SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to _______________.
COMMISSION FILE NUMBER: 000-49688
SKTF ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 33-0961488
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1059 E. SKYLER DRIVE
DRAPER, UTAH 84020
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (801) 361-7644
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No.
-----
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. The issuer had
no revenues for the year ended December 31, 2002.
State the aggregate market value of voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was sold, or the average bid and asked prices of such common equity, as
of a specified date within the past 60 days. (See definition of affiliate in
rule 12b-2 of the Exchange Act.) There was no market for our common stock.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of March 27, 2003, there
were 6,044,750 shares of common stock, par value $0.001, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990). None.
Transitional Small Business Disclosure
Format (check one):
Yes No X
----- -----
SKTF ENTERPRISES, INC.
TABLE OF CONTENTS
-----------------
PART I
Item 1 Description of Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5 Market for Common Equity and Related Stockholder Matters
Item 6 Management's Discussion and Analysis or Plan of Operations
Item 7 Financial Statements
Item 8 Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Reports on Form 8-K
Item 14 Controls and Procedures
2
PART I
This Annual Report includes forward-looking statements within the meaning of the
Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based
on management's beliefs and assumptions, and on information currently available
to management. Forward-looking statements include the information concerning
possible or assumed future results of operations of the Company set forth under
the heading "Management's Discussion and Analysis of Financial Condition or
Plan of Operation." Forward-looking statements also include statements in which
words such as "expect," "anticipate," "intend," "plan," "believe," "estimate,"
"consider" or similar expressions are used.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The Company's future results and
shareholder values may differ materially from those expressed in these
forward-looking statements. Readers are cautioned not to put undue reliance on
any forward-looking statements.
ITEM 1 - DESCRIPTION OF BUSINESS
RECENT DEVELOPMENTS
Through December 31, 2002, the Company's business was the development,
marketing, and distribution of branded and licensed hats and clothing at major
events such as sporting events, concerts, and conventions. A description of
this historical business is included below.
Recently, however, the Board of Directors of the Company has undertaken an
analysis of whether or not the historical business plan is economically viable,
and whether or not it should continue to be pursued. If the historical business
plan is not pursued, the Board of Directors will decide whether or not to pursue
other lines of business, either from start up or through acquisitions. No
decisions have been reached by the Board of Directors.
HISTORICAL BUSINESS
INTRODUCTION
SKTF Enterprises, Inc., a Florida corporation, was incorporated in the
State of Florida on March 27, 2001.
We are a development stage company with no assets and no revenues, and we
have not begun our operations. Our business plan is to develop, market and
distribute branded and licensed hats and clothing at major events such as
sporting events, concerts, and conventions. We do not have any agreements with
hat or clothing manufacturers, or with any event coordinators, and we have not
developed any of our products. We will focus on high-end events such as the
World Series, the Super Bowl, the Indianapolis 500, concerts, the Republican and
Democratic National Conventions, and others.
We expect to acquire appropriate licenses to manufacture and sell hats and
clothing, then have the products manufactured. We have not contacted any
potential licensors or manufacturers.
MARKETING AND DISTRIBUTION
We will hire personnel in the local area surrounding the respective event
who will put together a temporary sales force to market the products. We have
not taken any steps to identify potential members of our sales force, nor do we
have any estimate of how much they will cost. After each respective event, we
expect to continue to market our products using the local sales force,
mail-order catalog sales, and Internet web site sales. In our opinion, we
expect that the market for licensed products will continue for up to six months
following a major event.
3
COMPETITION
We have not yet commenced operations, and are entering into a very
competitive marketplace. The following is a list of the top 10 licensed apparel
companies based on 1998 actual sales, as published by the Sporting Goods
Business, November 1999:
1998 Sales (e) % Change from 1997
Starter . . . . . . $345 million +6%
Champion. . . . . . $245 million +50%
VF Knitwear . . . . $230 million 0%
Logo Athletic . . . $228 million +15%
Fruit of the Loom . $220 million +10%
Russell . . . . . . $120 million +70%
Nike. . . . . . . . $100 million +66%
Mighty Mac. . . . . $ 75 million +20%
Winning Ways. . . . $ 60 million +15%
Sports Specialties. $ 60 million +5%
In our opinion, we are not competitive with the companies described above.
