<PAGE>
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 November 30, 1997
Commission File Number 33-96638-A
U S AMATEUR SPORTS, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 65-0538051
- ------------------------------ ----------------------------------
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation or organization)
3932 RCA Boulevard, Suite 3902, 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.
[ X ] Yes [ ] No
As of November 30, 1997, the Registrant had 6,000,600 Shares of common stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes [ ] No [ X ]
<PAGE>
U S Amateur Sports, Inc. Form 10-QSB
November 30, 1997
INDEX
Page No.
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
Balance Sheets:
November 3O, 1997 and 1996 3
Statements of Operations:
Six-Month Periods Ended
November 30, 1997 and 1996 4
Three-Month Periods Ended
November 30, 1997 and 1996 5
Statements of Cash Flows:
Six-Month Periods Ended
November 30, 1997 and 1996 6
Notes to 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.
BALANCE SHEETS
NOVEMBER 30, 1997 AND 1996
(Unaudited)
November 30, 1997 November 30, 1996
----------------- -----------------
ASSETS
Cash $ 2,271 $ 930
Accounts and advances receivable 0 16,967
Inventories 83,546 77,808
Prepaid expense 0 9,821
Property and equipment 45,014 60,774
Rights to technology and
associated trademarks 30,055 39,546
Deferred charges 4,119 6,719
---------- ----------
TOTAL ASSETS $ 165,005 $ 212,565
========== ==========
LIABILITIES
Accounts payable $ 189,316 $ 16,211
Notes payable 195,582 61,295
Loans from stockholders 18,600 130,750
Accrued interest 7,927 14,967
---------- ----------
TOTAL LIABILITIES 411,425 223,223
---------- ----------
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 299,690 211,740
Accumulated deficit (546,710) (222,998)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (246,420) (10,658)
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 165,005 $ 212,565
========== ==========
See notes to financial statements.
3
<PAGE>
U S AMATEUR SPORTS, INC.
STATEMENTS OF OPERATIONS
Six-Month Periods Ended November 30, 1997 and 1996
(Unaudited)
Six Months Six Months
Ended Ended
November 30, 1997 November 30, 1996
REVENUES ----------------- -----------------
Net sales $ 31,413 $ 30,022
Other income 3,504 0
----------- ----------
TOTAL REVENUES 34,917 30,022
COSTS AND EXPENSES
Cost of products sold 10,299 14,896
Cost of event production and promotion 72,467 0
Freight 3,952 1,286
Professional fees 25,662 22,822
Advertising and promotion 3,659 2,146
Travel 8,392 8,946
Rent 11,769 4,692
Office, telephone and other
operating expenses 20,632 12,547
Interest 7,999 8,934
Depreciation 7,880 7,853
Amortization 6,046 6,046
---------- ---------
TOTAL COSTS AND EXPENSES 178,757 90,168
---------- ---------
NET LOSS $ (143,840) $ (60,146)
========== =========
See notes to financial statements.
4
<PAGE>
U S AMATEUR SPORTS, INC.
STATEMENTS OF OPERATIONS
Three-Month Periods Ended November 30, 1997 and 1996
(Unaudited)
Three Months Three Months
Ended Ended
November 30, 1997 November 30, 1996
REVENUES ----------------- -----------------
Net sales $ 10,075 $ 15,939
Other income 245 0
----------- ----------
TOTAL REVENUES 10,320 15,939
COSTS AND EXPENSES
Cost of products sold 6,948 8,563
Cost of event production and promotion 805 0
Freight 1,109 991
Professional fees 10,912 9,024
Advertising and promotion 3,659 320
Travel 3,789 6,527
Rent 5,865 2,572
Office, telephone and other
operating expenses 7,822 6,871
Interest 6,263 4,547
Depreciation 3,940 3,942
Amortization 3,023 3,023
----------- ----------
TOTAL COSTS AND EXPENSES 54,135 46,380
----------- ----------
NET LOSS $ (43,815) $ (30,441)
=========== ==========
See notes to financial statements.
