<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the quarterly period ended September 30, 2000
/ / Transition Report Under Section 13 or 15(d) of the Securities Exchange Act;
For the transition period from _________ to __________.
Commission File Number 000-27487
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0770630
-------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
5222 Balboa Avenue, Suite 24, San Diego, California 92117
--------------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(858) 581-2120
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 issuer had 6,852, 219 shares outstanding as at September 30, 2000.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements for the Nine Months Ended September 30, 2000 4
Comparative Balance Sheets for the 9 months ended September 30, 2000 (Unaudited) 5
Comparative Unaudited Statements of Operations for the 9 months ended September 30, 2000 6
Statements of Stockholder's Equity (Deficit) for the 9 months ended September 30, 2000 7
Comparative Unaudited Statements of Cash Flow for the 9 months ended September 30, 2000 9
Notes to Financial Statements 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation. 19
PART II - OTHER INFORMATION 21
Item 1. Legal Proceedings. 21
Item 2. Changes in Securities and Use of Proceeds. 21
Item 3. Defaults Upon Senior Securities. 21
Item 4. Submission of Matters to a Vote of Security Holders. 21
Item 5. Other Information. 21
Item 6. Exhibits and Reports of Form 8-K. 21
(a) Exhibits
(b) Reports on Form 8-K
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA - SAN DIEGO FLASH)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
3
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Balance Sheets
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------- -----------------
<S> <C> <C>
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 50,176 $ 50,253
----------------- -----------------
Total Current Assets 50,176 50,253
----------------- -----------------
PROPERTY AND EQUIPMENT (Net) (Notes 1 and 2) 24,687 18,119
----------------- -----------------
OTHER ASSETS
Receivable from shareholder 5,000 -
Deposits 1,350 1,350
Soccer franchises, net (Note 3) 161,400 166,800
----------------- -----------------
Total Other Assets 167,750 168,150
----------------- -----------------
TOTAL ASSETS $ 242,613 $ 236,522
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------------------------------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 442,434 $ 102,005
Accrued expenses 238,705 255,247
Bank overdraft - 1,065
Loans from related parties 38,765 2,273
Deferred revenue - 32,490
Credit lines payable (Note 4) 785,032 -
Convertible promissory notes (Note 6) 237,400 329,100
Notes payable (Note 5) 50,390 15,646
----------------- -----------------
Total Current Liabilities 1,792,726 737,826
----------------- -----------------
Total Liabilities 1,792,726 737,826
----------------- -----------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock: 20,000,000 shares authorized of no
par value, 6,852,219 and 5,284,369 shares issued
and outstanding, respectively 3,043,148 2,000,298
Common stock subscribed 12,000 12,000
Additional paid-in capital 1,071,523 941,363
Stock subscriptions receivable (1,000) (48,000)
Accumulated deficit (5,675,784) (3,406,965)
----------------- -----------------
Total Stockholders' Equity (Deficit) (1,550,113) (501,304)
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 242,613 $ 236,522
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
REVENUES
Ticket sales $ 31,029 $ 33,720 $ 71,468 $ 52,890
Corporate sponsorships 30,473 31,200 63,468 208,829
Other revenue 10,412 3,328 19,630 5,889
---------------- --------------- --------------- ----------------
Total Revenues 71,914 68,248 154,566 267,608
---------------- --------------- --------------- ----------------
EXPENSES
General and administrative 330,001 385,526 1,139,063 846,574
Game and player expenses 59,764 82,140 248,182 297,487
Advertising and promotion 34,362 129,858 213,536 465,762
Depreciation and amortization 2,753 2,752 9,903 8,124
---------------- --------------- --------------- ----------------
Total Expenses 426,880 600,276 1,610,684 1,617,947
---------------- --------------- --------------- ----------------
Loss From Operations (354,966) (532,028) (1,456,118) (1,350,339)
---------------- --------------- --------------- ----------------
OTHER INCOME (EXPENSE)
Gain (loss) on trading securities - - - 26,343
Interest income 218 254 773 961
Loan underwriting fee - - (750,000) -
Interest expense (19,858) (16,651) (63,474) (19,862)
---------------- --------------- --------------- ----------------
Total Other Income (Expense) (19,640) (16,397) (812,701) 7,442
---------------- --------------- --------------- ----------------
NET LOSS $ (374,606) $ (548,425) $ (2,268,819) $ (1,342,897)
================ =============== =============== ================
