U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2001
Commission file number 000-27987
---------
CAVALCADE OF SPORTS MEDIA, INC
------------------------------
(Name of Small Business Issuer in its charter)
NEVADA 33-0766069
------ ----------
(State of jurisdiction of incorporation) (IRS Employer I.D. Number)
12268 Via Latina Del Mar, CA 92914
------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number (858) 481-2207
--------------
Check whether the registrant (1) has filed all reports required to be filed
by Sections 13 or 15(d) of the Securities Exchange Act during the past 12 months
(or for such shorter period as 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
---- ----
Indicate the number of shares outstanding of each of the issuer's class of
common stock. THE REGISTRANT HAD 11,358,124 SHARES OF ITS COMMON STOCK
OUTSTANDING AS OF AUGUST 17, 2001.
Cavalcade of Sports Media, Inc
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending June 30, 2001
Table of Contents
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets:
June 30, 2001 and December 31, 2000
Condensed Consolidated Statement of Losses:
Three Months and Six Months Ended June 30, 2001 and 2000 and
The Period from July 29, 1997 (Date of Inception) to
June 30, 2001
Condensed Consolidated Statement of Cash Flows:
Six Months Ended June 30, 2001 and 2000 and
The Period from July 29, 1997 (Date of Inception) to
June 30, 2001
Condensed Consolidated Statement of Deficiency in
Stockholder's Equity for the period July 29, 1997 (Date of
Inception) to June 30, 2001
Notes to Condensed Consolidated Financial Statements:
June 30, 2001
Item 2. Management's Discussion and Analysis
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
Part I Financial Information
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
Condensed Consolidated Balance Sheet
JUNE 30, 2001 DECEMBER 31, 2000
------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and equivalents $ 6,310 $ 59,840
Advances 25,000 5,000
---------- ----------
Total current assets 31,310 64,840
Property, Plant & Equipment
Office Furniture, net 1,520 -
Other assets:
Film Library, at cost (Note B) 528,577 392,752
Goodwill, net of amortization of $ 147,139 at June 2001 and $98,093
at December 31, 2000 343,328 392,374
---------- ----------
Total Other Assets 871,905 785,126
$ 904,735 $ 849,966
========== =========
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses $ 300,882 $ 211,895
Other Accrued Liabilities 380,000 380,000
Note Payable (Note C) 832,000 557,000
Advances from Officers (Note E) 192,454 317,453
---------- ----------
Total Current Liabilities 1,705,336 1,466,348
Deficiency in Stockholders' equity (Note D):
Preferred stock, par value, $0.001 per share; 10,000,000 shares authorized;
none issued at June 30, 2001 and December 31, 2000
- -
Common stock, par value, $0.001 per share; 100,000,000 shares authorized ;
11,283,124 and 10,863,124 issued at June 30, 2001 and December 31, 2000,
respectively
11,283 10,863
Additional paid-in-capital 1,408,121 880,541
Deficit accumulated during development stage (2,220,005) (1,507,786)
---------- ----------
Deficiency in Stockholders' Equity (800,601) (616,382)
---------- ----------
$ 904,735 $ 849,966
========== ==========
See accompanying footnotes to the unaudited condensed consolidated financial
statements
3
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
Condensed Consolidated Statement of Losses
For the Period
July 29, 1997 (Date
Three Months Ended June 30, Six Month Ended June 30, of Inception) to
2001 2000 2001 2000 June 30, 2001
---- ---- ---- ---- --------------
Revenues: $ - $ - $ - $ - $ -
Costs and Expenses:
Selling, general and administrative
287,976 256,822 617,356 348,618 1,726,164
Interest expense 29,874 - 45,647 19 77,497
Amortization and depreciation expense
24,693 24,524 49,216 49,047 147,309
------------ ------------ ------------ ------------ ------------
Total Costs and Expenses 342,543 281,258 712,219 427,755 1,950,970
------------ ------------ ------------ ------------ ------------
Loss from Operations (342,543) (281,258) (712,219) (397,683) (1,950,970)
------------ ------------ ------------ ------------ ------------
Other Income:
Miscellaneous Income - - - - 4,766
Interest Income - 77 - 130 130
------------ ------------ ------------ ------------ ------------
- 77 - 130 4,896
------------ ------------ ------------ ------------ ------------
Loss from continuing operations, before
income taxes and discontinued operations (342,543) (281,181) (712,219) (397,553) (1,946,074)
------------ ------------ ------------ ------------ ------------
Income (taxes) benefit
Loss from continuing operations, before
discontinued operations (342,543) (281,181) (712,219) (397,553) (1,946,074)
------------ ------------ ------------ ------------ ------------
Loss from discontinued operations - 53,747 - 30,072 (352,905)
Income (loss) on disposal of discontinued
operations, net
- - - - 78,974
Net Loss $ (342,543) $ (227,434) $ (712,219) $ (367,481) $ (2,220,005)
------------ ------------ ------------ ------------ ------------
Income (loss) per common share (basic and
assuming dilution) $ (0.03) $ (0.02) $ (0.06) $ (0.03) $ (0.30)
------------ ------------ ------------ ------------ ------------
Continuing Operations $ (0.03) $ (0.03) $ (0.06) $ (0.04) $ (0.26)
Discontinued Operations $ - $ 0.01 $ - $ - $ (0.05)
Weighted average shares outstanding
11,220,902 10,735,270 11,140,902 10,694,768 7,343,839
See accompanying footnotes to the unaudited consolidated financial statements
4
