-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DSycvrMEsWSGsxZBs9GtlLYofIl5Hm7n72tnwRS51CpLwKRI38qc/gXpPy4bh/L0 EU6QeO1waZdgjutWbJxIgw== 0001391609-08-000063.txt : 20080401 0001391609-08-000063.hdr.sgml : 20080401 20080331210340 ACCESSION NUMBER: 0001391609-08-000063 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080401 DATE AS OF CHANGE: 20080331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPORTSNUTS INC CENTRAL INDEX KEY: 0001024920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 870561426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-14477 FILM NUMBER: 08727085 BUSINESS ADDRESS: STREET 1: TOWERS AT S TOWNE #2 STE 550 STREET 2: 10421 S 400 W CITY: SALT LAKE CITY STATE: UT ZIP: 84095 BUSINESS PHONE: 8019670777 MAIL ADDRESS: STREET 1: 4085 WEST 4715 SOUTH CITY: KEARNS STATE: UT ZIP: 84118 FORMER COMPANY: FORMER CONFORMED NAME: SPORTSNUTS COM INTERNATIONAL INC DATE OF NAME CHANGE: 19990420 FORMER COMPANY: FORMER CONFORMED NAME: DURWOOD INC /UT DATE OF NAME CHANGE: 19961015 10KSB 1 f10ksbsportsnuts.htm FORM 10-KSB SPORTSNUTS, INC. f10ksbsportsnuts.htm

 
 
 





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, 2007

OR

[   ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ___________

Commission file number: 333-14477

SPORTSNUTS, INC.
(Name of Small Business Issuer in Its Charter)


Delaware
  
87-0561426
(State or Other Jurisdiction
of Incorporation or Organization)
  
(IRS Employer
Identification No.)
     
10757 South, River Front Parkway, Suite 125
    
South Jordan, Utah
  
84095
(Address of Principal Executive Offices)
  
(Zip Code)



 
(801) 816-2500
  
 
Issuer’s Telephone Number, Including Area Code
  
     


Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:  None

 
 
 



Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  [     ]  

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X] No [   ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of the 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. [    ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [X]  No [  ]

The Company’s revenues for the fiscal year ending December 31, 2007 were $24,819.

The aggregate market value of the Company’s voting stock held by non-affiliates computed by reference to the closing price as quoted on the NASD Electronic Bulletin Board on March 28, 2007, was approximately $200,000.  For purposes of this calculation, voting stock held by officers, directors, and affiliates has been excluded.


APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.  As of March 24, 2008, the Company had outstanding 121,674,854 shares of common stock, par value $0.002 per share.


DOCUMENTS INCORPORATED BY REFERENCE

None.


Transitional Small Business Disclosure Format (check one)  [  ] Yes [x] No














TABLE OF CONTENTS
PART I.
 
1
ITEM 1:  DESCRIPTION OF BUSINESS
 
1
ITEM 2:  DESCRIPTION OF PROPERTY
 
10
ITEM 3:  LEGAL PROCEEDINGS
 
10
ITEM 4:  SUBMISSION ON MATTERS TO A VOTE OF SECURITY HOLDERS
 
10
PART II.
 
11
ITEM 5:  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
11
ITEM 6:  MANAGEMENT’S DISCUSSION AND ANALYSIS
 
12
ITEM 7:  FINANCIAL STATEMENTS
 
16
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
34
ITEM 8A: CONTROLS AND PROCEDURES
 
34
ITEM 8B: OTHER INFORMATION
 
34
PART III
 
34
ITEM 9:   DIRECTORS, OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
 
34
ITEM 10:  EXECUTIVE COMPENSATION
 
36
ITEM 11:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANGEMENT AND RELATED STOCKHOLDER MATTERS
 
37
ITEM 12:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 
38
ITEM 13:  EXHIBITS
 
39
ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
40
INDEX TO EXHIBITS
 
41
SIGNATURES
 
42
   




 
 
 
 

 
FORWARD LOOKING STATEMENTS


THIS ANNUAL REPORT ON FORM 10-KSB, IN PARTICULAR “ITEM 6. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” AND “ITEM 1. BUSINESS,” INCLUDE “FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.  THESE STATEMENTS REPRESENT THE COMPANY’S EXPECTATIONS OR BELIEFS CONCERNING, AMONG OTHER THINGS, FUTURE REVENUE, EARNINGS, AND OTHER FINANCIAL RESULTS, PROPOSED ACQUISITIONS AND NEW PRODUCTS, ENTRY INTO NEW MARKETS, FUTURE OPERATIONS AND OPERATING RESULTS, FUTURE BUSINESS AND MARKET OPPORTUNITIES.  THE COMPANY WISHES TO CAUTION AND ADVISE READERS THAT THESE STATEMENTS INVOLVE RISK AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE EXPECTATIONS AND BELIEFS CONTAINED HEREIN.  FOR A SUMMARY OF CERTAIN RISKS RELATED TO THE COMPANY’S BUSINESS, SEE “RISK FACTORS.” UNDER “ITEM 1.  DESCRIPTION OF BUSINESS.”

Unless the context requires otherwise, references to the Company are to SportsNuts, Inc. and its subsidiaries.

PART I.

ITEM 1:  DESCRIPTION OF BUSINESS

Cautionary Factors That May Affect Future Results (Cautionary Statements Under the Private Securities Litigation Reform Act of 1995)

The disclosure and analysis set forth herein contains certain forward looking statements, particularly statements relating to future actions, performance or results of current and anticipated products and services, sales efforts, expenditures, and financial results.  From time to time, the Company also provides forward-looking statements in other publicly-released materials, both written and oral.  Forward-looking statements provide current expectations or forecasts of future events such as new products or services, product approvals, revenues, and financial performance.  These statements are identified as any statement that does not relate strictly to historical or current facts.  They use words such as “anticipates,” “intends,” “plans,” “expects,” “will,” and other words and phrases of similar meaning.  In all cases, a broad variety of assumptions can affect the realization of the expectations or forecasts in those statements.  Consequently, no forward-looking statement can be guaranteed.  Actual future results may vary materially.

The Company undertakes no obligation to update any forward-looking statements, but investors are advised to consult any further disclosures by the Company on this subject in its subsequent filings pursuant to the Securities Exchange Act of 1934.  Furthermore, as permitted by the Private Securities Litigation Reform Act of 1995, the Company provides these cautionary statements identifying risk factors, listed below, that could cause the Company’s actual results to differ materially from expected and historical results.  It is not possible to foresee or identify all such factors.  Consequently, this list should not be considered an exhaustive statement of all potential risks, uncertainties and inaccurate assumptions.


 
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RISK FACTORS

Operating Risks

Defaults in Senior Securities.  Effective February 1, 2000, the Company sold and issued a promissory note secured by virtually all tangible and intangible assets of the Company (“Note”) in exchange for $450,000 in cash proceeds.  As of May 1, 2000, the Company is in default with respect to the Note.  Although the Note holder continues to be supportive of the Company and its management, if the holder of the Note determines to foreclose upon the Note, the Company would likely be forced to sell all of its tangible and intangible assets to satisfy the obligation represented by the Note and would, therefore, likely cease operations entirely.  The Note and Security Agreement executed in connection therewith have been filed as an exhibit to the Company’s 1999 annual report on Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2000.

Company Not Currently Profitable.  The Company was organized on July 12, 1996.  Since the date of its inception, the Company has incurred substantial losses and has not yet generated a profit.  There is no assurance that the Company will ever become profitable.

Risk of Computer System Failure.  The success of the Company is substantially dependent upon its ability to deliver high quality, uninterrupted access to its technology applications, which requires that the Company protect its computer hardware and software systems and the data and information stored in connection therewith.  The Company’s systems are vulnerable to damage by fire, water (principally from overhead sprinkler systems that may be triggered by fire or excessive heat within the building in which the Company and other co-tenants operate), natural disaster, power loss, telecommunications failures, unauthorized intrusion, and other catastrophic events.  Any substantial interruption in the Company’s systems would have a material adverse effect on the Company’s business, operating results, and financial condition.  In addition, the Company’s systems may be vulnerable to computer viruses, physical or electronic break-ins, sabotage, or other problems caused by third parties which could lead to interruptions, delays, loss of data, or cessation in service to persons desiring to access the Company’s Internet properties.  The occurrence of any of these risks could have a material adverse effect upon the Company’s business, results of operations, and financial condition.

Electronic Data Transmission Security Risks.  A significant barrier to the electronic transmission of confidential data over the Internet is the perception that such data may not be secure.  The Company relies upon encryption and authentication technology to provide the security necessary to effect secure transmissions of confidential information.  There can be no assurance that advances in decryption technology, computer espionage, and other developments will not result in a breach or compromise of the algorithms used by the Company to protect transaction data of persons accessing the Company’s internet properties and internet properties of the Company’s clients, and therefore lead to the misappropriation of such data by third parties.  Any such breach, compromise, or misappropriation could damage the Company’s reputation and expose the Company to a risk of loss or litigation and possible liability, and could have a material adverse effect upon the Company’s business, results of operations, or financial condition.


 
2
 

No Proprietary Protection for Technology.  The Company’s online registration system, statistical information system, and the league management system are not protected by any copyright or patent, and the Company does not anticipate filing an application with the United States Patent and Trademark Office (“USPTO”) or the United States Copyright Office for protection of these systems.  Although the Company believes that copyright and patent protection for these systems is either cost prohibitive or unnecessary, it may be wrong.  If the Company is wrong, it could face unexpected expenses pursuing, defending, or otherwise becoming involved in a copyright or patent dispute, any of which could have a material adverse effect upon the Company’s business, results of operations, and financial condition.

