SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended:
December 31, 1999
Commission File Number
333-86711
EtG Corporation
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(Name of small business issuer in its charter)
Nevada 87-0567854
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
1008 Mic-O-Say Circle 64015
Blue Springs, Missouri (Zip Code)
(Address of Principal Executive offices)
Issuer's telephone number: (816) 220-1119
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: None
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.[ X ]
State issuer's revenues for the most recent fiscal year. $14,044.
The aggregate market value of the voting common stock held by non-affiliates of
the Registrant as of March 29, 2000 was $700,000. No public market has been
established for the Company's common stock.
There were 3,210,000 shares of common stock $.001 par value outstanding as of
March 29, 2000.
Documents incorporated by reference: None
Transitional Small Business Format (check one); Yes ; No X
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Item 1. Description of Business
Introduction
EtG Corporation was incorporated in the State of Nevada in 1996 using the
name "B & R Ventures, Inc." The Company later changed its name to EtG
Corporation. On March 28, 1999, the Company acquired all of the common stock of
Enjoy The Game, Inc., a company incorporated in the State of Missouri. That
company is now a wholly owned subsidiary. Before this acquisition, the Company
was not engaged in any business activities. The Company's principal executive
offices are at 1008 S.W. Mic-O-Say Circle, Blue Springs, Missouri 64015. Its
telephone number is (816) 220-1119.
The Company's Business
The Company is a small media and merchandising company that promotes the
positive aspects of athletic competition. Its 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. The Company anticipates that the groups that will benefit the
most from its concepts will be the youth sports groups as well as junior
high/middle schools and high school and collegiate athletic programs. The
Company uses videos, apparel and specialized merchandise to promote its theme of
enjoyable athletic competition. The President of the Company, William J. Stutz,
also makes live appearances at which he stresses the Company's philosophy. The
Company would also eventually like to branch out into the production of
different kinds of publications to promote its philosophy. These publications
might include magazines, newsletters, brochures and a full educational
curriculum package that includes instructional materials and a multi-sport
video. The Company expects that a large portion of its revenues will come from
the sale and licensing of its products.
Marketing Strategy and Proposed Plan of Operation
The Company desires to teach youth the proper mindset for enjoyable and yet
competitive athletic competition. The overall approach to team sports, which the
Company believes 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 the Company's 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, the Company intends to expand its efforts into other
teams sports, such as football, baseball, softball and volleyball. In order to
expand its reach and operations, its goal is to recruit local corporate sponsors
who already have in place marketing programs that attempt to reach junior
athletes. In addition, the Company will attempt to market all of its products
and services to sports organizations involved in the targeted sports.
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Association Marketing Program. The Company initially intends to market its
products and services to sports organizations related to the sport of
basketball. The lead product is expected to be videos. The Company is still
analyzing which marketing concept will be most effective, but anticipate that
the video will be marketed either through endorsement, partnership (alliance),
outright purchase of bulk order or some combination thereof. It have identified
the following organizations which are connected with the sport of basketball and
which it believes would be receptive to the idea of promoting better
sportsmanship and teamwork:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Youth Interscholastic Collegiate Generic
- ---------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C>
Amateur Athletic National Federation of National Collegiate National Association of
Union State High School Athletic Athletic Association Basketball Coaches
Associations
- ----------------------------------------------------------------------------------------------------------
Biddy Basketball National Interscholastic National Women's Basketball Coaches
Athletic Administrators Association of Association
Association Intercollegiate
Athletics
- ----------------------------------------------------------------------------------------------------------
Upward Basketball Each State's High School National Junior Greater Kansas City
Activities Association College Athletic Basketball Coaches
Association Association
- ----------------------------------------------------------------------------------------------------------
Great American Basketball Each State's Coaches National Christian Sports Connection (KC)
League (KC) Association College Athletic
Association
- ----------------------------------------------------------------------------------------------------------
Blue Valley Recreation National Fellowship of Christian
Center (KC) Association of Athletes
Collegiate
Directors of
Athletics
- ----------------------------------------------------------------------------------------------------------
Police Athletic CCA United States Olympic
Basketball League (KC) 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. The local Kansas
City organizations range in size from as few as fifty to several hundred
participants while the large national organizations may have several thousand
participants. Many of these organizations have already been contacted and it is
the Company's expectation that the remainder will be contacted within the next
three months. For example, both the Greater Kansas City Basketball Coaches and
the Missouri Suburban Conference of Athletic Directors have voted to endorse and
use the Company's products and services. The Sports Connection has asked the
Company's president, William Stutz, to write a column for their publication. In
addition, the Company was the exclusive outfitter for their High School
Basketball Shoot-out Tournament in Kansas City in December of 1999. Revenues and
expenses from this tournament were approximately $300. Proposals have also been
submitted to both the Kansas and Missouri State Activities Associations to use
the Company's products or services. Both proposals are currently being reviewed.