We do not expect, in either the short or long term, to have sales similar to the
competition described above.
MANUFACTURING
We do not intend to manufacture any of our products. Once we obtain the
rights to manufacture products, we will contract with third-party manufacturers.
We have not contacted any manufacturers, and do not know what our costs of goods
will be.
KEY CUSTOMERS AND AGREEMENTS
In order to be successful, we will have to obtain the rights to manufacture
branded products, then we will have to obtain permission to deploy our sales
force in and around each event, an finally we will have to enter into agreements
to manufacture the products at profitable levels. Only after we have done all
three of these things can we begin to generate sales to our customers.
Our success is dependent on our ability to enter into key agreements as
described above. We currently do not have any such agreements. Our management
believes, however, that they can develop relationships with key event co-
ordinators licensors, however we can make no guaranty of our success. In the
event we are unable to develop these key relationships, our business will likely
fail.
4
We do not have, nor do we intend to obtain, any patents or trademarks of
our own until such time as we begin to develop our own custom designs. At that
time, we expect to apply for trademark and service mark protection.
GOVERNMENT APPROVALS AND REGULATION
Other than customary labor laws and local ordinances regarding sales of
products in public, we are not subject to any government regulation. Further,
we are not subject to any environmental laws or regulations.
RESEARCH AND DEVELOPMENT
We have not spent any material amount of time or money on research and
development, and do anticipate doing so in the future.
EMPLOYEES
Other than our current sole director and officer, we do not have any
employees because our business has not commenced operations. We intend to
market our products through a temporary sales force consisting of residents of
the local area where we will be selling products.
All internet and catalog sales following an event will be outsourced to
third parties for order-taking, inventory management, and distribution. Because
we have not commenced operations, we do not have any agreements nor have we
entered into negotiations concerning these functions.
ITEM 2 - DESCRIPTION OF PROPERTY
During our pre-operating period, we utilize the office of our founder, Carl
M. Berg, under a verbal agreement where we do not pay rent or reimburse him for
expenses incurred. When we are successful in raising sufficient capital to
begin executing our business plan, we will identify and lease appropriate office
space at market rates.
We anticipate the need to lease a small amount of temporary storage space
for our products, to hold them until they are sold. Management intends to
negotiate with the manufacturers of the products to hold them until they are to
be shipped to the location of sales, however, in the event we are not successful
in doing so, we anticipate renting temporary space as necessary.
ITEM 3 - LEGAL PROCEEDINGS
We are not a party to or otherwise involved in any legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders during the
fiscal year.
5
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On December 19, 2002, the National Association of Securities Dealers
notified our market maker that its request to submit a quote for our common
stock on the Over the Counter Bulletin Board had been cleared. The trading
symbol for our common stock is SKTE. As of the date of this filing, to the best
of our knowledge, no transactions in our common stock have taken place. Trading
in our common stock, if any, is anticipated to be very sporadic and should not
be deemed to constitute an established public trading market. There is no
assurance that there will be liquidity in the common stock.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. We recently registered, under the
Securities Act of 1933 for sale by selling security holders, 13,000 shares of
our common stock acquired by twelve shareholders in a private placement.
Of the 6,044,750 shares of common stock outstanding, (i) 31,750 shares held
by 50 shareholders of record were sold pursuant to an effective registration
statement and may be sold without restriction, (ii) 13,000 shares held by 12
shareholders of record were sold in a private placement over one year ago and
the resale of those shares was subsequently registered, and thus the shares may
be sold either pursuant to the effective registration statement or pursuant to
Rule 144, and (iii) 450,000 shares are held by one shareholder who may sell up
to 60,447 shares every 90 days pursuant to Rule 144. In addition to the above,
Mr. Carl Berg, our sole officer and director, is the holder of 5,550,000 shares
and may sell up to 60,447 shares every 90 days pursuant to Rule 144.
The number of holders of record of shares of our common stock is sixty four
(64).