5
<PAGE>
U S AMATEUR SPORTS, INC.
STATEMENTS OF CASH FLOWS
Six-Month Periods Ended November 30, 1997 and 1996
(Unaudited)
Six Months Six Months
Ended Ended
November 30, 1997 November 30, 1996
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (143,840) $ (60,146)
Reconciling adjustments:
Amortization 6,046 6,046
Depreciation 7,880 7,853
Decrease (increase) in receivables 3,064 (6,422)
Decrease (increase) in inventories (5,600) 7,160
Decrease (increase) in prepaid expenses 2,000 4,000
Increase (decrease) in accounts payable 109,854 (14,082)
Increase (decrease) in accrued expenses (40,000) 0
Increase (decrease) in accrued interest (16,930) 8,934
--------- ----------
NET CASH USED BY OPERATING ACTIVITIES (77,526) (46,657)
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 0 36,036
Notes payable 126,387 0
Loans from stockholders (47,400) 8,250
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 78,987 44,286
--------- ---------
NET INCREASE (DECREASE) IN CASH 1,461 (3,657)
CASH AT BEGINNING OF PERIOD 810 4,587
--------- ---------
CASH AT END OF PERIOD $ 2,271 $ 930
========= =========
See notes to financial statements.
6
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U S AMATEUR SPORTS, INC.
NOTES TO FINANCIAL STATEMENTS
November 30, 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 six month period
ended November 30, 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 November 30, 1997 and 1996:
7
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November 30, 1997 November 30, 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 (36,804) (21,044)
--------- ---------
Total net property and equipment $ 45,014 $ 60,774
========= =========
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 $17,400 and $7,909 at November 30, 1997 and 1996,
respectively.
NOTE E: DEFERRED CHARGES
Deferred charges consist of organization costs in the amount of $13,004 less
accumulated amortization of $8,885 and $6,285 at November 30, 1997 and 1996,
respectively.
NOTE F: ACCOUNTS PAYABLE
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 commenced 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 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
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
During the three months ended November 3O, 1997, management focused on
attainment of approval for trading of the Company's common stock on the OTC
Bulletin Board while seeking to establish the production capacity and
financial resources needed to commence full production of the Viper M1
paintball marker and continuing development of the USA SportsNet web site.
In addition, management announced its plan to use its common stock to achieve
rapid growth by means of acquisition via tax-free stock exchange. Using this
means to consolidate attractive market niches, the objective is to develop a
market leader that can realize enhanced profitability through the synergistic
benefits created by the consolidation.
Market for Common Equity
On October 31, 1997, the OTC Compliance Unit of NASD Regulation, Inc. cleared
the request submitted by Equitrade Securities Corporation for quotation on the
OTC Bulletin Board for US Amateur Sports common stock. Equitrade, located at
23736 Birtcher Drive, Lake Forest, California 92630, was established as the
lead market maker for the stock which had been assigned the trading symbol
USSP.
With an opening price of $1.00, the stock has traded at prices ranging from a
low of $.62 to a high of $1.31. This achievement of trading status enables the
Company to pursue growth through acquisitions.
The Consolidation Business Concept
Management has identified niches within the sports industry that offer strong
growth potential, but which lack dominant market leaders. By using its stock
to implement an acquisition strategy, the Company intends to consolidate, or
"roll up," the fragmented segments that have been targeted. Management
believes the sports industry, and particularly amateur athletics, offers an
extremely large market with segments that are underdeveloped and unthreatened
by technology. Although the roll-up concept has been applied successfully to
products and services as diverse as office supplies, auto dealerships and
waste management, sports offers virgin territory for use of this approach.
The Company has selected paintball for an initial consolidation target. Having
developed from an idea to a billion-dollar industry in less than 16 years, it
is one of the fastest growing sports in the world. This segment is extremely
fragmented, with the majority of products produced by small privately-owned
companies. Most of these products are then sold by "mom and pop" retail
outlets. The Company intends to use the Viper M1 as a beachhead within the
industry to acquire other manufacturers and suppliers so that the USA
Performance Products business unit can provide all of the products necessary
to play the game. Consolidation of the retail side of the business will then
be a logical next step.
