<PAGE>2
As filed with the Securities and Exchange Commission on November 20, 1996
Commission File Number: 333-8233
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1/A
REGISTRATION STATEMENT
Under
The Securities Act of 1933
GRAND SLAM LICENSING, INC.
INDIANA 35- 1952027
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdictions Classification Code Number) Indemnification Number)
of incorporation
or organization)
401 Pennsylvania Parkway
Suite 390
Indianapolis, Indiana 46280
Telephone: (317) 575-5900
(Address and telephone number of registrant's principal executive offices
and principal place of business.)
Milton Thompson
401 Pennsylvania Parkway
Suite 390
Indianapolis, Indiana 46280
Telephone: (317) 575-5900
(Name, address and telephone number of agent for service.)
with copies to:
Jody M .Walker
Attorney At Law
7841 South Garfield Way
Littleton, Colorado 80122
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 133, check the following box: | x |
<PAGE>3
<TABLE>
CALCULATION OF REGISTRATION FEE
=====================================================================
<CAPTION>
Title of each Proposed Proposed Amount of
class of Amount to be offering aggregate registration
securities registered price offering price fee,<F3>
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$.001 par value 65,000 $1.50 $97,500 $33.62
A Warrants 200,000 .001<F2> $200 $.07
Common Stock<F4> 200,000 5.00 $1,000,000 $344.83
Common Stock<F5> 556,050 1.50 $ 834,075 $287.61
Common Stock<F6> 77,000 1.50 $ 115,500 $39.83
- -----------------------------------------------------------------------
Total $2,047,275 $705.96
</TABLE>
[FN]
<F1>Represents Shares of common stock necessary to effect the
distribution described in the Registration Statement.
<F2>Estimated solely for purposes of calculating the registration fee.
<F3>Represents 1/29 of 1% of the book value of the Shares of common
stock issuable being registered.
<F4>Represents Common Stock underlying the A Warrants being
registered hereunder on behalf of the Selling Securityholders.
<F5>Represents Common Stock being registered hereunder on behalf of
the Selling Securityholders.
<F6>Represents Common Stock to be issued upon conversion of the Class
C Preferred Shares and upon exercise of A Warrants underlying the Class
C Preferred Shares on behalf of a Selling Shareholder
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>4
<TABLE>
<CAPTION>
GRAND SLAM LICENSING, INC.
Cross Reference Sheet between Items of Form S-1
and Prospectus Pursuant to 501(b) of Regulation S-K.
<S> <C>
Items in Form S-1 Location in Prospectus
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus Outside Front Cover Page.
2. Inside Front and outside Back Inside Front Cover Page;
Cover Pages of Prospectus Outside Back Cover Page;
3. Summary Information & Risk Factors Prospectus Summary;
Risk Factors.
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Inside Front Cover Page;
Prospectus Summary;
The Distribution
9. Description of Common Stock Outside Front Cover Page
to be Registered Prospectus Summary;
Description of Securities
10. Interest of Named Experts Interest of Named Experts
and Counsel and Counsel.
11. Information with Respect to The Corporation; Legal
the Registrant Proceedings; Market
Information of Common
Shares; Financial Statements;
Selected Financial Data;
Management's Discussion and
Analysis of Financial
Condition, Management;
Certain Relationships and
Related Transactions;
Principal Shareholders.
12. Statement as to Indemnification Management-Indemnification.
</TABLE>
<PAGE>5
PRELIMINARY PROSPECTUS DATED NOVEMBER 13, 1996
SUBJECT TO COMPLETION
65,000 Common Shares to be distributed
556,050 Common Shares on behalf of Selling Shareholders
200,000 A Warrants
200,000 Common Shares underlying the A Warrants
77,000 Common Shares underlying the Class C Preferred Shares
(includes 7,000 Common Shares underlying A Warrants to be
issued upon conversion of Class C Preferred Shares)
GRAND SLAM LICENSING, INC.
Common Stock ($.001 Par Value)
As more fully set forth herein, Pratt, Wylce & Lords, Ltd., a Nevada
corporation ("Pratt"), proposes to distribute (the "Distribution") as soon as
practicable after the effective date of this registration statement
1996 as a dividend to its shareholders of record at the close of business on
May 31, 1995 (the "Record Date"), one share of the common stock, par
value $.001 per share (the "Common Stock") of Grand Slam Licensing,
Inc., an Indiana corporation (the "Company"), for each forty shares of Pratt
common stock, par value $.001 per share (the "Pratt Common Stock"), held
by each Pratt shareholder on the Record Date. Pratt will distribute 65,000
Common Shares (40.63% of the 160,000 shares of Common Stock owned
by it), which represents 4.89% of the Company's outstanding Common
Stock on the Record Date. The Distribution will be made by Pratt without
the payment of any consideration by its shareholders. No fractional shares
will be distributed. See "The Distribution." The Common Shares of the
Company owned by Pratt that are not being distributed are being registered
for sale by Pratt as a selling shareholder. The expenses of the Distribution
are estimated to be $33,705.96 and are to be paid by the Company.
Additionally, the Company is registering 556,050 common shares on behalf
of its selling security holders. The Company is registering 70,000
common shares to be issued upon conversion of the Class C Preferred
Stock on behalf of Selling Shareholders (which shall be converted prior to
the effectiveness of this registration) and 7,000 common shares to be
issued upon exercise of A Warrants which shall be issue upon conversion
of the Class C Preferred Stock. The Company is also registering 200,000
A Warrants and the stock underlying said warrants on behalf of its selling
security holders. The A Warrants are exercisable into one common share
at the purchase price of $5.00. The A Warrants shall be effective for a
period of two years from the effective date of the registration statement and
shall be redeemable by the Company at $.001 per A Warrant upon thirty
days notice.
The 556,050 common shares being registered on behalf of selling security
holders consist of 95,000 Common Shares on behalf of Pratt, Wylce &
Lords, Ltd., 80,800 Common Shares on behalf of the Company's officers
and directors, 329,200 Common Shares on behalf of shareholders who
purchased in a previous private placement and 16,900 Common Shares to
other unaffiliated shareholders. See "Selling Security Holders".
<PAGE>6
Prior to the date hereof, there has been no trading market for the Common
Stock or Warrants of the Company. The Company intends to list its shares on
the Electronic Bulletin Board and in the "pink sheets." There can
be no assurance that the Common Stock will be quoted, that an active
trading and/or a liquid market will develop or, if developed, that it will be
maintained.
There are material risks in connection with the purchase of the securities.
See Risk Factors, page 8
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sales of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any state.
Available Information
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. office, a Registration Statement on
Form S-1 (Registration No. 333-8233) under the Securities Act of 1933, as
amended (the "Securities Act"), for the registration of the securities offered
hereby. This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and exhibits and schedules relating thereto for further information
with respect to the Company and the securities to which this Prospectus
relates. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement. Each such statement is qualified in its entirety by such
reference. Items of information omitted from this Prospectus but contained
in the Registration Statement may be inspected without charge at the Public
Reference Room of the Commission, 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 and copies of such material can be obtained
from the Public Reference Section of the Commission, Washington, D.C.
20549 at prescribed rates.
<PAGE>7
Upon consummation of this offering and the Distribution, the Company will
become subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and in accordance therewith file reports and other
information with the Securities and Exchange Commission. The reports
and other information filed by the Company can be inspected and copied at
the public reference facilities maintained by the Commission in Washington,
D.C. and at the Chicago Regional Office, Northwestern Atrium Center, 500
W. Madison Street, Suite 1400, Chicago, Illinois 60621-2511 and the New
York Regional Office, 7 World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission, Washington, D.C. 20549 at prescribed rates.
Reports to Security Holders
The Company will furnish to shareholders: (i) an annual report containing
financial information examined and reported upon by its certified public
accountants; (ii) unaudited financial statements for each of the first three
quarters of the fiscal year; and (iii) additional information concerning the
business and operations of the Company deemed appropriate by the Board
of Directors.
The approximate date on which this Prospectus is first being sent to holders
of Pratt Common Stock is , 1996.
<PAGE>8
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<S> <C>
PROSPECTUS SUMMARY 9
RISK FACTORS 14
THE DISTRIBUTION 18
SELLING SECURITY HOLDERS 19
USE OF PROCEEDS 23
THE COMPANY 24
BUSINESS ACTIVITIES 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION 28
Trends and Uncertainties
Capital and Source of Liquidity
Results of Operations
CERTAIN TRANSACTIONS 33
MANAGEMENT 34
Officers and Directors
Remuneration
Indemnification
PRINCIPAL SHAREHOLDERS 39
SHARES ELIGIBLE FOR FUTURE SALE 41
NASDAQ LISTING 41
DESCRIPTION OF SECURITIES 43
LEGAL MATTERS 45
LEGAL PROCEEDINGS 45
EXPERTS 45
INTERESTS OF NAMED EXPERTS AND COUNSEL 45
</TABLE>
<PAGE>9
- -----------------------------------------------------------------------------
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information, financial statements and notes to the financial statements
including the notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
<S> <C>
THE COMPANY. The Company was incorporated in
Indiana on April 28, 1995
consolidating activities in the areas of
the acquisition of licenses to use
trademarks, logos, and photographic
likenesses on collectibles, the design
of those collectibles, the importation
of those collectibles, and the
marketing of the collectibles. The
Company also serves as a licensing
agent and a consultant to
manufacturers of other products
seeking licenses to use marks,
logos and photographic likenesses on
their products. See "The Company" and
"Business Activities".
Prior to April 28, 1995, these
activities took place within
Grand Slam III, an Indiana limited
partnership, which also provided
contract advisor, negotiation, career
planning and general management
services for athletes, entertainers,
media personalities and others and
planning, management and
sponsorship development for events.
Grand Slam III remains in existence
for those purposes. See "The Company."
The Corporation's executive offices are
located at 401 Pennsylvania Parkway,
Suite 390, Indianapolis, Indiana 46280.
Telephone No. (317) 575-5900.
See "The Company."
DESCRIPTION OF SECURITIES. The Corporation is authorized to
issue Fifty Million (50,000,000)
Common Shares, $.001 par value.
<PAGE>10
The Corporation authorized a
dividend to shareholders of record as of
May 15, 1995 of 250 Class A
Convertible Preferred Shares ("Class A
Preferred") and 800 Class B
Convertible Preferred Shares (Class B
Preferred"). The Class A Preferred
shall be convertible at a rate of 1,000
shares of common stock for each
share of Class A Preferred.
Conversion will be authorized upon the
first fiscal year that the Corporation
attains at least $1,000,000 in audited
after tax profits. Class B Preferred
shall be convertible at a rate of 1,000
shares of common stock for each share
of Class B Preferred. The Class B
Preferred shall be convertible upon
completion of the first fiscal year that
the Corporation attains audited after tax
profits of at least $3,000,000.
See "Certain Transactions" and
"Description of Securities."
During September, 1995, the Corporation
authorized 1,000 Class C Preferred
Shares. Each Class C Preferred Share is
convertible, after four months from the
purchase date, into 100 Common Shares
and One "A" Warrant to purchase 10
additional Common Shares at $5.00 per
share. The Class C Preferred Stock is
not entitled to voting rights or
dividends. There are currently 700 Class C
Preferred Shares issued and outstanding.
See "Description of Securities."
Additionally, the Board of Directors of
the Corporation authorized a dividend
distribution of 200,000 A Warrants on a
pro rata basis to the shareholders of
record as of May 15, 1996. The A
Warrants shall be exercisable for a period
of two years from the effective date of
the registration statement. The A Warrants
shall be exercisable into Common Shares
of the Corporation at the exercise price
of $5.00 per Common Share.
See "Description of Securities" and
"Certain Transactions."
THE DISTRIBUTION.
Securities Being Distributed 65,000 shares of the Company's
Common Stock.
<PAGE>11
Purpose of Distribution To enhance the Company's ability to
raise additional capital, if necessary,
in the future.
Shares of Common Stock
Outstanding
After Distribution 1,329,100 shares of Common Stock.
Distributing Company Pratt, Wylce & Lords, Ltd., a Nevada
corporation.
Distribution Ratio One share of Common Stock for
every Forty shares of Pratt
Common Stock owned of record on
May 31, 1996 (the "Record Date").
See "The Distribution."
USE OF PROCEEDS The securities to which this
Prospectus relates are being
distributed to holders of Pratt
Common Stock as a dividend
and neither the Company nor Pratt
will receive any cash or other
proceeds in connection with the
Distribution.
Additionally this Prospectus relates to
securities being registered on behalf
of selling securityholders and the
Company will not receive any cash or
other proceeds in connection with the
subsequent sale. Any proceeds
received from the subsequent exercise
of the A Warrants shall be used
as working capital and to expand
operations.
See "Use of Proceeds."
RISK FACTORS There are material risks, such as
uncertainty of future financial results,
liquidity dependent on additional
capital and debt financing and risks
related to the pin sale industry, in
connection with the purchase of the
securities. See "Risk Factors."
MARKET FOR COMMON STOCK
AND A WARRANTS. Prior to the date hereof, there has been
no trading market for the Common
Stock or A Warrants of the Company.
The Company has agreed to use its
best efforts to apply for the quotation of
its Common Stock on the Electronic
Bulletin Board.
<PAGE>12
There can be no assurance
that the Common Stock will be quoted,
that an active trading and/or a liquid
market will develop or, if developed, that
it will be maintained. See "Risk
Factors" and "Market Listing."
RESALES BY SELLING
SHAREHOLDERS. This Prospectus relates to 626,050
Common Shares being registered on
behalf of selling securityholders.
The Company will not receive any
cash or other proceeds in connection
with the subsequent sale.
See "Selling Shareholders."
DIVIDEND POLICY The Company does not currently
intend to pay regular cash dividends
on its Common Stock; such policy
will be reviewed by the Company's
Board of Directors from time to time
in light of, among other things, the
Company's earnings and financial
position. See "Risk Factors."
TRANSFER AGENT The Company shall act as its own
Transfer Agent until after completion of
the Offering. The Company has not yet
entered into any contracts
with a transfer agent.
See "Description of Securities."
SELECTED FINANCIAL
INFORMATION. The selected financial information
presented below under the captions
and "Balance Sheet" as of the ten
months ended October 31, 1995 and
December 31, 1994 and "Statement of
Operations" for the ten months ended
October 31, 1995 and for the years
ended December 31, 1993 and 1995
are derived from the audited financial
statements of the Company.
The selected financial information
presented below under the captions
"Balance Sheet" as of July 31, 1996 and
1995 and the Statement of Operations
for the nine months ended July 31, 1996
and 1995 is derived from the unaudited
financial statements of the Company.
The Balance Sheet and Statement of
Operations have not been audited by
independent certified public accountants
<PAGE>13
however, in the opinion of management,
all adjustments (which include only
normal recurring adjustments) have been
made in order to present fairly the
operations for this period. See
"Management's Discussion and Analysis
of Financial Condition" and "Financial
Statements."
</TABLE>
<TABLE>
BALANCE SHEET
<CAPTION>
December 31, October 31, July 31,
1994 1995 1996
<S> <C> <C> <C>
Total Assets $45,924 $608,614 $742,080
Total Liabilities $36,625 $139,755 $481,080
Total Stockholders'
Equity (Deficit) $ 9,299 $468,859 $261,000
Total Liabilities &
Stockholders' Equity $45,924 $608,614 $742,080
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For Ten From For Nine For Nine
For Year Months Inception Months Months
Ended Ended (April, 1993) Ended Ended
Dec. 31, Oct. 31 to Dec. 31 July 31, July 31,
1995 1994 1993 1996 1995
<S> <C> <C> <C> <C> <C>
Revenues from continuing
operations $191,057 $178,099 $125,796 $404,325 $32,940
Income (Loss) from
continuing operations
(197,828) (73,644) (38,246) (229,803) (89,700)
Nonoperating Income
(Expense) (334,393) - - - (247,500)
Provision (Credit) For
Income Taxes - - - - -
Net income (loss)
(532,221) (73,644) (38,246) (227,627) (337,711)
Net income (loss) per common
share of outstanding stock
$ (0.53) $ (0.09) $ (0.05) $(0.17) $(0.32)
</TABLE>
<PAGE>14
- -----------------------------------------------------------------------------
RISK FACTORS
- -----------------------------------------------------------------------------
In analyzing this offering, prospective investors should read this entire
Prospectus and carefully consider, among other things, the following Risk
Factors:
Uncertainty of Future Financial Results. The Company has experienced
accumulated losses from operations to date and future financial results are
uncertain. As such, there can be no assurance that the Company can be
operated in a profitable manner. Profitability depends upon many factors,
including the success of the Company's marketing program, the
maintenance or reduction of expense levels and the success of the
Company's business activities. The Company has accumulated losses
from operations as of April 30, 1996 of $693,702 . Lacking future
profitable operations, the Company will require additional capital. Even if
the Company obtains future financing or revenues to expand operations,
increased production or marketing expenses would adversely affect liquidity
of the Company. See FINANCIAL STATEMENTS.
