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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending September 30, 1996
Commission File Number 0-21914
AGTSPORTS, INC.
(Exact name of Issuer as specified in its charter)
Colorado 84-1165916
(State of incorporation) (I.R.S. Employer Identification No.)
5082 East Hampden Avenue, Suite 234, Denver, Colorado 80222
(Address of principle executive offices) (Zip Code)
(303) 220-8686
(Issuer's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Common Stock $.001 par value
Check mark whether the Issuer (1) filed all reports required to be filed
by section 13 or 15(d) of Securities Exchange Act of 1934 during the
preceding 12 months (or for such a shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form and no disclosure will be
contained, to the best of the Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. [X ]
Issuer's revenues for its most recent fiscal year: $61,176.
The aggregate market value of the voting stock of the Issuer held by
non-affiliates as computed by reference to the prices at which the stock was
sold and the average of the bid and ask prices of such stock within the prior
sixty days as of September 30, 1996, was $3,872,308. A total of 15,489,232
shares were owned by non-affiliates as of September 30, 1996.
The number of shares of Common Stock, $.001 par value, outstanding on
September 30, 1996 was 23,950,596 shares. Transitional Small Business
Disclosure (check one): Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
None.
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Table of Contents
Part I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
Part II
Item 5. Market for Common Equity and
Related Stockholder Matter
Item 6. Management's Discussion and Analysis
or Plan of Operation
Item 7. Financial Statements
Item 8. Changes in and Disagreements with
Accountants and Financial Disclosure
Part III
Item 9. Directors and Executive Officers, Promoters
and Control Persons; Compliance with Section 16(a)
of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners
and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and reports on Form 8-K
SIGNATURES
FINANCIAL STATEMENTS AND SCHEDULES
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
AGTSPORTS, INC. (the "Company" or "AGT") is a U.S. public company engaged
in the development and marketing of computer software technologies and
related technology products and services for the golf and recreation
industries. The business of the Issuer is divided into four categories: 1)
development and marketing of golf course management software, with a special
emphasis on tee times reservations systems, 2) the LPGA scoring system, 3)
golf technology products, and 4) consulting services for the golf industry.
The common stock of the Company is traded under the symbol "AGTP" on the
Electronic Bulletin Board, NASDAQ (OTC-BB).
The Company was incorporated in Colorado on January 6, 1986 as AMERICAN
MERGER CONTROL, an investment holding company designed to invest in all types
of assets, businesses and/or properties. From 1991 to 1993, the Company
operated as ULTRATECH KNOWLEDGE SYSTEMS, INC., dba AGTSPORTS, INC.,
thereafter the name was officially changed to AGTSPORTS, INC. During prior
years, AGT was engaged in the research and development of "THE GOLF PLAYERS
SYSTEM NETWORK," a tournament management and statistical analysis system.
This system, together with several related golf software products, was under
development during the years from 1991 to 1995. (See the Company's Form
10-KSB, September 30, 1995).
In fiscal 1996, despite several advances in the development of AGT
software products, the Company was unable to successfully bring its products
to market and experienced significant financial difficulties resulting in a
major change in the business focus and management of the Company. Pursuant
to an internal restructuring plan authorized in May of 1996, the Company
acquired new management, divested itself of non-producing assets, and
terminated certain former business activities outside of the United States.
Management re-directed the business of the Company to pursue several "niche"
markets within the golf and recreation industries. These markets and the
Company's participation therein are discussed in greater detail below. (See
Part I - "Business of Issuer").
In fiscal 1995, the Company secured an exclusive agreement with the
LADIES PROFESSIONAL GOLF ASSOCIATION (LPGA) to become the OFFICIAL TECHNOLOGY
PARTNER OF THE LPGA. This role has allowed AGT to provide the LPGA with a
state-of-the-art computer system at their new headquarters in Daytona Beach,
Florida. The Company has developed significant business relationships which
management believes will afford AGT with material future marketing and
distribution opportunities. AGT has also developed an electronic scoring
system to be utilized at tournament events. Designed to become the LPGA's
official scoring system, the system was successfully tested and utilized at
twenty (20) LPGA-sanctioned tournament events in fiscal 1996.
As of September 30, 1996, the Company had a working capital deficiency of
$2,203,044 and a stockholders deficit of $2,050,294. Although the Company
continues to experience lack of adequate funding to fully pursue its business
objectives, following the recent completion of the internal restructuring
efforts and assuming new sources of financing will be secured, the Company
believes it will be able to successfully meet all of its current obligations.
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INVESTMENTS
In fiscal 1996, the Company held a fifty percent interest and active
investment in VISION APPLIED SPORTS TECHNOLOGY (VAST), a joint venture with a
South African technology company. VAST is engaged in the development,
marketing and sales of the "Handwedge," a hand-held golf improvement and
distance measuring device for golfers. The "Handwedge" is substantially
complete in its development phase and will be introduced to the golf
community at the PGA MERCHANDISING SHOW to be held on January 24 - 27th, 1997
in Orlando, Florida.
Subsequent to fiscal year ended September 30, 1996, the Company acquired
TEE TIMES OF AMERICA, INC., (TTA) of Dallas, Texas, and 100% of the assets of
JM GOLF, INC., of Denver, Colorado. TTA owns proprietary tee-times
reservation system technology and has installed its TTRS software at numerous
golf courses throughout the United States, including such notables as Arnold
Palmer's BAY HILL, and the Hyatt's BEAR CREEK. JM GOLF, INC. has completed
development of the "Micro-Caddie," a cart-mounted distance measuring device
for golfers. (See "Business of Issuer" and "Subsequent Events" below).
As reported in the Company's Form 10-K for fiscal year ended 1995, the
Company entered into a joint venture agreement with Global Links Trading,
Limited, ("GLT") a computer software licensing company. The agreement
transferred certain non-U.S. contracts and resources relating to reservation
tee times systems to GLT in exchange for an overriding royalty of 15% on
gross sales of certain GLT products. For the fiscal year ending September
30, 1996, GLT produced no sales relating to the Company's joint venture
agreement with GLT. The agreement carries no expense to the Company. Pending
further development of GLT products and markets, management can provide no
assurance GLT will be successful in its business plan or in achieving sales
which would result in material royalty payments to the Company.
Due to the recurring loss history of the Company and considering the
limited number of sources of new funding for working capital, the auditors of
the Company have raised significant doubts as to the abilities of the Company
to continue as a going concern.
BUSINESS OF ISSUER
The business of the Issuer is divided into four categories: 1)
development and marketing of golf course management software, with a special
emphasis on tee times reservations systems, 2) the LPGA scoring system, 3)
technology products for the golf industry, and 4) consulting services for the
golf industry.
SERVICES AND PRODUCTS OF AGT
AGT is a national provider of reservation tee times systems to golf
courses, associations, golf leagues, corporations and individual golfers
throughout the United States. The system is made up of several component
parts: computer software and services, information access and support, and
individual products for specific applications. In addition, AGT is the
OFFICIAL TECHNOLOGY PARTNER OF THE U.S. LPGA, providing scoring for
sanctioned golf tournaments. During its most recent fiscal year, the Company
scored 20 LPGA-sanctioned tournaments, representing over 8,560 rounds of
professional golf. In developing the LPGA scoring system, AGT has created a
state of the art wireless scoring system that allows real time scoring of
tournament events. The Company then assists in providing the information and
results to scoring officials, television and other media outlets and to LPGA
hospitality facilities.
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The Company also provides technical and back-up golf support services in
programming, designing, engineering and accounting-related functions.
Hand-held golf improvement devices represent another important area of
product development for the Company. Taken together, the services provided
by AGT can be viewed as a spectrum ranging from traditional computer-related
services to value-added alternative technology solutions.
Opportunities for growth are greatly enhanced by expanding the AGT
product line in order to diversify and penetrate new market segments. This
can be accomplished with TTRS, Point-of-Sale, Inventory Control, Tournament
Management, Handicapping and other market segments. In fiscal 1997, the
Company plans to analyze each of these market segments in-depth in order to
determine which areas may represent optimal growth opportunities.
AGT has established a computerized golf course management system. The
centerpiece of this technology is AGT's TTRS software, which provides a cost
effective solution for golf courses who spend extraordinary administrative
time and resources managing tee-times reservations. These courses are often
continually over-booked, with busy telephone lines, repetitive "the course is
full" telephone answering messages and other problems. The Company's
software is designed to automate the entire tee-times reservation process, to
increase management time where it is more effectively spent and to reduce
unnecessary functions where needed. The software is installed by AGT support
staff to help control overhead costs and to improve profitability.
AGT is headed by Mr. B. Mack DeVine, Chairman and CEO and Mr. Gary Crews,
President, who have established satellite executive offices for the Company
in Tampa, Florida and Tulsa, Oklahoma, respectively. AGT also maintains
executive offices in Denver, Colorado, with local affiliated legal,
accounting and technical support services. (See "Biographical Data" and
"Properties").
MARKETS OF AGT
The U.S. golf market consists of over 16,000 golf courses serving an
estimated 25 million golfers annually. Independent industry sources estimate
over 80 million tee times reservations were made in 1995, with approximately
20 million of these successfully completed utilizing automated reservation
systems. Industry analysts have noted the golf market has lagged behind most
other industries in adopting computerized systems. However, demand for (and
the acceptance of) automated TTR systems in golf is growing steadily; driven
by the need for an efficient and sometimes impartial method of recording
tee-time reservations by golf course managers. At the same time,
Point-of-Sale and Inventory Control modules are needed to help facilitate the
reporting and collection of green fees, cash sales and merchandise related
information. The Company's goal for these and other applications is to
computerize and ultimately automate all of the manual systems which Pro Shops
utilize in their current operations.
Golf represents a $20 billion industry in the U.S. In recent years, the
industry has experienced consistent growth at an annual rate of 11% or more
prior to 1994, at which time the number of new golfers and rounds played per
year appeared to level off. In 1994, there were over 450 million rounds of
golf played, which increased by 5.5% in 1995, as reported by the National
Golf Foundation. As a result, the Company believes the opportunity for
marketing and sales of AGT services and products is greater than ever before.
By securing strategic alliances and merger opportunities with other software
and technology developers, the Company plans to be a dominant force in the
U.S. golf software and automation industry.
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DISTRIBUTION METHODS OF COMPANY'S SERVICES
AGT plans to become a market leader in the U.S. TTRS industry by targeting
golf course reservations, which are the lifeblood of golf course operations.