BASIC LOSS PER SHARE $ (0.05) $ (0.11) $ (0.33) $ (0.29)
================ =============== =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Common Stock
---------------------------------- Additional Stock
Accumulated Paid-In Subscriptions
Shares Amount Capital Receivable Deficit
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 3,801,484 $ 849,503 $ 91,660 $ (172,500) $ (1,053,137)
Common stock and warrants
issued for cash 16,000 16,000 - - -
Common stock issued for cash 196,300 196,300 - (48,000) -
Common stock issued through
exercise of warrants 13,000 6,500 - - -
Common stock issued for
services 273,600 273,600 - - -
Receipt of stock subscription
receivable - - - 172,500 -
Common stock issued in lieu
of accrued liabilities 194,000 155,200 - - -
Common stock issued for
trading securities 295,000 78,345 - - -
Common stock issued for
syndication costs 70,135 - - - -
Common stock issued for
equipment 20,000 20,000 - - -
Common stock issued in
conversion of promissory notes 404,850 404,850 - - -
Stock options issued - - 849,703 - -
Net loss for the year ended
December 31, 1999 - - - - (2,353,828)
--------------- --------------- --------------- --------------- ---------------
Balance, December 31, 1999 5,284,369 $ 2,000,298 $ 941,363 $ (48,000) $ (3,406,965)
--------------- --------------- --------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Common Stock
---------------------------------- Additional Stock
Accumulated Paid-In Subscriptions
Shares Amount Capital Receivable Deficit
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 5,284,369 $ 2,000,298 $ 941,363 $ (48,000) $ (3,406,965)
Common stock issued for loan
underwriting fee (unaudited) 1,250,000 750,000 - - -
Common stock issued in
conversion of promissory notes
(unaudited) 190,600 190,600 - - -
Common stock issued for cash
(unaudited) 79,000 54,000 - - -
Common stock issued for
services (unaudited) 11,000 11,000 - - -
Stock options issued (unaudited) - - 131,160 - -
Receipt of stock subscription
receivable (unaudited) - - - 47,000 -
Distribution to shareholder
(unaudited) - - (1,000) - -
Common stock issued in conversion
of promissory notes (unaudited) 5,250 5,250 - - -
Common stock issued for services
(unaudited) 32,000 32,000 - - -
Net loss for the nine months
ended September 30, 2000
(unaudited) - - - - (2,268,819)
--------------- --------------- --------------- --------------- ---------------
Balance, September 30, 2000
(unaudited) 6,852,219 $ 3,043,148 $ 1,071,523 $ (1,000) $ (5,675,784)
=============== =============== =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (2,268,819) $ (1,342,897)
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Depreciation and amortization 9,903 8,124
(Gain) loss on trading securities - (26,343)
Stock issued for loan underwriting fee 750,000 -
Stock issued for services 43,000 250,732
Stock options issued for services 131,160 22,868
Changes in operating assets and liabilities:
(Increase) decrease in employee advances - -
(Increase) decrease in receivable from shareholder (5,000) -
Increase (decrease) in accounts payable 340,429 40,470
(Increase) decrease in prepaid expenses - (7,418)
Increase (decrease) in other liabilities (1,065) -
Increase (decrease) in deferred revenue (32,490) (18,066)
Increase (decrease) in accrued expenses (16,542) 53,487
------------------ ------------------
Net Cash (Used) by Operating Activities (1,049,424) (1,019,043)
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of trading securities - 79,431
Purchase of fixed assets (11,071) (14,000)
------------------ ------------------
Net Cash (Used) by Investing Activities (11,071) 65,431
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 101,000 212,300
Capital distributions (1,000) -
Principle payments on convertible notes payable (28,500) (24,033)
Cash received from notes payable 44,494 362,277
Convertible promissory notes proceeds 122,900 459,246
Line of credit proceeds 785,032 -
Due to related companies 36,492 -
------------------ ------------------
Net Cash Provided by Financing Activities 1,060,418 1,009,790
------------------ ------------------
NET INCREASE (DECREASE) IN CASH (77) 56,178
CASH AT BEGINNING OF PERIOD 50,253 298
------------------ ------------------
CASH AT END OF PERIOD $ 50,176 $ 56,476
================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ 63,474 $ -
Income taxes $ - $ -
NON-CASH INVESTING FINANCING ACTIVITIES
Common stock issued for convertible promissory
notes $ 195,850 $ 404,850
Common stock issued in exchange for equipment $ - $ 20,000
Common stock issued for trading securities $ - $ 78,345
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
San Diego Soccer Development Corporation, (the "Company") was
incorporated on August 22, 1997 in the State of California. The Company
is engaged in the management and marketing of a professional soccer
team. The majority of the Company's revenues are currently generated
from corporate sponsorships and ticket sales.