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The Company has also submitted proposals to the equivalent organizations that
govern high school athletics in New York and Colorado. These proposals are also
currently being reviewed. The Fellowship of Christian Athletes has allowed the
Company to put a brochure in their information kit that was sent to over 8,000
schools around the country. These brochures have generated small orders from a
couple of states.
Of the organizations that have not yet been approached, the Company intends
to contact the large national organizations, such as the NCAA over the course of
the next three months. The smaller organizations will be approached more quickly
based upon the time availability of Mr. Stutz. The exact strategy for
approaching each of these organizations has not been decided upon but is
expected to be determined on an ad hoc basis, based in large part on whether Mr.
Stutz has any contacts or relationships with any of the individuals who manage
these organizations. These approaches are expected to be both by phone if he
knows someone in the specific organization or by mail if he does not have a
contact in that organization.
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 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.
The Company believes that the main selling point to interscholastic groups
is that its 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 the Company's products and services, it anticipates that it 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 the Company's marketing
efforts because of their influence on their member schools.
Stand-alone Marketing Program. Ancillary to the Company's sports
association marketing efforts, a stand-alone approach for its 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. The Company's apparel and merchandise, if sold nationally,
would most likely be distributed through direct mail, the Internet and/or
selected retail sites, such as college bookstores or specialty/resort shops. The
Company has not yet initiated any specific efforts in its stand-alone marketing
program. It may not do so in the future if it determines that a program of this
nature would be too costly given the Company's limited financial resources or
for other reasons that the Company cannot foresee or anticipate.
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Products and Services
In order to disseminate and promote its philosophy of sportsmanship and to
achieve its objective of educating the target market of athletes, coaches,
parents, and fans, the Company intends 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 the Company's 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. Its 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. The Company was 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. The Company 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.
In August 1999, the Company finished production of its second video that
covered the sport of soccer. It used high school boy and girl athletes
after gaining approval from the National Federation of State High Schools,
the Missouri State High School Association nd the local Lee's Summit School
District. Using the experience the Company gained from the production of
its 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 wasapproximately 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, the
Company's production cost for the soccer video was approximately 35% less
than for the basketball video.
The Company also plans future videos covering Baseball/Softball (Spring
2000) and Football (Fall 2000) and Volleyball (Fall 2000). Each of its
planned videos will also involve the participation of high school players.
The Company has 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 its 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.
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Based upon the Company's prior experience with the soccer video, it now
plans to use Metro Sports of Kansas City, Missouri as its primary
production company to assist us in the production of its future videos. The
video sleeves as well as all of the printed material for its basketball
video were designed by Kevin Wahaus of Kevin and Company of Overland Park,
Kansas. The Company expects 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. The Company 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. The Company approached Gear for Sports, Inc. Lenexa, KS, early in
the planning stages of its apparel development. Working with artists and
sales representatives, it has 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 the Company's apparel, it believes 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.