Uncertain Protection of Trade Names and Related Intangible Assets.   The Company has registered the Internet domain names, “www.sportsnuts.com,” and “www.sportsnuts.net.”    Given the lack of financial resources available to the Company during 2007, the Company has not pursued trademark applications of its name and brand.  Consequently, other companies with names, marks, or slogans similar to SportsNuts could seek to require that the Company obtain a license from them or require the Company to change its name, either of which could entail substantial costs.  Additionally, if the Company were required to change its name, it could lose all goodwill associated with the “SportsNuts” mark.  In addition, future products and services offered by the Company may need to be marketed under different names if the mark “SportsNuts” causes confusion with another trade name being used by another company.  The Company could also incur substantial costs to defend any legal action taken against the Company pursuant to a trademark or service mark dispute.   If any legal action against the Company, its asserted trademarks, or service marks should be found to infringe upon intellectual property rights of a third party, the Company could be enjoined from further infringement and could be required to pay damages.  In the event a third party were to sustain a valid claim against the Company, and in the event a required license were not available on commercially reasonable terms, the Company’s financial operations and results of operations could be materially adversely affected.  Litigation, which could result in substantial cost to and diversion of resources of the Company, may also be necessary to enforce intellectual property rights of the Company or to defend the Company against claimed infringements of the rights of others.

Investment Risks

Speculative Investment.  The shares of the Company’s common stock are a speculative investment. To date, the Company has generated substantial losses and has yet to achieve a profit.  If the Company fails to generate profits, it is unlikely that the Company will be able to meet its financial obligations and investors could lose their entire investments.

Likely Change of Control.  During 2008, it is likely that the Company may offer certain of its creditors the right to convert their debts into common stock of the Company based upon the current trading price of the Company’s Common Stock.  The conversion of even a portion of these debts will result in a change of control in favor of such creditors.  Such creditors will likely also include Kenneth Denos, the Company’s Chief Executive Officer.

Securities Class Action Claims Based Upon Price Fluctuation.  Securities class action claims have been brought against issuing companies in the past after volatility in the market price of a company’s securities.  With respect to the Company, such litigation could be very costly and divert the attention of the Company’s management and resources, and any adverse determination in such litigation could also subject the Company to significant liabilities, any or all of which could have a material adverse effect on the Company’s business, results of operations, and financial condition.

No Active Market.  Although the Company’s shares are traded on the NASD Electronic Bulletin Board, the Company believes that the public trading price may be an inaccurate representation of the value of the Company because there is little or no trading volume in the Company’s shares and no analysts or NASD market makers actively follow the Company.
 
 
3

 
No Dividends.  The Company does not anticipate paying dividends on its Common Stock  in the foreseeable future, and may be restricted from paying dividends in the future pursuant to subsequent financing arrangements.

Anti-Takeover Provisions.  The Company’s Certificate of Incorporation contains certain provisions which could be an impediment to a non-negotiated change in control of the Company, namely an ability, without stockholder approval, to issue up to 20,000,000 shares of preferred stock with rights and preferences determined by the board of directors, staggered terms for directors, and super-voting requirements.  These provisions could impede a non-negotiated change in control and thereby prevent stockholders from obtaining a premium for their Common Stock.

Securities Eligible for Public Trading.  All of the Company’s outstanding shares are either freely tradeable or immediately eligible for resale under Rule 144 promulgated pursuant to the Securities Act of 1933, as amended.  Sales of substantial amounts of freely tradeable stock in the public market could adversely affect the market price of the Common Stock.  The Company has also filed a registration statement with respect to its 2000 Stock Option Plan, the result of which could be the sale of a significant number of shares in the public market, and consequently, an adverse effect upon the public trading price of the Company’s Common Stock.

Private Liability of Management.  The Company has adopted provisions in its Certificate of Incorporation which limit the liability of its officers and directors and provisions in its bylaws which provide for indemnification by the Company of its officers and directors to the fullest extent permitted by Delaware corporate law.  The Company’s Certificate of Incorporation generally provides that its directors shall have no personal liability to the Company or its stockholders for monetary damages for breaches of their fiduciary duties as directors, except for breaches of their duties of loyalty, acts or omissions not in good faith or which involve intentional misconduct or knowing violation of law, acts involving unlawful payment of dividends or unlawful stock purchases or redemptions, or any transaction from which a director derives an improper personal benefit.  Such provisions substantially limit the shareholders’ ability to hold directors liable for breaches of fiduciary duty.

Potential Issuance of Additional Common and Preferred Stock.  The Company is authorized to issue up to 200,000,000 shares of Common Stock.  To the extent of such authorization, the Board of Directors of the Company will have the ability, without seeking shareholder approval, to issue additional shares of common stock in the future for such consideration as the Board of Directors may consider sufficient.  The issuance of additional Common Stock in the future may reduce the proportionate ownership and voting power of existing shareholders.  The Company is also authorized to issue up to 20,000,000 shares of preferred stock, the rights and preferences of which may be designated in series by the Board of Directors.  To the extent of such authorization, such designations may be made without shareholder approval.  The designation and issuance of series of preferred stock in the future would create additional securities which would have dividend and liquidation preferences over common stock.

Volatility of Stock Prices.  In the event that there is an established public market for the Company’s Common Stock, market prices will be influenced by many factors and will be more subject to significant fluctuations in response to variations in operating results of the Company and other factors such as investor perceptions of the Company, supply and demand, interest rates, general economic conditions and those specific to the industry, developments with regard to the Company’s activities, future financial condition and management.

Applicability of Low Priced Stock Risk Disclosure Requirements.  The Common Stock of the Company may be considered a low priced security under rules promulgated under the Securities Exchange Act of 1934.  Under these rules, broker-dealers participating in transactions in low priced securities must first deliver a risk disclosure document which describes the risks associated with such stocks, the broker-dealer’s duties, the customer’s rights and remedies, certain market and other information, and make a suitability determination approving the customer for low priced stock transactions based on the customer’s financial
 
 
4
 
 
situation, investment experience and objectives.  Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent of the customer, and provide monthly account statements to the customer.  With all these restrictions, the likely effect of designation as a low priced stock will be to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity of the stock and to increase the transaction cost of sales and purchases of such stock compared to other securities.
 

BUSINESS OVERVIEW


DESCRIPTION OF BUSINESS

SportsNuts, Inc. (sometimes referred to hereinafter as the “Company”) is a sports management and marketing company, with a focus on community-based amateur athletics.  Incorporated in Delaware on July 12, 1996, the Company helps organize and manage certain community sports events, providing online registration, merchandise sales, event sponsorship, and event coordination.

Until March 1, 2007, the Company offered computer hardware sales and related services through Secure Networks, Inc., its wholly-owned subsidiary.  On that date, the Company spun-off the shares of Secure Networks on a pro-rata basis to its shareholders such that Secure Networks became an independent company.  Following the spin-off, due to the substantially decreased level of revenues and operations of the Company, SportsNuts, became a “shell company” as defined in 12b-2 of the Securities Exchange Act of 1934.


BUSINESS FOCUS

The Company targets organized sports events with various marketing and technology services to increase consumer satisfaction, athlete participation, corporate involvement, and purchasing opportunities.  The Company also seeks to create increased awareness of participating events within surrounding communities.  Through its Internet properties, the Company provides online event registration, merchandise sales, event website hosting, and the issuance of targeted e-mails to sports participants who have requested information about upcoming sporting events.  Event administrators can access and download customizable reports on their events, requesting a full financial breakdown or simply creating a report that displays the name and t-shirt size of each participant.


RESEARCH & DEVELOPMENT

Generally.  Product development expenses related to the Company’s Internet services consist primarily of payroll, software and systems, and related costs for programmers and software developers.  Product development expenses related to the Company’s information technology consulting consists primarily of payroll and systems development for the web site hosting services.  Where appropriate, the Company capitalizes certain systems development costs in accordance with generally accepted accounting principles.

Software Development.  The heart of the Company’s services is the sports information management system user base. A database contains all the detailed information that the Company gathers on every person who registers for a sports event through the Company’s web site.  The database software holds and manipulates all such information. This database is built with Sequel software.  The Company has invested in this software in order to insure reliability as well as scalability.  For the size of the Company’s computer systems and the volume of throughput, Sequel databases are typically the fastest and are easily moved from one computer platform to another. The database can efficiently provide any of the stored information when it
 
 
5
 
 
is automatically requested by the Company’s web site, software applications or manually requested by an employee for corporate use.

MARKET ANALYSIS/OPPORTUNITIES

The market for products and services among amateur sports enthusiasts in the United States is rapidly evolving and intensely competitive with a large number of competitors in the Internet sports industry.  However, the niche market in which the Company competes possesses relatively few amateur sports organizations that can provide a comprehensive marketing and technological approach to organizations that seek to increase participation and attendance for their events.  However, there can be no assurance that the Company can maintain a competitive position against current or future competitors as they enter the markets in which it competes, particularly those with greater financial, marketing, service, support, technical and other resources than those possessed by the Company.  The Company’s failure to maintain a competitive position within the market could have a material adverse effect on its business, financial condition, results of operations and cash flows.

The Reach of Amateur Sports. Amateur sports in the United States has a massive following, estimated by the Company at 135 million fans, 76 million active participants, 4 million organized teams, and over $30 billion spent annually on products and services.

Amateur sports touch multiple audiences (athletes, fans, coaches, officials, sports physicians, athletic directors, community sports writers) who generally want to enhance the experience for themselves and the participants.  At the grass-roots level, amateur sports tend to generate more emotional involvement than any other activity with the exception of academic education.  The dreams of millions of athletes are pursued through sports and many families live vicariously through sports in various supporting roles.  Amateur sports typically require a substantial investment of time and money.  The demographic profile of amateur sports enthusiasts is therefore strong relative to recreational spending.

