UNITED STATES SECURITIES AND EXCHANGE COMISSION
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 March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-25513
SPORTAN UNITED INDUSTRIES, INC.
Exact name of Registrant as specified in is charter
TEXAS 760333165
State of Incorporation IRS Employer Identification Number
3170 OLD HOUSTON ROAD
HUNTSVILLE, TEXAS 77340
936-295-2726
Address and telephone number of principal executive offices
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to filing
requirements for the past 90 days.
Yes _X_ No .
The number of shares of common stock of the Registrant outstanding at May 9,
2000 was 7,095,000.
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
BALANCE SHEET
March 31, 2000
ASSETS
Current Assets
<S> <C>
Cash $ 29,196
Accounts receivable, net of allowance
for doubtful accounts of $56,703 28,611
Accounts receivable-stockholder and employees 11,261
Prepaid expenses 5,000
Inventory, net of valuation allowance of $0 318,375
----------
Total Current Assets 392,443
Property and Equipment, net of $88,038
accumulated depreciation 35,478
Other assets 715
----------
TOTAL ASSETS $ 428,636
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 280,972
Accrued expenses 58,202
Notes payable to stockholders 193,500
Note payable to bank 79,000
----------
Total Current Liabilities 611,674
STOCKHOLDERS' EQUITY
Preferred stock, no par value, 10,000,000 shares
authorized, no shares issued or outstanding
Common stock, $.001 par value, 50,000,000 shares
authorized, 7,075,000 issued and outstanding 7,075
Paid in capital 279,497
Retained earnings (deficit) (469,610)
----------
Total Stockholders' Equity (183,038)
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 428,636
==========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
March 31, March 31,
2000 1999 2000 1999
-------------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 160,312 $ 740,225 $ 411,082 $1,737,935
Cost of Sales 134,457 618,189 323,571 1,464,131
-------------- ------------ ---------- ----------
Gross Margin 25,855 122,036 87,511 273,804
Operating Expenses
General and administrative 202,942 165,475 358,820 320,290
Expense of private offering 20,050 42,484
-------------- ------------ ---------- ----------
Total Operating Expenses 202,942 185,525 358,820 362,774
-------------- ------------ ---------- ----------
Operating Loss (177,087) (63,489) (271,309) ( 88,970)
Other Income and (Expense)
Gain on sale of assets 1,210 1,210
Interest expense ( 7,065) ( 9,321) ( 2,055)
Miscellaneous income(expense) 7 ( 1,746) 700 ( 2,429)
-------------- ------------ ---------- ----------
Total Other Income (Expense) ( 5,848) ( 1,746) ( 7,411) ( 4,484)
-------------- ------------ ---------- ----------
NET (LOSS) $ (182,935) $ (65,235) $ (278,720) $( 93,454)
============== ============ ========== ==========
Net (loss) per common share $ ( .03) $ ( .01) $ ( .04) $( .01)
Weighted average common shares
Outstanding 7,035,000 6,159,167 7,023,333 7,000,000
============== ============ ========== ===========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SPORTAN UNITED INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2000 and 1999
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $(278,720) $( 93,454)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 7,680 9,165
Securities issued for services 63,000
(Gain) on disposal of property and equipment ( 1,210)
Net (increase) decrease in:
Accounts receivable 33,826 ( 50,072)
Inventory ( 53,119) 116,719
Prepaid expenses ( 5,000) ( 17,844)
Other current assets ( 715)
Net increase (decrease) in:
Accounts payable 61,861 70,762
Accrued expenses ( 9,307) 4,882
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (181,704) 40,158
--------- ---------
CASH FLOWS (USED) BY INVESTING ACTIVITIES
Proceeds from sale of property and equipment 2,250
Cash paid for property and equipment ( 17,358) ( 7,873)
--------- ---------
NET CASH (USED) BY INVESTING ACTIVITIES ( 15,108) ( 7,873)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (repayments)from line of credit 69,000
Net proceeds from notes to stockholders 140,000 15,000
Net increase (decrease) in stockholder advances
to the company ( 1,482) ( 24,924)
Increase in drafts outstanding ( 24,782)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 207,518 ( 34,706)
--------- ---------
NET INCREASE IN CASH 10,706 ( 2,421)
CASH BALANCES
-Beginning of period 18,490 6,663
--------- ---------
-End of period $ 29,196 $ 4,272
========= =========
SUPPLEMENTAL DISCLOSURES
Interest paid in cash $ 6,111 $ 2,055
Income taxes paid in cash $ 0 $ 0
</TABLE>
3
<PAGE>
SPORTAN UNITED INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements of Sportan United Industries,
Inc. have been prepared in accordance with generally accepted accounting
principles and the rules of the Securities and Exchange Commission ("SEC"), and
should be read in conjunction with the audited financial statements and notes
thereto contained in the company's latest Annual Report filed with the SEC on
Form 10-KSB, as amended. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for interim
periods are not necessarily indicative of the results to be expected for the
full year. Notes to the financial statements which would substantially
duplicate the disclosures contained in the audited financial statements for the
most recent fiscal year 1999 as reported in the 10-KSB, have been omitted.