b. Accounting Methods
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31 year end.
c. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
d. Basic Loss Per Share
The computations of basic loss per share of common stock are based on
the weighted average number of common shares outstanding during the
period of the financial statements. Common stock equivalents,
consisting of stock options, warrants and conversion of notes have not
been included in the calculation as their effect is antidilutive for
the periods presented.
e. Property and Equipment
Property and equipment is recorded at cost. Major additions and
improvement are capitalized. The cost and related accumulated
depreciation of equipment retired or sold are removed from the accounts
and any differences between the undepreciated amount and the proceeds
from the sale are recorded as gain or loss on sale of equipment.
Depreciation is computed using the straight-line method over the
estimated useful life of the assets.
f. Provision for Taxes
At September 30, 2000, the Company has net operating loss carryforwards
of approximately $5,675,000 that may be offset against future taxable
income through 2020. No tax benefit has been reported in the financial
statements because the Company believes there is a 50% or greater
chance the net operating loss carryforwards will expire unused.
Accordingly, the potential tax benefits of the net operating loss
carryforwards are offset by a valuation allowance of the same amount.
11
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
h. Advertising
The Company follows the policy of charging the costs of advertising to
expense as incurred.
i. Soccer Franchise
The membership in the United Systems of Independent Soccer Leagues
(USISL) represents the original purchase price of the franchise
recorded at cost and is amortized using the straight-line method over a
25 year period. Each franchise is continuously evaluated by management
to determine if its carrying value will be realized based upon the
estimated discounted cash flow expected from the franchise. Additional
amortization will be recognized in a period if a decline in value is
identified.
j. Revenue and Expense Recognition
Revenue from ticket sales is recognized at the time the home game, to
which such proceeds relate, is played. Accordingly, advance ticket
sales for the next season are recorded as deferred revenues and
recognized ratably during the applicable season. Revenue from
advertising and promotions is recognized ratably during the season the
promotion relates to is played. Professional league team expenses,
principally player compensation, are recorded as expense over the
entire Professional Soccer League regular season. Administrative,
general, advertising and promotional expenses are charged to operations
as incurred.
k. Seasonal Fluctuations
The Company's primary business is the operations of the soccer team
from April to September each year. The Company derives all its ticket
and corporate sponsorship revenues during this period. The current
financial statements for the nine months and three months ended
September 30, 2000 and 1999, therefore, reflects results of operations
during part of the Company's off-season, during which it incurs
expenses in preparation for its operating season.
12
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
l. Stock Options
The Company has granted options to purchase common stock to various
individuals and officers of the Company in return for various services
rendered to the Company. Under the Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
123"), the Company is recognizing the compensation cost using the
estimated fair value method. Under the fair value method, total
compensation cost is the estimated fair value of the stock options at
the grant date, less any amount paid by the employee for the stock
options.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Soccer equipment $ 6,000 $ 6,000
Promotional equipment 9,684 -
Computers and software 17,716 17,716
------------------ ------------------
33,400 23,716
Accumulated depreciation (8,713) (5,597)
------------------ ------------------
Net property and equipment $ 24,687 $ 18,119
================== ==================
</TABLE>
NOTE 3 - SOCCER FRANCHISES
During 1997, the Company purchased a soccer franchise to operate the
San Diego Flash in San Diego, California. The Company paid cash and
common stock for the franchise and the value of the stock portion was
determined based on the cash price of a 1998 A-League franchise, which
was the first season the Company could participate in the league.
