<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended: August 31, 1997
Commission File Number 33-96638-A
U S AMATEUR SPORTS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 65-0538051
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3932 RCA Blvd., Suite 3902
Palm Beach Gardens, Florida 33410
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(Address of principal executive offices) (Zip code)
(561) 622-4395
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Issuer's telephone number
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No--
The number of shares outstanding of registrant's classes of common equity, as
of August 31, 1997
Common Stock, Par Value $.0001, 6,000,600 Shares
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U S AMATEUR SPORTS, INC.
Form 10-QSB
August 31, 1997
INDEX
PART I FINANCIAL INFORMATION PAGE NO.
ITEM 1 FINANCIAL STATEMENTS
Balance Sheets:
August 31, 1997 and May 31, 1997 3
Statements of Operations:
Three-Month Periods Ended
August 31, 1997 and 1996 4
Statements of Cash Flows:
Three-Month Periods Ended
August 31, 1997 and 1996 5
Statement of Stockholders' Equity 6
Notes to Financial Statements 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS 10
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 12
ITEM 2. CHANGES IN SECURITIES. 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 12
ITEM 5. OTHER INFORMATION. 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 12
2
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U S AMATEUR SPORTS, INC.
BALANCE SHEETS
August 31, 1997 and May 31, 1997
(Unaudited)
August 31, 1997 May 31, 1997
--------------- ------------
ASSETS
Cash $ 7,092 $ 810
Accounts and advances
receivable 273 3,064
Inventories 81,264 77,946
Prepaid expense 4,944 2,000
Property and equipment 48,954 52,894
Rights to technology and
associated trademarks 32,428 34,800
Deferred charges 4,769 5,419
TOTAL ASSETS $ 179,724 $ 176,933
LIABILITIES
Accounts payable $ 149,724 $ 79,461
Notes payable 195,582 69,195
Loans from stockholders 18,600 66,000
Accrued expenses 0 40,000
Accrued interest 18,349 24,857
Total liabilities 382,255 279,513
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value,
50,000,000 shares authorized,
6,000,600 shares issued
and outstanding 600 600
Additional paid-in capital 299,690 299,690
Accumulated deficit (502,821) (402,870)
Total stockholders' equity (202,531) (102,580)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 179,724 $ 176,933
See notes to financial statements.
3
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U S AMATEUR SPORTS, INC.
STATEMENTS OF OPERATIONS
Three-Month Periods Ended August 31, 1997 and 1996
(Unaudited)
Three Months Ended August 31,
1997 1996
-------- --------
REVENUES
Net sales $ 21,338 $ 14,083
Other income 3,259 0
TOTAL REVENUES 24,597 14,083
COSTS AND EXPENSES
Cost of products sold 3,351 6,333
Cost of event production and promotion 71,662 0
Freight 2,843 295
Professional fees 14,750 13,798
Advertising and promotion 0 1,826
Travel 4,603 2,419
Rent 5,904 2,120
Office, telephone, and other
operating expenses 12,810 5,676
Interest 1,736 4,387
Depreciation 3,940 3,911
Amortization 3,023 3,023
TOTAL COSTS AND EXPENSES 122,302 43,788
NET LOSS $ (99,951) $(29,705)
See notes to financial statements.
4
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U S AMATEUR SPORTS, INC.
STATEMENTS OF CASH FLOWS
Three-Month Periods Ended August 31, 1997 and 1996
(Unaudited)
Three Months Ended August 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES ----------- -----------
Net loss $ (99,951) $ (29,705)
Reconciling adjustments:
Amortization 3,023 3,023
Depreciation 3,940 3,911
Decrease (increase) in receivables 2,791 (4,167)
Decrease (increase) in inventories (3,318) 5,720
Decrease (increase) in prepaid expenses (2,944) (3,848)
Increase (decrease) in accounts payable 70,263 6,271
Increase (decrease) in accrued expenses (40,000) 0
Increase (decrease) in accrued interest (6,509) 4,387
NET CASH USED BY OPERATING ACTIVITIES (72,705) (14,408)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment 0 (1,286)
NET CASH USED BY INVESTING ACTIVITIES 0 (1,286)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable 126,387 0
Loans from stockholders (47,400) 13,000
NET CASH PROVIDED BY FINANCING ACTIVITIES 78,987 13,000
NET INCREASE(DECREASE) IN CASH 6,282 (2,694)
CASH AT BEGINNING OF PERIOD 810 4,587
CASH AT END OF PERIOD $ 7,092 $ 1,893
See notes to financial statements.
