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, 2000
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, Colorado 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 [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form and no disclosure will be
contained, to the best of the Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $1,650
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, 2000, was $48,902. A total of 48,902,589 shares
were owned by non-affiliates as of September 30, 2000.
The number of shares of Common Stock, $.001 par value, outstanding on
September 30, 2000 was 49,848,919 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
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PART I
Item 1. Description of Business.
AGTsports, Inc. (the "Company") was 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. From
September 30, 1991 to September 30, 1998, the Company was engaged in efforts to
develop technology products and services for golf and sports applications. The
Company was unable to successfully bring its technology products to market and
discontinued its former business plan for its technology products in fiscal
1998.
During fiscal 1999 and fiscal 2000, and as of the date of filing of this
report, the Company has no operating business, assets or investments. The
Company has implemented a restructuring plan designed to negotiate settlement of
outstanding liabilities while exploring potential business combinations with as
yet unidentified third parties to generate new sources of revenue. The Company
can provide no assurances that management will be successful in these endeavors.
The Company continues to experience severe financial difficulties. 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
The Company's Articles of Incorporation, as amended, entitle it to transact
any lawful business for which corporations may be incorporated pursuant to the
Colorado Corporation Code. The Company may be considered as a "shell" company
whose sole purpose, at this time, is to search for and enter into new business
opportunities. The Company can provide no assurances when, or if, this will
occur.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any significant cash or other
assets. However, management believes that the Company will be able to offer
owners of acquisition candidates the opportunity to acquire a controlling
ownership interest in a publicly registered company without incurring the cost
and time required to conduct an initial public offering. Accordingly, the
Company's current purpose is to seek, investigate, and, if such investigation
warrants, acquire an interest in business opportunities presented to it by
persons or firms seeking the perceived advantages of a corporation which files
periodic reports under Section 13 and 15 of the Securities Exchange Act of 1934
(the "Exchange Act"). The Company may participate in a business venture of
virtually any kind or nature.
The following discussion of proposed business opportunities is purposefully
general and is not meant to be restrictive of the Company's discretion to search
for and enter into potential business opportunities. Management anticipates that
it may be able to participate in only one potential business venture because the
Company has nominal assets and limited financial resources (See "Financial
Statements"). This lack of diversification should be considered a substantial
risk to shareholders of the Company because it will not permit the Company to
offset potential losses from one venture against gains from another.
Due to general economic conditions, rapid technological advances being made
in some industries and shortages of available capital, management believes there
are a number of firms seeking the perceived benefits of a publicly registered
corporation. Such perceived benefits may include facilitating or improving the
terms on which additional equity financing may be sought, providing liquidity
for incentive stock options or similar benefits to key employees, providing
liquidity (subject to restrictions of applicable statutes) for all shareholders
and other factors. Potentially available business opportunities may occur in
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
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opportunities extremely difficult, time-consuming and complex. In addition,
potential detriments also exist which may include the significant legal and
accounting costs incurred in connection with the acquisition of a business
opportunity and the costs of preparing forms 8-K, 10Q, or agreements and related
reports and documents. The Exchange Act specifically requires that any merger or
acquisition candidate comply with all applicable reporting requirements, which
include providing audited financial statements to be included within the
numerous filings relevant to complying with the Exchange Act.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, the officers and directors of the Company. In analyzing
prospective business opportunities, management will consider such matters as the
available technical, financial and managerial resources; working capital and
other financial requirements; history of operations, if any; prospects for the
future; nature of present and expected competition; the quality and experience
of management services which may be available and the depth of that management;
the potential for further research, development or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact the
proposed activities of the Company; the potential for growth or expansion; the
potential for profit; the perceived public recognition or acceptance of
products, services or trades; name identification; and other relevant factors.
As part of the Company's investigation, officers and directors of the Company
will meet personally with management and key personnel of the business
opportunity, may visit and inspect material facilities, obtain independent
analysis or verification of certain information provided, check reference of
management and key personnel and take other reasonable investigation measures,
to the extent allowable in light of the Company's limited financial resources
and management expertise.
To the extent possible, the Company intends to utilize written reports and
personal investigation to evaluate the above factors. The Company will not
acquire or merge with any company for which audited financial statements cannot
be obtained within a reasonable period of time after closing of the proposed
transaction. Management of the Company, while not especially experienced in
matters relating to the new business of the Company, shall rely upon their own
efforts and, to a much lesser extent, the efforts of the Company's shareholders,
in accomplishing the business purposes of the Company. It is anticipated that
outside consultants or advisors may be retained in the future, in addition to
the Company's legal counsel and accountants, to effectuate the business plan
described herein. In the event such consultants succeed in helping the Company
to complete a business combination, due to the Company's limited financial
resources, they will, in all likelihood, need to be paid by the prospective
merger/acquisition candidate.
The Company will not restrict its search to any specific kind of firms, but
may acquire a venture which is in its preliminary or development stage, or which
is already in operation or which is in essentially any stage of its corporate
life. The Company may acquire assets and establish wholly owned subsidiaries in
various businesses or acquire existing businesses as subsidiaries. It is
impossible to predict at this time the status of any business in which the
Company may become engaged, in that such business may need to seek additional
capital, may desire to have its shares publicly traded or may seek other
perceived advantages which the Company may offer. The Company anticipates that
the selection of a business opportunity in which to participate will be complex,
time-consuming and extremely risky. A number of risks arise in the acquisition
of any business opportunity that could materially and adversely affect the
Company and its business and operating results, including:
o problems integrating the acquired operations, technologies or
products;
o diversion of management's time and attention from the core plan of
business;
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o difficulties in retaining business relationships with suppliers and
customers of the acquired company;
o risks associated with entering markets in which we lack prior
experience; and
o potential loss of key employees of the acquired company.
