INTRODUCTION

The terms "ASDG," "us," "we," "our" and the "Company" refer to American Sports Development Group, Inc. and, unless the context otherwise requires, its consolidated subsidiaries, American Inflatables, Inc., Paintball Incorporated and ILM, Inc.

The current Company was formed on May 17, 2002 by the combination of two businesses: (i) Paintball Incorporated, a South Carolina corporation formerly known as "American Sports Development Group, Inc." and "National Paintball Supply Company, Inc." and (ii) American Inflatables, Inc., a Delaware corporation formerly known as "Global Lock Corporation" and "GlobaLock Corporation."

BANKRUPTCY FILING IN FISCAL YEAR 2003 -------------------------------------

On July 16, 2003, Paintball, Inc., a wholly owned subsidiary of American Sports Development Group, Inc., filed for reorganization under Chapter 11 of the Federal Bankruptcy Act in the United States Bankruptcy Court, District of South Carolina. The Chapter 11 filing was due to Paintball Inc.'s inability to secure a further extension from SouthTrust Bank ("SouthTrust") on its line of credit or able to renegotiate its terms. The filing of a bankruptcy case, under any chapter of the Bankruptcy Code, triggers an injunction against the continuance of any action by any creditor against the debtor or the debtor's property pursuant to 11 U.S.C. 362. This is commonly referred to as an "automatic stay."

The automatic stay gives the debtor protection from creditors, subject to the oversight of the bankruptcy judge, and brings all of the debtor's assets and creditors into the same forum, the bankruptcy court, where the rights of all concerned can be balanced. Generally, the automatic stay prohibits:

* Beginning or continuing lawsuits * Collection calls * Repossessions * Foreclosure sales * Garnishment or levies

The automatic stay usually remains in effect until a judge lifts the stay at the request of a creditor; the debtor gets a discharge; or the item of property is no longer property of the estate.

In September 2003, Accucaps Industries Limited ("Accucaps") submitted an offer to the Company's subsidiary, Paintball Inc., proposing to purchase certain assets, inventory and intellectual property of Paintball Inc., and to provide interim financing pending such sale. Because the Bankruptcy Court for the District of South Carolina would not approve a certain proposed term of the sale, Accucaps rescinded its offer.

The Company continued to seek suitable merger or acquisition partners during this process, but was not successful. As a result, and due to Paintball Inc.'s continuing incurrence of losses, on October 31, 2003, Paintball Inc. effectively ceased operations and its employees were terminated.

On November 11, 2003, Paintball Inc.'s bankruptcy status was converted from Chapter 11 of the Bankruptcy Act to Chapter 7. Chapter 11 of the Bankruptcy Act pertains to reorganizations, whereas Chapter 7 relates to liquidation.

Under the provisions of Chapter 7 of the Bankruptcy Act, the Company has effectively lost control of the assets and the operations of its subsidiary, Paintball Inc. As of November 11, 2003, Paintball Inc. ceased its operations. In the accompanying consolidated financial statements included elsewhere in this report on Form 10-KSB, the financial position, results of operations and cash flows of Paintball Inc. have been presented as a discontinued operation.

In January 2004, Accucaps submitted a second offer to purchase certain of Paintball Inc.'s assets, including inventory and intellectual property for $850,000. The Bankruptcy Court accepted this offer and approximately $737,833 of these funds was paid to SouthTrust , in partial satisfaction of Paintball's liability to South Trust of approximately $1,203,000. American Sports Development Group, Inc. does not have any liability to SouthTrust, although certain corporate officers remain personally liable to SouthTrust for the balance of the debt incurred by the Company's subsidiary, Paintball Inc.

Exclusive of the bankrupt subsidiary, the Company has two operating subsidiaries named "American Inflatables, Inc.," a Delaware corporation and ILM, Inc., a South Carolina corporation. For purposes of this Annual Report:.

(1) "THE COMPANY" and "ASDG" will refer to the post-May 17, 2002 consolidated companies, the parent of which now bears the name "American Sports Development Group, Inc."

