UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
( x ) ANNUAL REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the year ended December 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______ to ________ .
Commission file number: 33-55254-46
AMERICAN SPORTS HISTORY INCORPORATED
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(Name of small business issuer in its charter)
Nevada 87-0485307
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
18-I HERITAGE DRIVE, CHATHAM, NEW JERSEY 07928
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 635-0665
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
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 disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB (X)
The issuer had no revenues from continuing operations for its most recent
fiscal year ended December 31, 1996.
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based on the average of the closing bid and ask prices on
December 10, 1997 of $.125 and $2.00, respectively, was $1,693,706.
As of December 10, 1997, the issuer had 4,320,826 shares of its common
stock issued and outstanding or to be issued.
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Documents incorporated by reference:
Description of Document
Agreement between National Logistics, Inc. and Infinet, Inc. dated
August 21, 1995.
Articles of Incorporation of National Logistics, Inc. filed in the
office of the Secretary of State of the State of Nevada on August 9,
1990.
Amendment to the Articles of Incorporation of National Logistics, Inc.
to change the name of the corporation to Fans Holdings, Inc., filed in
the office of the Secretary of State of the State of Nevada on June
30, 1995.
Amendment to the Articles of Incorporation of Fans Holdings, Inc. to
change the name of the corporation to American Sports History
Incorporated, filed in the office of the Secretary of State of the
State of Nevada on September 20, 1995.
Bylaws of National Logistics, Inc.
Licensing Agreement between American Sports History Incorporated and
the National Football League Alumni, Inc. dated January 12, 1996.
Purchase Agreement between American Sports History Incorporated and
Vernon Nobles dated February 2, 1996.
Licensing Agreement between American Sports History Incorporated and
Gage Marketing Group, LLC dated May 28, 1996.
American Sports History 1996 Stock Incentive Plan.
Letter addressed to the Securities and Exchange Commission from Smith
& Company dated July 21, 1995.
Subsidiaries of the Registrant: Infinet, Inc. - incorporated in the
state of Delaware.
Transitional Small Business Disclosure Format: Yes ( ) No (X)
Total sequentially numbered page in this document: 19.
Exhibit index page number: 1.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Organization:
The Company was incorporated in the state of Nevada on August 9, 1990 as
National Logistics, Inc. National Logistics, Inc. changed its name to Fans
Holdings, Inc. on June 30, 1995, and subsequently to American Sports History
Incorporated ("ASH") on September 20, 1995. On August 21, 1995, ASH acquired
100% of the capital stock of Infinet, Inc., a Delaware corporation ("Infinet").
As used in this document, the "Company" refers to ASH and its subsidiary,
Infinet, unless the context indicates otherwise.
Business:
ASH entered into an Agreement dated August 21, 1995, pursuant to which it
acquired from Infinet's sole stockholder, Jeane Hays Nerlino, 100% of the
capital stock of Infinet, in exchange for 5,000,000 shares of ASH's restricted
common stock. The 5,000,000 shares of common stock represented approximately
83.3% of the issued and outstanding shares of ASH's common stock, which is the
only class of its equity securities issued and outstanding. At the direction of
Mrs. Nerlino, the 5,000,000 shares of common stock were issued to her husband,
Vincent M. Nerlino, and as a result, Mr. Nerlino may thus be deemed to have
acquired control of ASH from David R. Yeaman and Krista Castleton, the previous
officers and directors of ASH, and from Capital General Corporation, both of
whom may be deemed to have been the Company's "parents" and "promoters" pursuant
to the rules and regulations promulgated under the Securities Act of 1933. Mr.
Yeaman and Ms. Castleton control and have beneficial ownership of the shares of
common stock owned directly and indirectly by Capital General Corporation, and
exercise shared voting power and shared investment power with respect to such
shares.
In conjunction with its acquisition by ASH, Infinet transferred
substantially all of its assets (consisting primarily of marketable securities)
and certain of its liabilities, the net carrying value of which was
approximately $119,000 to its former sole stockholder, thereby reducing
outstanding accrued liabilities to the stockholder by the same amount.
For accounting purposes, the acquisition of the Infinet by ASH has been
treated as a recapitalization of Infinet, with Infinet as the acquiror (reverse
acquisition). ASH had no assets or operations prior to May 1995. The historical
financial statements prior to August 21, 1995 are those of Infinet. The business
of Infinet has historically been investing and consulting, but in conjunction
with its acquisition by ASH, the Company commenced the business of publishing a
variety of nostalgic sports magazines effective May 1, 1995. Accordingly, the
historical operations of Infinet have been classified as discontinued
operations. Although planned principal operations have commenced, since the
Company has not yet generated any revenue from operations, the Company is still
considered to be in the development stage.
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ASH had previously entered into an Agreement dated May 24, 1995, to acquire
100% of the outstanding capital stock of Fans Publishing, Inc., an Arizona
corporation ("Fans"), the publisher of "DIAMOND" magazine, a nostalgic baseball
magazine, of which Mr. Nerlino was a director and 21% shareholder. Infinet had
made non-interest bearing advances to Fans aggregating $431,751 ($434,671 at
December 31, 1994) to finance its operations. In addition, ASH made advances to
Fans for operating expenses of $80,856 during 1995. It was subsequently
determined that the acquisition of Fans by ASH was not feasible due to the
deteriorating financial condition of Fans. Accordingly, the advances to Fans by
Infinet and ASH were determined to be uncollectible and were charged to
operations during the year ended December 31, 1995. This transaction was never
consummated and no shares of ASH's common stock were issued. However, in
anticipation of the completion of this transaction, the previous officers and
directors of ASH resigned effective May 31, 1995, and Mr. Nerlino was appointed
as the sole director and President of ASH.
The Company agreed to pay Capital General corporation a fee of $150,000 for
services rendered with respect to the abandoned acquisition of Fans and the
completed acquisition of Infinet, of which $115,000 was paid. The Company also
issued 200,000 shares of common stock to Capital General Corporation for
additional services rendered during 1995, which were valued at $2,000. The
aggregate fee to Capital General Corporation of $152,000 was charged to
operations during the year ended December 31, 1995.
In 1996 the Company incurred general and administrative expenses of
$855,129 and consulting fees of $307,475. The Company funded operations from the
sale of stock, issuance of stock for services and assets, and from loans from
officers and stockholders.
Product Development Strategy:
The Company intends to focus its efforts on becoming a multi-media
publishing company with its primary focus on producing a historical sports
magazine covering America's five major professional sports: football, baseball,
basketball, hockey and soccer. Major league sports are a dominating interest to
the American public, who not only has a passion for the current season's
highlights, but also a profound fascination with historical statistics, former
players and nostalgic moments from past famous games. The Company was conceived
to chronicle the heritage of American sports history, and to become recognized
as the definitive source for historical sports content by sport enthusiasts of
all ages. The Company intends to capitalize on the current trend in sports
nostalgia and the increased growth of the general sports marketplace, as well as
the worldwide development of, and desire for, American sports products. The
Company also intends to market sports memorabilia, and through its entertainment
division, to produce sports-related videos and television productions.
