UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Amendment No. 1
to
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EtG Corporation
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(Name of small business issuer in its charter)
Nevada 87-0567854
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification
Code Number) No.)
1008 SW Mic-O-Say Circle, Blue Springs, Missouri 64015
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(Address and telephone number of principal executive offices)
1008 SW Mic-O-Say Circle Blue Springs, Missouri 64015
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(Address of principal place of business or
intended principal place of business)
William J. Stutz, 1008 SW Mic-O-Say Circle, Blue Springs, Missouri 64015
(816) 220-1119
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(Name, address and telephone number of agent for service)
Approximate date of proposed sale to the public December, 1999
Copies of communications to:
Allen G. Reeves, P.C.
900 Equitable Building, 730 17th Street
Denver, Colorado 80202
(303) 534-6278
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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<CAPTION>
CALCULATION OF REGISTRATION FEE
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Title of each Proposed maximum Proposed maximum
class of securities Amount to be offering price aggregate offering Amount of
to be registered registered per unit price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock
$.001 par value 200,000 $1.00 $200,000 $55.60
</TABLE>
(1) Calculated pursuant to Rule 457(o) under the Securities Act.
The registrant hereby arnends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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PROSPECTUS
For the initial public offering for sale of:
200,000 Shares of Common Stock
of
EtG Corporation
Per
Share Total We are a small start-up business
involved with instructional
efforts to help youth, parents
and coaches more fully enjoy
athletic competition.
Initial Offering Price
to the Public $1.00 $200,000 This is our initial public
offering. No public market
Underwriter Discounts $ 0 $ 0 currently exists for our shares.
We will attempt to trade our
shares on the Nasdaq Electronic
Proceeds to EtG, Inc. $1.00 $200,000 Bulletin Board Service but we
may not be successful in
creating a public market. The
initial offering price to the
public is $1.00 per share. But
this initial offering price may
not reflect the market price
after the initial offering.
There is no minimum investment
required.
Investing in our common stock involves a high degree of risk. You should
purchase shares only if you can afford a complete loss. See "Risk Factors"
beginning on page 4.
We intend to sell the common stock ourselves without using an underwriter.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined that this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December __, 1999
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Table of Contents
Page
Summary of Our Offering ................................................. 3
Risk Factors ............................................................ 4
Forward Looking Statements .............................................. 8
Use of Proceeds ......................................................... 8
Dividend Policy ......................................................... 9
Dilution ................................................................ 10
Our Business ............................................................ 11
Our Management .......................................................... 20
Principal Stockholders .................................................. 22
Certain Transactions .................................................... 23
Description of Common Stock ............................................. 23
Terms of the Offering ................................................... 28
Shares Eligible for Future Sale ......................................... 31
Litigation .............................................................. 32
Legal Matters ........................................................... 32
Experts ................................................................. 32
Additional Information .................................................. 32
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than contained in this
prospectus in connection with the offering described here. If given or made,
such information or representations must not be relied upon as having been
authorized by us. This prospectus does not constitute an offer to sell, or the
solicitation of an offer to buy, the securities offered by this prospectus to
any person in any state or other jurisdiction in which the offer or solicitation
is unlawful. Neither the delivery of this prospectus nor any sale under this
prospectus shall, under any circumstances, create any implication that there has
been no change in our affairs since this date.
Until _____________, 2000 (25 days after the date of this prospectus), all
dealers effecting transactions in the registered securities may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
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SUMMARY OF OUR OFFERING
This summary highlights important information about our business and about
this offering. Because it's a summary, it doesn't contain all the information
you may wish to consider before investing in the common stock. So please read
the entire prospectus.
EtG Corporation was incorporated in the State of Nevada in 1996 using the
name "B & R Ventures, Inc." We later changed our name to EtG Corporation. On
March 28, 1999, we acquired all of the common stock of Enjoy The Game, Inc., a
company incorporated in the State of Missouri. That company is now our wholly
owned subsidiary. Before this acquisition, we were not engaged in any business
activities. Our principal executive offices are at 1008 S.W. Mic-O-Say Circle,
Blue Springs, Missouri 64015. Our telephone number is (816) 220-1119. Our fiscal
year is a calendar year and ends on December 31.
Our Business
We are a small media and merchandising company that promotes the positive
aspects of athletic competition. Our main focus is to educate athletes, coaches,
parents and fans on the value of athletics and how to enjoy the art of playing
the game. We anticipate that the groups that will benefit the most from our
concepts will be the youth sports groups as well as junior high/middle schools
and high school and collegiate athletic programs. We use videos, apparel and
specialized merchandise to promote our theme of enjoyable athletic competition.
Our President, William J. Stutz, also makes live appearances at which he
stresses our philosophy. We would also eventually like to branch out into the
production of different kinds of publications to promote our philosophy. These
publications might include magazines, newsletters, brochures and a full
educational curriculum package that includes instructional materials and a
multi-sport video. We expect that a large portion of our revenues will come from
the sale and licensing of our products.
Our Operating Results
We've been in business since August 1998 and have a very limited operating
history. From the time we started business through September 30, 1999, we had
revenues of $8,140. Our cost of revenues was $3,624 and we also had additional
operating expenses of $48,845. Our loss from operations was $44,329 and our
total net loss was $50,370.
Our Proposed Plan of Operations
Our primary products include instructional tapes in which William Stutz,
our President, discusses the art of playing basketball and other sports. Our
goal is to produce additional videos in which we discuss additional sports. The
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aim of these tapes is to convey a message that sports can be fun and that the
pressures to compete and excel can be dealt with in a positive manner. In
addition, our products include caps, shirts, water bottles and banners. Our
marketing strategy involves approaching youth groups, junior high/middle
schools, high school organizations and college organizations such as the NCAA to
allow us to approach large numbers of schools in order to gain wide exposure of
our products.
The Offering
(A) Common stock offered 200,000 shares. We will attempt to sell
these shares to the public ourselves without
the assistance of an underwriter. There is
no minimum amount which must be sold in
order for the offering to proceed and no
minimum investment is required. All funds
invested may be used by us immediately.
(B) Proposed symbol and We would like to establish a trading market
trading market for the common stock on the Nasdaq
Electronic Bulletinboard. We have not
applied for a trading symbol and do not
expect to before this public offering takes
place. Nor have we recruited a market maker
to make a market in our stock.
(C) Use of proceeds We will use the proceeds of this offering
first to pay the offering expenses. Assuming
we have sold the entire offering, after
expenses we will have approximately $159,500
in net proceeds. We plan to use the proceeds
to pay for product inventory, marketing and
the general expenses of operating our
business.
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks and uncertainties described below and the other information in this
prospectus before deciding whether to invest in shares of our common stock. If
any of these risks occur, our business, results of operations and financial
condition could be adversely affected. This could cause the trading price of our
common stock to decline, and you might lose part or all of your investment.
Risks Associated with Our Financial Position.
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We lack working capital. We are a newly formed venture without significant
assets or cash. We have not brought in significant revenues from operations. Our
lack of cash makes it difficult for us to expand our business through
advertising or other marketing efforts. As of September 30, 1999, we had an
accumulated deficit of $50,370 and have suffered a loss from operations since
inception of $44,329. Continuing losses are likely before our business might
become profitable. There is no assurance that our business will ever become
profitable.
Our Certified Public Accountants Have Issued A Qualified Opinion. The
certified public accountants who audited our financial statements have issued an
opinion which expresses doubt about our ability to continue as a going concern.
Their doubt is based upon the following:
o our lack of an operating history
o a lack of working capital
o an unproven business concept
We believe we will be able to continue to operate as a going concern for at
least the next year, in part because we have little in the way of fixed costs
that cannot be deferred until our revenues match our expenses. Nevertheless, the
opinion of our certified public accountants should be carefully considered by
you when making a decision whether to purchase the common stock.
We Have Some Debt That May Be Difficult to Repay. We have borrowed $101,500
from a total of six individuals and corporations. The loans are payable on
demand of each of the lenders. If payment of these loans is demanded before we
can sell the common stock offered by this prospectus or if we terminate the
offering before all the shares have been sold, we would not have the cash on
hand to repay these loans. If payment of the loans is demanded, we would have
difficulty in continuing as an ongoing concern. In addition, we have not
earmarked any of the net proceeds from this offering to repayment of the loans.
Risks Associated with How This Offering is Being Conducted.
We are attempting to sell the shares of common stock ourselves. We have not
hired an underwriter to assist us in selling the common stock. Only our
officers, directors and employees will assist us in selling the common stock.
They will not be paid any commission. Because none of these individuals has any
prior experience in selling stock to the public, it will be more difficult for
them to sell all of the common stock than it would have been had we employed an
underwriter. There can be no assurance that they will be able to sell all of the
common stock or even enough of the common stock to be able to fully implement
our proposed plan of operations. If that happens, an investor is at increased
risk that his investment will not provide us with enough funds to make
profitable operations more likely.
There is no minimum number of shares of common stock that must be sold in
this offering and no minimum investment is required of any investor.
Furthermore, there is no escrow account into which the proceeds of this offering
will be deposited. All proceeds of this offering will be deposited directly into
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our operating account. If less than all the shares of common stock offered by
this prospectus is sold, an investor may sustain a loss of his or her entire
investment. An investment in our common stock is therefore immediately at risk.
No review of offering price by underwriter. In most public offerings that
use the services of an underwriter, the underwriter has the opportunity to
review the terms of the public offering and decide whether the offering price of
the common stock is fair and reasonable. Because we are attempting to sell the
common stock ourselves without using an underwriter, this review is not present
in this offering. We arbitrarily determined the offering price of the common
stock taking into consideration the following factors:
o the amount of proceeds required to initiate our business plan and
marketing strategy
o our lack of revenues
o estimates of future revenues
o our management capability
o our plans for future growth
o the general condition of the securities markets
o the amount of retained equity to the present shareholders.
Prospective investors should not assume that the offering price of the
common stock necessarily reflects the actual value of the common stock.
Other Factors that May Adversely Affect Our Common Stock.
No prior public market and possible price swings. Before this offering,
there has not been any public market for the common stock. Furthermore, it is
possible that an active public market for the common stock may never develop or
be sustained. We do not intend to list the common stock on any national
securities exchange or to apply for listing on either the Nasdaq Stock Market or
the Nasdaq Small Cap Stock Market. Any trading in the common stock will take
place in the over-the-counter (the "OTC") market in the so-called "pink sheets"
or the "OTC Bulletin Board" service. As a result, an investor might find it
difficult to sell the common stock or to obtain accurate price quotations.
You will experience substantial dilution. The public offering price of the
common stock is much higher than the net book value of the common stock that we
have already issued. As a result, purchasers of the common stock who paid $1.00
per share will experience immediate and substantial dilution. The net tangible
book value of the common stock immediately after the offering will be
approximately $.038. Our existing shareholders paid an average of $.001 per
share of common stock and, accordingly, new investors will bear most of the
risks inherent in an investment in our company.
Risk of sales of shares eligible for future sale. Three million ten
thousand shares, or 94%, of our total outstanding shares are restricted from
immediate resale but may be sold into the market in the near future. This could
cause the market price of our common stock to drop significantly, even if our
business is doing well.
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After this offering, we will have outstanding 3,210,000 shares of common
stock. This assumes we will be successful in selling the 200,000 shares we are
selling in this offering. The 200,000 shares in this offering may be resold in
the public market immediately if a market develops. The remaining 94%, or
3,010,000shares, of our total outstanding shares will become available for
resale in the public market as shown in the chart below.
As restrictions on resale end, the market price could drop significantly if the
holders of these restricted shares sell them or are perceived by the market as
intending to sell them.
Number of shares / % of total Date of availability for resale into
outstanding public market
3,010,000 / 94% Between 90 and 365 days after the
date of this prospectus due to the
requirements of the federal securities
laws.
For a more detailed description, see "Shares Eligible for Future Sale" on page
31.
We don't plan to pay dividends. We don't expect to pay dividends on common
stock anytime soon. We expect to use all earnings, and the proceeds from this
offering, to develop our business. Our Board will decide on any future payment
of dividends, depending on our results of operations, financial condition,
capital requirements, and any other relevant factors.