Liquidity Dependent on Additional Capital and Debt Financing. On a long
term basis, liquidity is dependent on increased revenues from operations,
additional infusions of capital and debt financing. The Company, to date,
has relied principally upon a $100,000 revolving line of credit with an
Indianapolis financial institution for additional financing. The Company
believes that this additional financing in the short term will allow the Company
to increase its marketing and sales efforts and thereafter result in increased
revenue and greater liquidity in the long term. No other means of arranging
additional capital are contemplated at this time. However, there can be no
assurance that the Company would, if required, be able to obtain additional
equity or debt financing in the future, if at all.
Risks Relating to Sports Stoppages. Sports stoppages such as the baseball
and hockey strikes could have an adverse effect on the operations of the
Company. Even though the Company has attempted to diversity into
entertainment licenses and to emphasize individual, as opposed to term,
sports, there can be no assurance that such attempts will be successful in
offsetting the inherent risks associated with team sports stoppages.
Competition. There is significant competition in the collector pin and
souvenir industry, particularly the logo pin market. The Corporation will be
competing with established companies and other entities (many of which
may possess substantially greater resources than the Corporation). Almost
all of the companies with which the Corporation competes are substantially
larger, have more substantial histories, backgrounds, experience and
records of successful operations, greater financial, technical, marketing and
other resources, more employees and more extensive facilities than the
Corporation now has, or will have in the foreseeable future. It is also likely
that other competitors will emerge in the near future. There is no assurance
that the Corporation will continue to compete successfully with other
established collector pin and souvenir enterprises. The Corporation shall
<PAGE>15
compete on the basis of quality and on public taste in addition to a price
basis. Inability to compete successfully might result in increased costs,
reduced yields and additional risks to the investors herein. See THE
CORPORATION - Competition.
Possible Rescission of Sales. The Company issued Common Shares without
registration under the Securities Act of 1933. Although the Company is of the
opinion that the sales did not involve a public offering of its securities and
that the Company did comply with the safe harbor exemptions from registration
under Section 4(2), the Company could be liable for rescission of the sales if
such exemptions were found not to apply. See "Financial Statements."
No Ability to Control Affairs of the Company. The majority shareholders
and the officers and directors of the Company as a group own over 60.79%
of all of the outstanding common shares of the Company. As a result, these
individuals have the ability to control the affairs of the Company.
Therefore, the success of the Company's operations is dependent upon the
management expertise, judgment and experience of its officers and
directors. See MANAGEMENT and PRINCIPAL SHAREHOLDERS.
Dependence on Key Individuals. The future success of the Company is
highly dependent upon the Company's ability to attract and retain qualified
key employees. Other than the employment agreement with Milton
Thompson, the Company has not yet entered into definitive employment
agreements with any such individuals. The inability to attract and retain
these individuals for the long term would have a material impact upon the
business of the Company. See COMPANY - Employees and MANAGEMENT.
Lack of Experience of Management. The financial success of the Company
is partly dependent upon the management expertise and judgment of its
officers regarding the promotion of its products. The current officers all
have prior management experience with large and small businesses and
Milton Thompson, Harold Thompson and Joel Stein all have specific prior
experience in the specific type of product promotion being conducted by the
Company. The officers and directors will have the exclusive authority to
manage and control and make all decisions regarding the business and
affairs of the Company. There can be no assurance that management will
be able to successfully conduct the operations of the Company due to this
lack of experience.
The current officers of the Company devote all of their time to the affairs of
the Company. The remaining directors spend as much time as deemed
necessary on the corporate business affairs (estimated to be approximately
80% of their time) but are not required nor expected to devote their entire
time or efforts to the Company's business and affairs. Milton Thompson is
currently President, Treasurer and Director. Dennis DeYoung serves as Vice
President, Secretary and a Director, Harold Thompson and Joel Stein serve
as Directors.
Conflicts of Interest. Milton Thompson is general partner of Grand Slam
III, an affiliated company, Harold Thompson is responsible for
procurement, marketing and merchandising licensed products for Grand
Slam III and Joel Stein helped found Grand Slam III. As a result, conflicts
of interest may arise. Regardless of whatever conflicts may exist or come
to exist, the Company's officers and directors owe a fiduciary duty to the
Company. The directors shall immediately notify the other
directors of any possible conflict which may arise due to their involvement
with other businesses. The interested directors in any conflict shall refrain
from voting on any matter in which a conflict of interest has arisen. The
Company has adopted a policy that any transactions with directors, officers
<PAGE>16
or entities of which they are also officers or directors or in which they have
a financial interest, will only be on terms which are fair and reasonable to
the Company and approved by a majority of the disinterested directors of
the Company's Board of Directors. For further discussion see
Management - Conflicts of Interest Policy. There can be no assurance
that such other activities will not interfere with the officers' and directors'
ability to discharge their obligation herein.
Benefit to Management. Although currently, the officers and directors have
received minimal compensation and common shares for their services, the
Company may, in the future, compensate the Company's management with
substantial salaries and other benefits. Even though no compensation plan
has been proposed or agreed upon, the payment of future salaries and the
costs of these benefits may be a burden on the Company and may be a
factor in limiting or preventing the Company from achieving profitable
operations in the future. However, the Company would not continue to
compensate management with such substantial salaries and other benefits
under circumstances where to do so would have a material negative effect
on the Company's financial condition. See MANAGEMENT -
Remuneration.
Arbitrarily Determined Warrant Exercise Price. The exercise price of the A
Warrants being registered on behalf of the Selling Security holders was
established arbitrarily by the Company with no direct relationship to the
original offering price or the Company's assets, book value, shareholder's
equity or any other recognized criterion of value. Accordingly, the A
Warrants can be considered to have little or no value at the present time.
Risks of Going Public through a "Distribution". Going public through a
"distribution", such as the one the Company is pursuing results in
bypassing conventional "roadshows" and will greatly increase the likelihood
of no active market developing for the stock fo the Company.
Additionally, bypassing conventional brokerages might make ot less likely
that any exchange or NASDAQ-approved listing will occur because a
"backdoor" registration might cause heightened concerns about the
Company.
No Assurance of Public Market for Securities. There is no market for the
securities of the Company and there can be no assurance that an established
trading market (or any public market) will develop at the conclusion of this
Offering, or that if developed, it would be sustained, or that the securities
distributed hereunder may be resold at their original book value price or at
any other price. Any market for the securities of the Company that may
develop will, in all likelihood, be a substantially limited one.
Risks of Trading Securities on the Electronic Bulletin Board or the "Pink
Sheets". The Company intends to apply for the trading of its securities on
the Electronic Bulletin Board or the "pink sheets". Stocks trading on the
Electronic Bulletin Board or the "pink sheets" are frequently illiquid, may
suffer from wide price variations and may frequently be sold at a sharp
variance from any underlying worth. Additionally, quotations of their price
are not available in The Wall Street Journal or any other major newspaper.
Effect of Future Sales of Shares and Uncertainty of Market Development.
Upon completion of the distribution and a successful completion of the
registration of warrants herein the Company will have 1,329,100 common
shares outstanding, of which the Warrants and underlying Shares registered
in this Offering will be freely tradable without restriction or further
registration under the Securities Act of 1933 (the "Securities Act"). Upon
the effective date of this Registration Statement, 556,050 of the currently
1,329,100 restricted Shares subject to certain limitations of Rule 144 of the
Securities Act will become available for public sale. This does not include
any Common Shares underlying the Class A, Class B or Class C Preferred
Shares or A Warrants. No assurance can be given that the availability of
such Shares for sale will not have an adverse impact on the market price of
the Company's Shares, should one develop. Prior to this Offering, there
has been little public market for any securities of this Company.
<PAGE>17
Management of the Company cannot predict to what extent a secondary
market in the Shares will develop and provide liquidity for holders of the
Shares. See SALE OF SHARES PURSUANT TO RULE 144 and MARKET INFORMATION ON
COMMON SHARES.
Possible Restrictions to Sales of Company Securities. After the
effectiveness of this registration statement and until the Company
obtains a listing on NASDAQ, if ever, the Company's securities will be
covered by a Rule 15c2-6 under the Securities Exchange Act of 1934 that
imposes additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination of the purchaser and have received the purchaser's
written agreement to the transaction prior to the sale. In order to approve a
person's account for transactions in designated securities, the broker or
dealer must (i) obtain information concerning the person's financial
situation, investment experience and investment objectives; (ii) reasonably
determined, based on the information required by paragraph (i) that
transactions in designated securities are suitable for the person and that the
person has sufficient knowledge and experience in financial matters that the
person reasonably may be expected to be capable of evaluating the rights of
transactions in designated securities; and (iii) deliver to the person a
written statement setting forth the basis on which the broker or dealer made
the determination required by paragraph (ii) in this section, stating in a
highlighted format that it is unlawful for the broker or dealer to effect a
transaction in a designated security subject to the provisions of paragraph
(ii) of this section unless the broker or dealer has received, prior to the
transaction, a written agreement to the transaction from the person; and
stating in a highlighted format immediately preceding the customer signature
line that the broker or dealer is required to provide the person with the
written statement and the person should not sign and return the written
statement to the broker or dealer if it does not accurately reflect the
person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of
the written statement. A designated security means any equity security
other than a security (i) registered, or approved for registration upon notice
of issuance on a national securities exchange that makes transaction reports
available pursuant to 17 CFR 11Aa3-1 (ii) authorized or approved for
authorization upon notice of issuance, for quotation in the NASDAQ
system; or . . . (iv) whose issuer has net tangible assets in excess of
$2,000,000 demonstrated by financial statements dated less than fifteen
months previously that the broker or dealer has reviewed and has a
reasonable basis to believe are true and complete in relation to the date of the
transaction with the person. Consequently, the rule may affect the ability
of broker-dealers to sell the Company's securities and also may affect the
ability of purchasers in this Offering to sell their shares in the secondary
market. See Market Listing - Broker-Dealer Sales of Company's
Securities.
<PAGE>18
Lack of Dividends. There can be no assurance that the continued operations
of the Company will result in any revenues or will be profitable. At the
present time, the Company intends to use any earnings which may be
generated to finance the growth of the Company's business. Accordingly,
while payment of dividends rests within the discretion of the Board of
Directors, the Company does not presently intend to pay dividends and
there can be no assurance that dividends will ever be paid. See DIVIDEND
POLICY.
Vulnerability to Fluctuations in Economy. Demand for the Company's
proposed products is dependent on, among other things, general economic
conditions which are cyclical in nature. Prolonged recessionary periods
may be damaging to the Company.
- ----------------------------------------------------------------------------
THE DISTRIBUTION
- ----------------------------------------------------------------------------
On April 12, 1995, the Company entered into a consulting agreement on
with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist the Company in its
capitalization and the obtainment of additional financing. To date, Pratt
provided consulting services regarding capital structuring, initial equity
financing, and preparation of a registration statement. The term of the
agreement is for one year from April 12, 1995. The agreement has been
extended by written mutual consent of the parties. As partial payment for
consulting services, the Company issued 165,000 of its Common Shares to
Pratt, of which 65,000 Common Shares are to be registered and distributed
to Pratt shareholders. Additionally, 32,000 Common Shares were issued to
Alan Filson, (issued prior to Mr. Filson becoming a director of Pratt). In
addition, Pratt has received cash compensation of $30,000 and Alan Filson
received cash compensation of $10,000.
The Company extended its agreement with Pratt due to the fact that
agreement expired prior to completing the process of the public offering.
The total amount of additional financing recived by the Company as a result
of its agreement with Pratt to date is $501,150. Pratt shall have received a
total of 160,000 common shares of the Company and $60,500 in cash
pursuant to the agreement once the registration is completed.
The Directors of the Company considered two(2) methods of seeking
additional financing prior to determining to seek public investors with the
support of Pratt. The first method was to sekk limited partners. The
General Partners determined that the sale of limited partnerships would not
generate sufficient enough capital for the Companh to become a force in the
collectibles segment of the licensed products market. Various forms of
debt including personal loans by the Directors and in the commercial market
were also evaluated. Again, the Directors determined that insufficient
capital would be genreated through these mechanisms for the Company to
develop its operationsin the collectibles segment of the licensed products
market.
After careful study and review and based upon the terms of its consulting
agreement with the Company, the Board of Directors of Pratt determined
that it would be in the best interests of Pratt and its shareholders to
distribute a portion of the Company's Common Shares held by Pratt to its
shareholders. In addition, the Company and Pratt determined that such a
distribution would be in the best interests of the Company. Pratt
shareholder's may realize economic benefits from the sale of any Common
Stock distribution if a market for the Company's Common Stock develops,
although there can be no assurances that any such market will result. Pratt
and the Company believe that the distribution to Pratt's shareholders, which
will result in an increased shareholder base of the Company, will be an
advantage to the Company at such time as the Company may require
additional capital and/or make application to NASDAQ Small Cap. The
increased shareholder base of approximately 1,321 shareholders represents
an increase in potential future purchasers of additional stock in any
subsequent offering or in the stock market if these individuals are satisfied
with the performance of the Company's operations.
<PAGE>19
Accordingly, after obtaining the approval of the independent directors on
Pratt's Board of Directors, the Board of Directors of Pratt declared a
dividend pursuant to which, as soon as practicable after the effective date of
the registration statement, 65,000 shares of the issued and outstanding
Common Stock of the Company, constituting 39.39% of the shares of
Common Stock owned by Pratt, will be distributed to the shareholders of
record of Pratt as of May 31, 1996 on the basis of one share of Common
Stock for each forty shares of Pratt Common Stock held. The shares of
Common Stock are being distributed by Pratt as a dividend to holders of
Pratt Common Stock and neither the Company nor Pratt will receive any
cash or other proceeds in connection with the Distribution. No fractional
shares of Common Stock will be issued. Pratt had approximately 1,321
shareholders of record on the Record Date. The Pratt Common Stock is
quoted over-the-counter under the symbol "PWLS".
In order to comply with certain provisions of Indiana corporate law, on
, 1996 (the "Payment Date') Pratt deposited the shares of Common
Stock to be distributed with Florida Atlantic Stock Transfer, Inc. (the
"Depositary"). The Depositary will hold such shares for the benefit of Pratt
shareholders on the Record Date. The terms of the agreement with the
Depositary provides that the shares will be released promptly after the
Registration Statement to which this Prospectus relates is declared effective
by the Commission. However, if the Registration Statement is not declared
effective prior to May 31, 1997, then, unless such date is changed by notice
to the Depositary from the Company, the Depositary shall return all such
shares to Pratt without effecting the distribution.
- ----------------------------------------------------------------------------
SELLING SECURITY HOLDERS
- ----------------------------------------------------------------------------
The Company shall register pursuant to this prospectus 626,050 Common
Shares currently outstanding for the account of the following individuals or
entities. The percentage owned prior to and after the offering reflects all of
the then outstanding common shares. The amount and percentage owned
after the offering assumes the sale of all of the Common Shares being
registered on behalf of the selling shareholders.
