SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED November 30,1996 OR ---------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR THE TRANSITION PERIOD FROM __________ TO __________ Commission file number 33-96638-A ---------- U S Amateur Sports, Inc. ---------------------------------------------------- (Exact name of registrant as specified in its charter) Florida 65-0538051 ------------------------------ ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3970 RCA Blvd., Suite 7010 Palm Beach Gardens, Florida 33410 -------------------------------------- -------- (Address of principal executive offices) (Zip Code) (561) 622-4395 -------------------------------------------------- (Registrant's telephone number, including area code) 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 such filing requirements for the past 90 days. Yes X No___ The number of shares outstanding of registrant's classes of common equity, as of November 30,1996 Common Stock, Par Value $.0001, 6,000,000 Shares U S Amateur Sports, Inc. Form lO-QSB November 30, 1996 INDEX PART I FINANCIAL INFORMATION PAGE NO. --------------------- -------- ITEM 1 FINANCIAL STATEMENTS Balance Sheets: November 30, 1996 and May 31, 1996 F2 Statements of Operations: For the Six Month Periods Ended November 30, 1996 and 1995 F3 Statements of Operations: For the Three Month Periods Ended November 30, 1996 and 1995 and the period from June 14, 1995 (Date of Inception) to November 30, 1996 F4 Statements of Cash Flow's: For the Six Month Periods Ended November 30, 1996 and 1995 and the period from June 14, 1995 (Date of Inception) to November 30, 1996 F5 Statement of Stockholders' Equity F6 Notes to Financial Statements F7 ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 3 PART II OTHER INFORMATION ----------------- ITEMS 1-6 4 U S AMATEUR SPORTS, INC. (A Development Stage Company) BALANCE SHEETS November 30, 1996 and May 31, 1996 November 30, 1996 May 31, 1996 ----------------- ------------ ASSETS (Unaudited) (Audited) Cash $ 930 $ 4,587 Accounts and advances receivable 16,967 10,545 Inventories 77,808 84,968 Prepaid expense 9,821 13,821 Property and equipment 60,774 67,342 Rights to technology and associated trademarks 39,546 44,291 Proprietary manuals -- -- Deferred charges 6,719 8,020 _________ _________ TOTAL ASSETS $ 212,565 $ 233,574 ========= ========= LIABILITIES Accounts payable $ 16,211 $ 30,294 Note payable 61,295 61,295 Loans from stockholders 130,750 122,500 Accrued interest 14,967 6,033 _______ _______ TOTAL LIABILITIES 223,223 220,122 --------- --------- STOCKHOLDERS' EQUITY Common stock, $.0001 par value, 50,000,000 shares authorized, 6,000,000 shares issued and outstanding 600 600 Additional paid-in capital 211,740 175,704 Deficit accumulated during the development stage (222,998) (162,852) _______ _______ TOTAL STOCKHOLDERS' EQUITY (10,658) 13,452 -------- ------- TOTAL LIABILITIES _________ _________ & STOCKHOLDERS' EQUITY $ 212,565 $ 233,574 ========= ========= See notes to financial statements. U S AMATEUR SPORTS, IN C. (A Development Stage Company ) STATEMENTS OF OPERATIONS Six-Month Periods Ended November 30, 1996 and 1995 and the Period from June 14, 1994 (Date of Inception) to November 30, 1996 (Unaudited) Six Months Six Months June 14, 1994 Ended Ended (Inception) to November 30, 1996 November 30, 1995 November 30, 1996 ----------------- ----------------- ----------------- SALES $ 30,022 $ -- $ 33,470 Cost of goods sold 14,896 -- 17,215 ______ ________ ______ GROSS PROFIT 15,126 -- 16,255 EXPENSES Freight 1,286 -- 1,286 Research and development -- 267 17,841 Professional fees 22,822 1,250 39,510 Advertising and promotion 2,146 175 6,871 Travel 8,946 -- 23,018 Rent 4,692 2,160 17,470 Office, Telephone and Other Operating Expenses 12,547 941 39,720 Interest 8,934 -- 14,967 Depreciation 7,853 2,756 21,043 Amortization 6,046 44,633 57,527 ______ ______ _______ TOTAL EXPENSES 75,272 52,182 239,253 ________ _________ __ _______ NET LOSS $( 60,146) $( 52,182) $(222,998) ======== ======== ========= See notes to financial statements. U S AMATEUR SPORTS, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS Three-Month Periods Ended November 30, 1996 and 1995 (Unaudited) Three Months Three Months Ended Ended November 30, 1996 November 30, 1995 ----------------- ----------------- SALES $ 15,939 $ -- Cost of goods sold 8,563 -- ______ ______ GROSS PROFIT 7,376 -- EXPENSES Freight 991 -- Professional fees 9,024 -- Advertising and promotion 320 175 Travel 6,527 -- Rent 2,572 1,080 Office, Telephone and Other Operating Expenses 6,871 810 Interest 4,547 -- Depreciation 3,942 1,378 Amortization 3,023 650 ______ ______ TOTAL EXPENSES 37,817 4,093 ______ ______ NET LOSS $(30,441) $(4,093) ====== ====== See notes to financial statements. U S AMATEUR SPORTS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS Six-Month Periods Ended November 30, 1996 and 1995 and the Period from June 14, 1994 (Date of Inception) to November 30, 1996 (Unaudited) Six Months Six Months June 14, 1994 Ended Ended (Inception) to Nov. 30, 1996 Nov. 30, 1995 Nov. 30, 