UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES OF SMALL BUSINESS ISSUERS
under Section 12(b) or (g) of The Securities Exchange Act of 1934
CELEBRITY SPORTS NETWORK, INC.
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(Name of Small Business Issuer in its charter)
Colorado 84-1521645
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(State of incorporation) (I.R.S. Employer Identification No.)
1869 W. Littleton Boulevard, Littleton, Colorado 80120
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(Address of principle executive offices) (Zip Code)
(303) 703-9831
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(Issuer's telephone number)
Securities to be registered under Section 12 (b) of the Exchange Act:
None
Securities to be registered under Section 12 (g) of the Exchange Act:
Common Stock, $.001 par value
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(Title of Class)
Copies of all communications, including all communications sent to the
agent for service, should be sent to:
David J. Babiarz, Esq.
Wendy H. Bird, Esq.
Overton, Babiarz & Associates, P.C.
7720 East Belleview Avenue, Suite 200
Englewood, Colorado 80111
(303) 779-5900
Page 1 of 19 Pages
Exhibit Page is Located at Page 18.
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TABLE OF CONTENTS
PART I 1
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Item 1. Description of Business 1
Background 1
Plan of Operation 1
Industry Background and Competition 4
Employees 4
Facilities 5
Item 2. Management's Discussion And Analysis or Plan of Operation 5
Introduction 5
Liquidity 5
Results of Operations 6
Item 3. Description of Property 7
Item 4. Security Ownership Of Certain Beneficial Owners and Management 7
Changes in Control 8
Item 5. Directors and Executive Officers, Promoters and Control Persons 8
Officers and Directors 8
Item 6. Executive Compensation 9
Item 7. Certain Relationships And Related Transactions 10
Initial Capitalization 10
Miscellaneous 10
Item 8. Description Of Securities 11
Common Stock 11
Preferred Stock 11
Transfer Agent 12
Dividends 12
PART II 12
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Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters 12
Potentially Limited Trading Market 12
Market Price 12
Shares Available for Future Sale 12
Holders 13
Penny Stock Regulation 13
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Item 2. Legal Proceedings 13
Item 3. Changes in and Disagreements With Accountants 14
Item 4. Recent Sales of Unregistered Securities 14
Item 5. Indemnification of Directors and Officers 14
PART F/S 17
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Financial Statements 17
PART III 18
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Item 1. Exhibit Index 18
SIGNATURES 19
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PART I
Item 1. Description of Business
Background
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Celebrity Sports Network, Inc. is a Colorado corporation organized on
August 27, 1999. The Company was formed in an effort to broaden the scope of
appearances available to current and former professional athletes. David
Preston, a former professional athlete and member of the Denver Broncos football
organization, organized the Company with the objective of assisting other
athletes in gaining a market for their speaking services and marketing those
services to end-users. The Company also hopes to assist these athletes in
refining their speaking and presentation skills to increase their marketability.
Activities of the Company to date have been limited to organizational efforts,
obtaining initial financing and developing its business plan. The Company's
executive offices are located at 1869 W. Littleton Boulevard, Littleton,
Colorado 80120, phone number (303) 703-9831 and web site address
www.celebsports.com.
The Company presently has fifty-four shareholders, no revenues and
extremely limited capitalization. The Company raised $124,500 in a limited
public offering in Colorado exempt from the registration requirements of
applicable Federal securities laws. Proceeds from that offering have been used
to repay obligations, for administrative expenses and as working capital for
future operations. Management is making efforts to contact sports celebrities
and develop a roster of qualified speakers. Once the Company has obtained a
roster of sufficient individuals to warrant marketing, the Company will
undertake efforts to contact end-users to market these services.
Plan of Operation
-----------------
The Company's plan of operation is to obtain a roster of qualified clients
and market their service to end-users for a profit. The success of this plan is
dependent on three primary factors: (i) obtaining a roster of qualified,
marketable personalities; (ii) successfully marketing their services to
end-users; and (iii) structuring the transactions in a way to generate revenue
to the Company. Due to its status as a development stage entity, the Company has
only recently embarked on its plan. The success of the Company's business plan
remains uncertain.
The task of evaluating and attracting qualified clients will fall primarily
on the Company's president, David Preston. Mr. Preston spent approximately four
years as a starter with the Denver Broncos football organization. In that
capacity, he was introduced to numerous other athletes, both active and retired,
seeking an outlet for their non-athletic services. This is especially true for
retired athletes, who are sometimes overlooked in the search for public speakers
once their playing careers are completed. In recent years, Mr. Preston
recognized the need to organize the services of these individuals. On that
basis, the substance of the Company's business plan was born.
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Mr. Preston has undertaken efforts to formally develop a roster of
qualified clients. Through his contacts with the Denver Broncos, Mr. Preston has
access to both current and retired members of the organization, which should
provide a ready source of talent. Due to his participation and contacts with the
Denver Broncos, Mr. Preston will also have access to other existing and former
professional football players. The anticipated group will form the basis for the
Company's initial roster.
In the opinion of management, many players make appearances and speeches on
a sporadic basis. Such individuals are contacted through private and public
organizations in the geographic area where the player spent his career or
resides. It is the Company's intention to formalize this process for the benefit
of its shareholders and the athletes.
A portion of the initial screening process will include an evaluation of
the athletes' talent. This evaluation will be based in part on the personal
observation of Company personnel, as well as references from third party
sources. In the event the athlete wishes to improve his or her speaking ability,
the Company hopes to maintain a resource of training courses for the benefit of
its clients.
If the Company is successful in reaching an agreement with a number of
athletes, efforts will be undertaken to market their service to third party
users. Such marketing will be conducted through a variety of means, including
print advertising, word-of-mouth referrals, maintenance of a Web page and direct
mailings. The Company will endeavor to contact end-users directly, as well as
through intermediaries such as incentive houses, event planners and destination
management companies. While no formal marketing or feasibility studies have been
conducted on the Company's behalf, management believes a sufficient market
exists for speaking and appearances. Due to the wide exposure of professional
sporting events via radio, television and print media, athletes enjoy a
favorable reputation with the public at large. The most famous athletes are
highly sought for speaking engagements. It will be the Company's objective to
inform the public of the availability of lesser-known athletes whose services
are more reasonably priced.