<TABLE>
<CAPTION>
Name Amount Total % Owned Amount % Owned
Being Number Prior to Owned After
Registered of Shares Offering After Offering
<S> <C> <C> <C> <C> <C>
Lisa Railing 10,000 10,000 .75% 0 0%
Kerry Kenna 3,000 3,000 .23% 0 0%
Frances Stewart 3,000 3,000 .23% 0 0%
Alan Fiering 3,000 3,000 .23% 0 0%
William Paton 9,000 9,000 .68% 0 0%
Elaine Paton 9,000 9,000 .68% 0 0%
<PAGE>20
William Paton
IRA 9,000 9,000 .68% 0 0%
Robert Gerner 3,000 3,000 .23% 0 0%
Lauren Tracy 3,000 3,000 .23% 0 0%
Thomas Hayden 3,000 3,000 .23% 0 0%
Robert Kemmerer 30,000 30,000 2.3% 0 0%
Robert & Alisa
DeStefano 3,000 3,000 .23% 0 0%
Lois Zoll 3,000 3,000 .23% 0 0%
Carol & Paul Rice 3,000 3,000 .23% 0 0%
RE Hunt Trust 3,000 3,000 .23% 0 0%
Johnny &
Barbara Wong 3,000 3,000 .23% 0 0%
Francis Hong 3,500 3,500 .26% 0 0%
Elizabeth Gheen 3,000 3,000 .23% 0 0%
Kellye Moore 3,000 3,000 .23% 0 0%
Julius & Jean
Richmond 6,000 6,000 .46% 0 0%
Chloe Green 3,000 3,000 .23% 0 0%
Robert Brown 5,000 5,000 .38% 0 0%
Shirley Jean
Carroll 3,000 3,000 .23% 0 0%
Myron Wolf 3,000 3,000 .23% 0 0%
Jeff McGuire 3,000 3,000 .23% 0 0%
Michael Tower 6,000 6,000 .46% 0 0%
Dominic & Julie
Cippola 3,000 3,000 .23% 0 0%
Bradley Mays 4,000 4,000 .30% 0 0%
Donald Burdsall 3,000 3,000 .23% 0 0%
Michael Campbell 3,000 3,000 .23% 0 0%
William Brady &
James Curtis 3,000 3,000 .23% 0 0%
Richard Roberts 3,000 3,000 .23% 0 0%
James Haines 3,334 3,334 .25% 0 0%
Domenic
Angelicchio 4,000 4,000 .30% 0 0%
Butch Cameron 3,000 3,000 .23% 0 0%
Thomas Kaminski 20,000 20,000 1.5% 0 0%
Greg Brown 5,000 5,000 .38% 0 0%
Joseph Kack 3,000 3,000 .23% 0 0%
Bradley Beck 5,333 5,333 .40% 0 0%
Clifford Jaebker 6,100 6,100 .46% 0 0%
William Taylor 6,000 6,000 .46% 0 0%
CarolAnn Mihalik 3,000 3,000 .23% 0 0%
Larry Konfirst 9,000 9,000 .68% 0 0%
Richard Payne 3,333 3,333 .25% 0 0%
Malcolm Thompson 3,000 3,000 .23% 0 0%
Ethel Thompson &
Verna Saunders 3,000 3,000 .23% 0 0%
Terrence Dooher 4,000 4,000 .30% 0 0%
Gerald Dooher 3,000 3,000 .23% 0 0%
Stephen Jones 3,000 3,000 .23% 0 0%
<PAGE>21
Karen & Donald
Matthews 3,000 3,000 .23% 0 0%
Nicholas Deets 10,000 10,000 .75% 0 0%
Charles Poulsen 3,500 3,500 .26% 0 0%
Ora Elliott 6,000 6,000 .46% 0 0%
William Thompson 3,000 3,000 .23% 0 0%
Gary Muncy 12,000 12,000 .90% 0 0%
Gavin Hart 6,000 6,000 .46% 0 0%
David Solotkin 6,000 6,000 .46% 0 0%
Daniel Carlson 3,000 3,000 .23% 0 0%
Robin Cipolla 3,000 3,000 .23% 0 0%
Fred Yde 3,000 3,000 .23% 0 0%
R.K. Hunter 3,000 3,000 .23% 0 0%
Roger Burch 6,000 6,000 .46% 0 0%
Steven Worland 3,000 3,000 .23% 0 0%
Donna Stocker 3,000 3,000 .23% 0 0%
Jay Rifkind 3,000 3,000 .23% 0 0%
Robert Kube 3,000 3,000 .23% 0 0%
Roger Vosti 3,000 3,000 .23% 0 0%
Mitsui & Betsy
Tatsugawa 4,000 4,000 .30% 0 0%
Stephen Jones 3,000 3,000 .23% 0 0%
James C. and Dorothy
Jane Filson Revocable
Living Trust 7,000 7,000 .53% 0 0%
Patrick J.
O'Toole 5,000 5,000 .38% 0 0%
Milton
Thompson<F1> 32,320 323,200 4.32% 290,880 21.89%
Dennis
DeYoung<F2> 32,320 323,200 4.32% 290,880 21.89%
Harold
Thompson<F3> 8,080 80,800 6.08% 72,720 5.47%
Joel Stein <F4> 8,080 80,800 6.08% 72,720 5.47%
Pratt, Wylce &
Lords, Ltd.<F5> 95,000 160,000 12.04% 0 0%
Alan Filson 34,150 34,150 2.57% 0 0%
Hugh & Marianne 70,000 70,000 5.27% 0 0%
Baker<F6>
</TABLE>
[FN]
<F1> Milton Thompson is currently President, Treasurer and a Director of
the Company.
<F2>Dennis DeYoung is currently Vice President, Secretary and a Director
of the Company.
<F3> Harold Thompson is currently a Director of the Company.
<F4> Joel Stein is currently a Director of the Company.
<F5> Pratt, Wylce & Lords, Ltd. is distributing 65,000 of its common
shares to its shareholders. These common shares are being registered in
this Offering.
<PAGE>22
<F6>Assumes conversion of the Class C Preferred Shares owned by
Hugh and Marianne Baker prior to or at effective date of registration
statement.
The Company shall register pursuant to this prospectus the A Warrants and
the common shares underlying 200,000 A Warrants currently outstanding
for the account of the following individuals or entities. The percentage
owned prior to and after the offering reflects all of the then outstanding
warrants. The amount and percentage owned after the offering assumes the
sale of all of the A Warrants and does not include any Common Shares
underlying the A Warrants being registered on behalf of the selling security
holders.
<TABLE>
<CAPTION>
Name and Amount Total Number Of % Amount %
Being Registered A Warrants Owned Owned Owned
Registered Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>
Milton Thompson
- 80,000 80,000 40% 0 0%
Dennis DeYoung
- 80,000 80,000 40% 0 0%
Harold Thompson
- 20,000 20,000 10% 0 0%
Joel Stein
- 20,000 20,000 10% 0 0%
</TABLE>
Additionally, the Corporation shall register pursuant
to this prospectus, the 7,000 Common Shares which may be issued upon
exercise of the 700 A Warrants which are issuable to Hugh and Marianne
Baker upon conversion of the Class C Preferred Stock into Common
Shares.
The A Warrants themselves are also being registered pursuant to this
prospectus and shall be freely tradable upon the effective date of this
registration statement. The Company does not intend to actively pursue a
market in the A Warrants.
- -----------------------------------------------------------------------------
USE OF PROCEEDS
- -----------------------------------------------------------------------------
The securities to which this Prospectus relates are being distributed to
holders of Pratt Common Stock as a dividend and neither the Company nor
Pratt will receive any cash or other proceeds in connection with the
Distribution.
<PAGE>23
Additionally, securities are being registered on behalf of the selling
securityholders and the Company will not receive any cash or other
proceeds in connection with the subsequent sale. Any proceeds received
from the subsequent exercise of the A Warrants shall be used as working
capital and to expand operations. Due to the uncertainty of the timing and
amount of actual funds which may received upon exercise of the A
Warrants, no specific breakdown of uses have been established by the
Company. The aggregate amount of proceeds if all of the A Warrants are
exercise is $1,000,000. If all of the A Warrants are exercised, the proceeds
shall be utilized over a twelve month period.
- ----------------------------------------------------------------------------
THE COMPANY
- ----------------------------------------------------------------------------
The Company. The Company was incorporated in Indiana on April 28,
1995 consolidating activities in the areas of the acquisition of licenses to use
trademarks, logos, and photographic likenesses on collectibles, the design
of those collectibles, the importation of those collectibles, and the marketing
of the collectibles. The Company also serves as a licensing agent and a
consultant to manufacturers of other products seeking licenses to use marks,
logos and photographic likenesses on their products. The Company has been
unprofitable since inception.
Prior to April 28, 1995, these activities took place within Grand Slam III,
an Indiana limited partnership, which also provided contract advisor,
negotiation, career planning and general management services for athletes,
entertainers, media personalities and others and planning, management and
sponsorship development for events. Grand Slam III remains in existence for
those purposes.
Grand Slam, an Indiana Limited Partnership was founded in 1982 to
provide professional representation primarily for athletes, but, also for
entertainers, other personalities and events. Grand Slam was terminated in
1988. Grand Slam II, a predecessor to Grand Slam III, an Indiana Limited
Partnership was created in 1988 to begin to aggressively seek licenses to
use logos and marks in the design, importation and manufacturing of
collectible pins and related jewelry. At the same time, Sports Ventures was
created, again as an Indiana Limited Partnership, by the same principals as
Grand Slam II, to maintain the original lines of business relating to
professional representation. In 1991, the principals determined to
reorganize and divide the assets of these two (2) partnerships , with the
athletes currently under contract going to the Sports Ventures successor,
Sport Ventures II, and the licenses going to a successor to Grand Slam II,
Grand Slam III. Grand Slam III retained the right and actively sought to
provide events in competition with Sports Ventures II.
Grand Slam III engaged in the provision of services to athletes, entertainers,
media professionals, other personalities and events in the areas of contract
development and negotiation, career, planning, general management,
solicitation of, and evaluation of endorsement and sponsorship proposals.
Grand Slam III also sought to acquire the rights (licenses) to use trademarks
<PAGE>24
and logos to use in the design and importation of its own line of collectibles,
including lapel pins, pin collector sets, key chains, earrings and related
items.
The Company's executive offices are located at 401 Pennsylvania
Parkway, Suite 390, Indianapolis, Indiana 46280. Telephone No. (317)
575-5900. These offices consist of 2,575 square feet provided, as a part of
a total agreement for $10,000 per month with Grand Slam III to provide
office space, storage, access to office equipment and management services.
Business Objective. The operations and objectives of the Company are
the acquisition of licenses from sports and entertainment entities and
personalities for the use of logos and other marks and individual
photographic images to manufacture lapel pins, photo pins and similar
collectible souvenir memorabilia.
Employees. As of the date of this prospectus, the Corporation has five full
time employees, one retained lawyer and one part time independent
contractor working on commission. See "RISK FACTORS." The
Corporation will, as operations demand, sub-contract the balance of its
personnel through independent contractors or hire additional employees.
Competition. There is significant competition in the collector pin and related
souvenir industry, particularly the logo pin market. The Corporation will be
competing with established companies and other entities (many of which
may possess substantially greater resources than the Corporation. Almost
all of the companies with which the Corporation competes are substantially
larger, have more substantial histories, backgrounds, experience and
records of successful operations, greater financial, technical, marketing and
other resources, more employees and more extensive facilities than the
Corporation now has, or will have in the foreseeable future. It is also likely
that other competitors will emerge in the near future. There is no assurance
that the Corporation will continue to compete successfully with other
established collector pin and related souvenir enterprises. The Corporation
shall compete on the basis of quality and on public taste in addition to a
price basis. Inability to compete successfully might result in increased
costs, reduced yields and additional risks to the investors herein.
Consulting Agreement. On April 12, 1995, Grand Slam II entered into a
consulting agreement on with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist
Grand Slam III in its capitalization and the obtainment of additional
financing. On April 28, 1995, the consulting agreement was assigned to the
Company. To date, Pratt provided consulting services regarding
capital structuring, initial equity financing, and preparation of a
registration statement. The term of the agreement is for one year from
April 12, 1995. The agreement has been extended by written mutual
consent of the parties. As of the date of this prospectus, Pratt has received
160,000 Common Shares valued at $1.50 per common share which represents 12.04%
of the currently outstanding common stock of the Company. As a result, Pratt
would be deemed to be an affiliate of the Company. Subsequent to the
distribution pursuant to this registration statement, Pratt shall be a
nonaffiliate owning 7.15% of the total outstanding common shares of the
Company. In addition, Pratt received total cash compensation of $30,000.
<PAGE>25
Pratt is to received further compensation of $25,000 upon filing of the
registration statement and $10,500 upon the effective date of the registration
statement. The $25,000 has been billed but not yet received by Pratt.
Alan Filson, (prior to becoming a director of Pratt) received cash
compensation of $10,000 and 32,000 Common Shares pursuant to the
consulting agreement.
- -----------------------------------------------------------------------------
BUSINESS ACTIVITIES
- -----------------------------------------------------------------------------
General. The Corporation's business focuses on the acquisition of
licenses from sports and entertainment entities and personalities for the use
of logos and other marks and individual photographic images to
manufacture lapel pins, photo pins and similar collectible souvenir
memorabilia. When licenses are acquired, the Corporation designs and
imports high end products under an exclusive arrangement with NAGAI Art
Industrial Company, Limited, a Far East manufacturer. This exclusive
agreement, although not a formal written agreement, affords the
Corporation exclusive access to the technology of NAGAI Art Industrial
Company, Ltd.'s manufacturing process within the United States. The
Corporation then distributes its products through a network of distributors
currently covering the entire United States and Canada.
Product Line. The Corporation's line of products consists of collector logo
lapel pins, collector photographic pins, pin collector set including logo pins
or a combination of logo pins, logo key chains, earrings, bottle openers
using logos or trademarks and related goods collectible items, such as water
bottles. The Corporation further serves as a Master Licensee and a
Licensing Agent for other intellectual properties, sub-licensing
manufacturers in other product categories. The following individual
licenses are material to the Corporation's results: NBA, USA Basketball,
The International Hockey League, The Rock & Roll Hall of Fame and
Museum, the Beatles, and Gibson Guitar. None of the the licenses identified
as material to the Company's results are exclusive. The percentage of the
Company's revenues attributable to each of these licenses for the nine (9)
months ending July 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
NBA Properties 1.28%
USA Basketball 67.6%
The International Hockey League 2.08%
The Rock & Roll Hall of Fame and Museum 16.5%
The Beatles 4.13%
Gibson Guitar 5.9%
</TABLE>
The Corporation acquires licenses in the following categories of products:
Logo pins;
photo pins -- team and individual likenesses;
key chains and fobs;
earrings;
promotional pins;
sponsor pins;
collector sets;
commemorative pins (all star, anniversary year, etc.); and
limited edition sets.
The Corporation determines the wholesale price of its products by taking the
sum of the product cost, overhead, royalties, sales commission and margin.
The Corporation attempts to obtain a 15%-30% margin on volume orders
and a 30%-40% margin on high-end program. Royalties are approximately
9%-15% and commissions equal 8%-15%.
<PAGE>26
Currently fifty percent (50%) of the Corporation's revenues are sports
related and fifty percent (50%) of the Corporation's revenues are non-sports
related.
Distribution. The Corporation organizes the distribution of its products to
conform to the market of the particular license, sports or entertainment has
established the following primary channels of distribution:
1. Sports - For licensed sports products, six (6) independent
sales agencies have specific territorial and/or account assignments. In the
aggregate, these sales agencies create a strategic presence for the
Corporation's products all of the major markets in the United States. These
sales agencies brings current experience with other comparable product
lines, creating thereby access among retail buyers for the Corporation's
lines of collectibles.
Specialty marketing supplements the efforts of the independent dealers in
the Corporation's licenses sports product line in two (2) ways. First,
independent sales agencies, with specific experience, have been hired to
focus on particular markets. One such independent sales agency works
exclusively to place Corporation's products in mass merchants. At the
other end of the size continuum, an active telemarketing consultant services
the small store market by identifying and qualifying leads for the
independent dealers' follow up.
Venues, catalogue and television shopping markets and premium
sales to corporations are managed within the Corporation by the National
Sales Manager and the experienced consultants and staff supporting him.
2. Entertainment - The Corporation varied its distribution to
accommodate the marketing and purchasing practices of the market for
entertainment related products. In this segment of business, very specific
understanding and experience are essential. For this reason, the
Corporation established an exclusive distribution relationship with a major
entertainment products distributor, Baker and Taylor, to service all major
record and book store chains.
Labyrinth Sales, an independent sales representative,
conducts all other sales nationally. As a part of its sales effort, Labyrinth
utilizes specialists concentrating on gift market distribution and on mass
merchants. The Corporation has entered into a one year sales agreement
with Labyrinth to act as the Company's sales representative for the states of
Michigan, Kentucky, Ohio and West Virginia and the western part of the
State of Pennsylvania. Either party has the right to cancel the agreement for
just cause upon thirty (30) days written notice. Labyrinth has the full and
complete rights to present and take orders for the full line of the Company's
collectible log pins and photo pins and related jewelry products with the
exception of collector sets. The Company shall pay Labyrinth a 15% sales
commission on some of the items and 7% on the sales of a few of the items.
All payments are to be based upon the total amount collected in each month
and paid by the fifth day of the subsequent month.
<PAGE>27
Finally, the Corporation's national sales management staff
retains responsibility for distribution to major department stores, catalogue
sales and the growing television sales markets.
A network of independent dealers - Currently Ten (10) independent sales
representatives are strategically located with access to major markets in the
United States. Most are established representatives who also represent
other product lines, thus providing the opportunity for headway among
retail buyers.
Market Research. The Corporation employs market research in the areas of
new product opportunities; niche market development, ongoing research in
market share and competition to enhance management decisions,
advertising/promotion planning and customer service analysis (especially
among the growing network of retail outlets).
