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, 1999
Commission File Number 0-21914
AGTsports, Inc.
(Exact name of Issuer as specified in its charter)
Colorado 84-1022287
(State of incorporation) (I.R.S. Employer Identification No.)
7255 E. Quincy Avenue, Suite 550, Denver, CO 80237
(Address of principle executive offices) (Zip Code)
(303) 437-9434
(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 [ ] No [X]
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: $ - 0 -
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, 1999, was $512,025. A total of 25,601,260 shares
were owned by non-affiliates as of September 30, 1999.
The number of shares of Common Stock, $.001 par value, outstanding on
September 30, 1999 was 27,554,726 shares. Transitional Small Business Disclosure
(check one): Yes ( ) No ( X )
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
2
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PART I
Item 1. Description of Business.
- --------------------------------
AGTsports, Inc. (the "Company") is an early development stage company first
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. During the period from September 30, 1991 to September 30,
1998, the Company's business plan was to provide software and technology
services and products to golf and sports industries.
Due to the Company's inability to successfully develop its technology
products and bring them to market, the Company abandoned its former business
plan and discontinued all research and development efforts in the technology
field in fiscal 1998. During fiscal 1999, and as of the date of filing of this
report, the Company has no underlying business, assets or investments. The
Company implemented a restructuring plan during fiscal 1999 designed to maintain
the public holding company with the goal of pursuing new business opportunities.
While management continues to negotiate with third parties to acquire potential
new businesses, investments or sources of revenue, the Company continues to
experience severe financial difficulties. The Company can provide no assurances
that management will be successful in these endeavors. In addition, the auditors
of the Company have raised considerable doubt as to the ability of AGTsports,
Inc. to continue as a going concern. (See "Notes to Consolidated Financial
Statements, Note 1.").
Business of the Issuer
AGTsports, Inc. (the "Company") is an investment holding company formerly
engaged in developing technology applications for the sports and recreation
industries. From September 30, 1998 to present, the Company suspended its former
business operations and was primarily engaged in restructuring efforts, namely,
to negotiate the settlement of past liabilities, to secure an independent
certified audit of operations for fiscal 1998 and fiscal 1999, and to complete
and update the Company's public filing documents. Subsequent to fiscal year
ended September 30, 1999, the Company continues to explore proposed business
combinations with as yet unidentified third parties for the purpose of acquiring
new sources of revenue and to increase shareholder value. The Company can
provide no assurances that management will be successful in these endeavors.
Management and Executive Offices of AGT
The Company maintains an administrative office at 7255 E. Quincy Avenue,
Suite 550, Denver, Colorado 80237. Telephone: (303) 437-9434, Fax: (303)
691-8884, Email: [email protected]. During fiscal 1999, no overhead or rent was
charged to the Company for the use of this office.
Subsequent Events
On December 16, 1999, the Company completed a settlement agreement with a
shareholder of the Company to cancel and retire all shares of its issued and
outstanding preferred stock. Pursuant to the conversion terms of the Company's
preferred shares, the Company converted 1,000,000 shares of non-voting preferred
stock on a one-for-one basis into 1,000,000 restricted shares of the Company's
voting common stock. In addition, the Company satisfied payment of accrued
preferred stock dividends due of $87,000 by the issuance of 2,695,203 restricted
common shares to the shareholder.
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On December 31, 1999, the Company completed settlement agreements with 12
debt holders of the Company to retire outstanding loans and other debts totaling
more than $400,000. Pursuant to the terms of the agreements, in lieu of cash
payment the Company issued 9,294,866 restricted common shares to the debt
holders in exchange for cancellation of the debts.
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, 1999,
AGT fully complies with the terms of this legislation as a U.S. employer.
Research and Development Costs
As of September 30, 1999, the Company is not engaged in material research
and development activities and has not incurred related material R&D costs in
the prior three fiscal periods.
Trademarks and Trade Names.
The Company has no trademarks, copyrights, or patents. A former patent on
the "Micro-Caddie" golf distance measuring device, U.S. Patent #5,644,880,
expired or has been suspended due to the Company's inability to pay related
filing and legal expenses. In fiscal 1998, the Company terminated development
efforts in the golf technology marketplace.
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, 1999, the Company had no employees.
Subsequent to fiscal year ending September 30, 1998, all employees resigned and
the Company hired Cory J. Coppage as a paid consultant to oversee restructuring
measures as described above. (See "Directors and Executive Officers of the
Registrant Biographical Information").
International Operations
At present, the Company conducts business only in the United States.
Forward Looking Statements
This Form 10-KSB includes certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of historical
fact included in this Form 10-KSB, including, without limitation, the statements
under "Item I. Description of Business," "Item 3. Legal Proceedings," and "item
6. Management's Discussion and Analysis or Plan of Operation" are
forward-looking statements. Although the Company believes that the limited
expectations reflected in such forward looking statements are reasonable, it can
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give no assurnace that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in this Form 10-KSB in conjunction with the
forward looking statements contained herein.
Item 2. Description of Property
- -------------------------------
During fiscal 1999, the Company maintained an administrative office located
at 7255 E. Quincy Avenue, Suite 550, Denver, Colorado 80237. Telephone: (303)
437-9434, Fax: (303) 691-8884, Email: [email protected]. During fiscal 1999, no
overhead or rent was charged to the Company for the use of this office. The
Company maintains no operating leases as of September 30, 1999.
Item 3. Legal Proceedings
- -------------------------
During fiscal 1999, the Company was not a party to, nor aware of, any legal
proceedings involving the Company that, in the opinion of Management, were
material to the future of the Company.
On February 19, 1999, a civil judgment of $65,003 was awarded in Arapahoe
County Court, Colorado, to Bloomberg Communications Corporation for services
provided to the Company in prior years. As of the date of filing of this report,
management is negotiating with representatives of Bloomberg concerning payment
of the obligation and cancellation of the judgment. The Company is unable to
determine whether it will be successful and the auditors of the Company have
recorded the item on the Company's financial statements as an accounts payable.
As reported in the Company's Form 10-KSB for the period ending September
30, 1997, certain registration requirements under federal and state securities
laws may have been violated in 1997 in connection with the Company's sale of its
common stock to approximately 30 individuals raising an aggregate of $477,950.
With the assistance of legal counsel, the Company has attempted to identify the
nature of any potential violations and the means of curing any such violations.
In fiscal 1998, the Company implemented a remedial securities compliance program
designed to address any potential registration violations, undertaken efforts to
update the Company's public filings and ensure full compliance in the future. In
addition, the Company has suspended all securities-related activities. To the
extent that the Company may be unable to resolve and/or cure any potential
registration violations, the Company and its ability to continue as a going
concern may be adversely impacted. (See the Company's Form 10-KSB for the period
ending September 30, 1997 and "Notes to Consolidated Financial Statements, Notes
1 and 4" below).
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
During fiscal year ended September 30, 1999, 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
In fiscal 1999, the Company's common stock, par value $.001 per share
("Common Stock") traded in the over-the-counter market, NASDAQ, (OTC-BB) under
the stock trading symbol "AGTP."
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(1) Bid
---
Quarter Ending (2) High (3) Low
-------------- ---- ---
September 30, 1999 $ 0.02 .00
June 30, 1999 0.06 .02
March 31, 1999 0.03 .00
December 31, 1998 0.03 .00
September 30, 1998 $ 0.02 .00
June 30, 1998 0.08 .02
March 31, 1998 0.11 .08
December 31, 1997 0.13 .11
September 30, 1997 $ 0.18 .14
(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, 1999. 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.
Holders of Record
As of September 30, 1999, there were approximately 900 shareholders of
record of Common Stock.
Dividends
For the fiscal years 1998 and 1999, no dividends were declared or issued by
the Company, excepting dividends on 1,000,000 issued and outstanding preferred
shares as described in the "Notes to Consolidated Financial Statements, Note
2."). Due to insufficient capital resources, the Company has been unable to
declare or pay dividends. Subsequent to fiscal year end 1999, on December 16,
1999, the Company completed a settlement agreement with a shareholder of the
Company to satisfy payment of preferred stock dividends due of $87,000 by the
issuance of 2,695,203 restricted common shares to the shareholder. The preferred
stock was cancelled and no dividends are due or outstanding as of the date of
filing of this report. 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
- --------------------------------------------------------------------------------
The Company's financial statements are presented on a going concern basis,
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. During the fiscal year ending at September 30,
1999, the Company incurred a sizable net loss and had a substantial working
capital deficit. There is no assurances that the Company will be successful in
its plans developed with the intent of remedying these conditions. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. See Independent Auditor's Report and "Notes to Financial
Statements, Note 1" included herein. The financial statements do not include any
adjustments that might result from the possible inability of the Company to
continue as a going concern.
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Following a change in management and the termination of former unprofitable
business activities of the Company, net loss decreased from $336,535 in fiscal
1998 to $94,352 in fiscal 1999. The Company produced no revenues in fiscal
1999 or fiscal 1998, as compared to revenues of $63,304 in fiscal 1997. For the
year ended September 30, 1999, operating expenses were $37,989 and interest
expenses totaled $56,363. In the opinion of management, the Company has not
progressed significantly in its operations over prior periods. Pursuant to
settlement agreements completed at December 31, 1999, outstanding liabilities
were reduced by over $400,000. Working capital shortages continue to limit the
Company's ability to conduct business. In the opinion of management, the future
business of the Company is dependent upon its ability to secure new business
opportunities and revenue sources to increase shareholder value. No assurances
can be provided the Company will be successful in this regard. In addition, the
auditors of the Company have raised considerable doubt as to the ability of
AGTsports, Inc. to continue as a going concern. (See "Notes to Consolidated
Financial Statements" below).
