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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 November 30, 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 (I.R.S. Employer
incorporation or organization) Identification No.)
8125 Monetary Drive, Suite H4, Riviera Beach, Florida 33404
-----------------------------------------------------------
(Address of principal executive offices)
(561) 622-4395
----------------------------------------------------
(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 November 30, 1998, the issuer had 11,996,600 shares of common stock,
$.0001 Par Value, outstanding.
Transitional Small Business Disclosure format: Yes _ No -X-
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U S AMATEUR SPORTS, INC. Form 10-QSB
November 30, 1998
INDEX
PART I FINANCIAL INFORMATION Page No.
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets:
November 30, 1998 and May 31, 1998 3
Consolidated Statements of Operations:
Six-Month Periods Ended
November 30, 1998 and 1997 4
Three-Month Periods Ended
November 30, 1998 and 1997 5
Consolidated Statements of Cash Flows:
Six-Month Periods Ended
November 30, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 10
PART II OTHER INFORMATION
Items 1-6 14
2
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U S AMATEUR SPORTS, INC.
CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, 1998 AND MAY 31, 1998
NOVEMBER 30, MAY 31,
1998 1998
------------ ---------
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 80,176 $ 89,542
Accounts and advances receivable 28,468 7,315
Inventories 86,160 85,155
Prepaid expense 21,341 34,580
-------- --------
Total current assets 216,145 216,592
Property and equipment 65,547 70,980
Rights to technology and associated trademarks 26,909 25,309
Deferred charges 1,518 2,818
Other assets 8,442 7,862
-------- --------
TOTAL ASSETS $318,561 $323,561
======== ========
LIABILITIES
Current Liabilities
Accounts payable $134,357 $131,704
Current portion of notes payable 125,897 130,214
Current portion of accrued interest 17,745 10,600
-------- --------
Total current liabilities 277,999 272,518
Loans from stockholders 166,995 101,600
Notes payable, less current portion 13,500 13,500
Accrued interest, less current portion 2,143 1,314
-------- --------
TOTAL LIABILITIES 460,637 388,932
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value:
Authorized - 50,000,000 shares;
Issued - 11,996,600 shares at
November 30, 1998 and 11,894,600
shares at May 31, 1998 1,199 1,189
Additional paid-in capital 530,128 484,361
Accumulated deficit (668,403) (545,921)
Less treasury stock - At cost: 2,000 shares (5,000) (5,000)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (142,076) (65,371)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $318,561 $323,561
======== ========
See notes to financial statements.
3
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U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Six-Month Periods Ended November 30, 1998 and 1997
(Unaudited)
Six Months
Ended November 30,
1998 1997
REVENUES -------- --------
Net sales $ 53,986 $ 31,413
Other income 0 3,504
--------- ---------
TOTAL REVENUES 53,986 34,917
COSTS AND EXPENSES
Cost of products sold 26,989 10,299
Cost of event production and promotion 0 72,467
Freight 2,172 3,952
Professional fees 36,067 25,662
Advertising and promotion 42,555 3,659
Travel 0 8,392
Rent 15,579 11,769
Office, telephone and other operating expenses 27,439 20,632
Interest 7,975 7,999
Depreciation 11,312 7,880
Amortization 6,380 6,046
--------- ---------
TOTAL COSTS AND EXPENSES 176,468 178,757
--------- ---------
NET LOSS $(122,482) $(143,840)
========= =========
NET LOSS PER COMMON SHARE $ (.010) $ (.024)
======== ========
See notes to financial statements.
4
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U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month Periods Ended November 30, 1998 and 1997
(Unaudited)
Three Months
Ended November 30,
1998 1997
REVENUES -------- --------
Net sales $ 31,019 $ 10,075
Other income 0 245
-------- --------
TOTAL REVENUES 31,019 10,320
COSTS AND EXPENSES
Cost of products sold 17,868 6,948
Cost of event production and promotion 0 805
Freight 1,342 1,109
Professional fees 18,297 10,912
Advertising and promotion 14,483 3,659
Travel 0 3,789
Rent 8,586 5,865
Office, telephone and other operating expenses 10,216 7,822
Interest 3,903 6,263
Depreciation 5,729 3,940
Amortization 3,357 3,023
-------- --------
TOTAL COSTS AND EXPENSES 83,781 54,135
-------- --------
NET LOSS $(52,762) $(43,815)
======== ========
NET LOSS PER COMMON SHARE $ (.004) $ (.007)
======== ========
See notes to financial statements.