The Company previously intended to launch GRIDIRON, a historical chronicle
focusing on the 75 years of the National Football League as its first
publication. This magazine was expected to premiere in late 1996 as a monthly
publication. Subject to the availability of working capital, during 1997 the
Company planned on developing and launching magazines for baseball ("BASES"),
basketball ("REPLAY"), hockey ("SLAPSHOT") and soccer ("CORNER KICK").
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In early 1997 the Company temporarily abandoned its plans to publish five
magazines monthly, and decided to publish one magazine quarterly until the
necessary capital is available. As of December 1997 the Company has not begun
publication of a magazine.
The Company has copyrighted the custom-designed logos that have been
designed for each magazine. The Company intends to file a trademark application
for "American Sports History" and intends to trademark each of the previously
stated magazine names once publication has commenced. In addition, once
publication has commenced, the Company intends to copyright each issue.
The Company requires a minimum of approximately $5,000,000 of operating
capital through December 1998 to implement its business plan of publishing a
nostalgic sports magazine. The Company intends to raise this operating capital
through the sale of its equity securities. However, there can be no assurances
that the Company will be successful in raising sufficient operating capital on a
timely basis, at an acceptable cost, and under acceptable terms and conditions
in order to implement its business plan. To the extent that the Company is
unable to raise the necessary operating capital, it will not be able to
implement its business plan, and it will have to curtail or cease operations. In
addition, even if the Company does raise sufficient operating capital through
the sale of its equity securities, there can be no assurances that the net
proceeds will be sufficient to enable the Company to develop its new line of
business to a level where it will generate profits and cash flows from
operations.
Marketing and Distribution:
In order to reach its intended customer, the sports-oriented retail
consumer who purchases several magazines per month, management intends to
utilize promotional advertising that will be coordinated both independently and
cooperatively with other sports publications, radio and television media, sports
events, consumer products, specialty retail distributors and other organizations
and associations.
The Company intends to introduce a broad-based subscriber acquisition
program, which will include direct to consumer communications through various
media, and which may include a video premium offer. The Company anticipates that
the standard cost for an annual subscription for the football magazine
"GRIDIRON" would have been $24.95. Individual copies were expected to sell for
$3.95 at retail.
The Company also intends to offer a subscription program in conjunction
with participating major league teams. A brochure offering a subscription will
be handed out at the end of each game to patrons leaving the stadium. In
addition, single copies of the Company's magazines will be sold in each
stadium's souvenir concession stores. Public announcements by the announcers in
the stadiums and messages on the stadium's electronic scoreboards will be
utilized to inform fans about the Company's magazines. Major league teams will
receive a commission based on subscriptions received as a result of this
program.
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The Company has identified several national specialty distributors to
assist in positioning the Company's magazines in various specialty direct retail
outlets (baseball and memorabilia shops, local and national retail stores,
sporting goods and equipment stores), as well as other retail environments
throughout the United States and possibly foreign points of distribution. These
distributors will be responsible for the marketing of this specialty direct
program, as well as the distribution of the Company's magazines. This program,
if and when implemented, will augment the Company's efforts in the areas of
direct mail and subscription services and national newsstand distribution.
Whenever possible, the specialty retail program will be based on a
non-return policy, although the Company expects that it may have to offer some
type of a billing program. General newsstand distribution will generally be on a
standard return basis. Depending on return policies and the specific market, the
Company expects that its wholesale price will range from 40% to 50% of the
expected newsstand price of $3.95.
The Company will also be reviewing opportunities in the areas of bundling
and cross-promotions programs containing magazines, T-shirts and coupons.
Acquisition Of Other Assets:
On January 30, 1996, the Company issued 120,000 shares of its restricted
common stock for the acquisition of a film library consisting of 16 hours of
sports footage film and the license rights to use 36 hours of footage from the
Historic Footage film library (not related to sports). As stipulated in the
contract, the Company also agreed to issue up to an additional 120,000 shares of
common stock in the event that the initial 120,000 shares were not sufficient to
generate $600,000 of proceeds to the seller. The Company valued the 120,000
shares of common stock issued at estimated fair value of $.25 per share, and
recorded the aggregate value of such shares of $30,000 as a deposit for the film
library. As of December 31, 1996 no additional shares of stock were issued. The
Company is currently negotiating a revision of the original contract terms with
the owner of the film library. No conclusion has yet been reached. Management
believes loss of this contract will not have a material effect on future
operations.
License Agreements:
On January 12, 1996, the Company entered into a Licensing Agreement with
the National Football League Alumni, Inc. ("NFLA") relating to the Company's use
of certain trademarks owned or beneficially owned by NFLA. The license agreement
was for the period beginning January 1, 1995 and ending on December 31, 2001.
Pursuant to the terms of the agreement, the Company issued 300,000 shares of the
its common stock and agreed to issue additional shares, not to exceed 300,000 to
cover future royalty payments to the NFLA. The Company has not yet filed a
registration statement covering such shares with the Securities and Exchange
Commission. At the time of issue to the NFLA, the Company valued the 300,000
shares of common stock at estimated fair value of $.25 per share, and recorded
the aggregate value of such shares of $75,000 as prepaid royalties.
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On May 28, 1996, the Company entered into a Licensing Agreement with Gage
Marketing Group, LLC ("Gage"), an exclusive agent for the NFLA. The Company paid
$100,000 for the right to be the presenting sponsor of the January 1996 Alumni
Player of the Year Awards Dinner. Gage granted the Company the rights to the
video footage of that dinner as well as future sponsorship rights. The initial
term was for the period beginning May 15, 1996 and ending on May 14, 2001.
Pursuant to the terms of the agreement, the Company issued 250,000 shares of its
common stock to cover future royalty payments to Gage and agreed to pay $600,000
in cash for the rights to be the presenting sponsorship of the dinners. The
Company has not yet filed a registration statement covering such shares with the
Securities and Exchange Commission. At the time of issue to Gage, the Company
valued the 250,000 shares of common stock at estimated fair value of $.25 per
share, and recorded the aggregated value of such shares of $62,500 as prepaid
royalties.
As of December 31, 1996, the contracts with the NFLA and Gage terminated in
accordance with the terms and conditions stipulated in the respective contracts.
As a result, the Company will not realize the benefits associated with these
agreements, and accordingly, has charged the prepaid royalties to operations.
Competition:
There is significant competition among sports magazines, including such
well known and widely circulated magazines as "Sports Illustrated", "Sport" and
"Inside Sports." All of these magazines are published by entities which are
significantly better capitalized than the Company, which have significantly
larger facilities, and which employ a larger number of personnel who have more
experience than the Company's employees. In addition, there is competition with
other magazines which provide reading entertainment and which may divert the
spending of discretionary income from purchasing the Company's magazines.