It is anticipated that the Company will incur certain expenses in the
implementation of its business plan described herein. Recognizing the Company
has no capital with which to pay these anticipated expenses, a number of the
Company's shareholders have voluntarily offered financial assistance to the
Company in the form of loans to be utilized for working capital purposes. In
making such loans, the Company's shareholders have acknowledged that the only
opportunity for these loans to be repaid will be through a prospective merger or
acquisition, and they have agreed among themselves that the repayment of any
loans made on behalf of the Company will not impede, or be made conditional in
any manner, on consummation of a proposed transaction. Notwithstanding the
potential for such voluntary loans, there is no assurances that the Company will
have, or can obtain, sufficient funds necessary to select, investigate and
thereafter acquire an interest in a new business opportunity.
Acquisition of Opportunities
In implementing a structure for a particular business acquisition, the
Company may become a party to a merger, consolidation, reorganization, joint
venture or licensing agreement with another corporation or entity. It may also
acquire stock or assets of an existing business. On the consummation of a
transaction, it is probable that the present management and shareholders of the
Company will no longer be in control of the Company. In addition, the Company's
directors may, as part of the terms of the acquisition transaction, resign and
be replaced by new directors without a vote of the Company's shareholders or may
sell their stock in the Company. Any and all such sales will only be made in
compliance with applicable federal and state securities laws. It is anticipated
that any securities issued in any such reorganization would be issued in
reliance upon exemption from registration under applicable federal and state
securities laws. In some circumstances, however, as a negotiated element of its
transaction, the Company may agree to register all or a part of such securities
immediately after the transaction is consummated or at specified times
thereafter. If such registration occurs, of which there can be no assurance, it
will be undertaken by the surviving entity after the Company has successfully
consummated a merger or acquisition. Until such time as this occurs, the Company
will not attempt to register any additional securities. The issuance of
substantial additional securities and their potential sale into any trading
market which may develop in the Company's securities may have a depressive
effect on the value of the Company's securities in the future, if such a market
develops, of which there is no assurance.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, the shareholders of the Company would retain less than
20% of the issued and outstanding shares of the surviving entity, which would
result in significant dilution in the equity of such shareholders.
With respect to any merger or acquisition, negotiations with target company
management are expected to focus on the percentage of the Company which target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
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assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to significant
and substantial reduction if the Company acquires a target company with
substantial assets. Any merger or acquisition effected by the Company can be
expected to have a significant and substantial dilutive effect on the percentage
of shares held by the Company's then-shareholders. The Company will, if required
by applicable law, seek shareholder approval of a proposed merger or acquisition
via a Proxy Statement. A prospective transaction can also be structured so that
it may be effectuated by the Board of Directors without shareholder approval.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of bearing costs, including costs
associated with the Company's attorneys and accountants, will set forth remedies
on default and will include miscellaneous other terms.
As stated hereinabove, the Company will not acquire or merge with any
entity which cannot provide independent audited financial statements within a
reasonable period of time after closing of the proposed transaction. The Company
is subject to all of the reporting requirements included in the Exchange Act.
Included in these requirements is the affirmative duty of the Company to file
independent audited financial statements as part of its Form 8-K to be filed
with the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements included in
its annual report on Form 10-KSB (or 10-K, as applicable). If such audited
financial statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements of the
Exchange Act, or if the audited financial statements provided do not conform to
the representations made by the candidate to be acquired in the closing
documents, the closing documents will provide that the proposed transaction will
be voidable, at the discretion of the present management of the Company. If such
transaction is voided, the agreement will also contain a provision providing for
the acquisition entity to reimburse the Company for all costs associated with
the proposed transaction.
Investment Company Act of 1940
The Company may participate in a business or opportunity by purchasing,
trading or selling the securities of such business. However, the Company does
not intend to engage primarily in such activities. Specifically, the Company
intends to conduct its activities so as to avoid being classified as an
"investment company" under the Investment Company Act of 1940 (the "Investment
Act"), and therefore avoid application of the costly and restrictive
registration and other provisions of the Investment Act and the regulations
promulgated thereunder. Section 3(a) of the Investment Act provides the
definition of an "investment company" which includes an entity that engages or
holds itself out as being engaged primarily in the business of investing,
reinvesting or trading in securities, or that engages or proposes to engage in
the business of investing, reinvesting, owning, holding or trading "investment
securities" (defined as all securities other than government securities,
securities of majority-owned subsidiaries and certain other securities) the
value of which exceeds 40% of the value of its total assets (excluding
government securities, cash or cash items). The Company intends to implement its
business plan in a manner that will result in the availability of this exception
from the definition of "investment company." Consequently, the Company's
participation in a business or opportunity through the purchase and sale of
investment securities will be limited. In order to avoid classification as an
investment company, the Company will search for, analyze and acquire or
participate in a business opportunity by use of a method that does not involve
the acquisition, ownership or holding of investment securities.
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The Company's plan of business may involve changes in its capital
structure, management, control and business, especially if it consummates a
reorganization as discussed above. Each of these areas is regulated by the
Investment Act, which regulation has the purported purpose of protecting
purchasers of investment company securities. Since the Company will not register
as an investment company, its shareholders will not be afforded these purported
protections. The Company intends to vigorously resist classification as an
investment company and to take advantage of any exemptions or exceptions from
application of the Investment Act. The necessity of asserting any such
resistance, or making any claim of exemption, could be time-consuming and
costly, or even prohibitive, given the Company's limited resources.
Compliance with Government Regulations
The operations of the Company 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, 2000,
the Company fully complies with the terms of this legislation as a U.S.
employer.
Research and Development Costs
As of September 30, 2000, the Company is not engaged in material research
and development activities and has not incurred material R&D costs in the prior
three fiscal periods.
Trade Names.
The Company does not own or utilize any trade names.
Intellectual Property.
The Company does not own any intellectual property or patents.
Competition
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's combined extremely limited financial resources and limited
management availability, the Company will continue to be at a significant
competitive disadvantage compared to the Company's competitors.