One shareholder is able to affect changes in control. After the offering,
about 63% of our common stock will be owned by our president, William Stutz.
Because our articles of incorporation and the Nevada corporate laws require only
a simple majority vote in favor of any acquisition or merger, Mr. Stutz could
prevent approval of these actions. He could also approve these actions without
any support from any other shareholder.
Business Factors that May Adversely Affect Our Operations.
We have an unproven product line and marketing concept. Our proposed plan
of operations will use an unproven product line and services that may have
limited appeal. Further, while we believe that a demand exists for our products
and services, we have not undertaken any marketing or similar studies that would
confirm that a demand exists. Even if a demand exists, we cannot assure you that
the proposed marketing concept will be effective in identifying and fulfilling
any demand or that we will have profitable operations.
Because we are significantly smaller than the majority of our national or
even local competitors, we may lack the financial resources needed to capture
market share in an amount sufficient for us to be profitable. Based on total
assets and revenues, we are significantly smaller than our potential
competitors. If we compete with them for the same geographic markets, starting
with the Kansas City metropolitan area, their financial strength could prevent
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us from capturing even a small portion of those markets. While we have not been
able to identify any competitors who are specifically engaged in marketing
products and services with a message of enjoyable athletic competition, there
are virtually no barriers to entry into this type of market. If a potential
competitor decides to enter this market, their financial resources would likely
make it difficult to compete, either because of their ability to buy or produce
inventory in bulk or because they can spend more for advertising and marketing.
Unproven management. Our management is not experienced in marketing and
promoting our line of products and services. For the last several years, our
president, William Stutz, has been area director of the greater Kansas City
Fellowship of Christian Athletes. While he has a background in athletics, he has
never managed a company that is engaged in the kind of business that we intend
to pursue. Our other officer, Valerie Stutz, also had some involved in
athletics. But she also has no prior experience in managing a company similar to
ours.
FORWARD LOOKING STATEMENTS
This prospectus contains certain forward-looking statements that are based
on beliefs and assumptions of our management. Often, you can recognize these
statements because we use words such as "believe", "anticipate", "intend",
"estimate" and "expect" in the statements. Our actual performance in 1999 and
beyond could differ materially from the forward-looking statements contained in
this prospectus. However, we are not obligated to release publicly any revisions
to the forward-looking statements contained in this prospectus.
USE OF PROCEEDS
The following table describes the intended use of proceeds of this
offering. Because it is difficult to predict how many shares of this offering
may be sold given the fact that we are attempting to sell the shares ourselves
rather than using the services of an underwriter, the table presents information
that assumes that one-third, two thirds and all of the shares are sold. The
categories of expenditures are also listed in the order of priority, with
purchase of merchandise being the most important category and working capital
the least important category. Accordingly, anywhere between approximately
$66,000 and $200,000 in gross proceeds would be allocated among the intended
uses as follows:
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Percentage of
Shares Sold
In This Offering
----------------
33% 66% 100%
------------------------------------
Description Amount
- ----------- ------
Purchase of Merchandise $ 5,000 $ 5,000 $ 5,000
Production of Videos 10,000 15,000 20,000
Marketing and Promotions 3,500 10,000 20,000
General and Administrative (1) 7,500 43,500 60,000
Expenses of Offering (2) 40,500 40,500 40,500
Working Capital 0 20,000 54,000
-------- -------- --------
Total 66,500 134,000 200,000
(1) Includes officers' salaries, rent, other fixed overhead expenses and
other costs associated with office space we anticipate leasing. Also
includes travel expenses. All of these expenses are associated with
the development and implementation of our proposed plan of operations.
(2) The expenses of the offering are estimated to be $40,500 and include
filing fees, transfer agent fees and expenses, legal fees and expenses
and accounting fees and expenses
If we are successful in raising only a minimal amount of money, the
resulting lack of proceeds will make it unlikely that we will be able to fully
implement our proposed plan of operations. The projected expenditures above are
estimates and approximations only and may change due to changes in our business.
For example, we may determine that funds earmarked for one particular type of
allocation may be more productively spent in another allocated use, based upon
the experience of our management in evaluating our needs over the next twelve
months. Proceeds not immediately used will be invested in bank certificates of
deposit, insured bank deposit accounts or similar investments.
DIVIDEND POLICY
We currently plan to retain any earnings and use them to finance the growth
and development of our business. We also intend to use earnings for working
capital and general corporate purposes. We do not anticipate paying cash
dividends on the common stock for at least the next three years. Any payment of
dividends will be at the discretion of the board of directors and will depend
upon the following factors:
o earnings
o financial condition
o capital requirements
o level of indebtedness
o contractual provisions that might restrict the payment of dividends
o other factors that we cannot currently predict
Persons who desire or need dividend income should not invest in the common
stock.
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DILUTION
The net tangible book value deficiency of our outstanding shares of common
stock as of September 30, 1999 was approximately $(63,540) or $(.021) per share.
"Net tangible book value" per share represents the total amount of our tangible
assets, less the total amount of our liabilities, divided by the number of
shares of common stock outstanding. After giving effect to the sale of 200,000
shares offered at an initial public offering price of $1.00 per share less
estimated costs of the offering, our net tangible book value at September 30,
1999 would have been $122,780 or approximately $0.038 per share. This represents
an immediate increase in net tangible book value of $0.059 per share to existing
shareholders and an immediate dilution of approximately $.962 per share of
common stock to new investors.
The following table illustrates this per share dilution:
Initial public offering price per share $ 1.00
Net tangible book value per share
before the offering $ (.021)
Increase per share attributable to new investors
purchasing this offering $ .059
Net tangible book value per share
after this offering $ .038
Dilution per share to new investors $ .962
The following table sets forth the number of shares of common stock
purchased, the total consideration paid and the average price per share paid by
our existing stockholders as of September 30, 1999 and new investors purchasing
the shares of common stock offered:
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing shareholders ... 3,010,000 93.8% $ 3,010 0.97% $ 0.001
New investors ........... 200,000 6.2% $ 200,000 93.4% $ 1.00
Total .......... 3,210,000 100.0% $ 203,010 100.00%
The above discussion assumes that all 200,000 shares that we are offering
to the public at $1.00 will be sold. However, given the fact that we are
attempting to sell the shares ourselves rather than using the services of an
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underwriter, it is possible that less than 200,000 shares will be sold. If less
than $200,000 in gross proceeds is received by us from the offering, dilution to
new investors who invest in the common sock will be greater than described
above.
OUR BUSINESS
Introduction
We are a sports media and merchandising company that promotes the positive
aspects of athletic competition. Our primary focus is to educate athletes,
coaches, parents and fans on the value of athletics and how to enjoy the art of
playing, coaching and observing the game. While we believe that our concepts are
applicable to all levels of athletics, it is anticipated that the age group that
will benefit the most are the youth sports groups (14 and under),
interscholastic athletics and collegiate programs. We have developed a
philosophy that explains why participants and spectators may appear frustrated
and act inappropriately at athletic contests. The following issues are at the
simple core of our philosophy
o Coaches must make tough decisions.
o Players are not perfect.
o Officials must deal with controversy.
Educational tools that we use to promote our philosophy and advance our theme of
enjoyable athletic competition include:
o Videos
o Apparel
o Specialized merchandise.
Our President, William J. Stutz, also makes live appearances at which he
stresses our philosophy. We also intend to branch out into the production of
various publications to promote our philosophy, including:
o Magazines
o Newsletters
o Brochures
o A multi-sport video
o Instructional materials
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The sale and licensing of our products are expected to provide a
significant portion of our revenues.
While we have less than one year of operating history and have experienced
losses to date, we believe that there will be numerous opportunities in the
future to establish contractual relations with significant customers of our
products and services. Assuming all of the shares of common stock offered by
this prospectus are sold, we anticipate that there will be sufficient proceeds
to meet our current expenses and execute our proposed plan of operations. Our
current cash requirements are not large since our general and administrative
expenses, including salaries and office overhead are strictly within the control
of our management.
We are seeking to develop prospects located beyond the immediate Kansas
City metropolitan area where we are now focused. We do not presently anticipate
any change in the number of employees required to maintain our operations.
However, if our business expands locally, we may employ a part-time
administrative assistant to help process orders. We may also employ a network of
customer service/sales reps if we are successful in expanding our business
beyond the Kansas City metropolitan area. It is anticipated that these customer
service/sales reps would be employed on the basis of a small base salary and an
emphasis on commissions. We do not conduct any research and development
activities at this time. We have no plant and/or equipment requirements and
anticipate no expenditures associated with plant or equipment. There are,
moreover, no plans, arrangements, commitments or understandings for us to
acquire, or be acquired by, any other company or business at this time.
Marketing Strategy and Proposed Plan of Operation
We desire to teach youth the proper mindset for enjoyable and yet
competitive athletic competition. The overall approach to team sports, which we
believe should involve an attitude of cooperative enterprise that strives
towards a common goal, has, unfortunately, been replaced to a large extent with
a more selfish attitude and mindset that inhibits the enjoyment of the team
aspects of athletic competition and discourages participation in team events to
all but the most competitive athletes. The result is that a "what's in it for
me" attitude is becoming more prevalent. It is our belief that a market exists
among coaches, athletic administrators and parents to teach the basics of an
enjoyable team experience. Initially aimed at the sports of basketball and
soccer, we intend to expand our efforts into other teams sports, such as
football, baseball, softball and volleyball. In order to expand our reach and
operations, our goal is to recruit local corporate sponsors who already have in
place marketing programs that attempt to reach junior athletes. In addition, we
will attempt to market all of our products and services to sports organizations
involved in the targeted sports.
Association Marketing Program. We initially intend to market our products
and services to sports organizations related to the sport of basketball. The
lead product is expected to be videos. We are still analyzing which marketing
concept will be most effective, but anticipate that the video will be marketed
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either through endorsement, partnership (alliance), outright purchase of bulk
order or some combination thereof. We have identified the following
organizations which are connected with the sport of basketball and which we
believe would be receptive to the idea of promoting better sportsmanship and
teamwork:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Youth Interscholastic Collegiate Generic
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Amateur Athletic Union National Federation of National Collegiate National Association
State High School Athletic of Basketball
Athletic Association Association Coaches
- ------------------------------------------------------------------------------------------------------
Biddy Basketball National Interscholastic National Association Women's Basketball
Athletic Administrators of Intercollegiate Coaches Association
Association Athletics
- ------------------------------------------------------------------------------------------------------
Upward Basketball Each State's High School National Junior Greater Kansas City
Activities Association College Athletic Basketball Coaches
Association Association
- ------------------------------------------------------------------------------------------------------
Great American Each State's Coaches National Christian Sports Connection
Basketball League Association College Athletic (KC)
(KC) Association
- ------------------------------------------------------------------------------------------------------
Blue Valley National Association Fellowship of
Recreation Center (KC) of Collegiate Christian Athletes
Directors of
Athletics
- ------------------------------------------------------------------------------------------------------
Police Athletic CCA United States
Basketball League (KC) Olympic Committee
- ------------------------------------------------------------------------------------------------------
YMCA 50 Conferences USA Basketball
- ------------------------------------------------------------------------------------------------------
</TABLE>
The above chart represents 7 organizations located in the Kansas City
metropolitan area and an additional 15 national organizations. They range in
size from as few as 50 to 100 participants to several thousand participants
among the large national organizations. Many of these organizations have already
been contacted and it is our expectation that the remainder will be contacted
within three months of the date of this prospectus. For example, both the
Greater Kansas City Basketball Coaches and the Missouri Suburban Conference of
Athletic Directors have voted to endorse and use our products and services. The
Sports Connection has asked our president, William Stutz, to write a column for
their publication and have indicated that they plan on using us as the exclusive
outfitter for their High School Basketball Shoot-out Tournament in Kansas City
in December of 1999, although no contract has been signed. Proposals have also
been submitted to both the Kansas and Missouri State Activities Associations to
use our products or services. Both proposals are currently being reviewed.
