As filed with the Securities and Exchange Commission on December 20, 2000
Registration No. ________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
AVID SPORTSWEAR & GOLF CORP.
(Name of Registrant in Our Charter)
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NEVADA 5136 88-0374969
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer Identification No.)
Incorporation Industrial
or Organization) Classification Code Number)
22 SOUTH LINKS AVENUE, SUITE 204 EARL T. INGARFIELD
SARASOTA, FLORIDA 34236 22 SOUTH LINKS AVENUE, SUITE 204
(941) 330-8051 SARASOTA, FLORIDA 34236
(Address and telephone number of (941) 330-8051
Principal Executive Offices and (Name, address and telephone number
Principal Place of Business) of agent for service)
Copies to:
Clayton E. Parker, Esq. Ronald S. Haligman, Esq.
Kirkpatrick & Lockhart LLP Kirkpatrick & Lockhart LLP
201 S. Biscayne Boulevard, Suite 2000 201 S. Biscayne Boulevard, Suite 2000
Miami, Florida 33131 Miami, Florida 33131
(305) 539-3300 (305) 539-3300
Telecopier No.: (305) 358-7095 Telecopier No.: (305) 358-7095
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Approximate date of commencement of proposed sale to the public: AS SOON
AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933 check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) FEE
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Common stock, par value $0.001 per share 55,500,000 Shares $0.21 $11,655,000 $3,076.92
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TOTAL 55,500,000 Shares $11,655,000 $3,076.92
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933. For the purposes
of this table, we have used the average of the closing bid and asked prices
as of December 13, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Subject to completion, dated December ___, 2000
AVID SPORTSWEAR & GOLF CORP.
55,500,000 SHARES OF COMMON STOCK
This prospectus relates to the resale of up to 55,500,000 shares of our
company's common stock by certain persons who are, or will become, shareholders
of our company. Of that total, certain selling shareholders will resell up to
50,000,000 shares of common stock in this offering that they received pursuant
to conversion of debentures that were purchased from us under a Line of Credit.
Our company is not selling any shares of common stock in this offering and
therefore will not receive any proceeds from this offering. We will, however,
receive proceeds from the sale of debentures under the Line of Credit. All costs
associated with this registration will be borne by our company. Our company has
also agreed to pay the May Davis Group, Inc. a fee of 8.4% of the proceeds
raised by us under the Line of Credit.
The shares of common stock are being offered for sale on a "best
efforts" basis by the selling shareholders at prices established on the
Over-the-Counter Bulletin Board during the term of this offering. There are no
minimum purchase requirements. These prices will fluctuate based on the demand
for the shares of common stock.
The selling stockholders consist of:
o GMF Holdings, Inc., which intends to resell up to 50,000,000 shares
of common stock to be issued upon conversion of debentures that may
be purchased under a Line of Credit Agreement, dated November 28,
2000.
o Mark Angelo, Hunter Singer, Joseph Donahue and Robert Farrell, all
of whom intend to resell up to 1,680,000 shares of common stock to
be issued upon exercise of warrants issued in connection with the
Line of Credit.
o The Persia Consulting Group, Inc., which intends to resell up to
250,000 shares of common stock previously issued and 320,000 shares
of common stock to be issued upon exercise of warrants, all of which
were issued in connection with consulting services provided, or to
be provided, to our company.
o Peter Che Nan Chen, Keyway Holding Co., William Murphy and Gerald
Hatton Simpson, all of whom intend to resell up to 1,200,000 shares
of common stock to be issued upon conversion of debentures that were
previously sold by our company.
o Basil Holdings, Ltd. and Ojibway Investments, Ltd., both of which
intend to resell up to 2,000,000 shares of common stock that were
previously sold by our company.
o Jie Zhu, who intends to resell up to 50,000 shares of common stock
previously issued in connection with consulting services provided,
or to be provided, to our company.
GMF Holdings, Inc. is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the resale of common stock under the
Line of Credit Agreement. GMF Holdings, Inc. will pay our company 80% of the
market price of our company's common stock. The 20% discount on the purchase of
the common stock to be received by GMF Holdings, Inc. will be an underwriting
discount.
Our common stock is quoted on the Over-the-Counter Bulletin Board under
the symbol "AVSG." On December 13, 2000, the last reported sale price of our
common stock on the Over-the-Counter Bulletin Board was $0.19 per share.
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
PLEASE REFER TO "RISK FACTORS" BEGINNING ON PAGE 7.
PRICE TO PUBLIC* PROCEEDS TO SELLING
SHAREHOLDERS
Per share $0.25 $0.25
Total $0.25 $13,375,000
-----------------------
* This includes the resale of 50,000,000 shares of common stock by GMF
Holdings, Inc. GMF Holdings, Inc.'s shares of common stock is based on it
purchasing all $10 million of debentures under the Line of Credit for a 20%
discount to the $0.25 market price on conversion of the debentures purchased
pursuant to the Line of Credit. Upon resale, assuming a market price of $0.25
per share of our common stock, GMF Holdings, Inc. would receive $12,500,000
million in net proceeds. This table also includes the resale of 2,300,000 shares
of common stock that were previously issued and 1,200,000 shares of common stock
to be issued upon conversion of debentures that were previously sold by our
company. This table excludes up to 2,000,000 shares of common stock that may be
sold upon the exercise of warrants. As indicated above, the price to the public
will fluctuate because the price will be equal to the price which can be
obtained on the Over-the-Counter Bulletin Board. For the purposes of this table,
we have used an assumed market price of $0.25.
No underwriter or any other person has been engaged to facilitate the
sale of shares of common stock in this offering. This offering will terminate
24 months after the accompanying registration statement is declared effective by
the Securities and Exchange Commission. None of the proceeds from the sale of
stock by the selling stockholders will be placed in escrow, trust or any similar
account.
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is ___________ ___, 2000.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY............................................................3
SUMMARY CONSOLIDATED FINANCIAL INFORMATION....................................6
RISK FACTORS..................................................................7
FORWARD-LOOKING STATEMENTS...................................................12
SELLING SHAREHOLDERS.........................................................13
USE OF PROCEEDS..............................................................14
DILUTION.....................................................................14
CAPITALIZATION...............................................................15
LINE OF CREDIT...............................................................16
PLAN OF DISTRIBUTION.........................................................19
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION....................20
MANAGEMENT'S DISCUSSION AND ANALYSIS.........................................21
DESCRIPTION OF BUSINESS......................................................25
MANAGEMENT...................................................................31
DESCRIPTION OF PROPERTY......................................................35
PRINCIPAL SHAREHOLDERS.......................................................36
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................38
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS..................................................40
DESCRIPTION OF SECURITIES....................................................41
EXPERTS......................................................................43
LEGAL MATTERS................................................................43
AVAILABLE INFORMATION........................................................43
FINANCIAL STATEMENTS........................................................F-1
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We became a reporting company on February 1, 2000 and intend to
distribute to our shareholders annual reports containing audited financial
statements. Our audited financial statements for the fiscal year December 31,
1999 were contained in our Form 10-SB (as amended) filed with the Securities and
Exchange Commission. Our quarterly reports for the first, second and third
quarters of 2000 containing unaudited interim financial statements have been
filed with the Securities and Exchange Commission and are available from the
company.
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PROSPECTUS SUMMARY
THE COMPANY
Through our wholly-owned subsidiary, Avid Sportswear, Inc., we design,
manufacture and market distinctive premium and moderately-priced sportswear. We
sell our products primarily through golf pro shops and resorts, corporate sales
accounts and better specialty stores. Our sportswear is marketed under the
following labels:
o Avid Sportswear;
o Dockers Golf; and
o British Open Collection.
We market sportswear under the "Avid Sportswear" label, in both premium
and moderately-priced product categories. Our moderately-priced product category
is marketed under the "Dockers Golf" label, while our premium-priced product
category is marketed under the "British Open Collection" label. Eventually our
product line may include non-apparel, golf-related products. Our products
feature distinctive, comfortable designs made primarily of natural fibers. All
of our products are manufactured by independent contractors. Embroidering,
warehousing and certain other functions are performed in a leased facility
located in Gardena, California. Our goal is to become one of the most recognized
and respected brands in sports apparel by expansion of existing labels,
purchasing other apparel businesses or licensing other brand names. We believe
this industry is highly fragmented and ripe for consolidation.
We were formed on September 19, 1997 in Nevada under the name Golf
Innovations Corp. We had no significant operations until March 1, 1999, at which
time we acquired Avid Sportswear, Inc. From its inception on October 6, 1988 in
California, Avid Sportswear, Inc.'s business has involved the design,
manufacture and marketing of golf apparel. On March 1, 1999, Avid Sportswear,
Inc. became our wholly-owned subsidiary and it continues to operate as a
separate legal entity. To better identify ourselves with the "Avid Sportswear"
brand, we changed our name to Avid Sportswear & Golf Corp. on May 27, 1999. All
of our operations are conducted through Avid Sportswear, Inc.
INDUSTRY
Our target customers are sports-minded professional men and women who
like casual, high-quality and distinctively styled apparel that reflects an
active lifestyle. We believe golf's popularity has risen in recent years.
According to the National Golf Foundation and McKinsey & Company, the number of
rounds played in the United States was 530 million rounds in 1998 and is
projected to increase to 630 million rounds in 2010. Over this same time frame,
according to the National Golf Foundation and McKinsey & Company, the number of
golfers in the United States is projected to increase from 26 million golfers in
1998 to 29 million golfers by 2010. The National Golf Foundation projects the
market for sales of sportswear apparel sold through all golf facilities to
increase between 3% to 5% annually through 2005. We believe there are over 4,500
golf pro shops and 1,000 better specialty stores in the United States.
STRATEGY
Our goal is to become one of the most recognized and respected brands in
sports apparel. Key elements of our business strategy include:
o EXPAND PRODUCT LINE. We intend to expand our product line by
increasing our volume of private label "made for" and corporate
sales. In addition, we intend to expand our product line by
licensing or purchasing existing brands of sportswear. We expect to
target brands which will complement the existing brands by filling a
perceived market niche, having name recognition and/or offering new
price points. We believe this strategy is best demonstrated by the
purchase of the "Avid Sportswear" label and the license of the
"Dockers Golf" and "British Open Collection" labels.
o MARKET PENETRATION OF EXISTING LABELS. We hope to leverage our
brands into greater shelf space by cross-promoting our products and
by offering in-store fixturing programs. In addition, we intend to
hire additional sales staff and independent sales representatives to
broaden our customer base. We currently sell to over 800 customers
in the United States. We estimate that the United States market is
3
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comprised of more than 4,500 golf pro shops and 1,000 better
specialty stores. We intend to use our labels and sales staff to
broaden our customer base and increase our average order size.
o INTERNATIONAL MARKETS. We believe the international markets will
provide us with new opportunities for the Avid Sportswear label and
other labels we may acquire in the future. We intend to enter these
markets by using distributors and licensees who are familiar with
the local markets. We believe international markets are receptive to
American lifestyle apparel brands in general and will be receptive
to the Avid Sportswear label in particular.
ABOUT US
Our principal office is located at 22 South Links Avenue, Suite 204,
Sarasota, Florida 34236, telephone number (941) 330-8051. Our worldwide website
is WWW.AVIDSPORTSWEAR.COM. Information contained on our website is not part of
this prospectus. For a copy of this prospectus, please contact us at the above
address and phone number.
4
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THE OFFERING
This offering relates to the resale of common stock by certain persons
who are, or will become, shareholders of our company. The selling shareholders
consist of:
o GMF Holdings, Inc., which intends to resell up to 50,000,000 shares
of common stock to be issued under a Line of Credit Agreement, dated
November 28, 2000.
o Mark Angelo, Hunter Singer, Joseph Donahue and Robert Farrell, all
of whom intend to resell up to 1,680,000 shares of common stock to
be issued upon exercise of warrants issued in connection with the
Line of Credit.
o The Persia Consulting Group, Inc., intends to resell up to 250,000
shares of common stock previously issued and 320,000 shares of
common stock to be issued upon exercise of warrants, all of which
were issued in connection with consulting services provided, or to
be provided, to our company.
o Peter Che Nan Chen, Keyway Holding Co., William Murphy and Gerald
Hatton Simpson, all of whom intend to resell up to 1,200,000 shares
of common stock to be issued upon conversion of debentures that were
previously sold by our company.
o Basil Holdings, Ltd. and Ojibway Investments, Ltd., both of which
intend to resell up to 2,000,000 shares of common stock that were
previously sold by our company.
o Jie Zhu, who intends to resell up to 50,000 shares of common stock
previously issued in connection with consulting services provided,
or to be provided, to our company.
Pursuant to the Line of Credit, we may, at our discretion, periodically
issue and sell to GMF Holdings, Inc. debentures for a total purchase price of
$10 million. GMF Holdings, Inc. may convert the debentures for shares of common
stock at a conversion price that is equal to 80% of the lowest closing bid price
for the 10 days immediately following the notice date of conversion. GMF
Holdings, Inc. intends to resell any shares purchased under the Line of Credit
at the market price. In connection with this transaction, our company granted to
the May Davis Group, Inc. warrants to purchase 1,680,000 shares of common stock
at an exercise price of $0.35 per share. The May Davis Group, Inc. has indicated
that the warrants will be transferred to Mark Angelo, Hunter Singer, Joseph
Donahue and Robert Farrell. We granted warrants to purchase 320,000 shares of
common stock at an exercise price of $0.35 per share to the Persia Consulting
Group, Inc. in exchange for consulting services provided, or to be provided, to
our company. This prospectus relates to (i) the shares of common stock to be
issued pursuant to the conversion of the debentures that are purchased under the
Line of Credit and upon the exercise of the warrants in connection with the Line
of Credit; (ii) common stock previously issued and shares of common stock to be
issued upon exercise of warrants issued in connection with consulting services
provided, or to be provided, to our company; and (iii) shares of common stock to
be issued upon conversion of debentures previously issued by our company.
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COMMON STOCK OFFERED 85,500,000 shares by our selling shareholders
OFFERING PRICE Market price
COMMON STOCK OUTSTANDING BEFORE THE OFFERING(1) 46,479,406 as of December 18, 2000
USE OF PROCEEDS We will not receive any proceeds of the
shares offered by the selling shareholders.
Any proceeds we receive from the sale of
debentures under the Line of Credit and the
exercise of warrants will be used for general
corporate purposes.
RISK FACTORS The securities offered hereby involve a high
degree of risk and immediate substantial
dilution. See "Risk Factors" and "Dilution."
OVER-THE-COUNTER BULLETIN BOARD SYMBOL AVSG
PLAN OF DISTRIBUTION The selling shareholders must sell the shares
registered in this offering through registered
brokers or dealers.
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-------------------------------
(1) This table excludes 1,939,477 options and 424,714 warrants to purchase
shares of our company's common stock.
5
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 2000 DECEMBER 31, 1999
(UNAUDITED) (AUDITED)
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STATEMENT OF OPERATION DATA:
Sales, net $5,912,021 $2,360,596
Cost of goods sold 5,027,164 1,959,997
Gross margin 884,857 400,599
Total operating expenses 6,559,681 5,021,973
Interest expense (321,902) (438,269)
Net loss (5,957,859) (5,035,978)
Net loss per share-basic (0.13) (0.23)
SEPTEMBER 30, 2000 DECEMBER 31, 2000
(UNAUDITED) (AUDITED)
----------- ---------
BALANCE SHEET DATA:
Cash $ -- $ 237,407
Accounts Receivable -- 315,804
Inventory 4,298,807 1,885,390
Total Equipment 1,123,967 457,114
Goodwill 2,154,154 2,346,103
Total Assets 7,723,770 5,279,834
Total Current Liabilities 5,816,346 3,753,747
Total Liabilities 6,579,703 3,753,747
Stockholders' Equity (Deficit) 1,144,067 1,526,087
6
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RISK FACTORS
Our Company is subject to various risks which may materially harm our
business, financial condition and results of operations. YOU SHOULD CAREFULLY
CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION
IN THIS FILING BEFORE DECIDING TO PURCHASE OUR COMMON STOCK. THESE ARE NOT THE
ONLY RISKS AND UNCERTAINTIES THAT WE FACE. IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING
RESULTS COULD BE MATERIALLY HARMED. IN THAT CASE, THE TRADING PRICE OF OUR
COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE
We have historically lost money. In the nine months ended September 30,
2000 and the year ended December 31, 1999, we sustained losses of $6.0 million
and $5.0 million, respectively. Future losses are likely to occur. Our
independent auditors have noted that our company does not have significant cash
or other material assets to cover its operating costs and to allow it to
continue as a going concern. Our ability to obtain additional funding will
determine our ability to continue as a going concern. Accordingly, we may
experience significant liquidity and cash flow problems if we are not able to
raise additional capital as needed and on acceptable terms. No assurances can be
given that we will be successful in reaching or maintaining profitable
operations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS
We have relied on significant external financing to fund our operations.
Such financing has historically come from a combination of borrowings and sale
of common stock from third parties and funds provided by certain officers and
directors. We may need to raise additional capital to fund our anticipated
operating expenses and future expansion. Among other things, external financing
may be required to cover our operating costs and to fulfill our obligations
under the licenses for the "Dockers Golf" and "British Open Collection" brands.
These licenses require the payment of minimum guaranteed royalties, whether we
sell licensed products or not. We cannot assure you that financing whether from
external sources or related parties will be available if needed or on favorable
terms. The sale of our common stock to raise capital may cause dilution to our
existing shareholders. Our inability to obtain adequate financing will result in
the need to curtail business operations, and may also jeopardize our ability to
satisfy the guaranteed minimum royalty obligations referred to above. Such an
event may result in the termination of our licenses. Any of these events would
be materially harmful to our business and may result in a lower stock price.
WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FROM OUR INDEPENDENT AUDITOR
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with the 1999 and 1998 financial statements
which states that our company does not have significant cash or other material
assets to cover its operating costs and to allow it to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
WE WILL RECEIVE NO PROCEEDS FROM THIS OFFERING
This offering relates to shares of our common stock that may be offered
and sold from time to time by selling shareholders of our company. There will be
no proceeds to our company from the sale of shares of common stock in this
offering.
WE HAVE BEEN AND CONTINUE TO BE SUBJECT TO A WORKING CAPITAL DEFICIT AND
ACCUMULATED DEFICIT
We had a working capital deficit of $1.3 million and $93,000 at December
31, 1999 and 1998, respectively. At September 30, 2000, we had a working capital
deficit of $1.4 million. We had an accumulated deficit of $5.6 million and
7
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$760,099 at December 31, 1999 and 1998, respectively. At September 30, 2000, we
had an accumulated deficit of $11.5 million.
OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY
Prior to this offering, there has been a limited public market for our
common stock and there can be no assurance that an active trading market for our
common stock will develop. As a result, this could adversely affect our
shareholders' ability to sell our common stock in short time periods, or
possibly at all. Our common stock has experienced, and is likely to experience
in the future, significant price and volume fluctuations which could adversely
affect the market price of our common stock without regard to our operating
performance. In addition, we believe that factors such as quarterly fluctuations
in our financial results, announcements by other designers and marketers of
sportswear, and changes in the overall economy or the condition of the financial
markets could cause the price of our common stock to fluctuate substantially.
WE HAVE BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME
Because we have been in business for a short period of time, there is
limited information upon which investors can evaluate our business. We were
formed on September 19, 1997 but did not begin significant operations until the
purchase of our wholly-owned subsidiary on March 1, 1999. You should consider
the likelihood of our future success to be highly speculative in view of our
limited operating history, as well as the complications frequently encountered
by other companies in the early stages of development, particularly companies in
the highly competitive sports apparel industry.
WE RELY ON FOREIGN SUPPLIERS AND BUY MANY PRODUCTS USING LETTERS OF CREDIT
We obtain all of our garments from independent foreign and domestic
suppliers. We do not have formal agreements with these suppliers. Our reliance
on foreign suppliers may be affected by economic, political, governmental and
labor conditions in such foreign countries. This may delay or cut-off our
ability to source materials needed in production or may increase the price of
such materials. Such events would harm our business. In addition, several of our
suppliers have required us to obtain a letter of credit prior to purchasing any
garments. The Company may have to utilize a significant portion of its available
working capital to secure these letters of credit.
WE MAY BE HARMED BY IMPORT RESTRICTIONS
Our imported materials are subject to certain quota restrictions and
U.S. customs duties, which are a material part of our cost of goods. A decrease
in quota restrictions or an increase in customs duties could harm our business
by making needed materials scarce or by increasing the cost of such materials.
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK"
Our common stock may be deemed to be "penny stock" as that term is
defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934.
Penny stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last
three years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
8
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is a suitable investment for a prospective investor. These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to resell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.
OUR STOCK PRICE COULD DECLINE DUE TO SEASONAL FLUCTUATIONS IN THE DEMAND FOR OUR
PRODUCTS AND GENERAL ECONOMIC CONDITIONS
Our business has been, and will continue to be, highly seasonal, and our
quarterly operating results will fluctuate due to the seasonality of our sales
of sportswear, among other things. Our sales tend to be highest during our first
and second calendar quarters (i.e., January through June), and lowest during our
third and fourth calendar quarters (i.e., July through December). Other factors
contributing to the variability of our operating results include:
o Seasonal fluctuation in consumer demand;
o The timing and amount of orders from key customers; and
o The timing and magnitude of sales of seasonal remainder merchandise
and availability of products.
In addition, any downturn, whether real or perceived, in general
economic conditions or prospects could change consumer spending habits and
decrease demand for our products.
As a result of these and other factors, our operating results may fall
below market analysts' expectations in some future quarters, and our stock price
may decline.
OUR OFFICERS AND DIRECTORS EXERCISE CONTROL OF THE COMPANY
Our executive officers and directors beneficially own approximately
45.0% of our outstanding common stock. As a result, these shareholders acting
together would be able to exert significant influence over most matters
requiring shareholder approval, including the election of directors. They would
also be able to delay or deter a change in control, which may result in
shareholders not receiving a premium on their stock.
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL
Our success largely depends on the efforts and abilities of key
executives and consultants, including Earl T. Ingarfield, our Chairman and Chief
Executive Officer, Jerry L. Busiere, our Secretary, Treasurer and a Director,
and Barnum Mow, Chief Executive Officer and President of our wholly-owned
subsidiary and a Director of our company. The loss of the services of any of
these people could materially harm our business because of the cost and time
necessary to replace and train such personnel. Such a loss would also divert
management attention away from operational issues. We do not have an employment
agreement with Mr. Busiere. We have entered into three year employment
agreements with Mr. Ingarfield and Mr. Mow, respectively. We do not maintain
key-man life insurance policies on any of these people.
WE FACE RISKS RELATED TO COLLECTION OF RECEIVABLES
We extend credit to our customers based on an assessment of their
financial circumstances, generally without requiring collateral. Our business is
seasonal and we may, in the future, offer customer discounts for placing
pre-season orders and extended payment terms for taking delivery before the peak
shipping season. Any such extended payment terms increase our exposure to the
risk of uncollectible receivables. Some of our customers have experienced
financial difficulties in the past, and future financial difficulties of
customers could materially harm our business. Effective August 2000, we assign
our accounts receivable to a factor which assumes credit risk, generally on a
nonrecourse basis. Invoices for orders of approximately $1.2 million that were
taken by our company prior to August 2000 remain at our company's risk.
WE COULD FAIL TO ANTICIPATE CHANGES IN FASHION TRENDS
Fashion trends can change rapidly, and our business is particularly
sensitive to such changes because we typically design and arrange for the
manufacture of our apparel substantially in advance of sales of our products to
consumers. We cannot assure you that we will accurately anticipate shifts in
fashion trends, or in the popularity of golf, and adjust our merchandise mix to
appeal to changing consumer tastes in apparel in a timely manner. If we misjudge
9
<PAGE>
the market for our products or are unsuccessful in responding to changes in
fashion trends or in market demand, we could experience insufficient or excess
inventory levels, missed market opportunities or higher markdowns, any of which
could substantially harm our business and our brand image.
WE FACE SUBSTANTIAL COMPETITION IN OUR BUSINESS
The sportswear and outerwear segments of the apparel industry are highly
competitive. Competition is based primarily on brand recognition, product
differentiation and quality, style and production flexibility. Our future growth
and financial success depend on our ability to further penetrate and expand our
distribution channels, including golf, corporate, international and retail
sales. We encounter substantial competition in the golf distribution channel
from Polo/Ralph Lauren, Cutter & Buck, Ashworth, Antiqua and Izod. Many of our
competitors are significantly larger and more diversified than we are and have
substantially greater resources available for developing and marketing their
products. Many of our competitors' brands also are more established in golf
distribution channels than our brands. In addition, our competitors may be able
to enter the emerging e-commerce marketplace more quickly or more efficiently
than us. We cannot assure you that we will successfully compete in this
industry.
OUR FLEXIBILITY TO USE ANY CASH FROM OUR OPERATIONS OR EXTERNAL FINANCING MAY BE
LIMITED DUE TO MINIMUM ROYALTY PAYMENTS
We are required to pay minimum royalty payments under the licenses for
the "Dockers Golf" and "British Open Collection," whether we sell licensed
products or not. Our ability to use available cash as we see fit may be
restricted due to our obligation to pay these minimum royalty payments. This
could place a strain on our ability to pay other bills or to spend such cash in
the most productive manner. As a result, we may not be able to purchase
equipment, to take advantage of corporate opportunities or to maximize our
operating results.
