Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to ___________
Commission file number: 000-52856
ATOMIC PAINTBALL, INC.
----------------------
(Exact name of registrant as specified in its charter)
TEXAS 75-2942917
----- ----------
(State of Incorporation) (IRS Employer ID Number)
2460 WEST 26TH AVENUE, SUITE 380-C, DENVER, COLORADO 80211
----------------------------------------------------------
(Address of principal executive offices)
303-380-2282
------------
(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No []
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ X] No
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of November 13, 2009, there
were 7,488,804 shares of the registrant's common stock, no par value, issued and
outstanding.
ATOMIC PAINTBALL, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Balance Sheet - September 30, 2009 and December 31, 2008 3
Statement of Operations - Three and Nine months ended September 30, 2009 and
2008 and for the period from inception (May 8, 2001) through
September 30, 2009 4
Statement of Cash Flows - Nine months ended September 30, 2009 and 2008 and for
the period from inception (May 8, 2001) through September 30, 2009 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 18
Item 4. Controls and Procedures 19
Item 4T. Controls and Procedures 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 1A. Risk Factors - Not Applicable 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits 19
SIGNATURES 20
PART I
ITEM 1. FINANCIAL STATEMENTS
ATOMIC PAINTBALL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2009 2008
(Unaudited) (Audited)
ASSETS
Current Assets
Cash & Cash Equivalents $ - $ -
Assets of Discontinued Operations 50 2,492
------------ ------------
Total Current Assets 50 2,492
------------ ------------
TOTAL ASSETS $ 50 $ 2,492
============ ============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities
Liabilities of Discontinued Operations $ 264,135 $ 172,557
------------ ------------
Total Liabilities, all current 264,135 172,557
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' (DEFICIT)
Preferred Stock, no par value: 2,000,000 shares authorized
Series A Convertible Preferred Stock, no par value; 400,000 shares authorized - -
no shares issued and outstanding as at September 30, 2009 and December 31, 2008
respectively, with a $0.25 per share liquidation preference'
Common Stock, no par value: 10,000,000 shares authorized, 436,790 436,790
7,488,804 shares issued and outstanding as at September 30, 2009 and
December 31, 2008, respectively
Deficit accumulated during the development stage. (700,876) (606,855)
------------ ------------
Total Stockholders' Deficit (264,085) (170,065)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 50 $ 2,492
============ ============
See accompanying Notes to Financial Statements.
3
ATOMIC PAINTBALL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEENTS OF OPERATIONS
(Unaudited)
FROM INCEPTION
THREE MONTHS ENDED NINE MONTHS ENDED (May 8, 2001)
SEPTEMBER 30, SEPTEMBER 30, THROUGH SEPTEMBER 30,
2009 2008 2009 2008 2009
-------------- ------------ ------------ ------------ ---------------
CONINTUING OPERATING EXPENSES
General and Administrative $ - $ - $ - $ - $ -
-------------- ------------ ------------ ------------ ---------------
Total Operating Expenses - - - - -
OPERATING LOSS - - - - -
OTHER INCOME (EXPENSE)
Interest Expense - - - - -
-------------- ------------ ------------ ------------ ---------------
Net Loss before Income Taxes - - - - -
Income tax expense - - - - -
------------ ------------ ------------ ------------ ---------------
Loss from continuting operations - - - - -
Loss from discontinued operations (24,399) (54,532) (94,039) (68,418) (700,876)
-------------- ------------ ------------ ------------ ---------------
NET LOSS $ (24,399)$ (54,532)$ (94,039)$ (68,418) $ (700,876)
============== ============ ============ ============ ===============
NET LOSS PER COMMON SHARE
Basic & Diluted, continuing operations - - - -
Basic & Diluted, discontinued operations * (0.01) (0.01) (0.01)
------------ ------------ ------------ ------------
Basic & Diluted * $ (0.01) $ (0.01) $ (0.01)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
Basic & Diluted 7,488,804 7,488,804 7,488,804 7,488,804
============== ============ ============ ============
* Less than ($0.01) per share.