5
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U S AMATEUR SPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six-Month Periods Ended November 30, 1998 and 1997
(Unaudited)
Six Months Ended
November 30,
1998 1997
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (122,482) $ (143,840)
Reconciling adjustments:
Amortization 6,380 6,046
Depreciation 11,312 7,880
Decrease (increase) in receivables (21,153) 3,064
Decrease (increase) in inventories (1,005) (5,600)
Decrease (increase) in prepaid expenses 13,239 2,000
(Increase) in other assets (7,261) 0
Increase in accounts payable 2,653 109,854
Increase (decrease) in accrued expenses 0 (40,000)
Increase (decrease) in accrued interest 7,974 (16,930)
---------- ----------
NET CASH USED BY OPERATING ACTIVITIES (110,343) (77,526)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (5,878) 0
---------- ----------
NET CASH USED BY INVESTING ACTIVITIES (5,878) 0
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 45,777 0
Notes payable (4,317) 126,387
Loans from stockholders 65,395 (47,400)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 106,855 78,987
---------- ----------
NET INCREASE (DECREASE) IN CASH (9,366) 1,461
CASH AT BEGINNING OF PERIOD 89,542 810
---------- ----------
CASH AT END OF PERIOD $ 80,176 $ 2,271
========== ==========
See notes to financial statements.
6
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U S AMATEUR SPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1998 and 1997
(Unaudited)
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
- ---------------------
The accompanying unaudited consolidated 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, 1998 are not necessarily indicative of the results
that may be expected for the year ending May 31, 1999. 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, 1998.
Consolidation
- -------------
The consolidated financial statements of the Company include the accounts of
USA Performance Products, Inc. USA Performance Products, Inc. is a
wholly-owned subsidiary responsible for the manufacture and sale of the Viper
M1 paintball marker and accessories.
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.
NOTE B: CASH EQUIVALENTS
Cash equivalents consist of cash credits received in connection with the sale
of advertising to Itex Corporation. These cash credits will be used for the
purchase of products and services provided by other Itex clients.
7
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NOTE C: INVENTORIES
Inventories consist of merchandise acquired for sale by the Company's USA
SportsNet business unit in addition to finished goods and work-in-process
inventories of the Viper M1 paintball marker and accessories. Inventories are
carried at cost which is considered to be less than market value.
NOTE D: PREPAID EXPENSE
Prepaid expense includes amounts paid for rent, commercial insurance and
advertising which will benefit the Company during the fiscal year ending May
31, 1999.
NOTE E: 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, 1998 and 1997:
November 30, 1998 November 30, 1997
Computer hardware $ 34,434 $ 10,542
Computer software 10,564 10,564
Furniture, fixtures and equipment 22,218 10,572
Tools, dies and fixtures 54,761 50,140
------- -------
Total cost 121,977 81,818
Less: accumulated depreciation (56,430) (36,804)
-------- -------
Total net property and equipment $ 65,547 $ 45,014
======== ========
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 F: 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. The cost assigned to these rights increased
by $6,679 as a result of payment for certain design improvements and drawing
updates during the three months ended August 31, 1998. The rights are valued
at $54,134 less accumulated amortization of $27,225 at November 30, 1998, and
$47,455 less accumulated amortization of $17,400 at November 30, 1997.
8
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NOTE G: DEFERRED CHARGES
Deferred charges consist of organization costs in the amount of $13,004 less
accumulated amortization of $11,486 and $8,885, at November 30, 1998 and 1997,
respectively.
NOTE H: OTHER ASSETS
Other assets include deposits and an advance to an officer of the Company.
NOTE I: ACCOUNTS PAYABLE
Accounts payable consist of professional fees, trade payables and costs
associated with event production and promotion.
NOTE J: NOTES PAYABLE AND LOANS FROM STOCKHOLDERS
Notes payable include balances remaining under a note agreement with Stratex
Corporation and a note recorded in connection with the purchase of certain
assets of Performance Paintball Products. The remaining balances of notes
payable and loans from stockholders consist of miscellaneous amounts borrowed
to finance the Company's operations.
NOTE K: SUBSEQUENT EVENT
On December 17, 1998, the Company's Board of Directors approved an action to
change the name of the Company from US Amateur Sports, Inc. to ecom ecom.com,
inc. A meeting of shareholders to discuss an amendment to the Company's
Articles of Incorporation to implement the change has been scheduled for
January 25, 1999. Management believes that the new name more appropriately
connotes the nature of the Company's core business which focuses on electronic
commerce and extends beyond the sports industry.
NOTE L: 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 OPERATION
The following discussion should be read in conjunction with the accompanying
consolidated financial statements for the three-month and six-month periods
ended November 30, 1998 and 1997 and the Form 10-KSB for the fiscal year ended
May 31, 1998.
Special Note Regarding Forward-Looking Statements
- -------------------------------------------------
Certain statements in this report and elsewhere (such as in other filings by
the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended
to identify these forward-looking statements. The Company's actual results
could differ materially from those anticipated in these forward-looking
statements. Factors that might cause or contribute to such differences
include, among others, competitive pressures, the growth rate of the paintball
industry and electronic commerce, constantly changing technology and market
acceptance of the Company's products and services. The Company undertakes no
obligation to publicly release the result of any revisions to these
forward-looking statements, which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
- --------
Electronic Commerce
With the exception of $17,120 in revenues related to last fiscal year's
production of the All American Bowl, the Company's revenues to date have
consisted entirely of sales of the Viper M1 paintball marker and accessories.