- ----------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ----------------------------------------------------------------------------
Trends and Uncertainties. Inasmuch as a major portion of the Company's
activities is the obtainment of licenses to manufacture and market lapel pins,
photo pins and similar collectible souvenir memorabilia pins, the
Company's business operations may be adversely affected by competitors
and prolonged recessionary periods. The sale of the Company's products
are seasonal in that the Olympics and other major sports events are strong
buying periods..
The Company utilizes McGillvrey Ltd. as the importer for its products from
Pacific Rim manufacturers most notably Naigai, International of Japan who
has developed the photo likeness pin manufacturing process available
exclusively to the Company. Although there are several other
manufacturers which could be utilized, There can be no assurance that if
McGillvrey, Ltd. were unable to continue as the Company's source, that the
Company could obtain its injection molding at the same price level per
product.
The Company has been adding new accounts, representative groups,
expanding into new markets and channels of distribution in recent months.
See "Business Activities - Marketing Strategy" The continuation of
obtaining additional types of new business and markets is uncertain and the
continued success of any of the Company's new marketing strategies for
generating revenue is uncertain.
In addition, the future exercise of any of the A Warrants is uncertain based
on the current financial condition of the Company. The lack of future
exercise of the Warrants registered hereunder would negatively impact the
Company's ability to successfully expand operations.
<PAGE>28
Capital and Source of Liquidity. In June, 1995, the Company entered into
an agreement, which was modified on January 1, 1996 to a rate of $10,000
per month, with Grand Slam III for the provision of 2,575 square feet of
office space, storage, access to office equipment and management and
professional services. Other than the portion of this agreement related to
the provision of office space, the Company has no material commitments
for capital expenditures.
The Company's high cost of sales percentage and operating expenses in
comparison to sales throughout its operational history results, in this early
phase of the Company's history, from the costs of analysis of prospective
licenses to seek, the acquisition of licenses being which are determined to
have potential, and product development. An infrastructure had to be put in
place to perform these functions, including development of the analytical
capability to be able to project the performance of particular licenses for the
Company's products, in-house capability to assure full understanding of the
contractual requirements of any particular license, negotiation regarding
terms of the license and graphic design to allow for the application of marks
and logos in innovative ways to appeal to collectible purchasers and to
develop sales materials for use by sales agencies to appeal to the buyer of
collectibles, leading to added expense. The precondition to the acquisition
of a license is the payment of a substantial advance against guaranteed
royalties and the duration required to design products, something that
cannot be undertaken until the license is granted require expenditures will in
advance of any revenues. Once prototypes are developed, approval by the
Licensor is required before manufacture can begin and the orders, which
result in revenue, can be taken. If any redesign is necessary to receive the
licensor's approval, the production process can be extended even further.
With the infrastructure in place and the process of product development for
the initial range of products for the existing portfolio of licenses largely
completed, the percentage cost of sales and operating base should lower.
Plan of Operation. The Company has planned capital expenditures as
discussed in "Business Activities". The Company intends to use future
revenue and proceeds from future sales of its equity securities. The
Company established a line of credit on June 26, 1996 in the amount of
$100,000. The line of credit is evidenced by a note with interest on the
unpaid balance payable monthly at the prime rate of the bank plus 8.25%.
The line of credit is fully collateralized by a Treasury bill held by the bank
in an investment account. There can be no guarantee that the Company will
be able to obtain the additional funds from any of the sources listed and will
not make the proposed acquisitions if said funds are not available.
The Company has developed the following to implement the marketing plan
of its products. During 1995 and the first two quarters of 1996, the Company
has concentrated on the diversification of this inventory of licensed
properties and on the design and development of collectible products. With
success in acquiring new licenses and the introduction of products into the
market place, the Company expects to achieve increases in sales in the
coming months. Also, with the advent of the 1996 NBA Playoffs and an
emphasis on its licensed products and the convening of Dream Team to
prepare for the 1996 Olympics in Atlanta, sales for already existing licensed
<PAGE>29
products improved. The Company received sales of $1,764, $3,476 and
$272,883 for the NBA logo, NBA Pro Pix and USA Basketball for the nine
months ended July 31, 1996.
Based on its established channels of distribution, its recent marketing and
current and projected sales levels, the Company should begin to have
positive cash flow from operations in the fourth quarter of 1996 and
management is of the opinion that the Company will be able to generate
sufficient cash flows to support these operations during fiscal year 1996.
The Company is currently financing its sales with a combination of cash
generated from internal operations and additional equity financing. The
Company has recently raised $591,459 in the private placement of common
shares and $105,000 in the private placement of preferred shares. The
Company shall pursue additional equity or debt financing, if necessary, to
continue or expand operations.
For the nine months ended July 31, 1996, the Company purchased $12,839
of equipment. As a result, the Company had net cash used in investing
activities of $12,839 for the nine months ended July 31, 1996.
For the ten months ended October 31, 1995, the Company utilized $36,425
in the purchase and development of trademark and product development
costs. This resulted in net cash used in investing activities of $36,425 for
the ten months ended October 31, 1995.
For the nine months ended July 31, 1996, the Company received funds
from a line of credit which is evidenced by a note with interest on the unpaid
balance monthly at the prime rate of the bank plus 8.25%. Additionally,
the Company satisfied accrued interest with the issuance of common stock
at $1.50 per common share for an aggregate of $1,768. As a result, the Company
had net cash provided by financing activities of $101,768.
For the ten months ended October 31, 1995, the Company received
$591,459 from the sale of its common stock and $47,822 from capital
contributions to partnership. The Company received $53,250 from a notes
payable. As a result, the Company had net cash provided by financing
activities of $692,531 for the ten months ended October 31, 1995.
For the year ended December 31, 1994, the Company received $76,520
from capital contributions to partnership. As a result, the Company had
net cash provided by financing activities of $692,531 for the year ended
December 31, 1994.
On a long term basis, liquidity is dependent on increased revenues from
operations, additional infusions of capital and debt financing. The
Company believes that additional capital and debt financing such as the line
of credit in the short term will allow the Company to increase its marketing
and sales efforts and thereafter result in increased revenue and greater
liquidity in the long term.
<PAGE>30
Results of Operations. The Company had a net loss from operations of
$227,627 for the nine months ended July 31, 1996. Amortization and
depreciation increased $9,828 due to the purchase of a computer system
used in the design and layout of new pins, advertising and layout.
Accounts receivable increased significantly by $259,952 due to the
increased sales over the prior period. Inventory increased by $195,656 as
the Company prepared for the Olympics and the projected increased NBA
sales. Larger quantities of inventory have been acquired to decrease unit
costs in the long run as the cost of goods is lower when the quantity of
goods increase. Prepaid expenses increased $15,178 and accrued expenses
increased $55,743 as the Company prepared for the Olympics and other
sporting finals. Accounts payable also increased by $203,582 as the
Company's distributors prepared for the Olympics and other sporting finals.
The Company had net cash used in operations of $398,904 for the nine
months ended July 31, 1996.
Sales increased from $32,940 for the nine months ended July 31, 1995 to
$404,325 for the same period in 1996. This increase was mainly due to the
sale of USA Basketball products of $272,883. Cost of sales increased
from $35,793 to $326,118 for those same period due to preparation for the
major sporting events such as the Olympics for the nine months ended July
31, 1996. Selling and marketing increased from $20,357 for the nine
months ended July 31, 1995 to $83,609 for the nine months ended July 31,
1996 as the Company attempted to increase visibility of its products for the
Olympics and other major sporting events. General and administrative
costs increase from $16,490 for the nine months ended July 31, 1995 to
$104,401 for the nine months ended July 31, 1996 due to additional
employees salaries. During this time frame, two (2) additional licenses, the
Beatles and Gibson Guitar, were also acquired requiring payment of an
advance against royalties and product development well ahead of any
potential of the sale of any products. Finally, expenses were incurred to
expand sales materials, generally and specifically in advance of the
Olympics and to increase the Company's sales force in preparation for the
Olympics and new entertainment lines. Additionally, management fees of
$120,000 were paid to a related party. Initial management fees covered the
infrastructure, including rent, use of equipment, supplies, management,
marketing, legal, sales management, product development and design and
inventory control the Company required. As of January 1, 1996, the
management fees were reduced as the Company brought most of the afore
mentioned functions in-house, leading to an corresponding increase in
operating costs. The remaining management fees cover marketing
consultation, additional legal consultation and advice, space and the use of
office equipment including computers and photocopiers.
The Company had a net loss from operations of $532,221 for the ten
months ended October 31, 1995 compared to a net loss of $73,644 for the
year ended December 31, 1994. Sales increased from $178,099 for the
year ended December 31, 1994 to $191,057 for the ten months ended
October 31, 1996. Cost of sales decreased from $121,359 for the year
ended December 31, 1994 to $91,567 (annualized to $109,880) for the ten
months ended October 31, 1995 due to the write-off of unsalable
merchandise in 1994. This merchandise related to a decision not to renew
the NFL license due to its high cost and the leveling of retail sales for team
<PAGE>31
sports products leading the Company to concentrate its team sports efforts
on the NSA and to extend its efforts in acquiring entertainment licenses.
Selling and marketing increased from $71,231 for the year ended December
31, 1994 to $122,163 for the ten months ended October 31, 1995 due to
advertising of $9,086, commissions of $17,679, consulting of $60,920,
royalties of $23,266, shipping & freight of $3,518, telephone of $2,524,
displays of $2,210, printing of $3,499 and other costs of $403. General
and administrative costs decreased from $59,153 for the year ended
December 31, 1994 to $38,153(annualized to $45,783) for the ten months
ended October 31, 1995 due to the reduction of shared expenses with GS
III. However, management fees of $137,000, (including payment of
shared expenses) were paid to a related party for the ten months ended
October 31, 1995 compared to $0.00 paid for the year ended December 31,
1994.
During April, 1995 the Company entered into a one year consulting
agreement with an entity whereby the entity would provide to the Company
financial consulting services. Pursuant to the agreement the entity agreed to
assist the Company in preparing a private placement memorandum to obtain
equity financing in the amount of up to $600,000 and to assist the Company
in completing a registration statement by which the common stock may
become tradable in a public market. In exchange for these services the
Company agreed to pay $65,000 in cash and to issue 160,000 shares of its
$.001 par value common stock to the consultant. During the third quarter of
1995, the Company began offering shares of its common stock at $1.50 per
share pursuant to the private placement. The Company issued 329,100
shares of common stock for cash aggregating $486,459, net of offering
expenses of $7,191 through October 31, 1995. The stock issued to the
consultant was valued at $240,000 ($1.50 per share) and such amount is
included in other income and expense in the accompanying statement of
operations. The Company issued an additional 32,000 shares valued at
$48,000 to an individual for consulting services provided in connection
with the private offering.
The Company had a net loss from operations of $74,644 for the year ended
December 31, 1994 compared to a net loss of $38,246 for the year ended
December 31, 1993. Sales increased from $125,796 for the year ended
December 31, 1993 to $178,099 for the year ended December 31, 1994.
Cost of sales increased from $72,847 for the year ended December 31,
1993 to $121,359 for the year ended December 31, 1994 due to increased
operations. Selling and marketing increased from $44,574 for the year
ended December 31, 1993 to $71,231 for the year ended December 31,
1994 due to increased operations. General and administrative costs
increased from $46,621 for the year ended December 31, 1993 to $59,153
for the year ended December 31, 1994 due to management's attempts to
obtain further capitalization and due to increased operations.
The Company is seeking to lower its operating expenses while expanding
operations and increasing its customer base and operating revenues. The
Company is focusing on decreasing administrative costs. The Company
has sought, and continues to seek, to lower its operating costs by (i)
creating an in-house infrastructure to service its needs for evaluation and
negotiation for the acquisition of licenses, marketing and sales and product
design and development; (ii) by looking at other alternatives for product
packaging, order fulfillment and inventory storage and (iii) by ordering in
larger quantities to assure the post possible unit cost for the acquisition of
<PAGE>32
inventory. However, increased marketing expenses will probably occur in
future periods as the Company attempts to further increase its marketing and
sales efforts.
- ----------------------------------------------------------------------------
CERTAIN TRANSACTIONS
- ----------------------------------------------------------------------------
Related Party Transactions. Effective May 15, 1995, the Company
entered into a management support agreement with Grand Slam III, an
affiliated limited partnership whereby Grand Slam III will supply support
services to the Company including the use of office space and equipment
and the use by the Company of employees of Grand Slam III in performing
administrative functions, planning and negotiation of license and sales
agreements. The contract provides for payments of $25,000 per month
plus 7% of gross revenues and expires on October 31, 1997. The contract
was modified effective January 1, 1996 to provide that certain employees of
Grand Slam III will become employees of the Company and to reduce the
fixed monthly payment to $10,000 per month. During the period from
May 15, 1995 to October 31, 1995, the Company made aggregate payments
under the contract of $164,819. The Company paid an additional $90,000
during the six months ended April 30, 1996.
Affiliated Company. Prior to April 28, 1995, Grand Slam III, an Indiana
Limited partnership engaged in the following lines of business:
representation, management and career planning for athletes, entertainers
and media personalities; planning management ad sponsorship development
for events; seeking licenses for the design, importation and marketing of
high end collectibles; serving as either a Master Licensee or a licensing
Agent for the owners of trademarks and logos; and, serving as a consultant
to manufacturers in other product categories seeking licenses from the
owners of trademarks.
On April 28, 1995, all of these licensing activities were organized into a
separate corporation incorporated in Indiana, Grand Slam Licensing, Inc.
Grand Slam III remains in existence fulfilling its other business purposes.
The Company receives, under an agreement between the two (2) entities,
some management services, marketing support, use of space and access to
office equipment for which it reimburses Grand Slam III at the current rate
of $10,000 per month. Milton O. Thompson is general partner of Grand
Slam III and is president and treasurer of the Company.
Services Provided by Affiliated Company. Thompson & Stein, an Indiana
professional corporation on September 27, 1996, provides general legal
services to the sports, entertainment and other clients of Grand Slamm III
and on a limited basis to others. As of the date of this prospectus, no
compensation has been paid by the Company to Thompson & Stein.
Consulting Agreement. The Company has entered into a consulting
agreement with Pratt, Wylce & Lords, Ltd. ("Pratt") to assist the Company
in its capitalization and the obtainment of additional financing. As partial
payment for consulting services, the Company issued 165,000 of its
Common Shares to Pratt, of which 65,000 Common Shares are to be
registered and distributed to Pratt shareholders. Additionally, 32,000
Common Shares were issued to a nominee of Pratt. In addition, Pratt
has received cash compensation of $30,000.
<PAGE>33
Distribution of Securities. On May 16, 1995, the Board of Directors
authorized the distribution of 200,000 common stock purchase warrants
exercisable at $5.00 plus one warrant for each share of common stock.
The warrants are exercisable for a period of 48 months from the date of
issue and are callable with 30 days notice at a price of $.001 per warrant.
These distributions shall be made to the owners of record of common stock
on the books of the Company as of May 15, 1995. The Warrants and the
common stock underlying said Class A Warrants are being registered in this
Offering.
Lockup Agreement. Pursuant to a written agreement in March 1996,
the principal shareholders and officers and directors (Milton Thompson,
Dennis DeYoung, Harold Thompson and Joel Stein) who received A
Warrants issued them pursuant to the Special Meeting of the Board of
Directors held on May 16, 1995 have agreed as follows:
In the event the shareholder exercises any warrants, the stock issued to the
shareholder pursuant to the exercise shall be locked in and restricted from
trading for a period of two years. A notice is to be placed on the face of
each stock certificate covered by the terms of the Agreement stating that the
transfer of the stock evidenced by the certificate is restricted until twenty-
four (24) months from the date of issuance. The shareholder also agrees
not to sell or otherwise transfer their interest in the warrants except to an
underwriter or other market makers in the stock once a market is
established. The shareholder further agrees that the total value in cash, or
other consideration, paid by the buyer to the seller shall not exceed $.01 per
warrant.
- ----------------------------------------------------------------------------
MANAGEMENT
- ----------------------------------------------------------------------------
Officers and Directors. Pursuant to the Articles of Incorporation, each
Director shall serve until the annual meeting of the stockholders, or until his
successor is elected and qualified. It is the intent of the Company to
support the election of a majority of "outside" directors at such meeting.
Directors may only be removed for "cause". The term of office of each
officer of the Company is at the pleasure of the Company's Board.