See accompanying Notes to Financial Statements.
4
ATOMIC PAINTBALL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
FROM INCEPTION
NINE MONTHS ENDED (May 8, 2001)
SEPTEMBER 30, THROUGH SEPTEMBER 30,
2009 2008 2009
---------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
NET LOSS FROM CONTINUING OPERATIONS $ - $ - $ -
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES
Depreciation - - -
CHANGES IN OPERATING ASSETS & LIABILITIES
------------------------------ --------------
Total Cash Flow Used In Operating Activities - - -
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets - - -
------------- ------------ --------------
Total Cash Flow Used In Investing Activities - - -
CASH FLOW FROM FINANCING ACTIVITIES
------------- ------------ --------------
Total Cash Flow Provided By Financing Activities - - -
CASH USED IN DISCONTINUED OPERATIONS (2,442) (7,469) 50
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS $ (2,442) $ (7,469) $ -
============= ============ ==============
Cash and Cash Equivalents at the beginning of the period $ 2,492 $ 14,217 $ -
============= ============ ==============
Cash and Cash Equivalents at the end of the period $ 50 $ 6,748 $ 50
============= ============ ==============
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $ - $ - $ 207
============= ============ ==============
Cash paid for income tax $ - $ - $ -
============= ============ ==============
See accompanying Notes to Financial Statements.
5
ATOMIC PAINTBALL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2009
(UNAUDITED)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations - Atomic Paintball, Inc.("we" or "the Company"), was
incorporated on May 8, 2001 in the State of Texas as a development stage
corporation which planned to own and operate paintball facilities and to provide
services and products in connection with paintball sport activities at its own
facilities and through a website.
On June 29, 2009, the Company (the Debtor) filed a voluntary petition for relief
in the United States Bankruptcy Court, Northern District of Texas, Dallas
District under Chapter 7 of Title 7 of the U.S. Bankruptcy Code, case number
09-34008-7. Under Chapter 7, all claims against the Debtor in existence prior to
the filing of the petition for relief under the U.S. Bankruptcy Code are stayed.
On October 1, 2009, one of our creditors and our sole director and officer,
David J Cutler, and our Trustee in bankruptcy, Scott Seidel, filed a Motion
Pursuant toss.ss.105, 501, and 502 and Fed. R. Bankr. P. 9019 for Order
Approving Bondholder Settlement ("9019 Motion") with the Bankruptcy Court. This
9019 Motion has been objected to by shareholders of the Company, J.H. Brech,
LLC, Harry McMillan, Charles J. Webb, Mark Dominey, Mark Armstrong, David Myers
and John E. Bradley ("Objecting Shareholders").
On October 15, 2009, Trustee, filed a Suggestion of Bankruptcy and Notice of the
Applicability or Partial Applicability of the Automatic Stay of 11 U.S.C. ss.
362(a) in the State Court Litigation. Subsequently, on October 16, 2009,
Plaintiffs and Defendant David Cutler executed a Rule 11 Standstill Agreement
staying the State Court Litigation until the Bankruptcy Court rules on the 9019
Motion or upon 14 days written notice of either party.
On October 30, 2009, the Objecting Shareholders filed a Motion to Dismiss
Chapter 7 Case ("Motion to Dismiss").
A hearing on both the 9019 Motion and the Motion to Dismiss is set at 2:30 p.m.,
December 17, 2009, before Judge Jernigan, United States Bankruptcy Court for the
Northern District of Texas, Dallas Division.
Significant Accounting Policies
Basis of Presentation:
The accompanying unaudited financial statements of Atomic Paintball, Inc. have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion the financial statements include all
adjustments (consisting of normal recurring accruals) necessary in order to make
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the financial statements not misleading. Operating results for the nine months
ended September 30, 2009 are not necessarily indicative of the results that may
be expected for the year ended December 31, 2009. For more complete financial
information, these unaudited financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 2008
included in our Annual Report on Form 10-K filed with the SEC.