Through marketing and sales of AGT computer software technologies and systems,
the Company's objective is to create a continuing stream of revenue built upon
fees generated from each individual round of golf played. Ancillary income will
be derived from internet tee times reservations, credit card processing fees,
advertising revenues, marketing of products endorsed by professional golfers,
licensing contracts through third party companies and from the sale of software
modules developed internally. Subsequent to fiscal 1996, the Company has
acquired or plans to acquire private companies who are similarly engaged in the
development of golf course management software, specifically, tee times
reservations systems. (See "Subsequent Events" below).
The Company promotes a philosophy of developing and maintaining long term
relationships with its clients, striving to achieve high levels of performance
and customer satisfaction to attract and retain local, regional and national
accounts. The Company continues to explore growth opportunities to expand its
existing service offerings, develop additional skill classes and enter new
markets by selectively expanding its operations through targeted acquisitions.
Prominent industry sources such as the National Golf Foundation's DIRECTORY
OF GOLF have reported extensively on the ongoing trend to establish central
reservation services for booking golf tee-times in large metropolitan cities and
resort destinations. Daily fee courses are seeking to join together in a
centralized reservation alliance to promote their area as a golf destination.
As a result, golf courses are seeking one vendor that offers a fully integrated
product line with internet access.
In order to become the market leader, AGT plans to achieve superiority in
its product development and to have the ability to create strategic alliances
with other software vendors in the marketplace. The Company believes the
popularity of WINDOWS-based systems will mandate this as the future platform for
tee-times reservation systems. In conjunction with these trends, management has
adopted plans to target and acquire smaller companies for the purpose of
expanding AGT's market presence in fiscal 1997. The profile for such targets
includes businesses with core TTRS accounts and operating TTRS systems.
Management believes such acquisitions can be made without excessive capital
outlay utilizing existing AGT resources management and personnel.
COMPETITIVE BUSINESS CONDITIONS
Demographically, the U.S. tee times reservation industry is highly
fragmented, with an estimated 30 to 40 private firms operating over 20 different
technology systems. The size of these companies is typically relatively small;
with most companies employing fewer than 10 people and producing revenues of
less than $1,000,000 annually. Despite the considerable competition, smaller,
well-managed companies, especially those with a specialized focus, can succeed
on a local or regional basis.
Currently, three software companies competing for dominance in the
Automated Tee Times business are: AGTSPORTS, INC., G.D.I.S. and FAIRWAY
SYSTEMS. New competitors appear to be entering the market rapidly, which has
contributed to lower prices and decreased profit margins. Many industry
analysts such as the National Golf Foundation agree that the popularity of the
sport is increasing, thereby enticing more people to enter the marketplace and
making it difficult to track existing competition.
Three significant competitive factors are: standardization and
user-friendliness of the systems and products, pricing, and customer service
and support. The Company recognizes that a standard hardware
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configuration for TTRS systems has yet to be established within the TTRS
industry. Additionally, pricing, network access fees and transaction fees
remain unresolved as the technologies continue to evolve. For most companies,
major obstacles include lack of sufficient development capital and knowledge
of the rapidly changing technologies.
The tee-times reservation business remains an emerging industry and is, as
such, still relatively undefined. It parallels the computer software technology
services industry in that it is also highly fragmented, with few large companies
operating on a national level. AGT believes all segments within the golf
industry are experiencing a trend toward consolidation. The Company has
implemented new strategies to help adapt to the changing marketplace and to
position AGT as a leader in this trend via acquisition of targeted TTRS and golf
software companies.
SUBSEQUENT EVENTS
On January 11, 1997, the Company acquired TEE TIMES OF AMERICA, INC. (TTA),
a tee-times reservation company located in Dallas, Texas. TTA owns proprietary
tee-times reservation system technology and has installed its TTRS software at
numerous golf courses throughout the United States, including such notables as
Arnold Palmer's BAY HILL, and the Hyatt's BEAR CREEK. The acquisition was
completed for payment in cash and shares of the Company's issued and outstanding
common stock. In conjunction with the acquisition, Mr. Kyle D. Ragsdale, TTA
President, accepted a management position with the Company and entered into a
five year employment agreement to assist AGT in achieving its future business
objectives.
On Janaury 11, 1997, the Company purchased 100% of the assets of JM GOLF,
INC., of Littleton, Colorado. JM GOLF, INC. has developed a cart-mounted
distance measuring device for golfers called the "Micro-Caddie." The acquisition
was completed for payment in shares of the Company's issued and outstanding
common stock.
On November 1, 1996, Mr. Gary W. Crews joined the Company as President.
(See "Biographical Information" below).
COMPLIANCE WITH GOVERNMENT REGULATIONS
The operations of AGT do not involve mandatory compliance with
non-environmental federal regulations other than employer-related issues such
as the 1995 federal Family Medical Leave Act ("FMLA"). As of September 30,
1996, AGT fully complies with the terms of this legislation as a U.S.
employer.
RESEARCH AND DEVELOPMENT COSTS
As of September 30, 1996, the Company is not engaged in material research
and development activities and has not incurred related material R&D costs in
the prior two fiscal periods.
TRADEMARKS AND TRADE NAMES.
The Company owns the following trademarks: The Golf Players System, Players
Merit, Course Merit, and Company Logos. The Company also holds a number of
copyrights and licenses covering different versions and modules of The Golf
Players System.
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COMPLIANCE WITH ENVIRONMENTAL LAWS AND REGULATIONS
The Company does not believe that it is subject to any local, state and
federal statutory and regulatory requirements with respect to environmental
safety.
EMPLOYEES
During the period ending September 30, 1996, the Company had 7 full time
employees, none of these employees are represented by any Union or collective
bargaining group and there is no prior history of any strikes, slow-downs or
other labor disputes. The Company is highly dependent on several full time
employees. (See "Directors and Executive Officers of the Registrant -
Biographical Information").
INTERNATIONAL OPERATIONS
During fiscal 1996, the Company terminated certain business activities
outside the continental U.S., with the exception of the VAST joint venture
agreement with a South African technology company. (See the Company's Form 10-K
for fiscal 1995). At present, the Company conducts operations only in the
United States.
ITEM 2. PROPERTIES
During fiscal 1996, the Company leased office space located at 6890 South
Tuscon Way, Suite 202, in Englewood, Colorado. The lease was terminated in July
of 1996. In August and September, 1996, the Company established satellite
executive offices with acting Chairman, Mr. B. Mack DeVine in Tampa, Florida,
whose mailing address is: P.O. Box 620, Tampa, FL 33601, and with incoming
President, Mr. Gary W. Crews, in Tulsa, Oklahoma, whose mailing address is: 5320
E. 89th Place, Tulsa, OK, 74137. The mailing address and telephone number for
the Company's Colorado office are: 5082 East Hampden Avenue, Suite 234, Denver,
CO 80222, (303) 220-8686. No rent expense has been or is being charged to the
Company for the use of these facilities.
Total rent expense charged to operations for the years ended September 30,
1995 and 1996 was $70,495 and $17,552, respectively. The Company maintains no
operating leases as of September 30, 1996.
ITEM 3. LEGAL PROCEEDINGS
On September 30, 1996, the Company was dismissed as a defendant from
DISPLAY GROUP, LLC VS. AGTSPORTS, INC. AND AMERICAN CONSOLIDATED GROWTH
CORPORATION, Civil Action No. 96-CV-1560, Division 5 of Arapahoe County District
Court, in the State of Colorado. The suit sought alleged damages and repayment
of a specific collateral debenture in the amount of $2,175,000 related to former
business transactions between the Company and third parties in 1990.
As of the date of the filing of this report, the Company has not been the
subject of any material legal proceedings other than as described above.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During fiscal year ended September 30, 1996, there were no matters
submitted to a vote of the Stockholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Company's common stock, par value $.001 per share ("Common Stock") is
traded in the over-the-counter market, NASDAQ, (OTC-BB) under the stock trading
symbol "AGTP."
(1) BID
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QUARTER ENDING (2) HIGH (3) LOW
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September 30, 1996 $0.37 .25
June 30, 1996 0.37 .25
March 31, 1996 0.25 .18
December 31, 1995 0.44 .37
September 30, 1995 2.78 1.87
June 30, 1995 1.15 0.75
March 31, 1995 2.50 1.50
December 31, 1994 2.62 2.25
September 30, 1994 4.75 4.25(4)
(1) Such over-the-counter market quotations reflect inter-dealer prices,
without any retail markup, markdown, or commission and may not necessarily
represent actual transactions.
(2)(3) At the time of this report, the only activities in the Company's
trading Common stock, of which the Company is aware, is by Broker/Dealers known
as wholesalers. Consequently, there has been little or no retail trading
activity in the Company's securities during the fiscal year ended September 30,
1996. The quotes shown above were arrived at by averaging the bid and the ask
price in the marketplace during these periods and are provided for
informational purposes only. The Company believes these quotes to be estimates
and therefore should not be relied upon for investment purposes.
(4) In May of 1993, the Company reverse-split its common stock 10 for 1.
HOLDERS OF RECORD
As of September 30, 1996, there were approximately 976 shareholders of
record of Common Stock.
DIVIDENDS
For the fiscal years 1994, 1995 and 1996, no dividends were declared or
issued by the Company. Due to insufficient capital resources and earnings
generated from operations during these years, the
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Company has been limited in its ability to declare or issue dividends. There
are no contractual or written limitations concerning the Company's
declaration of dividends in the by-laws or records of the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
In the fiscal year ending September 30, 1996, revenues were $61,176 as
compared to the year ending September 30, 1995 of $625,170. Following a change
in management and the termination of former unprofitable business activities of
the Company, net loss decreased from $5,216,415 in fiscal 1995 to a net loss of
$3,615,804 in fiscal 1996. For the year ended September 30, 1996, operating
expenses were $2,754,762 and interest expenses totaled $100,830. In fiscal
1996, the Company experienced a net non-recurring loss of $75,772 resulting from
costs associated with the write down and liquidation of certain assets and the
internal restructuring of the Company. The Company incurred a loss on the
disposal of miscellaneous assets of $295,337. The Company experienced
significant legal, accounting and other related costs which are included in both
discontinued and continuing operations.
As of September 30, 1996, the major internal restructuring measures have
been successfully completed. These efforts included a change in the management
of the Company, the write down and liquidation of all non-performing assets, the
resolution of numerous outstanding business matters, the reduction or
elimination of significant portions of short term debt and the adoption of new
measures designed to increase working capital and revenues.
In the opinion of management, the Company has progressed significantly as
compared to the period ending September 30, 1995. The Company assisted in
providing new working capital and management support to alleviate certain debts
and to improve its operations.