During 1999, the Company purchased a D-3 Pro League franchise for
$30,000. The new franchise is playing in Riverside and will serve as a
farm team for the San Diego Flash. The franchises have been amortized
as follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Soccer franchises $ 180,000 $ 180,000
Accumulated amortization (18,600) (13,200)
------------------ ------------------
Net Soccer Franchises $ 161,400 $ 166,800
================== ==================
</TABLE>
13
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 4 - RELATED PARTY TRANSACTIONS
a. Credit Lines Payable
The Company entered into a Credit Line Loan Agreement with one of its
shareholders effective March 6, 2000. The Agreement provides for a line
of credit of up to $500,000 for approved expenditures. The advances
bear interest at 10% per annum and the unpaid principal and interest is
due on December 31, 2000. An underwriting fee was paid in the form of
1,250,000 restricted shares of the Company's common stock. The balance
on this Credit Line at September 30, 2000 and December 31, 1999 was
$498,380 and $-0-, respectively. The shareholder has loaned the Company
an additional $161,652 as of September 30, 2000. This amount also bears
interest at 10% per annum and is due December 31, 2000.
In connection with the agreement, the Company also agreed to
reconstitute its Board of Directors by allowing the Lender to nominate
3 of the 5 directors, and to allow the Lender to approve budgets and
significant expenditures, and to receive monthly financial statements.
In addition, the agreement provides that the Lender will provide
certain accounting and senior management overview services and public
company reporting oversight in exchange for one percent (1%) of gross
revenues.
In the event of default, the Lender may terminate the agreement,
declare the outstanding balance to be due and payable, and convert that
balance into common restricted shares of the Company. The new shares to
be issued would be the number necessary for the Lender to have a
cumulative ownership position of 53% of the then issued and outstanding
shares plus all unexecuted options and warrants.
The Company entered into a separate Credit Line Loan Agreement with an
individual effective June 1, 2000. The agreement provides for a line of
credit of up to $125,000 for approved expenditures. The advances bear
interest at 10% per annum and the unpaid principal and interest is due
on December 31, 2000. The balance outstanding at September 30, 2000 and
December 31, 1999 was $125,000 and $-0-, respectively.
b. Loans from Related Parties
During 1999, certain officers of the Company formed another company to
acquire and operate a Las Vegas soccer franchise. The Company received
loans from that company and have accrued interest at 10%. The loan is
due on demand. Additional advances have been received from other
related parties through September 30, 2000. These amounts are
non-interest bearing and due on demand.
c. Stock for Trading Securities
During 1999, the Company traded shares of its stock for stock of a
publicly trading company's stock at a highly discounted rate in order
to get cash for operations. The President of the publicly traded
company is also a major shareholder of the Company. During 1999, this
shareholder also became a director of the Company.
14
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 5 - NOTES PAYABLE
Notes payable consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------------ ------------------
(Unaudited)
<S> <C> <C>
Note payable to certain individuals, interest at 10%
per annum, principal and interest due December
31, 2000, unsecured. $ 37,600 $ -
Note payable to an individual, interest at 10%
per annum, principal and interest due on
demand, unsecured. 12,790 15,646
------------------ ------------------
Total Notes Payable 50,390 15,646
Less: Current Portion (50,390) (15,646)
------------------ ------------------
Long-Term Notes Payable $ - $ -
================== ==================
</TABLE>
The aggregate principle maturities of notes payable are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, Amount
------------------ ------------------
<S> <C>
2000 $ 50,390
2001 -
2002 -
2003 -
2004 -
2005 and thereafter -
------------------
Total $ 50,390
==================
</TABLE>
NOTE 6 - CONVERTIBLE PROMISSORY NOTES
In order to obtain "bridge" funds while a public offering is being
prepared, the Company issued convertible notes with a face amount
totaling $733,950 during 1999 and $122,900 during 2000. The notes bear
interest at 8% per annum and are convertible into common stock at $1.00
per share at the option of the holder. The 1999 notes matured on
December 31, 1999. During 1999, the noteholders converted $404,850 of
convertible notes into 404,850 shares of common stock. During 2000, the
noteholders converted an additional $195,850 and paid $24,000 in cash.