The Company has 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 T-shirts are
currently being marketed at a price of $16.00.
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 ball caps are currently being marketed at a price of $20.00.
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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,
the Company have reordered a shipment of both the white and gray styles. Full 72
shirt allotments of the polo shirts were ordered initially in October, 1998,
primarily because it believes that polo shirts will never go out of style and
because it was able to obtain a better price as a result of a full allotment
order. Since then, the Company has reordered a half allotment of each color. We
are currently marketing the polo shirt at a price of $40.00.
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. The Company is 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. The Company is
currently sell the water bottles at a price of $3.00. It is 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.
o Live Appearances - A live presentation has been developed and is
delivered by the Company's president and founder, William J. Stutz.
Mr. Stutz's presentation adds impact to the commitment of the
Company's 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. The Company's
normal charge for a personal appearance by Mr. Stutz is $250 plus
expenses.
Recently, the Company 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 behalf of the Company. Under the terms of the agreement,
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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. The Company 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, the Company also reached an oral agreement with Tony Guy, a former
McDonald's High School Basketball All-American from the Baltimore, Maryland 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 in 1978. Neither of the oral agreements with Mr. Porter or Mr. Guy
have any specific time period and are completely open-ended. The oral
arrangements with each of these individuals also provides that they can say yes
or no to any request the Company may make concerning an appearance depending
upon their schedules. The Company has not established any pre-set appearance fee
rate for either Mr. Porter or Mr. Guy and anticipates that any appearance fee
would be negotiated on a case by case basis. The Company anticipates that it
will also seek to increase the number of available speakers with the ultimate
goal of establishing a full-service speakers bureau.
o Publications - In addition to the Company's videos, merchandise and live
presentations, it is currently evaluating whether it would be feasible to
produce various publications to promote its 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 the Company is 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, that might be expected to be realized
o the Company's management capability to fully develop and implement
publications as an additional product line
The Company has not made any decision regarding the feasibility of
producing its own publications.
Trademarks
The Company has obtained trademark protection from the United States Patent
Office for both "Enjoy the Game" and the slogan "Work Hard ... Have Fun". It
uses one or the other of these trademarks on virtually every item of merchandise
or apparel that it sell. The Company has not obtained any other trademarks and
have no patents, licenses, franchises, concessions or royalty agreements
involving any of its products or services.
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Competition
The Company believes that the industry within which it competes is highly
fragmented and comprised of numerous companies, many of whom are larger and have
more resources than the Company. On the other hand, it also believes it can
overcome its competitive disadvantages which are based upon its lack of size and
financial resources by emphasizing its unique message and by seeking to align
itself with corporate sponsors and other organizations who share its philosophy.
Substantially all of the Company's competitors have, and potential future
competitors could have, substantially greater financial, marketing and other
resources than does the Company. They also have, or could have, greater name
recognition and market acceptance of their products and services. The Company
can give no assurance that its 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, the Company may experience
significant price competition, which could have a material adverse effect on its
gross margins.
Regulation
The Company's business is not regulated by any governmental agency and
approval from any governmental agency is not required for it to market or sell
its products. However, many of the youth organizations and virtually all of the
high schools and colleges to whom it intend to market its 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. The Company has been extremely careful not to approach any teams
or individual members of teams to work with it, purchase its merchandise or
services or otherwise become involved with it without first clearing these
approaches with the appropriate sanctioning body. Moreover, its marketing
strategy has been to approach the sanctioning body first precisely because of
their ability to influence their member institutions. By becoming informed of
the Company's concept and what it has to offer, it is the Company's expectation
that these governing bodies might enhance the Company's ability to market its
products directly to their member institutions or teams.