(2) "PAINTBALL" will refer to both (1) the pre-May 17,2002 independent Paintball Incorporated, which formerly bore the names "American Sports Development Group, Inc." and "National Paintball Supply Company, Inc." and (2) the Company's post-May 17, 2002 operating subsidiary, Paintball Incorporated.

(3) "INFLATABLES" will refer to both (1) the pre-May 17, 2002 independent American Inflatables, Inc., which was a publicly traded company and (2) the Company's post-May 17, 2002 operating subsidiary, American Inflatables, Inc.

Prior to its bankruptcy under provisions of Chapter 7 of the Bankruptcy Act, Paintball was engaged in the business of manufacturing and distributing paintball gaming supplies (the "Paintball Business"). Inflatables is engaged in the business of manufacturing and marketing inflatable blimps and other custom inflatable products for advertising purposes (the "Inflatables Business"). ILM, Inc. is an independent insurance agent representing several insurance companies and brokers who insure mainly paintball gaming fields, stores, distributors and manufacturers. Paintball Games.com Inc. operated a web site designed to promote the Company's paintball products, but the web site is currently inactive.

HISTORY

Inflatables was formed in August 1998 under the laws of the State of Delaware with the name "Global Lock Corporation," subsequently changed to "GlobaLock Corporation" ("Globalock"), for the purpose of engaging in a merger with an operating entity. In December 1999, GlobaLock merged with Can/Am Marketing Group, LLC, a California limited liability company formed in 1997 which was engaged in the Inflatables Business. After the merger, GlobaLock changed its name to "American Inflatables, Inc." and continued to operate the Inflatables Business. Its stock was traded on the NASD Over-the-Counter Bulletin Board under the symbol "BLMP."

On October 12, 2000, Inflatables entered into a merger agreement with Paintball, then known as "National Paintball Supply Company, Inc.," a South Carolina corporation that provided for the merger of a subsidiary of National Paintball Supply Company, Inc. into Inflatables, making Inflatables a wholly-owned subsidiary of National Paintball Supply Company, Inc. The merger was never consummated and was replaced with the business combination described in the paragraph immediately below. In the interim, National Paintball Supply Company, Inc. formed a subsidiary named Paintball Incorporated. National Paintball Supply Company, Inc. also changed its name to "American Sports Development Group, Inc." on January 23, 2002.

On May 17, 2002, Inflatables acquired Paintball, at that time known as "American Sports Development Group, Inc." in a transaction that was treated for accounting purposes as the acquisition of Inflatables by Paintball in a reverse acquisition. Inflatables issued 50,612,159 shares of its common stock, or 83% of the total outstanding shares on a fully diluted basis after

the issuance, to the three shareholders of Paintball for all the issued and outstanding shares of Paintball, making it a wholly owned subsidiary of Inflatables.

In June 2002, after the reverse acquisition, the combined companies were restructured as follows:

(1) Paintball's wholly-owned subsidiary, Paintball Incorporated, was merged into Paintball with Paintball as the surviving company but with its name changed from "American Sports Development Group, Inc." to "Paintball Incorporated";

(2) Inflatables changed its name from "American Inflatables, Inc." to "American Sports Development Group, Inc." by means of a merger with a wholly owned shell subsidiary formed for the purpose of effecting the name change; and

(3) The newly renamed American Sports Development Group, Inc. formed a new Delaware subsidiary named "American Inflatables, Inc." and transferred the assets and liabilities of its pre-acquisition inflatable advertising business down to the new subsidiary.

The result of the June 2002 restructuring was that the old Inflatables survived as the parent company with the name "American Sports Development Group, Inc." and with four wholly owned operating subsidiaries: (1) Paintball, a South Carolina corporation named "Paintball Incorporated," conducting the Paintball Business, (2) the new Inflatables, a Delaware corporation named "American Inflatables, Inc.," conducting the Inflatables Business (3) ILM, Inc., an insurance agent conducting the insurance related business and (4) Paintballgames.com, an inactive subsidiary. The Company's stock symbol was also changed from "BLMP" to "ASDP" (sic). As a result of not filing timely this Form 10-KSB in a timely manner, the Company's stock symbol is currently "ASDP.PK".