WE MAY BE UNABLE TO MANAGE GROWTH
Successful implementation of our business strategy requires us to manage
our growth. Growth could place an increasing strain on our management and
financial resources. To manage growth effectively, we will need to:
o Implement changes in certain aspects of our business;
o Enhance our information systems and operations to respond to
increased demand;
o Attract and retain qualified personnel; and o Develop, train and
manage an increasing number of management-level and other employees.
If we fail to manage our growth effectively, our business, financial
condition or operating results could be materially harmed, and our stock price
may decline.
RISKS RELATED TO THIS OFFERING
FUTURE SALES BY OUR SHAREHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE AND OUR
ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS
Sales of our common stock in the public market following this offering
could lower the market price of our common stock. Sales may also make it more
difficult for us to sell equity securities or equity-related securities in the
future at a time and price that our management deems acceptable or at all. Of
the 46,479,406 shares of common stock outstanding as of December 1, 2000
(assuming no exercise of options or warrants), 12,375,330 shares are freely
tradable without restriction, unless purchased by our "affiliates." The
remaining 34,104,076 shares of common stock held by existing stockholders are
"restricted securities" and may be resold in the public market only if
registered or pursuant to an exemption from registration.
Upon completion of this offering, and assuming all shares registered in
this offering are resold in the public market, there will be an additional
55,100,000 shares of common stock outstanding (including and warrants issued in
connection with the Line of Credit). All of these shares of common stock may be
immediately resold in the public market upon effectiveness of the accompanying
registration statement and the sale to the investor under the terms of the Line
of Credit agreement. These consist of 50,000,000 shares of common stock to be
issued under the Line of Credit, 1,680,000 shares of common stock to be issued
upon exercise of warrants issued in connection with the Line of
10
<PAGE>
Credit, 300,000 shares of common stock previously issued in connection with
consulting services provided, or to be provided, to our company, 2,000,00 shares
of common stock previously issued by our company, 320,000 shares of common stock
to be issued upon exercise of warrants issued in connection with consulting
services provided, or to be provided, to our company, and 1,200,000 shares of
common stock to be issued upon conversion of debentures previously issued by our
company.
In addition, we have issued options to purchase a total of 1,939,477
shares of our common stock at exercise prices ranging from $0.30 to $0.375 per
share under our 2000 Stock Incentive Plan.
EXISTING SHAREHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM OUR SALE OF
SHARES UNDER THE LINE OF CREDIT OR THE EXERCISE OF WARRANTS
The sale of shares pursuant to the Line of Credit will have a dilutive
impact on our shareholders. As a result, our net income per share could decrease
in future periods, and the market price of our common stock could decline. In
connection with the Line of Credit, we issued warrants to purchase 1,680,000
shares of common stock at an exercise price of $0.35 per share. The issuance of
such shares pursuant to the conversion of debentures purchased under the Line of
Credit and the shares issuable upon exercise of the warrants would have a
further dilutive effect on our common stock and could lower the price of our
common stock. In addition, the lower our stock price is the more shares of
common stock we will have to issue under the Line of Credit. If our stock price
is lower, then our existing shareholders would experience greater dilution.
THE INVESTOR UNDER THE LINE OF CREDIT WILL PAY LESS THAN THE THEN-PREVAILING
MARKET PRICE OF OUR COMMON STOCK
The common stock to be issued upon conversion of the debenture purchased
under the Line of Credit will be issued at a 20% discount to the lowest closing
bid price for the 10 days immediately following the notice date of conversion.
These discounted sales could cause the price of our common stock to decline.
THE SELLING SHAREHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK IN THE
MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE
The selling shareholders intend to sell in the public market the shares
of common stock being registered in this offering. That means that up to
54,000,000 shares of common stock, the number of shares being registered in this
offering, may be sold. Such sales may cause our stock price to decline.
OUR COMMON STOCK HAS BEEN RELATIVELY THINLY TRADED AND WE CANNOT PREDICT THE
EXTENT TO WHICH A TRADING MARKET WILL DEVELOP
Before this offering, our common stock has traded on the
Over-the-Counter Bulletin Board. Our common stock is thinly traded compared to
larger more widely known companies in our industry. Thinly traded common stock
can be more volatile than common stock trading in an active public market. We
cannot predict the extent to which an active public market for the common stock
will develop or be sustained after this offering.
THE PRICE YOU PAY IN THIS OFFERING WILL FLUCTUATE
The price in this offering will fluctuate based on the prevailing market
price of the common stock on the Over-the-Counter Bulletin Board. Accordingly,
the price you pay in this offering may be higher or lower than the prices paid
by other people participating in this offering.
11
<PAGE>
FORWARD-LOOKING STATEMENTS
FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this prospectus may
contain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. This information may involve
known and unknown risks, uncertainties and other factors which may cause our
actual results, performance or achievements to be materially different from the
future results, performance or achievements expressed or implied by any
forward-looking statements. Forward-looking statements, which involve
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words "may," "will," "should," "expect,"
"anticipate," "estimate," "believe," "intend" or "project" or the negative of
these words or other variations on these words or comparable terminology.
This filing contains forward-looking statements, including statements
regarding, among other things, (a) our projected sales and profitability, (b)
our company's growth strategies, (c) anticipated trends in our company's
industry, (d) our company's future financing plans and (e) our company's
anticipated needs for working capital. These statements may be found under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as in this prospectus generally. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under "Risk Factors" and matters described in this prospectus
generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this filing will in fact occur.
In addition to the information expressly required to be included in this filing,
we will provide such further material information, if any, as may be necessary
to make the required statements, in light of the circumstances under which they
are made, not misleading.
12
<PAGE>
SELLING SHAREHOLDERS
The following table presents information regarding the selling
shareholders. Pursuant to the Line of Credit, GMF Holdings, Inc. has agreed to
purchase up to $10 million of debentures from our company. In connection with
the Line of Credit, our company granted to the May Davis Group, Inc. warrants to
purchase 1,680,000 shares of common stock at an exercise price of $0.35 per
share. The May Davis Group, Inc. has indicated that the warrants will be
transferred to Mark Angelo, Hunter Singer, Joseph Donahue and Robert Farrell.
Peter Che Nan Chen, Keyway Holding Co., William Murphy and Gerald Hatton Simpson
previously purchased debentures from our company that are convertible into
shares of our common stock. The Persia Consulting Group, Inc. and Jie Zhu are
consultants to our company. Except as noted above, none of the other selling
shareholders has held a position or office, or had any other material
relationship, with our company.
<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF OUTSTANDING
SHARES OUTSTANDING SHARES TO BE SHARES TO
BENEFICIALLY SHARES ACQUIRED BE ACQUIRED
OWNED BENEFICIALLY UNDER THE UNDER THE SHARES TO BE
SELLING BEFORE OWNED BEFORE LINE OF LINE OF SOLD IN THE
STOCKHOLDER OFFERING OFFERING(1) CREDIT(2) CREDIT(3) OFFERING
----------- -------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
GMF Holdings, Inc. 0 0.00% 50,000,000 51.8% 50,000,000
Mark Angelo(4) 0 0.00% 420,000 * 420,000
Hunter Singer(4) 0 0.00% 420,000 * 420,000
Joseph Donahue(4) 0 0.00% 420,000 * 420,000
Robert Farrell(4) 0 0.00% 420,000 * 420,000
Persia Consulting 820,000 1.8% 0 0.0% 570,000
Group(5)
Jie Zhu(6) 50,000 * 0 0.0% 50,000
Peter Che Nan Che(7) 160,000 * 0 0.0% 160,000
Keyway Holding Co.(7) 240,000 * 0 0.0% 240,000
William Murphy(7) 400,000 * 0 0.0% 400,000
Gerald Hatton Simpson(7) 400,000 * 0 0.0% 400,000
Basil Holdings, Ltd. 1,000,000 2.2% 0 0.0% 800,000
Ojibway Investments, Ltd. 1,000,000 2.2% 0 0.0% 800,000
</TABLE>
--------------------------------------------------
* Represents less than 1% of outstanding shares.
(1) Percentage of outstanding shares is based on 46,479,406 shares of common
stock outstanding as of December 18, 2000.
(2) Reflects the number of shares that could be acquired upon the conversion of
debentures that are purchased under the Line of Credit or upon the exercise of
options and warrants issued in connection with the Line of Credit.
(3) Percentage of outstanding shares is based on 46,479,406 shares of common
stock outstanding as of December 18, 2000, together with the maximum number of
shares of common stock that may be purchased by each selling shareholder from
our company under the Line of Credit or upon exercise of related warrants. The
shares to be issued to each selling shareholder under the Line of Credit or upon
exercise of related warrants are treated as outstanding for the purpose of
computing that person's percentage ownership, but are not treated as outstanding
for the purpose of computing the percentage ownership of any other selling
shareholder.
(4) These represent the number of shares of common stock to be issued upon
exercise of options and warrants issued in connection with the Line of Credit.
(5) Reflects 250,000 shares of common stock issued in connection with consulting
services provided or to be provided to our company, 320,000 shares of common
stock that could be issued upon exercise of warrants also issued in connection
with consulting services provided to our company and 250,000 shares of common
stock previously owned.
(6) Reflects 50,000 shares of common stock issued in connection with consulting
services provided or to be provided to our company.
(7) These represent the number of shares of common stock that could be acquired
upon the conversion of debentures that were purchased from our company on
November 1, 2000.
13
<PAGE>
USE OF PROCEEDS
This prospectus relates to shares of our common stock that may be
offered and sold from time to time by selling shareholders of our company. There
will be no proceeds to our company from the sale of shares of common stock in
this offering. However, our company will receive the proceeds from the sale of
debentures to GMF Holdings, Inc. under the Line of Credit, as well as the
proceeds, if any, relating to the exercise of outstanding warrants held by Mark
Angelo, Hunter Singer, Joseph Donahue, Robert Farrell and the Persia Consulting
Group, Inc. The conversion price of the debentures purchased under the Line of
Credit will be equal to 80% of the lowest closing bid price of our common stock
on the Over-the-Counter Bulletin Board for the 10 days immediately following the
notice date of conversion. All proceeds from the sale of the debentures, less
estimated offering expenses of $150,000 and placement agent and consultant fees
of 8.4% of the gross proceeds, under the Line of Credit and from the exercise of
warrants will be used for general corporate purposes. Our company previously
received $300,000 from the sale of debentures to Peter Che Nan Chen, Keyway
Holding Co., William Murphy and Gerald Hatton Simpson, and $400,000 from the
sale of shares of common stock to Basil Holdings, Ltd. and Ojibway Investments,
Ltd., all of such proceeds are being used for general corporate purposes.
DILUTION
Since this offering is being made solely by selling shareholders and
none of the proceeds will be paid to our company, our net tangible book value
will be unaffected by this offering. Our net tangible book value, however, will
be impacted by the common stock to be issued upon conversion of the debentures
purchased under the Line of Credit and upon exercise of warrants issued in
connection with the Line of Credit. Our existing shareholders, however, would
experience an increase in net tangible book value per share if the net proceeds
received by our company under the Line of Credit or upon exercise of the options
and warrants exceeded our net tangible book value per share on the date such
proceeds are received.
The net tangible book value of our company as of September 30, 2000 was
$(1,010,087) or $(0.023) per share of common stock. Net tangible book value is
determined by dividing the tangible book value of our company (total tangible
assets less total liabilities) by the number of outstanding shares of our common
stock.
14
<PAGE>
CAPITALIZATION
The following table sets forth the total capitalization of our company
as of September 30, 2000 and December 31, 1999:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
ACTUAL ACTUAL
(UNAUDITED) (AUDITED)
------------ ---------
<S> <C> <C>
Long-term Debt, Less Current Portion $ 0 $ 0
Stockholders' equity or capital deficit:
Common stock, $0.001 par value; 50,000,000
shares authorized 44,114,406 and 26,374,022
shares issued and outstanding(1) 44,114 26,374
Additional paid-in capital 13,460,932 7,092,848
Common stock subscription receivable (840,000) (30,000)
Accumulated deficit (11,520,994) (5,563,135)
Total stockholders' equity or (deficit) 1,144,052 1,526,087
Total capitalization $1,144,052 $ 1,526,087
</TABLE>
---------------------
(1) Excludes outstanding 1,939,477 options and 424,714 warrants to purchase
shares of our common stock, respectively.
15
<PAGE>
LINE OF CREDIT
Pursuant to the Line of Credit, we may, at our discretion, periodically
issue and sell to GMF Holdings, Inc. debentures for a total purchase price of
$10 million. If our company requests an advance under the Line of Credit, GMF
Holdings, Inc. will purchase debentures that may be converted into shares of
common stock of our company for 80% of the lowest closing bid price on the
Over-the-Counter Bulletin Board or other principal market on which our common
stock is traded for the 10 days immediately following the notice date of
conversion. GMF Holdings, Inc. intends to resell any shares converted under the
Line of Credit at the market price. In connection with this transaction, our
company granted to the May Davis Group, Inc. warrants to purchase 1,680,000
shares of common stock at an exercise price of $0.35 per share. The May Davis
Group, Inc. has indicated that the warrants will be transferred to Mark Angelo,
Hunter Singer, Joseph Donahue and Robert Farrell. Mark Angelo, Hunter Singer,
Joseph Donahue and Robert Farrell are employees of the May Davis Group, Inc.
This prospectus primarily relates to the shares of common stock to be issued
upon conversion of the debentures purchased under the Line of Credit and upon
the exercise of the warrants.
The effectiveness of the sale of debentures pursuant to the Line of
Credit and the issuance of the warrants is conditioned upon us registering the
shares of common stock underlying the debentures and warrants with the
Securities and Exchange Commission and upon our receiving shareholder approval
at our company's special meeting to be held on December 28, 2000.
ADVANCES. Pursuant to the Line of Credit, we may periodically sell
debentures to GMF Holdings, Inc. to raise capital to fund our working capital
needs. The periodic sale of debentures is known as an advance. We may request an
advance every 15 days.
MECHANICS. We may, at our discretion, request advances from GMF
Holdings, Inc. by written notice, specifying the amount requested up to the
maximum advance amount. A closing will be held 25 days after such written notice
at which time we will deliver debentures and GMF Holdings, Inc. will pay the
advance amount. We have the ability to determine when and if we desire to draw
an advance.
COMMITMENT PERIOD. We may request an advance at any time during the
commitment period. The commitment period begins on the date the Securities and
Exchange Commission first declares the accompanying registration statement
effective. The commitment period expires on the earliest to occur of (i) the
date on which GMF Holdings, Inc. has made advances totaling $10 million or (ii)
November 28, 2002 (I.E., two years from the date of the Line of Credit).
MAXIMUM ADVANCE AMOUNT. We may not request advances in excess of a total
of $10 million. In addition, each individual advance is subject to a maximum
advance amount based on an average daily volume of our company's common stock.
The maximum amount of each advance is equal to 150% of the average daily volume
of our company's common stock for the 40 trading days prior to the date of an
advance multiplied by 80% of the lowest closing bid price of our company's
common stock for the 10 trading days immediately following the notice date of an
advance.
By way of illustration only, if we had requested an advance on November
28, 2000, then the 40-day average volume would have been approximately 109,090
and the lowest closing bid price of our common stock for the 10 trading days
immediately following November 28, 2000 would have been $0.13. Accordingly, the
maximum advance amount would have been $21,273.
CONVERSION PRICE. The debentures sold under the Line of Credit may be
converted into shares of common stock at a conversion price of 80% of the lowest
closing bid price on the Over-the-Counter Bulletin Board or other principal
trading market for the 10 days immediately following the notice of conversion.
Note that the net proceeds to be received by our company will be lower than the
purchase price due to our obligation to pay a placement agent fee of 8.4% of
each advance to the May Davis Group, Inc.
NUMBER OF SHARES TO BE ISSUED. We cannot predict the actual number of
shares of common stock that will be issued pursuant to the Line of Credit, in
part, because the conversion price of the shares will fluctuate based on
prevailing market conditions and we have not determined the total amount of
advances we intend to draw. Nonetheless, we can estimate the number of shares of
16
<PAGE>
common stock that will be issued upon conversion of the debentures using certain
assumptions. Assuming we drew down the entire $10 million available under the
Line of Credit in a single advance (which is not permitted under the terms of
the Line of Credit) and the conversion price was equal to $0.20 per share, then
we would issue 50,000,000 shares of common stock to GMF Holdings, Inc. plus
warrants to purchase 1,680,000 shares of common stock to the May Davis Group,
Inc. These shares would represent 52.9% of our outstanding capital stock (53.7%
if the shares to be issued upon exercise of the and warrants are taken into
account) upon issuance. To assist our stockholders in evaluating the number of
shares of common stock that could be issued to GMF Holdings, Inc. and the May
Davis Group, Inc. at various prices, we have prepared the following table. This
table shows the number of shares of our common stock that would be issued with
and without the warrants at various prices.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Conversion Price: $.25 $.30 $.35 $.40 $.50
---- ---- ---- ---- ----
No. of Shares(1): 40,000,000 33,333,333 28,571,429 25,000,000 20,000,000
Total Outstanding
Excluding 86,479,406 79,812,739 75,050,835 71,479,406 66,479,406
Warrants(2):
Percent Outstanding
Excluding
Warrants(3): 46.3% 41.8% 38.1% 35.0% 30.1%
No. of Warrants(4): 1,680,000 1,680,000 1,680,000 1,680,000 1,680,000
Total Outstanding
Including 88,159,406 81,492,379 76,730,835 73,159,406 68,159,406
Warrants(5):
Percent Outstanding
Including
Warrants(6): 45.6% 40.9% 37.2% 34.2% 29.3%
</TABLE>
----------------------
(1) Represents the number of shares of common stock to be issued to GMF
Holdings, Inc. upon conversion of debentures at the prices set forth in
the table.
(2) Represents the total number of shares of common stock outstanding after
the issuance of the shares to GMF Holdings, Inc. and excludes the
issuance of shares to the May Davis Group, Inc. upon the exercise of
warrants granted to it.
(3) Represents the shares of common stock to be issued as a percentage of
the total number shares outstanding, excluding the warrants issued to
the May Davis Group, Inc.
(4) Represents the number of shares of common stock to be issued to the May
Davis Group, Inc. upon the exercise of warrants granted to it.
(5) Represents the total number of shares of common stock outstanding after
the issuance of the shares to GMF Holdings, Inc., including the issuance
of shares to the May Davis Group, Inc. upon the exercise of warrants
granted to it.
(6) Represents the shares of common stock to be issued as a percentage of
the total number shares outstanding, including the warrants issued to
the May Davis Group, Inc.
REGISTRATION RIGHTS. We granted to GMF Holdings, Inc. certain
registration rights. We are also obligated to register the shares of common
stock to be issued to the May Davis Group, Inc. upon exercise of the warrants.
The registration statement accompanying this prospectus will register such
shares upon effectiveness. The May Davis Group's registration rights were
subsequently transferred along with the warrants to Mark Angelo, Hunter Singer,
Joseph Donahue and Robert Farrell. The cost of this registration will be borne
by us.
17
<PAGE>
NET PROCEEDS. We cannot predict the total amount of proceeds to be
raised in this transaction, in part, because we have not determined the total
amount of the advances we intend to draw. However, we expect to incur expenses
of approximately $150,000 consisting primarily of professional fees incurred in
connection with registering 55,500,000 shares in this offering. In addition, we
are obligated to pay the May Davis Group, Inc. a cash placement agent fee equal
to 8.4% of each advance.
USE OF PROCEEDS. We intend to use the net proceeds received under the
Line of Credit for general corporate purposes.
PLACEMENT AGENT. We retained the May Davis Group, Inc. to act as our
placement agent in connection with the Line of Credit. We will pay a cash
placement agent fee to the May Davis Group, Inc. equal to 8.4% of each advance.
Further, we granted to the May Davis Group, Inc. warrants to purchase 1,680,000
shares of common stock. The warrants will become exercisable upon us drawing the
initial advance under the Line of Credit. Subsequently, the warrants were
transferred by the May Davis Group, Inc. to the following:
NAME: NUMBER OF WARRANTS
----- ------------------
Mark Angelo 420,000
Hunter Singer 420,000
Joseph Donahue 420,000
Robert Farrell 420,000
The exercise price of the warrants will be reduced if our company issues
or sells shares of common stock for, or issues securities convertible into
shares of common stock with a conversion or exercise price of, less than the
average closing bid prices of our common stock for the 10 trading days
immediately preceding the date of issuance, or in the case of options issued to
employees after 30 days of the employees start date, the closing bid price on
the date of issuance. In such event, the exercise price of the warrants will be
reduced to the price at which such common stock was issued or sold or to the
exercise price of such convertible securities. All warrants are exercisable for
five years after the date of issuance. The holders of the warrants may, under
certain circumstances, exercise the warrants pursuant to a cashless exercise.
SHAREHOLDER APPROVAL. The sale of debentures and the subsequent issuance
of the common stock pursuant to the conversion of such debentures and the
issuance of the common stock pursuant to the exercise of the warrants under the
Line of Credit is subject to us obtaining the affirmative vote of a majority of
our outstanding shares of common stock at a special meeting of our stockholders
to be held on December 28, 2000.
18
<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders have advised us that the sale or distribution
of our company's common stock owned by the selling shareholders may be effected
directly to purchasers by the selling shareholders or by pledgees, donees,
transferees or other successors in interest, as principals or through one or
more underwriters, brokers, dealers or agents from time to time in one or more
transactions (which may involve crosses or block transactions) (i) on the
Over-the-counter market or in any other market on which the price of our
company's shares of common stock are quoted or (ii) in transactions otherwise
than on the over-the-counter market or in any other market on which the price of
our company's shares of common stock are quoted. Any of such transactions may be
effected at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, at varying prices determined at the time of sale
or at negotiated or fixed prices, in each case as determined by the selling
shareholders or by agreement between the selling shareholders and underwriters,
brokers, dealers or agents, or purchasers. If the selling shareholders effect
such transactions by selling their shares of our company's common stock to or
through underwriters, brokers, dealers or agents, such underwriters, brokers,
dealers or agents may receive compensation in the form of discounts, concessions
or commissions from the selling shareholders or commissions from purchasers of
common stock for whom they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved). The selling
shareholders and any brokers, dealers or agents that participate in the
distribution of the common stock may be deemed to be underwriters, and any
profit on the sale of common stock by them and any discounts, concessions or
commissions received by any such underwriters, brokers, dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
GMF Holdings, Inc. is an "underwriter" within the meaning of the
Securities Act of 1933 in connection with the resale of common stock under the
Line of Credit agreement. GMF Holdings, Inc. will pay our company 80% of the
lowest closing bid price of our company's common stock on the Over-the-Counter
Bulletin Board or other principal trading market on which our common stock is
traded for the 10 days immediately following the notice date of conversion. The
20% discount on the purchase of the common stock to be received by GMF Holdings,
Inc. will be an underwriting discount. We retained the May Davis Group, Inc. as
our placement agent in connection with the Line of Credit. For its services, the
May Davis Group will be paid a placement agent fee consisting of a cash payment
of 8.4% of the gross proceeds raised in the Line of Credit, plus 1,680,000
warrants. These warrants have an exercise price of $0.35 per share.
Under the securities laws of certain states, the shares of common stock
may be sold in such states only through registered or licensed brokers or
dealers. We will inform the selling stockholders that any underwriters, brokers,
dealers or agents effecting transactions on behalf of the selling shareholders
must be registered to sell securities in all fifty states. In addition, in
certain states the shares of common stock may not be sold unless the shares have
been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
We will pay all the expenses incident to the registration, offering and
sale of the shares of common stock to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents. We
have agreed to indemnify certain selling shareholders and their controlling
persons against certain liabilities, including liabilities under the Securities
Act. We estimate that the expenses of the offering to be borne by us will be
approximately $150,000 as well as placement agent and consulting fees of 8.4% of
the gross proceeds received under the Line of Credit. We will not receive any
proceeds from the sale of any of the shares of common stock by the selling
stockholders. We will, however, receive proceeds from the sale of common stock
under the Line of Credit.
We will inform the selling shareholders that the anti-manipulation
provisions of Regulation M under the Exchange Act may apply to purchases and
sales of shares of common stock by the selling shareholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the shares. We will advise the selling shareholders that if a particular
offer of common stock is to be made on terms constituting a material change from
the information set forth above with respect to the Plan of Distribution, then
to the extent required, a Prospectus Supplement must be distributed setting
forth such terms and related information as required.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF OUR COMPANY AND THE NOTES THERETO APPEARING
ELSEWHERE IN THIS FILING.
OVERVIEW
Through our wholly-owned subsidiary, we design, manufacture and market
distinctive premium and moderately-priced sportswear. We sell our products
primarily through golf pro shops and resorts, corporate sales accounts and
better specialty stores. Our sportswear is marketed under three distinct labels:
Avid Sportswear, British Open Collection and Dockers Golf. From our
incorporation on September 19, 1997 until March 1, 1999, we had no operations.