5
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U S AMATEUR SPORTS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Three-Month Period Ended August 31, 1997
and the Year Ended May 31, 1997
(Unaudited)
Common Stock
---------------------
Number of
Shares Additional Total
Issued and Paid-in Accumulated Stockholders'
Outstanding Amount Capital Deficit Equity
----------- ------ --------- ----------- ------------
Balance,
June 1, 1996 6,000,000 $600 $175,704 $(162,852) $ 13,452
Capital
contributions - - 120,386 - 120,386
Return of stock
to Treasury (1,014,000) (101) - - -
Issuance of
common stock 1,014,600 101 3,600 - 3,600
Net loss, year
ended
May 31, 1997 - - - (240,018) (240,018)
Balance,
May 31, 1997 6,000,600 600 299,690 (402,870) (102,580)
Net loss, three
months ended
August 31, 1997 - - - (99,951) (99,951)
Balance,
August 31, 1997 6,000,600 $600 $299,690 $(502,821) $(202,531)
See notes to financial statements.
6
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U S AMATEUR SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
August 31, 1997 and 1996
(Unaudited)
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended August 31, 1997 are not necessarily indicative of the results that may
be expected for the year ending May 31, 1998. For further information, refer
to the financial statements and footnotes thereto included in the Company's
Form 10-KSB for the year ended May 31, 1997.
DEPRECIATION
The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed using the straight-line
method for financial reporting purposes and an accelerated method for tax
purposes.
AMORTIZATION
Rights to technology and associated trademarks are amortized using the
straight-line method over five years. Deferred charges are amortized using
the straight-line method over five years.
INVENTORIES
Inventories are stated at the lower of cost or market. See Note D.
ADJUSTMENTS
These financial statements include all adjustments which in the opinion of
management are necessary in order to make the financial statements not
misleading. All adjustments are of a normal recurring nature.
NOTE B: INVENTORIES
Inventories consist of merchandise acquired for sale by the Company's USA
SportsNet business unit in addition to paintball markers and accessories.
Inventories are carried at cost which is considered to be less than market
value.
NOTE C: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment recorded in the financial
statements at cost less depreciation as of August 31, 1997 and 1996:
7
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August 31, 1997 August 31, 1996
--------------- ---------------
Computer hardware $10,542 $10,542
Computer software 10,564 10,564
Furniture, fixtures and equipment 10,572 10,572
Tools, dies and fixtures 50,140 50,140
Total cost 81,818 81,818
Less: accumulated depreciation (32,864) (17,102)
Total net property and equipment $48,954 $64,716
The useful lives assigned to property and equipment to compute depreciation
are:
Computer hardware 5 years
Computer software 5 years
Furniture, fixtures and equipment 7 years
Tools, dies and fixtures 5 years
NOTE D: RIGHTS TO TECHNOLOGY AND ASSOCIATED TRADEMARKS
During the year ended May 31, 1996, the Company acquired the assets of
Performance Paintball Products, Inc. Included in the purchase were exclusive
rights to use of the Viper name and related technology used in the manufacture
of the Viper M1 paintball marker. These rights are valued at $47,455 less
accumulated amortization of $15,027 and $5,536, at August 31, 1997 and 1996,
respectively.
NOTE E: DEFERRED CHARGES
Deferred charges consist of organization costs in the amount of $13,004 less
accumulated amortization of $8,235 and $5,634, at August 31, 1997 and 1996,
respectively.
NOTE F: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable consist of professional fees, trade payables and production
and promotion costs owed in connection with the 1997 All American Bowl.