CAVALCADE OF SPORTS MEDIA, INC
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
FOR THE PERIOD JULY 29,1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2001
Additional
Preferred Common Stock Paid in
Shares Stock Amount Shares Amount Capital
---------------------------------------------------------------------
Shares issued at date of inception (July 29, 1997) to
founders in exchange for contribution of organization
costs valued @ $.91 per shares, as restated - - 12,657 12 11,541
Net Loss - - - - -
---- ---- ---- ---- ----
Balance at December 31, 1997 as restated - - 12,657 12 11,541
Shares issued January 1, 1998 in exhange for Gemma
Global, Inc., valued @ $.001 per shares, as restated
(Note D) - - 10 - -
Shares issued December 22, 1998 to consultants in
exchange for services valued @ $.002 per shares (Note D) - - 1,112,500 1,113 889
Shares issued December 22, 1998 to President in exchange
for debt valued @ $.002 per shares (Note D) - - 8,333,333 8,333 6,667
Operating expenses incurred by principal shareholder - - - - 8,925
Net Loss - - - - -
-------- ---- ----------- ------ --------
Balance at December 31, 1998 - - 9,458,500 9,458 28,022
Shares issued on April 13, 1999 for cash in connection
with private placement @ $1.00 per share (Note D) - - 4,000 4 3,996
Shares issued on April 13, 1999 to consultants in
exchange for services valued @ $1.00per share (Note D) - - 180,000 180 179,820
Shares issued May 28, 1999 in exchange ofr services
valued @ $.001 per share (Note D) 855,000 855 - - -
Contribution of shares to trasuery on September 30, 1999
by principal shareholder (Note D) - - (2,821,440) - 2,821
Shares issued on November 12, 1999 for cash in connection
with private placement @ $.10 per share (Note D) - - 1,000,000 1,000 99,000
Release of shares held in treasury and acquisition of
Cavalcade of Sports Network, Inc on December 16, 1999
(Note D) - - 2,821,440 - 279,323
Operating expenses incurred by principal shareholder - - - - 6,000
Net Loss - - - - -
-------- ---- ----------- ------ --------
Balance at December 31, 1999 855,000 855 10,642,500 10,642 598,982
Deficfit
Accumulated
During
Development Treasury
Stage Stock Total
---------------------------------------
Shares issued at date of inception (July 29, 1997) to
founders in exchange for contribution of organization
costs valued @ $.91 per shares, as restated - - 11,553
Net Loss - - -
--------- ---- ---------
Balance at December 31, 1997 as restated - - 11,553
Shares issued January 1, 1998 in exhange for Gemma
Global, Inc., valued @ $.001 per shares, as restated
(Note D) - - -
Shares issued December 22, 1998 to consultants in
exchange for services valued @ $.002 per shares (Note D) - - 2,002
Shares issued December 22, 1998 to President in exchange
for debt valued @ $.002 per shares (Note D) - - 15,000
Operating expenses incurred by principal shareholder - - 8,925
Net Loss (212,773) - (212,773)
--------- ---- ---------
Balance at December 31, 1998 (212,773) - (175,293)
Shares issued on April 13, 1999 for cash in connection
with private placement @ $1.00 per share (Note D) - - 4,000
Shares issued on April 13, 1999 to consultants in
exchange for services valued @ $1.00per share (Note D) - - 180,000
Shares issued May 28, 1999 in exchange for services
valued @ $.001 per share (Note D) - - 855
Contribution of shares to trasuery on September 30, 1999
by principal shareholder (Note D) - (2,821) -
Shares issued on November 12, 1999 for cash in connection
with private placement @ $.10 per share (Note D) - - 100,000
Release of shares held in treasury and acquisition of
Cavalcade of Sports Network, Inc on December 16, 1999
(Note D) - 2,821 282,144
Operating expenses incurred by principal shareholder - - 6,000
Net Loss (438,045) - (438,045)
--------- ---- ---------
Balance at December 31, 1999 (650,818) - (40,339)
See accompanying footnotes to the unaudited consolidated financial statements
5
CAVALCADE OF SPORTS MEDIA, INC
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
FOR THE PERIOD JULY 29,1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2001
Additional
Preferred Common Paid in
Shares Stock Amount Shares Stock Amount Capital
-------------------------------------------------------------------
Balance Forward 855,000 855 10,642,500 10,642 598,982
Shares issued in March 2000 in exchange for debt @ $1.25
per share - - 61,798 62 77,185
Shares issued March 28, 2000 in exchange for services @
$1.25 per share - - 2,100 2 2,623
Shares issued April 27, 2000 in exchange for services @
$1.25 per share - - 7,500 8 9,367
Shares issued May 8, 2000 in exchange for services @
$1.25 per share - - 12,500 13 15,612
Shares issued May 17, 2000 in exchange for services @
1.25 per share - - 25,000 25 31,225
Shares issued June 2000 in exchange for debt @ $1.25 per
share - - 4,000 4 4,996
Shares issued June 2000 in exchange for services @ $1.25
per share - - 17,666 18 22,065
Shares issued July 25, 2000 in exchange for debt @ $1.25
per share - - 1,000 1 1,249
Shares issued August 2000, in exchange for services @
$1.25 per share - - 65,000 65 81,185
Conversion of preferred stock on September 18, 2000 (Note
D) (855,000) (855) - - -
Shares issued October 13, 2000, in exchange for services
@ $1.25 per share - - 1,060 1 1,324
Shares issued October 30, 2000 in exchange for services @
$1.25 per share - - 20,000 20 24,980
Shares issued November 9, 2000 in exchange for services @
$1.25 per share - - 2,500 2 3,123
Shares issued December 1, 2000 in exchange for services @
$1.25 per share - - 500 - 625