THE PAINTBALL BUSINESS

Paintball was organized in 1989. Based on its own evaluation of its competitors, the Company believes that until its filing of protection under Chapter 11 of the bankruptcy laws and the subsequent conversion to Chapter 7 of the Federal Bankruptcy Act, it had been a leading wholesale distributor and manufacturer of paintball gaming supplies in terms of revenues, number of customers, and range of products offered. "Paintballing" is considered an "extreme sport" and involves participants shooting "paintballs" at targets or other persons, generally in a competitive situation. Paintballing is an international sport that is played in virtually all industrialized countries, as well as the Eastern Bloc countries and the Far East. Paintball's sales were predominately in the United States, with less than 5% of its sales earned in overseas markets. Paintball distributed more than 3,000 products used in the paintball industry. Examples of these products include paintball guns (sometimes called "markers"), paintballs, and safety equipment such as goggles and protective clothing.

Based on its own analysis of its competitors' web sites and printed catalogues, the Company believed that Paintball had one of the more comprehensive product lines in paintball, aimed primarily at the second stage and more "advanced" player base. Paintball's primary customers were paintball fields and stores worldwide, and to a lesser extent, the mass merchant arena through certain key customers. Paintball generally did not compete in the "beginner" market, believing that many of those purchasers only use the products to a limited extent. Because of the disposable nature of paintballs and the increasing technical sophistication of the products, advanced players may spend thousands of dollars per year on the sport. The Company believed that these players require a level of equipment that had not typically been found in a mass merchant environment, except to a limited extent among specialized sporting goods retailers.

The Company believes that the sport of paintball has had excellent growth over the past several years, facilitated in part by the sport now being considered to be a mainstream extreme sport. This is evidenced by the availability of paintball products in the sporting goods department of nearly every major sporting goods chain. This has helped to expand paintball to the general public, instead of just enthusiasts. The Company believes that the sport will continue to grow in popularity at all levels.

PAINTBALL PRODUCTS

As mentioned above, the Company believed that Paintball carried one of the more comprehensive lines of paintball products in the business, with over 3,000 line items specifically for paintball. In addition to carrying nearly every major brand in most categories, Paintball also manufactured through exclusive arrangements with various subcontractors, nearly 300 various items, which it distributed under a variety of brand names it controls.

Paintballs.

Paintballs are made from a gelatin-encapsulated product very similar to bath oil capsules. The product is non-toxic, biodegradable, and washable. Paintballs come in a variety of colors and fills. Paintballs are produced in factories set up exclusively for their manufacture or as an ancillary product by large drug and nutritional product manufacturers. Good quality paintballs are extremely hard to manufacture due to exacting requirements expected by advanced players. A slight deviation in the roundness, thickness of the shell or fill, along with a myriad of other details, can significantly affect the accuracy and breaking characteristics of a paintball.

Because of certain problems inherent in manufacturing paintballs (such as significant capital costs) and an extremely competitive environment among manufacturers, Paintball chose not to manufacture paintballs. Instead it had several brands private- labeled on its behalf. Based on numerous conversations between the Company's management and serious paintball enthusiasts, Paintball believed that it had some of the premier paintball brands. They included Proball and Powerball. These brands include several different levels of product names within the overall level brand names. Paintball also distributed several other well-

known brands, giving it one of the most comprehensive lineups of paintballs available in the industry.

Paintball Markers or Guns.

Paintball carried an extensive line of paintball "markers" or "guns," including such well known names as Tippmann, Kingman, Sheridan, Worr Games, WDP, Airgun Designs and GT. Through an affiliated company, Genesis Trading, Paintball maintained exclusive distribution rights for the premier paintball manufacturing operation in mainland China.

Accessory Items.