NOTE G: NOTES PAYABLE AND LOANS FROM STOCKHOLDERS
On July 21, 1997, the Company entered into an agreement with Performance
Paintball Products, Inc. to cancel a note payable recorded in connection with
the purchase of certain assets of Performance Paintball Products. A new note
was recorded in the principal amount of $51,795. Under the agreement, monthly
payments of principal and interest will begin on October 21, 1997 and continue
until the final payment is made on September 21, 1998.
On August 12, 1997, the Company borrowed $100,000 from Stratex Corporation.
Monthly payments consisting solely of interest commence September 1, 1997 and
continue until September 1, 1998, at which time all principal and interest is
due. The note bears interest at the rate of prime plus 6%. A portion of the
proceeds from this borrowing were used to reduce the balance of a loan from
Derek Panaia, a non-affiliate stockholder who is the son of David Panaia.
The remaining balances of notes payable and loans from stockholders consist of
miscellaneous amounts borrowed to finance the Company's operations.
8
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NOTE H: RECOVERABILITY OF ASSETS AND GOING CONCERN
The Company's financial statements have been presented on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company's continued existence is dependent upon its ability to secure
financing or its ability to generate sufficient cash flows through operations
to meet its operating costs and repay current obligations as they come due.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
During the three months ended August 31, 1997, management focused on four
goals:
(1) commencement of full production of the Viper M1 paintball marker,
(2) successful presentation of the l997 All American Bowl,
(3) continued development of the USA SportsNet Internet web site, and
(4) attainment of approval for trading of the Company's common stock on
NASDAQ's OTC Bulletin Board.
USA PERFORMANCE PRODUCTS
Having approved the final design of the Viper M1 for full production,
management structured a production plan with the aid of its manufacturing
subcontractor, Micro Tool Engineering, Inc.(MTE), to gradually increase the
number of units produced to 1,000 per month by the end of the current fiscal
year. Achievement of this target will be dependent on production capacity and
financial resources.
In addition to reorganizing production lines at MTE to boost that company's
volume, MTE will assist in the identification of an additional manufacturer in
order to ensure that future demand for the marker can be met. Management
believes that the demand for the Viper M1 that will be generated from the
Company's existing distribution through its dealer network and through its
Internet web site can be satisfied with current manufacturing arrangements.
However, the Company intends to position itself to meet the greater production
requirements that can be developed through penetration of new markets (e.g.,
international and military/police training) and use of new channels (e.g.,
mass marketing).
Although the profit margins offered by sale of the Viper Ml will provide funds
to be reinvested in boosting production volume, the rapid production increases
planned by the Company will require additional capital. See the section
entitled Liquidity and Capital Resources below for further discussion.
NATIONAL HIGH SCHOOL SPORTS CLASSICS
The 1997 All American Bowl, the first event in the Company's National High
School Sports Classics, was played on July 5, 1997 and broadcast in over 40
million households across the nation via the Sunshine Network, Fox Sports
regional affiliates and other local networks. As was anticipated, the event
resulted in a financial loss. The loss recorded in the financial statements
for the three months ended August 31, 1997 was greater than expected. Sales of
tickets, programs, tee shirts and other memorabilia were disrupted by a severe
storm that hit the game site in Palm Beach Gardens, Florida. However, although
the inclement weather delayed play, it did not prevent the game from
proceeding. The excitement of the game itself, which featured big plays and a
close score (West 20 East 17). celebrity coaches (former NFL stars Greg Pruitt
and Mike Fowler), the top college football recruits in the nation and a very
professional presentation by the Sunshine Network, made the event an artistic
success. The very positive response to the game indicates that this event will
attract sufficient sponsorship in the future to significantly contribute to
the Company's profitability.
USA SPORTSNET
One of management's goals for the current fiscal year is transformation of the
USA SportsNet web site into a profit center. Although it has been demonstrated
that significant sales of the Viper M1 can be achieved over the Internet,
considerable additional development of the site and linking to other
high-traffic sites is needed in order to increase traffic at USA SportsNet and
encourage repeat visits. This work continued during the first quarter of the
current fiscal year.