The principal executive officers and directors of the Company will be as
follows:
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
Milton O. Thompson, age 41 President, Treasurer Inception to
and Director present
Dennis DeYoung, age 50 Vice President, Secretary Inception to
Director present
<PAGE>34
Harold Thompson, age 52 Director Inception to
present
Joel K. Stein, age 39 Director Inception to
present
</TABLE>
Resumes:
Milton O. Thompson. Mr. Thompson serves as the Chairman, President
and Treasurer of the Corporation. Mr. Thompson devotes eighty percent
(80%) of his time to the Company's operations. Since 1989, Mr.
Thompson has served as the Managing General Partner of Grand Slam III,
L.P., a full sports and entertainment marketing and management company
representing athletes, entertainers, events, licensors and licensees.
Mr. Thompson received his Bachelor of Arts in Political Science and
Philosophy from Wittenberg University in 1976 and his Doctor of
Jurisprudence from Indiana University in 1979. Mr. Thompson's
experience ranges from negotiations relating to individuals, teams and
events. From 1985-1988, he served as the Vice President for Development
and the General Counsel for the Organizing Committee for Tenth Pan
American Games. Mr. Thompson is one of the five (5) founding
memebers of Thompson & Stein P.C., a law firm engaged in the general
practice of law.
Mr. Thompson is currently the Chairman of the Indianapolis Foundation
and on the Board of Directors of American States Insurance Company, IWC
Resources, a public utility and the Indianapolis Indians Triple A Baseball
Team, among many others.
Dennis DeYoung. Mr. DeYoung serves as a Director, Vice President and
Secretary of the Corporation. Mr. DeYoung devotes forty percent (40%)
of his time to the Company's operations. He received a Bachelor of Arts
Degree with a concentration in Restaurant Management from Washington
State University in 1968. Since his graduation from the University of
California at Davis with a Masters in Business Administration with a
concentration in Finance in 1975, he has been actively involved in the
animal feed business as corporate treasurer and comptroller of Lowell
DeYoung Co., Inc., an agricultural business in the Pacific Northwest. Mr.
DeYoung devotes the remainder of his time to Lowell DeYoung Co., Inc.
Mr. DeYoung serves on several boards of Washington State University
including the Board of Directors of the University's Foundation and the
Advisory Boards of the College of Business and Economics and the Athletic
Department.
Harold Thompson. Mr. Thompson is a Director of the Corporation. Mr.
Thompson graduated from Indiana University's School of Business in
1969. Mr. Thompson worked from 1969 to 1979 in merchandising,
marketing and purchasing for Ayr-Way, a midwestern mass merchandiser.
In 1979, Mr. Thompson became the Vice President for Sales and marketing
of the Unit-Step Corporation of Indianapolis. For the past five (5) years,
Mr. Thompson has been responsible for the day to day procurement,
marketing and merchandising function of the licensed products division of
Grand Slam III, L.P.
<PAGE>35
Joel K. Stein. Mr. Stein is currently a Director of the Corporation. Mr.
Stein is one of the five (5) founding members of Thompson & Stein, a law
firm engaged in the general practice of law. Mr. Stein received a Bachelor
of Arts with a major in Sociology from Marquette University in 1983. Mr.
Stein served as the Assistant to the Vice President and Corporate Counsel
of the Organizing Committee for the Tenth Pan American Games in 1987.
In 1988, Mr. Stein helped found Grand Slam II, L.P. Mr. Stein also
worked as the Director of the Professional Division of United Way of
Central Indiana from 1988 to 1991.
From 1991 to present, Mr. Stein has served as the founding President of the
Hoosier Alliance Against Drugs, a not-for-profit corporation created by the
Indiana General Assembly to advance the private sector's involvement in
community based substance abuse prevention and education. Mr. Stein
implemented the Alliance's start-up, including a comprehensive fund raising
program which has generated in excess of $1.5 million to support programs
in all of Indiana's 92 countries.
Remuneration. Since inception, no cash compensation has been paid by
the Corporation to its officers and directors, during which there were two
(2) officers and four (4) directors:
T/he Company has entered into an Employment Agreement with Milton
Thompson as of January 1, 1996. The Employment Agreement terminates
on December 31, 1998. Pursuant to the employment agreement, Mr.
Thompson shall receive $35,000 per annum.
The Board of Directors and shareholders have approved a Non-Statutory
Stock Option Plan to attract and retain persons of experience and ability and
whose services are considered valuable and to encourage the sense of
proprietorship in such persons and to stimulate the active interest of such
persons in the development and success of the Corporation.
1. Persons Eligible to Participate in Non-Statutory Stock Option Plan.
The persons eligible for participation in the Plan as recipients of Non-
statutory Stock Options ("NSOs") shall include full-time and part-time
employees (as determined by the Committee) and officers of the Company
or of an Affiliated Corporation. In addition, directors of the Company or
any Affiliated Corporation who are not employees of the Company or an
Affiliated Corporation and any attorney, consultant or other adviser to the
Company or any Affiliated Corporation shall be eligible to participate in the
Plan. For all purposes of the Plan, any director who is not also a common
law employee and is granted an option under the Plan shall be considered an
"employee" until the effective date of the director's resignation or removal
from the Board of Directors, including removal due to death or disability.
The Committee shall have full power to designate, from among eligible
individuals, the persons to whom NSOs may be granted. A person who
has been granted an NSO hereunder may be granted an additional NSO or
NSOs, if the Committee shall so determine. The granting of an NSO shall
not be construed as a contract of employment or as entitling the recipient
thereof to any rights of continued employment.
<PAGE>36
2. Stock Reserved for the Plan. Subject to adjustment, a total of
750,000 shares of Common Stock, no par value per share ("Stock"), of the
Company shall be subject to the Plan. The Stock subject to the Plan shall
consist of unissued shares or previously issued shares reacquired and held
by the Company or any Affiliated Corporation, and such amount of shares
shall be and is hereby reserved for sale for such purpose. Any of such
shares which may remain unsold and which are not subject to outstanding
NSOs at the termination of the Plan shall cease to be reserved for the
purpose of the Plan, but until termination of the Plan, the Company shall at
all times reserve a sufficient number of shares to meet the requirements of
the Plan. Should any NSO expire or be canceled prior to its exercise in full,
the unexercised shares theretofore subject to such NSO may again be
subjected to an NSO under the Plan.
3. Option Price. The purchase price of each share of Stock placed
under NSO shall not be less than Eighty Five percent (85%) of the fair
market value of such share on the date the NSO is granted. The fair market
value of a share on a particular date shall be deemed to be the average of
either (i) the highest and lowest prices at which shares were sold on the date
of grant, if traded on a national securities exchange, (ii) the high and low
prices reported in the consolidated reporting system, if traded on a "last sale
reported" system, such as NASDAQ, for over the counter securities, or (iii)
the high bid and high asked price for other over-the-counter securities. If
no transactions in the Stock occur on the date of grant, the fair market value
shall be determined as of the next earliest day for which reports or
quotations are available. If the common shares are not then quoted on any
exchange or in any quotation medium at the time the option is granted, then
the Board of Directors or Committee will use its discretion in selecting a
good faith value believed to represent fair market value based on factors
then known to them. The cash proceeds from the sale of Stock are to be
added to the general funds of the Company.
4. Exercise Period. (a) The NSO exercise period shall be a term of
not more than ten (10) years from the date of granting of each NSO and
shall automatically terminate:
(i) Upon termination of the optionee's employment with the
Company for cause;
(ii) At the expiration of twelve (12) months from the date of
termination of the optionee's employment with the Company for any reason
other than death, without cause; provided, that if the optionee dies within
such nine-month period, subclause (iii) below shall apply; or
(iii) At the expiration of fifteen (15) months after the date of
death of the optionee.
(b) "Employment with the Company" as used in the Plan shall
include employment with any Affiliated Corporation, and NSOs granted
under the Plan shall not be affected by an employee's transfer of
employment among the Company and any Parent or Subsidiary thereof. An
optionee's employment with the Company shall not be deemed interrupted
or terminated by a bona fide leave of absence (such as sabbatical leave or
employment by the Government) duly approved, military leave or sick
leave.
<PAGE>37
Board of Directors Compensation. Members of the Board of
Directors may receive an amount yet to be determined annually for their
participation and will be required to attend a minimum of four meetings per
fiscal year. All expenses for meeting attendance or out of pocket expenses
connected directly with their Board representation will be reimbursed by the
Corporation. Director liability insurance may be provided to all members of
the Board of Directors. No differentiation is made in the compensation of
"outside directors" and those officers of the Corporation serving in that
capacity.
Indemnification. The Corporation shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State of
Indiana, any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the Corporation,
or served any other enterprise as director, officer or employee at the request
of the Corporation. The Board of Directors, in its discretion, shall have the
power on behalf of the Corporation to indemnify any person, other than a
director or officer, made a party to any action, suit or proceeding by reason
of the fact that he/she is or was an employee of the Corporation.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Corporation,
the Corporation has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Corporation of expenses incurred or paid by a director, officer or
controlling person of the Corporation in the successful defense of any
action, suit or proceedings) is asserted by such director, officer, or
controlling person in connection with any securities being registered, the
Corporation will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE AGAINST
PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS THEREFORE
UNENFORCEABLE.
Conflicts of Interest Policy. The Company has adopted a policy that any
transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only be
on terms fair and reasonable to the Company (based on competitive bids, if
appropriate, or on terms similar contracts with the Company by unaffiliated
entities) and approved by a majority of the disinterested directors of the
Company's Board of Directors. The Board of Directors resolved that the
Bylaws of the Company shall be amended to provide that no such
<PAGE>38
transactions by the Company shall be either void or voidable solely because
of such relationship or interest of directors or officers or solely because
such directors are present at the meeting of the Board of Directors of the
Company or a committee thereof which approves such transactions, or
solely because their votes are counted for such purpose if: (i) the fact of
such common directorship or financial interest is disclosed or known by the
Board of Directors or committee and noted in the minutes, and the Board or
committee authorizes, approves or ratifies the contract or transaction in good
faith by a vote for that purpose without counting the vote or votes of such
interested directors; or (ii) the fact of such common directorship or financial
interest is disclosed to or known by the shareholders entitled to vote and
they approve or ratify the contract or transaction in good faith by a majority
vote or written consent of shareholders holding a majority of the Common
Shares entitled to vote (the votes of the common or interested directors or
officers shall not be counted in any such vote of shareholders), or (iii) the
contract or transaction is fair and reasonable to the Company based on
competitive bids, if appropriate, and/or on terms consistent with similar
contracts with the Company by unaffiliated entities at the time it is
authorized or approved. In addition, interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
of the Company or a committee thereof which approves such transactions.
Currently, there are only four directors. Milton Thompson and Harold
Thompson are brothers who own approximately 24% and 6% of the
Company's Common Shares. As a result, until such time as
additional directors are appointed or elected to the Board of Directors, and
even though the directors are aware of their fiduciary duty to the
shareholders, there can be no assurance that the utilization of the policy will
result in the resolution of any conflict of interest.
- -----------------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- -----------------------------------------------------------------------------
There are currently 1,329,100 Common Shares outstanding. The following
tabulates holdings of shares of the Company by each person who, subject to
the above, at the date of this Prospectus, holds of record or is known by
Management to own beneficially more than 5.0% of the Common Shares
and, in addition, by all directors and officers of the Company individually
and as a group.
<TABLE> Shareholdings at Date of
This Prospectus
<CAPTION>
Amount of
Common Shares
Name and Address of Amount of to be owned
Beneficial Owner Common Shares after Offering
Currently Owned % and Distribution %
<S> <C> <C> <C> <C>
Milton Thompson 323,200 24.32% 290,880 21.89%
5008 Fieldstone Trail
Indianapolis, Indiana 46254
<PAGE>39
Dennis DeYoung 323,200 24.32% 290,880 21.89%
805 4th Street West
Kirkland, Washington 98072
Harold Thompson 80,800 6.06% 72,720 5.47%
1070 Fleetwood Drive
Indianapolis, Indiana 46208
Joel Stein 80,800 6.06% 72,720 5.47%
7002 Bluff Grove Circle
Indianapolis, Indiana 46254
Pratt, Wylce &
Lords, Ltd. 160,000 12.04% 0 FN1 0%
P.O. Box 7571
Hilton Head Island, SC 29938
Hugh & Marianne
Baker 70,000 5.27% 0 0%
5780 Washington Boulevard
Indianapolis, Indiana 46220
All Directors & Officers
as a group (four) 808,000 60.79% 727,200 54.71%
</TABLE>
FN1 The table assumes that after the distribution of 65,000 Common
Shares by Pratt, Pratt will successfully sell the remaining 95,000 Common
Shares which are being registered on its behalf of Pratt as a selling
shareholder.
There are currently 200,000 A Warrants outstanding. The following
tabulates holdings of A Warrants of the Company by each person who,
subject to the above, at the date of this Prospectus, holds of record or is
known by Management to own beneficially more than 5.0% of the Common
Shares and, in addition, by all directors and officers of the Company
individually and as a group.
<TABLE>
<CAPTION>
Name Total Number Of % Amount %
A Warrants Owned Owned Owned
Owned Prior to After After
Offering Offering Offering
<S> <C> <C> <C> <C>
Milton Thompson 80,000 40% 0 0%
Dennis DeYoung 80,000 40% 0 0%
Harold Thompson 20,000 10% 0 0%
Joel Stein 20,000 10% 0 0%
<PAGE>40
All Officers and
Directors
As a Group (four) 200,000 100% 0 0%
</TABLE>
- ----------------------------------------------------------------------------
SHARES ELIGIBLE FOR FUTURE SALE
- ----------------------------------------------------------------------------
Upon completion of the Distribution, the Company will have 1,329,100
shares of Common Stock outstanding, 626,050 of which are being
registered on behalf of selling shareholders in this Offering. This does not
include any Common Stock issued upon exercise of the Class A or Class B
and 200,000 A Warrants currently being registered on behalf of selling
shareholders. Of these shares, 65,000 shares distributed in the Distribution
will be freely tradable without restriction or further registration under the
Securities Act, except for any shares purchased by an existing "affiliate" of
the Company, which will be subject to the resale limitations of Rule 144
under the Securities Act. The remaining shares, as well as other securities
which may be issued, in the future, in private transactions pursuant to an
exemption from the Securities Act are "restricted securities" and may be sold
in compliance with Rule 144 adopted under the Securities Act of 1933, as
amended. Rule 144 provides, in essence, that a person who has held
restricted securities for a period of two years may sell every three months in
a brokerage transaction or with a market maker an amount equal to the
greater of 1% of the Company's outstanding shares or the average weekly
trading volume, if any, of the shares during the four calendar weeks
preceding the sale. The amount of "restricted securities" which a person
who is not an affiliate of the Company may sell is not so limited:
nonaffiliates may each sell without limitation shares held for three years.
The Company will make application for the listing of its Shares on the
Electronic Bulletin Board and in the "pink sheets." Sales under Rule 144
may, in the future, depress the price of the Company's Shares in the over-
the-counter market, should a market develop.
Prior to this offering there has been no public market for the Common Stock
of the Company. The effect, if any, of a public trading market or the
availability of shares for sale at prevailing market prices cannot be
predicted. Nevertheless, sales of substantial amounts of shares in the
public market could adversely effect prevailing market prices.
- -----------------------------------------------------------------------------
MARKET LISTING
- -----------------------------------------------------------------------------
No Assurance of Public Market on Electronic Bulletin Board for the Securities.
Prior to the date hereof, there has been no trading market for the Common Stock
of the Company. The Company has agreed to use its best efforts to apply for
the quotation of its Common Stock on the NASDAQ, National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). The Company will not
meet the proposed criteria as of the completion of the offering and intends to
apply for quotation on the Electronic Bulletin Board or the "pink sheets".
In order to obtain the NASDAQ listing, the
<PAGE>41
Company must meet the following criteria: (i) have total assets in excess of
$4,000,000; (ii) have net equity in excess of $2,000,000; (iii) become a
reporting company under the Securities Exchange Act of 1934; (iv) have a
minimum of 300 shareholders; (v) have a public float of at least 100,000
shares and (vi) have a bid price of $3.00. The Company hopes to meet (i)
and (ii) upon the exercise of the warrants being registered in this offering.
There can be no assurance that any warrants will, in fact, be exercised.
Additionally, the Company shall file a Form 8-A immediately after the
effective date of this registration statement to meet the requirements of (iii).
Annual costs of compliance under the 1934 Act are estimated to be approximately
$15,000. After the effective date of this registration statement, the Company
shall meet the criteria in (iv). Immediately after the effective date of this
registration statement, the Company shall apply for the quotation of its
Common Stock on the over-the-counter market. There can be no
assurance, however, that the Common Stock will be quoted, that an active
trading and/or a liquid market will develop or, if developed, that it will be
maintained. The Company does not intend to apply for quotation of its
Common Stock on NASDAQ until it meets the above criteria.