Cash and Cash Equivalents -- Cash and cash equivalents consist of cash and
highly liquid debt instruments with original maturities of less than three
months.
Property and Equipment -- Property and equipment are recorded at cost.
Depreciation is provided using the straight line method over the estimated
useful lives of the related assets. Amortization of leasehold improvements is
computed using the straight-line method over the shorter of the remaining lease
term or the estimated useful life of the improvement.
The useful lives of property and equipment for purposes of computing
depreciation are:
Leasehold Improvements 1 year
Equipment 7 years
Computer Equipment 5 years
Expenditures for maintenance and repairs are charged to operations as incurred,
while betterments that extend the useful lives of the assets are capitalized.
Assets held by the Company are periodically reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
Deferred Costs and Other -- Offering costs with respect to issue of common
stock, warrants or options by us were initially deferred and ultimately offset
against the proceeds from these equity transactions if successful or expensed if
the proposed equity transaction is unsuccessful.
Impairment of Long-Lived and Intangible Assets -- In the event that facts and
circumstances indicated that the cost of long-lived and intangible assets may be
impaired, an evaluation of recoverability was performed. If an evaluation was
required, the estimated future undiscounted cash flows associated with the asset
were compared to the asset's carrying amount to determine if a write-down to
market value or discounted cash flow value was required.
Financial Instruments -- The estimated fair values for financial instruments was
determined at discrete points in time based on relevant market information.
These estimates involved uncertainties and could not be determined with
precision. The carrying amounts of notes receivable, accounts receivable,
accounts payable and accrued liabilities approximated fair value because of the
short-term maturities of these instruments. The fair value of notes payable
approximated to their carrying value as generally their interest rates reflected
our effective annual borrowing rate.
Income Taxes -- We account for income taxes under the liability method which
requires recognition of deferred tax assets and liabilities for the expected
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future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between financial statements
and tax base of assets and liabilities using enacted tax rates in effect fro the
year in which the differences are expected to reverse.
Revenue Recognition - We expect to generate revenue from providing facilities,
services and products in connection with paintball sport activities. Revenues
will be recognized as services and products are delivered. We had no revenue
during the three and nine months ended September 30, 2009 and 2008 or during the
period from inception (May 8, 2001) through September 30, 2009.
Comprehensive Income (Loss) -- Comprehensive income is defined as all changes in
stockholders' equity (deficit), exclusive of transactions with owners, such as
capital investments. Comprehensive income includes net income or loss, changes
in certain assets and liabilities that are reported directly in equity such as
translation adjustments on investments in foreign subsidiaries and unrealized
gains (losses) on available-for-sale securities.
There were no differences between our comprehensive loss and net loss during the
three and nine months ended September 30, 2009 and 2008 or during the period
from inception (May 8, 2001) through September 30, 2009.
Income (Loss) Per Share -- The income (loss) per share is presented as basic EPS
and diluted EPS. Basic EPS is calculated by dividing the income or loss
available to common stockholders by the weighted average number of common stock
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Diluted EPS was the same as Basic EPS
for the three and nine months ended September 30, 2009 and 2008 and during the
period from inception (May 8, 2001) through September 30, 2009, we have had
losses in all periods since our inception and, therefore, the effect of all
additional potential common stock would be antidilutive.
Use of Estimates -- The preparation of our consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in these
financial statements and accompanying notes. Actual results could differ from
those estimates. Due to uncertainties inherent in the estimation process, it is
possible that these estimates could be materially revised within the next year.
Business Segments -- We believe that our activities during the three and nine
months ended September 30, 2009 and 2008 comprised a single segment.
Recently Issued Accounting Policies - In June 2009, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Codification ("ASC") 105,
"Generally Accepted Accounting Principals" (formerly Statement of Financial
Accounting Standards ("SFAS") No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles").