Paintball carried thousands of accessory items, ranging from goggles, soft goods, after market parts, barrels and clothing. Many of these involved other manufacturers' brand name accessories, as well as many of its own brands. The accessory market accounted for nearly half of its sales and a larger portion of its profits.

PAINTBALL SALES AND DISTRIBUTION

Paintball operated from two warehouses and sales offices located in Paramount, CA and the home office and operations center located in Greenville, SC. Total office and warehousing space between the two locations was approximately 50,000 square feet. The majority of its sales from these locations were to paintball fields and stores. These ranged from "paintball only" stores, to hobby and hardware stores, skateboard shops, and gun shops. Paintball's sales staff possessed significant knowledge of the sport and offered significant assistance to new dealers and fields. The Company concentrated its efforts on the small to intermediate size customer, offering them competitive pricing and exceptional service that the Company believed customers were not likely to get from other distributors.

Paintball also maintained two retail facilities associated with their warehouse locations. Besides servicing the local players, these retail facilities helped Paintball to get immediate customer feedback on new products and keep up-to-date on current trends. Paintball also maintained several web sites, and provided fulfillment functions for other third party websites. In connection with its fulfillment functions, other website owners sent their customers' orders to Paintball, and Paintball shipped products directly to the customers. The customer paid full retail price (as set forth on the third party website) and the third party owner was paid an agreed upon amount.

Paintball purchased a substantial portion of its goods from Tippmann Pneumatics, Inc. and Nelson Technologies, Inc. At December 31, 2002 and November 11, 2003, (the date of conversion to Chapter 7 of the Bankruptcy Code) the combined amounts due to these suppliers were $1,540,939 and $1,344,707, respectively.

PAINTBALL INTELLECTUAL PROPERTY

Paintball owned the registered trademarks "Proball" and "Power Ball." Paintball sold paintballs under these trademarks manufactured by third parties under contract from Paintball. Paintball also owned in excess of a dozen web site domains.

PAINTBALL COMPETITION

The paintball market is extremely competitive and fragmented. Certain competitors of Paintball are significantly larger and have significantly greater resources than Paintball. Competitors include public companies, as well as smaller operations. Paintball estimates that there may be as many as 100 competitors that competed in one manner or another against Paintball. On the wholesale side of the business, there are two other large distributors that Paintball considered to be significant competitors. Also, manufacturers at times distribute products and were, therefore, competitive with Paintball.

During the period the Company operated its paintball subsidiary, the principal competitive factors in this market were price, product range, product availability, brand name recognition and awareness, customer service, and warehouse and shipping capabilities. Paintball believed that it was competitive in each of these categories, although in many instances, it did not seek to be the "low cost provider."

THE INFLATABLES BUSINESS

The Company's wholly owned subsidiary American Inflatables, Inc. is engaged in the manufacturing and marketing of inflatable blimps and other custom inflatable products. These products are typically used for advertising purposes. Its products (whether floating, flying or tethered) are designed to create strong brand awareness and offer an effective low cost form of advertising.

INFLATABLES OPERATIONS AND PRODUCTS

Inflatables designs and manufactures both hot air and cold air inflatable advertising devices. Hot air inflatables are usually filled with helium, a non-flammable gas that floats through the air. An electrical fan, providing a constant flow of air, usually powers cold air inflatables. Both styles of inflatables can either be rooftop-based or ground-based.

Inflatables' products are primarily manufactured at the Company's facility in Greenville, South Carolina. Inflatables uses lightweight and durable fabrics, primarily composed of coated nylon webbing and stainless steel rivets. Inflatables believes that this makes each inflatable product easy to handle, portable, and easily installed and dismantled without special equipment. Inflatables' products range from custom inflatable designs and huge product replicas, to low cost designs such as cold air and helium filled advertising balloons, airships, `hot air balloon' rooftop displays, airborne helium balls and large flying signs. Inflatables seeks to maintain its commitment of producing effective promotional specialties of the highest caliber in quality, durability and craftsmanship.

