including audited finance statements
concerning a target company and its business prior to any mergers or
acquisitions.
COMPETITION
Because ASM has not identified any potential acquisition or merger
candidate, it is unable to evaluate the type and extent of its likely
competition. ASM is aware that there are several other public companies with
only nominal assets that are also searching for operating businesses and other
business opportunities as potential acquisition or merger candidates. ASM will
be in direct competition with these other public companies in its search for
business opportunities and, due to ASM's limited funds, it may be difficult to
successfully compete with these other companies.
EMPLOYEES
As of the date hereof, ASM does not have any employees and has no plans for
retaining employees until such time as business warrants the expense, or until
ASM successfully acquires or merges with an operating business. The Company may
find it necessary to periodically hire part-time clerical help on an as-needed
basis.
INDUSTRY SEGMENTS
No information is presented regarding industry segments. ASM is presently
a development stage company seeking a potential acquisition of or merger with a
yet to be identified business opportunity. Reference is made to the statements
of income included herein in response to part F/S of this Form 10-SB for a
report of ASM's operating history for the past two fiscal years.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
<PAGE>
ASM is currently using at no cost to ASM, as its principal place of
business offices of its current management, James Donald Brock, Jr., located in
Atlanta, Georgia. Although ASM has no written agreement and pays no rent for the
use of this facility, it is contemplated that at such future time as an
acquisition or merger transaction may be completed, ASM will secure commercial
office space from which it will conduct its business. Until such an acquisition
or merger, ASM lacks any basis for determining the kinds of office space or
other facilities necessary for its future business. ASM has no current plans to
secure such commercial office space. It is also possible that a merger or
acquisition candidate would have adequate existing facilities upon completion of
such a transaction, and ASM's principal offices may be transferred to such
existing facilities.
ITEM 3. LEGAL PROCEEDINGS
ASM is currently not a party to any pending legal proceedings and no such
action by, or to the best of its knowledge, against ASM has been threatened.
ASM was inactive from 1996 through the date of this Form 10-SB.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise from the Company's inception to the
close of the 1999 fiscal year ended September 30, 1999, covered by this report.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Shares of ASM's common stock have previously been registered with the
Securities and Exchange Commission (the "Commission"). ASM intends to and has
made application to the NASD for ASM's shares to be quoted on the OTC Bulletin
Board. ASM's application to the NASD consists of current corporate information,
financial statements and other documents as required by Rule 15c211 of the
Securities Exchange Act of 1934, as amended. Inclusion on the OTC Bulletin
Board, when approved, permits price quotation for ASM's shares to be published
by such service.
ASM is not aware of any existing trading market for its common stock.
ASM's common stock has never traded in a public market. There are no plans,
proposals, arrangements or understandings with any person(s) with regard to the
development of a trading market in any of ASM's securities.
If and when ASM's common stock is traded in the over-the-counter market,
most likely the shares will be subject to the provisions of Section 15(g) and
Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth
certain requirements for transactions in penny stocks and Rule 15g9(d)(1)
incorporates the definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act.
The Commission generally defines penny stock to be any equity security that
has a market price less than $5.00 per share, subject to certain exceptions.
Rule 3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If ASM's shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers to
trade and/or maintain a market in ASM's common stock and may affect the ability
of shareholders to sell their shares.
<PAGE>
As of December 15, 1999, there were 26 holders of record of ASM's common
stock.
As of December 15, 1999, ASM has issued and outstanding One Million Four
Hundred Thousand [1,400,000] shares of common stock. Of this total, Five
Hundred Thousand [500,000] shares were originally issued in transactions more
than three (3) years ago. Such shares may be sold or otherwise transferred
without restriction pursuant to the terms of rule 144 ("Rule 144") of the
Securities Act of 1933, as amended (the "Act"), unless held by an affiliate.
------------
The remaining Nine Hundred Thousand [900,000] shares were issued subject to Rule
144 and may not be sold and/or transferred without further registration under
the Act or pursuant to an applicable exemption
DIVIDEND POLICY
ASM has not declared or paid cash dividends or made distributions in the
past, and ASM does not anticipate that it will pay cash dividends or make
distributions in the foreseeable future. ASM currently intends to retain and
reinvest future earnings, if any, to finance its operations.
PUBLIC QUOTATION OF STOCK
ASM has as of this date requested a broker-dealer, Public Securities, 300
North Argonne Road, Suite 202
Spokane, WA 99212, to act as a market maker for ASM's securities. ASM
anticipates that other market makers may be requested to participate at a later
date. ASM will not use consultants to obtain market makers. There have been no
preliminary discussions between ASM, or anyone acting on its behalf, and any
market maker regarding the future trading market for ASM.
TRANSFER AGENT
The Company selected Interwest Transfer Co. 1981 E. Murray Holladay Road,
Suite 100, Salt Lake City, Utah 84117 to serve as its transfer agent.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ASM is considered a development stage company with limited assets or
capital, and with no operations or income since approximately 1996. The costs
and expenses associated with the preparation and filing of this registration
statement and other operations of ASM have been paid for by a shareholder,
specifically James Donald Brock, Jr. (see Item 4, Security Ownership of Certain
Beneficial Owners and Management James Donald Brock, Jr. is the controlling
shareholder). Mr. Brock has agreed to pay future costs associated with filing
future reports under Exchange Act of 1934 if ASM is unable to do so. It is
anticipated that ASM will require only nominal capital to maintain the corporate
viability of ASM and any additional needed funds will most likely be provided by
ASM's existing shareholders or its sole officer and director in the immediate
future. Current shareholders have not agreed upon the terms and conditions of
future financing and such undertaking will be subject to future negotiations,
except for the express commitment of Mr. Brock to fund required 34 Act filings.