However, we cannot offer assurances that any of the proposals we have made to
any organization will be accepted. The primary selling point to youth groups
will be for the organization to see the value of educating their players,
coaches, parents and fans on the positive aspects of team competition and how to
avoid the negative, selfish aspects that have taken over the game. It is
anticipated that the cost of the video would be passed along to the
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organization's participating teams as an inclusion to their registration fees.
The organization, if it so chooses, could also use the video as a source of
independent revenue.
We believe that the main selling point to interscholastic groups is that
our products and services are expected to complement such group's ongoing
sportsmanship and citizenship programs. For example, The National Federation of
State High School Activities Association has a sportsmanship/citizenship program
in place, but it is not aimed at any specific sport (such as basketball) and is
general in nature. In order to successfully market our products and services, we
anticipate that we will eventually need to make presentations to each state
athletic administrators association or their functional equivalent. These state
associations are expected to have a significant impact on the success of our
marketing efforts because of their influence on their member schools.
Stand-alone Marketing Program. Ancillary to our sports association
marketing efforts, a stand-alone approach for our apparel, merchandise and
publications may be developed, although there can be no assurance that such a
program will ever be implemented or, if implemented, become a successful
marketing program. Such a program, if implemented, would be expected to utilize
some form of a national marketing campaign, possibly with a national spokesman.
Our apparel and merchandise, if sold nationally, would most likely be
distributed through direct mail, the Internet and/or selected retail sites, such
as college book stores or specialty/resort shops. We have not yet initiated any
specific efforts in our stand-alone marketing program. We may not do so in the
future if we determine that a program of this nature would be too costly given
our limited financial resources or for other reasons that we cannot foresee or
anticipate.
Products and Services
In order to disseminate and promote our philosophy of sportsmanship and to
achieve our objective of educating the target market of athletes, coaches,
parents, and fans, we intend to focus on producing the following products and
services:
o Videos - Quality video presentations that promoted the Enjoy The Game
philosophy, was the original idea behind our decision to go into business.
Typically, the videos are intended to be sport specific and will include a
"how-to" instructional guide that includes technical and strategic
considerations. Our first video on the sport of basketball was completed in
September of 1998. It was produced by High-Lites Video Productions of
Kansas City, Missouri. The final script took approximately 40 hours to
develop. Each shot was planned and the corresponding dialog created.
Because of this prior planning work, the basketball video footage was
completed in one 8-hour session. Actual players from Penn Valley Community
College were used in the video. We were careful to comply with the all
rules of the National Junior College Athletic Association regarding the
participation of student athletes in the video including the completion and
filing of appropriate paperwork in order not to jeopardize the eligibility
of the student athletes. We also applied for and received prior clearance
from the NCAA to use these players in order to avoid jeopardizing their
possible future eligibility at NCAA member institutions.
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In August 1999, we finished production of our second video that covered the
sport of soccer. We used high school boy and girl athletes after gaining
approval from the National Federation of State High Schools, the Missouri State
High School Association and the local Lee's Summit School District. Using the
experience we gained from the production of our first video on basketball, the
script writing for the soccer video took only half as long as did the basketball
video. The total time to shoot the soccer video was approximately eight hours,
about the same amount of time as the basketball video took to shoot. Using Metro
Sports of Kansas City, Missouri, a subsidiary of CNN, as the video production
company, our production cost for the soccer video was approximately 35% less
than for the basketball video.
We also plan future videos covering Baseball/Softball (Spring 2000) and
Football (Fall 2000) and Volleyball (Fall 2000). Each of our planned videos will
also involve the participation of high school players. We have also received
clearance from the National Federation of State High Schools and the Missouri
State High School Activities Association for these additional videos. Each of
our planned videos is expected to be approximately 12 to 14 minutes in length.
An optional One Way to Play Drug Free message from the Fellowship of Christian
Athletes which lasts approximately 2 to 3 minutes can also be included. Both
girls and boys will be used in the videos whenever possible.
Based upon our prior experience with the soccer video, we now plan to use
Metro Sports of Kansas City, Missouri as our primary production company to
assist us in the production of our future videos. The video sleeves as well as
all of the printed material for our basketball video were designed by Kevin
Wahaus of Kevin and Company of Overland Park, Kansas. We expect that Kevin and
Company will continue to provide such design work in the future. The
reproduction of the basketball video and packaging in the sleeve, were supplied
by UV Media of Denver, Colorado. The minimal initial order of the basketball
video was 1,000 units. The basketball video is currently being marketed at a
price of $20.00. The duplication of the soccer video and the printing of the
video sleeve was done by Audio/visual Graphics in Independence, Missouri at a
cost savings of approximately 20% compared to the basketball video. It is also
being marketed at a price of $20.00. Our planned videos for baseball/softball,
volleyball and football are also expected to be marketed at a price of
approximately $20.00.
o Apparel - A specific Enjoy The Game line of apparel is available.
Currently, this line includes several designs of T-shirts and polo shirts,
and ball caps. The main focus will be to offer products that will fill a
narrow sports market niche that offers a positive message. The EtG line
consists of all positive, upbeat and encouraging messages. We will focus on
the positive aspects of sports, such as teamwork, respect for coaches,
players and officials, as well as the "hard work-have fun" slogan. We
approached Gear for Sports, Inc. Lenexa, KS, early in the planning stages
of our apparel development. Working with artists and sales representatives,
we have initially developed a narrow apparel line with the goal of
establishing a significant volume base of sales in a few specific items.
While Gear for Sports, Inc. is currently the only supplier of our apparel,
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<PAGE>
we believe that alternative or additional sources of supply can be readily
obtained on favorable terms if Gear for Sports, Inc. ceases to be a
supplier or if volume requirements dictate the use of additional suppliers.
We have produced 4 styles of T-shirts so far. Two (one white and the other
gray), have the large Enjoy The Game mark placed on the center front. The other
two are a front and back design. Of these two, one is specifically directed
towards basketball, the other has the EtG slogan, "work hard-have fun" in an
oval design on the back of each shirt. The T-shirts are available in medium,
large, extra-large and double extra large sizes.
The EtG polo shirts have the Enjoy The Game mark embroidered on the left
chest. The shirts are available in red with white lettering, white with red
lettering, navy with gold lettering and black with red lettering. The designs
and colors were kept simple for broad appeal during the initial offering. The
polo shirts are available in medium, large, extra-large and double extra large
sizes.
The ball caps are white with a navy bill. They have the Enjoy The Game mark
on the front in red lettering. On the back in a semi-circle is our slogan "work
hard-have fun" in red lettering. Each ball cap has an adjustable back so one
size fits all.
The initial order in October 1998 for the T-shirts and ball caps was for 98
and 72 respectively, the minimum required by Gear for Sports, Inc. Since then,
we have reordered a shipment of both the white and gray styles. Full allotments
of the polo shirts were ordered initially in October, 1998, primarily because we
believe that polo shirts will never go out of style and because we were able to
obtain a better price as a result of a full allotment order. Since then, we have
reordered a half allotment of each color.
As of the date of this prospectus, we have paid for all of our shipments on
the date of delivery. However, it is anticipated that if we increase our orders,
of which there is no assurance, we will be able to negotiate terms of 30 or 60
days for payment.
o Merchandise - Specific Enjoy The Game merchandise is available. Currently
merchandise includes banners and water bottles. The banners are created by
House of Signs in Blue Spring, Missouri. Presently, a 4 by 6-foot white
vinyl banner with the red Enjoy The Game mark is offered in two styles. One
style has four grommets along the top and bottom; the other has a rope
stitched along the top and the bottom. The initial order for banners was a
quantity of four in October 1998. Since then 14 additional banners have
been ordered, seven of each style. We are currently selling the banners at
a price of $300.00. The water bottles are 32oz. white plastic with a
pull-up blue top. They have the red Enjoy The Game mark on one side as well
as the slogan, "work hard-have fun" in blue on the reverse side. An initial
order of 300 was placed in October 1998. We currently sell the water
bottles at a price of $3.00. We are also assessing the possibility of
introducing additional items such as key chains and game boards and
posters, although no firm decisions have been made with respect to any of
these items.
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<PAGE>
o Live Appearances - A live presentation has been developed and is delivered
by our president and founder, William J. Stutz. Mr. Stutz's presentation
adds impact to the commitment of our philosophy as he shares his love for
people and sports. In his presentation, Mr. Stutz incorporates his years of
playing sports at the youth, high school, junior college and NCAA Division
II levels, as well as the summer he spent playing basketball in Panama and
Brazil. We believe that Mr. Stutz relates well to coaches because he spent
two years as a high school and junior college assistant coach.
Additionally, over the past 13 years Mr. Stutz has officiated high school
and college basketball games, including the 1998 National Junior College
Division II Men's Basketball Championship. Mr. Stutz includes in his
presentation the fact that he has three sons and a daughter and has sat in
the stands and watched them play sports. Mr. Stutz has also coached youth
basketball since 1996.
Recently, we reached an oral agreement with Darrell Porter, a former member
of the Kansas City Royals baseball team and the 1982 World Series Most Valuable
Player, under which Mr. Porter has agreed to make live appearances and
presentations on our behalf. Under the terms of the agreement, Mr. Porter
Darrell will receive 75% of any appearance fee plus 25% of any profits from
merchandise sold and or ordered at his appearance. All of his travel and lodging
expenses would be paid for by the organization requesting his appearance. We may
enter into written agreements with Mr. Porter on a per appearance basis but have
not done so as of the date of this prospectus. In addition, we also reached an
oral agreement with Tony Guy, a former McDonald's High School Basketball
All-American from the Baltimore, Md area on similar terms as Mr. Porter. Mr. Guy
played college basketball for four years at the University of Kansas and was a
Pre-Season All-American and an Academic All-American. We anticipate that we will
also seek to increase the number of available speakers with the ultimate goal of
establishing a full-service speakers bureau. However, we cannot assure you that
a speakers bureau will ever be established or, if established, will be
profitable to us.
o Publications - In addition to our videos, merchandise and live
presentations, we are currently evaluating whether it would be feasible to
produce various publications to promote our philosophy. The types of
publications currently under evaluation include magazines, newsletters,
brochures and a full educational curriculum package for elementary schools
that incorporates a multi-sport video, as well as instructional materials.
Factors which we are currently evaluating include
o the cost of production and distribution of these publications
o the potential market for these materials
o the profit margins, if any, we might be expected to realize
o our management capability to fully develop and implement
publications as an additional product line
We have not made any decision regarding the feasibility of producing our
own publications.
Trademarks
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We have obtained trademark protection from the United States Patent Office
for both "Enjoy the Game" and the slogan "Work Hard - Have Fun" We use one or
the other of these trademarks on virtually every item of merchandise or apparel
that we sell. We have not obtained any other trademarks and have no patents,
licenses, franchises, concessions or royalty agreements involving any of our
products or services.
Competition
We believes that the industry within which we compete is highly fragmented
and comprised of numerous companies, many of whom are larger and have more
resources than us. On the other hand, we also believe we can overcome our
competitive disadvantages which are based upon our lack of size and financial
resources by emphasizing our unique message and by seeking to align ourselves
with corporate sponsors and other organizations who share our philosophy. As of
the date of this prospectus we have approached Ford, Hallmark, McDonalds and
Sprint concerning the possibility of acting as a corporate sponsor. While these
particular companies declined to sponsor our activities, we are continuing our
efforts to find sponsorships and intend to contact other national businesses,
including other fast food chains, insurance companies and banks.
Substantially all of our competitors have, and potential future competitors
could have, substantially greater financial, marketing and other resources than
do we. They also have, or could have, greater name recognition and market
acceptance of their products and services. We can give no assurance that our
competitors will not develop new products and services or enhancements to
existing products and services that will offer superior price or performance
features. In such case, we may experience significant price competition, which
could have a material adverse effect on our gross margins.
Regulation
Our business is not regulated by any governmental agency and approval from
any governmental agency is not required for us to market or sell our products.
