U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM ________ TO _________
Commission File Number: 0-25247
SPORTING MAGIC INC.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4675095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
17337 Ventura Boulevard, Suite 224
Encino, California 91316
Issuer's Telephone Number: (818) 784-0040
(Address and phone number of principal executive offices)
Check whether the registrant filed all documents and reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
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 Registrant has 6,800,000 shares of common stock, par value $.001 per
share, issued and outstanding as of November 30, 2000.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
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INDEX TO QUARTERLY REPORT
ON FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements ...............................................3
Balance Sheet (unaudited) ..........................................4
Statement of Operations (unaudited) ................................5
Statement of Cash Flows (unaudited) ................................6
Notes to Financial Statements ......................................7
Item 2. Management's Discussion and Analysis or Plan of Operation ..........8
PART II OTHER INFORMATION
Item 1. Legal Proceedings .................................................10
Item 2. Changes in Securities and Use of Proceeds .........................10
Item 3. Defaults upon Senior Securities 1 .................................10
Item 4. Submission of Matters to a Vote of Security Holders ...............10
Item 6. Exhibits and Reports on Form 8-K ..................................11
Signatures .................................................................11
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements. The forward-looking
statements include all statements that are not statements of historical fact.
Our actual results could differ materially from the anticipated results
described in the forward-looking statements. Factors that could affect our
results include, but are not limited to, those discussed in Item 2,
"Management's Discussion and Analysis or Plan of Operation," and our current
views with respect to future events that involve risks and uncertainties
including uncertainties related to successful negotiations with third parties,
capital availability, operational and other risks, selection of profitable
sites, and uncertainties and factors described from time to time in our publicly
available SEC reports. In light of these risks and uncertainties, the
forward-looking events described in this report might not occur.
For this purpose, any statements contained in this report that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as "may," "expect,"
"believe," "anticipate," "intend," "could," "estimate," or "continue," or the
negative or other variations thereof or comparable terminology, are intended to
identify forward-looking statements. Factors that may affect our results
include, but are not limited to, whether we will be able to identify, in a
timely manner, appropriate acquisition or merger candidates, negotiate
satisfactory terms for an acquisition or merger, satisfy any regulatory,
business, financing or other requirements and address other types of
contingencies that may arise in connection with such an acquisition or merger.
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PART I FINANCIAL INFORMATION
(Financial Statements Commence on Following Page)
(Balance of Page Intentionally Left Blank)
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<TABLE>
SPORTING MAGIC, INC.
BALANCE SHEETS
<CAPTION>
November 30,
2000 August 31,
(UNAUDITED) 2000
----------- ----------
<S> <C> <C>
ASSETS - CASH ..................................$ 1,287 $ -0-
=========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES:
Accrued expenses ...............................$ 8,741
Note payable to shareholder .................... 2,500
----------- ----------
Total liabilities .............................. 11,241 $ -0-
----------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT:
Common stock, par value - $.001,
25,000,000 shares authorized,
6,800,000 shares issued and
outstanding .................................. 6,800 6,800
Additional paid-in capital ..................... 914,264 914,264
Accumulated deficit ............................ (931,018) (921,064)
----------- ----------
Total shareholders' deficit .................... (9,954) -0-
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT ......................................$ 1,287 $ -0-
=========== ==========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
SPORTING MAGIC, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999 (UNAUDITED)
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
REVENUES ................................. $ 66,689
COST OF REVENUES ......................... 25,797
--------- ---------
GROSS PROFIT ............................. 40,892
--------- ---------
EXPENSES:
Selling and marketing .................... 49,612
General and administrative ............... $ 2,319 16,989
Professional fees ........................ 7,635 40,540
Interest expense ......................... 3,659
--------- ---------
Total expenses ........................... 9,954 110,800
--------- ---------
LOSS BEFORE INCOME TAXES ................. (9,954) (69,908)
INCOME TAXES ............................. 1,600
--------- ---------
NET LOSS ................................. $ (9,954) $ (71,508)
========= =========
BASIC LOSS PER SHARE ..................... $ (0.00) $ (0.02)
========= =========
See accompanying notes to financial statements.