There have been no cash dividends declared on our common stock. Dividends
are declared at the sole discretion of our Board of Directors.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. The Commission has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to a few exceptions
which we do not meet. Unless an exception is available, the regulations require
the delivery, prior to any transaction involving a penny stock, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
We recently closed a public offering of up to $1,000,000 pursuant to a Form
SB-2 originally filed with the Securities and Exchange Commission on August 30,
2001 and declared effective on December 12, 2001. A total of 31,750 shares of
our common stock were sold under the offering, which closed on September
30, 2002. For at least through the quarter ending June 30, 2003, management
anticipates that SKTF will engage in very little business activity, will not
hire any employees, and will not enter into any material contracts. As a
result, our cash requirements will be minimal, related only to the cost of
maintaining the Company in good standing. Our two primary shareholders, Mr.
Berg and Mr. Lebrecht, have verbally agreed to advance funds to us to fund these
minimal cash requirements that cannot otherwise be covered by the proceeds from
the offering.
6
Although we had hoped to offer products focused on the 2002 Winter
Olympics, we did not take any steps to obtain the necessary licenses or
manufacture the products to do so, and did not successfully market any products
at that event. Recently, the Board of Directors of the Company has undertaken
an analysis of whether or not the historical business plan is economically
viable, and whether or not it should continue to be pursued. If the historical
business plan is not pursued, the Board of Directors will decide whether or not
to pursue other lines of business, either from start up or through acquisitions.
No decisions have been reached by the Board of Directors.
On December 19, 2002, the National Association of Securities Dealers
notified our market maker that its request to submit a quote for our common
stock on the Over the Counter Bulletin Board had been cleared. The trading
symbol for our common stock is SKTE. As of the date of this filing, to the best
of our knowledge, no transactions in our common stock have taken place. Trading
in our common stock, if any, is anticipated to be very sporadic and should not
be deemed to constitute an established public trading market. There is no
assurance that there will be liquidity in the common stock.
It is not anticipated that current management will be paid a salary during
the next twelve months.
Management does not anticipate that we will engage in any material product
research and development because we will negotiate for the acquisition of
licenses to manufacture and sell products that are already in existence.
Management does not anticipate that we will purchase a plant or significant
equipment because we will enter into agreements with existing hat and clothing
manufacturers to manufacture the products.
Management anticipates that, if the historical business is pursued, over
the next twelve months we will hire up to five full-time employees to oversee a
temporary sales force at each location where we will sell our products. The
temporary sales people will either be paid a commission based on sales, or will
be paid an hourly wage plus a commission based on sales, depending on applicable
laws at that location. The temporary sales people will not be offered benefits.
Our financial statements have been prepared assuming we will continue as a
going concern. Because we have not generated any revenues to date and
have minimal capital resources, our Certified Public Accountants included an
explanatory paragraph in their report raising substantial doubt about our
ability to continue as a going concern. We have not identified any critical
accounting issues.
ITEM 7 - FINANCIAL STATEMENTS
Index to Financial Statements
Report of Certified Public Accounts F-1
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no events required to be reported by this Item 8.
7
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the name and age of the current sole
director and executive officer of the Company, the principal office and position
with the Company held by him and the date he became a director or executive
officer of the Company. The executive officers of the Company are elected
annually by the Board of Directors. The directors serve one year terms until
their successors are elected. The executive officers serve terms of one year or
until their death, resignation or removal by the Board of Directors. Unless
described below, there are no family relationships among any of the directors
and officers.
Name Age Position(s)
------------ --- ---------------------------------
Carl M. Berg 35 Chairman of the Board, President,
Secretary, and Treasurer (2001)
CARL M. BERG has served as our sole director and officer since our
inception. He also currently serves as a company executive with Sandlot
Corporation, a startup subscription management software company. Sandlot is
involved in managing subscription-based e-commerce. Mr. Berg has directed
business initiatives as the Business Development Manager, which have resulted in
growth of the company from 10 to 75 employees worldwide with offices in the U.S.
and Windsor, United Kingdom. Prior to Sandlot Corporation, from 1992 to 1999,
Mr. Berg served in various management positions in the technology division of
Ameritech Corporation. His roles varied from the overall management of library
automation implementation projects to directing the implementation division of
roughly 75 technical staff. Job titles included Project Coordinator, Project
Manager and Director of Implementation.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of a
registered class of the Company's equity securities to file with the SEC initial
reports of ownership and reports of changes in ownership of Common Stock and
other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
To the Company's knowledge, none of the required parties are delinquent in
their 16(a) filings.
