SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities and Exchange Act of 1934
For the Fiscal year ended: July 31, 1998 Commission file No. 0-5304
CUSTOMER SPORTS, INC.
----------------------
(Exact name of Registrant specified in its charter)
Utah 87-0282745
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) identification No.)
1023 RELIANCE WAY, DEL MAR, CALIFORNIA 92014
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(Address of Principal executive offices)
Registrant's telephone number, including area code: (619) 481-2400
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE
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(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required by Section 133 or 15d (O) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) been subject to such filing
requirements for the past 90 days.
(1) Yes X NO
----- -----
(1) Yes X NO
----- -----
The aggregate market value of the Registrant's common stock held by non-
affiliates of the Registrant:
$1,460,620 As Of July 31, 1998
------------------------------
Indicate the Number of Shares Outstanding of Each of the Issuer's Class of
Common Stock, as of the Close of the Period Covered by this Report
Class Outstanding at July 31, 1998
COMMON STOCK, $.01 PAR VALUE 20,866,253
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Documents incorporated by reference NONE
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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<S> <C> <C>
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . .3
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . .5
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . .8
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . .8
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . .9
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . 11
ITEM 9. DISAGREEMENT ON ACCOUNTING AND
FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT . . . . . . . . . . . . . . . . . . . . . . . . 12
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT. . . . . . . . . . . . . . . . . . . 14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES
AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
PART I
ITEM 1. BUSINESS
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(a) General Development of Business.
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CUSTOMER SPORTS (hereinafter referred to as "Registrant") was
incorporated under the laws of the State of Utah on September 26, 1968, for
the purpose of investing in real estate. Registrant was engaged in limited
operations in this area from inception until 1975. For the period 1975 to
1980, the Registrant was inactive.
In 1980, the Registrant came under new management and during 1980 and
1981, Registrant acquired several oil and gas properties, two commercial
buildings located in Dallas, Texas, and Oklahoma City, Oklahoma. In 1982,
management elected to concentrate its activities in the oil and gas
business and Registrant disposed of its health centers and the remaining
commercial real estate.
In 1982 and 1983, Registrant issued 2,766,582 shares of its common
stock (adjusted for reverse splits in 1982 and 1997) in exchange for
interests in oil and gas properties located primarily in Montana and Texas.
The interests were acquired from a series of California limited
partnerships of which Marquis Petroleum Corporation ("Marquis") was the
sponsor and general partner. Pursuant to this acquisition, Marquis and its
affiliates became controlling persons of the Registrant. Registrant filed
in its initial registrant statement under Form 10 with the Securities and
Exchange in November, 1982, for the fiscal year ending July 31, 1982.
During 1983, 1984 and 1985, Registrant commenced a series of
transactions hereby it acquired additional interests in oil and gas and
other real property in exchange for its common stock.
In 1986, Registrant came under new management and since that time, no
additional acquisitions have been made. Registrant assumed a substantial
amount of debt in connection with its acquisition of oil and gas interests
and limited partnership interests in 1982. Registrant's oil and gas
properties consist of minority interests of varying percentages in oil and
gas wells and leases. Since 1986, Registrant had been unable to exploit
its oil and gas properties.
In 1989, the Registrant held discussions with Pitts Oil company
concerning the sale of Registrant's operating wells in Texas because of
declining revenues. Discussions were later terminated. Registrant did not
re-open discussions. Later in 1989, Company elected not to attempt to
further exploit the properties and exchanged certain of its marginally
productive and non-productive properties with Northland Royalty Corp. In
the same year, management conducted discussions with numerous parties
concerning some form of business combination or financing. These
discussions proved unsuccessful.
During the period 1989-1994 the Company sought various business
combinations and alliances to restore the Company's operations but was
unsuccessful.
In 1994, Registrant attempted to acquire Golf Manufacturer Liquidation
Centers for a combination of cash and stock. For multiple reasons, the
attempted acquisition was terminated in early 1995. Registrant, however,
based upon the consultation conducted, determined that the golf industry
offered opportunities to re-constitute the Company by re-directing its
efforts internally and ceasing merger/acquisition discussion.
During 1995, the Company created and attempted to raise capital for
The Golf Show, a major retailing effort in golf. The effort was abandoned
due to a lack of capital.
In 1996, Registrant entered into the retail distribution of golf
products under a Back Nine Golf subsidiary. Once again, capital was
insufficient to develop a significant distribution presence and the effort
was terminated at the end of 1996.
In 1997, Registrant re-focused the efforts of Back Nine Golf to
operate retail facilities at public driving ranges. The Company had
previously developed a unique computer-based customer generation, sales and
retention system. In April of 1997, Registrant opened its first retail
facility and signed an agreement for first right of refusal for 50 or more
facilities. In April 1997, Registrant leased new office space to support
its staff. In July 1997, the Company engaged Stockton Equities to provide
the capital necessary for the inventory requirements of the shops. In
October 1997, Registrant moved its offices to its present location. In
December of 1997, Registrant filed an S-8 registration for 4,450,000 shares
and options to be issued to various entities involved in the promotion of
the Company's activities.
In January 1998, the Company expanded its business plan to include
operations of the ranges themselves in addition to retail space. The
Company engaged Stockbroker Relations, Inc., to provide the financial
community with news of the company in order to diminish the cost of capital
for the new business. In March 1998, the Registrant purchased and
exclusive nationwide license to distribute microbial products to golf
courses and driving ranges from a subsidiary of U.S. Microbics. The price
was 1,000,000 shares of the Registrant's common stock. The products are
designed to encourage growth and result in significant water savings.
In April 1997, Mr. Dennis Altbrandt, CEO of Voice-It Worldwide, re-
joined the Board and in July of 1997, Mr. Richard Mangerelli, CEO of
Cybertel Communications, joined the board.
In December 1997, the Board added Mr. William Carr and Mr. Eldon
Clawson, both of whom were investors in the Company's private offering of
securities.
Registrant's office is located at 1023 Reliance Way, Del Mar,
California, 92014; telephone 619-481-2400. Registrant moved its offices in
March 1997. Registrant had five full time employees during the year ended
July 31, 1998.