1996 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (60,146) $ (52,182) $ (222,998) Reconciling adjustments: Amortization 6,046 44,633 57,527 Depreciation 7,853 2,756 21,044 (Increase) in receivables (6,422) -- (16,967) Decrease in inventories 7,160 -- -- Decrease(increase) in prepaid expense 4,000 (5,821) (9,821) Increase(decrease) in accounts payable (14,082) 7,461 16,211 Increase in accrued interest 8,934 -- 14,967 NET CASH USED BY ______ ______ ______ OPERATING ACTIVITIES (46,657) (3,153) (140,037) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of inventories -- -- (77,808) Acquisition of property and equipment (1,286) -- (81,818) Purchase of technology and trademarks -- -- (47,455) Development of proprietary manuals -- -- (43,333) Organization costs paid -- -- (13,004) NET CASH USED BY ______ ______ ______ INVESTING ACTIVITIES (1,286) -- (263,418) CASH FLOWS FROM FINANCING ACTIVITIES Capital contributions 36,036 7,600 212,340 Note payable -- -- 61,295 Loans from stockholders 8,250 3,250 130,750 NET CASH PROVIDED BY ______ ______ ______ FINANCING ACTIVITIES 44,286 10,850 404,385 ______ ______ ______ NET INCREASE (DECREASE) IN CASH (3,657) 7,697 930 CASH AT BEGINNING OF PERIOD 4,587 1,110 -- ______ ______ ______ CASH AT END OF PERIOD $ 930 $8,807 $ 930 ====== ====== ====== See notes to financial statements. U S AMATEUR SPORTS, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF STOCKHOLDERS' EQUITY For the Six-Month Period Ended November 30, 1996 and the Period from June 14, 1994 (Date of Inception) to November 30, 1996 (Unaudited) Common Stock ------------ Number of Shares Additional Total Issued and Par Paid-in Accumulated Stockholders' Outstanding Value Capital Deficit Equity ----------- ----- ------- ------- ----------- Balance at inception -- -- -- -- -- Issuance of common stock $ 600 $ .0001 $ 168,104 $ -- $ 168,704 Net loss, year ended May 31, 1995 -- -- -- (105,740) (105,740) _______ ______ ________ ________ ________ Balance, May 31, 1995 600 .0001 168,104 (105,740) 62,964 Capital contributions, year ended May 31, 1996 -- -- 7,600 -- 7,600 Net loss, year ended May 31, 1996 -- -- -- (57,112) (57,112) _______ ______ ________ ________ ________ Balance, May 31, 1996 600 .0001 175,704 (162,852) 13,452 Capital contributions, six months ended November 30, 1996 -- -- 36,036 -- 36,036 Net loss, six months ended November 30, 1996 (60,146) (60,146) _______ ______ ________ ________ ________ Balance, November 30, 1996 $ 600 $ .0001 $ 211,740 $(222,998) $(10,658) ======= ======= ========= ========== ========= See notes to financial statements. U S AMATEUR SPORTS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS November 30, 1996 and 1995 (Unaudited) NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - --------------------- The Accompanying unaudited condensed financial statements have been prepared in accordance with generally accpected accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting priciples for complete financial statements. In the opinion of management, all adjustments (consisting of normal reoccuring accurals) considered necessary for a fair presentation have been included. Operating results for the six month period ended November 30, 1996 are not necessarily indicative of the results that may be expected for the year ending May 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Company's registration statement declared effective by the Securities and Exchange Commission on November 21, 1996. Depreciation - ------------ The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed using the straight-line method for financial reporting purposes and an accelerated method for tax purposes. Amortization - ------------ Proprietary manuals which are considered pre-opening costs have been amortized over a one year period. Rights to technology and associated trademarks are amortized using the straight-line method over five years. Deferred charges also are amortized using the straight-line method over five years. Inventories - ----------- Inventories are stated at the lower of cost or market. See Note C. Adjustments - ----------- These interim financial statements include all adjustments which in the opinion of management are necessary in order to make the financial statements not misleading. All adjustments are of a normal recurring nature. NOTE B: DEVELOPMENT STAGE OPERATIONS The Company was incorporated on June 14, 1994. Activities since inception have included research, feasibility studies, development of business plans and operating procedures, acquisition analysis, raising of capital, promotion, identification of key executives and administrative functions. On January 5, 1996, the Company acquired the assets of Performance Paintball Products, Inc. of Riviera Beach, Florida in exchange for a note in the amount of $101,295. The assets consist of inventory, property and equipment necessary to conduct the business of producing the Viper M1 paintball marker and related accessories. Included in the purchase were exclusive rights to use of the Viper name and related technology. At November 