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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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: February 28, 1998
Commission File Number 33-96638-A
U S AMATEUR SPORTS, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 65-0538051
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3932 RCA Blvd., Suite 3209, Palm Beach Gardens, Florida 33410
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(Address of principal executive offices)
(561) 622-4395
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(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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___
As of February 28, 1998, the issuer had 11,604,600 shares of common stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure Format Used (Check one) Yes--- No X
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U S AMATEUR SPORTS, INC. Form 10-QSB
February 28, 1998
INDEX
PART I FINANCIAL INFORMATION Page No.
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets:
February 28, 1998 and 1997 3
Consolidated Statements of Operations:
Nine-month Periods Ended
February 28, 1998 and 1997 4
Three-Month Periods ended
February 28, 1998 and 1997 5
Consolidated Statements of Cash Flows:
Nine-Month Periods Ended
February 28, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 11
PART II OTHER INFORMATION
Items 1-6 13
2
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U S AMATEUR SPORTS, INC.
CONSOLIDATED BALANCE SHEETS
FEBRUARY 28, 1998 AND 1997
(Unaudited)
February 28,
1998 1997
--------- --------
ASSETS
Cash and cash equivalents $ 49,057 $ 1,690
Accounts and advances receivable 707 16,206
Inventories 86,658 78,156
Prepaid expense 40,190 3,000
Property and equipment 41,074 56,834
Rights to technology and associated trademarks 27,682 37,173
Deferred charges 3,469 6,069
-------- --------
TOTAL ASSETS $248,837 $199,128
======== ========
LIABILITIES
Accounts payable $183,026 $ 33,387
Notes payable 176,662 59,195
Loans from stockholders 82,600 142,350
Accrued interest 10,732 19,573
-------- --------
TOTAL LIABILITIES 453,020 254,505
-------- --------
STOCKHOLDERS' EQUITY,
Common stock, $.0001 par value:
Authorized - 50,000,000 shares;
Issued and outstanding,
11,604,600 shares in 1998 and
6,000,600 shares in 1997 1,160 600
Additional paid-in capital 351,987 215,340
Accumulated deficit (556,210) (271,317)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (204,183) (55,377)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $248,837 $199,128
======== ========
See notes to financial statements.
3
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U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine-Month Periods Ended February 28, 1998 and 1997
(Unaudited)
Nine Months
Ended February 28,
1998 1997
REVENUES --------- ---------
Net sales $ 71,948 $ 41,400
Other income 3,504 0
--------- ---------
TOTAL REVENUES 75,452 41,400
COSTS AND EXPENSES
Cost of products sold 13,560 21,450
Cost of event production and promotion 72,467 0
Freight 4,262 2,748
Payroll expense 4,800 0
Professional fees 36,203 37,203
Advertising and promotion 11,063 2,146
Travel 8,842 13,637
Rent 16,961 7,369
Office, telephone and other operating expenses 26,829 30,909
Interest 12,916 13,541
Depreciation 11,820 11,793
Amortization 9,069 9,069
--------- ---------
TOTAL COSTS AND EXPENSES 228,792 149,865
--------- ---------
NET LOSS $(153,340) $(108,465)
========= =========
See notes to financial statements.
4
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U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Periods Ended August 31, 1997 and 1996
February 28, 1998 and 1997
(Unaudited)
Three Months
Ended February 28,
1998 1997
REVENUES --------- ---------
Net sales $ 40,535 $ 11,378
Other income 0 0
--------- ---------
TOTAL REVENUES 40,535 11,378
COSTS AND EXPENSES
Cost of products sold 3,261 6,554
Cost of event production and promotion 0 0
Freight 310 1,462
Payroll expense 4,800 0
Professional fees 10,541 14,381
Advertising and promotion 7,404 0
Travel 450 4,691
Rent 5,192 2,677
Office, telephone and other operating expenses 6,197 18,362
Interest 4,917 4,607
Depreciation 3,940 3,940
Amortization 3,023 3,023
--------- ---------
TOTAL COSTS AND EXPENSES 50,035 59,697
--------- ---------
NET LOSS $ (9,500) $ (48,319)
========= =========
See notes to financial statements.
