SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2/A
AMENDMENT NO. 1
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.
The information in this preliminary prospectus is not complete and may be
changed. We and the selling stockholders may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This preliminary prospectus is not an offer to sell these securities
and we and the selling stockholders are not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
ATOMIC PAINTBALL, INC. [LOGO]
1,200,000 Shares of Common Stock
including 400,000 shares of common stock offered by Atomic Paintball, Inc.
Price per share for shares offered by Atomic Paintball: $0.50
Total proceeds to Atomic Paintball, Inc. if maximum sold by us: $200,000
and 800,000 shares of common stock offered by Selling Stockholders
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. 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. The selling stockholders will sell their shares of our
common stock at a price of $0.50 per share until shares of our common stock are
quoted on the Over-The-Counter Bulletin Board or OTCBB, and thereafter at
prevailing market prices or privately negotiated prices.
Because this is our initial public offering, there is no public market for our
shares. While we hope to have prices for our shares quoted on the OTCBB after we
complete our offering, there is no guarantee that the prices for our shares will
be quoted on the OTCBB.
AN INVESTMENT IN ATOMIC PAINTBALL IS RISKY, ESPECIALLY GIVEN ITS YOUNG AGE. ONLY
PEOPLE WHO CAN AFFORD TO LOSE THE MONEY THEY INVEST IN ATOMIC PAINTBALL 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 Atomic Paintball:
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.
Subject to Completion, dated August 2, 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 price may be much lower.
The simultaneous offering of shares of our common stock by selling 6
stockholders may adversely affect our offering
We may fail to remain a going concern and our independent auditor's 7
report expresses substantial doubt about Atomic Paintball's ability
to continue as a going concern
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 8
our officers will be determined in the discretion of these parties.
Because of the nature of our proposed activities, we may be subject to 8
liability claims resulting from personal injuries and we may be unable to
obtain or maintain adequate liability insurance
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 9
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 9
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 16
Description of Property 21
Directors, Executive Officers, Promoters and Control Persons 22
Executive Compensation 22
Certain Relationships and Related Transactions 23
Securities Ownership of Certain Beneficial Owners and Management 24
Description of Securities 25
Market for Common Equity and Related Shareholder Matters 28
Selling Shareholders 29
Plan of Distribution 29
Disclosure of Commission Position on Indemnification for 31
Securities Act Liabilities
Legal Matters 31
Experts 32
Where You Can Find Additional Information 32
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.
ATOMIC PAINTBALL:
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. As of the date of this Prospectus, we are a company with no
revenues or operations, and we have achieved net losses to date. We have relied
solely on sales of our securities and loans from officers and directors to fund
our operations.
Our primary business operations to date have consisted of incorporating Atomic
Paintball as a Texas corporation, conducting market research for the paintball
industry and prospective paintball field locations, leasing a parcel of property
as a potential paintball field location, conducting an initial round of private
financing to obtain "seed" capital, engaging auditors and counsel, and beginning
the process of designing our business plan.
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 games, tournaments and league play events, a web page to be
developed and perhaps special competitive events. We plan to use the proceeds of
this offering to establish our corporate offices, to conduct feasibility studies
for real estate acquisitions for paintball locations, to hire limited staff, to
pay accounting and legal fees related to our status as a public company, to
repay loans from officers and directors, to make minor improvements to our
website, and to continue to implement our business plan, including limited
travel and administrative expense to pursue additional funds we will need to
raise. We will need to raise substantial additional funds to purchase land and
equipment for operating paintball fields, inventory for resale, to hire senior
management including any payments to executive search firms used to locate
senior management, and to enhance our website for marketing our Paintball games
and miscellaneous services via the Internet.
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 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.
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
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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
$36,000, to establish our corporate offices,
to conduct feasibility studies for real
estate acquisitions for paintball locations,
to hire limited staff, to pay accounting and
legal fees related to our status as a public
company, to repay loans from officers and
directors, to make minor improvements to our
website, and to continue to implement our
business plan, including limited travel and
administrative expense to pursue additional
funds we will need to raise. We will need to
raise substantial additional funds to
purchase land and equipment for operating
paintball fields, inventory for resale, to
hire senior management including any
payments to executive search firms used to
locate senior management, and to enhance our
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.
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 June 30,
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 June
30, 2004.
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SUMMARY OF FINANCIAL DATA
The summarized financial data presented below is derived from and should be read
in conjunction with our audited financial statements for the period ended
December 31, 2003, and the unaudited financial statements for the period ended
March 31, 2004, including the notes to those financial statements, which are
included elsewhere in this prospectus, along with the section entitled
"Management's Plan of Operation" beginning on page 11 of this prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------
For the period from For the fiscal year ended For the fiscal year ended For the three months
ended May 8, 2001 to December 31, 2002 December 31, 2003 March 31, 2004
December 31, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue $- $- $- $-
- ------------------------------------------------------------------------------------------------------------------------------------
Net Loss for the ($6,815) ($4,155) ($47,656) ($29,497)
Period
- ------------------------------------------------------------------------------------------------------------------------------------
Net Loss Per Share - ($0.02) ($0.01) ($0.06) ($0.04)
basic and diluted
- ------------------------------------------------------------------------------------------------------------------------------------
As of As of As of As of
December 31, 2001 December 31, 2002 December 31, 2003 March 31, 2004
- ------------------------------------------------------------------------------------------------------------------------------------
Working Capital $185 ($7,891) ($27,147) ($42,619)
(Deficit)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $185 $7,344 $9,070 $8,393
- ------------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' $185 ($3,970) ($22,626) ($37,373)
Equity (Deficit)
- ------------------------------------------------------------------------------------------------------------------------------------
Deficit Accumulated ($6,815) ($10,970) ($58,626) ($88,123)
During the
Development Stage
- ------------------------------------------------------------------------------------------------------------------------------------
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. The risks described below are the material risks known to management at
this time, but are not the only ones facing Atomic Paintball. Additional risks
not presently known to us may also impair our business operations. You could
lose all or part of your investment due to any of these risks.
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.
THE SIMULTANEOUS OFFERING OF SHARES OF OUR COMMON STOCK BY SELLING STOCKHOLDERS
MAY ADVERSELY AFFECT OUR OFFERING.
