UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 2003
Commission file number 000-31048
CAVALCADE OF SPORTS MEDIA, INC
------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 33-0766069
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
12268 Via Latina Del Mar, CA 92914
----------------------------------
(Address of principal executive offices)
(858) 481-2207
--------------
(Issuer's telephone number)
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 25,208,774 shares of its common stock
outstanding as of June 30, 2003.
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
QUARTERLY REPORT ON FORM 10-QSB FOR THE
QUARTERLY PERIOD ENDING JUNE 30, 2003
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets:
June 30, 2003 and December 31, 2002
Condensed Consolidated Statements of Losses:
Three and Six Months Ended June 30, 2003 and 2002
For the Period July 29, 1997 (Date of Inception) through June 30, 2003
Condensed Consolidated Statements of Deficiency in Stockholders' Equity
For the Period July 29, 1997 (Date of Inception) through June 30, 2003
Condensed Consolidated Statements of Cash Flows:
Six Months Ended June 30, 2003 and 2002
For the Period July 29, 1997 (Date of Inception) through June 30, 2003
Notes to Unaudited Condensed Consolidated Financial Information:
June 30, 2003
Item 2. Plan of Operation
Item 3. Controls and Procedures
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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (Audited)
June 30, 2003 December 31, 2002
ASSETS
Current assets:
Cash and equivalents $ 140 $ 4,295
Property, plant and equipment:
Office furniture, net 840 1,010
Other assets:
Film library, at cost 372,304 372,304
$ 373,284 377,609
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses 389,828 483,158
Other accrued liabilities 380,000 380,000
Note payable (NOTE C) 194,665 983,165
Advances from officers 189,323 184,955
Other advances 45,000 45,000
Total current liabilities 1,198,816 2,076,278
Commitments and contingencies - -
Deficiency in Stockholders' Equity:
Preferred stock, par value, $0.001 per
share; 10,000,000 shares authorized; none
issued and outstanding at March 31, 2003 and
December 31, 2002 - -
Common stock, par value, $0.001 per share;
100,000,000 shares authorized ; 21,930,514
and 18,741,014 shares issued at March 31,
2003 and December 31, 2002, respectively 25,609 18,741
Additional paid-in-capital 7,663,911 6,258,574
Deficit accumulated during development stage (8,515,052) (7,975,984)
Total deficiency in stockholder's equity (825,532) (1,698,669)
373,284 377,609
See accompanying notes to the unaudited condensed consolidated financial
Information
CAVALCADE OF SPORTS MEDIA, INC
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF LOSSES
(UNAUDITED)
For the Period July
Three Months Ended June 30, Six Months Ended June 30, 29, 1997 (Date of Inception)
2003 2002 2003 2002 through June 30, 2003
-------- -------- ------- ------- ----------------------
Costs and Expenses:
Selling, general and administrative $ 93,331 $ 746,862 $ 459,394 $ 1,122,454 $ 7,194,980
Impairment Loss - - - - 62,500
Depreciation and amortization expense 85 85 170 170 197,035
--------- --------- --------- ----------- ------------
Total costs and expenses 93,416 746,947 459,564 1,122,624 7,454,515
--------- --------- --------- ----------- ------------
Loss from operations (93,416) (746,947) (459,564) (1,122,624) (7,454,515)
-------- --------- --------- ----------- ------------
Other income (expenses) - - - 114,758
Interest income (expenses) (26,756) (56,219) (79,504) (113,283) (607,082)
--------- --------- --------- ----------- ------------
(26,756) (56,219) (79,504) (113,283) (492,324)
--------- --------- --------- ----------- ------------
Loss from continuing operations, before
income taxes and discontinued operations (120,172) (803,166) (539,068) (1,235,907) (7,946,839)
--------- --------- --------- ----------- ------------
Income (taxes) benefit - - - - -
Loss from continuing operations,
before discontinued operations (120,172) (803,166) (539,068) (1,235,907) (7,946,839)
--------- --------- --------- ----------- ------------
Loss from discontinued operations - - - - (352,905)
Income (loss) on disposal of
discontinued operations, net - - - - 78,974
--------- --------- --------- ----------- ------------
Net loss $(120,172) $ (803,166) $ (539,068) $ (1,235,907) $ (8,220,770)
--------- --------- --------- ----------- ------------