5
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U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine-Month Periods Ended February 28, 1998 and 1997
(Unaudited)
Nine Months Ended
February 28,
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (153,340) $(108,465)
Reconciling adjustments:
Amortization 9,069 9,069
Depreciation 11,820 11,793
Decrease (increase) in receivables 2,357 (5,660)
Decrease (increase) in inventories (8,712) 6,812
Decrease (increase) in prepaid expenses (38,191) 10,821
Increase (decrease) in accounts payable 103,565 3,093
Increase (decrease) in accrued expenses (40,000) 0
Increase (decrease) in accrued interest (14,125) 13,540
---------- ----------
NET CASH USED BY OPERATING ACTIVITIES (127,557) (58,997)
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
Capital contributions 51,737 39,636
Notes payable 107,467 (2,100)
Loans from stockholders 16,600 19,850
--------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 175,804 57,386
---------- -----------
NET INCREASE (DECREASE) IN CASH 48,247 (2,897)
CASH AT BEGINNING OF PERIOD 810 4,587
---------- -----------
CASH AT END OF PERIOD $ 49,057 $ 1,690
========== ===========
See notes to financial statements.
6
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U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
February 28, 1998 and 1997
(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 nine month period
ended February 28, 1998 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.
CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
USA Performance Products, Inc. The Company formed USA Performance Products,
Inc. as a separate wholly-owned subsidiary on January 20, 1998 and transferred
all assets related to the manufacture and sale of the Viper M1 paintball
marker and accessories to this new corporation. See note J.
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 C.
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: CASH EQUIVALENTS
Cash equivalents consist of cash credits received in connection with the sale
of All American Bowl Sponsorship Promotional Packages to Itex Corporation.
These
7
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cash credits will be used for the purchase of products and services provided
by other Itex clients.
NOTE C: 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 D: PROPERTY AND EQUIPMENT
The following is a summary of property and equipment recorded in the financial
statements at cost less depreciation as of February 28, 1998 and 1997:
February 28,
1998 1997
------- -------
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 (40,744) (24,984)
------- -------
Total net property and equipment $41,074 $56,834
======= =======
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 E: 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 $19,773 and $10,282 at February 28, 1998 and 1997,
respectively.
NOTE F: DEFERRED CHARGES
Deferred charges consist of organization costs in the amount of $13,004 less
accumulated amortization of $9,535 and $6,935, at February 28, 1998 and 1997,
respectively.
NOTE G: ACCOUNTS PAYABLE
Accounts payable consist of professional fees, trade payables and production
and promotion costs owed in connection with the 1997 All American Bowl.
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NOTE H: 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 began 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 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.
NOTE I: ISSUANCE OF COMMON STOCK
During the three month period ended February 28, 1998, the Board of Directors
authorized the issuance of 5,999,400 shares of common stock which increased
the total shares of stock approved for issue to 12,000,000. These
newly-issued shares were designated to pay for certain management, financial,
marketing and other business related services, to allow certain creditors of
the Company to trade their debt for equity and to effect a tax-free
acquisition of the assets of Amateur Athletes of America, Inc. 11,604,600
shares were issued and outstanding as of February 28, 1998. See NOTE J.
NOTE J: RELATED PARTY TRANSACTIONS
On January 10, 1998, the Company's Board of Directors approved an agreement
with Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to
retain Axis for a period of three years to provide certain financing,
marketing and management services in support of the Company's subsidiary, USA
Performance Products, Inc. In exchange for performance of these services,
Axis was granted 1,500,000 shares of common stock. The final marketing and
management agreement was executed on April 8, 1998.
Derek D. Panaia, son of David J. Panaia, CEO of the Company, was retained as a
consultant to provide management oversight of USA Performance Products. In
connection with this agreement, Derek Panaia was granted 400,000 shares of
common stock in return for his services.
On February 27, 1998, the Company acquired certain assets of Amateur Athletes
of America, Inc. in a tax-free exchange of assets for stock. The Company
acquired all rights to the ProCard and ComCard plus certain Internet-based
sports equipment exchange concepts in exchange for one million shares of
common stock. The ProCard and ComCard are prepaid telephone cards with unique
emergency medical features which are marketed through youth athletic
organizations. A portion of the stock was used for payment of a note held by
Amateur Athletes of America. Amateur Athletes of America, Inc. was a private
corporation owned by Linda C. Bergman, wife of Gerald V. Bergman, Treasurer of
the Company.