6
This prospectus includes the resale of up to 800,000 shares of our common stock
on behalf of the selling stockholders named in this prospectus. In the event a
market for our shares develops, the selling stockholders may resell their shares
of common stock at a price below the price at which we are offering shares in
this offering. The sale of shares at prices less than we are offering shares for
may make it more difficult for us to sell the shares we are offering. In this
event, we may not be able to complete our offering and we may not receive
sufficient proceeds to commence implementation of our business plans. This could
have a material adverse effect on our business.
WE MAY FAIL TO REMAIN A GOING CONCERN, AND OUR INDEPENDENT AUDITOR'S REPORT
EXPRESSES SUBSTANTIAL DOUBT ABOUT ATOMIC PAINTBALL'S ABILITY TO CONTINUE AS A
GOING CONCERN.
Our independent certified public accountants have included a going concern
paragraph in their opinion that expresses substantial doubt about Atomic
Paintball's ability to continue as a going concern, and 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. Their experience in the
paintball business is limited to four years of research of the paintball
business and participation in paintball games. We will likely need to rely on
others who understand that business better than Mr. and 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
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(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 Atomic Paintball, 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.
BECAUSE OF THE NATURE OF OUR PROPOSED ACTIVITIES, WE MAY BE SUBJECT TO LIABILITY
CLAIMS RESULTING FROM PERSONAL INJURIES AND WE MAY BE UNABLE TO OBTAIN OR
MAINTAIN ADEQUATE LIABILITY INSURANCE.
We may become involved in various lawsuits incidental to our business, some of
which may relate to claims allegedly resulting in injury or death. Significantly
increased product liability claims continue to be asserted successfully against
manufacturers and distributors of sports equipment throughout the United States
resulting in general uncertainty as to the nature and extent of liability for
personal injuries. In recent years, product liability insurance has become much
more expensive, more restrictive and more difficult to obtain. While we intend
to obtain liability insurance, there can be no assurance that we will be able to
obtain or maintain liability insurance coverage sufficient to cover any
successful liability claims made against us. Any claims substantially in excess
of our insurance coverage, or any substantial claim not covered by insurance,
could have a material adverse effect on our financial condition and results of
operations.
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.
8
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 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", "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 $36,000 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. In the event we are unsuccessful in raising
this minimum amount, we will likely be forced to cease operations, we may be
required to use the proceeds to wind up our business, and our investors will
lose their entire investment, unless we are able to raise additional funds after
this offering. 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 us and our investors, including a loss of their entire investment.
Regardless of the amount of proceeds we raise in this offering, we will need to
raise substantial additional funds to implement our business plans, and there
can be no assurance that we will be successful in raising these additional
funds, in which case our investors would lose all of their investment.
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, Atomic Paintball reserves the right to
change the use of proceeds based on the possible deferral of some of the
expenses (such as repayments of loans from officers, feasibility studies and
office expenses) until such time as Atomic Paintball raises additional funds, in
which case more of the proceeds from this offering might be allocated to the
other uses set forth in the table. In addition, in the event accounting and
legal expenses are greater than anticipated, less funds would be available for
other uses listed in the table, and if accounting and legal expenses are less
than anticipated, more funds would be available for such other uses..
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 36,000 36,000 36,000 36,000
-------- -------- -------- --------
Net proceeds from offering 14,000 64,000 114,000 164,000
Use of net proceeds
Accounting and legal expenses 10,000 10,000 10,000 10,000
Salaries and wages 0 6,100 35,600 57,100
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
Travel and administrative 4,000 8,000 20,000 25,000
Office lease expense 0 12,000 18,000 24,000
Repayment of loans from officers 0 12,400 12,400 12,400
Our President and director, Barbara J. Smith, loaned us $10,900 to help Atomic
Paintball in research and development, and to help Atomic Paintball to fund
operating expenses. The loan from Barbara Smith 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 intend to repay in full 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 loans to the extent we sell less than all, but
more than one half of the shares we are offering. The amount of the proposed
repayments increases as the proceeds of our offering increase because, as
proceeds to Atomic Paintball increase, we believe that we will have sufficient
funds available to continue to implement our business plan and remain a
reporting company while repaying amounts advanced to us by Ms. Smith.
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.
Proceeds not immediately required for the foregoing purposes will be 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 and March 31, 2004, we had a net tangible book value of
($22,626) and ($37,373), respectively. 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 $36,000. 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.
------------------------------------------
Shares Sold
-----------------------------------------------------------------------
31-Dec-03 31-Mar-04
100,000 200,000 300,000 400,000
-----------------------------------------------------------------------
Public offering price per share n/a n/a $ 0.50 $ 0.50 $ 0.50 $ 0.50
-----------------------------------------------------------------------
Common shares outstanding 800,000 800,000 900,000 1,000,000 1,100,000 1,200,000
-----------------------------------------------------------------------
Net tangible book value before the offering $(22,626) $(37,373) $(37,373) $(37,373) $(37,373) $(37,373)
Net Proceeds n/a n/a $ 14,000 $ 64,000 $ 114,000 $164,000
Net tangible book value after the offering n/a n/a $(23,373) $ 26,627 $ 76,627 $126,627
Net tangible book value per share of common $ (0.03) $ (0.05) n/a n/a n/a n/a
stock before the offering
Pro forma net tangible book value per share of n/a n/a $ (0.03) $ 0.03 $ 0.07 $ 0.11
common stock after the offering
Increase to net tangible book value attributable n/a n/a $ 0.02 $ 0.08 $ 0.12 $ 0.16
to purchase of common stock by new investors
Dilution to new investors n/a n/a $ 0.53 $ 0.47 $ 0.43 $ 0.39
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 March 31, 2004, we have spent a total of approximately $88,000 in
operating expenses, including $11,000 of expenses associated with making initial
contacts with potential vendors, and $54,000 in legal, filing and accounting
fees. As a result of the initial contacts with potential vendors, we have
located a potential website development employee, architectural firm, trademark
attorneys, and suppliers of paintball markers, paintballs, and equipment, as
well as real estate brokers. We have not yet engaged any of these vendors and do
not intend to engage them until we have raised additional funds in this offering
and following this offering. However, we believe these meetings have provided us
the additional due diligence on paintball field construction, paintball field
placement and paintball field operations, as well as supply chains, such that
when we have raised additional funds in this offering and after this offering,
we can move forward with the initial and second phases of our business plan
discussed below. We paid the amounts used in these activities to date from (1)
funds loaned to us by our officers in the amount of $28,400, (2) a Regulation D
private placement offering of $100,000 from which we have realized $75,000 in
cash and the balance of $25,000 in due in the form of an outstanding promissory
note from October 2003, to February 2004 and (3) a $25,000 loan from a
shareholder anticipated in July 2004.