The Internet.  Sports have been a core staple in the development of the Internet.  Over thirty million users in the United States access the Internet each day for sports-related information.  The administration of amateur sports organizations and events and the information management of amateur sports data lend itself to unique marketing approaches that can be greatly facilitated through various web-based solutions, but are currently not addressed efficiently by any single organization.

Market Segmentation/User Needs

Generally.  The Company has divided the grass roots amateur sports market into three specific segments: (i) Youth Sports (ages 5-13), (ii) High School Sports (ages 14-18), and (iii) Adult Recreation Sports (ages 19+).  As discussed below, the Company believes that there are approximately 76 million persons within these three categories, or roughly thirty percent of the U.S. population.  Each segment has specific interests and needs, but they all share the common goal of improving the amateur athletic experience by strengthening coaching and playing skills and providing easier access to reliable information and quality products and services.

Youth Sports.  The Company estimated that there are roughly three million organized youth sports teams in the United States.  Each team has an average of 12 players (36 million total players).  However, since most children play more than one sport, the Company estimates that the number of unique participants in this segment to be 24 million.

Youth sports are typically less organized and managed far less efficiently than high school or adult recreational sports.   The registration, rostering, and scheduling process is costly and cumbersome for youth sports organizations.  In addition, game and event information is usually difficult to obtain, including time and location of contest, profile of the opposing team, and a summary of the event itself.  Coaching at the youth sports level is often highly erratic, with a large number of children either inspired by or alienated
 
 
6
 
toward organized sports for life during this period.  Youth coaches require a variety of resources necessary to improve the quality of the instructional environment.  Finally, youth sports are constantly in need of funding for equipment, facilities, and transportation.

High School Sports.  The Company estimates that there are approximately 20,000 high schools in the United States, with approximately 25 teams of 20 athletes each per school across all sports and grade levels (10 million total players).  As with youth sports, since most teens play more than one sport, the Company estimates that the number of unique participants, together with a significant number of non-athlete participants (e.g. drill team members, cheerleaders, and equipment managers) in this segment to be 8 million.

Competition becomes significantly more important relative to youth sports as athletes reach their teenage years.  Nevertheless, current methods of tracking the history or performance of an individual or team are difficult or impossible, and broad comparison and ranking systems are largely unavailable.  Moreover, the scouting process is often unreliable, time consuming, and cost prohibitive.  High school athletes desire the type of tangible performance measurements and statistics available through the Company’s sports information management system.  In addition, those prep athletes with aspirations to participate in collegiate athletics are highly interested in scholarship and college placement opportunities afforded by increased exposure to college recruiters.  As with youth sports, high school sports programs are also chronically underfunded.  Finally, because of the increased intensity level of high school sports and the resulting injuries, these athletes will likely require access to sports medicine services, which is currently not available from any comprehensive source online.

Parents/Adult Recreation Sports.  The Company estimates that the 32 million children and teens participating in amateur sports will have at least one non-participant supporter, most likely a parent.  Although most youth and high school athletes have more than one parent who follows their activities, many parents with children who play sports typically have more than one child participating in organized amateur sports.  Many of these adults also participate in recreational sports themselves.  The Company believes that an additional 12 million adults who participate in recreational sports do not currently have children engaged in amateur sports.  Accordingly, the Company estimates that 44 million U.S. adults follow a child who participates in amateur sports and/or personally participate in adult recreational sports.

Because competition as well as exercise is at the heart of adult sports participation, a source for statistical information is likely to be a significant attraction within this category.  These persons are also more likely to utilize sports medicine services, given their increased susceptibility to aches, soreness, and injury due to age and increasing fragility.  Sports-oriented adults have significant purchasing power relative to the youth sports and high school sports segment, particularly with credit card transactions over the Internet.  Adults desire a wide range of and sufficient information concerning products and services that cater to their interests.


INTELLECTUAL PROPERTY

The Company has registered the Internet domain names, “www.sportsnuts.com,” and “www.sportsnuts.net.”  Given the lack of resources available to the Company during 2007, the Company has not pursued any trademark applications for its name and brand.

The Company’s online registration and league management systems are not protected by any copyright or patent, and the Company does not anticipate filing an application with the U.S. Patent and Trademark Office or the United States Copyright Office for protection of any of these systems.  Although the Company believes that copyright and patent protection for these systems is either cost prohibitive or unnecessary, it may be wrong.  If the Company is wrong, it could face unexpected expenses pursuing, defending, or otherwise becoming involved in a copyright or patent dispute, any of which could have a material adverse effect upon the Company’s business, results of operations, and financial condition.
 
 
7

 
Because the Company has no formal trademark protection, other companies with names, marks, or slogans similar to SportsNuts could seek to require that the Company obtain a license from them or require the Company to change its name, either of which could entail substantial costs.  Additionally, if the Company were required to change its name, it could lose all goodwill associated with the “SportsNuts” mark.  In addition, future products and services offered by the Company may need to be marketed under different names if the mark “SportsNuts” causes confusion with another trade name being used by another company.  The Company could also incur substantial costs to defend any legal action taken against the Company pursuant to a trademark or service mark dispute.   If, in any legal action against the Company, its asserted trademarks, or service marks should be found to infringe upon intellectual property rights of a third party, the Company could be enjoined from further infringement and could be required to pay damages.  In the event a third party were to sustain a valid claim against the Company, and in the event a required license were not available on commercially reasonable terms, the Company’s financial operations and results of operations could be materially adversely affected.  Litigation, which could result in substantial cost to and diversion of resources of the Company, may also be necessary to enforce intellectual property rights of the Company or to defend the Company against claimed infringements of the rights of others.


GOVERNMENT REGULATION

There are currently few laws or regulations directly applicable to information technology or electronic commerce.  Due to the increasing popularity and use of the Internet, it is possible that a number of laws and regulations may be adopted with respect to the Internet which could materially increase the cost of transacting business on the Internet.  Although transmissions from the Company’s Internet properties originate from the State of Utah, the government of the United States and the governments of other states and foreign countries might attempt to regulate such transmissions or assess taxes, fees, tariffs, duties, or other payments against the Company, its affiliates, or customers purchasing products or services through its internet properties of its clients.  Any such regulations or assessments could adversely affect the Company’s business, financial condition, and results of operations.


EMPLOYEES

As of March 1, 2008, the Company employed five persons on a part-time basis.  The Company believes that its future success will depend in part on its continued ability to attract, hire, and retain a sufficient number of highly skilled personnel.


REPORTS TO SECURITY HOLDERS

SportsNuts is subject to the information requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files quarterly and annual reports, as well as other information with the Securities and Exchange Commission (“Commission”) under File No. 333-14477.  Such reports and other information filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates, and at various regional and district offices maintained by the Commission throughout the United States.  Information about the operation of the Commission’s public reference facilities may be obtained by calling the Commission at 1-800-SEC-0330.  The Commission also maintains a website at http://www.sec.gov that contains reports and other information regarding the Company and other registrants that file electronic reports and information with the Commission.


 ITEM 2:  DESCRIPTION OF PROPERTY
 
 
8

The Company’s executive offices are located in a 5,500 square foot facility in south Salt Lake County, Utah, twenty minutes from the Salt Lake City International Airport and adjacent to Interstate 15.  The Company subleases this facility from an entity controlled by Kenneth Denos, the Company’s Chief Executive Officer.  Base rent for use of this facility is $500.00 per month, on a month-to-month lease.

The Company believes that the size of its executive offices is adequate for its business, technology, and operational needs for the intermediate future.  In the aggregate, however, the Company believes that additional office space may be necessary in the near future to accommodate its growth.  The current commercial real estate market in Salt Lake City has sufficient capacity that management believes that the Company should not experience any significant difficulty in procuring additional office space as needed.


ITEM 3:  LEGAL PROCEEDINGS

None.


ITEM 4:  SUBMISSION ON MATTERS TO A VOTE OF SECURITY HOLDERS

 
None.

 
9
 

PART II.
 
ITEM 5:  MARKET FOR COMMON EQUITY,  RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

 
(a)
Market for Common Equity and Related Stockholder Matters.

 
(1)
Market Information.

The Company’s Common Stock is listed on the NASD Electronic Bulletin Board (“Bulletin Board”) under the symbol “SPCI.”  The Company’s stock has been traded on the Bulletin Board since approximately January, 1997.  As of March 1, 2008, there was no active public market for the Company’s Common Stock.  The following table sets forth, for the periods indicated, the high and low closing sales prices, as to Bulletin Board prices of shares of the Company’s Common Stock during the calendar year ended December 31, 2007:

 
 
High
  
     Low
Fourth Quarter 2007
$ 0.00487
$ 0.0025
Third Quarter 2007
$ 0.006
$ 0.003
Second Quarter 2007
$ 0.00637
$ 0.003387
First Quarter 2007
$ 0.01487
$ 0.00231

      The following table sets forth, for the periods indicated, the high and low closing sales prices, as to Bulletin Board prices of shares of the Company’s Common Stock during the calendar year ended December 31, 2006:

 
 
High
  
     Low
Fourth Quarter 2006
$ 0.0046
$ 0.0023
Third Quarter 2006
$ 0.0121
$ 0.0021
Second Quarter 2006
$ 0.0057
$ 0.0028
First Quarter 2006
$ 0.0092
$ 0.004

 
(2)
Holders.

As of March 1, 2007, the Company had approximately 365 holders of record of its Common Stock.

 
(3)
Dividends.

The Company has not paid any cash dividends on its Common Stock since inception and does not anticipate paying cash dividends in the foreseeable future.  The Company anticipates that any future earnings will be retained for use in developing and/or expanding the business.

 
10
 


 
(b) Recent Sales of Unregistered Securities.