10
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MARKET FOR COMMON EQUITY
There is currently no market for the Company's stock nor is the Company's
stock listed on any exchange. It is the Company's intention to seek such a
listing on the NASDAQ OTC Bulletin Board or an exchange after it is qualified
to do so. EquiTrade Securities Corporation, 23736 Birtcher Drive, Lake Forest,
California, 92630, has filed Form 211 to represent the Company as a market
maker, and the Company's stock has been assigned the trading symbol USSP.
Further actions await approval from the OTC Compliance Unit of NASD
Regulation, Inc.
LIQUIDITY AND CAPITAL RESOURCES
At August 31, 1997, current assets totaled $93,573 compared to $83,820 at the
prior year end. Of the $9,753 increase in current assets, an increase in cash
accounted for $6,282. Inventory purchased for the All American Bowl and
remaining for sale as memorabilia accounted for an increase in inventories of
$3,318. An increase of $2,944 in prepaid expense offset a decline of $2,791 in
accounts receivable. All other assets decreased as a result of normal
amortization and depreciation. Accounts payable grew from $79,461 to $149,724
during the same time period. This increase was related to costs of producing
and promoting the All American Bowl. The remaining liabilities of the Company
consisted of principal and interest accrued on notes payable and loans from
stockholders.
On July 21, 1997, the Company entered into an agreement with Performance
Paintball Products, Inc. to cancel a note payable recorded in connection with
the purchase of certain assets of Performance Paintball Products. A new note
was recorded in the principal amount of $51,795. Under the agreement, monthly
payments of principal and interest will begin on October 21, 1997 and continue
until the final payment is made on September 21, 1998.
On August 12, 1997, the company borrowed $100,000 from Stratex Corporation.
Monthly payments consisting solely of interest commenced September 1, 1997 and
continue until September 1, 1998, at which time all principal and interest is
due. The note bears interest at the rate of prime plus 6%. A portion of the
proceeds from this borrowing were used to reduce the balance of a loan from
Derek Panaia, a non-affiliate stockholder who is the son of David Panaia The
remainder of the proceeds were used to fund the current production run of the
Viper M1.
The Company is seeking additional outside financing to meet its operational
requirements. Management believes that additional loans from stockholders and
capital contributions will be sufficient to fund operations and meet its
current obligations. In addition, management is negotiating an agreement for
inventory sale and repurchase as a means of funding Viper M1 production.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED AUGUST 31,1997 WITH THE THREE MONTHS
ENDED AUGUST 31, 1996
Revenue for the period ended August 3l, l997 was $24,597 compared to $l4,083
of revenue recorded during the same period of the prior year. Prior
period revenues resulted from initial sales of the Viper Ml, while the
majority of revenues in the current period were derived from the sale of
advertising, tickets and memorabilia connected with the All American Bowl.
$3,259 in other income recorded during the current period represented a gain
realized from renegotiation of a note payable. However, the Company's net loss
during the current year period was $99,951 compared to $29,705 during the same
period of the prior year. An increase in expense of $71,662 created by the
cost of producing and promoting the All American Bowl was responsible for the
increased loss.
11
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company knows of no material pending legal proceedings to which
the Company is a party or which any of its business units are the subject and
no such proceedings are known to the Company.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports - None
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
U S AMATEUR SPORTS, INC.
October 15, 1997 /s/ Gerald V. Bergman
Gerald V. Bergman
Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and consolidated statements of operations found on pages 3 and
4 of the Company's Form 10-QSB for the quarter ended August 31, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<CASH> 7,092
<SECURITIES> 0
<RECEIVABLES> 273
<ALLOWANCES> 0
<INVENTORY> 81,264
<CURRENT-ASSETS> 93,573
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 179,724
<CURRENT-LIABILITIES> 149,724
<BONDS> 0
0
0
<COMMON> 600
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 179,724
<SALES> 21,338
<TOTAL-REVENUES> 24,597
<CGS> 31,351
<TOTAL-COSTS> 117,215
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,736
<INCOME-PRETAX> (99,951)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (99,951)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
