SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement Under the Securities Act of 1933
ATOMIC PAINTBALL, INC.
(Name of Small Business Issuer in Its Charter)
Texas 7959 75-2942917
State of Incorporation Primary Standard Industrial I.R.S. Employer
Classification Code Number Identification Number
219 Josey Lane, Red Oak, Texas 75154 (972) 617-2728
(Address and Telephone Number of Issuer's Principal Executive Offices
and Place of Business)
Barbara J. Smith
219 Josey Lane, Red Oak, Texas, 75154
(972) 617-2728
(Name, Address and Telephone Number of Agent for Service)
Copies to:
David Allen Wood, P.C.
12770 Coit Road, Suite 1100
Dallas, Texas 75251
(972) 458-0300 / Facsimile (972) 458-0301
Approximate date of proposed sale to the public: As soon as this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the box.
CALCULATION OF REGISTRATION FEE
Title of class of Amount Proposed Proposed Amount of
securities to be to be registered Maximum maximum Registration Fee
registered offering price per aggregate offering
unit price
Common Stock 1,200,000 $0.50 $600,000 $206.90
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
ATOMIC PAINTBALL, INC. [LOGO]
1,200,000 Shares of Common Stock
including 400,000 shares of common stock offered by Atomic Paintball, Inc.
and 800,000 shares of common stock offered by Selling Stockholders
Price per share: $0.50
Total proceeds to Atomic Paintball, Inc. if maximum sold by us: $200,000
This prospectus relates to 400,000 shares of common stock offered by Atomic
Paintball, Inc., a Texas corporation, and the resale of 800,000 shares of our
common stock by selling stockholders who acquired shares of our convertible
preferred stock in a private placement transaction exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933. We will not
receive any of the proceeds from the sale of the shares by the selling
stockholders. The selling stockholders may sell their shares in sales in the
open market or in privately negotiated transactions.
Because this is our initial public offering, there is no public market for our
shares. However, we hope to have prices for our shares quoted on the
over-the-counter bulletin board maintained by the National Association of
Securities Dealers after we complete our offering.
An investment in our Company is risky, especially given its young age. Only
people who can afford to lose the money they invest in our Company should invest
in our shares. A full discussion of the risks of owning our shares begins at
page 6 of this Prospectus under the caption Risk Factors.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF OUR SHARES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Price to Public Underwriting Discount Proceeds to Issuer
and Commissions or other Persons
To be sold by the Company:
Per Share $0.50 None $0.50
Total Maximum $200,000 None $200,000
To be sold by the Selling Stockholders:
Per Share $0.50 None $0.50
Total Maximum $400,000 None $400,000
We will sell the shares ourselves and do not plan to use underwriters or pay any
commissions. We will be selling our shares using our best efforts and no one has
agreed to buy any of our shares. There is no minimum amount of shares we must
sell so no money raised from the sale of our stock will go into escrow, trust or
another similar arrangement. We expect to end our offering on the earlier of the
sale of all of the shares offered by us or 90 days after the date of the
prospectus and the selling shareholders offering will terminate on the earlier
of the sale of all of the shares or 365 days after the date of the prospectus.
The information in this Prospectus is not complete and may be changed. We may
not sell our shares until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
our shares and it is not soliciting an offer to buy our shares in any state
where the offer or sale is not permitted.
February __, 2004
Prospectus Summary 3
Risk Factors 6
We are a development stage company, with no significant history of 6
operations
Even if we sell all of the shares offered, we will not have significant 6
funds to conduct business.
Competition in the paintball and e-commerce businesses is intense 6
and we may not be able to compete and survive.
Because this is a "best efforts" offering, we have no assurances that 6
any of our stock will be sold
We have no underwriters so no other party with a financial interest has 6
reviewed this offering for fairness.
We determined the offering price for these shares arbitrarily, so the 6
market pricemay be much lower.
We may fail to remain a going concern 7
We have no history of profits and no assurances of profits ever developing 7
Our success will depend greatly upon our president and vice president 7
Our management will have voting control of us, even if all of the 7
shares offered are sold
Because we only have two officers and one director, the compensation of 7
our officers will be determined in the discretion of these parties.
Because the price at which the shares are offered is higher than our 8
current per share value, immediate dilution of value of our stock will
occur
Because we have issued shares that may become eligible for resale 8
under Rule 144, a large amount of our stock could be sold,
potentially depressing our stock price
Because we do not expect to pay dividends on our common stock in the 8
foreseeable future, shareholders may have no way to recoup
any of their investment
There is no public market for our shares and this should be considered an 8
illiquid investment.
Our stock will be subject to the penny stock regulations and 8 may be more
difficult to sell than other registered stock
Special Note Regarding Forward Looking Statements 9
Use of Proceeds 10
Determination of Offering Price 11
Dilution 11
Management's Discussion and Analysis or Plan of Operation 12
Description of Business 14
Description of Property 16
Directors, Executive Officers, Promoters and Control Persons 17
Executive Compensation 17
Certain Relationships and Related Transactions 19
Securities Ownership of Certain Beneficial Owners and Management 20
Description of Securities 21
Market for Common Equity and Related Shareholder Matters 25
Selling Shareholders 26
Plan of Distribution 27
Disclosure of Commission Position on Indemnification for 29
Securities Act Liabilities
Legal Matters 30
Experts 30
Where You Can Find Additional Information 31
Financial Statements F-1
2
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in
this prospectus. This summary does not contain all of the information that you
should consider before investing in our common stock. You should read the entire
prospectus carefully, including the information under "Risk Factors" beginning
on page 6 and the financial statements beginning on page F-1, before making an
investment decision. Unless otherwise indicated, all information in this
Prospectus has been adjusted to give effect to a two - for - one stock split
completed in February 2004.
THE COMPANY:
Atomic Paintball, Inc. is a development stage corporation that was formed under
the laws of Texas on May 8, 2001, whose principal executive offices are located
in Red Oak, Texas.
We plan to provide facilities, services and products in connection with
paintball sport activities. We intend to buy and sell paintball products through
periodic paintball play sales events, a web page to be developed and perhaps
special competitive events. Our primary activities to date have consisted of
organizing our company, conducting an initial round of private financing to
obtain "seed" capital and beginning the process of designing and implementing
our business plan. Through the proceeds raised from this offering and our prior
private placement of preferred stock, we expect to be able to acquire inventory,
design and implement our website and establish relationships with other
paintball dealers willing to allow us to assist in the sale of their items for
profit and on a consignment basis.
We expect to purchase our inventory through local and national wholesale
paintball sources, or wherever paintball products can be bought at what we
consider good prices. We will then service the items as we consider necessary,
photograph, price and list them on our web site where they can be viewed by
potential buyers. We will also display paintball equipment that has been
consigned to us by individuals and businesses.
We have secured atomicpaintball.com for our web site address and expect to
proceed to build our web site with some of the proceeds to be raised through
this offering. The information contained on our web site does not constitute a
part of this prospectus and is not incorporated by reference into this
prospectus. We maintain our executive office at 219 Josey Lane, Red Oak, Texas,
75154.
SECURITIES OFFERED:
We are offering up to a maximum of 400,000
shares of common stock, no par value per
share. We are offering the shares at $0.50
per share for total gross offering proceeds
of $200,000, assuming the maximum amount is
sold. The selling stockholders are offering
up to a maximum of 800,000 shares at prices
to be determined from time to time. We will
not receive any of the proceeds from sales
of shares by the selling stockholders. The
selling stockholders holding 770,000 shares
of our common stock, as well as our
President and director, Barbara J. Smith,
and our Vice President, Alton K. Smith, have
entered into lockup agreements pursuant to
which they have agreed not to sell one half
of their shares for a period ending 180 days
after effectiveness of this offering.
3
SHARES OF COMMON STOCK OUTSTANDING
AS OF THE DATE OF THIS PROSPECTUS:
1,600,000 shares (assuming conversion of
shares of Series A Convertible Preferred
Stock into 800,000 shares of common stock)
SHARES OF COMMON STOCK OUTSTANDING
AFTER OFFERING, ASSUMING MAXIMUM
AMOUNT SOLD: 2,000,000 shares
TERMS OF THE OFFERING:
There is no minimum offering. Accordingly,
as shares are sold, we will use the money
raised from the sales of shares by Atomic
Paintball, Inc. for our activities. We
expect that the offering will remain open
until the earlier of the sale of all of the
shares offered by us or 90 days after the
date of the prospectus, unless we decide to
cease selling efforts prior to this date,
and the selling shareholders offering will
terminate on the earlier of the sale of all
of the shares or 365 days after the date of
the prospectus.
USE OF PROCEEDS:
If we sell all 400,000 shares we are
offering, we will receive gross proceeds of
$200,000. We expect to use the net proceeds
from the sale of the shares we are offering,
after offering expenses estimated to be
$33,000, to establish our corporate offices,
to conduct feasibility studies for real
estate acquisitions for paintball locations,
to conduct an executive search to locate
senior management with expertise in the
paintball business, and to continue to
implement our business plan. We will need to
raise substantial additional funds to
purchase land and equipment for operating
paintball fields, inventory for resale, and
to develop a website for marketing our
Paintball games and miscellaneous services
via the internet. We will not receive any of
the proceeds from the sale of shares by the
selling stockholders.
PLAN OF DISTRIBUTION:
This is a best efforts offering, with no
commitment by anyone to purchase any shares.
The shares offered by us will be offered and
sold by our principal executive officer and
director so no underwriters will be used.
4
SHARES THAT MAY BE ISSUED AFTER
OUR INITIAL PUBLIC OFFERING
You should be aware that we are permitted,
and in some cases obligated, to issue shares
of our common stock in addition to the
common stock to be outstanding after our
initial public offering. If and when we
issue these shares, the percentage of our
common stock that you own will be diluted.
The following is a summary of additional
shares of common stock, that as of February
25, 2004, we have approved for issuance as
part of or after our initial public
offering:
o 800,000 shares of common stock
issuable upon the conversion of
outstanding shares of Series A
convertible preferred stock
effective upon the effectiveness of
the registration statement that
includes this prospectus;
o 2,000,000 shares issuable upon the
exercise of outstanding options
granted to our employees, directors
and consultants with a weighted
average exercise price of $0.125
per share, of which 1,200,000 are
currently exercisable; and
o Up to 2,000,000 additional shares
issuable pursuant to future awards
under our 2003 Stock Incentive
Plan, none of which had been issued
as of February 25, 2004.
5
RISK FACTORS
An investment in the shares involves a high degree of risk, including a risk of
loss of an investor's entire investment in Atomic Paintball, Inc. Prospective
investors should consider carefully, in addition to the other information
contained in this prospectus, the following risk factors before purchasing any
shares.
We are a development stage company, with no significant history of operations.
We were incorporated on May 8, 2001, and are, therefore, a start up company with
very little operating history or revenues. We need to receive substantially all
of the maximum proceeds of the shares offered by us in this offering to proceed
with our business plan.
Even if we sell all of the shares offered, we will not have significant funds to
conduct business. We are only seeking to raise $200,000. As a result, we will
still be considered an extremely small company, even if we sell all of the stock
we are trying to sell. Because we will have so little money, any negative
financial event could totally wipe out any reserve we had hoped to have.
