SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities
Exchange Act of 1934
For the transition period from ________ to ___________
Commission file number: 333-14477______ to ___________
---------
SPORTSNUTS, INC.
----------------
(Exact name of small business issuer as specified in its charter)
Delaware 87-0561426
------------------------------ ----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
The Towers at South Towne II
10421 South 400 West, Suite 550
Salt Lake City, UT 84095
-------------------------------------- --------------
(Address of principal executive offices) Zip Code
(801) 816-2500 )
--------------------
Issuer's telephone number
- ---------------------------------------------------------------
(Former name or former address and former fiscal year, if change since last
report.)
1
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act of 1934 after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of September 30, 2002, the Company
had outstanding 94,368,854 shares of common stock, par value $0.002 per share.
Transitional Small Business Disclosure Format (check one) [ ] Yes [x ] No
2
PART I
FINANCIAL INFORMATION
The Financial Statements of the Company are prepared as of September 30, 2002.
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-QSB
CONTENTS
Consolidated Balance Sheets................................................. 4
Consolidated Statements of Operations....................................... 6
Consolidated Statements of Stockholders' Equity (Deficit)................... 8
Consolidated Statements of Cash Flows...................................... 10
Notes to the Consolidated Financial Statements............................. 12
3
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Balance Sheets
ASSETS
September 30, December 31,
2002 2001
------------------ -----------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents (Note 1) $ 165,591 $ 84,859
Accounts receivable, net (Note 1) 33,619 12,218
Prepaid expenses 12,443 13,338
------------------ ------------------
Total Current Assets 211,653 110,415
------------------ -------------------
PROPERTY AND EQUIPMENT (Note 1)
Computer hardware 722,534 722,534
Computer software 751,809 721,809
Furniture and office equipment 193,819 193,819
Less - accumulated depreciation (1,419,885) (1,137,588)
------------------ -----------------
Total Property and Equipment 248,277 500,574
------------------ -----------------
OTHER ASSETS
Goodwill, net (Note 1) 153,270 153,270
------------------ -----------------
Total Other Assets 153,270 153,270
------------------ -----------------
TOTAL ASSETS $ 613,200 $ 764,259
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
4
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
September 30, December 31,
2002 2001
------------------ -----------------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 803,990 $ 850,020
Accrued expenses 878,578 632,721
Capital leases, current portion (Note 11) 114,053 69,023
Notes payable, current portion (Note 3) 140,000 115,000
Notes payable, related parties (Note 2) 567,666 486,000
------------------ -----------------
Total Current Liabilities 2,504,287 2,152,764
------------------ -----------------
LONG-TERM LIABILITIES
Capital leases (Note 11) 207,194 252,224
------------------ -----------------
Total Long-Term Liabilities 207,194 252,224
------------------ -----------------
TOTAL LIABILITIES 2,711,481 2,404,988
------------------ -----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.002 par value; 20,000,000 shares
authorized, 178,000 shares issued and outstanding 356 356
Common stock, $0.002 par value; 200,000,000 shares
authorized, 94,368,854 and 46,668,854 shares issued
and outstanding, respectively 188,738 93,338
Additional paid-in capital 20,060,147 19,166,789
Accumulated deficit (22,347,522) (20,901,212)
------------------ -----------------
Total Stockholders' Equity (Deficit) (2,098,281) (1,640,729)
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ 613,200 $ 764,259
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
5
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
September 30,
-------------------------------------
2002 2001
------------------ -----------------
NET SALES $ 98,066 $ 22,187
------------------ -----------------
OPERATING EXPENSES
Cost of Sales 53,936 12,853
General and administrative 194,078 406,113
Selling and marketing 87,916 85,163
Research and development 40,177 51,167
------------------ -----------------
Total Operating Expenses 376,107 555,296
------------------ -----------------
LOSS FROM OPERATIONS (278,041) (533,109)
------------------ -----------------
OTHER INCOME (EXPENSES)
Interest expense (27,340) (37,336)
Interest income 305 177
Other income 12,115 5,175
Gain on settlement of debt (Note 1) 6,774 203,219
------------------ -----------------
Total Other Income (Expenses) (8,146) 171,235
------------------ -----------------
LOSS BEFORE INCOME TAXES (286,187) (361,874)
INCOME TAX EXPENSE - -
------------------ -----------------
NET LOSS $ (286,187) $ (361,874)
================== =================
BASIC LOSS PER COMMON SHARE -
BASIC AND DILUTED (Note 1)
Loss from continuing operations $ (0.004) $ (0.02)
------------------ -----------------
Basic Loss Per Share $ (0.004) $ (0.02)
================== =================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 80,238,419 16,163,243
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
6
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Statements of Operations
(Unaudited)
For the Nine Months Ended
September 30,
-------------------------------------
2002 2001
------------------ -----------------
NET SALES $ 520,207 $ 155,565
------------------ -----------------
OPERATING EXPENSES
Cost of Sales 260,295 70,752
General and administrative 1,201,615 1,052,306
Selling and marketing 289,814 552,439
Research and development 158,345 148,538
------------------ -----------------
Total Operating Expenses 1,910,069 1,824,035
------------------ -----------------
LOSS FROM OPERATIONS (1,389,862) (1,668,470)
------------------ -----------------
OTHER INCOME (EXPENSES)
Interest expense (99,001) (97,261)
Interest income 496 423
Other income 35,283 31,889
Gain on settlement of debt (Note 1) 6,774 344,133
------------------ -----------------
Total Other Income (Expenses) (56,448) 279,184
------------------ -----------------
LOSS BEFORE INCOME TAXES (1,446,310) (1,389,286)
INCOME TAX EXPENSE - -
------------------ -----------------
NET LOSS $ (1,446,310) $ (1,389,286)
================== =================
BASIC LOSS PER COMMON SHARE -
BASIC AND DILUTED (Note 1)
Loss from continuing operations $ (0.022) $ (0.13)
------------------ -----------------
Basic Loss Per Share $ (0.022) $ (0.13)
================== =================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 66,984,971 10,598,005
================== =================
The accompanying notes are an integral part of these consolidated
financial statements.
7
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Statements of Stockholders' Equity (Deficit)
Preferred Stock Common Stock
------------------ -----------------------
Shares Amount Shares Amount
-------- ------------ ------------ - --------------
Balance, December 31, 2000 178,000 $ 356 3,397,095 $ 6,794
Issuance of common stock for cash - - 15,000,000 30,000
Warrants/Options issued below market value - - - -
Shares issued for services - - 4,525,000 9,050
Shares issued for exercise of stock options - - 3,460,000 6,920
Shares issued for exercise of warrants for
cash - - 712,206 1,425
Shares issued for exercise of warrants for
services rendered - - 990,000 1,980
Shares issued for debt payment - - 12,784,553 25,569
Shares issued to an officer for debt
payment and compensation - - 2,000,000 4,000
Shares issued for purchase of Rocky
Mountain Sports Alliance - - 3,800,000 7,600
Net loss for the year ended December 31,
2001 - - - -
------- ----------- ---------- -------------
Balance, December 31, 2001 178,000 356 46,668,854 93,338
Issuance of common stock for cash
(unaudited) - - 37,400,000 74,800
Warrants/Options issued below market
value (unaudited) - - - -
Shares issued for services (unaudited) - - 10,300,000 20,600
Net loss for the nine months ended
September 30, 2002 (unaudited) - - - -
--------- ------------ ---------------- --------------
Balance, September 30, 2002 (unaudited) 178,000 $ 356 94,368,854 $ 188,738
========= ============ ================ =============
The accompanying notes are an integral part of these consolidated
financial statements.
8
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Additional
Paid-In Accumulated Total Stockholders'
Capital Deficit Equity (Deficit)
---------- -------------- -------------------
Balance, December 31, 2000 $ 17,708,296 $ (19,197,972) $ (1,482,526)
Issuance of common stock for cash 210,000 - 240,000
Warrants/Options issued below market value 283,954 - 283,954
Shares issued for services 216,350 - 225,400
Shares issued for exercise of stock options 88,980 - 95,900
Shares issued for exercise of warrants for cash 63,575 - 65,000
Shares issued for exercise of warrants for services rendered 210,622 - 212,602
Shares issued for debt payment 146,612 - 172,181
Shares issued to an officer for debt payment and compensation 56,000 - 60,000
Shares issued for purchase of Rocky Mountain Sports Alliance 182,400 - 190,000
Net loss for the year ended December 31, 2001 - (1,703,240) (1,703,240)
------------------- ---------------- --------------
Balance, December 31, 2001 19,166,789 (20,901,212) (1,640,729)
Issuance of common stock for cash (unaudited) 299,200 - 374,000
Warrants/Options issued below market value (unaudited) 308,758 - 308,758
Shares issued for services (unaudited) 285,400 - 306,000
Net loss for the nine months ended September 30, 2002
(unaudited) - (1,446,310) (1,446,310)
------------------- ----------------- ----------------
Balance, September 30, 2002 (unaudited) $ 20,060,147 $ (22,347,522) $ (2,098,281)
============ =============== ===============
The accompanying notes are an integral part of these consolidated
financial statements.
