<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File No.
January 31, 1998 0-5304
CUSTOMER SPORTS, INC.
UTAH 87-0282745
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1023 Reliance Way Del Mar, California 92014
(Address of Principal Executive Offices)
Registrant's telephone number including area code:(619) 481-2400
Former name, former address, and former fiscal 455 Marine View Avenue,
year end, if changed since last report. Suite 260, Del Mar, California 92014
Indicate by checkmark 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 such
filing requirements in the past 90 days:
Yes X No
------- -------
Indicate the number of shares outstanding for each of the issuer's classes
of Common Stock as of the last practical date:
Common Stock, Par Value $.01 Per Share, 16,984,290 Shares Outstanding at
January 31, 1998. <PAGE>
CUSTOMER SPORTS, INC.
TABLE OF CONTENTS
PART I FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Balance Sheets. . . . . . . . . . . . . . . . . . . . . . .3
Statement of Operations . . . . . . . . . . . . . . . . . .4
Statement of Cash Flows . . . . . . . . . . . . . . . . . .5
Note to Financial Statements. . . . . . . . . . . . . . . .6
ITEM 2 MANAGEMENT DISCUSSION AND FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . .7
SIGNATURES . . . . . . . . . . . . . . . . . . . . .8
<PAGE>
Customer Sports, Inc.
Balance Sheet
January 31, 1998 Unaudited & July 31, 1997
<TABLE>
<CAPTION>
January July
31, 1998 31, 1997
------------ ------------
<S> <C> <C>
ASSETS
------
Current Assets
- --------------
Cash $ 200 $ 234
Receivables (Note #3) 3,213 3,213
Inventory 23,218 23,218
------------ ------------
Total Current Assets 26,631 26,665
Other Assets
- ------------
Prepaid Advertising Promotional Services
and Banking Services 220,000 -0-
Refundable Deposit 3,000 3,000
Equipment - Net 7,003 8,213
Oil & Gas Properties
(Successful Efforts Method) 782,901 832,901
Less Accumulated Depreciation ( 709,316) ( 697,450)
------------ ------------
Total Other Assets 303,588 146,664
------------ ------------
TOTAL ASSETS $ 330,219 $ 173,329
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current Liabilities
- -------------------
Cash in Bank Overdraft $ 274 $ -0-
Accounts Payable & Accrued Expenses 156,689 133,415
Notes Payable (Note #5) 178,965 178,965
------------ ------------
Total Current Liabilities 335,928 312,380
Long Term Liabilities
- ---------------------
Notes Payable (Note #5) 225,675 214,925
Stockholders' Equity
- --------------------
Capital Stock, 50,000,000 Shares at $0.01
Par Value; 16,984,290 & 13,766,790
Shares Issued and Outstanding Restated 169,843 137,668
Paid In Capital 6,615,019 6,404,319
Deficit in Retained Earnings ( 7,016,246) ( 6,895,963)
------------ ------------
Total Stockholders' Equity ( 231,384) ( 353,976)
------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 330,219 $ 173,329
============ ============
</TABLE>
See Accompanying Notes
<PAGE>
Customer Sports, Inc.
Statement of Operations (Unaudited)
For the Three Months Period Ended January 31, 1998 & 1997
and the Six Months Ended January 31, 1998 & 1997
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
January January January January
31, 1998 31, 1997 31, 1998 31, 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
- --------
Golf Sales & Fees $ 8,825 $ 6,376 $ 24,317 $ 27,993
---------- ---------- ---------- ----------
Total Revenues 8,825 6,376 24,317 27,993
Cost & Expenses
- ---------------
Cost of Golf Sales 1,050 5,237 2,465 9,815
---------- ---------- ---------- ----------
Gross Profit 7,775 1,139 21,852 18,178
Operating Expenses
- ------------------
General & Administrative
Expenses 34,384 114,463 93,613 173,233
Depreciation & Amortization 7,587 4,553 13,076 10,043
---------- ---------- ---------- ----------
Total Cost & Expenses 41,971 119,016 106,689 183,276
---------- ---------- ---------- ----------
Loss from Operations ( 34,196) ( 117,877) ( 84,837) ( 165,098)
Other Income (Expenses)
- -----------------------
Gain on Sale of Assets -0- -0- 2,550 -0-
Oil & Gas Revenues 12,470 7,674 21,190 17,053
Lease Operating Expenses
Delayed Rentals, Royalties,
& Taxes - Oil Well ( 5,514) -0- ( 9,186) ( 3,096)
Oil Well Impairment ( 25,000) ( 25,000) ( 50,000) ( 50,000)
---------- ---------- ---------- ----------
Total Other Income (Loss) ( 18,044) ( 17,326) ( 35,446) ( 36,043)
---------- ---------- ---------- ----------
Net Loss ($ 52,240) ($135,203) ($120,283) ($201,141)
========== ========== ========== ==========
Net Loss Per Share of
Common Stock ($ .01) ($ .01) ($ .01) ($ .01)
Weighted Average Number
Of Shares Outstanding
During Period 15,384,290 13,766,790 15,384,290 13,766,790
</TABLE>
See Accompanying Notes
<PAGE>
Customer Sports, Inc.