The Company intends to compete against other sports magazines by providing
a unique, high-quality product focusing on historical professional sporting
events and personalities.
Employees:
During 1996 the Company had three employees. Early in 1997 the Company
reduced its staff to one employee. (see "ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT"). The Company periodically retains outside consultants to perform certain
corporate administrative tasks.
ITEM 2. DESCRIPTION OF PROPERTY
The Company does not currently own, and does not anticipate acquiring, any
real estate, principal plants and/or other property.
The Company occupied its Scottsdale, Arizona editorial offices on a
month-to-month basis at a monthly rent of $1,043 through January 1997. The
Company currently operates its corporate offices from office facilities provided
by its President on a month-to-month basis without charge.
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ITEM 3. LEGAL PROCEEDINGS
On June 30, 1996, a Default Judgement was entered against Infinet, the
Company's wholly-owned subsidiary, and Vincent M. Nerlino, the President and
principal shareholder of the Company. Mr. Nerlino has filed a Motion to Set
Aside the Entry of Default (the "Motion") and Infinet filed a similar motion on
September 4, 1996. Mr. Nerlino has filed briefs on his Motion and is currently
awaiting the setting of a date for a hearing on such Motion.
The entry of the Default Judgement is the result of a Cross-Complaint filed
by William Brin, former President of Fans Publishing, Inc., against Infinet,
Jeane Hays Nerlino, the wife of Vincent M. Nerlino and the former sole
stockholder of Infinet, and Vincent M. Nerlino, a former director and
shareholder of Fans Publishing, Inc., among others, in Superior Court of
Arizona, Maricopa County, Case No. CV 95-18275. The Cross-Complaint seeks
indemnification should any award be obtained in the underlying suit (the
"Complaint") together with punitive and compensatory damages according to proof
and attorneys' fees.
The Complaint was filed by Dr. Craig B. Pearson against Fans Publishing,
Inc., Mr. Nerlino, Mrs. Nerlino, Mr. Brin, Mr. Bianchi and others, alleging,
among other things, fraudulent sale of securities, breach of contract, fraud and
breach of fiduciary duties. Dr. Pearson is seeking, among other things, actual
damages of $600,000, punitive damages, and attorneys' fees. Counsel has advised
the Company that this matter is in the process of being settled for a nominal
amount.
On August 2, 1996, the Company became a defendant in a case involving one
of its current stockholders. The plaintiff is seeking refund of the $200,000
original amount invested in the Company's common stock plus interest and legal
costs incurred, based on allegations that the Company failed to register the
stock timely. Legal counsel for the Company believes the case has no merit, but
that the Company will most probably settle the case out of court. Such
settlement cannot be reasonably determined at the present time and there is no
assurance that this matter will be satisfactorily resolved. A verdict against
the Company would have a material adverse effect on the Company's financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of its security holders
during the fourth quarter of the fiscal year ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a). Market Information
The Company's common stock has been traded in the over-the-counter market
on the NASD's Electronic Bulletin Board under the symbol "ASPH" since September
20, 1995. In May 1997 the Company effectuated a 1 for 10 reverse stock split at
which time the symbol was changed to "AMSH." Prior to that date, there was no
market for the Company's common stock. The trading market is limited and
sporadic and should not be deemed to constitute an "established trading market".
The following table sets forth the range of bid prices for the common stock
during the periods indicated, and represents inter-dealer prices, which do not
include retail mark-ups and mark-downs, or any commission to the broker-dealer,
and may not necessarily represent actual transactions. The information set forth
below was provided by the National Quotation Bureau, Inc.
Year Ended December 31, 1996:
Quarter High Low
------- ----- ------
1 $4.00 $.01
2 5.00 .25
3 1.50 .46875
4 3.00 .0625
Year Ending December 31, 1997:
Quarter High Low
------- ---- ---
1 $.04 $.04
2 .05 .01
3 2.00 .05
4 .25 .125
(b) Holders:
Approximate number of
Record Holders (as of
Title of Class December 10, 1997
-------------- ----------------------
Common stock, $.01 par value 450 (1)
(1) Included in the number of stockholders of record are three records holders
who hold 50,010 shares of common stock as nominees or under "street name".
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(c) Dividends:
The Company has never paid cash dividends on its common stock. Payment of
dividends is within the discretion of the Company's board of directors and will
depend, among other factors, on earnings and debt service requirements, as well
as the operating and financial condition of the Company. At the present time,
the Company's anticipated working capital requirements are such that it intends
to follow a policy of retaining earnings in order to finance the development of
its business. Accordingly, the Company does not expect to pay a cash dividend
within the foreseeable future (see "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION").
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview:
Effective August 21, 1995, ASH acquired Infinet. For accounting purposes,
the acquisition of Infinet by ASH has been treated as a recapitalization of
Infinet, with Infinet as the acquiror (reverse acquisition). The historical
financial statements prior to August 21, 1995 are those of Infinet. The business
of Infinet has historically been investing and consulting, but in conjunction
with its acquisition by ASH, the Company commenced efforts to publish a variety
of nostalgic sports magazines. Accordingly, the historical operations of Infinet
have been classified as discontinued operations. Although planned principal
operations have commenced, since the Company has not yet generated any revenues
from operations, the Company is still considered to be in the development stage.
Statement of Operations -
Years Ended December 31, 1996 and 1995:
During the year ended December 31, 1996, general and administrative
expenses were $855,129, including 2,428,400 shares of common stock issued to
consultants, employees and officers (see "ITEM 10. EXECUTIVE COMPENSATION -
Summary Compensation Table"), which were valued at $260,083. In addition,
consulting fees were $307,045. During the year ended December 31, 1995, general
and administrative expenses were $306,061, including 3,632,500 shares of common
stock issued to consultants, employees and officers, which were valued at
$222,925. In addition, consulting fees were $152,000, consisting of the $150,000
fee payable to Capital General Corporation for services rendered, and 200,000
shares of common stock issued to Capital General Corporation which were valued
at $2,000.
As a result of the Company's determination during 1995 that the acquisition
of Fans was not feasible, advances to Fans by ASH and Infinet of $80,856 and
$431,751, respectively, were charged to operations during the year ended
December 31, 1995.
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During the year ended December 31, 1996, the Company had a net loss of
$1,162,398, consisting of a net loss from continuing operations. During the year
ended December 31, 1995, the Company had a net loss of $1,169,908, consisting of
a net loss from continuing operations of $970,406 and a net loss from
discontinued operations of $199,502.
As of December 31, 1996 and 1995, the Company was a development stage
company that had not yet generated any revenues from operations. The Company
expects to incur continuing general and administrative expenses, without any
commensurate operating revenues, until such time as it is able to commence
revenue-generating operations. The generation of revenue will be dependent upon
the Company raising substantial working capital from the sales of equity
securities/loan proceeds, and the publishing of at least one nostalgic sports
magazine. There can be no assurances, however, that the Company will ultimately
be successful in raising the necessary capital and in publishing one or more
nostalgic sports magazine.