NOTE B - STOCK OPTION PLAN
On March 1, 1999, the Company had adopted an incentive stock option plan for its
eligible employees. On February 7, 2000, 410,000 options were issued to
employees with an exercise price of $ .75 per share. These options become
exercisable on March 31, 2003, and expire seven years from the exercise date.
Additionally, options representing 200,000 shares were issued to an officer of
the Company with an exercise price of $ .825 per share. These options become
exercisable on March 31, 2003, and expire two years from the exercise date.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis as of March 31, 2000 and for the
three-month and six -month periods ended March 31, 2000 and 1999 should be read
in conjunction with the unaudited condensed consolidated financial statements
and notes thereto set forth in Item 1 of this report.
The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. For example, words such as, "may,"
"will," "should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statement. Factors that might cause or
contribute to such a discrepancy include, but are not limited to the risks
discussed in our other SEC filings. These forward-looking statements speak only
as of the date hereof. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in our expectations with regard thereto
or any change in events, conditions or circumstances on which any such
statement is based.
GENERAL
Our fiscal year was changed from December 31 to September 30 in 1997. We
recognize revenues from sales of sports memorabilia at the time of shipment.
General and administrative costs are charged to expense as incurred. Property,
plant and equipment are recorded at cost and depreciated using an appropriate
accounting method over the estimated useful lives of the assets. Expenditures
for repairs and maintenance are charged to expense as incurred. The costs of
major renewals and betterments are capitalized and depreciated over the
estimated useful lives. The cost and related accumulated depreciation of the
assets are removed from the accounts upon disposition.
Historically we have concentrated on the distribution of sports cards and
memorabilia. In June 1999, we sold the sports cards and supplies segment of our
product line. We estimate that the sold product line represented approximately
80% of our revenues. We believe that we can achieve greater margins on our
remaining products, although there is no assurance that we will be able to do
so.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999
Sales. Sales decreased to $160,312 for the three months ended March 31,
2000 from $740,225 for the three months ended March 31, 1999, a decrease of
$579,913 or 78%. Cost of sales decreased to $134,457 for the three months ended
March 31, 2000 from $618,189 for the three months ended March 31, 1999, a
decrease of $483,732 or 78%. The decrease in sales was due to our divestiture
in June 1999 of our sports card and supplies segment, which we estimate
represented 80% of our products. Our gross margins for both periods was 16%.
General and Administrative Expenses. General and administrative expenses
increased to $202,942 for the three months ended March 31, 2000 from $165,475
for the three months ended March 31, 1999, an increase of $37,467 or 23%. We
believe the increase in general and administrative expenses is due to additional
professional fees in connection with our public filing requirements and in web
site developments.
Net Income (Loss). We had a net loss of $182,935 for the three months
ended March 31, 2000, as compared to a net loss of $65,235 for the three months
ended March 31, 1999. The loss was due to the decrease in product sales due to
our divestiture in June 1999 of our sports card and supplies segment, then
restructuring the new design of the company, which was not accompanied by a
corresponding decrease in general and administrative expenses.
5
<PAGE>
Six Months Ended March 31, 2000 Compared to the Six Months Ended March 31, 1999
Sales. Sales decreased to $411,082 for the six months ended March 31, 2000
from $1,737,935 for the six months ended March 31, 1999, a decrease of
$1,326,853 or 76%. Cost of sales decreased to $323,571 for the six months ended
March 31, 2000 from $1,464,131 for the six months ended March 31, 1999, a
decrease of $1,140,560 or 78%. The decrease in sales was due to our divestiture
in June 1999 of our sports card and supplies segment, which we estimate
represented 80% of our products. Our gross margins for the six months ended
March 31, 2000 was 21% compared to a gross margin of 16% for the six months
ended March 31, 1999. We believe that our gross margins increased due to our
increased focus on higher margin products subsequent to the divestiture of our
sports card and supplies segment.
General and Administrative Expenses. General and administrative expenses
increased to $358,820 for the six months ended March 31, 2000 from $320,290 for
the six months ended March 31, 1999, an increase of $38,530 or 12%. We believe
the increase in general and administrative expenses is due to additional
professional fees in connection with our public filing requirements and in web
site developments.
Net Income (Loss). We had a net loss of $278,720 for the six months ended
March 31, 2000, as compared to a net loss of $88,970 for the six months ended
March 31, 1999. The loss was due to the decrease in product sales due to our
divestiture in June 1999 of our sports card and supplies segment, then
restructuring the new design of the company, which was not accompanied by a
corresponding decrease in general and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow from Operating Activities. Our net cash flow from operating
activities resulted in cash used by operations of $181,704 for the six months
ended March 31, 1999, from cash provided by operations of $40,158 for the six
months ended March 31, 1999. The decrease is primarily the result of: (a) an
increase in net losses, as described above, (b) an increase in inventory, and
(c) a decrease in accounts payable. This decrease was not sufficiently offset
by an increase in cash flow from the issuance of securities for services of
$63,000, and a decrease in accounts receivable of $83,898.
Cash Flow from Investing Activities. Our net cash used from investing
activities during the six months ended March 31, 2000 increased to $15,108 from
$7,873 for the six months ended March 31, 1999. The increase was primarily due
to an increase in purchases of property and equipment.
