U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 2002
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 11,730,972 shares of its common stock
outstanding as of March 31, 2002.
1
Cavalcade of Sports Media, Inc
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending March 31, 2002
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets:
March 31, 2002 and December 31, 2001
Consolidated Statement of Operations:
Three Months Ended March 31, 2002 and 2001
Consolidated Statement of Cash Flows:
Three Months Ended March 31, 2002 and 2001
Notes to Consolidated Financial Statements:
Item 2. Management's Discussion and Analysis or Plan of Operation
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
CAVALCADE OF SPORTS MEDIA, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 2002 December 31, 2001
-------------- -----------------
ASSETS
Current assets:
Cash and equivalents $ 3,506 $ 15,459
Other receivable 30,000 30,000
-------------- -----------------
Total current assets 33,506 45,459
Property, Plant & Equipment
Office Furniture, net 1,265 1,350
Other assets:
Film Library, at cost 522,577 522,577
Goodwill, net of amortization 269,761 294,282
Other Investment 62,500 -
-------------- -----------------
Total Other Assets 854,837 816,859
889,607 863,668
-------------- -----------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable and accrued expenses 375,483 318,419
Other Accrued Liabilities 380,000 380,000
Note Payable 1,090,665 1,084,415
Advances from Officers 214,166 193,799
Other Advances 45,000 45,000
-------------- -----------------
Total Current Liabilities 2,105,314 2,021,633
Commitments and Contingencies - -
Deficiency in Stockholders' Equity
Preferred stock, par value, $0.001 per share;
10,000,000 shares authorized; none issued at
March 31, 2002 and December 31, 2001 - -
Common stock, par value, $0.001 per share;
100,000,000 shares authorized ; 11,730,972 and
11,430,972 shares issued at March 31, 2002 and
December 31, 2001, respectively 11,731 11,431
Additional paid-in-capital 1,970,673 1,595,973
Deficit accumulated during development stage (3,198,111) (2,765,370)
-------------- -----------------
Deficiency in stockholder's equity (1,215,707) (1,157,966)
-------------- -----------------
$ 889,607 $ 863,668
============== =================
See accompanying notes to unaudited condensed consolidated financial statements
CAVALCADE OF SPORTS MEDIA, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Period
July 29, 1997
Three Months Ended March 31 (Date of
Inception) to
2002 2001 March 31, 2002
------------ ------------ ------------
Revenues: $ - $ - $ -
Costs and Expenses:
Selling, general and administrative 351,069 333,971 2,345,922
Interest expense 57,064 15,773 362,021
Amortization and depreciation expense 24,608 24,608 221,133
Total Cost and Expense 432,741 374,352 2,929,076
Loss from Operations (432,741) (374,352) (2,929,076
Other Income
Miscellaneous Income - - 4,766
Interest Income - - 130
------------ ------------ ------------
- - 4,896
------------ ------------ ------------
Loss from continuing operations, before income
taxes and discontinued operations (432,741) (374,352) (2,924,180)
------------ ------------ ------------
Income (taxes) benefit - - -
Loss from continuing operations, before
discontinued operations (432,741) (374,352) (2,924,180)
------------ ------------ ------------
Loss from discontinued operations - - (352,905)
Income (loss) on disposal of discontinued
operations, net - - 78,974
------------ ------------ ------------
Net Loss $ (432,741) $ (374,352) $ (3,198,111)
============ ============ ============
Income (loss) per common share
(basic and assuming dilution) $ (0.04) $ (0.03) $ (0.39)
============ ============ ============
Continuing Operations $ (0.04) $ (0.03) $ (0.36)
Discontinued Operations $ - $ - $ (0.03)
Weighted average shares outstanding
Basic and Diluted 11,548,194 10,963,124 8,066,881
See accompanying notes to the unaudited condensed consolidated financial statements
CAVALCADE OF SPORTS MEDIA, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Period
July 29, 1997
Three Months Ended March 31 (Date of
Inception) to
2002 2001 March 31, 2002
------------ ------------ ------------
Cash flows from operating activities:
Net loss for the period from continuing operations (432,741) (374,352) (2,924,180)
Loss from discontinued operations - - (352,905)
Disposal of business segment, net - - 78,974
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Amortization and Depreciation 24,608 24,608 221,133
Organization and acquisition costs expensed - - 11,553
Common Stock issued in exchange for Service 312,500 251,500 1,283,338
Common Stock issued in exchange for Debt - - 233,498
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 - - 26,925
Expenses paid by shareholders in exchange for
common stock - - 25,000
(Increase) decrease in:
Other receivable - - (30,000)
Increase (decrease) in:
Accounts payable and accrued expenses, net 57,064 2,773 145,903
Net cash used in operating activities (38,569) (95,471) (1,275,761)
------------ ------------ ------------
Cash flows used in investing activities:
Acquisition of Film Library and footage
production costs - - (183,080)
Acquisition of Office Furniture - - (1,690)
Cash acquired in connection with acquisition - - 35,207
------------ ------------ ------------
Net cash used in investing activitie - - (149,563)
Cash flows (used in)/provided by financing activities:
Advances from officer, net 20,367 - 214,166
Other advances, net - - 45,000
Proceeds from issuance of notes payable , net 6,250 1,090,665
Proceeds from issuance of common stock, net - 44,961 79,000
------------ ------------ ------------
Net cash used in financing activities 26,617 44,961 1,428,831
Net increase (decrease) in cash and equivalents (11,952) (50,510) 3,506
Cash and cash equivalents at beginning of period 15,459 56,580 -
Cash and cash equivalents at end of period $ 3,506 $ 6,071 $ 3,506
------------ ------------ ------------
See accompanying notes to unaudited condensed consolidated financial statements
CAVALCADE OF SPORTS MEDIA, INC.