Competition in the paintball and e-commerce businesses is intense and we may not
be able to compete and survive. The paintball industry is relatively new, ever
changing and very competitive. We expect competition in this business to
intensify in the future. If we fail to attract and retain a customer base we
will not develop significant revenues or market share. Going into business in
the paintball industry is relatively easy and new competitors enter this market
at a relatively low cost. In addition, the market for paintball gaming and
paintball products is very competitive and no clear leader has been established.
We will compete with a variety of other companies, including existing paintball
product suppliers and paintball activity fields and the online retail web sites
of some traditional retailers who may also sell paintball products and services,
many of whom have much more money than we do.
Because this is a "best efforts" offering, we offer no assurances that any of
our stock will be sold. This offering is being conducted on a "best efforts"
basis. As such, no assurances are given as to what level of proceeds, if any,
will be obtained from the sale of shares offered by us. In the event we fail to
obtain all or substantially all of the proceeds sought from the sales of shares
by us in this offering, our ability to implement our business plan will be
materially and adversely affected, and investors may lose all or substantially
all of their investment. We can provide no assurances that the subscription
proceeds that may be received by us will be sufficient to sustain our operations
prior to our anticipated receipt of revenues from customers. Because this is a
best efforts, no minimum offering and because we are not using an escrow agent,
we will be able to use any funds received in this offering as soon as we receive
the funds. Accordingly, even if we sell only a nominal amount of shares in this
offering, we will be able to use those funds and the funds will not be returned
to the investor or investors. In this event, and if we are unable to raise funds
from another source the investor or investors who purchased the nominal amount
of shares would likely lose their entire investment because we would have
insufficient funds to generate sustainable cash flow from operations.
We have no underwriters so no other party with a financial interest has reviewed
this offering for fairness. We are offering these shares through our sole
director and officers and are not using an underwriter. As a result, no other
person sophisticated in financial affairs has reviewed this offering to
determine if it is fair or if our business plan makes financial sense.
We determined the offering price for these shares arbitrarily, so the market
price may be much lower. We chose the offering price for these shares without
basing the price on our assets, book value, net worth or any other recognized
criteria of value. If a public market for our common stock ever does develop,
the value of our securities could be substantially less than the $0.50 per share
offering price. This could result in an immediate and significant per-share
reduction in the value of your investment.
6
We may fail to remain a going concern. Our independent certified public
accountants have included a going concern paragraph in their opinion that notes
that we have generated no revenue, have an accumulated deficit and have a
negative working capital such that our ability to continue as a going concern is
dependent upon obtaining additional capital and financing for our business plan.
We are conducting this offering to generate the capital necessary to finance at
least our initial operations. As a result, our ability to continue as a going
concern is dependent upon us receiving the maximum proceeds of this offering and
operating profitably or raising additional funds.
We have no history of profits and no assurances of profits ever developing. We
have experienced losses since inception. If only limited funds are raised in
this offering, the risk of our financial failure is high. We have been dependent
upon loans from members of management and a private placement of shares of our
preferred stock to sustain our development activities to date. In our
discretion, if we receive the maximum proceeds sought to be raised, the entire
principal amount of these loans from members of management, including interest,
will probably be repaid.
Our success will depend greatly upon our president and vice-president. Barbara
J. Smith serves as our sole Director and President and Alton K. Smith serves as
Vice-president and Secretary. The loss of either of their services may hamper
our ability to implement our business plan, and could cause our stock to become
worthless. We will be heavily dependent upon Ms. Smith's entrepreneurial skills
and experience to implement our business plan. Their inability to devote full
time and attention to the affairs of Atomic Paintball, Inc. could hinder our
growth.
We do not have an employment agreement with either Barbara or Alton Smith and
there is no assurance that either will continue to manage our affairs in the
future. We could lose the services of both parties, or they could decide to join
a competitor or otherwise compete with us directly or indirectly, having a
negative affect on our business and potentially causing the price of our stock
to be worthless. The services of either Barbara or Alton Smith would be
difficult to replace.
Both Barbara and Alton Smith have limited experience in the area of paintball or
outside entertainment business on or off the Internet. Neither party is a
paintball professional or entertainer by trade. We will likely need to rely on
others who understand that business better than Ms. Smith. Because of this lack
of experience, we may overestimate the marketability of our products and may
underestimate the costs and difficulties of selling the products. These
difficulties could prevent us from accurately determining the feasibility of our
business plan, limiting our profitability, if any, and decreasing the value of
our stock.
Our management will have voting control of us, even if all of the shares offered
are sold. Our management, inclusive of our board of directors, owns 800,000
shares of our outstanding common stock and vested options to purchase up to
1,200,000 shares of common stock. After completion of this offering, assuming
all of the shares offered hereby are sold, our management will continue to
beneficially own at least 50% of our voting securities, without giving effect to
(i) any stock option plan that could be adopted by our board of directors or
(ii) any additional issuances of our common stock or other securities to
management and/or others, in our board's sole discretion. As a result, our
management will effectively control our affairs, including the election of all
of our board of directors, the issuance of additional shares of common stock for
a stock option plan or otherwise, the distribution and timing of dividends, if
any, and all other matters.
Because we only have two officers and one director, the compensation of our
officers will be determined in the discretion of these parties. Because they
have the ability to control the election of our board of directors and will own
50% collectively of our company, jointly they will likely continue to control
our board of directors. As a result, Mr. and Ms. Smith will be entitled to
establish the amount of their compensation, including the amount of any bonuses
paid to them. In addition, because we do not have any independent directors,
there will be no oversight of the reasonableness of any bonuses paid to either
Barbara or Alton Smith or other officers, if added.
7
Because the price at which the shares are offered is higher than our current per
share value, immediate dilution of value of our stock will occur. We are
authorized to issue a substantial number of shares of common stock in addition
to the shares comprising the shares offered hereby, as well as shares of
preferred stock in such series and with such designating rights and preferences
as may be determined by our board of directors in its sole discretion.
This offering itself involves immediate and substantial dilution to investors.
Any securities issued in the future, including issuances to management, could
reduce the proportionate ownership, economic interests and voting rights of any
holders of shares of our common stock purchased in this offering.
Because we have issued shares that may become eligible for resale under Rule
144, a large amount of our stock could be sold, potentially depressing our stock
price. All of our presently outstanding shares of common stock aggregating
800,000 shares of common stock, as well as 800,000 shares of common stock
issuable upon conversion of our Series A Convertible Preferred Stock, are
"restricted securities" as defined under Rule 144 promulgated under the
Securities Act and may only be sold pursuant thereto or otherwise pursuant to an
effective registration statement or an exemption from registration, if
available. Rule 144, as amended, generally provides that a person who has
satisfied a one year holding period for such restricted securities may sell,
within any three-month period (provided we are current in our reporting
obligations under the Exchange Act) subject to certain manner of resale
provisions, an amount of restricted securities which does not exceed the greater
of 1% of a company's outstanding common stock or the average weekly trading
volume in such securities during the four calendar weeks prior to such sale.
Barbara J. Smith and Alton K. Smith, our principal executive officers, own an
aggregate of 800,000 restricted shares for which the one year holding period
expired on May 8, 2003, and which will be available for resale under Rule 144 90
days after we become a reporting company. In addition, all of our other
shareholders' shares of common stock are being registered under this prospectus
and will also be eligible to use Rule 144 after expiration of their respective
holding periods. A sale of shares by such security holders, whether pursuant to
Rule 144 or otherwise, may have a depressing effect upon the price of our common
stock in any market that might develop.
Because we do not expect to pay dividends on our common stock in the foreseeable
future, shareholders may have no way to recoup any of their investment. We
intend for the foreseeable future to retain earnings, if any, for the future
operation and expansion of our business and do not anticipate paying dividends
on our shares of common stock for the foreseeable future.
There is no public market for our shares and should be considered an illiquid
investment. There is currently no market for any of our shares and no assurances
are given that a public market for such securities will develop or be sustained
if developed. While we plan, in connection with this offering, to take
affirmative steps to request or encourage one or more broker/dealers to act as a
market maker for our securities, no such efforts have yet been undertaken and no
assurances are given that any such efforts will prove successful. As such,
investors may not be able to readily dispose of any shares purchased hereby.
Our stock will be subject to the penny stock regulations and may be more
difficult to sell than other registered stock. Broker-dealer practices in
connection with transactions in "penny stocks" are regulated by certain penny
stock rules adopted by the Securities and Exchange Commission. Penny stocks
generally are equity securities with a price of less than $5.00. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a risk disclosure document that
provides information about penny stocks and the risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
the penny stock rules generally require that prior to a transaction in a penny
stock, the broker-dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
8
stock that becomes subject to the penny stock rules. As our shares immediately
following this offering will be subject to these penny stock rules, investors in
this offering will in all likelihood find it more difficult to sell their
securities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary", "Risk Factors", "Management's
Discussion and Analysis of Financial Condition and Results of Operations",
"Business", and elsewhere in this prospectus constitute forward-looking
statements. These statements involve known and unknown risks, uncertainties, and
other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such
as "may", "will", "should", "expects", "plans", "anticipates", "believes",
"estimates", "predicts", "potential", "continue" or the negative of these terms
or other comparable terminology.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements.
9
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of any shares by the
selling shareholders.
Our net proceeds from this offering will vary depending upon the total number of
shares sold by us. Regardless of the number of shares sold, we expect to incur
offering expenses estimated at approximately $20,000 for legal, accounting,
printing and other costs in connection with the offering. In order to have funds
available to move forward with our business plan, we have to complete a minimum
of 25% of the offering, or $50,000. We wish to remind investors that there is no
guarantee that we will fully complete this offering or obtain this minimum
amount, and that the actual proceeds we receive from the offering could be
substantially less than $200,000. Our receipt of no or nominal proceeds will
have a material adverse effect upon our investors and us.
The table below shows how proceeds from this offering would be used for
scenarios where we sell various amounts of the shares and the priority of the
use of net proceeds in the event actual proceeds are not sufficient to
accomplish the uses set forth. While management has developed the following
estimates to the best of its ability, there can be no assurance that we will
spend the use of proceeds exactly as laid out in the table.
Total shares offered by us 400,000 400,000 400,000 400,000
Percent of total shares offered 25% 50% 75% 100%
Shares sold 100,000 200,000 300,000 400,000
Gross proceeds from offering $ 50,000 $100,000 $150,000 $200,000
Less: offering expenses 33,000 33,000 33,000 33,000
-------- -------- -------- --------
Net proceeds from offering 17,000 67,000 117,000 167,000
Use of net proceeds
Repayment of loans from officer 0 10,950 16,425 21,900
Feasibility study 0 5,000 7,500 25,000
Marketing expenses 0 7,500 7,500 7,500
Development of website 0 3,000 3,000 3,000
Operating expenses &
working capital 17,000 40,550 82,575 109,600
Our director, Barbara J. Smith, loaned us $10,900 to help the company in
research and development. This loan bears interest at a rate of 6.5% per year,
is due in July 2004, and is convertible into 87,200 shares of our common stock.
We will probably repay the loan from Ms. Smith out of the proceeds of this
offering in the event we sell all of the shares we are offering, and repay part
of the loan to the extent we sell less than all, but more than one half of the
shares we are offering. However, Ms. Smith has indicated that she currently
intends to buy $5,000 worth of the shares offered hereby for investment
purposes.
Because we are selling the shares strictly through the efforts of our officers,
the above numbers do not include any deductions for selling commissions.