Venues for the Company's clients are potentially numerous. Large and medium
size corporations often hire public speakers to motivate employees and reward
past accomplishments. Celebrities, including professional athletes, are also
utilized as a means of marketing and promotion for those entities including
appearances at trade shows and special events. Recognizable examples include
Michael Jordan and Tiger Woods as spokespersons for Nike and John Elway for an
automobile retailer. Significant funds are expended each year to retain the
services of celebrities on behalf of corporate image and product sales.
The Company's personnel will also target charities and other nonprofit
organizations. These organizations frequently use celebrity speakers in
conjunction with fund-raising activities to attract participants. Such
activities include banquets, golf tournaments, auctions and advertisements.
Again, well-recognized athletes are highly sought by these organizations. It
will be the Company's goal to match lesser-known athletes with smaller charities
desiring their services.
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A third source of potential customers includes government and
quasi-government agencies, including school systems. Due to their status as
recognizable public figures, athletes are highly sought as role models for
school-aged children. While celebrities donate many of these appearances,
management of the Company will endeavor to expand the number of such appearances
as a means of promoting its services for private events.
The final factor affecting the success of the Company's business plan will
be the structure of the fee arrangement between the client and the end-user. It
is out of this fee which the Company will collect its revenue. Management
anticipates utilizing a combination of flat fees and percentage fees, depending
on the event. In general, management anticipates that the Company will charge a
flat fee for those events generating smaller fees to the athlete as a means of
covering the overhead necessary to represent the client. Larger appearances may
be structured as a percentage of the fee paid to the athlete or a combination of
a flat fee and percentage, depending on the needs and objectives of the athlete.
More specifically, the Company might charge a percentage fee for scheduling an
appearance at a grand opening, autograph session, or awards banquet.
Fees for individual client appearances such as these can range from $500 to
$25,000, depending upon the nature of the event and the magnitude of the client.
In this case it would be appropriate to charge a percentage rate of 10% to 20%
of the fee collected. Another example would be to arrange for a group of
celebrities to attend an event where the sponsor agrees in advance to compensate
the group at a set fee. In this instance, a group of celebrities would be
obtained for placement at the customer's event, and the Company would pay a
prearranged fee to each celebrity and retain a flat fee to cover expenses. A
third example would be to arrange for a guest speaker at a sports banquet,
conference or special event. The fee for this type of appearance is potentially
greater.
Other methods of generating revenues, such as endorsement contracts,
merchandise agreements, etc., may develop over time and management will be
receptive to those types of opportunities. In any case, the fee amounts charged
for the celebrity appearance, and that portion ultimately collected by the
Company, will increase relative to the prominence of the celebrity. The costs to
attend the events featuring the celebrities and the size of the audience will
not generally relate to the fees charged. Due to the infancy of the Company's
plan, no projections can be made as to the amount or timing of revenue.
Management does not expect that start-up expenses to implement its business
plan will be substantial. Proceeds from the Company's initial offering have been
budgeted for a period of approximately of twelve months, primarily for
marketing, promotion and consulting fees necessary to market the Company's
service and general and administrative expenses. However, the long-term success
of the Company will depend on the success of management in marketing the
Company's service.
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Industry Background and Competition
-----------------------------------
The industry within which the Company proposes to operate may be described
as marketing and promotion. However, the Company expects to operate in only a
small segment of that industry representing sports personalities, to promote
public speaking and appearances. This latter group is poorly defined and highly
fragmented, in the opinion of management. The group is comprised of a wide array
of participants, from business divisions of large advertising agencies to
individual agents representing one or more personalities. In the opinion of
management, competition is greatest to obtain personalities with the most
recognized name and marketability.
Most companies engaged in representing professional athletes are spread
throughout the United States, primarily on the east and west coasts and
metropolitan areas with the greatest concentration of sports teams, including
Chicago, Texas and Colorado. Participants include larger entities providing a
variety of services for athletes, including contract negotiation, marketing and
promotion, tax, legal and financial planning, career management, counseling and
professional development; agents representing individual athletes for purposes
of contract negotiation and financial planning; divisions of advertising
agencies; and entities similar to the Company who provide marketing and
promotional services for former and current professional athletes. Some of these
organizations represent the individual athletes, while others represent
corporations and civic organizations seeking to retain the services of such
athletes. Most of the entities in this group for which information was available
report revenues less than $2,000,000 per year.
Due to the Company's status as a newly organized, developmental stage
entity, it will likely be at a competitive disadvantage with regard to existing
entities. In addition to its status as a new entity, the Company has limited
working capital and personnel. However, management believes it has a realistic
opportunity to compete with existing participants.
Employees
---------
The Company currently has one employee, David Preston, who serves as its
President and Chief Executive Officer. David Preston will oversee all of the
Company's operations and be primarily responsible for retaining athletes to
serve as professional speakers. Additional individuals will be retained as
independent contractors for the foreseeable future.
Depending on the availability of working capital and the success of its
marketing, the Company may also obtain the services of a part or full-time
administrative assistant to help with bookkeeping, billing, scheduling and other
administrative matters. In the absence of such an individual, Company employees
or independent contractors will perform that function.
The Company will also retain the services of various consultants from
time-to-time to supplement its employees. Examples include attorneys and
accountants to assist with regulatory and compliance matters and management and
financial consultants to assist with strategic planning, marketing and
promotion. Management does not believe obtaining qualified individuals will be a
material impediment to the success of its business plan.
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Facilities
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The Company has executed a lease agreement with GLF2 LLC, an independent
entity, effective January 1, 2000 to occupy its administrative and executive
facilities located at 1869 W. Littleton Boulevard, Littleton, Colorado. The
lease covers approximately 400 square feet and allows the Company access to
secretarial space, reception services, conference and other common areas on a
non-exclusive basis. The Company will pay $500 per month for rent plus expenses
for common area maintenance for this space, which the Company believes will be
sufficient for the Company's needs for the foreseeable future. The lease may be
terminated upon 30 days notice from either party.
Item 2. Management's Discussion And Analysis or Plan of Operation
Introduction
------------
Celebrity Sports Network, Inc. is a development stage entity organized on
August 27, 1999. Activities of the Company to date have been limited to
organizational efforts and obtaining financing. The Company has no revenues to
date.
The following information discusses the financial condition and results of
operation of the Company for the nine-month period ended September 30, 2000 and
for the period from inception to December 31, 1999. For more complete
information, reference is made to the financial statements included in this
Registration Statement.
Due to the absence of operating history, management has little or no basis
to predict revenue or profitability for the current and upcoming fiscal year.