Broker-Dealer Sales of Company Securities. Until the Company
successfully obtains a listing on the NASDAQ quotation system, if ever, the
Company's securities may be covered by Rule 15c2-6 under the Securities
Exchange Act of 1934 that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with
their spouse). For transactions covered by the rule, the broker-dealer must
make a special suitability determination of the purchaser and have received
the purchaser's written agreement to the transaction prior to the sale. In
order to approve a person's account for transactions in designated
securities, the broker or dealer must (i) obtain information concerning the
person's financial situation, investment experience and investment
objectives; (ii) reasonably determine, based on the information required by
paragraph (i) that transactions in designated securities are suitable for the
person and that the person has sufficient knowledge and experience in
financial matters that the person reasonably may be expected to be capable
of evaluating the rights of transactions in designated securities; and (iii)
deliver to the person a written statement setting forth the basis on which the
broker or dealer made the determination required by paragraph (ii) in this
section, stating in a highlighted format that it is unlawful for the broker or
dealer to effect a transaction in a designated security subject to the
provisions of paragraph (ii) of this section unless the broker or dealer has
received, prior to the transaction, a written agreement to the transaction from
the person; and stating in a highlighted format immediately preceding the
customer signature line that the broker or dealer is required to provide the
person with the written statement and the person should not sign and return
the written statement to the broker or dealer if it does not accurately reflect
the person's financial situation, investment experience and investment
objectives and obtain from the person a manually signed and dated copy of
the written statement. A designated security means any equity security
other than a security (i) registered, or approved for registration upon notice
of issuance on a national securities exchange that makes transaction reports
available pursuant to 17 CFR 11Aa3-1 (ii) authorized or approved for
<PAGE>42
authorization upon notice of issuance, for quotation in the NASDAQ
system; or . . . (iv) whose issuer has net tangible assets in excess of
$2,000,000 demonstrated by financial statements dated less than fifteen
months previously that the broker or dealer has reviewed and has a
reasonable basis to believe are true and complete in relation to the date of the
transaction with the person. Consequently, the rule may affect the ability
of broker-dealers to sell the Company's securities and also may affect the
ability of purchasers in this Offering to sell their shares in the secondary
market. As of the date of this prospectus, no broker-dealer has agreed to act
as the Company's market maker.
- -----------------------------------------------------------------------------
DESCRIPTION OF SECURITIES
- -----------------------------------------------------------------------------
Qualification. The following statements constitute brief summaries of the
Corporation's Certificate of Incorporation and Bylaws, as amended. Such
summaries do not purport to be complete and are qualified in their entirety
by reference to the full text of the Certificate of Incorporation and Bylaws.
The Corporation's articles of incorporation authorize it to issue up to
50,000,000 Common Shares, $.001 par value per Common Share .
Shares of common stock purchased in this offering will be fully paid and
non-assessable.
The Corporation has authorized a dividend to shareholders of record as of
May 1, 1995 of 250 Class A Convertible Preferred Shares ("Class A
Preferred") and 800 Class B Convertible Preferred Shares (Class B
Preferred"). The Class A Preferred shall be convertible at a rate of 1,000
shares of common stock for each share of Class A Preferred. Conversion
will be authorized upon the first fiscal year that the Corporation attains at
least $1,000,000 in audited after tax profits. Class B Preferred shall be
convertible at a rate of 1,000 shares of common stock for each share of
Class B Preferred. The Class B Preferred shall be convertible upon
completion of the first fiscal year that the Corporation attains audited after
tax profits of at least $3,000,000. During September, 1995, the
Corporation authorized 1,000 Class C Preferred Shares. Each Class C
Preferred Share is convertible, after four months from the purchase date,
into 100 Common Shares and One "A" Warrant to purchase 10 additional
Common Shares at $5.00 per share. The Class C Preferred Stock is not
entitled to voting rights or dividends. There are currently 700 Class C
Preferred Shares issued and outstanding. Additionally, the Board of
Directors of the Corporation have authorized a dividend distribution of
200,000 A Warrants on a pro rata basis to the shareholders of record as of
May 15, 1995. The A Warrants shall be exercisable for a period of two
years from the effective date of the registration statement. The A Warrants
shall be exercisable into Common Shares of the Corporation at the exercise
price of $5.00 per Common Share.
There are presently outstanding 1,329,100 Common Shares, 250 Class A
Preferred Shares, 800 Class B Preferred Shares and 700 Class C Preferred
Shares.
<PAGE>43
Common Stock. Holders of Common Shares of the Corporation are
entitled to cast one vote for each share held at all shareholders meetings for
all purposes. Upon liquidation or dissolution, each outstanding Common
Share will be entitled to share equally in the assets of the Corporation
legally available for distribution to shareholders after the payment of all
debts and other liabilities. Common Shares are not redeemable, have no
conversion rights and carry no preemptive or other rights to subscribe to or
purchase additional Common Shares in the event of a subsequent offering.
All outstanding Common Shares are, and the shares offered hereby will be
when issued, fully paid and non-assessable.
There are no limitations or restrictions upon the rights of the Board of
Directors to declare dividends out of any funds legally available therefor.
The Corporation has not paid dividends to date and it is not anticipated that
any dividends will be paid in the foreseeable future. The Board of Directors
initially may follow a policy of retaining earnings, if any, to finance the
future growth of the Corporation. Accordingly, future dividends, if any,
will depend upon, among other considerations, the Corporation's need for
working capital and its financial conditions at the time.
"A" Warrants. The Board of Directors of the Corporation have authorized
a dividend distribution of 200,000 "A" Warrants on a pro rata basis to the
shareholders of record as of May 15, 1995. The "A" Warrants shall be
exercisable for a period of two years from the effective date of the
registration
statement. The "A" Warrants shall be exercisable into Common Shares of
the Corporation at the exercise price of $5.00 per Common Share. The
warrants will be callable with 30 days notice for a price of $.001 per
warrant.
Preferred Stock. The Corporation has authorized a dividend to
shareholders of record as of May 1, 1995 of 250 Class A Convertible
Preferred Shares ("Class A Preferred"). The Class A Preferred shall be
convertible at a rate of 1,000 shares of common stock for each share of
Class A Preferred. Conversion will be authorized upon the first fiscal year
that the Corporation attains at least $1,000,000 in audited after tax profits.
The Corporation has also authorized a dividend to shareholders of record as
of May 1, 1995 of 800 Class B Convertible Preferred Shares (Class B
Preferred"). Class B Preferred shall be convertible at a rate of 1,000 shares
of common stock for each share of Class B Preferred. The Class B
Preferred shall be convertible upon completion of the first fiscal year that
the Corporation attains audited after tax profits of at least $3,000,000.
During September, 1995, the Corporation authorized 1,000 Class C
Preferred Shares. Each Class C Preferred Share is convertible, after four
months from the purchase date, into 100 Common Shares and One "A"
Warrant to purchase 10 additional Common Shares at $5.00 per share. The
Class C Preferred Stock is not entitled to voting rights or dividends. There
are currently 700 Class C Preferred Shares issued and outstanding.
<PAGE>44
Transfer Agent. The Corporation shall act as its own transfer agent until
after the completion of the Offering.
- -----------------------------------------------------------------------------
LEGAL MATTERS
- -----------------------------------------------------------------------------
The due issuance of the Common Shares offered hereby will be opined
upon for the Company by Charles A. Richmond of Thompson & Stein,
P.C. in which opinion Counsel will rely on the validity of the Certificate
and Articles of Incorporation issued by the State of Indiana, as amended
and the representations by the management of the Company that appropriate
action under Indiana law has been taken by the Company.
- -----------------------------------------------------------------------------
LEGAL PROCEEDINGS
- -----------------------------------------------------------------------------
The Company is not involved in any legal proceedings as of the date of this
Prospectus.
- -----------------------------------------------------------------------------
EXPERTS
- -----------------------------------------------------------------------------
The audited financial statements included in this Prospectus have been so
included in reliance on the report of Winter, Scheifley & Associates P.C.,
Certified Public Accountants, on the authority of such firm as experts in
auditing and accounting.
- -----------------------------------------------------------------------------
INTERESTS OF NAMED
EXPERTS AND COUNSEL
- -----------------------------------------------------------------------------
Corporate counsel is a member of a Thompson & Stein, a firm of which the
directors of the Company are also members. None of the other experts named in
the Prospectus are affiliated with the Company.
<PAGE>45
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Grand Slam Licensing, Inc.
We have audited the accompanying balance sheets of Grand Slam
Licensing, Inc. and its predecessor (see Note 1) as of October 31, 1995 and
December 31, 1994, and the related statements of operations,
stockholders' equity, and cash flows for the ten months ended October
31, 1995, the year ended December 31, 1994 and the period from inception,
(April 25, 1993) to December 31, 1993. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Grand Slam
Licensing, Inc. and its predecessor as of October 31, 1995 and December
31, 1994, and the results of its operations, and its cash flows for the
ten months ended October 31, 1995, the year ended December 31, 1994,
and the period from inception (April 26, 1993) to December 31, 1993, in
conformity with generally accepted accounting principles.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
January 30, 1996
<PAGE>46
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Balance Sheets
October 31, 1995 and December 31, 1994
ASSETS
<S> <C> <C>
1995 1994
Current assets: ----------- -----------
Cash and cash equivalents $ 411,523 $ -
Accounts receivable, trade, less
reserve for bad debts of $6,013 in 1994 23,873 15,963
Inventories 99,630 20,794
Prepaid expenses 15,107 -
Prepaid expenses - related party 27,813 9,167
----------- -----------
Total current assets 577,946 45,924
Other assets:
Product design costs 26,616 -
Trademarks 3,971 -
Organization costs 81 -
----------- -----------
$ 608,614 $ 45,924
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 26,625 $ -
Accounts payable, trade 66,591 36,625
Accrued expenses 19,914 -
----------- -----------
Total current liabilities 113,130 36,625
Long-term debt 26,625 -
Commitments (Note 5)
Stockholders' equity:
Preferred stock class A,
1, 000 shares authorized,
250 shares issued and outstanding - -
Preferred stock class B,
1, 000 shares authorized,
800 shares issued and outstanding - -
Preferred stock class C, $150 stated
value, 1,000 shares authorized,
700 shares issued and outstanding 105,000 -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,329,100 and 808,000 shares
issued and outstanding 1,329 808
Additional paid-in capital 796,824 120,381
Subscriptions to common stock 64,500 -
----------- -----------
Accumulated deficit (498,794) (111,890)
----------- -----------
468,859 9,299
----------- -----------
$ 608,614 $ 45,924
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>48
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Statements of Operations
Ten Months Ended October 31, 1995 and
Year Ended December 31, 1994 and for the
Period from Inception (April 28, 1993 to December 31, 1993
1995 1994 1993
----------- ----------- --------
<S> <C> <C> <C>
Revenues:
Sales $ 191,057 $ 178,099 $ 125,796
Costs and expenses:
Cost of sales 91,567 121,359 72,847
Selling and marketing 122,165 71,231 44,574
General and administrative 38,153 59,153 46,621
Management fees paid to
related party 137,000 - -
----------- ----------- -----------
388,885 251,743 164,042
----------- ----------- ----------
Income (loss) from operations 197,828) (73,644) (38,246)
Other income and (expense):
Interest income 937 - -
Consulting expense associated with
private offering of securities (333,190) - -
Interest expense (2,140) - -
----------- ----------- -----------
(334,393) - -
Net income (loss) $ (532,221) $ (73,644) $(38,246)
=========== ========== ==========
Earnings (loss) per share:
Net income (loss) $ (0.5) $ (0.09) $ (0.05)
========== ========== ==========
Weighted average shares
outstanding 987,436 808,000 808,000
========= ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>49
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Statement of Changes in Stockholders' Equity
Ten Months Ended October 31, 1995,
Year Ended December 31, 1994
and for the Period from Inception
(April 28, 1993) to December 31, 1993
Additional
Preferred Stock Common Stock Paid-In
ACTIVITY Shares Amount Shares Amount Capital
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992
Assumed inception date
- $ - 808,000 $ 808 $ (6,539)
Capital contribution by partners
- - 50,400
Net (loss) for the year - - - - -
------- ------- ------- ------- ---------
Balance,
December 31, 1993 808,000 808 43,861
Capital contribution by partners 76,520
Net (loss) for the year - - - - (73,644)
------- ------- ------- ------- ----------
Balance,
December 31, 1994 808,000 808 120,381
Capital contribution
by partners 47,822
Common stock
issued for cash 329,100 329 486,130
Preferred stock
issued for cash 700 105,000 - - -
Common stock
issued for services - - 192,000 192 287,808
Common stock
subscribed for services - - - - -
Net (loss) for the period - - - - -
Reclassification
of partnership losses - - - - (145,317)
-------- --------- -------- ------- ----------
Balance,
October 31, 1995 700 $105,000 1,329,100 $1,329 $796,824
========= ======== ========= ======= ==========
</TABLE>
<PAGE>50
<TABLE>
Statement of Changes in Stockholders Equity
Continued
<CAPTION>
Stock Accumulated
ACTIVITY Subscriptions Deficit Total
<S> <C> <C> <C>
Balance, December 31, 1992
Assumed inception date $ - $ - $ (5,731)
Capital contribution by partners 50,400
Net (loss) for the year - (38,246) (38,246)
----------- ----------- ----------
Balance,
December 31, 1993 - (38,246) (38,246)
Capital contribution by partners 76,520
Net (loss) for the year - (73,644) (73,644)
----------- ----------- ----------
Balance,
December 31, 1994 - (111,890) 9,299
Capital contribution
by partners 47,822
Common stock
issued for cash - - 486,459
Preferred stock
issued for cash - - 105,000
Common stock
issued for services - - 288,000
Common stock
subscribed for services 64,500 - 64,500
Net (loss) for the period - (532,221) (532,221)
Reclassification
of partnership losses - 145,317 -
--------- ---------- -----------
Balance,
October 31, 1995 $64,500 $(498,794) $468,859
========= =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>51
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Statements of Cash Flows
Ten Months Ended October 31, 1995
and Year Ended December 31, 1994 and for the
Period from Inception (April 28, 1993 to December 31, 1993
1995 1994 1993
----------- ----------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (532,221) $ (73,644) $ (38,246)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Amortization 5,757 - -
Common stock issued or
subscribed for services 352,500 - -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (7,910) 2,497 (18,460)
(Increase) decrease in inventory (78,836) (12,844) (1,950)
(Increase) decrease in prepaid
expenses (33,753) (5,833) (3,334)
Increase (decrease) in accounts
payable 29,966 13,304 11,590
Increase (decrease) in accrued liabilities 19,914 - -
----------- ----------- -----------
Total adjustments 287,638 (2,876) (12,154)
Net cash provided by (used in)
operating activities (244,583) (76,520) (50,400)
----------- ----------- -----------
Cash flows from investing activities:
Purchase and development of
Trademark and product development
costs (36,425) - -
----------- ----------- -----------
Net cash (used in) investing activities (36,425) - -
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from sale of common stock 591,459 - -
Capital contributions to partnership 47,822 76,520 50,400
Proceeds from notes payable 53,250 - -
----------- ----------- -----------
Net cash provided by (used in)
financing activities 692,531 76,520 50,400
----------- ----------- -----------
<PAGE>52
Increase (decrease) in cash 411,523 - -
Cash and cash equivalents,
beginning of period 73,644 - -
----------- ----------- -----------
Cash and cash equivalents,
end of period $ 485,167 $ - $ -
=========== ========== ===========
Supplemental cash flow information:
Cash paid for interest $ - $ - $ -
Cash paid for income taxes $ - $ - $ -
See accompanying notes to financial statements.
</TABLE>
<PAGE>53
Grand Slam Licensing, Inc.
Notes to Financial Statements
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated on April 26 , 1995, in the State of Indiana.
The Company is a successor to the commemorative pin business carried on
by Grand Slam III (GS III), an Illinois limited partnership formed in
April 1993. The partnership continues to operate its sports management
business and to fulfill certain general and administrative functions for
the Company (See Note 5 ). The financial statements consist of the
separate operations of the commemorative pin business of the partnership
for the period from January 1, 1993 to May 31, 1995 and the operations of
the company since its inception.
Inventories: Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method. Inventory consists
principally of commemorative pins manufactured by others.
Fixed assets: The company uses office equipment owned by GS III (See
Note 5).
Product design costs: Costs of dies and photographic images used in the
design and production of the Company's commemorative pins are
capitalized and amortized to expense over a three year period. The
Company reviews the costs accumulated on an annual basis and charges off
unamortized balances associated with pins that are no longer being sold.