Board Meetings and Committees
--------------------------------
During the fiscal year ended December 31, 2002, the Board of Directors did
not meet but took written action on numerous other occasions. The written
actions were by unanimous consent.
The Company presently has no executive committee, nominating committee or
audit committee of the Board of Directors.
8
ITEM 10 - EXECUTIVE COMPENSATION
None of our employees are subject to a written employment agreement, and we
have not paid compensation to any employees, executive officers, or directors
for services rendered to us.
On May 15, 2001, our directors and shareholders approved the SKTF, Inc.
2001 Stock Option Plan, effective June 1, 2001. The plan offers selected
employees, directors, and consultants an opportunity to acquire our common
stock, and serves to encourage such persons to remain employed by us and to
attract new employees. The plan allows for the award of stock and options, up
to 600,000 shares of our common stock. Following the effectiveness of this
registration statement, we intend to register with the Commission the shares of
common stock covered by the plan. We have not issued any options or stock
awards under the plan.
Our Directors do not receive compensation for serving as a Director, but
they are entitled to reimbursement for their travel expenses.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 27, 2003, certain information
with respect to the Company's equity securities owned of record or beneficially
by (i) the sole Officer and Director of the Company; (ii) each person who owns
beneficially more than 5% of each class of the Company's outstanding equity
securities; and (iii) all Directors and Executive Officers as a group.
Name and mount and
Address of Nature of Percent of
Title of Class Beneficial Owner Beneficial Ownership Class (1)
---------------------- --------------------- --------------------- ----------
Common
Stock . . . . . . . . . Carl M. Berg (2) 5,550,000 91.8%
Common
Stock . . . . . . . . . Brian A. Lebrecht (3) 450,000 7.4%
--------- -----
All Officers and
Directors as a Group
(1 Person) 5,550,000 91.8%
========= =====
(1) Based on 6,044,750 shares outstanding.
(2) Mr. Berg is our sole director and officer.
(3) Mr. Lebrecht is President of The Lebrecht Group, APLC, which serves as
our securities counsel.
There are no current arrangements that will result in a change in control.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 20, 2001, our founder, Carl M. Berg, purchased 5,550,000 shares of
common stock for $555.00. Also on April 20, 2001, Brian A. Lebrecht, our legal
counsel, purchased 450,000 shares of common stock for $45.00.
9
Mr. Berg and Mr. Lebrecht have, from time to time, advanced us funds to
cover certain expenses. The amount of these advances has not exceeded, and is
not expected to exceed, $25,000. These advances do not bear interest, and
although they have no maturity date, are expected to be repaid as soon as
reasonably possible. During 2002 and 2001, the Company incurred legal expenses
of $33,054 and $12,699, respectively, to Mr. Lebrecht's firm for certain
out-of-pocket legal expenses.
On October 4, 2001, Mr. Berg executed a Lock-Up Agreement wherein he agreed
not to sell any of his shares of common stock until at least thirty days after
the termination of our registered offering. The Lock-Up Agreement expired on
October 30, 2002.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
99.1 Certification of Carl M. Berg, Chief Executive Officer
and Chief Financial Officer of the Company
(B) REPORTS ON FORM 8-K
None.
ITEM 14 - CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer (or those
persons performing similar functions), after evaluating the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c) under the Securities Exchange Act of 1934, as amended) as of a date
within 90 days of the filing of this annual report (the "Evaluation Date"), have
concluded that, as of the Evaluation Date, the Company's disclosure controls and
procedures were effective to ensure the timely collection, evaluation and
disclosure of information relating to the Company that would potentially be
subject to disclosure under the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder. There were no significant
changes in the Company's internal controls or in other factors that could
significantly affect the internal controls subsequent to the Evaluation Date.