Since inception through March 31, 2004, we have managed to keep our average
monthly operating expenses at less than $1,500 (excluding filing, accounting and
legal fees). For the three months ended March 31, 2004 our monthly operating
expenses increased to an average of $2,400 in part due to one-time travel and
related expenses associated with the $100,000 private placement discussed above.
Our President and Vice President have 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 and Vice President.
Given our low monthly cash flow requirement and the agreement of our officers 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 as set forth in Phase One and
Phase Two of our Plan of Operations described below, 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.
The following is a monthly summary of our Plan of Operations until we generate
our first revenues. We have divided our Plan of Operations into two phases:
Phase One, which will commence upon completion of this offering and will
continue until we have raised an additional subsequent round of financing of
approximately $5 million, and Phase Two, which will follow the $5 million round
of financing. Where relevant, we have indicated items that will require
additional financing to complete, whether from this offering or subsequent
rounds of financing.
Phase One
If we obtain funding from the sale of shares in this offering, we will be able
to move forward with the initial phase of our business plan, Phase One.
Executing our business plan will significantly change our cash needs and monthly
burn rate. Regardless of the amount of proceeds we raise in this offering, we
will need to raise substantial additional funds to implement our business plans,
and there can be no assurance that we will be successful in raising these
additional funds, in which case our investors would lose all of their
investment. Even if we are unsuccessful in raising funds in this offering, we
believe we will have sufficient funds available to maintain Atomic Paintball as
a fully reporting company with the Securities and Exchange Commission and
maintain the current limited level of operations, although we will require
additional funds before we can move forward with our business plan.
12
In the first three months following completion of this offering, for the
execution of the initial phase of our business plan, we will seek to establish
temporary corporate offices, conduct a feasibility study related to potential
paintball field locations, and engage in limited marketing and promotions
activities. Our most important goal will be development of a unified corporate
and operating structure (including training manuals, policies and procedures,
hiring criteria, internal accounting controls, and operational manuals for
individual locations) that would enable us to manage multiple paintball play
facilities (which facilities will only be opened after we raise additional funds
as described below). Management expects to cover these initial expenses with the
proceeds from this offering, which are included under feasibility study and
marketing expenses and in the Use of Proceeds section. We will also continue to
file our required reports with the Securities and Exchange Commission to
maintain our status as a reporting company. During this initial three-month
period, we will also seek to raise our next round of financing in order to
pursue the implementation of the next phase of our business plans, Phase Two.
The following is a more detailed breakdown of our proposed monthly activities
during Phase One, assuming we raise the full $200,000 we are seeking from this
offering:
o Month One: We intend to interview candidates for our corporate
management team. We also intend to commence our feasibility studies to
address logistical and demographical concerns in order to determine
appropriate locations for each of our proposed facilities and
including computer assisted drafting (CAD) plans for our proposed
paintball facilities. We will develop our Internet strategies,
including e-commerce sales of equipment, gear and clothing, and our
marketing strategies for tournament and league play to increase foot
traffic to our facilities.
o Month Two: We will continue to interview and start to hire our
corporate management team. The initial members of our corporate
management team will be responsible for implementation of the
following items:
1. Establishment of corporate offices
2. Establishment of relationships including, but not limited to:
a. Payroll services
b. Corporate Insurance services
c. Banking services
d. Federal, state and local tax authorities
3. Establish employee compensation plans, including
a. Employment agreements
b. Compensation structures
c. ISO plans
d. Benefit plans
o Month Three: We will begin to interview candidates for our facilities
management team. Our corporate management team will be responsible for
development and implementation of the following additional items:
1. Establish initial operating policies and procedures corporately
and for multiple paintball facilities
2. Establish accounting structure and policies for multiple
facilities
3. Seek to close additional rounds of capital
4. Assist in recruiting additional executive level and
administrative staff including through the efforts of an
executive search firm (which we would pay when we hire the
employees during Phase Two).
In the event we raise only 25% of the funds we are seeking in this offering, or
$50,000, our activities during Phase One will be limited to filing our SEC
reports to maintain our status as a reporting company and very limited travel
and administrative expenses in order to pursue additional funding. We would not
engage in any of the other activities set forth in Phase One above.
In the event we raise only 50% of the funds we are seeking in this offering, or
$100,000, our activities during Phase One will be limited to filing our SEC
reports to maintain our status as a reporting company, hiring one staff member,
obtaining a smaller temporary office space, engaging in a more limited
preliminary feasibility study and marketing activities, development of our web
site, and very limited travel and administrative expenses in order to pursue
additional funding.
Phase Two
Phase Two will commence after we have raised an additional $5 million in funds.
During the next nine months of our business plan, we will seek to raise an
additional $10 million in capital resources to acquire land and improvements to
expand into multiple paintball facility locations, for marketing and promotions
to increase public awareness of our operations, in order to increase foot
traffic to our facilities, and to make Atomic Paintball operational. This phase
will require substantial additional capital. We wish to remind investors that
there is no guarantee that we will be able to secure any financing or customers.
13
Over these nine months of Phase Two, we expect our primary expenses to be
associated with continuing our feasibility studies for real estate acquisitions
for paintball facility locations, hiring executive and senior management with
expertise in the paintball business (although this expense will not be incurred
until such time as we have raised additional funds), continuing to implement our
business plan, and maintaining our status as a reporting entity.
The following is a more detailed breakdown of our proposed monthly activities
during Phase Two, assuming we raise the full $5,000,000 we are seeking in the
later offering:
Months One through Three: During the first three months of Phase Two we intend
to take the following actions:
o raise an additional $5,000,000 in a Class B Convertible Preferred
Stock private placement to further the development of Atomic Paintball
and our operations.
o further develop atomicpaintball.com as an e-commerce portal and
commence operations as an online venue.
o finalize concept and architectural designs, feasibility, and cost
analysis of the paintball facilities.
o begin researching real estate venues for placement for initial ten
facilities.
o further develop and establish tournament series and league play
frameworks in order to increase visibility of our brand and increase
foot traffic.
o begin cost analysis on the establishment of a professional paintball
team under management of Atomic Paintball.
o begin to establish vendor relationships and contracts to supply
product and amenities for the initial ten facilities.