Employees
The Company has no full time employees. The Company's President works in a
consulting capacity. The President anticipates that the business plan described
herein can be implemented by his devoting approximately 100 hours per month to
the business affairs of the Company and, consequently, conflicts of interest may
arise with respect to his limited time commitment. See Item 9, "Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Exchange Act."
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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] (See "Item 2. Property," below.)
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" regarding the
Company's financial position, its acquisition strategy and approach to the
acquistion of business opportunities and other matters are forward-looking
statements. Although the Company believes that the limited expectations
reflected in such forward looking statements are reasonable, it can give no
assurance 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.
The Company owns no property or assets, and maintains no operating leases
as of September 30, 2000. The Company rents an office of approximately 1,500
square feet on a month-to-month basis at a rate of $1,600 per month. In the
fiscal year 2000, the Company paid rent expenses of $19,200 for the use of this
office.
Item 3. Legal Proceedings
As of the date of filing of this report, the Company is not a party to, nor
aware of, any legal proceedings against it which, in the opinion of management,
are material to the future of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the Stockholders during the
fiscal year ended September 30, 2000.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) MARKET INFORMATION. The Company's Common Stock trades in the
over-the-counter market, under the symbol "AGTP." The following table sets forth
the high and low bid prices for the Company's Common Stock for the periods
indicated as reported by the OTC Bulletin Board. These prices are believed to be
inter-dealer quotations and do not include retail mark-ups, mark-downs, or other
fees or commissions, and may not necessarily represent actual transactions.
Quarter Ending High Bid Low Bid
-------------- -------- -------
September 30, 2000 $0.02 $.001
June 30, 2000 0.08 .02
March 31, 2000 0.11 .08
December 31, 1999 0.02 .00
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
(b) HOLDERS. As of January 15, 2001, the Company had 830 shareholders of
record. This does not include shareholders who hold stock in their accounts at
broker/dealers.
(c) DIVIDENDS. The Company has never paid a cash dividend on its common
stock and does not expect to pay a cash dividend in the foreseeable future.
(d) RECENT SALES OF UNREGISTERED SECURITIES.
In December, 1999, the Company completed a settlement agreement with a
shareholder of the Company to cancel and retire all shares of its issued and
outstanding Series A preferred stock. Pursuant to the conversion terms of the
Company's Series A preferred shares, the Company converted 1,000,000 shares of
non-voting preferred stock on a one-for-two basis into 2,000,000 restricted
shares of the Company's voting common stock. The Company also satisfied payment
of $87,000 in accrued and unpaid preferred stock dividends by the issuance of
additional restricted common shares to the shareholder. Finally, the Company
issued to 6,850,000 restricted common shares to the same shareholder as required
under the default terms of a joint venture agreement and thereby released the
Company from further obligations thereunder. (See "Item 12 - Certain
Transactions and Related Transactions" below and "Notes to Consolidated
Financial Statements".) The subject shares were issued by the Company in
reliance upon various registration exemptions including Sections 4(2) and 4(6)
of the 1933 Act. Appropriate restrictive legends were placed on all certificates
and stop transfer instructions were issued to the transfer agent.
During the year ended September 30, 2000, the Company issued 13,440,193
restricted shares of its common shares to 12 existing shareholders (each being
an accredited investor) and two (2) former employees in exchange for the
cancellation of outstanding indebtedness and claims. The subject shares were
issued by the Company in reliance upon a registration exemption afforded by
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Sections 4(2) and/or 4(6) of the 1933 Act and the provisions of Regulation D
promulgated thereunder. Each person was provided with current information on the
Company and provided an opportunity to ask questions of management. Appropriate
restrictive legends were placed on all certificates and stop transfer
instructions were issued to the transfer agent.
During September, 2000, the Company issued an aggregate of 1,494,395 shares
of Series 2000A Preferred Stock in exchange for the cancellation and
satisfaction of indebtedness and to eliminate, cancel and release certain
alleged "anti-dilution" rights and stock options offered to approximately 30
investors who participated in the Company's private placements of its common
stock in 1997 and 1998. As to subject shares issued to the approximately 20
non-U.S. persons, the Company relied upon a registration exemption afforded by
Regulation S promulgated under the 1933 Act. The remaining shares were issued by
the Company in reliance upon a registration exemption afforded by Sections 3(b)
and/or 4(2) of the 1933 Act and the provisions of Regulation D promulgated
thereunder. Each person was provided with current information on the Company and
provided an opportunity to ask questions of management. Appropriate restrictive
legends were placed on all certificates and stop transfer instructions were
issued to the transfer agent.
ITEM 6. Management's Discussion and Analysis of Financial Condition and plan of
Operations
For the fiscal year ended September 30, 2000, the Company was principally
involved in settling its delinquent indebtedness and exploring potential
business opportunities with third parties. During fiscal 2000, the Company
settled numerous delinquent accounts payable, note payable balances and
potential claims in consideration of a combination of cash payments aggregating
$33,000, the issuance of 22,294,193 restricted shares of the Company's common
stock, and 1,494,395 shares of Series 2000A preferred stock in satisfaction of
debts and claims valued at approximately $993,700, and which resulted in net
debt forgiveness of approximately $301,000.
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 fiscal 2000, the Company had a net
working capital deficit of ($63,167) and a shareholders deficit of ($62,167).
There is no assurance 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.
RESULTS OF OPERATIONS
As of September 30, 2000, the Company had no assets other than minor cash
balances and had settled substantially all of its indebtedness. Revenues for the
fiscal year 2000 were $1,650 as compared to zero revenues for the fiscal year
ended September 30, 1999.