Financial Condition - December 31, 1996:
The Company will require a minimum of approximately $5,000,000 of operating
capital through December 1998 to implement its business plan of publishing a
magazine quarterly. The Company intends to attempt to raise this operating
capital through the sale of its equity securities and/or seek outside private
sources of financing. However, there can be no assurances that the Company will
be successful in raising sufficient operating capital on a timely basis, at an
acceptable cost, and under acceptable terms and conditions in order to implement
its business plan. To the extent that the Company is unable to raise the
necessary operating capital, it will not be able to implement its business plan,
and it will have to curtail or cease operations. In addition, even if the
Company does raise sufficient operating capital through the sale of it equity
securities, there can be no assurances that the net proceeds will be sufficient
to enable the Company to develop its new line of business to a level where it
will generate profits and cash flows from operations.
During the year ended December 31, 1996, the Company sold 563,750 shares of
common stock for $307,508. In addition, the Company issued 2,428,200 common
shares for services rendered by employees, consultants and officers, which were
valued at $260,083 (see "ITEM 10. EXECUTIVE COMPENSATION - Summary Compensation
Table"). During the year ended December 31, 1995, the Company sold 663, 612
shares of common stock for $266,456, which included detachable warrants to
purchase 663,612 shares of common stock at an exercise price of $.75 per share
for a one year period commencing October 6, 1995. No warrants were exercised and
expire October 6, 1996. These warrants have expired as of October 1996. In
addition, during the year ended December 31, 1995, the Company issued 3,632,500
shares of common stock for services rendered by employees, consultants and
officers (including 200,000 shares to Capital General Corporation), which were
valued at $222,925.
The Company agreed to pay Capital General Corporation a fee of $150,000 for
services rendered with respect to the abandoned acquisition of Fans and the
completed acquisition of Infinet, of which $115,000 was paid during the year
ended December 31, 1995. The Company also issued 200,000 shares of common stock
to Capital General Corporation for additional services rendered during 1995,
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which were valued at $2,000. The aggregate fee to Capital General Corporation of
$152,000 was charged to operations during the year ended December 31, 1995.
As a result of the determination that the acquisition of Fans was not
feasible, ASH made a recession offer to certain purchasers of its common stock.
Purchasers who had paid $24,900 for 49,800 shares elected to accept such
recession offer. The obligation resulting from the rescission of the sale of
these shares has been recorded as a liability at December 31, 1995.
Management of the company believes that it will be able to sustain limited
operations during the year ending December 31, 1998, with the cash resources
generated by the continuing sale of small amounts of common stock, issuance of
stock for services, and through management's ability to control discretionary
expenditures. Except for the Company's employment agreement with its President,
the Company has no fixed expenses. During the year ended December 31, 1996, the
Company did not pay any compensation to officers in cash, and the Company
intends to continue to defer the cash payment of compensation to officers until
such time as the Company has adequate working capital and/or cash flow. The
Company intends to continue to issue shares of its common stock to officers,
employee and consultants for services rendered to conserve working capital.
ITEM 7. FINANCIAL STATEMENTS
The financial statements are listed at "Index to Financial Statements"
in this document.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Effective December 10, 1997, the Company dismissed Hollander, Gilbert &
Co., Los Angeles, California, as the Company's independent accountants, and
engaged Michelle Gelinas, Certified Public Accountant, Chatham, New Jersey, as
the Company's new independent accountant. The dismissal of Hollander, Gilbert &
Co. and the retention of Michelle Gelinas, Certified Public Accountant was
approved by the unanimous consent of the Company's Board of Directors. Prior to
the engagement of Michelle Gelinas, Certified Public Accountant, the Company did
not consult with such firm regarding the application of accounting principles to
a specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company's financial statements.
Hollander, Gilbert & Co. audited the Company's financial statements for the
year ended December 31, 1995 and issued an unqualified opinion for the year then
ended. During the year ended December 31, 1995, and the period from January 1,
1996 to October 23, 1997, there were no disagreements with Hollander, Gilbert &
Co. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Hollander, Gilbert & Co., would have caused such firm to
make reference to the subject matter of the disagreements in connection with its
reports on the Company's financial statements.
The Company has provided Hollander, Gilbert & Co. with a copy of the
disclosures contained herein, and Hollander, Gilbert & Co. has furnished the
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Company with a letter addressed to the Securities and Exchange Commission
stating that it agrees with the statements made by the Company in response to
Item 304(a) regarding its involvement with the Company as independent
accountants.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
The following table and text sets forth the name and ages of all
directors and executive officers of the Company and their positions and offices
with the Company as of December 10, 1997. All of the directors will serve until
the next annual meeting of shareholders and until their successors are elected
and qualified, or until their earlier death, retirement, resignation or removal.
A brief description of the business experience of each director and executive
officer during the past five years and an indication of directorships held by
each director in other companies subject to the reporting requirements under the
federal securities law is also provided.
Name Age Positions Director Since
- ------------------ --- ------------------ --------------
Vincent M. Nerlino 62 President, Chief May 31, 1995
Executive Officer,
Chief Financial
Officer, Secretary
and Director
There are no family relationships among directors and executive officers.
Biographies of Directors and/or officers:
Vincent M. Nerlino - Mr. Nerlino has been President, Chief Executive
Officer, Chief Financial Officer, Secretary and a Director since May 31, 1995.
Prior to acquiring control of the Company, Mr. Nerlino was a registered
securities representative providing investment and financial advice from 1975
until 1995, and served as a vice president with Paine Webber, an associate
director with Bear Stearns & Co., Inc. and senior vice president with
Oppenheimer & Co., Inc. Mr. Nerlino was previously a director and shareholder of
Fans Publishing, Inc. (see "ITEM 1. DESCRIPTION OF BUSINESS - Business" and
"ITEM 3. LEGAL PROCEEDINGS" for information regarding Fans Publishing, Inc. and
related litigation involving Mr. Nerlino.)
Compliance with Section 16(a) of the Exchange Act:
The Company does not have any securities registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, and accordingly, the Company's
officers, directors and affiliates are not required to file any Forms 3, 4
and/or 5.
13
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
--------------------------
Name and Annual
Principal Compensation
Position Salary
- -------- ------------
Vincent M. Nerlino $50,000 (1)
President, Chief Executive
Officer, Chief Financial
Officer and Secretary
(1) Consists of 1,100,000 shares of common stock issued to Mr. Nerlino as
partial consideration under his employment agreement. The shares were valued at
$50,000 (see "Employment Agreement").