9
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
2002 2001
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,446,310) $ (1,389,286)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 282,297 357,683
Amortization of goodwill - 18,032
Common stock issued for services 306,000 270,400
Warrants issued below market value 308,758 253,199
Gain on settlement of debt (6,774) (344,133)
Warrants exercised for services - 212,602
Options exercised for services - 3,342
Changes in operating assets and liabilities:
Accounts receivable (21,401) 5,091
Inventory - 5,108
Other current assets 895 21,776
Capital leases payable - (13,302)
Advances payable - 30,849
Deferred revenue - (22,043)
Accounts payable and accrued expenses 206,601 269,474
----------------- -----------------
Net Cash Used in Operating Activities (369,934) (321,208)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property & Equipment (30,000) -
----------------- -----------------
Net Cash Used in Investing Activities (30,000) -
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 25,000 -
Proceeds from issuance of notes payable - related parties 81,666 4,000
Proceeds from issuance of common stock 374,000 100,000
Proceeds from exercise of stock options - 81,600
Proceeds from exercise of stock warrants - 65,000
Cash received upon acquisition of subsidiary - 20,420
Cash received from capital lease - 96,011
Principal payments of notes payable - related parties - (7,500)
----------------- -----------------
Net Cash Provided by Financing Activities $ 480,666 $ 359,531
----------------- -----------------
The accompanying notes are an integral part of these consolidated
financial statements.
10
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Nine Months Ended
September 30,
2002 2001
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 80,732 $ 38,323
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 84,859 651
----------------- -----------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 165,591 $ 38,974
================= =================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ 6,912 $ 2,298
Income taxes $ - $ -
Non-Cash Investing and Financing Activities:
Common stock issued for services $ 306,000 $ 270,400
Common stock issued to convert notes
payable and interest $ - $ 17,227
Common stock issued for reduction of
accounts payable $ - $ 15,000
Common stock issued for warrants exercised
through services rendered $ - $ 212,602
Common stock issued for options exercised
through services rendered $ - $ 3,342
Common stock issued for options exercised
by conversion of accounts payable and
other liabilities $ - $ 9,358
Common stock issued for options exercised
for stock subscription receivable $ - $ 1,600
The accompanying notes are an integral part of these consolidated
financial statements.
11
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
a. Organization and Description of Business
SportsNuts, Inc. (formerly SportsNuts.com International, Inc.)
(the "Company") was incorporated under the laws of the State of
Delaware on July 12, 1996. On April 15, 2001 the Company changed
its name from SportsNuts.com International, Inc. to SportsNuts,
Inc. Prior to the reorganization with SportsNuts.com, Inc.
("SportsNuts"), a privately held Delaware corporation, on April
6, 1999, the Company had not commenced active business operations
and was considered a development stage company.
The Company's primary business is providing unique solutions to
the challenges faced by amateur athletes and the organizations in
which they participate. The Company helps organize and manage a
wide variety of sports events, providing online registration and
merchandise sales, event sponsorship, event coordination, and
online and offline promotion. The Company is the emerging
technology leader in sports information systems and the only
organization of its kind to compliment its technology solutions
with offline, marketing, sales, and support. The Company's
mission is to become the ultimate resource for event
coordinators, administrators, athletes, fans, and coaches.
Effective April 15, 2001, the Company issued 3,800,000 shares of
its common stock to aquire Rocky Mountain Sports Alliance, Inc.
("RMSA") in exchange for all of the issued and outstanding shares
of RMSA common stock. The acquisition was accounted for as a
purchase per APB No. 16. The RMSA is a sports management firm
located in Salt Lake City, Utah and currently holds the rights to
a number of sports events throughout Utah and the surrounding
intermountain area. Management believes that the addition of the
RMSA to the Company's technology solutions gives the Company a
unique position in the amateur sports industry in being able to
provide offline as well as online support to teams, leagues, and
sports organizations.
During the second quarter of 2001, the Company began certain
consulting activities through two wholly-owned subsidiares:
Synerteck Incorporated, a Utah corporation ("Synerteck"), and
Sports Management Partners, Inc., a Delaware corporation ("SMP").
Synerteck was created to be a technology partner with the Company
for a variety of organizations, both sports and non- sports
related, that require Information Technology ("IT") services.
These services include website hosting, website design and
maintenance, computer hardware leasing, and hardware and software
programming and related services. SMP was created to provide
consulting services to sports organizations, principally
management consulting and strategic advisory services, and the
facilitation of introductions to SMP's contacts within the sports
industry.
b. Accounting Method
The Company's consolidated financial statements are prepared
using the accrual method of accounting. The Company has elected a
December 31 year end.
c. Cash and Cash Equivalents
Cash Equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
12
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Property and Equipment
Property and equipment are stated at cost. Expenditures for
ordinary maintenance and repairs are charged to operations as
incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line and accelerated
methods over estimated useful lives as follows:
Computer hardware 3 years
Computer software 3 years
Office equipment 7 years
Depreciation expense for the nine months ended September 30, 2002
and 2001 was $282,297 and $357,683, respectively.
e. Accounts Receivable
Accounts receivable are recorded net of the allowance for
doubtful accounts of $25,793 as of September 30, 2002 and
December 31, 2001.
f. Revenue Recognition
Substantially all of the Company's sales are on a
cash-for-service basis. Occasionally, sales are made on account
for the sale of promotional merchandise. Revenue is recognized
upon completion of the service or upon delivery of the goods.
g. Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
h. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
13
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. Basic Loss Per Share
For the Nine Months Ended
September 30,
----------------------------------------
2002 2001
----------------- ------------------
Basic loss per share from continuing operations:
Loss (numerator) $ (1,446,310) $ (1,389,286)
Shares (denominator) 66,984,971 10,598,005
Per share amount $ (0.022) $ (0.13)
The basic loss per share of common stock is based on the weighted
average number of shares issued and outstanding during the period
of the financial statements. Common shares to be issued from
preferred stock, warrants, and options are not included in the
computation because they would have an antidilutive effect on the
net loss per common share.
j. Provision for Taxes
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, using the liability method. The
estimated future tax effect of differences between the basis in
assets and liabilities for tax and accounting purposes is
accounted for as deferred taxes. In accordance with the
provisions of SFAS No. 109, a valuation allowance would be
established to reduce deferred tax assets if it were more likely
than not that all, or some portion, of such deferred tax assets
would not be realized. A full allowance against deferred tax
assets was provided as of December 31, 2001.
At December 31, 2001 the Company had net operating loss
carryforwards of approximately $12,500,000 that may be offset
against future taxable income through 2021. No tax benefits have
been reported in the financial statements, because the potential
tax benefits of the net operating loss carry forwards are offset
by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act
of 1986, net operating loss carryforwards for Federal income tax
reporting purposes are subject to annual limitations. Should a
change in ownership occur, net operating loss carryforwards may
be limited as to use in the future.
k. Research and Development
The Company follows the policy of charging research and
development costs to expense as incurred.
14
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Stock Options and Warrants
As permitted by FASB Statement 123 "Accounting for Stock Based
Compensation" (SFAS No. 123), the Company elected to measure and
record compensation cost relative to employee stock option costs
in accordance with Accounting Principles Board ("APB") Opinion
25, "Accounting for Stock Issued to Employees," and related
interpretations and make pro forma disclosures of net income
(loss) and basic earnings (loss) per share as if the fair value
method of valuing stock options had been applied. Under APB
Opinion 25, compensation cost is recognized for stock options
granted to employees when the option price is less than the
market price of the underlying common stock on the date of grant.
As of September 30, 2002, there were 22,600,000 options
outstanding which were granted to employees, 22,350,000 of which
were granted at exercise prices equal to or above the market
price on the grant date. 250,000 options were granted at an
exercise price of $0.01 below the market price on the grant date.