As of December 31, 2007, the Company had outstanding 18,150,000 common stock purchase options granted to various officers, directors, employees, and service providers of the Company pursuant to the Company’s 2000 Stock Option Plan (“Plan”).  The Company believes that the options granted under the Plan are exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) of such Act.

During 2000-2005 and continuing into 2007, Kenneth Denos, the Company’s former Chief Executive Officer, made various cash loans to the Company totaling $67,000 in the aggregate.  These loans are represented by unsecured promissory notes of the Company and bear interest at the rate of ten percent (10%) per annum.

During 2000-2005 and continuing into 2007, the Company has accrued payroll and other expenses owed to Kenneth Denos, the Company’s former Chief Executive Officer, totaling $909,868 in the aggregate.  These accruals are unsecured obligations of the Company.  Interest has accrued on the unpaid expenses commencing January 1, 2006 at the rate of twelve percent (12%) per annum.

 
ITEM 6:  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion of the financial condition and results of operations of SportsNuts, Inc. and its subsidiaries (hereafter collectively, “SportsNuts” or the “Company”) should be read in conjunction with the Audited Financial Statements and related Notes thereto included herein.   This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding the Company’s expectations, beliefs, intentions, or future strategies that are signified by the words “expects,” “anticipates,” “intends,” “believes,” or similar language.  Actual results could differ materially from those projected in the forward looking statements.  Prospective investors should carefully consider the information set forth below under the caption “Risk Factors” in addition to the other information set forth herein.  The Company cautions investors that its business and financial performance is subject to substantial risks and uncertainties.

Overview

SportsNuts is a sports management and marketing company, with a focus on community-based amateur athletics, providing unique solutions to the challenges faced by athletes and the organizations in which they participate.  The Company helps organize and manage various sports events, providing online registration, merchandise sales, event sponsorship, and event coordination.

SportsNuts endeavors to make events more profitable and efficient by promoting such events through various media channels, attracting corporate sponsorships, and providing technology tools to decrease administrative and personnel costs.

The Company previously provided computer hardware and related software sales through Secure Networks, Inc., the Company’s wholly-owned subsidiary (“Secure Networks”).  On March 1, 2007, Secure Networks was spun off, on a pro-rata basis, to the shareholders of SportsNuts.  The spin-off is described in a report on Form 8-K filed by the Company with the Securities and Exchange Commission on January 19, 2007.

The Company’s principal sources of revenues during 2007 were (i) online services targeted to sports organizations and their members, (ii) offline promotional, management, and sponsorship services provided in connection with community-based sports events, and (iii) computer hardware sales.  The ability to generate
 
 
11
 
 
revenues during the year 2007 and beyond depends substantially upon the revenues relating to the Company’s amateur sports business, as the Company spun-off Secure Networks on March 1, 2007.

Expenses which comprise cost of goods sold are principally comprised of offline costs associated with the management and promotion of sporting events which the company has an active role.  Also included in cost of goods sold are commissions paid for information technology consulting contracts.  As more organizations utilize the Company’s technology services, future expenses included in cost of goods sold will be personnel and materials costs to administer these services, as well as potential fee sharing expenses to organizations involved in sports event management, and online registration and administration.

General and administrative expenses have been comprised of administrative wages and benefits; occupancy and office expenses; outside legal, accounting and other professional fees; travel and other miscellaneous office and administrative expenses.  Selling and marketing expenses include selling/marketing wages and benefits; advertising and promotional expenses; travel and other miscellaneous related expenses.  R&D expenses consist mainly of development expenses related to creating new technology applications.  In the future, the Company anticipates significant expenditures in business development to create strategic alliances with third parties, and in developing a sales channel to the various amateur sports organizations throughout the United States.

Because the Company has incurred losses, income tax expenses are immaterial.  No tax benefits have been booked related to operating loss carryforwards, given the uncertainty of the Company being able to utilize such loss carryforwards in future years.  The Company anticipates incurring additional losses during the coming year.

Results of Operations

Following is management’s discussion of the relevant items affecting results of operations for the years ended December 31, 2007 and 2006.

Revenues.  The Company generated net revenues of $24,819 during the year ended December 31, 2007, which represents a 27% decrease compared to $33,979 in net revenues during the year 2006.  Following the spin-off of Secure Networks on March 1, 2007, the Company’s sole source of revenues will be related to sports events and services rendered pursuant thereto.  Accordingly, the Company anticipates that future overall consolidated revenues will likely be substantially lower than in prior periods.  Management therefore believes that SportsNuts is considered a “shell company” as defined in Rule 126-2 of the Securities Exchange Act of 1934.

Cost of Sales.  Cost of sales for the year ended December 31, 2007 were $11,508, a 36% decrease from $17,856 during the year 2006.  This decrease correlates with the decrease in revenues.  Cost of sales were 46% of revenues in 2007 compared to 53% in 2006.  The Company anticipates that cost of sales will decrease in the future as a result of the spin-off of Secure Networks, Inc.  Other costs of sales consisted of online registration services, sports event management and promotional services, and sales commissions paid in connection with hardware sales and leases.

Salaries and Consulting Expenses.  Salaries and consulting expenses for the year ended December 31, 2007 were $134,935, a 7% decrease from $145,690 during the year 2006.  Management continues to make a concerted effort to decrease certain costs associated with personnel salaries and benefits and contract labor.

Professional Fees.  Professional fees for the year ended December 31, 2007 were $8,170, a 1% decrease from $8,099 during 2006.  No major change is expected in professional fees as the Company will continue to have audits and reviews of the financial statements.  Contributing to professional fees was the legal and accounting fees associated with the spin-off of Secure Networks.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $12,770 for the year ended December 31, 2007, as compared to $49,715 during 2006, a decrease of 74%.  The decrease is due to the change in one of the largest expense categories in general and administrative
 
 
12
 
 
expenses, rent and utilities expense, which went from $19,277 in 2006 to $1,376 in 2007.  Where appropriate, the Company capitalizes certain systems development costs in accordance with generally accepted accounting principles.

Gain on Settlement of Debt.  The Company had a gain on settlement of debt in the amount of $-0- for the year ended December 31, 2007 compared to $236,608 during 2006.  This gain in 2006 was generated from the write off of certain old debts of the Company.

Other Income (Expense).  The Company had net other expense of $117,824 for the year ended December 31, 2007 compared to net other expense of $107,261 during 2006.  The expenses incurred were comprised primarily of interest expenses related to balances on Company credit cards and short term loans.  
 
Liquidity and Capital Resources

As of December 31, 2007, the Company’s primary source of liquidity consisted of $6,129 in cash and cash equivalents.  The Company holds most of its cash reserves in local sweep accounts with local financial institutions.  Since inception, the Company has financed its operations through a combination of short and long-term loans, and through the private placement of its Common Stock.

The Company has sustained significant net losses which have resulted in an accumulated deficit at December 31, 2007 of $23,701,741 and is currently experiencing a substantial shortfall in operating capital which raises doubt about the Company’s ability to continue as a going concern.  The Company generated a net loss for the year ended December 31, 2007 of $253,697 compared to a net loss in 2006 of $190,707.  The Company anticipates a net loss for the year ended December 31, 2008 and with the expected cash requirements for the coming months, without additional cash inflows from an increase in revenues combined with continued cost-cutting or a receipt of cash from capital investment, there is substantial doubt as to the Company’s ability to continue operations.

The Company believes these conditions have resulted from the inherent risks associated with the small startup technology-oriented companies.  Such risks include, but are not limited to, the ability to (i) generate revenues and sales of its products and services at levels sufficient to cover its costs and provide a return for investors, (ii) attract additional capital in order to finance growth, (iii) further develop and successfully market commercial products and services, and (iv) successfully compete with other comparable companies having financial, production and marketing resources significantly greater than those of the Company.

The Company believes that its capital resources are insufficient for ongoing operations, with minimal current cash reserves.  The Company will likely require considerable amounts of financing to make any significant advancement in its business strategy.  There is presently no agreement in place with any source of financing and there can be no assurance that the Company will be able to raise any additional funds, or that such funds will be available on acceptable terms.  Funds raised through future equity financing will likely be substantially dilutive to current shareholders.  Lack of additional funds will materially affect the Company and its business, and may cause the Company to cease operations.  Consequently, shareholders could incur a loss of their entire investment in the Company.


 
13
 

 
ITEM 7:  FINANCIAL STATEMENTS REQUIRED BY FORM 10-KSB



CONTENTS

Report of Independent Registered Public Accounting Firm
 
15
 
Consolidated Balance Sheet
 
16
 
Consolidated Statements of Operations
 
17
 
Consolidated Statements of Stockholders’ Deficit
 
18
 
Consolidated Statements of Cash Flows
 
19
 
Notes to the Consolidated Financial Statements
 
20
 















 
14
 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors
SportsNuts, Inc. and Subsidiaries
South Jordan, Utah

We have audited the accompanying consolidated balance sheet of SportsNuts, Inc. and Subsidiaries as of December 31, 2007 and the related consolidated statements of operations, stockholders' deficit and cash flows for the years ended December 31, 2007 and 2006.  These consolidated financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SportsNuts, Inc. and Subsidiaries as of December 31, 2007 and the consolidated results of their operations and their cash flows for the years ended December 31, 2007 and 2006 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 7 to the consolidated financial statements, the Company has negative working capital, negative cash flows from operations and recurring operating losses which raises substantial doubt about its ability to continue as a going concern.  Management's plans in regard to these matters are also described in Note 7.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.




