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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 15, 1999
AURIC ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 91-1950699
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification Number
10 Office Park Rd, Suite 222,
Carolina Building, Hilton Head, SC 29928
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (843) 686-5590 31
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Item 1. Changes in Control of Registrant - On November 15, 1999 Auric
entered into an Agreement and Plan of Reorganization with Freedom Golf
Corporation, a Colorado corporation. Pursuant to the Agreement and
Plan of Reorganization, Auric is acquiring 100% of Freedom in exchange
for the initial issuance of 9,820,206 Auric Common Shares to the
current shareholders of Freedom. As a result, the control of Auric
will be transferred to the shareholders of Freedom.
Item 2. Acquisition or Disposition of Assets. - None
Item 3. Bankruptcy or Receivership. None.
Item 4. Changes in Registrant's Certifying Accountant. None.
Item 5. Other Events. None
Item 6. Resignation of Registrant's Directors. None
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Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Freedom Golf Corporation
We have audited the accompanying balance sheet of Freedom Golf
Corporation as of September 30, 1999, and the related statements of
operations, changes in stockholders' equity, and cash flows for
each of the two years then ended. 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
audit.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Freedom
Golf Corporation as of September 30, 1999, and the results of its
operations, and its cash flows for each of the two years then
ended, in conformity with generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Englewood, Colorado
4-Nov-99
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Freedom Golf Corporation
Balance Sheet
September 30, 1999
ASSETS
Current assets:
Cash $ 246
Accounts receivable - trade, net of allowance for
doubtful accounts of $2,281 746
Inventory 48,185
Prepaid expenses and deposits 30,524
----------
Total current assets 79,701
Property and equipment, at cost, net of
accumulated depreciation of $4,768 7,171
Deposit 2,000
Patents, net of accumulated amortization of $7,778 92,222
----------
$181,094
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - bank 20,945
Notes payable - others 140,626
Accounts payable - trade 43,971
Advances from officer 17,653
Accrued salaries 232,500
Accrued interest 6,092
----------
Total current liabilities 461,787
Stockholders' equity:
Common stock, no par value,
100,000,000 shares authorized,
9,694,880 shares issued and outstanding 1,288,080
Unearned services (201,389)
Accumulated deficit (1,367,384)
----------
(280,693)
----------
$181,094
See accompanying notes to financial statements.
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Freedom Golf Corporation
Statements of Operations
Years Ended September 30, 1999 and 1998
1999 1998
Sales, net $ 88,736 $ 38,953
Cost of sales 94,837 8,847
---------- ----------
Gross profit (loss) (6,101) 30,106
Selling, general and administrative expenses 672,595 454,929
---------- ----------
(Loss) from operations (678,696) (424,823)
Other income and (expense):
Interest expense (17,836) (15,461)
Other income 39 174
---------- ----------
(17,836) (15,287)
(Loss) before income taxes (696,532) (440,110)
Provision for income taxes - -
---------- ----------
Net (loss) $ (696,532) $ (440,110)
Basic and fully diluted (loss) per share:
Net income (loss) $ (0.10) $ (0.07)
Weighted average shares outstanding 7,106,240 6,111,675
See accompanying notes to financial statements.
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Freedom Golf Corporation
Statement of Stockholders' Equity
Years Ended September 30, 1999 and 1998
<CAPTION
Common Unearned Accumulated
Shares Amount Services Deficit Total
Balance at September 30, 1997 5,884,600 $ 160,060 $ - $ (230,742) $ (70,682)
Common stock sold for cash 367,400 145,643 - - 145,643
Compensation value of stock
sold at discounted price - 38,057 - - 38,057
Common stock issued for services 215,600 115,300 - - 115,300
Net (loss) for the year - - - (440,110) (440,110)
----------- ----------- ----------- ---------- ----------
Balance, September 30, 1998 6,467,600 459,060 - (670,852) (211,792)
Common stock sold for cash 1,139,280 239,720 - - 239,720
Compensation value of stock
sold at discounted price - 77,800 - - 77,800
Stock issue costs - (8,000) - - (8,000)
Common stock issued for services 1,932,400 468,800 (201,389) - 267,411
Common stock issued for interest 100,000 25,000 - - 25,000
Common stock issued for debt conversion 45,600 25,700 - - 25,700
Net (loss) for the year - - - (696,532) (696,532)
----------- ----------- ----------- ---------- ----------
Balance, September 30, 1999 9,684,880 $ 1,288,080 $ (201,389) $(1,367,384 $ (280,693)
See accompanying notes to financial statements.