On March 1, 1999, we acquired Avid Sportswear, Inc., which has been in the
business of designing, manufacturing and marketing golf apparel since October 6,
1988. For accounting purposes, the acquisition was treated as a purchase of Avid
Sportswear, Inc. All of our business operations are conducted through Avid
Sportswear, Inc.
PLAN OF OPERATIONS
ADDITIONAL FUND RAISING ACTIVITIES. As of September 30, 2000, we had no
cash-on-hand. We have historically funded our operations through a combination
of internally generated cash, funds loaned to our company by certain of our
officers and directors and through the sale of securities. We may need to raise
additional funds to meet expected demand for our products in 2000 and beyond.
Expenses are anticipated to increase in preparation for the upcoming season due
to, among other things, the addition of the Dockers Golf and British Open
Collection labels. If we underestimate demand or incur unforeseen expenses in
our product design or other areas, such funds may be required earlier. We are
registering 50,000,000 shares of common stock issued pursuant to the Line of
Credit if and when the Securities and Exchange Commission declares this
registration statement effective. The sale of these shares is permitted in most
states pursuant to registration or exemptions from registration. With respect to
certain other states, we are in the process of attempting to register such
shares with the applicable state securities authorities. No assurance can be
given that such registration in those states will be accomplished. These shares
of common stock may be offered and sold from time to time by selling
shareholders of our company, and none of the proceeds generated from such sales
will be available to our company.
SUMMARY OF ANTICIPATED PRODUCT DEVELOPMENT. We spent approximately
$285,000 and $430,000 on product development in 1999 and 2000, respectively, and
expect to spend approximately $450,000 on product development in 2001 in
preparation for future seasons and in designing products for the Dockers Golf
and British Open Collection labels. Because these product development efforts
are in their infancy, we expect these efforts to continue into the foreseeable
future. Initially, these efforts are expected to focus on golf-related apparel
and may eventually include other types of apparel. Even after our product lines
mature, we expect product development to remain a significant expense due to
changing fashions and other factors. We commenced a national roll-out of our
Dockers Golf and British Open Collection labels in the Fall of 2000.
SIGNIFICANT PLANT AND EQUIPMENT PURCHASES. We spent approximately
$860,000 to purchase computer hardware and software, telephone and embroidery
equipment in 2000. In 2001, we expect to spend approximately $150,000 on
additional equipment purchases.
20
<PAGE>
CHANGES IN NUMBER OF EMPLOYEES. We currently have 62 employees. As shown
in the following chart, we anticipate hiring additional personnel during 2001 in
connection with our expected growth plans. We believe that these personnel will
be adequate to accomplish the tasks set forth in the plan.
PROJECTED
CURRENT EMPLOYEES
DEPARTMENT EMPLOYEES 2001
---------- --------- ----
Marketing and Sales 7 7
Embroidery and Sewing 25 17
Warehousing and Delivery 9 7
Design and Production Control 3 3
Administrative and Other
Support Positions 18 16
-------- --------
Total Employees 62 50
-------- --------
Independent Contractors - Sales 33 35
-------- --------
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the
percentage of net sales represented by certain items in our company's
Consolidated Statement of Operations for the nine months ended September 30,
2000 and 1999 and for the three months ended September 30, 2000 and 1999:
<TABLE>
PERCENTAGE OF SALES
<CAPTION>
NINE MONTHS NINE MONTHS THREE THREE
ENDED ENDED MONTHS ENDED MONTHS ENDED
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 2000 30, 1999 30, 2000 30, 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales, net 100.0% 100.0% 100.0% 100.0%
Cost of goods sold (85.0%) (69.4%) (73.8%) (51.5%)
Gross margin 15.0% 30.6% 26.8% 48.5%
Operating expenses (111.0%) (132.5%) (107.6%) (59.7%)
(Loss) from
operations (96.0%) (101.9%) (81.5%) (12.4%)
Interest expense (5.4%) (1.7%) (0.9%) (2.2%)
Net loss (100.8%) (103.6%) (80.9%) (14.6%)
-------------------------------------------------------------------------------------------------
</TABLE>
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THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Our results of operations for the three-month period ended September 30,
1999, included three months of operations of our wholly-owned subsidiary, Avid
Sportswear, Inc. We acquired Avid Sportswear, Inc. on March 1, 1999. Our results
of operations in the three-month period ended September 30, 2000, also included
three months of operations of our wholly-owned subsidiary.
SALES, NET. Sales, net increased $1.5 million, or 187.0%, from $0.8
million to $2.2 million in the three months ended September 30, 2000 compared to
the same period in the prior year. This increase was primarily attributable to
the operations of our wholly-owned subsidiary, Avid Sportswear, Inc.
COST OF GOODS SOLD. Cost of goods sold increased $1.3 million, or
311.5%, from $0.4 million to $1.7 million in the three months ended September
30, 2000 compared to the same period in the prior year, and cost of goods sold
as a percentage of sales, net, increased from 51.5% in the three months ended
September 30, 1999 to 73.8% in the three months ended September 30, 2000. This
increase was primarily attributable to increased sales, net and the higher cost
of materials and freight incurred in connection with the introduction of the
Dockers Golf and British Open Collection product lines, as well as the need to
give concessions to customers caused by late shipping, and the liquidation of
inventory from prior seasons.
GROSS PROFIT. Gross profit increased $0.2 million in the three months
ended September 30, 2000 compared to the same period in the prior year. Gross
profit as a percentage of sales, net decreased from 48.5% to 26.2% in the three
months ended September 30, 1999 and 2000, respectively. This decrease was
primarily attributable to the increase in cost of goods sold in the current
period compared to the same period in the prior year.
SELLING EXPENSES. Selling expenses increased $1.0 million, or 693.9%,
from $0.1 million to $1.2 million in the three months ended September 30, 2000
compared to the same period in the prior year. This increase was primarily
attributable to the start-up costs incurred in connection with the introduction
of the Dockers Golf and British Open Collection product lines.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.9 million, or 337.0%, from $0.3 million to $1.1 million in the
three months ended September 30, 2000 compared to the same period in the prior
year. This increase was primarily attributable to the start-up costs incurred in
connection with the introduction of the Dockers Golf and British Open Collection
product lines.
INTEREST EXPENSE. Interest expense increased $3,612, or 20.6%, in the
three-month period ended September 30, 2000, compared to the same period in the
prior year. This increase consisted primarily of interest paid in connection
with bank loans. We anticipate an increase in interest expense in future periods
due to our increased borrowings, including a new factoring arrangement.
NET LOSS. Net loss increased $1.7 million, or 1,487.6%, from $0.1
million to $1.8 million in the three months ended September 30, 2000 compared to
the same period in the prior year. This increase was primarily attributable to
the increase in cost of goods sold, selling expenses and general and
administrative expenses in the three-month period ended September 30, 2000.
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Our results of operations for the nine-month period ended September 30,
1999, included seven months of operations of our wholly-owned subsidiary, Avid
Sportswear, Inc. Our results of operations in the nine-month period ended
September 30, 2000, included nine months of operations of our wholly-owned
subsidiary.
SALES, NET. Sales, net increased $3.6 million, or 152.6%, from $2.3
million to $5.9 million in the nine months ended September 30, 2000 compared to
the same period in the prior year. This increase is primarily attributable to
the introduction of the Dockers Golf and British Open Collection product lines.
The nine-month period ended September 30, 2000, included nine months of
operating results compared to seven months of operating results in the same
period in the prior year.
22
<PAGE>
COST OF GOODS SOLD. Cost of goods sold increased $3.4 million, or
209.6%, from $1.6 million to $5.0 million in the nine months ended September 30,
2000 compared to the same period in the prior year. Cost of goods sold as a
percentage of sales, net, increased from 69.4% in the nine months ended
September 30, 1999 to 85.0% in the nine months ended September 30, 2000. This
increase was primarily attributable to increased sales, net and the higher cost
of materials and freight incurred in connection with the introduction of the
Dockers Golf and British Open Collection product lines, as well as the need to
give concessions to customers caused by late shipping, and the liquidation of
inventory from prior seasons.
GROSS PROFIT. Gross profit increased $0.2 in the nine months ended
September 30, 2000 compared to the same period in the prior year. Gross profit
as a percentage of sales, net decreased from 30.6% to 15.0% in the nine months
ended September 30, 1999 and 2000, respectively. This decrease was primarily
attributable to the increase in cost of goods sold in the current period
compared to the same period in the prior year.
SELLING EXPENSES. Selling expenses increased $1.9 million, or 365.5%,
from $0.5 million to $2.5 million in the nine months ended September 30, 2000
compared to the same period in the prior year. This increase was primarily
attributable to the start-up costs incurred in connection with the introduction
of the Dockers Golf and British Open Collection product lines.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $1.4 million, or 56.6%, from $2.4 million to $3.8 million in the nine
months ended September 30, 2000 compared to the same period in the prior year.
This increase was primarily attributable to the start-up costs incurred in
connection with the introduction of the Dockers Golf and British Open Collection
product lines.
INTEREST EXPENSE. Interest expense increased $0.3 million, or 707.4%, in
the nine-month period ended September 30, 2000, compared to the same period in
the prior year. This increase consisted primarily of $0.2 million of interest
expense to reflect a discount given in connection with the conversion of debt to
equity. In total, during the nine-month period ended September 30, 2000, $1.2
million of debt was converted into 3.2 million shares of common stock at an
average price of $0.38 per share.
NET LOSS. Net loss increased $3.5 million, or 145.6%, from $2.4 million
to $6.0 million in the nine months ended September 30, 2000 compared to the same
period in the prior year. This increase was primarily attributable to the
increase in cost of goods sold, selling expenses, general and administrative
expenses and interest expense in the nine-month period ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, we had no cash-on-hand and our current
liabilities exceeded our current assets. A discussion of how we generated and
used cash in the period follows:
OPERATING ACTIVITIES. Our operating activities used $3.7 million in cash
during the nine-month period ended September 30, 2000, consisting mainly of a
net loss of $6.0 million and an increase in inventory $2.4 million. These items
were partially offset by common stock issued for services valued at $0.7
million, depreciation and amortization expenses of $0.3 million, an increase in
accounts payable of $2.4 million, a decrease in accounts receivable of $0.3
million an increase in leases payable of $0.2 million, an increase in due to
factor of $0.1 million and an increase in accrued expenses of $0.1 million.
INVESTING ACTIVITIES. Our investing activities used $0.8 million in cash
during the nine-month period ended September 30, 2000, consisting mainly of
embroidery equipment, an exhibit booth for trade shows and computer equipment.
FINANCING ACTIVITIES. Financing activities provided net cash of $4.1
million, generated mainly by the proceeds from related party notes payable of
$1.8 million, the issuance of common stock for cash of $2.0 million and proceeds
from subscribed stock of $1.8 million, partially offset by payments on notes
payable of $1.5 million.
Due to anticipated demand for our Dockers Golf product line, we will
need to rely on external financing to fund our operations for the foreseeable
future. Expenses are anticipated to increase as a result of anticipated
increases in sales volume. Our need for funding will increase likewise. If we
underestimate demand or incur unforeseen expenses in our product design or other
areas, such funds may be required earlier.
23
<PAGE>
In August 2000, we entered into a factoring, letter of credit and
revolving inventory facility. Under the terms of these arrangements, we assign
substantially all invoices for collection, typically on a non-recourse basis. We
may borrow up to 75% of eligible accounts receivable with a factoring commission
rate on the net sales factored and interest on the amounts advanced at the
factor's index rate plus 4.29%. The index rate was 6.5% at September 30, 2000,
corresponding to an interest rate of 10.79%. In addition, we may borrow up to
40% of eligible inventory, subject to a borrowing limit of $2,500,000. In
addition a letter of credit facility was established that is not to exceed
$3,500,000 subject to a reserve 60% of available borrowing under the revolving
facility. The term of the facility is one year and will automatically renew
unless either party gives sixty days' notice of its intent not to renew.
In August 2000, the outstanding balance of the company's loan with First
State Bank, including all collateral security and guarantees associated
therewith, were assigned to Earl T. Ingarfield, Michael LaValliere and Lido
Capital Corporation in consideration of payment in full of all outstanding
indebtedness to First State Bank. The outstanding balance of this loan is
included in the convertible notes payable to Lido Capital Corporation and Mr.
LaValliere.
On August 10, 2000, we received a letter from Dockers Golf that our
company was in default of the license with Dockers Golf for failure to pay
timely our royalty payments for May and June 2000. We have subsequently cured
this default to the satisfaction of Dockers Golf.
In November 2000, our company raised $300,000 in gross proceeds and
$255,000 in net proceeds from the sales of convertible debentures. See "Item 2.
Changes in Securities and Use of Proceeds."
On November 28, 2000, we entered into a Line of Credit with GMF
Holdings, Inc. Pursuant to the Line of Credit, GMF Holdings, Inc. agreed to
acquire up to $10 million of our debentures. The debentures are convertible into
shares of our common stock at a conversion price equal to 80% of the closing bid
price on the Over-the-Counter Bulletin Board or other principal market on which
our company's common stock is traded for the 10 days immediately following the
notice date of conversion. The timing of each sale and the number of debentures
to be sold is at our discretion, subject to various conditions, including an
effective registration of the conversion shares. The dollar amount that our
company can request under any individual sale is subject to the average trading
volume of our common stock for the preceding 40-day trading period. The maximum
term of the Line of Credit is 30 months from the date of the agreement. The
agreement contains various representations, warranties and covenants by us,
including limitations on our ability to sell common stock or common stock
equivalents, sell assets, merge, or enter into certain other transactions.
In December 2000, our company raised $400,000 from the sale of 2,000,000
shares of common stock. See "Item 2. Changes in Securities and Use of Proceeds."
SEASONALITY
Our business has been, and will continue to be, highly seasonal, and our
quarterly operating results will fluctuate due to the seasonality of our sales
of sportswear, among other things. Our sales tend to be highest during our first
and second calendar quarters (i.e., January through June), and lowest during our
third and fourth calendar quarters (i.e., July through December). Other factors
contributing to the variability of our operating results include:
o Seasonal fluctuation in consumer demand;
o The timing and amount of orders from key customers; and
o The timing and magnitude of sales of close-out merchandise and
availability of products.
As a result of these and other factors, our operating results may fall
below market analysts' expectations in some future quarters, which could
materially harm the market price of our common stock.
GOING CONCERN OPINION
Our independent auditors have added an explanatory paragraph to their
audit opinions issued in connection with the 1999 and 1998 financial statements
and to their review report to our financial statements as of September 30, 2000,
which states that our company does not have significant cash or other material
assets to cover its operating costs and to allow it to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
24
<PAGE>
DESCRIPTION OF BUSINESS
OVERVIEW
Through our wholly-owned subsidiary, Avid Sportswear, Inc., we design,
manufacture and market distinctive premium and moderately-priced sportswear. We
sell our products primarily through golf pro shops and resorts, corporate sales
accounts and better specialty stores. Our sportswear is marketed under the
following labels:
o Avid Sportswear;
o Dockers Golf; and
o British Open Collection.
We market sportswear under the "Avid Sportswear" label, in both premium
and moderately-priced product categories. Our moderately-priced product category
is marketed under the "Dockers Golf" label, while our premium-priced product
category is marketed under the "British Open Collection" label. Eventually our
product line may include non-apparel, golf-related products. Our products
feature distinctive, comfortable designs made primarily of natural fibers. All
of our products are manufactured by independent contractors. Embroidering,
warehousing and certain other functions are performed in a leased facility
located in Gardena, California. Our goal is to become one of the most recognized
and respected brands in sports apparel by expansion of existing labels,
purchasing other apparel businesses or licensing other brand names. We believe
this industry is highly fragmented and ripe for consolidation.
We were formed on September 19, 1997 in Nevada under the name Golf
Innovations Corp. We had no significant operations until March 1, 1999, at which
time we acquired Avid Sportswear, Inc. From its inception on October 6, 1988 in
California, Avid Sportswear, Inc.'s business has involved the design,
manufacture and marketing of golf apparel. On March 1, 1999, Avid Sportswear,
Inc. became our wholly-owned subsidiary and it continues to operate as a
separate legal entity. To better identify ourselves with the "Avid Sportswear"
brand, we changed our name to Avid Sportswear & Golf Corp. on May 27, 1999. All
of our operations are conducted through Avid Sportswear, Inc.
FINANCIAL PERFORMANCE
We have historically lost money. For the nine-months ended September 30,
2000, we sustained losses of $6.0 million. For the year ended December 31, 1999,
we sustained losses of $5.0 million. Our independent auditors have noted that
our company does not have significant cash or other material assets to cover its
operating costs and to continue as a going concern. Accordingly, we may
experience significant liquidity and cash flow problems if we are not able to
raise additional capital as needed and on acceptable terms. For more information
concerning our financial performance, please see "Risk Factors - We Have
Historically Lost Money and Losses May Continue in the Future" and "Management's
Discussion and Analysis or Plan of Operation."
PURCHASE OF AVID SPORTSWEAR, INC.
On December 18, 1998, we entered into an agreement to purchase Avid
Sportswear, Inc. from its shareholders. The purchase was completed on March 1,
1999. We paid $725,000 in cash and issued 1,100,000 shares of our common stock
to the former shareholders of Avid Sportswear, Inc. In connection with the
purchase, we were required to advance $1,826,111 to Avid Sportswear, Inc. to be
used to satisfy certain liabilities owed by Avid Sportswear, Inc. Avid
Sportswear, Inc. remains liable for any liabilities which existed on March 1,
1999. We received standard representations and warranties from the former
shareholders of Avid Sportswear, Inc., who also agreed to indemnify us for
certain events.
LICENSES TO USE CERTAIN TRADEMARKS
Of the three labels our products are marketed under, the "Dockers Golf"
and "British Open Collection" are licensed from their respective owners. The
"Avid Sportswear" label is owned by our wholly-owned subsidiary. A description
of these licenses follows:
25
<PAGE>
BRITISH OPEN COLLECTION. On December 8, 1998, our wholly-owned
subsidiary obtained the sole and exclusive right and license to use certain
trademarks associated with the British Open Golf Championship. The licensor is
The Championship Committee Merchandising Limited, which is the exclusive
licensor of certain trademarks from The Royal & Ancient Golf Club of St.
Andrews, Scotland. This license is for the United States and its territories and
has a seven year term. Under this license, our wholly-owned subsidiary may
manufacture, advertise, distribute and sell products bearing the licensed
trademarks to specialty stores and the menswear departments of department
stores. It is not permitted to sell these products to discount stores or
mass-market retail chains. In return for this license, our wholly-owned
subsidiary must pay the licensor, on a quarterly basis, a royalty equal to five
percent of net wholesale sales of products bearing these trademarks, subject to
a guaranteed minimum royalty. Net wholesale sales means the invoiced wholesale
billing price, less shipping, discounts actually given, duties, insurance, sales
taxes, value-added taxes and credits allowed for returns or defective
merchandise. Our wholly-owned subsidiary may also deduct uncollectible accounts
up to a total of five percent of such sales. The guaranteed minimum royalty is
as follows:
CONTRACT YEAR: MINIMUM ROYALTY:
-------------- ----------------
1 $100,000
2 $125,000
3 $150,000
4 $175,000
5 $200,000
6 $200,000
7 $200,000
The licensor has the right to approve or disapprove in advance of sale
the quality, style, color, appearance, material and workmanship of all licensed
products and packaging. It may also approve or disapprove any and all
endorsements, trademarks, trade names, designs and logos used in connection with
the license. Our wholly-owned subsidiary must submit samples of the licensed
products to the licensor for examination and approval or disapproval prior to
sale.
DOCKERS GOLF. On May 10, 1999, our wholly-owned subsidiary obtained the
exclusive, non-assignable right to use the "Dockers Golf" trademark solely in
connection with the manufacturing, advertising, distribution and sale of
products to approved retailers. The licensor is Levi Strauss & Co. This license
is for the United States, its territories and the Caribbean. It has an initial
term expiring on December 31, 2003 and will renew for an additional three year
term expiring December 31, 2006 if: (i) net sales of the licensed products for
calendar year 2002 are at least $17.0 million and (ii) our wholly-owned
subsidiary has not violated any material provisions of the license. Thereafter,
the licensor will negotiate in good faith for up to two additional three year
terms if: (i) the license is renewed for the initial renewal period, (ii) our
wholly-owned subsidiary's net sales for each year in the initial renewal period
have exceeded its projected sales for each such year and (iii) our wholly-owned
subsidiary has not violated any material provisions of the license. Subject to a
guaranteed minimum royalty, our wholly-owned subsidiary must pay the licensor a
royalty of six percent of net sales of first quality products and four percent
of net sales of second quality products and close-out or end-of-season products.
If second quality products and close-out or end-of-season products account for
more than ten percent of total licensed product sales, then the royalty on such
products will be six percent instead of four percent. The guaranteed minimum
royalty is as follows:
CONTRACT YEAR: MINIMUM ROYALTY:
-------------- ----------------
1 $250,000
2 $540,000
3 $765,000
4 $990,000
The guaranteed minimum royalty in the initial renewal period, if any,
will be equal to seventy-five percent of our wholly-owned subsidiary's projected
earned royalty derived from the sales plan provided for each annual period
contained in the initial renewal period. The guaranteed minimum royalty is
payable quarterly, except for the first year in which it is payable as follows:
$25,000 on March 31, 2000, $50,000 on June 30, 2000, $75,000 on September 30,
2000 and $100,000 on December 31, 2000.
26
<PAGE>
Our wholly-owned subsidiary is required to spend at least three percent
of its projected sales of licensed products for each year on advertising for
this brand. Between June 1, 1999 and December 31, 1999, it was required to spend
at least $240,000 on initial product launch advertising. The license requires
our wholly-owned subsidiary to produce two collections per year for the
spring/summer and winter/fall seasons, in at least 52 styles, of which 40 must
be tops and 12 bottoms. The licensor has the right to approve or disapprove in
advance of sale the trademark use, styles, designs, dimensions, details, colors,
materials, workmanship, quality or otherwise, and packaging. The licensor also
has the right to approve or disapprove any and all endorsements, trademarks,
trade names, designs and logos used in connection with the license. Samples of
the licensed products must be submitted to the licensor for examination and
approval or disapproval prior to sale.
BUSINESS STRATEGY
Our goal is to become one of the most recognized and respected brands in
sports apparel. Key elements of our business strategy include:
o EXPAND PRODUCT LINE. We intend to expand our product line by
increasing our volume of private label "made for" and corporate
sales. In addition, we intend to expand our product line by
licensing or purchasing existing brands of sportswear. We expect to
target brands which will complement the existing brands by filling a
perceived market niche, having name recognition and/or offering new
price points. We believe this strategy is best demonstrated by the
purchase of the "Avid Sportswear" label and the license of the
"Dockers Golf" and "British Open Collection" labels.
o MARKET PENETRATION OF EXISTING LABELS. We hope to leverage our
brands into greater shelf space by cross-promoting our products and
by offering in-store fixturing programs. In addition, we intend to
hire additional sales staff and independent sales representatives to
broaden our customer base. We currently sell to over 800 customers
in the United States. We estimate that the United States market is
comprised of more than 4,500 golf pro shops and 1,000 better
specialty stores. We intend to use our labels and sales staff to
broaden our customer base and increase our average order size.
o INTERNATIONAL MARKETS. We believe the international markets will
provide us with new opportunities for the Avid Sportswear label and
other labels we may acquire in the future. We intend to enter these
markets in the future by using distributors and licensees who are
familiar with the local markets. We believe international markets
are receptive to American lifestyle apparel brands in general and
will be receptive to the Avid Sportswear label in particular.
MARKET
Our target customers are sports-minded professional men and women who
like casual, high-quality and distinctively styled apparel that reflects an
active lifestyle. We believe golf's popularity has risen in recent years.
According to the National Golf Foundation and McKinsey & Company, the number of
rounds played in the United States was 530 million rounds in 1998 and is
projected to increase to 630 million rounds in 2010. Over this same time frame,
according to the National Golf Foundation and McKinsey & Company, the number of
golfers in the United States is projected to increase from 26 million golfers in
1998 to 29 million golfers by 2010. The National Golf Foundation projects the
market for sales of sportswear apparel sold through all golf facilities to
increase between 3% to 5% annually through 2005. As indicated above, we believe
there are over 4,500 golf pro shops and 1,000 better specialty stores in the
United States.
COMPETITION
The sportswear and outerwear segments of the apparel industry are highly
competitive. Competition is based primarily on brand recognition, product
differentiation and quality, style and production flexibility. Five companies
account for about one-quarter of all apparel sales in the industry. These
companies are: Polo/Ralph Lauren, Cutter & Buck, Ashworth, Antiqua and Izod.
Between 200 and 300 companies account for the remaining apparel sales in the
industry. Many of these companies have greater resources and sell brands with
greater name recognition than us. We are attempting to differentiate ourselves
from our competitors by purchasing or licensing well-established brand names and
producing high quality, stylish sportswear.