Results of operations will depend in part upon the success of the Company's
development of a roster of celebrity speakers and marketing to end-users, as
well as general economic conditions.
Liquidity
---------
September 30, 2000. At September 30, 2000, management believed the Company
had sufficient liquidity and capital to meet its needs for the next twelve
months. The Company's working capital at September 30, 2000 consisted of $74,524
of cash and current liabilities of $5,923, or working capital of $68,601.
Working capital at September 30, 2000 represented an increase of $77,920 from
fiscal year end December 31, 1999. That increase resulted from a limited public
offering conducted by the Company primarily in the third quarter of the current
fiscal year. Liabilities at September 30, 2000 consisted of accounts payable and
accrued expenses in the amount of $5,923. Proceeds from the recent offering and
issuance of short-term debt represent all of the Company's cash flow for the
period ended September 30, 2000.
During the nine-month period ended September 30, 2000, the Company issued
an aggregate of 230,000 shares of Common Stock in a limited public offering for
total proceeds $115,000, or $.50 per share. Offering costs for the offering were
$8,500. The stock was sold by officers and directors of the Company and
accordingly, no commissions were paid in connection with the offering. A portion
of the proceeds was used to repay outstanding indebtedness to related parties,
along with other outstanding expenses. The remainder of the proceeds is
available for operations.
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A portion of the working capital available at September 30, 2000 will be
spent on professional fees and expenses, including legal and accounting expenses
incurred in connection with this Registration Statement. Remaining funds will be
used by the Company to pay operating expenses. Capital requirements for the next
twelve months include cash to pay vendors, employees and other general and
administrative expenses. Management believes that a significant amount of the
working capital will be devoted to expenses incurred in developing a roster of
speakers (clients) and marketing expenses to arrange speaking or appearance
engagements for the Company's clients. Management is of the opinion that the
Company is totally dependent on commencement of operations and achievement of
profitability or the obtaining of additional financing to continue as a going
concern.
December 31, 1999. The Company's working capital at December 31, 1999
consisted of $1400 of cash and current liabilities of $10,719, or a working
capital deficit of $(9,319). Liabilities consisted of notes payable to officers
in the amount of $10,500 and $219 in accrued interest payable. Proceeds from
issuance of short-term notes represented all of the Company's cash flow for the
period ended December 31, 1999. In the opinion of management, the Company's
financial condition at December 31, 1999 warranted additional efforts to
increase liquidity and available cash. As a result, the limited public offering
discussed above was conducted.
During the period ended December 31, 1999, the Company issued an aggregate
of 1,700,000 shares of Common Stock for services valued at $1,700 or $.001 per
share. The Company also received $2,000 in additional paid-in capital,
representing the estimated fair market value of its facilities provided by an
officer and shareholder.
Results of Operations
---------------------
September 30, 2000. During the nine months ended September 30, 2000, the
Company realized a net loss of $34,080, or $(.02) per share, on no revenue.
Material operating expenses for the period included $5,383 in compensation to
the Company's President, its only full-time employee, $10,000 for web site
development costs, $5,000 in consulting fees, $5,054 in professional fees and
$4,500 for rent. Management believes that a professional web site is integral to
its success, given the popularity and broad reach of the Internet. The
consulting fees were incurred pursuant to a consulting agreement entered into in
January of 2000 for consulting services related to business plan development,
developing a marketing plan, client development and general business
development.
Additionally, the Company repaid $26,082 in notes to directors and officers
of the Company, including $25,000 in principal and $1,082 in interest.
Management of the Company is of the opinion that the Company will continue to
incur losses until such time, if ever, that the Company obtains a roster of
qualified celebrities to generate revenues sufficient to cover operating and
other expenses.
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December 31, 1999. For the period ended December 31, 1999, the Company
realized a net loss of $7,519, or less than $(.01) per share, on no revenue.
Operating expenses for the period included $1,700 in stock-based compensation,
$3,500 for professional fees and $2,100 for rent and miscellaneous items.
Item 3. Description of Property
The Company owns no real property as of the date of the Registration
Statement. The Company leases its executive and administrative offices pursuant
to a month-to-month lease with the landlord. However, management deems such
arrangement to be adequate for the Company's needs for the foreseeable future.
Item 4. Security Ownership Of Certain Beneficial Owners and Management
As of the date of this Registration Statement, there were a total of
1,940,000 shares of Common Stock of the Company outstanding, the only class of
voting securities of the Company currently outstanding. The holders of Common
Stock are entitled to one vote for each share held by them of record.
The following tabulates holdings of Common Stock of the Company by each
person who, as of the date of this Registration Statement, holds of record or is
known by management of the Company to own beneficially more than 5% of the
voting securities outstanding and, in addition, by all directors and officers of
the Company individually and as a group. The table does not reflect up to
2,000,000 shares of Common Stock underlying the Company's Stock Option Plan. The
shareholders listed below have sole voting and investment power.
Name Number of Shares Percent of Voting Securities
---- ---------------- ----------------------------
R. David Preston 1,640,000 84.54%
1869 W. Littleton Blvd.
Littleton, Colorado 80120
Scott M. Thornock 50,000 2.58%
1422 Delgany Street, Suite 12
Denver, CO 80202
All Officers and Directors
as a Group (2 persons) 1,690,000 87.11%
----------------------
Each of the individuals listed in the foregoing table are officers and directors
of the Company.
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Changes in Control
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The Company knows of no arrangement, including the pledge by any person of
securities of the Company, which may at a subsequent date result in a change of
control of the Company.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
Officers and Directors
----------------------
The following individuals presently serve as officers and directors of the
Company:
Name Age Position
---- --- --------
R. David Preston 45 Chairman of the Board of Directors,
President and Chief Executive Officer
Scott M. Thornock 41 Secretary, Treasurer and Director
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Messrs. Preston and Thornock should be considered "founders" and "parents"
of the Company (as such terms are defined by rule under the Securities Exchange
Act of 1934, as amended), inasmuch as each has taken initiative in founding and
organizing the business of the Company.
Mr. Preston presently serves the Company as an employee pursuant to an
employment contract, although his position as officer is at the will of the
Board of Directors. Mr. Thornock serves at the will of the Board of Directors.
All of the Directors are currently serving a term of office until the next
annual meeting of shareholders and until their successors are duly elected and
qualified. Each of the foregoing individuals has served in his current position
since the Company's inception in August 1999.