Facilities
The Company's offices are presently located in the Kansas City metropolitan
area at the home of William J. Stutz. Mr. Stutz does not charge the Company rent
for the use of this space and has no plans to do so in the future. The Company
anticipates that it may eventually become necessary to obtain suitable office
space in the Kansas City area after this offering if its planned activities
expand to the point where its present space becomes inadequate. If the Company
determines that new office space is desirable, it does not anticipate any
difficulties in obtaining new space.
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Employees
The Company presently has two employees, William J. Stutz and Valerie M.
Stutz. Other than the possibility of hiring a part time administrative
assistant, the Company has no present plans to hire additional personnel in the
near future.
Item 2. Description of Property
The Company's executive offices are located at 1008 Mic-O-Say Circle, Blue
Springs, Missouri 64015. The Company' President contributes office space and
warehouse space at no charge.
The Company does not own or invest in, nor does the Company intend in the
future, to own or invest in real estate or interests in real estate, real estate
mortgages or securities of or interests in persons primarily engaged in real
estate activities.
Item 3. Legal Proceedings.
The Company is not a party to any material pending or threatened legal
proceedings nor is any of its property subject to any such legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended December 31, 1999, either through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
There is no established public trading market for the Company's common
stock.
The Company has not paid any dividends on its common stock and the Board of
Directors presently intends to continue a policy of retaining earnings, if any,
for use in the Company's operations and to finance expansion of its business.
The declaration and payment of dividends in the future, of which there can be no
assurance, will be determined by the Board of Directors in light of conditions
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then existing, including earnings, financial condition, capital requirements and
other factors. There are no restrictions that currently materially limit the
Company's ability to pay dividends or which the Company reasonably believes are
likely to limit materially the future payment of dividends on common stock. On
March 29, 2000, the Company had 44 shareholders of record.
Item 6. Management's Discussion and Analysis of Financial Condition and Result
of Operations.
Results of Operations for the year ended December 31, 1999.
The Company did not engage in any material operations nor did it have any
material revenues from operations during the year ended December 31, 1998. For
the year ended December 31, 1999, the Company had revenues of $14,044. Cost of
net product sales was $4,474 and costs and expenses were $58,496, resulting in a
loss from operations of $48,926. General and administrative expenses for the
year ended December 31, 1999 were $58,496, compared to general and
administrative expenses of $14,278 in the year ended December 31, 1998.
Management expects that general and administrative expenses will continue to
increase in the year ending December 31, 2000 as the Company's operations
expand.
Liquidity and Capital Resources.
On December 31, 1999, the Company had $41,283 in current assets, including
$16,283 in cash. Total current liabilities at December 31, 1999 were $125,860,
resulting in a net working capital deficiency of $84,577. Net cash used in
operating activities for the year ended December 31, 1999 was $23,698, compared
to $23,870 for the year ended December 31, 1998. Net cash provided by financing
activities for the year ended December 31, 1999 was $25, 944 compared to $42,000
for the year ended December 31, 1998.
In March of 2000, the Company completed an offering of its common stock.
Two hundred thousand shares were sold at a price of $1.00 per share, resulting
in gross proceeds of $200,000. Expenses of the offering were approximately
$40,500 and net proceeds to the Company from the offering were approximately
$159,500. The Company expects to use the net cash proceeds to expand its
operations and believes it now has sufficient cash resources to execute its
planned operations for the year ending December 31, 2000. The Company does not
have any plans for significant capital or operating expenditures above their
current levels.
Year 2000 Concerns
The Company addressed the concerns of potential year 2000 computing
problems and incurred no significant problems or costs as a result of this
issue. The Company expects no problems from this issue in the future.
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Item 7. Financial Statements.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
The executive officers and directors of the Company and their ages are as
follows:
William J. Stutz 39 President, Treasurer,
Director
Valerie M. Stutz 38 Secretary, Director
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The Company's directors are elected to hold office until the next annual
meeting of shareholders and until their respective successors have been elected
and qualified. Officers are elected by the board of directors and hold office
until their successors are elected and qualified.