Repayment of any such funding will also be subject to such negotiations. The
ability of ASM to continue as a going concern long term (beyond 12-24 months) is
contingent upon the successful completion of a business combination.
Since its inception, the Company has conducted minimal business operations
except for organizational and capital raising activities. The Company has not
realized any revenues since its inception due to the fact that its executive,
---
Mr. Brock has been primarily engaged in organizational and promotional
activities on behalf of the Company. As a result, from inception (June 2, 1995)
through September 30, 1999, the Company had $0.00 revenue. Total Company
operations and operating expenses as of September 30, 1999 were $42,289.00.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
At September 30, 1999, the Company had assets totaling $2,711.00 and an
accumulated deficit of $43,289.00 attributable to accrued legal expenses,
organization expenses and professional fees. Since the Company's inception, it
has received $46,000.00 in cash contributed as consideration for the issuance
of shares of Common Stock.
NET OPERATING LOSSES
<PAGE>
The Company has net operating loss carry-forwards of $42,289.00 expiring
in 2014. The company has a $8,400.00 deferred tax asset resulting from the loss
carry-forwards, for which it has established a 100% valuation allowance. The
Company may not be able to utilize such carry-forwardsas the Company has no
history of profitable operations.
In the opinion of management, inflation has not and will not have a
material effect on the operations of ASM until such time as ASM successfully
completes an acquisition or merger. At that time, management will evaluate the
possible effects of inflation on ASM as it relates to its business and
operations following a successful acquisition or merger.
Management plans may but do not currently provide for experts to secure a
successful acquisition or merger partner so that it will be able to continue as
a going concern. In the event such efforts are unsuccessful, contingent plans
have been arranged to provide that the current Director of ASM is to fund
required future filings under the 34 Act without reimbursement, and existing
shareholders have expressed an interest in additional funding if necessary to
continue ASM as a going concern.
PLAN OF OPERATION
During the next twelve months, ASM will actively seek out and investigate
possible business opportunities with the intent to acquire or merge with one or
more business ventures. In its search for business opportunities, management
will follow the procedures outlined in Item 1 above. Because the Company has
limited funds, it may be necessary for the sole officer and director to either
advance funds to ASM or to accrue expenses until such time as a successful
business consolidation can be made. ASM will not make it a condition that the
target company must repay funds advanced by its officers and directors.
Management intends to hold expenses to a minimum and to obtain services on a
contingency basis when possible. Further, ASM's directors will defer any
compensation until such time as an acquisition or merger can be accomplished and
will strive to have the business opportunity provide their remuneration.
However, if ASM engages outside advisors or consultants in its search for
business opportunities, it may be necessary for ASM to attempt to raise
additional funds. As of the date hereof, ASM has not made any arrangements or
definitive agreements to use outside advisors or consultants or to raise any
capital. In the event ASM does need to raise capital most likely the only
method available to ASM would be the private sale of its securities. Because of
the nature of ASM as a development stage company, it is unlikely that it could
make a public sale of securities or be able to borrow any significant sum from
either a commercial or private lender. There can be no assurance that ASM will
able to obtain additional funding when and if needed, or that such funding, if
available, can be obtained on terms acceptable to ASM.
ASM does not intend to use any employees, with the possible exception of
part-time clerical assistance on an as-needed basis. Outside advisors or
consultants will be used only if they can be obtained for minimal cost or on a
deferred payment basis. Management is convinced that it will be able to operate
in this manner and to continue its search for business opportunities during the
next twelve months.
YEAR 2000 COMPLIANCE
The Company is currently in the process of evaluating its information
Technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information Technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
FORWARD-LOOKING STATEMENTS
<PAGE>
This Form 10-KSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-KSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based
on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements have been examined to the extent
indicated in their reports by Dorra, Shaw, & Dugan, independent certified
accountants, and have been prepared in accordance with generally accepted
accounting principles and pursuant to Regulation S-B as promulgated by the
Securities and Exchange Commission and are included herein, on Page F-1 hereof
in response to Part F/S of this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention in November 1998 of Dorra,
Shaw & Dugan, CPA's, 270 South County Road, Palm Beach, Florida 33480. There has
been no change in the Company's independent accountant during the period
commencing with the Company's retention of Dorra, Shaw & Dugan, CPA's, through
the date hereof.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
- ------------------------------ ---
BALANCE SHEET F-2
- -------------- ---
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT F-3
- ---------------------------------------------------- ---
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY F-4
- ------------------------------------------------- ---
STATEMENT OF CASH FLOWS F-5
- -------------------------- ---
NOTES TO FINANCIAL STATEMENTS F-6
- -------------------------------- ---
<PAGE>
DORRA SHAW & DUGAN
Certified Public Accountants
----------------------------
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
The American Sports Machine, Inc.