Operating expenses incurred by principal shareholder - - - - 6,000
Net Loss - - - - -
-------- ------- ------- ------- ------
Balance at December 31, 2000 - - 10,863,124 10,863 880,541
Deficfit
Accumulated
During
Development Treasury
Stage Stock Total
-----------------------------------------
Balance Forward (650,818) - (40,339)
Shares issued in March 2000 in exchange for debt @ $1.25
per share - - 77,247
Shares issued March 28, 2000 in exchange for services @
$1.25 per share - - 2,625
Shares issued April 27, 2000 in exchange for services @
$1.25 per share - - 9,375
Shares issued May 8, 2000 in exchange for services @
$1.25 per share - - 15,625
Shares issued May 17, 2000 in exchange for services @
1.25 per share - - 31,250
Shares issued June 2000 in exchange for debt @ $1.25 per
share - - 5,000
Shares issued June 2000 in exchange for services @ $1.25
per share - - 22,083
Shares issued July 25, 2000 in exchange for debt @ $1.25
per share - - 1,250
Shares issued August 2000, in exchange for services @
$1.25 per share - - 81,250
Conversion of preferred stock on September 18, 2000 (Note
D) - - (855)
Shares issued October 13, 2000, in exchange for services
@ $1.25 per share - - 1,325
Shares issued October 30, 2000 in exchange for services @
$1.25 per share - - 25,000
Shares issued November 9, 2000 in exchange for services @
$1.25 per share - - 3,125
Shares issued December 1, 2000 in exchange for services @
$1.25 per share - - 625
Operating expenses incurred by principal shareholder - - 6,000
Net Loss (856,968) - (856,968)
--------- ------- ---------
Balance at December 31, 2000 (1,507,786) - (616,382)
See accompanying footnotes to the unaudited consolidated financial statements
6
CAVALCADE OF SPORTS MEDIA, INC
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIENCY)
FOR THE PERIOD JULY 29,1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2001
Additional
Preferred Stock Common Stock Paid in
Shares Amount Shares Amount Capital
-------------------------------------------------------------------------
Balance Forward - - 10,863,124 10,863 880,541
Shares issued in January 2001, in exchange for services @
$1.25 per share - - 200,000 200 249,800
Shares issued in April 2001, in exchange for services @
$1.25 per share - - 120,000 120 149,880
Shares issued in April 2001, in exchange for advances
from officers @ $1.25 per share - - 100,000 100 124,900
Operating expenses incurred by principal shareholder - - - - 3,000
Net loss for period ended June 30, 2001 - - - - -
-------- ---------- ------------- --------- ------------
Balance at June 30, 2001 $ - $ - $11,283,124 $ 11,283 $ 1,408,121
======== ========== ============ ========== ============
Deficfit
Accumulated
During
Development Treasury
Stage Stock Total
---------------------------------------------
Balance Forward
(1,507,786) - (616,382)
Shares issued in January 2001, in exchange for services @
$1.25 per share - - 250,000
Shares issued in April 2001, in exchange for services @
$1.25 per share - - 150,000
Shares issued in April 2001, in exchange for advances
from officers @ $1.25 per share - - 125,000
Operating expenses incurred by principal shareholder - - 3,000
Net loss for period ended June 30, 2001 (712,219) - (712,219)
------------ ----------- -----------
Balance at June 30, 2001 $(2,220,005) $ - $ (800,601)
============ =========== ===========
See accompanying footnotes to the unaudited consolidated financial statements
7
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
Condensed Consolidated Statement of Cash Flows
For the Period July 29,
Six Months Ended June 30, 1997(Date of Inception) to
2001 2000 June 30, 2001
---- ---- ------------------
Cash flows from operating activities:
Net loss for the period from continuing operations $(712,219) $(427,625) $ (1,951,074)
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Loss from discontinued operations - - (352,905)
Amortization 49,216 49,047 147,309
Organization and acquisition costs expensed
- - 11,553
Common Stock issued in exchange for Services
400,000 85,958 785,838
Disposal of business segment, net - - 78,974
Common Stock issued in exchange for Debt - 77,248 108,498
Preferred Stock issued in exchange for Services
- - 855
Conversion of preferred stock - - (855)
Write off of acquired asset - - 5,000
Expenses paid by principal shareholder 3,000 - 23,925
Expenses paid by shareholders in exchange for common stock
- - 25,000
(Increase) decrease in:
Advances (20,000) - (20,000)
Increase (decrease) in:
Accounts payable and accrued expenses, net 88,988 (77,248) 71,302
---------- --------- -----------
Net cash used in operating activities (191,015) (292,620) (1,066,580)
Cash flows used in investing activities:
Acquisition of Film Library and footage production costs
(135,825) 13,328 (189,080)
Acquisition of Office Furniture (1,690) - (1,690)
Cash acquired in connection with acquisition
- - 35,207
---------- --------- -----------
Net cash used in investing activities (137,515) 13,328 (155,563)
Cash flows (used in)/provided by financing activities:
Advances from officer - 31,625 317,453
Proceeds from issuance of Notes Payable
275,000 217,000 832,000
Proceeds from issuance of Common Stock - - 79,000
---------- --------- -----------
Net cash used in financing activities 275,000 248,625 1,228,453
Net increase (decrease) in cash and equivalents
(53,530) (30,667) 6,310
Cash and cash equivalents at January 1 59,840 37,795 -
---------- --------- -----------
Cash and cash equivalents at June 30 $ 6,310 $ 7,128 $ 6,310
========== ======== ==========
See accompanying footnotes to the unaudited consolidated financial statements