Since paid advertising in paintball-oriented magazines is a recent addition to
the Viper marketing program, most of the Viper M1 sales were generated from
the Company's Internet web site.
From the inception of US Amateur Sports, Company management has believed in
the concept of an amateur sports network on the Internet that would serve as a
portal for amateur athletes worldwide to access sports information, products
and services to support their activities. This sports network, designated as
USA SportsNet and established as a division of the Company, would include a
site available to local community recreation departments, youth leagues and
schools to post scores, standings, schedules and highlights of local amateur
athletic activities free of charge. This approach is designed to build a high
volume of Internet traffic which management believes will make USA SportsNet
attractive to sports-oriented merchants.
10
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In September 1998, the Company entered into an agreement with the North
American Youth Sport Institute (NAYSI) and its founder and director, Dr. Jack
Hutslar, under which NAYSI granted exclusive rights to the Company to present
the NAYSI coaches course on USA SportsNet in return for 100,000 shares of
restricted common stock. In connection with a profit-sharing agreement, Dr.
Hutslar will provide consultation services to ensure that the content of the
course and its related text is kept current. Founded in 1979, NAYSI has
developed curricula for national training programs that enroll over one
million youngsters annually, and it has trained more than 30,000 coaches and
teachers in live training sessions. Management considers the agreement with
NAYSI to be an important step to provide the means to identify individuals who
are not suited for coaching positions and to strengthen the abilities of those
who do coach young athletes.
(The following paragraph addresses a material subsequent event.)
Successful use of the Internet to market paintball products, management's
intention to extend this use by launching an amateur sports network, and the
belief that many of the marketing concepts embodied in this plan (and the
related software) can be applied to products that are outside of the sports
industry, led management of the Company to redefine the core business. On
December 17, 1998, the Company's directors voted to change the Company's name
to ecom ecom.com, inc. A special meeting of shareholders is scheduled at 4:00
p.m. on January 25, 1999 at the offices of the Company to discuss an amendment
to the Company's Articles of Incorporation in order to adopt the new name.
Management believes that the proposed name more accurately reflects the nature
of the Company's core business which is defined as electronic commerce.
Manufacturing Operations
USA Performance Products, Inc. is a wholly-owned subsidiary responsible for
the production and sale of the Viper M1 paintball marker and accessories.
Sales of the paintball marker have been depressed by the inability of the
manufacturing subcontractor to produce the Viper M1 in sufficient quantities
to meet demand. During the current fiscal year, the Company moved its
headquarters to approximately 6,000 square feet of leased commercial space in
Riviera Beach, Florida to allow for the development of an in-house
manufacturing operation. In the final month of the current quarter, in-house
production of the paintball marker commenced, and the first units assembled
in-house were shipped.
Results of Operations
- ---------------------
Comparison of the six months ended November 30, 1998
with the six months ended November 30, 1997
----------------------------------------------------
Revenue for the six-month period ended November 30, 1998 was $53,986 compared
to $34,917 of revenue recorded during the same period of the prior year. All
current period revenue consisted of sales of the Viper M1 paintball marker and
accessories. Revenues during the prior year period included $17,120 derived
from the sale of advertising, tickets and memorabilia connected with the
Company's production of the All American Bowl, $3,259 which represented a gain
realized from renegotiation of a note payable, and $14,538 derived from sales
of the Viper M1.
11
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Total costs and expenses were $176,468 in the current period compared to
$178,757 in the prior year period. The prior year total included $72,467
related to production and promotion of the All American Bowl. Elimination of
this cost in the current year was offset by increases in all other expense
categories except travel, freight and interest. Relocation and equipping of
Company headquarters accounted for increases in rent, depreciation, office and
other operating expenses. Focus on development of the Company's Internet
network increased professional fees. However, the most significant increase
was $38,896 in additional spending on advertising and promotion of the Company
and the Viper M1 paintball marker. This spending was made in anticipation of
the Company's ability to satisfy greater demand once transfer of production to
in-house facilities was complete. As noted in the discussion above, in-house
production commenced in November, and the majority of current quarter Viper M1
sales were recorded in this last month of the quarter.
The increase in sales of the Viper M1 and elimination of the costs related to
the All American Bowl translated into a reduction of net loss for the
six-month period from $143,840 in the prior year to $122,482 in the current
year.
Comparison of the three months ended November 30, 1998
with the three months ended November 30, 1997
------------------------------------------------------
Revenue for the three-month period ended November 30, 1998 was $31,019
compared to $10,320 recorded during the same period of the prior year.