Palm Beach, Florida
<PAGE>
We have audited the accompanying balance sheet of The American Sports Machine,
Inc. (a Florida corporation) and (a development stage company) as of May 31,
1999, and the related statements of operations, accumulated deficit, cash flows
and changes in stockholders' equity for the period October 1, 1998 to May 31,
1999 and June 2, 1995 (date of inception) to May 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Sports Machine,
Inc. as of May 31, 1999 and the results of its operations and its cash flows and
changes in stockholders' equity for the period from October 1, 1998 to May 31,
1999 and June 2, 1995 (date of inception) to May 31, 1999 in conformity with
generally accepted accounting principles.
Audited balance sheets for prior periods and the statements of operations, cash
flows and stockholders' equity for the two years ended September 30, 1998 as
required by item 310 of regulation S-B are not provided because the company was
dormant.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The June 30, 1999 financial statements were compiled by the company; and we did
not audit or review those financial statements and, accordingly, expressed no
opinion or other form of assurance on them.
/s/Dorra Shaw & Dugan
- ------------------------
Certified Public Accountants
June 4, 1999 and August 30, 1999
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 822-9955
Website: dsd-cpa.com
F-1
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The director and executive officer of ASM and his respective age is as
follows:
<PAGE>
Name Age Position
- ---- --- --------
James Donald Brock, Jr. 31 Director, President, Secretary
and Treasurer
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. ASM has not compensated
its directors for service on the Board of Directors or any committee thereof.
As of the date hereof, no director has accrued any expenses or compensation.
Officers are appointed annually by the Board of Directors and each executive
officer serves at the discretion of the Board of Directors. ASM does not have
any standing committees at this time.
No director, or officer, or promoter of ASM has, within the past five
years, filed any bankruptcy petition, been convicted in or been the subject of
any pending criminal proceedings, or is any such person the subject or any
order, judgment or decree involving the violation of any state or federal
securities laws.
The business experience of the person listed above during the past five
years is as follows:
Mr. James Donald Brock, Jr., 31 years of age, is an Arts and Science Degree
graduate of Santa Fe Community College and Emory University, Atlanta, Georgia.
Mr. Brock was a student in the education programs from 1993 to 1997. In 1997,
he received his B.S. Degree in Mathematics from Georgia State University,
Atlanta, Georgia. From 1992 to 1997, Mr. Brock was employed at Savage Pizza,
Atlanta, Georgia. In 1997-98, Mr. Brock served as a student-teacher at North
Atlanta High School, Atlanta, Georgia. In 1998, Mr. Brock was employed and
continues to be employed as a mathematics teacher at Decatur High School,
Decatur, Georgia.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
ASM's executive officers and directors and persons who own more than 10% of a
registered class of ASM's equity securities, to file with the Securities and
Exchange Commission (hereinafter referred to as the "Commission") initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership, of Common Stock and other equity securities
of ASM on Forms 3, 4, and 5, respectively. Executive officers, directors and
greater than 10% shareholders are required by Commission regulations to furnish
ASM with copies of all Section 16(a) reports they file. Mr Brock comprises all
of ASM's executive officers, directors and greater than 10% beneficial owners of
its common Stock, and has complied with Section 16(a) filing requirements
applicable to them during ASM's most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
ASM has not had a bonus, profit sharing, or deferred compensation plan for
the benefit of its employees, officers or directors. ASM has not paid any
salaries or other compensation to its officers, directors or employees for the
years ended 1997 and 1998, nor at any time during 1999. Further, ASM has not
entered into an employment agreement with any of its officers, directors or any
other persons and no such agreements are anticipated in the immediate future.
ASM's officer and director will forego any compensation until such time as an
acquisition or merger can be accomplished and the new business opportunity
provide any remuneration. As of the date hereof, no person has accrued any
---
compensation from ASM. No compensation will accrue in the interim period.
COMPENSATION OF DIRECTORS
<PAGE>
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 15, 1999, with
-
respect to each person known by ASM to own beneficially more than 5% of ASM's
outstanding common stock, each director of ASM and all directors and officers of
ASM as a group.
Name of Address of Amount and Nature of Percent of
- --------------------- ----------------------- -----------
Beneficial Owner Beneficial Ownership Class
- ----------------- --------------------- -----
James Donald Brock, Jr. 500,000 35.7%
1933 Radar Rd Ne
Atlanta, GA 30345
All Executive Officers and Directors
as a Group (one person) 500,000 35.7%
_____________
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 1, 1998 the Company issued 500,000 shares of its Common Stock
to Ms. Angela M. Bartolotta, the sole officer and director of the Company in
consideration and in exchange for services valued at 25,000 in connection with
the reorganization of ASM. On March 12, 1999, Ms. Bartolotta resigned her
position due to personal conflicts and other personal reasons and tendered her
500,000 shares of stock to the company for cancellation such shares were in fact
canceled.
On March 2, 1999, ASM issued and sold 500,000 shares of the Common Stock to
Mr. Brock, the President, Secretary and Treasurer of ASM and record and
beneficial owner of approximately 35.7% of ASM's outstanding Common Stock, in
consideration and exchange therefore for services valued at $25,000 in
connection with the reorganization of ASM. Services rendered and to be
rendered by Mr. Brock include the restructuring of ASM, obtaining requisite
financial assistance, searching for merger and acquisition candidates, and a
commitment on the part of Mr. Brock to fund, if necessary, future filings of 34
Act requirements without reimbursement
In addition Mr. Brock has paid for the cost and expenses associated with
the filing of this Form 10-SB and other operations of ASM.
At the current time, ASM has no provision to issue any additional
securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although ASM has a very large amount of authorized
but unissued Common Stock and Preferred Stock which may be issued without
further shareholder approval or notice, ASM intends to reserve such stock for
the Rule 506 offerings for acquisitions.