ASC 105 establishes the FASB ASC as the single source of authoritative
nongovernmental U.S. GAAP. The standard is effective for interim and annual
periods ending after September 15, 2009. We adopted the provisions of the
standard on September 30, 2009, which did not have a material impact on our
financial statements.
8
There were various other accounting standards and interpretations issued in
2009, none of which are expected to have a material impact on the Company's
financial position, operations or cash flows.
2. GOING CONCERN:
In our financial statements for the fiscal years ended December 31, 2008 and
2007, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2008 and 2007, have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. At September 30, 2009 we reported
an accumulated deficit of $700,876.
On June 29, 2009, the Company filed a voluntary petition for relief in the
United States Bankruptcy Court, Northern District of Texas, Dallas district
under Chapter 7 of Title 7 of the U.S. Bankruptcy Code, case number 09-34008-7.
Under Chapter 7, all claims against the Debtor in existence prior to the filing
of the petition for relief under the U.S. Bankruptcy Code are stayed.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The financial statements do not contain any adjustments
relating to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
3. DISCONTINUED OPERATIONS
On June 29, 2009, the Company (the Debtor) filed a voluntary petition for relief
in the United States Bankruptcy Court, Northern District of Texas, Dallas
district under Chapter 7 of Title 7 of the U.S. Bankruptcy Code, case number
09-34008-7. Under Chapter 7, all claims against the Debtor in existence prior to
the filing of the petition for relief under the U.S. Bankruptcy Code are stayed.
At June 30, 2009, the carrying values of the Company's assets and liabilities
(presented as assets and liabilities of discontinued operations) were as
follows:
Assets:
Cash $ 50
-----------------------
Total Assets $ 50
=======================
Liabilities:
Accounts payable $ 40,742
Accrued liabilities 18,856
Loan from shareholder(1) 180,138
-----------------------
Total Liabilities $ 239,736
=======================
(1) Barbara J. Smith, formerly an officer, director and a
shareholder of the Company loaned us a total of $10,900 between
April and July of 2002 to pay for further research and development
and for general corporate overhead. This loan bears interest at an
annual rate of 6.5%, was repayable in full in July 15, 2004. The
loan was convertible at Ms. Smith's option into shares of our common
9
stock at $0.125 per share. This loan has not been repaid and Ms.
Smith has declined to convert the outstanding balance into shares.
Accordingly, the entire balance of the loan continues to be
outstanding and we continue to accrue interest on the balance
outstanding.
Mr. Cutler, our sole officer and a director, has made advances to us
by way of a loan to support our ongoing operating costs and settle
certain outstanding liabilities. At June 30, 2009, the Company owed
Mr. Cutler $168,060. There can be no assurance that Mr. Cutler will
continue to provide such financing on an ongoing basis.
4. STOCKHOLDERS' DEFICIT:
Preferred Stock
In October 2003, our Board of Directors adopted a resolution to authorize the
issuance (in series) of up to 2,000,000 shares of preferred stock with no par
value. Our board of directors may determine to issue shares of our preferred
stock. If done, the preferred stock may be created and issued in one or more
series and with such designations, rights, preference and restrictions as shall
be stated and expressed in the resolution(s) providing for the creation and
issuance of such preferred stock. If preferred stock is issued and we are
subsequently liquidated or dissolved, the preferred stock would be entitled to
our assets, to the exclusion of the common stockholders, to the full extent of
the preferred stockholders' interest in us.
No shares of our Preferred Stock were issued or outstanding during the three and
nine months ending September 30, 2009 or 2008.
Common Stock
We are authorized to issue 10,000,000 shares of common stock, no par value per
share. The holders of common stock are entitled to one vote per share for the
election of directors and with respect to all other matters submitted to a vote
of stockholders. Shares of common stock do not have cumulative voting rights,
which means that the holders of more than 50% of such shares voting for the
election of directors can elect 100% of the directors if they choose to do so.