27
<PAGE>
PRODUCTS
We design industry-leading products which feature high-quality
materials, such as fine-gauge combed cotton, virgin wools and performance
microfibers. Our products are finished with unique trims, special fabric
finishes and washes and extra needlework. All of our manufacturing is outsourced
to independent contractors. We offer distinctive products under the following
three labels:
o Avid Sportswear;
o Dockers Golf; and
o British Open Collection.
AVID SPORTSWEAR. The Avid Sportswear label is designed exclusively for
the men's market and is sold in the premium and mid-priced product categories.
This product line features higher quality materials and sewing, and more
detailed designs in the premium category than in the mid-priced category. It is
marketed to golfers and others.
DOCKERS GOLF. The Dockers Golf label is designed for the men's market.
It is marketed to brand-conscious golfers seeking moderately priced, high
quality golf apparel. This label appeals to the casual market, and is rugged and
durable.
BRITISH OPEN COLLECTION. The British Open Collection label is designed
for the men's market. It is marketed exclusively as a premium brand, and
combines the elegance and tradition that characterizes the British Open Golf
Tournament. This label is made of the finest quality material and features
detailed designs and embroidery.
PRODUCT DEVELOPMENT
Our experienced product development team determines product strategy,
color and fabric selection. With respect to the "British Open Collection" and
"Dockers Golf" labels, the respective licensors have the right to approve or
disapprove the design and other aspects of our products prior to sale and may
require modifications. Our design and production teams coordinate product
development, negotiate price and quantity with cutting and sewing contractors,
purchase fabrics and trim, and establish production scheduling. These teams also
coordinate the inspection of fabric deliveries and perform fabric testing for
shrinkage and color-fastness. Except for embroidering, all manufacturing is
outsourced to independent contractors. We do not have any long-term agreements
with our contractors. Our quality control personnel are responsible for
inspecting finished goods on arrival from our contractors.
The production of our product lines is time sensitive. Due to seasonal
variations in the demand for golf apparel, we are required to forecast market
demand, place raw material orders and schedule cutting and sewing services in
order to have inventory available to meet projected sales. Our designs are
usually finalized between six and nine months prior to the display of our
seasonal product lines by customers. We design for two collections per year, the
spring/summer and winter/fall seasons. Collections are shipped about three to
four months in advance of display by our customers.
Since we did not begin significant operations until March 1, 1999, the
date we acquired Avid Sportswear, Inc., we did not spend any money on product
development in 1998 or 1997. We spent approximately $280,000 in 1999. We expect
to spend approximately $430,000 and $450,000 in 2000 and 2001, respectively, on
product development. None of these costs were borne directly by our customers.
SOURCES OF SUPPLY
The design staff is responsible for creating innovative products for our
two seasonal collections. During the design process, our manufacturing sources
develop new seasonal textiles in association with the design team. This enables
us to source a wide variety of textile and printed artwork designs. Our
materials are sourced from a wide variety of domestic and foreign suppliers. We
believe we can replace the loss of any supplier without causing any material
harm to our business.
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DISTRIBUTION AND SALES
GENERAL. Our products are distributed in the United States primarily
through golf pro shops, resorts and specialty stores. Our products are sold
through a dedicated sales staff as well as independent sales representatives. As
of December 1, 2000, our sales staff was composed of five employees and
thirty-four independent sales representatives. Each employee or sales
representative is responsible for serving targeted accounts in a specific
geographic region through merchandise consultation and training, and for meeting
specific account growth and average-order-size goals. They present our
collections each season at national and regional trade shows and at customers'
stores through promotional literature and samples. In addition to other
responsibilities, these employees and sales representatives implement our
merchandise fixturing program with suitable golf pro shops, resorts and
specialty stores. Our products are typically sold on open account with payment
required within thirty days. Certain large customers may require extended credit
terms as a condition to carrying a product line. We will where required conform
to this industry practice.
AVID SPORTSWEAR. The Avid Sportswear product line is distributed in the
United States primarily through golf pro shops, resorts and specialty stores.
This product line is an approved vendor with Collegiate Licensing Company and is
sold to several professional sports teams.
BRITISH OPEN COLLECTION. The British Open Collection product line is
distributed in the United States primarily through department stores and
high-end golf pro shops. In the upcoming season, we intend to expand our
customer base by targeting high-end golf pro shops, resorts and specialty
stores.
DOCKERS GOLF. The Dockers Golf product line is distributed in the United
States and the Caribbean primarily through golf pro shops and specialty golf
stores. We believe this product line will have broad appeal and expect to target
traditional mass merchandise retail outlets as well as the golf pro shops,
resorts and specialty stores.
MERCHANDISING AND MARKETING
We believe our three labels are well-positioned to cater to
premium-priced and moderately-priced product categories. Avid Sportswear
addresses the premium and moderately priced product categories. The British Golf
Collection is an upscale, premium priced product line, and the Dockers Golf is a
brand conscious, moderately priced product line. We hope to leverage these
brands to expand our product offerings, customer base and average-order-size.
All of our products have golf-themes and are color-related. Our labels are
generally featured prominently on our products and displays to help build brand
loyalty. Our products are directed at sports-minded professional men who like
casual, high-quality and distinctively styled apparel that reflects an active
lifestyle. We expect our product lines to appeal to both golfers and others who
identify with an active lifestyle.
We currently advertise in national and regional trade magazines and
participate in various trade shows. Our products are also marketed on the World
Wide Web at http://www.avidsportswear.com, where we provide information and
pictures of products. Our promotional program offers point-of-sale displays
maintained by our sales staff and independent sales representatives. This
in-store fixturing program helps to showcase these collections and enhances our
brand image at the point of sale. The fixtures are designed to display assorted
elements of our collections and allow the consumer to easily assemble and
purchase coordinated outfits.
Our merchandise is sold and shipped to customers in collection groups.
We believe this will help to reinforce the strength of our product offerings.
For specialty items, we have developed an in-house embroidery service
and also work with independent embroiderers to embroider the customer's name or
logo on our garments.
ORDER BOOKING CYCLE AND BACKLOG
We receive our orders for a season over a ten month period beginning
when samples are first shown to customers and continuing into the season. We
begin to take orders for our fall collections in January, generally for delivery
between May and October and for our spring collection in August, generally for
delivery between November and April. Our domestic backlog, which consists of
open, unfilled customer orders, has not historically comprised a significant
part of our business. We expect our domestic backlog to become significant in
the future with the appeal of the Dockers Golf and British Open Collection
labels.
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INTELLECTUAL PROPERTY
We are attempting to build a brand name in the golf apparel industry. To
that end, we have received trademark protection in the United States and in the
European Community for the "Avid" name and logo. We are evaluating whether to
apply for trademark protection in other countries. Our name and logo are
regarded as valuable assets and critical to marketing our products.
The names and logos associated with the "British Open Collection" and
"Dockers Golf" are licensed from their respective owners.
STOCK AND OPTION ISSUANCES FOR PERSONAL GUARANTEES
Several individuals have personally guaranteed our lease obligations and
other corporate indebtedness. In exchange for these personal guarantees, our
company had agreed to issue the following individuals the number of shares of
common stock opposite their names:
NAME NUMBER OF SHARES
Earl T. Ingarfield 11,500,000
Thomas Browning 3,000,000
Michael LaValliere 3,000,000
Jeffrey Abrams 2,000,000
Stephen Ponsler 2,000,000
On January 17, 2000, all of the above described transactions were
rescinded and, in lieu thereof, our company granted the following options:
NAME NUMBER OF SHARES EXERCISE PRICE
Earl T. Ingarfield 200,000 $0.30
Thomas Browning 200,000 $0.30
Michael LaValliere 200,000 $0.30
Jeffrey Abrams 200,000 $0.30
Stephen Ponsler 200,000 $0.30
Subsequently, the options to Messrs. Ponsler and Abrams were cancelled when our
company's senior lender required payment of its loan facility to our company and
such payment was made solely by Mr. Lavaliere and Lido Capital Corporation.
MR. INGARFIELD OBTAINED CONTROL OF OUR COMPANY ON JUNE 4, 1998
As mentioned earlier in this filing, we were formed on September 19,
1997 in Nevada. On or about June 4, 1998, Lido Capital Corporation, an entity
wholly-owned by our President, Mr. Ingarfield, purchased 3,000,000 shares of
common stock (adjusted for a 3 for 1 stock split) for $150,000 from our founding
shareholders, Thomas Gelfand, Robert Gelfand and Jin Sook Lee. At the time of
the purchase, our company had 6,300,000 shares of common stock outstanding
(adjusted for a 3 for 1 stock split). As a result, Mr. Ingarfield owned 47.6% of
our company's outstanding capital stock. Mr. Ingarfield currently owns 31.1% of
our company's outstanding capital stock.
LEGAL PROCEEDINGS
We are involved in various claims and legal actions arising in the
ordinary course of business. In our opinion, the ultimate disposition of these
matters will not have a material adverse effect on our company.
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MANAGEMENT
Information concerning our current executive officers and directors is
set forth in the following table:
NAME: AGE: POSITION:
Earl T. Ingarfield 41 President, Chief Executive Officer and
Chairman
Jerry L. Busiere 65 Secretary, Treasurer and Director
Michael E. 39 Director
LaValliere
Thomas L. Browning 40 Director
Barnum Mow 43 Director and Chief Executive Officer
and President of Avid Sportswear, Inc.
David Roderick 47 Executive Vice-President of
Merchandising and Design of Avid
Sportswear, Inc.
EARL T. INGARFIELD has been the Chief Executive Officer, President and
Chairman since June 1998. Since June 30, 1995, Mr. Ingarfield has also been the
sole owner of Lido Capital Corporation, a privately-held company in Sarasota,
Florida. From 1979 to 1987, he was a professional hockey player for the Atlanta
Flames, Calgary Flames and Detroit Red Wings. For many years, he has also been
involved in Indy-car racing, offshore boat racing and is an avid golfer.
JERRY L. BUSIERE has been the Secretary, Treasurer and a Director since
June 1998. Mr. Busiere has over forty-one years of experience in accounting and
taxation. From 1997 to July 1998, he was Controller of Lido Capital Corporation,
a privately-held company owned by Mr. Ingarfield. From 1989 to 1995, he was a
Senior Rate Analyst and Chief Financial Officer of Poly-Portables, Inc., a
Georgia-based manufacturing company. From 1962 to 1988, he owned his own
accounting practice. He has served as a consultant for numerous companies, such
as Wellcraft Boat Manufacturing, Englewood Disposal Service, Poly-Portables,
Inc., Colony Beach Resort, Buccaneer Inn and Far Horizon Resorts. He received an
A.S. Degree in 1973 from the University of South Florida in Sarasota, Florida.
MICHAEL E. LAVALLIERE has been a Director of our company since June,
1998. Since 1996, he has also been President and CEO of Collaborative Marketing
Services, Inc. ("CMS"), a leader in the marketing and distribution of kiosk
advertising programs and point of sale machines in a broad range of
applications. Under Mr. LaValliere's leadership, CMS has become an industry
leader in the area of web page design activities for the Internet. From 1993 to
1996, he served as Vice President of Sales and Marketing for Interactive Golf
Services, Inc. ("IGSI"), a company which provided touch screen kiosks to the
golf market. Under Mr. LaValliere's direction, IGSI developed a client base
which included Maxfli Golf Co., Taylor Made Golf Co. and Cleveland Golf Co. From
1981 to 1995, he was a professional baseball player as a member of the
Philadelphia Phillies (1981-1984), St. Louis Cardinals (1985-1986), Pittsburgh
Pirates (1987-1992) and Chicago White Sox (1993-1995). While a member of the
Pirates and White Sox, he was elected to serve as the player union
representative with negotiation responsibilities in the area of labor contracts,
pension plans, player marketing rights and licensing agreements.
THOMAS L. BROWNING has been a Director of our company since June, 1998.
From 1992 to 1996, he was a member of the Cincinnati Reds Major League Baseball
team. Since retiring from professional baseball, Mr. Browning has been a General
Partner of Ashley Canterbury, a residential construction company in the greater
Cincinnati area, and also serves an active role in community youth programs and
the United Way.
BARNUM MOW has been Chief Executive Officer and President of Avid
Sportswear, Inc. since September, 1999. From 1983 until September 1999, Mr. Mow
was Senior Vice President of Bugle Boy Industries, a wholesale and retail
apparel company with combined annual sales of $550,000,000. Over a sixteen year
period of progressive management responsibility, Mr. Mow became responsible for
Bugle Boy's operations, distributions, sales, and management information
systems. Most recently, he led a management team, comprised for four
vice-presidents and four directors, which was responsible for over nine hundred
employees and a $40,000,000 annual operating budget. Mr. Mow managed four
distribution sites, totaling over one million square feet in size and which
supported two thousand five hundred wholesale accounts and two hundred sixty
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retail stores; the integration of software development with hardware platforms
used to support Bugle Boy's activities; and Bugle Boy's website, intranet,
telecommunications, video conferencing, and Internet e-commerce. He was
responsible for costing, merchandising, product development, production, and
bringing to market four different line breaks per year. Mr. Mow was also the
National Sales Manager for Bugle Boy Active Wear, Swim Wear and T-shirts, which
accounted for $70,000,000 in annual sales. Mr. Mow received a B.S. in Business
Administration from the University of Southern California.
DAVID RODERICK had been a Director of our company from March 1, 1999 to
November 26, 1999 and Executive Vice-President of Merchandising and Design of
our wholly-owned subsidiary since September, 1999. In this capacity, Mr.
Roderick is primarily responsible for our company's three brands: Avid
Sportswear, Dockers Golf and British Open Collection. Mr. Roderick founded Avid
Sportswear, Inc. in October of 1988. He served as President of Avid Sportswear,
Inc. until September, 1999, during which time he was responsible for the product
and brand development of the Avid Sportswear brand name.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table provides information
about the compensation paid by our company to its Chief Executive Officer and
all other current executive officers who were serving as executive officers at
the end of 1999 and who received in excess of $100,000:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
--------------------- -------------------------------------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARD(S) OPTIONS COMPENSATION
POSITION(S) YEAR SALARY ($) BONUS($) ($) ($) (#S) ($)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earl T. Ingarfield(1) 1999 -- -- -- -- -- --
Chief Executive 1998 -- -- -- -- -- --
Officer, President and
Chairman of the Board
of Directors
Jerry L. Busiere(2) 1999 -- -- -- -- -- --
Secretary, Treasurer
and Director 1998 -- -- -- -- -- --
Barnum Mow(3) 1999 $70,577 $25,000 -- $360,000(4) 864,477 --
President of Avid
Sportswear, Inc.
David Roderick, 1999 $150,000 -- $12,000 -- --
Executive
Vice-President of 1998 $150,000 -- $12,000 -- --
Merchandising and
Design of Avid
Sportswear, Inc.(5)
</TABLE>
---------------------
(1) Mr. Ingarfield became Chief Executive Officer, President and
Chairman of the Board of Directors in June, 1998.
(2) Mr. Busiere became Secretary, Treasurer and a Director in June,
1998.
(3) Mr. Mow became Chief Executive Officer and President of our
wholly-owned subsidiary on September 17, 1999.
(4) Reflects 1,200,000 shares of our common stock issued to Mr. Mow
valued at $0.30 per share.
(5) Mr. Roderick's other annual compensation consists of a company
car and automobile insurance.
EMPLOYMENT AGREEMENTS
On February 29, 2000, we entered into a three-year employment agreement
with Mr. Ingarfield. Pursuant to this agreement, Mr. Ingarfield is employed as
the Chief Executive Officer and President of our company. Mr. Ingarfield has an
annual base salary of $325,000, plus annual cost of living adjustments and other
increases to be determined by the Board of Directors. Except in the event of a
change of control or other special circumstance, Mr. Ingarfield's salary (less
employment taxes) will be paid quarterly in our company's stock on the last day
of each calendar quarter. In addition, Mr. Ingarfield will be entitled to annual
incentive bonus compensation in an amount to be determined by the Board of
Directors. Mr. Ingarfield is entitled to a company car. In the event that Mr.
Ingarfield's employment is terminated by our company without "cause" or by Mr.
Ingarfield for "good reason" (which includes a change of control), he is
entitled to receive all accrued or earned but unpaid salary, bonus (defined as
an amount equal to the prior years' bonus) and benefits for the lesser of the
balance of the term or three years. In addition, Mr. Ingarfield is entitled to
certain relocation expenses incurred in a change of principal residence. The
agreement provides that Mr. Ingarfield will not compete with our company during
his employment and for two years thereafter unless his employment is terminated
by our company without "cause" or by Mr. Ingarfield for "good reason." Mr.
Ingarfield has demand and piggy-back registration rights with respect to his
stock in our company. Mr. Ingarfield may require our company to file a
registration statement with respect to this stock on an annual basis. Additional
terms of Mr. Ingarfield's employment are set forth in his employment agreement,
which is included as an exhibit to our company's Registration Statement on Form
10-SB, as amended.
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Our wholly-owned subsidiary entered into a three year employment
agreement with Barnum Mow, commencing September 17, 1999. Upon the expiration of
the initial term, the agreement will automatically renew for one year terms
unless either party elects not to renew the agreement by providing written
notice to the other party at least four months' prior to the expiration of any
term. Mr. Mow is employed as the Chief Executive Officer and President of our
wholly-owned subsidiary, Avid Sportswear, Inc. His base salary is $300,000 per
year, subject to increases as determined by the Board of Directors of Avid
Sportswear, Inc. In addition to his salary, Mr. Mow also received a bonus of
$25,000 in 1999. His bonus will be the same for each year during the term unless
the employer establishes a formal bonus plan. The employer reimburses Mr. Mow
for all reasonable expenses incurred in connection with the performance of his
duties. On January 25, 2000, our company granted Mr. Mow options to purchase
864,477 shares of our common stock at a purchase price of $0.375 per share. In
February 2000, our company issued Mr. Mow 1,200,000 shares of our company's
common stock. Additional terms of Mr. Mow's employment are set forth in his
employment agreement, which is included as an exhibit to our company's
Registration Statement on Form 10-SB (as amended).
Our wholly-owned subsidiary also entered into a five year employment
agreement with David Roderick, effective January 1, 1999. From January, 1999,
until September, 1999, Mr. Roderick was employed as the President of Avid
Sportswear, Inc. In September, 1999, Mr. Roderick became the Executive Vice
President of Merchandising and Design. His base salary is $181,000, subject to
increases as determined by the employer. In addition, Mr. Roderick will be
eligible for bonuses at the discretion of the Board of Directors. The employer
will reimburse Mr. Roderick for all reasonable expenses incurred in connection
with the performance of his duties. Additional terms of employment are set forth
in his employment agreement, which is included as an exhibit to our company's
Registration Statement on Form 10-SB (as amended) filed with the Commission on
December 1, 1999.
We have not entered into an employment agreement with Mr. Busiere.
STOCK PLAN
On January 17, 2000, we adopted our company's 2000 Stock Incentive Plan,
under which our key employees, consultants, independent contractors, officers
and director are eligible to receive grants of stock or stock options. Our
company has reserved a total of 3,000,000 shares of common stock under the
incentive plan. It is presently administered by the Board of Directors. Subject
to the provisions of the incentive plan, the Board of Directors has full and
final authority to select the individuals to whom options will be granted, to
grant the options and determine the terms and conditions and the number of
shares issued pursuant thereto.
The maximum term of any option granted under the incentive plan is ten
years, except that with respect to incentive stock options granted to a person
possessing more than ten percent of the total combined voting power of all our
classes of stock, the maximum term of such options is five years. The exercise
price of incentive stock options under the incentive plan is the fair-market
value of the stock underlying the options on the date of grant and, in the case
of an incentive stock option granted to a ten-percent shareholder, the exercise
price must be at least 110% of the fair-market value of our stock at the time
the option is granted.
On January 17, 2000, we granted stock options as follows:
<TABLE>
<CAPTION>
NAME: NO. OF SHARES: EXERCISE PRICE: EXPIRATION:
---- ------------- -------------- ----------
<S> <C> <C> <C>
Earl T. Ingarfield 200,000 $0.30 January 16, 2010
Thomas Browning 200,000 $0.30 January 16, 2010
Michael 200,000 $0.30 January 16, 2010
LaValliere
Steven Ponsler 200,000 $0.30 January 16, 2010
</TABLE>
Jeff Abrams 200,000 $0.30 January 16, 2010 These options were granted
in exchange for these individuals' agreement to personally guaranty certain
obligations of our company, including leases for our facilities. We do not
believe that we could have obtained these leases without the personal
guarantees. Subsequently, the options to Messrs. Ponsler and Abrams were
cancelled when our company's senior lender required payment of its loan facility
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to our company and such payment was made solely by Mr. LaValliere and Lido
Capital Corporation. See "Executive Compensation - Stock Plan."
RESTRICTED STOCK GRANT
On January 17, 2000, we granted Barnum Mow, Chief Executive Officer and
President of our wholly-owned subsidiary, 1.2 million shares of our common
stock, in part, to provide an economic incentive to maximize our financial
results. These shares will be restricted shares; all shares were vested upon
grant and none are subject to any restrictions.
DESCRIPTION OF PROPERTY
Our corporate headquarters are located at 22 South Links Avenue, Suite
204, Sarasota, Florida 34236. Our corporate headquarters occupies about 2,017
square feet pursuant to a five year lease which will expire on June 30, 2004.
Most of our operations are conducted from a 39,640 square foot production and
warehouse facility in Gardena, California leased by our wholly-owned subsidiary.
This lease has a five year term, expiring on March 31, 2004. We believe our
existing facilities will be adequate for the foreseeable future.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of December 1, 2000, the names,
addresses and stock ownership in our company for the current directors and named
executive officers of our company and every person known to our company to own
five percent (5%) or more of the issued and outstanding shares of the common
stock:
<TABLE>
<CAPTION>
SHARES ACQUIRABLE
NAME AND ADDRESS BENEFICIARY WITHIN PERCENTAGE
TITLE OF CLASS: OF BENEFICIAL OWNER: OWNED: 60 DAYS(1): OF CLASS(2):
--------------- -------------------- ----- ----------- ------------
<S> <C> <C> <C> <C>
Common Earl T. Ingarfield(3)(5) 14,256,017 200,000 31.1%
22 South Links Avenue,
Suite 204
Sarasota, Florida 34236
Common Jerry L. Busiere 100,000 -- 0.2%
22 South Links Avenue,
Suite 204
Sarasota, Florida 34236
Common Thomas L. Browning(5) 1,289,359 200,000 3.2%
22 South Links Avenue,
Suite 204
Sarasota, Florida 34236
Common Michael LaValliere(5) 1,562,940 200,000 3.8%
22 South Links Avenue,
Suite 204
Sarasota, Florida 34236
Common David Roderick 1,000,000 -- 2.2%
22 South Links Avenue,
Suite 204
Sarasota, Florida 34236
Common Barnum Mow(4) 1,200,000 864,477 4.4%
22 South Links Avenue,
Suite 204
Sarasota, Florida 34236
Common All Officers and Directors 19,408,316 1,464,477 44.9%
as a Group(4)(5)
</TABLE>
----------------------
(1) Reflects the number of shares that could be purchased by exercise of
options available at December 1, 2000 or within 60 days thereafter under
our company's 2000 Stock Incentive Plan.
(2) Based on 46,479,406 shares of common stock outstanding as of December 1,
2000, plus options to purchase 864,477 shares at $0.375 per share
granted to Mr. Mow and options to purchase a total of 600,000 shares at
$0.30 per share granted under our stock plan to Messrs. Ingarfield,
Browning and LaValliere. See "Executive Compensation - Stock Plan." This
excludes warrants to purchase 100,000 shares at an exercise price of
$0.50 per share to an investor, warrants to purchase 285,714 shares at
an exercise price of $1.50 per share and warrants to purchase 39,000
shares at $0.01 per share.
(3) Includes all stock held by Mr. Ingarfield and Lido Capital Corporation,
an entity in which Mr. Ingarfield is the sole owner, officer and
director.
(4) Includes options granted on January 25, 2000 to purchase 864,477 shares
of $0.375 per share.
(5) Includes options to purchase 200,000 shares at $0.30 per share granted
to each of Messrs. Ingarfield, Browning and LaValliere. See "Executive
Compensation - Stock Plan."
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POTENTIAL CHANGE OF CONTROL
To secure some of our indebtedness, Mr. Ingarfield pledged (i.e.,
tendered shares of common stock to the lender as security for the indebtedness)
9,000,000 shares of common stock in our company. If we are unable to repay this
indebtedness when due or otherwise default on such indebtedness, then the lender
may foreclose on these shares of common stock in satisfaction of all or part of
such indebtedness. This would result in the lender becoming the owner of these
shares. As a result, the lender would be able to exert significant control over
our company.