Statement of Cash Flows (Unaudited)
For the Six Month Period Ending January 31, 1998 & 1997
<TABLE>
<CAPTION>
Six Month Period Ending
January January
31, 1998 31, 1997
------------ ------------
<S> <C> <C>
Operating Expenses
- ------------------
Net (Loss) from Operations ($ 120,283) ($ 201,141)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by Operating Activities:
Depreciation 13,076 10,043
Write Off of Oil Well Impairment 50,000 50,000
Non Cash Stock Issued for Services
Rounding Adjustments 16,750 -0-
Changes in Operating Assets & Liabilities
(Increase) Decrease in Receivables -0- -0-
Increase (Decrease) in Accounts Payable 23,274 14,550
------------ ------------
Net Cash Provided (Used) by
Operating Activities ( 17,183) ( 126,548)
Cash Flows From Investing Activities -0- -0-
- ------------------------------------ ------------ ------------
Net Cash Provided (Used) by
Investing Activities -0- -0-
Cash Flows from Financing Activities
- ------------------------------------
Increase in Notes Payable 13,000 50,000
Sale of Common Shares 6,375 75,000
Payment on Notes Payment ( 3,000) -0-
Increase in Cash in Bank Overdraft 274 -0-
Contributed Capital 500 -0-
------------ ------------
Net Cash Provided (Used) by
Financing Activities 17,149 125,000
------------ ------------
Increase (Decrease) in Cash ( 34) ( 1,548)
Cash at Beginning of Period 234 3,248
------------ ------------
Cash at End of Period $ 200 $ 1,700
============ ============
Disclosures from Operating Activities
Interest $ 23,274 $ 14,550
Taxes -0- -0-
</TABLE>
See Accountant's Notes
<PAGE>
Customer Sports, Inc.
Notes to Financial Statements (Unaudited)
ITEM I
NOTE #1 - 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-Q and Rule 10-01 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, adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ending October 1997 are not
necessarily indicative of the results that may be expected for the year ended
July 31, 1998. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended July 31, 1997.
ITEM II
Management's Discussion and Analysis of Financial Condition and Results of
Operation
For the six months period August 1, 1997 to January 31, 1998, operating revenues
were $24,317 compared to $27,993, for the corresponding fiscal year ending
January 31, 1997. Operating cost August 31, 1997 to January 31, 1998, period
were $106,689 compared to $183,276 for the same fiscal period of the preceding
year.
Total operating revenues from operations for the quarter ended January 31, 1998
were $41,971 compared to $6,376 for the quarter ended January 31, 1997. Total
operating expenses for the quarter ended January 31, 1998, were $41,971 compared
to $119,016 for the quarter ended January 31, 1997.
During the period, Registrant signed a sales agreement with Stockton Equities,
Inc., a licensed NASD broker to offer for sale units of the Registrant's new
Private Placement of Securities as the agreement with LaJolla capital had lapsed
and Registrant had no interest in renewal.
Sales of golf equipment and accessories were less than estimates because of lack
of capital to promote the shop and the business. Oil and gas revenues continued
their orderly decline during the period and Registrant wrote down the value of
the oil and gas holdings by an additional $25,000.
The Company entered into modifications of its leases both at its executive
headquarters and at its reality facility. These modifications which commenced
at the end of October called for a rental reduction at the executive office to
$750 monthly for less space and reduced services. Registrant's intent is to
move these offices closer to what will become the core of its operations in
Orange County, California. This will provide reduced commuting time for
operational personnel. The Registrant also entered into a rental abatement and
sales sharing agreement at its retail facility until such time as Stockton
Equities provides the agreed upon capital.
Both agreements were personally guaranteed by Mr. Edmund Irvine, Chairman of the
Registrant.
<PAGE>
PART II
OTHER INFORMATION
Item 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . None
Item 2 Changes in the Rights of the Company's Security Holders . . . . . None
Item 3 Defaults by the Company on its Senior Securities . . . . . . . . . None
Item 4 Results of Votes of Security Holders . . . . . . . . . . . . . . . None
Item 5 Other Information
During the period, Registrant received the resignation of Mr. Alan Margulis from
the Board and appointed two new directors, Mr. Eldon Clawson and Mr. William
Carr, both of whom are shareholders of the Company.
During the period, Registrant modified its rental agreement with its landlord at
the Canal Street facility such that Registrant would pay to the landlord fifty
percent of monthly merchandise sales. In addition, Registrant agreed to rent
office space from its Chairman in an effort to cut overhead at its corporate
offices. This resulted in a rental decline from $2,178 to $750 monthly and
became effective November 1, 1997.
During the period, Registrant canceled it proposed financing agreement with
Stockton Equities and began exploring alternative methods of financing its
expansion.
During the period, the Registrant filed a Form S-8 Registration Statement with
the Securities and Exchange Commission covering the issuance and registration of
three million shares of the Registrant's common stock which were issued to a
third party individual under contracts with the Registrant to provide public
relations, stockholders relations and promotional services. The Registrant
issued 1,000,000 shares of registered common stock which was trading at $0.20
per share at the issue date and 2,000,000 shares of restricted stock for the
services. The Company booked the transactions at the trading value of the
Registered Stock, $200,000 and the par value of the restricted stock, $20,000.
Item 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . None
<PAGE>
SIGNATURES
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 thereunto duly authorized.
Customer Sports, Inc. (Registrant)
/S/ Edmund J. Irvine
Date: May 15, 1998 By:______________________
Edmund J. Irvine, Jr.
President
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000051853
<NAME> CUSTOMER SPORTS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 200
<SECURITIES> 0
<RECEIVABLES> 3,213
<ALLOWANCES> 0
<INVENTORY> 23,218
<CURRENT-ASSETS> 0
<PP&E> 789,904
<DEPRECIATION> (709,316)
<TOTAL-ASSETS> 330,219
<CURRENT-LIABILITIES> 335,928
<BONDS> 0
0
0
<COMMON> 169,843
<OTHER-SE> (401,227)
<TOTAL-LIABILITY-AND-EQUITY> 335,928
<SALES> 24,317
<TOTAL-REVENUES> 24,317
<CGS> 2,465
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 142,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (120,283)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (120,283)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