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Freedom Golf Corporation
Statements of Cash Flows
Years Ended September 30, 1999 and 1998
1999 1998
Net income (loss) $ (696,532) $ (440,110)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 8,151 3,363
Stock issued for services 337,211 153,357
Stock issued for interest 25,000 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (528) (221)
(Increase) decrease in inventory 1,864 (27,455)
(Increase) decrease in prepaid expenses (30,524) -
Increase (decrease) in accounts payable 709 39,296
Increase (decrease) in accrued salaries 78,800 103,585
Increase (decrease) in accrued expenses (508) 7,159
---------- ---------
Total adjustments 420,173 279,084
---------- ---------
Net cash provided by
operating activities (276,357) (161,026)
---------- ---------
Cash flows from investing activities:
Purchase of license agreement - (100,000)
Acquisition of property and equipment (2,727) (552)
Increase in lease deposit (1,000) (1,000)
---------- ---------
Net cash (used in) investing activities (3,727) (101,552)
---------- ---------
Cash flows from financing activities:
Common stock sold for cash 239,720 145,643
Proceeds from bank loan - 25,282
Repayment of bank loan (3,799) (538)
Officer aadvance 5,500 -
Repayment of officer loans (6,154) (9,787)
Proceeds from notes payanle 173,624 164,900
Repayment of notes payable (128,561) (63,473)
---------- ---------
Net cash (used in)
financing activities 280,330 262,027
---------- ---------
Increase (decrease) in cash 246 (551)
Cash and cash equivalents,
beginning of period - 551
---------- ---------
Cash and cash equivalents,
end of period $ 246 $ -
See accompanying notes to financial statements.
Freedom Golf Corporation
Statements of Cash Flows
Years Ended September 30, 1999 and 1998
1999 1998
Supplemental cash flow information:
Cash paid for interest $ 10,661 $ 10,599
Cash paid for income taxes $ - $ -
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Freedom Golf Corporation
Notes to Financial Statements
September 30, 1999
Note 1. Organization and Summary of Significant Accounting Policies.
The Company was incorporated in Colorado on December 18, 1996 and has
elected to be taxes as a "C" corporation. The Company has developed
and is marketing a line of custom fitted golf clubs. Limited sales of
the Company's products began in 1998. The Company has chosen
September 30th as the end of its fiscal year.
Inventory:
Inventory is valued at the lower of cost or market on a first-in
first-out basis and consists primarily of finished goods, which
includes fully assembled golf clubs and promotional items and raw
materials for the assembly of additional golf clubs.
Property, Plant and Equipment:
Property, plant and equipment are recorded at cost and are
depreciated based upon estimated useful lives using the straight-line
method. Estimated useful lives range from 3 to 5 years for furniture
and fixtures and from 5 to 10 years for equipment.
Revenue Recognition:
Revenue is recognized at the time the product is delivered or the
service is performed. Provision for sales returns will be estimated
based on the Company's historical return experience.
Intangible Assets and Long Lived Assets:
The Company makes reviews for the impairment of long-lived assets and
certain identifiable intangibles whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Under SFAS No. 121, an impairment loss would be
recognized when estimated future cash flows expected to result from
the use of the asset and its eventual disposition is less than its
carrying amount. No such impairment losses have been identified by
the Company for the period ended September 30, 1999.