(b) Narrative Description of Business
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Registrant, until its entry into the golf industry as an operating
company, had been generally engaged in the business of owning minority
working interests in oil and gas properties located in the states of
Montana and Texas. Registrant's oil and gas interests are subject to
working and operating agreements whereby an unaffiliated operator operates
the wells. This operator, for a fee or a carried interest in the well,
manages the well production, sells the production, collects revenues, pays
operating expenses and distributes the remaining revenues, if any, to the
working interest owners.
In general, Registrant's working interest agreements require that
Registrant receive a specified percentage of revenues and pay a specified
percentage of the well operating costs. Net revenues from Registrant's
operating wells secure a convertible note in the amount of $75,000 issued
by the Registrant in a private placements during 1995 and 1996.
Registrant currently specializes in golf-related businesses. Its
first operation, Community Golf Centers, is a management/retailing
operation that: 1) Acquires operating rights at public driving ranges on a
leveraged basis, and 2) Ensures the increased success/profitability of the
range with installation of a CGC Clubhouse. Community Golf has a unique
customer generation, marketing and retention system. The system drives
range profitability, the range retail operation and off-site customer
relations.
Ranges targeted for acquisition, are initially smaller facilities with
36-60 hitting spaces and sufficient space for a retail presence and
practice area.
75% of Community Golf's early members expressed interest in
lessons/game improvement. Success at each facile is based upon creating a
desirable teaching facility, the number of members enrolled at each
facility, continuous print and telephonic communication; the ability to
outbound market based upon information they provide, and the periodic
introduction of new goods and services for them to purchase. The range
operation is a significant profit center and a natural link to the
Clubhouse and the Member presentation. The Clubhouse is the marketing arm
for the entire operation.
There are over 2,000 ranges in the United States. Community Golf
seeks to implement its management/marketing system by capturing a 10-15%
market share of these ranges over a 3-5 year period.
Community Golf creates:
- - Cash flows from range operations and merchandise sales from two
different sources;
- - An expanding customer base who join a membership club of the Company;
- - Awareness of new products where the Company may elect to invest;
- - Creates opportunities for new business using the membership base.
Registrant intends to grow or acquire related businesses using the
established membership to aid in their growth. Later, Registrant may add
value to its shareholders by offering all or a portion or its portfolio of
grown/acquired companies via public offerings, mergers, etc.
(C) Industry Competition
- ------------------------------
The Registrant encounters a strong competition in its businesses.
Better-capitalized companies occupy positions of strength in the oil and
gas business, in off course golf retailing and in golf driving range
operation. Registrant believes, however, that its unique customer
generation, merchandising and retention system is of significant value in
meeting the threats from the competition.
(d) Government Regulations
- ---------------------------------
The golf industry is largely unregulated by the federal government.
However, state and local governments, the Professional Golfers Association,
and other industry organizations may have an adverse impact of the
Registrant's operating capabilities. In addition, federal laws and
regulations governing imports and exports could have a material effect upon
the business prospects for the Registrant.
ITEM 2. PROPERTIES
- --------------------
Registrant abandoned its single lease of a retail facility at one
driving range in early 1998. It is currently attempting to conclude
negotiations for leases of three driving ranges in Southern California
including their golf shop. Registrant leases office space from its
Chairman.
Registrant owns various interests in oil and gas leases, which are
located in Texas. In 1989, Registrant completed a swap of certain oil and
gas wells with Northland Royalty. The purpose of the swap was to maintain
the Registrant's net equity at or above that required for continuing
inclusion in the NASDAQ system. It permitted the company to recover
previously deferred expenses, to cancel the 10-year non-cancellable
operating agreement with Northland and reduce the depletion charges.
The transaction resulted in the write-off of an $82,684 liability to
Northland that was offset against current operating expenses.
In June of 1993, Registrant elected to write down the carrying costs
of all non-producing wells and to write off accounts payable that were aged
beyond seven years. These write-offs produced a net loss of nearly $87,000
to shareholders equity.
In October 1994, Registrant exchanged interests in certain oil and gas
interests in a Montana field known as the Haystack Butte. As a result of
the transfer, the Company retains a 25% working interest in one section
with one producing well and some random additional acreage in the area.
The property was sold to another Operator in July 1996.
Registrant presently holds interests in 7 producing oil and gas
properties. Registrant's collective interest in the 7 producing wells
gives it ownership of 1.25 net wells. The gross wells were included in
Registrant's independent engineering report prepared for its fiscal year
1985. Registrant's oil and gas property holdings experienced a decline in
production in reserves due to the production during the period and
management has elected to write down the valuation of the oil and gas
assets as rapidly as is prudent.
(b) Productive Wells and Acreage
- --------------------------------------
Stanley T. Serocki, an independent petroleum engineer, evaluated the
Registrant's proved oil and gas net recoverable reserves, as of July 31,
1985, and previous years. Registrant is not required to furnish
information concerning its proven oil and gas reserves required by FASB
statements 19 and 69 and the Securities and Exchange Commission Rules and
Regulations because revenues from properties are passive. Evaluations were
not prepared for fiscal years 1986 through 1998 for the same reason.
Registrant has attempted to provide an estimate (below) of its current
reserves by subtracting the net oil and gas production for Registrants
1994, 1995, 1996, 1997 and 1998 fiscal years from Registrant's net
recoverable oil and gas production as of July 31, 1985.
Management, based on its best judgement, provides the estimates presented
below.
<TABLE>
<CAPTION>
YEAR ENDED PROVED RESERVES PROVED DEVELOPED
RESERVES
Natural Gas Crude Oil Natural Gas Crude Oil
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(Mcf) (Bbl) (Mcf) (Bbl)
1994 244,000 260 244,000 260
1995 199,000 140 199,000 140
1996 150,000 110 150,000 110
1997 100,000 70 100,000 70
1998 75,000 50 75,000 50
</TABLE>
Productive wells and Producing Areas
Registrant's interest in gross and net productive wells located on its
properties as of July 31, 1998, was as follows:
<TABLE>
<CAPTION>
WELLS LOCATION GROSS NET
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<C> <C> <C> <C>
Gas Texas 7 1.25
<CAPTION>
Gross and net development acres covered by Registrant's properties as
of July 31, 1998, were as follows:
LOCATION GROSS NET
--------- -------- -------
Texas 4,344 805
</TABLE>
(C) Drilling Activities
- ------------------------------
Registrant has drilled no productive or dry exploratory wells within
its last three fiscal years. Registrant had three marginal wells in Texas
plugged and abandoned.