In August 2000, the outstanding balance of our company's loan with the
lender, including all collateral security and guarantees associated therewith,
were assigned to Mr. LaValliere and Lido Capital Corporation in consideration of
payment in full of all outstanding indebtedness to the lender. The outstanding
amounts owed to Mr. LaValliere and Lido Capital Corporation are convertible into
common stock of our company under the terms of the December 1, 1999 convertible
demand notes.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LOANS. From time to time we have entered into related party transactions
primarily to finance the operations of our company. The company has borrowed
money periodically from Messrs. Ingarfield, Browning and LaValliere. Some of the
loans described below have been made by Lido Capital Corporation, an entity
wholly-owned by Mr. Ingarfield. Because Mr. Ingarfield has exclusive control
over Lido Capital Corporation, all loans from Mr. Ingarfield and Lido Capital
Corporation are reflected as loans from Mr. Ingarfield. Below is a summary of
all loans to and from related parties since January 1, 1998:
o In 1998, our company loaned a total of $253,500 to Mr. Ingarfield,
consisting of a $100,000 loan on June 25, 1998, a $143,500 loan on
November 30, 1998 and a $10,000 loan on December 31, 1998.
o In January 1999, Mr. Browning loaned $50,000 to our company. In
addition, Mr. Ingarfield repaid $237,000. Our company loaned an
additional $126,500 to Mr. Ingarfield in January 1999.
o In February 1999, Mr. Ingarfield repaid $20,000 to our company and
our company loaned Mr. Ingarfield $5,704. In addition, Mr.
LaValliere and Mr. Browning loaned $35,000 and $47,000,
respectively, to our company.
o In March 1999, Mr. Ingarfield repaid $500 to our company. In
addition, our company loaned Mr. Ingarfield $15,000.
o In April 1999, Mr. Ingarfield repaid $116,250 to our company and our
company loaned an additional $26,562 to Mr. Ingarfield.
o In May 1999, Mr. Ingarfield paid off the balance of his loan to our
company in the amount of $53,516 and loaned our company $136,484.
Further, our company repaid $40,292 to Mr. Ingarfield.
o In June 1999, Mr. Ingarfield loaned $151,000 to our company and our
company repaid $51,000 to Mr. Ingarfield.
o In July 1999, Mr. Ingarfield loaned $30,000 to our company.
o In August 1999, Mr. Ingarfield loaned $30,000 to our company.
o In September 1999, Mr. Ingarfield loaned $53,000 to our company.
o In October 1999, Mr. Ingarfield loaned $25,000 to our company.
o In November 1999, Mr. Ingarfield loaned $53,919 to our company.
o In December 1999, Mr. Ingarfield loaned $394,509 to our company. In
addition, Mr. Browning loaned $300,000 to our company. As described
in more detail below, the entire outstanding principal balance, plus
accrued interest, of Mr. Ingarfield's loan and $97,000 of Mr.
Browning's loan were converted into shares of our common stock on
December 28, 1999.
Effective December 1, 1999, Messrs. Ingarfield, LaValliere and Browning
entered into revolving convertible demand notes in the amounts of $1,500,000,
$125,000 and $500,000, respectively. Each of these notes is due on demand and
bears an annual interest rate of 10%. As of December 28, 1999, accrued but
unpaid interest on these loans was $52,927, owed as follows: $39,131 to Mr.
Ingarfield, $10,659 to Mr. Browning and $3,137 to Mr. LaValliere. Interest on
all three notes is payable monthly commencing on April 1, 2000. The holders can
elect to convert the indebtedness into shares of common stock at any time at a
price equal to 80% of our common stock's closing price on the date of
conversion. The company recognized additional interest expense of $293,381 to
reflect the 20% discount. Effective December 28, 1999, Messrs. Ingarfield,
Browning and LaValliere elected to convert all or a portion of the then
38
<PAGE>
outstanding principal and interest under such convertible notes into shares of
common stock, as follows:
<TABLE>
<CAPTION>
NAME: INDEBTEDNESS: CONVERSION PRICE: NO. OF SHARES:
---- ------------ ---------------- -------------
<S> <C> <C> <C>
Mr. Ingarfield $821,750 $0.22 3,735,227
Mr. Browning $107,659 $0.22 489,359
Mr. LaValliere $38,137 $0.22 173,350
</TABLE>
o In January 2000, Mr. Ingarfield loaned our company a total of
$557,562, Mr. LaValliere loaned our company a total of $125,000 and
Mr. Browning loaned our company a total of $200,000.
o In February 2000, our company issued 1,200,000 shares of our common
stock to Barnum Mow in consideration of his employment.
o In February 2000, Mr. Ingarfield loaned our company a total of
$182,000. Pursuant to the terms of his convertible demand note, on
January 25, 2000, Mr. Ingarfield elected to convert $247,562 into
825,207 shares of our common stock at a conversion price of $0.30
per share, or 80% of the closing price on that date. Also on that
date, Mr. LaValliere elected to convert $125,000 into 416,667 shares
of common stock at a conversion price of $0.30 per share.
o On February 1, 2000, Mr. Ingarfield elected to convert $236,498 into
695,583 shares of our common stock at a conversion price of $0.34
per share, or 80% of the closing price on that date.
o In March 2000, Mr. Ingarfield loaned our company a total of
$119,462.
o In April 2000, our company repaid $372,964 to Mr. Ingarfield. Also
in April 2000, our company loaned a total of $201,706 to Mr.
Ingarfield upon the same terms as the funds previously borrowed from
Mr. Ingarfield.
o In May 2000, our company loaned a total of $8,500 to Mr. Ingarfield.
o In June 2000, Mr. LaValliere elected to tender a $60,523 receivable
owed to him by the company under the terms of the private placement
offering in exchange for 172,923 shares of our common stock. In
addition, in June 2000, our company loaned Mr. Ingarfield a total of
$207,000.
o In July 2000, Mr. Ingarfield repaid all of the indebtedness owed by
him to our company. In addition, Mr. Ingarfield loaned our company a
total of $111,425.
o In August 2000, the outstanding balance of the company's loan with
First State Bank, including all collateral security and guarantees
associated therewith, were assigned to Mr. LaValliere and Lido
Capital Corporation in consideration of payment in full of all
outstanding indebtedness to First State Bank. The outstanding
amounts owed to Mr. LaValliere and Lido Capital Corporation are
convertible into common stock of our company under the terms of the
December 1, 1999 convertible demand notes.
SALE OF STOCK. In addition to the loans referenced above, our company
has sold common stock to Earl Ingarfield, Thomas Browning and Michael LaValliere
in order to help finance our company's operations. We also issued common stock
to David Roderick in connection with the acquisition of Avid Sportswear, Inc.
Below is a summary of all sales or issuance of common stock to such persons
since January 1, 1998:
o In June 1998, we sold 6,000,000 shares of common stock to Mr.
Ingarfield for $0.05 per share paid in cash and services. Total
consideration paid for these shares was $20,000 in cash and $280,000
in services. An administrative expense was recorded to value the
sale to $0.05 per share. The number of shares issued reflects a
three-for-one split on July 23, 1998.
39
<PAGE>
o In August 1998, we sold 500,000 shares of common stock to each of
Messrs. Browning and LaValliere for $0.15 in cash per share and
100,000 shares of common stock to Mr. Busiere for $0.15 per share,
payable in the form of a subscription receivable. Total
consideration paid for these shares was $165,000.
o In January 1999, we sold 100,000 shares of common stock to the
parents of Mr. Ingarfield for $0.25 in cash per share. Total
consideration paid for these shares was $25,000.
o In January 1999, we issued 1,000,000 shares of common stock to Mr.
Roderick in connection with the acquisition of Avid Sportswear, Inc.
The company valued these shares at $0.75 per share, for total
consideration of $750,000.
o In December 1999, and as noted above, we issued 3,735,227 shares to
Mr. Ingarfield, 489,359 shares to Browning and 173,350 shares to
LaValliere upon the conversion of indebtedness. Messrs. Ingarfield,
Browning and LaValliere converted $821,750, $107,659 and $38,137,
respectively, of indebtedness. These shares were converted at a
price of $0.22 per share.
o In January 2000, we issued 825,207 shares to Mr. Ingarfield upon the
conversion of $247,562 of indebtedness and 416,667 shares to Mr.
LaValliere upon the conversion of $125,000 of indebtedness. On
February 1, 2000, Mr. Ingarfield elected to convert $236,498 of
indebtedness into 695,583 shares of our common stock at a conversion
price of $0.34 per share.
o In June 2000, Mr. LaValliere elected to tender a $60,523 receivable
owed to him by the company under the terms of the private placement
offering in exchange for 172,923 shares of our common stock.
OTHER. In addition to the transactions listed above, our company entered
into the following transactions with related parties:
o On January 17, 2000, our company granted options to purchase up to
200,000 shares, or a total of 1,000,000 shares, of our stock to each
of Messrs. Ingarfield, Browning, LaValliere, Ponsler and Abrams.
Messrs. Ponsler and Abrams are shareholders of our company. The
purchase price of these options was $0.30 per share, or $0.075 per
share less than the closing price on January 17, 2000. These options
were granted in exchange for these individuals agreement to
personally guaranty certain obligations of our company, including
leases for our facilities. We do not believe that we could have
obtained these leases without the personal guarantees. See
"Executive Compensation - Stock Plan." Subsequently, the options to
Messrs. Ponsler and Abrams were cancelled when our company's senior
lender required payment of its loan facility to our company and such
payment was made solely by Mr. LaValliere and Lido Capital
Corporation.
o On January 17, 2000, our company granted Mr. Mow 1.2 million shares
of restricted stock in our company. These shares were valued at
$360,000, or $0.30 per share. In addition, Mr. Mow was granted
options to purchase 864,477 shares of stock at $0.375 per share.
MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
The company's common stock began trading on the Over-the-Counter
Bulletin Board on March 24, 1998, under the symbol "GFIO." On July 22, 1999, our
company's symbol was changed to "AVSG." On December 2, 1999, our company's
common stock was no longer eligible for quotation on the OTC BB because our
company's Registration Statement on Form 10-SB had not been declared effective
by the Commission as of that date. On that date, our company's common stock
began trading on the "pink sheets." Our company began trading again in the OTC
BB May 9, 2000. The company's high and low bid prices by quarter during 1998,
1999 and 2000 are as follows: (2)
40
<PAGE>
CALENDAR YEAR 2000(1)
HIGH BID LOW BID
First quarter $0.8100 $0.2500
Second Quarter $0.6250 $0.2500
Third Quarter $0.6875 $0.2550
CALENDAR YEAR 1999(1)
HIGH BID LOW BID
First quarter $2.0000 $0.7500
Second quarter $1.4688 $0.8750
Third quarter $1.1250 $0.6875
Fourth quarter $1.0938 $0.2500
CALENDAR YEAR 1998(1)
HIGH BID LOW BID
Second quarter $1.2500 $0.5000
Third quarter $3.0000 $0.7500
Fourth quarter $1.5000 $0.4375
-------------------------
(1) These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual
transactions.
(2) These quotations reflect high and low bid prices form the OTC BB and the
"pink sheets."
On December 1, 2000, our company had approximately 197 shareholders of
record.
We have not paid dividends in the past on any class of stock and we do
not anticipate paying dividends in the foreseeable future. Our loan agreement
with First State Bank, which was assigned to Lido Capital Corporation and Mr.
LaValliere, prohibits the payment of dividends.
DESCRIPTION OF SECURITIES
AUTHORIZED CAPITAL STOCK. The authorized capital stock of our company
consists of 50,000,000 shares of common stock and 10,000,000 shares of preferred
stock. As of the date hereof, our company has 44,114,405 shares of common stock
outstanding. The company also has the following options and warrants
outstanding:
TYPE NUMBER OF SHARES EXERCISE PRICE
Options 600,000 $0.30
Options 864,477 $0.375
Options 475,000 $0.35
Warrants 100,000 $0.50
Warrants 285,714 $1.50
Warrants 39,000 $0.01
The following description is of the material terms of our capital stock.
Additional information may be found in our company's articles of incorporation
included as an exhibit to our Registration Statement on Form 10-SB (as amended)
filed with the Securities and Exchange Commission.
41
<PAGE>
COMMON STOCK. Each share of common stock entitles the holder to one vote
on each matter submitted to a vote of our shareholders, including the election
of directors. There is no cumulative voting. Subject to preferences that may be
applicable to any outstanding preferred stock, shareholders are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors. Shareholders have no preemptive, conversion or other
subscription rights. There are no redemption or sinking fund provisions
available to the common stock. In the event of liquidation, dissolution or
winding up of our company, shareholders are entitled to share ratably in all
assets remaining after payment of liabilities, subject to prior distribution
rights of preferred stock, if any, then outstanding.
PREFERRED STOCK. The Board of Directors is authorized, subject to any
limitations prescribed by the Nevada Revised Statutes, or the rules of any
quotation system or national securities exchange on which stock of our company
may be quoted or listed, to provide for the issuance of shares of preferred
stock in one or more series; to establish from time to time the number of shares
to be included in each such series; to fix the rights, powers, preferences, and
privileges of the shares of such series, without any further vote or action by
the shareholders. Depending upon the terms of the preferred stock established by
the Board of Directors, any or all series of preferred stock could have
preference over the common stock with respect to dividends and other
distributions and upon liquidation of our company or could have voting or
conversion rights that could adversely affect the holders of the outstanding
common stock. The company has no present plans to issue any shares of preferred
stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND
NEVADA LAW
The following provisions of the Articles of Incorporation and Bylaws of
our company could discourage potential acquisition proposals and could delay or
prevent a change in control of our company. Such provisions may also have the
effect of preventing changes in the management of our company, and preventing
shareholders from receiving a premium on their common stock.
AUTHORIZED BUT UNISSUED STOCK. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
shareholder approval. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans.
BLANK CHECK PREFERRED STOCK. The existence of authorized but unissued
and unreserved shares of preferred stock may enable the Board of Directors to
issue shares to persons friendly to current management which would render more
difficult or discourage an attempt to obtain control of our company by means of
a proxy contest, tender offer, merger or otherwise, and thereby protect the
continuity of our company's management.
NEVADA BUSINESS COMBINATION LAW. The State of Nevada has enacted
legislation that may deter or frustrate takeovers of Nevada corporations. The
Nevada Business Combination Law generally prohibits a Nevada corporation from
engaging in a business combination with an "interested shareholder" (defined
generally as any person who beneficially owns 10% or more of the outstanding
voting stock of our company or any person affiliated with such person) for a
period of three years following the date that such shareholder became an
interested shareholder, unless the combination or the purchase of shares made by
the interested shareholder on the interested shareholder's date of acquiring
shares is approved by the board of directors of the corporation before that
date. A corporation may not engage in any combination with an interested
shareholder of the corporation after the expiration of three years after his
date of acquiring shares unless:
o The combination or the purchase of shares made by the interested
shareholder is approved by the board of directors of the corporation
before the date such interested shareholder acquired such shares;
o A combination is approved by the affirmative vote of the holders of
stock representing a majority of the outstanding voting power not
beneficially owned by the interested shareholder proposing the
combination, or any affiliate or associate of the interested
shareholder proposing the combination, at a meeting called for that
purpose no earlier than three years after the interested
shareholder's date of acquiring shares; or
o The aggregate amount of cash and the market value, as of the date of
consummation, of consideration other than cash to be received per
share by all of the holders of outstanding common shares of the
42
<PAGE>
corporation not beneficially owned by the interested shareholder,
satisfies the fair value requirements of Section 78.441 of Nevada
Revised Statutes.
SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of the shareholders
of our company may be called by its Board of Directors or other persons
authorized to do so under Nevada law. Under applicable Nevada law, shareholders
do not have the right to call a special meeting of the shareholders. This may
have the effect of discouraging potential acquisition proposals and could delay
or prevent a change in control of our company by precluding a dissident
shareholder from forcing a special meeting to consider removing the Board of
Directors or otherwise.
TRANSFER AGENT AND REGISTRAR. Transfer Online is the transfer agent and
registrar for our common stock. Its address is 227 S.W. Pine Street, Suite 300,
Portland, Oregon 97204.
EXPERTS
Our balance sheet as of December 31, 1999 and the related statements of
operation, capital deficit and cash flow from September 19, 1997 (inception)
through December 31, 1999 appearing in this prospectus and elsewhere in this
Prospectus have been audited by HJ & Associates, L.L.C., independent auditors,
as stated in their report herein and elsewhere in this Prospectus, and are
included herein in reliance upon the report of such firm given their authority
as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Kirkpatrick & Lockhart LLP, Miami, Florida.
AVAILABLE INFORMATION
For further information with respect to us and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto. Statements herein concerning the contents of any contract or other
document are not necessarily complete, and in each instance reference is made to
such contract or other statement filed with the Securities and Exchange
Commission or included as an exhibit, or otherwise, each such statement, being
qualified by and subject to such reference in all respects.
Reports, registration statements, proxy and information statements, and
other information filed by us with the Securities and Exchange Commission can be
inspected and copied at the public reference room maintained by the Securities
and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at its regional offices located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of these materials may be obtained at
prescribed rates from the Public Reference Section of the Securities and
Exchange Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. The Securities and Exchange Commission maintains a site on the World Wide
Web (HTTP://WWW.SEC.GOV) that contains reports, registration statements, proxy
and information statements and other information. You may obtain information on
the Public Reference Room by calling the Securities and Exchange Commission at
1-800-SEC-0330.
43
<PAGE>
INDEX TO FINANCIAL STATEMENTS
o The company's unaudited Balance Sheets as of September 30, 2000
and unaudited Statements of Operations, Statement of Stockholders' Equity, and
Statements of Cash Flows for the three months' ended September 30, 2000 and 1999
and for the nine month's ended September 30, 2000 and 1999; and
o The company's audited Balance Sheets as of December 31, 1999 and
audited Statements of Operations, Statements of Stockholders' Equity, and
Statements of Cash Flows for the years ended December 31, 1999 and 1998.
44
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
F-1
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2000 1999
---- ----
(Unaudited)
CURRENT ASSETS
Cash $ $ 237,407
Accounts receivable, net -- 315,804
Inventory 4,298,807 1,885,390
Prepaid expenses 123,826 20,000
------------- -------------
Total Current Assets 4,422,633 2,458,601
------------- -------------
EQUIPMENT
Machinery and equipment 539,075 378,531
Furniture and fixtures 98,198 253,644
Show booths 745,160 298,479
Computers and software 338,443 --
Leasehold improvements 30,698 29,398
Less: accumulated depreciation (627,607) (502,938)
------------- -------------
Total Equipment 1,123,967 457,114
------------- -------------
OTHER ASSETS
Goodwill, net 2,154,154 2,346,103
Deposits 20,114 15,114
Trademarks 2,902 2,902
------------- -------------
Total Other Assets 2,177,170 2,364,119
------------- -------------
TOTAL ASSETS $ 7,723,770 $ 5,279,834
============= =============
F-2
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September December
30, 2000 31, 1999
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ 28,355 $ --
Accounts payable 4,662,446 1,504,858
Accrued expenses 349,449 200,865
Equipment leases payable - current 39,698 --
Due to factor 127,823 --
Notes payable - related parties - current 450,000 300,000
Notes payable - current 150,000 1,735,524
Subscribed stock 8,575 12,500
----------- -----------
Total Current Liabilities 5,816,346 3,753,747
----------- -----------
LONG-TERM LIABILITIES
Equipment leases payable 111,711 --
Notes payable - related parties 651,646 --
----------- -----------
Total Long-Term Liabilities 763,357 --
----------- -----------
Total Liabilities 6,579,703 3,753,747
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; 10,000,000 shares authorized
of $0.001 par value, zero issued and outstanding -- --
Common stock; 50,000,000 shares authorized of
$0.001 par value, 44,114,406 and 26,374,022
shares issued and outstanding 44,129 26,374
Additional paid-in capital 13,460,932 7,092,848
Common stock subscription receivable (840,000) (30,000)
Accumulated deficit (11,520,994) (5,563,135)
----------- -----------
Total Stockholders' Equity 1,144,067 1,526,087
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 7,723,770 $ 5,279,834
=========== ===========
F-3
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Operations
(Unaudited)
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES, NET $ 5,912,021 $ 2,340,939 $ 2,244,097 $ 781,808
COST OF GOODS SOLD 5,027,164 1,623,989 1,656,607 402,596
--------------- --------------- --------------- ------------
Gross Margin 884,857 716,950 587,490 379,212
--------------- --------------- --------------- ------------
OPERATING EXPENSES
Selling expenses 2,465,365 529,677 1,178,604 148,456
Depreciation and amortization
expense 321,269 163,010 115,852 71,157
General and administrative expenses 3,773,047 2,409,958 1,120,741 256,456
--------------- --------------- --------------- ------------
Total Operating Expenses 6,559,681 3,102,645 2,415,197 467,069
--------------- --------------- --------------- ------------
Loss from Operations (5,674,824) (2,385,695) (1,827,707) (96,857)
--------------- --------------- --------------- ------------
OTHER INCOME (EXPENSE)
Interest income 1,820 -- 1,632 --
Interest expense (321,902) (39,870) (21,112) (17,500)
Gain on sale of asset 50,206 -- 44,787 --
Loss on abandonment of asset (13,159) -- (13,159) --
--------------- --------------- --------------- ------------
Total Other Income (Expense) (283,035) (39,870) 12,148 (17,500)
--------------- --------------- --------------- ------------
INCOME TAX BENEFIT -- -- -- --
--------------- --------------- --------------- ------------
NET LOSS $ (5,957,859) $ (2,425,565) $ (1,815,559) $ (114,357)
=============== =============== =============== ============
BASIC LOSS PER SHARE $ (0.13) $ (0.16) $ (0.09) $ (0.01)
=============== =============== =============== ============
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 14,612,000 $14,612 $ 893,193 $ (60,000) $ (527,157)
January 5, 1999, common stock issued for
cash, services and debt, valued at $0.75
per share 590,000 590 441,910 -- --
January 5, 1999, common stock issued for cash
and debt, valued at $0.75 per share
866,670 867 649,133 -- --
January 8, 1999, common stock issued for cash
at $0.75 per share 210,668 211 157,789 -- --
January 8, 1999, warrants issued below market
value -- -- 53,235 -- --
January 11, 1999, common stock issued for
cash and services, valued at $0.75 per
share 560,000 560 419,440 -- --
January 11, 1999, common stock issued for
media services valued at $0.75 per share
800,000 800 599,200 -- --
January 20, 1999, common stock issued for
cash and services valued at $0.75 per share
160,000 160 119,840 -- --
January 27, 1999, common stock issued to
purchase Avid Sportswear valued at $0.75
per share 1,100,000 1,100 823,900 -- --
February 4, 1999, common stock issued for
cash at $0.75 per share 372,002 372 278,630 -- --
---------- -------- ---------- ---------- ---------
Balance Forward 19,271,340 $ 19,272 $4,436,270 $ (60,000) $(527,157)
========== ======== ========== ========== =========
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Continued)
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance Forward 19,271,340 $ 19,272 $ 4,436,270 $ (60,000) $ (527,157)
March 11, 1999, common stock issued for
cash and services valued at $0.75 per
share 1,220,000 1,220 913,780 -- --
March 11, 1999, common stock issued for
cash at $0.75 per share
83,334 83 62,417 -- --
March 11, 1999, common stock issued for
cash at $0.75 per share
18,334 18 13,732 -- --
May 28, 1999, common stock issued for
cash at $0.75 per share
101,100 101 75,724 -- --
September 20, 1999, common stock issued
for cash and services valued at $0.75
per share
50,000 50 37,450 -- --
December 28, 1999, common stock issued
for conversion of debt to equity at
$0.22 per share 5,344,200 5,344 1,170,380 -- --
Conversion of debt below market value
-- -- 293,381 -- --
December 31, 1999, common stock issued
for cash at $0.35 per share
285,714 286 99,714 -- --
Stock offering costs -- -- (10,000) -- --
Receipt of stock subscription -- -- -- 30,000 --
Net loss for the year ended December
31, 1999 -- -- -- -- (5,035,978)
---------- --------- ----------- --------- -----------
Balance, December 31, 1999 26,374,022 $ 26,374 $ 7,092,848 $ (30,000) $(5,563,135)
========== ========= =========== ========= ===========
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Continued)
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 26,374,022 $ 26,374 $ 7,092,848 $ (30,000) $ (5,563,135)
January 17, 2000, common stock issued for
services at $0.30 per share (unaudited)
1,200,000 1,200 358,800 (90,000) --
January 17, 2000, options granted below
market value (unaudited) -- -- 75,000 -- --
January 25, 2000, common stock issued for
conversion of debt to equity at $0.375
per share (unaudited) 1,241,874 1,242 464,461 -- --
February 1, 2000, common stock issued for
conversion of debt to equity at $0.437
per share (unaudited) 695,583 696 303,274 -- --
March 6, 2000, canceled 100,000 shares
common stock, issued in February 1998, at
$0.15 per share and canceled subscription
receivable in the amount of $15,000
(unaudited) (100,000) (100) (14,900) 15,000 --
Common stock issued for conversion of
subscribed stock at $0.35 per share
(unaudited) 5,103,357 5,103 1,781,072 -- --
Common stock issued for cash at $0.35 per
share (unaudited) 7,955,218 7,955 2,740,763 (735,000) --
Common stock issued for conversion of debt
at $0.35 per share (unaudited)
1,294,352 1,294 451,729 -- --
Common stock issued for consulting contract
at $0.58 per share (unaudited)
350,000 350 202,650 -- --
Common stock issued for consulting services
at $0.35 per share (unaudited)
15,000 15 5,235 -- --
Net loss for the nine months ended
September 30, 2000 (unaudited) -- -- -- -- (5,957,859)
---------- ------- ----------- ---------- ------------
Balance, September 30, 2000 (unaudited)
44,129,406 $44,129 $13,460,932 $ (840,000) $(11,520,994)
========== ======= =========== ========== ============
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
-------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net (loss) $ (5,957,859) $(2,425,565)
Adjustments to reconcile net (loss)
to net cash used in operating activities:
Depreciation and amortization 321,269 163,010
Common stock issued for services, discounts 707,185 1,475,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 315,804 199,061
(Increase) decrease for prepaid insurance (103,826) (8,165)
(Increase) decrease in inventory (2,413,417) (467,272)
(Increase) decrease in deposits (5,000) --
Increase (decrease) in cash overdraft 28,355 --
Increase (decrease) in accounts payable 3,157,588 294,012
Increase (decrease) in accrued expenses 148,584 119,827
Increase (decrease) in leases payable 151,409 --
Increase (decrease) in due to factor 127,823 --
----------- -----------
Net Cash Used in Operating Activities (3,522,085) (650,092)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (796,173) (365,977)
----------- -----------
Net Cash Used in Investing Activities (796,173) (365,977)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash purchased with Avid Sportswear, Inc. -- 40,282
Payment to Avid shareholders -- (725,000)
Proceeds from notes payable -- 1,340,735
Payments on notes payable (1,499,521) (2,006,061)
Proceeds from related party notes payable 1,784,404 --
Issuance of common stock for cash 2,013,718 1,859,576
Receipt of related party receivable -- 352,300
Proceeds from subscribed stock 1,782,250 --
------------ ------------
Net Cash Provided by Financing Activities 4,080,851 861,832
------------ ------------
NET INCREASE (DECREASE) IN CASH (237,407) (154,237)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 237,407 154,237
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ $ --
============ ============
</TABLE>
F-8
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months
Ended
September 30,
-------------
2000 1999
---- ----
CASH PAID FOR:
Interest $ 63,415 $ 36,592
Income tax $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Issuance of common stock for subsidiary $ -- $ 275,000
Issuance of common stock for debt $ 1,222,696 $ --
Issuance of common stock for services, $ 707,185 $ 1,475,000
discounts
F-9
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the consolidated financial position,
results of operations and cash flows at September 30, 2000 and 1999
and for all periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1999 audited
consolidated financial statements. The results of operations for the
period ended September 30, 2000 and 1999 are not necessarily
indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company has generated significant losses from
operations for the years ended December 31, 1998 and 1999, and for
the nine months ended September 30, 2000 and has current liabilities
in excess of current assets at September 30, 2000. For the year
ended December 31, 2000, the Company anticipates a significant
increase in sales volume from the 1999 level, requiring cash in
excess of the cash generated from operations. Management has secured
necessary cash to date from additional cash investments by existing
shareholders and from the proceeds of a private placement of
additional shares of Company stock; additional required cash is
anticipated from borrowing from a senior lender. However, there can
be no assurance that the Company will be able to raise the
additional required cash.