The Company has no audit or compensation committee.
William J. Stutz. Mr. Stutz has been president, treasurer and a director of
the 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
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 $600,000 when he resigned. Since his resignation from FCA, he
has been a full time employee of the Company.
Valerie M. Stutz has been secretary and a director of the Company since
1998. She received her Bachelor of Science degree from Slippery Rock State
College in 1982. While attending Slippery Rock, Mrs. Stutz was a cheerleader and
she competed in judo. Her junior year she received a silver medal and her senior
year a bronze medal from the East Coast Judo Association for her achievements in
its National Tournament. For the past 12 years she has spent the bulk of her
time raising her 4 children. She also teaches preschool, at Small Wonders in
Independence, Missouri three mornings a week. In April of 1999, Mrs. Stutz
became a certified Court Appointed Special Advocate, (CASA) for Jackson County,
Missouri. She has had no business experience for the last five years.
Willaim J. Stutz and Valerie M. Stutz are husband and wife.
13
<PAGE>
Item 10. Executive Compensation
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid to our chief executive officer since our inception. There were
no stock appreciation rights outstanding during the fiscal year ended December
31, 1999, nor are there any rights outstanding as of the date of this
prospectus.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Securities Long-Term
Underlying Incentive All Other
Name and Principal Fiscal Salary Bonus Other Annual Options Payouts Compensation
Position Year ($) ($) Compensation (#) ($) ($)
- ------------------ ---- ------- ----- ------------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
William J. Stutz.........1999 $9,700 0 0 0 0 0
President
Valerie M. Stutz.........1999 0 0 0 0 0 0
Secretary
</TABLE>
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 in
the year ending December 31, 2000.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the ownership of the Company's common stock
by each directors, each of our executive officers and directors as a group, and
all persons known by the Company to own more than 5% of the Company's common
stock.
Beneficial Ownership
Name and Address (1) Shares Percentage
- -------------------- ------ ----------
William J. Stutz and
Valerie M. Stutz 2,010,000 62.6%
1008 S.W. Mic-O-Say Circle
Blue Springs, Mo. 64015
David M. Nemelka 500,000 15.6%
897 So. Artistic Circle
Springville, Utah 84663
Covest, Inc.(2) 250,000 7.8%
11011 King Street
Overland Park, Kansas 66210
Ivacind, Inc.(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 62.6%
14
<PAGE>
- -----------------------------
(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.
Item 12. Certain Relationships and Related Transactions.
The Company's corporate offices are located at the personal residence of
William J. Stutz and Valerie M. Stutz. Under an oral agreement with Mr. and Mrs.
Stutz, the Company pays no rent for the use of this office space.
On August 29, 1998 the Company issued 2,000,000 shares of its restricted
common stock to William J. Stutz for a total cash consideration of $2,000.
On March 28, 1999 the Company issued 5,000 shares of its 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, the Company also
issued 5,000 shares of its 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 a wholly owned subsidiary of
the Company.
On March 13, 1996 the Company issued 1,000,000 shares of its restricted
common stock to David N. Nemelka for a total cash consideration of $1,000.
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.01 Articles of Incorporation (1)
3.02 Bylaws(2)
27.01 Financial Data Schedule
(1) Incorporated by reference to Exhibit 3.01 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on September 8, 1999 (File No. 333-86711).
(2) Incorporated by reference to Exhibit 3.02 to the registration statement on
Form SB-2 of Registrant filed with the Securities and Exchange Commission
on September 8, 1999 (File No. 333-86711).
(b) No reports on From 8-K were filed during the quarter ended December 31,
1999.