Cumulative effect of accounting
change (Note D) - (294,282) - (294,282) (294,282)
--------- --------- --------- ------------ -------------
Net loss applicable to common shares $(120,172) (1,097,448) $ (539,068) $(1,530,189) (8,515,052)
--------- --------- --------- ----------- ------------
Income (loss) per common share
(basic and assuming dilution) $ (0.00) $ (0.09) $ (0.02) $ (0.13) $ (0.83)
--------- --------- --------- ----------- ------------
Continuing operations $ (0.00) $ (0.09) $ (0.02) $ (0.13) $ (0.79)
--------- --------- --------- ----------- ------------
Discontinued operations $ - $ - $ - $ - (0.03)
Weighted average shares outstanding 24,402,251 11,913,943 22,600,420 11,732,079 10,388,361
See accompanying notes to the unaudited condensed consolidated financial
information
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2003
Preferred Stock Common Stock Additional Deficit Treasury Total
Shares Amount Shares Amount Paid in Accum During Stock
Capital Develop Stage
--------- ------ ------ ------ ------- ------------ -------- -------
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 $ - $ - $ 11,553
Net Loss - - - - - - - -
_______ _____ _________ ______ ______ __________ ______ ___________
Balance at December 31, 1997
as restated - - 12,657 12 11,541 - - 11,553
Shares issued January 1, 1998
in exchange for Gemma Global,Inc.,
valued @ $.001 per shares, as
restated - - 10 - - - - -
Shares issued December 22, 1998
to consultants in exchange for
services valued @ $.002 per shares - - 1,112,500 1,113 889 - - 2,002
Shares issued December 22, 1998
to President in exchange for debt
valued @ $.002 per shares - - 8,333,333 8,333 6,667 - - 15,000
Operating expenses incurred by
principal shareholder - - - 8,925 - - 8,925
Net Loss - - - - - (212,773) - (212,773)
_______ _____ _________ ______ ______ __________ ______ ___________
BALANCE AT DECEMBER 31, 1998 - $ - 9,458,500 $9,458 28,022 $(212,773) - $ (175,293)
======= ===== ========= ====== ====== ========== ====== ===========
Shares issued on April 13, 1999
for cash in connection with
private placement @ $1.00
per share - - 4,000 4 3,996 - - 4,000
Shares issued on April 13, 1999
to consultants in exchange for
services valued @ $1.00per share - - 180,000 180 179,820 - - 180,000
Shares issued May 28, 1999 in
exchange for services
valued @$.001 per share 855,000 855 - - - - - 855
Contribution of shares to treasury
on September 30, 1999 by principal
shareholder - - (2,821,440) - 2,821 - (2,821) -
Shares issued on November 12, 1999
for cash in connection with private
placement @ $.10 per share - - 1,000,000 1,000 99,000 - - 100,000
Release of shares held in treasury
and acquisition of Cavalcade of
Sports Network, Inc on
December 16, 1999 - - 2,821,440 - 279,323 - 2,821 282,144
Operating expenses incurred by
principal shareholder - - - - 6,000 - - 6,000
Net Loss - - - - - (438,045) - (212,773)
_______ _____ _________ ______ ______ __________ ______ ___________
BALANCE AT DECEMBER 31, 1999 855,000 $ 855 10,642,500 $10,642 598,982 $ (650,818) - $ (40,339)
======= ===== ========= ====== ======= ========== ====== ===========
See accompanying notes to the unaudited condensed consolidated financial
information
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2003
Preferred Stock Common Stock Additional Deficit Treasury Total
Shares Amount Shares Amount Paid in Accum During Stock
Capital Develop Stage
--------- ------ ------ ------ ------- ------------ -------- -------
BALANCE 855,000 $ 855 10,642,500 $10,642 598,982 $ (650,818) - $ (140,339)
Shares issued in March 2000
in exchange for debt @ $1.25
per share - - 61,798 62 77,185 - - 77,247
Shares issued March 28, 2000
in exchange for services @
$1.25 per share - - 2,100 2 2,623 - - 2,625
Shares issued April 27, 2000
in exchange for services @
$1.25 per share - - 7,500 8 9,367 - - 9,375
Shares issued May 8, 2000 in
exchange for services @
$1.25 per share - - 12,500 13 15,612 - - 15,625
Shares issued May 17, 2000 in
exchange for services @
1.25 per share - - 25,000 25 31,225 - - 31,250
Shares issued June 2000 in
exchange for debt @
$1.25 per share - - 4,000 4 4,996 - - 5,000
Shares issued June 2000 in
exchange for services @
$1.25 per share - - 17,666 18 22,065 - - 22,083
Shares issued July 25, 2000
in exchange for debt @
$1.25 per share - - 1,000 1 1,249 - - 1,250
Shares issued August 2000, in
exchange for services @
$1.25 per share - - 65,000 65 81,185 - - 81,250
Conversion of preferred stock