Liquidity and Capital Resources
Cash and cash equivalent's balance on September 30, 1999 was $22. Current
assets were $22 and current liabilities were $821,739. There was no significant
change in working capital during fiscal year 1999 as the Company continued
restructuring with the objective of pursuing new business opportunities. At
September 30, 1999, the Company has no underlying business or investments and
continues to experience severe working capital shortages. For the fiscal year
ending September 30, 1999, the Company had no sales or revenues resulting in a
net loss of (94,352). The loss was attributed to costs associated with the
restructuring of the Company. At September 30, 1999, the Company has working
capital deficiency of $820,717 and a stockholders deficit of $820,717. In the
opinion of management, the Company continues to experience lack of adequate
funding to fully pursue its business plan. Given the severe working capital
problems of AGTsports, Inc., the auditors of the Company have raised significant
doubts as to the ability of AGTsports, Inc. to continue as a going concern. (See
"Notes to Consolidated Financial Statements.").
Material Commitments for Capital Expenditures
As of September 30, 1999, the Company has no material commitments for
capital expenditures.
Unfavorable Trends or Uncertainties
The business of AGT is not subject to unfavorable trends or uncertainties
other than the potential significant decline the health of the U.S. economy
and/or 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.
Seasonal Aspects Bearing Upon Operations
AGT is not subject to seasonal fluctuations in its business cycle which
have a material impact on operations.
7
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Item 7. Financial Statements and Supplementary Data
- ---------------------------------------------------
This response is submitted as a separate section of this report (see
"Consolidated Financial Statements" below).
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
- --------------------------------------------------------------------------------
In fiscal 1998, after the Company's former auditors declined to stand for
reappointment, the firm of Brimmer, Burek & Keelan LLP, Certified Public
Accountants of Tampa, Florida, was retained as the Company's auditors for the
fiscal year ended September 30, 1998, and for the fiscal year ended September
30, 1999. (See the Company's Form 8-K dated October 14, 1998.).
In connection with their audits of the Registrant's financial statements
for the three most recent fiscal years and during subsequent interim, the
Registrant has not had any disagreements with either firm on any matter of
accounting principals or practices, financial statement disclosure, or auditing
scope or procedure. In connection with their audits of the Registrant's
financial statements for the fiscal year ended September 30, 1997, the prior
auditors report was qualified for uncertainties related to possible securities
violations and for going concern issues. The audit reports for the years ended
fiscal 1998 and fiscal 1999 also contain a qualification for the going concern
issue.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
- --------------------------------------------------------------------------------
As of September 30, 1999, the Executive Officers and Directors of the
Company, their ages and positions held in the Company were as follows:
Name Age Positions held
- ---- --- --------------
Cory J. Coppage 36 President/Treasurer/Secretary/Director
Louis F. Coppage 62 Director
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
Cory J. Coppage - President, Treasurer, Secretary and Director
Mr. Coppage, 36, first joined the Company as Secretary in 1996. In October
of 1998, Mr. Coppage became acting President and is presently serving as the
sole officer of the Company pending completion of restructuring measures. He has
over nine years of business management experience working with various public
and private companies. From 1989 to 1994 he was a licensed property & casualty
insurance agent and field manager for Liability Insurance Operations Network,
Inc., and W.J. Plemons Insurance Agency of Atlanta, GA. From 1994 to 1998, he
was Secretary and a member of the board of directors of American Consolidated
Growth Corporation, a Colorado corporation. Mr. Coppage is an officer of Citadel
Environmental Group, Inc., a public company based in Castle Rock, Colorado. He
earned a bachelor's of science in business administration at Regis University in
1985.
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Louis F. Coppage - Director
Mr. Coppage, 62, has served as a director of the Company since 1996. He has
over twenty years of executive and managerial experience with domestic and
international operations involving finance and business development in the
private and public sectors. Since 1979, he has provided advisory services for
corporate clients with an emphasis on the capital formation process. From 1986
to present, Mr. Coppage has served as a financial consultant for numerous
clients in real estate, energy, insurance, and investments. From 1978 to 1986,
Mr. Coppage was founder and principal of American Energy Investments, Inc., of
Denver, CO. From 1969 to 1979 he was president of Foresee, Ltd., an energy
development company, and of Coppage & Associates, a financial planning company
in Denver, CO. Mr. Coppage began his career in business as an account executive
for Conneticut General Life Insurance Company in 1964, where he was honored as a
top producer and featured in the Company's advertisements in publications such
as Time, Newsweek and U.S. World Report. He was a founding member of the
insurance and financial planning groups, Top of the Table and The Forum. Mr.
Coppage is presently the Chairman of Citadel Environmental Group, Inc., a public
company based in Castle Rock, Colorado.
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
transactions involving common stock of the Company, and, if necessary, to file
any such reports in the appropriate time and manner.
9
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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>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------
Annual Compensation Long term Compensation
- -----------------------------------------------------------------------------------------------------
Awards Payouts
- -----------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Name and Annual Restricted All Other
Prinicpal Fiscal Comp- Stock Options/ LTIP Compen-
Position Year Salary Bonus ensation Awards SARs Payouts sation
($) ($) ($) ($) (#) ($) ($)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cory J. Coppage
President 1999 $ 30,000 --- --- --- --- --- ---
Secretary & Treasurer 1998 $ 36,000 --- --- --- --- --- ---
1997 $ 0 --- --- --- --- --- ---
B. Mack DeVine
Chairman and CEO 1998 $100,000 --- --- --- 60,330 --- ---
1997 94,500 --- --- --- 533,300 --- 34,080
Gary Crews 1998 $ 31,730 --- --- --- 200,000 --- ---
President 1997 $ 48,000 --- --- 250,000 533,300 --- ---
- -----------------------------------------------------------------------------------------------------
</TABLE>
(1). Salary and Fees. In fiscal 1999, compensation shown was paid by the Company
as consulting fees to Mr. Coppage of $30,000, with unpaid fees accrued at
September 30, 1999 of $5,675. In fiscal 1998, actual salary paid to Devine
was $20,504.67, and to Coppage was $6,914.84, with unpaid balances accrued
at 9/30/98, recorded as promissory notes of the Company.
(2). Options/SARs. Indicates compensation provided under Mr. DeVine and Mr.
Crews former employment agreements with the Company;
(2)a. Mr. DeVine's employment agreement provided incentive stock grant
shares and authorized consecutive options of up to 1,000,000 shares
annually of the Company's issued and outstanding common stock for a
period of five years. At December 31, 1999, the Company completed a
settlement agreement with Mr. DeVine and cancelled all options and
compensation due in exchange for 500,000 restricted common shares of
the Company.
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(2)b. Mr. Crews' employment agreement authorized options of up to
200,000 shares annually of the Company's issued and outstanding common
stock exercisable for a period of five years. The exercise market
price at January 1, 1998 was $0.13 per share. Mr. Crews resigned
effective March 1, 1998. As of the date of filing of this report, the
Company has not issued the options nor have any options been exercised
by Mr. Crews. In fiscal 1999, the board of directors of the Company
authorized the cancellation of the Company's former stock option plans
including all stock options provided under Mr. Crews former employment
agreement with the Company.
OPTION GRANTS IN LAST FISCAL YEAR
None.
INDIVIDUAL GRANTS
None.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
See above.
Other Compensation
Subsequent to fiscal year end 1999, the Company issued 500,000 restricted
common shares to DeVine & Associates pursuant to a settlement agreement with the
Company's former Chairman, B. Mack DeVine. In lieu of cash payment for services
rendered in 1998 and in exchange for waiving all stock compensation formerly
due, the Company issued the shares and cancelled Mr. DeVine's Note dated 9/30/98
evidencing the principal amount of $102,000.
During fiscal 1999, the Company did not provide group medical insurance to
AGT officers and employees and did not adopt a comprehensive employee health
plan. The Company made no contributions to any Defined Contribution Benefit
Plans on behalf of its employees in fiscal 1999.
Meetings of the Board of Directors
During fiscal 1999, the Company's board of directors met on two occasions.
There were no incumbent directors who attended less than 75% of these meetings
of the Board during that period.
Director Agreements and Compensation
The Company's director 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 reimbursement of 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 1999, no compensation was paid or
distributed to any directors of the Company.
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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, 1999 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, 1999 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, 1999, the total outstanding shares of the Company's
common stock were 27,554,726.
Name, Position and Address Number of Shares (1) Percent of Class
- -------------------------- -------------------- ----------------
Cory J. Coppage 0 0 %
President, Treasurer, Secretary, Director
7255 E. Quincy Avenue, Suite 550
Denver, CO 80237
Louis F. Coppage, Director 120,166 .0 %
5668 S. Rex Road
Memphis, TN 38119
Officers and Directors as a Group 120,166 (2) .01 %
(two persons)
(1) Includes all stock options available at September 30, 1999. As of the date
of filing of this report, no options have been issued or exercised during
the period 9/30/98 through 12/31/99.