Inflatables' strategy is to offer the most cost-effective solutions and options in the industry. Its products are designed for rapid set-up and quick deflation, breakdown and packing. Unlike billboards, these products are reusable both indoors and outdoors. Also, helium inflatables offer an aerial advantage with greater visibility from a great distance. Inflatables believes that these products provide the power of billboard advertising at a lower cost, with greater portability and reusability. Inflatables can also be used in retail situations as a sophisticated point-of-purchase display aid. A typical Inflatables' customer order ranges from $1,000 to $10,000.

INFLATABLES SALES AND MARKETING

Inflatables' products are marketed as being an effective medium for attracting new customers. Inflatables secures orders through its in-house marketing and sales staff who are paid solely on a commission basis. After Inflatables receives an order, Inflatables' design staff works with the salesperson that generated the order to develop the design. The mock up design is then submitted to the customer for approval. After the customer approves the design, Inflatables' manufacturing staff commences work on the product. For most orders, Inflatables has found that from product design to product completion, Inflatables' manufacturing process requires seven to 10 days. After completion, each product is then shipped to the customer via overnight carrier. Each inflatable product is packaged and delivered to the customer with instructions to assist the customer in erecting the product for maximum marketing impact. Customers are responsible for all installation.

INFLATABLES COMPETITION

The inflatable advertising market is very competitive. It is a very fragmented industry, with numerous competitors manufacturing and selling several different types of products. These types of products include helium blimps, spheres and custom shapes that fly on a tether. Ground-based competitive products include "regular hot air shaped balloons," custom shaped cold air units and the super fan dancing inflatables. Certain manufacturers of inflatables focus on only one of these product types. Inflatables manufactures and distributes all of these general types.

The principal competitive factors in the inflatable advertising market are price, durability, quality of construction, timely delivery, and the ability to produce custom shaped products. Inflatables believes that its prices are similar to those of its competitors, and it is not aware of any competitor that has a production cost advantage. Quality control is a priority in the production process of inflatables. Based on its own analysis of its competitors' products, Inflatables believes its products are of the highest quality in the industry, and its custom design capability is among the best in its industry. Inflatables is not aware of any competitor that can design and produce the variety of products that it has produced.

A large part of Inflatables' sales are custom or one-of-a-kind products. Therefore, Inflatables does not maintain an inventory of completed or partially completed products. As all of its

products are produced to order, production, planning and control are critical to meet customer delivery requirements. Inflatables' delivery schedule is generally two to four weeks, which Inflatables believes is an industry norm.

For each of these product types, competitors range from smaller private companies to divisions of larger companies, many of which are significantly larger than Inflatables and have significantly greater resources. Inflatables estimates that no competitor has more than 10% of the overall inflatables market.

EMPLOYEES

As of September 7, 2004 the Company had a total of 5 employees, 3 of whom are full-time employees. The Company and its two remaining operating subsidiaries, American Inflatables, Inc. and ILM, INC, employ all of the Company's employees.

RISK FACTORS

An investment in our Common Stock involves risks, and you should consider these risks before making a decision to invest in our Common Stock. PROSPECTIVE PURCHASERS OF OUR COMMON STOCK MUST BE PREPARED FOR THE POSSIBLE LOSS OF THEIR ENTIRE INVESTMENTS. The order in which the following risks factors are presented is arbitrary, and you should not conclude, because of the order of presentation, that one risk factor is more significant than another risk factor.

THE COMPANY'S INDEPENDENT AUDITORS INCLUDED A "GOING CONCERN" QUALIFICATION IN THEIR REPORT ON THE COMPANY'S AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR FISCAL YEAR 2002 INCLUDED IN THIS ANNUAL REPORT.