Months Four through Six: During the next three months of Phase Two we intend to
take the following actions
o raise approximately $10 million in a Class C Preferred Stock or debt
securities (secured by the real estate underlying the first ten
paintball facilities) in order to purchase and develop the real
property for our initial ten paintball facilities.
o commence construction of our first ten paintball facilities.
o finalize vendor contracts and begin inventory build-up in anticipation
of construction completion.
o finalize policy and procedure documentation for facility operations.
o establish corporate network operations and data warehousing in
anticipation of construction completion.
Month Seven through Nine: During the next three months of Phase Two we intend to
take the following actions
o start the process of hiring facility managers for the initial ten
paintball facilities.
o hire the facility managers for our initial ten paintball facilities
with the hiring process beginning in month eight.
o complete construction on the initial ten facilities.
o hire support staff for our initial ten paintball facilities, with the
hiring process beginning in the middle of month nine.
o begin a media campaign to promote and establish our brand and
facilities in the local markets.
o acquire inventory on site in anticipation of facilities opening.
o test all policies and procedures and revise them as required before
opening facilities.
o hold grand opening events at our first ten paintball facilities.
Reasons for this Offering
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.
14
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.
15
DESCRIPTION OF BUSINESS
General
Atomic Paintball, Inc. was incorporated under the laws of the State of Texas on
May 8, 2001. Atomic Paintball was formed for the purpose of providing
facilities, services and products in connection with paintball sport activities.
As of the date of this Prospectus, we are a development stage company with no
revenues or operations, and we have achieved net losses of approximately $88,000
since inception. We have relied solely on sales of our securities and loans from
officers, directors and shareholders to fund our operations. As of the date of
this Prospectus, Atomic Paintball has not commenced significant operations.
Atomic Paintball is in the process of raising financing to execute our business
plan and fund future operations. As such, Atomic Paintball is considered to be
in the development stage.
Our primary activities to date have consisted of organizing Atomic Paintball,
conducting an initial round of private financing to obtain "seed" capital and
beginning the process of designing and implementing our business plan, including
interviews with industry participants, visits to paintball facilities, locating
a website development firm, architectural firm, trademark attorneys, and
suppliers of paintball markers, paintballs, and equipment, as well as real
estate brokers. We have not engaged any of these vendors and do not intend to
engage them until we have raised additional funds in this offering and following
this offering. We believe, however, that these meetings have provided us with
additional due diligence on field construction, placement and operations and
supply chains such that when we have raised additional funds in this offering
and after this offering, we can move forward with the initial and second phases
of our business plan discussed in Management's Discussion and Analysis or Plan
of Operations, and below. We did not spend any funds on research and development
activities in the fiscal years ended December 31, 2003 and December 31, 2002,
respectively.
Our plan is to own and operate paintball facilities and to provide services and
products in connection with paintball sport activities at our facilities and
through our website. Our proposed facilities will each include four fully
enclosed paintball fields (including one tournament-sized and three smaller
fields), a pro shop for equipment and merchandise sales, an equipment rental
facility, a players' lounge, a covered picnic area, indoor restrooms, an
air-conditioned meeting room, and a concession stand.
Through the proceeds raised from this offering and our prior private placement,
we expect to be able to conduct a feasibility study, obtain temporary office
space, maintain our status as a reporting company with the Securities and
Exchange Commission (in the event we become a reporting company, as to which
there can be no assurance), establish and improve our website and establish
relationships with other paintball vendors. Following that, as described in
Management's Plan of Operations, in Phase Two, we intend to acquire land and
construct our initial ten paintball facilities, which will require completion of
additional rounds of financing. We anticipate that we will open our first
paintball facilities in 2005 and begin to generate revenues from our facilities
at that time, if we are successful in completing our business plans, raising
additional funds, and acquiring and constructing our facilities.
Description of our proposed facilities
We intend to locate our first ten paintball facilities in Texas, including five
facilities in the Dallas/Fort Worth area and five facilities in the Houston,
Texas area. Although we have not determined the exact prototype for the
facilities, the general layout of our proposed facilities is as follows:
Each proposed facility will include four netted, outdoor paintball playing
areas, each simulating different types of obstacles and various levels of
challenge, with each field consisting of approximately 75 x 150 square feet of
playing space. The netting will prevent any paintballs from leaving the field
while keeping the weather conditions from entering the field. This will allow
the players and spectators to safely enjoy the outdoor environment and the
paintball activities while being shielded from the elements.
Each proposed facility will also include a 2,000 square feet building housing
the pro shop, rental facility, concession area, meeting area, and restrooms. The
pro shop will display paintball related products, clothing and accessories for
player purchase with attendants available to answer players' questions about
product enhancements, assembly, and repair of paintball equipment. Our rental
facility will be located in the rear of the building with visibility to the
playing fields. The location of the rental facility will decrease the amount of
time a player spends refilling tanks and purchasing more paint in order to
return to play. The rental location will house 200 to 300 rental guns, paintball
masks, paint, and six 80 pound Co2 tanks for refilling players' air guns.
Each facility will provide indoor restrooms, a concession stand, and an all
weather surface parking area for 200 vehicles at any one time. An observation
area will be established with bleacher seating between playing areas so that
friends and onlookers can view the games. This will provide a vantage point for
the field operator to control and monitor the games and enforce safety
regulations. This 5-acre facility will also feature 1,000 square feet of covered
picnic tables for dining and relaxing between games. Netting will be used to
divide these sections and enhance player safety.
16
Our proposed sources of revenues
We intend to generate revenues through:
o Session Fees: Each paintball session will cost $25 per person,
including the rental of equipment, and will last 4 hours per session.
o Equipment Rental: If a participant does not own their own equipment,
they may rent the equipment for an average fee of $20 per person. This
includes the gun (also called a marker) and the mask. These rental
items will cost Atomic Paintball an average of $100 to purchase and
will include models on the low-end, middle-end, and high-end to offer
variety for the players and potentially boost pro shop sales of
equipment in the process.
o Paintball Sales: A large portion of Atomic Paintball's revenues will
be generated through sales of the paintballs used in the games. We
believe that an average paintball participant will use $40 worth of
paintballs in a session.
o Pro Shop Equipment Sales: Many players prefer to own their own
equipment, such as guns (markers) and masks. The prices for guns range
from $40 for the low-end model to $1,600 for the high-end model. The
average price for a mask is $60. We intend to determine the exact
product mix that we will carry in our pro shops in 2004. In order to
find the right product mix, we will conduct extensive research on
established paintball pro shops and websites.