15
<PAGE>
SIGNATURES
In accordance with Sections 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EtG Corporation
By: /s/ William J. Stutz
--------------------------------------
William J. Stutz
President and Principal Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ William J. Stutz President, Director April 11, 2000
- --------------------- Principal Executive Officer
William J. Stutz Principal Financial
and Accounting Officer
/s/ Valerie M. Stutz Secretary, Director April 11, 2000
- ---------------------
Valerie M. Stutz
<PAGE>
EtG CORPORATION
ITEM 8. FINANCIAL STATEMANTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Page
----
Report of independent accountants................................... F-2
Consolidated balance sheet at December 31, 1999..................... F-3
Consolidated statements of operations, for each of the two years
ended December 31, 1999........................................... F-4
Consolidated statement of changes in shareholders' deficit
for each of the two years ended December 31, 1999................. F-5
Consolidated statements of cash flows, for each of the two years
ended December 31, 1999........................................... 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, 1999, 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, 1999. 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, 1999, and the results of their operations and
their cash flows for each of the years in the two year period ended December 31,
1999, 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 suffered significant
operating losses and at December 31, 1999 has a net capital deficiency. 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.
Cordovano and Harvey, P.C.
Denver, Colorado
March 22, 2000
F-2
<PAGE>
EtG CORPORATION
CONSOLIDATED BALANCE SHEET
December 31, 1999
ASSETS
Current assets:
Cash ..................................................... $ 16,283
Accounts receivable ...................................... 7,616
Merchandise inventory, at lower of cost or market ........ 17,384
---------
Total current assets .......................... 41,283
Equipment, at cost, net of accumulated
depreciation of $1,133 ................................... 2,005
Intangible assets:
Trademark, net of accumulated amortization
of $342 (Note C) ....................................... 1,124
Other assets:
Deferred offering costs (Note G) ......................... 28,308
---------
$ 72,719
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts and notes payable:
Trade payables ...................................... $ 12,968
Line of credit (Note D) ............................. 3,002
Notes payable, convertible into subsidiary
common stock (Note E) ............................. 40,000
Other notes payable (Note E) ........................ 62,500
Accrued interest on notes payable ........................ 7,390
---------
Total current liabilities .............. 125,860
---------
Shareholders' deficit:
Preferred stock, $0.001 par value;
5,000,000 shares authorized, -0-
issued and outstanding .................................. --
Common stock, $0.001 par value,
50,000,000 shares authorized, 3,010,000
issued and outstanding .................................. 3,010
Additional paid-in capital ............................... 14,690
Retained deficit ......................................... (70,841)
---------
Total shareholders' deficit ............ (53,141)
---------
$ 72,719
=========
See accompanying notes to consolidated financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
EtG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net product sales ................................ $ 14,044 $ 917
Cost of net product sales ........................ 4,474 257
----------- -----------
Gross profit ......................... 9,570 660
----------- -----------
Costs and expenses:
General and administrative ....................... 48,696 9,478
Contributed rent and services (Note B) ........... 9,800 4,800
----------- -----------
58,496 14,278
----------- -----------
Loss from operations ................. (48,926) (13,618)
Interest income .................................. 49 39
Interest (expense) ............................... (6,039) (1,705)
----------- -----------
Loss before provision for income taxes (54,916) (15,284)
Income taxes (Note F):
Current .......................................... 23,590 3,105
Deferred ......................................... (23,590) (3,105)
----------- -----------
Net loss ............................. $ (54,916) $ (15,284)
=========== ===========
Net loss per basic common share ........................ $ (0.02) $ (0.01)
=========== ===========
Number of shares outstanding for purposes
of computing net loss per
basic and diluted share .......................... 3,010,000 3,010,000
=========== ===========
See accompanying notes to consolidated financial statements
F-4
<PAGE>
EtG CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
Preferred Stock Common Stock Additional
---------------- ------------------- Paid-In Retained
Shares Amount Shares Amount Capital Deficit Total
------ ------ ------ ------ ------- ------- ----------
Balance, December 31, 1997 ..... -- $ -- 1,000,000 $ 1,000 -- $ (641) $ 359