The following represents a summary of the business history of each of the
foregoing individuals for the last five years:
R. DAVID PRESTON. Mr. Preston is currently the president and sole
shareholder of Preston & Associates, Inc., a privately-owned, Denver based real
estate appraisal firm, a position he has occupied since 1992. Preston &
Associates is active in the residential real estate market along the front range
of Colorado. Mr. Preston was the President and CEO of Cash Flow Marketing, Inc.,
a Colorado corporation, from July 1997 to December 1998, until its merger with
Mediquik Services, Inc. Prior to his association with those entities, Mr.
Preston served as the head of the appraisal department for Colorado National
Bank (now US Bank), a position he occupied from 1985 to 1993. Prior to that, Mr.
Preston played in the National Football League where he spent all but one year
with the Denver Broncos. He retired as the fourth leading rusher in Bronco
history as a running back. In addition to these positions, Mr. Preston has been
active as an investor in numerous business ventures, including restaurants, real
estate development and oil and gas.
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Mr. Preston graduated with a bachelor of science, business administration
in business management from Bowling Green University in 1977.
SCOTT M. THORNOCK. Mr. Thornock has been the sole owner and manager of
Paragon Real Estate and Development, LLC, a private Colorado company engaged in
residential real estate development since November 1995. Simultaneously, he is
the president, chief financial officer, secretary and a director of
Nickebys.com, Inc., a publicly-held corporation engaged in marketing and sale of
fine art, antiques and collectibles on the Internet and president, treasurer and
a director of Posteralley.com, a private internet antique poster company. Mr.
Thornock has occupied these positions since January 1999 and July 1999
respectively. Mr. Thornock has also been a principal in approximately thirty
single-purpose real estate development companies since 1996. These entities were
formed to acquire, develop, construct and sell real estate projects. Mr.
Thornock served as president, chief financial officer, secretary and a director
of Perseus Art Group, Inc., a publicly-held Colorado corporation ("PAG") from
the date of PAG's inception on June 26, 1998, until his resignation on May 12,
1999. He served as the president, chief executive officer, treasurer and a
director of Triad Development Corp., a publicly-held Colorado corporation, from
the date of its inception on October 31, 1997, through the date of his
resignation, and the transfer of a majority of his equity interest in the
company, on April 2, 1999. Mr. Thornock served as the president, chief executive
officer, treasurer, chief financial officer and director of Perfection
Development Corporation ("PDC"), from April 18, 1997, the date of the
organization of the company, through October 2, 1998, on which date he resigned
as an executive officer and director of, and disposed of a portion of his equity
ownership interest in, PDC. Mr. Thornock served as the vice president, chief
financial officer, secretary and a director of Thor Management Group, Inc., from
the date of that company's inception on January 9, 1998, through June 19, 1998,
on which date control of the company changed and Mr. Thornock resigned his
positions as an executive officer and director of the company. He served as the
president, chief executive officer and a director of Pegasus Development Group,
Inc., a publicly-held Colorado corporation, from the date of its organization on
December 23, 1996, through October 22, 1997, on which date Mr. Thornock resigned
as executive officer and director of, and disposed of his entire equity interest
in, the company. He was also associated with Flanagan LaMee Real Estate, LLC as
a real estate broker's associate from December 1995 through January 1997.
Mr. Thornock received a bachelors of arts degree in history and a masters
degree in business management from the University of Colorado in 1982 and 1994
respectively.
No family relationships exist among the officers or directors of the
Company.
Item 6. Executive Compensation
David Preston serves the Company pursuant to a one-year employment contract
effective July 15, 2000. Mr. Preston is compensated at the rate of $24,000 per
annum and is entitled to participate in employee benefit plans maintained by the
Company, including insurance, stock option and profit sharing plans. The
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employment contract is renewable from year-to-year unless terminated by either
the employee or the Company upon not less than 90 days advance written notice.
The other officer presently serves without compensation.
Directors are not compensated in their capacities as such, although each is
entitled to be reimbursed for travel and other expenses incurred in connection
with attendance at meetings. All of the officers, directors and employees are
entitled to participate in the Stock Option Plan maintained by the Company.
Item 7. Certain Relationships And Related Transactions
Initial Capitalization
----------------------
As of October 15, 1999, the Company completed its initial capitalization by
issuing an aggregate of 1,700,000 shares of Common Stock for aggregate
consideration of $1,700 consisting of services rendered to the company. Of that
amount, 1,640,000 shares were issued to Mr. Preston, 10,000 shares to Ms. Robbin
Minkel and 50,000 shares to Mr. Thornock for a price of $.001 per share. Messrs.
Preston and Thornock and Ms. Minkel were the sole members of the Board of
Directors approving that transaction on behalf of the Company. Ms. Minkel
resigned from the Company as an officer and director effective October 23, 2000
and returned 9,000 shares of Common Stock to the Company for cancellation.
Also effective October 15, 1999, the Company borrowed an aggregate of
$10,500 from two of its shareholders, Messrs. Preston and Thornock. These loans
are represented by promissory notes, bear interest at the rate of 10% per annum
and were paid in full on September 15, 2000. During the nine months ended
September 30, 2000, Mr. Preston loaned the Company an additional $14,500 bearing
interest at the rate of 10% per annum. These additional loans were also repaid
in full on September 15, 2000.
Miscellaneous
-------------
During the period from inception to December 31, 1999, the Company occupied
office space and received administrative services pursuant to an informal
arrangement with its president, David Preston. The Company occupied space in an
office located in Mr. Preston's residence on a month-to-month basis and received
secretarial and administrative services from an entity with which Mr. Preston is
affiliated. As of the date of this Registration Statement, such services have
been provided to the Company for no charge, but the Company has expensed $500
per month on its financial statements, based upon the estimated fair market
value of the services received by the Company. Effective January 1, 2000, the
Company relocated its office pursuant to a lease with an unaffiliated party.
Effective January 6, 2000, the Company executed a Consulting Agreement with
Paragon Real Estate and Development, LLC, a Colorado limited liability company.
This agreement provided the Company with management consulting services in
exchange for the payment of $5,000. Scott Thornock, an officer and director of
the Company, is also the sole owner and manager of Paragon. The services to be
provided under the Consulting Agreement have been completed and payment has been
made in full.
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Management of the Company is of the opinion that the foregoing transactions
were no less favorable than could have been obtained from unaffiliated third
parties.