o Pro Shop Merchandise Sales: The pro shops will also carry a variety of
Atomic Paintball merchandise, such as hats, t-shirts, sweatshirts,
beer mugs, shot glasses, key chains, etc. The prices for this
merchandise will vary depending on the product.
o Concession Stands: The concessions stand will carry a variety of food
items, such as bottled soda and water, chips, candy, etc. - the basic
convenience store type food. The prices for this merchandise will vary
depending on the product.
o Website Sales: Our website will also sell equipment, such as guns and
masks, and merchandise, such as t-shirts and hats, similar to those
sold in our pro shop, but with three added advantages:
o The website can carry a fuller line of products since it is not
restricted by physical space.
o The website will also serve as a valuable marketing tool for the
physical locations, allowing people to find out about session
fees, Atomic Paintball locations and directions, equipment rental
fees, joining a league, and other information related to Atomic
Paintball and the paintball sport.
o We believe that our website sales will also give Atomic Paintball
a good indication of the top selling items, allowing the pro shop
to carry the best choices in products.
Although the other amenities, such as the players' lounge and picnic areas, will
not be direct revenue generators, we believe that the inclusion of these
amenities at each Atomic Paintball facility will increase the overall customer
appeal and lead to valuable referrals and repeat business.
As a standard operating procedure, all paintball participants must purchase
Atomic Paintball's paintballs in order to play on our fields, whether they bring
in their own equipment or rent from Atomic Paintball. The reason for this policy
is two-fold:
o The first, and foremost, reason is customer safety. Atomic Paintball
needs to ensure that no one has altered the consistency of the
paintball, such as freezing the paintballs, prior to the game. This
policy will help to ensure the safety of Atomic Paintball's
facilities.
o The second reason is profit. We believe that Atomic Paintball's most
profitable item will be the paintballs - they have the greatest markup
and they are used the most frequently. Most paintball participants
will go through an average of $40 worth of paintballs per session.
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.
17
Our proposed paintball game operations
We intend to offer customers the opportunity to participate in paintball games
on a daily basis for walkup or group reservations, league play for local
paintball league organizations, tournament series play, and special group
events.
We expect to conduct paintball games at our facilities on a daily basis, for
walk up traffic and individuals and groups who reserve playing time at our
fields. We also intend to host games for players who are involved in local
paintball leagues on a weekly basis. We also intend to host tournament series
events for regional and national paintball tournament sponsors. We anticipate
that these tournament events would be playoff type events held over three days
and would be held at each location two or three times per year. Finally, we
expect to hold special group events consisting of paintball games for
corporations, church groups and similar organizations.
Although we will be open for business on a daily basis, we believe that the
majority of our customer traffic will be on the weekends.
Our proposed 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. 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 Atomic Paintball. 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. We anticipate that
employees that we will hire will perform most of our web site development and
operation activities and that funds for the salaries of these employees will be
raised in Phase Two of our plan of operations. We have allocated $3,000 of the
proceeds from this offering for preliminary website design services ($2,600) and
for hosting fees (approximately $240 per year).
Our website will also serve as a marketing tool for our physical paintball field
locations, allowing people to find out about session fees, Atomic Paintball
locations and directions, equipment rental fees, joining a league, and other
information related to Atomic Paintball and the paintball sport.
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.
18
Feasibility Study
We intend to engage architects and real estate consultants to conduct a
feasibility study to address logistical and demographical concerns in order to
determine appropriate locations for each of our proposed facilities. The planned
feasibility study will address such factors as:
1. major traffic areas;
2. highly populated areas;
3. established community centers;
4. businesses and governmental facilities;
5. other Atomic Paintball facilities;
6. direct competitors; and
7. other high-traffic and high-profit companies
During the feasibility study, research will be collected from the local traffic
advisory boards and traffic associations to determine where the highest traveled
intersections and areas are in relation to the proposed locations. These
statistics will be key indicators as to the potential success of each location.
The feasibility study will also pinpoint where the high growth areas are
migrating towards so that Atomic Paintball can attempt to secure locations in
the direct path of the anticipated growth avenues.
Since one of Atomic Paintball's goals is to make the sport of paintball more
travel-friendly and logistically convenient, Atomic Paintball will look to
secure the location sites near community centers, such as shopping centers,
restaurant developments, civic centers, colleges, and universities.
Beyond the initial ten units, Atomic Paintball will rely on both the feasibility
study and the information we obtain from the operation of our initial ten
paintball facilities to determine the optimum locations for and the best
distance between Atomic Paintball's new units.
Because logistical convenience is a key component to our strategy, our
feasibility study will include analysis of the following factors:
o What is the travel timeframe from nearby centers of population? In
determining each location, Atomic Paintball will look to purchase real
estate that is near high traffic areas and near large population
centers. Atomic Paintball wants to distance itself from the typical
"mom and pop" model that locates their facilities out in the country,
sometimes an hour away from the nearest major city. Atomic Paintball
will look to develop its facilities in areas that have a substantial
volume of pass-by traffic, to aid in the convenience of Atomic
Paintball's locations and to be within easy reach of local traffic.
o How close are the facilities to centers of commerce? The proximity of
local centers of commerce, such as downtown areas, shopping centers,
outlet malls, and business parks will also be a deciding factor in
location. We intend to target corporate, churches and other social
groups for events and sponsorships; therefore, our facilities should
be close to these groups. In addition, Atomic Paintball will locate
the facilities near large shopping outlets in order to take advantage
of the pass-through traffic as well as consistently appeal to the
youthful markets that normally frequent shopping areas.
o How close are the facilities to highway exits? The third and final
aspect that Atomic Paintball will analyze is proximity to highway
exits and intersections. Atomic Paintball will attempt to establish
locations that use the interstate traffic and pass-by advertising that
often accompany highways. By placing our facilities near highway
areas, our facilities will be much more accessible to nearby towns and
cities and we will use this as a draw to get participants from outside
communities to frequent our facilities. This influx of customers from
outside communities would allow for an easier avenue of expansion,
because Atomic Paintball's name and service offerings would already
have a semi-established base.
19
Other considerations regarding the exact site locations will include: the
proximity of other Atomic Paintball locations, the proximity of the direct
competitors to each Atomic Paintball facility, and the track-records and
longevity of the other companies located in the area.
Competition
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 although a number of companies have recently
announced plans to open multiple paintball facilities in other parts of the
United States. 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.