General and administrative expenses for the year ended September 30, 2000
were $51,576 as compared to $4,923 for the year ended September 30, 2000. The
increase in general and administrative expenses was due to the efforts to clean
up the Company's balance sheet. Interest expense decreased from $56,363 in the
year ended September 30, 1999 to $23,867 in fiscal 2000 due to the difference in
nature of settlements reached during 1999 as compared to 2000. For the year
ended September 30, 2000, the Company recognized extraordinary income from debt
forgiveness in the amount of $200,438 (net of $100,000 in income taxes) and
income tax benefit realized in the amount of $19,878, all due to the settlement
of various debts owed by the Company.
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The Company had a net loss before extraordinary income of $169,348 in the
year ended September 30, 2000 compared to a net loss of $94,352 for the year
ended September 30, 1999. However, the Company had net income for the year ended
September 30, 2000 in the amount of $50,968 as compared to a net loss of $94,352
for the prior year. The 2000 net income was due principally to the extraordinary
income relating to the Company's efforts to settle outstanding debt and
liabilities which resulted in debt forgiveness income.
In the opinion of management, the Company has not progressed significantly
in its operations over prior periods. 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
There was no significant change in the Company's deficit working capital
during fiscal year 2000 as the Company continued restructuring with the
objective of pursuing new business opportunities. Cash and cash equivalent's
balance on September 30, 2000 was $16,547. Current assets were $16,547 and
current liabilities were $79,714. At September 30, 2000, the Company has no
underlying business or investments and continues to experience severe working
capital shortages. For the fiscal year ending September 30, 2000, the Company
had nominal revenues, total expenses of $251,810 but had net income of $50,968
as a result of extraordinary income in the amount of approximately $220,316.
This net income was attributed to debt forgiveness arising in connection with
the restructuring of the Company. At September 30, 2000, the Company has working
capital deficiency of $(63,167) and a stockholders deficit of $(62,167). 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" below).
Material Commitments for Capital Expenditures
As of September 30, 2000, the Company has no material commitments for
capital expenditures.
Unfavorable Trends or Uncertainties
The business of the Company 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
The Company is not subject to seasonal fluctuations in its business cycle
which have a material impact on operations.
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ITEM 7. FINANCIAL STATEMENTS.
The Consolidated Financial Statements of the Company are attached as
follows:
Page
----
Independent Auditor's Report ....................................... F-1
Balance Sheets - September 30, 2000 and 1999 ....................... F-2
Statements of Operations for the Years Ended
September 30, 2000 and 1999 ........................................ F-3
Statements of Changes in Stockholders' Equity
for the Years Ended September 30, 2000 and 1999 .................... F-5
Statements of Cash Flows for the Years Ended
September 30, 2000 and 1999 ........................................ F-6
Notes to the Financial Statements - September 30,
2000 and 1999 ...................................................... F-8
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
Information with respect to the executive officers and directors of the Company
is set forth below:
Name Age Company Positions and Offices
---- --- -----------------------------
Cory J. Coppage 37 President, Treasurer, Corporate
Secretary, Director
Louis F. Coppage 63 Director
Business Experience of EXECUTIVE Officers and Directors
Cory J. Coppage, President, Treasurer, Secretary and Director. Mr. Coppage,
38, 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 ten years
of business management experience working with various public and private
companies. From 1999 to present, he has served as secretary and past director of
SAN Holdings, Inc. "SANZ" (formerly Citadel Environmental Group, Inc.), a data
storage technology services business based in Castle Rock, CO. He is a
consultant and secretary of TangibleData, Inc., a digital content publishing and
distribution business based in Boulder, CO. From 1994 to 1998, he was secretary
and a member of the board of directors of American Consolidated Growth
Corporation, a public holding company and Colorado corporation. 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. Mr. Coppage has expertise in the areas of business
administration, investor relations and early stage development of public
companies. He holds a bachelors of science degree in business administration
from Regis University (1985) located in Denver, Colorado.
Louis F. Coppage, Director. Mr. Coppage, 63, was appointed to the board of
directors of the Company in 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. From 1997 to
2000, he served as president and director of Citadel Environmental Group, Inc.,
a Colorado corporation. In 2000, he served as chairman of SAN Holdings, Inc., a
data storage technology services business based in Castle Rock, CO. From 1986 to
present, Mr. Coppage has served as a financial consultant for numerous clients
in real estate, energy, insurance, and investments. He has provided advisory
services with an emphasis on the capital formation process for corporate clients
including SyberSay Communications, a wireless appliance business in Walnut
Creek, CA, and Alliance Medical Corporation, a medical instrument recycling
business in Phoenix, AZ. 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 studied
business at the University of Maryland and Emporia State College before
beginning his career at Connecticut General Life Insurance Company (1964), where
he was recognized for his achievements 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.
13
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors and shareholders of more than ten percent of the
Company's capital stock to file reports of ownership and change in ownership
with the Securities and Exchange Commission (SEC) and the National Association
of Securities Dealers, Inc. Officers, directors and greater-than-ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they may file from time to time.
Based solely upon a review of the copies of ownership reports submitted to
it, the Company believes that, for the fiscal year ended September 30, 2000,
Cory Coppage and Louis Coppage, as officers and directors of the Company, filed
ownership change reports, but such reports were filed late.
Item 10. Executive Compensation
The following table sets forth information regarding the executive
compensation for the Company's President and each other executive officer whose
total annual salary and bonus exceeded $100,000 for the years ended September
30, 2000 and 1999:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- ----------------- -------
SECURITIES
UNDERLY-
OTHER RE- ING ALL
ANNUAL STRICTED OPTIONS/ OTHER
NAME AND PRINCIPAL COMPEN- STOCK SARs LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARD(S) (NUMBER) PAYOUTS SATION
------------------ ---- ------- ----- ------ -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cory J. Coppage, 2000 $60,000 0 -- 22,500 -- -- --
President 1999 $30,000 0 -- -- -- -- --
</TABLE>
On October 1, 1999, the Company entered into a Consulting Agreement with
Cory J. Coppage, the acting President, for business development and
administrative services. The subject agreement expires on September 30, 2001 and
provides consulting fees of $5,000 per month and a one time stock grant. On
September 30, 2000, the Company issued 225,000 Series 2000A preferred shares to
Mr. Coppage, with such shares having a liquidation value of $0.10 per share or
$22,500. Expenses of $27,000 were reimbursed with accrued fees and expenses of
$65,000 at September 30, 2000. During fiscal 2000, the Company recognized
$60,000 in compensation expense.