Item 8. Description Of Securities
The Company's authorized capital consists of 50,000,000 shares of Common
Stock, $.001 par value and 10,000,000 shares of Preferred Stock, $.001 par
value. The following description of the Company's securities is qualified in its
entirety by reference to the Company's Articles of Incorporation, as amended, a
copy of which is available upon request to the Company.
Common Stock
------------
Each share of Common Stock is entitled to one vote at all meetings of
shareholders. All shares of Common Stock are equal to each other with respect to
liquidation rights and dividend rights. There are no preemptive rights to
purchase any additional shares of Common Stock. The Articles of Incorporation of
the Company prohibit cumulative voting in the election of directors. In the
event of liquidation, dissolution or winding up of the Company, holders of
shares of Common Stock will be entitled to receive on a pro rata basis all
assets of the Company remaining after satisfaction of all liabilities and all
liquidation preferences, if any, granted to holders of the Company's Preferred
Stock.
All of the Company's issued and outstanding Common Stock is fully paid and
non-assessable and is not subject to any future call.
Preferred Stock
---------------
The Articles of Incorporation vest the Board of Directors of the Company
with authority to divide the Preferred Stock into series and to fix and
determine the relative rights and preferences of the shares of any such series
so established to the full extent permitted by the laws of the State of Colorado
and the Articles of Incorporation in respect to, among other things, (i) the
number of shares to constitute such series and the distinctive designations
thereof; (ii) the rate and preference of dividends, if any, the time of payment
of dividends, whether dividends are cumulative and the date from which any
dividend shall accrue; (iii) whether Preferred Stock may be redeemed and, if so,
the redemption price and the terms and conditions of redemption; (iv) the
liquidation preferences payable on Preferred Stock in the event of involuntary
or voluntary liquidation; (v) sinking fund or other provisions, if any, for
redemption or purchase of Preferred Stock; (vi) the terms and conditions by
which Preferred Stock may be converted, if the Preferred Stock of any series are
issued with the privilege of conversion; and (vii) voting rights, if any.
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Transfer Agent
--------------
The Company has retained Corporate Stock Transfer, Inc., a Colorado
corporation, located at 3200 Cherry Creek Drive South, Suite 430, Denver,
Colorado 80209 to act as its transfer agent.
Dividends
---------
No dividend has been declared or paid by the Company on its shares of
Common Stock since inception and no dividends on shares of Common Stock are
contemplated in the foreseeable future. Any earnings of the Company will be
reinvested in the Company's business for the foreseeable future.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
Potentially Limited Trading Market
----------------------------------
There is no trading market for the Company's Common Stock at present and
there has been no trading market to date. Management has not undertaken any
discussions, preliminary or otherwise, with any prospective market maker
concerning the participation of such market maker in the aftermarket for the
Company's securities, but the Company may initiate such discussions in the
future following the effective date of this Registration Statement.
In addition to rules regulating sales of penny stocks, discussed below,
trading in the Company's Common Stock may be limited by the "Blue Sky" statutes
enacted by individual states. Initial sale and distribution of the Company's
Common Stock was restricted to residents of the State of Colorado. Since the
sale of the Common Stock was not qualified in any additional states, trading in
any after-market may be limited. While the Company will seek to overcome this
obstacle by obtaining listing in Standard and Poors Corporation Records or
another recognized securities manual, there is no assurance that such efforts
will be successful or that a market will develop. Purchasers of the Common Stock
may therefore have difficulty selling their shares, should they desire to do so.
Market Price
------------
The Company's Common Stock is not quoted at the present time.
Shares Available for Future Sale
--------------------------------
An aggregate of 1,690,000 shares of the Common Stock presently outstanding
are "restricted securities" within the meaning of the 1933 Act and may hereafter
be sold in compliance with Rule 144 promulgated thereunder. Rule 144 provides,
among other things, and subject to certain limitations, that a person holding
restricted securities for a period of one year may sell, every three months,
those securities in brokerage transactions equal to 1% of the Company's
12
<PAGE>
outstanding Common Stock or the average weekly trading volume during the four
weeks preceding the sale, whichever amount is greater. After two years, holders
of restricted stock who are not affiliates of the Company may apply to sell all
restricted stock free of restrictions. Possible sales of the Company's Common
Stock pursuant to Rule 144 may have a depressive effect on the price of the
Company's Common Stock. All of the restricted shares of Common Stock presently
outstanding were issued in October of 1999, and will be available for sale free
of restrictions by fall of 2001.
Holders
-------
There are fifty-four holders of the Company's Common Stock as of the date
of this Registration Statement.
Penny Stock Regulation
----------------------
In the event the Company is successful in obtaining listing of its Common
Stock on the OTC Bulletin Board, investors should be aware of limitations on
marketing securities characterized as "penny stocks" under existing securities
statutes and regulations. Broker-dealer practices in connection with
transactions in "Penny Stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission. Penny stocks generally are
equity securities with a price of less than $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risk associated with the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer must make a
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules.
If the Company is successful in obtaining listing of its Common Stock, the
stock will likely have a trading price of less than $5.00 per share and will not
be traded on any exchanges. Therefore, the Company's stock will become subject
to the penny stock rules and investors may find it more difficult to sell their
securities, should they desire to do so.
Item 2. Legal Proceedings
The Company knows of no legal proceeding to which it is a party or to which
any of its property is subject which are either pending, threatened or
contemplated, nor are there any unsatisfied judgments against the Company.
13
<PAGE>
Item 3. Changes in and Disagreements With Accountants
The Company has retained its accountants, Cordovano and Harvey, P.C., 201
Steele Street, Suite 300, Denver, Colorado 80206 since its inception and there
are no disagreements with the findings of said accountants.
Item 4. Recent Sales of Unregistered Securities
On October 15, 1999, the Company completed its initial capitalization by
selling an aggregate of 1,700,000 shares to its directors, 1,640,000 shares to
Mr. Preston, 50,000 shares to Mr. Thornock and 10,000 shares to Ms. Minkel. This
offering was conducted under Section 4(2) of the Securities Act, as each
individual was afforded access to information typically contained in a
registration statement under such Act, and each was able to fend for himself in
the transaction. Securities were sold for an aggregate consideration of $1,700
or $.001 per share, consisting of services provided by each individual in
connection with the Company's organization.