Bouwhuis, Morrill & Company, LLC
Layton, Utah
March 24, 2008

 
15
 



SPORTSNUTS, INC. AND SUBSIDIARIES
  
Consolidated Balance Sheet
  
       
ASSETS
  
   
December 31,
  
   
2007
  
       
CURRENT ASSETS
      
       
Cash and cash equivalents
   $ 6,129  
Accounts receivable, net
     41,755  
Advances due from related party (Note 8)
     16,394  
Prepaid expenses
     7,175  
         
Total Current Assets
     71,453  
         
PROPERTY AND EQUIPMENT - NET
     145  
         
TOTAL ASSETS
   $ 71,598  
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
  
         
CURRENT LIABILITIES
        
         
Accounts payable
   $ 33,579  
Due to related parties (Note 8)
     166,770  
Accrued expenses
     1,920,535  
Line of credit payable
     27,709  
Notes payable (Note 3)
     30,850  
Notes payable - related parties (Note 2)
     747,297  
         
Total Current Liabilities
     2,926,740  
         
STOCKHOLDERS' DEFICIT
        
         
Common stock, $0.002 par value; 200,000,000 shares
        
 authorized, 121,674,854 shares issued and outstanding
     243,350  
Additional paid-in capital
     20,764,999  
Stock subscriptions receivable
     (161,750 )
Accumulated deficit
     (23,701,741 )
         
Total Stockholders' Deficit
     (2,855,142 )
         
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
   $ 71,598  
         




The accompanying notes are an integral part of these consolidated financial statements.

 
16
 



SPORTSNUTS, INC. AND SUBSIDIARIES
  
Consolidated Statements of Operations
  
             
   
For the Years Ended
  
   
December 31,
  
   
2007
    
2006
  
             
NET SALES
   $ 24,819     $ 33,979  
                 
COST OF SALES
     11,508       17,856  
                 
GROSS MARGIN
     13,311       16,123  
                 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
                
Salaries and consulting
     134,935       145,690  
Professional fees
     8,170       8,099  
Selling, general and administrative
     12,770       49,715  
Total Selling, General and Administrative Expenses
     155,875       203,504  
                 
OTHER OPERATING GAINS AND LOSSES
                
Impairment of goodwill (Note 1)
     -       (52,696 )
Gain on settlement of debt (Note 1)
     -       236,608  
Total Other Operating Gains and Losses
     -       183,912  
                 
LOSS FROM OPERATIONS
     (142,564 )     (3,469 )
                 
OTHER INCOME (EXPENSES)
                
Interest expense
     (119,164 )     (130,316 )
Interest income
     13       13  
Other income
     1,327       23,042  
Total Other Income (Expenses)
     (117,824 )     (107,261 )
                 
LOSS BEFORE INCOME TAXES
     (260,388 )     (110,730 )
                 
INCOME TAX EXPENSE
     -       -  
                 
LOSS FROM CONTINUING OPERATIONS
     (260,388 )     (110,730 )
                 
DISCONTINUED OPERATIONS
                
Income (Loss) from subsidiary
                
discontinued due to spin off (Note 10)
     6,691       (79,977 )
                 
NET LOSS
   $ (253,697 )   $ (190,707 )
                 
BASIC AND DILUTED:
                
Net loss per common share from
                
continuing operations
   $ (0.00 )   $ (0.00 )
                 
Net loss per common share
   $ (0.00 )   $ (0.00 )
                 
Weighted average shares outstanding
     121,674,854       121,674,854  
                 


The accompanying notes are an integral part of these consolidated financial statements.

 
17
 



SPORTSNUTS, INC. AND SUBSIDIARIES
  
Consolidated Statements of Stockholders' Deficit
  
                                     
                                     
               
Additional
    
Stock
          
Total
  
   
Common Stock
    
Paid-in
    
Subscriptions
    
Accumulated
    
Stockholders'
  
   
Shares
    
Amount
    
Capital
    
Receivable
    
Deficit
    
Deficit
  
                                     
Balance, December 31, 2005
     121,674,854     $ 243,350     $ 20,764,999     $ (161,750 )   $ (23,257,337 )   $ (2,410,738 )
                                                 
Net loss for year ended
                                                
December 31, 2006
     -       -       -       -       (190,707 )     (190,707 )
                                                 
Balance, December 31, 2006
     121,674,854       243,350       20,764,999       (161,750 )     (23,448,044 )     (2,601,445 )
                                                 
Net loss for year ended
                                                
December 31, 2007
     -       -       -       -       (253,697 )     (253,697 )
                                                 
Balance, December 31, 2007
     121,674,854     $ 243,350     $ 20,764,999     $ (161,750 )   $ (23,701,741 )   $ (2,855,142 )
                                                 



The accompanying notes are an integral part of these consolidated financial statements.

 
18
 



SPORTSNUTS, INC. AND SUBSIDIARIES
            
Consolidated Statements of Cash Flows
            
             
   
For the Years Ended
        
   
December 31,
        
   
2007
    
2006
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
             
Net loss
   $ (253,697 )   $ (190,707 )
Adjustments to reconcile net loss to net
                
 cash used by operating activities:
                
Depreciation
     993       10,573  
Gain on settlement of debt
     -       (236,608 )
Impairment of goodwill
     -       52,696  
Changes in operating assets and liabilities:
                
Accounts receivable
     (3,798 )     19,626  
Advances due from related party
     (9,445 )     15,263  
Other current assets
     (2,148 )     5,591  
Accounts payable and accrued expenses
     238,632       262,351  
Due to related parties
     6,647       6,412  
                 
Net Cash Used by Operating Activities
     (22,816 )     (54,803 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
     -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
                
                 
Change in line of credit payable
     8,996       (10,058 )
Proceeds from notes payable - related parties
     6,615       11,492  
                 
Net Cash Provided by Financing Activities
     15,611       1,434  
                 
NET DECREASE IN CASH AND CASH EQUIVALENTS
     (7,205 )     (53,369 )
                 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     13,334       66,703  
                 
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 6,129     $ 13,334  
                 
SUPPLEMENTAL CASH FLOW INFORMATION
                
                 
Cash Payments For:
                
                 
Interest
   $ 5,413     $ 5,909  
Income taxes
   $  -     $ -  
                 




The accompanying notes are an integral part of these consolidated financial statements.

 
19
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006

NOTE 1 - -       ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 
a.
Organization and Description of Business

 
SportsNuts, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on July 12, 1996.  On April 15, 2001 the Company changed its name from SportsNuts.com International, Inc. to SportsNuts, Inc.  Prior to the reorganization with SportsNuts.com, Inc. (“SportsNuts”), a privately held Delaware corporation, on April 6, 1999, the Company had not commenced active business operations and was considered a development stage company.

 
The Company’s primary business is providing unique solutions to the challenges faced by amateur athletes and the organizations in which they participate.  The Company helps organize and manage a wide variety of sports events, providing online registration and merchandise sales, event sponsorship, event coordination, and online and offline promotion.  The Company is the emerging technology leader in sports information systems and the only organization of its kind to compliment its technology solutions with offline, marketing, sales, and support.  The Company’s mission is to become the ultimate resource for event coordinators, administrators, athletes, fans, and coaches.

 
Effective April 15, 2001, the Company issued 3,800,000 shares of its common stock to acquire Rocky Mountain Sports Alliance, Inc. (“RMSA”) in exchange for all of the issued and outstanding shares of RMSA common stock.  The acquisition was accounted for as a purchase per APB No. 16.  The RMSA is a sports management firm located in Salt Lake City, Utah and currently holds the rights to a number of sports events throughout Utah and the surrounding intermountain area.  Management believes that the addition of the RMSA to the Company’s technology solutions gives the Company a unique position in the amateur sports industry in being able to provide offline as well as online support to teams, leagues, and sports organizations.

During February 2004, the Company acquired Secure Networks, Inc. from an individual for 2,500,000 shares of SportsNuts, Inc.’s common stock making it a wholly owned subsidiary.  Goodwill of $52,696 was recognized as a result of this acquisition.  As of December 31, 2006, we have determined that there has been an impairment of goodwill and the entire amount has been written off.

 
b.
Accounting Method

 
The Company’s consolidated financial statements are prepared using the accrual method of accounting.  The Company has elected a December 31 year end.

 
c.
Cash and Cash Equivalents

 
Cash Equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.

 
20
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006

NOTE 1 -
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

 
d.
Property and Equipment

 
Property and equipment are stated at cost. Expenditures for ordinary maintenance and repairs are charged to operations as incurred.  Major additions and improvements are capitalized. Depreciation is computed using the straight-line and accelerated methods over estimated useful lives as follows:

 
Computer hardware
3 years
 
Computer software
3 years
 
Office equipment
7 years

Depreciation expense for the years ended December 31, 2007 and 2006 was $993 and $10,573, respectively.

 
e.
Accounts Receivable

 
Accounts receivable are recorded net of the allowance for doubtful accounts of $3,938 as of December 31, 2007.

 
f.
Revenue Recognition

 
Revenue is recognized upon completion of services or delivery of goods where the sales price is fixed or determinable and collectibility is reasonably assured.  Advance customer payments are recorded as deferred revenue until such time as they are recognized.  The Company does not offer any cash rebates.  Returns or discounts, if any, are netted against gross revenues.  For the years ended December 31, 2007 and 2006, sales are recorded net of the allowance for returns and discounts of $-0-.

 
g.
Estimates

 
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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 could differ from those estimates.

 
h.
Advertising

 
The Company follows the policy of charging the costs of advertising to expense as incurred.  Advertising expense is included in selling and marketing expenses in the consolidated statements of operations.

 
i.
Goodwill

 
Based on SFAS No. 142, the Company has determined that the goodwill of $52,696 associated with the acquisition of Secure Networks has been impaired and was written off as of December 31, 2006.