10
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 27, 2003 /s/ Carl M. Berg
-------------------------------
Carl M. Berg
President, Director,
Chief Executive Officer,
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Dated: March 27, 2003 /s/ Carl M. Berg
-------------------------------
Carl M. Berg
President, Director,
Chief Executive Officer,
Chief Financial Officer
11
CERTIFICATION OF CHIEF EXECUTIVE AND CHIEF FINANCIAL OFFICER
I, Carl M. Berg, Chief Executive Officer and Chief Financial Officer of the
registrant, certify that:
1. I have reviewed this annual report on Form 10-KSB of SKTF Enterprises,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rule 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effective-
ness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons fulfilling the
equivalent functions):
(i) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize, and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
(ii) any fraud, whether or not material, that involves management or
other employees who have a significant role in the issuer's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Dated: March 27, 2003 /s/ Carl M. Berg
------------------------------
Carl M. Berg
Chief Executive Officer
and Chief Financial Officer
12
Financial Statements and Report of
Independent Certified Public Accountants
SKTF ENTERPRISES, INC.
(A Development Stage Enterprise)
December 31, 2002 and 2001
Table of Contents
Report of Independent Certified Public Accountants F-1
Financial Statements
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To: The Board of Directors
of SKTF ENTERPRISES, INC.
We have audited the accompanying balance sheets of SKTF ENTERPRISES, INC. (the
"Company") (a Development Stage Corporation) as of December 31, 2002 and 2001
and the related statements of operations, stockholders' equity and cash flows
for the year ended December 31, 2002 and the period from inception (March
27, 2001) through December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 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 SKTF ENTERPRISES, INC. as of
December 31, 2002 and 2001 and the results of its operations and cash flows for
the year ended December 31, 2002 and the period from inception (March 27, 2001)
through December 31, 2001, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has no established source of revenue and is dependent on
its ability to raise substantial amounts of capital. Management's plans in
regard to these matters are also described in Note 2. These matters raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Ramirez International
-------------------------------------
RAMIREZ INTERNATIONAL
March 26, 2003
Irvine, CA
F-1
SKTF ENTERPRISES, INC.
(A Development Stage Corporation)
Balance Sheet
December 31,
2002 2001
--------- ---------
ASSETS
Current assets
Cash . . . . . . . . . . . . . . . . . . . . . . $ 2,104 $ -
Total assets . . . . . . . . . . . . . . . . . . $ 2,104 $ -
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities . . . . . $ 20,260 $ 4,645
Commitments and contingencies. . . . . . . . . . . - -
Stockholders' equity:
Preferred stock, $0.001 par value;
5,000,000 shares authorized; no shares
issued or outstanding at December 31, 2002 . . - -
Common stock, $0.001 par value; 100,000,000
shares authorized; 6,044,750 and 6,013,000
shares issued and outstanding . . . . . . . . 6,045 6,013
Additional paid in capital . . . . . . . . . . . 41,804 10,086
Deficit accumulated during the development stage (66,005) (20,744)
--------- ---------
(18,156) (4,645)
Total liabilities and stockholders' equity . . . $ 2,104 $ -
========= =========
The accompanying notes are an integral part of these financial statements.
F-2
SKTF ENTERPRISES, INC.
(A Development Stage Corporation)
Statement of Operations
Cumulative from
inception (March Period from
27, 2001) through Year ended inception
December 31, December 31, (March 27, 2001) to
2002 2002 December 31, 2001
Revenue. . . . . . . . . . . . . . . $ - $ - $ -
General and administrative expenses. 66,005 45,261 20,744
------------------ ---------------- -------------------
Net loss . . . . . . . . . . . . . . $ (66,005) $ (45,261) $ (20,744)
================== ================ ===================
Basic and diluted net loss per share $ (0.01) $ (0.00)
Weighted average shares outstanding. 6,021,090 5,490,570
The accompanying notes are an integral part of these financial statements.
F-3
SKTF ENTERPRISES, INC.