(d) Present Activities
- ----------------------------
As of this date, Registrant has no wells in the process of
drilling. In 1993, Registrant wrote down by $329,429, the aggregate value
of its remaining wells to more accurately reflect their value. In 1998,
Registrant wrote down its wells by $100,000.
(e) Delivery Commitment
- -----------------------------
Registrant has no direct contracts or agreements to provide a
fixed and determined quantity of oil or gas in the future to any entity.
ITEM 3. LEGAL PROCEEDINGS
- ---------------------------
There are no legal proceedings against the Company as of July 31,
1998. Registrant has decided to commence arbitration proceedings with the
operator or the range where it had conducted retail business until February
1998. Registrant has also elected to seek arbitration concerning a dispute
with its Investor Relations firm and its principals in an effort to cancel
2.2 million shares issued for their services.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ---------------------------------------------------------------
The registrant did not have a shareholder meeting during the
fiscal year. In October 1996, shareholders approved a 1:2 reverse split of
the Common Shares, a re-incorporation in the state of Nevada; the issuance
of 5,000,000 shares of preferred stock; the name change from INCORP, Inc.,
to Customer Sports, Inc.; and a mandate to fund and carry out the proposed
plan of operations. Results of the vote indicated 97 percent approval.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
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(a) Market Information
- ----------------------------
The Registrant's common stock was traded on the NASDAQ system (Symbol
INVT/INVTE), until December 31, 1998. In January 1989 the NASD notified
the Registrant that its shares were being de-listed for lack of market
makers. The Registrant's shares were then quoted in the Pink Sheets
provided by the NASD. In June 1989, the Registrant appealed the decision
at a hearing conducted in San Francisco. The Registrant was notified
shortly thereafter that inclusion in the NASDAQ system was denied because
of the lack of active business operations.
In November 1996, Brookstreet Securities filed a 15c2-11 with the NASD
that was approved in May 1997, and commenced making a market in the shares
of the Registrant on the Electronic Bulletin Board. The Symbol is "CTMR".
The high and low prices for each quarter of each fiscal year were as
follows:
<TABLE>
<CAPTION>
Quarter Ended bid High asked Low bid High asked Low bid
------------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
October 31 $.31 $.09 N/A N/A
January 31 $.30 $.06 N/A N/A
April 30 $.38 $.07 N/A N/A
July 31 $.16 $.05 $.37 $.19
</TABLE>
(b) HOLDERS
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The approximate number of Registrant's common stock holders based
upon the transfer records of Registrant as of July 31, 1998, were 614. In
addition, 123 shareholders hold stock in Street Name.
(c) DIVIDENDS
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Registrant has not paid cash dividends to date and does not
anticipate or contemplate paying dividends in the foreseeable future. It
is the present intention of management to utilize all available funds for
Registrant's new business activities while retaining its oil and gas
interests.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------------
The following is a five year summary of selected financial data.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31, 1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Total Sales $ 68,490 $ 31,039 $ 45,015 $ 57,561 $ 51,571
Net Earnings (Loss) (515,064) (265,820) (388,387) (119,224) (59,869)
Total Assets $ 60,826 $173,329 $275,343 $295,263 $329,817
Total Long Term Debt $157,377 $319,263 $ 32,105 $ -0- $ -0-
Net Gain (Loss) Per (0.03) (0.02) (0.01) (0.00) (0.00)
- --------------------------------------------------------------------------------
</TABLE>
No dividends were paid in fiscal 1997 or in the four years prior thereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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(a) In General
---------------
During the fiscal year 1998, Registrant continued to experience severe
financial difficulties caused by lack of capital to augment its growth.
During the period, the Registrant ceased sales at its retail location and
commenced seeking driving ranges for its business. In January,
Registrant's S-8 registration for 4,450,000 shares plus options became
effective. Proceeds from exercised stock options for 2,194,117 shares at
an average price of $.06 per share provided working capital of $133,500 for
the entire year. Capital to support the growth was not made available
during the fiscal year.
Further, oil and gas revenues declines. Registrant's change in the
repayment schedule on $75,000 secured debt was accepted. Registrant
anticipates that arrearages will be made up from other revenue sources
associated with its golf business should such anticipated revenues, in fact
be received.
Registrant's total stockholders' equity for fiscal 1998 was ($451,984)
compared to ($353,976) for fiscal year 1997, an increase of $98,008
occasioned by operating losses, depletion, and the start up expenses of the
Registrant's new activity.
Management personnel re-wrote employment contracts so that arrearages
could be forgiven, paid out overtime or converted into equity in the
Corporation. Board Members purchased options on Registrant's shares in
December of 1997 by issuing notes to the Registrant in the amount of
$12,000.
Registrant has been profitable only once since it filed its initial
registration statement with the Securities and Exchange Commission in
November 1982. Also, Registrant has not generated adequate cash flows from
its assets to pay all its existing obligations on a timely basis. The main
sources of operating revenue have been the sales of golf merchandise and
Registrant's interests in producing gas wells in Texas. The Texas wells
currently produce anywhere from negative balances to $2,000 in net revenues
per month depending on price. Net revenues are not predictable.
Registrant does not desire to expend the funds necessary expand
activities in Texas.
Registrant's day-to-day operating expenses have increased with the
commencement of Registrant's new entrance into the golf business.
Registrant's management served without cash compensation from 1986 until
October 1994. Registrant's office facilities, storage, clerical assistance
and administration were provided by affiliates of the President pursuant to
an agreement, at a cost of $1,500 per month until March 1, 1996 and then
again after October 1997.
In the judgement of Management, the future success of Registrant is
dependent upon the following factors;
- Establish Community Golf as a viable operating golf entity
- Obtain necessary capital to implement the operation
- Attract and compensate management to carry out the plan
(b) Results of Operations
--------------------------
The production revenues from the oil and gas properties for fiscal
year 1998 were $37,825 as compared to $41,720 for fiscal year 1997 as two
wells were abandoned. Revenues from the golf business that had been
dormant but re-opened for operation in May 1997 were $28,225 vs. $34,414 in
1997.
(c) Effect of Inflation/Business Cycle
---------------------------------------
Registrant does not anticipate that inflation will have a serious
impact on its operations. Inflation will tend to increase operating
expenses and cause a corresponding increase in revenues from the sale of
oil and gas production, the prices asked for golf merchandise and less
likely, through the appreciation of Registrant's oil and gas property
values.