(2) At September 30, 1999, 1,000,000 shares of the Company's preferred stock
were issued and outstanding. The shares are non-voting and convertible at
the option of the holder into shares of the Company's common stock upon
demand. (See "Notes to Consolidated Financial Statements, Note 2" below).
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, 1999. Beneficial ownership is calculated in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
12
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Item 12. Certain Relationships and Related Transactions
- -------------------------------------------------------
On December 16, 1999, the Company completed a settlement agreement with a
shareholder of the Company to cancel and retire all shares of its issued and
outstanding preferred stock. Pursuant to the conversion terms of the Company's
preferred shares, the Company converted 1,000,000 shares of non-voting preferred
stock on a one-for-one basis into 1,000,000 restricted shares of the Company's
voting common stock. In addition, the Company satisfied payment of related
preferred stock dividends due of $87,000 by the issuance of 2,695,203 restricted
common shares to the shareholder.
During fiscal 1999, the Company received notice of assignment of the 1997
joint venture agreement with Global Links Trading, Ltd. to a third party. On
December 16, 1999, pursuant to the terms of the joint venture agreement, the
Company reissued 6,850,000 common shares as required under the default terms of
the agreement. Effective December 16, 1999, the joint venture was cancelled and
the Company was released from any further obligations thereof by GLT and its
assignee. (See the Company's Form 10-K report for fiscal 1998).
The former president of the Company resigned effective March 1, 1998. A
claim was filed with the Oklahoma Department of Labor with respect to accrued
unpaid wages and expenses incurred on behalf of the Company for an aggregate
total of $14,615. In addition, the former president's employment agreement
provided for 200,000 stock options to be granted annually beginning December 31,
1997 through December 31, 2001. The options are exercisable at the average
closing bid price during the twenty trading days immediately preceding the date
of grant. The options are exercisable for a period of five years following the
date of grant. Although the Company is in dispute with the former president as
to whether the former president is entitled to common stock options subsequent
to employment termination, the options have been accrued as of September 30,
1998.
Subsequent to fiscal 1997, the Company has determined it may have violated
Section 5 of the Securities Act of 1993, as amended (the 93 Act) in connection
with the sale of $477,950 of the Company's common stock to approximately thirty
individuals in 1997. The Company has not complied with the provisions of either
Rule 505 or 506 and no Form D or other similar fillings have been made which
claim or substantiate the availability of a registration exemption under certain
Federal and State securities laws. Violation of Section 5 of the Act entities
the purchaser of the security to recover from the Company the consideration paid
for the security together with interest thereon. The Company may also have
violated certain Blue-Sky laws of the various states, in which investors reside.
The Company has taken remedial actions which it believes, based on the advice of
legal counsel, may cure the potential violations and ensure full compliance in
the future. (See Notes to Consolidated Financial Statements, Related Party
Transactions below".)
13
<PAGE>
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**
27 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
See Exhibit 27 below.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 13th day of
January, 2000.
Dated: January 13, 2000
By: /s/ Cory J. Coppage
-----------------------
Cory J. Coppage
President
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this report has been signed by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Dated: January 13, 2000
By: /s/ Cory J. Coppage
-----------------------
Cory J. Coppage
President
Dated: January 13, 2000
By: /s/ Cory J. Coppage
-----------------------
Cory J. Coppage
Secretary
15
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
September 30, 1999
Tampa, Florida
Audited Consolidated Financial Statements
At September 30, 1999 and 1998 and
for the Years then Ended and for the Cumulative
Period from January 6, 1986 (inception) to September 30, 1999
(Together with Independent Auditors' Report)
<PAGE>
CONTENTS
--------
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT) F-4 - F-9
CONSOLIDATED STATEMENTS OF CASH FLOWS F-10 - F-11
NOTES TO FINANCIAL STATEMENTS F-12 - F-29
<PAGE>
Independent Auditors' Report
The Board of Directors
AGTsports, Inc.
Denver, Colorado
We have audited the accompanying consolidated balance sheets of AGTsports, Inc.
(a development stage company) (the "Company") at September 30, 1999, and the
related consolidated statements of operations, shareholders' equity (deficit),
and cash flows for the year then ended and the fiscal 1999 amounts included in
the cumulative amounts from January 6, 1986 (inception) to September 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the fiscal 1999 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of the
Company at September 30, 1999 and the consolidated results of operations and
cash flows for the year then ended and the fiscal 1999 amounts included in the
cumulative amounts from January 6, 1986 (inception) to September 30, 1999.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations and has a shareholders' deficit and a working capital deficit
which all raise substantial doubt about its ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
BRIMMER, BUREK & KEELAN LLP
Certified Public Accountants
January 11, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
Tampa, Florida
Balance Sheets
September 30, 1999
ASSETS
1999 1998
------------ ------------
Current:
<S> <C> <C>
Cash $ 22 $ 685
------------ ------------
Total current assets 22 685
Deposits 1,000 1,000
------------ ------------
Total assets $ 1,022 $ 1,685
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 227,807 $ 201,475
Accrued expenses 112,440 58,950
Notes payable - current 481,492 371,625
------------ ------------
Total current liabilities 821,739 632,050
Notes payable (less current portion) -- 60,000
------------ ------------
Total liabilities 821,739 692,050
Shareholders' deficit:
Convertible Preferred stock, $1.00 par value;
5,000,000 shares authorized; 1,000,000
shares issued and outstanding (Note 2) 1,000,000 1,000,000
Common stock, $.001 par value; 50,000,000
shares authorized; 27,554,726 shares issued
and outstanding 27,555 27,555
Treasury stock (17,459) (17,459)
Additional paid-in capital 22,392,893 22,392,893
Deficit accumulated during the development stage (24,223,706) (24,093,354)
------------ ------------
Total shareholders' deficit (820,717) (690,365)
------------ ------------
Total liabilities and shareholders' deficit $ 1,022 $ 1,685
============ ============
Please read accompanying notes.
F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
January 6,
1986 (Inception)
Years Ended Through
September 30, September 30,
---------------------------- -------------
1999 1998 1999
------------ ------------ ------------
Revenue:
<S> <C> <C> <C>
Territory sales $ -- $ -- $ 1,612,009
Other revenue -- -- 2,292,775
------------ ------------ ------------
-- -- 3,904,784
------------ ------------ ------------
Expenses:
Cost of purchased goods for resale -- -- 162,378
Salaries and director compensation -- 39,215 3,419,101
Professional services 33,066 214,516 3,986,084
General and administrative 4,923 106,431 3,420,132
Depreciation and amortization -- -- 2,486,603
Advertising -- -- 306,112
Contract services -- -- 4,985,397
Cost of unsuccessful offering -- -- 56,860
Travel and entertainment -- 30,747 916,156
Territory reacquisition -- -- 1,465,075
------------ ------------ ------------
Total expenses 37,989 390,909 21,203,898
------------ ------------ ------------
Preoperative loss (37,989) (390,909) (17,299,114)
------------ ------------ ------------
Other income (expenses):
Interest income -- -- 1,081
Rent income -- -- 14,992
Interest expense (56,363) (39,798) (686,508)
Loss on equity securities -- -- (8,652,613)
(Loss) gain on disposal of assets -- -- 2,814,846
Provision for loan loss -- -- (528,342)
Equity in loss of joint venture -- -- (748,650)
Loss on purchase of subsidiaries -- -- (442,419)
Other income -- -- 84,565
------------ ------------ ------------
Total other income (expenses), net (56,363) (39,798) (8,143,048)
------------ ------------ ------------
Net loss before extraordinary items and
provision for income taxes (94,352) (430,707) (25,442,162)
Provision for income taxes -- -- (1,793,033)
------------ ------------ ------------
Loss before extraordinary items (94,352) (430,707) (27,235,195)
Extraordinary items:
Income tax benefit realized -- -- 1,793,033
Debt forgiveness -- 94,172 963,271
Debt forgiveness - AGTsports Australia Pty Ltd. -- -- 339,155
------------ ------------ ------------
Net loss $ (94,352) $ (336,535) $(24,139,736)
============ ============ ============
Loss per common share before extraordinary items $ (.003) $ (.015)
Extraordinary items per common share -- .003
------------ ------------
Net loss per common share $ (.003) $ (.012)
============ ============
Weighted-average shares of common stock outstanding 27,554,726 27,120,218
============ ============
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
Preferred Stock Common Stock Deficit Memorandum
--------------- -------------------- Accumulated Total
Number Number Additional During the Shareholders'
of of Paid-In Treasury Development Equity