30, 1996, the Viper marketing program, including use of internet web sites, publication of articles in leading paintball industry magazines, demonstrations at trade shows, distribution of manuals, brochures and other marketing materials to dealers and establishment of a telemarketing department, had created demand for the Viper M1 marker that resulted in a backlog of orders. Expansion of the Internet web site for the USA SportsNet business unit and testing of the Saf-T-Net software bundle continued. The initial public offering of the Company's common stock for up to $9,000,000 was made effective by the Securities and Exchange Commission on November 21, 1996. The offering consists of 30,000 units of common stock at $300 per unit, each unit consisting of 50 shares. Sale of the stock by the Company's officers on a best efforts basis was scheduled for an offering period of 180 days, subject to extension for an additional 90 days. NOTE C: INVENTORIES Inventories consist of merchandise acquired for sale by the Company's USA SportsNet business unit in addition to paintball markers and accessories. Inventories are carried at cost which is considered to be less than market value. NOTE D: PROPERTY AND EQUIPMENT The following is a summary of property and equipment recorded in the financial statements at cost less depreciation as of November 30, 1996 and 1995: November 30, 1996 November 30, 1995 ----------------- ----------------- Computer hardware $ 10,542 $ 10,542 Computer software 10,564 9,964 Furniture, fixtures and equipment 10,572 9,887 Tools, dies and fixtures 50,140 -- ______ ______ Total cost 81,818 30,393 Less: accumulated depreciation (21,044) (7,089) ________ ________ Total net property and equipment $ 60,774 $ 23,304 ======== ======== The useful lives assigned to property and equipment to compute depreciation are: Computer hardware 5 years Computer software 5 years Furniture, fixtures and equipment 7 years Tools, dies and fixtures 5 years NOTE E: PROPRIETARY MANUALS Proprietary manuals include detailed programs for development and operation of a multi-sport recreational complex and athletic training and fitness curricula. Amounts paid to outside parties totaling $43,333 for work performed on these manuals have been capitalized. However, since they are considered pre-opening costs, they have been amortized over a one-year period resulting in accumulated amortization of $43,333. NOTE F: DEFERRED CHARGES Deferred charges consist of organization costs in the amount of $13,004 less accumulated amortization of $6,285 and $3,684, at November 30, 1996 and 1995, respectively. NOTE G: ACCOUNTS PAYABLE Accounts payable consist of professional fees and miscellaneous trade payables. NOTE H: NOTE PAYABLE In connection with the asset purchase discussed in NOTE B, the Company recorded a note payable in the initial amount of $101,295. Subsequent payments totaling $40,000 reduced the balance to $61,295 as of November 30, 1996. Interest is accrued on the unpaid balance of the note at the rate of 10%. The balance of principal and interest was initially due on December 31, 1996, but the due date has been extended to June 30, 1997. There are no other payment requirements, and there is no prepayment penalty. NOTE I: LOANS FROM STOCKHOLDERS The Company's stockholders have loaned the Company $130,750 as of November 30, 1996 as bridge financing in anticipation of a public offering of the Company's stock. Of this amount, $38,000 has been loaned in return for an unsecured, non-interest-bearing note with no stated repayment terms, and $92,750 has been loaned under unsecured notes bearing interest at the prime rate plus 4.0% with repayment to be made from proceeds of the public offering. NOTE J: RECOVERABILITY OF ASSETS AND GOING CONCERN The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's continued existence is dependent upon the success of its public offering, its ability to secure other financing, or its ability to generate sufficient cash flows through operations to meet its operating costs and repay current obligations as they come due. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION US Amateur Sports, Inc. is a development stage sports entertainment, Internet marketing and sales company. Its primary mission is to develop sports-related products and services designed for the training, well-being and entertainment of amateur athletes. The Company has established five business units. As of November 30, 1996, two of these business units, USA SportsNet and USA Performance Products, have commenced operations. USA Performance Products has experienced a demand for its first sports product, the Viper M1 paintball marker, that the Company cannot meet without an increase in production by the Company's manufacturing subcontractor. This production increase is dependent on the ability of the subcontractor to obtain outside financing or the ability of US Amateur Sports to pay the balance of a note due to the subcontractor in the amount of $61,295. Initial proceeds of the public offering described below are designated for payment of this