Employment Agreement:
The Company entered into an employment agreement with Vincent M. Nerlino
for a period of five years beginning on January 1, 1996 and ending on December
31, 2000, pursuant to which Mr. Nerlino will serve as the Company's President
and Chief Executive Officer. The employment agreement provides for base annual
compensation of $200,000 and an annual bonus of 7.5% of pretax operating profits
in excess of $200,000 in 1996, $1,000,000 in 1997, $1,500,000 in 1998,
$2,000,000 in 1999 and $2,500,000 in 2000. Mr. Nerlino will also be provided
with an automobile allowance of $1,000 per month. At the conclusion of the
employment agreement, Mr. Nerlino will receive a one-year consulting contract at
the most recent year's base annual compensation. As an inducement for Mr.
Nerlino to enter into the employment agreement, the Company issued 1,342,500
shares of common stock to Mr. Nerlino which were valued at $13,425 and charged
to operations at December 31, 1995. In lieu of cash payment for employment
services, the Company issued 1,100,000 shares of its common stock valued at
$50,000 to Mr. Nerlino during the year ended December 31, 1996, as partial
payment under the contract.
Board of Directors:
Directors of the Company are reimbursed for travel expenses incurred in
attending such meetings. During the fiscal year ended December 31, 1996, there
were no meetings of the Board of Directors, with all corporate actions being
approved by the unanimous written consent of the Board of Directors. The Company
had no audit, nominating or compensation committees or committees performing
similar functions during the fiscal year ended December 31, 1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As used in this section, the term beneficial ownership with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as
consisting of sole or shared voting power (including the power to vote or direct
14
<PAGE>
the vote) and/or sole or shared investment power (including the power to dispose
of or direct the disposition of) with respect to a security through any
contract, arrangement, understanding, relationship or otherwise, subject to
community property laws.
As of December 10, 1997, the Company had authorized 25,000,000 shares of
its common stock, $.01 par value, of which 4,320,826 shares were issued and
outstanding.
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of December 10, 1997. Listed below is the name
and address of each beneficial owner of more than 5% of the Company's common
stock known to the Company, the number of shares of common stock beneficially
owned by each such person or entity, and the percent of the Company's common
stock so owned. Also listed below are the number of shares of common stock of
the Company beneficially owned, and the percentage of the Company's common stock
owned, by each officer and director and by all officers and directors of the
Company as a group. Each such person or entity has sole voting or investment
power with respect to the shares of common stock, except as otherwise indicated.
Beneficial ownership consists of a direct interest in the shares of common
stock, except as otherwise indicated.
Name and Address Amount and Nature of Percent of Shares
of Beneficial Owner Beneficial Ownership of Common Stock
- ------------------- -------------------- -----------------
Vincent M. Nerlino 2,716,750 (1) 63.1%
18-I Heritage Drive
Chatham, NJ 07928
All Directors and
Officers as a
Group (1 person) 2,716,750 63.1%
(1) Includes 625,000 shares of common stock owned by Jeane Hays Nerlino, the
wife of Vincent M. Nerlino, and 250,000 shares of common stock owned by Vincent
M. Nerlino as custodian for Michael Nerlino, who is the minor son of Vincent M.
and Jeane Hays Nerlino. Excludes 582,000 shares of common stock owned by various
members of Mr. Nerlino's extended family over which Mr. Nerlino does not
exercise voting or investment power.
Changes in Control:
There are no contractual or other arrangements known to the Company which
may later result in a change in control of the Company.
15
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ASH entered into an Agreement dated August 21, 1995, pursuant to which it
acquired from Infinet's sole stockholder, Jeane Hays Nerlino, 100% of the
capital stock of Infinet, in exchange for 5,000,000 shares of ASH's restricted
common stock. The 5,000,000 shares of common stock represented approximately
83.3% of the issued and outstanding shares of ASH's common stock, which is the
only class of its equity securities issued and outstanding. At the direction of
Mrs. Nerlino, the 5,000,000 shares of common stock were issued to her husband,
Vincent M. Nerlino, and as a result, Mr. Nerlino may thus be deemed to have
acquired control of ASH from David R. Yeaman and Krista Castleton, the previous
officers and directors of ASH, and from Capital General Corporation, both of
whom may be deemed to have been the Company's "parents" and "promoters" pursuant
to the rules and regulations promulgated under the Securities act of 1933. Mr.
Yeaman and Ms. Castleton control and have beneficial ownership of the shares of
common stock owned directly and indirectly by Capital General Corporation, and
exercise shared voting power and shared investment power with respect to such
shares.
ASH had previously entered into an Agreement dated May 24, 1995, to acquire
100% of the outstanding capital stock of Fans Publishing, Inc., an Arizona
corporation ("Fans"), the publisher of "DIAMOND" magazine, a nostalgic baseball
magazine, of which Mr. Nerlino was a director and 21% shareholder and Ronald J.
Bianchi was an officer, director and 10% shareholder. Infinet had made
non-interest bearing advances to Fans aggregating $431,751 ($434,671 at December
31, 1994) to finance its operations. In addition, ASH made advances to Fans for
operating expenses of $80,856 during 1995. It was subsequently determined that
the acquisition of Fans by ASH was not feasible due to the deteriorating
financial condition of Fans. Accordingly, the advances to Fans by Infinet and
ASH were determined to be uncollectible and were charged to operations during
the year ended December 31, 1995. This transaction was never consummated and no
shares of ASH's common stock were issued. However, in anticipation of the
completion of this transaction, the previous officers and directors of ASH
resigned effective May 31, 1995, and Mr. Nerlino was appointed as the sole
director and President of ASH.
The Company agreed to pay Capital General Corporation a fee of $150,000 for
services rendered with respect to the abandoned acquisition of Fans and the
completed acquisition of Infinet, of which $85,000 was paid during the year
ended December 31, 1995. The Company also issued 200,000 shares of common stock
to Capital General Corporation for additional services rendered during 1995,
which were valued at $2,000. The aggregate fee to Capital General Corporation of
$152,000 was charged to operations during the year ended December 31, 1995.
In conjunction with its acquisition by ASH, Infinet transferred
substantially all of its assets (consisting primarily of marketable securities)
and certain of its liabilities, the net carrying value of which was
approximately $119,000 to its former sole stockholder, thereby reducing
outstanding accrued liabilities to the stockholder by the same amount.
16
<PAGE>
During the years ended December 31, 1996 and 1995, the Company issued
shares of common stock to related parties as set forth below. For additional
information regarding shares of common stock issued to officers, see "ITEM 10.
EXECUTIVE COMPENSATION - Summary Compensation Table" and "ITEM 11. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
Shares of Common
Recipient Stock Issued
- --------- ----------------
1995
- ----
Vincent M. Nerlino (reverse acquisition) 5,000,000
Vincent M. Nerlino (employment agreement) 1,342,500
Jeane Hays Nerlino (services rendered) 250,000
Ronald J. Bianchi (services rendered) 1,000,000
Ronald Cooper (services rendered) 100,000
Capital General Corporation (services rendered) 200,000
International Investment Associates
(services rendered) 600,000
1996
- ----
Vincent M. Nerlino (employment agreement) 1,100,000
Jean Nerlino (services rendered) 525,000
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: Three months ended December 1996 - None.