Shares Amount Shares Amount Capital Stock Stage (Deficit)
------ ------ ------ ------ ------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 6, 1986 -- $ -- -- $ -- $ -- $ -- $ -- $ --
Balance at January 21, 1986 -- -- 30,000 30 5,970 -- -- 6,000
Common stock issued for cash -- -- 90,000 90 149,910 -- -- 150,000
Offering costs -- -- -- -- (7,257) -- -- (7,257)
Net loss -- -- -- -- -- -- (5,247) (5,247)
---- ------ ----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1986 -- -- 120,000 120 148,623 -- (5,247) 143,496
Net loss -- -- -- -- -- -- (44,583) (44,583)
---- ------ ----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1987 -- -- 120,000 120 148,623 -- (49,830) 98,913
Net loss -- -- -- -- -- -- (98,913) (98,913)
---- ------ ----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1988 -- -- 120,000 120 148,623 -- (148,743) --
Common stock issued to
acquire subsidiaries -- -- 99,943 100 5,534,840 -- (8,824) 5,526,116
Shares purchased by
subsidiary -- -- -- -- -- (25,112) -- (25,112)
---- ------ ----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1989 -- -- 219,943 220 5,683,463 (25,112) (157,567) 5,501,004
Common stock issued
for services -- -- 14,801 15 167,231 -- -- 167,246
Common stock issued
pursuant to
debenture agreement -- -- 60,000 60 649,940 -- -- 650,000
Common stock issued for
investment in joint
venture -- -- 34,500 35 381,815 -- -- 381,850
Common stock issued for
professional services -- -- 60,000 60 649,940 -- -- 650,000
Common stock issued to
settle litigation -- -- 4,055 3 44,735 -- -- 44,738
Treasury stock activity -- -- -- -- -- 25,112 -- 25,112
Net loss -- -- -- -- -- -- (5,783,853) (5,783,853)
---- ------ ----------- ----------- ----------- ----------- ----------- -----------
(continued)
F-4
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Preferred Stock Common Stock Deficit Memorandum
------------------- ------------------- Accumulated Total
Number Number Additional During the Shareholders'
of of Paid-In Treasury Development Equity
Shares Amount Shares Amount Capital Stock Stage (Deficit)
------ ------ ------ ------ ------- ----- ----- ---------
Balance at September
30, 1990 -- $ -- 393,299 $ 393 $ 7,577,124 $ -- $(5,941,420) $1,636,097
Common stock issued
to settle
litigation -- -- 3,000 3 39,147 -- -- 39,150
Common stock issued
to acquire
intangible assets -- -- 1,585,194 1,585 2,376,206 -- -- 2,377,791
Distribution
declared pursuant
to January 28,
1991 contract -- -- -- -- (6,142,907) -- -- (6,142,907)
Net income -- -- -- -- -- -- 4,545,160 4,545,160
--------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Balance at September
30, 1991 -- -- 1,981,493 1,981 3,849,570 -- (1,396,260) 2,455,291
Common stock issued
for cash -- -- 200,000 200 199,800 -- -- 200,000
Common stock issued
for services -- -- 447,250 447 590,303 -- -- 590,750
Common stock issued
to acquire
intangible assets -- -- 330,000 330 329,670 -- -- 330,000
Common stock issued
through private
placement -- -- 42,750 43 85,457 -- -- 85,500
Net loss -- -- -- -- -- -- (1,267,987) (1,267,987)
--------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Balance at September
30, 1992 -- -- 3,001,493 3,001 5,054,800 -- (2,664,247) 2,393,554
Common stock issued
for cash -- -- 263,000 263 516,737 -- -- 517,000
Common stock issued
for services -- -- 166,916 167 277,097 -- -- 277,264
Common stock issued
to settle
litigation -- -- 76,379 77 106,836 -- -- 106,913
Common stock issued
to former BBBC
stockholder -- -- 161,401 161 (161) -- -- --
Common stock issued
to acquire assets -- -- 200,000 200 199,800 -- -- 200,000
Preferred stock
issued to treasury 1,000,000 4,000,000 -- -- -- (4,000,000) -- --
Cancellation of
distribution
declared -- -- -- -- 6,142,907 -- -- 6,142,907
Net loss -- -- -- -- -- -- (7,620,061) (7,620,061)
--------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
(continued)
F-5
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Preferred Stock Common Stock
------------------------- ---------------------------
Number Number Additional
of of Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Balance at September 30, 1993 1,000,000 $ 4,000,000 3,869,189 $ 3,869 $ 12,298,016
Common stock issued for cash -- -- 80,871 81 153,620
Common stock issued
for services -- -- 907,237 907 1,901,355
Common stock issued
to settle obligations -- -- 305,827 306 522,139
Common stock issued
to acquire software -- -- 33,000 33 58,955
Treasury stock activity -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at September 30, 1994 1,000,000 4,000,000 5,196,124 5,196 14,934,085
Common stock issued for cash -- -- 1,122,200 1,122 596,078
Common stock issued
for services -- -- 1,539,875 1,540 1,396,402
Common stock issued for debt
settlement with employees -- -- 2,186,023 2,186 1,167,322
Common stock issued
for debt and obligation
settlement -- -- 310,750 311 168,060
Common stock issued for territory
acquisition -- -- 225,000 225 129,850
Common stock issued for
VAST joint venture -- -- 700,000 700 867,300
Return of preferred stock
per AMGC settlement (1,000,000) (4,000,000) -- -- --
Treasury stock activity -- -- (749,000) (749) (3,999,251)
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
(continued)
F-6
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Deficit
Accumulated Memorandum
During the Total
Treasury Development Shareholders'
Stock Stage Equity (Deficit)
----- ----- ----------------
Balance at September 30, 1993 $ (4,000,000) $(10,284,308) $ 2,017,577
Common stock issued for cash -- -- 153,701
Common stock issued
for services -- -- 1,902,262
Common stock issued
to settle obligations -- -- 522,445
Common stock issued
to acquire software -- -- 58,988
Treasury stock activity (6,860) -- (6,860)
Net loss -- (3,783,365) (3,783,365)
------------ ------------ ------------
Balance at September 30, 1994 (4,006,860) (14,067,673) 864,748
Common stock issued for cash -- -- 597,200
Common stock issued
for services -- -- 1,397,942
Common stock issued for debt
settlement with employees -- -- 1,169,508
Common stock issued
for debt and obligation
settlement -- -- 168,371
Common stock issued for territory
acquisition -- -- 130,075
Common stock issued for
VAST joint venture -- -- 868,000
Return of preferred stock
per AMGC settlement -- -- (4,000,000)
Treasury stock activity 3,990,140 -- (9,860)
Net loss -- (5,216,415) (5,216,415)
------------ ------------ ------------
(continued)
F-6(a)
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Preferred Stock Common Stock
-------------------------- -----------------------------
Number Number Additional
of of Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Balance at September 30, 1995 -- $ -- 10,530,972 $ 10,531 $ 15,259,846
Other -- -- -- -- 56,250
Common stock issued for cash -- -- 2,599,855 2,600 609,650
Common stock issued for services -- -- 1,824,102 1,824 963,285
Common stock issued to Global
Links, Ltd. in October 1995
pursuant to prior settlement
with AMGC -- -- 7,850,000 7,850 3,180,439
Common stock issued for debt
obligation settlement -- -- 104,966 105 103,485
Common stock issued for debt
settlement with employees -- -- 1,020,701 1,021 742,505
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at September 30, 1996 -- -- 23,930,596 23,931 20,915,460
Common stock issued for cash -- -- 1,795,800 1,796 445,144
Common stock issued in connection
with the exercise of stock options -- -- 536,000 536 53,827
Commissions paid in common stock
in connection with common
stock sales -- -- 60,000 60 (60)
Common stock returned to the
Company in connection with the
settlement of VAST joint venture -- -- (700,000) (700) (118,650)
Preferred stock issued for settlement
of notes payable and in exchange
for common stock 1,000,000 1,000,000 (6,850,000) (6,850) (835,650)
Common stock issued for settlement
of a note payable and accrued
interest -- -- 3,000,000 3,000 1,102,179
Common stock issued in connection
with purchase of royalty rights -- -- 500,000 500 124,500
Common stock issued in connection
with acquisitions -- -- 1,245,647 1,246 173,634
Common stock issued for services -- -- 1,021,747 1,021 94,324
Common stock issued in connection
with the settlement of accrued
liabilities -- -- 332,157 332 54,769
Preferred stock dividends -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
(continued)
F-7
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Deficit
Accumulated Memorandum
During the Total
Treasury Development Shareholders'
Stock Stage Equity (Deficit)
----- ----- ----------------
Balance at September 30, 1995 $ (16,720) $(19,284,088) $ (4,030,431)
Other -- -- 56,250
Common stock issued for cash -- -- 612,250
Common stock issued for services -- -- 965,109
Common stock issued to Global
Links, Ltd. in October 1995
pursuant to prior settlement
with AMGC -- -- 3,188,289
Common stock issued for debt
obligation settlement -- -- 103,590
Common stock issued for debt
settlement with employees -- -- 743,526
Net loss -- (3,776,475) (3,776,475)
------------ ------------ ------------
Balance at September 30, 1996 (16,720) (23,060,563) (2,137,892)
Common stock issued for cash -- -- 446,940
Common stock issued in connection
with the exercise of stock options -- -- 54,363
Commissions paid in common stock
in connection with common
stock sales -- -- --
Common stock returned to the
Company in connection with the
settlement of VAST joint venture -- -- (119,350)
Preferred stock issued for settlement
of notes payable and in exchange
for common stock -- -- 157,500
Common stock issued for settlement
of a note payable and accrued
interest -- -- 1,105,179
Common stock issued in connection
with purchase of royalty rights -- -- 125,000
Common stock issued in connection
with acquisitions -- -- 174,880
Common stock issued for services -- -- 95,345
Common stock issued in connection
with the settlement of accrued
liabilities -- -- 55,101
Preferred stock dividends -- (12,000) (12,000)
Net loss -- (648,256) (648,256)