Net loss per share: The net loss per share is computed by dividing the
net loss for the period by the weighted average number of common shares
outstanding for the period. Common stock equivalents are excluded from
the computation as their effect would be anti-dilutive. Shares issued to
the Company's founders in May 1995 are considered to be outstanding
from the beginning of the periods presented.
Cash and cash equivalents: Cash and cash equivalents consist of cash and
other highly liquid debt instruments with original maturities of less than
three months.
Revenue recognition: The company recognizes revenue from the sale of its
products upon shipment.
Advertising costs: Advertising costs are charged to operations when
incurred. Advertising costs charged to operations were $9,086 for the ten
months ended October 31, 1995 and $2,045 and $970 respectively, for the
years ended December 31, 1994 and 1993.
Concentration of credit risk: Financial instruments that potentially
subject the Company to a concentration of credit risk consist principally
of cash and cash equivalents. During the year the Company did not
maintain cash deposits at financial institutions in excess of the
$100,000 limit covered by the Federal Deposit Insurance Corporation. The
<PAGE>54
Company has funds deposited in a money market account administered by
an investment company amounting to $400,000 at October 31, 1995. Such
amount is not covered by the Federal Deposit Insurance Corporation or any
other deposit insurance program and any decline in the value of the
underlying investment securities which collateralize the account, may
have a negative impact on the availability of these funds.
Note 2. LONG-TERM DEBT
Long-term debt consists of three promissory notes given in exchange for
cash aggregating $53,250. The notes and interest accrued at 12.5% per
annum are due in two annual installments on the anniversary dates of the
notes (June and July, 1996 and 1997).
Note 3. STOCKHOLDERS EQUITY
Common stock:
During the periods covered by these financial statements the Company
issued shares of common stock without registration under the Securities Act
of 1933. Although the Company believes that the sales did not involve a
public offering of its securities and that the Company did comply with the
safe harbor exemptions from registration under section 4(2), it could be
liable for rescission of the sales if such exemptions were found not to apply.
The Company has not received a request for rescission of shares nor does it
believe that it is probable that its shareholders would pursue rescission nor
prevail if such action were undertaken.
At inception, the Company issued 808,000 shares of its $.001 par value
common stock to four of its officers and/or directors in exchange for
certain assets of GS III. For the purpose of these financial statements,
these shares are considered to be outstanding as of beginning of the
periods presented and the value attributed thereto represents partnership
basis in certain net assets applicable to the pin business. Also, for
purpose of these financial statements, amounts necessary to fund the losses
of GS III applicable to the pin business have been shown as contributions
of capital in the accompanying statement of changes in stockholders' equity
for the years ended December 31, 1994 and 1993 and for the five month
period of partnership operation ended May 31, 1995.
During April, 1995 the Company entered into a one year consulting
agreement with an entity whereby the entity would provide to the Company
financial consulting services. Pursuant to the agreement the entity agreed to
assist the Company in preparing a private placement memorandum to obtain
equity financing in the amount of up to $600,000 and to assist the Company
in completing a registration statement by which the common stock may
become tradable in a public market. In exchange for these services the
Company agreed to pay $65,000 in cash and to issue 160,000 shares of its
$.001 par value common stock to the consultant. During the third quarter of
1995, the Company began offering shares of its common stock at $1.50 per
share pursuant to the private placement. The Company issued 329,100
shares of common stock for cash aggregating $486,459, net of offering
expenses of $7,191 through October 31, 1995. The stock issued to the
<PAGE>55
consultant was valued at $240,000 ($1.50 per share) and such amount is
included in other income and expense in the accompanying statement of
operations. The Company issued an additional 32,000 shares valued at
$48,000 to an individual for consulting services provided in connection
with the private offering.
During May 1995, the Company authorized the issuance of 200,000
common stock purchase warrants to shareholders of record on a pro rata
basis. The warrants are exercisable at $5.00 per share for a 24 month
period from the effective date of the registration statement and may be
redeemed prior to exercise upon 30 days notice for a price of $.001
per warrant.
During July and September of 1995 the Company entered into consulting
agreements with two prominent sports persons for their assistance in the
acquisition of additional licenses for the sale of pin products with top
athletes in the golf and tennis professions. As compensation for these
services, the Company will issue an aggregate of 43,000 shares of its
restricted common stock valued at $1.50 per share. An amount of $64,500
has been included as subscriptions to common stock with a corresponding
charge to selling and marketing expense in the accompanying financial
statements.
Preferred stock:
During May 1995 the Company authorized the issuance of 250 shares of
Class A preferred stock and 800 shares of Class B preferred stock on a pro
rata basis to shareholders of record on May 15, 1995. The Class A
preferred stock is convertible into 1,000 shares of common stock for each
preferred share upon the conclusion of the first fiscal year that the Company
attains at least $1,000,000 of after tax profits.. The Class B preferred stock
is convertible into 1,000 shares of common stock for each preferred share
upon the conclusion of the first fiscal year that the Company attains at least
$3,000,000 of after tax profits. Neither class of preferred stock is entitled
to voting rights or dividends. No value was placed on the preferred stock.
During September 1995, the Company authorized the issuance of 700
shares of Class C preferred stock to an individual in exchange for $105,000
in cash. Each Class C preferred share is convertible, after four months
from the purchase date, into 100 shares of common stock and a warrant to
purchase 10 additional shares of common stock at $5 .00 per share. The
Class C preferred stock is not entitled to voting rights or dividends.
Other: For purposes of these financial statements, the amounts necessary
to fund the losses of GS III applicable to its pin business for the period
from January 1, 1993 to May 31, 1995 have been shown as capital
contributions by the partners of GS III in the accompanying Statement of
Changes in Stockholders' Equity. Accumulated losses of the partnership
during the period from January 1, 1993 to May 31, 1995 amounting to
$145,317 have been charged to additional paid in capital at May 31, 1995 so
that the remaining accumulated deficit at October 31, 1995 represents only
the losses of the corporate entity.
<PAGE>56
Note 4. INCOME TAXES
The operations presented for the years ended December 31, 1994 and 1993
are those of GS III and are not attributed to the Company for federal and
state income tax purposes. The operations presented for the ten months
ended October 31, 1995 include GS III operations applicable to the
commemorative pin business from the period from January 1, 1995 to May
31, 1995 and are likewise excluded for income tax purposes. The Company
has adopted Financial Accounting Standards Board Statement No. 109,
Accounting for Income Taxes. Of the loss for the ten months ended October
31, 1995 approximately $485,900 will be available as an operating loss
carryforward for the Company expiring during 2010. The Company is
unable to predict future taxable income that would enable it to utilize the
loss carryforward and therefore the deferred tax asset attributable thereto of
approximately $165,000 is fully reserved.
Note 5. RELATED PARTY TRANSACTIONS
Effective May 15, 1995 the Company entered into a management support
agreement with GS III whereby GS III will supply support services to the
Company including the use of office space and equipment and the use by
the Company of employees of GS III in performing administrative
functions, planning and negotiation of license and sales agreements. The
contract provides for payments of $25,000 per month plus 7% of gross
revenues and expires on October 31, 1997. The contract was modified
effective January 1, 1996 to provide that certain employees of GS III
become employees of the Company and to reduce the fixed monthly
payment to $10,000 per month.
During the period from May 15, 1995 to October 31, 1995, the Company
made aggregate payments under the contract of $164,813 of which
$137,000 was charged to expense. The excess payments are classified as
prepaid expenses - related party in the accompanying balance sheet at
October 31, 1995.
During the years ended December 31, 1994 and 1993 and the five months
ended May 31, 1995, GS III incurred similar general and administrative
expenses as provided for in the management contract. For purposes of the
financial statements included herein, allocation of such costs between
the pin business and the sports management business carried on by GS III
was based upon the percentage of gross revenues provided by each
business activity. Allocation of these expenses to the pin business, of
which the Company is the successor, was as follows:
<TABLE>
<CAPTION>
<S> <C>
Five months ended May 31, 1995 $ 25,734
Year ended December 31, 1994 $ 71,212
Year ended December 31, 1993 $ 59,448
</TABLE>
<PAGE>57
Note 6. STOCK OPTION PLAN
During 1995, the Company adopted the 1995-1996 Non-Statutory Stock
Option Plan which provides for granting to the Company's officers,
directors, employees and certain other individuals who consult with or
advise the Company, options to acquire up to 750,000 shares of the
Company's common stock. The shares issuable under the 1995-1996 plan
are at a price not less than 85% of the fair market value of the stock on the
date of grant. The exercise periods of the options are not to exceed ten
years. No options have been granted pursuant to the plan as of October 31,
1995.
Note 7. SALES TO MAJOR CUSTOMERS
During the ten months ended October 31, 1995 and the years ended
December 31, 1994 and 1993, the Company made sales to customers that
comprise greater than 10% of total revenues as follows:
<PAGE>58
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Balance Sheets
July 31, 1996 and 1995
(unaudited)
ASSETS
<S> <C> <C>
1996 1995
Current assets: ----------- -----------
Cash and cash equivalents $101,548 $ 62,423
Accounts receivable, trade, less
reserve for bad debts of
$6,013 in 1994 283,825 8,756
Inventories 295,286 67,048
Prepaid expenses 27,742 30,600
----------- -----------
Total current assets 708,401 268,827
Equipment 12,059 -
Other assets:
Product design costs 18,685 16,852
Trademarks 2,868 2,073
Organization costs 67 90
----------- -----------
$ 742,080 $ 187,832
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt $ - $ 26,625
Accounts payable, trade 270,173 19,213
Accrued expenses 75,657 909
Notes payable 135,250 -
----------- -----------
Total current liabilities 481,080 46,747
Long-term debt - 26,625
Commitments (Note 5)
Stockholders' equity:
Preferred stock class A,
1, 000 shares authorized,
250 shares issued and outstanding - -
Preferred stock class B,
1, 000 shares authorized,
800 shares issued and outstanding - -
Common stock, $.001 par value,
50,000,000 shares authorized,
1,329,100 and 808,000 shares
issued and outstanding 1,411 1,262
Additional paid-in capital 921,510 417,482
Subscriptions to common stock 64,500 -
<PAGE>59
Accumulated deficit (726,421) (304,284)
----------- -----------
261,000 114,460
----------- -----------
$ 742,080 $ 187,832
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>60
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Statements of Operations
Nine Months Ended July 31, 1996 and 1995
(unaudited)
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Sales $ 404,325 $ 32,940
Costs and expenses:
Cost of sales 326,118 35,793
Selling and marketing 83,609 20,357
General and administrative 104,401 16,490
Management fees paid to related party 120,000 50,000
----------- ---------
Income (loss) from operations (229,803) (89,700)
Other income and (expense):
Interest income 7,427 -
Consulting expense associated with
private offering of securities - (247,500)
Interest expense (5,251) (511)
----------- -----------
Net income (loss) $ (227,627) $ (337,711)
=========== ==========
Earnings (loss) per share:
Net income (loss) $ (0.17) $ (0.32)
=========== ==========
Weighted average shares
outstanding 1,356,433 1,049,278
=========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>61
<TABLE>
Grand Slam Licensing, Inc.
<CAPTION>
Statements of Cash Flows
Nine Months Ended July 31, 1996 and 1995
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (227,627) $ (337,711)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Amortization & depreciation 9,828 -
Common stock issued or
subscribed for services - 247,500
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (259,952) 5,233
(Increase) decrease in inventory (195,656) (57,628)
(Increase) decrease in prepaid
expenses 15,178 (30,600)
Increase (decrease) in accounts
payable 203,582 (759)
Increase (decrease) in accrued liabilities 55,743 909
---------- -----------
Total adjustments (171,277) 164,655
Net cash provided by (used in)
operating activities (398,904) (173,056)
----------- -----------
Cash flows from investing activities:
Purchase of equipment (12,839) -
Purchase and development of
trademark and product development
costs - (19,005)
----------- -----------
Net cash (used in) investing activities (12,839) (19,005)
----------- -----------
Cash flows from financing activities:
Notes payable 100,000 53,250
Proceeds from sale of common stock - 145,651
Accrued interest satisfied with common
stock 1,768 -
Capital contributions to the partnership - 57,980
----------- -----------
Net cash provided by financing activities 101,768 256,881
Increase (decrease) in cash (309,975) 64,820
<PAGE>62
Cash and cash equivalents,
beginning of period 411,523 2,397
---------- ----------
Cash and cash equivalents,
end of period $ 101,548 $ 62,423
========== ==========
Supplemental cash flow information:
Cash paid for interest $ 822 $ -
Cash paid for income taxes $ - $ -
See accompanying notes to financial statements.
</TABLE>
<PAGE>63
Grand Slam Licensing, Inc.
Notes to Financial Statements
Note 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
The Company was incorporated on April 26 , 1995, in the State of Indiana.
The Company is a successor to the commemorative pin business carried on
by Grand Slam III (GS III), an Illinois limited partnership formed in
April 1993. The partnership continues to operate its sports management
business and to fulfill certain general and administrative functions for
the Company (See Note 5 ).
The financial statements consist of the commemorative pin business of the
Company for the nine month period ended July 31, 1996 and a nine month
period ended July 31, 1995 which is a combination of operations of the
partnership for the six months ended April 30, 1995 and the operations of
the Company for the three months ended July 31, 1995.
Inventories: Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method. Inventory consists
principally of commemorative pins manufactured by others.
Fixed assets: The company uses office equipment owned or leased by GSIII
with the exception of a computer system used in the design and layout of
new pins, advertising and packaging. Depreciation is provided for on the
straight line method over the estimated useful life of the equipment.
Accumulated depreciation as of July 31, 1996 was $780.
Product design costs: Costs of dies and photographic images used in the
design and production of the Company's commemorative pins are
capitalized and amortized to expense over a three year period. The
Company reviews the costs accumulated on an annual basis and charges off
unamortized balances associated with pins that are no longer being sold.
Cash and cash equivalents: Cash and cash equivalents consist of cash and
other highly liquid debt instruments with original maturities of less than
three months. Included in the cash balance at July 31, 1996 is a Treasury
bill valued at $99,140, purchased June 26, 1996 with a maturity date of
September 26, 1996. The Company has pledged this Treasury bill as
collateral for a bank line of credit in the amount of $100,000 due September
26, 1996 (see note 2).
Advertising costs: Advertising costs are charged to operations when
incurred. Advertising costs were $11,664 for the nine months ended July
31, 1996 and $1,420 for the nine months ended July 31, 1995
Revenue recognition: The company recognizes revenue from the sale of its
products upon shipment.
Concentration of credit risk: Financial instruments that potentially
subject the Company to a concentration of credit risk consist principally
of cash and cash equivalents. During the year the Company did not
<PAGE>64
maintain cash deposits at financial institutions in excess of the
$100,000 limit covered by the Federal Deposit Insurance Corporation.
Net loss per share: The net loss per share is computed by dividing the net
loss for the period by the average number of common shares outstanding
for the period. Common stock equivalents are excluded from the
computation as their effect would be anti-dilutive. Shares issued to the
Company's founders on May 31, 1995 are considered to be outstanding
from the beginning of the periods presented.
Note 2. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt on July 31, 1995 consists of four promissory notes given in
exchange for cash aggregating $53,250. The notes and accrued interest at
12.5% per annum are due in two annual installments on the anniversary
dates of the notes. The Company redeemed two of the notes and accrued
interest in exchange for 12,000 shares of $.001 par value common stock on
May 1, 1996. The amount of the two notes converted to common stock
totaled $18,000 with accrued interest on $1,768. The first installment on
the two remaining notes was extended and the entire balance of $35,250 is
due in July 1997.
The Company established a line of credit on June 26, 1996 in the amount of
$100,000. The line of credit is evidenced by a note with interest on the
unpaid balance payable monthly at the prime rate of the bank plus 8.25%.
The line of credit is fully collateralized by a Treasury bill held by the bank
in an investment account.
Note 3. STOCKHOLDERS EQUITY
At inception, the Company issued 808,000 shares of its $.001 par value
common stock to four of its officers and/or directors in exchange for
certain assets of GS III. For the purpose of these financial statements,
these shares are considered to be outstanding as of beginning of the
periods presented and the value attributed thereto represents partnership
basis in certain net assets applicable to the pin business.
The Company issued 12,000 additional shares of stock during the nine
month period ended July 31, 1996 in exchange for two notes payable.
Further the Company issued 70,000 shares of stock and 700 warrants in
exchange for 700 shares of Class convertible preferred. Each warrant
entitles the holder to purchase 10 shares of common stock at $5.00 per
share.