In the event we receive the maximum proceeds of $200,000, our management
believes that the net proceeds, together with proceeds from our prior private
placement, will provide us with sufficient funds to meet our cash requirements
for approximately twelve (12) months following the receipt of this maximum
amount.
We have not yet determined the amount of net proceeds to be used specifically
for any of the foregoing purposes. Accordingly, management will have significant
flexibility in applying the net proceeds of the offering.
Proceeds not immediately required for the foregoing purposes will be probably
invested principally in federal and/or state government securities, short-term
certificates of deposit, money market funds or other short term interest-bearing
investments.
10
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no established public market for the
shares of our common stock. As a result, the offering price and other terms and
conditions relative to the shares of common stock offered hereby have been
arbitrarily determined by us and do not bear any relationship to assets,
earnings, book value, net worth, actual results of operations, or any other
established objective investment criteria. There is no relationship between the
offering price of the common stock and our assets, earnings, book value or any
other objective criteria of value. In addition, no investment banker, appraiser
or other independent, third party has been consulted concerning the offering
price for the shares or the fairness of the price for the shares.
DILUTION
The common stock to be sold by the selling shareholders is common stock that is
issuable upon conversion of shares of preferred stock that are currently issued
and outstanding. Accordingly, there will be no dilution to those existing
shareholders. However, the 400,000 shares of common stock which are to be sold
by Atomic Paintball as part of this offering, will create an immediate dilution
to the purchasers of those shares. In July 2001, Atomic Paintball sold an
aggregate of 200,000 shares of common stock to Ms. Smith and Mr. Smith in a
private offering at a price of $0.005 per share. In July 2001, we issued an
aggregate of 600,000 shares of our common stock to Ms. Smith and Mr. Smith in
exchange for services at a price of $0.01 per share. In October 2003, we granted
options to purchase an aggregate of 2,000,000 shares of our common stock to Ms.
Smith and Mr. Smith at an exercise price per share of $0.125 per share.
At December 31, 2003, we had a net tangible book value of ($22,626). The
following table sets forth the dilution to persons purchasing shares in this
offering without taking into account any changes in our net tangible book value,
except the sale of 400,000 shares at the offering price and receipt of $200,000,
less offering expenses estimated to be $20,000. The net tangible book value per
share is determined by subtracting total liabilities from our tangible assets,
then dividing by the total number of shares of common stock outstanding.
December 31, 2003 400,000 shares sold
----------------- -------------------
Public offering price per share n/a $0.50
Net tangible book value per ($0.03) n/a
share of
common stock before the
offering
Pro forma net tangible book n/a $0.13
value per share
of common stock after the
offering
Increase to net tangible book n/a $0.16
value per share
attributable to purchase of
common stock by new
investors
Dilution to new investors n/a $0.37
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
As of the date of this prospectus, we have not had any material operations.
Expansion of our business will require significant capital resources that may be
funded through the sale of equity or debt securities issued by us, in addition
to the proceeds from our private placement and this offering.
As of December 31, 2003, we have spent a total of approximately $59,000 in
general operating expenses, expenses associated with making initial contacts
with potential vendors, and legal and accounting fees. We paid the amounts used
in these activities from funds loaned to us by our officers in the amount of
$28,400 and from a Regulation D private placement offering in which we raised
$44,000 in cash and $66,000 in promissory notes from October 2003 to February
2004.
Through December 31, 2003, we have managed to keep our monthly operating
expenses less than $2,000 (excluding accounting and legal fees). Our President
has agreed not to draw a salary, although after we have raised $100,000 in this
offering or we have achieved an aggregate minimum of $100,000 in revenues and
gross proceeds from this offering combined, we may determine to pay a salary to
our President.
Given our low monthly cash flow requirement and the agreement of our officer to
forego salary, we believe that, even though our auditors have expressed
substantial doubt about our ability to continue as a going concern, and assuming
that we do not commence our anticipated operations, we have sufficient financial
resources to meet our obligations for at least the next twelve months even
without the proceeds of this offering. Assuming that we do not commence our
anticipated operations, our primary cash requirements would be those associated
with maintaining our status as a reporting entity. We believe that on an annual
basis those costs would not exceed an average of $2,000 per month for a total of
$4,000 per month when combined with our current expenses. Based on this belief,
we would have adequate financial resources to meet our financial obligations as
we currently conduct business for at least twelve months following the date of
this prospectus.
If we obtain funding from the sale of shares in this offering, we will be able
to move forward with our business plan. Executing our business plan will
significantly change our cash needs and monthly burn rate. Based upon our
planned use of proceeds from this offering, we will have to complete at least
25% of the offering, or $50,000 in order to have sufficient funds available to
move forward with our business plan.
In the early stages of our business plan, we will need cash to establish
corporate offices, hire an executive management team, conduct a feasibility
study, and for marketing and promotions. Our most important goal will be
development of a unified corporate and operating structure to manage multiple
paintball play facilities. Management expects to cover these costs with the
proceeds from this offering, which are included under feasibility study,
marketing expenses and operating expenses and working capital in the Use of
Proceeds section.
The next stage of our business plan involves raising additional capital
resources to acquire land and improvements to expand into multiple paintball
play locations, for marketing and promotions to increase public awareness of our
operations, in order to increase foot traffic to our facilities, and to make our
company operational. We wish to remind investors that there is no guarantee that
we will be able to secure any customers.
Over the next twelve months we expect our primary expenses to be associated with
conducting a feasibility study for real estate acquisitions for paintball
locations, to conduct an executive search to locate senior management with
expertise in the paintball business, to continue to implement our business plan,
and to maintain our status as a reporting entity. Also, if funds are available
12
after these activities, the acquisition of inventory for sale, advertising costs
associated with conducting our sales, paying for the development and maintenance
of our web page and perhaps paying a salary to Ms. Smith. Our business plan is
such that if we are successful in generating net profits from our activities and
raising additional funds, we will acquire more properties, conduct more sales,
hire additional staff and attempt to grow our company in an orderly way. If we
are successful in raising the entire $200,000 proposed to be raised in this
offering by us, we expect such $200,000, together with the proceeds from our
prior private placement, to be sufficient to allow us to conduct business for at
least a one year period. If we are unable to raise this entire $200,000 amount,
our ability to continue as a going concern may be jeopardized and we may be
required to cease conducting operations in less than a year.
We are conducting this offering, in part, because we believe that an early
registration of our equity securities will minimize some of the barriers to
capital formation that otherwise exist. By having a registration statement in
place, we believe that we will be in a better position, either to conduct a
future public offering of our securities or to undertake a private placement
with registration rights, than if we were a privately held company. Registering
our shares may help minimize the liquidity discounts we may otherwise have to
take in a future financing because investors may have confidence that the Rule
144(c)(1) public information requirement will be satisfied and a public market
will exist to effect Rule 144(g) broker transactions.
We believe that the cost of registering our securities and undertaking the
required disclosure obligations will be more than offset by being able to get
better terms for future financing efforts. No specific investors have been
identified.
Critical Accounting Policies
Revenue Recognition
We expect to generate revenue from providing facilities, services and products
in connection with paintball sports activities. Revenues will be recognized as
facilities, services and products are delivered. We are currently in the
development stage, and no revenue was earned during 2003 or 2002.
Stock-Based Compensation
We account for stock-based employee compensation arrangements in accordance with
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and comply with the disclosure provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation" as amended by SFAS No.
148, "Accounting for Stock-Based Compensation-Transition and Disclosure, an
amendment of FASB Statement No. 123". Under APB Opinion No. 25, compensation
expense for employees is based on the excess, if any, on the date of grant,
between the fair value of our stock over the exercise price.
We account for equity instruments issued to non-employees in accordance with the
provisions of SFAS No. 123 and SFAS No. 148 and Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the consideration received or the fair value of the equity
instrument issued, whichever is more reliably measurable. The measurement date
of the fair value of the equity instrument issued is the earlier of the date on
which the counterparty's performance is complete or the date on which it is
probable that performance will occur.
13
DESCRIPTION OF BUSINESS
General
Atomic Paintball, Inc. was incorporated under the laws of the State of Texas on
May 8, 2001, and we are in our early developmental and promotional stages. Our
general plan is to provide facilities, services and products in connection with
paintball sport activities. We intend to buy and sell paintball products through
periodic paintball play sales events, a web page to be developed and perhaps
special competitive events. Our primary activities to date have consisted of
organizing our company, conducting an initial round of private financing to
obtain "seed" capital and beginning the process of designing and implementing
our business plan. Through the proceeds raised from this offering and our prior
private placement, we expect to be able to acquire inventory, design and
implement our website and establish relationships with other paintball dealers
willing to allow us to assist in the sale of their items on a consignment basis.
We expect to purchase our inventory through local and national wholesale
paintball sources, or wherever paintball products can be bought at what we
consider good prices. We will then service the items as we consider necessary,
photograph, price and list them on our web site where they can be viewed by
potential buyers. We will also display paintball equipment that has been
consigned to us by individuals and businesses. Customers with questions can
e-mail us, correspond by mail or phone us. All sales will be by credit card,
check or money order and we will ship the items when the funds clear.
The following are the primary manners in which we expect to conduct business:
Weekly Play Sales Events. We expect to conduct play sales events on a weekly
basis although there can be no assurance that sales this frequently are
warranted. These sales will be preceded by such advertising as we deem
appropriate, probably consisting of local newspaper advertisement, hand delivery
of flyers to people we think may be interested in our sales and word of mouth.
To the extent we are successful in generating net profits, we may expand these
advertising efforts to perhaps include local radio or television advertisements.
Our weekly play sales events will typically be scheduled on weekends so the
maximum amount of customer traffic can be generated. We expect to conduct our
sales in the extreme sports district in Waxahachie, Texas where we maintain our
facilities. The extreme sports district has several other facilities such as
motor sports, and a planned $100,000,000 extreme sports complex that encompasses
a number of extreme sports venues, that has the potential to increase automobile
and foot traffic to our facilities so we hope sales are healthy.
We expect to conduct our first play sale event in the first quarter of 2005, at
which time we will attempt to sell our products for revenues. We anticipate
conducting another sale in the following week and from that point forward on a
weekly basis. The frequency of our sales will be largely dependent upon our
ability to obtain quality merchandise for sale together with the sales results
we obtain from our previous sales.
At our sales, we will offer to the public items we own and items we have agreed
to sell on consignment from other dealers. When we conduct a sale on a
consignment basis, we expect to receive 20% of the purchase price paid at the
sale for our fee in conducting the sale. Depending upon the amount of proceeds
we are able to raise with this offering, we hope to acquire at least $25,000
worth of inventory. If we generate additional net revenue, we expect to take a
significant portion of any profits we make and devote them to acquiring property
that we think we can sell for a profit.
As we continue to develop our business plan, we expect to be able to determine
whether or not it is more profitable for us to devote most of our efforts toward
consignment sales or toward sales of our own items. The percentage of our sales
that will be on a consignment basis versus a sale of items we own will be
determined after we can make an accurate assessment of which activities generate
the most net revenues for our company.
14
Special Competitive Events. If our management thinks that a special competitive
event could best maximize the use of our time, we may conduct those events with
special invitations to league organizations, churches, and corporations, and we
may conduct TV and Radio advertising campaigns. If special competitive events
are conducted, we expect the financial parameters of the same to be similar to
our sales. Specifically, we would likely sell inventory that we currently own,
presumably at a price in excess of what we paid for the items, and may conduct
the special competitive events for the benefit of third parties, receiving a
typical entry fee. We do not expect to conduct any special competitive events
until we have established our procedures for our individual sales and our
website.