</TABLE>
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<TABLE>
SPORTING MAGIC, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 2000 AND 1999 (UNAUDITED)
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................... $ (9,954) $(71,508)
Adjustments to reconcile net loss
to net cash used by operating activities:
Amortization ................................... 2,000
Changes in operating assets and
liabilities:
Accounts receivable ............................ (25,553)
Accrued expenses ............................... 8,741 47,662
-------- --------
Net cash used by operating activities .............. (1,213) (47,399)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES - Net
borrowings from shareholder .................... 2,500 55,000
-------- --------
NET INCREASE IN CASH ............................... 1,287 7,601
CASH, BEGINNING OF PERIOD .......................... -0- 10,859
-------- --------
CASH, END OF PERIOD ................................ $ 1,287 $ 18,460
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid for income taxes ......... $ -0- $ 1,600
See accompanying notes to financial statements.
</TABLE>
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SPORTING MAGIC, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - The accompanying unaudited financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB and Item 310(b) of Regulation S-B. 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 three-month period ended November 30, 2000, are not
necessarily indicative of the results that may be expected for the year
ended August 31, 2001. For further information, refer to the financial
statements and footnotes thereto included in the company's report on Form
10K-SB for the year ended August 31, 2000.
The balance sheet at August 31, 2000, has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
GENERAL INFORMATION - The Company is a "shell" company with minimal
operations. Management's plan is to identify and complete an acquisition,
merger or other transaction that will enhance shareholder value.
GOING CONCERN - The Company experienced significant operating losses since
inception and has a negative net worth. The financial statements have been
prepared assuming the Company will continue to operate as a going concern
which contemplates the realization of assets and the settlement of
liabilities in the normal course of business. No adjustment has been made
to the recorded amount of assets or the recorded amount or classification
of liabilities, which would be required if the Company were unable to
continue its operations.
LOSS PER SHARE - The Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" that
established standards for the computation, presentation and disclosure of
earnings per share ("EPS"), replacing the presentation of Primary EPS with
a presentation of Basic EPS. It also requires dual presentation of Basic
EPS and Diluted EPS on the face of the income statement for entities with
complex capital structures. The Company did not present Diluted EPS since
it has a simple capital structure.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
As a "shell" company, we currently have no revenues from operations. Our
business plan is to identify and complete an acquisition, merger or other
transaction that will enhance shareholder value. Our President and Chairman is
investigating potential business opportunities, as authorized by the Board of
Directors. The Board has placed no limitations on the type of business or
industry to consider. Currently, we have no plans, agreements, arrangements or
understandings, written or oral, with respect to any acquisition, merger or
similar transaction. No assurances can be given as to our ability to identify
and complete a transaction by any given date or as to the nature of the business
or profitability of the company if a transaction is completed. A proposed
transaction could be subject to significant regulatory, business, financing and
other contingencies and might require shareholder and other approvals.
RESULTS OF OPERATIONS
The following is a limited discussion of the results of operations for the
three months ended November 30, 2000. A comparison of the results of operations
for the 2000 fiscal quarter are not directly comparable to results for the prior
year period, because on March 23, 2000, the Company sold all of the assets and
liabilities related to its workforce training video business to Becor
Communications, Inc. ("Becor"). The limited results of operations for the three
months ended November 30, 2000 are described below, but no comparison has been
made of the results of operations for that period to those for the prior year's
quarter because such a comparison would not be meaningful under the
circumstances. The March 23, 2000 sale of the assets was part of an overall
transaction pursuant to which we acquired Soccer Magic, Inc. in a stock exchange
transaction. However, when Soccer Magic, Inc. was unable to fulfill certain post
acquisition obligations, we rescinded the exchange of shares with Soccer Magic,
Inc. and returned all its assets and liabilities to it. The sale of our assets
to Becor was and is not subject to rescission.
THREE MONTHS ENDED NOVEMBER 30, 2000
During the quarter ended November 30, 2000, our operations were dormant. We
did not engage in any income or revenue producing activity. During the quarter,
we rescinded our acquisition agreement with Soccer Magic, Inc. This rescission
was effective on October 6, 2000. Since that time, we initiated a search for
possible business acquisitions and other business opportunities. We plan to
continue with that search. During the quarter, we did not identify any likely
candidates for such a transaction.