In October of 2000, the Company completed a limited public offering
pursuant to the provisions of Regulation D, Rule 504 of the Securities Act and
registered under provisions of the Colorado Securities Act. The Company sold an
aggregate of 249,000 shares of Common Stock at an offering price of $.50 per
share for aggregate proceeds of $124,500. Those securities were sold to a group
of individuals consisting of friends, relatives and business associates of the
founders of the Company, all residents of the state of Colorado. All sales were
made by the Company through its officers and directors.
Item 5. Indemnification of Directors and Officers
Article IX of the Company's Articles of Incorporation contain provisions
providing for the Indemnification if directors and officers of the Company as
follows:
The Board of Directors of the Corporation shall have the power to:
Section 1. Indemnify any director, officer, employee or agent of the
Corporation to the fullest extent permitted by the Colorado Business
Corporation Act as presently existing or as hereafter amended.
Section 2. Authorize payment of expenses (including attorney's fees)
incurred in defending a civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer,
employee or agent to repay such amount unless it is ultimately determined
that he is entitled to be indemnified by the Corporation as authorized in
this Article IX.
Section 3. Purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation or who
is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust
14
<PAGE>
or other enterprise against any liability asserted against him and incurred
by him in any such capacity or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against such
liability under the provisions of this Article IX.
The indemnification provided by this Article IX shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these Articles of Incorporation, and Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise, and any procedure
provided for by any of the foregoing, both as to action in his official
capacity and as to action in another capacity while holding such office,
shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
Section 7-109-103 of the Colorado Business Corporation Act (the "Act")
provides that a corporation organized under Colorado law shall be required to
indemnify a person who is or was a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or fiduciary or agent of another corporation or other entity or of any
employee benefit plan (a "Director") or officer of the corporation and who was
wholly successful, on the merits or otherwise, in defense of any threatened,
pending or complete action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal (a
"Proceeding"), in which he was a party, against reasonable expenses incurred by
him in connection with the Proceeding, unless such indemnity is limited by the
corporation's articles of incorporation.
Section 7-109-102 of the Act provides, generally, that a corporation may
indemnify a person made a party to a proceeding because the person is or was a
Director against any obligation incurred with respect to a Proceeding to pay a
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) or reasonable expenses incurred in the
Proceeding if the person conducted himself or herself in good faith and the
person reasonably believed, in the case of conduct in an official capacity with
the Corporation, the person's conduct was in the corporation's best interests
and, in all other cases, his or her conduct was at least not opposed to the
corporation's best interests and, with respect to any criminal proceedings, the
person had no reasonable cause to believe that his or her conduct was unlawful.
A corporation may not indemnify a Director in connection with any Proceeding by
or in the right of the corporation in which the Director was adjudged liable to
the corporation or, in connection with any other Proceeding charging the
Director derived an improper personal benefit, whether or not involving actions
in an official capacity, in which Proceeding the Director was judged liable on
the basis that he or she derived an improper personal benefit. Any
indemnification permitted in connection with a Proceeding by or in the right of
the corporation is limited to reasonable expenses incurred in connection with
such Proceeding.
Under Section 7-109-107 of the Act, unless otherwise provided in the
articles of incorporation, a corporation may indemnify an officer, employee,
fiduciary, or agent of the corporation to the same extent as a Director and may
indemnify an officer, employee, fiduciary, or agent who is not a director to a
15
<PAGE>
greater extent, if not inconsistent with public policy and if provided for by
its bylaws, general or specific action of its board of directors or
shareholders, or contract.
Section 7-108-402 of the Act provides, generally, that the articles of
incorporation may contain a provision eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director; except that any such
provision may not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) acts specified in section 7-108-403, or
(iv) any transaction from which a director directly or indirectly derived an
improper personal benefit. Such provision may not eliminate or limit the
liability of a director for any act or omission occurring prior to the date on
which such provision becomes effective.
The Company's Articles of Incorporation limit director's liability to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director to the fullest extent permitted by Colorado law.
16
<PAGE>
PART F/S
Financial Statements
--------------------
The financial statements of the Company are attached to this Registration
Statement and filed as a part thereof.
17
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Index to Financial Statements
Page
----
Independent auditors' report............................................. F-2
Balance sheets, September 30, 2000 and December 31, 1999................. F-3
Statements of operations, for the nine months ended September 30, 2000,
for the period from August 27, 1999 (inception) through December
31, 1999 and for the period from August 27, 1999 (inception)
through September 30, 2000.......................................... F-4
Statement of shareholders' equity (deficit), for the period from
August 27, 1999 (inception) through September 30, 2000.............. F-5
Statements of cash flows, for the nine months ended September 30, 2000,
for the period from August 27, 1999 (inception) through December
31, 1999 and for the period from August 27, 1999 (inception)
through September 30, 2000.......................................... F-6
Summary of significant accounting policies............................... F-7
Notes to the financial statements........................................ F-9
F-1
<PAGE>
To the Board of Directors and Shareholders of
Celebrity Sports Network, Inc.
INDEPENDENT AUDITORS' REPORT
We have audited the balance sheets of Celebrity Sports Network, Inc. (a
development stage company) as of September 30, 2000 and December 31, 1999, and
the related statements of operations, shareholders' equity (deficit), and cash
flows for the nine months ended September 30, 2000, from August 27, 1999
(inception) through December 31, 1999 and from August 27, 1999 (inception)
through September 30, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Celebrity Sports Network, Inc.
as of September 30, 2000 and December 31, 1999, and the results of its
operations and its cash flows for the nine months ended September 30, 2000, from
August 27, 1999 (inception) through December 31, 1999 and from August 27, 1999
(inception) through September 30, 2000, in conformity with generally accepted
accounting principles.
Celebrity Sports Network, Inc. issued $25,000 in debt instruments to its
officers, which were repaid as of September 30, 2000. Accrued interest expense
related to the debt instruments totaling $1,082 was also paid to the officers
through September 30, 2000.
Cordovano and Harvey, P.C.