NOTE 3 - DUE TO FACTOR
In August 2000, Avid Sportswear, Inc. (Avid), the wholly-owned
subsidiary of Avid Sportswear and Golf Corp., entered into a
factoring, revolving credit and trade finance agreement with a
factor. Under this agreement, which has an initial term expiring in
August 2001 and continuing on an annual basis thereafter, Avid
assigns substantially all of its accounts receivable to the factor,
typically on a non-recourse basis. Avid may request advances up to
75% of the eligible net sales and up to 40% of eligible inventory.
Advances against inventory may not exceed $2,500,000 at any one
time. The factor charges Avid a fee on the net sales factored and
interest on the amounts advanced at the factor's index rate plus
4.29%. The index rate was 6.5%, at September 30, 2000, corresponding
to an interest rate of 10.79%. Avid is subject to financial
covenants under the agreement including the requirement to maintain
a minimum tangible net worth and minimum working capital. Such
covenants are effective on December 31, 2000.
F-10
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 3 - DUE TO FACTOR (Continued)
Outstanding factored receivables:
Without recourse $ 796,308
With recourse 860,405
1,656,713
----------
Advances (1,651,350)
----------
$ 5,363
==========
Avid has an agreement with the factor to open letters of credit to
facilitate the purchase of inventory. Letters of credit are opened
as needed, subject to factor approval, and are secured by the
acquired inventories. Open letters of credit may not exceed
$3,500,000 at any time. The amount of open letters of credit was
$710,453 at September 30, 2000.
Obligations due to the factor under the factoring agreement are
collateralized by a continuing security interest in all of the
assets of Avid, except fixed assets, and are guaranteed by the
parent. All indebtedness due to the factor is additionally
guaranteed by a shareholder up to a limit of $375,000.
NOTE 4 - SUBSEQUENT EVENTS
CONVERTIBLE DEBENTURES
The Company has raised $300,000 in gross proceeds and $255,000 in
net proceeds in the form of convertible debentures. Terms of the
convertible debentures are as follows: 6% convertible debentures
principal and accrued interest due by November 1, 2005. The
debenture holders are entitled to convert all or any part of the
principal amount plus accrued interest into shares of the Company's
common stock equal to either (a) an amount equal to 120% of the
closing bid price of the Company's common stock as of the date of
the debenture issuance or (b) an amount equal to 80% of the lowest
closing bid price for twenty trading days immediately preceding the
conversion date. The Company is obligated to register the resale of
the conversion shares under the Securities Act of 1933. The
debentures are subordinate and junior in right of payment to all
accounts payable of the Company incurred in the ordinary course of
business and/or bank debt of the Company not to exceed $500,000. The
Company shall have the right to require the debenture holders to
convert any unpaid principal and accrued interest on the debentures
by giving the debenture holder not less than five days prior written
notice if the closing bid price of the Company's common stock is
$1.25 or higher per share for ten consecutive trading days or upon
the five year anniversary of the debenture issuance.
SUBSCRIPTION RECEIVABLE
The Company has received $125,000 of the subscription receivable.
F-11
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(FORMERLY GOLF INNOVATIONS CORP.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
F-1
<PAGE>
C O N T E N T S
Independent Auditors' Report F-3
Consolidated Balance Sheet F-4
Consolidated Statements of Operations F-6
Consolidated Statements of Stockholders' Equity F-7
Consolidated Statements of Cash Flows F-10
Notes to the Consolidated Financial Statements F-12
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Avid Sportswear & Golf Corp.
(Formerly Golf Innovations Corp.)
Carson, California
We have audited the accompanying consolidated balance sheet of Avid Sportswear &
Golf Corp. (formerly Golf Innovations Corp.) as of December 31, 1999 and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended December 31, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our 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
consolidated 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 Avid Sportswear &
Golf Corp. (formerly Golf Innovations Corp.) as of December 31, 1999 and the
results of their operations and their cash flows for the years ended December
31, 1999 and 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 13 to the
financial statements, the Company has current liabilities in excess of current
assets of $1,295,146 and has generated significant losses for the years ended
December 31, 1999 and 1998. These items raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 13. The financial statements do not
include any adjustments that might result from the outcome of the uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
February 26, 2000
F-3
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Consolidated Balance Sheet
ASSETS
December 31,
1999
------------
CURRENT ASSETS
Cash $ 237,407
Accounts receivable, net (Note 1) 315,804
Inventory (Note 2) 1,885,390
Prepaid expenses 20,000
------------
Total Current Assets 2,458,601
------------
EQUIPMENT
Machinery and equipment 378,531
Furniture and fixtures 253,644
Show booths 298,479
Leasehold improvements 29,398
Less: accumulated depreciation (502,938)
------------
Total Equipment 457,114
------------
OTHER ASSETS
Goodwill, net (Note 6) 2,346,103
Deposits 15,114
Trademarks 2,902
------------
Total Other Assets 2,364,119
------------
TOTAL ASSETS $ 5,279,834
============
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
1999
------------
CURRENT LIABILITIES
Accounts payable $ 1,504,858
Accrued expenses 200,865
Notes payable - related party (Note 4) 300,000
Notes payable (Note 5) 1,735,524
Subscribed stock 12,500
------------
Total Current Liabilities 3,753,747
------------
Total Liabilities 3,753,747
------------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY
Preferred stock; 10,000,000 shares
authorized of $0.001 par value;
zero shares issued and outstanding, --
Common stock; 50,000,000 shares
authorized of $0.001 par value,
26,374,022 shares issued and outstanding 26,374
Additional paid-in capital 7,092,848
Common stock subscription receivable (30,000)
Accumulated deficit (5,563,135)
------------
Total Stockholders' Equity 1,526,087
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,279,834
------------
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Consolidated Statements of Operations
For the Years Ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
SALES, NET $ 2,360,596 $ --
COST OF GOODS SOLD 1,959,997 --
----------- -----------
Gross Margin 400,599 --
----------- -----------
OPERATING EXPENSES
Selling expenses 837,574 --
Depreciation and amortization expense 369,072 114
General and administrative expenses 3,815,327 465,952
----------- -----------
Total Operating Expenses 5,021,973 466,066
----------- -----------
(Loss) from Operations (4,621,374) (466,066)
----------- -----------
OTHER INCOME (EXPENSE)
Interest income -- 45
Interest expense (438,269) (527)
Bad debt expense (57,039) --
Recovery of bad debts 80,704 --
Loss on valuation of asset (Note 10) -- (55,000)
----------- -----------
Total Other Income (Expense) (414,604) (55,482)
----------- -----------
INCOME TAX BENEFIT -- --
----------- -----------
NET LOSS $(5,035,978) $ (521,548)
=========== ===========
BASIC LOSS PER SHARE (Note 1) $ (0.25) $ (0.04)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Consolidated Statements of Stockholders' Equity
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 3,000,000 $ 3,000 $ 7,000 $ -- $ (5,609)
February 1998, common stock issued
for assets at $0.08333 per share 300,000 300 24,700 -- --
February 1998, common stock issued
for cash at $0.08333 per share 3,000,000 3,000 247,000 -- --
June 1998, common stock issued to a
related party for cash and services
at $0.05 per share 6,000,000 6,000 294,000 -- --
August 1998, common stock issued to
related parties for subscriptions
and cash at $0.15 per share 1,100,000 1,100 163,800 (15,000) --
August 1998, common stock issued for
cash and subscriptions at $0.15 per share 800,000 800 119,200 (45,000) --
December 1998, common stock issued
for cash at $0.25 per share 412,000 412 102,588 -- --
Stock offering costs -- -- (65,195) -- --
Net loss for the year ended December
31, 1998 -- -- -- -- (521,548)
---------- ---------- ---------- ----------- -----------
Balance, December 31, 1998 14,612,000 $ 14,612 $ 893,193 $ (60,000) $ (527,157)
---------- ---------- ---------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Consolidated Statements of Stockholders' Equity (Continued)
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance Forward 14,612,000 $ 14,612 $ 893,193 $ (60,000) $ (527,157)
January 5, 1999, common stock
issued for cash, services and
debt, valued at $0.75 per share
(Note 3) 590,000 590 441,910 -- --
January 5, 1999, common stock
issued for cash and debt,
valued at $0.75 per share (Note 3) 866,670 867 649,133 -- --
January 8, 1999, common stock issued
for cash at $0.75 per share (Note 3) 210,668 211 157,789 -- --
January 8, 1999, warrants issued
below market value (Note 3) -- -- 53,235 -- --
January 11, 1999, common stock
issued for cash and services,
valued at $0.75 per share (Note 3) 560,000 560 419,440 -- --
January 11, 1999, common stock
issued for media services
valued at $0.75 per share (Note 3) 800,000 800 599,200 -- --
January 20, 1999, common stock
issued for cash and services
valued at $0.75 per share (Note 3) 160,000 160 119,840 -- --
January 27, 1999, common stock
issued to purchase Avid
Sportswear valued at $0.75 per
share (Note 3) 1,100,000 1,100 823,900 -- --
February 4, 1999, common stock
issued for cash at $0.75 per share
(Note 3) 372,002 372 278,630 -- --
---------- --------- ---------- ---------- ---------
Balance Forward 19,271,340 $ 19,272 $4,436,270 $ (60,000) $(527,157)
---------- --------- ---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-8
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Consolidated Statements of Stockholders' Equity (Continued)
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 19,271,340 $ 19,272 $ 4,436,270 $ (60,000) $ (527,157)
March 11, 1999, common stock
issued for cash and services
valued at $0.75 per share (Note 3) 1,220,000 1,220 913,780 -- --
March 11, 1999, common stock issued
for cash at $0.75 per share (Note 3) 83,334 83 62,417 -- --
March 11, 1999, common stock issued
for cash at $0.75 per share (Note 3) 18,334 18 13,732 -- --
May 28, 1999, common stock issued for
cash at $0.75 per share (Note 3) 101,100 101 75,724 -- --
September 20, 1999, common stock
issued for cash and services,
valued at $0.75 per share (Note 3) 50,000 50 37,450 -- --
December 28, 1999, common stock
issued for conversion of debt to
equity at $0.22 per share (Note 3) 5,344,200 5,344 1,170,380 -- --
Conversion of debt below market value -- -- 293,381 -- --
December 31, 1999, common stock
issued for cash at $0.35 per share
(Note 3) 285,714 286 99,714 -- --
Stock offering costs -- -- (10,000) -- --
Receipt of stock subscription -- -- -- 30,000 --
Net loss for the year ended
December 31,1999 -- -- -- -- (5,035,978)
---------- ------------- ----------- ------------- -----------
Balance, December 31, 1999 26,374,022 $ 26,374 $ 7,092,848 $ (30,000) $ (5,563,135)
========== ============= =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-9
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Statements of Cash Flows
For the Years Ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(5,035,978) $ (521,548)
Adjustments to reconcile net (loss) to net cash used in operating
activities:
Depreciation and amortization 369,072 114
Loss on valuation of asset -- 55,000
Common stock issued for services 1,943,235 280,000
Conversion of debt below market value 293,381 --
Recovery of bad debt expense (80,704) --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 80,775 --
(Increase) decrease in inventory (876,299) --
(Increase) decrease in other assets (13,165) (20,949)
Increase (decrease) in accounts payable 926,954 --
Increase (decrease) in accrued expenses 116,416 --
----------- -----------
Net Cash Used in Operating Activities (2,276,268) (207,383)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (343,705) (32,276)
----------- -----------
Net Cash Used in Investing Activities (343,705) (32,276)
CASH FLOWS FORM FINANCING ACTIVITIES
Cash purchased with Avid Sportswear, Inc. 34,045 --
Payments to Avid shareholders (725,000) --
Proceeds from notes payable 1,962,274 210,000
Payments on notes payable (1,852,869) --
Proceeds from related party notes payable 1,479,677 --
Payments on related party notes payable (265,058) --
Loans to related parties -- (352,300)
Stock offering costs -- (65,195)
Issuance of common stock for cash 1,804,074 598,000
Receipt of related party receivable 253,500 --
Proceeds from subscribed stock 12,500 --
----------- -----------
Net Cash Provided by Financing Activities 2,703,143 390,505
----------- -----------
NET INCREASE IN CASH 83,170 150,846
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
154,237 3,391
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 237,407 $ 154,237
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Statements of Cash Flows (Continued)
For the Years Ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
CASH PAID FOR:
Interest $ 94,392 $ --
Income tax $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Issuance of common stock for subsidiary $ 825,000 $ --
Issuance of common stock for debt $1,385,724 $ --
Issuance of common stock for services $1,943,235 $ 280,000
Issuance of common stock for subscription $ -- $ 60,000
Issuance of common stock for assets $ -- $ 25,000
Conversion of debt below market value $ 293,381 $ --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-11
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - NATURE OF ORGANIZATION
This summary of significant accounting policies of Avid
Sportswear & Golf Corp. (formerly Golf Innovations Corp.) is
presented to assist in understanding the Company's
consolidated financial statements. The consolidated financial
statements and notes are representations of the Company's
management which is responsible for their integrity and
objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently
applied in the preparation of the consolidated financial
statements.
a. Organization and Business Activities
Avid Sportswear & Golf Corp. was incorporated under the laws
of the State of Nevada on September 19, 1997 as Golf
Innovations Corp. On April 19, 1999, the board of directors
voted to change the name of the Company to Avid Sportswear &
Golf Corp. to better reflect the business of the Company.
Additionally, the board of directors voted to change the
authorized capitalization to 50,000,000 shares of common stock
with a par value of $0.001 and 10,000,000 shares of preferred
stock with a par value of $0.001. On July 13, 1998, the board
of directors authorized a 3-for-1 forward stock split. All
references to common stock have been retroactively restated.
The rights and preferences of the preferred stock are to be
set at a later date. The Company is engaged in the business of
producing and selling golf wear related products.
b. Depreciation
Depreciation is provided using the straight-line method over
the assets' estimated useful lives as follows:
Machinery and equipment 5-10 years
Furniture and fixtures 3-5 years
Show booths 5 years
Leasehold improvements 5 years
c. Accounting Method
The Company's consolidated financial statements are prepared
using the accrual method of accounting. The Company has
elected a December 31 year end.
d. Cash and Cash Equivalents
For the purpose of the statement of cash flows, the Company
considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
e. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from the
estimates.
F-12
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - NATURE OF ORGANIZATION (Continued)
f. Basic Loss Per Share
The computation of basic loss per share of common stock is
based on the weighted average number of shares outstanding
during the period of the financial statements as follows:
<TABLE>
<CAPTION>
For the Years Ended
December 31,
------------
1999 1998
---- ----
<S> <C> <C>
Numerator (net loss) $ (5,035,978) $ (521,548)
Denominator (weighted average number of shares 20,264,997 12,077,400
outstanding) ---------- ----------
Loss per share $ (0.25) $ (0.04)
====== ======
</TABLE>
Fully diluted loss per share is not presented as any common
stock equivalents are antidilutive in nature.
g. Income Taxes
No provision for income taxes has been accrued because the
Company has net operating losses from inception. The net
operating loss carryforwards of approximately $5,200,000 at
December 31, 1999 which expire in 2019. No tax benefit has
been reported in the financial statements because the Company
is uncertain if the carryforwards will expire unused.
Accordingly, the potential tax benefits are offset by a
valuation account of the same amount.
h. Uninsured Corporate Cash Balances
The Company maintains its corporate cash balances at two
banks. Corporate cash accounts at banks are insured by the
FDIC for up to $100,000. Amounts in excess of insured limits
were approximately $80,000 at December 31, 1999.
i. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities,
measured at fair market value. Gains or losses resulting from
changes in the values of those derivatives would be accounted
for depending on the use of the derivative and whether it
qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or
cash flows. SFAS No. 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Management
believes the adoption of this statement will have no material
impact on the Company's financial statements.
F-13
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - NATURE OF ORGANIZATION (Continued)
j. Goodwill
Goodwill generated from the purchase of Avid Sportswear, Inc.
is amortized over a ten-year life using the straight-line
method. The Company will evaluate the recoverability of the
goodwill annually. Any impairment of goodwill will be realized
in the period it is recognized.
k. Allowance for Doubtful Accounts
The Company's accounts receivable are shown net of an
allowance for doubtful accounts of $184,912 at December 31,
1999.
l. Reclassification
Certain December 31, 1998 balances have been reclassified to
conform with the December 31, 1999 financial statement
presentation.
m. Advertising Expense
The Company expenses advertising costs as incurred.
n. Principles of Consolidation
The consolidated financial statements presented include the
accounts of Avid Sportswear & Golf Corp. and Avid Sportswear,
Inc. All significant intercompany accounts have been
eliminated.
o. Revenue Recognition
The Company's revenue is created primarily from the sale of
men's golf apparel. Revenue is recognized when the product is
shipped to and accepted by the customer.
p. Subscribed Stock
Subscribed stock represents cash received from shareholders
for the Company's common shares for which the amount of shares
to be issued has not been determined.
NOTE 2 - INVENTORY
Inventories for December 31, 1999 consisted of the following:
December 31,
1999
--------------------
Finished goods $ 1,703,643
Work-in-process 66,549
Raw materials and supplies 115,198
--------------------
Total $ 1,885,390
====================
F-14
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - INVENTORY (Continued)
Inventories for raw materials, finished goods and
work-in-process are stated at the lower of cost or market.
NOTE 3 - EQUITY TRANSACTIONS
On January 5, 1999, the Company issued 590,000 shares of
common stock at $0.25 per share for cash of $117,500 and debt
conversion of $35,000. Additional expense of $295,000 was
recorded to reflect the discount from $0.75 per share which
was the price that the Company was selling restricted stock to
independent third parties.
On January 5, 1999, the Company issued 866,670 shares of
common stock valued at $0.75 per share for cash of $475,000
and conversion of debt of $175,000.
On January 8, 1999, the Company issued 210,668 shares of
common stock valued at $0.75 per share for cash of $158,000.
On January 11, 1999, the Company issued 560,000 shares of
common stock for cash at $0.25 per share or $140,000.
Additional expense of $280,000 was recorded to value the
shares at $0.75 per share.
On January 11, 1999, the Company issued 800,000 shares of
common stock for media services at $0.75 per share.
On January 20, 1999, the Company issued 160,000 shares of
common stock for cash at $0.25 per share or $40,000.
Additional expense of $80,000 was recorded to value the shares
at $0.75 per share.
On January 27, 1999, the Company issued 1,100,000 shares of
common stock for the purchase of Avid Sportswear, Inc. valued
at $0.75 per share.
On February 4, 1999, the Company issued 372,002 shares of
common stock at $0.75 per share for cash of $279,002.
On March 11, 1999, the Company issued 1,220,000 shares of
common stock for cash at $0.25 per share or $305,000.
Additional expense of $610,000 was recorded to value the
shares at $0.75 per share.
On March 11, 1999, the Company issued 83,334 shares of common
stock for cash of $67,500.
On March 29, 1999, the Company issued 18,334 shares of common
stock valued at $0.75 per share for cash of $13,750.
On May 28, 1999, the Company issued 101,100 shares of common
stock for cash at $0.75 per share for cash of $75,825.
On September 22, 1999, the Company issued 50,000 shares of
common stock at $0.25 per share for cash of $12,500.
Additional expense of $25,000 was recorded to value the shares
at $0.75 per share.
F-15
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - EQUITY TRANSACTIONS (Continued)
On December 28, 1999, the Company issued 5,344,200 shares of
common stock valued at $0.275 per share for the conversion of
$1,175,724 of debt. The shares are valued at the market price
on the date of issuance with additional interest expense of
$293,381, recorded to reflect a 20% discount on the
conversion.
On December 31, 1999, the Company issued 285,714 shares of
common stock valued at $0.35 per share for cash of $100,000.
NOTE 4 - NOTES PAYABLE - RELATED PARTY
Notes payable - related parties consisted of the following at
December 31, 1999:
Note payable to Director dated December 9, 1999,
bearing interest at 10%, unsecured and due on demand $ 300,000
---------
Total Notes Payable - Related Party $ 300,000
---------
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following at December 31, 1999:
Note payable to bank bearing
interest at 9.25%, requiring
monthly interest payments of
$7,708 with the principal due on
November 17, 2000, secured by
assets of the Company, personal
guarantees of certain officers
and certificates of deposits of
the officers at the bank. $ 1,000,000
Note payable to the bank bearing
interest at 8.25%, requiring
monthly interest payments of
$1,106 with the principal due on
June 14, 2000, secured by assets
of the Company, personal
guarantees of certain officers
and certificates of deposits of
the officers at the bank. 160,524
Note payable to individual dated
December 24, 2000, bearing
interest at 12%, principal and
interest due by January 31,
2000, secured by personal
guarantees of certain officers. 200,000
Note payable to shareholder
dated January 29, 1999, bearing
interest at 8.50%, secured by
personal guarantee of the chief
executive officer, due on
demand. 375,000
-------------
Total notes payable 1,735,524
Less: amounts due by December 31, 2000 (1,735,524)
-------------
Total long-term debt $ --
=============
F-16
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - PURCHASE OF AVID SPORTSWEAR, INC.
On December 18, 1998, the Company entered into a stock
purchase and sales agreement (Agreement) with Avid Sportswear
& Golf Corp. (formerly Golf Innovations Corp.) (GFIO), a
Nevada corporation. This Agreement was finalized on March 1,
1999. The Agreement called for GFIO to purchase all of the
outstanding stock of the Company for $725,000 and 1,100,000
shares of GFIO stock. Additionally, GFIO was to pay off all of
the notes payable to the shareholders of the Company and the
notes payable to Nations Bank, fka Bank IV. The total amounts
of these notes was $1,826,119 at the date of closing.
The following is a proforma consolidated balance sheet and
income statement reflecting the issuance of 1,100,000 shares
of common stock by GFIO to acquire 100% of the outstanding
shares of common stock of the Company as though the purchase
occurred on December 31, 1998 and for the year ended December
31, 1998. The acquisition of the Company by GFIO was accounted
for as a purchase of the Company by GFIO on March 1, 1999. The
actual purchase generated goodwill of $2,559,331. The
difference between the actual goodwill and the proforma
goodwill is the result of the Company's operations from
December 31, 1998 to the date of closing. The goodwill will be
amortized over a 10-year period. Any impairment of goodwill
will be recognized in the year it is realized.