The Company accrued $60,000 in compensation to the executive officers as
a group for services rendered to the Company in all capacities during the fiscal
year 2000. No one executive officer received, or has accrued for his benefit, in
excess of $60,000 for the year. No cash bonuses were or are to be paid to such
persons. There are currently no options outstanding under any of the Company's
employee incentive stock option plans and no options were granted during the
14
<PAGE>
2000 fiscal year. There are no plans pursuant to which cash or non-cash
compensation was paid or distributed during the last fiscal year, or is proposed
to be paid or distributed in the future, to the executive officers of the
Company. No other compensation not described above was paid or distributed
during the last fiscal year to the executive officers of the Company. There are
no compensatory plans or arrangements, with respect to any executive officer of
the Company, which would result from the resignation, retirement or any other
termination of such individual's employment with the Company or from a change in
control of the Company or a change in the individual's responsibilities
following a change in control.
Director Compensation
Employee directors do not receive any additional compensation for Board or
committee service. Non-employee directors are not compensated for each Board
meeting they attend, other than for the reimbursement of expenses.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the ownership of
shares of the Company's common stock by (i) each person known by the Company to
own 5 % or more of such class of equity securities, (ii) each officer and
director of the Company, and by (iii) all executive officers and directors as a
group.
Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Ownership
--------------------------------------------------------------------------------
Cory J. Coppage 926,164 1.9%
7255 E. Quincy Ave, Suite 550
Denver, CO 80237
Louis F. Coppage 20,166 .--
7350 N. Broadway, Suite 111
Denver, CO 80221
NyCon Resources 12,015,728 24.1%
12345 W. Alameda Parkway
Lakewood, CO 80220
All Directors and Officers as a Group 946,330 1.9%
In addition to the ownership of the Company's common stock as set forth
above, the following table sets forth information regarding the ownership of the
Company's Series 2000A preferred stock by (i) each person known by the Company
to own 5 % or more of this class of securities, (ii) each officer and director
of the Company, and by (iii) all executive officers and directors as a group.
15
<PAGE>
Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Ownership (1)
--------------------------------------------------------------------------------
Cory J. Coppage 245,204 16.4 %
7255 E. Quincy Ave, Suite 550
Denver, CO 80237
NyCon Resources 307,260 20.5%
12345 W. Alameda Parkway
Lakewood, CO 80220
Frank and Angela Barchella 100,000 6.7%
4312 Woodman Avenue
3rd Floor
Sherman Oaks, CA 91423
Randall Toig 107,670 7.2%
680 Lakeshore Drive
Suite 830
Chicago, IL 60611
Arthur V. Adams Trust dtd 1997 100,870 6.7%
3170 W. Sahara Avenue
Suite D-11
Las Vegas, NV 89102
Steve Moore 104,650 7.0%
56312 Dearborn
Spokane, WA 99223
All Directors and Officers as a Group 245,204 16.4%
(1) Includes all Series A and Series 2000A preferred shares issued and
outstanding. At September 30, 2000, there are 1,500,000 Series A
preferred shares authorized, of which none are issued and outstanding,
and 1,500,000 Series 2000A preferred shares authorized and 1,494,395
are issued and outstanding. Each share of the Company's Series 2000A
preferred stock is automatically converted into one share of common
stock at the earlier of (a) the closing of a firm commitment
underwritten public offering pursuant to an effective registration
statement, covering the offer and sale of shares of the Company's
common stock to the public with net proceeds to the Company of not
less than $2 million, or (b) the consent of the holders of at least 66
2/3% of all outstanding shares of the Preferred Stock. (See "Notes to
Consolidated Financial Statements, Note 4" 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, 2000. Beneficial ownership is calculated in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder.
16
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as noted below, there were no transactions exceeding $60,000 during
the last two years, or proposed transactions, in which the Company was, or is to
be a party, in which an officer, director, 5% of more shareholder or any
immediate family member thereof, had or is to have a direct or indirect material
interest.
In December, 1999, the Company converted 1,000,000 shares of non-voting
Series A convertible preferred stock held by NyCon Reources, a principal
shareholder, into 2,000,000 restricted shares of the Company's voting common
stock. In addition, the Company issued 2,695,203 restricted shares of its common
stock to NyCon Resources as payment for minor interest and debt and $87,000 in
accrued dividends of its Series A preferred stock.
During fiscal 1999, the Company received notice that NyCon Resources had
been assigned the interest of Global Links Trading, Ltd. in connection with a
1997 joint venture agreement between the Company and Global Links Trading, Ltd.
In December, 1999, pursuant to the terms of the joint venture agreement, the
Company issued to NyCon Resources 6,850,000 shares of its common stock as
required under the default terms of the joint venture agreement. Effective
December 16, 1999, the joint venture was cancelled thereby releasing the Company
from any further obligations thereunder.
In December, 1999, the Company issued 500,000 restricted common shares to a
former employee as consideration for canceling unissued stock options granted
under a 1997 employment agreement. The employment agreement provided for
1,000,000 stock options to be issued annually over a five-year term, with
incentive options to purchase up to $100,000 of common stock at the closing bid
price on the date of exercise expiring in 2002 See "Notes to Consolidated
Financial Statements, Note 5" below
In June, 2000, the Company settled a claim for disputed wages and expenses
of $14,615 with the former president of the Company by issuing 325,000
restricted common shares to him. Pursuant to the settlement agreement, the
Company canceled unissued stock options granted under a 1997 employment
agreement which were accrued in the fiscal years 1999 and 1998. See "Notes to
Consolidated Financial Statements, Note 5" below.