During ASM's last two fiscal years, there have not been any other
transactions between ASM and any officer, director, nominee for election as
director, or any shareholder owning greater than five percent (5%) of ASM's
outstanding shares, nor any member of the above referenced individuals'
immediate family.
James Donald Brock, Jr., may be deemed to be a "promoter" of ASM as that
term is defined under the Rules and Regulations promulgated under the Act.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<PAGE>
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B,
as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Exhibit Name
- ------------ --------------
3(i).1 Articles of Incorporation filed June 2, 1995 (1)
3(i).2 Articles of Amendment filed March 10, 1999 (1)
3(ii).1 By-laws (1)
27 * Financial Data Schedule
Incorporated herein by reference to the Registration Statement on Form
10-SB of TECH Creations, Inc.(File No. 0-26901), filed with the U.S.
Securities and Exchange Commission.
(b) No Reports on Form 8-K were filed during the last quarter of the
fiscal year ended September 30, 1999, covered by this Annual Report on Form
10-KSB.
* Filed herein
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized.
The American Sports Machine, Inc.
(Registrant)
Date: December _____, 1999 BY: /s/ James Donald Brock, Jr.
-------------------------------
James Donald Brock, Jr., President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date Signature Title
- ---- --------- -----
December _____, 1999 BY:/s/ JAMES DONALD BROCK JR. Director, President,
--------------------------
James Donald Brock, Jr. Secretary, Treasurer
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1999
COMMISSION FILE NO. 0-26327
---------
THE AMERICAN SPORTS MACHINE, INC.
------------------------------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 65-0877744
- ------------------------------------ -----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S.EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
222 LAKEVIEW AVENUE, SUITE 160-146
WEST PALM BEACH, FL 33401
- ------------------------------------------
- -----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (561) 832-5698
SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
NONE NONE
- -----------------------------------
- -----------------------------
SECURITIES TO BE REGISTERED UNDER SECTION 12(G) OF THE ACT:
COMMON STOCK, $.0001 PAR VALUE PER SHARE
--------------------------------------------------------
(TITLE OF CLASS)
COPIES OF COMMUNICATIONS SENT TO:
DONALD F. MINTMIRE
MINTMIRE & ASSOCIATES
265 SUNRISE AVENUE, SUITE 204
PALM BEACH, FL 33480
TEL: (561) 832-5696 - FAX: (561) 659-5371
<PAGE>
Indicate by Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
As of December 31, 1999, there are 1,400,000 shares of voting stock of
the registrant issued and outstanding.
<PAGE>
PART I
Item 1. Financial Statements
THE AMERICAN SPORTS MACHINE, INC.
- -------------------------------------
TABLE OF CONTENTS
- -------------------
PAGE
----
BALANCE SHEETYYYYYYYYYYYYYYYYYYYYYYYYYYYYY. F- 1
------------------------------------------- ----
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICITYYYY F-2
---------------------------------------------------- ---
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITYYYYYYYYY F- 3
---------------------------------------------------- ----
STATEMENT OF CASH FLOWSYYYYYYYYYYYYYYYYYYYYYYY F- 4
---------------------------------------------- ----
NOTES TO FINANCIAL STATEMENTSYYYYYYYYYYYYYYYYYYY F-5-6
------------------------------------------------ -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C>
( A Development Stage Company)
- -----------------------------------------------------------------
BALANCE SHEET
- -----------------------------------------------------------------
December 31,. . . . . . . . . . . . . . . . . . . . . . . . . . . 1999
- ----------------------------------------------------------------- ---------
ASSETS
- -----------------------------------------------------------------
CURRENT ASSETS:
- -----------------------------------------------------------------
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,081
- ----------------------------------------------------------------- ---------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . 1,081
- ----------------------------------------------------------------- ---------
$ 1,081
---------
LIABILITIES
- -----------------------------------------------------------------
CURRENT LIABILITIES:
- -----------------------------------------------------------------
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . $ -
- ----------------------------------------------------------------- ---------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . $ -
- ----------------------------------------------------------------- ---------
$ -
---------
STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------
Common stock - $.0001 par value - 50,000,000 shares authorized
- -----------------------------------------------------------------
1,400,000 shares issued and outstanding . . . . . . . . . 140
- ----------------------------------------------------------------- ---------
Preferred stock - No par value - 10,000,000 shares authorized
- -----------------------------------------------------------------
No shares issued or outstanding . . . . . . . . . . . . . -
- ----------------------------------------------------------------- ---------
Additional paid-in-capital. . . . . . . . . . . . . . . . . . . 45,860
- ----------------------------------------------------------------- ---------
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (44,919)
- ----------------------------------------------------------------- ---------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . 1,081
- ----------------------------------------------------------------- ---------
$ 1,081
---------
</TABLE>
See accompanying notes to Financial Statements
1
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C>
( A Development Stage Company)
- -----------------------------------------------
STATEMENT OF OPERATIONS AND
- -----------------------------------------------
ACCUMULATED DEFICIT
---------------------
For the period October 1, 1999 to December 31.. 1999
- ----------------------------------------------- ---------------------
REVENUES. . . . . . . . . . . . . . . . . . . . $ -
- ----------------------------------------------- ---------------------
OPERATING EXPENSES:
- -----------------------------------------------
Professional fees . . . . . . . . . . . . . . $ 1,630
- ----------------------------------------------- ---------------------
$ 1,630
---------------------
LOSS BEFORE INCOME TAXES. . . . . . . . . . . . ($1,630)
- ----------------------------------------------- ---------------------
Income taxes . . . . . . . . . . . . . . . . . -
- ----------------------------------------------- ---------------------
NET LOSS. . . . . . . . . . . . . . . . . . . . $ (1,630)
- ----------------------------------------------- ---------------------
ACCUMULATED DEFICIT - OCTOBER 1, 1998 . . . . . $ (43,289)
- ----------------------------------------------- ---------------------
ACCUMULATED DEFICIT - DECEMBER 31, 1999 . . . . $ (44,919)
- ----------------------------------------------- ---------------------
NET LOSS PER SHARE. . . . . . . . . . . . . . . $ (0.03)
- ----------------------------------------------- ---------------------
WEIGHTED AVERAGE SHARES OF COMMON STOCK . . . . 1,400,000
- ----------------------------------------------- ---------------------
</TABLE>
See Accompanying Notes to Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C> <C> <C> <C> <C> <C>
( A Development Stage Company)
- -----------------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- -----------------------------------------------
For the period October 1, 1999 to December 31,. 1999
- ----------------------------------------------- ---------
Additional
- -----------------------------------------------
Number of . . . . . . . . . . . . . . . . . Preferred Common Paid - In Accumulated
- ----------------------------------------------- --------- ------- ---------- ------------
Shares. . . . . . . . . . . . . . . . . . . Stock Stock Capital Deficit Total
- ----------------------------------------------- --------- ------- ---------- ------------ ---------
BEGINNING BALANCE:
- -----------------------------------------------
June 2, 1995 - Services . . . . . . . . . . . 500,000 $ - $ 50 $ 950 $ - $ 1,000
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
ISSUANCE OF COMMON STOCK:
- -----------------------------------------------
December 1, 1998 - Services . . . . . . . . . 500,000 - 50 24,950 - 25,000
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
December 1, 1998. . . . . . . . . . . . . . . 400,000 - 40 19,960 - 20,000
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
ACCUMULATED DEFICIT . . . . . . . . . . . . . . - - - - (44,919) (44,919)
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
1,400,000 $ - $ 140 $ 45,860 $(44,919) $ 1,081
--------- ------- ---------- ------------ --------- ---------
</TABLE>
See Accompanying Notes to Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C>
(A Development Stage Company)
- -----------------------------------------------
STATEMENT OF CASH FLOWS
- -----------------------------------------------
For the period October 1, 1999 to December 31,. 1999
- ----------------------------------------------- --------
OPERATING ACTIVITIES:
- -----------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . $(1,630)
- ----------------------------------------------- --------
Net cash provided by operating activities . . . $(1,630)
- ----------------------------------------------- --------
Net decrease in cash. . . . . . . . . . . . . . $(1,630)
- ----------------------------------------------- --------
Cash - October 1, 1999. . . . . . . . . . . . . $ 2,711
- ----------------------------------------------- --------
Cash - December 31, 1999. . . . . . . . . . . . $ 1,081
- ----------------------------------------------- --------
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- -----------------------------------------------------------
ORGANIZATION
- ------------
The American Sports Machine, Inc. (a development stage company) is a Florida
Corporation organized June 2, 1995 to build recreational centers for small
organized sports activities including basketball, handball, racquetball, as well
as video games and other computer board sports activities. The Company failed in
its attempt to implement its initial business plan and during June 1996
abandoned its efforts. The Company had no operations for the period prior to
June 1996. The Company was inactive and there were no transactions from June
1996 to the date of reinstatement by the State of Florida on December 1, 1998
that affect the balances reflected in the financial statements as of December 1,
1998.
The Company has a new business plan, which was adopted on or about December 1,
1998, which is to engage in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
assets of the Company will be used for its expenses of operation to implement
this plan.
ACCOUNTING METHOD
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a September 30 year end.
START B UP COSTS
START B UP COSTS
Start B up and organization costs are being expensed as incurred.
Loss Per Share
LOSS PER SHARE
- ----------------
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
USE OF ESTIMATES
USE OF ESTIMATES
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
- ------------------------------
The December 31, 1999 interim financial statements include all adjustments,
which in the opinion of management are necessary in order to make the financial
statements not misleading.
NOTE B STOCKHOLDERS' EQUITY:
- -------------------------------
On June 2, 1995, the Company issued 500,000 shares of common stock, in lieu of
cash, for the fair market value of services rendered by its initial officer B
stockholder. On or about December 1, 1998, third parties purchased the shares
from the initial officer B stockholder. On or about December 1, 1998, the
Company issued 500,000 shares of its common stock to its sole officer in
exchange for services valued at $25,000. Subsequently the same third parties
purchased at $0.05 per share, 400,000 shares
F-5
<PAGE>
of the common stock of the Company in a private placement pursuant to Regulation
D of the SEC. Included in professional fees are $1,500 in auditing and
accounting fees.
At December 31, 1999, the Company had authorized 50,000,000 shares of $.0001 par
value common stock and had 1,400,000 shares of common stock issued and
outstanding. In addition, the Company authorized 10,000,000 shares of preferred
stock with the specific terms; conditions, limitations and preferences to be
determined by the Board of Directors. None of the preferred stock was issued and
outstanding as of December 31, 1999.