<TABLE>
<CAPTION>
ASSETS
------
Proforma
Avid Avid Adjustments
Sportswear Sportswear Increase Proforma
and Golf Corp. Inc. (Decrease) Consolidated
-------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 154,237 $ 40,282 $ 70,207 $ 264,726
Prepaid insurance 21,949 -- -- 21,949
Accounts receivable (net) -- 296,633 -- 296,633
Inventory -- 889,865 -- 889,865
------------ --------- ---------- -----------
Total Current Assets 176,186 1,226,780 70,207 1,473,173
FIXED ASSETS (NET) 2,162 271,293 -- 273,455
------------ ---------- ---------- -----------
OTHER ASSETS
Trademarks -- 2,902 -- 2,902
Goodwill -- -- 2,329,428 2,329,428
Accumulated amortization -- -- (232,942) (232,942)
------------ ----------- ----------- -----------
Total Other Assets -- 2,902 2,096,486 2,099,388
------------ ----------- ----------- -----------
TOTAL ASSETS $ 178,348 $ 1,500,975 $ 2,166,693 $ 3,846,016
============ =========== =========== ===========
</TABLE>
F-17
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - PURCHASE OF AVID SPORTSWEAR, INC. (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
-----------------------------------------------
<TABLE>
<CAPTION>
Proforma
Avid Avid Adjustments
Sportswear Sportswear Increase Proforma
and Golf Corp. Inc. (Decrease) Consolidated
-------------- ------------------ -------------- ---------------
<S> <C> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ -- $ 364,489 $ -- $ 364,489
Accrued expenses -- 63,353 -- 63,353
Notes payable 210,000 1,852,561 (924,369) 1,138,192
------------- ----------- -------------- -------------
Total Current Liabilities 210,000 2,280,403 (924,369) 1,566,034
------------- ----------- -------------- -------------
TOTAL LIABILITIES 210,000 2,280,403 (924,369) 1,566,034
------------- ----------- -------------- -------------
STOCKHOLDERS' EQUITY
(DEFICIT)
Common stock : 50,000,000 shares
authorized of $0.001 par value,
19,740,770 shares issued and
outstanding 14,612 764,170 (759,041) 19,741
Additional paid-in capital 893,193 -- 2,539,447 3,432,640
Stock subscription receivable (60,000) -- -- (60,000)
Receivable from related parties (352,300) -- -- (352,300)
Accumulated deficit (527,157) (1,543,598) 1,310,656 (760,099)
------------- ----------- -------------- -------------
Total Stockholders' Equity (Deficit) (31,652) (779,428) 3,091,062 2,279,982
------------- ----------- -------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT) $ 178,348 $ 1,500,975 $ 2,166,693 $ 3,846,016
============= =========== ============== =============
</TABLE>
F-18
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - PURCHASE OF AVID SPORTSWEAR, INC. (Continued)
<TABLE>
<CAPTION>
Proforma
Avid Adjustments
Sportswear and Avid Increase Proforma
Golf Corp. Sportswear Inc. (Decrease) Consolidated
----------------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C>
SALES, NET $ -- $ 3,721,829 $ -- $ 3,721,829
COST OF GOODS SOLD -- 2,678,906 -- 2,678,906
----------------- ---------------- ------------- ----------------
Gross Profit -- 1,042,923 -- 1,042,923
----------------- ---------------- ------------- ----------------
OPERATING EXPENSE
Selling expenses -- 576,260 -- 576,260
Depreciation and amortization 114 74,441 232,942 307,497
General and administrative 465,952 980,134 -- 1,446,086
----------------- ---------------- ------------- ----------------
Total Operating Expenses 466,066 1,630,835 232,942 2,329,843
----------------- ---------------- ------------- ----------------
OPERATING (LOSS) INCOME (466,066) (587,912) (232,942) (1,286,920)
----------------- ---------------- ------------- ----------------
OTHER INCOME EXPENSES
Bad debt expenses -- (21,554) -- (21,554)
Interest income 45 -- -- 45
Loss of valuation of asset (55,000) -- -- (55,000)
Interest expense (527) (134,384) -- (134,911)
----------------- ---------------- ------------- ----------------
Total Other Income Expenses (55,482) (155,938) -- (211,420)
----------------- ----------------
------------- ----------------
LOSS BEFORE INCOME TAXES (521,548) (743,850) (232,942) (1,498,340)
INCOME TAXES -- -- -- --
----------------- --------------- ------------- ----------------
NET LOSS $ (521,548) $ (743,850) $ (232,942) $ (1,498,340)
================= =============== ============= ================
</TABLE>
F-19
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - PURCHASE OF AVID SPORTSWEAR, INC. (Continued)
Proforma Adjustments
1) Goodwill (Golf Innovations) $ 2,329,428
Common stock (Avid) 764,170
Retained earnings (Avid) (1,543,598)
Common stock (Golf Innovations) (1,100)
Additional paid-in capital (Golf Innovations) (823,900)
Cash (Golf Innovations) (725,000)
------------------
$ --
==================
To record purchase of Avid through the issuance of 1,100,000 shares of common
stock valued at $0.75 per share and $725,000 cash.
2) Cash (Golf Innovations) $ 1,719,576
Common stock (Golf Innovations) (4,029)
Additional paid-in capital (Golf Innovations) (1,715,547)
------------------
$ --
==================
To record the sale of 4,028,770 shares of common stock to fund the purchase of
AVID.
3) Amortization expense $ 232,942
Accumulated amortization - goodwill (232,942)
------------------
$ --
==================
To record one year of amortization expense based on a ten year life using the
straight-line method.
4) Notes payable (Avid) $ 1,826,119
Cash (Golf Innovations) (1,826,119)
------------------
$ --
==================
To reflect the payoff of the Avid notes payable.
5) Cash (Golf Innovations) $ 901,750
Notes payable (Golf Innovations) (901,750)
------------------
$ --
==================
To reflect cash received from notes payable.
F-20
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Financial Statements
December 31, 1998 and 1997
NOTE 7 - COMMITMENTS AND CONTINGENCIES
a. Office Lease
The Company leases its office and warehouse space under a
non-cancellable operating lease which expires on March 31,
2004. The monthly rent amount is $10,114. Rent expense for the
years ended December 31, 1999 and 1998 was $124,846 and
$52,241, respectively.
Future payments required under the lease terms are as follows:
<TABLE>
<CAPTION>
For the
Years Ended
December 31,
----------------------
<S> <C> <C>
2000 $ 91,026
2001 121,368
2002 121,368
2003 121,368
2004 30,342
----------------
$ 485,472
================
</TABLE>
b. Royalty Agreement
BRITISH OPEN COLLECTION. On December 8, 1998, the Company
obtained the sole and exclusive right and license to use
certain trademarks associated with the British Open Golf
Championship. The licensor is The Championship Committee
Merchandising Limited, which is the exclusive licensor of
certain trademarks from The Royal & Ancient Golf Club of St.
Andrews, Scotland. This license is for the United States and
its territories and has a seven year term. Under this license,
the Company may manufacture, advertise, distribute and sell
products bearing the licensed trademarks to specialty stores
and the menswear departments of department stores. The Company
is not permitted to sell these products to discount stores or
mass-market retail chains. In return for this license, the
Company must pay the licensor, on a quarterly basis, a royalty
equal to five percent of net wholesale sales of products
bearing these trademarks, subject to a guaranteed minimum
royalty. Net wholesale sales means the invoiced wholesale
billing price, less shipping, discounts actually given,
duties, insurance, sales taxes, value-added taxes and credits
allowed for returns or defective merchandise. The Company has
accrued a payable of $100,000 for the first year as a minimum
guaranteed royalty. This amount is included in the accrued
expenses.
F-21
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
b. Royalty Agreement (Continued)
<TABLE>
<CAPTION>
CONTRACT YEAR MINIMUM ROYALTY
------------- ---------------
<S> <C> <C>
1 $100,000
2 $125,000
3 $150,000
4 $175,000
5 $200,000
6 $200,000
7 $200,000
</TABLE>
c. Royalty Agreement
DOCKERS GOLF. On May 10, 1999, our wholly-owned subsidiary
obtained the exclusive, nonassignable right to use the
"Dockers Golf" trademark solely in connection with the
manufacturing, advertising, distribution and sale of products
to approved retailers. The licensor is Levi Strauss & Co. This
license is for the United States, its territories and Bermuda.
The license has an initial term expiring on December 31, 2003
and will renew for an additional three year term expiring
December 31, 2006 if: (i) net sales of the licensed products
for calendar year 2002 are at least $17.0 million and (ii) our
wholly-owned subsidiary has not violated any material
provisions of the license. Thereafter, the licensor will
negotiate in good faith for up to two additional three year
terms if: (i) the license is renewed for the initial renewal
period, (ii) our wholly-owned subsidiary's net sales for each
year in the initial renewal period have exceeded its projected
sales for each such year and (iii) our wholly-owned subsidiary
has not violated any material provisions of the license.
Subject to a guaranteed minimum royalty, our wholly-owned
subsidiary must pay the licensor a royalty of six percent of
net sales of first quality products and four percent of net
sales of second quality products and close-out or end-of
season products. If second quality products and close-out or
end-of-season products account for more than ten percent of
total licensed product sales, then the royalty on such
products will be six percent instead of four percent. The
guaranteed minimum royalty is as follows: The minimum
guaranteed royalties will begin in 2000 when the Company
begins marketing the product.
CONTRACT YEAR MINIMUM ROYALTY
1 $250,000
2 $540,000
3 $765,000
4 $990,000
F-22
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)
b. Royalty Agreement (Continued)
The guaranteed minimum royalty in the initial renewal period,
if any, will be equal to seventy-five percent of our
wholly-owned subsidiary's projected earned royalty derived
from the sales plan provided for each annual period contained
in the initial renewal period. The guaranteed minimum royalty
is payable quarterly, except for the first year in which it is
payable as follows: $25,000 on March 31, 2000, $50,000 on June
30, 2000, and $100,000 on December 31, 2000.
Our wholly-owned subsidiary is required to spend at least
three percent of its projected sales of licensed products for
each year on advertising for this brand. Between June 1, 1999
and December 31, 1999, it was required to spend at least
$240,000 on initial product launch advertising. The license
requires our wholly-owned subsidiary to produce two
collections per year for the spring/summer and winter/fall
seasons, in at least 52 styles, of which 40 must be tops and
12 bottoms. The licensor has the right to approve or
disapprove in advance of sale the trademark use, styles,
designs, dimensions, details, colors, materials, workmanship,
quality or otherwise, and packaging. The licensor also has the
right to approve or disapprove any and all endorsements,
trademarks, trade names, designs and logos used in connection
with the license. Samples of the licensed products must be
submitted to the licensor for examination and approval or
disapproval prior to sale.
d. Employment Agreements
The Company's wholly-owned subsidiary has entered into a three
year employment agreement with Barnum Mow, commencing
September 17, 1999. Upon the expiration of the initial term,
the agreement will automatically renew for one year terms
unless either party elects not to renew the agreement by
providing written notice to the other party at least four
months prior to the expiration of any term. Mr. Mow is
employed as the Chief Executive Officer and President of Avid
Sportswear, Inc. His base salary is $300,000 per year, subject
to increases as determined by the employer. In addition to his
salary, Mr. Mow also received a bonus of $25,000 in 1999. His
bonus will be the same for each year during the term unless
the employer establishes a formal bonus plan. The employer
will reimburse Mr. Mow for all reasonable expenses incurred in
connection with the performance of his duties.
The Company's wholly-owned subsidiary has also entered into a
five year employment agreement with David Roderick, effective
January 1, 1999. From January 1999 until September 1999, Mr.
Roderick was employed as the President of Avid Sportswear,
Inc. In September 1999, Mr. Roderick became the Vice President
of Production and Sales. His base salary is $150,000, subject
to increases as determined by the employer. In addition, Mr.
Roderick will be eligible for bonuses at the discretion of the
Board of Directors. The employer will reimburse Mr. Roderick
for all reasonable expenses incurred in connection with the
performance of his duties.
F-23
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 8 - CONCENTRATIONS OF RISK
a. Cash
The Company maintains a cash account at a financial
institution located in Sarasota, Florida and Carson,
California. The accounts are insured by the Federal Deposit
Insurance Corporation up to $100,000. The Company's balances
occasionally exceed that amount.
b. Accounts Receivable
The Company provides for accounts receivable as part of
operations. Management does not believe that the Company is
subject to credit risks outside the normal course of business.
c. Accounts Payable
The Company has one vendor which accounts for 40% of the total
accounts payable.
NOTE 9 - CUSTOMERS AND EXPORT SALES
During 1999, the Company operated one industry segment which
was the manufacturing and marketing of sports apparel.
The Company's financial instruments subject to credit risk are
primarily trade accounts receivable from its customers.
For the Year Ended
December 31, 1999
------------------
Foreign sales $ --
Domestic sales 2,360,596
------------------
$ 2,360,596
==================
NOTE 10 - LOSS ON VALUATION OF ASSET
During the year ended December 31, 1998, the Company purchased
the right to market and distribute the products manufactured
by Bo Ah Industrial Co. for $30,000 cash plus 300,000 shares
of common stock valued at $25,000. The Company elected not to
distribute the products because they were not compatible with
the new business plan of the Company, and the Company had no
intent to develop or pursue the distribution channels. The
asset was written off, producing a loss of $55,000.
F-24
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 11 - WARRANTS
The Company had the following warrants outstanding at December
31, 1999:
NUMBER DATE GRANTED EXERCISE PRICE EXERCISE DATE
------ ------------ -------------- -------------
39,000 Jan. 8, 1999 $0.01 Jan. 8, 2004
The Company recognized an expense of $53,235 on January 8,
1999 to reflect the discount from the trading price to the
exercise price.
NOTE 12 - RELATED PARTY TRANSACTIONS
During the year ended December 31, 1999, officers and
directors of the Company advanced $1,479,677 to the Company,
of which $265,058 was repaid during the year, under revolving
demand notes bearing interest at 10.00%. The advances accrued
interest of $52,926. The advances and accrued interest were
converted into 4,397,936 shares on December 28, 1999. At
December 31, 1999, the Company owed an officer and director
$300,000 (Note 4).
During the year ended December 31, 1999, the Company received
$253,500 in full satisfaction of the note receivable - related
party from December 31, 1998.
Certain officers and directors have pledged certificate of
deposits as additional collateral for the notes payable to the
bank. Additionally, these officers and directors have
personally guaranteed the notes payable to the banks, as well
as the office lease agreement in Carson, California.
A non-interest bearing, unsecured, due upon demand loan
receivable of $93,000 was due from Avid Sportswear which was
purchased by the Company on March 1, 1999. Additionally, there
was a receivable from an affiliated company for $5,800 which
was non-interest bearing and due on demand.
During the year ended December 31, 1998, the Company advanced
$253,500 to its President. The amount was non-interest bearing
and due on demand.
During June 1998, the Company sold 6,000,000 shares of its
common stock to its President for $20,000, or $0.00333 per
share. The Company has revalued these shares to a pre 3-for-1
forward split price of $0.15 per share which equals the price
that the President paid in June 1998 in an arms-length
transaction to acquire a controlling interest in the Company.
On a post-split basis, the shares are valued at $0.05 per
share. An additional administrative expense of $280,000 was
recorded to revalue the shares at $0.05 per share on a
post-split basis.
During August 1998, the Company sold 1,100,000 shares of its
common stock to directors and secretary of the Company, valued
at $0.15 per share. Total cash consideration received was
$150,000, with a subscription receivable of $15,000.
F-25
<PAGE>
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 13 - GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the relation of assets and
liquidation of liabilities in the normal course of business.
However, the Company has current liabilities in excess of
current assets of $1,295,146 and has generated significant
losses for the years ended December 31, 1999 and 1998. For the
year ended December 31, 2000, the Company anticipates that it
will need $2,000,000 to $4,000,000 of cash above the cash
generated by operations in order to meet operating
requirements. Management anticipates that the necessary cash
will be provided from existing shareholders and from the sales
of additional shares through private placements.
NOTE 14 - SUBSEQUENT EVENTS
ISSUANCE OF COMMON STOCK
------------------------
On January 17, 2000, the Company issued 1,200,000 shares of
common stock to an officer for services to be rendered in
2000.
RELATED PARTY LOANS
-------------------
Subsequent to December 31, 1999, related parties have loaned
the Company $882,592.
CONVERSION OF RELATED PARTY LOANS
---------------------------------
On February 1, 2000, a related party converted $236,498 of
debt into 695,583 shares of common stock. Additional interest
expense of $67,472 was recorded to reflect the discount on
conversion.
On January 25, 2000, related parties converted $372,562 of
debt into 1,241,874 shares of common stock. Additional
interest expense of $93,141 was recorded to reflect the
discount on conversion.
ISSUANCE OF WARRANTS
--------------------
The Company failed to repay a note payable of $200,000 at
January 31, 2000 as specified by the promissory note.
Accordingly, the Company was required to grant 100,000
warrants which are exercisable at $0.50 per share and expire
on August 1, 2003. The warrants were issued at a price above
the market price of the Company's stock.
STOCK OPTION PLAN
-----------------
On January 17, 2000, the Company authorized a 2000 stock
option incentive plan (plan). The plan authorizes the issuance
of up to 3,000,000 shares of common stock to key employees. On
January 17, 2000, the Company granted 600,000 options to
directors and 400,000 options to shareholders exercisable at
$0.30 per share which was $0.075 below the trading price at
the date of grant. The Company will recognize additional
compensation expense of $75,000. The remaining options will be
issued at prices as determined by the board of directors.
SALE OF COMMON STOCK
--------------------
Subsequent to year end, the Company has sold 1,000,000 shares
of common stock for $350,000.
F-26
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
(Formerly Golf Innovations Corp.)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
EMPLOYMENT AGREEMENT
--------------------
On February 29, 2000, the Company entered into a three-year
employment agreement with its Chief Executive Officer, Earl
Ingarfield. Mr. Ingarfield will have a base salary of
$325,000, plus annual cost of living adjustments and other
increases as determined by the Board of Directors. Mr.
Ingarfield's salary will be paid quarterly with the Company's
common stock on the last day of each calendar quarter.
F-27
<PAGE>
WE HAVE NOT AUTHORIZED ANY DEALER,
SALESPERSON OR OTHER PERSON TO PROVIDE
ANY INFORMATION OR MAKE ANY
REPRESENTATIONS ABOUT AVID SPORTSWEAR
& GOLF CORP. EXCEPT THE INFORMATION OR
REPRESENTATIONS CONTAINED IN THIS
PROSPECTUS. YOU SHOULD NOT RELY ON
ANY ADDITIONAL INFORMATION OR
REPRESENTATIONS IF MADE. ----------------------
----------------------- PROSPECTUS
This prospectus does not constitute an ---------------------
offer to sell, or a solicitation of an
offer to buy any securities:
O except the common stock offered
by this prospectus; 55,500,000 SHARES OF COMMON STOCK
O in any jurisdiction in which the
offer or solicitation is not
authorized; AVID SPORTSWEAR & GOLF CORP.
O in any jurisdiction where the
dealer or other salesperson is
not qualified to make the offer
or solicitation;
O to any person to whom it is ___________ __, 2000
unlawful to make the offer or
solicitation; or
O to any person who is not a
United States resident or who is
outside the jurisdiction of the
United States.
The delivery of this prospectus or any
accompanying sale does not imply that:
O there have been no changes in
the affairs of Avid Sportswear &
Golf Corp. after the date of
this prospectus; or
O the information contained in this
prospectus is correct after the
date of this prospectus.
-----------------------
UNTIL __________ __, 2001 (25 DAYS
AFTER THE EFFECTIVE DATE OF THE
REGISTRATION STATEMENT) ALL DEALERS
THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
45
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of Nevada Revised Statutes provides, in effect, that any
person made a party to any action by reason of the fact that he is or was a
director, officer, employee or agent of our company may and, in certain cases,
must be indemnified by our company against, in the case of a non-derivative
action, judgments, fines, amounts paid in settlement and reasonable expenses
(including attorneys' fees) incurred by him as a result of such action, and in
the case of a derivative action, against expenses (including attorneys' fees),
if in either type of action he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of our company and in any
criminal proceeding in which such person had reasonable cause to believe his
conduct was lawful.. This indemnification does not apply, in a derivative
action, to matters as to which it is adjudged that the director, officer,
employee or agent is liable to our company, unless upon court order it is
determined that, despite such adjudication of liability, but in view of all the
circumstances of the case, he is fairly and reasonably entitled to
indemnification for expenses.
As authorized by Section 78.037 of Nevada Revised Statutes, our Articles
of Incorporation eliminate or limit the personal liability of a director to our
company or to any of its shareholders for monetary damage for a breach of
fiduciary duty as a director, except for:
o Acts or omissions which involve intentional misconduct, fraud or
knowing violation of law; or
o The payment of distributions in violation of Section 78.300 of Nevada
Revised Statutes.
Our Articles of Incorporation provide for indemnification of officers
and directors to the fullest extent permitted by Nevada law. Such
indemnification applies in advance of the final disposition of a proceeding.
The company maintains an insurance policy that provides protection,
within the maximum liability limits of the policy and subject to a deductible
amount for certain claims, to our company.
At present, there is no pending litigation or proceeding involving any
director or officer as to which indemnification is being sought, nor are we
aware of any threatened litigation that may result in claims for indemnification
by any director or officer.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth estimated expenses expected to be
incurred in connection with the issuance and distribution of the securities
being registered.
Securities and Exchange Commission Registration $ 3,000
Fee
Printing and Engraving Expenses $ 7,000
Accounting Fees and Expenses $ 15,000
Legal Fees and Expenses $ 50,000
Blue Sky Qualification Fees and Expenses $ 70,000
Miscellaneous $ 5,000
TOTAL $150,000
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Some of the transactions described below have been made by Lido Capital
Corporation, an entity wholly-owned by Mr. Ingarfield. Because Mr. Ingarfield
has exclusive control over Lido Capital Corporation, all transactions involving
either Mr. Ingarfield or Lido Capital Corporation are reflected as transactions
with Mr. Ingarfield.
II-1
<PAGE>
On October 8, 1997, our company issued 3,000,000 shares of common stock
for $0.00333 in cash per share to the original founders. The total offering
price of this transaction was $10,000. The number of shares issued reflects a
three-for-one split on July 23, 1998.
In February 1998, our company issued 300,000 shares of common stock to
Y.K. International Co., Ltd. in exchange for the assignment of certain
distribution rights under a Distribution Agreement dated as of September 8, 1997
between Bo Ah Industrial Co. and Y.K. International Co., Ltd. These rights were
valued at $25,000. The number of shares issued reflects a three-for-one split on
July 23, 1998.
In February 1998, our company issued 3,000,000 shares of common stock
for $0.08333 in cash per share. The total offering price of this transaction was
$250,000. The number of shares issued reflects a three-for-one split on July 23,
1998. All of these shares were purchased by unrelated persons.
On June 18, 1998, our company issued 6,000,000 shares of common stock
for $0.05 per share in cash and services. All of these shares were purchased by
Mr. Ingarfield. The total offering price of this transaction was $20,000 in cash
and $280,000 in services. The number of shares issued reflects a three-for-one
split on July 23, 1998. An administrative expense of $280,000 was recorded to
value the shares at $0.05 per share to reflect a discount to the $0.00333 per
share actually paid. The value of $0.05 per share was based on the price Mr.
Ingarfield paid in an arms-length transaction to purchase a controlling interest
in our company on or about June 4, 1998.
In August, 1998, our company issued 1,100,000 shares of common stock for
$0.15 in cash per share. The total offering price of this transaction was
$165,000. Michael LaValliere, a Director of our company, purchased 500,000 of
these shares for a total purchase price of $75,000, Thomas Browning, a Director
of our company, purchased 500,000 of these shares for a total purchase price of
$75,000 and Jerry L. Busiere, the Secretary, Treasurer and a Director of our
company, purchased 100,000 of these shares for a total purchase price of
$15,000, payable as a subscription receivable. The remaining shares were
purchased by four unrelated persons for a total purchase price of $135,000.
In August, 1998, our company issued 800,000 shares of common stock for
$0.15 in cash per share. All of these shares were purchased by unrelated parties
for a total purchase price of $120,000, of which $75,000 was paid in cash and
$45,000 was paid in the form of a subscription receivable.
On December 21, 1998, our company issued 412,000 shares of common stock
for $0.25 in cash per share. The total offering price of this transaction was
$103,000. All of these shares were purchased by unrelated persons.
On January 5, 1999, our company issued 590,000 shares of common stock
originally valued at $0.25 per share for cash of $117,500 and debt conversion of
$35,000. Additional expense of $295,000 was recorded to reflect the discount
from $0.75 per share which was the price that our company was selling restricted
stock to independent third parties. Of the total number of shares issued on this
date, 100,000 shares were issued to Mr. Ingarfield's parents and the remainder
were issued to unrelated persons.