 
21
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006

NOTE 1 -
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

 
j.
Basic Net Loss Per Share

   
For the Years Ended
December 31,
  
   
2007
    
2006
  
Basic net loss per share:
            
             
Loss (numerator)
   $ (253,697 )   $ (190,707 )
Shares (denominator)
     121,674,854       121,674,854  
Per share amount
   $ (0.00 )   $ (0.00 )

 
The basic income (loss) per share of common stock is based on the weighted average number of shares issued and outstanding during the period of the financial statements. Common shares to be issued from preferred stock, warrants, and options are not included in the computation because they would have an antidilutive effect on the net loss per common share.

 
k.
Provision for Taxes

The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, using the liability method.  The estimated future tax effect of differences between the basis in assets and liabilities for tax and accounting purposes is accounted for as deferred taxes.  In accordance with the provisions of SFAS No. 109, a valuation allowance would be established to reduce deferred tax assets if it were more likely than not that all or some portion, of such deferred tax assets would not be realized.  A full allowance against deferred tax assets was provided as of December 31, 2007.

At December 31, 2007 the Company had net operating loss carryforwards of approximately $14,000,000 that may be offset against future taxable income through 2027.  No tax benefits have been reported in the financial statements, because the potential tax benefits of the net operating loss carry forwards are offset by a valuation allowance of the same amount.

 
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carryforwards may be limited as to use in the future.

 
l.
Research and Development

 
The Company follows the policy of charging research and development costs to expense as incurred.

 
m.
Stock Options and Warrants

 
On January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004), Share-Based Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS 123 (R) supercedes Accounting Principles Board opinion (APB) No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows.

 
22

 
NOTE 1 -
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

 
n.
Gain on Settlement of Debt

 
The gain on settlement of debt arises from the write-off of certain old accounts and notes payable by the Company pursuant to a legal opinion from the Company’s attorney and CEO.  The Company is continuing to negotiate with additional creditors to settle other old accounts payable at a discount.  The gain on settlement of debt associated with these write-offs amounted to $-0- and $236,608, respectively at December 31, 2007 and 2006.

 
o.
Line of Credit

 
The company has one line of credit outstanding at December 31, 2007.  Following are the details of the line of credit:
 
 
Line of credit is due on demand.
      
Available credit line
   $ 34,000  
Interest rate
     8 %
Balance outstanding at December 31, 2007
   $ 27,709  

 
p.
Reclassifications

Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year presentation.  These reclassifications have no material affect on the consolidated financial statements.

 
q.
Accrued Expenses

Accrued expenses consisted of the following at December 31, 2007:
 
Accrued compensation
   $ 1,148,475  
Accrued interest
     678,973  
Other accrued expenses
     93,087  
Total accrued expenses
   $ 1,920,535  

r.              
Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities” (“SFAS No. 159”). SFAS No. 159 permits an entity to choose to measure many financial instruments and certain items at fair value. The objective of this standard is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reporting earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 permits all entities to choose to measure eligible items at fair value at specified election dates. Entities will report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that
 
 
23

 
NOTE 1 - -       ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

 
r.
Recent Accounting Pronouncements (Continued)

begins after November 15, 2007. Early adoption is permitted. We are currently evaluating the impact that the adoption of SFAS No. 159 will have on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces SFAS No. 141, “Business Combinations”, but retains the requirement that the purchase method of accounting for acquisitions be used for all business combinations. SFAS 141(R) expands on the disclosures previously required by SFAS 141, better defines the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any non-controlling interests in the acquired business. SFAS 141(R) also requires an acquirer to record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to acquired businesses. SFAS 141(R) is effective for all business combinations with an acquisition date in the first annual period following December 15, 2008; early adoption is not permitted. The impact of SFAS 141(R) will have on our consolidated financial statements will depend on the nature and size of acquisitions we complete after we adopt SFAS 141(R).

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160). SFAS 160 requires that non-controlling (or minority) interests in subsidiaries be reported in the equity section of the company’s balance sheet, rather than in a mezzanine section of the balance sheet between liabilities and equity. SFAS 160 also changes the manner in which the net income of the subsidiary is reported and disclosed in the controlling company’s income statement. SFAS 160 also establishes guidelines for accounting for changes in ownership percentages and for deconsolidation. SFAS 160 is effective for financial statements for fiscal years beginning on or after December 1, 2008 and interim periods within those years; early adoption is not permitted. The adoption of SFAS 160 is not expected to have a material impact on our financial position, results of operations or cash flows.


 
24
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006

NOTE 2-        NOTES PAYABLE - RELATED PARTIES

Notes payable - related parties consisted of the following:
      
   
December 31,
2007
  
 
Note payable to a shareholder, secured by tangible
and intangible assets of the Company,
interest at 16%, principal and interest due
April 1, 2000, past due.  Note is convertible into
common stock of the Company at $.10 per share.
   $ 450,000   
 
Note payable to a related individual, secured
 by tangible assets of the Company, interest at 16%,
 principal and interest due May 4, 2000, past due.
 Note is convertible into common stock of the
 Company at $1.00 per share.
             20,000  
 
Notes payable to related individuals, unsecured,
 interest at 10%, due on demand.
       221,916  
 
Notes payable to a related individual, unsecured,
 interest at 13%, due on demand.
       21,500  
 
Notes payable to a related individual, unsecured,
 interest at 24%, due on demand.
       33,881  
 
Total notes payable - related parties
     747,297  
 
Less: current portion
     (747,297 )
 
Long-term notes payable - related parties
   $ -  
 
Maturities of notes payable - related parties are as follows:
        
 
Yeah Ending
December 31,
  
 
Amount
  
 
2008
   $ 747,297  
 
Total
   $ 747,297  





 
25
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006

NOTE 3 - -        NOTES PAYABLE

Notes payable consisted of the following:
    
   
December 31,
2007
 
Notes payable to individuals, unsecured, interest
 at 10%, due on demand.
  
 
 
$ 23,750
 
Note payable to a company, unsecured, interest
 at 24%, due on demand.
  
 
 
7,100
 
Total notes payable
  
 
30,850
 
Less: current portion
  
 
(30,850)
 
Long’term notes payable
  
 
-
 
Maturities of notes payable are as follows:
    
 
Year Ending
December 31,
  
 
 
Amount
 
2008
  
 
$ 30,850
 
Total
  
 
$30,850


NOTE 4 - -       COMMON AND PREFERRED STOCK TRANSACTIONS

 
Effective March 11, 2005, the Company issued 10,000,000 shares of its common stock in exchange for the exercise of stock options held by employees and consultants of the Company.  The Company has recorded a stock subscription receivable of $100,000 as payment which has not yet been received.

NOTE 5 - -       OPTIONS AND WARRANTS

The Company has adopted FASB Statement 123(R), “Share-Based Payments” (“SFAS No. 123R”) to account for its stock options.  The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model.  The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our experience.  Compensation expense is recognized only for those options expect to vest, with forfeitures estimated at the date of grant based on our historical experience and future expectations.  No stock options or warrants were granted during 2007.
 
 
26
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006

 
NOTE 5 - -       OPTIONS AND WARRANTS (Continued)

Employee Stock Options

The following tables summarize the information regarding employee stock options at December 31, 2007:

Outstanding at December 31, 2006
     16,750,000  
Granted
     -  
Expired
     (8,000,000 )
Exercised
     -  
Options outstanding at December 31, 2007
     8,750,000  
Weighted average exercise price of options
outstanding at December 31, 2007
   $ 0.005  
         


 
 
 
Exercise
Prices
  
Number of
Options
Outstanding
December 31,
2007
  
Weighted
Average
Remaining
Contractual
Life (Yrs)
  
 
Weighted
Average
Exercise
Price
  
Number of
Options
Exercisable at December 31,
2007
  
 
Weighted
Average
Exercise
Price
                     
$           0.005
  
8,750,000
  
1.83
  
$                 0.005
  
8,750,000
  
$           0.005
                     

 
NOTE 6 - -       OPERATING LEASES

 
The Company leased two (2) different facilities on a month to month basis.  Rental expense for the years ended December 31, 2007 and 2006 was $4,576 and $24,470, respectively.

NOTE 7 -
GOING CONCERN

 
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained significant net losses which have resulted in an accumulated deficit at December 31, 2007 of approximately $23,700,000, has negative working capital, and negative cash flows from operations, all of which raise substantial doubt regarding the Company’s ability to continue as a going concern.

To date the Company has funded its operations through a combination of loans and the private placement of its common stock. The Company anticipates another net loss for the year ended December 31, 2008 and with the expected cash requirements for the coming year, there is substantial doubt as to the Company’s ability to continue operations.

 
The Company believes these conditions have resulted from the inherent risks associated with small startup technology-oriented companies. Such risks include, but are not limited to, the ability to (i) generate revenues and sales of its products and services at levels sufficient to cover its costs

 
27
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006


NOTE 7 -
GOING CONCERN (Continued)

 
and provide a return for investors, (ii) attract additional capital in order to finance growth, (iii) further develop and successfully market commercial products and services, and (iv) successfully
 
compete with other comparable companies having financial, production and marketing resources significantly greater than those of the Company.

 
The Company is attempting to improve these conditions by way of financial assistance through issuances of additional equity and by generating revenues through sales of products and services.

NOTE 8 - -        RELATED PARTY TRANSACTIONS

 
From time to time, the Company makes advances to a related company.  These advances are short term in nature and due on demand.  The balance receivable at December 31, 2007 was $16,394.

 
From time to time, an officer of the Company and an entity he owns paid for expenses of the Company for which he has not been reimbursed.  These unreimbursed expenses are disclosed as due to related parties.  The balance due at December 31, 2007 was $166,770.

NOTE 9 - -        SEGMENT REPORTING

 
SportsNuts, Inc.’s reportable segments are business units that offer different products and services.  The Company has three reportable business segments: online services, sports event management and information technology consulting.  The online services segment provides internet team and league management for amateur sports organizations and online registrations for
 
sporting events.  The sports event management segment creates, promotes and manages sporting events.  The information technology consulting segment provides services related to computer hardware, software and websites.