Subsequent to fiscal year 1996, on January 11, 1997 the Company acquired
TEE TIMES OF AMERICA, INC., (TTA) of Dallas, Texas, and 100% of the assets of JM
GOLF, INC., of Denver, Colorado. The acquisitions are anticipated to help
increase revenues and profitability on a going-forward basis. AGT will utilize
the new tee times technology of TTA to increase market share and to complete
targeted acquisitions of local and regional tee times reservation businesses in
fiscal 1997. Although no assurance can be provided that acquisitions will be
made or AGT future sales will increase, in the opinion of management, the
Company's performance in fiscal 1997 will be favorably impacted by these
acquisitions and other improvements in the operation and business of the
Company.
During fiscal 1996, the Company has been able to successfully continue
operations, to reposition itself in the marketplace, to acquire new management
and consulting expertise and to improve its marketing strategies. All of these
efforts have been made for the purpose of increasing shareholders' equity and
profitability on a going forward basis.
The foregoing discussion contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered by the safe
harbors created thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives relating to
development of new business and predictions concerning the results of various
legal proceedings as discussed in Item 3. The forward-looking statements
included herein are based on current expectations that involve numerous risks
and uncertainties. Assumptions related to the foregoing involve judgements with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company.
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Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
innaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Form 10-KSB will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
In fiscal 1995, the Securities and Exchange Commission began a formal private
investigation regarding AGTsports, Inc. The SEC order authorizing the
investigation and subsequent investigative efforts seem to focus upon, among
other things, the accuracy of public statements made by or about the Company,
the price at which the stock of the Company has traded, and whether the stock
of the Company was sold in violation of the registration provisions of the
federal securities laws. However, no assurances can be given that the Company
has a complete or accurate understanding of the scope of the inquiry. As of
September 30, 1996, the investigation continues and the Company is
cooperating with the SEC. No prediction or assurances can be given regarding
the outcome of this inquiry.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalent's balance on September 30, 1996 was $65,806.
Current assets were $65,806 and current liabilities were $2,218,850. Current
ratios for the year ending September 30, 1996 were .03 to 1 as compared to
.01 to 1 the previous year. There was a significant change in working
capital during fiscal year 1996 due mainly to the change in the business
focus of the Company. As of September 30, 1996, the Company had a working
capital deficiency of $2,203,044 and a stockholders deficit of $2,050,294
which includes non-recurring losses of $75,772 sustained in fiscal 1995 due
to the write down and liquidation of certain non-performing assets of the
Company.
Assuming the business of the Company continues to experience positive cash
flow and to be profitable on a going forward basis and provided new sources of
outside financing are secured, Management believes the Company will be able to
successfully meet all of its current obligations. However, no assurances can be
given the Company will be successful in these endeavors.
MATERIAL COMMITMENTS FOR CAPITAL EXPENDITURES
As of September 30, 1996, the Company has no material commitments for
capital expenditures. The Company anticipates material capital expenditures in
fiscal 1997 with respect to acquisitions and the LPGA operations.
UNFAVORABLE TRENDS OR UNCERTAINTIES
The business of AGT may be subject to various unfavorable trends or
uncertainties such as increased competition in the marketplace, rapid
consolidation of the reservation tee times industry and/or a significant decline
the health of the U.S. economy. The Company may also be affected by a
significant rise or decline in interest rates and the U.S. trading markets. The
Company can make no determination as to the effect of these factors on
operations or the probability such factors will occur.
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SEASONAL ASPECTS BEARING UPON OPERATIONS
AGT is not subject to seasonal fluctuations in its business cycle which
have a material impact on operations. Concerning the scoring of LPGA events,
the Company is subject to a normal decrease in activities upon conclusion of the
Tour in November. However, in the opinion of management, this does not
represent a material impact on the total operations and TTRS activities of the
Company.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
This response is submitted as a separate section of this report (see
Consolidated Financial Statements - Pages F-1 to F-23).
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with the Company's independent accountants
on accounting or financial disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
As of September 30, 1996, the Executive Officers and Directors of the
Company, their ages and positions held in the Company were as follows:
NAME AGE POSITIONS HELD
- - ---- --- --------------
B. Mack DeVine 51 Acting Chairman and CEO
Gary W. Crews 42 Acting President*
Cory J. Coppage 33 Secretary
Joe E. Lee 62 Director
Louis F. Coppage 59 Director
* Mr. Crews formally accepted his nomination as President subsequent to fiscal
1996, on November 1, 1996. Directors of the Company serve for a term of three
years and will be formally nominated at the Company's annual meeting to be held
at a future date yet to be announced. If elected at the annual meeting, the
directors will serve until their successors are duly elected and qualified or
until their earlier resignation or removal.
BIOGRAPHICAL INFORMATION
B. MACK DEVINE - ACTING CHAIRMAN AND CEO
Mr. Devine, 51, was nominated as acting Chairman and Chief Executive Officer of
the Company at a special meeting of the Board of Directors held on May 13, 1996.
Pursuant to the terms of a five year
12
<PAGE>
services agreement authorized by the Board in August of 1996, Mr. DeVine will
assume the full time duties of Chairman and Chief Executive Officer of the
Company effective January 1, 1997. Mr. DeVine has more than twenty years
experience in both the public and private sectors as chief executive officer
and/or president of operating companies listed on NASDAQ, AMEX and NYSE. He
is an experienced turnaround specialist for companies facing financial
distress or bankruptcy and has successfully directed numerous Chapter 11
reorganizations. Since 1989 he has been the CEO of DEVINE & ASSOCIATES,
INC., a company providing management consulting services to clients in the
Southeast United States. From 1988 to 1989, he was CEO, President and
Director of DEVCO PETROLEUM COMPANY, INC., where he directed operations of
ten convenience store/petroleum outlets with annual revenues of over
$10,000,000 and approximately fifty employees. From 1982 to 1988, Mr. DeVine
was Chairman, CEO and President of KEY ENERGY ENTERPRISES, INC., an
$80,000,000 convenience store company with 800 employees and operations
located in the Southeast United States. He was also President and Director
of AMERICAN AGRONOMICS CORPORATION from 1976 to 1982, where he was
responsible for the turnaround and restructuring of a $200,000,000 vertically
integrated citrus company. Prior to 1976, Mr. DeVine held positions as Chief
Financial Officer of companies such as GREAT SOUTHERN EQUIPMENT COMPANY,
AUTOMATIC MERCHANDISING, INC., and BAY-CON INDUSTRIES, INC. He was first
lieutenant in the U.S. Army and is a private pilot.
GARY W. CREWS - PRESIDENT
Mr. Crews, 42, was nominated as incoming President of the Company in August of
1996 and formally accepted the position subsequent to fiscal 1996 on November 1,
1996. From 1995 to present, he has been President of CONSULTING TECHNOLOGIES,
INC. (CTI), a software consulting business providing services to clients
including two of the largest golf course management companies in the United
States: AMERICAN GOLF CORPORATION and CLUB CORPORATION OF AMERICA. CTI also
provided valuable consulting services to AGTSPORTS, INC. during fiscal 1996.
Mr. Crews has extensive sales and marketing experience and has been an active
participant in the computer software development industry since 1985. From 1992
to 1995, he was President and Chief Operating Officer of XETA RESERVATION
SYSTEMS, the largest automated tee times reservation company in the U.S. From
1990 to 1992, Mr. Crews was a Director of UNITED VIDEO, INC., an FCC common
carrier involved in the sales, marketing and satellite distribution of audio and
video signals to cable television systems throughout North America. He was a
Director of CARAPACE, INC., a medical products division of LOHMANN COMPANY of
West Germany from 1985 to 1990. Mr. Crews holds a law degree from the
UNIVERSITY OF TULSA, and a bachelors degree in business administration from
AUBURN UNIVERSITY.
CORY J. COPPAGE - SECRETARY AND TREASURER
Mr. Coppage, 33, was nominated as acting Secretary of the Company at a special
meeting of the Board of Directors held on August 29, 1996. He is Chief
Operating Officer, Secretary and a member of the Board of Directors of AMERICAN
CONSOLIDATED GROWTH CORPORATION. Mr. Coppage has over seven years of business
management experience including two years of administration service with AMGC.
He is a graduate of REGIS UNIVERSITY, where he earned a Bachelor of Science
Degree in Business Administration. From 1989 to 1994, Mr. Coppage gained
valuable management experience in the liability insurance field as a licensed
property & casualty agent and field manager for LIABILITY INSURANCE OPERATIONS
NETWORK, INC., and W.J. PLEMONS INSURANCE AGENCY of Atlanta, GA, prior to
joining AMERICAN CONSOLIDATED GROWTH CORPORATION as assistant Secretary of the
Corporation and aide to the Chairman in 1994. In 1995, Mr. Coppage became the
Secretary of AMGC and received an appointment to the AMGC Board of Directors.
He has studied corporate finance and marketing and has successfully completed
educational programs in the areas of SEC reporting of public companies and
shareholder and investor relations. Mr. Coppage assists in the development,
publishing and distribution of AGT informational materials to the U.S.
investment community.
13
<PAGE>
JOE LEE - DIRECTOR
Mr. Lee, 58, accepted an appointment as an outside member of the Board of
Directors of the Company on May 13, 1996. He is Chairman of the Board of
Directors of DENVER BUSINESS COLLEGE, INC., General Manager of UNIVERSAL
MANAGEMENT, INC., President of SCHOOL MANAGEMENT, INC. and the General Partner
of THE EDUCATIONAL PLAZA, a 110,000 square foot private educational facility
located in Denver, Colorado. Mr. Lee has expertise in the administration and
management of independent colleges and schools, with a special emphasis on
financial and staff personnel management. He is a past president and past
commissioner of the ASSOCIATION OF INDEPENDENT COLLEGES AND SCHOOLS. From 1973
to 1982, Mr. Lee owned and operated PARKS COLLEGE, INC., formerly PARKS SCHOOL
OF BUSINESS, in Denver, Colorado. From 1984 to 1986 he was Chairman of TREND
SYSTEMS, INC., where he supervised the operation of nine schools and three
branch campuses in the states of Washington and Oregon. Mr. Lee's present
duties as Chairman of DENVER BUSINESS COLLEGE, INC. include overall
responsibility for operation of the main campus and three branch campuses. Mr.
Lee is also a Director of PRIDES BUSINESS COLLEGE in Adelaide, South Australia.
LOUIS F. COPPAGE - DIRECTOR
Mr. Coppage, 59, was nominated as an outside member of the Board of
Directors of the Company on May 13, 1996. He has over twenty years of executive
and managerial experience with both domestic and international operations
involving finance and business development for both private and public
corporations. From 1993 to present, he has held advisory positions and has
provided investment banking consulting services for the Company and its former
affiliate, AMERICAN CONSOLIDATED GROWTH CORPORATION, where he assisted in the
turnaround and restructuring of both companies. From 1986 to 1993, Mr. Coppage
served as financial consultant for numerous clients in real estate, energy,
insurance management and investment holdings-related businesses. From 1978 to
1984, Mr. Coppage was founder and a major shareholder of AMERICAN ENERGY
INVESTMENTS, INC., of Denver, Colorado. From 1973 to 1979 he was president of
FORESEE, LTD., a an energy development company in Denver, Colorado. From 1969
to 1973 he was president of COPPAGE & ASSOCIATES, a financial planning company.