However, many of the youth organizations and virtually all of the high schools
and colleges to whom we intend to market our products and services are regulated
to some extent by governing boards or bodies which oversee the activities of
their member teams or schools. The National Collegiate Athletic Association
(NCAA) is an example of such an organization. Although regulation by these
entities can take different forms, the primary means by which they can control
the activities of their teams or individual participants is in the area of
eligibility. We have been extremely careful not to approach any teams or
individual members of teams to work with us, purchase our merchandise or
services or otherwise become involved with us without first clearing these
approaches with the appropriate sanctioning body. Moreover, our marketing
strategy has been to approach the sanctioning body first precisely because of
their ability to influence their member institutions. By becoming informed of
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<PAGE>
our concept and what we have to offer, it is our expectation that these
governing bodies might enhance our ability to market our products directly to
their member institutions or teams.
Facilities
Our offices are presently located in the Kansas City metropolitan area at
the home of our president, William J. Stutz. Mr. Stutz does not charge us rent
for the use of this space and has no plans to do so in the future. We anticipate
that it may eventually become necessary to obtain suitable office space in the
Kansas City area after this offering if our planned activities expand to the
point where our present space becomes inadequate. If we determine that new
office space is desirable, we do not anticipate any difficulties in obtaining
new space.
Employees
We presently have two employees, William J. Stutz and Valerie M. Stutz.
Other than the possibility of hiring a part time administrative assistant, we
have no present plans to hire additional personnel following completion of the
offering.
Legal Proceedings
It is possible that we may be subject, from time to time, to various legal
proceedings concerning claims stemming from our business. We are not a party to
any pending or threatened legal proceedings, nor have we been advised that any
such proceedings are contemplated.
Year 2000 Issue
We are aware of the issues associated with the programming code in existing
computer systems as the year 2000 approaches. The "Year 2000" problem is
concerned with whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. The Year 2000 problem is pervasive and complex since virtually every
company's computer operation will be affected in some way. We have not incurred
any costs in solving Year 2000 problems nor do we anticipate significant future
costs associated with "Year 2000" compliance.
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<PAGE>
We depend on information contained primarily is electronic format in
databases and computer systems maintained by us and third parties with whom we
deal. The disruption of third-party systems or our systems interacting with
these third-party systems could prevent us from processing transactions and
ordering products and could materially adversely affect our business and results
of operations.
We have completed an audit of our internal systems and believe these
systems are Year 2000 compliant. We do not rely on any non-compliant third party
software and therefore third party non-compliance will not materially adversely
affect our business operations. We have upgraded our software and hardware to
the latest year 2000 compliant platform and tested our software in the new
platform. In case our computerized information system fails, we will rely on our
manual information system, which is comprised of original hand written or typed
records, to process our transactions such as accounts receivable, accounts
payable, delivery schedules and invoicing. The manual system will be very time
consuming and labor intensive, therefore, additional staff might be required if
we have to use the manual system in the worst case scenario. We believe that
additional staff can be hired and trained within a reasonable time frame to meet
our requirements in case our information system failed.
OUR MANAGEMENT
Officers and Directors
Information concerning each of our executive officers and directors is set
forth below:
Name Age Position
---- --- --------
William J. Stutz 39 President, Treasurer,
Director
Valerie M. Stutz 38 Secretary, Director
Our directors are elected to hold office until the next annual meeting of
shareholders and until their respective successors have been elected and
qualified. Our officers are elected by the Board of Directors and hold office
until their successors are elected and qualified.
We have no audit or compensation committee.
William J. Stutz. Mr. Stutz has been President, Treasurer and a Director of
our company since 1998. Mr. Stutz was born and raised in Buffalo, NY. Mr. Stutz
lettered in three sports, golf, basketball and baseball as both a junior and a
senior at Baker-Victory High School in Lackawanna, NY. He received a basketball
scholarship to attend Villa Maria College of Buffalo, NY. While there he set new
basketball single season and career records for most field goals and points
scored. He received an Associates Degree in Graphic Communications. In 1980, he
continued his education, on another basketball scholarship, at Slippery Rock
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State College of Pennsylvania. At Slippery Rock, he finished his last two years
of college basketball and played baseball during his senior year only. By the
conclusion of his college career in 1982, Mr. Stutz was a few credits short of
obtaining a Bachelor of Science Degree in Communication with an emphasis in
Public Relations.
The pursuit of playing professional basketball took him to Panama and
Brazil. After receiving a contract to play in Brazil, the contract fell through
and he began working for Household Finance in October 1982. From 1984 until 1992
he served in various junior management positions with the J C Penney Company in
its catalog division, serving the last two years as a Quality Circle
Facilitator. In 1990, the Kansas City Chapter for the Fellowship of Christian
Athletes ("FCA") recognized Mr. Stutz as its Volunteer of the Year. In September
1992, Mr. Stutz joined FCA as the Kansas City Area Director. He stayed in that
position until May of 1999. Under his direction the FCA saw significant growth,
both in funding and in the FCA School Huddle Program. School Huddles, are
positive peer support groups for students that meet regularly on the campuses of
the schools and are based on Biblical principles. These groups are supported by
and receive resources from the FCA in their local area. School Huddles grew from
34 to 110; staff grew from 2 to 9 and the operating account balance went from
$5,000 in 1992 to $600,000 when he resigned.
Valerie M. Stutz has been Secretary and a Director of our company since
1998. She received her Bachelor of Science degree from Slippery Rock State
College in 1982. While attending Slippery Rock, Mrs. Stutz was a cheerleader and
she competed in judo. Her junior year she received a silver medal and her senior
year a bronze medal from the East Coast Judo Association for her achievements in
its National Tournament. For the past 12 years she has spent the bulk of her
time raising her 4 children. She also teaches preschool, at Small Wonders in
Independence, Missouri three mornings a week. In April of 1999, Mrs. Stutz
became a certified Court Appointed Special Advocate, (CASA) for Jackson County,
Missouri. She has had no business experience for the last five years.
Willaim J. Stutz and Valerie M. Stutz are husband and wife.
Executive Compensation
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid to our chief executive officer since our inception. There were
no stock appreciation rights outstanding during the fiscal year ended December
31, 1998, nor are there any rights outstanding as of the date of this
prospectus.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Securities Long-Term
Underlying Incentive All Other
Name and Principal Fiscal Salary Bonus Other Annual Options Payouts Compensation
Position Year ($) ($) Compensation (#) ($) ($)
-------- ---- --- --- ------------ --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
William J. Stutz...... 1998 0 0 0 0 0 0
President
Valerie M. Stutz...... 1998 0 0 0 0 0 0
Secretary
- --------------------
* Not applicable
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</TABLE>
<PAGE>
Employment Agreements
There are no employment agreements with any of our officers or directors.
Mr. Stutz and Mrs. Stutz intend to receive annual salaries of $48,000 and $ 0
upon completion of this offering if we are successful in selling all shares.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this prospectus, the
ownership of the our common stock by (a) each of our directors, (b) all of our
executive officers and directors as a group, and (c) all persons known by us to
own more than 5% of our common stock. The percentage owned after the offering
assumes that all of the offered common stock will be sold.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to Offering After Offering
--------------------- --------------
Name and Address (1) Shares Percentage Shares Percentage
- -------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
William J. Stutz and
Valerie M. Stutz 2,010,000 66.8% 2,010,000 62.6%
1008 S.W. Mic-O-Say Circle
Blue Springs, Mo. 64015
David M. Nemelka 500,000 16.6% 500,000 15.6%
897 So. Artistic Circle
Springville, Utah 84663
Covest, Inc. (2) 250,000 8.3% 250,000 7.8%
11011 King Street
Overland Park, Kansas 66210
Ivacind, Inc. (3) 250,000 8.3% 250,000 7.8%
4001 W. 104th Terrace
Overland Park, Kansas 66207
All directors and executive officers
as a Group (2) persons 2,010,000 66.8% 2,010,000 62.6%
- -----------------------------
</TABLE>
(1) The address of each executive officer and director of the Company is 1008
S.W. Mic-O-Say Circle, Blue Springs, Missouri 64015.
(2) Covest, Inc. is controlled by David C. Owen.
(3) Ivacind, Inc. is controlled by Peterson & Sons Holding Company, which in
turn is controlled by Mark Peterson and Steve Peterson.
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CERTAIN TRANSACTIONS
Our corporate offices are located at the personal residence of William J.
Stutz and Valerie M. Stutz. Under an oral agreement we have with Mr. and Mrs.
Stutz, we pay no rent for the use of this office space.
On August 29, 1998 we issued 2,000,000 shares of our restricted common
stock to William J. Stutz for a total cash consideration of $2,000.
On March 28, 1999 we issued 5,000 shares of our restricted common stock to
William J. Stutz in exchange for 5,000 shares of the common stock of Enjoy The
Game, Inc., a Missouri corporation. At the same time, we also issued 5,000
shares of our restricted common stock to Valerie M. Stutz in exchange for 5,000
share of the common stock of Enjoy The Game, Inc. As a result of these
transactions, Enjoy The Game, Inc. became our wholly owned subsidiary.
On March 13, 1996 we issued 1,000,000 shares of our restricted common stock
to David N. Nemelka for a total cash consideration of $1,000.
DESCRIPTION OF COMMON STOCK
General
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We are authorized to issue 50,000,000 shares of $0.001 par value common
stock and 5,000,000 shares $0.001 par value preferred stock.
Common Stock
As of the date of this prospectus, there were 3,010,000 shares of common
stock outstanding held by five (5) shareholders.
Holders of common stock are entitled to one vote per share in all matters
to be voted on by the shareholders. Except for any priority in the payment of
dividends which may be granted to the holders of preferred stock, holders of
common stock are entitled to receive on a per share basis any dividends that may
be legally declared from time to time by our Board of Directors. If we were to
liquidate, dissolve or wind up our affairs, holders of common stock would be
entitled to share ratably in all assets remaining after payment of our
liabilities and the liquidation preference, if any, of any outstanding preferred
stock. All of our issued and outstanding shares of common stock are fully paid
and non-assessable. The rights, preferences and privileges of common stock
holders are subject to the rights of the holders of preferred stock even if the
preferred stock is issued after your common stock.
Preferred Stock
The Board of Directors has the authority, without any further vote or
action by the shareholders, to issue up to 5,000,000 shares of preferred stock
from time to time on those terms that the Board of Directors may determine.
Although it is not possible to state what effect, if any, issuance of preferred
stock might have on the rights of common stockholders, the issuance of preferred
stock may have one or more of the following effects:
o to restrict common stock dividends if preferred stock dividends have not
been paid
o to dilute the voting power and equity interest of holders of common stock
to the extent that any preferred stock has voting rights or is convertible
into common stock
o to prevent current holders of common stock from participating in our assets
if we were to liquidate until the preferred stockholders have been paid.
The issuance of any shares of preferred stock having rights superior to
those of common stock may result in a decrease of the value or market price of
the common stock. The issuance of preferred stock could also be used by the
Board of Directors as a device to prevent a change in our control. There are no
shares of preferred stock presently outstanding and the Board of Directors does
not presently intend to issue any shares of preferred stock.
No Preemptive Rights
Holders of common stock do not have any preemptive right to subscribe for
or purchase any class of our securities nor do they have any redemption or
conversion rights.
No Cumulative Voting
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Common stock shareholders do not have the right to cumulate his or her
votes in an election of directors or for any other matter or matters to be voted
upon by our shareholders.
Certain Provisions of the Nevada General Corporation Law
As a Nevada corporation, we are subject to the Nevada General Corporation
Law. Under certain circumstances, the following provisions of the Nevada Law may
delay or make more difficult acquisitions or changes in our control. These
provisions may make it more difficult to accomplish transactions that our
shareholders may believe to be in their best interests. These provisions may
also have the effect of preventing changes in our management.
Control Share Acquisitions.
