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 Quarter Ended: March 31, 2001
Commission File Number: 0-23100
TEAM SPORTS ENTERTAINMENT, INC.
(Exact name of small business issuer as specified in its charter)
LOGISOFT CORP.
(Former name of small business issuer)
Delaware 22-2649848
(State of Incorporation) (IRS Employer ID No)
1111 South Main, Suite 127, Tx, 76051
(Address of principal executive office)
375 Woodcliff Drive, Fairport, NY 14450
(Former address of principal executive office)
(817) 410-5708
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 common stock, par value
$.0001 per share, as of March 31, 2001 was 31,006,875.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X].
TEAM SPORTS ENTERTAINMENT,INC. AND SUBSIDIARIES
INDEX
Page
No.
Part I. Unaudited Financial Information
Item 1. Condensed Consolidated:
Balance Sheet - March 31, 2001 3
Statements of Operations - 4
Three Months Ended March 31, 2001 and 2000
Statement of Stockholders' Equity - 5
Three Months Ended March 31, 2001
Statements of Cash Flows - 6
Three Months Ended March 31, 2001 and 2000
Notes to Financial Statements - 7-12
Three Months Ended March 31, 2001 and 2000
Item 2. Managements Discussion and Analysis of Plan of Operation 13-14
Part II. Other Information 15
2
TEAM SPORTS ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet
March 31, 2001
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 365,903
Marketable equity securities 176,000
Note receivable 40,000
Note receivable - officer 144,097
Inventory 12,000
Prepaid expenses and other assets 21,622
Current assets of discontinued operations, net 898,383
-----------
Total current assets 1,658,005
Property and equipment, net 3,020
Non-current assets of discontinued operations, net 2,528,336
Other 3,900
-----------
$ 4,193,261
===========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 19,290
Accrued expenses 5,710
-----------
Total current liabilities 25,000
Stockholders' equity
Preferred stock; $2.75 par value; authorized 2,000,000
shares; no shares issued and outstanding -
Common stock, $.0001 par value; authorized 60,000,000
shares; issued and outstanding 31,006,875 shares 3,101
Paid-in capital 8,825,418
Notes receivable from warrant exercise (350,000)
Accumulated deficit (4,310,258)
-----------
Total stockholders' equity 4,168,261
-----------
$ 4,193,261
===========
See accompanying notes to condensed consolidated financial statements.
3
TEAM SPORTS ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
Sales and revenues $ 20,365 $ 45,706
Cost of goods sold 6,440 27,218
--------- ---------
Gross profit 13,925 18,488
Selling, general and administrative expense 107,173 14,700
--------- ---------
Earnings (loss) from operations (93,248) 3,788
Other income:
Interest and other income 2,889 2,119
Unrealized gain on marketable
equity securities 76,000 -
--------- ---------
Total other income (expense) 78,889 2,119
Earnings (loss) before income taxes and --------- ---------
discontinued operations (14,359) 5,907
Income tax expense - 2,829
--------- ---------
Earnings (loss) from continuing operations (14,359) 3,078
Discontinued operations: --------- ---------
Earnings (loss) from operations of
discontinued operations,
less applicable income taxes of $9,383 in 2000 (831,342) 19,324
Loss on disposal of discontinued
operations, including provision of
$550,000 for operating losses during
the phase-out period (550,000) -
--------- ---------
Earnings (loss) from discontinued operations (1,381,342) 19,324
--------- ---------
Net earnings (loss) $(1,395,701) $ 22,402
========= =========
Net earnings (loss) per share, basic and diluted
Continuing operations $ (0.00) $ 0.00
Discontinued operations (0.05) 0.00
--------- ---------
$ (0.05) $ 0.00
========= =========
Weighted average shares outstanding
Basic 30,967,942 14,628,509
========= =========
Diluted 30,967,942 15,587,274
========= =========
See accompanying notes to condensed consolidated financial statements.
4
TEAM SPORTS ENTERTAINMENT, INC. AND SUSIDIARIES
Condensed Consolidated Statement of Stockholders' Equity
Three Months Ended March
31, 2001
(Unaudited)
Common Stock Paid-in
Shares Par Value Capital
Balance, December 31, 2000 30,958,875 $ 3,096 $8,788,899
Issuance of common shares 48,000 5 14,995
for services
Stock based compensation - - 21,524
Net loss - - -
---------- ---------- ---------
Balance, March 31, 2001 31,006,875 $ 3,101 $8,825,418
========== ========== =========
Notes
Receivable-
Warrant Accumulated
Exercise Deficit Total
Balance, December 31, 2000 $ (350,000) $(2,914,557) $5,527,438
Issuance of common shares - - 15,000
for services
Stock based compensation - - 21,524
Net loss - (1,395,701) (1,395,701)
---------- ---------- ---------
Balance, March 31, 2001 $ (350,000) $(4,310,258) $4,168,261
========== ========== =========
See accompanying notes to condensed consolidated financial
statements.