Of the remaining balance, $195,500 was in default as of January 1,
2000, and the remaining $41,900 was in default as of July 1, 2000.
15
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 7 - LEASING ACTIVITIES
The Company leases its office facilities under an operating lease that
expires on January 16, 2002. The base rent under the lease is $1,350
per month. The Company also leased a soccer field from a local
community college on an annual lease that expired at the end of 1999.
The base rent was $1,450 per home game. The Company has one other
operating lease for equipment.
The future annual minimum lease payments under operating leases at
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, Amount
------------------ ------------------
<S> <C>
2000 $ 17,628
2001 16,914
2002 -
2003 -
2004 -
2005 and thereafter -
------------------
Total $ 34,542
==================
</TABLE>
NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT)
a. Common Stock
During 1997, the Company prepared a private placement memorandum
offering 1,000,000 common shares (the Offering). The 1,000,000 common
shares were offered at a price of $5.00 per unit. Each unit included 5
common shares and entitled the investor to 2 warrants to purchase
additional shares of common stock for $0.50 per share. The price per
unit was allocated $4.00 to the shares and $1.00 to the warrants. Under
the Offering, the Company sold 458,300 common shares and raised
$425,050 net of syndication costs.
A second private placement memorandum dated February 3, 1999 (Second
Offering) offered 1,000,000 common shares at a price of $1.00 per
share. Under the Second Offering, the Company raised $148,300.
During the last quarter of 1998, the Company traded 650,000 shares of
its stock for stock of a publicly trading company's stock at a highly
discounted rate in order to get cash for operations. Most of the stock
received in the trade was liquidated, however, stock valued at $22,725
was still held in trading securities at December 31, 1998. The
President of the publicly traded company is also a major shareholder of
the Company. During 1999, this shareholder also became a director of
the Company.
During 1999, the Company traded an additional 200,000 shares with the
same publicly traded company, again at a highly discounted rate, in
order to get cash for operations. The Company further traded 95,000
shares with another publicly traded company for shares valued at
$38,792 on the date of trade. All of the trading securities were
liquidated by the end of 1999.
16
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT)
b. Warrants
Warrants for 183,320 shares were issued along with the first private
placement. Warrants for 85,400 were exercised in total during 1999 and
1998, leaving 97,920 outstanding at December 31, 1999. The warrants
expire in 2001.
c. Convertible Promissory Notes
At September 30, 2000, the Company had convertible promissory notes
outstanding which were convertible into 243,650 shares of common stock
(see Note 6).
d. Stock Options
The Company had the following common stock option transactions during
the quarter ended September 30, 2000:
<TABLE>
<CAPTION>
Weighted Contractual
Average Life of
Exercise Options
Shares Price Outstanding
------------------ ------------------ ------------------
<S> <C> <C> <C>
Options outstanding at
January 1, 2000 1,085,300 $ 0.16 3.67 years
Options granted 190,000 $ 0.18 3.42 years
Options exercised - - -
Options forfeited or expired - - -
------------------ ------------------ ------------------
Options outstanding at
September 30, 2000 1,275,300 $ 0.17 3.42 years
================== ================== ==================
Options price range at end of year: $0.05 through $1.25
Exercisable at end of year 1,275,300
==================
</TABLE>
The fair value of the stock options are estimated on the date of grant
using the Black-Scholes option-pricing model. The estimated fair value
has been calculated ignoring the volatility factor. The following
assumptions were used to estimate the fair values of options:
Risk free interest rate 5.5%
Expected life 4 years
Expected dividend yield 0%
17
<PAGE>
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
(DBA SAN DIEGO FLASH)
Notes to the Financial Statements
September 30, 2000 and December 31, 1999
NOTE 9 - GOING CONCERN
As reported in the financial statements, the Company has an accumulated
deficit of approximately $5,675,000 at September 30, 2000 and has
incurred a loss from operations for the nine months then ended. In
addition, the Company was not able to pay their promissory notes when
the notes matured on December 31, 1999. The Company's shareholders'
deficit was $1,550,113 and its current liabilities exceeded its current
assets by $1,742,550.