Under Sections 78.378 to 78.3793 of Nevada Law, an acquiring person who
acquires a controlling interest in our shares may not exercise voting rights on
any of these shares unless these voting rights are granted by a majority vote of
the our disinterested shareholders at a special meeting of the our shareholders
held upon the request and at the expense of the acquiring person. If the control
shares have full voting rights and the acquiring person acquires control shares
with a majority or more of all the voting power, any shareholder, other than the
acquiring person, who does not vote for authorizing voting rights for the
control shares, is entitled to demand payment for the fair value of their
shares, and we must comply with the demand. An "acquiring person" means any
person who, individually or acting with others, acquires or offers to acquire,
directly or indirectly, a controlling interest in our shares. "Controlling
interest" means the ownership of our outstanding voting shares sufficient to
enable the acquiring person, individually or acting with others, directly or
indirectly, to exercise
o one-fifth or more but less than
o one-third one-third or more but less than a majority, or
o a majority or more of the voting power
of our shares in the election of our directors. Voting rights must be given by a
majority of our disinterested shareholders as each threshold is reached or
exceeded. "Control Shares" means our outstanding voting shares that an acquiring
person acquires or offers to acquire in an acquisition or within 90 days
immediately preceding the date when the acquiring person becomes an acquiring
person. The Nevada Law applies to any corporation that is organized in Nevada,
has 200 or more shareholders (at least 100 of whom are shareholders of record
and residents of Nevada) and does business in Nevada directly or through an
affiliated corporation. It does not apply if our articles of incorporation or
by-laws in effect on the 10th day following the acquisition of a controlling
interest by an acquiring person provide that these provisions do not apply. Our
Amended Articles of Incorporation and Bylaws do not exclude us from the
restrictions imposed by these provisions.
Certain Business Combinations.
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Sections 78.411 to 78.444 of the Nevada Law restrict our ability to engage
in any combination with an "interested shareholder" for three years after the
interested shareholder acquired the shares that cause him to become an
interested shareholder unless he had prior approval of our Board of Directors.
If the combination did not have such prior approved, the interested shareholder
may proceed after the three-year period only if such shareholder receives
approval from a majority of our disinterested shares or the offer is fairly
priced. For the above provisions, "resident domestic corporation" means a Nevada
corporation that has 200 or more shareholders. An "interested shareholder" is
someone who is (i) the beneficial owner, directly or indirectly, of 10% or more
of the voting power of our outstanding voting shares or (ii) our affiliate or
associate and who within three years immediately before the date in question,
was the beneficial owner, directly or indirectly, of 10% or more of the voting
power of our outstanding shares at that time. This does not apply to
corporations that so elect in a charter amendment approved by a majority of the
disinterested shares. Such a charter amendment, however, would not become
effective for 18 months after its passage and would apply only to stock
acquisitions occurring after its effective date. Our Amended Articles of
Incorporation do not exclude us from the restrictions imposed by such
provisions.
Directors' Duties.
Section 78.138 of the Nevada Law allows our directors and officers, in
exercising their powers to further our interests, to consider the interests of
our employees, suppliers, creditors and customers. They can also consider the
economy of the state and the nation; the interests of the community and of
society and our long-term and short-term interests and shareholders, including
the possibility that these interests may be best served by our continued
independence. Our directors may resist a change or potential change in control
if they, by a majority vote of a quorum, determine that the change or potential
change is opposed to or not in our best interest. Our Board of Directors may
consider these interests or have reasonable grounds to believe that, within a
reasonable time, any debt which might be created as a result of the change in
control would cause (i) our assets to be less than our liabilities, (ii) render
us insolvent or (iii) cause us to file for bankruptcy protection.
Advance Notice for Raising Business or Making Nominations at Meetings.
Our Amended Articles of Incorporation establish an advance notice procedure
for shareholder proposals to be brought before a meeting of our shareholders and
for nominations by shareholders of candidates for election as directors at an
annual meeting or a special meeting at which directors are to be elected. Such
business may only be conducted at a meeting of shareholders when it has been
brought before the meeting by either our Board of Directors or by a shareholder
who has given our Secretary timely notice, in proper form, of the shareholder's
intention to bring the business before the meeting. The presiding officer at the
meeting has the authority to make a determination concerning whether proper
procedures have been followed. Only persons who are nominated by our Board of
26
<PAGE>
Directors, or who are nominated by a shareholder who has given timely written
notice, in proper form, to the Secretary prior to a meeting at which directors
are to be elected will be eligible for election as our director.
To be timely, notice of nominations before an annual meeting must be
received by our Secretary no less than 90 days prior to the meeting. Notice of
other business before an annual meeting must be received by our Secretary not
less than 20 days nor more than 50 days prior to the meeting. Similarly, notice
of nominations or other business to be brought before a special meeting must be
delivered to our Secretary at our principal executive office no later than the
close of business on the 10th day following the day on which notice of the date
of a special meeting of shareholders was given.
The notice of any nomination for election as a director must set forth
o the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated
o a representation that the shareholder is a holder of our record stock
entitled to vote at the meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in
the notice
o a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming
such person or persons) by which the nomination or nominations are to
be made by the shareholder
o any other information regarding each nominee proposed by the
shareholder that would be required to be included in a proxy statement
filed under the proxy rules of the Commission, if the nominee had been
nominated, or intended to be nominated, by the Board of Directors; and
o the consent of each nominee to serve as our director if so elected.
The notice of other business to be brought before the annual meeting must
state
o a brief description of the business proposed to be brought before the
annual meeting and the reasons for conducting such business at the
annual meeting
o the name and address, as they appear on our books, of the shareholder
proposing such business
o the number of our shares which are beneficially owned by the
shareholder; and
o any material interest of the shareholder in such business.
Amendments to Bylaws.
Our Amended Articles of Incorporation provide that the power to adopt,
alter, amend, or repeal our bylaws is vested exclusively with the Board of
Directors.
Limitation of Liability and Indemnification
Our Amended Articles of Incorporation contain a provision permitted under
the Nevada Law concerning the liability of directors. This provision eliminates
a director's personal liability for monetary damages resulting from a breach of
27
<PAGE>
fiduciary duty, except when a breach of a director's duty of loyalty or acts or
omissions that involve intentional misconduct or a knowing violation of law are
involved. This provision does not limit or eliminate our rights or the rights of
any shareholder to seek non-monetary relief, such as an injunction or
rescission, if there is a breach of a director's fiduciary duty. This provision
will not change a director's liability under federal securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
is permitted to our directors, officers or persons controlling us pursuant to
the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is therefore unenforceable.
Transfer Agent and Registrar
Before the effective date of this offering, we intend to engage Interwest
Transfer Company, Inc. of Salt Lake City, Utah, as the transfer agent and
registrar of the common stock.
TERMS OF THE OFFERING
Plan of Distribution
We are offering to sell up to 200,000 shares of our common stock at a
purchase price of $1.00 per share. The common stock is being offered by our
officers and directors on a "direct participation" basis. This means that no
underwriter will be involved to assist us in our sales efforts. The employees,
officers and directors who will sell the offering on our behalf are William J.
Stutz and Valerie M. Stutz. These individuals will be relying on the safe harbor
in Rule 3a4-1 under the Securities Exchange Act of 1934 to sell our securities.
The principal shareholders will supply names of prospective investors to our
management, none of whom shall have been offered shares of common stock prior to
the date of this prospectus. We do not intend to offer the shares of common
stock by means of general advertising or solicitation. No sales commission,
finder's fee or other compensation (other than the normal salaries paid to our
management) will be paid for common stock that we sell. We reserve the right to
withdraw, cancel or reject any offer to purchase our stock. The common stock
will not be sold to our insiders, control persons, or affiliates. There are no
plans, proposals, arrangements or understandings with any potential sales agent
with respect to participating in the distribution of our securities. If at some
point in the future such participation develops, the registration statement will
be amended to identify those persons.
28
<PAGE>
Lack of a Public Market.
Before the offering, there has been no established trading market for the
common stock. Even if a public market were to be created or maintained, brokers
or dealers who make a market in or otherwise trade in the common stock would be
subject to certain requirements when trading our stock because our stock would
be considered to be a "penny stock". For example, Rule 15g-9 under the
Securities Exchange Act of 1934 imposes additional sales practice requirements
upon brokers-dealers who sell "penny stocks" to persons other than established
customers and institutional accredited investors. For transactions under this
rule, a broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to the sale. The Securities and Exchange Commission defines a "penny
stock" to be any non-Nasdaq Stock Market equity security that has a market price
of less than $5.00 per share, subject to certain exceptions. For any transaction
by broker-dealers involving a penny stock, unless exempt, the rules of the
Commission require delivery, prior to a transaction in penny stock, of a risk
disclosure document relating to the penny stock market, together with other
requirements and restrictions. The market liquidity of our stock could be
severely adversely affected.
In addition, the National Association of Securities Dealers, Inc. has
adopted a series of changes pertaining to the OTC Bulletin Board and the OTC
market. Generally stated, these changes:
o allow only those companies that report their current financial
information to the Commission, banking, or insurance regulators
to be quoted on the OTC Bulletin Board;
o require brokers, before they recommend a transaction involving an
OTC security, to review current financial statements on the
company they are recommending; and,
o prior to the initial purchase of an OTC security, require that
every investor receive a standard disclosure statement (prepared
by the NASD) emphasizing the differences between OTC securities
and other market-listed securities.
The NASD is also considering the adoption of additional changes, such as
seeking the authority for the NASD to halt trading of securities on the OTC
Bulletin Board under certain circumstances. We cannot predict the likelihood of
these proposed changes being approved by the Commission in their current form or
the adoption of any additional changes by the NASD.
In addition, in order to create a market in our common stock that would
trade on the OTC Electronic Bulletin Board, we would need to recruit an NASD
member broker-dealer to act as a market maker. Although we have identified some
potential market makers, we have not entered into any negotiations or
arrangements with any broker-dealer to act as a market maker. Even if such a
29
<PAGE>
public market were to develop, the vagaries of the stock market are such that
there may be significant price and volume fluctuations that may or may not be
related to our operating performance.
We have not applied for a trading symbol under which our stock would trade.
It is anticipated that we would apply for such a trading symbol once we have
identified a market maker who would make a market in our stock.
Determination of Offering Price.
We arbitrarily determined the offering price and other terms of the common
stock after considering the following factors:
o the amount of proceeds required to initiate our business plan and
marketing strategy
o our lack of revenues estimates of future revenues
o our management capability our plans for future growth
o the general condition of the securities markets
o the amount of retained equity to the present shareholders.
Prospective investors should not assume that the offering price of the
common stock necessarily reflects the actual value of the common stock.
No Minimum Investment
There is no minimum investment that any investor must make in this
offering. Further, there is no minimum amount of stock that must be sold in
order for this offering to go forward. All funds received by us from the sale of
the common stock offered by this prospectus will be deposited immediately into
our operating account and used in our operations.
Offering Procedure.
This offering will terminate on or before__________, 2000. In our sole
discretion, the offering of common stock may be extended from time to time but
in no event later than one (1) year from the date of this prospectus. Factors we
would consider in deciding whether to extend the offering would include:
o the likelihood that additional common stock could be sold based
upon our past experience with this offering
o the availability of alternative sources of financing
o our continued capital needs
o the reception our common stock has received in the financial and
investment communities
o our business results
30
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
In General
Once the offering is complete, we will have a total of 3,210,000 shares of
common stock outstanding, assuming we are able to sell all shares of common
stock offered by this prospectus. Of these shares of common stock, all shares
from the offering will be freely tradable without restriction or further
registration under the Securities Act, except that any shares held by our
"affiliates," as that term is defined in Rule 144 of the Act, may generally be
sold only in compliance with the limitations of Rule 144 described below.
Sales of Restricted Shares
In general. The remaining 3,010,000 shares of common stock are "restricted
securities" as defined in Rule 144. Restricted securities may be sold in the
public market only if they are registered or if they qualify for an exemption
from registration under the Securities Act. Subject to the volume limitations
described below, all but 10,000 of these restricted shares may be sold beginning
90 days from the date of this prospectus
Who can sell.