5
TEAM SPORTS ENTERTAINMENT, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2001 and 2000
(Unaudited)
2001 2000
Cash flows from operating activities
Net earnings (loss) $(1,395,701) $ 22,402
Adjustments to reconcile net earnings (loss) to net
cash used by operating activities:
(Earnings) loss from discontinued operations, net 1,381,342 (19,324)
of tax
Depreciation and amortization 800 800
Unrealized gain from marketable securities (76,000) -
Common stock issued for services 36,524 -
Change in assets and liabilities (excluding
effects of acquisitions):
Accounts receivable 225 -
Inventory 4,990 (9,000)
Prepaid expenses 12,251 -
---------- ----------
Net cash used by operating activities (35,569) (5,122)
---------- ----------
Cash flows from investing activities
Collections of notes receivable - officer 82,234 -
Proceeds from short-term investments 133,669 -
Capital expenditures - (5,020)
---------- ----------
Net cash provided by (used in) investing activities 215,903 (5,020)
---------- ----------
Cash flows from financing activities
Collection of notes receivable 200,000 -
Funds transferred from(to)discontinued operations (14,431) 10,142
---------- ----------
Net cash provided by financing activities 185,569 10,142
Net increase in cash and cash equivalents from ---------- ----------
continuing operations 365,903 -
Cash and cash equivalents, beginning of period
from continuing operations - -
---------- ----------
Cash and cash equivalents, end of period $ 365,903 $ -
========== ==========
See accompanying notes to condensed consolidated financial statements.
6
TEAM SPORTS ENTERTAINMENT, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2001 and 2000
(Unaudited)
A ORGANIZATION
Team Sports Entertainment, Inc. (the "Company" or "Team Sports"), a
Delaware corporation, is a holding company whose wholly-owned
subsidiaries, Logisoft Computer Products Corp. ("LCP") and
eStorefronts.net Corp. ("eStorefronts") create global and localized
Internet solutions for both traditional and pure e-business companies.
On May 15, 2001, Team Sports changed its name from Logisoft Corp. to
Team Sports Entertainment, Inc.
On May 15, 2001 the Company acquired all of the common stock of Maxx
Motorsports, Inc., a South Carolina corporation, ("Maxx"), in a tax-free
stock exchange for 7,750,000 shares of the Company's common stock. In
addition, the Company completed the sale of its wholly owned
subsidiaries, LCP and eStorefronts to a group of its shareholders in
exchange for 12,000,000 shares of the Company's common stock, which were
cancelled. The operations from these business segments have been
classified as discontinued operations in the accompanying financial
statements.
The financial statements included in this report have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission for interim reporting and include all adjustments
(consisting only of normal recurring adjustments) that are, in the
opinion of management, necessary for a fair presentation. These
financial statements have not been audited.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that
the disclosures contained herein are adequate to make the information
presented not misleading. However, these financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report for the year ended December 31,
2000, which is included in the Company's Form 10-KSB for the year ended
December 31, 2000. The financial data for the interim periods presented
may not necessarily reflect the results to be anticipated for the
complete year.
Certain reclassifications of the amounts presented for the comparative
period have been made to conform to the current presentation.
B. Accounting policies
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash and cash equivalents - The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents.
Investment securities - Investments are classified into three categories
as follows:
1. Trading securities reported at fair value with unrealized gains and
losses included in earnings;
7
2. Securities available-for-sale reported at fair value with unrealized
gains and losses reported in other comprehensive income;
3. Held-to-maturity securities reported at amortized cost.
Property and equipment - Property and equipment are stated at cost.
Expenditures for significant renewals and improvements are capitalized.
Repairs and maintenance are charged to expense as incurred.
Depreciation is computed using an accelerated method for both financial
and tax purposes based upon the useful lives of the assets.
Revenue recognition - Revenue from product sales is recognized when the
related goods are shipped and all significant obligations of the Company
have been satisfied.
Stock option plans - The Company applies the intrinsic value-based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, in accounting for its stock option plan. As such,
compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise
price.