Since 1979, he has provided advisory services for corporate clients with an
emphasis on the capital formation process. Mr. Coppage began his career in
business as an account executive for CONNETICUT GENERAL LIFE INSURANCE COMPANY
in 1964, where he earned outstanding salesman honors and was featured in TIME,
NEWSWEEK and U.S. WORLD REPORT MAGAZINES. He was a founding member of the
insurance and financial planning groups, TOP OF THE TABLE and THE FORUM. Since
1993, Mr. Coppage has served as an investment banking consultant and a special
advisor to the AGT Board of Directors.
None of the above directors have held any equity stake in any business that
has declared bankruptcy; nor have been convicted of any criminal offense other
than minor traffic violations, nor have had any judgements entered against them
which would restrict or preclude the director from being involved in securities
transactions; nor have any record of violations of securities or commodities
laws.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file initial reports of ownership and
reports of changes in ownership with the Securities Exchange Commission.
Executive officers and directors are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and written
representations from the Company's executive officers and directors, as of the
date of this report, the Company is unable to make a determination as to whether
or not any officers or directors failed to file on a timely basis any reports
relating to transactions involving common stock of the Company owned by them.
The Company has implemented internal procedures for the purpose of determining
whether officers or directors have failed to file timely reports relating to
14
<PAGE>
transactions involving common stock of the Company, and, if necessary, to file
any such reports in the appropriate time and manner.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the salary, bonus and other compensation
approved by Board of Directors of the Company for the President and the
Company's four other most highly compensated executive officers (the "named
executive officers").
<TABLE>
SUMMARY COMPENSATION TABLE
NAME AND POSITION 1996 ANNUAL COMPENSATION LONG TERM COMPENSATION
SALARY STOCK AWARDS SECURITIES UNDERLYING OPTIONS & BENEFIT PLANS
------ ------------ ----------------------------------------------
<S> <C> <C> <C>
B. Mack DeVine $25,000 (1) 250,000 -0-
ACTING CHAIRMAN AND CEO
(MAY, 1996 TO PRESENT)
T. Alan Walls $82,187 - 57,143 (2)
PRESIDENT
(MAY, 1995 TO MAY, 1996)
Robert Wetzel $18,979 - 24,969
SECRETARY AND DIRECTOR
(MAY, 1991 TO MAY, 1996)
Tom Eickenberry $25,384 - 5,770
ASSISTANT TO THE PRESIDENT
(MAY, 1995 TO MAY 1996)
</TABLE>
(1) Indicates compensation paid to Mr. DeVine in fiscal 1996 for consulting
services rendered from May of 1996 to August of 1996.
(2) Indicates compensation paid for prior year accrued salary in fiscal 1995.
OTHER COMPENSATION
Additional compensation paid to officers of the Company during fiscal
1996 included salary and expenses of $18,979 to Robert Wetzel, former
Secretary. The compensation was paid on September 17, 1996 as part of a
settlement agreement which included accrued salary, accrued director fees and
certain debt to equity conversions totaling a combined 491,500 restricted
common AGTP shares. The shares were issued at a value of $.14 per share, the
fair market value on that date after a discount of 45% due to the restricted
nature of the stock. The Company issued Mr. Wetzel 24,969 common AGTP shares
pursuant to the former employee benefit plans of the Company and the S-8
registration of February 1, 1996. On March 6, 1996, the Company issued 57,143
restricted common AGTP shares and 52,078 freetrading common AGTP shares to
Mr. T. Alan Walls, former President. The shares were issued at a value of
$.35 per share, including the adjustment restricted discount of 45%. Mr.
Greg Jablonski, former Chairman and Chief Executive Officer, received
compensation as a consultant to the Company of $34,667 for the period from
September, 1995 to May of 1996. In addition, the Company issued Mr.
Jablonski 440,392 common AGTP shares pursuant to the former employee benefit
plans of the Company from fiscal years 1994 and 1995. On March 6, 1996, the
Company issued 96,000 restricted shares for consulting services to former
15
<PAGE>
President Michael Tanner, together with 142,838 common AGTP shares issued on
February 1, 1996 pursuant to the former employee benefit plans of the
Company.
On August 27, 1996 the Company issued 250,000 shares to DeVine &
Associates as additional consideration for Mr. DeVine's consulting services
rendered from May 1996 to August, 1996. The fair market value of the stock as
determined by the Board on that date was $0.19 per share. On August 27, 1996,
in lieu of cash payment, Mr. Gary Crews accepted 36,364 restricted common shares
for consulting services rendered to the Company in fiscal 1996. The fair market
value of the stock as determined by the Board on that date was $.19 per share.
Subsequent to fiscal year ended 1996, Mr. Crews joined the Company as President
and Director on November 1, 1996, at which time he received a stock grant of
75,000 restricted common AGTP shares. The fair market value of the stock as
determined by the Board on that date was $.10 per share. On August 29, 1996,
the Company authorized a stock grant of 50,000 restricted common AGTP shares to
Mr. Cory J. Coppage for joining the Company as Secretary. The fair market value
of the stock as determined by the Board on the date was $.15 per share. On May
13, 1996, the Company entered into agreements with two outside directors: Mr.
Lou Coppage and Mr. Joe Lee. Pursuant to the agreements, on September 6, 1996,
the Company issued 100,000 shares of restricted common AGTP stock to Mr. Coppage
and Mr. Lee at a value of $.15 per share, the fair market value of the stock as
determined by the Board on that date. All restricted stock issuances included a
45% discount off the fair market value due to the restricted nature of the
stock.
During fiscal 1996, the Company provided group medical insurance to AGT
officers and employees under the Company's employee health plan. The plan,
which is offered through Prudential, provides life, medical, dental and
disability coverage at an average cost of approximately $245 monthly per
individual. The employees were covered by the Company under AGT's health plan
during their respective terms of service. All premiums were paid by AGT. The
Company's health plan was terminated in fiscal 1996 following a change in
management of the Company.
The Company made no contributions to any Defined Contribution Benefit Plans
on behalf of its employees in fiscal 1996, other than provision of insurance
coverages as described above.
MEETINGS OF THE BOARD OF DIRECTORS
On May 13, 1996, the Board of Directors nominated Mr. Lou Coppage and Mr.
Joe Lee to serve as independent outside members of the AGT Board of Directors.
During fiscal 1996, the AGT Board convened on four occasions. There were no
incumbent directors who attended less than 75% of the meetings of the Board and
Committees thereof on which such director served during that period.
DIRECTOR AGREEMENTS AND COMPENSATION
On May 13, 1996, the Company executed outside director agreements with Mr.
Coppage and Mr. Lee. The agreements provide for a three year term of service
and compensation in the form of a one time restricted common stock award of
100,000 shares and $1,500 for attending each of the four quarterly scheduled
meetings of the Board, plus expenses. Compensation for meeting attendance is
payable at the Company's option in cash or in equivalent AGTP restricted common
shares set at the market price on the day of issue. Directors who are U.S.
residents are entitled to participate in the Company's health and welfare
benefit programs. Employee directors are not entitled to receive compensation
for Board service. During fiscal 1996, no compensation was paid or distributed
to any directors of the Company other than the stock awards described above.
16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP
The following table sets forth certain information regarding the beneficial
and economic ownership of AGTP common stock as of September 30, 1996 by: (1)
each stockholder known by the Company to be the beneficial owner of more than 5%
of the outstanding Common Stock; (2) each director and nominee for director; (3)
all directors and executive officers as a group. The beneficial ownership
reflected in the following table is calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934 (the "Exchange Act"). Shares issuable on
exercise of options exercisable within 60 days of September 30, 1996 are deemed
to be outstanding for the purpose of computing the percentage of ownership of
persons beneficially owning such options, but have not been deemed to be
outstanding for the purpose of computing the percentage ownership of any other
person. As of September 30, 1996, the total outstanding shares of the Company's
common stock were 23,950,596.
NUMBER OF PERCENT
NAME AND ADDRESS SHARES HELD OF CLASS
- - ---------------- ----------- --------
B. Mack DeVine, ACTING CHAIRMAN AND CEO 250,000 1.0%
P.O. Box 620
Tampa, FL 33601
Gary Crews, ACTING PRESIDENT 111,364 (a) .4%
5320 E. 89th Place
Tulsa, OK 74137
Cory J. Coppage, SECRETARY 50,000 .2%
7255 E. Quincy Ave, #550
Denver, CO 80237
Joe Lee, DIRECTOR 100,000 .1%
4250 S. Olive Street, #216
Denver, CO 80237
Lou Coppage, DIRECTOR 100,000 .1%
283 Kimbrough
Memphis, TN 38103
Global Links Trading, Ltd. 7,850,000 (b) 32.8%
P.O. Box 301, Queens House
Don Road, St. Helier, Jersey, JE4 8UG
Channel Islands
Officers and Directors as a Group
(five persons) 611,364 (c) 1.8% (d)
(a) Mr. Crews accepted the position of President of the Company on November 1,
1996. The shares indicated include 75,000 common shares issued subsequent to
September 30, 1996, in addition to shares received for consulting services
provided to the Company during fiscal 1996.
(b) Represents the Company's largest shareholder and the joint venture project
with AMGC, a former affiliate of the Company.
(c) and (d) Includes all shares depicted except for those shares held by
Global Links Trading, Limited, who is neither an officer nor director.
17
<PAGE>
All ownership is beneficial and of record except as specifically indicated
otherwise. Beneficial owners listed above have sole voting and investment power
with respect to the shares shown unless otherwise indicated. Economic interest
is calculated by including shares directly owned and, in the case of individuals
and all directors and executive officers as a group, shares such individuals or
group are entitled to receive upon exercise of outstanding options exercisable
within 60 days of September 30, 1996. Beneficial ownership is calculated in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1996, the Company issued a one year promissory note to Global
Links Trading, Ltd., for $172,500 at ten percent interest payable annually. The
note expires on June 30, 1997 and contains a conversion provision to common
stock at a value of $.125 per share. (See Related Party Transactions in Notes
to Consolidated Financial Statements - Note 5".)
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (a)(2) List of Financial Statements and Schedules
(a)(3) List of Exhibits (in accordance with Item 601 of Regulation S-B).