Since we rescinded the acquisition of Soccer Magic, Inc. on October 6,
2000, we became a dormant shell corporation and did not engage in any ongoing
business activities in the quarter. Also, since we sold all the assets and
liabilities related to our workforce training video business in March, 2000, we
did not have any business activity to resume following the October 6, 2000
rescission of the Soccer Magic, Inc. acquisition agreement. Without the
workforce training video business, the business of Soccer Magic, Inc. or any
other business during the quarter, any
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comparison between the two quarters would be futile and meaningless.
Accordingly, no such comparison is being made.
However, during the quarter ended November 30, 2000, we incurred general
and administrative expenses totaling $2,319 representing primarily stock
transfer agent fees. Consulting and professional fees totaled $7,635. These
expenses were mainly comprised of accounting and auditing fees.
Our current plan of operation is to identify and complete an acquisition,
merger or other transaction that will enhance shareholder value.
DISCONTINUED OPERATIONS
Advanced Knowledge -
As indicated above, on March 23, 2000, following the Soccer Magic
acquisition, we sold all of our assets and liabilities related to its workforce
training video business to Becor, which is a corporation controlled by Buddy
Young, who is a significant shareholder and, at the time of the sale, was a
director and executive officer of the Company. The assets transferred included
all rights to the "Advanced Knowledge" name; the advancedknowledge.com web site;
four workforce-training videos; and all cash, accounts receivable, inventory,
equipment, personal property, and rights under production and distribution
agreements held by the Company as of March 23, 2000. In exchange for the assets,
Becor assumed, and both Becor and Mr. Young agreed to indemnify the Company with
respect to, all of the liabilities incurred or accrued by the Company prior to
March 23, 2000. Soccer Magic -
During the period of March 20, 2000 through August 31, 2000 and continuing
through October 6, 2000, we operated Soccer Magic's business, which business
consisted of designing, constructing, owning and operating multi-recreational
and family oriented facilities, with soccer as their primary venue. However, on
October 6, 2000, the Acquisition Agreement was rescinded and Soccer Magic,
including all of its business operations was severed from the company and we
discontinued operating Soccer Magic's business. Since the rescission, we
commenced operating as a shell corporation without any business operations.
CONTINUED OPERATIONS
Without any operating business or material assets, we anticipate that the
Company will continue to operate as a shell corporation until such time as
management identifies and completes an acquisition of, or merger with an
operating company. No assurances can be given as to our ability to identify and
complete a transaction by any given date or as to the nature of the business or
profitability of the company if a transaction is completed. A proposed
transaction could be subject to significant regulatory, business, financing and
other contingencies and might require shareholder and other approvals.
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We anticipate that the Company will incur expenses of approximately $2,000
per month while operating as a shell corporation.
LIQUIDITY
At November 30, 2000, the Company had no working capital. It is currently
solely dependent on its president and principal shareholder, Buddy Young, to
finance its limited operations. In accordance with a promissory note between the
Company and Mr. Young, he has agreed to loan us up to $2,000 per month through
August 31, 2001. Under the terms of the note, funds advanced to us by Mr. Young
will accrue interest at the rate of eight percent (8%) per annum. The note is
due and payable on September 30, 2001. Additional working capital may be sought
through additional debt or equity private placements, additional notes payable
to banks or related parties (officers, directors or stockholders), or from other
available funding sources at market rates of interest, or a combination of
these. The ability to raise necessary financing will depend on many factors,
including the nature and prospects of any business to be acquired and the
economic and market conditions prevailing at the time financing is sought. No
assurances can be given that any necessary financing can be obtained on terms
favorable to the Company, or at all.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Sporting Magic Inc. is not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On October 6, 2000, the Acquisition Agreement between Soccer Magic and us
was rescinded. Accordingly the 10,000,000 newly issued shares of our common
stock which had been issued to the Soccer Magic shareholders as part of the
Acquisition Agreement were returned to us and cancelled. Immediately, the total
number of shares of our issued and outstanding common stock was reduced from
16,800,000 to 6,800,000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders during the quarter.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K(A)
EXHIBITS
The following documents are included or incorporated by reference as exhibits to
this report:
(27) FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized.
SPORTING MAGIC INC.
(Registrant)
Date: December 26, 2000 /S/ BUDDY YOUNG
-----------------------------------
Buddy Young, President and Chief
Executive Officer (Principal
Executive Officer)
Date: December 26, 2000 /S/ BUDDY YOUNG
-----------------------------------
Buddy Young, Chief Financial
Officer (Principal Financial and
Accounting Officer)
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