9
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NOTE K: 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.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
USA PERFORMANCE PRODUCTS
The Company's manufacturing business unit, USA Performance Products (USAPP),
was incorporated in the State of Florida as USA Performance Products, Inc. on
January 2O, 1998. USAPP was established as a wholly-owned subsidiary of US
Amateur Sports, Inc. to formally segregate the business unit's operations and
accounts and to facilitate management's focus on development of the Company's
paintball business.
On January 10, 1998, the Company's Board of Directors approved an agreement
with Axis Enterprises, Ltd., a Bahamian corporation of Nassau, Bahamas, to
retain Axis for a period of three years to provide financing, marketing and
management services in support of USA Performance Products. In exchange for
performance of these services, Axis was granted 1,500,000 shares of the
Company's common stock. The final marketing and management agreement was
executed on April 8, 1998.
Derek D. Panaia, son of David J. Panaia, CEO of the Company, was retained as a
consultant to provide management oversight of USA Performance Products. In
connection with this agreement, Derek Panaia was granted 400,000 shares of
common stock in return for his services.
Having identified the rapidly-expanding paintball segment of the sports market
as a target for consolidation, management believes that these actions will
accelerate the growth of this part of the Company's business. USA Performance
Products is now positioned to enter into certain strategic alliances that will
enable it to penetrate the market segment with sales of paintball products
other than the Viper Ml marker,
Sales of the Viper Ml paintball marker and accessories continued to be
backlogged through the third quarter because of delays in reorganization of
production lines at the Company's manufacturing subcontractor, Micro Tool
Engineering, Inc. Although it appears that these delays have been resolved so
that fourth quarter production will result in significant improvement in Viper
Ml revenues, management is establishing other sources for components of the
Viper M1 and accessories in order to reduce dependence on Micro Tool.
USA SPORTSNET
On February 27, 1998, the Company acquired certain assets of Amateur Athletes
of America, Inc. in a tax-free exchange of assets for stock. The Company
acquired all rights to the ProCard and ComCard plus certain Internet-based
sports equipment exchange concepts in exchange for one million shares of
common stock. The ProCard and ComCard are prepaid telephone cards with unique
emergency medical features which are marketed through youth athletic
organizations. These prepaid Cards have been successfully tested, and over one
thousand cards have been sold.
The ProCard is featured on USA SportsNet. Management intends to expand the use
of the ProCard so that it serves as the foundation for implementation of
certain other Internet-related concepts currently under development.
On an average day, USA SportsNet receives in excess of 15,000 visits to its
web site. During the third quarter work continued on development of the web
site and linking of the site to other high-traffic Internet locations.
11
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ALL AMERICAN SPORTS CLASSICS
The Company's selection committee is in the process of choosing the national
high school football "Super 70," Class of'98. Management is currently
evaluating several options available for recognition of this year's class of
All Americans. The date and venue of the next All American Bowl has not been
determined, but it is likely that the next game will be played in 1999. This
will enhance the opportunity to ensure that the event will be financially and
artistically successful. Some sponsorship packages for the 1999 event have
already been sold. Coca-Cola, Adidas and Schutt Sports were the major sponsors
of the 1997 All American Bowl. The Company intends to expand the existing
sponsorship base to include support for other events in the All American
Sports Classics series.
MARKET FOR COMMON EQUITY
The Company's common stock continues to trade under the symbol USSP on the OTC
Bulletin Board. Several additional market makers have been established,
although the lead market maker continues to be Equitrade Securities
Corporation of Lake Forest, California. The stock has traded in a price range
from a low of $.25 to a recent high of $1.47. Trading volume was low through
the third quarter, but trading became very active in March as interest in the
stock has grown. In excess of one million shares were traded during the month
of March.
LIQUIDITY AND CAPITAL RESOURCES
At February 28, 1998, current assets totaled $176,612 compared to $99,052 at
the end of the corresponding quarter of the prior year. Of the $77,560
increase, an increase in cash and cash equivalents accounted for $47,367. This
amount includes cash credits of $35,000 received for sale of All American Bowl
sponsorship promotional packages. Prepaid expense rose $37,190 due to purchase
of advertising to appear over the coming year. Additions to Viper M1 and
memorabilia inventory amounted to $8,502. These increases were offset by a
$15,499 reduction of accounts receivable. All other assets decreased as a
result of normal amortization and depreciation. Accounts payable grew from
$33,387 to $183,026 during the same time period, principally due to costs of
producing and promoting the All American Bowl in addition to funding the
production of the Viper M1.