Exhibit Number Description of Exhibit
3.1 Articles of Incorporation of the Company*
3.2 Bylaws of the Company**
3.3 Financial Data Schedule
* (Incorporated by reference to the Company's Form S-18 Registration Statement
of American Merger Control, Inc. filed with the Commission in 1986 and to the
Form 10-K for the fiscal year ended September 30, 1992 filed with the Commission
on or about March 10, 1993.)
** Previously filed under cover of Form 10-SB, filed June 15, 1993, SEC File No.
0-21914.
18
<PAGE>
AGTSPORTS, INC.
(A Development Stage Company)
Consolidated Financial Statements
For the Year Ended
September 30, 1996
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Index to Consolidated Financial Statements
PAGE
----
Independent Auditors' Reports F-1
Financial Statements:
Consolidated Balance Sheet:
September 30, 1996 F-3
Consolidated Statements of Operations:
Years Ended September 30, 1996 and 1995 F-4 to F-5
Consolidated Statements of Changes in Shareholders'
Equity: Years Ended September 30, 1996 and 1995 F-6 to F-10
Consolidated Statements of Cash Flows:
Years Ended September 30, 1996 and 1995 F-11 to F-12
Notes to the Consolidated Financial Statements:
Years Ended September 30, 1996 and 1995 F-13 to F-26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(The auditor's report for the year ended September 30, 1996 is not yet
available. Management has prepared the accompanying unaudited financial
statements in accordance with generally accepted accounting principles and
believes they include all necessary disclosures and footnotes as required for
complete financial statements. In the opinion of Management, all adjustments
considered necessary for a fair presentation have been included.)
F-1
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Balance Sheet
September 30, 1996
1996
------------
ASSETS
Current:
Cash and cash equivalents $ 65,806
------------
Total current assets 65,806
Fixed assets:
Property, plant and equipment (Note 3) 131,380
Less: accumulated depreciation (114,176)
------------
Total fixed assets 17,204
Other assets:
Prepaids and other assets 16,196
Intangibles - net (Note 4) --
Investment in joint venture 119,350
------------
Total other assets 135,546
------------
Total assets $ 218,556
------------
------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 179,914
Accounts payable - other 78,063
Long term debt - current portion (Note 5) 1,373,846
Accrued expenses (Note 9) 637,027
------------
Total current liabilities 2,268,850
Shareholders' Equity:
Preferred stock, $4.00 par value; 50,000,000
shares authorized; -0- shares issued and
outstanding as of September 30, 1996 --
Common stock, $.001 par value; 50,000,000
shares authorized; 10,530,972 shares issued
and 23,930,596 shares outstanding as of
September 30, 1996 23,931
Treasury stock (16,720)
Additional paid-in capital 20,859,210
Cumulative translation adjustment (16,823)
Deficit accumulated during the development stage (22,899,892)
------------
Total shareholder's equity (2,050,294)
------------
Total liabilities and shareholders' equity $ 218,556
------------
------------
See accompanying notes to consolidated financial statements
F-3
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
JANUARY 6, 1986
YEARS ENDED SEPTEMBER 30, INCEPTION THROUGH
-------------------------- SEPTEMBER 30,
1996 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Revenue
Territory sales $ $ -- $ 1,612,009
Revenue 61,694 625,170 2,229,471
----------- ----------- ------------
61,694 625,170 3,841,480
Expenses
Cost of purchased goods for resale 672 162,378
Salaries and wages 349,948 477,011 2,329,902
Professional services 883,607 998,571 3,489,861
Directors fees 184,041 503,200 687,241
General and administrative 335,920 974,540 2,985,068
Depreciation and amortization 471,716 192,848 2,476,551
Advertising 1,151 62,439 305,880
Contract services 351,479 1,024,026 4,985,397
Cost of Unsuccessful offering 56,860 -- 56,860
Travel and entertainment 120,040 124,527 818,733
Territory reacquisition -- 1,465,075 1,465,075
----------- ----------- ------------
Total expenses 2,754,762 5,822,909 19,762,946
----------- ----------- ------------
Operating income (loss) (2,693,068) (5,197,739) (15,921,466)
Other income (expenses)
Interest income 740 15 1,081
Rent income -- 983 14,992
Interest expense (100,830) (73,515) (516,780)
Gain (loss) on equity securities -- 243,465 (8,652,613)
Gain (loss) on disposal of assets (354,324) (3,856) 2,925,638
Provision for loan loss -- (222,562) (528,342)
Equity in (loss) of joint venture (748,650) (748,650)
Other income 1,776 10,618 84,565
----------- ----------- ------------
Total other income (expense) (1,201,288) (44,852) (7,420,109)
----------- ----------- ------------
Net income (loss) before extraordinary
items and provision for income taxes (3,894,356) (5,242,591) (23,341,575)
Provision for income taxes -- -- (1,793,033)
----------- ----------- ------------
Net income (loss) before
extraordinary items (3,894,356) (5,242,591) (25,134,608)
Extraordinary items:
Income tax benefit realized -- -- 1,793,033
Debt forgiveness 278,552 26,176 441,683
----------- ----------- ------------
Net income (loss) $(3,615,804) $(5,216,415) $(22,899,892)
----------- ----------- ------------
(Continued)
</TABLE>
F-4
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Page 2)
<TABLE>
JANUARY 6, 1986
YEARS ENDED SEPTEMBER 30, INCEPTION THROUGH
-------------------------- SEPTEMBER 30,
1996 1995 1996
----------- ----------- ------------
<S> <C> <C> <C>
Net income (loss) per common share
before extraordinary items $ (.20) $ (.71) $ (6.12)
Extraordinary items per common share .02 .01 .54
----------- ----------- ------------
Net income (loss) per common share $ (.18) $ (.70) $ (5.58)
----------- ----------- ------------
Weighted average shares of
common stock outstanding 19,616,641 7,432,297 4,106,286
----------- ----------- ------------
----------- ----------- ------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholder's Equity
<TABLE>
PREFERRED STOCK COMMON STOCK MEMORANDUM
------------------ ------------------ ADDITIONAL TOTAL
NUMBER OF NUMBER OF PAID-IN TREASURY ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK (DEFICIT) EQUITY
--------- ------ --------- ------ ---------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance: January 6, 1986 -- $ -- -- $ -- $ -- $ -- $ -- $ --
Balance: January 21, 1986 -- -- 30,000 30 5,970 -- -- 6,000
Issued common stock -- -- 90,000 90 149,910 -- -- 150,000
Offering costs -- -- -- -- (7,257) -- -- (7,257)
Net loss -- -- -- -- -- -- (5,247) (5,247)
--------- ------ ------- ---- ---------- -------- ----------- -----------
Balance: September 30, 1986 -- -- 120,000 120 148,623 -- (5,247) 143,496
Net loss -- -- -- -- -- -- (44,583) (44,583)
--------- ------ ------- ---- ---------- -------- ----------- -----------
Balance: September 30, 1987 -- -- 120,000 120 148,623 -- (49,830) 98,913
Net loss -- -- -- -- -- -- (98,913) (98,913)
--------- ------ ------- ---- ---------- -------- ----------- -----------
Balance: September 30, 1988 -- -- 120,000 120 148,623 -- (148,743) --
Stock split: 3 to 1 -- -- -- -- -- -- -- --
Issued common stock to acquire
subsidiaries -- -- 99,943 100 5,534,840 -- (8,824) 5,526,116
Shares purchased by subsidiary -- -- -- -- -- (25,112) -- (25,112)
--------- ------ ------- ---- ---------- -------- ----------- -----------
Balance: September 30, 1989 -- -- 219,943 220 5,683,463 (25,112) (157,567) 5,501,004
Reverse stock split: 15 to 1 -- -- -- -- -- -- -- --
Issued common stock for services -- -- 14,801 15 167,231 -- -- 167,246
Issued common stock pursuant to
debenture agreement -- -- 60,000 60 649,940 -- -- 650,000
Issued common stock for investment
in joint venture -- -- 34,500 35 381,815 -- -- 381,850
Issued common stock for
professional services -- -- 60,000 60 649,940 -- -- 650,000
Issued common stock to settle
litigation -- -- 4,055 3 44,735 -- -- 44,738
Treasury stock activity -- -- -- -- -- 25,112 -- 25,112
Stock split: 3 to 1 -- -- -- -- -- -- -- --
Net loss -- -- -- -- -- -- (5,783,853) (5,783,853)
--------- ------ ------- ---- ---------- -------- ----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
F-6
<PAGE>
<TABLE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholder's Equity
(Page 2)
Preferred Stock Common Stock
---------------------- ------------------- Additional
Number of Number of Paid-In Treasury Accumulated
Shares Amount Shares Amount Capital Stock (Deficit)
--------- ---------- --------- ------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance: September 30, 1990 -- $ -- 393,299 $ 393 $ 7,577,124 -- $(5,941,420)
Issued common stock to settle
litigation -- -- 3,000 3 39,147 -- --
Issued common stock to acquire
intangible assets -- -- 1,585,194 1,585 2,376,206 -- --
Distribution declared pursuant to
January 28, 1991 contract -- -- -- -- (6,142,907) -- --
Net income -- -- -- -- -- -- 4,545,160
--------- ---------- --------- ------ ----------- ---------- -----------
Balance September 30, 1991 -- -- 1,981,493 1,981 3,849,570 -- (1,396,260)
Issued common stock -- -- 200,000 200 199,800 -- --
Issued common stock for services -- -- 447,250 447 590,303 -- --
Issued common stock to acquire
intangible assets -- -- 330,000 330 329,670 -- --
Issued common stock through
private placement -- -- 42,750 43 85,457 -- --
Net income -- -- -- -- -- -- (1,267,987)
--------- ---------- --------- ------ ----------- ---------- -----------
Balance: September 30, 1992 -- -- 3,001,493 3,001 5,054,800 -- (2,664,247)
Issued common stock -- -- 263,000 263 516,737 -- --
Issued common stock for services -- -- 166,916 167 277,097 -- --
Issued common stock to settle
litigation -- -- 76,379 77 106,836 -- --
Reverse stock split: 13 to 1 -- -- -- -- -- -- --
Issued common stock to former
BBBC stockholders -- -- 161,401 161 (161) -- --
Issued common stock to acquire
assets -- -- 200,000 200 199,800 -- --
Issued preferred stock to treasury 1,000,000 4,000,000 -- -- -- (4,000,000) --
Cancellation of distribution
declared -- -- -- -- 6,142,907 -- --
Net income -- -- -- -- -- -- (7,620,061)
--------- ---------- --------- ------ ----------- ---------- -----------
Memorandum
Total
Shareholders'
Equity
-------------
<S> <C>
Balance: September 30, 1990 $ 1,636,097
Issued common stock to settle
litigation 39,150