Sale of common stock ....................... -- -- 2,000,000 2,000 -- -- 2,000
Office space and time and
effort contributed by an officer .......... -- -- -- -- 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)
Acquisition of subsidiary
under common control (Note B) ............. -- -- 10,000 10 (10) -- --
Office space and time and
effort contributed by an officer .......... -- -- -- -- 9,800 -- 9,800
Net loss for the year ...................... -- -- -- -- -- (54,916) (54,916)
------ ------ ---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 ..... -- $ -- 3,010,000 $ 3,010 $ 14,690 (70,841) $ (53,141)
====== ====== ========== ========== ========== ========== ==========
See accompanying nots to consolidated financial statements
F-5
<PAGE>
EtG CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
------------------------------
1999 1998
-------- --------
Cash flows from operating activities:
Net loss .................................................... $(54,916) $(15,284)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .......................... 1,338 136
Contributed capital (Note B) ........................... 9,800 4,900
-------- --------
(43,778) (10,248)
Changes in current assets and liabilities:
Accounts receivable, inventory
and other current assets ............................. (9,773) (15,227)
Accounts payable and accrued expenses .................. 29,853 1,605
-------- --------
Net cash flow (used in) operating activities ........ (23,698) (23,870)
-------- --------
Cash flows from investing activities:
Purchase of equipment ....................................... -- (3,138)
Payments for trademark (Note C) ............................. -- (1,465)
-------- --------
Net cash flow (used in) investing activities ........ -- (4,603)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock ...................... -- 2,000
Offering costs incurred (Note F) ............................ (39,558) --
Borrowings on credit card ................................... 3,002 --
Proceeds from demand notes payable (Note D) ................. 70,000 40,000
Repayment of demand notes payable (Note D) .................. (7,500) --
-------- --------
Net cash flow provided by financing activities ...... 25,944 42,000
-------- --------
Net change in cash ................................................ 2,247 13,527
Cash at beginning of year ......................................... 14,036 509
-------- --------
Cash at end of year ................................. $ 16,283 $ 14,036
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ............................................... $ 386 $ --
======== ========
Income taxes ........................................... $ -- $ --
======== ========
See accompanying ntoes to consolidated financial statements
F-6
</TABLE>
<PAGE>
EtG CORPORATION
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 is a sports media and merchandising
business that promotes the positive aspects of athletic competition.
In 1998, The Company was a development stage enterprise in accordance with
Statement of Financial Accounting Standards (SFAS) No. 7 "Accounting for
Development Stage Enterprises" in prior years. In 1999, the Company emerged from
the development stage. Accordingly, the Company 's consolidated financial
statements do not include the cumulative amounts and other disclosures required
by SFAS No. 7.
In order to finance its development stage operations, the Company issued
interest bearing debt that is convertible into shares of its subsidiary's common
stock and other short-term debt. The Company retired $7,500 of the debt in 1999
and at December 31, 1999, notes payable totaled $102.500. In addition, the
Company has suffered significant operating losses since inception and at
December 31, 1999 has a net capital deficiency. These factors, among others,
raise substantial doubt about the Company's ability to continue as a going
concern.
The Company is offering of 200,000 shares of its common stock at a price of
$1.00 per share in an IPO that expires on April 2, 2000, unless extended for
another 30 days. Management of the Company has budgeted the proceeds of its IPO
for a period of approximately nine months. 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 IPO does not sell out, management would rely on additional private
debt or equity financing. There is no assurance that the Company's will sell
out, that the Company will meet the objectives of its business plan or that it
will be successful in obtaining additional financing.
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, and
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.
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-7
<PAGE>
EtG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 years ended
December 31, 1999 and 1998, the Company recorded depreciation expense of $1,046,
and $87, respectively.
Earnings/(loss) per share
Basic earnings per share have been computed based on the weighted average of
number of common shares outstanding. However, the Company has treated as
outstanding for the entirety of all reporting periods, shares issued at
substantially less than the public offering price of $1.00 per share pursuant to
Securities and Exchange Commission policy.