Our common stock does not have preemptive rights, meaning that our common
shareholders' ownership interest would be diluted if additional shares of common
stock are subsequently issued and the existing shareholders are not granted the
right, in the discretion of the Board of Directors, to maintain their ownership
interest in us.
Upon any liquidation, dissolution or winding-up of us, our assets, after the
payment of debts and liabilities and any liquidation preferences of, and unpaid
dividends on, any class of preferred stock then outstanding, will be distributed
pro-rata to the holders of the common stock. The holders of the common stock do
not have preemptive or conversion rights to subscribe for any of our securities
and have no right to require us to redeem or purchase their shares.
The holders of Common Stock are entitled to share equally in dividends, if and
when declared by our Board of Directors, out of funds legally available
therefore, subject to the priorities given to any class of preferred stock which
may be issued.
10
Stock Options
On October 21, 2003, we adopted a stock purchase plan entitled "2003 Stock
Incentive Plan" to attract and retain selected directors, officers, employees
and consultants to participate in our long-term success and growth through an
equity interest in us. We have been authorized to make available up to 2,000,000
shares of our common stock for grant as part of the long term incentive plan.
No stock options were issued or outstanding during the nine months ended
September 30, 2009 or 2008.
5. COMMITMENTS AND CONTINGENCIES:
On June 9, 2009, three Atomic shareholders filed a lawsuit against Atomic
Director David Cutler in the County Court at Law No. 4 in Dallas County, Texas,
styled JH Brech, LLC et al. v. Cutler et al., Cause No. CC-090-4654-D ("State
Court Litigation"). The state court granted a temporary restraining order on
June 9, 2009, which required Cutler to refrain from: (a) marketing, attempting
to sell, transferring or otherwise disposing of Atomic; (b) causing Atomic to
issue any further shares of stock to Cutler; (c) dissipating any assets of
Atomic, including paying any amounts not in the ordinary course of business; and
(d) transferring any shares of stock to any third party. On June 18, 2009, the
Court granted Plaintiffs' motion to extend the temporary restraining order. On
June 22, 2009, Cutler filed a special appearance and, subject thereto, plea to
the jurisdiction and plea in abatement. On June 26, 2009, Cutler made demand on
the Corporation's counsel for indemnity of attorneys fees incurred in defense of
the lawsuit. At the time of the demand, Cutler's legal fees exceeded $22,000.
Atomic filed for Chapter 7 bankruptcy on June 29, 2009 in a Title 11 Case styled
In re Atomic Paintball, Case No. 09-34008-7, now pending in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division. Cutler,
thereafter, on June 29, 2009 removed the State Court Litigation to the United
States District Court for the Northern District of Texas, Dallas Division,
styled JH Brech, LLC et al. v. Cutler et al., Case No. 3:09-CV1213-G ("Federal
Litigation"). Plaintiffs in the State Court Litigation, also on June 29, 2009,
filed a First Amended Petition. On August 19, 2009, the District Court remanded
the Federal Litigation to the County Court at Law No. 4.
On October 1, 2009, one of our creditors and our sole director and officer,
David J Cutler, and our Trustee in bankruptcy filed a Motion Pursuant
toss.ss.105, 501, and 502 and Fed. R. Bankr. P. 9019 for Order Approving
Bondholder Settlement ("9019 Motion") with the Bankruptcy Court. This 9019
Motion has been objected to by shareholders of the Company, J.H. Brech, LLC,
Harry McMillan, Charles J. Webb, Mark Dominey, Mark Armstrong, David Myers and
John E. Bradley ("Objecting Shareholders").
On October 15, 2009, the Trustee filed a Suggestion of Bankruptcy and Notice of
the Applicability or Partial Applicability of the Automatic Stay of 11 U.S.C.
ss. 362(a) in the State Court Litigation. Subsequently, on October 16, 2009,
Plaintiffs and Defendant David Cutler executed a Rule 11 Standstill Agreement
staying the State Court Litigation until the Bankruptcy Court rules on the 9019
Motion or upon 14 days written notice of either party.