 
The policies applied to determine the segment information are the same as those described in the summary of significant accounting policies (Note 1).  All significant intersegment transactions have been eliminated in the consolidated financial statements.  Financial information as of and for the year ended December 31, 2007 with respect to the reportable segments is as follows:

   
Online
Services
    
Sports Event
Management
    
Information
Technology
Consulting
  
                   
Cash
   $ 2,531     $ 2,209     $ 1,389  
Fixed assets, net
     -       145       -  
Total assets
     6,403       18,748       46,447  
Total liabilities
     2,665,038       28,719       232,983  
Revenues
     13,184       11,635       -  
Cost of goods sold
     7,119       4,389       -  
Other income (expense)
     (114,515 )     (3,309 )     -  
Segment profit (loss) before tax effect
  and discontinued operations
     (260,709 )     321       -  



 
28
 
SPORTSNUTS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
December 31, 2007 and 2006


NOTE 10 - -      DISCONTINUED OPERATIONS


During the year ended December 31, 2007, the Company spun off its wholly owned subsidiary, Secure Networks, Inc.  The Company has accounted for these operations as discontinued.  The following is a summary of the income (loss) from discontinued operations.

   
For the Years Ended
December 31,
  
   
2007
    
2006
  
 
NET SALES
   $ 42,543     $ 301,982  
 
COST OF SALES
     24,967       208,391  
 
GROSS MARGIN
     17,576       21,591  
 
OPERATING EXPENSES
                
 
Salaries and consulting
     4,967       19,500  
Professional fees
     5,125       19,276  
Selling, general and administrative expenses
     4,993       44,599  
 
Total Operating Expenses
     15,085       83,375  
 
LOSS FROM OPERATIONS
     2,491       (61,784 )
 
OTHER INCOME (EXPENSES)
                
 
Interest expense
     (3,908 )     (18,193 )
Gain on settlement of debt
     8,108       -  
 
Total Other Income (Expenses)
     4,200       (18,193 )
 
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS
       6,691       (79,977 )



 
29
 

ITEM 8:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 8A:  CONTROLS AND PROCEDURES

 
Management’s Report on Disclosure Controls and Procedures
 
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, to allow for timely decisions regarding required disclosure.
 
 
As of December 31, 2007, the end of our fiscal year covered by this report, we carried out an evaluation, under the supervision of our Chief Executive Officer and Controller, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, we concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.  Our board of directors has only one member.  We do not have a formal audit committee.
 
 
Management’s Report on Internal Control over Financial Reporting
 
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act, as amended). In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2007, our internal control over financial reporting is effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with US generally accepted accounting principles.
 
 
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
 
 
Inherent limitations on effectiveness of controls
 
 
30
 
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 
Changes in Internal Control over Financial Reporting
 
 
There have been no significant changes in our internal controls over financial reporting that occurred during the year ended December 31, 2007 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
 

ITEM 8B:  OTHER INFORMATION

None


PART III
 
ITEM 9:   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Pursuant to the Company's Delaware Certificate of Incorporation and Bylaws, the Company's Board of Directors (the "Board") has been divided into three classes, with only a single class subject to re-election each year.  The initial re-election of the Board under this procedure requires the directors to be nominated to serve a one-, two-, or three-year term.  Thereafter, any director, whether elected or re-elected, will serve a three-year term.  Each of the Company’s eight directorships has been divided  into one of these three classes, with one class containing two directorships and two classes containing three directorships.  John D. Thomas, age 35, is the Chief Executive Officer of the Company and currently the only executive officer of the Company and the only member of the Board of Directors.  A short summary of Mr. Thomas’ business experience is below.  His term of office will expire at the next annual shareholders meeting.  No annual shareholders’ meeting is planned for the year 2008.

John D. Thomas, J.D., age 35, Mr. Thomas has served as corporate counsel for SportsNuts, Inc., since January, 2005.  Mr. Thomas practices law specializing in general corporate law and mergers and acquisitions for his law firm, John D. Thomas P.C.  Since December, 2008, Mr. Thomas has served as a member of the board of directors of Cognigen Networks, Inc. (CGNW.OB),  a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934.  He has also been general legal counsel for Cancer Therapeutics, Inc., a filer of reports pursuant to Sections 13(a) and 15(d) of the Securities
 
 
31
 
 
Exchange Act of 1934, since May, 2004.  Prior to his association with Cancer Therapeutics, Mr. Thomas practiced general corporate law for various clients from May, 2003 until the present and from November 1999 until August 2002.  From September, 2002 until April, 2003 Mr. Thomas practiced law as a litigator for the Law Offices of Kirk A. Cullimore and from September, 2000 until September, 2002 was deputy corporate counsel for LIFE International LLC, an international corporate services firm specializing in estate planning and international corporate law.  Mr. Thomas holds a Juris Doctor degree from Texas Tech University School of Law and is licensed to practice law in Texas and Utah.

Board of Directors Meetings and Committees

Although various items were reviewed and approved by the Board of Directors during 2007, the Board held no meetings during the fiscal year ended December 31, 2007.

The Company does not have Audit or Compensation Committees of the Board of Directors.  Because of the lack of financial resources available to the Company, the Company also does not have an “audit committee financial expert” as such term is described in Item 401 of Regulation S-B promulgated by the Securities and Exchange Commission.

Compensation of Directors

Although the Company anticipates compensating the members of its Board of Directors in the future at industry levels, current members are not paid cash compensation for their service as directors.  Each director may be reimbursed for certain expenses incurred in attending Board of Directors and committee meetings.  Directors may also be granted stock options under the Company’s 2000 Stock Option Plan.

Code of Ethics

We have adopted a code of ethics that applies to all of our executive officers and senior financial officers (including our chief executive officer, chief financial officer and any person performing similar functions).  A copy of our code of ethics is publicly available on our website at www.sportsnuts.com under the caption "INVESTORS." If we make any substantive amendments to our code of ethics or grant any waiver,  including any implicit waiver,  from a provision of the code to our chief  executive  officer,  chief  financial  officer,  chief accounting officer or controller,  we will disclose the nature of such amendment or waiver in a report on Form 8-K.

Section 16(a) Beneficial Ownership Reporting Compliance 

We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.

For the 2007 fiscal year we are unaware of any officer, director or beneficial owner of more that 10% of our registered equity securities who failed to file reports on a timely basis in accordance with Section 16(a) of the Securities Exchange Act of 1934.


 
32
 

ITEM 10:  EXECUTIVE COMPENSATION.

The following table sets forth certain information regarding the annual and long-term compensation for services rendered in all capacities during the fiscal year ended December 31, 2007, 2006, and 2005 of those persons who were the Company’s Chief Executive Officer and other executive officers of the Company.

Summary Compensation Table

 
 
Annual Compensation
  
Long-Term
Compensation
  
Name and
Principal
Position
 
Year
 
Salary
 
Bonus
Securities
Underlying
Options
All Other
Compensation
 
John D. Thomas CEO
Kenneth Denos
Former CEO
    2007
 
2007(1)
2006(2)
2005(3)
$0
 
   $100,000100,000 (1)
   $100,000100,000 (2)
   $100,000150,000 (3)
 
     $0
 
      $0 0
      $0 0
      $0 0
 
         $0
 
         $0 0
         $0 8,000,000
         $0 8,000,000
         $0
 
         $0 0
         $0 0
         $0 0

(1) Represents $100,000 in earned but unpaid salary during 2007.
(2) Represents $100,000 in earned but unpaid salary during 2006.
(3) Represents $100,000 in earned but unpaid salary during 2005.


Aggregated Option Exercises in Last Fiscal Year and Year End Option Values

     
Number of
Unexercised Options at December 31, 2007
Value of Unexercised
In-the-Money Options
at December 31, 2007(1)
 
 
Name
Shares
Acquired
On Exercise
 
Value
Realized
 
Exercisable/
Unexercisable
 
 
Exercisable/
Unexercisable
Kenneth Denos
0
0
1,000,000/0
0/0
Kenneth Denos
0
0
9,000,000/0
0/0

(1)  Based on the closing sales price of the Common Stock on the NASD Electronic Bulletin Board on December 31, 2007 of $0.00269.




 
33
 
 
ITEM 11:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

(a) Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock (par value $0.002 per share) as of March 31, 2008 by (i) each person (or group of affiliated persons) who is known by the Company to beneficially own more than 5% of the outstanding shares of the Company’s Common Stock, (ii) each person who has served as a director or executive officer of the Company during the calendar year 2007, and (iii) all persons who have served as a director or executive officer of the Company during the calendar year 2007 as a group.  As of such date, the Company had 121,321,086 shares of Common Stock outstanding.  Unless indicated otherwise, the address for each officer, director, and 5% shareholder is c/o the Company, 10757 South, River Front Parkway, South Jordan, Utah 84095.

 
Common Stock
Directors, Executive Officers,
5% Stockholders
 
Number
 
Percent of  Class(1)
John D. Thomas
Kenneth Denos(3)
0
24,467,953
0%
20.17%
Prestbury Investment Holdings Limited(4)
25,000,000
20.6%
Nigel Wray(5)
25,000,000
20.6%
Nicholas Leslau(6)
25,000,000
20.6%
Gardner Management, Inc. Profit Sharing Plan and Trust(7)
19,026,607
15.68%
Moore, Clayton & Co., Inc.(8)
14,667,953
12.09%
Todd Shell(9)
7,500,000
6.18%
All directors and officers as a group
(1 person)
0
0%

(1) For each shareholder, the calculation of percentage of beneficial ownership is based upon 121,321,086 shares of Common Stock outstanding as of March 31, 2007, and shares of Common Stock subject to options, warrants and/or conversion rights held by the shareholder that are currently exercisable or exercisable within 60 days, which are deemed to be outstanding and to be beneficially owned by the shareholder holding such options, warrants, or conversion rights.  The percentage ownership of any shareholder is determined by assuming that the shareholder has exercised all options, warrants and conversion rights to obtain additional securities and that no other shareholder has exercised such rights.  Except as otherwise indicated below, the persons and entity named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to applicable community property laws.