The driving range business is insulated from the impact of the
business cycle to a certain degree. Management is of the opinion that
because of the type of merchandise to be offered by the Company, that its
retail operations will not be impacted significantly by an economic
downturn.
(a) Subsequent Events
----------------------
In early July 1997, Mr. Ronald Brouillette, and officer of the Company
resigned to pursue other more lucrative interests. At the end of
September, 1997, Dr. Michael Sharp, Corporate Secretary, also resigned
based principally on the Company's' inability to honor his employment
contract despite its modification in April of 1997. In October 1997, the
Company terminated its lease at its corporate offices and modified its
leases with the landlord at the Company's' Clubhouse retail facility.
In early 1998, Dr. Sharp agreed to serve as CEO of GranVerde a
subsidiary of the parent provided funding could be obtained and product
provided as represented. Dr. Sharp assisted the Company through the end of
the fiscal year without cash remuneration.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------------------------------------------------------
The financial statements meeting the requirements of Regulation S-X,
with the exception of unaudited oil and gas reserve data, are listed in
line 14 and are filed by registrant pursuant to Item 8 of this Form.
ITEM 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
There are not and have not been any disagreements between the
Registrant and any of the accountants on any matter of accounting
principles or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE OFFICE
- ------------------------ ----- -------------- -----------------------
<S> <C> <C> <C>
Edmund J. Irvine, Jr. 59 1985 Chairman, President
S. Michael Sharp 49 1997 Secretary
Gary A. Stougaard 47 1995 Director
Richard Mangerelli 58 1997 Director
Michael H O'Neal 45 1996 Director
William Carr 68 1997 Director
Dennis Altbrandt 54 1997 Director
Eldon R. Clawson 73 1997 Director
</TABLE>
BOARD OF DIRECTORS
- ------------------
The Board of Directors of Customer Sports, Inc., is comprised of the
following individuals.
Edmund J. Irvine, Jr., Chairman of the Board/CEO Customer Sports, Inc.
- ----------------------------------------------------------------------
Mr. Irvine is a graduate of the Wharton School of Business of the
University of Pennsylvania and the New York Institute of Finance. He was a
decorated Naval Aviator in the United States Marine Corps. He spent nearly
twenty five years in the investment banking industry. For seven years he
was a partner and principal with his own brokerage firm. He has been
president of two equity based real estate lending organizations. He is
currently President of Customer Sports, Inc., and its Community Golf
Centers subsidiary.
S. Michael Sharp, Ph.D., Corporate Secretary
- --------------------------------------------
Mr. Sharp is a graduate of Chapman University, the University of North
Dakota, the Amos Tuck School of Business at Dartmouth College and
California Coast University. He taught management and communications at
several major universities. For the last fifteen years, he has guided
development stage companies, helping them emerge as profitable public
companies. He served as Senior Vice President and Chief Operating Officer
of Customer Sports, Inc., until his resignation in September 30, 1997.
Immediately prior to joining Customers Sports, Inc., he served as Vice
President of Intelligent Surgical Lasers, Inc.
Gary A. Stougaard
- -----------------
Mr. Stougaard is Vice President of Acquisitions, for a publicly traded real
estate investment trust in the hotel business. He has served in executive
capacities with various companies with profit and loss responsibilities and
spend over six years as an audit manager with Ernst and Whitney. He has
directed major real estate projects and had been involved in multi-hotel
financing and the creation of equity. He is familiar with public offering,
mergers, and acquisitions and leverage buyouts.
Michael O'Neal
- --------------
Mr. O'Neal is an officer in the firm of First Albany Securities, a general
securities firm. He has been a specialist in municipal finance as a
General Securities Principal for over 28 years. He was a partner in the
Solana Beach Firm of Whipple, Kinsell, and O'Neal. HE was also a partner
of the Los Angeles securities firm of Cromwell Weeden & Co., Inc., Mr.
O'Neal is a former Director of the Los Angeles Municipal Bond Club and has
served or headed Boards or other organizations.
Dennis Altbrandt
- ----------------
Mr. Altbrandt is a consultant in the field of communications and
electronics. He is the former President and CEO of Voice It
Communications, a publicly held company in the hand held voice
communications field. He has been a partner in two venture capital firms
and was a founder and C.E.O. of Sunward Technologies, a $100 million
company. Mr. Altbrandt was with Price Waterhouse for nine years. He has
been Chief Financial Officer at several major companies and Chief Executive
Officer at two others. He graduated with a degree in accounting from
Syracuse University completed all MBA coursework at the University of San
Francisco.
Mr. Richard Mangerelli
- ----------------------
Mr. Mangerelli is president and CEO of Cybertel Communications, a publicly
held communications company that is developing telefony communications for
the Internet. Cybertel operates primarily through affinity groups. He is
a retired Colonel from the United States Marine Corps and has run public
companies for the last ten years. He has an Undergraduate degree from the
University of Connecticut and a Masters of Business degree from Pepperdine
University.
Mr. Eldon R. Clawson
- --------------------
Mr. Clawson is a retired attorney and investor. Following a term with the
law firm of Gibson, Dunn and Crutcher, Mr. Clawson joined Bekins Van and
Storage as General Counsel. He became head of their most profitable, non-
moving and storage division, the Business Services Group. He has served on
the board of a number of companies including firms engaged in franchise and
insurance brokerage. He is a graduate of the University of Arizona School
of law and received his Masters of Law degree from the Columbia Law School
in New York City.
Mr. William H. Carr
- -------------------
Following retirement from the United States Navy, Mr. Carr founded C&R
construction, a firm that built hundreds of homes shopping malls,
industrial buildings and warehouses. He has served multiple terms on the
City Commission of Desert Hot Springs and was instrumental in the
construction of new schools and sewers and tourist attractions. He served
on the Riverside County Central Committee for seven years. Mr. Carr is a
retired investor and ordained minister.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
Mr. Irvine received cash compensation during the fiscal year
ended July 31, 1998 of $37,500. Mr. Irvine received 1,008,000 shares for
services; Mr. Sharp received 408,000 shares and Mr. Brouillette received
8,000 of common shares for payment of services and in kind of accrued
interest.
Mr. Irvine received options for two million shares at $0.10 per
share for a period of five year, option for 2,000,0000 shares at a price
$0.025 provided the Registrant's shares closed above $0.25 per share during
a two year period; and options for 2,000,000 shares at $0.25 per share for
a period of five years provided Registrant's shares closed at $0.75 or more
during a two year period.