Many of our competitors and potential competitors have longer operating
histories and significantly greater financial, technical, sales, marketing and
other resources, as well as greater name recognition and a larger customer base,
than we do. Our competitors could offer paintball games and equipment at lower
prices than we are able to.
In terms of the pro shop merchandise sales, there are other companies across the
country that retail paintball merchandise at competitive prices both online and
in retail stores. These companies offer competitively priced basic paintball
equipment, supplies, and apparel; however, we believe that we will be able to
compete effectively with sales at our paintball facilities' pro shops because we
will allow the end-user to touch and feel each product and play with them
immediately, where the "strictly Internet" companies and retailers not
associated with playing fields can not.
We are not aware of any direct competitors in the paintball game industry with
more than two locations in the Dallas/Fort Worth or Houston areas. There are a
number of competitors with single location paintball fields. We intend to
compete on the basis of economies of scale from having multiple locations.
20
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 one acre field that we
may develop for special competitive events at 3740 South Highway 287,
Waxahachie, Texas. The field is in good condition and would require estimated
build-out expenditures of $100,000 to prepare it for paintball play, which would
not come from the proceeds of this offering but would be part of Phase Two of
our plan of operations, if we determine to use this field as one of our
paintball facilities after our feasibility studies are completed. The field also
has space for parking. The leased premises are part of a larger parcel that
includes a storage and office facilities owned by the lessor. Pursuant to this
lease agreement, the lessor and owner of the land and storage facilities, Alton
Smith, has agreed to allow us to place many of our paintball products in the
storage buildings, because we and the lessor believe that paintball customers
would be potential customers of the storage business, and the storage customers
would be potential paintball customers. We believe that the location will allow
us to showcase our merchandise while still performing the basic function of
storing the merchandise in the open areas of the storage facility offices. We
believe that the office facilities of the storage business could also serve as
paintball equipment rental facilities, a shop for sale of paintball products and
a staging area for players to prepare to play on the field, and that we could
obtain an agreement to permit these uses if desired. The initial term of this
lease was for one year, and we have renewed the lease for an additional one year
period, with two remaining renewal terms of one year each. The rental payments
are one dollar for every person who plays paintball or purchases paintball
products at the leased and adjacent premises. We have not made any rental
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 (including the construction of culverts to
permit access to adjacent roads and parking lot improvements). 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 incurred costs of approximately $9,000 to construct the
improvements, which were financed from our working capital received from the
$10,900 loans from our officer and director, Barbara J. Smith.
We have no assurances as to how long we will be able to maintain this
relationship; if this relationship were ended, we would have to spend money to
obtain a suitable storage space or store the equipment at another location owned
by Mr. or Ms. Smith at minimal or no cost, though we would lose the use of the
improvements and have to record a write-down of our assets in the amount of
approximately $5,200.
21
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Ms. Barbara J. Smith, age 45, has served as our President, Treasurer and
Chairman of our Board of Directors since our inception in May 2001. Since prior
to June 1999, Ms. Smith was a student at DeVry University where she received her
Bachelor of Science degree in 2003. Ms. Smith serves as our principal executive,
financial and accounting officer. Ms. Smith is the wife of Mr. Alton K. Smith,
our Vice President and Secretary.
Mr. Alton K. Smith, age 45, has served as our Vice-President and Secretary since
our inception in May 2001. From November 1998 until October 2003, Mr. Smith
served as a Senior Systems Engineer/Global Systems Integration (where he was
responsible for executive level technology consulting) for Cisco Systems, a
leading provider of networking equipment and services for the Internet. Since
October 2003, Mr. Smith has also served as President and a director of INTREorg
Systems Inc., an information technology consulting firm he founded. Mr. Smith is
the husband of Ms. Barbara J. Smith, our President and director.
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 two employees, Barbara Smith and Alton Smith. At present, we
do not pay salary to Ms. Smith or Mr. Smith, but Ms. Smith and Mr. Smith each
owns a significant amount of our common stock. Although we have no current,
definite plans for paying Ms. Smith or Mr. 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. 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 1,200,000 0 0
(1) Represents shares issued to our President in lieu of $3,600 in services
rendered to Atomic Paintball.
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 four years from the date of
grant.
22
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The founders of Atomic Paintball are our President and sole director, Barbara J.
Smith, and our Vice President and Secretary, Alton K. Smith, who are husband and
wife.
Effective May 8, 2001, we issued a total of 200,000 shares of our common stock
to the founders of Atomic Paintball in exchange for an initial investment of
$1,000 to cover our organizational expenses. Barbara J. Smith received 120,000
shares of our common stock in exchange for her initial investment of $600 and
Alton K. Smith received 80,000 shares of our common stock in exchange for his
initial investment of $400.
On June 20, 2001, Atomic Paintball 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. Barbara J. Smith received 360,000 shares of our common stock
in exchange for her services valued at $3,600 and Alton K. Smith received
240,000 shares of our common stock in exchange for his services valued at
$2,400.
Our director and President, Barbara J. Smith, loaned us a total of $10,900
between April and July of 2002, to pay for further research and development and
for general corporate overhead. This loan bears interest at an annual rate of
6.5% and is payable July 15, 2004 and is convertible into shares of our common
stock at $0.125 per share. We intend to pay Ms. Smith $12,416 in full payment of
this loan, including interest, out of the proceeds of this offering if at least
50% of the shares we are offering are sold.
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
of one year each. The rental payments are one dollar for every person engaging
in "Paintball Play Revenues", which include rentals, concessions, fees, or other
revenues relating to paintball activities conducted on this leased property. 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 bears interest at an annual rate of 8% and was payable on demand. This note
and accrued interest was repaid in April 2004 out of the proceeds of the private
placement. Mr. Smith also loaned us $7,500 in November 2003, pursuant to a
promissory note which bore interest at an annual rate of 8%. This note and
accrued interest were repaid in December 2003 out of the proceeds of the private
placement.
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.