Remaining liabilities of the Company consisted of principal and interest
accrued on notes payable and loans from stockholders. Compared to the end of
the corresponding quarter of the prior year, notes payable increased $117,467,
while loans from stockholders decreased $59,750. The major portion of this
change was created on August 12, 1997 when the Company borrowed $100,000 from
Stratex Corporation and used proceeds to reduce the balance of a loan from
Derek Panaia, a non-affiliate stockholder who is the son of David Panaia. In
accordance with the terms of the loan from Stratex Corporation, monthly
payments consisting solely of interest commenced September 1, 1997 and
continue until September 1, l998, at which time all principal and interest is
due. The note bears interest at the rate of prime plus 6%. The reduction in
loans from stockholders that resulted from this transaction was subsequently
offset by additional stockholder loans.
The Company continues to seek additional outside financing to meet its
operational requirements. Management believes that additional loans from
stockholders and capital contributions will be available if needed to fund
operations and meet current obligations.
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RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED FEBRUARY 28, 1998 WITH THE NINE
MONTHS ENDED FEBRUARY 28, 1997
Revenue for the nine-month period ended February 28, 1998 was $75,452 compared
to $41,400 of revenue recorded during the same period of the prior year. Viper
M1 sales accounted for all of the revenues in the prior year period. Revenues
during the current period included $52,120 derived from the sale of
promotional packages, advertising, tickets and memorabilia connected with the
All American Bow1. Other income included $3,259 which represented a gain
realized from renegotiation of a note payable. Sales of the Viper M1 produced
the balance of the revenues recorded for the current year to date.
COMPARISON OF THE THREE MONTHS ENDED FEBRUARY 28, 1998 WITH THE THREE
MONTHS ENDED FEBRUARY 28, 1997
Revenue for the three-month period ended February 28, 1998 was $40,535
compared to $11,378 recorded during the same period of the prior year. Current
period revenue consisted of $5,535 in sales of the Viper M1 combined with
$35,000 in sales of All American Bowl sponsorship promotional packages.
Reorganization of manufacturing lines continued to hamper production of the
Viper Ml through January. Viper sales resumed in February. Total costs and
expenses declined from $59,697 to $50,035 as a result of an effort to cut
overhead expenses. As a result, the Company posted a net loss for the current
year period of $9,500 which is the best quarterly performance of the Company
to date. The net loss for the prior year period was $48,319.
OTHER INFORMATION
PART II
ITEM 1. LEGAL PROCEEDINGS.
As noted in the Quarterly Report on Form 10-QSB filed for the period ended
November 30, 1997, the Company has been named as a defendant in a lawsuit
brought by one of its creditors in connection with a lease agreement for
certain computer and telephone equipment. One other creditor had threatened
legal action because payment had been withheld for printing services which
were in dispute because of poor quality. Both of these actions have been
resolved without a material adverse effect on the Company or its prospects.
The Company knows of no other material pending legal proceedings to which the
Company is a party or to which any of its business units are subject.
ITEM 2. CHANGES IN SECURITIES.
The Company's Board of Directors authorized the issuance of 5,999,400 shares
of common stock which increased the total shares of stock approved for issue
to 12,000,000. These newly-issued shares were designated to pay for
management, financial, marketing and other business related services, to allow
certain creditors of the Company to trade their debt for equity and to be used
for certain mergers and acquisitions.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None.
ITEM 5. OTHER INFORMATION. None.
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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.
By:/s/ Gerald V. Bergman
Dated: April 13, 1998 Gerald V. Bergman
Treasurer (Principal Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 3 and 4 of the Company's Form 10-QSB for the quarter ended February 28,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> FEB-28-1998
<CASH> 49,057
<SECURITIES> 0
<RECEIVABLES> 707
<ALLOWANCES> 0
<INVENTORY> 86,658
<CURRENT-ASSETS> 176,612
<PP&E> 81,818
<DEPRECIATION> 40,744
<TOTAL-ASSETS> 248,837
<CURRENT-LIABILITIES> 183,026
<BONDS> 0
0
0
<COMMON> 1,160
<OTHER-SE> (204,223)
<TOTAL-LIABILITY-AND-EQUITY> 248,837
<SALES> 71,948
<TOTAL-REVENUES> 75,452
<CGS> 13,560
<TOTAL-COSTS> 228,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,916
<INCOME-PRETAX> (153,340)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (153,340)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
