SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
FEBRUARY 23, 1998
CALIFORNIA PRO SPORTS, INC.
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(Exact Name of registrant as specified in its charter)
DELAWARE 0-25114 84-121773
- ---------------------------- ------------------------ ----------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) identification number)
1221-B SOUTH BATESVILLE ROAD
GREER, SOUTH CAROLINA 29650
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(Address of principal executive offices) (Zip Code)
(864) 848-5160
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(Registrant's telephone number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
California Pro Sports, Inc. (the "Registrant") currently owes USA Skate
Corporation (its majority owned subsidiary) approximately $893,000 and plans to
satisfy its obligation by issuing California Pro preferred stock to the
subsidiary. The Company also plans to sell its licenses and trademarks to USA
Skate Corporation at fair market value in exchange for a receivable. The Company
has also negotiated with a group of accredited investors, whereby the investors
will purchase the existing shares of common stock of USA Skate Corporation that
are currently owned by the Registrant in exchange for $1,400,000 in cash.
Additionally, the Company plans to issue preferred stock to an unrelated third
party in exchange for assumption of certain trade payables and a note payable
totaling $581,000. Management believes that these transactions will provide the
Company with sufficient working capital to meet its current obligations and
allow the Company to pursue possible merger or other transactions and provide
the Company with approximately $2,200,000 of net tangible assets which will be
sufficient to maintain its continuing Nasdaq SmallCap Market inclusion
requirements.
Separately, The Company is negotiating (through ImaginOn Acquisition
Corp., a newly formed, wholly owned subsidiary of the Company) to merge with a
privately owned development stage enterprise. Under the proposed merger
transaction, there would be an exchange of 100% of the outstanding shares of the
privately owned enterprise for an amount equal to 60% of the outstanding
post-merger common stock of the Company (without giving effect to the possible
exercise of certain currently outstanding options and warrants of the Company).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL STATEMENTS
Included with this report are the following pro forma financial
statements:
(1) The Registrant's unaudited pro forma condensed consolidated
balance sheet as of December 31, 1997, giving effect to the
transactions (other than the proposed merger) as if they had
occurred on December 31, 1997.
(c) EXHIBITS
Exhibit
Number Description
------- -----------
None
SIGNATURES
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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 hereunto duly authorized.
CALIFORNIA PRO SPORTS, INC.
Date: February 24, 1998 By /s/ Barry S. Hollander
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Chief Financial Officer
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CALIFORNIA PRO SPORTS, INC.
AND SUBSIDIARIES
UNAUDITED PRO FORMA
CONSOLIDATED BALANCE SHEET
California Pro Sports, Inc. (the "Company") has negotiated with a group
of accredited investors whereby the investors will purchase existing shares of
USA Skate Corporation ("USA Skate") common shares that are currently owned by
the Company in exchange for approximately $1,400,000 in cash. The Company
currently owes USA Skate approximately $893,000 and plans to satisfy its
obligation by issuing California Pro preferred stock to the subsidiary. The
Company also plans to transfer its licenses and trademarks to USA Skate
Corporation at fair market value, based on an appraisal (which management
believes approximates book value), in exchange for a receivable. Additionally,
the Company plans to issue preferred stock to an unrelated third party in
exchange for assumption of certain trade payables and a note payable for the
Company totaling $581,000. The preferred stock issued will automatically convert
to common stock upon approval by the shareholders of the Company to increase the
number of authorized common shares that the Company is allowed to issue.
The accompanying unaudited pro forma condensed consolidated balance sheet as of
December 31, 1997 gives effect to these transactions as if they had occurred on
December 31, 1997.
The unaudited pro forma condensed consolidated balance sheet should be read in
conjunction with the historical financial statements of the Company. The
unaudited pro forma consolidated balance sheet does not purport to be indicative
of the financial position of the company had the sale occurred on December 31,
1997.
<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
California Pro
Sports, Inc. and Pro Forma Pro Forma
ASSETS Subsidiaries Adjustments Consolidated
------ ---------------- ----------- ------------
(unaudited)
<S> <C> <C> <C>
Current Assets:
Cash $ 16,952 (2) $ 1,397,018 $ 1,413,970
Accounts Receivable 528,795 (2) (297,525) 231,270
Escrow Receivable 997,127 (2) (997,127)
Due to/from affiliated company 400,000 (1,2) (400,000)
Prepaid & other 218,207 (2) (190,066) 28,141
------------ ------------ ------------
Total current assets 2,161,081 (487,700) 1,673,381
------------ ------------ ------------
Notes Receivable (4) 490,909 490,909
Property, plant and equipment, net 153,387 0 153,387
Licenses and trademarks, net 490,909 (4) (490,909)
Goodwill and other intangible
assets, net 576,616 (2) (576,616)
------------ ------------ ------------
Total assets $ 3,381,993 $ (1,064,316) $ 2,317,677
============ ============ ============
Current liabilities:
Notes payable:
Convertible promissory notes $ 1,074,900 (2) $ (1,074,900) $
Other 726,172 (2,3) (726,172)
Officers/shareholders 100 100
Accounts payable and accrued exp.
Accounts payable, trade 568,225 (2,3) (492,830) 75,395
------------ ------------ ------------
Total current liabilities 2,369,397 (2,293,902) 75,495
------------ ------------ ------------
Deferred income taxes 60,149 (2) (60,149)
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Minority Interest 380,125 (2) (380,125)
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Shareholders' equity 572,322 (1,2,3) 1,669,860 2,242,182
------------ ------------ ------------
Total liabilities
& shareholders' equity $ 3,381,993 $ (1,064,316) $ 2,317,677
============ ============ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
<PAGE>
CALIFORNIA PRO SPORTS, INC. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED PRO FORMA
BALANCE SHEET
DECEMBER 31, 1997
(1) To record issuance of preferred stock of $893,640 in consideration for
forgiveness of debt to former subsidiary.
(2) To record the cash of $1,400,000 received for the sale of 1,842,000 shares
of USA Skate Corporation common stock owned by the Company resulting in the
elimination of minority interest, goodwill and previously consolidated
assets and liabilities related to USA Skate Corporation resulting in a gain
of approximately $1,200,000.
(3) To record issuance of preferred stock to an unrelated third party in
exchange for assumption of certain trade payables and a note payable for
the Company.
(4) To record the transfer of licenses and trademarks to USA Skate Corporation
in exchange for a receivable.