On January 5, 1999, our company issued 866,670 shares of common stock
valued at $0.75 per share for cash of $475,000 and conversion of debt of
$175,000. All of these shares were purchased by unrelated persons.
On January 8, 1999, our company issued 210,668 shares of common stock
valued at $0.75 per share for cash of $158,000. All of these shares were
purchased by unrelated persons.
On January 11, 1999, our company issued 560,000 shares of common stock
for cash, originally valued at $0.25 per share for $140,000 of cash. Additional
expense of $280,000 was recorded to value the shares at $0.75 per share. All of
these shares were purchased by unrelated persons.
On January 11, 1999, our company issued 800,000 shares of common stock
for media services originally valued at $0.75 per share. All of these shares
were issued by an unrelated marketing firm.
On January 20, 1999, our company issued 160,000 shares of common stock
for cash originally valued at $0.25 per share for $40,000 of cash. Additional
expense of $80,000 was recorded to value the shares at $0.75 per share. All of
these shares were purchased by unrelated persons.
II-2
<PAGE>
On January 27, 1999, our company issued 1,100,000 shares of common stock
for the purchase of Avid Sportswear, Inc. valued at $0.75 per share. All of
these shares were issued to the former shareholders of Avid Sportswear, Inc.,
including 1,000,000 shares to David Roderick, the Executive Vice-President of
Merchandising and Design of Avid Sportswear, Inc.
On February 4, 1999, our company issued 372,002 shares of common stock
at $0.75 per share for cash of $279,002. All of these shares were purchased by
unrelated persons.
On March 11, 1999, our company issued 1,220,000 shares of common stock
for cash originally valued at $0.25 per share for $305,000 of cash. Additional
expense of $610,000 was recorded to value the shares at $0.75 per share. All of
these shares were purchased by unrelated persons.
On March 11, 1999, our company issued 83,334 shares of common stock for
cash of $67,500. All of these shares were purchased by unrelated persons.
On March 29, 1999, our company issued 18,334 shares of common stock
valued at $0.75 per share for cash of $13,750. All of these shares were
purchased by unrelated persons.
On May 28, 1999, our company issued 101,100 shares of common stock
valued at $0.75 per share for cash of $75,825. All of these shares were
purchased by unrelated persons.
On September 22, 1999, our company issued 50,000 shares of common stock
originally valued at $0.25 per share for cash of $12,500. Additional expense of
$25,000 was recorded to value the shares at $0.75 per share. All of these shares
were purchased by unrelated persons.
On December 31, 1999, our company issued 285,714 shares of common stock
valued at $0.35 per share for cash of $100,000. All of these shares were
purchased by an unrelated party.
In December 1999, our company issued a total of 5,344,200 shares of
common stock for the conversion of debt to equity at a price of $0.22 per share,
including 3,735,227 shares to Mr. Ingarfield, 489,359 shares to Browning and
173,350 shares to LaValliere. Messrs. Ingarfield, Browning and LaValliere
converted indebtedness of $821,750, $107,659 and $38,137, respectively. An
additional interest expense of $293,381 was recorded to value the shares at
$0.275 per share to reflect a 20% discount on the conversion. See "Certain
Relationships and Related Transactions."
In January 2000, our company issued a total of 825,207 shares of common
stock to Mr. Ingarfield for the conversion of $247,562 of indebtedness to equity
at a price of $0.30 per share. In addition, our company issued a total of
416,667 shares of common stock to Mr. LaValliere for the conversion of $125,000
of indebtedness to equity at a price of $0.30 per share. An additional interest
expense of $93,141 was recorded to value the shares at $0.375 per share to
reflect a 20% discount on the conversion.
In February 2000, our company issued a total of 695,583 shares of common
stock to Mr. Ingarfield for the conversion of $236,498 of indebtedness to equity
at a price of $0.34 per share. An additional interest expense of $67,472 was
recorded to value the shares at $0.437 per share to reflect a 20% discount on
the conversion. In addition, in February 2000, our company issued 1,200,000
shares to Barnum Mow in consideration of his employment. These shares were
valued at $0.30 per share. See "Executive Compensation - Restricted Stock
Grant."
Between February 22, 2000 and June 22, 2000, our company sold
subscriptions to purchase 14,352,927 shares of our common stock at a price of
$0.35 per share for cash of $5.0 million. All of these shares were purchased by
unrelated persons.
In June 2000, our company issued 350,000 shares of common stock to
Persia Consulting Group, Inc. in exchange for consulting services provided under
a Consulting Agreement dated June 22, 2000. These consulting services were
valued at $203,000. In addition, in June 2000, Mr. LaValliere elected to tender
a $60,523 receivable owed to him by the company under the terms of the private
placement offering in exchange for 172,923 shares to our common stock.
II-3
<PAGE>
In June 2000, our company issued a total of 1,294,352 shares of common
stock for the conversion of debt to equity at a price of $0.35 per share,
including 172,923 shares to Mr. LaValliere and 1,121,429 shares to unrelated
parties. Mr. LaValliere and unrelated parties converted indebtedness of $60,523
and $392,500, respectively.
In June 2000, our company issued 15,000 shares of common stock to
Undiscovered Equities Research Corp. in exchange for consulting services
provided under a Consulting Agreement dated June 28, 2000 and $10,000. The
consulting services were valued at $5,250.
In November 2000, our company raised $300,000 in the form of convertible
debentures. The debentures are at an interest rate of 6% with the principal and
accrued interest due November 1, 2005. The debenture holders are entitled to
convert all or part of the principal amount plus accrued interests into shares
of the company's common stock equal to either (a) an amount equal to 120% of the
closing bid price of the company's common stock as of the date of the debenture
issuance or (b) an amount equal to 80% of the closing bid price for twenty
trading days immediately preceding the conversion date. The company is obligated
to register the resale of the conversion shares under the Securities Act of
1933. The debentures are subordinate and junior in right of payment to all
account payable to the company incurred in the ordinary course of business
and/or bank debt of the company not to exceed $500,000. The company has the
right to require the debenture holders to convert any unpaid principal and
accrued interest on the debentures by giving the debenture holder not less than
five days prior to written notice if the closing bid price of the company's
common stock is $1.25 or higher price per share for ten consecutive trading days
or upon the five year anniversary of the debenture issuance.
In November 2000, our company issued 300,000 shares of common stock to
unrelated parties in exchange for consulting services provided to the company.
These consulting services were valued at $46,875.
In December 2000 our company issued 2,000,000 shares of common stock
valued at $0.20 per share for cash of $400,000. All of these shares were
purchased by unrelated parties.
With respect to the sale of unregistered securities referenced above,
all transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 ACT"), and Regulation D promulgated under the
1933 Act. In each instance, the purchaser had access to sufficient information
regarding our company so as to make an informed investment decision. More
specifically, and except with respect to the purchases by Lido Capital
Corporation and Messrs. Ingarfield, Browning, LaValliere and Roderick, each
purchaser signed a written subscription agreement with respect to their
financial status and investment sophistication in which they represented and
warranted, among other things, that they had:
o the ability to bear the economic risks of an investment in the shares
of common stock of our company;
o a certain net worth sufficient to meet the suitability standards of
our company; and
o been provided with all material information requested by the
purchaser or his or her representatives, and been provided an
opportunity to ask questions of and receive answers from our company
concerning our company and the terms of the offering.
The sale of unregistered securities to Lido Capital Corporation and
Messrs. Ingarfield, Browning, LaValliere and Roderick were exempt from
registration pursuant to Section 4(2) of the 1933 Act and Regulation D
promulgated under the 1933 Act. Each of these investors was an officer or
director of our company at the time of purchase, except for Lido Capital
Corporation which was wholly-owned and controlled by an officer and director of
our company, Mr. Ingarfield.
II-4
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C>
2.01 Stock Purchase and Sale Agreement Incorporated by reference to Exhibit 2.01
dated as of December 18, 1998 among to the Registrant's Registration
our company, Avid Sportswear, Inc. Statement on Form 10-SB (the
and the shareholders of Avid "Registration Statement")
Sportswear, Inc.
3.01 Articles of Incorporation filed on Incorporated by reference to Exhibit 3.01
September 19, 1997 with the Nevada to the Registration Statement
Secretary of State
3.02 Amended Articles of Incorporation Incorporated by reference to Exhibit 3.02
filed on May 12, 1999 with the Nevada to the Registration Statement
Secretary of State
3.03 Certificate of Amendment to Articles Incorporated by reference to Exhibit 3.03
of Incorporation filed on May 27, to the Registration Statement
1999 with the Nevada Secretary of
State
3.04 Bylaws Incorporated by reference to Exhibit 3.04
to the Registration Statement
4.01 2000 Stock Incentive Plan Incorporated by reference to Exhibit 4.01
to Amendment No. 2 to the Registration
Statement.
10.01 Agreement dated as of December 8, Incorporated by reference to Exhibit
1998 between the Championship 10.01 to the Registration Statement
Committee Merchandising Limited and
Avid Sportswear Inc.
10.02 Lease dated as of March 1, 1999 Incorporated by reference to Exhibit
between F & B Industrial Investments, 10.02 to the Registration Statement
LLC and Avid Sportswear, Inc.
10.03 Lease dated as of April 30, 1999 Incorporated by reference to Exhibit
between Links Associates, Ltd. and 10.03 to the Registration Statement
our company
10.04 Employment Agreement dated as of Incorporated by reference to Exhibit
September 11, 1999 between Barnum Mow 10.04 to the Registration Statement
and Avid Sportswear, Inc.
10.05 Trademark License Agreement dated as Incorporated by reference to Exhibit
of May 10, 1999 between Levi Strauss 10.05 to Amendment No. 2 to the
& Co. and Avid Sportswear, Inc. Registration Statement
10.06 Employment Agreement dated as of Incorporated by reference to Exhibit
January 1, 1999 between David E. 10.06 to the Registration Statement
Roderick and Avid Sportswear, Inc.
10.07 Promissory Note in the original Incorporated by reference to Exhibit
principal amount of $180,000 dated as 10.07 to the Registration Statement
of June 4, 1999 from our company to
First State Bank
10.08 Commercial Security Agreement dated Incorporated by reference to Exhibit
as of November 17, 1999 between First 10.08 to the Registration Statement
State Bank and our company
II-5
<PAGE>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C> <C>
10.09 Promissory Note dated as of November Incorporated by reference to Exhibit
17, 1999 in the original principal 10.09 to the Registration Statement
amount of $1,000,000 given by our
company to First State Bank
10.10 Business Loan Agreement dated as of Incorporated by reference to Exhibit
November 17, 1999 between First State 10.10 to the Registration Statement
Bank and our company
10.11 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.11 to Amendment No. 2 to the
original principal amount of $550,000 Registration Statement
given by our company to Earl
Ingarfield
10.12 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.12 to Amendment No. 2 to the
original principal amount of Registration Statement
$1,000,000 given by our company to
Lido Capital Corporation
10.13 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.13 to Amendment No. 2 to the
original principal amount of $125,000 Registration Statement
given by our company to Michael E.
LaValliere
10.14 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.14 to Amendment No. 2 to the
original principal amount of $500,000 Registration Statement
given by our company to Thomas
Browning
10.15 Promissory Note dated as of December Incorporated by reference to Exhibit
23, 1999 in the original principal 10.15 to Amendment No. 2 to the
amount of $200,000 given by our Registration Statement
company to Daniel Paetz
10.16 Executive Employment Agreement Incorporated by reference to Exhibit
effective as of February 1, 2000 10.16 to Amendment No. 2 to the
between our company and Earl T. Registration Statement
Ingarfield
10.17 Consulting Agreement dated as of June Incorporated by reference to Exhibit
22, 2000 between Persia Consulting 10.17 to Registrant's Registration
Group, Inc. and our company Statement on Form SB-2.
10.18 Form of Factoring Agreement between Incorporated by reference to Exhibit
our company and GE Capital Commercial 10.18 to the Registrant's Quarterly
Services, Inc. Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
10.19 Form of Factoring Agreement Incorporated by reference to Exhibit
Guaranty/Letter of Credit Supplement 10.19 to the Registrant's Quarterly
between our company and GE Capital Report on Form 10-QSB for the quarterly
Commercial Services, Inc. period ended September 30, 2000.
10.20 Form of Factoring Agreement - Incorporated by reference to Exhibit
Inventory Supplement (with advances) 10.20 to the Registrant's Quarterly
between our company and GE Capital Report on Form 10-QSB for the quarterly
Commercial Services, Inc. period ended September 30, 2000.
10.21 Form of Letter of Agreement between Incorporated by reference to Exhibit
our company and GE Capital Commercial 10.21 to the Registrant's Quarterly
Services, Inc. Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
10.22 Form of Convertible Debenture Incorporated by reference to Exhibit
10.22 to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
II-6
<PAGE>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
10.23 Form of Registration Rights Agreement Incorporated by reference to Exhibit
between our company and purchasers of 10.23 to the Registrant's Quarterly
convertible debentures Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
10.24 Line of Credit Agreement dated as of Incorporated by reference to Appendix "A"
November 28, 2000 between our company to the Registrant's Proxy Statement (the
and GMF Holdings, Inc. "Proxy Statement")
10.25 Form of Debenture dated as of Incorporated by reference to Appendix "B"
November 28, 2000 given by our company to the Registrant's Proxy Statement
10.26 Registration Rights Agreement dated Incorporated by reference to Appendix "C"
as of November 28, 2000 between our to the Registrant's Proxy Statement
company and GMF Holdings, Inc.
10.27 Form of Warrant dated as of Incorporated by reference to Appendix "D"
November 28, 2000 given by our company to the Registrant's Proxy Statement
10.28 Registration Rights Agreement dated Incorporated by reference to Appendix "E"
as of November 28, 2000 between our to the Registrant's Proxy Statement
company and the May Davis Group, Inc.
10.29 Placement Agent Agreement as of Incorporated by reference to Appendix "F"
November 28, 2000 between our company to the Registrant's Proxy Statement
and the May Davis Group, Inc.
10.30 Escrow Agreement dated as of Incorporated by reference to Appendix "G"
November 28, 2000 among our company, to the Registrant's Proxy Statement
the May Davis Group, Inc. and First
Union National Bank
11.01 Statement re: Computation of Earnings Not Applicable
16.01 Letter on Change in Certifying Not Applicable
Accountant
21.01 Subsidiaries of our company Incorporated by reference to Exhibit
21.01 to the Registration Statement
23.01 Consent of Independent Accountants Provided herewith
23.02 Opinion of Counsel Provided herewith
24.01 Power of Attorney Included on Signature Page
27.01 Financial Data Schedule Provided herewith
</TABLE>
II-7
<PAGE>
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by Sections 10(a)(3)
of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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 a bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer 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 small business
issuer 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 whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) 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 BONA FIDE offering thereof.
II-8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on our behalf by the undersigned, in the City of
Sarasota, Florida, on December 18, 2000.
AVID SPORTSWEAR & GOLF, INC.
By: /s/ Earl T. Ingarfield
------------------------
Name: Earl T. Ingarfield
Title: President, Chief Executive Officer
and Chairman
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Earl T. Ingarfield his true and lawful
attorney-in-fact and agent, with full power of substitution and revocation, for
him and in his name, place and stead, in any and all capacities (until revoked
in writing), to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done as fully for all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or is substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/Earl T. Ingarfield President, Chief Executive December 18, 2000
----------------------------- Officer and Chairman
Earl T. Ingarfield
/s/Jerry L. Busiere Secretary, Treasurer and December 18, 2000
----------------------------- Director
Jerry L. Busiere
/s/Michael E. LaValliere Director December 18, 2000
-----------------------------
Michael E. LaValliere
Director December __, 2000
-----------------------------
Thomas L. Browning
/s/Barnum Mow Director December 18, 2000
-----------------------------
Barnum Mow
</TABLE>
II-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C> <C>
2.01 Stock Purchase and Sale Agreement Incorporated by reference to Exhibit 2.01
dated as of December 18, 1998 among to the Registrant's Registration
our company, Avid Sportswear, Inc. Statement on Form 10-SB (the
and the shareholders of Avid "Registration Statement")
Sportswear, Inc.
3.01 Articles of Incorporation filed on Incorporated by reference to Exhibit 3.01
September 19, 1997 with the Nevada to the Registration Statement
Secretary of State
3.02 Amended Articles of Incorporation Incorporated by reference to Exhibit 3.02
filed on May 12, 1999 with the Nevada to the Registration Statement
Secretary of State
3.03 Certificate of Amendment to Articles Incorporated by reference to Exhibit 3.03
of Incorporation filed on May 27, to the Registration Statement
1999 with the Nevada Secretary of
State
3.04 Bylaws Incorporated by reference to Exhibit 3.04
to the Registration Statement
4.01 2000 Stock Incentive Plan Incorporated by reference to Exhibit 4.01
to Amendment No. 2 to the Registration
Statement.
10.01 Agreement dated as of December 8, Incorporated by reference to Exhibit
1998 between the Championship 10.01 to the Registration Statement
Committee Merchandising Limited and
Avid Sportswear Inc.
10.02 Lease dated as of March 1, 1999 Incorporated by reference to Exhibit
between F & B Industrial Investments, 10.02 to the Registration Statement
LLC and Avid Sportswear, Inc.
10.03 Lease dated as of April 30, 1999 Incorporated by reference to Exhibit
between Links Associates, Ltd. and 10.03 to the Registration Statement
our company
10.04 Employment Agreement dated as of Incorporated by reference to Exhibit
September 11, 1999 between Barnum Mow 10.04 to the Registration Statement
and Avid Sportswear, Inc.
10.05 Trademark License Agreement dated as Incorporated by reference to Exhibit
of May 10, 1999 between Levi Strauss 10.05 to Amendment No. 2 to the
& Co. and Avid Sportswear, Inc. Registration Statement
10.06 Employment Agreement dated as of Incorporated by reference to Exhibit
January 1, 1999 between David E. 10.06 to the Registration Statement
Roderick and Avid Sportswear, Inc.
10.07 Promissory Note in the original Incorporated by reference to Exhibit
principal amount of $180,000 dated as 10.07 to the Registration Statement
of June 4, 1999 from our company to
First State Bank
10.08 Commercial Security Agreement dated Incorporated by reference to Exhibit
as of November 17, 1999 between First 10.08 to the Registration Statement
State Bank and our company
II-10
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
10.09 Promissory Note dated as of November Incorporated by reference to Exhibit
17, 1999 in the original principal 10.09 to the Registration Statement
amount of $1,000,000 given by our
company to First State Bank
10.10 Business Loan Agreement dated as of Incorporated by reference to Exhibit
November 17, 1999 between First State 10.10 to the Registration Statement
Bank and our company
10.11 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.11 to Amendment No. 2 to the
original principal amount of $550,000 Registration Statement
given by our company to Earl
Ingarfield
10.12 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.12 to Amendment No. 2 to the
original principal amount of Registration Statement
$1,000,000 given by our company to
Lido Capital Corporation
10.13 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.13 to Amendment No. 2 to the
original principal amount of $125,000 Registration Statement
given by our company to Michael E.
LaValliere
10.14 Convertible Revolving Demand Note Incorporated by reference to Exhibit
dated as of December 1, 1999 in the 10.14 to Amendment No. 2 to the
original principal amount of $500,000 Registration Statement
given by our company to Thomas
Browning
10.15 Promissory Note dated as of December Incorporated by reference to Exhibit
23, 1999 in the original principal 10.15 to Amendment No. 2 to the
amount of $200,000 given by our Registration Statement
company to Daniel Paetz
10.16 Executive Employment Agreement Incorporated by reference to Exhibit
effective as of February 1, 2000 10.16 to Amendment No. 2 to the
between our company and Earl T. Registration Statement
Ingarfield
10.17 Consulting Agreement dated as of June Incorporated by reference to Exhibit
22, 2000 between Persia Consulting 10.17 to Registrant's Registration
Group, Inc. and our company Statement on Form SB-2.
10.18 Form of Factoring Agreement between Incorporated by reference to Exhibit
our company and GE Capital Commercial 10.18 to the Registrant's Quarterly
Services, Inc. Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
10.19 Form of Factoring Agreement Incorporated by reference to Exhibit
Guaranty/Letter of Credit Supplement 10.19 to the Registrant's Quarterly
between our company and GE Capital Report on Form 10-QSB for the quarterly
Commercial Services, Inc. period ended September 30, 2000.
10.20 Form of Factoring Agreement - Incorporated by reference to Exhibit
Inventory Supplement (with advances) 10.20 to the Registrant's Quarterly
between our company and GE Capital Report on Form 10-QSB for the quarterly
Commercial Services, Inc. period ended September 30, 2000.
10.21 Form of Letter of Agreement between Incorporated by reference to Exhibit
our company and GE Capital Commercial 10.21 to the Registrant's Quarterly
Services, Inc. Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
10.22 Form of Convertible Debenture Incorporated by reference to Exhibit
10.22 to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
II-11
<PAGE>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
10.23 Form of Registration Rights Agreement Incorporated by reference to Exhibit
between our company and purchasers of 10.23 to the Registrant's Quarterly
convertible debentures Report on Form 10-QSB for the quarterly
period ended September 30, 2000.
10.24 Line of Credit Agreement dated as of Incorporated by reference to Appendix "A"
November 28, 2000 between our company to the Registrant's Proxy Statement (the
and GMF Holdings, Inc. "Proxy Statement")
10.25 Form of Debenture dated as of Incorporated by reference to Appendix "B"
November 28, 2000 given by our company to the Registrant's Proxy Statement
10.26 Registration Rights Agreement dated Incorporated by reference to Appendix "C"
as of November 28, 2000 between our to the Registrant's Proxy Statement
company and GMF Holdings, Inc.
10.27 Form of Warrant dated as of Incorporated by reference to Appendix "D"
November 28, 2000 given by our company to the Registrant's Proxy Statement
10.28 Registration Rights Agreement dated Incorporated by reference to Appendix "E"
as of November 28, 2000 between our to the Registrant's Proxy Statement
company and the May Davis Group, Inc.
10.29 Placement Agent Agreement as of Incorporated by reference to Appendix "F"
November 28, 2000 between our company to the Registrant's Proxy Statement
and the May Davis Group, Inc.
10.30 Escrow Agreement dated as of Incorporated by reference to Appendix "G"
November 28, 2000 among our company, to the Registrant's Proxy Statement
the May Davis Group, Inc. and First
Union National Bank
11.01 Statement re: Computation of Earnings Not Applicable
16.01 Letter on Change in Certifying Not Applicable
Accountant
21.01 Subsidiaries of our company Incorporated by reference to Exhibit
21.01 to the Registration Statement
23.01 Consent of Independent Accountants Provided herewith
23.02 Opinion of Counsel Provided herewith
24.01 Power of Attorney Incorporated by reference to the
signature page attached to this
Registration Statement
27.01 Financial Data Schedule Provided herewith
II-12
</TABLE>
<PAGE>
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Avid Sportswear & Golf Corp.
Sarasota, Florida
We consent to the use in this Registration Statement of Avid Sportswear & Golf
Corp. on Form SB-2, of our audit report dated February 26, 2000 for Avid
Sportswear & Golf Corp. for the year ended December 31, 1999, which are
incorporated as part of this Registration Statement, and to all references to
our firm included in this Registration Statement.
/s/ HJ & Associates, LLC
HJ & Associates, LLC
(Formerly Jones, Jensen & Company)
Salt Lake City, Utah
December 14, 2000
<PAGE>
EXHIBIT 23.02
December 18, 2000
Avid Sportswear & Golf Corp.
22 South Links Avenue, Suite 204
Sarasota, Florida 34236
RE: AVID SPORTSWEAR & GOLF CORP. REGISTRATION STATEMENT ON FORM
SB-2, AS AMENDED (THE "REGISTRATION STATEMENT")
----------------------
Gentlemen:
We have acted as counsel to Avid Sportswear & Golf Corp., a Nevada
corporation (the "CORPORATION"), in connection with the preparation of the
above-referenced Registration Statement as filed on Form SB-2, as amended, with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended (the "1933 ACT"), relating to the offering and sale by selling
shareholders of the Corporation of up to 54,000,000 shares of the Corporation's
Common Stock, par value $0.001 per share (the "COMMON STOCK"). We are furnishing
this opinion to you in accordance with Item 601 of Regulation S-B promulgated
under the 1933 Act for filing as Exhibit 23.02 to the Registration Statement.
We are familiar with the Registration Statement, and we have
examined the Corporation's Articles of Incorporation, as amended to date, the
Corporation's Bylaws, as amended to date, and minutes and resolutions of the
Corporation's Board of Directors and shareholders. We have also examined such
other documents, certificates, instruments and corporate records, and such
statutes, decisions and questions of law as we have deemed necessary or
appropriate for the purpose of this opinion.
Based upon the foregoing, we are of the opinion that the 54,000,000
shares of Common Stock proposed to be sold by the selling shareholders of the
Corporation as contemplated by the Registration Statement will be legally and
validly issued, fully-paid and nonassessable.
We consent to the filing of this opinion as an Exhibit to the
Registration Statement.
Very truly yours,
/s/ Kirkpatrick & Lockhart LLP
Kirkpatrick & Lockhart LLP