Note 4. INCOME TAXES
The operations presented for the nine month period July 31, 1995 include
six months of GSIII and are not attributed to the Company for federal and
state income tax purposes. The Company has adopted Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes. The
Company has an operating loss carryforward from the period ended October
31, 1995 approximately $485,900 (expiring during 2010). The Company
is unable to predict future taxable income and therefore the deferred tax asset
attributable thereto of approximately $165,000 is fully reserved.
<PAGE>65
Note 5. RELATED PARTY TRANSACTIONS
For the last two months of the period ended July 31, 1995, the Company
operated under an agreement with GSIII whereby GSIII supplied support
services to the Company including the use of office space, equipment and
the use of GSIII employees. During this two month period the agreement
required a payment of $25,000 per month plus 7% of net income. The
agreement was modified effective January 1, 1996 to provide that the certain
employees of GSIII become employees of the Company and to reduce the
fixed monthly fee to $10,000 per month. During the nine month period
ended July 31, 1995, the Company made aggregate payments under the
contract of $49,813 and accrued an additional $187. During the nine
month period ended July 31, 1996, the Company made aggregate payments
of $72,187, accrued an additional $20,000 and charged of an additional
$27,813 which was prepaid at the beginning of the period. The Company
owed GSIII a balance of $20,000 as of July 31, 1996.
Note 6. STOCK OPTION PLAN
During the nine month periods ended July 31, 1996 and 1995, the
Company did not grant any stock options under its Non-Statutory Stock
Option Plan.
<PAGE>66
PART II
INFORMATION NOT REQUIRED BY PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
Other expenses in connection with this offering which will be paid
by Grand Slam Licensing, Inc. (hereinafter in this Part II referred to as the
"Company") are estimated to be substantially as follows:
<TABLE>
<CAPTION>
Amount
Payable
Item By Company
<S> <C>
S.E.C. Registration Fees $ 705.96
State Securities Laws (Blue Sky) Fees and Expenses 1,500.00
Printing and Engraving Fees 5,000.00
Legal Fees 15,000.00
Accounting Fees and Expenses 10,000.00
Transfer Agent's Fees 1,500.00
Total $33,705.96
</TABLE>
Item 14. Indemnification of Officers and Directors.
Indemnification. The Company shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State of
Indiana, any person made, or threatened to be made, a party to an action or
proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that he is or was a director or officer of the Company, or
served any other enterprise as director, officer or employee at the request of
the Company. The Board of Directors, in its discretion, shall have the
power on behalf of the Company to indemnify any person, other than a
director or officer, made a party to any action, suit or proceeding by reason
of the fact that he/she is or was an employee of the Company. The extent of
the indemnification shall be determined on a case by case basis and will be
dependent on the nature of the action, suit or proceeding and the specific
facts and circumstances surrounding the situation.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, the
Company understands that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceedings) is asserted by such director, officer, or controlling person in
<PAGE>67
connection with any securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issues.
Item 15. Recent Sales of Unregistered Securities.
At inception, the Company issued 808,000 common shares to its officers
and directors (Milton Thompson - 323,000 common shares, Dennis
DeYoung 323,200 common shares, Harold Thompson 80,800 common shares and
Joel Stein - 80,800 common shares in exchange for certain assets and liabilities
of Grand Slam III, an affiliated limited partnership. The liabilities
assumed were more than the value of the assets and so the Company
received $808 and paid in capital of (6,539).
On May 16, 1995, the Company issued 160,000 common shares to Pratt,
Wylce & Lords, Ltd. and 32,000 common shares to Alan Filson for
consulting services pursuant to the terms of a consulting agreement filed as
an exhibit to the registration statement. The services were valued
at $1.50 per common share.
During May, 1995, the Company issued 250 Class A Preferred Stock and
800 Class B Preferred Stock on a pro rata basis to shareholders of record on
May 15, 1995 (Milton Thompson, Dennis DeYoung, Howard Thompson
and Joel Stein). These securities were issued to the shareholders as a
dividend and no direct amount of consideration was paid by the
shareholders.
During September 1995, the Company issued 700 Class C preferred stock
to Hugh & Marianne Baker in exchange for $105,000 in cash.
During July and September of 1995, the Company entered into consulting
agreements with two prominent sports persons for their assistance in the
acquisition of additional licenses for the sale of pin products with top
athletes in the golf and tennis professions. As compensation for these
services, the Company will issue an aggregate of 43,000 common shares
valued at $1.50 per common share.
The Company also pursued a private placement at $1.50 per common shares
during the third quarter of 1995 and issued a total of 329,100 to the
following individuals. These issuances were made in compliance with Rule
505, Regulation D of the Securities Act of 1933 by Registrant's
management, consultants and selected broker/dealers. No commissions or
other remuneration was paid to anyone other than a NASD selected
broker/dealer. No general solicitation was utilized. There was less than
35 nonaccredited investors. The determination of whether an
investor was accredited or nonaccredited was based on the responses in the
subscription agreement filled out by each investor.
<PAGE>68
<TABLE>
<CAPTION>
Date Amount of Amount
Issued Name Common Stock Paid
- -------- -------- -------------- ------------
<S> <C> <C> <C>
6/13/95 Malcolm Thompson 3,000 $4,500 cash
6/13/95 Ethel Thompson
& Verna Saunders 3,000 $4,500 cash
6/28/95 Richard Payne 3,333 $5,001 cash
7/3/95 Larry Konfirst 9,000 $13,500 cash
7/6/95 William Taylor 6,000 $9,000 cash
7/6/95 CarolAnn Mihalik 3,000 $4,500 cash
7/14/95 Clifford Jaebker 6,100 $9,150 cash
7/19/95 Greg Brown 5,000 $7,500 cash
7/19/95 Joseph Kack 3,000 $4,500 cash
7/19/95 Bradley Beck 5,333 $7,999.50 cash
7/20/95 Thomas Kaminski 20,000 $30,000 cash
7/24/95 Thomas Hayden 3,000 $4,500 cash
7/24/95 Lois Zoll 3,000 $4,500 cash
7/26/95 Kellye Moore 3,000 $4,500 cash
7/26/95 Domenic Angelicchio 4,000 $6,000 cash
7/26/95 Butch Cameron 3,000 $4,500 cash
7/28/95 Robert & Alisa DeStefano 3,000 $4,500 cash
7/31/95 James Haines 3,334 $5,001 cash
8/2/95 Richard Roberts 3,000 $4,500 cash
8/3/95 Robert Brown 5,000 $7,500 cash
8/4/95 Shirley Jean Carroll 3,000 $4,500 cash
8/4/95 Michael Campbell 3,000 $4,500 cash
8/4/95 William Brady
& James Curtis 3,000 $4,500 cash
8/7/95 Bradley Mays
8/7/95 Donald Burdsall 3,000 $4,500 cash
8/8/95 Kerry Kenna 3,000 $4,500 cash
8/8/95 Chloe Green 3,000 $4,500 cash
8/10/95 Lisa Railing 10,000 $15,000 cash
8/10/95 Jay Rifkind 3,000 $4,500 cash
8/16/95 Robert Kemmerer 30,000 $45,000 cash
8/16/95 Elizabeth Gheen 3,000 $4,500 cash
8/20/95 Lauren Tracy 3,000 $4,500 cash
8/21/95 Roger Vosti 3,000 $4,500 cash
8/21/95 Carol & Paul Rice 3,000 $4,500 cash
8/21/95 Johnny & Barbara Wong 3,000 $4,500 cash
8/21/95 Francis Hong 3,500 $5,250 cash
8/21/95 Julius & Jean Richmond 6,000 $9,000 cash
8/21/95 Michael Tower 6,000 $9,000 cash
8/21/95 Dominic & Julie Cippola 3,000 $4,500 cash
8/21/95 Terrence Dooher 3,000 $4,500 cash
8/22/95 Robert Kube 3,000 $4,500 cash
8/22/95 Myron Wolf 3,000 $4,500 cash
<PAGE>69
8/22/95 Jeff McGuire 3,000 $4,500 cash
8/24/95 RE Hunt Trust 3,000 $4,500 cash
8/24/95 Gerald Dooher 3,000 $4,500 cash
8/25/95 Gary Muncy 12,000 $18,000 cash
8/25/95 Stephen Jones 3,000 $4,500 cash
8/28/95 Daniel Carlson 3,000 $4,500 cash
8/28/95 Mitsui & Betsy Tatsugawa 4,000 $6,000 cash
8/29/95 Robert Gerner 3,000 $4,500 cash
8/29/95 Steven Worland 3,000 $4,500 cash
8/29/95 Donna Stocker 3,000 $4,500 cash
8/29/95 Roger Burch 3,000 $4,500 cash
8/31/95 Robin Cipolla 3,000 $4,500 cash
8/31/95 Fred Yde 3,000 $4,500 cash
8/31/95 R.K. Hunter 3,000 $4,500 cash
9/1/95 Karen & Donald Matthews 3,000 $4,500 cash
9/1/95 Gavin Hart 6,000 $9,000 cash
9/1/95 David Solotkin 6,000 $9,000 cash
9/6/95 William Paton 9,000 $13,500 cash
9/7/95 Alan Fiering 3,000 $4,500 cash
9/7/95 Nicholas Deets 10,000 $15,000 cash
9/7/95 Charles Poulsen 3,500 $5,250 cash
9/7/95 Ora Elliott 6,000 $9,000 cash
9/9/95 Elaine Paton 9,000 $13,500 cash
9/9/95 William Paton IRA 9,000 $13,500 cash
9/11/95 Frances Stewart 3,000 $4,500 cash
9/11/95 William Thompson 3,000 $4,500 cash
</TABLE>
Due to the integration rules of Section 502(a), all of the above issuances of
common stock would be deemed to be integrated and deemed to be part of
the same Regulation D offering (Section 505). As a result, the Company
obtained subscription agreements from all investors which indicated
whether or not the investors were accredited. There were a total
of 33 non-accredited investors. All of the above sales were made without
general solicitation. No commissions were paid to anyone other than
registered NASD broker-dealers. The total aggregate value of all of the
issuances were substantially less than $5,000,000.
<TABLE>
<CAPTION>
Exhibit Index.
<S> <C>
(1) Not Applicable
(2) Not Applicable
(3) Articles of Incorporation, Amendments and Bylaws
(4) Specimen certificate for Common Stock - to be filed
by amendment
(5) Consent and Opinion of Thompson & Stein regarding
legality of securities registered under this Registration
Statement and to the references to such attorney in the
Prospectus filed as part of this Registration Statement
(6) Not Applicable
(7) Not Applicable
(8) Not Applicable
(9) Not Applicable
(10.1) Agreement to Provide Management, Professional and
Support Services between Grand Slam III and Grand Slam
Licensing, Inc., dated June 15, 1995 incorporated by
reference to Form S-1 filed July 17, 1996, file no. 333-
8233.
(10.2) Amendment to the Agreement to Provide Management,
Professional and Support Services, dated January 1, 1996
(10.3) Sales Agreement with Labyrinth Sales Company dated July
14, 1995 incorporated by reference to Form S-1 filed July
17, 1996, file no. 333- 8233.
(10.4) Merchandising Licensing Agreement incorporated by
reference to Form S-1/A filed October, 1996, file no.
333-8233
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Not Applicable
(17) Not Applicable
(18) Not Applicable
(19) Not Applicable
(20) Not Applicable
(21) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Consent of Winter, Scheifley & Associates, P.C., Certified
Public Accountants for the Company
(25) Not Applicable
(26) Not Applicable
(27) Not Applicable
(28) Not Applicable
(99.1) Lease Agreement between Crowe-Lippe-Gillespie and
Sports Ventures II, an affiliate of Grand Slam III, dated
October 29, 1990 incorporated by reference to Form S-1/A
filed October, 1996, file number 333-8233.
(99.2) Addendum to Office Lease incorporated by reference to Form
S-1/A filed October, 1996, file number 333-8233.
(99.3) Consulting Agreement with Pratt, Wylce & Lords, Ltd.
incorporated by reference to Form S-1 filed July 17, 1996,
file no. 333-8233.
(99.4) Lock Up Agreement incorporated by reference to Form S-1/A
filed October, 1996, file no. 333-8233.
(99.5) Employment Agreement with Milton Thompson
incorporated by reference to Form S-1 filed July 17, 1996,
file no. 333-8233.
(99.6) Assignment by Grand Slam III of the Rights and
Responsibilities under its Agreement with Pratt, Wylce &
Lords, Ltd. to Grand Slam Licensing, Inc. incorporated
by reference to Form S-1/A filed October, 1996, file
number 333-8233.
(99. 7) Letter re: Extension of Consulting Agreement with Pratt,
Wylce & Lords, Ltd. incorporated by reference to Form S-1/A
filed October, 1996, file number 333-8233.
</TABLE>
Item 17. Undertaking.
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
<PAGE>71
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) (Section
230.424(b) of this chapter), if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Delivery of Certificates.
The undersigned registrant hereby undertakes to provide to the
Transfer Agent at the closing, certificates in such denominations and
registered in such names as are required by the Transfer Agent to permit
prompt delivery to each purchaser.
(c) Indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions set forth in the Company's
Articles of Incorporation or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
<PAGE>72
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Signatures
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-1 as amended to be
signed on its behalf by undersigned, thereunto duly authorized, in the city
of Indianapolis, State of Indiana on the 19th day of November, 1996.
Grand Slam Licensing, Inc.
/s/ Milton O. Thompson
--------------------------------
By: Milton O. Thompson,
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
on Form S-1/A as amended has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
<S> <C> <C>
/s/ Milton O. Thompson 11/19/96
- ----------------------------- Chief Executive Officer ----------------
Milton O. Thompson Chief Financial Officer
Principal Accounting Officer
Controller
Director
/s/ Dennis DeYoung 11/19/96
- ----------------------------- Vice President/Secretary ----------------
Dennis DeYoung Director
/s/ Harold Thompson 11/19/96
- ---------------------------- Director ----------------
Harold Thompson
/s/ Joel K. Stein 11/19/96
- --------------------------- Director ----------------
Joel K. Stein
</TABLE>
AMENDMENT TO THE AGREEMENT
TO
PROVIDE MANAGEMENT, PROFESSIONAL AND
SUPPORT SERVICES
This Agreement, entered into this 1st day of January, 1996 amends the
Agreement of June 15, 1995 between Grand Slam III, hereinafter referred
to as GS III, an Indiana partnership with offices located at 401
Pennsylvania Parkway, Suite 390, Indianapolis, Indiana 46280, and Grand
Slam Licensing, Inc., hereinafter referred to as GSL, an Indiana C
Corporation, with offices located at 401 Pennsylvania Parkway, Suite 390,
Indianapolis, Indiana 46280, for the provision of management, professional
and support services.
RECITALS
1. GS III and GSL entered into an Agreement on June 15, 1996 for GS III
to provide management, professional and support services to GSL.
2. As the demands associated with the identification of licenses to seek, the
acquisition of licenses, the negotiation of the terms of the licenses,
continued development of the GSL sales network, product development
and sales and marketing and other management and professional services
have increased, GSL requires a management staff of its own.
AGREEMENT
NOW THEREFORE, in consideration of these recitals and of the mutual
representations and covenants contained herein, the parties hereby agree to
amend their original agreement as follows:
1. SCOPE OF SERVICES: The scope of services provided by GS III to
GSL shall be reduced to the provision of: sufficient space for GSL to
design its logo and photo likeness collectible lapel pins, pin collector sets,
key chains and similar memorabilia products to conduct the marketing and
sales of its products; to provide office space for its management personnel
and, to store a reasonable amount of inventory and materials supporting
GSL's operations; and, such management and professional services as not
provided directly by GSL and as mutually agreed to by the parties.
2. COMPENSATION: The amount paid to GSIII by GSL shall be
forthwith reduced to $10,000 per month, payable on the first day of each
month, plus seven percent (7%) of the net revenues, calculated on revenues
actually received during the previous month and payable by the fifteenth day
of each month.
3. ALL OTHER TERMS AND CONDITIONS: All other terms and
conditions of the original Agreement shall ermine in force as stated in that
Agreement.
WHEREFORE, this Agreement has been executed as of the day and date
first written above:
GRAND SLAM III GRAND SLAM LICENSING, INC.
by:___________________________ by:________________________
Milton O. Thompson, Esq. Charles A. Richmond
General Partner Assistant Recording Secretary
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated January 30, 1996 relating to the financial statements of
Grand Slam Licensing, Inc. and the reference to our firm under the caption
"EXPERTS" in the Registration Statement.
/s/ Winter, Scheifley & Associates, P.C.
----------------------------------------------------
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
November 20, 1996
Englewood, Colorado