These factors create uncertainty about the Company's ability to
continue as a going concern. The ability of the Company to continue as
a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital it could be forced to cease
operations.
In order to continue as a going concern, develop and grow its game
attendance, revenues and achieve a profitable level of operations, the
Company will need, among other things, additional capital resources.
Management's plans to obtain such resources for the Company include (1)
raising additional capital through sales of common stock, the proceeds
of which would be used to build soccer stadiums in both San Diego and
Riverside County, hiring of administrative, sales and marketing
personnel; (2) continuing to use stock options to pay for employee
compensation and marketing services; (3) converting promissory notes
into common stock; (4) expanding the revenue sources from corporate
sponsors, television and radio advertising, concessions, merchandise
sales, soccer camps, concerts and other stadium events. In addition,
management is continually seeking to improve the operations and grow
the business through a variety of venues. However, management cannot
provide any assurances that the Company will be successful in
accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually secure other sources of financing
and attain profitable operations. The accompanying financial statements
do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
NOTE 10 - PROPOSED MERGER
During December 1999, the Company entered into negotiations to merge
with Roller Coaster, Inc. (a Nevada Corporation). Roller Coaster, Inc.
is a public shell with no activity other than inception in December
1995 and a 1:10 stock split in October 1999. The agreement was signed
in the month of March 2000.
According to the merger agreement, the surviving corporation will be
named San Diego Soccer Development Corporation and will be a Nevada
Corporation. Shares will be exchanged 1:1 for the public shell's
shares. The merger will result in approximately 9,314,000 shares
outstanding (2,500,000 shares pertaining to the former Roller Coaster,
Inc.) Shares authorized will be 100,000,000 common stock at $0.001 par
value and 50,000,000 preferred shares at $0.001 par value. In
connection with the merger, the Company incurred $200,000 in consulting
fees on the merger. The merger had not been approved by the
stockholders at September 30, 2000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of San Diego Soccer
Development Corporation's financial condition and results of operation. Detailed
information is contained in the financial statements included in this document.
This section contains forward-looking statements that involve risks and
uncertainties, such as statements of the company's plans, objectives,
expectations and intentions. The cautionary statements made in this document
should be read as being applicable to all related forward-looking statements
wherever they appear in this document.
The following is the Management Discussion and Analysis of the Financial
Conditions and Results of Operations for San Diego Soccer Development
Corporation for third quarter 2000.
The Company owns and operates a professional soccer franchise in the United
Soccer League's - A-League (Division II). The Company derives revenue and income
from its ticket sales, merchandise, concessions, soccer camps and corporate
sponsorship. The total operating expenses of the Company decreased 28.9% from
third quarter 1999 to third quarter 2000. The decrease can be attributed to
several operating expenses that were curtailed by less demand or other factors.
A few of the substantial reductions involved decreases in general and
administrative expenses, advertising and promotion and player payroll.
The Company has experienced a 14.4% reduction of general and administrative
expenses, down from $385,526 for the third quarter 1999 to $330,001 for the
Company's third quarter 2000. The Company's general decrease in advertising and
promotion is directly related to a modification of the Company's newly
implemented grass-roots marketing efforts. The Company has previously expended
capital on print advertising. This marketing strategy has been diminished
because of new alliances with local media sponsors, both in television and
radio. The alliances provide for television and radio ad campaigns that were
procured through trade sponsorship and ticket giveaways. Further, several local
soccer clubs and the Company created new working relationships to provide a
basis for grass-roots level marketing of the franchise. The Company's modified
marketing efforts to promote its franchise contributed to the 73.5% reduction in
advertising and promotional expenses, where the Company had expended $129,858 on
advertising and promotional expenses for third quarter 1999 to $34,362 for third
quarter 2000. The Company also saw a reduction of 27.2% in paid expenses for
player payroll from 1999 to 2000.