December 10, 1997.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
AMERICAN SPORTS HISTORY INCORPORATED
------------------------------------
(Registrant)
Date: January 8, 1998 By: /s/ VINCENT M. NERLINO
----------------------
Vincent M. Nerlino
President
In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: January 8, 1998 By: /s/ VINCENT M. NERLINO
----------------------
Vincent M. Nerlino
President and Director
(Chief Executive,
Financial and Accounting
Officer)
18
<PAGE>
Index to Financial Statements
Report of Independent Auditor ............................................ F-1
Consolidated Balance Sheets, Dec. 31, 1996 and 1995 ...................... F-2
Consolidated Statements of Operations, for the
year ended December 31, 1996 and 1995, and cumulative
from May 1, 1995 ........................................................ F-3
Consolidated Statement of Stockholders' Deficit, for
the year ended December 31, 1996 and 1995 ............................... F-4
Consolidated Statements of Cash Flows, for the years
ended December 31, 1996 and 1995, and cumulative
from May 1, 1995 ........................................................ F-5
Notes to consolidated financial statements ........................ F-6 to F-11
Report of Independent Auditor (1995) .................................... F-12
19
<PAGE>
REPORT OF INDEPENDENT AUDITOR
To the Board of Directors and Shareholders
American Sports History Incorporated
I have audited the consolidated balance sheet of American Sports History
Incorporated and Subsidiary (A Development Stage Company) as of December 31,
1996, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the year then ended and cumulative from May 1, 1995.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Sports History Incorporated and Subsidiary (A Development Stage Company) as of
December 31, 1996 and the results of their operations, stockholders' deficit and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company's significant operating loss, significant
continuous capital requirements and the uncertainty with respect to its ability
to pay debts as they become due, raises substantial doubt about the Company's
ability to continue as a going-concern. The consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
Michelle M. Gelinas
Certified Public Accountant
Chatham, New Jersey
December 4, 1997
F-1
<PAGE>
AMERICAN SPORTS HISTORY INCORPORATED AND SUBSIDIARY
A (DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
1996 1995
--------- ---------
ASSETS
Current Assets:
Cash $8 $6,626
Prepaid Taxes 3,442 3,442
--------- ---------
Total Current Assets 3,450 10,068
Other Assets:
Deposit (Note 4) 30,000
Trade Name 5,000 5,000
--------- ---------
Total Other Assets 35,000 5,000
--------- ---------
TOTAL ASSETS $38,450 $15,068
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable and Accrued expenses $298,839 $85,839
Due to Officer (Note 8) 166,669
Loan from Stockholder (Note 3) 50,260
Notes Payable (Note 3) 23,400
Liability from Sale of Common Stock
subsequently rescinded (Note 8) 22,260 24,900
Income Taxes Payable resulting from
Discontinued Operations 32,000 32,000
--------- ---------
Total Current Liabilities 593,428 142,739
Stockholders' Deficit (Notes 5 and 7)
Common Stock $.001 par value; authorized
25,000,000 shares issued and
outstanding-13,958,262 and 10,296,112 shares
December 31, 1996 and 1995 respectively 13,958 10,297
Additional Paid-In Capital 1,216,514 485,084
Deficit (Deficit of $1,701,053
accumulated since May 1, 1995) (1,785,450) (623,052)
--------- ---------
Total Stockholder's Deficit (554,978) (127,671)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $38,450 $15,068
========= =========
See Notes To Consolidated Financial Statements.
F-2
<PAGE>
AMERICAN SPORTS HISTORY INCORPORATED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,1996 AND 1995
AND CUMULATIVE FROM MAY 1, 1995
1996 1995 Cumulative from
May 1, 1995
---------- ---------- -----------
REVENUES
Interest $206 $262 $468
EXPENSES
General and Administrative 855,129 306,061 1,161,190
Consulting fees 307,475 152,000 459,475
Write-off of advances
for terminated acquisition 80,856 80,856
Write-off of advances
to related party 431,751
---------- ---------- -----------
Total Expenses 1,162,604 970,668 1,701,521
LOSS FROM CONTINUING OPERATIONS (1,162,398) (970,406) (1,701,053)
LOSS FROM DISCONTINUED OPERATIONS (199,502)
NET OF INCOME TAXES
---------- ---------- -----------
NET LOSS ($1,162,398) ($1,169,908) ($1,701,053)
========== ========== ===========
NET LOSS PER COMMON SHARE
Loss from Continuing Operations ($0.10) ($0.13)
Loss from Discontinued Operations ($0.03)
---------- ----------
NET LOSS ($0.10) ($0.16)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,061,000 7,720,000
========== ==========
See Notes To Consolidated Financial Statements.
F-3
<PAGE>
AMERICAN SPORTS HISTORY INCORPORATED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
Retained
Additional Earnings
Common Stock Paid-In (Accumulated
Shares Amount Capital Deficit)
--------- ------ ----------- ------------
BALANCE, December 31, 1994 5,000,000 $5,000 ($4,000) $546,856
Shares issued to
pre-merger stockholders 1,000,000 1,000 4,000
Shares issued for services 3,632,500 3,633 219,292
Sale of common stock 663,612 664 265,792
Net Loss (1,169,908)
-------------------------------- ------------
BALANCE, December 31, 1995 10,296,112 10,297 485,084 ($623,052)
Shares issued for services 2,428,400 2,428 257,655
Shares issued for Assets 670,000 670 166,830
Sale of common stock 563,750 563 306,945
Net Loss ($1,162,398)
-------------------------------- ------------
BALANCE, December 31, 1996 13,958,262 $13,958 $1,216,514 ($1,785,450)
================================ ============
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
AMERICAN SPORTS HISTORY INCORPORATED AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
AND CUMULATIVE FROM MAY 1, 1995
<TABLE>
<CAPTION>
Cumulative
from May 1,
1996 1995 1995
---------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Loss from continuing operations ($1,162,398) ($970,406) ($1,701,053)
Adjustments to reconcile loss from
continuing operations to net cash
provided by (used in) operating activities:
Write-off of advances to related parties 431,751
Write-off of Prepaid Royalty 137,500 137,500
Shares of common stock issued for services 260,083 222,925 483,008
Changes in operating assets and liabilities:
Other assets (5,000) (5,000)
Income taxes payable resulting
from discontinued operations (40,000)
Accounts payable and accrued expenses 213,000 25,939 249,000
Due to officer 166,669 166,669
-------------------------------------
Net cash provided by (used in)
continuing operations (385,146) (334,791) (669,876)
Net cash provided by discontinued operations 40,541
----------------------------------
Net cash (used in) operating activities (385,146) (294,250) (669,876)
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in advances to
related party, net 2,920
-----------------------------------
Net cash provided by investing activities 2,920
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes 23,400 23,400
Loan from stockholder 50,260 50,260
Sale of common stock 307,508 266,456 573,964
Liability from sales of common stock rescinded (2,640) 24,900 22,260
---------------------------------
Net cash provided by financing activities 378,528 291,356 669,884
---------------------------------
NET INCREASE (DECREASE) IN CASH (6,618) 26 8
CASH-Beginning of period 6,626 6,600
---------------------------------
CASH-End of period $8 $6,626 $8
=================================
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
AMERICAN SPORTS HISTORY INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANACIAL STATEMENTS
DECEMBER 31,1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION. The Company was incorporated in the State of Nevada on
August 9, 1990 as National Logistics, Inc. National Logistics, Inc.
changed its name to Fans Holdings, Inc. on June 30, 1995, and subsequently
to American Sports History Incorporated ("ASH") on September 20, 1995. On
August 21, 1995, ASH acquired 100% of the capital stock of Infinet, Inc.