Issued common stock to acquire
intangible assets 2,377,791
Distribution declared pursuant to
January 28, 1991 contract (6,142,907)
Net income 4,545,160
-------------
Balance September 30, 1991 2,455,291
Issued common stock 200,000
Issued common stock for services 590,750
Issued common stock to acquire
intangible assets 330,000
Issued common stock through
private placement 85,500
Net income (1,267,987)
-------------
Balance: September 30, 1992 2,393,554
Issued common stock 517,000
Issued common stock for services 277,264
Issued common stock to settle
litigation 106,913
Reverse stock split: 13 to 1 --
Issued common stock to former
BBBC stockholders --
Issued common stock to acquire
assets 200,000
Issued preferred stock to treasury --
Cancellation of distribution
declared 6,142,907
Net income (7,620,061)
-------------
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
F-7
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholder's Equity
(Page 3)
<TABLE>
PREFERRED STOCK COMMON STOCK MEMORANDUM
---------------------- ------------------ ADDITIONAL TOTAL
NUMBER OF NUMBER OF PAID-IN TREASURY ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK (DEFICIT) EQUITY
--------- ----------- --------- ------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance: September 30, 1993 1,000,000 $ 4,000,000 3,869,189 $ 3,869 $ 12,298,016 $(4,000,000) $(10,284,308) $ 2,017,577
Issued common stock -- -- 80,871 81 153,620 -- -- 153,701
Issued common stock for
services -- -- 907,237 907 1,901,355 -- -- 1,902,262
Issued common stock to
settle obligations -- -- 305,827 306 522,139 -- -- 522,445
Issued common stock to
acquire software -- -- 33,000 33 58,955 -- -- 58,988
activity -- -- -- -- -- (6,860) -- (6,860)
Preferred stock split
10 to 1 -- -- -- -- -- -- -- --
Net income -- -- -- -- -- -- (3,783,365) (3,783,365)
--------- ----------- --------- ------- ---------- ----------- ------------ -----------
Balance: September 30, 1994 1,000,000 4,000,000 5,196,124 5,196 14,934,085 (4,006,860) (14,067,673) 864,748
Issued common stock -- -- 1,122,200 1,122 596,078 -- -- 597,200
Issued common stock for
services -- -- 1,539,875 1,540 -- -- -- 1,397,942
Issued common stock for
debt settlement with
employees -- -- 2,186,023 2,186 1,396,402 -- -- 1,169,508
Issued common stock for
debt and obligation
settlement -- -- 310,750 311 168,060 -- -- 168,371
Issued stock for territory
acquisition -- -- 225,000 225 129,850 -- -- 130,075
Issued common stock for
VAST joint venture -- -- 700,000 700 867,300 -- -- 868,000
Return of preferred stock
per AMIC settlement (1,000,000) (4,000,000) -- -- -- -- -- (4,000,000)
Treasury stock activity -- -- (749,000) (749) (3,999,251) 3,990,140 -- (9,860)
Net loss -- -- -- -- -- -- (5,216,415) (5,216,415)
--------- ----------- --------- ------- ---------- ----------- ------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
<TABLE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholder's Equity
(Page 4)
PREFERRED STOCK COMMON STOCK MEMORANDUM
------------------ ------------------ ADDITIONAL TOTAL
NUMBER OF NUMBER OF PAID-IN TREASURY ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK (DEFICIT) EQUITY
--------- ------- ---------- ------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance: September 30, 1995 -- $ -- 10,530,972 $10,531 $15,259,846 $(16,720) $(19,284,088) $(4,030,431)
Issued common stock 2,599,855 2,600 609,650 612,250
Issued common stock for services 1,824,102 1,824 963,285 965,109
Issued common stock for debt
obligation settlement 7,954,966 7,955 3,283,924 3,291,879
Issued stock for debt settlement
with employees 1,020,701 1,021 742,505 743,526
Net loss (3,615,804) (3,615,804)
--- ----- ---------- ------- ----------- -------- ------------ -----------
Balance: September 30, 1996 -- $ -- 23,930,596 $23,931 $20,859,210 $(16,720) $(22,899,892) $(2,050,294)
--- ----- ---------- ------- ----------- -------- ------------ -----------
--- ----- ---------- ------- ----------- -------- ------------ -----------
</TABLE>
F-9
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity
(Page 4)
<TABLE>
MEMORANDUM
TOTAL UNREALIZED CUMULATIVE TOTAL
SHAREHOLDERS' HOLDING TRANSLATION SHAREHOLDERS'
EQUITY GAIN ADJUSTMENT EQUITY
------------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Balance: January 6, 1986 $ -- $ -- $ -- $ --
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1986 143,496 -- -- 143,496
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1987 98,913 -- -- 98,913
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1988 -- -- -- --
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1989 5,501,004 -- -- 5,501,004
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1990 1,636,097 -- -- 1,636,097
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1991 2,455,291 -- -- 2,455,291
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1992 2,393,554 -- -- 2,393,554
----------- --------- -------- -----------
----------- --------- -------- -----------
Balance: September 30, 1993 2,017,577 -- -- 2,017,577
----------- --------- -------- -----------
----------- --------- -------- -----------
Memorandum total shareholders'
equity 864,748 -- -- 864,748
Unrealized holding gain -- 1,660,517 -- 1,660,517
Unrealized loss - foreign
currency translation -- -- (8,893) (8,893)
----------- --------- -------- -----------
Balance: September 30, 1994 864,748 1,660,517 (8,893) 2,516,372
----------- --------- -------- -----------
----------- --------- -------- -----------
Memorandum total shareholders'
equity (4,030,431) -- -- (4,030,431)
Unrealized loss - foreign
currency translation -- -- (11,191) (11,191)
----------- --------- -------- -----------
Balance: September 30, 1995 $(4,030,431) $ -- $(11,191) $(4,041,622)
----------- --------- -------- -----------
----------- --------- -------- -----------
Memorandum total shareholders'
equity (2,033,471) -- -- (2,033,471)
Unrealized loss - foreign
currency translation -- -- (16,823) (16,823)
----------- --------- -------- -----------
Balance: September 30, 1996 $(2,033,471) $ -- $(16,823) $(2,050,294)
----------- --------- -------- -----------
----------- --------- -------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
PERIOD FROM
YEARS ENDED SEPTEMBER 30, JANUARY 6, 1986
--------------------------- (INCEPTION) TO
1996 1995 SEPT. 30, 1996
----------- ------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $(3,615,804) $(5,216,415) $(20,899,892)
Adjustments to reconcile net income
(Loss) to net cash provided by
operating activities
Depreciation and amortization 471,716 192,848 2,476,551
(Gain) loss on disposal of assets 354,324 3,856 (2,676,183)
Loss on sale of investments -- -- 35,072
Loss on equity securities -- (243,465) 4,973,015
Write-down of investments to market -- -- 3,567,629
Debt forgiven -- (26,176) (163,131)
Territory management -- -- 205,000
Territory sales/reacquisition -- 1,465,075 482,586
Equity in loss of joint venture 748,650 748,650
Common stock issued for software -- -- 58,988
Common stock issued for services 965,109 1,397,942 5,925,974
Common stock issued for obligation 848,056 1,337,879 2,744,293
(Increase) decrease in accounts
receivable -- -- (335,000)
(Increase) decrease in inventory -- 40,812 --
(Increase) decrease in other assets 22,234 263,994 58,859
Increase (decrease) in accounts payable (244,230) (299,709) 130,695
Increase (decrease) in accrued expenses (270,936) 554,883 636,571
----------- ----------- ------------
Net cash used by operating activities (720,881) (528,476) (4,022,324)
Cash flows from investing activities:
Return of capital - limited partnership -- 500,000
Receipts from notes receivable -- 80,772
Loans made -- (237,328)
Purchase of assets (12,687) (42,838) (359,774)
Purchase of stock in affiliate -- (10,000)
Proceeds from sale of investments -- 277,739
Proceeds from insurance settlement 5,720 -- 17,749
----------- ----------- ------------
Total cash flows from investing activities (6,967) (42,838) 276,125
Cash flows from financing activities:
Proceeds from issuance of capital stock 612,250 597,200 2,314,394
Payments on capital lease financing -- (10,000) (20,976)
Principal payments on notes payable (8,000) (14,000) 15,500
Advances from affiliates -- -- 1,421,542
(Continued)
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Page 2)
<TABLE>
PERIOD FROM
YEARS ENDED SEPTEMBER 30, JANUARY 6, 1986
--------------------------- (INCEPTION) TO
1996 1995 SEPT. 30, 1996
----------- ------------ ---------------
<S> <C> <C> <C>
Payments to affiliates $ -- $ -- $ (509,317)
Advances from line of credit -- 7,829 158,829
Advances from notes payable 172,500 6,000 439,000
----------- ----------- -----------
Total cash flows from financing activities 776,750 587,029 3,818,972
----------- ----------- -----------
Net increase in cash 48,902 15,715 65,806
Cash at beginning of year 16,904 1,189 --
----------- ----------- -----------
Cash at end of year $ 65,806 $ 16,904 $ 65,806
----------- ----------- -----------
----------- ----------- -----------
Financing activities not affecting cash:
$ 152,000
Marketable securities received as
contribution to capital $ $ -- $ (152,000)
Marketable securities contributed
to capital -- $ 5,314,678
Additional paid in capital received -- $(5,314,678)
Additional paid in capital contributed -- $ 1,611,036
Transfer assets to limited partnership and
termination pursuant to agreement $(1,611,036)
Issuance of common stock in exchange
for investment in joint venture $ 868,000 $ 868,000
Issuance of common stock in exchange for
liability to issue common stock $3,187,349 $ 3,187,349
Supplemental information:
Interest paid $ 14,000 $ 11,239
Taxes paid $ 12,740
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS
HISTORY - AGTsports, Inc. (the "Company") was incorporated under the laws of
the state of Colorado on January 6, 1986 as American Merger Control, Inc.,
and had no operations through April 30, 1989. In 1990 the Company changed
its name to Ultratech Knowledge Systems, Inc., and in 1993 the Company
changed its name again to AGTsports, Inc. (AGT). The Company has selected
September 30th as its accounting and fiscal year end. During the fiscal year
ended September 30, 1991, the Company began to pursue its current principal
activity of providing technological and software services to golf and related
industries.