Mr. Sharp received options for 750,000 shares at a price of $0.10
for a five year period following grant.
Directors of the Company purchased options of 2,000,000 shares at
a price of $0.10 for a period of three years from the date of the grant.
Each Director paid $500 in cash and a note for $2,000 for the options or
$0.01 per option. Directors of the Registrant do not currently receive any
fees for attending directors meetings. No officers or director received or
is owed cash compensation for meeting attendance for the Registrant's
fiscal year ended July 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
-----------------------------------------
The table below sets forth: (i) the number of shares owned of
record or beneficially by Registrant's officers and directors as of July
31, 1997; (ii) the number of shares owned by such persons as a group; and
(iii)those persons known to Registrant to own or record or beneficially
more than five percent (5%) of Registrant's outstanding common stock as of
July 31, 1994. Unless otherwise noted, each of the persons reflected in
the table possessed the sole power to vote and the sole power to dispose of
the shares indicated, except as noted.
<TABLE>
<CAPTION>
COMMON STOCK
------------
Name and Address of
Beneficial Owner
<S> <C> <C>
Edmund J. Irvine, Jr. 3,981,000 20.8%
1023 Reliance Way
Del Mar, California 92014
Gary A. Stougaard 462,500 2.2%
5721 Chelsea Avenue
La Jolla, California 92128
S. Michael Sharp, Ph.D. 1,568,500 7.5%
Old El Camino Road
San Diego, California 92130
Richard Mangiarelli 62,500 0.3%
Orchid Lane
Del Mar. California 92104
Dennis Altbrandt 362,500 1.7%
5300 Preserve Parkway South
Greenwood Village, Colorado 80121
William Carr 274,500 1.3%
15459 Happy Hollow Lane
Pauma Valley, California 92061
Eldon R. Clawson 512,500 2.5%
1286 Elk Place
Davis, California 95616
Directors and Officers 7,224,000 34.6%
*Holdings are based upon certain performance provisions
Other Major Shareholders
Roy Meadows 4,194,117 20.1%
1230 Longwood Avenue, Suite 200
Longwood, Florida 32714
Bio-Con Microbes 1,000,000 4.8%
6935 El Camino Real, Suite 105-279
Carlsbad, California 92009
David A. Tenwick 800,050 3.8%
480 Medic Way
Worthington, Ohio 43085
John Vanover 750,000 3.7%
1705 Blue Mountain
Las Vegas, Nevada 89108
Frank DeMarco, Trustee (1) 600,000 2.9%
899 El Centro St., Suite 201
South Pasadena, California 91030
Unified Professional Services 575,000 2.7%
c/o David Bustrum
1316 North Walnut
LaHabra Heights, California 90631
Robert C. Brehm 500,000 2.4%
6935 El Camino Real, Suite 105-279
Carlsbad, California 92009
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS
- -----------------------------------------------------
During Fiscal Year 1997, the Board authorized the issuance
of 4,450,000 shares in connection with its engagement of Roy Meadows and
Stockbrokers Relations, Inc. It authorizes the issuance of 1,000,000
shares to Bio-Con Microbes for a national exclusive license to distribute
microbial products. It authorized 1,400,000 shares to Messrs. Sharp and
Irvine for services. It also authorized issuance of 380,146 shares as
payment in kind for interest. It issued 50,000 shares in conjunction with
private placement of shares. It also issued 205,000 shares for services
for legal matters, consulting and fund raising. In addition, options for
6,000,0000 shares were issued for Mister Irvine and were performance based.
Board Members purchased options for 2,000,000 shares. Roy Meadows also
exercised options on 2,194,117 shares at an average price of $0.06 per
share. Registrant believes Meadows sold some or all of its shares received
from this exercise.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
A. Financial Statements to follow this document
B. Consent of Independent Auditors
C. Reports on Form 8-K
None
Customer Sports, Inc.
FINANCIAL STATEMENTS
JULY 31, 1998
&
JULY 31, 1997
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Independent Auditors Report
--------------------------
Board of Directors
Customer Sports, Inc.
I have audited the accompanying balance sheets of Customer Sports, Inc., as
of July 31, 1998 and 1997, and the related statements of operations,
stockholders' equity, and cash flows for the years ended July 31, 1998,
1997 and 1996. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatements. 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 the significant estimates made by management, as well as
evaluating the overall financial statements presentation. I believe that
my audit provides a reasonable basis for my opinion.
In my opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of Customer Sports, Inc., as
of July 31, 1998 and 1997, and the results of its operations and its cash
flows for the years ended July 31, 1998, 1997, and 1996, in conformity with
generally accepted accounting principles.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
October 19, 1999
Customer Sports, Inc.
Balance Sheet
July 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
- --------------
Cash $ 20,927 $ 234
Receivables (Note #3) 2,732 3,213
Inventory 7,218 23,218
----------- -----------
Total Current Assets 30,877 26,665
Other Assets
- ------------
License 10,000 -0-
Refundable Deposit 3,000 3,000
Equipment - Net 3,150 8,213
Oil & Gas Properties
(Successful Efforts Method) 732,901 832,901
Less Accumulated Depreciation ( 719,102) ( 697,450)
----------- -----------
Total Other Assets 29,949 146,664
----------- -----------
TOTAL ASSETS $ 60,826 $ 173,329
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
- -------------------
Accounts Payable & Accrued Expenses $ 117,920 $ 133,415
Notes Payable (Note #5) 237,513 178,965
----------- -----------
Total Current Liabilities 355,433 312,380
Long Term Liabilities
- ---------------------
Notes Payable (Note #5) 157,377 214,925
Stockholders' Equity
- --------------------
Capital Stock, 50,000,000 Shares at $0.01
Par Value; 20,866,253 & 13,766,790
Shares Issued and Outstanding Restated 208,660 137,770
Paid In Capital 6,750,383 6,404,217
Deficit in Retained Earnings (7,411,027) ( 6,895,963)
----------- -----------
Total Stockholders' Equity ( 451,984) ( 353,976)
----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 60,826 $ 173,329
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
Customer Sports, Inc.