Website. We currently have one domain name registered, www.atomicpaintball.com.
We plan to operate a web site based showroom through which we can display and
offer our inventory to potential purchasers. Our plan is to develop a web page
with pictures of those items we have in our inventory that are for sale along
with pricing information and all other data relevant to someone searching over
the internet for paintball equipment and supplies. We may acquire some of our
property through third party auction type web sites such as eBay and other
similar providers. The amount we spend on the development of our website will be
largely dependent upon the success we receive from maintaining the same.
Specifically, initially we expect to have a relatively simple web page that is
registered with the larger search engines. If we enjoy success that generates
profits, we may expand our web page capabilities and register with additional
search engines. Because we have not developed our web page yet, we are unable to
make any determinations at this point as to the total cost of establishing and
maintaining our web page and cannot, therefore, make any estimates as to the
percentage of our revenues that will come from website sales.
Regulation of the Internet. In general, existing laws and regulations apply to
transactions and other activity on the Internet; however, the precise
applicability of these laws and regulations to the Internet is sometimes
uncertain. The vast majority of such laws were adopted prior to the advent of
the Internet and, as a result; do not deal with the unique issues of the
Internet or electronic commerce. Nevertheless, numerous federal and state
government agencies have already demonstrated significant activity in promoting
consumer protection and enforcing other regulatory and disclosure statutes on
the Internet.
Due to the increasing use of the Internet as a medium for commerce and
communication, it is possible that new laws and regulations may be enacted with
respect to the Internet and electronic commerce covering issues such as user
privacy, freedom of expression, advertising, pricing, content and quality of
products and services, taxation, intellectual property rights and information
security. The adoption of such laws or regulations and the applicability of
existing laws and regulations to the Internet may impair the growth of Internet
use and result in a decline in our sales.
A number of legislative proposals have been made at the federal, state and local
level, and by foreign governments, that would impose additional taxes on the
sale of goods and services over the Internet, and certain states have taken
measures to tax Internet-related activities. Although Congress recently placed a
three- year moratorium on new state and local taxes on Internet access or on
discriminatory taxes on electronic commerce, existing state or local laws were
expressly exempted from this moratorium. Further, once this moratorium is
lifted, some type of federal and/or state taxes may be imposed upon Internet
commerce. Such legislation or other attempts at regulating commerce over the
Internet may substantially impair the growth of commerce on the Internet and, as
a result, adversely affect the opportunity of Atomic Paintball, Inc. to derive
financial benefit from such activities.
15
DESCRIPTION OF PROPERTY
In April 2002, we entered into a lease agreement with Alton Smith, one of our
officers and shareholders, pursuant to which we lease a small field for special
competitive events at 3740 South Highway 287, Waxahachie, Texas. Pursuant to
this agreement, the owner of the land and facilities has agreed to allow us to
place many of our paintball products in their building to improve their exposure
to their core business in the storage industry, in return for allowing us to
store our products at the building and have access to the use of the unused land
their facilities are improved on. Because we are located in an extreme sports
district, we have the location that allows us to showcase our merchandise while
still performing the basic function of storing the same. The term of this lease
is for one year, with three renewal terms. The rental payments are one dollar
for every person engaging in Paintball Play Revenues, as defined in the lease.
We have not made any payments to Mr. Smith to date pursuant to the terms of the
lease. We are also responsible for payment of one half of the taxes on the
leased property, which amounted to $300 in the fiscal year 2003.
Beginning in July 2002, we began construction and improvements on the property
for use as a paintball field facility and equipment for use in transporting our
paintball field equipment. As of December 31, 2003, we have approximately $9,300
of property and equipment capitalized. This property and equipment has a
carrying value of approximately $4,500 at December 31, 2003.
We have no assurances as to how long we will be able to maintain this favorable
relationship; if this relationship is ended, we would have to spend money to
obtain a suitable office and storage space. Unless we are successful in both
selling our shares and conducting business thereafter, this change could put us
out of business.
16
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Ms. Barbara J. Smith, age 45, is our President, Treasurer and Chairman of our
Board of Directors. Ms. Smith has 15 years of experience in the medical field, 9
years either as a pharmacy supervisor or a purchasing agent, and 6 years
coordinating and/or scheduling surgical procedures. Ms. Smith received her BS
from DeVry University in 2003.
Mr. Alton K. Smith, age 45, is our Vice-President and Secretary. Mr. Smith has
over 20 years of experience in the Telecommunications industry. Mr. Smith
received his AS from DeVry Institute of Technology in 1980. For the past
5-years, Mr. Smith has held the position of a Sales Engineer for Cisco Systems.
He has held similar positions with HyperCom, Unysis, American Airlines, and
Sabre.
We presently expect to conduct our first annual meetings of shareholders and
directors in July 2004 at which time directors will be elected. All directors
serve for a period of one year unless removed in accordance with our bylaws.
EXECUTIVE COMPENSATION
We currently have one employee, Barbara Smith. At present, Ms. Smith is not paid
a salary but does own a significant amount of our common stock. Although we have
no current, definite plans for paying Ms. Smith a salary during the next twelve
months, if our sales and website revenues generate enough profits, we expect to
pay Ms. Smith a salary. In the interim, and until we generate enough net sales
revenues to pay a salary to Ms. Smith, we may pay Ms. Smith compensation that is
based upon the total amount of sales of items by Ms. Smith. No officer or
director has received any remuneration from us other than shares of our common
stock issued in 2001 in exchange for services. Although we have no current plan
in existence, we may adopt a plan to pay or accrue cash compensation to our
officers and directors for services rendered. We have a stock incentive plan for
the benefit of officers, directors or employees, and our Board of Directors may
recommend the adoption of additional programs in the future.
Summary Compensation Table
The following table sets forth the total compensation paid to or accrued for the
period from May 8, 2001 (inception) through the fiscal year ended December 31,
2003 to our President. We did not have any other executive officers who received
more than $100,000 in salary for such periods.
Other Restricted Securities All
Name and Principal Annual Stock Underlying LTIP Other
Position Year Salary Bonus Compensation Awards Options Payouts Compensation
Barbara J. Smith, 2001 0 0 0 360,000(1) 0 0 0
President 2002 0 0 0 0 0 0 0
2003 0 0 0 0 1,2000,000 0 0
(1) Represents shares issued to our President in lieu of $3,600 in services
rendered to the Company.
17
Option Grants In Last Fiscal Year
The following table sets forth each grant of stock options during 2003 to each
of the Named Officers. No stock appreciation rights were granted during the
fiscal year. Each of the options has a ten-year term, subject to earlier
termination in the event the holder ceases providing services to us.
The percentage numbers are based on an aggregate of 2,000,000 options granted to
our employees during 2003, including officers. The exercise price was $0.125 per
share, the fair market value of our common stock as determined by the Board of
Directors on the date of grant.
INDIVIDUAL GRANTS
---------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING OPTIONS GRANTED TO PRICE EXPIRATION
NAME GRANTED EMPLOYEES IN 2003 ($/SH) DATE
- ---------------- ------------------- ------------------ ---------- ----------
Barbara J. Smith 1,200,000 (1) 60.0% $ 0.125 10/21/2013
(1) Options to purchase 720,000 shares are exercisable immediately, with options
to purchase 120,000 shares vesting annually over five years from the date of
grant.
Aggregated Option Exercises In Last Fiscal Year And FY-End Option Values
The following table reports information regarding stock option exercises during
fiscal 2003 and outstanding stock options held at the end of fiscal 2003 by our
named executive officers.
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS
SHARES AT FISCAL YEAR- AT FISCAL YEAR-
ACQUIRED ON VALUE END(EXERCISABLE/ END(EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE) UNEXERCISABLE)(1)
- ----------------- ----------- --------- -------------------- --------------------
Barbara J. Smith 0 $0 720,000 / 480,000 $270,000 / $180,000
(1) Based on offering price of $0.50 per share less the exercise price per share
of $0.125.
18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our director and Chief Executive Officer, Barbara J. Smith, loaned us $10,900 in
early 2002, to pay for further research and development and for general
corporate overhead. This loan is payable in July 2004 and is convertible into
shares of our common stock at $0.125 per share. We will probably repay Ms. Smith
out of the proceeds of this offering. However, Ms. Smith has indicated that she
currently intends to buy $5,000 worth of the shares offered hereby for
investment purposes.
In April 2002, we entered into a Lease Agreement with Alton K. Smith, one of our
officers, for a lease of property in Ellis County, Texas for use in our
paintball games. The term of the lease is for one year, with three renewal
terms. The rental payments are one dollar for every person engaging in Paintball
Play Revenues, as defined in the lease. We have not made any payments to Mr.
Smith to date under the lease. We are also responsible for payment of one half
of the taxes on the leased property, which amounted to $300 in the fiscal year
2003.
Our Vice President, Alton K. Smith, loaned us $10,000 in October 2003, to pay
for further research and development and for general corporate overhead. This
loan is payable on demand. We will probably repay Mr. Smith out of the proceeds
of this offering if the full $200,000 is raised. Mr. Smith also loaned us $7,500
in November 2003, which was repaid out of the proceeds of the private placement
in December 2003.
Our President and director, Barbara J. Smith, and our Vice President, Alton K.
Smith, have entered into lockup agreements pursuant to which they have agreed
not to sell one half of their shares for a period ending 180 days after
effectiveness of this offering.
19
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of February 23, 2004, the Company has issued and outstanding 800,000 shares
of Common Stock and 400,000 shares of Series A Convertible Preferred Stock,
convertible into 800,000 shares of Common Stock. There is no other class of
voting security of the Company issued or outstanding. The following table sets
forth the number of shares of Common Stock beneficially owned as of February 23,
2004 by (i) each person known to the Company to own more than 5% of the Common
Stock, (ii) each director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all directors, named executive officers and other
executive officers as a group. We calculated beneficial ownership according to
Rule 13d-3 of the Securities Exchange Act as of that date. Shares issuable upon
exercise of options, preferred stock or notes that are exercisable within 60
days after February 23, 2004 are included as beneficially owned by the holder.
Beneficial ownership generally includes voting and investment power with respect
to securities. Unless otherwise indicated below, the persons and entities named
in the table have sole voting and sole investment power with respect to all
shares beneficially owned.
Shares of
Series A Convertible Shares of
Preferred Stock Common Stock
-------------------------- --------------------------
Approximate Approximate
Number of Percent Number of Percent
Name and Address Shares Owned Of Class Shares Owned Of Class
- ------------------------------ ------------ ------------ ------------ ------------
Barbara J. Smith (1) 1,287,200 62.0%
Alton K. Smith (2) 800,000 38.0%
David Myers (3) 40,000 10.0% 80,000 5.0%
727 Yellowstone Dr.
Allen, TX 75002
Charles J. Webb &
Brenda D. Webb (JTWROS) (4) 61,000 15.25% 122,000 7.6%
1101 E. Duke Street
Hugo, OK 74743
Don Mark Dominey (5) 240,000 60.0% 480,000 30.0%
6 Valley Wood Ct.
Trophy Club, TX 76262
All officers and directors
as a group (2 people) (6) 2,087,200 %
(1) Includes 720,000 shares subject to currently exercisable options and 87,200
shares issuable upon conversion of a promissory note.