On October 30, 2009, the Objecting Shareholders filed a Motion to Dismiss
Chapter 7 Case ("Motion to Dismiss").
11
A hearing on both the 9019 Motion and the Motion to Dismiss is set at 2:30 p.m.,
December 17, 2009, before Judge Jernigan, United States Bankruptcy Court for the
Northern District of Texas, Dallas Division.
6. INCOME TAX
We have had losses since our Inception (May 8, 2001) through September 30, 2009
and therefore have not been subject to federal or state income taxes. We have
accumulated tax losses available for carry forward of approximately $700,000.
The carry forward is subject to examination by the tax authorities and expires
at various dates through the year 2029. The Tax Reform Act of 1986 contains
provisions that limit the NOL carry forwards available for use in any given year
upon the occurrence of certain events, including significant changes in
ownership interest. Consequently following the issue of 55.1% of our total
authorized and issued share capital in August 2006 to Mr. Cutler, one of our
directors, our ability to use these losses is substantially restricted by the
impact of section 382 of the Internal Revenue Code.
NOTE 7. SUBSEQUENT EVENTS
The Company has reviewed its activities, since September 30, 2009 and has found
no other subsequent events other than those discussed in Note 1 and Note 5.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto and the other financial information
included elsewhere in this report. This discussion contains forward-looking
statements that involve risks and uncertainties. You are urged to carefully
consider these factors, as well as other information contained in this Quarterly
Report on Form 10-Q and in our other periodic reports and documents filed with
the SEC.
OVERVIEW
We were incorporated on May 8, 2001, in the State of Texas, as a development
stage corporation which planned to own and operate paintball facilities and to
provide services and products in connection with paintball sport activities at
its own facilities and through a website.
On June 29, 2009, the Company (the Debtor) filed a voluntary petition for relief
in the United States Bankruptcy Court, Northern District of Texas, Dallas
district under Chapter 7 of Title 7 of the U.S. Bankruptcy Code, case number
09-34008-7. Under Chapter 7, all claims against the Debtor in existence prior to
the filing of the petition for relief under the U.S. Bankruptcy Code are stayed.
On October 1, 2009, one of our creditors and our sole director and officer,
David J Cutler, and our Trustee in bankruptcy, filed a Motion Pursuant to
ss.ss.105, 501, and 502 and Fed. R. Bankr. P. 9019 for Order Approving
Bondholder Settlement ("9019 Motion") with the Bankruptcy Court. This 9019
Motion has been objected to by certain of the Company's shareholders; J.H.
Brech, LLC, Harry McMillan, Charles J. Webb, Mark Dominey, Mark Armstrong, David
Myers and John E. Bradley ("Objecting Shareholders").
On October 15, 2009, the Trustee filed a Suggestion of Bankruptcy and Notice of
the Applicability or Partial Applicability of the Automatic Stay of 11 U.S.C.
ss. 362(a) in the State Court Litigation. Subsequently, on October 16, 2009,
Plaintiffs and Defendant David Cutler executed a Rule 11 Standstill Agreement
staying the State Court Litigation until the Bankruptcy Court rules on the 9019
Motion or upon 14 days written notice of either party.
On October 30, 2009, the Objecting Shareholders filed a Motion to Dismiss
Chapter 7 Case ("Motion to Dismiss").
A hearing on both the 9019 Motion and the Motion to Dismiss is set at 2:30 p.m.,
December 17, 2009, before Judge Jernigan, United States Bankruptcy Court for the
Northern District of Texas, Dallas Division.
Liquidity and Capital Resources
At September 30, 2009, we had total assets of $50 consisting solely of cash, no
operating business or other source of income, outstanding liabilities totaling
$264,135 and a stockholder' deficit of $264,135.
13
In our financial statements for the fiscal years ended December 31, 2008 and
2007, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2008 and 2007, have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. At September 30, 2009, we reported
an accumulated deficit of $700,876.