The Company's decrease in expenses for third quarter 2000 have been
significantly related to the above mentioned factors.
The standard revenue streams as mentioned above, have been continually modified
and refined to achieve revenue targets. Most notably the ticket sales functions
of the Company were modified by contracting with an out source ticket selling
agency and developing new grass-roots programs that have been implemented by
Company Staff.
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Ticket sales revenue was about on par with third quarter 1999. Ticket revenue
for third quarter 1999 was $33,720, while ticket sales for third quarter 2000
were $31,029, a decrease of slightly less than 8% quarter-to-quarter.
The concessions sales of the Company is currently out sourced to a professional
catering company. The percentage collected from this contract has produced a 37%
increase from third quarter 1999. The professionalism of the out sourced company
has not only provided quality foods and beverages for Company consumers but has
also provided the needed personnel to provide relatively quick and efficient
service to waiting consumers. Out sourcing this function of operation is
currently the only alternative to staffing the concession in-house. The number
of personnel required in addition to the experience and expertise in food
handling and sales cannot be currently produced by in-house personnel. Future
changes may be conceivable to increase the profit margin, however projected
changes at this stage in relation to the venue occupied and the average fan
attendance figures would make the difference in profit margins negligible and
expose the Company to potential legal and financial liabilities. As such, the
Company does not foresee an in-house catering operation in the near future.
The Corporate Sponsorship sales and marketing relationships have been developing
over the past three months. Some of the immediate results have been the expanded
television and radio promotional events. Time Warner has become a major
sponsorship partner in promoting individual matches through its own game
promotion and cable television exposure through an expanded ad campaign. Local
radio stations have also come forward in providing on air drive-time ticket
giveaways, thereby reaching different demographic groups throughout San Diego
County. The current relationships are being expanded to provide future contracts
for television and radio broadcast of franchise matches.
The Financial statements of the Company provide evidence of the seasonal nature
of the business. The operational expenses have decreased significantly overall
during the third quarter 2000.
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PART II
OTHER INFORMATION.
ITEM 1 LEGAL PROCEEDINGS
In management's opinion, there are no material litigation matters
pending or threatened against the company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None
ITEM 3 DEFAULT UPON SENIOR SECURITIES.
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On June 29, 2000, the Company filed a preliminary proxy statement
pursuant to Regulation 14A under the Exchange Act in connection with a Notice of
a Special Meeting of Shareholders. The meeting was to be held on April 17, 2000.
The meeting was held for the purpose of: electing directors of the Company,
reaffirming the proposed merger between the Company and Roller Coaster, Inc., a
Nevada corporation; and, to consider and act upon such other business as may
properly come before the special meeting. The Company did not file a final proxy
statement. Accordingly, the meeting did not occur and the matter was not
submitted to the shareholders. The Company intends to file an amended proxy
statement in August, 2000 which more completely discloses the terms of the
merger.
There was no other matter to be considered at the Special Meeting. The
Company intends to withdraw the proxy statement in lieu of the filing of an S-4
Registration/Proxy Statement which will be used to seek the consent for the
merger from the Shareholders at a special meeting of shareholders.
On October 11, 2000, the Company filed a Form S-4 which acts as a Proxy
Statement and Registration Statement in connection with the registration of
shares to be issued in the Rollercoaster, Inc. Company merger and which is to be
used to solicit consent of the shareholders for the merger. The merger will not
be effective until the S-4 will clear all SEC comments.
ITEM 5 OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed an 8-K Form on August 10, 2000 reporting the
change in its independent auditor from Logan Throop & Co.,
Certified Public Accountants to HJ & Associates, Certified
Public Accountants
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the Registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
SAN DIEGO SOCCER DEVELOPMENT CORPORATION
Dated: November 20, 2000 /s/ Sarkis Kaloustian
----------------------------------------
Sarkis Kaloustian
Chief Executive Officer
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