on September 18, 2000 (855,000) (855) - - - - - (855)
Shares issued October 13, 2000,
in exchange for services @
$1.25 per share - - 1,060 1 1,324 - - 1,325
Shares issued October 30, 2000
in exchange for services @
$1.25 per share - - 20,000 20 24,980 - - 25,000
Shares issued November 9, 2000
in exchange for services @
$1.25 per share - - 2,500 2 3,123 - - 3,125
Shares issued December 1, 2000
in exchange for services @
$1.25 per share - - 500 - 625 - - 625
Operating expenses incurred by
principal shareholder - - - - 6,000 - - 6,000
Net Loss - - - - - (856,968) - (856,968)
_______ _____ _________ ______ ______ __________ ______ ___________
BALANCE AT DECEMBER 31, 2000 - $ - 10,863,125 $10,863 880,541 $(1,507,786) - $ (616,382)
======= ===== ========= ====== ======= ========== ====== ===========
See accompanying notes to the unaudited condensed consolidated financial
information
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2003
Preferred Stock Common Stock Additional Deficit Treasury Total
Shares Amount Shares Amount Paid in Accum During Stock
Capital Develop Stage
--------- ------ ------ ------ ------- ------------ -------- -------
BALANCE FORWARD - $ - 10,863,125 $10,863 880,541 $(1,507,786) - $ (616,382)
Shares issued in
January 2001, in exchange
for services @ $1.25 per share - - 200,000 200 249,800 - - 250,000
Shares issued in April 2001,
in exchange for services @
$1.25 per share - - 120,000 120 149,880 - - 150,000
Shares issued in April 2001,
in exchange for advances from
officers @ $1.25 per share - - 100,000 100 124,900 - - 125,000
Shares issued in August 2001,
in exchange for services @
$1.25 per share - - 75,000 75 93,675 - - 93,750
Shares issued in August 2001,
in exchange for services @
$1.25 per share - - 30,000 30 37,470 - - 37,500
Fractional shares cancelled in
August, 2001 - - (152) - - - - -
Shares canceled in November 2001 - - (20,000) (20) (24,980) - - (25,000)
Shares issued in December 2001,
in exchange for services @
1.25 per share - - 63,000 63 78,687 - - 78,750
Operating expenses incurred by
principal shareholder - - - - 6,000 - - 6,000
Net Loss - - - - - (1,257,584) - (1,257,584)
_______ _____ _________ ______ ______ __________ ______ ___________
BALANCE AT DECEMBER 31, 2001 - $ - 11,430,972 $11,431 1,595,973 $(2,765,370) - $(1,157,966)
======= ===== ========= ====== ======= ========== ====== ===========
See accompanying notes to the unaudited condensed consolidated financial
information
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2003
Preferred Stock Common Stock Additional Deficit Treasury Total
Shares Amount Shares Amount Paid in Accum During Stock
Capital Develop Stage
--------- ------ ------ ------ ------- ------------ -------- -------
BALANCE FORWARD - $ - 11,430,972 $11,431 1,595,972 $(2,765,370) - $ (1,157,966)
Shares issued in January 2002,
in exchange for investment at
$1.25 per share - - 50,000 50 62,450 - - 62,500
Shares issued in March 2002, in
exchange for services at
$1.25 per share - - 250,000 250 312,250 - - 312,500
Shares issued in June 2002, in
exchange for services at
approximately $1.25 per share - - 566,700 567 757,808 - - 758,375
Shares issued in June 2002,
in exchange for debt at
$1.25 per share - - 80,000 80 99,920 - - 100,000
Shares issued in July 2002,
in exchange for services at
approximately $.3614 per share - - 21,500 22 7,749 - - 7,770
Shares issued in July 2002, in
connection with acquisition of
Cineports.com, Inc. at
approximately $.25 per share - - 4,789,582 4,790 1,192,607 - - 1,197,396
Shares issued in August 2002, in
exchange for services at
approximately $.3614 per share - - 64,000 64 23,065 - - 23,129
Shares issued in September 2002,
in exchange for services at
approximately $.3614 per share - - 300,000 300 108,120 - - 108,420
Shares issued in October 2002,
in exchange for services at
approximately $.3895 per share - - 120,000 120 46,620 - - 46,740
Shares issued in October 2002
for cash in connection with private
placement at $.2313 per share - - 540,540 541 124,459 - - 125,000
Shares issued in October 2002,
in exchange for interest at
approximately $.3895 per share - - 15,200 15 5,905 - - 5,920
Shares issued in November 2002,
in exchange for services at
approximately $.29 per share - - 50,000 50 14,450 - - 14,500
Shares issued in November 2002
for cash in connection with private
placement at $.34 per share - - 30,000 30 10,170 - - 10,200
Shares issued in November 2002
for cash in connection with