(2) Includes 480,000 shares subject to currently exercisable options.
(3) Common shares consists of 80,000 shares that are issuable upon the
conversion of Series A Convertible Preferred Stock.
(4) Common shares consists of 122,000 shares that are issuable upon the
conversion of Series A Convertible Preferred Stock.
(5) Common shares consists of 480,000 shares that are issuable upon the
conversion of Series A Convertible Preferred Stock. (6) Includes 1,200,000
shares subject to currently exercisable options and 87,200 shares issuable upon
conversion of a promissory note held by all officers and directors as a group.
20
DESCRIPTION OF SECURITIES
Common Stock
Atomic Paintball, Inc. is authorized to issue 10,000,000 shares of common stock,
no par value per share, of which 800,000 shares were issued and outstanding as
of the date of this Prospectus. The outstanding shares of common stock are fully
paid and non-assessable. 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 our company.
Upon any liquidation, dissolution or winding-up of our company, 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
therefor, subject to the priorities given to any class of preferred stock which
may be issued.
Preferred Stock
We are authorized to issue 2,000,000 shares of preferred stock, no par value per
share. We had 400,000 shares of Series A Convertible Preferred Stock issued and
outstanding as of the date of this Prospectus. In addition, our board of
directors may later determine to issue additional 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 our company.
Series A Convertible Preferred Stock.
We issued 400,000 shares of our Series A convertible preferred stock to a
limited number of accredited investors as defined under the Securities Act, in a
private placement from October 2003 to February 2004. The shares of Series A
convertible preferred stock are convertible into 800,000 shares of our common
stock at the option of the holder, and automatically upon the effectiveness of
the registration statement of which this prospectus is a part. The holders of
our Series A convertible preferred stock are not entitled to receive dividends,
unless dividends are declared with respect to our shares of common stock, in
which case the holders of our Series A convertible preferred stock are entitled
to receive dividends in preference and priority to any payments of dividends on
our common stock. The shares of our Series A convertible preferred stock have a
liquidation preference of $0.25 per share plus any declared but unpaid
dividends. Holders of Series A convertible preferred stock vote together as a
class with our common stock. Holders of Series A convertible preferred stock
have piggyback registration rights. Holders of 385,000 shares of our issued and
outstanding shares of Series A convertible preferred stock have entered into
lockup agreements pursuant to which they have agreed not to sell one half of
their shares for a period ending 180 days after effectiveness of this offering.
21
Stock Options
As of the date of this Prospectus, options to purchase a total of 2,000,000
shares of our common stock were outstanding, of which 1,200,000 were currently
exercisable. An additional 2,000,000 shares of common stock will be available
for future grants under the 2003 Stock Incentive Plan.
We intend to file a Form S-8 registration statement under the Securities Act
covering all shares of common stock subject to outstanding options or issuable
pursuant to our 2003 Stock Incentive Plan approximately 30 days after the
closing of our initial public offering. Subject to Rule 144 volume limitations
applicable to affiliates, shares registered under the Form S-8 registration
statement will be available for sale in the open market, beginning 90 days after
the date of this Prospectus, except to the extent that the shares are subject to
vesting restrictions with us or the contractual restrictions described above.
We cannot predict the effect, if any, that market sales of shares of common
stock, or the availability of shares for sale, will have on the market price of
the common stock. Nevertheless, sales of a large number of shares of common
stock in the public market could adversely affect the market price of the common
stock and could impair our future ability to raise capital through an offering
of our equity securities.
2003 Stock Incentive Plan
The board of directors adopted the 2003 Stock Incentive Plan in October 2003.
The plan authorizes the Board or a committee, which administers the plan, to
grant stock options, stock appreciation rights, restricted stock and deferred
stock awards to our officers, other key employees and consultants.
A total of 4,000,000 shares of common stock are available and reserved for
issuance under the terms of the 2003 Stock Incentive Plan. In the event of any
sale of assets, merger, reorganization, consolidation, recapitalization, stock
dividend or other change in corporate structure affecting the stock, the Board
or committee may make an equitable substitution or adjustment in the aggregate
number of shares reserved for issuance under the plan. We have granted options
to purchase up to 2,000,000 shares of our common stock, 1,200,000 of which are
vested, as of the date of this prospectus.
Option Grants
The 2003 Stock Incentive Plan permits the granting of incentive stock options,
as defined by the Internal Revenue Code, and nonqualified stock options.
Incentive stock options may only be granted to our employees. The term of any
stock option is set by the Board or committee, but cannot exceed ten years in
the case of incentive stock options. Stock options become exercisable, in full
or in installments, for shares of common stock at the time determined by the
Board or committee, but generally a stock option will not be exercisable prior
to six months from the date of the grant of a stock option. The exercise price
per share of stock options is determined by the Board or committee at the time
of grant, but must be equal to 100% of the fair market value of our common stock
on the date of grant.
22
Stock Appreciation Rights
Stock appreciation rights may be granted in conjunction with nonqualified stock
options granted under the 2003 Stock Incentive Plan to our officers, employees
and consultants. Stock appreciation rights may only be exercised at such time
and to the extent the underlying options are exercisable. These stock
appreciation rights entitle the holder, upon exercise of the stock appreciation
right, to receive an amount in any combination, of cash or our unrestricted
common stock equal in value to the excess of the fair market value on the date
of exercise of the stock appreciation rights of one share of our common stock
over the exercise price per share of the connected stock option multiplied by
the number of shares for which the stock appreciation right is exercised. Each
stock appreciation right will terminate upon the termination of the related
option.
Restricted Stock Awards
The Board or committee may also award non-transferable restricted shares of our
common stock to our officers and key employees. Such restricted shares will be
subject to such conditions and restrictions as the Board or committee may
determine. The Board or committee will determine to whom restricted shares will
be granted, the number of shares to be awarded, the price, if any, to be paid by
the recipient, the times within which such awards may be subject to forfeiture
and all other conditions of the award. During the restriction period set by the
Board or committee, the recipient may not sell, transfer, pledge or assign
restricted shares awarded to the recipient under the 2003 Stock Incentive Plan.
If a recipient of restricted stock terminates employment for any reason other
than death, disability or retirement prior to the end of the restriction period
determined by the Board or committee, the participant will forfeit all shares
still subject to restriction in exchange for the amount, if any, that the
participant paid for them.
Deferred Stock Awards
Deferred stock awards may be made under the 2003 Stock Incentive Plan by the
Board or committee to any of our officers, key employees and consultants it
determines. These awards entitle the recipient to receive unrestricted shares
without any payment in cash or property in one or more installments at a future
date or dates, as determined by the Board or committee. Each deferred stock
award will be confirmed by and subject to the terms of a deferred stock award
agreement executed by us and the recipient and may generally not be sold,
assigned, transferred, pledged or otherwise encumbered during the period
specified by the Board or committee. Receipt of deferred stock may be
conditioned on such matters as the Board or committee may determine, including
continued employment or attainment of performance goals. All rights under a
deferred stock award will generally terminate upon the participant's termination
of employment prior to the receipt of unrestricted shares.
Executive Compensation Conversion Stock Options
Under the 2003 Stock Incentive Plan, each year the Chairman of the Board of
Directors or the Board or committee will designate those executives eligible to
convert salary and bonus to stock options for the next year. These eligible
executives may then, prior to the beginning of the next calendar year, elect to
convert up to 25% of their next year's salary and 25% of their next year's bonus
(in either 5% or $10,000 increments) into stock options under the plan. On the
last day of each calendar year, the total amount of salary, bonus and
compensation an eligible executive elected to convert into stock options for
that calendar year will be converted into stock options. The number of shares of
common stock subject to stock options that are converted from salary, bonus or
compensation will be the total dollar amount an eligible executive has elected
to convert into stock options divided by the per share value of a stock option
on the last day of that year, as determined by the Board or committee using any
recognized option valuation model it selects. Options converted from salary,
bonus or compensation are generally exercisable, cumulatively, as to 10%
commencing on each of the first through tenth anniversaries of the day the
option is converted.
23
The exercise price per share of common stock under stock options obtained by
conversion of salary, bonus or compensation will, at the election of the holder
of the option prior to the year for which the option is converted from salary,
bonus or cash, be either 100% of the fair market value on the last day of the
year when the option is obtained or a lesser percentage determined by the Board
or committee from time to time, but not less than 75% of the fair market value
on the last day of the year when the option is obtained.
Change of Control
The 2003 Stock Incentive Plan provides that in the event of a change of control
of Atomic Paintball unless otherwise determined by the Board or committee prior
to the change of control, and, to the extent expressly provided by the Board or
committee, in the event of a potential change of control, the following will
occur:
- - Any stock appreciation rights and any stock options that are not previously
exercisable and vested will become fully exercisable and vested;
- - The restrictions and deferral limitations on restricted stock and deferred
stock awards will lapse and these shares and awards will become fully vested;
and
- - The value of all outstanding stock options, stock appreciation rights,
restricted stock and deferred stock awards will, to the extent determined by the
Board or committee, be settled on the basis of the change of control price as of
the date the change of control occurs.
Dividend Policy
To date, we have not paid any dividends. The payment of dividends, if any, on
our common stock in the future is within the sole discretion of our Board of
Directors and will depend upon our earnings, capital requirements, financial
condition, and other relevant factors. Our Board of Directors does not intend to
declare any dividends on the common stock in the foreseeable future, but instead
intends to retain all earnings, if any, for use in our business operations.
Transfer Agent and Registrar
Securities Transfer Corporation, Dallas, Texas, serves as the transfer agent and
registrar for our shares of common and preferred stock.
24
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
This is our initial public offering so there is currently no public trading
market for our common stock. We hope to have our common stock prices listed on
the bulletin board maintained by the National Association of Securities Dealers.
To be eligible to have our common stock quoted on the bulletin board, we will be
required to file with the Securities and Exchange Commission periodic reports
required by the Securities and Exchange Act of 1934 and thus be a "reporting"
company, a step we will attempt to accomplish after the effective date of this
registration statement.
2,000,000 shares of our common stock are subject to outstanding options, and we
have issued 400,000 shares of Series A Convertible Preferred Stock that are
convertible into 800,000 shares of our common stock. We have agreed to register
the shares of our common stock issuable upon conversion of the Series A
Convertible Preferred Stock and intend to file a registration statement on Form
S-8 covering the shares issuable upon exercise of the issued options and the
remaining 2,000,000 options or shares that may be issued under our 2003 Stock
Incentive Plan. As of February 23, 2004, there were 800,000 common shares issued
and outstanding, and 400,000 shares of Series A Convertible Preferred Stock
outstanding and convertible into 800,000 shares of common stock. All of these
common shares were issued under Section 4(2) of the Securities Act and the
preferred shares were issued under Rule 506 of Regulation D under the Securities
Act, and will be subject to the re-sale restrictions of Rule 144, as well as a
contractual lockup restriction (with respect to one half of the shares owned by
the holders of 770,000 shares of common stock issuable on conversion of 385,000
shares of our preferred stock and the shares of common stock held by our
President, Barbara J. Smith, and our Vice President, Alton K. Smith) for a
period of 180 days after effectiveness of this offering.