For purposes of the pro forma disclosures and to measure and
record consideration paid to non- employees in the form of stock
options or warrants, the Company applies FASB Statement 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"), which
requires the Company to estimate the fair value of each dilutive
instrument (stock options and warrants) award at the grant date
by using the Black-Scholes option pricing model.
m. Gain on Settlement of Debt
The gain on settlement of debt arises from the forgiveness of
certain accounts payable by creditors of the Company in exchange
for structured cash payments or cash settlements for less than
the face amount of the obligations. The Company is continuing to
negotiate with additional creditors to settle other old accounts
payable at a discount.
15
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 2 - NOTES PAYABLE - RELATED PARTIES
Notes payable - related parties consisted of the following:
September 30, December 31,
2002 2001
----------------- -----------------
(Unaudited)
Note payable to a shareholder, secured by tangible
and intangible assets of the Company,
interest at 16%, principal and interest due
April 1, 2000. Note is convertible into common
stock of the Company at $.10 per share. $ 450,000 $ 450,000
Note payable to a related individual, secured by tangible assets
of the Company, interest at 16%, principal and interest due May
4, 2000. Note is convertible into common stock of the
Company at $1.00 per share. 20,000 20,000
Notes payable to related individuals, unsecured,
interest at 10%, due on demand. 83,666 7,000
Notes payable to related individuals, unsecured,
interest at 10%, due on demand. 14,000 9,000
----------------- -----------------
Total notes payable - related parties 567,666 486,000
Less: current portion (567,666) (486,000)
----------------- -----------------
Long-term notes payable $ - $ -
================ =================
Maturities of notes payable - related parties are as follows:
Year Ending
September 30, Amount
2003 $ 567,666
-----------------
Total $ 567,666
=================
16
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 3 - NOTES PAYABLE
Notes payable consisted of the following:
September 30, December 31,
2002 2001
----------------- -----------------
(Unaudited)
Note payable to an individual, secured by tangible
assets of the Company, interest at 16%, principal
and interest due May 1, 2000. Note is convertible
into common stock of the Company at $1.00 per share. $ 20,000 $ 20,000
Note payable to an individual, unsecured, interest at
10%, principal and interest due June 26, 2000. Note
is convertible into common stock of the Company at
$1.00 per share. 25,000 25,000
Note payable to an individual, unsecured, interest
at 18%, principal and interest due August 15, 2001.
Note is convertible into common stock of the Company
at $0.25 per share. 50,000 50,000
Notes payable to individuals, unsecured,
interest at 10%, due on demand. 45,000 15,000
Note payable to an individual, unsecured,
interest at 12%, due on demand. - 5,000
----------------- -----------------
Total notes payable 140,000 115,000
Less: current portion (140,000) (115,000)
----------------- ------------------
Long-term notes payable $ - $ -
================= ==================
Maturities of notes payable are as follows:
Year Ending
September 30, Amount
------------- -----------------
2003 $ 140,000
-----------------
Total $ 140,000
=================
17
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 4 - COMMON AND PREFERRED STOCK TRANSACTIONS
Effective January 2, 2001, the Company issued 350,000 shares of
common stock valued at $0.219 per share in satisfaction of
obligations for public relations services received by the Company.
Effective January 3, 2001, the Company issued 300,000 shares of
common stock at a price of approximately $0.083 in exchange for
the exercise of warrants held by certain individuals.
Effective January 8, 2001, the Company issued 80,000 shares of
common stock at a price of $0.16 in exchange for the exercise of
stock options held by certain employees and consultants of the
Company.
Effective January 12, 2001, the Company issued 37,402 shares of
common stock at a price of approximately $0.1337 in exchange for
the exercise of warrants held by certain individuals.
Effective February 2, 2001, the Company issued 300,000 shares of
common stock at a price of approximately $0.083 in exchange for
the exercise of warrants held by certain individuals.
Effective February 15, 2001, the Company issued 74,804 shares of
common stock at a price of approximately $0.1337 in exchange for
the exercise of warrants held by certain individuals.
Effective February 21, 2001, the Company sold and issued 500,000
shares of its common stock at a price of $0.10 per share.
Effective March 14, 2001, the Company issued 200,000 shares of
common stock at a price of $0.25 in exchange for the exercise of
warrants held by certain individuals for services rendered.
Effective April 1, 2001, the Company issued 1,175,000 shares of
common stock valued at $0.05 per share in satisfaction of
obligations for consulting services received by the Company.
Effective April 15, 2001, the Company issued 3,800,000 shares of
common stock , valued at $0.05 per share to acquire the Rocky
Mountain Sports Alliance.
Effective May 1, 2001, the Company issued 900,000 shares of common
stock at a price of $0.05 in exchange for the exercise of stock
options held by a consultant of the Company.
Effective May 15, 2001, the Company issued 229,703 shares of
common stock valued at $0.075 per share in satisfaction of notes
payable due to an individual by the Company.
Effective May 16, 2001, the Company sold and issued 500,000 shares
of its common stock at a price of $0.10 per share.
Effective May 31, 2001, the Company issued 790,000 shares of
common stock at a price of approximately $0.21 in exchange for the
exercise of warrants held by certain individuals for services
rendered.
Effective July 30, 2001, the Company issued 630,000 shares of
common stock at a price of $0.024 in exchange for the exercise of
stock options held by a consultant of the Company.
18
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 4 - COMMON AND PREFERRED STOCK TRANSACTIONS (Continued)
Effective August 15, 2001, the Company issued 2,000,000 shares of
common stock valued at $0.0075 in satisfaction of obligations for
expense reimbursements due to an officer of the Company. The
difference between the issue price and the market price has been
expensed as general and administrative expenses in the financial
statements.
Effective August 20, 2001, the Company issued 3,000,000 shares of
common stock valued at $0.03 per share in satisfaction of
obligations for consulting services received by the Company.
Effective September 19, 2001, the Company issued 50,000 shares of
common stock at a price of $0.03 in exchange for the exercise of
stock options held by certain employees of the Company.
Effective September 25, 2001, the Company issued 1,800,000 shares
of common stock at a price of $0.012 in exchange for the exercise
of stock options held by a consultant of the Company.
Effective November 15, 2001, the Company sold and issued
14,000,000 shares of its common stock at a price of $0.01 per
share.
Effective November 15, 2001, the Company issued 286,850 shares of
common stock valued at $0.10 per share in satisfaction of notes
and interest payable due to an individual by the Company.
Effective November 15, 2001, the Company issued 12,268,000 shares
of common stock valued at $0.01 per share in satisfaction of
interest payable due to an individual by the Company.
Effective January 7, 2002, the Company sold and issued 1,000,000
shares of its common stock at a price of $0.01 per share.
Effective January 22, 2002, the Company sold and issued 2,500,000
shares of its common stock at a price of $0.01 per share.
Effective February 4, 2002, the Company sold and issued 1,400,000
shares of its common stock at a price of $0.01 per share.
Effective February 15, 2002, the Company sold and issued 500,000
shares of its common stock at a price of $0.01 per share.
Effective March 12, 2002, the Company sold and issued 5,500,000
shares of its common stock at a price of $0.01 per share.
Effective April 1, 2002, the Company issued 10,000,000 shares of
common stock valued at $0.03 per share in satisfaction of
obligations for consulting services received by the Company.
Effective May 1, 2002, the Company issued 300,000 shares of common
stock valued at $0.02 per share in satisfaction of obligations for
consulting services received by the Company.
Effective May 22, 2002, the Company sold and issued 1,500,000
shares of its common stock at a price of $0.01 per share.
19
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 4 - COMMON AND PREFERRED STOCK TRANSACTIONS (Continued)
Effective August 22, 2002, the Company sold and issued 25,000,000
shares of its common stock at a price of $0.01 per share.