On June 29, 2009, the Company (the Debtor) filed a voluntary petition for relief
in the United States Bankruptcy Court, Northern District of Texas, Dallas
district under Chapter 7 of Title 7 of the U.S. Bankruptcy Code, case number
09-34008-7. Under Chapter 7, all claims against the Debtor in existence prior to
the filing of the petition for relief under the U.S. Bankruptcy Code are stayed.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2008
During the three months ended September 30, 2009 and 2008, we did not recognize
any revenue from operations.
Discontinued Operations
During the three months ended September 30, 2009, the loss from discontinued
operations of $24,399 compared to $54,532 for the three months ended September
30, 2008. The decrease of $30,133 relates largely to legal fees incurred in the
three months ended September 30, 2008 that were not incurred in the three months
ended September 30, 2009.
Net Loss and Comprehensive Loss
During the three months ended September 30, 2009, we recognized a net loss of
$24,399 compared to a net loss of $54,532 during the three months ended
September 30, 2008, a decrease of $30,133 due to the factors discussed above.
The comprehensive loss was identical to the net loss during both the three
months ended September 30, 2009 and 2008.
NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 2008
During the nine months ended September 30, 2009 and 2008, we did not recognize
any revenue from operations.
Discontinued Operations
During the nine months ended September 30, 2009, the loss from discontinued
operations of $94,039 compared to loss from discontinued operations of $64,418
for the nine months ended September 30, 2008. The increase of $29,621 relates
14
largely to legal fees incurred in the nine months ended September 30, 2009 that
were not incurred in the nine months ended September 30, 2008.
Net Loss and Comprehensive Loss
During the nine months ended September 30, 2009, we recognized a net loss of
$94,039 compared to a net loss of $64,418 during the nine months ended September
30, 2008, an increase of $29,621 due to the factors discussed above.
The comprehensive loss was identical to the net loss during both the nine months
ended September 30, 2009 and 2008.
CASH FLOW INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2008
At September 30, 2009, we had total assets of $50 consisting of cash, no
operating business or other source of income, outstanding liabilities totaling
$264,135 and a stockholder' deficit of $264,085.
Net cash used by discontinued operations during the nine months ended September
30, 2009 was $2,442 compared to $7,469 for the nine months ended September 30,
2008.
In our financial statements for the fiscal years ended December 31, 2008 and
2007, the Report of the Independent Registered Public Accounting Firm includes
an explanatory paragraph that describes substantial doubt about our ability to
continue as a going concern. Our financial statements for the fiscal years ended
December 31, 2008 and 2007, have been prepared on a going concern basis, which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business. At September 30, 2009, we reported
an accumulated deficit of $700,876.
On June 29, 2009, the Company (the Debtor) filed a voluntary petition for relief
in the United States Bankruptcy Court, Northern District of Texas, Dallas
district under Chapter 7 of Title 7 of the U.S. Bankruptcy Code, case number
09-34008-7. Under Chapter 7, all claims against the Debtor in existence prior to
the filing of the petition for relief under the U.S. Bankruptcy Code are stayed.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the
Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
As of the quarter ended September 30, 2009, we conducted an evaluation, under
the supervision and with the participation of our Chief Executive Officer and
Chief Financial Officer, of our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the 1934
15
Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms.