Statements of Operations
For the Years Ended July 31, 1998, 1997, and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
- --------
Golf Sales & Fees $ 28,115 $ 34,414 $ 14,400
----------- ----------- -----------
Total Revenues 28,115 34,414 14,400
Cost of Sales
- -------------
Cost of Golf Sales 12,209 17,746 3,703
----------- ----------- -----------
Gross Profit 15,906 16,668 10,697
Operating Expenses
- ------------------
Consulting Fees 18,860 162,125 285,029
General & Administrative Expenses 144,095 165,132 84,196
Interest Expenses 46,720 47,011 19,967
Depreciation & Amortization 24,072 25,333 29,067
Loss Prepaid Advertising 222,500 -0- -0-
Prior Period Accruals -0- ( 182,133) -0-
----------- ----------- -----------
Total Costs & Expenses 456,247 217,468 418,259
----------- ----------- -----------
Loss from Operations ( 440,341) ( 200,800) ( 407,562)
- --------------------
Other Income (Expenses)
- -----------------------
Gain on Sale of Assets 2,550 6,500 -0-
Oil & Gas Revenues 37,825 41,720 45,015
Write Off Impaired Oil Wells ( 100,000) ( 100,000) -0-
Lease Operating Expenses, Delayed
Rentals, Royalties, & Taxes - Oil Well ( 15,098) ( 13,240) ( 25,840)
----------- ----------- -----------
Total Other Income ( 74,723) ( 65,020) 19,175
----------- ----------- -----------
Net Loss ($ 515,064) ($ 265,820) ($ 388,387)
=========== =========== ===========
Net Loss Per Share
Of Common Stock ( .03) ( .02) ( .04)
Weighted Average Number
Of Shares Outstanding
During Period 17,080,356 11,598,256 8,974,361
</TABLE>
The accompanying notes are an integral part of these financial statements
Customer Sports, Inc.
Statements of Stockholders' Equity
For the Period August 1, 1995 to July 31, 1998
<TABLE>
<CAPTION>
Deficit
Common Stock Paid In Retained
Shares Amount Capital Earnings
-------------------------------------------------
<S> <C> <C> <C> <C>
Balance, August 1, 1995 7,276,196 $ 72,762 $6,214,595 ($ 6,241,756)
Shares Issued for Services
at $.01 Per Share 250,000 2,500 2,500
Shares Issued for Director
Fees at $.01 Per Share 437,500 4,375 4,375
Shares Issued for Services
at $.01 Per Share 175,000 1,750 1,750
Shares Issued for Services &
Incentives at $.01 Per Share 2,250,000 22,500 22,500
Shares Issued in Satisfaction
of Debt Satisfaction at $1.06
Per Share 12,500 125 26,375
Net Loss Year Ended
July 31, 1996 ( 388,387)
-------------------------------------------------
Balance, July 31, 1996 10,401,196 104,012 6,272,095 ( 6,630,143)
Shares Issued for Cash
at $.10 Per Share 1,350,000 13,500 121,500
Shares Issued for Services
at $.01 Per Share 2,038,000 20,380 10,500
Adjustments to Shares
for Rounding ( 12,206) ( 122) 122
</TABLE>
The accompanying notes are an integral part of these financial statements
Customer Sports, Inc.
Statements of Stockholders' Equity - Continued-
For the Period August 1, 1994 to July 31, 1998
<TABLE>
<CAPTION>
Deficit
Common Stock Paid In Retained
Shares Amount Capital Earnings
-------------------------------------------------
<S> <C> <C> <C> <C>
Net Loss from Operations
Year Ended July 31, 1997 ( 265,820)
-------------------------------------------------
Balance, July 31, 1997 13,776,990 137,770 6,404,217 ( 6,895,963)
Shares Issued for Cash
at $0.10 Per Share 50,000 500 5,125
Shares Issued for License
at $0.01 Per Share 1,000,000 10,000
Shares Issued for Cash
at $0.06 Per Share 2,194,117 21,940 112,559
Shares Issued in Satisfaction
of Accrued Interest at
$0.08 Per Share 390,146 3,900 28,232
Shares Issued to Acquire
Prepaid Services at $0.10
Per Share 2,225,000 22,250 200,250
Shares Issued for Services
at $0.01 Per Share 1,230,000 12,300
Loss for Year Ended
July 31, 1998 ( 515,064)
-------------------------------------------------
Balance, July 31, 1998 20,866,253 $ 208,660 $6,750,383 ($ 7,411,027)
=================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
Customer Sports, Inc.
Statements of Cash Flows
For the Years Ended July 31, 1998, 1997 & 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
- ------------------------------------
Net Loss ($ 515,064) ($ 265,820) ($ 388,387)
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by Operating Activities:
Write Off of Accounts Payable -0- ( 182,133) -0-
Shares of Common Stock Issued
for Services in Lieu of Cash 269,667 30,880 62,250
Write Off of Impaired Assets 100,000 100,000 -0-
Depreciation 24,072 25,333 29,067
Changes in Operating Assets & Liabilities:
(Increase) Decrease in Receivables 481 ( 165) 2,256
(Increase) Decrease in Inventory 16,000 ( 22,718) ( 500)
Increase in Accounts Payable ( 15,495) 76,946 188,219
Increase in Refundable Deposit -0- -0- ( 3,000)
----------- ----------- -----------
Net Cash (Used) by Operating Activities ( 120,339) ( 237,677) ( 110,095)
Cash Flows from Investing Activities
- ------------------------------------
Purchase of Equipment ( 2,643) ( 4,200) ( 6,170)
Sale of Assets 2,550 750 -0-
----------- ----------- -----------
Net Cash (Used) by Investing Activities ( 93) ( 3,450) ( 6,170)
----------- ----------- -----------
Cash Flows from Financing Activities
- ------------------------------------
Sale of Common Shares 140,125 135,000 -0-
Increase in Notes Payable 6,500 103,113 130,000
Cash Paid on Notes Payable ( 5,500) -0- ( 12,002)
----------- ----------- -----------
Net Cash Provided by Financing Activities 141,125 238,113 117,998
----------- ----------- -----------
Increase (Decrease) In Cash 20,693 ( 3,014) 1,733
Cash at Beginning of Year 234 3,248 1,515
----------- ----------- -----------
Cash at End of Year $ 20,927 $ 234 $ 3,248
=========== =========== ===========
Disclosures from Operating Activities
- -------------------------------------
Interest $ 46,720 $ 47,011 $ 19,967
Taxes -0- -0- -0-
Significant Non Cash Transactions
- ---------------------------------
Stock Issued for Services 6,225,000 Shares $ -0- $ -0- $ 62,250
Stock Issued for Services 2,038,000 Shares -0- 30,880 -0-
Stock Issued in Satisfaction of Debt
25,000 Shares -0- -0- 26,500
Stock Issued for Services 3,455,000 Shares 234,800 -0- -0-
Stock Issued for License 1,000,000 Shares 10,000 -0- -0-
Stock Issued for Accrued Expenses 390,146 Shares 32,063 -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
Customer Sports, Inc.