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Period
July 29, 1997
Three Months Ended March 31 (Date of
Inception) to
2002 2001 March 31, 2002
------------ ------------ ------------
Supplemental Information:
Cash paid during the period for interest $ - $ - $ -
Cash paid during the period for taxes - - -
Common Stock issued for services 312,500 251,500 1,283,338
Common Stock issued for investment 62,500 - 62,500
Conversion of preferred stock - - (855)
Preferred Stock issued in exchange for services - - 855
Contribution of shares to treasury by principal
Shareholder - - (2,821)
Common Stock issued in exchange for debt - - 223,498
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 notes to unaudited condensed consolidated financial statements
CAVALCADE OF SPORTS MEDIA, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2002
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------
General
- -------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-QSB, 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 three-month period ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2002. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated December 31, 2001
financial statements and footnotes thereto included in the Company's SEC Form
10SB, 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. The
consolidated financial statements include the accounts of Cavalcade of Sports
Media, Inc. and its wholly-owned subsidiaries, Cavalcade of Sports Network,
Inc. Significant intercompany transactions have been eliminated in
consolidation.
Reclassification
- ----------------
Certain prior period amounts have been reclassified for comparative purposes
Recent Accounting Pronouncements
- --------------------------------
In July 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS No.
141), and Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS No. 142). The FASB also issued Statement of
Financial Accounting Standards No. 143, "Accounting for Obligations Associated
with the Retirement of Long-Lived Assets" (SFAS No. 143), and Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS No. 144), in August and October 2001,
respectively.
SFAS No. 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates the
pooling-of-interest method. The adoption of SFAS No. 141 had no material
impact on the Company's consolidated financial statements.
CAVALCADE OF SPORTS MEDIA, INC.
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
MARCH 31, 2002
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
- ---------------------------------------
Recent Accounting Pronouncements (Continued)
- -------------------------------------------
Effective January 1, 2002, the Company adopted SFAS No. 142. Under the new
rules, the Company will no longer amortize goodwill and other intangible
assets with indefinite lives, but such assets will be subject to periodic
testing for impairment. On an annual basis, and when there is reason to
suspect that their values have been diminished or impaired, these assets must
be tested for impairment, and write-downs to be included in results from
operations may be necessary. SFAS No. 142 also requires the Company to
complete a transitional goodwill impairment test six months from the date of
adoption.
Any goodwill impairment loss recognized as a result of the transitional
goodwill impairment test will be recorded as a cumulative effect of a change
in accounting principle no later than the end of fiscal year 2002. The
adoption of SFAS No. 142 had no material impact on the Company's consolidated
financial statements.
SFAS No. 143 establishes accounting standards for the recognition and
measurement of an asset retirement obligation and its associated asset
retirement cost. It also provides accounting guidance for legal obligations
associated with the retirement of tangible long-lived assets. SFAS No. 143 is
effective in fiscal years beginning after June 15, 2002, with early adoption
permitted. The Company expects that the provisions of SFAS No. 143 will not
have a material impact on its consolidated results of operations and financial
position upon adoption. The Company plans to adopt SFAS No. 143 effective
January 1, 2003.
SFAS No. 144 establishes a single accounting model for the impairment or
disposal of long-lived assets, including discontinued operations. SFAS No. 144
superseded Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" (SFAS No. 121), and APB Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions".
The Company adopted SFAS No. 144 effective January 1, 2002. The adoption of
SFAS No. 144 had no material impact on Company's consolidated financial
statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 intends to continue utilizing capital raised from the sale of Capital
Notes and or equity. Our annual report (10-KSB) dated April 16, 2002 includes
a detailed Plan of Operations for this year. That annual report can be
accessed on EDGAR.
The following discussion contains forward-looking statements that are subject
to significant risks and uncertainties about us, our current and planned
products, our current and proposed marketing and sales, and our projected
results of operations. There are several important factors that could cause
actual results to differ materially from historical results and percentages
and results anticipated by the forward-looking statements. The Company has
sought to identify the most significant risks to its business, but cannot
predict whether or to what extent any of such risks may be realized nor can
there be any assurance that the Company has identified all possible risks that
might arise. Investors should carefully consider all of such risks before
making an investment decision with respect to the Company's stock. The
following discussion and analysis should be read in conjunction with the
financial statements of the Company and notes thereto. This discussion should
not be construed to imply that the results discussed herein will necessarily
continue into the future, or that any conclusion reached herein will
necessarily be indicative of actual operating results in the future. Such
discussion represents only the best present assessment from our Management.