Cash:
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with maturity of three
months or less to be cash equivalents.
Estimates:
The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
Advertising costs:
Advertising costs are charged to operations when the advertising
first takes place. Advertising costs charged to operations were
$76,720 and $87,928 for the years ended September 30, 1999 and 1998
respectively.
Fair value of financial instruments
The Company's short-term financial instruments consist of cash and
cash equivalents, accounts and loans receivable, and payables and
accruals. The carrying amounts of these financial instruments
approximates fair value because of their short-term maturities.
Financial instrument that potentially subjects the Company to a
concentration of credit risk consists principally of cash. During
the year the Company did not maintain cash deposits at financial
institutions in excess of the $100,000 limit covered by the Federal
Deposit Insurance Corporation. The Company does not hold or issue
financial instruments for trading purposes nor does it hold or issue
interest rate or leveraged derivative financial instruments
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No.
123 (FAS 123), Accounting for Stock-Based Compensation at its
inception. Upon adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation plans
using the intrinsic value method prescribed by APB No. 25, Accounting
for Stock Issued to Employees. The Company paid stock based
compensation during the years ended September 30, 1999 and 1998 as
described in Note 4.
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New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes
guidelines for all items that are to be recognized under accounting
standards as components of comprehensive income to be reported in the
financial statements. The statement is effective for all periods
beginning after December 10, 1997 and reclassification financial
statements for earlier periods will be required for comparative
purposes. The adoption of SFAS No. 130 has had no impact on the
Company, as the Company has not engaged in transactions that would
generate other comprehensive income as defined in the statement.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-
1"). SOP 98-1 provides authoritative guidance on when internal-use
software costs should be capitalized and when these costs should be
expensed as incurred. The Company adopted SOP 98-1 at its inception.
The adoption of SOP 98-1 has had no impact on the Company, as the
Company has not engaged in transactions that would are whose
accounting treatment is prescribed by the statement.
Effective December 31, 1998, the Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting
for Segments of a Business Enterprise. SFAS 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating
segments in interim financial reports. SFAS 131 also establishes
standards for related disclosures about products and services,
geographic areas, and major customers. To date, the Company has
operated in one business segment as defined by the statement.
Effective December 31, 1998, the Company adopted the provisions of
SFAS No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits ("SFAS 132"). SFAS 132 supersedes the disclosure
requirements in SFAS No. 87, Employers' Accounting for Pensions, and
SFAS No. 106, Employers' Accounting for Post-retirement Benefits
Other Than Pensions. The overall objective of SFAS 132 is to improve
and standardize disclosures about pensions and other post-retirement
benefits and to make the required information more understandable.
The Company has to date not adopted benefit plans that would require
the disclosures prescribed by the statement.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which is required to be adopted in years beginning
after June 15, 1999. SFAS 133 will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the
change in fair value of hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings.
Management believes that the adoption of SFAS No. 133 will have no
impact on the Company, as the Company has not engaged in transactions
whose accounting treatment is prescribed by the statement.
Note 2. Property, Plant and Equipment.
Property, plant and equipment consists of the following at September
30, 1999:
Office furniture an equipment $ 8,746
Manufacturing equipment 1,710
---------
10,456
Less accumulated depreciation (3,285)
---------
$7,171
Depreciation charged to operations was $1,484 and $2,252 for the
years ended September 30, 1999 and 1998, respectively.
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Note 3. Patents
During May 1998, the Company purchased the patent for certain of its
golf club technology from an unaffiliated company whose principal
owner is a recognized expert in golf club design. The Company paid
$100,000 in cash for the patent and is amortizing such cost over a
fifteen-year period, the remaining term of the patent. Amortization
expense amounted to $6,667 and $1,111 for the years ended September
30, 1999 and 1998, respectively.