17
<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 3.3 below.
18
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
September 30, 2000 and 1999
Tampa, Florida
Audited Consolidated Financial Statements
At September 30, 2000 and 1999 and
for the Years then Ended and for the Cumulative
Period from January 6, 1986 (inception) to September 30, 2000
(Together with Independent Auditors' Report)
19
<PAGE>
CONTENTS
--------
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3, F-4
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIT) F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS F-6, F-7
NOTES TO FINANCIAL STATEMENTS F-8
20
<PAGE>
Independent Auditors' Report
The Board of Directors
AGTsports, Inc.
Tampa, Florida:
We have audited the accompanying consolidated balance sheets of AGTsports, Inc.
(a development stage company) (the "Company") at September 30, 2000 and 1999,
and the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the years then ended and the fiscal 2000 and 1999
amounts included in the cumulative amounts from January 6, 1986 (inception) to
September 30, 2000. 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 audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the September 30, 2000 and 1999 consolidated financial
statements referred to above present fairly, in all material respects, the
financial position, consolidated results of operations and cash flows for the
year then ended and the cumulative amounts from January 6, 1986 (inception) to
September 30, 2000.
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.
/s/ BRIMMER, BUREK & KEELAN LLP
-------------------------------
BRIMMER, BUREK & KEELAN LLP
Certified Public Accountants
January 10, 2001
F-1
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
Tampa, Florida
Balance Sheets
September 30, 2000
ASSETS
2000 1999
------------ ------------
<S> <C> <C>
Current:
Cash $ 16,547 $ 22
------------ ------------
Total current assets 16,547 22
Property and Equipment 1,000 --
Deposits -- 1,000
------------ ------------
Total assets 17,547 1,022
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 12,455 $ 227,807
Accrued expenses 64,804 112,440
Notes payable - current 2,455 481,492
------------ ------------
Total current liabilities 79,714 821,739
Notes payable (less current portion) -- --
------------ ------------
Total liabilities 79,714 821,739
Shareholders' deficit:
Convertible Preferred stock, $.001 par value;
1,500,000 shares authorized; 1,494,395
shares issued and outstanding (Note 2) 1,494 --
Convertible Preferred stock, $1.00 par value;
5,000,000 shares authorized; 1,000,000
shares issued and outstanding (Note 2) -- 1,000,000
Common stock, $.001 par value; 50,000,000
shares authorized; 49,848,919 shares issued
and outstanding 49,845 27,555
Treasury stock -- (17,459)
Additional paid-in capital 24,085,691 22,392,893
Deficit accumulated during the development stage (24,199,197) (24,223,706)
------------ ------------
Total shareholders' deficit (62,167) (820,717)
------------ ------------
Total liabilities and shareholders' deficit $ 17,547 $ 1,022
============ ============
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 September 30, Through
---------------------------- September 30,
2000 1999 2000
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Territory sales $ -- $ -- $ 1,612,009
Other revenue 1,650 -- 2,294,425
------------ ------------ ------------
1,650 -- 3,906,434
------------ ------------ ------------
Expenses:
Cost of purchased goods for resale -- -- 162,378
Salaries and director compensation 1,000 -- 3,420,101
Professional services (approximately 82 and 91
percent paid to related parties in 2000 and
1999 respectively) 100,988 33,066 4,087,072
General and administrative 51,576 4,923 3,471,708
Depreciation and amortization 200 -- 2,486,803
Advertising -- -- 306,112
Contract services -- -- 4,985,397
Cost of unsuccessful offering -- -- 56,860
Travel and entertainment 2,781 -- 918,937
Territory reacquisition -- -- 1,465,075
------------ ------------ ------------
Total expenses 156,545 37,989 21,360,443
------------ ------------ ------------
Preoperative loss (154,895) (37,989) (17,454,009)
Other income (expenses):
Interest income -- -- 1,081
Rent income -- -- 14,992
Interest expense (23,867) (56,363) (710,375)
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)
Settlement of claims (71,398) -- (71,398)
Other income -- -- 84,565
------------ ------------ ------------
Total other income (expenses), net (95,265) (56,363) (8,238,313)
------------ ------------ ------------
Net loss before extraordinary items and
provision for income taxes (250,160) (94,352) (25,692,322)
Provision for income taxes (80,812) -- (1,873,815)
------------ ------------ ------------
Loss before extraordinary items (169,348) (94,352) (23,818,507)
Extraordinary items:
Income tax benefit realized 19,878 -- 1,812,911
Debt forgiveness (net of $100,690 in income taxes) 200,438 -- 1,163,709
Debt forgiveness - AGTsports Australia Pty Ltd. -- -- 339,155
------------ ------------ ------------
Net income (loss) $ 50,968 $ (94,352) $(20,502,732)
============ ============ ============
See accompanying notes to consolidated financial statements.
F-3
</TABLE>
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
Years Ended September 30,
--------------------------
2000 1999
----------- -----------
Basic Earnings per Share
Loss per common share before extraordinary items $ (0.004) $ (0.003)
Extraordinary items per common share 0.006 --
----------- -----------
Net income (loss) per common share $ 0.002 $ (0.003)
=========== ===========
Weighted-average shares of common stock outstanding 39,288,360 27,554,726
=========== ===========
Fully diluted earnings per share
Loss per common share before extraordinary items $ (0.004) $ (0.003)
Extraordinary items per common share 0.005 --
----------- -----------
Net income (loss) per common share $ 0.001 $ (0.003)
=========== ===========
Weighted-average shares of common stock outstanding 41,335,621 27,554,726
=========== ===========
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
Memorandum Total
Total Unrealized Cumulative Shareholders'
Shareholders' Holding Translation Equity
Equity (Deficit) Gain Adjustment (Deficit)
--------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
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)
=========== ============= ============= ===========
Balance at September 30, 2000 $ (62,167) $ -- $ -- $ (62,167)
=========== ============= ============= ===========
See accompanying notes to consolidated financial statements.