Notes to Financial Statements
NOTE #1 - Organization
- ----------------------
The Company was organized under the laws of the State of Utah and commenced
business activities on September 25, 1969. Substantially all of the
Company's assets were acquired in 1982 and 1983 in exchange for 5,533,164
shares of the Company's common stock.
The Company was engaged in the business of owning and managing oil and gas
properties located in the state of Montana, Texas and California. At July
31, 1996, the Company has interest in producing wells in Texas and Montana.
During the year the Company filed a D.B.A. "Back Nine Golf, Inc." in San
Diego, California. Customer Sports, Inc., will now pursue its primary
business of marketing golf equipment, accessories, educational aids and
motivational media to assist golfers.
NOTE #2 - Summary of Significant Accounting Policies
- ----------------------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period
when the goods are shipped to the customer.
C. The Company considers all short term, highly liquid investments, that
are readily convertible, within ninety days, to known amounts as cash. The
Company currently has no cash equivalents.
D. Basic Earnings Per Shares are computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted Earnings Per Share shall be
computed by including contingently issuable shares with the weighted
average shares outstanding during the period. When inclusion of the
contingently issuable shares would have an antidilutive effect upon
earnings per share no diluted earnings per share shall be presented.
E. Inventories: Inventories are stated at the lower of cost, determined
by the FIFO method or market.
F. Depletion: The Company's policy is to provide depletion based on the
units of production method. During the past ten years, depletion has been
claimed on the ratio of prior years units of production to estimated
revenues.
G. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of leasehold
improvements is amortized over the lesser of the length of the lease of the
related assets of the estimated lives of the assets. Depreciation and
amortization is computed on the straight line method.
H. Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
<PAGE>
Customer Sports, Inc.
Notes to Financial Statements -Continued-
NOTE #3 - Receivables
- ---------------------
<TABLE>
<CAPTION>
July 31, July 31,
1998 1997
----------- ----------
<S> <C> <C>
Receivables consist of the following:
Current Assets Due from Oil &
Gas Production & Royalty $ 2,732 $ 3,213
----------- ----------
Total $ 2,732 $ 3,213
=========== ==========
</TABLE>
NOTE #4 - Depreciation
- ----------------------
The Company capitalizes the purchase of equipment and fixtures for major
purchases in excess of $500 per item. Capitalized amounts are depreciated
over the useful life of the assets using the straight-line method of
depreciation.
Scheduled below are the assets, costs, lives, and accumulated depreciations
at July 31, 1998 and 1997.
<TABLE>
<CAPTION>
Depreciation Accumulated
1998 1997 Expense Depreciations
Assets Cost Cost Life 1998 1997 1998 1997
- ------------ --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Furniture
& Fixtures $ 12,092 $ 9,620 5 $ 2,420 $ 781 $ 3,827 $ 1,407
Compressors 5,116 5,116 5 -0- 607 5,116 5,116
- ------------ --------------------------------------------------------------------
Total
Equipment $ 17,208 $ 14,736 $ 2,420 $ 1,388 $ 8,943 $ 6,523
- ------------ --------------------------------------------------------------------
Oil & Gas
Wells Tangible $ 732,901 $ 832,901 $21,652 $23,945 $ 719,102 $ 697,450
</TABLE>
Management believes that its investment in oil and gas wells has been
impaired in part because the Company cannot expend additional funds to
drill new wells or attempt in increase capacity on its existing wells. The
Company has taken an Impairment Write Off of $25,000 in each quarter of
this fiscal year and intends to take $25,000 impairment allowance in each
quarter of the fiscal year commencing August 1, 1997.
Customer Sports, Inc.
Notes to Financial Statements -Continued-
NOTE #5 - Notes Payable
- -----------------------
The Company has notes payable as follows:
<TABLE>
<CAPTION>
July 31, 1998 July 31, 1997
Long Short Long Short
Term Term Term Term
- ---------------------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Note Payable (Wilson Judgement) Interest
at 12% per Annum Unsecured $ -0- $ 68,627 $ -0- $ 68,627
Note Payable - 10%Interest Term 36 Months 3,614 6,386 7,228 2,772
Note Payable - 10% Interest Term 36 Months -0- 15,000 940 14,060
Note Payable - 10% Interest Term 36 Months -0- 10,000 915 9,085
Note Payable - 10% Interest Term 36 Months -0- 10,000 1,482 8,518
Note Payable - No Interest Term 12 Months -0- 750 -0- -0-
Note Payable - 12% Interest -0- 5,750 -0- -0-
Note Payable - 12% Interest Term 36 Months -0- 12,500 4,166 8,334
Note Payable - 12% Interest Term 36 Months -0- 12,500 4,166 8,334
Note Payable - 10% Interest Term 36 Months -0- 25,000 5,099 19,901
Note Payable - 10% Interest Term 36 Months -0- 5,000 1,666 3,334
Note Payable - Eight Investors, 12% Interest
Term 36 Months 30,000 60,000 60,000 30,000
Note Payable - Officer, 12% Interest
Term 36 Months 38,576 6,000 44,600 6,000
Note Payable - Officer, 12% Interest
Term 36 Months 44,600 -0- 44,076 -0-
Note Payable - Officer, 12% Interest
Term 36 Months 40,587 -0- 40,587 -0-
- ---------------------------------------- ---------- ---------- ---------- -----------
Total Notes Payable $ 157,377 $ 237,513 $214,925 $ 178,965
========================================
</TABLE>
Customer Sports, Inc.