We have never paid dividends and do not expect to declare any in the foreseeable
future. Instead, we expect to retain all earnings for our growth. Although we
have no specific limitations on our ability to pay dividends, the corporate law
of Texas, the State under which we are organized, limits our ability to pay
dividends to those instances in which we have earnings and profits. If we are
unable to achieve earnings and profits in a sufficient amount to satisfy the
statutory requirements of Texas, no dividends will be made, even if our Board of
Directors wanted to pay dividends. Investors should not purchase shares in this
offering if their intent is to receive dividends.
25
SELLING SHAREHOLDERS
The table below sets forth information concerning the resale of the shares of
common stock by the selling stockholders. All of the shares offered hereby were
issued upon conversion of the shares of Series A Convertible Preferred Stock
sold by the Company to accredited investors in a private placement. We will not
receive any proceeds from the resale of the common stock by the selling
stockholders. Assuming all the shares registered below are sold by the selling
stockholders, none of the selling stockholders will continue to own any shares
of our common stock, except as indicated.
The following table also sets forth the name of each person who is offering the
resale of shares of common stock by this Prospectus, the number of shares of
common stock beneficially owned by each person, the number of shares of common
stock that may be sold in this offering and the number of shares of common stock
each person will own after the offering, assuming they sell all of the shares
offered.
No selling stockholder has, or within the past three years has had, any
position, office or other material relationship with us or any of our
affiliates. The selling stockholders may from time to time offer and sell any or
all of their shares as listed below. Because the selling stockholders are not
obligated to sell their shares, and because they may also acquire publicly
traded shares of our common stock, we cannot estimate how many shares each
selling stockholder will beneficially own after this offering. We may update,
amend or supplement this prospectus from time to time to update the disclosure
in this section.
BENEFICIALLY OWNED
PRIOR TO OFFERING
-------------------------------------
NUMBER OF SHARES BENEFICIALLY OWNED
SHARES AFTER THE OFFERING (2)
COMMON SHARES BEING ----------------------
NAME OF BENEFICIAL OWNER STOCK % OF CLASS OFFERED(1) NUMBER % OF CLASS
- -------------------------- -------- -------------- ------------ -------- -----------
Fritz P. Barowsky (3) 72,000 4.5% 72,000 - *
Christie Ford Davis 8,000 *% 8,000 - *
David Myers (3) 80,000 5.0% 80,000 - *
H.L. Palmer 2,000 *% 2,000 - *
William J. Rogers and
Sue E. Buck (3) 20,000 1.3% 20,000 - *
William Charles Wells (3) 16,000 1.0% 16,000 - *
Charles J. Webb and
Brenda D. Webb (3) 122,000 7.6% 122,000 - *
Don Mark Dominey (3) 480,000 30.0% 480,000 - *
-------- -------------- ------------ -------- -----------
800,000 50.0% 800,000 - *%
======== ============== ============ ========= ===========
* less than 1%
(1) The actual number of shares of common stock offered in this prospectus, and
included in the registration statement of which this prospectus is a part,
includes such additional number of shares of common stock as may be issued or
issuable upon conversion of the preferred stock, or by reason of any stock
split, stock dividend or similar transaction involving the common stock, in
accordance with Rule 416 under the Securities Act of 1933
(2) Assumes all shares being offered are sold.
(3) The selling shareholder has entered into a contractual lockup agreement with
the Company pursuant to which the selling shareholder has agreed not to sell one
half of the shares until 180 days following effectiveness of the registration
statement.
26
PLAN OF DISTRIBUTION
We are offering up to a maximum of 400,000 shares at a price of $0.50 per share
to be sold by us through the efforts of our executive officers. Since our shares
are sold through our executive officers, no compensation will be paid with
respect to such sales. In addition, because the offering is conducted on a "best
efforts" basis, there is no assurance that any of the shares offered hereby will
be sold.
The offering will remain open until the earlier of the sale of all of the shares
offered by us or 90 days after the date of the prospectus, unless we determine,
in our discretion, to cease selling efforts and the selling shareholders
offering will terminate on the earlier of the sale of all of the shares or 365
days after the date of the prospectus. Our officers, directors and stockholders
and their affiliates may purchase shares in this offering. In particular, Ms.
Smith has indicated that she presently intends to purchase up to $5,000 of our
shares.
There is no minimum number of shares that must be sold to complete the offering.
As a result, there will be no escrow of any of the proceeds of this offering.
Accordingly, we will have use of such funds once we accept a subscription and
funds have cleared. Such funds shall be non-refundable except as may be required
by applicable law.
Upon effectiveness of this registration statement, we will conduct the sale of
the shares we are offering on a self-underwritten, best-efforts basis. This
means that we do not have an underwriter and that we will sell the shares
directly to investors. Participating on our behalf in the distribution is
Barbara J. Smith, our Principal Executive Officer, who is exempt from
registration as a broker dealer under Rule 3a4-1 of the Securities Exchange Act.
All shares of our common stock that we are registering for sale by the company
that we are able to sell will be sold at a price per share of $0.50. There can
be no assurance that we will sell all or any of the shares offered. We have no
arrangement or guarantee that we will sell any shares. All subscription checks
shall be made to the order of Atomic Paintball, Inc.
While we do not anticipate using any registered securities broker-dealers in
connection with any sales of the shares and have no arrangements to use any
broker-dealers, we may, in our discretion, accept subscriptions for shares
through broker-dealers that are members of the National Association of
Securities Dealers, Inc. and are willing to, in connection with such sales, pay
a commission of up to 10% of the price of each share sold. No officers or
directors shall receive any commissions or compensation for their sale of the
shares pursuant to the terms hereof.
The selling stockholders holding 770,000 shares of our common stock, have
entered into lockup agreements pursuant to which they have agreed not to sell
one half of their shares for a period ending 180 days after effectiveness of
this offering.
The selling shareholders will sell their shares at a price of $0.50 per share
until our shares are quoted on the Over The Counter Bulletin Board or otherwise
traded and thereafter at prevailing market prices or in privately negotiated
transactions. The selling shareholders may sell or distribute their common stock
from time to time themselves, or by donees or transferees of, or other
successors in interests to, the selling shareholders, directly to one or more
purchasers or through brokers, dealers or underwriters who may act solely as
agents, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices, at negotiated prices, or at fixed prices, which
may be changed. Accordingly, the prices at which the selling shareholder's
shares are sold may be different than the price of shares that we sell. These
sales by selling shareholders may occur contemporaneously with sales by us. The
sale of the common stock offered by the selling shareholders through this
prospectus may be effected in one or more of the following:
- - ordinary brokers' transactions;
27
- - transactions involving cross or block trades or otherwise;
- - "at the market" to or through market makers or into any market for the common
stock which may develop;
- - in other ways not involving market makers or established trading markets,
including direct sales to purchasers or sales effected through agents;
- - in privately negotiated transactions; or
- - any combination of the foregoing.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholders and/or purchasers of the
common stock for whom such broker-dealers may act as agent, or to whom they may
sell as principal, or both. The compensation paid to a particular broker-dealer
may be less than or in excess of customary commissions.
Neither we nor any selling shareholder can presently estimate the amount of
compensation that any agent will receive. We know of no existing arrangements
between any selling shareholder, any other shareholder, broker, dealer,
underwriter or agent relating to the sale or distribution of the shares. In the
event that we use an underwriter or a broker-dealer to consummate the sale of
the shares we are registering for sale by the company, we will file a
post-effective amendment to this registration statement setting forth the name
of such entity and the terms under which such entity is participating in this
offering.
We will pay all of the expenses incident to the registration, offering and sale
of the shares to the public, but will not pay commissions and discounts, if any,
of underwriters, broker-dealers or agents, or counsel fees or other expenses of
the selling shareholders. We have also agreed to indemnify the selling
shareholders and related persons against specified liabilities, including
liabilities under the Securities Act.
We have advised the selling shareholders that while they are engaged in a
distribution of the shares included in this prospectus they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934,
as amended. With certain exceptions, Regulation M precludes the selling
shareholders, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered hereby in this
prospectus.
Under the penny stock regulations, a broker-dealer selling penny stocks to
anyone other than an established customer or "accredited investor" (generally,
an individual with a net worth in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with his or her spouse) must make a
special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to the sale, unless the
broker-dealer is otherwise exempt. In addition, unless the broker-dealer or the
transaction is otherwise exempt, the penny stock regulations require the
broker-dealer to deliver, prior to any transaction involving a penny stock, a
disclosure schedule prepared by the Securities and Exchange Commission relating
to the penny stock. A broker-dealer is also required to disclose commissions
payable to the broker-dealer and the Registered Representative and current
quotations for the securities. A broker-dealer is additionally required to send
monthly statements disclosing recent price information with respect to the penny
stock held in a customer's account and information with respect to the limited
market in penny stocks.
28
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Article Nine of our Bylaws provides that we shall indemnify our officers or
directors against expenses incurred in connection with the defense of any action
in which they are made parties by reason of being our officers or directors,
except in relation to matters as to which such director or officer shall be
adjudged in such action to be liable for negligence or misconduct in the
performance of his duty. One of our officers or directors could take the
position that this duty on our behalf to indemnify the director or officer may
include the duty to indemnify the officer or director for the violation of
securities laws.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to our directors, officers and controlling
persons pursuant to our Articles of Incorporation, Bylaws, Texas law or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by one of our directors, officers or controlling
persons, and the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by a controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
29
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us by
David Allen Wood, P.C., Dallas, Texas.
EXPERTS
The financial statements of Atomic Paintball, Inc. as of and for the years ended
December 31, 2003 and 2002, appearing in this Prospectus have been audited by
KBA Group LLP, independent certified public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
30
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement under the Securities Act with respect to
the securities offered hereby with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. This prospectus, which is a part of the registration
statement, does not contain all of the information contained in the registration
statement and the exhibits and schedules thereto, certain items of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to Atomic Paintball, Inc. and the securities
offered hereby, reference is made to the registration statement, including all
exhibits and schedules thereto, which may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N. W.,
Room 1024, Washington, D.C. 20549 at prescribed rates during regular business
hours. You may obtain information on the operation of the public reference
facilities by calling the Commission at 1-800-SEC-0330. Also, the SEC maintains
an Internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the Commission
at http://www.sec.gov. Statements contained in this prospectus as to the
contents of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or document filed
as an exhibit to the registration statement, each such statement being qualified
in its entirety by such reference. We will provide, without charge upon oral or
written request of any person, a copy of any information incorporated by
reference herein. Such request should be directed to us at Atomic Paintball,
Inc., 219 Josey Lane, Red Oak, Texas 75154 Attention: Barbara J. Smith,
President.
Following the effectiveness of this registration statement, we will file reports
and other information with the Commission. All of such reports and other
information may be inspected and copied at the Commission's public reference
facilities described above. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of such site
is http://www.sec.gov. In addition, we intend to make available to our
shareholders annual reports, including audited financial statements, unaudited
quarterly reports and such other reports as we may determine.
31
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountants..........................F-2
Financial Statements
Balance Sheets..........................................................F-3
Statements of Operations................................................F-4
Statement of Changes in Stockholders' Equity (Deficit)..................F-5
Statements of Cash Flows................................................F-6
Notes to Financial Statements...........................................F-7
F-1
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Board of Directors of
Atomic Paintball, Inc.