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Period from
Years Ended January 6, 1986
September 30, (Inception) to
--------------------------- September
2000 1999 2000
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 50,968 $ (94,352) $(24,088,738)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 200 -- 2,486,803
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 (301,127) -- (1,348,014)
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 31,150 -- 6,103,015
Common stock issued for obligations -- -- 2,744,293
Preferred stock issued for services 23,751 -- 23,751
Preferred stock issued for settlement expenses 40,247 -- 40,247
Decrease (increase) in accounts receivable -- -- (329,229)
Decrease in other assets -- -- 74,055
Increase in prepaid expenses -- -- --
Increase (decrease) in accounts payable
and accrued expenses 81,806 43,822 1,185,067
------------ ------------ ------------
Net cash used by operating activities (73,005) (50,530) (4,979,532)
------------ ------------ ------------
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 (1,200) -- (360,974)
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 (1,200) -- 267,958
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of common stock options -- -- 54,363
Proceeds from issuance of common stock -- -- 3,038,189
Payments on capital lease financing -- -- (20,976)
Principal payments on notes payable -- -- (138,106)
Advances from affiliates -- -- 1,421,542
Payments to affiliates -- -- (509,317)
Advances on line of credit (net) (804) (133) 157,892
Preferred stock dividends paid in cash -- -- (6,000)
Advances on notes payable 91,534 50,000 730,534
------------ ------------ ------------
Net cash provided by financing activities 90,730 49,867 4,728,121
------------ ------------ ------------
Net increase (decrease) in cash $ 16,525 $ (663) $ 16,547
Cash at beginning of year 22 685 --
------------ ------------ ------------
Cash at end of year $ 16,547 $ 22 $ 16,547
============ ============ ============
F-6
<PAGE>
AGTsports, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows, Continued
Period from
Years Ended January 6, 1986
September 30, (Inception) to
--------------------------- September
2000 1999 2000
------------ ------------ ------------
Noncash financing and investing activities:
Common stock issued in connection with the
settlement of certain accrued liabilities $ -- $ -- $ 175,106
============ ============ ============
Common stock issued in connection with the settlement
of notes payable $ 474,006 $ -- $ 1,631,506
============ ============ ============
Common stock issued in connection with the settlement
of accounts payable $ 3,528 $ -- $ 61,487
============ ============ ============
Common stock issued in connection with the settlement
of certain accrued interest $ 59,459 $ -- $ 164,638
============ ============ ============
Preferred stock issued in connection with settlement
of notes payable $ 12,175 $ -- $ 12,175
============ ============ ============
Preferred stock issued in connection with settlement
of accounts payable $ 1,910 $ -- $ 1,910
============ ============ ============
Preferred stock issued in connection with settlement
of accrued interest $ 71,356 $ -- $ 71,356
============ ============ ============
Accrued dividends converted to note payable $ 87,000 $ -- $ 87,000
============ ============ ============
$1 Par preferred stock converted to common stock $ 999,000 $ -- $ 999,000
============ ============ ============
Preferred stock dividends included in accounts payable $ -- $ -- $ 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
============ ============ ============
Loan assumed by shareholder $ -- $ 70,000 $ 70,000
============ ============ ============
Supplemental information:
Interest paid $ -- $ 4,222
============ ============
Taxes paid $ -- $ --
============ ============
See accompanying notes to consolidated financial statements.
F-7
</TABLE>
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
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.
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 before extraordinary items of
$169,348 and $94,352 for the years ended September 30, 2000 and 1999,
respectively. At September 30, 2000 and 1999, the Company has a net working
capital deficit of $63,167 and $821,717 respectively, and a shareholders'
deficit of $62,167 and $820,717 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. The financial statements do not include any adjustments
that might result should the Company be unable to continue as a going concern.
F-8
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 1999 and 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Principles of Consolidation
The September 30, 1999 consolidated financial statements include the accounts of
AGTsports, Inc., Tee Times of America, Inc., and AGTsports (Europe) Ltd. a
wholly owned foreign subsidiary. All significant intercompany transactions have
been eliminated in consolidation. Because of the closing of the subsidiaries in
fiscal 1999, the September 30, 2000 statements include only the accounts of
AGTsports, Inc.
Tee Times of America, Inc. ("TTA") was acquired on January 10, 1997. TTA's
primary business activity was the development of computer software for a golf
tee-time reservation system The operational activities of TTA ceased subsequent
to the acquisition and the corporate charter was closed in February 1999.
AGTsports (Europe) Ltd. (a wholly-owned foreign subsidiary) never 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.). This subsidiary was closed in May 1999.
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.
Revenue Recognition
Revenue is recognized when services are rendered or when computer software
products are delivered.
F-9
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 2000 and 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. The Company's preferred stock and
options are common stock equivalents, and have been included in the calculation
of fully diluted earnings per share for the year ended September 30, 2000. These
securities are antidilutive for the year ended September 30, 1999 and therefore
fully diluted earnings per share equals basic earnings per share.
F-10
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
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 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."
NOTE 2 -RELATED PARTY TRANSACTIONS
Effective October 1, 1999 the Company entered into a two-year consulting
agreement with Cory J. Coppage ( a shareholder of the corporation) for $5,000
per month plus expenses. Mr. Coppage may elect to be paid in cash or stock. In
addition, Mr. Coppage received 225,000 shares of Series 2000A Preferred Stock as
a signing bonus. The agreement may be renewed for two subsequent one-year
periods.
During the year ended September 30, 2000 the Company reimbursed $27,957 in
expenses pursuant to the agreement. Mr. Coppage's consulting fees for fiscal
2000 have not been paid and are included in accrued expenses on the balance
sheet.