Deferred income taxes - Deferred income taxes are provided for temporary
differences between financial and tax reporting in accordance with the
liability method under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes."
Earnings per common share - Earnings per common share are calculated
under the provisions of SFAS No. 128, "Earnings per Share," which
established new standards for computing and presenting earnings per
share. SFAS No. 128 requires the Company to report both basic earnings
per share, which is based on the weighted-average number of common
shares outstanding, and diluted earnings per share, which is based on
the weighted-average number of common shares outstanding plus all
potential dilutive common shares outstanding.
Estimates - Use of estimates and assumptions are made by management in
the preparation of the financial statements in conformity with generally
accepted accounting principles that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
C. Marketable Investment Securities
The amortized cost of investment securities as shown in the accompanying
balance sheet and their estimated market value at March 31, 2001 is as
follows:
Trading securities: 2001
Cost $ 100,000
Unrealized gain 76,000
-------
$ 176,000
=======
The Company included an unrealized gain in the amount of $76,000 in
earnings for the three-month period ended March 31, 2001.
8
D. Notes receivable - officer
In July 2000, the Company entered into a bridge loan with the former
Chief Executive Officer of the Company related to the purchase of the
officer's principal residence. The remaining balance of this loan in
the amount of $144,097, plus accrued interest was repaid in April 2001.
E. Common stock options an warrants
In April 2000, the Company adopted its 2000 Stock Option Plan (the
"Plan") and the Company's Board of Directors approved the same. The
Company's shareholders approved the Plan in April 2001. The Plan was
established to advance the interests of the Company and its stockholders
by attracting, retaining and motivating key personnel of the Company.
The Board of Directors, or a committee that it appoints, is authorized
to grant options to purchase the Common Stock of the Company, not to
exceed an aggregate of 3,000,000 shares. The Board of Directors, or a
committee that it appoints, is also authorized to establish the exercise
price and vesting terms of individual grants under the Plan.
Options granted under the Plan may be either "incentive stock options"
intended to qualify as such under the Internal Revenue Code, or "non-
qualified stock options". The Company expects that most options granted
pursuant to the Plan will be subject to vesting over a three or four-
year period, such as 25% increments on each annual grant date
anniversary, during which the optionee must continue to be an employee
of the Company. The Board or the committee, if applicable, may choose
to impose different vesting requirements or none at all. Options
outstanding under the Plan have a maximum term of up to ten (10) years.
The Plan also provides that all options that are not vested will become
vested upon a change in control, unless the options are either assumed
or substituted with equivalent options. In addition, unvested options
become vested, after a change in control, if an optionee is subject to
involuntary termination other than for cause during that optionee's
remaining vesting period after a change in control.
A summary of stock option activity during the three months ended March
31, 2001 is as follows:
Weighted Average
Options Exercise Price
------- ------------
Outstanding at December 31,2000 1,823,450 $ 1.30
Granted 111,000 0.46
Exercised - -
Forfeited (116,250) 1.96
------------- ---------
Outstanding at March 31,2001 1,818,200 $ 1.21
============= =========
Options exercisable at
March 31, 2001 70,625 $ 0.34
============= =========
The stock options issued under the Plan include 1,376,700 options, which
vest ratably over a four-year period (25% per year) and 441,500 options,
which vest ratably over a 36-month period.
The Company applies APB25 and related interpretations in accounting for
the stock option plan. Stock compensation expense has been recorded for
35,000 options issued to two employees with an exercise price of $0.01
per share. Compensation expense is being recognized for the difference
between the fair value of the shares on the day the options were granted
and the $0.01 exercise price, over the related service period of one
year. The Company recognized $16,787 of stock compensation expense for
the three months ended March 31, 2001 relating to these options. The
remaining stock compensation expense of $4,737 relates to stock options
granted to individuals for services performed.
9
As a part of its issue of 28,500,000 shares of its common stock on May
15, 2001 for $7,125,000 in cash, the Company also issued warrants to
purchase 14,250,000 shares of its common stock at a purchase price of
$1.00 per share.
F. Earnings per share
The following data for the three months ended March 31, 2001 and 2000
shows the amounts used in computing earnings per share and the weighted
average number of shares of dilutive potential common stock.
2001 2000
Earnings (loss) from continuing operations
available to common shareholders
used in basic and diluted EPS $ (14,359) $ 3,078
========= ==========
Earnings (loss) from discontinued operations
available to common shareholders
used in basic and diluted EPS $ (1,381,342) $ 19,324
========== ==========
Weighted average number of common shares
used in basic EPS 30,967,942 14,628,509
Effect of dilutive options - 958,765
---------- ----------
Weighted average number of common shares
and dilutive potential common stock used
in dilutive EPS 30,967,942 15,587,274
========== ==========
At March 31, 2001, all exercisable common stock equivalents (70,625
options to purchase common stock) were antidilutive and are not included
in the earnings per share calculations.