In general. Under Rule 144 a person (or persons whose shares are
aggregated), including an affilitate, who has beneficially owned shares for at
least one year can sell, within any three-month period beginning 90 days after
the date of this prospectus, a number of shares of common stock that does not
exceed the greater of:
(a) 1% of the then outstanding shares of common stock (about 32,100 shares
immediately after the offering); or
(b) the average weekly trading volume in the common stock during the four
calendar weeks before notice of the Rule 144 sale is filed, subject to
a few restrictions described in Rule 144.
No volume limits. In addition, any person who has not been our affiliate at
any time during the 90 days before a sale and who has beneficially owned the
shares he or she desires to sell for at least two years may sell those shares
under Rule 144(k) and not be concerned with the volume limits described above.
Effect of Sales of Shares. Before the offering, there has been no public
market for the common stock. No precise prediction can be made as to whether a
market will be created or sustained after the offering. Therefore, we cannot
predict what precise effect sales of restricted stock may have on the market
price of the common stock. Nevertheless, sale of substantial amounts of common
31
<PAGE>
stock in the public market could adversely affect market prices. Sales of
restricted stock could also impair our future ability to raise capital through
the sale of our equity securities.
LITIGATION
We are not a party to any pending or threatened legal proceedings.
LEGAL MATTERS
We are being advised on the legality of issuing the common stock offered by
this prospectus by Allen G. Reeves, P.C., Denver, Colorado.
EXPERTS
Our financial statements as of December 31, 1998, and for each of the years
in the two year period ended December 31, 1998, included in this prospectus and
elsewhere in the registration statement, have been included in reliance on the
report of Cordovano and Harvey, P.C., our independent certified public
accountants, appearing on page F-1, and upon the authority of that firm as
experts in accounting and auditing.
The report of Cordovano and Harvey, P.C. covering the year ended December
31, 1998 financial statements contains an explanatory paragraph that states that
we have suffered recurring losses from operations and have limited capital
resources which raise substantial doubt about the our ability to continue as a
going concern. The financial statements do not include any adjustments that
might result if that uncertainty is resolved.
ADDITIONAL INFORMATION
We have filed our Form SB-2 registration statement with the SEC. This
prospectus does not contain all of the information set forth in the registration
statement. You'll find additional information about us and our common stock in
the registration statement. For example, in this prospectus we've summarized or
referred to some contracts, agreements, and other documents that have been filed
as exhibits to the registration statement. The registration statement, including
its exhibits and schedules, may be inspected without charge at the SEC's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
may be obtained from that office, if you pay the applicable fees. The
registration statement, including its exhibits and schedules, are also available
on the SEC's website at www.sec.gov.
32
<PAGE>
We have to comply with the information requirements of the Securities
Exchange Act of 1934, and will file reports, proxy statements, and other
information with the SEC. These materials can be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.
Washington, D.C. 20549, or at its regional offices at 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of these materials can be obtained from the SEC's
Public Reference Section at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. Some information about us is also available on the SEC's
website at www.sec.gov.
We intend to furnish our shareholders, after the close of each calendar
year, with an annual report that describes our business and contains audited
financial statements that have been examined and reported upon by an independent
certified public accountant. In addition, we may from time to time furnish our
shareholders with other reports that we believe will help keep them informed
about our business.
33
<PAGE>
EtG CORPORATION
(A Development Stage Company)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent auditors' report............................................. F-2
Consolidated balance sheets, September 30, 1999 (unaudited) and
December 31, 1998...................................................... F-3
Consolidated statements of operations, for the nine months ended
September 30, 1999 and 1998 (unaudited), for the years
ended December 31, 1998 and 1997, and for the
period from March 13, 1996 (inception) through
September 30, 1999 (unaudited)......................................... F-4
Consolidated statement of shareholders' deficit, from March 13, 1996
(inception) through September 30, 1999 (unaudited) ................... F-5
Consolidated statements of cash flows, for the nine months ended
September 30, 1999 and 1998 (unaudited), for the years
ended December 31, 1998 and 1997, and for the
period from March 13, 1996 (inception) through
September 30, 1999 (unaudited)......................................... F-6
Notes to consolidated financial statements............................... F-7
F-1
<PAGE>
To the Board of Directors and Shareholders
EtG Corporation and subsidiary
Independent Auditors' Report
We have audited the accompanying consolidated balance sheet of EtG Corporation
and subsidiary (the "Company") as of December 31, 1998, and the related
consolidated statements of operations, shareholders' deficit, and cash flows for
each of the years in the two year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of EtG Corporation and
subsidiary as of December 31, 1998, and the results of their operations and
their cash flows for each of the years in the two year period ended December 31,
1998, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note A to the
consolidated financial statements, the Company has a lack of operating history,
limited capital and working capital, and an unproven business concept at
December 31, 1998. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans regarding those
matters also are described in Note A. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
We express no opinion on the consolidated interim financial information,
presented herein, as of September 30, 1999 and for the nine months ended
September 30, 1999 and 1998.
Cordovano and Harvey, P.C.
Denver, Colorado
August 17, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
EtG CORPORATION
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
--------- -----------
(unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash ..................................................... $ 30,223 $ 14,036
Accounts receivable ...................................... 2,598 --
Merchandise inventory, at lower of cost or market ........ 23,473 15,227
--------- ---------
TOTAL CURRENT ASSETS 56,294 29,263
EQUIPMENT, AT COST, net of accumulated
depreciation of $872 and $88, respectively ............... 2,266 3,050
INTANGIBLE ASSETS
Trademark, net of accumulated amortization
of $416 and $49, respectively (Note C) ................. 1,050 1,417
OTHER ASSETS
Deferred offering costs (Note F) ......................... 26,820 --
--------- ---------
$ 86,430 $ 33,730
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses .................... $ 14,839 $ 50
Notes payable, convertible into subsidiary
common stock (Note D) .................................. 40,000 30,000
Other notes payable (Note D) ............................. 61,500 10,000
Accrued interest on notes payable ........................ 5,761 1,705
--------- ---------
TOTAL CURRENT LIABILITIES 122,100 41,755
--------- ---------
SHAREHOLDERS' DEFICIT (NOTE F)
Preferred stock, $0.001 par value, 5,000,000 shares
authorized, -0- and -0- shares issued and
outstanding, respectively............................... -- --
Common stock, $0.001 par value, 50,000,000 shares
authorized, 3,010,000 and 3,000,000 shares
issued and outstanding, respectively ................... 3,010 3,000
Additional paidin capital ................................ 11,690 4,900
Deficit accumulated during the development stage ......... (50,370) (15,925)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT (35,670) (8,025)
--------- ---------
$ 86,430 $ 33,730
========= =========
See accompanying notes to consolidated financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EtG CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended For the Years Ended Through March 13, 1996
September 30, December 31, (inception)
------------------------- -------------------------- September 30,
1999 1998 1998 1997 1999
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES ......................................... $ 7,223 $ -- 917 $ -- $ 8,140
COST OF REVENUES ................................. 3,367 -- 257 -- 3,624
----------- ----------- ----------- ----------- -----------
GROSS PROFIT 3,856 -- 660 -- 4,516
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES
General and administrative ................. 27,126 6,787 9,478 641 37,245
Contributed rent and services (Note B) ..... 6,800 1,200 4,800 -- 11,600
----------- ----------- ----------- ----------- -----------
33,926 7,987 14,278 641 48,845
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (30,070) (7,987) (13,618) (641) (44,329)
-----------
Interest income ............................ 36 -- 39 -- 75
Interest (expense) ......................... (4,411) (705) (1,705) -- (6,116)
----------- ----------- ----------- ----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (34,445) (8,692) (15,284) (641) (50,370)
INCOME TAXES (NOTE E)
Current .................................... 6,792 1,738 3,105 130 10,027
Deferred ................................... (6,792) (1,738) (3,105) (130) (10,027)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (34,445) $ (8,692) $ (15,284) $ (641) (50,370)
=========== =========== =========== =========== ===========
Net loss per basic common share ............ $ (0.01) * $ (0.01) *
=========== =========== =========== ===========
Number of shares outstanding for purposes
of computing net loss per basic share ...... 3,007,778 1,444,444 1,888,333 1,000,000
=========== =========== =========== ===========
* Less than $.01
See accompanying notes to consolidated financial statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EtG CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS'DEFICIT
Deficit
Accumulated
Preferred Stock Common Stock Additional During
--------------- --------------------- Paid-In Development
Shares Amount Shares Amount Capital Stage Total
------ -------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
March 13, 1996, sale of common stock ......... -- $ -- 1,000,000 $ 1,000 $ -- $ -- $ 1,000
---- -------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1996 -- -- 1,000,000 1,000 -- -- 1,000
Net loss for the year ........................ -- -- -- -- -- (641) (641)
---- -------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1997 -- -- 1,000,000 1,000 -- (641) 359
August 29, 1998, sale of common stock ........ -- -- 2,000,000 2,000 -- -- 2,000
August 1 through December 31, 1998,
office space and time and effort
contributed by officer (Note B) ............ -- -- -- -- 4,900 -- 4,900
Net loss for the year ........................ -- -- -- -- -- (15,284) (15,284)
---- -------- --------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1998 -- -- 3,000,000 3,000 4,900 (15,925) (8,025)
March 3, 1999,acquisition of subsidiary
under common control (Note B) (unaudited) .. -- -- 10,000 10 (10) -- --
January 1 through September 30, 1999,
office space and time and effort
contributed by officer (Note B) (unaudited) -- -- -- -- 6,800 -- 6,800
Net loss for the period (unaudited) .......... -- -- -- -- -- (34,445) (34,445)
---- -------- --------- --------- --------- --------- ---------
BALANCE, September 30, 1999 (UNAUDITED) -- $ -- 3,010,000 $ 3,010 $ 11,690 $ (50,370) $ (35,670)
==== ======== ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EtG CORPORATION
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
March 13, 1996
For the Nine Months Ended For the Years Ended (inception)
June 30, December 31, Through
---------------------- ---------------------- September 30,
1999 1998 1998 1997 1999
--------- --------- --------- --------- ---------
(unaudited) (unaudited) (unaudited)
OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss ............................................. $ (34,445) $ (8,692) $ (15,284) $ (641) $ (50,370)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ................... 1,151 -- 136 -- 1,287
Contributed capital (Note B) .................... 6,800 1,200 4,900 -- 11,700
--------- --------- --------- --------- ---------
(26,494) (7,492) (10,248) (641) (37,383)
Changes in current assets and liabilities:
Accounts receivable, inventory
and other current assets ...................... (10,844) (8,500) (15,227) -- (26,071)
Accounts payable and accrued expenses ........... 18,845 655 1,605 150 20,600
--------- --------- --------- --------- ---------
NET CASH (USED IN)
OPERATING ACTIVITIES (18,493) (15,337) (23,870) (491) (42,854)
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES
Purchase of equipment ................................ -- -- (3,138) -- (3,138)
Payments for trademark (Note C) ...................... -- (1,465) (1,465) -- (1,465)
--------- --------- --------- --------- ---------
NET CASH (USED IN)
INVESTING ACTIVITIES -- (1,465) (4,603) -- (4,603)
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock ............... -- 2,000 2,000 -- 3,000
Offering costs incurred (Note F) ..................... (26,820) -- -- -- (26,820)
Proceeds from demand notes payable (Note D) .......... 69,000 40,000 40,000 -- 109,000
Repayment of demand notes payable (Note D) ........... (7,500) -- -- -- (7,500)
--------- --------- --------- --------- ---------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES 34,680 42,000 42,000 -- 77,680
--------- --------- --------- --------- ---------
Net change in cash ......................................... 16,187 25,198 13,527 (491) 30,223
Cash at beginning of period ................................ 14,036 509 509 1,000 --
--------- --------- --------- --------- ---------
CASH AT END OF PERIOD $ 30,223 $ 25,707 $ 14,036 $ 509 $ 30,223
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ........................................ $ 156 $ -- $ -- $ -- $ --
========= ========= ========= ========= =========
Income taxes .................................... $ -- $ -- $ -- $ -- $ --
========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements
F-6
</TABLE>
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Organization and summary of significant accounting policies
Description of operations and liquidity
- ---------------------------------------
EtG Corporation (including subsidiary, the "Company") was incorporated in the
state of Nevada on March 13, 1996. On November 16, 1998, the Company changed its
name from B&R Ventures, Inc. The Company plans to become a sports media and
merchandising business that promotes the positive aspects of athletic
competition.