NOTE C B INCOME TAXES:
- --------------------------
The Company has a net operating loss carry forward of $44,919 that may be offset
against future taxable income. If not used, the carry forward will expire in
2019.
The amount recorded as deferred tax assets, cumulative as of June 30,1999 is
$9,000, which represents the amounts of tax benefits of loss carry-forwards. The
Company has established a valuation allowance for this deferred tax asset of
$9,000, as the Company has no history of profitable operations.
NOTE D B GOING CONCERN:
- ---------------------------
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through December
31, 1999. It has not established revenues sufficient to cover operating costs
and to allow it to continue as a going concern. Management plans currently
provide for experts to secure a successful acquisition or merger partner so that
it will be able to continue as a going concern. In the event such efforts are
unsuccessful, contingent plans have been arranged to provide that the current
Director of the Company is to fund required future filings under the 34 Act, and
existing shareholders have expressed an interest in additional funding if
necessary to continue the Company as a going concern.
F-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company is considered a development stage company with limited assets or
capital, and with no operations or income since approximately 1995. The costs
and expenses associated with the preparation and filing of the Company's
registration statement and other operations of the Company have been paid for by
a shareholder, specifically Mr. James Donald Brock, Jr. It is anticipated that
the Company will require only nominal capital to maintain the corporate
viability of the Company and any additional needed funds will most likely be
provided by the Company's existing shareholders or its officers and directors in
the immediate future. However, unless the Company is able to facilitate an
acquisition of or merger with an operating business or is able to obtain
significant outside financing, there is substantial doubt about its ability to
continue as a going concern.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company until such time as the Company
successfully completes an acquisition or merger. At that time, management will
evaluate the possible effects of inflation on the Company as it relates to its
business and operations following a successful acquisition or merger.
PLAN OF OPERATION
During the next twelve months, the Company will actively seek out and
investigate possible business opportunities with the intent to acquire or merge
with one or more business ventures. In its search for business opportunities,
management will follow the procedures outlined in Item 1 to its Registration
Statement on Form 10SB. Because the Company has limited funds, it may be
necessary for the officers and directors to either advance funds to the Company
or to accrue expenses until such time as a successful business consolidation can
be made. Management intends to hold expenses to a minimum and to obtain
services on a contingency basis when possible. Further, the Company's directors
will defer any compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity provide their
remuneration. However, if the Company engages outside advisors or consultants
in its search for business opportunities, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does need to
raise capital most likely the only method available to the Company would be the
private sale of its securities. Because of the nature of the Company as a
development stage company, it is unlikely that it could make a public sale of
securities or be able to borrow any significant sum from either a commercial or
private lender. There can be no assurance that the Company will able to obtain
additional funding when and if needed, or that such funding, if available, can
be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is convinced that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
<PAGE>
For the period from October 1, 1999 through December 31, 1999, the Company
had no income from operations and operating expenses aggregating $1,630.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
At December 31, 1999, the Company had assets totaling $1,081 and no
liabilities. James Donald Brock, Jr. is the President, Secretary, Treasurer,
and Director of the Company and the record and beneficial owner of
approximately 35.7% of the Company's outstanding Common Stock.
The Company has no potential capital resources from any outside sources at
the current time.
It is anticipated that the Company will require only nominal capital to maintain
the corporate viability of the Company. Any additional capital needed will most
likely be provided by the Company's existing shareholders or its officers and
directors.
The ability of the Company to continue as a going concern is dependent upon
the availability of obtaining additional capital and financing from such
shareholders and directors.
NET OPERATING LOSSES
The Company has net operating loss carryforwards of $44,919 which expire
in 2019. Until the Company's current operations begin to produce earnings, it
is unclear whether the Company can utilize such carryforwards.
YEAR 2000 COMPLIANCE
The Company did not experience any material negative impact to its
operations as a result of the Year 2000 calendar change. The Company did not
experience any material impact to its financial condition as a result of
becoming Year 2000 compliant. The Company does not anticipate any material
disruption in its operations in the future as a result of the Year 2000 calendar
change.
FORWARD-LOOKING STATEMENTS
<PAGE>
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), finding
suitable merger or acquisition candidates, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-QSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending December 31, 1999,
covered by this report to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Description
- ----------------------------------------------------------------------
3(i).1 Articles of Incorporation filed June 2, 1995(1)
3(i).2 Articles of Amendment filed March 10, 1999(1)
3(ii).1 By-laws (1)
27 * Financial Data Schedule
________________
<PAGE>
Exhibit B - Page 57
Incorporated herein by reference to the Company's Registration Statement
on Form 10-SB.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended December
31, 1999.
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The American Sports Machine, Inc.
Date: February ___, 2000 BY: /s/ James Donald Brock,
Jr.
---------------------------
James Donald Brock, Jr., President
[sign page The American Sports Machine, Inc. 10Q 12.31.99]
<PAGE>
Exhibit G - Page 15
Exhibit B - Page 59
EXHIBIT G
FORM OF INVESTMENT LETTER
<PAGE>
Exhibit B - Page 60
EXHIBIT H
SOFTQUAD USA MATERIAL CONTRACTS
1. Thomson Kernaghan Engagement Letter dated December ___, 1999
2. Common Stock Purchase Agreement (VC Advantage Limited Partnership)
dated December 9, 1999
3. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 9, 1999
4. Agent's Warrant (Thomson Kernaghan & Co. Ltd.) dated December 9,
1999
5. Registration Rights Agreement dated December 9, 1999
6. Class A Convertible Preferred Stock Purchase Agreement (VC Advantage
Limited Partnership) dated December 16, 1999
7. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 16, 1999
8. Agent's Warrant (VC Advantage Limited Partnership) dated December
16, 1999
9. Registration Rights Agreement dated December 16, 1999
10. Acquisition Agreement dated December __, 1999, among SoftQuad
Software, Ltd., SoftQuad Acquisition Corp. and SoftQuad Software, Inc., and
related documents referred to therein.