Note 4. Stockholders' Equity
During the year ended September 30, 1998, the Company sold an
aggregate of 367,400 shares of its common stock for gross proceeds of
$145,643. The shares were sold to unaffiliated individuals at a
price of $.50 per share and to existing directors and shareholders at
a price of $.175 per share. The Company has recognized $38,057 as
compensation expense related to the shares sold at the discounted
price. Additionally, during the year ended September 30, 1998, the
Company issued an aggregate of 215,600 shares of its common stock to
certain individuals for services provided to the Company. The shares
were valued at $.50 per share except for 15,000 of the shares that
were valued at $1.00 per share pursuant to a consulting contract.
During the year ended September 30, 1999 the Company sold an
aggregate of 1,139,280 shares of its common stock for gross proceeds
of $239,72 and incurred $8,000 of costs related to the sales. The
shares were sold to unaffiliated individuals at a price of $.50 per
share through January 1999 and at $.25 per share thereafter and to
certain existing directors and shareholders at a price of $.125 per
share. The Company has recognized $77,800 as compen1sation expense
related to the shares sold at the discounted price. Additionally,
during the year ended September 30, 1999, the Company issued an
aggregate of 1,932,400 shares of its common stock to certain
individuals for services provided to the Company. The shares were
valued at $.25 per share as they were issued after January 1999.
Additionally, the Company issued 45,600 of its shares to certain note
holders as repayment of principal and interest and issued 100,000
shares as additional interest to a note holder. These shares were
valued at $.25 per share.
Certain of the shares issued for services in 1999 were for services
not yet completed by the shareholder pursuant to a consulting
contract. The shareholder became a director of the Company in
connection with the agreement. Services charged to expense during
the year amounted to $48,611 and the unearned services under the
contract amounted to $201,389 at September 30, 1999 and are
classified as a reduction of stockholders' equity. The services will
be charged to expense ratably over the remaining term of the contract
(29 months).
Note 5. Income Taxes.
Deferred income taxes may arise from temporary differences resulting
from income and expense items reported for financial accounting and
tax purposes in different periods. Deferred taxes are classified as
current or non-current, depending on the classifications of the
assets and liabilities to which they relate. Deferred taxes arising
from temporary differences that are not related to an asset or
liability are classified as current or non-current depending on the
periods in which the temporary differences are expected to reverse.
The Company had no significant deferred tax items arise during any of
the periods presented.
The Company has not provided for income taxes during the years ended
September 30, 1999 and 1998 as a result of operating losses. The
Company has a net operating loss carryforward at September 30, 1999
of approximately $1,500,000, which will expire in the year 2012
($230,000), 2013 ($440,000) and 2014 ($830,000). The Company has
fully reserved the deferred tax asset (approximately $510,000), that
would arise from the loss carryforward since the Company believes
that it is more likely than not that future income from operations
will not be available to utilize the deferred tax asset.
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Note 6. Commitments and contingencies
Operating leases:
The Company leases its office facilities under an operating lease
through April 15, 2000. Minimum future rentals payable under the
lease is as follows:
Year Amount
2000 $24,849
2001 $24,849
2002 $ 2,071
Rent expense amounted to $29,463 and $16,609 for the years ended
September 30, 1999 and 1998, respectively.
Note 7. Related Party Transactions
At September 30, 1997, the Company had outstanding cash working
capital advances from its president amounting to $28,094. During the
years ended September 30, 1999 and 1998, the Company made repayments
against the advances of $9,787 and $6,154, respectively.
Additionally the officer advanced $5,500 to the Company during the
year ended September 30, 1999. The advances are non-interest bearing
and are expected to be repaid currently.
(b) Pro forma financial information.
To be filed on or before January 29, 2000
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Exhibits.
Agreement and Plan of Reorganization dated November 15, 1999
Item 8. Change in Fiscal Year. None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned here unto duly authorized.
Auric Enterprises, Inc.
(Registrant)
By: /s/ Robert Hinchey
----------------------------
Robert Hinchey, President
Date: November 30, 1999