We have audited the accompanying balance sheets of Atomic Paintball, Inc. (a
development stage company) as of December 31, 2003 and 2002 and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended and for the period from inception (May 8, 2001) through
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atomic Paintball, Inc. as of
December 31, 2003 and 2002, and the results of its operations and its cash flows
for the years then ended and for the period from inception (May 8, 2001) through
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note C to the financial statements,
the Company is in the development stage and has not generated revenue since its
inception. In addition, at December 31, 2003, the Company's liabilities exceeded
its assets and the Company currently has no funds available to execute its
business plan. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Managements' plans in regard to those
matters are also described in Note C. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KBA GROUP LLP
Dallas, Texas
February 12, 2004
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
BALANCE SHEETS
December 31, 2003 and 2002
ASSETS
------
2003 2002
---------- ----------
Current assets
Cash $ 766 $ 3,423
Prepaid expenses 2,400 --
Travel advances 897 --
Other receivable 486 --
---------- ----------
Total current assets 4,549 3,423
Property and equipment, net 4,521 3,921
---------- ----------
Total assets $ 9,070 $ 7,344
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable $ 9,533 $ --
Notes payable to related parties 22,163 11,314
---------- ----------
Total liabilities 31,696 11,314
STOCKHOLDERS' DEFICIT
Preferred stock, no par value; 2,000,000 shares authorized:
Series A Convertible Preferred Stock, no par value; 400,000
shares authorized; 116,000 issued and outstanding at
December 31, 2003, with a $0.25 per share liquidation
preference 29,000 --
Common stock, no par value; 10,000,000 shares authorized;
800,000 shares issued and outstanding
at December 31, 2003 and 2002 7,000 7,000
Deficit accumulated during the development stage (58,626) (10,970)
---------- ----------
Total stockholders' deficit (22,626) (3,970)
---------- ----------
Total liabilities and stockholders' deficit $ 9,070 $ 7,344
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
STATEMENTS OF OPERATIONS
For the years ended December 31, 2003 and 2002,
and the period from inception (May 8, 2001) through December 31, 2003
From inception
through
2003 2002 December 31, 2003
----------------- ----------------- -----------------
Revenues $ -- $ -- $ --
General and administrative expenses 47,656 4,155 58,626
----------------- ----------------- -----------------
Net loss $ (47,656) $ (4,155) $ (58,626)
================= ================= =================
Net loss per common share - basic and diluted $ (0.06) $ (0.01)
================= =================
Weighted average common shares outstanding -
basic and diluted 800,000 800,000
================= =================
The accompanying notes are an integral part of these financial statements.
F-4
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the years ended December 31, 2003 and 2002,
and the period from inception (May 8, 2001) through December 31, 2003
Total
Common Stock Preferred Stock Stockholders'
------------------------- ------------------------- Accumulated Equity
Shares Amount Shares Amount Deficit (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
Balance at May 8, 2001 -- $ -- -- $ -- $ -- $ --
(date of inception)
Issuance of common stock
for cash on May 8, 2001
(Note F) -- -- 200,000 1,000 -- 1,000
Issuance of common stock
for services on June 20, 2001
(Note F) -- -- 600,000 6,000 -- 6,000
Net loss for the period from
inception (May 8, 2001)
through December 31, 2001 -- -- -- -- (6,815) (6,815)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2001 -- -- 800,000 7,000 (6,815) 185
Net loss for the year ended
December 31, 2002 -- -- -- -- (4,155) (4,155)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2002 -- -- 800,000 7,000 (10,970) (3,970)
Issuance of Series A
Convertible Preferred Stock
for cash during October and
November 2003(Note F) 116,000 29,000 -- -- -- 29,000
Net loss for the year ended
December 31, 2003 -- -- -- -- (47,656) (47,656)
----------- ----------- ----------- ----------- ----------- -----------
Balance at December 31, 2003 116,000 $ 29,000 800,000 $ 7,000 $ (58,626) $ (22,626)
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of this financial statement.
F-5
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2003 and 2002,
and the period from inception (May 8, 2001) through December 31, 2003
From inception
through
2003 2002 December 31, 2003
----------------- ----------------- -----------------
Cash flows from operating activities:
Net loss $ (47,656) $ (4,155) $ (58,626)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,743 3,045 4,788
Increase in note payable to related party
in lieu of payment of interest expense 915 414 1,329
Issuance of common stock for services -- -- 6,000
Changes in operating assets and liabilities
Prepaid expenses (2,400) -- (2,400)
Travel advances (897) -- (897)
Other receivable (486) -- (486)
Accounts payable 9,533 -- 9,533
----------------- ----------------- -----------------
Net cash used in operating activities (39,248) (696) (40,759)
Cash flows from investing activities:
Purchase of property and equipment (2,343) (6,966) (9,309)
Cash flows from financing activities:
Proceeds from sale of common stock -- -- 1,000
Proceeds from sale of preferred stock 29,000 -- 29,000
Proceeds from notes payable to related parties 17,500 10,900 28,400
Payments on note payable to a related party (7,566) -- (7,566)
----------------- ----------------- -----------------
Net cash provided by financing activities 38,934 10,900 50,834
----------------- ----------------- -----------------
Net increase (decrease) in cash (2,657) 3,238 766
Cash, beginning of period 3,423 185 --
----------------- ----------------- -----------------
Cash, end of period $ 766 $ 3,423 $ 766
================= ================= =================
Supplemental information:
Cash paid for interest $ 67 $ -- $ 67
================= ================= =================
Cash paid for income tax $ -- $ -- $ --
================= ================= =================
Schedule of non-cash financing and
investing activities:
Issuance of stock for services to related parties $ -- $ -- $ 6,000
================= ================= =================
The accompanying notes are an integral part of these financial statements.
F-6
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE A - DESCRIPTION OF THE BUSINESS
Atomic Paintball, Inc. (the "Company") was incorporated in the state of Texas on
May 8, 2001. The Company was formed for the purpose of providing facilities,
services and products in connection with paintball sport activities. As of the
date of this report, the Company has not commenced significant operations. The
Company is in the process of raising financing to execute its business plan and
fund future operations. As such, the Company is considered to be in the
development stage.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
- ---\-
The Company considers cash in banks, certificates of deposit and other highly
liquid investments with a maturity of three months or less when purchased to be
cash equivalents.
Revenue Recognition
- -------------------
The Company expects to generate revenue from providing facilities, services and
products in connection with paintball sport activities. Revenues will be
recognized as facilities, services and products are delivered. The Company is
currently in the development stage, and no revenue was earned during 2003 or
2002.
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:
Useful
life
------
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.
Income Taxes
- ------------
Through September 30, 2003, the Company elected to be treated as an "S"
Corporation for federal tax purposes. Accordingly, the Company was generally not
subject to federal income taxes. Income or loss of the Company was included in
the shareholder's respective income tax returns.
Effective October 1, 2003, upon issuance of Series A Preferred Stock, the
Company converted to a "C" Corporation. As such, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
F-7
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Had the company been a C
Corporation for income tax purposes effective January 1, 2002, the accompanying
statements of operations would not have been affected.
Use of Estimates and Assumptions
- --------------------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities, and the reported
amounts of revenues and expenses. Actual results could vary from these estimates
that were used. Net Loss per Share
Basic earnings per share amounts are computed based on the weighted average
number of shares outstanding during the period after giving retroactive effect
to a stock split which is discussed in Note K. The diluted earnings per share is
shares, if any, outstanding during the period. Stock options totaling 2,000,000
shares granted under the terms of the calculated by dividing net loss by the
weighted-average number of common shares and dilutive potential common 2003
Stock Incentive Plan, 87,200 shares of common stock issuable upon conversion of
a note payable to a related party, and 232,000 common shares issuable upon
conversion of the Series A Convertible Preferred Stock were not included in the
computation of the diluted loss per share because their effects are
anti-dilutive at December 31, 2003. No stock options were granted during 2002.
Stock Based Compensation
- ------------------------
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and complies with the disclosure
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" as amended
by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure, an amendment of FASB Statement No. 123". Under APB Opinion No. 25,
compensation expense for employees is based on the excess, if any, on the date
of grant, between the fair value of the Company's stock over the exercise price.
The Company recorded no compensation expense associated with options issued
during the year ended December 31, 2003 (no options were issued prior to 2003).
Had the Company determined compensation based on the fair value at the grant
date for its stock options under SFAS No. 123 as amended by SFAS No. 148, net
loss and net loss per share would have been affected as indicated below:
F-8
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock Based Compensation (continued)
- ------------------------------------
Year Ended December 31,
-----------------------
2003 2002
--------- ---------
Net loss attributable to common
stockholders as reported $ (47,656) $ (4,155)
Add: Stock-based employee compensation
expense included in reported net loss -- --
Deduct: Stock-based employee compensation expense
determined under fair value based method (23,431) --
--------- ---------
Pro forma net loss $ (71,087) $ (4,155)
========= =========
Net income (loss) per common share, basic and diluted
As reported $ (0.06) $ (0.01)
========= =========
Pro forma $ (0.09) $ (0.01)
========= =========
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and SFAS No. 148 and Emerging
Issues Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services." All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the
equity instrument issued, whichever is more reliably measurable. The measurement
date of the fair value of the equity instrument issued is the earlier of the
date on which the counterparty's performance is complete or the date on which it
is probable that performance will occur.
NOTE C - GOING CONCERN UNCERTAINTY
The Company is currently in the development stage and has generated no revenues.
The Company has incurred $58,626 in losses from its inception through December
31, 2003, including $6,000 of services provided by its founders which was paid
for through the issuance of common stock. In addition, at December 31, 2003, the
Company's liabilities exceeded its assets by $22,626, and the Company currently
has no funds available to execute its business plan. The ability of the Company
to continue as a going concern is dependent on management's ability to raise the
necessary capital to finance the implementation of its business plan. The
Company may rely upon its President to advance funds to the Company in order to
meet ongoing obligations until sufficient capital is raised from other sources.
However there is no agreement in this regard and no assurance that any such
funding will be available in the future. The financial statements do not include
any adjustments to reflect the possible effects on the recoverability and
classification of assets or classification of liabilities which may result from
the possible inability of the Company to continue as a going concern.
F-9
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
2003 2002
--------- ---------
Leasehold improvements $ 3,966 $ 3,966
Equipment 3,650 3,000
Computer equipment 1,693 --
--------- ---------
9,309 6,966
Less: accumulated depreciation and amortization (4,788) (3,045)
--------- ---------
Property and equipment, net $ 4,521 $ 3,921
========= =========
Depreciation and amortization expense was $1,743 and $3,045 for the years ended
December 31, 2003 and 2002, respectively.
NOTE E - NOTES PAYABLE TO RELATED PARTIES
During 2003, the Company obtained two notes from one of its officers totaling
$17,500. Both of these notes mature 10 days after demand by the officer, bear
interest at 8%, and are unsecured. Principal and accrued interest on these notes
are due at maturity. On December 29, 2003, one of the notes totaling $7,500 was
paid, along with accrued interest of $67.
Throughout 2002, the Company borrowed money from one of its officers for ongoing
business expenditures. On July 1, 2003, a note agreement was executed totaling
$10,900. The note, which bears interest at 6.5%, is unsecured and matures on
July 15, 2004. Principal and accrued interest are due at maturity; however, in
lieu of the payments of principal and interest, the officer may elect to receive
87,200 shares of the Company's common stock at $0.125 per share.