On May 15, 1991, the Company entered into an agreement with American
Consolidated Growth Corporation (ACGC) to acquire the division of ACGC known
as Advance Golf Technologies (AGT) by the issue of 1,585,194 (post-split)
shares of AGT common stock to ACGC. The transaction was valued at
predecessor cost. There was no write-up of the asset valuations from this
transaction. Pursuant to this agreement, the Management of the Company
formally established the "doing business as" or DBA name of Advance Golf
Technologies. Through this transaction, ACGC gained substantial control over
the Company. At September 30, 1994, ACGC owned 8.37% of the outstanding
common stock of the Company. On September 15, 1995, the Company entered into
a settlement agreement with ACGC which settled intercompany activities with
ACGC. (Reference Note 2).
On March 16, 1992, the Company established an 80% owned subsidiary to operate
under the name of "Advance Golf Technologies Systems, Inc." Advance Golf
Technologies Systems, Inc. was incorporated under the laws of the state of
Colorado. This affiliated company has not been capitalized or activated.
Therefore it is not consolidated into these financial statements.
In fiscal 1994 and fiscal 1995, the Company established two wholly-owned
subsidiaries, AGTsports (Europe) Ltd. and ATsports Australia Pty. Ltd.
Neither company ever achieved operational revenues and the Company
discontinued their operations in fiscal 1996 to concentrate on markets within
the U.S.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of AGTsports, Inc. and its two wholly-owned foreign
subsidiaries, AGTsports Australia Pty. Ltd. and AGTsports (Europe) Ltd. All
significant intercompany transactions have been eliminated.
DEVELOPMENT STAGE COMPANY/GOING CONCERN - The Company is in the development
stage. It has not commenced principal operations and has not sold
significant products to date. Its proposed operations are subject to all of
the risks inherent in the establishment of a new business enterprise,
including the absence of an operating history. The Company's continued
existence is dependent upon its ability to either develop or purchase
components and sell its products and obtain profitable operations or on its
ability to obtain additional sources of funding through outside financing or
equity investments.
F-13
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
INCOME TAXES - During the year ended September 30, 1994, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," which requires an asset and liability approach for financial
accounting and reporting for income taxes. Under SFAS No. 109, deferred
income taxes are provided for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities.
Deferred income taxes represent the future tax return consequences of the
temporary differences, which will be taxable or deductible when assets and
liabilities are recovered or settled.
FOREIGN CURRENCY TRANSLATION - The Company's primary functional currency is
the U.S. dollar. For non-U.S. subsidiaries (primarily AGTaustralia Pty.
Ltd.) whose functional currency is not the U.S. dollar, monetary assets and
liabilities are translated at current year-end exchange rates while
nonmonetary items are translated at historical rates. Income and expense
accounts are translated at the average rates in effect during the year,
except for depreciation and cost of product sales which are translated at
historical rates. Adjustments resulting from these translations are
reflected in the Shareholders' equity section titled "Cumulative translation
adjustment."
PROPERTY AND EQUIPMENT - Fixed assets are carried at cost and are depreciated
over their estimated useful lives utilizing the straight-line method of
accounting. Reference Note 5 - Property, Plant and Equipment
CASH AND CASH EQUIVALENTS - For the purposes of the Statements of Cash Flows,
the Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
RESEARCH AND DEVELOPMENT COSTS - The policy of the Company is to expense
research and development costs as incurred. Software products for which
technological feasibility has been established will be capitalized when
purchased. During the years ended September 30, 1996 and 1995, there were no
charges to expense for research and development costs.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Accordingly, actual results could differ such
estimates and assumptions.
Estimates that are particularly sensitive to future change include legal and
tax matters which are subject to change as events evolve and as additional
information becomes available. In addition, significant estimates are
involved in determining the estimated useful lives of the Company's fixed and
intangible assets, and in assessing possible
F-14
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
impairment relative to any of the Company's investments or long-lived assets.
The carrying values of these assets are dependent upon Management's plans
and intentions, and where it is economically desirable and feasible for the
Company to concentrate its marketing efforts. Management believes that its
estimates and assumptions provide a reasonable basis for the fair
presentation of the Company's financial position and results of operations.
EARNINGS PER SHARE - Earnings per share have been computed based upon the
weighted average number of shares outstanding during the year of
19,616,641 and 7,432,297 for the years ended September 30, 1996 and 1995,
respectively. Common stock equivalents in the aggregate do not dilute
earnings per share by more than 3%, therefore, no change is presented.
REVENUE RECOGNITION - Revenue is recognized on the accrual basis of
accounting. Revenue for bartering type agreements is recognized as services
are provided on an accrual basis of accounting.
INVESTMENTS - Investments owned greater than 50% by the Company will be
reported on a consolidated basis of accounting. Investments for which the
Company owns greater than 20% but less than 51% and for investments that are
not corporate entities for which the Company exercises significant influence
are reported on the equity method of accounting. Investments owned less than
20% by the Company are reported on the lower of cost or estimated fair market
value.
NOTE 2 - RELATED PARTY TRANSACTIONS
On September 15, 1995 the Company entered into a resolution agreement with a
former affiliate, American Consolidated Growth Corporation (AMGC) to resolve
related party activities and outstanding issues between the two companies
from prior years. Pursuant to the Agreement, AMGC returned 1,000,000
preferred shares to AGT and forgave an accounts receivable of $671,000 in
return for 40% of the then total outstanding and issued common shares of AGT.
A second agreement, a joint venture between AGT, AMGC and Global Links
Trading Ltd. (GLT) allowed for the payment by GLT of 10% overriding royalties
on gross sales of GLT products to AMGC and AGT, respectively, in exchange for
the transfer of 100% of AMGC's common AGT shareholdings to GLT and the
transfer by AGT of certain non-U.S. contracts and resources to GLT. The
common stock issued to AMGC was determined by the amount of debt owed by the
Company, net of assets received, or 7,850,000 common shares. Such shares
were issued in October 1995.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
At September 30, Property, Plant and Equipment are summarized by major
classifications as follows:
F-15
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
1996 1995
--------- -----------
Computer Equipment $ 7,477 $ 359,993
Equipment 12,688 18,006
Furniture and Fixtures -- 66,384
Players Software 100,000 100,000
Promotional Tape Library -- 57,514
Software Masters 58,988 835,569
--------- -----------
179,153 1,437,466
Less Accumulated Depreciation
and Amortization (102,961) (960,685)
--------- -----------
$ 76,192 $ 476,781
--------- -----------
--------- -----------
The estimated useful lives of the listed assets is as follows:
Computer Equipment - 5 years Players Software - 5 years
Equipment - 5 years Promotional Tape Library - 5 years
Furniture and Fixtures - 7 years Software Masters - 5 years
NOTE 4 - INTANGIBLE ASSETS
On May 15, 1991, the Company entered into an agreement with ACGC to acquire
the division of ACGC known as "Advance Golf Technologies" (AGT) by the issue
of 1,585,194 (post-split) shares of the Company's common stock to ACGC. This
transaction was valued at predecessor cost of $2,377,791. There was no
write-up in asset value at May 15, 1991. Management valued this transaction
at $1.50 per share which is based on a discounting of estimated market value.
This intangible investment was amortized over five years on the straight
line method.
NOTE 5 - LONG-TERM DEBT
Long-Term Debt consists of the following:
SEPTEMBER 30,
-----------------------------
1996 1995
----------- --------
Installment note payable at $737.52 per
month plus 10% interest, collateralized
by equipment $ -- $ 3,500
Unsecured 90-Day Note payable at maturity
plus 10% interest, collateralized by
equipment -- 2,500
Unsecured Note, payable in full plus 10%
interest at 5-30-94. Past due and payable
in full upon demand 25,000 25,000
Unsecured Note, payable in full plus 10%
interest upon demand 61,226 61,226
F-16
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
Unsecured Note, payable in full plus 10%
interest upon demand 2,000 2,000
Note payable secured by accounts receivable
and revenues, payable in monthly payments
of $12,336 or 1.34% of AGT's net operating
revenues during the immediately preceding
30 days, whichever is greater, but past due
and therefore payable in full upon demand.
Outstanding principal accrues interest
at 7.5% 1,000,000 1,000,000
Unsecured Note, payable in full plus 15%
interest at 5-27-95. Past due and payable
in full upon demand -- 2,000
Unsecured Note to related entity, payable
in full by the issuance of 89,000 shares
of common stock plus 15% interest payable
in cash or stock 113,120 113,120
Unsecured Note to related entity (Global
Links Ltd.), 10% interest, payable in full
June 30, 1997, convertible into the
Company's common stock at $.125 per share 172,500 --
Less amount due within one year (1,373,846) (348,142)
----------- ----------
Long-term portion $ -- $ 861,204
----------- ----------
----------- ----------
NOTE 6 - COMMITMENTS AND CONTINGENCIES
(a) At September 30, 1996, The Company has no operating leases whose term
exceeds one year. For the years ended September 30, 1996 and 1995, rental
expense amounted to $17,552 and $70,495, respectively.
(b) As of September 30, 1994, a disputed claim of $21,557 has been filed
against the Company in the State of Colorado District Court, City and County
of Denver, by a vendor on an open account. The dispute involves certain
contracted desk-top publishing and graphic design supplied to the Company.
The disputed amount is included in accounts payable.
(c) There is an action pending before the Court of Claims of the Country of
Ireland on behalf of a former contractor of AGTsports, Inc. for breach of
agreement to and including some past due fees due and owing in the amount of
#48,000 pounds. Such action is disputed by the Company and local counsel has
been retained in Ireland to represent the Company in this action.
F-17
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
(d) In August 1995, the Securities and Exchange Commission initiated a formal
private investigation regarding AGTsports, Inc. The SEC order authorizing the
investigation, and subsequent investigatory efforts, seem to focus upon, among
other things, the accuracy of public statements made by or about the Company,
the price at which the stock of the Company has traded, and whether the stock of
the Company was sold in violation of the registration provisions of the federal
securities laws. However, no assurances can be given that the Company has a
complete or accurate understanding of the scope of the SEC inquiry. The
investigation continues, and the Company is cooperating with the SEC. No
prediction or assurances can be given regarding the outcome of this inquiry.
(e) In the normal course of its business, the Company has entered into
agreements with several golf associations to provide hardware and software
computer components to the associations at no cost. In return, the associations
agree to make the Company's optical scan cards the official score cards of the
associations' tournament events and to assist the Company in various ways with
its marketing efforts. Such agreements are generally for five year periods
beginning in November 1995. The Company believes that it has satisfied all its
obligations under these agreements.
(f) The Company has an agreement with one of its officers for the period August
1996 through December 2001. Annual base salary for calendar 1997 is to be
$100,000 with annual increases of $50,000 thereafter. The Company has also
entered into three additional employment agreements subsequent to September 30,
1996. Reference Note 12.
(g) The Company has a commitment to a joint venture as further discussed in
Note 11.