(2) Chief Executive Officer, Secretary and Director of the Company.

(3) Former Chief Executive Officer, Secretary, and Director of the Company.  Includes 800,000 shares of Common Stock held directly by Mr. Denos and 9,000,000 shares of Common Stock issuable upon exercise of options held by Mr. Denos that are currently exercisable or will become exercisable within 60 days.  Because Mr. Denos is a member of the Board of Directors of Moore, Clayton & Co., Inc. (“MCC”), this number also includes 1,071,429 shares held directly by MCC, and certain promissory notes held by MCC that are currently convertible into 13,596,524 shares of Common Stock.
 
 
34

 
(3) Principal Shareholder of the Company.  Includes 25,000,000 shares held directly by Prestbury Investment Holdings Limited (“PIHL”).

(4) Prinicipal of PIHL and, together with Mr. Nicholas Leslau, the controlling shareholders of PIHL.  Includes 25,000,000 shares of Common Stock held directly by PIHL.

(5) Principal of PIHL and, together with Mr. Nigel Wray, the controlling shareholders of  PIHL.  Includes 25,000,000 shares of Common Stock held directly by PIHL.

(6) Principal Shareholder of the Company.  Includes 12,273,895 shares of Common Stock held directly by Gardner Management, Inc. Profit Sharing Plan and Trust and 6,752,712  shares of Common Stock issuable upon the exercise of a Convertible Promissory Note held by the Trust.

(7) Principal Shareholder of the Company.  Includes 1,071,429 shares held directly by MCC and certain promissory notes held by MCC that are  convertible into 13,596,524 shares of Common Stock.

(8) Principal Shareholder of the Company.  Includes 5,000,000 shares of Common Stock held directly by Mr. Shell and 2,500,000 shares of Common Stock held by Kelli Shell, the wife of Mr. Shell.



(b) Securities Authorized for Issuance Under Equity Compensation Plans.


 
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
 reflected in column (a))
 
(a)
(b)
(c)
Equity compensation
plans approved by
security holders
 
50,000,000
 
$0.011
 
19,400,000
Equity compensation
plans not approved by
security holders
 
0
 
$0
 
0
Total
50,000,000
$0.011
19,400,000


 
(c) Possible Change of Control.

To reduce the Company’s debts, the Company may attempt to convert certain of its liabilities into Common Stock during 2008, depending upon the agreement of various creditors of the Company.  These liabilities are the result of loans received by the Company, accrued payroll expense for various employees of the Company, and operating liabilities incurred but unpaid during the past five years.  Although the Company will endeavor to obtain the highest possible conversion price to such liabilities, the collective effect of converting a substantial amount of this debt may result in a change of control of the Company in favor of certain of the Company’s larger creditors.

ITEM 12:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
 
35

 
During 2000-2008 and up to the date of this filing, Kenneth I. Denos, the Chief Executive Officer of the Company, made various loans to the Company in his personal capacity and through a professional corporation controlled by Mr. Denos.  These loans, aggregating $67,000, were made for working capital purposes, are due upon demand, and bear interest at the rate of ten percent (10%) per annum until repaid.

Since May 2000, Kenneth I. Denos, the Company’s Former Chief Executive Officer, has not been paid a salary for his services, although his salary payment obligation has been accrued on the books of the Company.  As of December 31, 2007, such accrued payroll liability and related expenses totaled $909,868.  Accordingly, the Company may seek to convert some or all of Mr. Denos’ payroll liability into stock of the Company, the result of which could be the issuance of a substantial number of shares of Common Stock and substantial dilution to current stockholders.

Commencing May 1, 2006, the Company became a subtenant of Acadia Properties, Inc., an entity controlled by Kenneth I. Denos, the Company’s Chief Executive Officer.  Acadia Properties will charge the Company $500 per month for use of its facilities, telephones, and limited use of office supplies.

ITEM 13:  EXHIBITS AND REPORTS ON FORM 8-K.

 
(a)
Documents Filed as a Part of this Report

 
(1)
Financial Statements

 
See “Item 7 - Financial Statements Required by Form 10-KSB.”

 
(2)
Financial Statement Schedules

The following Financial Statement Schedules of the Company and its subsidiaries, together with the report of Bouwhuis Morrill & Company, LLC, the Company’s independent accountants, thereon are filed as part of this Report on Form 10-KSB as listed below and should be read in conjunction with the consolidated financial statements of the Company:

Report of Bouwhuis Morrill & Company, LLC, Independent Accountants, on Financial Statement Schedules.

 
(3)
Exhibits

 
See “Index to Exhibits.”

 
(b)
Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended December 31, 2007.


 
36
 

ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees Billed For Audit and Non-Audit Services

The following table represents the aggregate fees billed for professional audit services rendered to the Company by Bouwhuis, Morrill & Company, LLC, our current independent auditor, (“BMC”) for the audit of the Company’s annual financial statements for the years ended December 31, 2007 and 2005, and all fees billed for other services rendered by BMC during those periods.


Year Ended December 31
2007
2006
     
Audit Fees(1)
7,325
$7,849
Audit-Related Fees(2)
0
0
Tax Fees(3)
0
0
All Other Fees(4)
______0______
______0______
     
Total Accounting Fees and Services
$7,325
$7,849
     

  (1) Audit Fees. These are fees for professional services for the audit of the Company’s annual financial statements, and for the review of the financial statements included in the Company’s filings on Form 10-QSB, and for services that are normally provided in connection with statutory and regulatory filings or engagements. The amounts shown for BMC in 2006 relate to (i) the audit of the Company’s annual financial statements for the fiscal year ended December 31, 2006, and (ii) the review of the financial statements included in the Company’s filings on Form 10-QSB for the first, second and third quarters of 2006. The amounts shown for BMC in 2007 relate to (i) the audit of the Company’s annual financial statements for the fiscal year ended December 31, 2007, and (ii) the review of the financial statements included in the Company’s filings on Form 10-QSB for the first, second and third quarters of 2007.

  (2)  Audit-Related Fees. These are fees for the assurance and related services reasonably related to the performance of the audit or the review of the Company’s financial statements.

  (3) Tax Fees. These are fees for professional services with respect to tax compliance, tax advice, and tax planning.

  (4) All Other Fees. These are fees for permissible work that does not fall within any of the other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax Fees.




 
37
 

INDEX TO EXHIBITS


Exhibit
Number
 
Title of Document
3.1
Certificate of Incorporation of SportsNuts, Inc., a Delaware corporation. (1)
3.2
Bylaws of SportsNuts, Inc., a Delaware corporation. (1)
10.1
Convertible Promissory Note and Security Agreement among Gardner Management, Inc. Profit Sharing Plan and Trust, SportsNuts.com, Inc., Sportzz.com, Inc., and the Company, including amendments, dated February 1, 2000.(3)
10.2
SportsNuts, Inc. 2000 Stock Option Plan.(4)
21.1
Subsidiaries of the Registrant (5)
99.1
Certification by Chief Executive Officer and Chief Financial Officer, John D. Thomas, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
99.2
Certification by Chief Executive Officer and Chief Financial Officer, John D. Thomas, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


(1) Filed as an Exhibit to the Company’s quarterly report on Form 10-QSB, filed with the Commission on August 14, 2001.

(2) Filed as an Exhibit to the Company’s quarterly report on Form 10-QSB, filed with the Commission on August 14, 2001.

(3) Filed as an Exhibit to the Company’s annual report on Form 10-KSB, filed with the Commission on March 30, 2000.

(4) Filed as an Exhibit to the Company’s Quarterly Report on Form 10-QSB, filed with the Commission on May 11, 2001.

(5) Filed as an Exhibit to the Company’s quarterly report on Form 10-QSB, filed with the Commission on March 17, 2004.






 
38
 

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SPORTSNUTS, INC.

Dated March 31, 2008
By:
/s/ John D. Thomas
   
John D. Thomas
   
Chief Executive Officer


 
39
 

EX-31 2 ex31sarbanesoxley.htm EXHIBIT 31 SARBANES OXLEY 302 ex31sarbanesoxley.htm
 
 
 

Exhibit 31
SECTION 302 CEO CERTIFICATION
 
Form of Certification Required
by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934
 
I, John D. Thomas, certify that:
 
 
1.
I have reviewed this Report on Form 10-KSB of Sportsnuts, Inc.;
 
 
2.
Based on my knowledge, this 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 report;
 
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
 
 
4.
The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:
 
 
a.
Designed such disclosure controls and procedures. or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
c.
Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation;
 
 
d.
Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of a report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting, and;
 
 
5.
The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the small business issuer’s auditors and the audit committee of small business issuer’s board of directors (or persons performing the equivalent function):
 
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting, which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
 
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
 
Date: March 31, 2008
 
 
 
 /s/ John D. Thomas
 John D. Thomas
Chief Executive Officer

 

 
 
 

EX-32 3 ex32sarbanesoxley906.htm EXHIBIT 32 SARBANES OXLEY 906 ex32sarbanesoxley906.htm
 
 
 


 
Exhibit 32
 
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
 
In connection with the accompanying report of SportsNuts, Inc. (the “Company”) on Form 10-KSB for the period ended December 31, 2007 (the “Report”), I, John D. Thomas, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 
(1)
To my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Dated: March 31, 2008
 
 
 
 /s/ John D. Thomas
 John D. Thomas
 
 
 Chief Executive Officer
 

 

 
 
 

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