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. Advertising expense was
$8,609 and $2,706 for the years ended December 31, 1999 and 1998, 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 product sales is recognized at the time the product is delivered and
advertising revenue is earned as the advertisements are aired. Revenue from
speaking engagements is recognized after the speech 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-8
<PAGE>
EtG CORPORATION
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 years ended December 31, 1999 and 1998, the Company recorded contributed
capital totaling $9,800 and $4,900, 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 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 $293 and $49, respectively, for the years ended
December 31, 1999 and 1998.
Note D: Line of credit
The Company has a $10,000 line of credit with a financial institution. The line
carries a fixed annual percentage rate of interest of 15.4 percent. The line
matures annually and requires a minimum payment that varies depending on the
available credit ($99 at December 31, 1999). The line is unsecured and is
guaranteed by the president of the Company. Finance charges for the year ended
December 31, 1999 were $33. The unused portion of the line of credit was $6,998
at December 31, 1999.
Note E: 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. 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
December 31, 1999 follows on the next page:
F-9
<PAGE>
EtG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
WHERE'S THE TEXT FOR THIS PAGE???????????????
The file was empty - Please call ASAP
F-10
<PAGE>
EtG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note F: Income taxes
A reconciliation of U.S. statutory federal income tax rate to the effective rate
follows for years ended December 31, 1999 and 1998 follows:
For the Years Ended
December 31,
-----------------------
1999 1998
------ ------
U.S. statutory federal rate .......... 20.46% 15.00%
State income tax rate, net ........... 5.01% 5.31%
Deferred offering costs .............. 18.14% --
Other ................................ -0.66% --
NOL for which no tax
benefit is currently available ....... -42.95% -20.31%
----- -----
0.00% 0.00%
===== =====
The benefit for income taxes from operations consisted of the following
components at December 31, 1999: current tax benefit of $26,695 resulting from a
net loss before income taxes, and deferred tax expense of $26,695 resulting from
the valuation allowance recorded against the deferred tax asset resulting from
net operating losses. The change in the valuation allowance for the years ended
December 31, 1999 and 1998, were $23,590 and $3,105, respectively. Net operating
loss carryforwards at December 31, 1999 will begin to expire in 2019. 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 G: 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.
Initial public offering
The Company is offering 200,000 shares of its $.001 par value common stock to
the public at $1.00 per share. The offering is being made on a "direct
participation" basis and no sales commissions are expected to be paid. The
Company's registration statement on Form SB-2 was declared "effective" by the
Securities and Exchange Commission on February 2, 2000. The offering commenced
on February 6, 2000.
Legal, accounting, and printing costs incurred in connection with the above
initial public offering, has 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.
F-11
<PAGE>
EtG CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note H: Subsequent event
As of March 22, 2000, the Company has sold 182,000 shares of its common stock at
$1.00 per share for gross proceed of $182,000 through its IPO. The Company used
proceeds of $42,500 from the IPO to retire debt.
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,283
<SECURITIES> 0
<RECEIVABLES> 7,616
<ALLOWANCES> 0
<INVENTORY> 17,384
<CURRENT-ASSETS> 41,283
<PP&E> 3,138
<DEPRECIATION> (1,133)
<TOTAL-ASSETS> 72,719
<CURRENT-LIABILITIES> 125,860
<BONDS> 0
0
0
<COMMON> 3,010
<OTHER-SE> (56,151)
<TOTAL-LIABILITY-AND-EQUITY> 72,719
<SALES> 14,044
<TOTAL-REVENUES> 14,093
<CGS> 4,474
<TOTAL-COSTS> 4,474
<OTHER-EXPENSES> 58,496
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,039
<INCOME-PRETAX> (54,916)
<INCOME-TAX> 0
<INCOME-CONTINUING> (54,916)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,916)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