The Company incurred interest expense of $915 and $415 at December 31, 2003 and
2002, respectively. At December 31, 2003 and 2002 the outstanding balance of the
notes payable totaling $22,163 and $11,344, include accrued interest of $1,263
and $444, respectively.
NOTE F -STOCKSTOCKHOLDERS' EQUITY (DEFICIT)
Common Stock
- ------------
During 2001, the Company issued 100,000 shares of common stock for cash of
$1,000 and 300,000 shares of common stock at fair value for services rendered by
related parties totaling $6,000.
Common shares reserved for future issuance as of December 31, 2003 include
232,000 shares issuable upon conversion of the Series A Convertible Preferred
Stock; 87,200 shares issuable upon conversion of a note payable to a related
party; and 2,000,000 shares issuable upon exercise of stock options.
F-10
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE F -STOCKSTOCKHOLDERS' EQUITY (DEFICIT) - (continued)
Preferred Stock
- ---------------
In October 2003, the 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. During October and November of 2003, the Company issued 116,000 shares of
its Series A Convertible Preferred Stock for $29,000. The Series A Convertible
Preferred Stock ("Series A Preferred") has no par value and has a liquidation
preference of $0.25 per share. The Series A Preferred is convertible into the
Company's common stock at a conversion rate of 2:1, and will automatically
convert into common stock upon the effectiveness of any registration statement
filed by the Company with the Securities and Exchange Commission.
NOTE G- INCOME TAXES
As disclosed in Note B, the Company converted to a "C" Corporation effective
October 1, 2003. Deferred federal income taxes are comprised of the following at
December 31, 2003:
Deferred federal income tax assets:
Accrued interest $ 108
Net operating loss 14,134
----------
Gross deferred income tax assets 14,242
Valuation allowance (14,242)
----------
Deferred income tax assets, net $ --
==========
The Company has net operating losses of approximately $42,000 from October 1,
2003 (the effective date of the conversion to C Corporation status) to December
31, 2003 which may be used to offset future taxable income. These loss carry
forwards expire in 2023. The Company has recorded a valuation allowance to
offset all deferred tax assets, as the ultimate realization of such assets is
uncertain.
Differences between the statutory federal income tax rate and the effective rate
for the year ended December 31, 2003 is as follows:
Income tax provision at statutory rate 34.00%
Permanent differences (0.87%)
Change in valuation allowance (33.15%)
Other 0.02%
---------
Effective tax rate --
---------
F-11
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 and 2002
NOTE H - STOCK OPTIONS
On October 21, 2003, the Company adopted a stock purchase plan entitled "2003
Stock Incentive Plan" to attract and retain selected directors, officers,
employees and consultants to participate in the long-term success and growth of
the Company through an equity interest in the Company. The Company has
authorized 2,000,000 shares to be available for grant as part of the long term
incentive plan.
During 2003, the Company granted stock options under the 2003 Stock Incentive
Plan to two of its officers to purchase a total of 2,000,000 shares of the
Company's common stock at an exercise price of $0.125 per share. These options
vest over a five year period, with 60% vesting in the first year and 10% in each
of the next four years, and expire upon the tenth anniversary of the date of
grant. At December 31, 2003, there are 1,200,000 exercisable stock options.
The per-share weighted-average grant date fair value of all stock options
granted during 2003 was $.04, using the Black-Scholes option-pricing model.
The following assumptions were used in calculating the fair value of the
options: expected volatility 0%, risk free rate of 3.31%, no dividend yield and
expected life of 5 years. The weighted average remaining contractual life of the
outstanding options and the options exercisable is approximately 10 years.
NOTE I - COMMITMENTS AND CONTINGENCIES
During April, 2002, the Company entered into a one year non-cancelable operating
lease agreement with one of its stockholders for real property that is to be
used as a paintball facility. The Company has the right to extend the lease for
up to three additional periods of one year each. Rental expense is charged based
on $1 for each person admitted to play paintball at the Company's paintball
facility. During the years ended December 31, 2003 and 2002, the Company did not
generate any revenue and, therefore, no rent expense was recorded.
NOTE J - RELATED PARTIES
As discussed in Note I, the Company entered into a lease agreement with one of
the Company's stockholders in April, 2002.
As discussed in Note E, the Company has notes payable to stockholders in the
amount of $22,163 and $11,314 (including accrued interest of $1,263 and $444) at
December 31, 2003 and 2002, respectively.
NOTE K - SUBSEQUENT EVENTS
On February 12, 2004, the Company authorized a two for one stock split on its
common stock. Additionally, each option to purchase one share of the Company's
common stock granted by the Company prior to the February 12, 2004, is split
into an option to purchase two shares of the Company's common stock with an
exercise price equal to one half of the original price. This stock split has
been reflected in the financial statements as of the earliest date presented.
During January and February, 2004, the Company issued a total of 284,000 shares
of Series A Convertible Preferred Stock for an aggregate purchase price of
$71,000 (including 225,000 shares for promissory notes totaling $56,250 and
59,000 shares for cash totaling $14,750). The promissory notes bear interest at
a rate of 5% per year and mature on December 31, 2004. Principal and interest
are paid in six equal monthly payments starting June 13, 2004. The notes are
secured by the underlying Series A Convertible Preferred Stock.
F-12
ATOMIC PAINTBALL, INC. [LOGO]
1,200,000 SHARES COMMON STOCK
NO PAR VALUE
PROSPECTUS
February __, 2004
Until _____________, 2004, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Part II - Information not required in prospectus
Item 24. Indemnification of directors and officers
Article Twelve of the Articles of Incorporation and Article Nine of the Bylaws
of the Company provide that the Company shall indemnify, to the maximum extent
allowed by Texas law, any person who is or was a Director, Officer, agent or
employee of the corporation, and any person who serves or served at the
Company's request as a Director, Officer, agent, employee, partner or trustee of
another corporation, partnership, joint venture, trust or other enterprise. An
officer or director of the Company could take the position that this duty on
behalf of the Company to indemnify the director or officer may include the duty
to indemnify the officer or director for the violation of securities laws.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to the Company's Articles of Incorporation, Bylaws,
Texas law or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company and the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 25. Other expenses of issuance and distribution
The following is an itemized list of the estimate by the Company of the expenses
of the offering:
SEC registration fee $ 206
Accounting fees and expenses* $20,000
Legal* $10,000
Miscellaneous* $ 2,500
-------
Total $32,706
* estimates
II-1
Item 26. RECENT SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities sold by us
within the past three years that were not registered under the Securities Act.
The issuances described hereunder were made in reliance upon the exemptions from
registration set forth in Section 4(2) and Regulation D of the Securities Act
relating to sales by an issuer not involving any public offering. None of the
foregoing transactions involved a distribution or public offering.
In May 2001, the Company was incorporated under the laws of the State of Texas.
Effective as of May 8, 2001, we issued a total of 200,000 shares of our common
stock to the founders of our Company, Barbara J. Smith and Alton K. Smith in
exchange for an initial investment of $1,000. The federal exemption we relied
upon in issuing the securities was Section 4(2) of the Securities Act. The
Section 4(2) exemption was available to us because we did not solicit any
purchasers to invest in the company and instead issued shares to our founders,
Ms. Smith and Mr. Smith. In addition, given our founders' involvement in the
establishment of the company, they had access to such information as they deemed
necessary to fully evaluate an investment in our company. No underwriters were
used in the offering.
On June 20, 2001, the Company also issued a total of 600,000 shares of our
common stock to Barbara J. Smith and Alton K. Smith in exchange for services
valued at $6,000. The federal exemption we relied upon in issuing the securities
was Section 4(2) of the Securities Act. The Section 4(2) exemption was available
to us because we did not solicit any purchasers to invest in the company and
instead issued shares to our founders, Ms. Smith and Mr. Smith, in exchange for
services rendered to the Company. In addition, given our founders' involvement
in the establishment of the company, they had access to such information as they
deemed necessary to fully evaluate an investment in our company. No underwriters
were used in this offering.
Beginning in October 2003, we conducted a private offering of 400,000 shares of
Series A Convertible Preferred Stock of our company at a purchase price of $0.25
per share. These shares were offered and sold to a limited number of accredited
investors, without public solicitation. A total of eight individuals purchased
shares from us for a total of $100,000. The offering was completed on February
15, 2004. The federal exemption we relied upon in issuing these securities was
Rule 506 under of the Securities Act. The Rule 506 exemption was available to us
because we did not publicly solicit any investment in the company. We also gave
all of these investors the opportunity to ask questions of and receive answers
from us as to all aspects of our business as well as access to such information
as they deemed necessary to fully evaluate an investment in our company.
All shares issued under the private placement and all shares issued to Ms. Smith
and Mr. Smith have been and will remain restricted and may not be transferred
unless and until the effectiveness of this registration statement or pursuant to
another applicable exemption.
The consideration paid by these individuals was cash, promissory notes in the
amount of $56,250, and services rendered by Ms. Smith and Mr. Smith. Because of
the extremely limited nature of this offering, no underwriters were used.
II-2
ITEM 27. EXHIBITS
Exhibit Number Description
3.1 Articles of Incorporation of Atomic Paintball, Inc
3.2 Amendment 1 to the Articles of Incorporation of Atomic Paintball,
Inc
3.3 Amendment 2 to the Articles of Incorporation of Atomic Paintball,
Inc
3.4 Bylaws of Atomic Paintball, Inc
3.5 Certificate of Designations for Series A Convertible Preferred
Stock
4.1 Specimen certificate of the Common Stock of Atomic Paintball, Inc.
4.2 Promissory Note, dated July 1, 2003, payable to Barbara J. Smith.
4.3 Promissory Note, dated October 29, 2003, payable to Alton K. Smith.
4.4 Promissory Note, dated February 13, 2004, payable to the
Registrant.
5.1 Opinion of David Allen Wood, P.C. as to the legality of securities
being registered
10.1 Lease Agreement, dated as of April 1, 2002, by and between Alton K.
Smith as Landlord, and Atomic Paintball, Inc. as Tenant
10.2 Atomic Paintball, Inc. 2003 Stock Incentive Plan
10.3 Stock Option Agreement between Barbara J. Smith and the Registrant,
dated October 21, 2003
10.4 Stock Option Agreement between Alton K. Smith and the Registrant,
dated October 21, 2003
10.5 Form of Subscription Agreement for Series A Convertible Preferred
Stock
23.1 Consent of KBA Group LLP
23.2 Consent of David Allen Wood, P.C.
(included in Exhibit 5.1)
Attached to this registration statement are the exhibits required by Item 601 of
Regulation S-B.
II-3
UNDERTAKINGS
The Company does not presently anticipate using an underwriter in conducting
this offering; if the company changes its plan and utilizes an underwriter, the
Company will provide to the underwriter, at the closing specified in any
underwriting agreement, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the Company pursuant to the Company's Articles of Incorporation, Bylaws,
Texas law or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company and the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue. The
undersigned registrant hereby undertakes that it will:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(a) include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(b) reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in the volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(c) include any additional or changed material information on the plan of
distribution.
2. For determining any liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
II-4
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB- 2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Red Oak,
State of Texas on February 27, 2004.
(Registrant) Atomic Paintball, Inc.
By (Signature and Title): /s/ Barbara J. Smith
---------------------------
Barbara J. Smith, President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
(Signature) /s/ Barbara J. Smith
Barbara J. Smith
(Title) President and Director
(Date) February 27, 2004.