Notes to Financial Statements -Continued-
NOTE #5 - Notes Payable -Continued-
- -----------------------------------
Debt service requirements for all notes are as follows:
Principal
<TABLE>
<CAPTION>
Amount
Year Ended Due
---------------------------
<S> <C>
July 31, 1997 $156,520
July 31, 1998 178,965
July 31, 1999 55,662
July 31, 2000 159,263
</TABLE>
NOTE #6 - Net Operating Loss Carryforward for Income Tax Purposes
- -----------------------------------------------------------------
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:
<TABLE>
<CAPTION>
Year of Loss Amount Expiration Date
<S> <C> <C>
July 31, 1982 $ 728,099 2002
July 31, 1983 181,918 2003
July 31, 1984 317,779 2004
July 31, 1985 448,697 2005
July 31, 1986 570,831 2006
July 31, 1987 202,722 2007
July 31, 1988 136,277 2008
July 31, 1989 11,573 2009
July 31, 1990 34,099 2010
July 31, 1991 45,224 2011
July 31, 1992 31,777 2012
July 31, 1993 45,230 2013
July 31, 1994 59,869 2014
July 31, 1995 119,224 2015
July 31, 1996 388,387 2016
July 31, 1997 265,820 2017
July 31, 1998 521,064 2018
</TABLE>
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax
assets in future years. Due to the uncertainty as to the utilization of
net operating loss carryforwards an evaluation allowance has been made to
the extent of any tax benefits that net operating losses may generate.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Current Tax Asset Value of Net Operating Loss
Carryforwards at Current Prevailing Federal
Tax Rate $1,149,368 $ 972,206
Evaluation Allowance (1,149,368) ( 972,206)
Net Tax Assets $ -0- $ -0-
Current Income Tax Expense -0- -0-
Deferred Income Tax Expense -0- -0-
</TABLE>
Customer Sports, Inc.
Notes to Financial Statements -Continued-
NOTE #7 - Lease Commitments
- ---------------------------
The Company canceled its lease on the golf driving range in Orange County,
California and in the subsequent year settled with the landlord for $3,000
in termination fees.
NOTE #8 - Costs Incurred in Oil & Gas Activities
- ------------------------------------------------
<TABLE>
<Catpion>
July July
31, 1998 31, 1997
<S> <C> <C>
Capitalized Costs:
Acquisitions of Producing Oil, Gas & Equipment $ -0- $ -0-
Expensed:
Delay Rents, Royalties and Well Expenses 15,098 13,240
Depletion 21,562 23,945
</TABLE>
NOTE #9 - Related Party Transactions
- ------------------------------------
The holders of notes are current officers and others, who during their
tenure as Officers, have provided services, or cash, totaling $123,763.
These notes bear interest at 12% and have 36 month terms.
NOTE #10- Stock Options
- -----------------------
The Company has an aggregate of $75,000 in notes payable that allow the
holders thereof to convert their notes to 1,000,000 shares at $0.075 per
share. The note holder loses convertibility of 3.33% of the original
amount for each payment received from the Company.
The Company granted options to two officers as follows:
1. President/Chief Executive Officer, 2,000,000 options to acquire
2,000,000 shares of common stock at $0.10 per shares for a period of five
years commencing April 4, 1997.
2. Vice President/Chief Executive Officer, 1,000,000 shares of common
stock at $0.10 per share for a period of five years commencing April 4,
1997.
NOTE #11 - Consultant Agreement
- -------------------------------
On September 23, 1997, the Company modified the Consultant Agreement with
an Officer as follows:
The President and Chief Executive Officer, was to receive a
consultant fee of $10,000 per month for three months commencing March 1,
1996 and $15,000 per month commencing July 1, 1996. The Contract
stipulated that these consultant fees were contingent upon the Company
reaching "benchmark" funded levels. The benchmark-funded level was not met
and the Consultant Agreement provided that in such case the President/Chief
Executive Officer would receive $5,000 for the first three months and
$7,500 for the remaining nine months.
<PAGE>
Customer Sports, Inc.
Notes to Financial Statements -Continued-
NOTE #12 - Non Cash Financing and Investing Activities
- ------------------------------------------------------
In 1996, the Company has issued 6,225,000 shares of its common stock for
services valued at $62,250. In addition, the Company issued 25,000 shares
of its common stock in settlement of a $26,500 account payable.
The Company issued 2,038,000 shares of its common stock at $0.01 per share,
for services received during the year ended July 31, 1997.
The Company issued 1,000,000 shares of its common stock to acquire a
distributor license valued at $10,000 during the year ended July 31, 1998.
During the year ended July 31, 1998, the Company issued 390,146 shares of
its common stock, in satisfaction of accrued interest of $32,063, and an
additional 2,225,000 shares of its common stock, were issued for services
valued at $222,500.
SIGNATURES
----------
CUSTOMER SPORTS, INC.
Dated: October 20, 1999 By: Edmund J. Irvine, Jr.
- ------------------------ ----------------------------
EDMUND J. IRVINE, JR.
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed by the following persons on the dated listed
below on behalf of the Registrant and in the capacities indicated.
Signature Date Title
- ---------------------------- ---------------- -------------------------
/S/ EDMUND J. IRVINE, JR. October 20, 1999 President, Chairman, Director
- ---------------------------- ---------------- -------------------------
EDMUND J. IRVINE, JR.
/S/ S. MICHAEL SHARP October 20, 1999 Secretary, Director
- ---------------------------- ---------------- -------------------------
S. MICHAEL SHARP
/S/ RICHARD MANGERELLI October 20, 1999 Director
- ---------------------------- ---------------- -------------------------
RICHARD MANGERELLI
/S/ WILLIAM CARR October 20, 1999 Director
- ---------------------------- ---------------- -------------------------
WILLIAM CARR
/S/ MICHAEL H. O'NEAL October 20, 1999 Director
- ---------------------------- ---------------- -------------------------
MICHAEL H. O'NEAL
/S/ DENNIS ALTBRANDT October 20, 1999 Director
- ---------------------------- ---------------- -------------------------
DENNIS ALTBRANDT
/S/ ELDON R. CLAWSON October 20, 1999 Director
- ---------------------------- ---------------- -------------------------
ELDON R. CLAWSON
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, Suite #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
Consent of Darrell T. Schvaneveldt
Independent Auditor
I consent to the use, of our report dated October 20, 1999, on
the financial statements in the Form 10-KSB, of Customer Sports,
Inc., dated July 31, 1998, included herein and to the reference
made to me.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
October 20, 1999
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<NAME> CUSTOMER SPORTS, INC.
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