NOTE 5 - OPTIONS AND WARRANTS
Employee Stock Options
The following tables summarize the information regarding employee
stock options at September 30, 2002:
Options outstanding at December 31, 2001 8,005,000
Options granted 15,450,000
Options forfeited (855,000)
------------------
Options outstanding at September 30, 2002 22,600,000
==================
Weighted average exercise price of options
outstanding at September 30, 2002 $ 0.03
==================
Number of Weighted Number of
Options Average Weighted Options Weighted
Outstanding Remaining Average Exercisable at Average
Exercise September 30, Contractual Exercise September 30, Exercise
Prices 2002 Life Price 2002 Price
----------------- ---------------- -------------- --------------- ---------------- ------------
$ 0.02 18,775,000 4.37 $ 0.02 781,250 $ 0.02
$ 0.03 2,600,000 3.54 $ 0.03 1,215,000 $ 0.03
$ 0.16 1,225,000 2.79 $ 0.16 979,998 $ 0.16
The Company applies APB Opinion 25 and related Interpretations in
accounting for its plan. Accordingly, an expense of $2,500 has
been recognized for its stock option plan during the nine months
ended September 30, 2002. Had compensation cost for the Company's
stock-based compensation plan been determined based on the fair
value at the grant dates for awards under such plan consistent
with the method of FASB Statement 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), the Company's net loss and basic
loss per common share would have been as indicated below:
September 30,
----------------------------------------------
2002 2001
---------------------- ---------------------
Net loss as reported $ (1,446,310) $ (1,389,286)
Pro forma net loss (1,754,725) (1,463,152)
Basic loss per share as reported (0.022) (0.13)
Pro forma basic loss per share (0.026) (0.14)
20
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 5 - OPTIONS AND WARRANTS (Continued)
The Company estimates the fair value of each stock option at the
grant date and re-valuation date by using the Black-Scholes option
pricing model based on the following assumptions:
Risk free interest rate 3.93% - 6.12%
Expected life 4 - 6 Years
Expected volatility 2.18 - 2.89
Dividend yield 0.0
Non-Employee Stock Options
The following tables summarize the information regarding
non-employee options outstanding at September 30, 2002.
Options outstanding at December 31, 2001 1,640,000
Options granted 370,000
Options forfeited (195,000)
-----------------
Options outstanding at September 30, 2002 1,815,000
==================
Weighted average exercise price of non-employee
options outstanding at September 30, 2002 $ 0.02
==================
Number of Weighted Number of
Options Average Weighted Options Weighted
Outstanding Remaining Average Exercisable at Average
Exercise September 30, Contractual Exercise September 30, Exercise
Price 2002 Life Price 2002 Price
----------------- ---------------- -------------- --------------- ---------------- ------------
$ 0.02 1,520,000 3.99 $ 0.02 380,000 $ 0.02
$ 0.03 270,000 4.48 $ 0.03 80,000 $ 0.03
$ 0.04 25,000 4.50 $ 0.04 6,250 $ 0.04
The Company applies SFAS No. 123 for options issued to
non-employees, which requires the Company to estimate the fair
value of each option issued at the grant date by using the Black-
Scholes pricing model with the following assumptions:
Risk free interest rate 3.93% - 5.22%
Expected life 1 - 60 Months
Expected volatility 2.29 - 2.77
Dividend yield 0.0
As a result of applying SFAS No. 123, the Company had an expense
of $9,631 and $156,434 during the nine months ended September 30,
2002 and 2001, respectively. The expense is included in the
general and administrative amount in the statement of operations.
21
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 5 - OPTIONS AND WARRANTS (Continued)
Warrants
During the nine months ended September 30, 2002, the Company
issued warrants to acquire 29,500,000 shares of common stock.
These warrants were issued at exercise prices ranging from $0.01
to $0.03. The warrants were issued as follows: 14,500,000 attached
to common stock issued for cash, and 15,000,000 related to
services rendered. The following tables summarize the information
regarding warrants outstanding at September 30, 2002. All the
warrants are exercisable at September 30, 2002.
Warrants outstanding at December 31, 2001 9,975,167
Warrants granted 29,500,000
Warrants expired (118,500)
---------------
Warrants outstanding at September 30, 2002 39,356,667
===============
Weighted average exercise price of warrants
outstanding at September 30, 2002 $ 0.08
============
Number of Weighted
Warrants Average Weighted
Outstanding at Remaining Average
September 30, Contractual Exercise
Range of Exercise Prices 2002 Life Price
------------------------ ------------------ ------------------ ------------------
$0.01 - $0.10 38,250,000 1.31 $ 0.02
$0.75 66,667 0.97 $ 0.75
$2.00 1,040,000 0.55 $ 2.00
The Company applies SFAS No. 123 for warrants issued, which
requires the Company to estimate the fair value of each warrant
issued at the grant date by using the Black-Scholes pricing model
with the following assumptions:
Risk-free interest rate 3.43% - 6.68%
Expected life 1 - 36 Months
Expected volatility 1.04 - 3.15
Dividend yield 0.0
As a result of applying SFAS No. 123, the Company had an expense
of $296,626 and $96,765 during the nine months ended September 30,
2002 and 2001, respectively. The expense is included in the
general and administrative amount in the statement of operations.
22
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 6 - OPERATING LEASES
The Company leases two (2) different facilities under
non-cancelable operating leases expiring in 2004. Rental expense
for the nine months ended September 30, 2002 and 2001 was $65,829
and $101,294, respectively.
The Company also has operating leases on certain office equipment.
Office equipment leases are generally for a term of 48 to 60
months. Lease expense was $1,368 and $4,976, respectively for the
nine months ended September 30, 2002 and 2001.
Future minimum lease payments, by year and in the aggregate, under
the non-cancelable operating leases with initial or remaining
terms of one year or more are due as follows:
Year Ending
December 31, Amount
------------ ------------------
2002 $ 146,919
2003 143,715
2004 58,085
2005 and thereafter -
------------------
Total minimum lease payments $ 348,719
===================
NOTE 7 - GOING CONCERN
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has
sustained significant net losses which have resulted in an
accumulated deficit at December 31, 2001 of approximately
$20,900,000 and has experienced periodic cash flow difficulties,
all of which raise substantial doubt regarding the Company's
ability to continue as a going concern.
The net loss for the nine months ended September 30, 2002 and 2001
was $1,446,310 and $1,389,286, respectively. To date the Company
has funded its operations through a combination of short and
long-term loans and the private placement of its common stock. The
Company anticipates another net loss for the year ended December
31, 2002 and with the expected cash requirements for the coming
year, there is substantial doubt as to the Company's ability to
continue operations.
The Company believes these conditions have resulted from the
inherent risks associated with small startup technology-oriented
companies. Such risks include, but are not limited to, the ability
to (i) generate revenues and sales of its products and services at
levels sufficient to cover its costs and provide a return for
investors, (ii) attract additional capital in order to finance
growth, (iii) further develop and successfully market commercial
products and services, and (iv) successfully compete with other
comparable companies having financial, production and marketing
resources significantly greater than those of the Company.
The Company is attempting to improve these conditions by way of
financial assistance through issuances of additional equity and by
generating revenues through sales of products and services.
23
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 8 - RELATED PARTY TRANSACTIONS
Effective August 15, 2001, the Company issued 2,000,000 shares of
common stock valued at $0.0075 per share in satisfaction of
obligations for expense reimbursements due to an officer of the
Company.
Effective November 15, 2001, the Company converted interest of
$122,680 as accrued on a promissory note issued by the Company and
held by a principal shareholder of the Company into 12,268,000
shares of restricted Common Stock of the Company.
NOTE 9 - SEGMENT REPORTING
SportsNuts, Inc.'s reportable segments are business units that
offer different products and services. The Company has three
reportable business segments: online services, sports event
management and information technology consulting. The online
services segment provides internet team and league management for
amateur sports organizations and online registrations for sporting
events. The sports event management segment creates, promotes and
manages sporting events. The information technology consulting
segment provides services related to computer hardware, software
and websites.
The policies applied to determine the segment information are the
same as those described in the summary of significant accounting
policies (Note 1). All significant intersegment transactions have
been eliminated in the consolidated financial statements.
Financial information as of and for the nine months ended
September 30, 2002 with respect to the reportable segments is as
follows:
Information
Online Sports Event Technology
Services Management Consulting
----------------- ------------------ ------------------
Cash $ 152,302 $ 655 $ 12,634
Fixed assets, net 114,806 3,300 130,171
Total assets 461,289 9,663 337,374
Total liabilities 2,373,300 39,498 484,127
External revenues 37,689 399,611 82,907
Cost of goods sold 1,785 243,775 14,735
Other income (expense) (37,639) (431) (18,378)
Segment profit (loss) before tax effect (1,360,591) (40,687) (45,032)
NOTE 10 - BUSINESS COMBINATION
On April 15, 2001, the Company acquired Rocky Mountain Sports
Alliance (RMSA) by exchanging 3,800,000 shares of its common stock
for all of the common stock of RMSA. The transaction was accounted
for as a purchase in accordance with APB 16, "Business
Combinations." The results of operations of RMSA are included in
the consolidated financial statements from the date of
acquisition.