------------ ------------ ------------
(continued)
F-7(a)
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Preferred Stock Common Stock
--------------------------- --------------------------
Number Number Additional
of of Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Balance at September 30, 1997 1,000,000 $ 1,000,000 24,871,947 $ 24,872 $ 22,009,477
Common stock issued
for services -- -- 263,785 264 50,282
Common stock issued
to settle debt obligation -- -- 331,194 331 57,628
Common stock issued
for cash -- -- 2,087,800 2,088 275,506
Common stock returned
to Company in settlement
of SWSI acquisition -- -- -- -- --
Preferred stock dividends -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at September 30, 1998 1,000,000 1,000,000 27,554,726 27,555 23,392,893
Preferred stock dividends -- -- -- -- --
Net loss -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Balance at September 30, 1999 1,000,000 $ 1,000,000 27,554,726 $ 27,555 $ 22,392,893
============ ============ ============ ============ ============
(continued)
F-8
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Deficit
Accumulated Memorandum
During the Total
Treasury Development Shareholders'
Stock Stage Equity (Deficit)
----- ----- ----------------
Balance at September 30, 1997 $ (16,720) $(23,720,819) $ (703,190)
Common stock issued
for services -- -- 50,546
Common stock issued
to settle debt obligation -- -- 57,959
Common stock issued
for cash -- -- 277,594
Common stock returned
to Company in settlement
of SWSI acquisition (739) -- (739)
Preferred stock dividends -- (36,000) (36,000)
Net loss -- (336,535) (336,535)
------------ ------------ ------------
Balance at September 30, 1998 (17,459) (24,093,354) (690,365)
Preferred stock dividends -- (36,000) (36,000)
Net loss -- (94,352) (94,352)
------------ ------------ ------------
Balance at September 30, 1999 $ (17,459) $(24,223,706) $ (820,717)
============ ============ ============
F-8(a)
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit), Continued
Memorandum Total
Total Unrealized Cumulative Shareholders'
Shareholders' Holding Translation Equity
Equity (Deficit) Gain Adjustment (Deficit)
---------------- ---- ---------- ---------
Balance at January 6, 1986 $ -- $ -- $ -- $ --
=========== ============ ============ ===========
Balance at September 30, 1986 $ 143,496 $ -- $ -- $ 143,496
=========== ============ ============ ===========
Balance at September 30, 1987 $ 98,913 $ -- $ -- $ 98,913
=========== ============ ============ ===========
Balance at September 30, 1988 $ -- $ -- $ -- $ --
=========== ============ ============ ===========
Balance at September 30, 1989 $ 5,501,004 $ -- $ -- $ 5,501,004
=========== ============ ============ ===========
Balance at September 30, 1990 $ 1,636,097 $ -- $ -- $ 1,636,097
=========== ============ ============ ===========
Balance at September 30, 1991 $ 2,455,291 $ -- $ -- $ 2,455,291
=========== ============ ============ ===========
Balance at September 30, 1992 $ 2,393,554 $ -- $ -- $ 2,393,554
=========== ============ ============ ===========
Balance at 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 at September 30, 1994 $ 864,748 $ 1,660,517 $ (8,893) $ 2,516,372
=========== ============ ============ ===========
Memorandum total shareholders' deficit $(4,030,431) $ -- $ -- $(4,030,431)
Unrealized loss - foreign currency translation -- -- (11,191) (11,191)
----------- ------------ ------------ -----------
Balance at September 30, 1995 $(4,030,431) $ -- $ (11,191) $(4,041,622)
=========== ============ ============ ===========
Memorandum total shareholders' deficit $(2,137,892) $ -- $ -- $(2,137,892)
Unrealized loss - foreign currency translation -- -- (16,823) (16,823)
----------- ------------ ------------ -----------
Balance at September 30, 1996 $(2,137,892) $ -- $ (16,823) $(2,154,715)
=========== ============ ------------ ===========
Balance at September 30, 1997 $ (703,190) $ -- $ -- $ (703,190)
=========== ============ ============ ===========
Balance at September 30, 1998 $ (690,365) $ -- $ -- $ (690,365)
=========== ============ ============ ===========
Balance at September 30, 1999 $ (820,717) $ -- $ -- $ (820,717)
=========== ============ ============ ===========
See accompanying notes to consolidated financial statements.
F-9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Period from
January 6, 1986
Years Ended (Inception) to
September 30, September
------------------------------- ------------
1999 1998 1999
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (94,352) $ (336,535) $(24,139,706)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization -- -- 2,486,603
Loss (gain) on disposal of assets -- -- (2,565,391)
Loss on purchase of royalty rights -- -- 125,000
Loss on purchase of subsidiaries -- -- 442,419
Loss on sale of investments -- -- 35,072
Loss on equity securities -- -- 4,973,015
Write-down of investments to market -- -- 3,567,629
Debt forgiven -- (94,172) (1,046,887)
Territory management -- -- 205,000
Territory sales/reacquisition -- -- 482,586
Stock options -- -- 56,250
Equity in loss of joint venture -- -- 748,650
Common stock issued for software -- -- 58,988
Common stock issued for services -- 50,546 6,071,865
Common stock issued for obligations -- -- 2,744,293
Decrease (increase) in accounts receivable -- -- (329,229)
Decrease in other assets -- (1,000) 74,055
Increase in prepaid expenses -- 581 --
Increase (decrease) in accounts payable
and accrued expenses 43,822 20,408 1,103,261
------------ ------------ ------------
Net cash used by operating activities (50,530) (360,172) (4,906,527)
------------ ------------ ------------
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 -- -- (359,774)
Purchase of stock in affiliate -- -- (10,000)
Proceeds from sale of investments -- -- 277,739
Proceeds from insurance settlement -- -- 17,749
------------ ------------ ------------
Net cash provided by (used in) investing activities -- -- 269,158
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of common stock options -- -- 54,363
Proceeds from issuance of common stock -- 276,855 3,038,189
Payments on capital lease financing -- -- (20,976)
Principal payments on notes payable -- (16,875) (138,106)
Advances from affiliates -- -- 1,421,542
Payments to affiliates -- -- (509,317)
Advances on line of credit net (133) -- 158,696
Preferred stock dividends paid in cash -- (3,000) (6,000)
Advances on notes payable 50,000 100,000 639,000
------------ ------------ ------------
Net cash provided by financing activities 49,867 356,980 4,637,391
------------ ------------ ------------
(continued)
F-10
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows, Continued
Period from
January 6, 1986
Years Ended (Inception) to
September 30, September
---------------------------- -----------
1999 1998 1999
-------------- ----------- -----------
Net (decrease) increase in cash $ (663) $ (3,192) $ 22
Cash at beginning of year 685 3,877 --
-------------- ----------- -----------
Cash at end of year $ 22 $ 685 $ 22
============== =========== ===========
Noncash financing and investing activities:
Common stock issued in connection with the
settlement of certain accrued liabilities $ -- $ 120,005 $ 175,106
============== =========== ===========
Common stock issued in connection with the settlement
of notes payable $ -- $ -- $ 1,157,500
============== =========== ===========
Common stock issued in connection with the settlement
of accounts payable $ -- $ 57,959 $ 57,959
============== =========== ===========
Common stock issued in connection with the settlement
of certain accrued interest $ -- $ -- $ 105,179
============== =========== ===========
Preferred stock dividends included in accounts payable $ -- $ 36,000 $ 45,000
============== =========== ===========
Assets acquired and liabilities assumed in connection with
purchase of Tea Times of America, Inc.
Notes payable $ -- $ -- $ 218,500
============== =========== ===========
Accrued liabilities $ -- $ -- $ 35,320
============== =========== ===========
Accounts receivable $ -- $ -- $ 5,771
============== =========== ===========
Goodwill $ -- $ -- $ 28,682
============== =========== ===========
Common stock retired in connection with termination
of VAST joint venture $ -- $ -- $ 119,350
============== =========== ===========
Common stock issued in connection with acquisitions $ -- $ -- $ 174,880
============== =========== ===========
Common stock issued in connection with the purchase
of royalty rights $ -- $ -- $ 125,000
============== =========== ===========
Marketable securities received as contribution to capital $ -- $ -- $ 152,000
============== =========== ===========
Marketable securities contributed to capital $ -- $ -- $ (152,000)
============== =========== ===========
Additional paid in capital received $ -- $ -- $ 5,314,678
============== =========== ===========
Additional paid in capital contributed $ -- $ -- $(5,314,678)
============== =========== ===========
Transfer assets to limited partnership and termination
pursuant to agreement $ -- $ -- $ --
============== =========== ===========
Issuance of common stock in exchange for investment
in joint venture $ -- $ -- $ 868,000
============== =========== ===========
Issuance of common stock in exchange for liability to
issue common stock $ -- $ -- $ 3,187,349
============== =========== ===========
Supplemental information:
Interest paid $ 4,222 $ 7,065 $ 4,222
============== =========== ===========
Taxes paid $ -- $ -- $ --
============== =========== ===========
Loan assumed by shareholder $ 70,000 $ -- $ 70,000
============== =========== ===========
See accompanying notes to consolidated financial statements.
F-11
</TABLE>
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
AGT Sports, Inc. (the "Company") is in the development stage. The Company has
not commenced principal operations and has not sold significant products.