The Company has devoted substantially all of its efforts since inception to
organization matters, the acquisition of Enjoy the Game, Inc., development of
its business plan, and raising capital. The Company plans to finance its
activities through an initial public offering of 200,000 shares of its common
stock at a price of $1.00 per share.
To date, the Company's sales revenue has been insignificant. The Company has not
gained market acceptance for any of its merchandise and promotions and there can
be no assurance that the Company will be able to gain such acceptance in the
future, that future sales and revenues will be significant, that any sales will
be profitable, or that the Company will have sufficient funds available to
develop its proposed merchandise sales and services.
The Company's consolidated financial statements are prepared in accordance with
Statement of financial Accounting Standards No. 7 "Accounting for Development
Stage Enterprises".
The Company is in the early period of its development embarking on a new
venture. The Company has limited capital, is dependent upon the proceeds of its
proposed initial public offering (See Note F), and achieving profitable
operations. The Company's business plan was prepared based upon the limited
experience of management. The Company's business model is unproven and will take
additional resources to perfect, if at all. The success of the Company's
marketing plan is dependent on attracting new customers. The likelihood of the
success of the Company will depend upon its ability to raise sufficient capital
to overcome the problems, expenses and delays frequently encountered in the
operation of a new business and the competitive environment in which it will be
operating. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.
Management of the Company has budgeted the proceeds of its proposed initial
public offering of common stock for a period of approximately nine months.
However, there is no assurance that the Company's revenues will increase such
that a public offering would be unnecessary. In order for the Company to
complete implementation of its business plan and fund anticipated growth, the
Company may require additional financing from outside sources. Management
believes that the Company is not a viable candidate for commercial bank debt
financing due to its lack of operating history and lack of tangible assets. In
the event that the Company's initial public offering is unsuccessful, management
would rely on additional private debt or equity financing. There is no assurance
that the Company's proposed initial public offering will be successful, that the
Company will meet the objectives of its business plan or that it will be
successful in obtaining additional financing.
F-7
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Organization and summary of significant accounting policies, continued
Principles of consolidation
- ---------------------------
The accompanying consolidated financial statements include the accounts of EtG
Corporation and its wholly owned subsidiary, Enjoy the Game, Inc. All material
intercompany transactions have been eliminated in consolidation.
Financial instruments and cash equivalents
- ------------------------------------------
The Company's financial instruments consist of cash, accounts receivable,
accounts payable, demand notes payable, and accrued liabilities. The carrying
value of these financial instruments approximates fair value because of their
short-term nature or because they bear interest at rates which approximate
market rates. For financial accounting purposes and the statement of cash flows,
cash equivalents include all highly liquid debt instruments purchased with an
original maturity of three months or less.
Use of estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect certain reported amounts of assets and liabilities; disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements; and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
Income Taxes
- ------------
The Company reports income taxes in accordance with SFAS No. 109, "Accounting
for Income Taxes", which requires the liability method in accounting for income
taxes. Deferred tax assets and liabilities arise from the difference between the
tax basis of an asset or liability and its reported amount on the consolidated
financial statements. Deferred tax amounts are determined by using the tax rates
expected to be in effect when the taxes will actually be paid or refunds
received, as provided under currently enacted law. Valuation allowances are
established when necessary to reduce the deferred tax assets to the amounts
expected to be realized. Income tax expense or benefit is the tax payable or
refundable, respectively, for the period plus or minus the change during the
period in the deferred tax assets and liabilities.
Unaudited financial information
- -------------------------------
Interim financial information presented herein contain all adjustments (all
which are normal and recurring in nature) necessary to present fairly the
consolidated financial position of the Company as of September 30, 1999 and the
results their operations for the nine months ended September 30, 1999 and 1998.
Accounts receivable
- -------------------
Management considers all accounts receivable collectible. Therefore, no
allowance for doubtful accounts receivable is reflected in the accompanying
financial statements.
Inventories
- -----------
Inventories are stated at the lower of cost or market; cost being determined
principally by the use of the average-cost method, which approximates the
first-in, first-out method.
F-8
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A: Organization and summary of significant accounting policies, continued
Equipment and depreciation
- --------------------------
Equipment is stated at cost. Depreciation is computed over the estimated useful
life of the assets using the straight-line method. During the nine months ended
September 30, 1999 and 1998, the years ended December 31, 1998 and 1997, and for
the period from March 16, 1996 (inception) through September 30, 1999, the
Company recorded depreciation expense of $784 (unaudited), $-0- (unaudited),
$88, $-0-, and $872 (unaudited), respectively.
Earnings/(loss) per share
- -------------------------
Basic earnings per share have been computed on the basis of the weighted average
of number of common shares outstanding.
Diluted earnings per share is not presented in the accompanying consolidated
financial statements as there are no common stock equivalents outstanding that
would result in dilution.
Advertising costs
- -----------------
The Company expenses advertising costs as incurred. During the nine months ended
September 30, 1999 and 1998, the years ended December 31, 1998 and 1997, and for
the period from March 16, 1996 (inception) through September 30, 1999, the
Company expensed $6,755 (unaudited), $-0- (unaudited), $2,706, $-0-, and $9,461
(unaudited), respectively.
Impairment of Long-Lived Assets
- -------------------------------
The Company follows Statement of Financial Accounting Standards ("SFAS") No.121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, which requires than an impairment loss be recognized when the
carrying amount of an asset exceeds the expected future undiscounted net cash
flows.
Revenue Recognition
- -------------------
Revenue for sales is recognized at the time the product is delivered.
Recently issued accounting pronouncements
- -----------------------------------------
The Company has adopted the following new accounting pronouncements for the year
ended December 31, 1998. There was no effect on the consolidated financial
statements presented from the adoption of the new pronouncements. SFAS No. 130,
"Reporting Comprehensive Income," requires the reporting and display of total
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," is based on the "management" approach for reporting
segments. The management approach designates the internal organization that is
used by management for making operating decisions and assessing performance as
the source of the Company's reportable segments. SFAS No. 131 also requires
disclosure about the Company's products, the geographic areas in which it earns
revenue and holds long-lived assets, and its major customers. SFAS No. 132,
"Employers' Disclosures about Pensions and Other Post-retirement Benefits,"
which requires additional disclosures about pension and other post-retirement
benefit plans, but does not change the measurement or recognition of those
plans.
F-9
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note B: Related party transactions
For all periods presented, the Company was a home-based business, with no
employees. An officer of the Company contributed office and warehouse space at
no charge. In addition, the officer contributed his time and effort in the
initial operations of the Company. The accompanying consolidated financial
statements reflect the estimated cost of the use of such space and the estimated
cost of such services with an offsetting credit to contributed capital. During
the nine months ended September 30, 1999 and 1998, the years ended December 31,
1998 and 1997, and for the period from March 16, 1996 (inception) through
September 30, 1999, the Company recorded contributed capital totaling $6,800
(unaudited), $-0- (unaudited), $4,900, $-0-, and $11,700 (unaudited),
respectively related to the rent and services.
Pursuant to the terms of a certain stock subscription agreement dated March 3,
1999, the two 50 percent shareholders of Enjoy the Game, Inc. ("EGI") exchanged
all of their shares in EGI for 10,000 shares (unaudited) of EtG Corporation
("ETG") common stock. Upon the exchange of shares, EGI became a wholly owned
subsidiary of ETG. The former EGI shareholders held approximately 67 percent of
the issued and outstanding shares of ETG prior to the date of the Agreement.
Accordingly, the transaction has been accounted for as an exchange of shares of
companies under common control. This accounting treatment is similar to a
"pooling-of-interests". Common control was established on August 29, 1998. EGI
was incorporated in Missouri on May 28, 1998. The accompanying financial
statements have been presented on a consolidated basis as if common control was
established on May 28, 1998. For the period from May 28 through August 29, 1998,
EGI's transactions consisted only of organizational matters. The separate
financial statements of EGI for the period from May 28, 1998 (inception) through
August 28, 1998 have not been presented.
Note C: Trademark
Costs incurred to register the Company's trademark are capitalized in the
accompanying consolidated financial statements and are being amortized on the
straight-line basis over a period of 60 months. These costs include filing fees
and legal costs incurred in connection with the application and registration of
the trademark "Enjoy the Game" for videos and certain merchandise.
Amortization expense totaled $367 (unaudited), $-0- (unaudited), $49, $-0-, and
$416 (unaudited) for the nine months ended September 30, 1999 and 1998, the
years ended December 31, 1998 and 1997, and for the period from March 16, 1996
(inception) through September 30, 1999.
Note D: Notes payable
The Company issued promissory notes, due on demand, to certain investors in
order to provide the Company with working capital during its development stage.
However, certain of these promissory notes are convertible into a total of 2,496
shares of non-voting common stock of the subsidiary, EGI, at the rate of .0624
shares to the dollar. The notes are convertible beginning two years from the
date of issuance, at the option of the holder.
F-10
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note D: Notes payable, concluded
In the event all of the notes are converted into non-voting common stock of EGI,
the holders would own an aggregate of less than 20 percent of the common stock
outstanding. Management has classified, as current, all interest accrued on the
notes. Notes payable at September 30, 1999 and December 31, 1998 follow:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------- ----------
(unaudited)
Convertible into shares of EGI non-voting common stock
- ----------------------------------------------------------------------
<S> <C> <C>
Note payable to individual, with interest due on June 1, 1999
and June 1, 2000 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ $ 5,000 $ 5,000
Note payable to individual, with interest due on June 2, 1999
and June 2, 2000 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 5,000
Note payable to individual, with interest due on June 9, 1999
and June 9, 2000 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 5,000
Note payable to individual, with interest due on July 23, 1999
and July 23, 2000 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 5,000
Note payable to individual, with interest due on August 18, 1999
and August 18, 2000 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 5,000
Note payable to individual, with interest due on August 28, 1999
and August 28, 2000 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 5,000
Note payable to corporation, with interest due on May 2, 2000
and May 2, 2001 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 --
Note payable to individual, with interest due on June 2, 2000
and June 2, 2001 at 10 percent, unsecured, convertible into
312 shares of Class "B" common stock of EGI ........................ 5,000 --
------- -------
Total convertible notes payable $40,000 $30,000
======= =======
Other notes payable
- ----------------------------------------------------------------------
Note payable to corporation, with interest due on demand
at 10 percent, unsecured ........................................... 5,000 5,000
Note payable to corporation, with interest due on demand
at 10 percent, unsecured ........................................... 5,000 5,000
Note payable to corporation, with interest due on demand
at 10 percent, unsecured ........................................... 1,500 --
Note payable to corporation, with interest due on demand
at 12 percent, unsecured ........................................... 20,000 --
Note payable to corporation, with interest due on demand
at 10 percent, unsecured ........................................... 10,000 --
Note payable to corporation, with interest due on demand
at 10 percent, unsecured ........................................... 15,000 --
Note payable to corporation, with interest due on demand
at 10 percent, unsecured ........................................... 5,000 --
------- -------
Total other notes payable $61,500 $10,000
======= =======
F-11
</TABLE>
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note E: Income taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for the nine months ended September 30, 1999 and 1998, the years ended
December 31, 1998 and 1997, and the period from March 13, 1996 (inception)
through September 30, 1999,follows:
<TABLE>
<CAPTION>
March 13, 1996
Nine Months Ended For the Years Ended (inception)
September 30, December 31, through
-------------------- ------------------- September 30,
1999 1998 1998 1997 1999
------- ------- ------- ------- -------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
U.S. statutory federal rate ........... 16.27% 15.00% 15.00% 15.00% 21.17%
State income tax rate, net ............ 9.35% 5.31% 5.31% 5.31% 7.60%
Deferred offering costs ............... 12.66% -- -- -- 11.27%
Accumulated depreciation .............. -0.03% -- -- -- -0.03%
Accumulated amortization .............. -0.05% -- -- -- -0.04%
NOL for which no tax
benefit is currently available ........ -38.20% -20.31% -20.31% -20.31% -39.97%
------- ------- ------- ------- -------
0.00% 0.00% 0.00% 0.00% 0.00%
======= ======= ======= ======= =======
</TABLE>
The benefit for income taxes from operations consisted of the following
components at December 31, 1998: current tax benefit of $3,105 resulting from a
net loss before income taxes, and deferred tax expense of $3,105 resulting from
the valuation allowance recorded against the deferred tax asset resulting from
net operating losses. The change in the valuation allowance for the December 31,
1998 and 1997, were $3,105 and $130, respectively. Net operating loss
carryforwards at December 31, 1998 will begin to expire in 2018. The valuation
allowance will be evaluated at the end of each year, considering positive and
negative evidence about whether the asset will be realized. At that time, the
allowance will either be increased or reduced; reduction could result in the
complete elimination of the allowance if positive evidence indicates that the
value of the deferred tax asset is no longer impaired and the allowance is no
longer required.