8
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
Condensed Consolidated Statement of Cash Flows
Supplemental Information:
Cash paid during the period for interest $ - $ - $ -
Cash paid during the period for taxes - - -
Common Stock issued for services 400,000 88,958 785,838
Preferred Stock issued in exchange for services
- - 855
Conversion of preferred stock - - (855)
Common Stock issued in exchange for debt 125,000 77,248 223,498
Acquisition of Treasury Stock - - (2,821)
Acquisition:
Assets acquired - - 379,704
Goodwill - - 490,467
Accumulated deficit - - -
Liabilities assumed - - (588,027)
Common Stock Issued - - (282,144)
------- ------ --------
Net Cash paid for Acquisition $ - $ - $ -
======= ====== ========
Liabilities disposed of in disposition of business, net
$ - $ - $ 79,374
Net cash received in disposition of business
$ - $ - $ -
======= ====== ========
See accompanying footnotes to the unaudited consolidated financial statements
9
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE A-SUMMARY OF ACCOUNTING POLICIES
GENERAL
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Rule 310(b) of Regulation S-B, and
therefore, do not include all the information necessary for a fair presentation
of financial position, results of operations and cash flows in conformity with
generally accepted accounting principles.
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 six month period ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's SEC Form 10-SB, as amended.
BUSINESS AND BASIS OF PRESENTATION
Cavalcade of Sports Media, Inc. (the "Company") is in the development stage and
its efforts have been principally devoted to developing a sports entertainment
business, which will provide 24 hours per day broadcasting from a library of
nostalgic sports films and footage to paid subscribers. To date the Company has
generated no sales revenues, has incurred expenses, and has sustained losses.
Consequently, its operations are subject to all risks inherent in the
establishment of a new business enterprise. For the period from inception
through June 30, 2001, the Company has accumulated losses of $ 2,220,005.
The consolidated financial statements include the accounts of Cavalcade of
Sports Media, Inc. and its wholly-owned subsidiaries, Cavalcade of Sports
Network, Inc. and Global Group International, Inc. Significant inter-company
transactions have been eliminated in consolidation.
REVENUE RECOGNITION
The Company follows a policy of recognizing subscriber fee income as revenue in
the period the service is provided.
10
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE A-SUMMARY OF ACCOUNTING POLICIES
FILM LIBRARY
The inventories of the Company's nostalgic sports film and footage ("Film
Library") are stated at the lower of unamortized acquisition cost or net
realizable value. Cost principally consists of direct acquisition costs of the
films and footage of previously televised programs and events, post-production
costs, and production overhead. The Company's Film Library is amortized on a
straight-line basis over a period not to exceed five years starting once footage
is ready for distribution. The straight line method of amortization is also used
for tax purposes. The unamortized costs of the Film Library are classified as
noncurrent assets.
ADVERTISING
The Company follows the policy of charging the costs of advertising to expenses
incurred.
INCOME TAXES
Income taxes are provided based on the liability method for financial reporting
purposes in accordance with the provisions of Statements of Financial Standards
No. 109, "Accounting for Income Taxes". Under this method deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be removed or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of operations in the period
that includes the enactment date.
CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity date of three months or less
to be cash equivalents.
11
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE A-SUMMARY OF ACCOUNTING POLICIES
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of the purchase price over the fair value of
assets acquired by the company and is being amortized on a straight-line basis
over a period not exceeding five years. Should events or circumstances occur
subsequent to the acquisition of a business which bring into question the
realizable value or impairment of the related goodwill, the Company will
evaluate the remaining useful life and balance of goodwill and make adjustments,
if required. The Company's principal consideration in determining an impairment
includes the strategic benefit to the Company of the particular asset or assets
as measured by discounted current and expected future operating income of that
specified group of assets and expected discounted future cash flows. Should
impairment be identified, a loss would be reported to the extent that the
carrying value of the related goodwill exceeds the fair value of that goodwill
based upon the expected discounted future cash flows
LONG-LIVED ASSETS
The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121). The Statement requires that long-lived assets and certain
identifiable intangibles held and used by the Company be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. SFAS No. 121 also requires assets to be
disposed of be reported at the lower of the carrying amount or the fair value
less costs to sell.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly actual results
could differ from those estimates.