Revenue in prior periods resulted from preoperative product tests which were
unsuccessful and terminated prior to the commencement of planned principal
operations. The Company was incorporated under the laws of the state of Colorado
on January 6, 1986 as American Merger Control, Inc. 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). During the fiscal years ended September
30, 1991 and through September 30, 1998, the Company's business plan was to
pursue providing technological and software services to golf and related
industries. In 1998, the Company abandoned this business plan. Management of the
Company is now pursuing other alternatives such as possible business
combinations with other entities.
On September 26, 1997, the Company acquired 100% of the outstanding stock of
Super Women Systems, Inc. ("SWSI"). SWSI's primary business activity is the
development of computer systems and software which is marketed primarily to the
utility and transit industries. On January 8, 1998, the Company's board of
directors approved the sale of fifty-one percent of SWSI to an individual
effective December 1, 1997. As a result of the sale of fifty-one percent of SWSI
subsequent to fiscal year end and management s intention to dispose of the
remaining forty-nine percent of SWSI, control of SWSI is deemed to be temporary
in nature and accordingly, SWSI is not consolidated in the Company's September
30, 1997 financial statements.
In addition, because of uncertainties created by management disagreements and
cash flow problems at SWSI, the Company does not expect to realize any benefit
from this investment. No income or expense was recognized during the year ended
September 30, 1999. It is management's understanding that SWSI has ceased
operations.
On January 10, 1997, the Company acquired 100% of the outstanding stock of Tee
Times of America, Inc. ("TTA"). TTA's primary business activity is the
development of computer software for a golf tee time reservation system (see
Note 2). The operational activities of TTA substantially ceased subsequent to
the acquisition and the corporate charter was terminated in February 1999.
In fiscal 1994 and fiscal 1995, the Company established two wholly-owned
subsidiaries, AGTsports (Europe) Ltd. and AGTsports Australia Pty. Ltd. During
fiscal 1996, AGTsports Australia undertook an unsuccessful public offering which
failed to meet the "minimum" and was abandoned in April 1996. Neither company
ever achieved operational revenues and the Company suspended their operations in
fiscal 1996 due to lack of working capital in order to concentrate on markets
within the United States (U.S.). The Australian company was terminated in June
1997. The European subsidiary was terminated in May 1999.
F-12
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Summary of Significant Accounting Policies
A summary of the significant accounting policies used in preparing the
accompanying financial statements follows:
Basis of Presentation
The accompanying consolidated financial statements have been prepared on a going
concern basis which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the financial
statements, the Company has incurred net losses of $94,352 and $336,535 for the
years ended September 30, 1999 and 1998, respectively. At September 30, 1999 and
1998, the Company has a net working capital deficit of $820,717 and $631,365,
respectively, and a shareholders' deficit of $820,717 and $690,365, respectively
all of which raise substantial doubt about the Company's ability to continue as
a going concern. Management has developed plans intended to remedy these
conditions. These plans include seeking other sources of financing such as the
completion of a possible business combination and the sale of common stock. No
assurances can be given as to the success of these plans. In addition,
management has been advised by legal counsel that the Company may have violated
certain securities laws as discussed below which might result in additional
liability not currently determinable due to possible recission of certain common
stock sales. The financial statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.
Possible Securities Law Violations
The Company may have violated certain Federal and State laws in connection with
certain 1997 sales of common stock. Certain of the possible violations are
discussed below.
The Company's sales of common stock to approximately thirty persons aggregating
$477,950 in 1997 might be deemed to be in violation of Section 5 of the
Securities Act of 1993, as amended (the "1993 Act"). The Company has not
complied with the provisions of either Rule 505 or 506 and no Form D or other
similar filings have been made which claim or substantiate the availability of a
registration exemption under certain Federal and State securities laws.
Violation of Section 5 of the 1993 Act entitles the purchaser of the security to
recover from the Company the consideration paid for the security together with
interest thereon. The Company may also have violated certain Blue Sky laws of
the various states, in which investors reside. See Note 6 regarding the
Securities and Exchange Commissions formal private investigation of AGTsports,
Inc.
F-13
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Other Corporate Law Violations
The Company sold certain common stock in 1997 and the purchasers were given
contractual nondilutive rights in the event of a reverse split or similar common
stock adjustment. The Company's Articles of Incorporation do not permit the sale
of nondilutive common stock.
The Company has taken actions which it believes, based on the advice of legal
council, may cure the above securities law and corporate law violations as well
as any additional securities and corporate law violations that may have
occurred. However, the effect on the Company, if any, as a result of the
ultimate disposition of these matters cannot be determined.
Principles of Consolidation
The consolidated financial statements include the accounts of AGTsports, Inc.
and Tee Times of America, Inc., and its two wholly-owned foreign subsidiaries,
AGTsports Australia Pty. Ltd. and AGTsports (Europe) Ltd. All significant
intercompany transactions have been eliminated in consolidation.
Use of 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.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates, however,
management does not believe these differences would have a material effect on
operating results.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all short
term, highly liquid investments with maturities of three months or less to be
cash equivalents.
Property and Equipment
Property and equipment are carried at cost and are depreciated over their
estimated useful lives utilizing the straight-line method of accounting. The
Company does not have any operating assets for the year ended September 30,
1999.
F-14
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Revenue Recognition
Revenue is recognized when services are rendered or when computer software
products are delivered.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. The Company has
chosen to account for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the carrying amounts of
existing assets and liabilities measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Comprehensive Income
Financial Accounting Standards No. 130 establishes standards for reporting
comprehensive income which is defined as the change in equity of an enterprise
except those resulting from stockholder transactions. All components of
comprehensive income are required to be reported in the income statement. The
Company adopted this Standard effective October 1, 1998. During 1999, the
Company did not engage in any transactions required to be reported under this
new Standard.
Loss Per Share
Loss per common share has been computed based upon the weighted-average number
of shares outstanding during the period. Although the Company's preferred stock
(Note 2) and options (Note 5) are common stock equivalents, they are
antidilutive for the year ended September 30, 1999 and 1998.
F-15
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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."
Reclassificaitons
Certain reclassifications of prior year amounts have been made to conform to the
current year presentation.
NOTE 2 - ACQUISITIONS
SWSI
On September 26, 1997 the Company acquired 100% of the outstanding stock of SWSI
for an aggregate purchase price of $2,000,000. The purchase price was to be
payable as follows:
- 1,000,000 shares of restricted common stock of the Company,
representing (by agreement) $500,000 of the purchase price, on
September 26, 1997.
- On or before March 31, 1998, the balance due of the purchase price of
$1,500,000 was to be payable in common stock of the Company based on
the set per share value of the Company's common stock in an
anticipated public offering divided into the $1,500,000 purchase
price.
- In addition, from the proceeds of the anticipated public offering the
Company has agreed to provide a minimum of $500,000 for SWSI expansion
efforts.
- The Company agreed to be responsible for all working capital needs of
SWSI.
- The Company and prior stockholders of SWSI have agreed to indemnify
each other in the event of any breech or failure of observance of any
covenant or agreement or commitment made by the Company and SWSI.
F-16
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 2 - ACQUISITIONS (Continued)
On December 12, 1997 the Company entered into a settlement and release agreement
between the Company, SWSI and the president of SWSI. Significant provisions of
this agreement are as follows:
- The president of SWSI resigned effective January 1, 1998.
- The president of SWSI is released from any further obligations with
respect to the SWSI Stock Purchase Agreement of September 26, 1997.
- The Company agreed to cause SWSI to become current on all Internal
Revenue Service obligations on or before December 31, 1997. Such
obligations totaled $51,084 and were paid by the Company on February
12, 1998.
- The president of SWSI returned 539,000 shares of restricted common
stock to the Company.
- Effective January 1, 1998 the former President of SWSI will become a
consultant of SWSI for a period of one year for an annual salary of
$45,000.
- The Company agreed to assume responsibility for all of SWSI's
administrative functions and obligations.
The Company did not complete a public offering prior to March 31, 1998 and has
not completed a public offering through July 23, 1999. As a result, the
$1,500,000 of consideration discussed above has not been paid to SWSI. The
Company paid payroll tax obligations of $51,084 and advanced $68,553 to SWSI for
working capital in fiscal 1998. The advances for working capital and payroll
taxes of $119,637 were included in loss on purchase of subsidiaries in the
September 30, 1997 statements of operations and have also been included in
accrued expenses-SWSI in the September 30, 1997 consolidated balance sheet.
The Company believes, based on the advice of legal counsel, that the selling
stockholders of SWSI made certain misrepresentations with respect to the
financial condition of SWSI. As a result of the alleged misrepresentations the
Company is unsure as to whether the provisions of the SWSI Stock Purchase
Agreement of September 26, 1997 (the "Agreement") are enforceable and as a
result the Company is not complying with certain provisions of the Agreement and
therefore does not intend to pay the remaining $1,500,000 of consideration due
per the Agreement or to fund working capital obligations of SWSI as required per
the Agreement. The amount of working capital obligations, if any, cannot be
determined. In addition, whether or to what extent the Company is obligated with
respect to all of the original provisions of the Agreement cannot be determined.
Management does not believe the ultimate disposition of this matter will have a
material adverse affect on the financial condition or results of operations of
the Company.