Denver, Colorado
October 13, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Balance Sheets
September 30, December 31,
2000 1999
--------- ---------
Assets
<S> <C> <C>
Cash $ 74,524 $ 1,400
Deferred offering costs -- 5,500
--------- ---------
$ 74,524 $ 6,900
========= =========
Liabilities and shareholders' equity (deficit)
Liabilities
Accounts payable and accrued expenses $ 5,923 $ --
Notes payable to officers (Note B) -- 10,500
Accrued interest on notes payable to officers (Note B) -- 219
--------- ---------
Total liabilities 5,923 10,719
--------- ---------
Shareholders' equity (deficit) (Notes B & D)
Preferred stock, $.001 par value; 10,000,000 shares authorized;
-0- and -0- shares issued and outstanding, respectively -- --
Common stock, $.001 par value; 50,000,000 shares authorized;
1,930,000 and 1,700,000 shares issued and outstanding,
respectively 1,930 1,700
Additional paid-in capital 108,270 2,000
Deficit accumulated during development stage (41,599) (7,519)
--------- ---------
Total shareholders' equity (deficit) 68,601 (3,819)
--------- ---------
$ 74,524 $ 6,900
========= =========
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Statements of Operations
August 27, August 27,
1999 1999
Nine Months (Inception) (Inception)
Ended Through Through
September 30, December 31, September 30,
2000 1999 2000
----------- ----------- -----------
Operating expenses:
<S> <C> <C> <C>
Compensation and payroll taxes $ 5,383 $ -- $ 5,383
Web site development 10,000 -- 10,000
Consulting, related party (Note B) 5,000 -- 5,000
Stock-based compensation (Note B) -- 1,700 1,700
Professional fees 5,054 3,500 8,554
Rent 4,500 -- 4,500
Rent, related party (Note B) -- 2,000 2,000
Other 3,280 100 3,380
----------- ----------- -----------
Operating loss (33,217) (7,300) (40,517)
Interest expense (Note B) (863) (219) (1,082)
----------- ----------- -----------
Net loss before income taxes (34,080) (7,519) (41,599)
Income taxes (Note C) -- -- --
----------- ----------- -----------
Net loss $ (34,080) $ (7,519) $ (41,599)
=========== =========== ===========
Basic loss per common share $ (0.02) $ *
=========== ===========
Basic weighted average common shares outstanding 1,714,167 1,044,094
=========== ===========
* Less than $.01 per share
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Statement of Shareholders' Equity (Deficit)
August 27, 1999 (inception) through September 30, 2000
Preferred stock Common Stock
------------------------- ----------------------
Shares Par Value Shares Par Value
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
October 15, 1999, shares issued to officers for
services related to organizing the Company,
valued at the fair value of the services
($.001/share) (Notes B) -- $ -- 1,700,000 $ 1,700
Office space provided by an officer
(Note B) -- -- -- --
Net loss for the period from August 27, 1999
(inception) through December 31, 1999 -- -- -- --
--------- --------- --------- ---------
Balance, December 31, 1999 -- -- 1,700,000 1,700
September 15, 2000, shares sold in a limited
public offering, less offering costs of
$8,500 ($.50/share) (Note D) -- -- 230,000 230
Net loss for the nine months ended
September 30, 2000 -- -- -- --
--------- --------- --------- ---------
Balance, September 30, 2000 -- $ -- 1,930,000 $ 1,930
========= ========= ========= =========
Table continues on following page.
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-5
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Statement of Shareholders' Equity (Deficit)
August 27, 1999 (inception) through September 30, 2000
(Continued)
Deficit
Accumulated
Additional During the
Paid-in Development
Capital Stage Total
-------- --------- ---------
October 15, 1999, shares issued to officers for
services related to organizing the Company,
valued at the fair value of the services
($.001/share) (Notes B) $ -- $ -- $ 1,700
Office space provided by an officer
(Note B) 2,000 -- 2,000
Net loss for the period from August 27, 1999
(inception) through December 31, 1999 -- (7,519) (7,519)
--------- --------- ---------
Balance, December 31, 1999 2,000 (7,519) (3,819)
September 15, 2000, shares sold in a limited
public offering, less offering costs of
$8,500 ($.50/share) (Note D) 106,270 -- 106,500
Net loss for the nine months ended
September 30, 2000 -- (34,080) (34,080)
--------- --------- ---------
Balance, September 30, 2000 $ 108,270 $ (41,599) $ 68,601
========= ========= =========
See accompanying summary of significant accounting policies and
notes to the financial statements.
F-5-a
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Statements of Cash Flows
August 27, August 27,
1999 1999
Nine Months (Inception) (Inception)
Ended Through Through
September 30, December 31, September 30,
2000 1999 2000
--------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (34,080) $ (7,519) $ (41,599)
Transactions not requiring cash:
Common stock issued for services (Note B) -- 1,700 1,700
Office space provided by an affiliate (Note B) -- 2,000 2,000
Changes in operating liabilities:
Accounts payable and accrued expenses 5,704 219 5,923
--------- --------- ---------
Net cash used in operating activities (28,376) (3,600) (31,976)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt (Note B) 14,500 10,500 25,000
Debt repayments (Note B) (25,000) -- (25,000)
Proceeds from sale of common stock 115,000 -- 115,000
Payments for offering costs (3,000) (5,500) (8,500)
--------- --------- ---------
Net cash provided by financing activities 101,500 5,000 106,500
--------- --------- ---------
Net change in cash 73,124 1,400 74,524
Cash, beginning of period 1,400 -- --
--------- --------- ---------
Cash, end of period $ 74,524 $ 1,400 74,524
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (Note B) $ 1,082 $ -- $ --
========= ========= =========
Income taxes $ -- $ -- $ --
========= ========= =========
See accompanying summary of significant accounting policies
and notes to the financial statements.
F-6
</TABLE>
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Summary of Significant Accounting Policies
Development stage company
Celebrity Sports Network, Inc. (the "Company") is in the development stage in
accordance with Financial Accounting Standards Board Statements of Financial
Accounting Standards (SFAS) No. 7 "Accounting and Reporting by Development Stage
Enterprises".
Use of estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, and
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 those estimates.
Cash equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Income taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the recorded book basis and the tax
basis of assets and liabilities for financial and income tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
Deferred offering costs
The Company incurred legal and accounting fees related to the preparation of an
offering memorandum to be used in the offer and sale of its common stock during
the periods presented. These costs were deducted from the gross proceeds at the
offering's conclusion.
Earnings (loss) per share
The Company reports earnings (loss) per share using a dual presentation of basic
and diluted earnings per share. Basic earnings (loss) per share excludes the
impact of common stock equivalents. Diluted earnings (loss) per share utilizes
the average market price per share when applying the treasury stock method in
determining common stock equivalents. However, the Company has a simple capital
structure for the period presented and, therefore, there is no variance between
the basic and diluted earnings (loss) per share.