24
SPORTSNUTS, INC.
(Formerly SportsNuts.com International, Inc.)
Notes to the Consolidated Financial Statements
September 30, 2002 and December 31, 2001
NOTE 10 - BUSINESS COMBINATION (Continued)
Based on SFAS No. 142 as described in Note 1, the Company has
determined that the goodwill associated with the acquisition of
RMSA will no longer be amortized. Furthermore, the Company has
determined that there has been no impairment in goodwill since
December 31, 2001.
NOTE 11 - CAPITAL LEASES
Obligations under the capital lease at September 30, 2002 are as
follows:
Payable in monthly principal and interest payments of
$7,351 for 60 months beginning June 30, 2001,
interest rate of 11.76%, secured by fixed assets $ 419,007
Less amounts representing taxes and interest (97,760)
------------------
Total capital leases 321,247
Less current portion (114,053)
------------------
Capital leases - long-term portion $ 207,194
------------------
Future principal obligations of the capital leases payable are as
follows:
Year Ending
September 30, Amount
------------- ------------------
2003 $ 114,053
2004 68,248
2005 79,144
2006 59,802
------------------
Total capital leases $ 321,247
==================
Depreciation expense of $33,957 associated with the equipment
under capital lease was expensed during the nine months ended
September 30, 2002.
25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of SportsNuts, Inc. (hereafter, "SportsNuts" or the "Company") should
be read in conjunction with the Unaudited Financial Statements and related Notes
thereto included herein. This discussion may contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, including, without limitation,
statements regarding the Company's expectations, beliefs, intentions, or future
strategies that are signified by the words "expects," "anticipates," "intends,"
"believes," or similar language. Actual results could differ materially from
those projected in the forward looking statements. Prospective investors should
carefully consider the information set forth below under the caption "Risk
Factors" in addition to the other information set forth herein. The Company
cautions investors that its business and financial performance is subject to
substantial risks and uncertainties.
Overview
SportsNuts is a sports management and marketing company, with a focus on
community-based amateur athletics, providing unique solutions to the challenges
faced by athletes and the organizations in which they participate. The Company
helps organize and manage a wide variety of sports events, providing online
registration and merchandise sales, event sponsorship, event coordination, and
targeted promotion using technology and strategic media relationships. The
Company is the emerging technology leader in sports information systems and the
only organization of its kind to complement its technology solutions with
offline marketing, sales, and support. The Company's mission is to become the
ultimate resource for amateur and community event coordinators, administrators,
athletes, fans and coaches.
The Company seeks to make events more profitable and efficient by promoting
such events through various media channels, attracting corporate sponsorships,
and providing technology tools to decrease administrative and personnel costs.
The Company also provides additional avenues for revenue generation, such as
merchandise sales through the Company's online sports mall.
The Company also provides technology-based services to sports and other
organizations through Synerteck Incorporated, the Company's wholly-owned
subsidiary ("Synerteck"). Synerteck offers a wide variety of technology
services, including web site design, programming, and hosting, wide area network
or local area network configuration, hardware lease brokering, and hardware
configuration.
The Company's principal sources of revenues are (i) online services
targeted to sports organizations and their members, (ii) offline promotional,
management, and sponsorship services provided in connection with community-based
sports events, and (iii) information technology consulting services. The ability
to generate revenues during the year 2002 and beyond depends substantially upon
the Company's resources available in order to market to and engage organizations
and their members to receive these services. Such efforts require significant
systems development, marketing and personnel costs, which, in turn, requires
substantial funding. If the Company is unable to obtain such funding, its
ability to generate revenues will be significantly impaired.
Expenses which comprise cost of goods sold are principally comprised of
offline costs associated with the management and promotion of sporting events
which the company has an active role. Also included in cost of goods sold are
commissions paid for information technology consulting contracts. As more
organizations utilize the Company's technology services, future expenses
included in cost of goods sold will be personnel and materials costs to
administer these services, as well as potential fee sharing expenses to
organizations involved in sports event management, fundraising, and online
registration and administration.
General and administrative expenses have been comprised of administrative
wages and benefits; occupancy and office expenses; outside legal, accounting and
other professional fees; travel and other miscellaneous office and
administrative expenses. Selling and marketing expenses include
26
selling/marketing wages and benefits; advertising and promotional expenses;
travel and other miscellaneous related expenses. R&D expenses consist mainly of
development expenses related to creating new technology applications. In the
future, the Company anticipates significant expenditures in business development
to create strategic alliances with third parties, and in developing a sales
channel to the various amateur sports organizations throughout the United
States.
Because the Company has incurred losses, income tax expenses are
immaterial. No tax benefits have been booked related to operating loss
carryforwards, given the uncertainty of the Company being able to utilize such
loss carryforwards in future years. The Company anticipates incurring additional
losses during the coming year.
Results of Operations
Following is management's discussion of the relevant items affecting
results of operations for the periods ended September 30, 2002 and 2001.
Revenues. The Company generated net revenues of $98,066 during the three
months ended September 30, 2002, a 342% increase compared to $22,187 in net
revenues during the third quarter of 2001. For the nine months ended September
30, 2002, net revenues were $520,207, a 234% increase compared to $155,565 in
net revenues during the first nine months of 2001. This increase was primarily
due to new sports events and other entertainment events acquired by the Company
which were managed and promoted during the second and third quarters of 2002.
Other sources of revenue were the sales of the Company's online services and
information technology consulting. The Company anticipates that these three
areas will constitute the principal source of the Company's revenue for the
foreseeable future.
Cost of Sales. Cost of sales for the three months ended September 30, 2002
were $53,936 a 320% increase from $12,853 during the third quarter of 2001. For
the nine month period ended September 30, 2002, cost of sales were $260,295, a
268% increase compared to $70,752 during the first nine months of 2001. This
increase correlates to the increase in revenues and is mainly attributable to
expenses incurred pursuant to the delivery of the Company's sports event
management and promotional services. Other costs of sales consisted of online
registration services and sales commissions paid in connection with technology
consulting projects.
General and Administrative Expenses. General and administrative expenses
for the three months ended September 30, 2002 were $194,078, a 52% decrease from
$406,113 during the third quarter of 2001. General and administrative expenses
for the nine months ended September 30, 2002 were $1,201,615, a 14% increase
from $1,052,306 during the nine months ended September 30, 2001. This increase
was principally due to the recognition of $308,758 in expenses relating to
issuances of warrants during the first half of 2002. The warrants were attached
to a line of credit established by the Company for the development of future
sports events. Without the expenses related to warrants, general and
administrative expenses would have been $892,857, a 15% decrease from the first
nine months of 2001. Management continues to make a concerted effort to decrease
certain costs associated with professional fees, contract labor, and rent and
occupancy-related expense. Payroll expense and professional fees accounted for
approximately $131,273 and $7,142, respectively, of general and administrative
expenses during the third quarter of 2002, as compared to $82,495 and $118,957
during the third quarter of 2001. For the nine months ended September 30, 2002
payroll expense and professional fees totaled approximately 383,130 and 343,351,
respectively, of general and administrative expenses as compared to $229,790 and
$231,886 during the first nine months of 2001. The increase is mainly due to
administrative expenses associated with a major sales initiative which was
started in 2002. Furthermore, in order to retain the cash resources of the
Company, certain consultants of the Company were paid in stock in which the
market value was expensed as professional fees.
Selling and Marketing Expenses. Selling and marketing expenses for the
three months ended September 30, 2002 were $87,916, a 3% increase from $85,163
during the second quarter of 2001. For the nine months ended September 30, 2002,
selling and marketing expenses were $289,814, a 48% decrease from $552,439
during the nine month period ended September 30, 2001. This decrease was
primarily attributable to the public relations campaign which was started in the
first half of 2001. The Company anticipates that selling and marketing expenses
in the future will increase as a sales initiative starting in
27
2002 will create a sales channel to the amateur sports organizations throughout
the United States. The Company also continues to focus on the sales of its
technology consulting services.