G. Income Taxes
Income tax expense for continuing operations for the three months ended
March 31, 2001 and 2000 consists of:
2001 2000
Current tax expense:
Federal $ - $ 2,008
State - 821
-------- --------
- 2,829
Deferred tax expense - -
-------- --------
Total income tax expense $ - $ 2,829
======== ========
Actual income tax expense applicable to earnings, from continuing
operations, before income taxes is reconciled with the "normally
expected" federal income tax expense as follows for the three months
ended March 31, 2001 and 2000:
10
2001 2000
"Normally expected" income tax expense $(4,900) $ 2,000
State income taxes, net of Federal
income tax benefit (800) 800
Valuation allowance 5,700 -
Other - 29
-------- --------
$ - $ 2,829
======== ========
The deferred income tax assets at March 31, 2001 are comprised of the
following:
Current Noncurrent
Net operating loss $36,100 $ -
Marketable equity securities (30,400) -
Valuation allowance (5,700) -
-------- --------
Net deferred income tax assets $ - $ -
======== ========
H. Divestitures
As a part of the acquisition of Maxx, the Company was required to sell
its interest in its wholly owned subsidiaries, LCP and eStorefronts to a
group of its shareholders for 12,000,000 shares of its common stock,
accordingly, no gain or loss will be recognized on the transaction. This
transaction was completed on May 15,2001. Operating results for the
discontinued operations during the three months ended March 31, 2001 and
2000 were as follows:
2001 2000
Net sales $1,859,637 $1,145,535
========== ==========
Earnings (loss) before income
tax benefit (1,381,342) 27,705
Income tax expense (benefit) - 9,383
---------- ---------
Earnings (loss) from discontinued
Operations before minority interest(1,381,342) 18,322
Minority interest - 1,002
-------- ---------
Net earnings (loss) from
discontinued operations $(1,381,342) $ 19,324
========= =========
Net assets of discontinued operations at March 31, 2001 consist of the
following:
Current assets $2,993,549
Current liabilities 2,095,166
---------
Current assets of discontinued operations, net $ 898,383
==========
Non-current assets $2,906,121
Non-current liabilities 377,785
----------
Non-current assets of discontinued operations, net $2,528,336
==========
11
I. Subsequent event
On May 15, 2001, the Company completed acquisition of Maxx for 7,750,000
shares of its common stock. Maxx, through its wholly owned subsidiary,
Team Racing Auto Circuit,LLC. ("TRAC") will own, operate, and sanction a
stock car racing league designed to provide content for television and
tracks while expanding the existing base of stock car fans. TRAC will
initially consist of multi-car teams, strategically positioned in major
North American television markets located near major motorsport venues.
Each team will represent the city or state where it is located. The
initial TRAC racing season, planned to start in 2003, will consist of a
regular season race schedule, a playoff race schedule, and a
Championship Race. TRAC will incorporate the use of aerodynamically
identical cars (AerostockT), fuel-injection engines and other innovative
competition standards to increase parity among the teams without
diminishing the entertainment value. TRAC intends to attract multiple
manufacturers who currently are involved in motorsports worldwide, but
may not be currently involved in the major stock car racing series in
America.
TRAC will be structured as a single-entity league to allow for
centralized management, economies of scale in purchasing, strict
operational standards and cost controls at the team level. Revenue
sharing systems will be enacted to ensure parity and fairly allocate
revenue among teams.
Initial TRAC funds will be derived through the sales of rights to
city/state-based teams. Team owners will own and operate local race
teams and will also have the opportunity to own shares in TRAC's parent
company. TRAC will seek strategic alliances with companies in the areas
of television, sports/entertainment marketing and public relations.
Once racing begins, TRAC will generate revenue through event ticket
sales, league corporate sponsorships, television and other multimedia
contracts, merchandise sales, licensing/royalty fees, team fees/dues,
and sales of additional expansion teams.
TRAC's long-term business plan includes expanding its team base not only
in North America, but also internationally.