Cash Flow from Financing Activities. Our net cash flows provided in
financing activities for the six months ended March 31, 2000 increased to
$207,518 from a net cash flows used of $34,706 for the six months ended March
31, 1999. The increase is primarily due to an increase in net proceeds from our
line of credit of $79,000 and from a $125,000 increase in proceeds from notes to
stockholders.
As of March 31, 2000, we had negative working capital of $219,231, and cash
and cash equivalents of $29,196. We are currently attempting to obtain external
equity financing in an amount of no less than $250,000 on a best efforts basis,
but there is no assurance that we will be able to do so. If we are unable to
raise additional capital, we will be forced to reduce growth. We estimate our
current monthly operating costs are approximately $50,000. We do not have any
other material commitments for capital expenditures. We estimate that our
current product sales will not raise sufficient profits to meet our operating
costs, and we believe we will need to add additional product lines to increase
revenues.
We have established a line of credit in the amount of $100,000 with First
National Bank of Huntsville. At March 31, 2000, we had a balance of
approximately $79,000 on the line of credit. There can be no assurance that we
will be able to obtain additional funding from other external sources on
suitable terms, if at all.
We have borrowed from our stockholders $53,500 in the form of a note
payable due on demand, at an annual interest rate of 12% with principal plus
accrued interest to be paid on repayment. Presently, the stockholders do not
intend to demand payment of the loan. There can be no assurance that
stockholder funds will be available in the future.
In addition, in May 2000, we will issue 2,144,006 shares of convertible
preferred stock in exchange for 2,144,006 shares of our outstanding common stock
to an affiliate of the company. The preferred stock was valued at $.418 per
share and pays dividends at a rate of 6% per annum, payable monthly. The total
annual payments that will be required is approximately $53,800. We have the
option of redeeming the preferred stock or forcing the conversion of the
preferred stock into an equal number of shares of common stock.
6
<PAGE>
We may in the future experience significant fluctuations in our results of
operations. These fluctuations may result in volatility in the price and/or
value of our common stock. Results of operations may fluctuate as a result of a
variety of factors, including demand for our products, introduction of new
products by us or our competitors, the variety of products distributed, the
number and timing of the hiring of additional personnel, the timing of
acquisitions, general competitive conditions in the industry and general
economic conditions. Shortfalls in revenues may adversely and disproportionately
affect our results of operations because a high percentage of our operating
expenses are relatively fixed. Accordingly, we believe that period to period
comparisons of results of operations are not necessarily meaningful and should
not be relied upon as an indication of future results of operations. Due to the
foregoing factors, it is likely that in one or more future periods our operating
results will be below the expectations of the investor.
SEASONALITY
Sales of sports-related memorabilia products tend to be more constant, with
sales peaks during holiday seasons and the then current sport season.
7
<PAGE>
PART II
OTHER INFORMATION
Pursuant to the Instructions to Part II of the Form 10-Q, Items 1, 3-5 are
omitted.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In March 2000, we issued an 30,000 shares of common stock to an accredited
investor for consulting services rendered. We believe the transaction was
exempt from registration pursuant to Section 4(2) of the Securities Act, as the
issuance was to an accredited investor and since the transactions were
non-recurring and privately negotiated.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
Exhibit 3.1 Amended and Restated Articles of Incorporation of Sportan
United Industries, Inc. iled previously on Form 10-SB
SEC File No. 000-25513)
Exhibit 3.2 Bylaws of Sportan United Industries, Inc. (Filed previously
on Form 10-SB SEC File No. 000-25513)
Exhibit 4.1 Common Stock Certificate, Sportan United Industries, Inc.
(Filed previously on Form 10-SB SEC File No. 000-25513)
Exhibit 10.1 Sportan United Industries, Inc. 1999 Stock Option Plan
(Filed previously on Form 10-SB SEC File No. 000-25513)
Exhibit 10.2 Lease Agreement (Filed previously on Form 10-KSB SEC
File No. 000-25513)
Exhibit 27.1 Financial Data Schedule
____________________
(b) REPORTS ON FORM 8-K
None.
8
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Sportan United Industries, Inc.
--------- ---------
Date: May 15, 2000 By: /s/ Jason G. Otteson
--------------------------
Jason G. Otteson, President
9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 29196
<SECURITIES> 0
<RECEIVABLES> 85314
<ALLOWANCES> 56703
<INVENTORY> 318375
<CURRENT-ASSETS> 392443
<PP&E> 123516
<DEPRECIATION> 88038
<TOTAL-ASSETS> 428636
<CURRENT-LIABILITIES> 611674
<BONDS> 0
0
0
<COMMON> 7075
<OTHER-SE> (175963)
<TOTAL-LIABILITY-AND-EQUITY> 428636
<SALES> 160312
<TOTAL-REVENUES> 160312
<CGS> 134457
<TOTAL-COSTS> 134457
<OTHER-EXPENSES> 201725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7065
<INCOME-PRETAX> (182935)
<INCOME-TAX> 0
<INCOME-CONTINUING> (182935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182935)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