Product Development. Product research and development expenditures were
$40,177 for the three months ended September 30, 2002, as compared to $51,167
during the second quarter of 2001, a decrease of 21%. For the nine months ended
September 30, 2002, product development expenses were $158,345, a 7% increase
from $148,538 for the nine months ended September 30, 2001. Product development
expenses related to the Company's internet services consist primarily of
payroll, software and systems, and related costs for programmers and software
developers. Product development expenses related to the Company's information
technology consulting consists primarily of payroll and systems development for
the web site hosting services. Where appropriate, the Company capitalizes
certain systems development costs in accordance with generally accepted
accounting principles. The Company believes that significant investments in
product development are required to remain competitive. Accordingly, the Company
expects to incur increased expenditures with respect to product development in
future periods.
Other Income (Expense). The Company had net other expense of $56,448 for
the nine months ended September 30, 2002 compared to net other income of
$279,184 during the first nine months of 2001. The income during 2001 was
generated principally from the settlement of certain accounts payable by
creditors of the Company in exchange for structured cash payments or cash
settlements for less than the face amount of the obligations. During the nine
month period ended September 30, 2002, the Company had a gain of $6,774 on the
settlement of debt compared to $344,133 during the same time period of 2001.
Management continues to negotiate with its creditors in order to settle on old
accounts payable. Expenses incurred in this category were comprised primarily of
interest expenses related to balances on Company credit cards and short term
loans.
Liquidity and Capital Resources
As of September 30, 2002, the Company's primary source of liquidity
consisted of $165,591 in cash and cash equivalents. The Company holds most of
its cash reserves in local sweep accounts with local financial institutions.
Since inception, the Company has financed its operations through a combination
of short and long-term loans, and through the private placement of its Common
Stock.
The Company has sustained significant net losses which have resulted in an
accumulated deficit at September 30, 2002 of $22,347,522 and is currently
experiencing a shortfall in operating capital which raises doubt about the
Company's ability to continue as a going concern. The net loss for the year
ended December 31, 2001 and the nine months ended September 30, 2002 was
$1,703,240 and $1,446,310, respectively. The Company anticipates a net loss for
the year ended December 31, 2002 and with the expected cash requirements for the
coming months, without additional cash inflows from an increase in revenues
combined with continued cost-cutting or a receipt of cash from capital
investment, there is substantial doubt as to the Company's ability to continue
operations.
The Company believes these conditions have resulted from the inherent risks
associated with the small startup technology-oriented companies. Such risks
include, but are not limited to, the ability to (i) generate revenues and sales
of its products and services at levels sufficient to cover its costs and provide
a return for investors, (ii) attract additional capital in order to finance
growth, (iii) further develop and successfully market commercial products and
services, and (iv) successfully compete with other comparable companies having
financial, production and marketing resources significantly greater than those
of the Company.
The Company has made substantial progress in developing its business and
revenue models and has implemented a major sales initiative during 2002. In
addition, the Company has implemented stringent cost-cutting efforts and is
presently working with sources of investment capital to fund operating losses
until the Company reaches profitability. The Company will likely require
considerable amounts of financing to make any significant advancements in its
business strategy. Funds raised through future equity financing will likely be
dilutive to current shareholders. Lack of additional funds will materially
affect the Company and its business, and may cause the Company to cease
operations. Consequently, shareholders could incur a loss of their entire
investment in the Company.
28
FORWARD LOOKING STATEMENTS AND RISK FACTORS
Forward Looking Statements
When used in this report, the words, "believes," "plans," "expects," and
similar expressions are intended to identify forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements are subject to certain risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from those projected. These forward-looking statements
speak only as of the date hereof. All of these forward-looking statements are
based on estimates and assumptions made by management of the Company, which
although believed to be reasonable, are inherently uncertain and difficult to
predict. There can be no assurance that the benefits anticipated in these
forward-looking statements will be achieved.
The Company undertakes no obligation to update any forward-looking
statements, but investors are advised to consult any further disclosures by the
Company on this subject in its subsequent filings pursuant to the Securities
Exchange Act of 1934. Furthermore, as permitted by the Private Securities
Litigation Reform Act of 1995, the Company provides these cautionary statements
identifying risk factors, listed below, that could cause the Company's actual
results to differ materially from expected and historical results. It is not
possible to foresee or identify all such factors. Consequently, this list should
not be considered an exhaustive statement of all potential risks, uncertainties
and inaccurate assumptions.
RISK FACTORS
Operating Risks
Defaults in Senior Securities. Effective February 1, 2000, the Company sold
and issued a promissory note secured by virtually all tangible and intangible
assets of the Company ("Note") in exchange for $450,000 in cash proceeds. As of
May 1, 2000, the Company is in default with respect to the Note. Although the
Note holder continues to be supportive of the Company and its management, if the
holder of the Note determines to foreclose upon the Note, the Company would
likely be forced to sell all of its tangible and intangible assets to satisfy
the obligation represented by the Note and would, therefore, likely cease
operations entirely. The Note and Security Agreement executed in connection
therewith have been filed as an exhibit to the Company's 1999 annual report on
Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2000.
Default in Capital Computer Lease. The Company's wholly-owned subsidiary,
Sports Management Partners, Inc. ("SMP"), is presently in default with respect
to a capital computer lease with IBM Credit Corp. signed on May 31, 2001. The
lease concerns various computer hardware components leased by SMP in connection
with efforts to provide hardware management solutions to sports organizations
but does not include hardware used by the Company with respect to its Internet
technology solutions or the Company's Local Area Network. To date, SMP has not
generated any revenue. Although SMP is presently attempting to restructure the
lease on more favorable terms, the possible repossession of such computer
hardware will substantially inhibit the Company's ability to hardware management
solutions and and other hardware related services through SMP.
Dependence on Key Personnel. The Company's success depends, in large part,
upon the talents and skills of its management and key personnel. To the extent
that any of its key personnel are unable or refuse to continue their association
with the Company, a suitable replacement would have to be found. The competition
for qualified personnel in the computer software and Internet markets is
intense, and there are limited numbers of such qualified personnel in the
metropolitan Salt Lake City area. There is no assurance that the Company would
be able to find suitable replacements for its existing management personnel or
technical personnel or that such replacements could be obtained for an amount
affordable to the Company.
29
Additional Financing Required. The Company will likely require substantial
additional capital in the future for expansion, business development, marketing,
computer software and systems, overhead, administrative, and other expenses.
There is no assurance that the Company will be able to raise additional funds or
that financing will be available on acceptable terms. Lack of additional funds
could significantly affect the Company and its business. Further, funds raised
through future equity financing could be substantially dilutive to existing
shareholders.
Company Not Currently Profitable. The Company was organized on July 12,
1996. Since the date of its inception, the Company has incurred substantial
losses and has not yet generated a profit. To achieve any significant measure of
profitability, the Company must create substantial activity through its Web Site
to generate revenues, and there is no assurance that the Company will do so in
the future or that such revenue generation will ultimately lead to the Company
becoming profitable.
Revenues Subject to Seasonal Fluctuation. The Company expects that it will
experience a sharp increase in commercial activity during the spring and winter
months, principally due to spring recreational athletic leagues, tournaments,
and events operating during that period. During the winter months, winter games
events, basketball tournaments, leagues, and events, and other winter events are
expected to generate increases in revenue as compared to the summer and fall
periods. There can be no assurance that the Company can decrease its selling,
general, and administrative expenses during periods of decreased revenue and
that the Company's results of operations during these periods will not be
materially adversely affected.
Growth Management. The Company anticipates that it will experience rapid
growth in the next few years of operations. The management challenges imposed by
this growth include entry into new markets, growth in the number of persons
utilizing its Internet properties, management of affiliated sports
organizations, employees and customers, expansion of facilities and computer
systems necessary to accommodate such growth, and additions and modifications to
the products and services offered through the Company's Internet properties. To
manage these changes effectively, the Company may be required to hire additional
management and operations personnel and to improve its operational, financial,
computer, and management systems. If the Company is unable to manage growth
effectively or hire or retain qualified personnel, the Company's business and
results of operations could be materially adversely affected.
Government Regulation of the Internet. There are currently few laws or
regulations directly applicable to electronic commerce. Due to the increasing
popularity and use of the Internet, it is possible that a number of laws and
regulations may be adopted with respect to the Internet which could materially
increase the cost of transacting business on the Internet. Although
transmissions from the Company's Web Site originate from the State of Utah, the
government of the United States and the governments of other states and foreign
countries might attempt to regulate such transmissions or assess taxes, fees,
tariffs, duties, or other payments against the Company, the Company's
Affiliates, or customers purchasing products or services through the Web Site.
Any such regulations or assessments could adversely affect the Company's
business, operating results, and financial condition.