F-7
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Summary of Significant Accounting Policies
Web site development
The Company expenses all internal and external costs incurred to develop
internal-use computer software. As a development stage company, management has
determined there is no assurance that the web site will provide substantive
service potential to the Company.
Fair value of financial instruments
SFAS 107, "Disclosure About Fair Value of Financial Instruments," requires
certain disclosures regarding the fair value of financial instruments. The
Company has determined, based on available market information and appropriate
valuation methodologies, the fair value of its financial instruments
approximates carrying value. The carrying amounts of cash, accounts payable and
other current liabilities approximate fair value due to the short-term maturity
of the instruments.
Year-end
The Company selected December 31 as its accounting and tax year-end.
Stock-based compensation
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in October
1995. This accounting standard permits the use of either a "fair value based
method" or the "intrinsic value method" defined in Accounting Principles Board
Opinion 25, "Accounting for Stock Issued to Employees" (APB 25) to account for
stock-based compensation arrangements. Companies that elect to use the method
provided in APB 25 are required to disclose pro forma net income and pro forma
earnings per share information that would have resulted from the use of the fair
value based method. The Company adopted SFAS No. 123 during the period ended
December 31, 1999; however, the Company has elected to continue to determine the
value of stock-based compensation arrangements under the provisions of APB 25.
No pro forma disclosures have been included with the accompanying financial
statements as there was no pro forma effect to the Company's net loss or loss
per share.
F-8
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Notes to the Financial Statements
Note A: Background
The Company was incorporated under the laws of Colorado on August 27, 1999.
The principal activities since inception have been organizational matters,
the issuance of promissory notes to officers and the sale of its $.001 par
value common stock. The Company was formed in an effort to broaden the
scope of public appearances available to current and former professional
athletes. The Company plans to obtain a roster of qualified clients and
market their service to end-users.
Note B: Related party transactions
An officer provided office space to the Company at no charge from August
27, 1999 (inception) through December 31, 1999. The office space was valued
at $500 per month based on the market rate in the local area and is
included in the accompanying financial statements as rent expense with a
corresponding credit to contributed capital. The Company entered into an
operating lease with an unrelated third party to rent office space on a
month-to-month basis, which commenced on January 1, 2000. The Company makes
monthly payments of $500 under the lease.
On September 15, 2000, the Company paid an affiliate $5,000 for consulting
services performed during the nine months ended September 30, 2000. Under
the terms of the consulting agreement, the affiliate provided advice to the
Company related to business plan development, marketing plan development,
and client development.
On October 15, 1999, the Board of Directors approved the issuance of
1,700,000 shares of the Company's $.001 par value restricted common stock
to three officers/directors of the Company in exchange for services related
to the organization of the Company. The transaction was recorded at the
fair value of the services. Stock-based compensation expense of $1,700 was
recognized in the accompanying financial statements during the period ended
December 31, 1999. These shares are "restricted securities" and may be sold
only in compliance with Rule 144 of the Securities Act of 1933, as amended.
On October 19, 1999, two officers loaned the Company a total of $10,500 for
working capital in exchange for promissory notes. Notes payable consist of
the following:
September 30, December 31,
2000 1999
------------- ------------
Notes payable to officer,
interest rate at 10.00
percent, due on demand, unsecured $ -- $ 7,000
Notes payable to officer,
interest rate at 10.00
percent, due on demand, unsecured -- 3,500
------------- ------------
$ -- $ 10,000
============= ============
F-9
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Notes to the Financial Statements
During the nine months ended September 30, 2000, the president loaned the
Company an additional $14,500 for working capital in exchange for
promissory notes. All notes and related accrued interest were repaid to the
officers on September 15, 2000. Accrued interest expense on the promissory
notes totaled $-0- and $219 as of September 30, 2000 and December 31, 1999,
respectively. Interest expense on the notes totaled $863 and $219 for the
nine months ended September 30, 2000 and for the period ended December 31,
1999, respectively.
Note C: Income taxes
A reconciliation of the U.S. statutory federal income tax rate to the
effective rate is as follows:
September 30, December 31,
2000 1999
------------- ------------
U.S. Federal statutory granted
rate 15.00% 15.00%
State oncome tax rate,
net of federal benefit 4.04% 4.04%
Deferred offering costs 1.67% 13.92%
Net operating loss for which no tax
benefit is currently available -20.71% -32.96%
------------- ------------
0.00% 0.00%
============= ============
At September 30, 2000, deferred taxes consisted of a net tax asset of
$9,537, due to operating loss carryforwards of $50,099, which was fully
allowed for, in the valuation allowance of $9,537. The valuation allowance
offsets the net deferred tax asset for which there is no assurance of
recovery. The changes in the valuation allowance for the nine months ended
September 30, 2000 and from August 27, 1999 (inception) through December
31, 1999 were $7,059 and $2,478, respectively. Net operating loss
carryforwards will expire through 2020.
The valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset will be
realized. At that time, the allowance will either be increased or reduced;
reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax asset is no
longer impaired and the allowance is no longer required.
Note D: Shareholders' equity
During the nine months ended September 30, 2000, the Company conducted a
limited public offering whereby it sold 230,000 shares of its $.001 par
value common stock for $.50 per share pursuant to an exemption from
registration claimed under Regulation D and Section 3(b) of the Securities
Act of 1933, as amended. The Company received net proceeds of $106,500
after deducting offering costs totaling $8,500.
F-10
<PAGE>
CELEBRITY SPORTS NETWORK, INC.
(A Development Stage Company)
Notes to the Financial Statements
Note E: Subsequent event
During October of 2000, the Company sold an additional 19,000 shares of its
common stock through the private placement offering. The Company received
$9,500 from the subsequent sales.
F-11
<PAGE>
PART III
Item 1. Exhibit Index Sequential
page number
No. Description
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(2) Not applicable
(3) Charters and by-laws
(i) Articles of Incorporation, as filed with the Colorado Secretary
of State on August 27, 1999;
(ii) Amended and Restated Articles of Incorporation, as filed with the
Colorado Secretary of State on December 8, 1999;
(iii) Bylaws
(4) Not applicable
(9) Not applicable
(10) Not applicable
(11) Not applicable
(16) Not applicable
(21) Not applicable
(24) Not applicable
*(27) Financial Data Schedule
*filed herewith
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant has caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Celebrity Sports Network, Inc.
By: /s/ R. David Preston
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R. David Preston, President
Date: November 13, 2000
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