The Company's audited consolidated financial statements for fiscal years 2002 and 2003 included in this Annual Report were prepared based on the assumption that the Company would continue as an operating business or a "going concern." The Company's independent auditors indicated in their report on these financial statements, which report is included under Item 7 of this Annual Report, that the Company's recurring losses, lack of working capital and past-due obligations raised substantial doubt about the Company's ability to continue as a going concern. Although the Company's management believed that the Company would survive as a going concern, its inability to raise additional capital and/or arrange an adequate merger or sale of the Company led to the conversion of its dominant subsidiary, Paintball Inc., from Chapter 11 of the Federal Bankruptcy Laws to Chapter 7 of the Federal Bankruptcy laws in November 2003. Since Paintball Inc. was the dominant subsidiary of the company; its conversion to Chapter 7 effectively meant the Company ceased to operate as a going concern.

AT NOVEMBER 11, 2003, THE DATE OF CONVERSION TO CHAPTER 7 OF THE FEDERAL BANKRUPTCY LAWS, PAINTBALL INC.'S NET SHAREHOLDERS' DEFICIT TOTALLED APPROXIMATELY $3.6 MILLION.

The Company's bankrupt subsidiary's (Paintball Inc.) total liabilities were approximately $4.9 million at November 11, 2003 and its total assets were approximately $1.3 million. The majority of the liabilities are well more than 90 days past due. The Company no longer has control over the collection of receivables or payment of liabilities. Such control is now vested with the Trustee of the Bankruptcy Court. The Company believes it is highly unlikely that liabilities of the bankrupt subsidiary will be paid in full. There can be no assurance that lack of payment will not precipitate legal action by creditors in the future.

INFLATABLES IS OVER $300,000 IN ARREARS ON ITS 2001 FEDERAL PAYROLL WITHHOLDINGS.

Prior to Inflatables' business combination with Paintball in May 2002, Inflatables failed to pay to federal and state taxing authorities an aggregate of approximately $317,000 in payroll income tax withholdings for the 2001 calendar year. As of December 31, 2002, this amount had increased to approximately $322,000. The Company is currently preparing a settlement offering with the Internal Revenue Service. However, if the Company cannot arrange a suitable payment plan with the IRS for Inflatables' accrued withholding liability, the Company could be materially adversely affected. Inflatables began utilizing a payroll service in 2002 which resulted in Inflatables paying its payroll holdings to the IRS; therefore the Company believes Inflatables paid its payroll income tax withholdings in 2002 and 2003. Depending upon the amount finally settled with the IRS, if such a settlement occurs at all, the Company will attempt to pay such settlement through cash generated by operations. However, considering the current poor financial results, there can be no assurance that the Company will generate income from operations in 2004 or be able to obtain new credit to pay Inflatables' tax obligation.

If tax authorities were to force Inflatables to pay this liability before the Company has generated net income from operations or obtained sufficient credit, the Company's business could be materially adversely affected.

PAINTBALL'S $1,327,813 PROMISSORY NOTE TO SOUTHTRUST BANK MATURED ON APRIL 30, 2003, AND SOUTHTRUST BANK DID NOT RENEW THE NOTE.

The Company's subsidiary Paintball had a $1,327,813 line of credit with SouthTrust Bank that matured on December 30, 2002. Paintball was unable to repay the line at maturity. The line of credit was restructured into a promissory note in the principal amount of $1,327,813, due April 30, 2003, bearing interest at the bank's base rate plus one percent. The promissory note provided that it is secured by all of Paintball's presently existing or hereafter acquired inventory, intangibles, accounts receivable and furniture, fixtures and equipment and all proceeds and products thereof. SouthTrust Bank did not renew the note. Between April 30 and November 11, 2003, Paintball paid approximately $125,000 against this line of credit and an additional $737,000

was paid to SouthTrust in partial settlement of this note. Such funds were generated through the sale of certain assets and intellectual properties of the bankrupt subsidiary, Paintball Inc. Additional payments to SouthTrust after November 11, 2003, if any, generated by collections of accounts receivable have been made under the control of the Bankruptcy Trustee.

THE INFLATABLES BUSINESS HAS OPERATED AND CONTINUES TO OPERATE AT A LOSS.