CONCENTRATIONS OF CREDIT RISK
Financial instruments and related items, which potentially subject the Company
to concentrations of credit risk, consist primarily of cash, cash equivalents
and trade receivables. The Company places its cash and temporary cash
investments with high credit quality institutions. At times, such investments
may be in excess of the FDIC insurance limit.
12
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE A-SUMMARY OF ACCOUNTING POLICIES
STOCK BASED COMPENSATION
The Company accounts for stock transactions in accordance with APB Opinion 25,
"Accounting for Stock Issued to Employees." In accordance with statement of
Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation," the Company has adopted the proforma disclosure requirements.
LIQUIDITY
Cavalcade of Sports Media, Inc. (the "Company") is in the development stage and
its efforts have been principally devoted to developing a sports entertainment
business, which will provide 24 hours per day broadcasting from a library of
nostalgic sports films and footage to paid subscribers. To date the Company has
generated no sales revenues, has incurred expenses, and has sustained losses.
For the period from inception through June 30, 2001, the Company has accumulated
losses of $ 2,220,005. The Company's current liabilities exceeded its current
assets by $ 1,674,026 as of June 30, 2001. Consequently, its operations are
subject to all risks inherent in the establishment of a new business enterprise.
COMPREHENSIVE INCOME
The Company does not have any items of comprehensive income in any of the
periods presented.
SEGMENT INFORMATION
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131"). SFAS establishes standards for reporting information regarding operating
segments in annual financial statements and requires selected information for
those segments to be presented in interim financial reports issued to
stockholders. SFAS 131 also establishes standards for related disclosures about
products and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial information
is available for evaluation by the chief operating decision maker, or decision
making group, in making decisions how to allocate resources and assess
performance. The information disclosed herein, materially represents all of the
financial information related to the Company's principal operating segments.
13
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE A-SUMMARY OF ACCOUNTING POLICIES
NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic earnings per share has
been calculated based upon the weighted average number of common shares
outstanding. Stock options and warrants have been excluded as common stock
equivalents in the diluted earnings per share because they are either
antidilutive, or their effect is not material.
NOTE B- FILM LIBRARY
The Company's Film Library is comprised of nostalgic sports films and footage
which resides in the public domain. The Company does not have enforceable legal
rights to control the access and distribution of the content of these films and
footage.
The Company's Film Library at June 30, 2001 and December 31, 2000 consists of
the following:
JUNE 30, 2001 DECEMBER 31, 2000
------------- -----------------
Nostalgic sports films and footage acquisition and direct
production costs
$ 528,577 $ 392,752
========= ==========
Post production costs capitalized during the six months ended June 30, 2001 were
$132,325.
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE C- NOTES PAYABLE
Notes payable at June 30, 2001 and December 31, 2000 are as follows:
JUNE 30, 2001 DECEMBER 31, 2000
------------- -----------------
12 % convertible subordinated payable, unsecured and due December 31, 2000;
Noteholder has the option to convert unpaid note principal together with accrued
and unpaid interest to the Company's common stock thirty (30) days following the
effectiveness of the registration of the Company's common stock under the
Securities Act of 1933 at a rate of $1.25 per share. In the event the unpaid
principal amount of the notes, together with any accrued and unpaid interest,are
not converted , or paid in full by December 31, 2000 then interest accrues at
18% per annum until paid in full. The Company is in default under the terms of
the Note Agreements (See Note D) $ 682,000 $ 457,000
18% note payable, unsecured; principal together with accrued interest due
February 2001; guaranteed by the Company's President 150,000 100,000
832,000 557,000
Less: current portion (832,000) (557,000)
---------- ----------
$ - $ -
========== ==========
NOTE D-CAPITAL STOCK
The Company has authorized 100,000,000 shares of common stock , with a par value
of $.001 per share. The Company has also authorized 10,000,000 shares of
preferred stock, with a par value of $.001 per share.
The Company's predecessor was Tren Property Corp., an inactive company with no
significant operations incorporated under the laws of the State of Delaware in
July 1997. The Company issued 11,553,100 shares of common stock to the initial
shareholders in exchange for initial organization costs. The stock issued was
valued at $.001 per share, which represents the fair value of the services
received. In February 1998, Tren Property Corp. changed its name to Gemma
Global, Inc. ("Gemma").
14
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE D-CAPITAL STOCK (continued)
In April 1998, the shareholders of Gemma exchanged all of their outstanding
shares on a share for share basis for shares of the common stock of Gemma
Global, Inc., an inactive company with no significant operations, organized
under the laws of the State of Nevada ("Company"). The Company's sole asset was
a License Agreement granting the Company the right to manufacture and distribute
women's shoes. The Company issued 10,000 shares of common stock to the
shareholders of Gemma Global, Inc. in exchange for the License Agreement. The
stock issued was valued at $.001 per share, which represents the fair value of
the License Agreement.
In December 1998, the Company's Board of Directors approved a one (1) share for
one thousand (1,000) share reverse stock split. The accompanying financial
statements have been restated to give effect for the reverse split.
In December 1998, the Company issued 1,112,500 shares of common stock to
non-employees in exchange for legal and financial advisory services rendered to
the Company. The stock issued was valued at approximately $.02 per share, which
represents the fair value of the services received, which did not differ
materially from the value of the stock issued.