("Infinet"). As used in this document, the "Company " refers to ASH and
its subsidiary, Infinet, unless the context indicates otherwise.
BASIS OF PRESENTATION. ASH entered into an Agreement dated August 21,
1995, pursuant to which it acquired from Infinet's sole shareholder Jeane
Hays Nerlino 100% of the capital stock of Infinet, in exchange for
5,000,000 shares of ASH's restricted common stock representing
approximately 83.3% of the issued and outstanding shares of ASH's common
stock. At the direction of Mrs. Nerlino, the 5,000,000 shares of common
stock were issued to her husband, Vincent M. Nerlino and, as a result, Mr.
Nerlino may thus be deemed to have acquired control of ASH from David R.
Yeaman and and Krista Castleton, the previous officers and directors of
ASH, and from Capital General Corporation, both of whom may be deemed to
have been the Company's "parents" and "promoters" pursuant to the rules
and regulations promulgated under the Securities Act of 1933.
For accounting purposes, the acquisition of Infinet by ASH has been
treated as a recapitalization of Infinet, with Infinet as the acquirer
(reverse acquisition). ASH had no assets or operations prior to May 1995.
The historical financial statements prior to August 21, 1995 are those of
Infinet. The business of Infinet has historically been investing and
consulting, but in conjunction with its acquisition by ASH, the Company
commenced the business of publishing a variety of nostalgic sports
magazines effective May 1, 1995. Accordingly, the historical operations of
Infinet have been classified as discontinued operations. Although planned
principal operations have commenced, since the Company has not generated
any revenues from operations, the Company is still considered to be in the
development stage, and therefore cumulative results of operations and cash
flows have been presented.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
INCOME TAXES. The Company utilizes the asset and liability approach for
financial accounting and reporting for income taxes. If it is more likely
than not that some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized.
NET INCOME (LOSS) PER COMMON SHARE. In August 1995, the Company issued new
shares of common stock in consideration for the acquisition of Infinet, in
F-6
<PAGE>
a transaction, which has been accounted for as a reverse acquisition.
All significant inter-company accounts and transactions have been
eliminated in consolidation.
2. GOING CONCERN
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The
financial statements do not include any adjustments relating to the
recoverability of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to
continue as a going concern.
The Company incurred a net loss of $1,162,398 for the year ended December
31, 1996, resulting in an accumulated deficit of $1,785,450 and a
stockholders' deficit of $554,978.
Management of the Company has a business plan under which
approximately $5,000,000 will be required through December 1998, to pay
off current debt and fund the start up of its sports magazine. The Company
is currently negotiating with several independent parties regarding
certain potential contracts that will help achieve the promotion of its
magazine. The intention is to raise capital through the sale of its
equity securities and/or to seek outside private sources of financing.
There can be no assurances that the Company will be successful in its
attempts to raise sufficient capital essential to its survival. To the
extent the Company is unable to raise the necessary operating capital, it
will not be able to implement its business plan, and it will become
necessary to curtail or cease operations. Additionally, even if the
Company does raise sufficient operating capital, there can be no
assurances that the net proceeds will be sufficient enough to enable it to
develop its business to a level where it will generate profits and
cash flows from operations.
3. TRANSACTIONS WITH RELATED PARTIES
In conjunction with the acquisition of Infinet, Infinet also distributed
its cash, investments and furniture and fixtures and its note payable and
certain other liabilities, the net carrying value of which was
approximately $119,000 as of July 31, 1995, to its sole stockholder, Jeane
Hays Nerlino, thereby reducing outstanding accrued liabilities due to the
shareholder by the same amount.
ASH had previously entered into an Agreement dated May 24, 1995 to acquire
100% of the outstanding capital stock of Fans Publishing, Inc., an Arizona
corporation. ("Fans"), the publisher of "DIAMOND" magazine, a nostalgic
baseball magazine, of which Mr. Nerlino was a director and 21% stockholder
and Ronald J. Bianchi was an officer, director and 10% shareholder.
Infinet had made non-interest-bearing advances to Fans to finance its
operations totaling $431,751 in 1995. In addition, ASH made advances to
Fans for operation expenses of $80,856 during 1995. It was subsequently
F-7
<PAGE>
determined that the acquisition was not feasible due to the deteriorating
financial condition of Fans. Accordingly, the advances to Fans by Infinet
and ASH were determined to be uncollectible and were charged to operations
during year ended December 31, 1995. This transaction was never
consummated and no shares of ASH's common stock was issued. However, in
anticipation of the completion of this transaction, the previous officers
and directors of ASH resigned effective May 31, 1995, and Mr. Nerlino was
appointed as the sole director and President of ASH.
The Company agreed to pay Capital General Corporation a fee of $150,000
and in addition, issued 200,000 shares of its common stock valued at
$2,000 for services rendered with respect to the Company's terminated
acquisition of Fans and the completed acquisition of Infinet. As of
December 31, 1995, $115,000 of the fee was paid to Capital General
Corporation.
LOAN FROM STOCKHOLDER/NOTES PAYABLE. Loan from stockholder of $50,260 at
December 31, 1996 reflects advances made to and expenses paid on behalf of
the Company by Jeane Hays Nerlino. Notes payable of $23,400 at December
31, 1996 represents direct loans made to the Company by stockholders. The
loans and notes are due on demand. The notes bear interest at 10% per
annum. Total interest cost incurred for the year ended December 31, 1996
was $3,182.
See also Note 5 to the Consolidated Financial Statements.
4. ACQUISITION OF OTHER ASSETS
DEPOSITS. On January 30, 1996, the Company issued 120,000 shares of its
restricted common stock for the acquisition of a film library consisting
of 16 hours of sports footage film and license rights to use 36 hours of
footage from the Historical Footage film library (not related to sports).
As stipulated in the contract, the Company also agreed to issue up to an
additional 120,000 shares of common stock in the event that the initial
120,000 shares were not sufficient to generate $600,000 of proceeds to the
seller. The Company valued the 120,000 shares of common stock issued at
estimated fair value of $.25 per share, and recorded the aggregate value
of such shares of $30,000 as a deposit for the film library. As of
December 31, 1996, no additional shares of stock were issued.