ITEM 4T. CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of our
assets;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations
of our management and directors; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Management's assessment of the effectiveness of the small business issuer's
internal control over financial reporting is as of the quarter ended September
30, 2009. We believe that internal control over financial reporting is
effective. We have not identified any, current material weaknesses considering
the nature and extent of our current operations and any risks or errors in
financial reporting under current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There have been no changes in the issuer's internal control over financial
reporting identified in connection with the evaluation required by paragraph (d)
of Rule 240.15d-15 that occurred during the issuer's last fiscal quarter that
has materially affected, or is reasonable likely to materially affect, the
issuer's internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 9, 2009 three Atomic shareholders filed a lawsuit against Atomic
Director David Cutler in the County Court at Law No. 4 in Dallas County, Texas,
styled JH Brech, LLC et al. v. Cutler et al., Cause No. CC-090-4654-D ("State
Court Litigation"). The state court granted a temporary restraining order on
June 9, 2009, which required Cutler to refrain from: (a) marketing, attempting
to sell, transferring or otherwise disposing of Atomic; (b) causing Atomic to
issue any further shares of stock to Cutler; (c) dissipating any assets of
Atomic, including paying any amounts not in the ordinary course of business; and
(d) transferring any shares of stock to any third party. On June 18, 2009, the
court granted Plaintiffs' motion to extend the temporary restraining order. On
June 22, 2009, Cutler filed a special appearance and, subject thereto, plea to
the jurisdiction and plea in abatement. On June 26, 2009, Cutler made demand on
the Corporation's counsel for indemnity of attorneys fees incurred in defense of
the lawsuit. At the time of the demand, Cutler's legal fees exceeded $22,000.
Atomic filed for Chapter 7 bankruptcy on June 29, 2009 in a Title 11 Case styled
In re Atomic Paintball, Case No. 09-34008-7, now pending in the United States
Bankruptcy Court for the Northern District of Texas, Dallas Division. Cutler,
thereafter, on June 29, 2009 removed the State Court Litigation to the United
States District Court for the Northern District of Texas, Dallas Division,
styled JH Brech, LLC et al. v. Cutler et al., Case No. 3:09-CV1213-G ("Federal
Litigation"). Plaintiffs in the State Court Litigation, also on June 29, 2009,
filed a First Amended Petition. On August 19, 2009, the District Court remanded
the Federal Litigation to the County Court at Law No. 4.
On October 1, 2009, one of our creditors and our sole director and officer,
David J Cutler, and our Trustee in bankruptcy filed a Motion Pursuant
toss.ss.105, 501, and 502 and Fed. R. Bankr. P. 9019 for Order Approving
Bondholder Settlement ("9019 Motion") with the Bankruptcy Court. This 9019
Motion has been objected to by certain shareholders of the Company, J.H. Brech,
LLC, Harry McMillan, Charles J. Webb, Mark Dominey, Mark Armstrong, David Myers
and John E. Bradley ("Objecting Shareholders").
On October 15, 2009, the Trustee filed a Suggestion of Bankruptcy and Notice of
the Applicability or Partial Applicability of the Automatic Stay of 11 U.S.C.
ss. 362(a) in the State Court Litigation. Subsequently, on October 16, 2009,
Plaintiffs and Defendant David Cutler executed a Rule 11 Standstill Agreement
staying the State Court Litigation until the Bankruptcy Court rules on the 9019
Motion or upon 14 days written notice of either party.
On October 30, 2009, the Objecting Shareholders filed a Motion to Dismiss
Chapter 7 Case ("Motion to Dismiss").
A hearing on both the 9019 Motion and the Motion to Dismiss is set at 2:30 p.m.,
December 17, 2009, before Judge Jernigan, United States Bankruptcy Court for the
Northern District of Texas, Dallas Division.
ITEM 1A. RISK FACTORS
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the
Company is not required to provide information required by this Item.
17
ITEM 2. CHANGES IN SECURITIES
During the period of January 1, 2009 through September 30, 2009, we did not make
any sales or issuances of our unregistered securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
We are in default under the terms of a loan note with a former officer, director
and a shareholder of the Company as described in Note 3 Discontinued Operations
in the Notes to Financial Statements above.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
ITEM 5. OTHER INFORMATION
NONE.
ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive and Financial
Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
Exhibit 32.1 Certification of Principal Executive and
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act
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SIGNATURES
In accordance with the requirements of Section 12 of the Securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
ATOMIC PAINTBALL, INC.
Date: November 23, 2009 By: /s/ David J. Cutler
---------------------------------
David J Cutler
Chief Executive Officer, &
Chief Financial Officer
1