On May 15, 2001, in conjunction with the acquisition of Maxx, the
Company issued 28,500,000 shares of its common stock for $7,125,000 in
cash. This equity funding also included warrants to purchase 14,250,000
shares of its common stock at a purchase price of $1.00 per share.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
From time to time, the Company may publish forward-looking statements
relative to such matters as anticipated financial performance, business
prospects, technological developments and similar matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. All statements other than statements of
historical fact included in this section or elsewhere in this report
are, or may be deemed to be, forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Exchange Act of 1934. Important factors that could cause actual
results to differ materially from those discussed in such forward-
looking statements include, but are not limited to, the following:
changes in the economy or in specific customer industry sectors; changes
in customer procurement policies and practices; changes in product
manufacturer sales policies and practices; the availability of product
and labor; changes in operating expenses; the effect of price increases
or decreases; the variability and timing of business opportunities
including acquisitions, alliances, customer agreements and supplier
authorizations; the Company's ability to realize the anticipated
benefits of acquisitions and other business strategies; the incurrence
of debt and contingent liabilities in connection with acquisitions;
changes in accounting policies and practices; the effect of
organizational changes within the Company; the emergence of new
competitors, including firms with greater financial resources than the
Company; adverse state and federal regulation and legislation; and the
occurrence of extraordinary events, including natural events and acts of
God, fires, floods and accidents.
On May 15, 2001, the Company completed acquisition of Maxx for 7,750,000
shares of its common stock. Maxx, through its wholly owned subsidiary,
TRAC will own, operate, and sanction a stock car racing league designed
to provide content for television and tracks while expanding the
existing base of stock car fans. TRAC will initially consist of multi-
car teams, strategically positioned in major North American television
markets located near major motorsport venues. Each team will represent
the city or state where it is located. The initial TRAC racing season,
planned to start in 2003, will consist of a regular season race
schedule, a playoff race schedule, and a Championship Race. TRAC will
incorporate the use of aerodynamically identical cars (AerostockT), fuel-
injection engines and other innovative competition standards to increase
parity among the teams without diminishing the entertainment value.
TRAC intends to attract multiple manufacturers who currently are
involved in motorsports worldwide, but may not be currently involved in
the major stock car racing series in America.
13
TRAC will be structured as a single-entity league to allow for
centralized management, economies of scale in purchasing, strict
operational standards and cost controls at the team level. Revenue
sharing systems will be enacted to ensure parity and fairly allocate
revenue among teams.
Initial TRAC funds will be derived through the sales of rights to
city/state-based teams. Team owners will own and operate local race
teams and will also have the opportunity to own shares in TRAC's parent
company. TRAC will seek strategic alliances with companies in the areas
of television, sports/entertainment marketing and public relations.
Once racing begins, TRAC will generate revenue through event ticket
sales, league corporate sponsorships, television and other multimedia
contracts, merchandise sales, licensing/royalty fees, team fees/dues,
and sales of additional expansion teams.
TRAC's long-term business plan includes expanding its team base not only
in North America, but also internationally.
The Company's current projections include commencing sales of city/state-
based teams immediately and use of these proceeds together with existing
working capital to complete its business plan.
DISCONTINUED OPERATIONS
As a part of the acquisition of Maxx, the Company was required to sell
its interest in its wholly owned subsidiaries, LCP and eStorefronts to a
group of its shareholders in exchange for 12,000,000 shares of its
common stock. The transaction was also completed on May 15, 2001 and
the shares were cancelled.
During the three months ended March 31, 2001, the Company realized a
loss from operations of its discontinued operations in the amount of
$831,342, as compared to earnings in the amount of $19,324 during the
same year earlier period. In addition, the Company recorded a provision
for operating losses to be incurred between the measurement date of
March 31, 2001 and the disposal date of May 15, 2001 in the amount of
$550,000.
14
PART II - OTHER INFORMATION
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K
(1) The Company filed its Form 8-K dated March 23, 2001 to report
the appointment of Terry Washburn to the Company's Board of
Directors. Financial statements were not filed.
(2) The Company filed its Form 8-K dated April 11, 2001 to report
the resignation of Gene Devine from the Company's Board of
Directors and the appointment of Clark Bundren to replace Mr.
Devine. The Company also reported the formation of a special
committee of independent Directors to consider the proposed
acquisition of Maxx Motorsports, Inc. and filed a copy of the
Letter of Intent between the shareholders of Maxx Motorsports, Inc.
and the Company. Financial statements were not filed.
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 thereunto duly authorized.
TEAM SPORTS ENTERTAINMENT, INC.
Date: May 21, 2001 By: /s/ Terry Washburn
------------------
Terry Washburn
Chief Executive Officer and
Principal Accounting Officer
15