Web Site Development
During the second quarter work continued on development of the USA SportsNet
web site and linking of the site to other high-traffic internet locations. In
addition, a new site was created at www.ussp-stock.com. This site was designed
solely to provide information about the Company and its goals for individuals
interested in the Company's common stock.
10
<PAGE>
Viper Ml Production
Sales of the Viper M1 paintball marker and accessories continued to be
backlogged through the second quarter pending completion of the reorganization
of production lines at the Company's manufacturing subcontractor, Micro Tool
Engineering, Inc., and securing of additional capital to finance production
increases.
Liquiditv and Capital Resources
At November 3O, 1997, current assets totaled $85,817 compared to $105,526 at
the end of the corresponding quarter of the prior year. The $19,709 decrease
in current assets resulted from collections of accounts receivable and
amortization of prepaid expense totaling $26,788 offset by increases in cash
and inventories. Cash increased $1,341 while inventories accounted for $5,738,
most of which consisted of All American Bowl memorabilia. All other assets
decreased as a result of normal amortization and depreciation. Accounts
payable grew from $16,211 to $189,316 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. There were no changes in
notes payable or loans from stockholders during the current quarter. Compared
to the end of the corresponding quarter of the prior year, notes payable
increased by $134,287 while loans from stockholders decreased $112,150. 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, 1998, at which time all
principal and interest is due. The note bears interest at the rate of prime
plus 6%.
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.
Results of Operations
Comparison of the Six Months Ended November 30. 1997 with the Six Months Ended
November 30, 1996
Revenue for the six-month period ended November 30, 1997 was $34,917 compared
to $3O,022 of revenue recorded during the same period of the prior year.
Revenues during the current period included $17,120 derived from the sale of
advertising, tickets and memorabilia connected with the All American Bowl.
Other income included $3,259 which represented a gain realized from
renegotiation of a note payable. Remaining revenues consisted of sales of the
Viper M1. Viper M1 sales accounted for all of the revenues in the prior year
period. The Company's net loss during the current year period was $143,840
compared to $6O,146 during the same period of the prior year. The larger net
loss reflected an increase in total expenses of $88,589. The cost of producing
and promoting the All American Bowl accounted for $72,467 of the expense
increase.
11
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Comparison of the Three Months Ended November 30, 1997 with the Three Months
Ended November 30, 1996
Revenue for the three-month period ended November 3O, 1997 was $1O,320
compared to $15,939 recorded during the same period of the prior year. Revenue
during both periods consisted of sales of the Viper M1. The decrease resulted
from production limitations pending reorganization of manufacturing lines and
securing of additional capital to finance production increases. Total costs
and expenses rose from $46,380 to $54,135 with expenses rising in all
categories except travel. As a result, the Company's net loss during the
current year period was $43,815 compared to $3O,441 during the same period of
the prior year.
OTHER INFORMATION
PART II
ITEM 1. Legal Proceedings.
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 has threatened legal action because
payment has been withheld for printing services which are in dispute because
of poor quality. The Company believes that these actions will be 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. 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
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
U S AMATEUR SPORTS, INC.
By /s/ Gerald V. Bergman
Gerald V. Bergman
Chief Financial Officer
Date: January 15, 1998
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
balance sheets and statements of operations found on pages 3 and 4 of the
Company's Form 10-QSB for the quarter ended November 30, 1997, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1997
<CASH> 2,271
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 83,546
<CURRENT-ASSETS> 85,817
<PP&E> 81,818
<DEPRECIATION> 36,804
<TOTAL-ASSETS> 165,005
<CURRENT-LIABILITIES> 189,316
<BONDS> 0
0
0
<COMMON> 6,000,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 165,005
<SALES> 31,413
<TOTAL-REVENUES> 34,917
<CGS> 10,299
<TOTAL-COSTS> 178,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,999
<INCOME-PRETAX> (143,840)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143,840)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