note. If the public offering is unsuccessful, the Company will be dependent on securing other outside financing in order to satisfy the note obligation. USA SportsNet offers sports-related merchandise and services through its web site on the Internet. Although the web site is planned for use as a marketing vehicle for a broad array of company- and client-owned products, its primary use to date is to generate sales of the Viper M1 paintball marker. A third business unit, Saf-T-Net, has developed a software package to be marketed to youth sports organizations as a method of raising funds for their activities. As of November 30, 1996, the Company continues to test this product which is designed to allow simplified, protected access to the World Wide Web and enable parents to restrict their children from access to adult content and other undesirable material on the Internet. Whether Saf-T-Net becomes operational depends on the success of the Company's public offering. The remaining business units, USA Fitness & Sports Arena and USA Sportsplex, are only proposed. Future development is dependent on the success of the public offering. Liquidity and Capital Resources - ------------------------------- At November 30, 1996, current assets had declined to $105,526 from a balance of $113,921 at May 31, 1996, the prior fiscal year end. However, accounts payable decreased from $30,294 to $16,211 during the same period. The remaining liabilities of the Company consisted of the note discussed above and loans from stockholders, payment of both of which are designated as uses of proceeds in the Company's public offering. The Company's initial public offering was made effective by the Securities and Exchange Commission on November 21, 1996. The offering is made for up to $9,000,000 and consists of 30,000 units at a price of $300.00 per unit with no minimum offering requirement. The Company is offering the units through its officers on a "best efforts" basis. If the maximum is not sold within the initial 180 day offering period, the Company reserves the right to continue to offer the remaining securities for a period of up to an additional ninety days. The Company may seek additional outside financing if the sale of the stock is not adequate to meet its operational requirements. If only a minimal number of units is sold in the Company's public offering, the Company's continued existence will be dependent on its ability to secure such financing. Results of Operations - --------------------- Comparison of the Six Months Ended November 30, 1996 with the Six Months ------------------------------------------------------------------------ Ended November 30, 1995 ----------------------- Revenue for the period ended November 30, 1996 was $30,022, while no revenue was recorded during the same period of the prior year. This increase is attributable to commencement of sales of the Viper M1 paintball marker. A net loss of $60,146 was posted during the period ended November 30, 1996 compared to a net loss of $52,182 during the prior year period. This increase resulted from the recording of professional fees that were $21,572 higher than in the prior year period, an increase of $8934 in interest expense and an increase of $11,606 in expenses related to opening of a new office in June, 1996. These increased expenses offset a contribution of $15,126 in gross profit resulting from the commencement of sales activity and a decrease in amortization of $38,587. The latter decrease was created by the prior year recording of the amortization over one year of certain pre-opening costs. Comparison of the Three Months Ended November 30, 1996 with the Three --------------------------------------------------------------------- Months Ended November 30, 1995 ------------------------------ Revenue in the three months ended November 30, 1996 was $15,939, while no revenue was recorded during the same period of the prior year. This revenue was derived from sales of the paintball marker. However, the Company's net loss during the current year period was $30,441 compared to $4,093 during the same period of the prior year. Gross profit of $7,376 was offset by increases in professional fees, travel costs related to attendance at paintball trade shows, higher interest expense and costs related to opening of the new office. OTHER INFORMATION PART II ITEM 1. Legal Proceedings. The Company knows of no material pending legal proceedings to which the Company is a party or which any of its business units are the subject and no such proceedings are known to the Company. ITEM 2. Changes in Securities. None ITEM 3. Defaults Upon Senior Securities. None ITEM 4. Submission of Matters to a Vote of Security Holders. None ITEM 5 Other Information. None ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits - none (b) Reports on Form 8-K - none SIGNATURE 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 thereunder duly authorized. (Regiatrant) U S Amateur Sports, Inc. BY(Signature) /s/ Gerald V. Bergman (Date) January 15, 1997 (Name and Title) Gerald V. Bergman, Chief Financial Officer