In December 1998, the Company issued 8,333,333 shares of common stock in
exchange for a $ 15,000 loan payable to the Company's principal shareholder and
Chief Executive Officer. The Shareholder subsequently issued an aggregate of
2,625,000 of the shares of stock to certain consultants deemed essential to the
continuance of the Company's principal business at the time, that of developing
a shoe manufacturing, sales and distribution enterprise. In accordance with
Staff Accounting Bulletin Topic 5-T, the Company accounted for the consulting
expense as a current expense and a corresponding capital contribution. The stock
issued was valued at $ 2,925, or approximately $.0012 per share, which
represents the fair value of the stock issued.
In March 1999, the Company was renamed Pioneer 2000, Inc. In December, 1999 the
Company was renamed Cavalcade of Sports Media, Inc.
In April 1999, the Company issued 4,000 shares of common stock in exchange for $
4,000 in connection with a private placement memorandum.
In April 1999, the Company issued 180,000 shares of common stock to a
non-employee in exchange for financial advisory services rendered to the
Company. The stock issued was valued at $1.00 per share, which represents the
fair value of the stock issued, which did not differ materially from the value
of the services received.
15
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE D-CAPITAL STOCK (continued)
In May 1999, the Company authorized and issued a series of 855,000 shares of the
Company's preferred stock as convertible preferred stock ("1999 Global Group
Series") to the Company's management and advisors who had been unsuccessful in
developing the Company's shoe apparel business segment in exchange for those
individuals continuing to devote their services to developing the shoe business
segment.
At the time of the issuance of the preferred shares, the Company's shoe apparel
segment had no operations, liabilities in excess of its assets and was in
default under the terms of its License Agreements. The stock issued was valued
at approximately $.001 per share, which represents the fair value of the stock
issued, which did not differ materially from the value of the services rendered.
The holders of the convertible preferred stock shall only be entitled to receive
dividends from earnings of the Company's wholly-owned subsidiary, Global Group
International, Inc. Global International, Inc.'s principal asset is the License
Agreement to manufacture and distribute women's' shoes. Such dividends shall be
equal to ten percent (10%) of the subsidiary's earnings on a quarterly basis.
Earnings are defined as net income after taxes. Any earned, but unpaid dividends
shall be accrued. In the event of liquidation, dissolution, or winding up of the
Company, the holders of the 1999 Global Group Series convertible preferred stock
shall be entitled to receive out of assets of the Company, solely the common
stock of Global Group, International, Inc.
In December 1999, the Company issued 1,000,000 shares of common stock in
exchange for $75,000 and payment of $ 25,000 of Company expenses, in connection
with a private placement to accredited investors.
In connection with the acquisition of Cavalcade of Sports Network, Inc., the
Company assumed a $ 380,000 liability representing advances by private investors
to Cavalcade of Sports Network, Inc. Subject to the Company registering its
common stock, the Company has agreed to offer shares of the Company's common
stock to the investors in exchange for the advances based upon the price per
share of the registration.
During the year ended December 31, 2000, the Company issued 66,798 shares of
common stock in exchange for debts assumed by the Company in connection with its
acquisition of Cavalcade of Sports Network, Inc. The Company valued the shares
issued at $1.25 per share, which approximated the fair value of the shares at
the dates of issuance.
16
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE D-CAPITAL STOCK (continued)
During the year ended December 31, 2000, the Company issued 153,826 shares of
the Company's common stock to consultants in exchange for services provided to
the Company. The Company valued the shares issued at $1.25 per share, which
approximated the fair value of the shares issued during the periods the services
were rendered. The compensation cost of $192,282 was charged to income during
the year ended December 31, 2000.
In January 2001, the Company issued 200,000 shares of the Company's common stock
to consultants in exchange for services provided to the Company. The Company
valued the shares issued at $1.25 per share, which approximated the fair value
of the shares issued during the periods the services were rendered. The
compensation costs of $250,000 was charged to income during the period ended
March 31, 2001.
In April 2001, the Company issued 220,000 shares of the Company's common stock.
The shares are comprised of 120,000 shares issued to consultants in exchange for
services rendered to the company, and 100,000 shares issued in exchange for a
reduction in advances from officers. The Company valued the shares issued at
$1.25 per share, which approximated the fair value of the shares issued during
the periods the services were rendered.
In addition, the Company increased additional paid in capital by $3,000 for
operating expenses incurred by a principal shareholder.
NOTE E-RELATED PARTY TRANSACTIONS
From the Company's inception in July 1997, the Company's Officer, Director and
principal shareholder has advanced funds to the Company for working capital
purposes. No formal repayment terms or arrangements exist. The net amount of the
advances due the officer at June 30, 2001 and December 31, 2000 were $192,454
and $ 317,454, respectively. (See Note D).
17
CAVALCADE OF SPORTS MEDIA, INC.
(A developmental stage company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(UNAUDITED)
NOTE F- DISCONTINUED OPERATIONS
On September 18, 2000, the holders of the Company's preferred stock elected to
convert their shares to common stock of Global Group International, Inc. (see
Note F). As a result of the conversion, the Company's interest in Global Group
International, Inc., which represented the Company's shoe business segment, was
reduced from 100% to less than 1%. As a result of the spin off of the
subsidiary, the Company's shoe business segment is accounted for as a
discontinued operation. Accordingly, the amounts in the financial statements and
related notes for all periods shown have been restated to reflect discontinued
operations accounting.