Dependence on Continued Growth in Use of the Internet. The Company's future
success is substantially dependent upon continued growth in the use of the
Internet in order to support the volume of activity necessary to generate
advertising revenue and the sale of its products and services. Rapid growth in
the use of the Internet is a relatively recent phenomenon, and the Company
relies on consumers who have historically used traditional means of media and
commerce for entertainment and the purchase of goods and services. For the
Company to be successful, these consumers must accept and utilize novel ways of
conducting business and exchanging information. There can be no assurance that
communication or commerce over the Internet will become more widespread or that
the Internet will otherwise become a viable commercial marketplace. Moreover, to
the extent that the Internet continues to experience significant growth in the
number of users and frequency of use, there can be no assurance that the
Internet infrastructure will continue to be able to support the demands placed
upon it by such growth, or that the performance or reliability of the Internet
will not be adversely affected thereby. In addition, certain factors such as
Internet commerce security and the speed of Internet transmissions may deter
existing as well as potential customers from engaging in transactions on the
Internet. The occurrence of any of these risks could adversely affect the
Company's business, operating results, and financial condition.
30
Risk of Computer System Failure. The success of the Company is
substantially dependent upon its ability to deliver high quality, uninterrupted
access to its technology applications, which requires that the Company protect
its computer hardware and software systems and the data and information stored
in connection therewith. The Company's systems are vulnerable to damage by fire,
natural disaster, power loss, telecommunications failures, unauthorized
intrusion, and other catastrophic events. Any substantial interruption in the
Company's systems would have a material adverse effect on the Company's
business, operating results, and financial condition. Although the Company
carries general commercial insurance coverage, such coverage may not be adequate
to compensate for the losses that may occur. In addition, the Company's systems
may be vulnerable to computer viruses, physical or electronic break-ins,
sabotage, or other problems caused by third parties which could lead to
interruptions, delays, loss of data, or cessation in service to persons desiring
to access the Company's Internet properties. The occurrence of any of these
risks could have a material adverse effect upon the Company's business, results
of operations, and financial condition.
Electronic Data Transmission Security Risks. A significant barrier to the
electronic transmission of confidential data over the Internet is the perception
that such data may not be secure. The Company relies upon encryption and
authentication technology to provide the security necessary to effect secure
transmissions of confidential information. There can be no assurance that
advances in decryption technology, computer espionage, and other developments
will not result in a breach or compromise of the algorithms used by the Company
to protect transaction data of persons accessing the Web Site or other Internet
properties of the Company, and therefore lead to the misappropriation of such
data by third parties. Any such breach, compromise, or misappropriation could
damage the Company's reputation and expose the Company to a risk of loss or
litigation and possible liability, and could have a material adverse effect upon
the Company's business, results of operations, or financial condition.
Rapid Technological Change. The Internet and on-line industries are
characterized by rapid technological change, changing market conditions and
customer demands, and the emergence of new industry standards and practices that
could render the Company's existing technology platform and the services
provided pursuant thereto obsolete. The Company's future success will
substantially depend on its ability to enhance its existing services, develop
new services, and otherwise respond to technological advances in a timely and
cost-effective manner. If the Company is unable, for technical, legal,
financial, or other reasons, to adapt in a timely manner in response to changing
market conditions or customer requirements, or if the Company's technology
applications do not achieve market acceptance, the Company's business, operating
results, and financial condition would be adversely affected.
No Proprietary Protection for Technology. The Company's online registration
system, statistical information system, and the league management system are not
protected by any copyright or patent, and the Company does not anticipate filing
an application with the United States Patent and Trademark Office ("USPTO") or
the United States Copyright Office for protection of these systems. Although the
Company believes that copyright and patent protection for these systems is
either cost prohibitive or unnecessary, it may be wrong. If the Company is
wrong, it could face unexpected expenses pursuing, defending, or otherwise
becoming involved in a copyright or patent dispute, any of which could have a
material adverse effect upon the Company's business, results of operations, and
financial condition.
Uncertain Protection of Trade Names and Related Intangible Assets. The
Company has submitted applications to the USPTO for trademark protection for the
name "SportsNuts.com" with respect to the following classes of products and
services: (i) vitamins, minerals, and herbal supplements; (ii) sporting goods
and apparel; (iii) Internet communication, education, and entertainment; (iv)
miscellaneous goods and services. Currently the mark "E-Sports Mall" is pending
registration. The Company has also registered the Internet domain names,
"www.sportsnuts.com," and "www.sportsnuts.net." Given the lack of resources
available to the Company during 2001, the Company has not vigorously pursued
finalization of its trademark applications and the status of such applications
is presently in doubt. If the Company is unsuccessful in obtaining the right of
full usage of its name from the USPTO, other companies with names, marks, or
slogans similar to SportsNuts could seek to require that the Company obtain a
license from them or require the Company to change its name, either of which
could entail substantial costs. Additionally, if the Company were requried to
change its name, it could lose all goodwill associated with the "SportsNuts"
mark. In addition, future products and services offered by the Company may need
31
to be marketed under different names if the mark "SportsNuts" causes confusion
with another trade name being used by another company. The Company could also
incur substantial costs to defend any legal action taken against the Company
pursuant to a trademark or service mark dispute. If any legal action against the
Company, its asserted trademarks, or service marks should be found to infringe
upon intellectual property rights of a third party, the Company could be
enjoined from further infringement and could be required to pay damages. In the
event a third party were to sustain a valid claim against the Company, and in
the event a required license were not available on commercially reasonable
terms, the Company's financial operations and results of operations could be
materially adversely affected. Litigation, which could result in substantial
cost to and diversion of resources of the Company, may also be necessary to
enforce intellectual property rights of the Company or to defend the Company
against claimed infringements of the rights of others.
Competition and Technological Change. The market for computer technology
products, services, and advertising within the amateur sports market is new,
rapidly evolving, and intensely competitive and will continue to undergo rapid
technological change. The Company must continue to enhance and improve the
functionality and features of its online services and sports information
management software. If new industry needs, standards, or practices emerge, the
Company's existing services, technology, and systems may become obsolete.
Developing and enhancing the Company's proprietary technology entails
significant technical and business risks, in addition to substantial costs. If
the Company faces delays in introducing new services, products and enhancements,
its users may forego the use of the Company's services and use those of its
competitors. The Company currently competes with many other amateur sports
information and product web sites and the Company anticipates competition to
intensify in the future. Barriers to entry may not be significant, and current
and new competitors may be able to launch new web sites and new operations
quickly at a relatively low cost. Accordingly, the Company believes that its
success will depend heavily upon achieving significant market acceptance before
its competitors and potential competitors introduce competing services. Many of
the Company's competitors, as well as potential entrants into the Internet
amateur sports market, have longer operating histories, larger customer or user
bases, greater brand recognition and significantly greater financial, marketing,
and other resources than the Company. Furthermore, several of the Company's
competitors have acquired certain key sponsorships and relationships with a few
well-known amateur sports organizations which may impede the Company's growth
and thereby have a material adverse effect upon the Company's business, results
of operations, and financial condition.
Investment Risks
Speculative Investment. The shares of the Company's common stock are a
speculative investment. To date, the Company has generated substantial losses
and has yet to achieve a profit. If the Company fails to generate profits, it is
unlikely that the Company will be able to meet its financial obligations and
investors could lose their entire investments.
Securities Class Action Claims Based Upon Price Fluctuation. Securities
class action claims have been brought against issuing companies in the past
after volatility in the market price of a company's securities. With respect to
the Company, such litigation could be very costly and divert the attention of
the Company's management and resources, and any adverse determination in such
litigation could also subject the Company to significant liabilities, any or all
of which could have a material adverse effect on the Company's business, results
of operations, and financial condition.
No Active Market. Although the Company's shares are traded on the NASD
Electronic Bulletin Board, the Company believes that the public trading price
may be an inaccurate representation of the value of the Company because there is
little or no trading volume in the Company's shares and no analysts or NASD
market makers actively follow the Company.
No Dividends. The Company does not anticipate paying dividends on its
Common Stock in the foreseeable future, and may be restricted from paying
dividends in the future pursuant to subsequent financing arrangements.
Concentration of Voting Power. Pursuant to the Company's Certificate of
Incorporation, the Board of Directors has been divided into three classes, with
only one class subject to reelection in a given
32
year. The Certificate of Incorporation requires a vote of 66 2/3% of the shares
of the Company to amend the provision governing the election of directors.