Should the Company undergo an ownership change, as defined in Section 382 of the
Internal Revenue Code, the Company's tax net operating loss carryforwards
generated prior to the ownership change will be subject to an annual limitation
which could reduce or defer the utilization of those losses.
Note F: Shareholders' deficit
Preferred stock
- ---------------
The preferred stock may be issued in series as determined by the Board of
Directors. As required by law, each series must designate the number of shares
in the series and each share of a series must have identical rights of (1)
dividend, (2) redemption, (3) rights in liquidation, (4) sinking fund provisions
for the redemption of the shares, (5) terms of conversion and (6) voting rights.
F-12
<PAGE>
EtG CORPORATION
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note F: Shareholders' deficit, concluded
Proposed initial public offering
- --------------------------------
The Company is planning to offer 200,000 shares of its $.001 par value common
stock to the public at $1.00 per share. The offering will be made on a "direct
participation" basis and no sales commissions are expected to be paid. The
Company is currently in the process of filing on Form SB-2 a registration
statement with the Securities and Exchange Commission. This statement is to
register 200,000 shares of common stock.
Legal, accounting, and printing costs incurred in connection with the above
proposed initial public offering, have been deferred until such time as the
proposed offering is closed. Upon closing, the deferred offering costs will be
offset against the gross offering proceeds. However, if and when the offering is
declared unsuccessful, the costs will be expensed.
Note G: The Year 2000 Issue
The Y2K issue is the result of computer programs being written using two digits
rather than four to define the applicable year. Any of the Company's computer
programs that have date sensitive software may recognize a date using "00" as
the year 1900 instead of 2000. This could result in system failure or
miscalculations causing disruptions or operations, including, among other things
an inability to process transactions, send invoices, or engage in similar normal
business activities. The Company's equipment, consisting of a computer and
related components, has been certified as Y2K compliant as of December 31, 1998.
The Company cannot determine the extent to which the Company is vulnerable to
third parties' failure to remediate their own Y2K problems. As a result, there
can be no guarantee that the systems of other companies on which the Company's
business relies will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with the Company's
systems, would have a material adverse effect on the Company. In view of the
foregoing, there can be no assurance that the Y2K issue will not have a material
adverse effect on the Company's business.
F-13
<PAGE>
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Section 78.037 of the Nevada Revised Statutes ("NRS") provides that a
corporation, in its Articles of Incorporation, may provide for the limitation of
personal liability of directors or officers to the corporation or its
stockholders for breach of fiduciary duty except for acts or omissions involving
intentional misconduct, fraud or knowing violation of law or unlawful payment of
distributions. The Company's Articles of Incorporation contains such a
provision.
The Company's Articles of Incorporation, pursuant to the authority granted
by Section 78.037 NRS, state that no director or officer shall be personally
liable to the Corporation for monetary damages for any breach of fiduciary duty
by such person as a director or officer. Notwithstanding the foregoing sentence,
a director or officer shall be liable to the extent provided by applicable law,
(i) for acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law, or (ii) for the payment of dividends in violation of
NRS 78.300.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses in connection
with the issuance and distribution of the securities offered hereby.
SEC Registration Fee .............................. $ 55.60
Printing .......................................... 500.00
Blue Sky Fees and Expenses ........................ 1,000.00
Transfer Agent Fees ............................... 500.00
Accounting Fees and Expenses ...................... 8,000.00
Legal Fees and Expenses ........................... 30,000.00
Miscellaneous Fees and Expenses ................... 450.00
-------------
Total ..................................... $ 40,505.60
Item 26. Recent Sales of Unregistered Securities.
Since inception in 1996, sales of unregistered common stock (the only
issued and outstanding securities of the Company) were made by the small
business issuer as follows:
Name
Consideration Date Sold Number of Shares Cash
- ------------- --------- ---------------- ----
David N. Nemelka March 7, 1999 1,000,000 $1,000
William J. Stutz August 29, 1998 2,000,000 $2,000
<PAGE>
In addition, 5,000 shares of the small business issuer's restricted common
stock were issued to William J. Stutz on March 28, 1999 in exchange for 5,000
shares of restricted common stock of Enjoy The Game, Inc., a Missouri
corporation. At the same time 5,000 shares of restricted common stock of the
small business issuer were also issued to Valerie M. Stutz in exchange for 5,000
shares of Enjoy The Game, Inc.
With respect to the sale of all unregistered securities as described above,
this small business issuer relied upon the exemptions afforded by Sections 4 (2)
or 4 (6) of the Securities Act of 1933 or Rule 506 promulgated under such Act.
All recipients were either officers or directors of the Company or were
independent, non-affiliated, accredited investors. Each of the certificates
evidencing the respective securities contained a restrictive Rule 144 legend. No
transfer will be permitted without opinion of counsel that such transfer is in
compliance with the rules and regulations of the SEC.
Item 27. Exhibits.
See Index to Exhibits.
Item 28. Undertakings.
The undersigned registrant hereby undertakes that it will:
File, during any period in which it offers or sells securities under
Rule 415 of the Securities Act, a post-effect amendment to this
registration statement to:
Include any prospectus required by section 10(a)(3) of the Securities
Act;
Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the registration
statement; and
Include any additional or changed material information on the plan of
distribution.
For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that
time to be the initial bona fide offering.
File a post effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or controlling persons
of the registrant pursuant to the provisions described in Item 24, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
<PAGE>
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding), is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes that:
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance on Rule 430A
and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the
Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Blue springs, Missouri on November 7, 1999.
EtG Corporation
By: /s/ William J. Stutz
------------------------
William J. Stutz
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on November 7, 1999.
Signature Title Date
--------- ----- ----
/s/ William J. Stutz President, Treasurer, November 7, 1999
- -------------------- Director, Principal
William J. Stutz Financial Officer
/s/ Valerie M. Stutz Secretary, Director, November 7, 1999
- -------------------- Principal Accounting
Valerie M. Stutz Officer
<PAGE>
EXHIBIT INDEX
TO
REGISTRATION STATEMENT ON FORM SB-2
EtG CORPORATION
3.1 Articles of Incorporation of Registrant (1)
3.12 Articles of Amendment to the Articles of Incorporation (1)
3.2 By-laws of Registrant (1)
5.1 Proposed Form of Opinion of Counsel Regarding Legality (1)
5.11 Opinion of counsel Regarding Legality (2)
24.1 Consent of Counsel (2)
24.2 Consent of Cordovano and Harvey, P.C., certified public accountants (2)
27 Financial Data Schedule (2)
(1) Previoulsy Filed
(2) Filed Herewith
Allen G. Reeves, P.C.
Attorney and Counselor at Law
900 Equitable Building
730 Seventeenth Street
Denver, Colorado 80202
(303)534-6278 FAX (303) 825-9147
November 9, 1999
EtG Corporation
1008 Mic-O-Say Circle
Blue Springs, MO 64015
Ladies and Gentlemen:
I have acted as counsel for EtG Corporation (the "Company") in connection
with the preparation and filing of the Registration Statement and Prospectus
with the Securities and Exchange Commission relating to the issuance of up to
200,000 shares of Common Stock (the "Common Stock").
I have examined copies of the Company's Articles of Incorporation, Bylaws
and certain other corporate documents, including copies of resolutions adopted
by the Board of Directors of the Company and certificates of officers of the
Company, and I have reviewed such other documents and made such investigations
as I have deemed necessary or appropriate in order to express my opinion on the
matters set forth below.
Based upon and subject to the foregoing, I am of the opinion that:
The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Nevada, with full
corporate power and authority to own and operate its properties and to carry on
its business as set forth in the Registration Statement and Prospectus.
The Company is duly qualified and registered to transact the business in
which the Company is engaged and is qualified and in good standing in each and
every jurisdiction in which its ownership of property or its conduct of business
requires such qualification or registration.
<PAGE>
EtG Corporation
Page 2
November 9, 1999
The Company has an authorized and outstanding capitalization as set forth
in the Registration Statement and Prospectus; the Common Stock offered thereby
of the Company conforms to the statements concerning it in the Registration
Statement and Prospectus; the outstanding Common Stock of the company has been
duly and validly issued and is fully paid and non-assessable and no Common Stock
is subject to any pre-emptive rights.
The holders of the issued and outstanding shares of Common Stock are, and
the holders of the securities to be sold under the Registration Statement,
namely, the Common Stock offered pursuant to the Prospectus will be entitled to
the rights, and preferences set forth in the certificates representing the same.
No consents, approvals, authorizations or orders of agencies or other
regulatory authorities are necessary for the valid authorization, issuance or
sale of the Common Stock except as required under the Securities Act of 1933 or
state Blue Sky or other securities laws.
The issuance and sale of the Common Stock will not conflict with or result
in a breach of any of the terms, conditions or provisions of, or constitute a
default under, the Articles of Incorporation or Bylaws of the Company or any
note, indenture, mortgage, Deed of Trust or other Agreement or instrument
(however characterized or described) known to me as to which the Company is a
party or any of its property is bound or any existing laws, order, rule,
regulation, writ, injunction or decree known to me of any government,
governmental instrumentality, agency, body, arbitration tribunal or court,
domestic or foreign, having jurisdiction over the Company or its property.
The undersigned hereby consents to the use of his name under the heading
"Legal Matters" in the Company's registration statement on Form SB-2 and to all
references thereto as contained in said registration statement.
Very truly yours,
Allen G. Reeves, P.C.
By: /s/ Allen G. Reeves
--------------------------------
Allen G. Reeves
AGR/rga
Consent of Counsel
The consent of Allen G. Reeves, P.C. of all references made to it in the
Prospectus included as a part of this Registration Statement on Form SB-2 of EtG
Corporation, and in all amendments thereto are included in its opinion filed as
Exhibit 5.11 to the Registration Statement.
Allen G. Reeves, P.C.
By: /s/ Allen G. Reeves
-----------------------
Allen G. Reeves
Denver, Colorado
November 9, 1999
TO: The Securities and Exchange Commission
450 Fifth Street, NW
Washington, D.C. 20549-1004
Attn: Filing Desk, Stop 1-4
RE: EtG Corporation
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of EtG Corporation and
subsidiary on Form SB-2 of our report dated August 17, 1999, appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Cordovano and Harvey, P.C.
Denver, Colorado
November 9, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 30,223
<SECURITIES> 0
<RECEIVABLES> 2,598
<ALLOWANCES> 0
<INVENTORY> 23,473
<CURRENT-ASSETS> 56,294
<PP&E> 3,138
<DEPRECIATION> 872
<TOTAL-ASSETS> 86,430
<CURRENT-LIABILITIES> 122,100
<BONDS> 0
0
0
<COMMON> 3,010
<OTHER-SE> (38,680)
<TOTAL-LIABILITY-AND-EQUITY> 86,430
<SALES> 0
<TOTAL-REVENUES> 7,223
<CGS> 3,367
<TOTAL-COSTS> 37,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (34,445)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,445)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,445)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