18
ITEM 2. Plan of Operations
As previously reported, this corporation is in a development stage and has not
yet conducted any business so as to become an income producing entity. The
Company continues to utilize capital raised from the sale of Capital Notes. Our
amended annual report (10-KSB) dated August 2, 2001 and cleared of all SEC
comments on August 3, 2001 includes a detailed Plan of Operations for this year.
That annual report can be accessed on EDGAR.
Overview
Results of Operations
The Company is in the development stage and is seeking to acquire and market
retired sporting footage and events, which have been transferred to digital or
Beta- SP format, for delivery to consumers and businesses via satellite and
cable transmission. The risks specifically discussed are not the only factors
that could affect future performance and results. In addition the discussion in
this registration statement concerning us, our business and our operations
contain forward-looking statements. Such forward-looking statements are
necessarily speculative and there are certain risks and uncertainties that could
cause actual events or results to differ materially from those referred to in
such forward- looking statements. We do not have a policy of updating or
revising forward-looking statements and thus it should not be assumed that
silence by our Management over time means that actual events or results are
occurring as estimated in the forward-looking statements herein.
As a development stage company, we have yet to earn revenues from operations. We
may experience fluctuations in operating results in future periods due to a
variety of factors including, but not limited to, market acceptance of our
sports channel and nostalgic content, our ability to acquire and deliver high
quality products at a price lower than currently available to consumers, our
ability to obtain additional financing in a timely manner and on terms favorable
to us, our ability to successfully attract customers at a steady rate and
maintain customer satisfaction, our promotions, branding and sales programs, the
amount and timing of operating costs and capital expenditures relating to the
expansion of our business, operations and infrastructure and the implementation
of marketing programs, key agreements, and strategic alliances, the number of
products offered by us, the number of cancellations we experience, and general
economic conditions specific to the transferring of previously televised
material onto Beta- SP, the broadcasting of nostalgic content, and the
entertainment industry.
As a result of limited capital resources and no revenues from operations from
its inception, the Company has relied on the issuance of equity securities to
non-employees in exchange for services. The Company's management enters into
equity compensation agreements with non-employees if it is in the best interest
19
of the Company under terms and conditions consistent with the requirements of In
accordance with statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation." In order conserve its limited operating capital
resources, the Company anticipates continuing to compensate non-employees for
services during the next twelve months. This policy may have a material effect
on the Company's results of operations during the next twelve months.
Revenues
We have generated no operating revenues from operations from our inception. We
believe we will begin earning revenues from operations in our second year of
operation as the Company transitions from a development stage company to that of
an active growth and acquisition stage company.
Costs and Expenses
From our inception through June 30, 2001, we have not generated any revenues. We
have incurred losses of $ 2,220,005 during this period. These expenses were
associated principally with equity-based compensation to employees and
consultants, product development costs and professional services.
Liquidity and Capital Resources
As of June 30, 2001, we had a working capital deficit of $1,674,026 As a result
of our operating losses from our inception through June 30, 2001, we generated a
cash flow deficit of $ 1,066,580 from operating activities. Cash flows used in
investing activities was $ 155,563 during the period July 29, 1997 through June
30, 2001. We met our cash requirements during this period through the private
placement of $79,000 of common stock, $ 832,000 from the issuance of capital and
other notes (net of repayments), and $ 317,453 from advances from the Company's
President.
While we have raised capital to meet our working capital and financing needs in
the past, additional financing is required in order to meet our current and
projected cash flow deficits from operations and development. We are seeking
financing in the form of equity in order to provide the necessary working
capital. We currently have no commitments for financing. There is no guarantee
that we will be successful in raising the funds required.
We believe that our existing capital resources will be sufficient to fund our
current level of operating activities, capital expenditures and other
obligations through the next 12 months. However, if during that period or
thereafter, we are not successful in generating sufficient liquidity from
operations or in raising sufficient capital resources, on terms acceptable to
us, this could have a material adverse effect on our business, results of
operations liquidity and financial condition.
The independent auditors report on the Company's December 31, 2000 financial
statements states that the Company's recurring losses and default under its debt
obligations raise substantial doubts about the Company's ability to continue as
a going concern.
20
Product Research and Development
We do not anticipate performing research and development for any products during
the next twelve months.
Acquisition or Disposition of Plant and Equipment
We do not anticipate the sale of any significant property, plant or equipment
during the next twelve months. We do not anticipate the acquisition of any
significant property, plant of equipment during the next 12 months, other than
computer equipment and peripherals used in our day-to-day operations. We believe
we have sufficient resources available to meet these acquisition needs.
Number of Employees
From our inception through the period ended June 30, 2001, we have relied on the
services of outside consultants for services and had no employees. In order for
us to attract and retain quality personnel, we anticipate we will have to offer
competitive salaries to future employees. We anticipate an employment base of
two (2) full and part time employees during the next 12 months. These employees
will be Ed Litwak, our President and Director and an Administrative Assistant.
The Company has entered into an informal employment agreement with Mr. Litwak,
and is expected to formalize the agreement within the next 90 days. The Company
also plans to use the advise of its Advisory Board on an as needed basis. As we
continue to expand, we will incur additional cost for personnel. This projected
increase in personnel is dependent upon our generating revenues and obtaining
sources of financing. There is no guarantee that we will be successful in
raising the funds required or generating revenues sufficient to fund the
projected increase in the number of employees.