NOTE 7 - REALIZATION OF ASSETS
As shown in the accompanying financial statements, the Company incurred a net
loss of $3,615,806 and $5,216,415 during the years ended September 30, 1996 and
1995, respectively, and as of those dates, the Company's current liabilities
exceeded its current assets by $2,203,044 and $1,741,408, respectively. These
factors, as well as continued operating losses and lack of working capital,
create an uncertainty as to the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
Management of the Company plans continued pursuit of its existing operations and
strategic alliances. Management of the Company will pursue to the best of its
ability, the capitalization of the Company through equity investors, shareholder
loans and cash generated from operations which include providing statistical
information to individuals and limited sales of individual players system
software. Management continues to explore revenue generating opportunities
which utilize the proprietary software of the Company.
F-18
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
NOTE 8 - SECURITIES CHANGES
During the year ended September 30, 1995, the Company issued 1,122,200 shares of
common stock to unrelated parties for $597,200 at per share prices ranging from
$0.50 to $1.00.
During the year ended September 30, 1995, the Company issued 1,539,875 shares of
its common stock for services. The transactions were valued by management at
the estimated fair market value as calculated by the average of the bid and the
ask quotations discounted 45% since the stock issued was restricted and has a
limited trading market. The transactions were valued at $1,397,942. Of this
amount, $86,392 to officers and directors with the balance to unrelated parties.
During the year ended September 30, 1995, the Company issued 2,186,023 shares of
its common stock to Company employees as settlement in lieu of cash payment for
accrued wages and all debts outstanding which totalled $1,169,508. The
transactions were valued by management as the total of the debt paid.
During the year ended September 30, 1995, the Company issued 310,750 shares of
its common stock as payment for debts outstanding and other obligations which
totalled $168,371. The transactions were valued by management as the total of
the debt and obligations paid.
During the year ended September 30, 1995, the Company issued 225,000 shares of
its common stock for acquisition of territory rights. The transactions were
valued by management at the estimated fair market value as calculated by the
average of the bid and the ask quotations discounted 45% since the stock issued
was restricted and has a limited trading market. The transactions were valued
at $130,075.
During the year ended September 30, 1995, the Company issued 700,000 shares of
its common stock as a contribution to capital for 50% ownership in the Vision
Applied Sports Technology joint venture (Reference Note 11 - Joint Venture).
The transaction was valued at the estimated market value of the common stock
calculated as the average of the bid and the ask prices for the period of issue
discounted 45% due to being a block of restricted stock.
During the year ended September 30, 1996, the Company issued 2,599,855 shares of
common stock to unrelated parties for $612,250 at per share prices ranging from
$0.19 to $.76.
During the year ended September 30, 1996, the Company issued 1,824,102 shares of
its common stock for services. Of this amount, 631,364 shares were to officers
and directors with the balance to unrelated parties. The transactions were
valued by management at the estimated fair market value as calculated by the
average of the bid and the ask quotations discounted 45% since the stock issued
was restricted and has a limited trading market. The transactions were valued
at $965,109.
F-19
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
During the year ended September 30, 1996, the Company issued 1,020,701 shares of
its common stock to Company employees as settlement in lieu of cash payment for
accrued wages and all debts outstanding which totalled $743,526. The
transactions were valued by management as the total of the debt paid.
During the year ended September 30, 1996, the Company issued 7,954,966 shares of
its common stock as payment for debts outstanding and other obligations which
totalled $3,291,879. The transactions were valued by management as the total of
the debt and obligations paid.
NOTE 9 - ACCRUED EXPENSES
Accrued Expenses are summarized by components as follows:
September 30,
------------------------
1996 1995
--------- ---------
Accrued Payroll Expense $ 169,961 $ 280,341
Accrued Interest Payable 124,538 48,860
Accrued Directors' Fees 342,528 503,200
Accrued Professional Expenses -- 75,562
--------- ---------
Total $ 637,027 $ 907,963
--------- ---------
--------- ---------
NOTE 10 - COMPANY STOCK OPTION PLANS
During fiscal 1994 the Company's Board of Directors implemented a common stock
compensation plan whereby each full-time employee of the Company employed at the
current fiscal year end will be issued common stock of the Company during the
first quarter following the fiscal year end. The value of the common stock is
to be ten percent (10%) of the fiscal year normal hourly and salary wages
(exclusive of profit sharing, bonus payments, commissions or any other form of
compensation) paid to the employee. This is not a tax deferred plan. All
compensation under this plan is treated as a taxable fringe benefit.
During fiscal 1994, the Company also implemented an employee common stock
purchase plan whereby each employee has the option to purchase two-times the
equivalent number of shares as calculated under the common stock compensation
plan. The price of the shares is to be fifty percent (50%) of the average price
per share calculated for the common stock compensation plan. This option must
be exercised when the employee signs the Company Option Plan Agreement. This is
not a tax deferred plan. Discounts to the employee are to be treated as taxable
fringe benefits.
Activity under the stock compensation plan has been as follows. All shares
shown as owed were issued in the first quarter of the following fiscal year.
F-20
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
Compensation
Shares Received
------ ------------
Stock owed for fiscal 1993 25,634 $44,834
Stock owed for fiscal 1994 2,684 $11,407
Stock owed for fiscal 1995 23,650 $53,213
Under the employee common stock purchase plan, there are 47,300 shares of common
stock under option, of which 47,300 are exercisable at September 30, 1996, at an
option price of $1.13 per share. No additional options were granted under this
plan for fiscal 1996.
In August 1996, the Company's Board of Directors voted to terminate both of the
stock plans effective immediately.
NOTE 11 - JOINT VENTURE AND COMMITMENT
In fiscal 1995, the Company entered into a joint venture with a South African
company for the development, marketing and sales of the "Handwedge," a golf
distance measuring device. The joint venture established Vision Applied Sports
Technology (VAST), a company incorporated in the British Virgin Islands, with
AGT as a fifty percent equity partner. Pursuant to the agreement, AGT is to
provide marketing assistance and expertise and to secure a guarantee of payment
to the manufacturer for the first 10,000 units produced. The investment in VAST
is accounted for using the equity method of accounting based on the Company's
cost basis.
The Company issued 700,000 shares of common stock restricted under section 144
during the year ended September 30, 1995 for the benefit of the joint venture.
This stock may be used as collateral or to assist in other funding opportunities
to finance the production and inventory of the units. The transaction was
valued at the estimated market value of the common stock calculated as the
average of the bid and the ask prices for the date of issue discounted 45% due
to being a block of restricted stock.
At September 30, 1996, the Company's underlying equity in the joint venture
declined because the market value of the common stock contributed to the joint
venture had declined in value. Therefore, at September 30, 1996, the investment
was reduced to an amount of $119,350.
NOTE 12 - SUBSEQUENT EVENTS
(a) In November 1996, the Company entered into an employment agreement with Gary
W. Crews, incoming President. The agreement is a five year contract with a
performance-based compensation package including base salary, stock options and
annual review provisions. On November 7, 1996, the Company issued 75,000
restricted common shares as a one-time incentive stock award for Mr. Crews
joining the Company and for services rendered in November and December 1996 at a
reduced salary.
F-21
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
(b) In November 1996 the Company entered into a three-year employment agreement
with a former officer and director. The agreement requires the Company to pay
an annual salary of $48,000.
(c) Subsequent to September 30, 1996, the Company entered into agreements with
two of its stockholders, one who is a noteholder and the other who is a former
officer and director, to settle certain indebtedness of the Company to these
individuals. Pursuant to the terms of the agreement with the noteholder, this
individual agreed to convert his debt of $1,000,000, related accrued interest
and certain other rights into 3,500,000 restricted shares of the Company's
common stock. With respect to the second individual, this individual agreed to
forgive all debts owed, totaling approximately $342,217 for no consideration.
(d) Subsequent to fiscal 1996, the Company acquired Tee Times of America, Inc.
(TTA) of Dallas, Texas for cash and shares of AGT common stock. In conjunction
with the acquisition, the Company entered into an employment agreement with Mr.
Kyle D. Ragsdale, former President of TTA. The agreement is a five year
contract with performance-based compensation package including base salary,
stock options and annual review provisions. The agreement authorizes a one-time
incentive stock award for Mr. Ragsdale of 50,000 restricted common AGT shares
for joining the Company.
(e) In January 1997, the Company accepted the resignation of the chief
executive officer of AGTaustralia Pty. Ltd.
NOTE 13 - INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
The Company operates in one principal industry segment: providing technological
and software services to golf and related industries.
Geographical financial information is as follows:
1996 1995
------------ -----------
Net sales to unaffiliated customers:
Australia $ 61,176 $ 192,500
Europe -- 348,500
United States 518 84,170
------------ -----------
Total sales $ 61,694 $ 625,170
------------ -----------
------------ -----------
1996 1995
------------ -----------
Operating income:
Australia $ (519,241) $ (124,738)
Europe (18,676) (27,213)
United States (2,230,923) (5,045,788)
Corporate-other income (expense) (846,964) (44,852)
------------ -----------
Total income (loss) before extra-
ordinary item and income taxes $(3,615,804) $(5,242,591)
------------ -----------
------------ -----------
F-22
<PAGE>
AGTSPORTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(CONTINUED)
Identifiable assets:
Australia $ 74 $ 146,386
Europe -- 5,302
United States 15,783 431,164
Corporate assets 202,699 1,182,391
------------ -----------
Total assets $ 218,556 $ 1,765,243
------------ -----------
------------ -----------
There were no sales or transfers between geographic areas. Operating income
consists of total net sales less operating expenses, and does not include either
interest and other income, debt forgiveness, equity in loss of joint venture, or
income taxes. U.S. operating income is net of corporate expenses. Identifiable
assets of geographic areas are those assets used in the Company's operations in
each area. Corporate assets include cash and cash equivalents in U.S. accounts,
joint venture investments, and intangible assets. As discussed in Note 1, the
Company discontinued its operations in Europe and Australia during late fiscal
1996.
F-23
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<PAGE>
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<CASH> 65,806
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65,806
<PP&E> 131,680
<DEPRECIATION> (114,176)
<TOTAL-ASSETS> 218,556
<CURRENT-LIABILITIES> 2,268,850
<BONDS> 0
0
0
<COMMON> 23,931
<OTHER-SE> (2,074,225)
<TOTAL-LIABILITY-AND-EQUITY> 218,556
<SALES> 61,694
<TOTAL-REVENUES> 61,694
<CGS> 0
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<OTHER-EXPENSES> 3,855,220
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<INCOME-PRETAX> (3,894,356)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,894,356)
<DISCONTINUED> 0
<EXTRAORDINARY> 278,552
<CHANGES> 0
<NET-INCOME> (3,615,804)
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