Revenue for both periods consisted of sales of the Viper M1.
Total costs and expenses rose from $54,135 in the prior year period to $83,781
in the current quarter with expenses rising in all categories except travel
and interest. All increases resulted from the operational changes and
investment spending discussed in the comparison of the six-month periods
above.
The increased expenditures resulted in a net loss of $52,762 for the current
quarter compared to a loss of $43,815 in the same period of the prior year.
Liquidity and Capital Resources
- -------------------------------
At November 30, 1998, current assets totaled $216,145 compared to $216,592 at
the prior year end. An increase of $21,153 in accounts receivable generated
from Viper M1 sales late in November was offset by decreases in cash and cash
equivalents of $9,366 and prepaid expense of $13,239. The reduction in the
prepaid category consisted primarily of the expensing of amounts paid for
advertising. Current liabilities at November 30, 1998 were $277,999 compared
to $272,518 at the prior year end. Increases of $2,653 in accounts payable
and $7,145 in accrued interest were offset by a $4,317 decrease in the current
portion of notes payable.
Net cash used by operating activities during the six months ended November 30,
1998 was $110,343. The principal use of cash was to fund the Company's net
loss from operations. Cash used to increase accounts receivable and other
assets was offset by decreases in prepaid expenses and increases in accounts
payable and accrued interest.
12
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Net cash used by investing activities consisted of $5,878 used for acquisition
of tools, dies and fixtures and computer hardware.
Net cash provided by financing activities was $106,855 derived from $45,777 in
capital contributions and $65,395 in loans from stockholders offset by a
$4,317 decrease in notes payable. Of the capital contributions, $30,780 was
recorded from private sales of restricted stock, and the remainder resulted
from the exchange of stock for services. Loans from stockholders, which bear
no interest, continued to be a significant source of capital to fund the
Company's operations. Notes payable included balances remaining under a note
agreement with Stratex Corporation and a note recorded in connection with the
purchase of certain assets of Performance Paintball Products. The Stratex
note, which bears interest at the rate of prime plus 6% on a balance of
$100,000, was amended during the quarter to provide for a new maturity date of
September 1, 1999.
Management believes that the combination of revenues, loans from stockholders
and capital contributions will be sufficient to fund operations for the
remainder of the current fiscal year. To the extent that the Company requires
additional funds to support its operations or the expansion of its business,
the Company may sell additional equity, issue debt or obtain credit facilities
through financial institutions. Any sale of additional equity securities will
result in dilution to the Company's shareholders. There can be no assurance
that additional financing, if required, will be available to the Company in
amounts or on terms acceptable to the Company.
Market for Common Equity
- ------------------------
The Company's common stock continues to trade on the OTC Bulletin Board under
the symbol USSP. Equitrade Securities Corporation of Lake Forest, California
continues to serve as the lead market maker for the stock.
13
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OTHER INFORMATION
PART II
ITEM 1. Legal Proceedings.
The Company is not involved in any material legal proceedings or litigation,
and the officers and directors are aware of no other pending litigation which
would have a material, adverse effect on 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.
A promotional article relating to the Company's business appeared in the fall
1998 edition of an advertising publication called "Market Pulse Journal." On
December 29, 1998, an article appeared in the "Eavesdropper" column on CBS
Marketwatch (cbs.marketwatch.com), an online financial news site, which
referred to the referenced article in the Market Pulse Journal and made
favorable comments about the Company. On January 4, 1999, CBS Marketwatch
retracted its earlier article, stating that it had not seen the disclosure
indicating that the Company had paid compensation to a public relations firm
in connection with the article in Market Pulse Journal. On January 5, 1999,
the Company (unaware that CBS Marketwatch had retracted its earlier article)
issued a press release calling attention to the favorable CBS Marketwatch
article.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - None
(b) Reports - None
14
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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.
January 18, 1998 By /s/ Guy T. Lindley
Guy T. Lindley, Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<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 November 30,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> NOV-30-1998
<CASH> 80,176
<SECURITIES> 0
<RECEIVABLES> 28,468
<ALLOWANCES> 0
<INVENTORY> 86,160
<CURRENT-ASSETS> 216,145
<PP&E> 121,977
<DEPRECIATION> 56,430
<TOTAL-ASSETS> 318,561
<CURRENT-LIABILITIES> 277,999
<BONDS> 0
0
0
<COMMON> 1,199
<OTHER-SE> (143,275)
<TOTAL-LIABILITY-AND-EQUITY> 318,561
<SALES> 53,986
<TOTAL-REVENUES> 53,986
<CGS> 26,989
<TOTAL-COSTS> 176,468
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,975
<INCOME-PRETAX> (122,482)
<INCOME-TAX> 0
<INCOME-CONTINUING> (122,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,482)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