(A Development Stage Corporation)
Statement of Stockholders' Equity
Deficit
Additional Accumulated During
Common Stock Paid-in the Development
Shares Par Value Capital Stage Total
------------- --------- --------------- ------------------ ---------
Issuance of common stock to
founders on April 20, 2001 6,000,000 $ 6,000 $ (5,400) $ - $ 600
Issuance of common stock for
cash in August 2001. . . . 13,000 13 1,287 1,300
Contributed capital-services. 14,199 14,199
Net loss. . . . . . . . . . . (20,744) (20,744)
------------- --------- --------------- ------------------ ---------
Balance, December 31, 2001. . 6,013,000 6,013 10,086 (20,744) (4,645)
Issuance of common stock for
cash in September 2002 . . 31,750 32 31,718 31,750
Net loss. . . . . . . . . . . (45,261) (45,261)
------------- --------- --------------- ------------------ ---------
Balance, December 31, 2002. . 6,044,750 $ 6,045 $ 41,804 $ (66,005) $(18,156)
============= ========= =============== ================== =========
The accompanying notes are an integral part of these financial statements.
F-4
SKTF ENTERPRISES, INC.
(A Development Stage Corporation)
Statement of Cash Flows
Cumulative from Period from
inception (March 27, Year ended inception (March
2001) to December 31, December 31, 27, 2001) to
2002 2002 December 31, 2001
--------------------- ------------ -----------------
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . $ (66,005) $ (45,261) $ (20,744)
Adjustments to reconcile net loss to cash used in
operating activities:
Contributed capital for services rendered . . . . . 14,199 - 14,199
Increase in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . . 20,260 15,615 4,645
--------------------- ------------ -----------------
Net cash used by operating activities . . . . . . . (31,546) (29,646) (1,900)
--------------------- ------------ -----------------
Cash flows from financing activities:
Proceeds from issuance of stock . . . . . . . . . . 33,650 31,750 1,900
--------------------- ------------ -----------------
Net increase in cash. . . . . . . . . . . . . . . . 2,104 2,104 -
Cash and cash equivalents, beginning of period. . . - - -
--------------------- ------------ -----------------
Cash and cash equivalents, end of period. . . . . . $ 2,104 $ 2,104 $ -
===================== ============ =================
The accompanying notes are an integral part of these financial statements.
F-5
SKTF ENTERPRISES, INC.
(A Development Stage Corporation)
Notes to Financial Statements
December 31, 2002 and 2001
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES
-------------------------------------------------
Nature of Operations. The Company incorporated in Florida on March 27, 2001.
The fiscal year end of the Company is December 31. Planned principal operations
of the Company have not yet commenced; activities to date have been limited to
forming the Company, developing its business plan, and obtaining initial
capitalization. The Company's business plan is to develop, market and
distribute branded and licensed hats and clothing at major events such as
sporting events, concerts and conventions. The Company plans to focus on
high-end events such as, the World Series, the Super Bowl, the Indianapolis 500,
the Republican and Democratic National Conventions.
Principles of Accounting. The accompanying financial statements have been
prepared in conformity with generally accepted accounting principles.
Accounting Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
Shares Issued in Exchange for Services. The fair value of shares issued in
exchange for services rendered to the Company is determined by the Company's
officers and directors, as there is currently no market for the Company's stock.
As of December 31, 2002, no shares have been issued for services.
Cash and Cash Equivalents. The Company includes cash on deposit and short-term
investments with original maturities less than ninety days as cash and cash
equivalents in the accompanying financial statements.
General and Administrative Expenses. The Company's general and administrative
expenses consisted primarily of legal and accounting fees in 2002 and 2001
related to organization purposes.
Research and Development. Research and development costs are expensed as
incurred as required by Statement of Financial Accounting Standards No. 2,
"Accounting for Research and Development Costs." As of December 31, 2002, no
research and development costs had been incurred.
Stock-Based Compensation. Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation, encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to account for stock-based
compensation using the intrinsic value method prescribed in previously issued
standards. Accordingly, compensation cost for stock options issued to employees
is measured as the excess, if any, of the fair market value of the Company's
stock at the date of grant over the amount an employee must pay to acquire the
stock Compensation is charged to expense over the shorter of the service or
vesting period. Stock options issued to non-employees are recorded at the fair
value of the services received or the fair value of the options issued,
whichever is more reliably measurable, and charged to expense over the service
period.
F-6
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES - Continued
---------------------------------------------------------------
Income Taxes. The Company has made no provision for income taxes because of
financial statement and tax losses since its inception. A valuation allowance
has been used to offset the recognition of any deferred tax assets due to the
uncertainty of future realization. The use of any tax loss carryforward
benefits may also be limited as a result of changes in Company ownership.