11. Share Purchase and Option Exchange Agreements with each
securityholder of SoftQuad Software, Inc. dated as of February 25, 2000.
12. Loan Agreement between SoftQuad Acquisition Corp. and SoftQuad
Software, Inc. dated December __, 1999.
13. Thomson Kernaghan Engagement Letter dated February __, 2000
14. Class B Convertible Preferred Stock Purchase Agreement (VC
Advantage) dated February 28, 2000
15. Purchaser's Warrant (VC Advantage) dated February 28, 2000
16. Agent's Warrant (VC Advantage) dated February 28, 2000
17. Registration Rights Agreement (VC Advantage) dated February 28,
2000
18. Class B Convertible Preferred Stock Purchase Agreement (Hammock)
dated February 28, 2000
19. Purchaser's Warrant (Hammock) dated February 28, 2000
20. Agent's Warrant (Hammock) dated February 28, 2000
21. Registration Rights Agreement (Hammock) dated February 28, 2000
22. Common Stock Purchase Agreement dated February 29, 2000
23. Agent's Warrant dated February 29, 2000
24. Registration Rights Agreement dated February 29, 2000
<PAGE>
Exhibit B - Page 61
EXHIBIT I
ASM MATERIAL CONTRACTS
NONE
<PAGE>
Exhibit B - Page 74
SCHEDULE 1
LIABILITIES OF SOFTQUAD USA NOT DISCLOSED IN FINANCIAL STATEMENTS
<PAGE>
SCHEDULE 2
ADVERSE CHANGES SINCE THE DATE OF THE FINANCIAL STATEMENTS
NONE
<PAGE>
SCHEDULE 3
LITIGATION
NONE
<PAGE>
SCHEDULE 4
EXCEPTIONS TO COMPLIANCE WITH LAWS AND REGULATIONS
NONE
<PAGE>
SCHEDULE 5
MATERIAL AGREEMENTS
25. Thomson Kernaghan Engagement Letter dated December ___, 1999
26. Common Stock Purchase Agreement (VC Advantage Limited Partnership)
dated December 9, 1999
27. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 9, 1999
28. Agent's Warrant (Thomson Kernaghan & Co. Ltd.) dated December 9,
1999
29. Registration Rights Agreement dated December 9, 1999
30. Class A Convertible Preferred Stock Purchase Agreement (VC
Advantage Limited Partnership) dated December 16, 1999
31. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 16, 1999
32. Agent's Warrant (VC Advantage Limited Partnership) dated December
16, 1999
33. Registration Rights Agreement dated December 16, 1999
34. Acquisition Agreement dated December __, 1999, among SoftQuad
Software, Ltd., SoftQuad Acquisition Corp. and SoftQuad Software, Inc., and
related documents referred to therein.
35. Share Purchase and Option Exchange Agreements with each
securityholder of SoftQuad Software, Inc. dated as of February 25, 2000.
36. Loan Agreement between SoftQuad Acquisition Corp. and SoftQuad
Software, Inc. dated December __, 1999.
37. Thomson Kernaghan Engagement Letter dated February __, 2000
38. Class B Convertible Preferred Stock Purchase Agreement (VC
Advantage) dated February 28, 2000
39. Purchaser's Warrant (VC Advantage) dated February 28, 2000
40. Agent's Warrant (VC Advantage) dated February 28, 2000
41. Registration Rights Agreement (VC Advantage) dated February 28,
2000
42. Class B Convertible Preferred Stock Purchase Agreement (Hammock)
dated February 28, 2000
43. Purchaser's Warrant (Hammock) dated February 28, 2000
44. Agent's Warrant (Hammock) dated February 28, 2000
45. Registration Rights Agreement (Hammock) dated February 28, 2000
46. Common Stock Purchase Agreement dated February 29, 2000
47. Agent's Warrant dated February 29, 2000
48. Registration Rights Agreement dated February 29, 2000
<PAGE>
SCHEDULE 6
EXCEPTIONS TO TITLE TO PROPERTIES AND LIST OF REAL PROPERTY
NONE
<PAGE>
SCHEDULE 7
LICENSES, TRADEMARKS, TRADENAMES, ETC.
NONE
<PAGE>
SCHEDULE 8
SOFTQUAD USA'S CAPITALIZATION
<TABLE>
<CAPTION>
SHARES
- ------
<S> <C>
Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued
- ---------------------------------------------------------------- --------------------------------
25,000,00 shares of Common Stock . . . . . . . . . . . . . . . . 1,706,703 shares of Common Stock
25,00,000 shares of Preferred Stock, of which 1,473,405. . . . . 1,473,405 Class A Shares
shares have been designated as Class A Convertible. . . . . . 1,722,222 Class B Shares
Preferred Stock ("Class A Shares") and 1,722,222 shares
have been designated as Class B Convertible Preferred Shares
("Class B Shares")
</TABLE>
WARRANTS AND OPTIONS
--------------------
- --Warrants outstanding exercisable for an aggregate of 1,878,368 shares of
Common Stock.