23
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of June 30, 2004, Atomic Paintball has issued and outstanding 800,000 shares
of Common Stock and 400,000 shares of Series A Convertible Preferred Stock. The
shares of Series A Convertible Preferred Stock are convertible into 800,000
shares of Common Stock, which are included in the Shares of Common Stock in the
table. There is no other class of voting security of Atomic Paintball issued or
outstanding. The following table sets forth the number of shares of Common Stock
beneficially owned as of June 30, 2004 by (i) each person known to Atomic
Paintball to beneficially 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 June
30, 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 Percent
Number of Percent Number of Percent of Class After
Name and Address Shares Owned Of Class Shares Owned Of Class Offering (1)
- ------------------------------ ------------ ------------ ------------ ------------ --------------
Barbara J. Smith (2) 1,287,200 62.0% 45.9%
Alton K. Smith (3) 800,000 38.0% 32.3%
David Myers (4) 40,000 10.0% 80,000 5.0% 0%
727 Yellowstone Dr.
Allen, TX 75002
Charles J. Webb &
Brenda D. Webb (JTWROS) (5) 61,000 15.25% 122,000 7.6% 0%
1101 E. Duke Street
Hugo, OK 74743
Don Mark Dominey (6) 240,000 60.0% 480,000 30.0% 0%
6 Valley Wood Ct.
Trophy Club, TX 76262
All officers and directors
as a group (2 people) (7) 2,087,200 100.0% 78.2%
(1) Assumes all shares being offered are sold by the Company and the selling
stockholders.
(2) Includes 720,000 shares subject to currently exercisable options and 87,200
shares issuable upon conversion of a promissory note.
(3) Includes 480,000 shares subject to currently exercisable options.
(4) Common shares consists of 80,000 shares that are issuable upon the
conversion of Series A Convertible Preferred Stock.
(5) Common shares consists of 122,000 shares that are issuable upon the
conversion of Series A Convertible Preferred Stock.
(6) Common shares consists of 480,000 shares that are issuable upon the
conversion of Series A Convertible Preferred Stock.
(7) 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.
24
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 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 Atomic Paintball.
Upon any liquidation, dissolution or winding-up of Atomic Paintball, 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 Atomic Paintball.
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.
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.
25
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.
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.
26
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.
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.
27
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 OTCBB. To be eligible to have our common stock quoted on the OTCBB, 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. While we hope to have prices for our shares quoted on
the OTCBB after we complete our offering, there is no guarantee that the prices
for our shares will be quoted on the OTCBB.
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 June 30, 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.
28
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 Atomic Paintball 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
Atomic Paintball 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.
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.
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.
29
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 Atomic
Paintball 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.
Some of the selling stockholders, who collectively own 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 OTCBB or otherwise traded (though there is no
guarantee that the shares will be quoted on the OTCBB) 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;
- - 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 Atomic Paintball, 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.
30
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.
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.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us by
David Allen Wood, P.C., Dallas, Texas.
31
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.
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.
32
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
F-2
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
Preferred Stock Common 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 January
1, 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.
(a Development Stage Company)
TABLE OF CONTENTS
Page
----
Unaudited Interim Financial Statements
Interim Balance Sheet...................................................F-14
Interim Statements of Operations........................................F-15
Interim Statements of Cash Flows........................................F-16
Notes to Interim Financial Statements ..................................F-17
F-13
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
UNAUDITED INTERIM BALANCE SHEET
March 31, 2004
ASSETS
------
Current assets
Cash $ 1,001
Interest receivable 362
Other receivable 1,784
---------
Total current assets 3,147
Property and equipment, net 5,246
---------
Total assets $ 8,393
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable $ 23,226
Notes payable to related parties 22,540
---------
Total liabilities 45,766
STOCKHOLDERS' DEFICIT
Preferred stock, no par value; 2,000,000 shares authorized:
Series A Convertible Preferred Stock, no par value; 400,000
shares authorized; 400,000 issued and outstanding at
March 31, 2004, with a $0.25 per share liquidation
preference 100,000
Preferred stock subscription receivable (56,250)
Common stock, no par value; 10,000,000 shares authorized;
800,000 shares issued and outstanding
at March 31, 2004 7,000
Deficit accumulated during the development stage (88,123)
---------
Total stockholders' deficit (37,373)
---------
Total liabilities and stockholders' deficit $ 8,393
=========
The accompanying notes are an integral part of these financial statements.
F-14
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
UNAUDITED INTERIM STATEMENTS OF OPERATIONS
For the three months ended March 31, 2004 and 2003,
and the period from inception (May 8, 2001) through March 31, 2004
Three months Three months Period
ended ended from inception
March 31, March 31, through
2004 2003 March 31, 2004
-------------- -------------- --------------
Revenues $ -- $ -- $ --
General and administrative expenses 29,859 1,521 88,485
-------------- -------------- --------------
Net loss from operations (29,859) (1,521) (88,485)
Interest income 362 -- 362
-------------- -------------- --------------
Net loss $ (29,497) $ (1,521) $ (88,123)
============== ============== ==============
Net loss per common share - basic and diluted $ (0.04) $ (0.00)
============== ==============
Weighted average common shares outstanding -
basic and diluted 800,000 800,000
============== ==============
The accompanying notes are an integral part of these financial statements.
F-15
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
UNAUDITED INTERIM STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2004 and 2003,
and the period from inception (May 8, 2001) through March 31, 2004
Three months Three months Period
ended ended from inception
March 31, March 31, through
2004 2003 March 31, 2004
-------------- -------------- --------------
Cash flows from operating activities:
Net loss $ (29,497) $ (1,521) $ (88,123)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 265 1,314 5,053
Increase in note payable to related party
in lieu of payment of interest expense 377 177 1,706
Issuance of common stock for services -- -- 6,000
Changes in operating assets and liabilities
Interest receivable (362) -- (362)
Other receivable 1,999 -- (1,784)
Accounts payable 13,693 -- 23,226
-------------- -------------- --------------
Net cash used in operating activities (13,525) (30) (54,284)
Cash flows from investing activities:
Purchase of property and equipment (990) -- (10,299)
Cash flows from financing activities:
Proceeds from sale of common stock -- -- 1,000
Proceeds from sale of preferred stock 14,750 -- 43,750
Proceeds from notes payable to related parties -- -- 28,400
Payments on note payable to a related party -- -- (7,566)
-------------- -------------- --------------
Net cash provided by financing activities 14,750 -- 65,584
-------------- -------------- --------------
Net increase (decrease) in cash 235 (30) 1,001
Cash, beginning of period 766 3,423 --
-------------- -------------- --------------
Cash, end of period $ 1,001 $ 3,393 $ 1,001
============== ============== ==============
Supplemental information:
Cash paid for interest $ -- $ -- $ 67
============== ============== ==============
Cash paid for income tax $ -- $ -- $ --
============== ============== ==============
Schedule of non-cash financing and
investing activities:
Sale of preferred stock for notes receivable $ 56,250 $ -- $ 56,250
Issuance of stock for services to related parties $ -- $ -- $ 6,000
-------------- -------------- --------------
$ -- $ -- $ --
============== ============== ==============
The accompanying notes are an integral part of these financial statements.