F-17
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 2 - ACQUISITIONS (Continued)
On December 1, 1997 the Company sold fifty-one percent of SWSI to an individual
for $164,300. The Company issued a $164,300 noninterest bearing note receivable
due in monthly installments of $500 commencing February 1, 1998 with the unpaid
principle due February 1, 2003. The note receivable is collateralized by the
SWSI stock sold to the individual. The Company has not received any payments
with respect to the note receivable through July 31, 1998. Management is
currently negotiating to settle the note receivable with the individual and to
dispose of its forty-nine percent interest in SWSI.
The Company's remaining purchase of SWSI for 461,000 shares of restricted common
stock, after consideration of the 539,000 shares of restricted common stock
returned to the Company by the former president of SWSI was accounted for by the
equity method. The financial statements of SWSI were not consolidated with the
Company's financial statements because control of SWSI was deemed temporary in
nature as of September 30, 1997 as a result of the sale of fifty-one percent of
SWSI on December 1, 1997 and a plan implemented by management to dispose of the
Company's remaining forty-nine percent interest in SWSI. The cost of the
Company's investment in SWSI was $41,920, after reflecting a 50% discount from
the market value of common stock due to the restriction on sale. Due to the
uncertainty associated with the recoverability of the SWSI investment it has
been expensed as of September 30, 1997. Such amount is included in loss on
purchase of subsidiaries in the accompanying consolidated statements of
operations. In addition, the Company does not expect to realize any additional
earnings as a result of its investment in SWSI. It is management's understanding
that the SWSI operations have been terminated.
TTA
On January 10, 1997, the Company acquired 100% of the outstanding stock of TTA
for 175,000 shares of restricted common stock valued at $29,750, after
reflecting a 50% discount from the market value of common stock due to the
restriction on sale and 175,000 options to purchase 175,000 shares for $1 per
share. The common stock options have no expiration date. The transaction was
accounted for as a purchase and accordingly, the operating results of TTA have
been included in the Company's consolidated financial statements since the date
of the acquisition. In connection with the purchase of TTA the Company assumed
notes payable of $218,500 and accrued liabilities of $35,320 and acquired
accounts receivable of $5,771. As a result of the acquisition, $280,862 in
goodwill was recorded by the Company, which reflects the adjustments necessary
to allocate the purchase price to the fair value of assets purchased and
liabilities assumed. The Company subsequently determined the goodwill was not
recoverable and charged off goodwill of $280,862 during the year ended September
30, 1997. Such amount is included in loss on purchase of subsidiary in the
accompanying consolidated statements of operations.
F-18
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 2 - ACQUISITIONS (Continued)
The following unaudited proforma consolidated results of operations assumes the
acquisition of TTA had occurred on October 1 of each year.
Years Ended September 30,
-------------------------
1999 1998
--------- ------------
Unaudited Proforma Information
------------------------------
Revenue $ -- $ --
Net loss -- (336,535)
Loss per share -- (.012)
The unaudited proforma information is for informational purposes only and may
not necessarily reflect the consolidated results of operations of the Company
had the acquired business operated as part of the Company for the years ended
September 30, 1997.
J.M. Golf, Inc.
On January 10, 1997 the Company acquired all of the assets of J.M. Golf, Inc.
for 609,647 shares of restricted common stock of the Company valued at $103,640,
after reflecting a 50% discount from the market value of common stock due to the
restriction on sale. The assets acquired consisted primarily of a patent for a
handheld golf course distance computer for automatically computing distances to
sequentially selected points and is known as the Micro Caddie System. The
Company has not marketed the device and is uncertain as to the future
marketability. Due to uncertainty with respect to recoverability of the cost of
the patent the Company charged off the entire cost of $103,640 during the year
ended September 30, 1997. Such amount is in included in loss on disposal of
assets in the accompanying consolidated statements of operations.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has an agreement with Devine and Associates, Inc. and B. Mack Devine
("Mr. Devine") (the "Agreement") for Mr. Devine to serve as Chairman of the
Board of Directors, President and Chief Executive Officer of the Company through
December 31, 2001. B. Mack Devine receives no direct cash compensation from the
Company, he is however an officer of Devine and Associates, Inc. The Agreement
provides for annual consulting fees payable to Devine and Associates, Inc.
beginning January 1, 1997 payable as follows:
F-19
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
Year Ending December 31, Amount
------------------------ ------
1997 $ 100,000
1998 150,000
1999 200,000
2000 250,000
2001 300,000
In addition, the Agreement provided for an incentive bonus for the year ended
December 31, 1996 consisting of 250,000 shares of nondilutive restricted common
stock. These shares were issued to Devine and Associates, Inc. Such amount was
recorded during the year ended September 30, 1996. Commencing January 1, 1997
the Agreement provided for the payment of an annual cash bonus to Devine and
Associates, Inc. equal to 5% of earnings before taxes. In addition, the
Agreement provides for stock option incentives to Mr. Devine as follows:
Effective January 15, 1997 incentive stock options exercisable through
January 15, 2002 to purchase up to $100,000 in value of common stock
at the closing bid price (approximately 533,300 shares.) In addition,
the agreement provides for nonqualified stock options with no
expiration date to purchase common stock at the average closing bid
price during the twenty trading days immediately preceding the date of
grant are to be granted as follows:
Date of Grant Number of
December 31, Options
------------ -------
1997 1,000,000
1998 1,000,000
1999 1,000,000
2000 1,000,000
2001 1,000,000
F-20
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
Mr. Devine resigned as Chairman and CEO effective September 30, 1998. Based on
his employment contract, Mr. Devine retains all options granted prior to his
resignation.
Per the Agreement, during the year ended September 30, 1998, fees earned by
Devine and Associates, Inc. were as follows:
1999 1998
-------- --------
Consulting fees $ -- $144,550
Administration and accounting -- 9,280
Automobile allowance -- 6,500
-------- --------
$ -- $160,330
======== ========
Approximately $102,200 of these fees were converted to a note payable at
September 30, 1998.
In addition, Devine and Associates, Inc. was reimbursed for certain expenses
incurred on behalf of the Company as follows:
1999 1998
------- -------
Travel and entertainment $ -- $23,429
Other -- 7,428
------- -------
$ -- $30,857
======= =======
Mr. Devine has canceled all debt and options as of December 31, 1999 in exchange
for 500,000 shares of common stock.
On May 15, 1991, the Company entered into an agreement with American
Consolidated Growth Corporation ("AMGC") to acquire the division of AMGC known
as Advance Golf Technologies ("AGT") by the issue of 1,585,194 shares of AGT
common stock to AMGC. 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,
AMGC gained substantial control over the Company. At September 30, 1994, AMGC
owned 8.37% of the outstanding common stock of the Company.
F-21
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
On September 15, 1995 the Company entered into a resolution agreement with a
former affiliate, 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 shares of
common stock. Such shares were issued in October 1995. GLT subsequently sold
1,000,000 shares of common stock to third parties. In addition, GLT advanced the
Company $172,500 during the year ended September 30, 1996.
On May 27, 1997, the Joint Venture agreement dated September 15, 1995 between
Global Links Trading Ltd., AGTsports, Inc., and AMGC was amended as follows:
Revenue sharing arrangement was revised to provide for 85% of revenues
to the Company and 15% to AMGC.
GLT exchanged 6,850,000 shares of common stock and a note payable with
an outstanding principal balance of $172,500 for 1,000,000 shares of
preferred stock plus $15,000. The $15,000 cash payment was applied to
the note payable resulting in the settlement of a note payable of
$157,500 in connection with this transaction. The preferred stock is
convertible at the option of GLT at a ratio of two shares of
restricted common stock for each share of preferred stock. The
preferred stock bears an aggregate dividend of $3,000 per month for 83
months. As of September 30, 1999, accrued dividend payments of $78,000
were unpaid. Such amounts have been included in accounts payable at
September 30, 1999 in the accompanying balance sheet. The amended
joint venture agreement provides for a default in the event a
preferred stock dividend payment remains unpaid. The agreement
requires the Company to reissue all common stock surrendered by GLT
under this amendment and all future payments due by the Company shall
be suspended.
On July 10, 1998 GLT and the Company entered into a settlement agreement.
Significant provisions of the settlement agreement are as follows:
The Company agreed to pay GLT $1,000 upon execution of the settlement
agreement and $10,000 on September 1, 1998. The Company failed to make
the September 1, 1998 payment and GLT may, at its sole option, void
the settlement agreement and exercise all of its rights under the May
27, 1997 agreement discussed above. The $1,000 is reported as a
deposit on the September 30, 1998 and 1999 balance sheets.
F-22
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued)
GLT transferred its interest in all rights and obligations with the Company
to an unrelated company (NYCON Resources, Inc.) as of September 17, 1999.
In December 1999, NYCON terminated all debts and obligations with the
Company in exchange for 2,695,203 shares of common stock.