- --Options outstanding exercisable (subject to vesting) for an aggregate of
2,513,500 shares of Common Stock.
OTHER
-----
- --Obligation to issue 3,435,670 shares of Common Stock to certain shareholders
of SoftQuad Software, Inc. pursuant to share purchase agreements.
- --Obligation to issue 1,837,000 shares of Common Stock on exercise of options
issuable under option exchange agreements.
- --Obligation to issue 5,792,605 shares of Common Stock or exchange of equivalent
number of exchangeable shares of SoftQuad Acquisition Corporation issuable to
certain shareholders of SoftQuad Software, Inc. under share purchase agreements.
<PAGE>
SCHEDULE 9
LIABILITIES OF ASM NOT DISCLOSED IN FINANCIAL STATEMENTS
NONE
<PAGE>
SCHEDULE 10
ADVERSE CHANGES SINCE THE DATE OF THE FINANCIAL STATEMENTS AND FORM 10-QSB
None
<PAGE>
SCHEDULE 11
LITIGATION
NONE
<PAGE>
SCHEDULE 12
MATERIAL AGREEMENTS
NONE
<PAGE>
SCHEDULE 13
EXCEPTIONS TO TITLE TO PROPERTIES
NONE
<PAGE>
Exhibit B - Page 3
Exhibit B - Page 75
SCHEDULE 14
EXCEPTIONS TO COMPLIANCE WITH LAWS AND REGULATIONS
NONE
<PAGE>
Exhibit C - Page 1
EXHIBIT C
PRESS RELEASE
SOFTQUAD MERGES WITH THE AMERICAN SPORTS MACHINE, INC.
(NASD: AMRR.BB)
Toronto, Ontario (March 2, 2000) - SoftQuad Software Limited (SoftQuad) today
announced that it has entered into a 1-for-1 share exchange to merge with The
American Sports Machine, Inc. (ASM), a Florida-based shell corporation listed on
the NASD Electronic Bulletin Board under the symbol AMRR.BB.
Under the terms of the transactions related to the merger, SoftQuad is now a
wholly-owned subsidiary of ASM. However, shareholder approval will be sought in
the near future to rename the merged company SoftQuad Software Ltd. and
redomicile it to Delaware.
"SoftQuad is extremely enthusiastic about merging with an NASD-listed company
and the opportunity to share our company's success with public investors," said
Roberto Drassinower, President and CEO of SoftQuad. "We view this transaction
with The American Sports Machine as a very important first step toward achieving
full public status."
As a consequence of the transactions related to the share exchange, ASM's
outstanding share capital now consists of 3,936,703 shares of common stock;
1,473,405 shares of Class A convertible preferred stock; and 1,722,222 shares of
Class B convertible preferred stock, on an undiluted basis. There is also a
total of 1,704,699 share purchase warrants outstanding. ASM has also agreed to
assume SoftQuad's obligation - pursuant to SoftQuad certain agreements to
acquire all the outstanding shares of its Canadian operating subsidiary,
SoftQuad Software Inc. from the shareholders thereof- to issue an additional
11,065,275 shares of common stock (on a fully diluted basis).
SoftQuad also announced it has entered into an agreement with Thomson Kernaghan
& Co. Ltd., pursuant to which Thomas Kernaghan has agreed to act as agent, on a
best efforts basis, to raise up to US$15 million in additional common equity for
SoftQuad.
About SoftQuad
SoftQuad Software Ltd. is a Delaware corporation whose sole asset is its
wholly-owned subsidiary, SoftQuad Software Inc. (SSI). SSI is an
internationally-recognized developer and marketer of enabling technologies and
commerce solutions for e-business. XMetaL, the world's first advanced, yet easy
to use XML content creation solution, has already become the premier enabling
technology for XML-based content applications in e-publishing, e-commerce, and
knowledge management. Leveraging its technological and market leadership, SSI
is targeting the growing business-to-business (B2B) marketplace with Global
OnRamp, a comprehensive supply-side content solution that allows companies to
effectively join and compete in B2B e-markets.
Headquartered in Toronto, Canada, and with European operations based in London,
SSI is a founding member of, and active participant in, the World Wide Web
Consortium (W3C), the Organization for the Advancement of Structured Information
Standards (OASIS), and XML.org.
About American Sports Machine
American Sports Machine is a Florida-based corporation listed on the NASD
Electronic Bulletin Board under the symbol ASMR. Subsequent to its merger with
SoftQuad, it is a holding company whose only subsidiaries are the subsidiaries
of SoftQuad.
For further information contact:
Roberto Drassinower
President and CEO
SoftQuad Software Inc.
(416)544-9000
or click on Investor Relations at www.softquad.com
----------------
Forward-looking statements in this news release are made pursuant to the "safe
harbor" provisions of the United States Private Securities Litigation Reform Act
of 1995. Investors are cautioned that such forward-looking statements involve
risks and uncertainties, including, without limitation, risks relating to
possible product defects and product liability, risks related to international
sales and potential foreign currency exchange fluctuations, risks related to the
year 2000 issue, continued produce acceptance, increased levels of competition,
technological change, dependence on intellectual property rights and other risks
detailed from time to time in SoftQuad's or The American Sports Machine's
periodic reports filed with the United States Securities and Exchange Commission
and other regulatory authorities.
-30-