The Company is currently negotiating a revision of the original contract
terms with the owner of the film library. No conclusion has yet been
reached.
On January 12, 1996, the Company entered into a licensing agreement with
National Football League Alumni, Inc. ("NFLA") relating to the Company's
use of certain trademarks owned or beneficially owned by NFLA. The license
agreement was for the period beginning January1, 1995 and ending on
December 31, 2001. Pursuant to the terms of the agreement, the Company
issued 300,000 shares of its common stock and agreed to issue additional
shares, not to exceed 300,000, to cover future royalty payments to the
NFLA. The Company has not yet filed a registration statement covering such
shares with the Securities and Exchange Commission. At the time of issue
to the NFLA, the Company valued the 300,000 shares of common stock at
F-8
<PAGE>
estimated fair value of $.25 per share, and recorded the aggregate value
of such shares of $75,000 as prepaid royalties.
On May 28, 1996, the Company entered into a licensing agreement with Gage
Marketing Group, LLP ("GAGE"), an exclusive agent for the NFLA. The
Company paid $100,000 for the right to be the presenting sponsor of the
January 1996 NFLA Alumni Player of the Year Awards Dinner. GAGE granted
the Company rights to the video footage of that dinner as well as future
sponsorship rights. The initial term was for the period beginning May 15,
1996 and ending on May 14, 2001. Pursuant to the terms of the agreement,
the Company issued 250,000 shares of its common stock to cover future
royalty payments to Gage and agreed to pay $600,000 in cash for the rights
to be the presenting sponsorship of the dinners. The Company has not yet
filed a registration statement covering such shares with the Securities
and Exchange Commission. At the time of issue to GAGE, the Company valued
the 250,000 shares of common stock at estimated fair value of $.25 per
share, and recorded the aggregated valued of such shares of $62,500 as
prepaid royalties.
As of December 31, 1996, the contracts with the NFLA and GAGE terminated
in accordance with the terms and conditions stipulated in the respective
contracts. As a result, the Company will not realize the benefits
associated with these agreements, and accordingly, has charged the prepaid
royalties to operations.
5. ISSUANCE OF COMMON STOCK
During the year ended December 31, 1996, the Company issued 3,662,150
shares of common stock. Of such amount, 670,000 shares were issued in
conjunction with the NFLA and the Gage agreements and the acquisition of
the Nobles film library and were valued at $167,500. 563,750 shares of
commom stock, were sold for net proceeds of $307,508 and 2,428,400 shares
of common stock were issued for services rendered to officers, employees
and consultants and were valued at $260,083. Included in those shares were
1,100,000 shares issued to Mr. Nerlino, 525,000 shares issued to Jeane
Hays Nerlino for creating and designing logos for the Company, 350,000
shares issued to two organizations for promotional and marketing services,
and 260,000 shares issued for legal services performed for the Company.
6. INCOME TAXES
There were no provisions for income taxes for the years ended December 31,
1996 and 1995. The Company has federal tax net operating loss carry
forwards of approximately $1,700,000, which are available to offset future
taxable income, expiring through 2011. The utilization of such
carry-forwards will be limited by the change in ownership. The Company has
not recorded any deferred tax asset as a result of the net operating loss
carry forward as it has provided a 100% allowance against this asset.
F-9
<PAGE>
7. STOCKHOLDERS' DEFICIT
The authorized capital stock of the Company consists of 25,000,000 shares
of common stock with $.001 par value.
PRIVATE PLACEMENTS. During 1995, the Company raised, net of rescission
described below, $226,456 from the sale of 663,612 shares of its common
stock in private placements.
As a result of the determination that the acquisition of Fans was not
feasible, the Company made a rescission offer to certain purchasers of its
common stock. Purchasers who had paid $24,900 for 49,800 shares elected to
accept such rescission offer. The obligation resulting from the rescission
of the sale of these shares has been recorded as a liability at December
31,1995. During the year ended December 31, 1996, the Company paid $2,640
of its obligation for rescinded stock.
8. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENT. The Company entered into a five year employment
agreement with Vincent Nerlino beginning on January 1, 1996 and
terminating on December 31, 2000, pursuant to which Mr. Nerlino serves as
the Company's President and Chief Executive Officer. The employment
agreement provides for base annual compensation of $200,000 and an annual
bonus based on pretax operating profits. The Company is obligated to
provide Mr. Nerlino with an automobile allowance of $1,000 per month. At
the conclusion of the employment agreement, Mr. Nerlino will receive a
one-year consulting contract at the most recent year's base annual
compensation. As an inducement for Mr. Nerlino to enter into the
employment agreement, the Company issued him 1,342,500 shares of it common
stock valued at $13,425, which was charged to operations at December 31,
1995. In lieu of cash payment for employment services, the Company issued
1,100,000 shares of its common stock valued at $50,000 to Mr. Nerlino
during the year ended December 31, 1996, as partial payment under the
contract.
LEGAL PROCEEDINGS. On June 30, 1996 a default judgment was entered against
Infinet Inc., the wholly-owned subsidiary of American Sports History Inc.
and certain of the Company's principal stockholders by a former affiliated
party of Infinet Inc., alleging breach of contractual commitments and
other matters. Legal counsel for the Company, has advised management that
this matter is currently being settled for a nominal amount.
On August 2, 1996, the Company became a defendant in a case involving one
of its current stockholders. The plaintiff is seeking a refund of
approximately $200,000, the original amount invested in the Company's
common stock. Management and legal counsel for the Company believe the
allegations brought by the plaintiff have no merit. The Company is
attempting to settle the case out of court.
F-10
<PAGE>
9. SUBSEQUENT EVENT
On May 15, 1997, the Board of Directors of the Company authorized a 1 for
10 reverse stock split upon unanimous approval by its stockholders. As of
that date, the total number of common shares issued and outstanding was
reduced from 13,958,262 (no stock was issued by the Company between
December 31, 1996 and May 15, 1997) to 1,395,826, and related par value
was increased to .01 cents per common share from .001 cents per common
share.
F-11
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
American Sports History Incorporated
We have audited the accompanying consolidated balance sheet of American Sports
History Incorporated and subsidiary (A Development Stage Company) as of December
31, 1995, and the related consolidated statements of operations, shareholders'
equity (deficiency), and cash flows for the year then ended and cumulative from
May 1, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our 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 financial statements referred to above present fairly, in
all material respects, the financial position of American Sports History
Incorporated and subsidiary (A Development Stage company) as of December 31,
1995, and the results of their operations, shareholders' equity (deficiency) and
cash flows for the year then ended and cumulative from May 1, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 2 and 8 to the
financial statements, the Company's significant operating loss, significant
capital requirements and the uncertainty with respect to the outcome of legal
proceedings raise substantial doubt about the company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
/s/ Hollander, Gilbert & Co.
Hollander, Gilbert & Co.
Los Angeles, California
May 30, 1996, except for
Note 8 on legal proceedings,
As to which the date is
August 2, 1996
F-12
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