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to
our business, but we cannot predict whether or to what extent any of such risks
may be realized nor can we guarantee that we have identified all possible risks
that might arise. Investors should carefully consider all of such risk factors
before making an investment decision with respect to our Common stock.
21
PART II - OTHER INFORMATION
ITEM I LEGAL PROCEEDINGS
We are not engaged in any pending legal proceedings. We are not aware of any
legal proceedings pending, threatened or contemplated, against any of our
officers and directors, respectively, in their capacities as such.
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 2001, the Company issued 20,000 shares to an
individual for public relations services. This issuance is considered exempt
from registration by reason of Section 4(2) of the Securities Act of 1933.
In April of 2001, the Company issued 100,000 shares to an individual. This
issuance is considered exempt from registration by reason of Section 4(2) of the
Securities Act of 1933.
Also in April of 2001, the Company issued 100,000 shares to Ed Litwak, our
President, in partial repayment of his previous advances made to the Company.
This issuance is considered exempt from registration by reason of Section 4(2)
of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
There have been no defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders in the second quarter of
2001.
ITEM 5 OTHER INFORMATION
N/A
22
ITEM 6 EXHIBITS AND REPORTS ON FORM 8K
(a) EXHIBIT INDEX
No. Description of Exhibit
- --- ----------------------
*3.1 Certificate of Incorporation of Tren Property Corp., filed July 29, 1997 in
Delaware.
*3.2 Articles of Incorporation of Gemma Global, Inc., filed July 22, 1997 in
Nevada.
*3.3 Reorganization Agreement between Tren Property Corp. and Edward E. Litwak,
dated January 1, 1998.
*3.4 Certificate of Amendment to the Certificate of Incorporation of Tren
Property Corp., changing its corporate name to Gemma Global, Inc. and
increasing capital structure, filed February 23, 1998 in Delaware.
*3.5 Certificate of Ownership and Merger of Gemma Global, Inc. (a Nevada
Corporation) with and into Tren Property Corp. (a Delaware Corporation),
filed February 23, 1998 in Delaware.
*3.6 Articles/Certificate of Merger of Gemma Global, Inc. (a Nevada Corporation)
with and into Gemma Global, Inc. formerly Tren Property Corp. (a Delaware
Corporation) filed March 4, 1998 in Nevada.
*3.7 Articles of Incorporation of Gemma Global, Inc., filed March 5, 1998 in
Nevada.
*3.8 Articles/Certificate of Merger (re-domestication) of Gemma Global , Inc.
(Delaware) with and into Gemma Global, Inc. (Nevada) filed April 21, 1998.
*3.9 Articles of Amendment to the Articles of Incorporation of Gemma Global,
Inc., changing name to Pioneer2000, Inc. and increasing capital structure,
filed March 4, 1999 in Nevada.
*3.10 Certificate of Incorporation of Cavalcade of Sports Network, Inc., filed
June 22, 1998 in New York.
*3.11 Articles of Incorporation of Global Group International, Inc., filed March
23, 1999 in Nevada.
*3.12 Certificate of Designation, Powers, Preferences and Rights of 1999-Global
Group Series of Convertible Preferred Stock, filed December 14, 1999 in
Nevada.
*3.13 Articles of Amendment to the Articles of Incorporation of Pioneer2000,
changing corporate name to Cavalcade or Sports Media, Inc., filed December
17, 1999 in Nevada.
*3.14 Articles of Merger of Cavalcade of Sports Network, Inc. (New York) with
and into Cavalcade of Sports Media, Inc. (Nevada), filed
December 22, 1999 in Nevada.
*3.15 Certificate of Merger of Cavalcade of Sports Network, Inc. with and into
Cavalcade of Sports Media, Inc., filed December 30, 1999 in New York.
*3.16 Bylaws of the Registrant.
*4.1 Subordinated Capital Note, Sample Copy
*4.2 Promissory Note
*10.1 Indemnification Agreement with Edward E. Litwak
*10.2 Indemnification Agreement with Nicolas Lagano, Jr.
*10.3 Indemnification Agreement with Carol Conners
*10.4 Indemnification Agreement with Michael Haynes
*10.5 Indemnification Agreement with Don Parson
*10.6 Indemnification Agreement with Dennis Murphy
*10.7 Indemnification Agreement with Edwin Rue
*10.8 License Agreement with Jennifer Gucci
*10.9 License Agreement with Gemma Gucci
*10.10 Assignment of License Agreements to Gemma Global, Inc.
*10.11 Gemma Global, Inc. Assignment of License Agreements to Global
International, Inc.
*10.12 Consulting and Compensation Agreement with Robert Bubeck and
Thomas O'Donnell
*10.13 License Agreement with Soccer Camps of America, Inc. and Cosmos Soccer
Club, Inc.
*10.14 License Agreement with Sekani, Inc.
- -----------------------------
* Previously filed with 10-SB
23
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Cavalcade of Sports Media, Inc.
--------------------------------
(Registrant)
Date August 17, 2001 /s/ Ed Litwak
- -------------------- -------------------------------
Ed Litwak, President
24