NOTE 4 - NOTES PAYABLE
Notes payable consist of the following:
1999 1998
-------- --------
Unsecured notes payable due on demand
Interest at 10%. $261,093 $146,226
Unsecured notes payable due on demand
Non-interest bearing. 35,000 30,000
Unsecured notes payable. Principal and
accrued interest at 10%, due February
and September 2000. 60,000 60,000
Demand note payable in full on June 10,
1999 with interest at 11.5% payable
monthly, guaranteed by a stockholder
of the Company. -- 70,000
Notes payable for $17,746 and $102,260 for
services, due December 31, 1998. Automatically
renewing for 60 and 90 days, respectively. If
not paid by December 31, 1998, the notes will
accrue interest at 12%. 120,006 120,006
Other 5,393 5,393
-------- --------
Total notes payable 481,492 431,625
Less current portion -- 371,625
-------- --------
Total long-term debt $ -- $ 60,000
======== ========
Required payments on long-term debt are as follows:
September 30,
-------------
2000 $ 60,000
========
F-23
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financia Statements
September 30, 1999 and 1998
NOTE 4 - NOTES PAYABLE (Continued)
As of September 30, 1999, $106,765 of interest was accrued related to these
notes.
With the exception of the $35,000 in unsecured non-interest bearing notes, the
fair value of these obligations approximates fair market value based on current
market rates. Because the non-interest bearing notes have no fixed maturity, it
is impossible to determine a fair value for these non-interest bearing
obligations.
On January 16, 1997 the holder of the $1,000,000 note payable at September 30,
1996 agreed to exchange the $1,000,000 note payable and accrued interest of
$105,179 through the date of the transaction for 3,000,000 shares of restricted
common stock. In addition the holder of the note payable sold to the Company
rights to 2.5% of the net operating revenues derived by the Company in a certain
region of the United States for 500,000 shares of common stock valued at
$125,000. The Company subsequently expensed the $125,000 as there was no
discernable value with respect to the asset acquired.
The holder of the $113,120 note payable at September 30, 1996 released the
Company of its obligation during fiscal 1997.
As discussed in Note 3 the holder of the $172,500 note payable at September 30,
1996 exchanged 6,850,000 shares of common stock and $172,500 note payable for
1,000,000 shares of preferred stock, plus $15,000.
NOTE 5 - ACCRUED EXPENSES
Components of accrued expenses are summarized as follows:
1999 1998
-------- --------
Accrued compensation $ 5,675 $ --
Accrued interest payable 106,765 58,950
-------- --------
Total $112,440 $ 58,950
======== ========
F-24
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The former president of the Company resigned effective March 1, 1998. A claim
was filed with the Oklahoma Department of Labor with respect to accrued unpaid
wages and expenses incurred on behalf of the Company for an aggregate total of
$14,615. In addition, the former president's employment agreement provided for
200,000 stock options to be granted annually beginning December 31, 1997 through
December 31, 2001. The options are exercisable at the average closing bid price
during the twenty trading days immediately preceding the date of grant. The
options are exercisable for a period of five years following the date of grant.
Although the Company is in dispute with the former president as to whether the
former president is entitled to common stock options subsequent to employment
termination, the options have been accrued as of September 30, 1998.
Accounts payable includes $65,003 due to one of the Company's vendors. In
February 1999, the vendor obtained a judgement against the Company for this
amount. In addition, the Company must pay interest on the unpaid judgement at 8%
per annum.
In August 1995, the Securities and Exchange Commission (SEC) 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.
The Company may have violated certain Federal and State laws in connection with
certain 1997 sales of common stock. Certain of the possible violations are
discussed below.
The Company's sales of common stock to approximately thirty persons aggregating
$477,950 in 1997 might be deemed to be in violation of Section 5 of the
Securities Act of 1993 as amended (the 93 Act). The Company has not complied
with the provisions of either Rule 505 or 506 and no Form D or other similar
fillings have been made which claim or substantiate the availability of a
registration exemption under certain Federal and State securities laws.
Violation of Section 5 of the Act entitles the purchaser of the security to
recover from the Company the consideration paid for the security together with
interest thereon. The Company may also have violated certain Blue-Sky laws of
the various states, in which investors reside.
The Company sold certain common stock in 1997 and the purchasers were given
contractual nondilutive rights in the event of a reverse split or similar common
stock adjustment. The Company's Articles of Incorporation do not permit the sale
of nondilutive common stock.
F-25
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)
The Company has taken actions which it believes, based on the advice of legal
council, may cure the above securities law and corporate law violations as well
as any additional securities and corporate law violations that may have
occurred. However, the effect on the Company, if any, as a result of the
ultimate disposition of these matters cannot be determined.
NOTE 7 - STOCK BASED COMPENSATION AND STOCK OPTIONS
On August 29, 1996 the Company's Board of Directors approved a director stock
option plan whereby 417,964 shares were reserved for grant to members of the
board of directors. The exercise price will be the average stock price during
the twenty trading days immediately preceding the grant. No common stock options
were granted in connection with this plan during the year ended September 30,
1998.
In addition, the Company has stock option plans under which certain key
employees may be granted options to purchase shares of Company common stock
which are exercisable at market value at the date of grant. Options generally
vest immediately and either have no expiration date or expire five years from
the date of the grant.
The Company applies APB Opinion 25 and related interpretations in accounting for
its plans. Accordingly, compensation costs are recognized as the difference
between the exercise price of each option and the market price of the Company's
stock at the date of grant. No compensation costs were charged to income in
1998. Had compensation for the Company's stock option plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of FASB Statement 123, the Company's net income would
not have changed.
The following is a summary of the status of the Company's stock option plans as
of September 30, 1999:
Number Option Price
of Shares Per Share
--------- ---------
Outstanding at 9/30/97 908,333 $ .19 to .35
Granted 1,200,000 .13
Exercised -- --
Expired (375,000) .35
---------- ------------
1,733,333 $ .13 to .19
========== ============
F-26
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 7 - STOCK BASED COMPENSATION AND STOCK OPTIONS (Continued)
Number Option Price
of Shares Per Share
--------- ---------
Outstanding at 9/30/98 1,733,333 $.13 to .19
Granted -- --
Exercised -- --
Expired -- --
--------- -----------
1,733,333 $.13 to .19
========= ===========
In addition, during fiscal 1997 certain purchasers of common stock were granted
875,250 options to purchase one share of common stock for each dollar invested.
Such options expire five years from the date of grant and are exercisable at 50%
of the market value of the common stock on the day of exercise. In addition,
175,000 options were issued to the selling shareholders of TTA. Such options are
exercisable at $1 per share. At September 30, 1999, 518,250 options are
outstanding with respect to options granted in connection with certain 1997
common stock sales and to the selling shareholders of TTA.
NOTE 8 - JOINT VENTURE AND COMMITMENT
In fiscal 1995, the Company entered into a joint venture with a South African
company ("VEI") 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.
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 Company's 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.
On March 17, 1997, the Company entered into an Agreement and Release with VEI
whereby the Company relinquished all ownership rights in VAST and agreements
related to VAST. In addition, VAST returned 700,000 shares of common stock to
the Company. The Company subsequently retired the 700,000 shares of common
stock.
F-27
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 9 - INCOME TAXES
The tax effects of temporary differences that give rise to significant portions
of the deferred tax asset are:
1999 1998
----------- -----------
Deferred tax assets:
Net operating loss carryforwards $ 4,867,006 $ 4,852,854
Goodwill 18,413 18,413
----------- -----------
Total gross deferred tax assets 4,885,419 4,871,267
Less valuation allowance (4,885,419) (4,871,267)
----------- -----------
Net deferred tax assets $ -- $ --
=========== ===========
A valuation allowance has been established to reduce the deferred tax assets to
an amount that management believes will ultimately be realized. Realization of
deferred tax assets is dependent upon sufficient future taxable income during
the period that temporary differences and carryforwards are expected to be
available to reduce taxable income. Based on the Company's history of operating
losses and expectations for the future, management believes sufficient
uncertainty exists regarding the realizability of these items that a valuation
allowance is required. Both the deferred tax asset and related valuation
allowance decreased by approximately $3,600,000 because of a change in
assumptions about the tax rate which will apply when the differences reverse.
The change in assumptions has no effect on the financial statements.
At September 30, 1999, the Company has net operating loss carryforwards for tax
reporting purposes totaling approximately $22,848,000. These carryforwards will
expire in the following fiscal years:
Fiscal Year Amount
----------- ------
2004 $ 1,376,000
2006 1,182,000
2007 7,590,000
2008 3,789,000
2009 5,206,000
2010 3,026,000
2011 92,000
2012 492,000
2013 95,000
------------
$ 22,848,000
============
F-28
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1998
NOTE 11 - SUBSEQUENT EVENTS
Stock for Indebtedness
In December, 1999 and January, 2000, the Company cancelled various indebtedness
and interest totaling approximately $407,376 in exchange for approximately
9,294,866 shares of common stock.
Preferred Stock Conversion
In December, 1999, NYCON Resources, Inc. converted their holding of 1,000,000
shares of Preferred Stock into 1,000,000 shares of common stock.
F-29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from balance sheet and
statement of operations accounts filed as for 10-QSB and is qualified in its
entirety by such registrant's annual report on 10-KSB for the year end period
September 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> SEP-30-1998
<PERIOD-END> SEP-30-1999
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,022
<CURRENT-LIABILITIES> 821,739
<BONDS> 0
0
1,000,000
<COMMON> 27,554,726
<OTHER-SE> (17,459)
<TOTAL-LIABILITY-AND-EQUITY> 1,022
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 37,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 856,363
<INCOME-PRETAX> (94,352)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (94,352)
<EPS-BASIC> (.003)
<EPS-DILUTED> (.003)
</TABLE>