Fair Value of Financial Instruments. The Company considers all liquid
interest-earning investments with a maturity of three months or less at the date
of purchase to be cash equivalents. Short-term investments generally mature
between three months and six months from the purchase date. All cash and
short-term investments are classified as available for sale and are recorded at
market using the specific identification method; unrealized gains and losses are
reflected in other comprehensive income. Cost approximates market for all
classifications of cash and short-term investments; realized and unrealized
gains and losses were not material.
Net Loss per Common Share. Net loss per share is calculated in accordance with
Statement of Financial Accounting Standards No. 128, Earnings Per Share. Basic
net loss per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that options
are included in the calculation of diluted earnings per share, except when their
effect would be anti-dilutive. Dilution is computed by applying the treasury
stock method. Under this method, options and warrants are assumed to be
exercised at the beginning of the period (or at the time of issuance, if later),
and as if funds obtained thereby were used to purchase common stock at the
average market price during the period.
2. REALIZATION OF ASSETS
-----------------------
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has no established source of revenue, and as of December 31, 2002,
the Company had negative working capital of $18,156. In addition, the Company is
a development stage entity and is dependent on outside financing to fund its
operations. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.
Management's plans in regard to these matters are to continue to raise
additional capital from selling the Company's stock. Management believes
actions currently being taken provide the opportunity for the Company to
continue as a going concern. However, there is no assurance that the Company
will be able to obtain such financing. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
3. STOCKHOLDERS' EQUITY
---------------------
Founders' Stock. The Company issued 6,000,000 shares of common stock on April
20, 2001 for cash totaling $600.
Stock-Based Compensation. The Company did not issue nor did it recognize
stock-based compensation from inception (March 27, 2001) through December 31,
2002.
F-7
3. STOCKHOLDERS' EQUITY - Continued
-----------------------------------
Private Placement Memorandum. On June 1, 2001, the Company began an offering to
sell up to 100,000 shares of common stock at $0.10 per share pursuant to a
Private Placement Memorandum. In August 2001, the Company sold 13,000 shares of
its common stock at $0.10 under this private placement. All proceeds from the
offering are to be used for pre-incorporation expenditures, consulting fees and
working capital.
Registered Stock Offering. During the quarter ended September 30, 2002, the
Company sold 31,750 shares of its common stock at $1.00 per share for total
proceeds of $31,750. The stock offering was pursuant to the Company's effective
Form SB-2/A registration statement dated December 12, 2001. The Company used the
proceeds to repay advances and general and administrative expenses. The
Company's registered offering expired on September 30, 2002.
Stock Option Plan. The Company's Board and shareholders approved a Stock Option
Plan, effective June 1, 2001. The plan limits the aggregate number of shares
available to 600,000. Each award under the plan will be evidenced by a Stock
Purchase Agreement; each agreement will establish the vesting requirements and
the maximum term of the options granted. As of December 31, 2002, no options had
been granted.
4. RELATED PARTY TRANSACTIONS
----------------------------
Legal and Administrative Services. The Company has engaged a shareholder as its
corporate counsel. In 2002 and for the period from inception (March 27, 2001) to
December 31, 2001, total legal services and out of pocket costs were $33,054 and
$12,699, respectively. As of December 31, 2002 and 2001, the Company had amounts
due to its corporate counsel of $15,136 and $4,645, respectively, which are
recorded in accounts payable and accrued liabilities in the accompanying
financial statements.
The Company's president elected to forego a salary during the early
developmental stages. The Company's president also provides office space for the
Company. The Company estimates the value of these services to be $5,125 and
$1,500 for the year ended December 31, 2002 and for the period from inception
(March 27, 2001) to December 31, 2001, respectively. As of December 31, 2002 and
2001, the Company had amounts due to its president of $5,125 and nil,
respectively, which are recorded in accounts payable and accrued liabilities in
the accompanying financial statements.
Stockholders Loans and Advances. From time to time, certain Company
stockholders loan or advance monies to the Company. Loans bear interest at
rates established at the time of the loan; advances bear no interest. While
these loans and advances have no maturity dates, they are expected to be repaid
as early as practicable.
F-8