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 viewers 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 quarterly
report concerning our business our operations and us 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, viewer acceptance of our
sports channel and its nostalgic content, our ability to acquire and deliver
high quality products, our ability to obtain additional financing in a timely
manner and on terms favorable to us, our ability to successfully attract
viewers and maintain viewer 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 of the Company under terms and conditions consistent with the
requirements 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 our inception. We believe we
will begin earning revenues from operations during the fourth quarter of
fiscal year 2002 as the Company transitions from a development stage company
to an active growth and acquisition stage company.
Costs and Expenses
- ------------------
From our inception through March 31,2002, we have not generated any revenues.
We have incurred losses of $ 3,198,111 during this period. Losses incurred
during the first quarter of 2002 were $432,741 compared with losses of
$374,352 during the first quarter of 2001. These losses stem from expenses
associated principally with equity-based compensation to employees and
consultants, product development costs and professional service fees.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2002, we had a working capital deficit of $ 2,071,808 as a
result of our operating losses from our inception through March 31, 2002. We
generated a cash flow deficit of $ 38,569 from operating activities during the
first quarter ended March 31, 2002, partially offset by proceeds from loans of
$26,617. Net cash declined by $11,952 during this period.
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 and to acquire
desirable film library assets. We are actively engaged in negotiations with
interested investors and anticipate making a private equity placement at an
appropriate valuation and on terms acceptable to the existing shareholders.
We are also discussing possible joint venture arrangements to share or finance
costs, and pre selling advertising and or sponsorships to raise working
capital. We plan to raise sufficient capital to fund operations for the next
12 months and to finance the timely acquisition and digitization of additional
vintage sports film footage. (See the discussion below under Acquisition of
Plant and Equipment and Other Assets for additional details). 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 and planned 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 Company's independent certified public accountants have stated in their
report included in the Company's December 31, 2001 Form 10-KSB, that the
Company has incurred operating losses in the last two years, and that the
Company is dependent upon management's ability to develop profitable
operations. These factors among others may raise substantial doubt about the
Company's ability to continue as a going concern.
Product Research and Development
- --------------------------------
We do not anticipate performing research and development for any products
during the next twelve months.
Acquisition of Plant and Equipment and Other Assets (Film Library)
- ------------------------------------------------------------------
We do not anticipate the acquisition of any material property, plant or
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.
However, negotiations are presently in progress to acquire approximately 7,000
hours of additional vintage sports film footage. The Company intends to
aggregate more than 10,000 hour of vintage sports programming by purchase or
license. This film library and footage will be necessary to support our
mission to provide around the clock broadcasting. Costs associated with
program acquisition and digitizing this footage are capitalized and this film
library becomes the primary programming asset of the Company. The Company
intends to acquire these film libraries on an opportune basis, as they become
available, and to negotiate acceptable financing arrangements, which may be
limited by its ability to raise sufficient capital resources.
The Company presently has approximately 3,000 hours of program content and
believes that 4,300 hours would be sufficient for two years of broadcast
programming. Therefore, if the Company is not successful in obtaining the
full inventory of 10,000 hours during the next twelve months, its ability to
deliver near term program content will not be impaired. Should sufficient
financial resources become available, it is the intention of the Company to
acquire the full target of 10,000 hours of quality vintage sports hours as
soon as possible. Once digitized, this film library has an unlimited shelf
life and adds measurable economic value to the Company's net assets. In
addition, it positions the Company to provide significant well-timed entry
barriers to competitors that may chose to enter the nostalgia sports market.
Number of Employees
- -------------------
From our inception through the period ended March 31, 2002, 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 that it
may become desirable to add full and or part time employees to discharge
certain critical functions during the next 12 months. These positions include
a President, CFO, EVP of Operations, CIO and a Senior Sales and Marketing
executive. The Company has entered into a Consulting Agreement with Ed
Litwak, our President and Director, which is expected to be superseded by an
Employment Agreement within the next 60 days. Candidates have been identified
for the other positions, but The Company presently has no obligation to enter
into Employment Agreements with these candidates. This projected increase in
personnel is dependent upon our ability to generate revenues and obtain
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.
The Company also plans to use the advice of its Advisory Board on an as needed
basis. As we continue to expand, we will incur additional cost for personnel.
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.
Cautionary Factors that May Affect Future Results
- -------------------------------------------------
Our annual report (10-KSB) dated April 16, 2002 includes a detailed list of
cautionary factors that may affect future results. Management believes that
there have been no material changes to those factors listed, however other
factors besides those listed could adversely affect us. That annual report
can be accessed on EDGAR.
PART II - OTHER INFORMATION
ITEM 1. 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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the fiscal year ended December 31, 2000, we sold $457,000 of Capital
Notes which became due on December 31, 2000. All of such notes are in
default, and the principal sums are bearing interest at the rate of 18% per
annum since maturity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders in the first quarter of
2002.
ITEM 5. OTHER INFORMATION
N/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
None.
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 May 19, 2002 /S/ ED LITWAK
- ----------------- -------------------------------
Ed Litwak, President