F-16
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
March 31, 2004
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 - GOING CONCERN UNCERTAINTY
The Company is currently in the development stage and has generated no revenues.
The Company has incurred $88,123 in losses from its inception through March 31,
2004. In addition, at March 31, 2004, the Company's liabilities exceeded its
assets by $37,373, and it 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.
NOTE C - BASIS OF PRESENTATION
The accompanying financial statements of the Company have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information. The financial statements as of March 31, 2004
and for the three month periods ended March 31, 2004 and 2003 are unaudited and,
in the opinion of management, contain all adjustments necessary for the fair
presentation of the financial position and results of operations for the interim
period. These financial statements should be read in conjunction with the
Financial Statements and notes thereto included in the Company's Form SB-2 for
the year ended December 31, 2003. The results of operations for the three months
ended March 31, 2004 are not necessarily indicative of the results to be
expected for the entire year.
NOTE D -STOCKHOLDERS' EQUITY
Common Stock
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.
F-17
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
March 31, 2004
NOTE D -STOCKHOLDERS' EQUITY - (continued)
Preferred Stock
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 13, 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.
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 January
1, 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:
3 Months Ended March 31,
------------------------
2004 2003
---------- ----------
Net loss attributable to common
stockholders as reported $ (29,497) $ (1,521)
Add: Stock-based employee compensation
expense included in reported net loss -- --
Deduct: Stock-based employee compensation expense
determined under fair value based method (946) --
---------- ----------
Pro forma net loss $ (30,443) $ (1,521)
========== ==========
Net loss per common share, basic and diluted
As reported $ (0.04) $ (0.00)
========== ==========
Pro forma $ (0.04) $ (0.00)
========== ==========
F-18
ATOMIC PAINTBALL, INC.
(a Development Stage Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
March 31, 2004
NOTE D -STOCKHOLDERS' EQUITY - (continued)
Stock Based Compensation (continued)
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 E - SUBSEQUENT EVENTS
During April 2004, $25,000 was received in partial payment of a $50,000
promissory note issued for and secured by 200,000 shares of Series A Convertible
Preferred Stock. During May 2004, $6,250 was received in full payment of a
promissory note issued for and secured by 25,000 shares of Series A Convertible
Preferred Stock.
During April 2004, the Company paid $10,379 including interest in full
settlement of a demand note payable to a related party.
F-19
ATOMIC PAINTBALL, INC. [LOGO]
1,200,000 SHARES COMMON STOCK
NO PAR VALUE
PROSPECTUS
July __, 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 Atomic Paintball provide that Atomic Paintball 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 Atomic Paintball'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 Atomic Paintball could take the
position that this duty on behalf of Atomic Paintball 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 Atomic Paintball pursuant to Atomic
Paintball's Articles of Incorporation, Bylaws, Texas law or otherwise, Atomic
Paintball 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 Atomic
Paintball of expenses incurred or paid by a director, officer or controlling
person of Atomic Paintball 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, Atomic Paintball 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 Atomic Paintball of the
expenses of the offering:
SEC registration fee $ 206
Accounting fees and expenses* $20,000
Legal* $10,000
Trustees' fees $ 0
Transfer agent $ 3,000
Federal taxes $ 0
State taxes and fees $ 0
Costs of engraving and printing $ 100
Listing fees $ 0
Miscellaneous* $ 2,500
-------
Total $35,806
=======
* 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, Atomic Paintball 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 Atomic Paintball, consisting of 120,000 shares
to Barbara J. Smith in exchange for an initial investment of $600 and 80,000
shares to Alton K. Smith in exchange for an initial investment of $400. 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 Atomic Paintball and instead issued
shares to our founders, Ms. Smith and Mr. Smith. In addition, given our
founders' involvement in the establishment of Atomic Paintball, they had access
to such information as they deemed necessary to fully evaluate an investment in
Atomic Paintball. No underwriters were used in the offering.
On June 20, 2001, Atomic Paintball also issued 360,000 shares of our common
stock to Barbara J. Smith in exchange for services valued at $3,600, and 240,000
shares to Alton K. Smith in exchange for services valued at $2,400, based on the
Board of Directors' determination that the invoices submitted by Ms. Smith and
Mr. Smith for their services (based on the number of hours of services performed
times $8 per hour) were reasonable consideration for the shares. 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 Atomic Paintball and instead issued
shares to our founders, Ms. Smith and Mr. Smith, in exchange for services
rendered to Atomic Paintball. In addition, given our founders' involvement in
the establishment of Atomic Paintball, they had access to such information as
they deemed necessary to fully evaluate an investment in Atomic Paintball. No
underwriters were used in this offering.
Beginning in October 2003, we conducted a private offering of 800,000 shares of
Series A Convertible Preferred Stock of Atomic Paintball 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 Atomic
Paintball. 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 Atomic Paintball.
The following is a list of the persons to whom Atomic sold shares of Series A
Convertible Preferred Stock, the date on which Atomic sold the securities and
the amount of securities Atomic sold to each person:
Number of shares of
Name Date Series A Convertible Preferred Stock
- ---- ---- ------------------------------------
Fritz P. Barowsky February 15, 2004 72,000
Christie Ford Davis February 15, 2004 8,000
David Myers February 15, 2004 80,000
H.L. Palmer February 15, 2004 2,000
William J. Rogers and Sue E. Buck February 15, 2004 20,000
William Charles Wells February 15, 2004 16,000
Charles J. Webb and Brenda D. Webb February 15, 2004 122,000
Don Mark Dominey February 15, 2004 480,000
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
Atomic Paintball does not presently anticipate using an underwriter in
conducting this offering; if Atomic Paintball changes its plan and utilizes an
underwriter, Atomic Paintball 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 Atomic Paintball pursuant to Atomic Paintball's Articles of Incorporation,
Bylaws, Texas law or otherwise, Atomic Paintball 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 Atomic Paintball of expenses incurred or paid by a director,
officer or controlling person of Atomic Paintball 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, Atomic
Paintball 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 August 2, 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 (Principal Executive,
Financial and
Accounting Officer)
(Date) August 2, 2004.