Consequently, even if a shareholder or group of shareholders were to acquire a
majority of the outstanding shares of the Company, such acquisition would not
necessarily lead to a change in control of the Company. However, the Company
cannot guarantee that certain persons, either collectively or individually, will
not be able to control the election of the Board of Directors and that minority
shareholders will not be adversely affected as a result.
Anti-Takeover Provisions. The Company's Certificate of Incorporation
contains certain provisions which could be an impediment to a non-negotiated
change in control of the Company, namely an ability, without stockholder
approval, to issue up to 20,000,000 shares of preferred stock with rights and
preferences determined by the board of directors, staggered terms for directors,
and super-voting requirements. These provisions could impede a non-negotiated
change in control and thereby prevent stockholders from obtaining a premium for
their Common Stock.
Securities Eligible for Public Trading. Of the 94,368,854 shares of the
Company's Common Stock outstanding at June 30, 2002, approximately 32,000,000
are freely tradeable or immediately eligible for resale under Rule 144
promulgated pursuant to the Securities Act of 1933, as amended. Sales of
substantial amounts of freely tradeable stock in the public market could
adversely affect the market price of the Common Stock. The Company has also
filed a registration statement with respect to its 2000 Stock Option Plan, the
result of which could be the sale of a significant number of shares in the
public market, and consequently, an adverse effect upon the public trading price
of the Company's Common Stock.
Private Liability of Management. The Company has adopted provisions in its
Certificate of Incorporation which limit the liability of its officers and
directors and provisions in its bylaws which provide for indemnification by the
Company of its officers and directors to the fullest extent permitted by
Delaware corporate law. The Company's Certificate of Incorporation generally
provides that its directors shall have no personal liability to the Company or
its stockholders for monetary damages for breaches of their fiduciary duties as
directors, except for breaches of their duties of loyalty, acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law, acts involving unlawful payment of dividends or unlawful stock purchases or
redemptions, or any transaction from which a director derives an improper
personal benefit. Such provisions substantially limit the shareholders' ability
to hold directors liable for breaches of fiduciary duty.
Potential Issuance of Additional Common and Preferred Stock. The Company is
authorized to issue up to 200,000,000 shares of Common Stock. To the extent of
such authorization, the Board of Directors of the Company will have the ability,
without seeking shareholder approval, to issue additional shares of common stock
in the future for such consideration as the Board of Directors may consider
sufficient. The issuance of additional Common Stock in the future may reduce the
proportionate ownership and voting power of existing shareholders. The Company
is also authorized to issue up to 20,000,000 shares of preferred stock, the
rights and preferences of which may be designated in series by the Board of
Directors. To the extent of such authorization, such designations may be made
without shareholder approval. The designation and issuance of series of
preferred stock in the future would create additional securities which would
have dividend and liquidation preferences over common stock.
Volatility of Stock Prices. In the event that there is an established
public market for the Company's Common Stock, market prices will be influenced
by many factors and will be more subject to significant fluctuations in response
to variations in operating results of the Company and other factors such as
investor perceptions of the Company, supply and demand, interest rates, general
economic conditions and those specific to the industry, developments with regard
to the Company's activities, future financial condition and management.
Applicability of Low Priced Stock Risk Disclosure Requirements. The Common
Stock of the Company may be considered a low priced security under rules
promulgated under the Securities Exchange Act of 1934. Under these rules,
broker-dealers participating in transactions in low priced securities must first
deliver a risk disclosure document which describes the risks associated with
such stocks, the broker-dealers's duties, the customer's rights and remedies,
certain market and other information, and make a suitability determination
approving the customer for low priced stock transactions based on the customer's
financial situation, investment experience and objectives. Broker-dealers must
33
also disclose these restrictions in writing to the customer, obtain specific
written consent of the customer, and provide monthly account statements to the
customer. With all these restrictions, the likely effect of designation as a low
priced stock will be to decrease the willingness of broker-dealers to make a
market for the stock, to decrease the liquidity of the stock and to increase the
transaction cost of sales and purchases of such stock compared to other
securities.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING.
None.
ITEM 2. CHANGES IN SESCURITIES
Recent Sales of Unregistered Securities
Effective August 19, 2002, the Company sold and issued 25,000,000 shares of
unregistered common stock to an accredited investors in exchange for $250,000 in
cash proceeds. No commissions or underwriting discounts were given or paid in
connection with this transaction. The Company believes that this transaction was
exempt from the registration provisions of the Securities Act of 1933 pursuant
to Section 4(2) of such Act and Rule 506 promulgated thereunder.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Effective February 1, 2000, the Company sold and issued a promissory note
secured by certain tangible and intangible assets of the Company ("Note") in
exchange for $450,000 in cash proceeds. As of May 1, 2000, the Company is in
default with respect to the Note. As of April 1, 2001, the principal amount of
the Note, together with interest as accrued, is convertible into approximately
5,395,562 shares of common stock. The Note and its accompanying Security
Agreement have been filed as an exhibit to the Company's 1999 annual report on
form 10-KSB filed with the Securities and Exchange Commission on March 30, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
The following documents are filed as exhibits to this Form 10-QSB:
34
INDEX TO EXHIBITS
Number Exhibits
- ------ ---------
3.1 Amended and Restated Certificate of Incorporation of
SportsNuts, Inc.(1)
3.2 Amended and Restated Bylaws of SportsNuts, Inc., a Delaware
corporation.(2)
10.1 Convertible Promissory Note and Security Agreement among
Gardner Management,Inc. Profit Sharing Plan and Trust,
SportsNuts.com, Inc., Sportzz.com, Inc., and the Company,
including amendments, dated February 1, 2000.(3)
10.2 Note Purchase Agreement, dated February 22, 2002, between
Eslie Barlow and the Company. (4)
10.3 Note Purchase Agreement, dated February 1, 2002, between
Moore, Clayton & Co.,Inc. and the Company. (5)
10.4 SportsNuts, Inc. 2000 Stock Option Plan.(6)
21.1 Subsidiaries of the Registrant.(7)
- --------------------------
(1) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB, filed
with the Commission on August 14, 2001.
(2) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB, filed
with the Commission on August 14, 2001.
(3) Filed as an Exhibit to the Company's annual report on Form 10-KSB, filed
with the Commission on March 30, 2000.
(4) Filed as an Exhibit to the Company's Quarterly Report on Form 10-QSB, filed
with the Commission on May 15, 2002.
(5) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB, filed
with the Commission on May 15, 2002.
(6) Filed as an Exhibit to the Company's Quarterly Report on Form 10-QSB, filed
with the Commission on May 11, 2001.
(7) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB, filed
with the Commission on August 14, 2001.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPORTSNUTS, INC.
By: /s/ Kenneth I.Denos
Dated: November 12, 2002 ------------------------------------
Kenneth I. Denos
Chief Financial Officer
35
Exhibit Index
Number Exhibits
- ------ ---------
3.1 Amended and Restated Certificate of Incorporation of
SportsNuts, Inc.(1)
3.2 Amended and Restated Bylaws of SportsNuts, Inc., a Delaware
corporation.(2)
10.1 Convertible Promissory Note and Security Agreement among
Gardner Management,Inc. Profit Sharing Plan and Trust,
SportsNuts.com, Inc., Sportzz.com, Inc., and the Company,
including amendments, dated February 1, 2000.(3)
10.2 Note Purchase Agreement, dated February 22, 2002, between
Eslie Barlow and the Company. (4)
10.3 Note Purchase Agreement, dated February 1, 2002, between
Moore, Clayton & Co.,Inc. and the Company. (5)
10.4 SportsNuts, Inc. 2000 Stock Option Plan.(6)
21.1 Subsidiaries of the Registrant.(7)
- ---------------
(1) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB,
filed with the Commission on August 14, 2001.
(2) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB,
filed with the Commission on August 14, 2001.
(3) Filed as an Exhibit to the Company's annual report on Form 10-KSB,
filed with the Commission on March 30, 2000.
(4) Filed as an Exhibit to the Company's Quarterly Report on Form 10-QSB,
filed with the Commission on May 15, 2002.
(5) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB,
filed with the Commission on May 15, 2002.
(6) Filed as an Exhibit to the Company's Quarterly Report on Form 10-QSB,
filed with the Commission on May 11, 2001.
(7) Filed as an Exhibit to the Company's quarterly report on Form 10-QSB,
filed with the Commission on August 14, 2001.
36