In 1995 the Company entered into a joint venture agreement with Global Links
Trading Ltd. (GLT) pursuant to the agreement GLT received 7,850,000 shares of
the Company's common stock. GLT subsequently sold 1,000,000 shares of common
stock to third parties. In May, 1997, the Joint Venture agreement was amended
and 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 convertible
preferred stock plus $15,000. 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 required the Company to reissue all common stock
surrendered by GLT under this amendment and all future payments due by the
Company have been suspended.
F-11
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
NOTE 2 - RELATED PARTY TRANSACTIONS (Continued)
In December, 1999 the Company entered into a settlement agreement with GLT's
successor Nycon Resources. In connection with the settlement agreement, the
Company issued 8,850,000 shares of its common stock to Nycon Resources and was
relieved of all further obligations under the joint venture agreement.
NOTE 3 - NOTES PAYABLE
Notes payable consist of the following:
2000 1999
-------- --------
Unsecured notes payable due on demand.
Interest at 10%. -- $261,093
Unsecured notes payable due on demand.
Non-interest bearing. -- 35,000
Unsecured notes payable. Principal and
accrued interest at 10%, due February
and September 2000. -- 60,000
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%. In June these notes and
related accrued interest were satisfied by
issuing 1,426,364 shares of common stock. -- 120,006
Other 2,455 5,393
-------- --------
Total notes payable 2,455 481,492
Less current portion 2,455 481,492
-------- --------
Total long-term debt -- $ --
======== ========
F-12
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
NOTE 4 - PREFERRED STOCK
During the year ended September 30, 2000, the Company had two issues of
preferred stock outstanding. From October 1, 1999 through December 17, 1999 the
Company had 1,000,000 shares of $1.00 par convertible preferred stock
outstanding in connection with a previous joint venture agreement. The shares
paid a dividend of $36,000 per year. For the year ended September 30, 2000, the
Company paid $9,000 in dividends to the holders of these shares. On January 17,
1999 these shares of preferred stock were converted to 8,850,000 share of common
stock.
On August 28, 2000 the board of directors authorized the issuance of 1,500,000
shares of "Series 2000A" convertible preferred stock with a par value of $.001
per share. Approximately 1,495,000 shares were issued in connection with the
settlement of accounts and notes payable. The shareholders of these preferred
shares are entitled to a preference in liquidation of ten cents per share. These
preferred shareholders also receive dividends on a pro-rata basis with common
stockholders. No dividends were paid during the year ended September 30, 2000.
Each share is convertible at the option of the shareholder to one share of
common stock. In addition, the shares will automatically convert to common
shares if the event of the closing of a firm commitment underwritten public
offering with net proceeds in excess of $2,000,000 or a vote of two-thirds of
the preferred shareholders.
NOTE 5 - 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 of common stock 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 years ended
September 30, 2000 and 1999.
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
2000. 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.
F-13
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
NOTE 5 - STOCK BASED COMPENSATION AND STOCK OPTIONS (continued)
The following is a summary of the status of the Company's stock option plans as
of September 30, 2000:
Number Option Price
of Shares Per Share
---------- ------------
Outstanding at 9/30/98 1,733,333 $ .13 to .19
Granted -- --
Exercised -- --
Expired -- --
---------- ------------
Balance at 9/30/99 1,733,333 $ .13 to .19
Granted -- --
Exercised (1,733,333) .13 to .19
Expired -- --
---------- ------------
Balance at 9/30/00 -- $ --
========== ============
During fiscal 1997 certain purchasers of common stock were granted 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, 2000, 451,000 options are outstanding with respect
to options granted in connection with certain 1997 common stock sales and to the
selling shareholders of TTA.
NOTE 6 - INCOME TAXES
During the year ended September 30, 2000, The Company used prior net operating
losses to offset income reported for the fiscal year. The Company realized
approximately $301,000 of income, as the result of debts forgiven by various
creditors. The taxes associated with this income (approximately $100,700) were
partially offset by the current period loss from operations. The remaining
balance of approximately 19,800 was offset by prior operating losses. Therefore,
the Company has no income tax liability for the years ended September 30, 2000
or 1999.
F-14
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
NOTE 6 - INCOME TAXES (continued)
The Company has a deferred tax asset as the result of temporary differences
attributable to the carry forward of prior year net operating losses. The tax
asset represents the future taxes that will be offset by reducing future income
by the net operating losses. The following schedule shows the balance of the
deferred tax asset
2000 1999
----------- -----------
Deferred tax assets:
Net operating loss carryovers $ 4,847,128 $ 4,867,006
Goodwill -- 18,413
----------- -----------
Total gross deferred tax assets 4,847,128 4,885,419
Less valuation allowance (4,847,128) (4,885,419)
----------- -----------
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 carryovers 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 and therefore a
valuation allowance has been provided to reduce the tax asset to its net
realizable value.
At September 30, 2000, the Company has net operating loss carryovers for tax
reporting purposes totaling approximately $22,797,000. These carryovers will
expire in the following fiscal years:
Fiscal Year Amount
----------- ------------
2004 $ 1,325,000
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
------------
$ 22,797,000
============
F-15
<PAGE>
AGTsports, Inc.
Tampa, Florida
Notes to Financial Statements
September 30, 2000 and 1999
NOTE 7 - DEBT FORGIVENESS
During the September 30, 2000 fiscal year, management negotiated with its
creditors to eliminate outstanding accounts and notes payable. Most accounts
payable were forgiven out right, however in some instances management made a
small payment or issued stock to settle the obligations. The Company issued
stock to satisfy notes payable and the related accrued interest thereon. The
excess of the payable over the fair value of the stock issued is reported as
debt forgiveness income
2000
--------
Accounts payable $130,500
Notes Payable 170,500
--------
Total $301,000
========
In addition, the Company negotiated settlements of other obligations such as
shareholder claims, non-dilutive rights, and stock options in exchange for
Series A preferred stock. Using a stock value of ten-cents per share the costs
assigned to settlement of these obligations was approximately $71,400
F-16