Prior to Inflatables' business combination with Paintball in May 2002, there was substantial doubt about Inflatables' ability to continue to operate as a going concern as noted by Inflatables' independent auditors Merdinger Fruchter Rosen & Company, P.C. in its report on Inflatables' financial statements included in its Annual Report on Form 10-KSB for the 2001 fiscal year. The Inflatables business continues to be unprofitable, generating a net loss of approximately $313,000 from May 17, 2002, the date of closing of the business combination, to December 31, 2002. During 2003, net losses continued due to a decrease in marketing efforts and Inflatables generated a net loss for 2003 of approximately $127,000. The failure of the Inflatables Business to become profitable would have a material adverse effect on the Company.

THE COMPANY'S COMPETITORS COULD HARM ITS BUSINESS OPERATIONS.

Competition in the advertising industry, the industry in which the Inflatables Business operates, is intense. Many of our competitors have substantially more experience, financial and technical resources and productions, marketing and development capabilities than Inflatables. Many of the same competitive conditions exist in the insurance industry, where the Company's ILM, Inc. subsidiary operates.

THE COMPANY IS HEAVILY DEPENDENT UPON ITS CEO, AND THE LOSS OF THIS INDIVIDUAL WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY.

The Company is dependent upon the services of William R. Fairbanks, its President and Chief Executive Officer. The loss of services of Mr. Fairbanks would have an adverse effect on the Company. No assurance can be given that a replacement for Mr. Fairbanks could be found if his services were no longer available.

OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER OWNS A MAJORITY OF OUR STOCK AND CONTROLS THE COMPANY.

Mr. Fairbanks, our President and Chief Executive Officer, owns approximately 57.0 % of our Common Stock, either directly or indirectly, and controls the Company. Accordingly, he has the ability to unilaterally determine the outcome of most corporate transactions and business decisions, and potential purchasers of the shares will have limited ability to affect decisions made by management.

THE LIABILITY OF OUR OFFICERS AND DIRECTORS IS LIMITED.

The Company's certificate of incorporation, as amended, includes a provision eliminating or limiting the personal liability of our officers and directors for damages for breach of fiduciary duty as a director or officer. Accordingly, our officers and directors may have no liability to our shareholders for any mistakes or errors of judgment or for any act or omission, unless such act or omission involves intentional misconduct, fraud, or a knowing violation of law or results in unlawful distributions to our shareholders.

OUR SHARES MAY NOT BECOME LIQUID.

The prices of our Common Stock are quoted under the symbol "ASDP.PK" (sic) in the Over-the-Counter (the "OTC") Bulletin Board, an electronic quotation service maintained by the National Quotation Bureau for the National Associations of Securities Dealers, Inc. for securities not traded on a national, regional or other securities exchange. During the second quarter of 2004, as a result of not timely filing Form 10-KSB for the fiscal year ended December 31, 2003, the prices of our common stock began being listed on the "Pink Sheets", rather than the former listing on the OTC Bulletin Board. The OTC Bulletin Board does not provide the level of liquidity provided by securities exchanges, and the public market may not develop for our shares. Purchasers of shares will have no right to present shares to us for repurchase. Purchasers of shares who wish to terminate their investment in the shares must rely solely upon their ability to sell or otherwise transfer their shares, subject to applicable securities laws. Consequently, purchase of shares should be considered only as a long-term investment.

WE MAY NEED TO OBTAIN CAPITAL, AND THE AVAILABILITY OF ADDITIONAL FUNDING IS DOUBTFUL.

Achieving and maintaining competitiveness of our products may require additional funds. It is possible that additional cash will be required to develop, promote, produce and distribute our inflatables advertising and insurance related products. Such additional cash may be received from public or private funding transactions, as well as borrowing and other resources. To the extent that additional cash is received by the sale of equity or equity-related securities, the issuance of such securities could result in dilution to our stockholders. There can be no assurance that additional funding, if any, will be available on favorable terms. If adequate cash is not available, we may be required to curtail operations significantly or obtain cash by entering into arrangements with collaborative partners or other persons that may require us to relinquish rights to certain of our products that we would not otherwise relinquish.