private placement at $.25 per share - - 120,000 120 29,880 - - 30,000
Shares issued in November 2002,
in exchange for debt at
$1.25 per share - - 26,000 26 32,474 - - 32,500
Shares issued in November 2002,
in exchange for interest at
$1.25 per share - - 6,520 7 8,143 - - 8,150
Shares issued in December 2002,
in exchange for services at
approximately $.4085 per share - - 280,000 280 114,100 - - 114,380
Warrants issued in connection
with acquisition of
Cineports.com, Inc. - - - - 1,051,065 - - 1,051,065
Options issued in exchange for
services rendered - - - - 661,365 - - 661,365
Net Loss - - - - - (5,210,614) - (5,210,614)
_______ _____ _________ ______ ______ __________ ______ ___________
BALANCE AT DECEMBER 31, 2002 - $ - 18,741,014 $18,741 6,258,574 $(7,975,984) - $(1,698,669)
======= ===== ========= ====== ======= ========== ====== ===========
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JULY 29, 1997 (DATE OF INCEPTION) THROUGH JUNE 30, 2003
Preferred Stock Common Stock Additional Deficit Treasury Total
Shares Amount Shares Amount Paid in Accum During Stock
Capital Develop Stage
--------- ------ ------ ------ ------- ------------ -------- -------
BALANCE FORWARD - $ - 18,741,014 $18,741 6,258,574 $(7,975,984) - $ (1,698,669)
Shares issued in January 2003
in exchange for services at
approximately $.20 per share - - 420,000 420 83,580 - - 84,000
Shares issued in January 2003
in exchange for services at
approximately $.15 per share - - 807,000 807 120,243 - - 121,050
Shares issued in January 2003 in
exchange for services at
approximately $.12 per share - - 462,000 462 54,978 - - 55,440
Shares issued in February 2003
in exchange for services
at approximately $.07 per share - - 1,100,500 1,101 75,935 - - 77,036
Shares issued in February 2003
for cash in connection with
private placement at
$.04 per share - - 200,000 200 7,800 - - 8,000
Shares issued in February 2003
in exchange for services at
approximately $.05 per share - - 200,000 200 9,800 - - 10,000
Shares issued in April 2003 in
exchange for services at
approximately $.03 per share - - 420,000 420 12,180 - - 12,600
Shares issued in April 2003
in exchange for expenses paid
by shareholders at
approximately $.03 per share - - 666,667 667 19,333 - - 20,000
Shares issued in April 2003 in
exchange for conversion of capital
notes at $1.25 per share - - 688,804 689 860,316 - - 861,005
Shares issued in April 2003 for
cash in connection with private
placement at $.04 per share - - 130,000 130 4,870 - - 5,000
Shares issued in May 2003 in
Exchange for conversion of capital
notes at $1.25 per share - - 77,739 77 97,097 - - 97,174
Shares issued in May 2003 in
exchange for services at
approximately $.05 per share - - 530,000 530 25,370 - - 25,900
Shares issued in May 2003 for
cash in connection with private
placement at $.03 per share - - 500,000 500 14,500 - - 15,000
Shares issued in May 2003 in
exchange for expenses paid
by shareholders at
approximately $.03 per share - - 665,000 665 19,335 - - 20,000
Net Loss - - - - - (539,068) - (539,068)
_______ _____ _________ ______ ______ __________ ______ ___________
BALANCE AT DECEMBER 31, 2003 - $ - 25,608,724 $25,609 7,663,911 $(8,515,052) - $ (825,532)
======= ===== ========= ====== ======= ========== ====== ===========
See accompanying notes to the unaudited condensed consolidated financial
informatioN
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Period July 29,
1997(Date of Inception) to
Six Months Ended June 30, June 30, 2003
2003 2002
Cash flows from operating activities:
Net loss for the period from continuing
operations $ (539,068) $ (1,530,189) $ (8,241,121)
Loss from discontinued operations - - (352,905)
Disposal of business segment, net - - 78,974
Adjustments to reconcile net losses to
net cash provided by (used in)
operating activities:
Cumulative effect of accounting change - 294,282 294,282
Depreciation and amortization 170 170 197,035
Organization and acquisition costs expensed - - 11,553
Common stock issued in exchange for
services (Note B) 386,026 1,020,875 2,742,678
Common stock issued in connection
with acquisition of Cineports - - 1,197,396
Common stock issued in exchange
for debt - - 233,498
Common stock issued in exchange for
interest (Note B and C) 169,679 - 183,749
Preferred stock issued in exchange
for services - - 855
Conversion of preferred stock - - (855)
Stock options issued in exchange
for services rendered - - 661,365
Warrants issued in connection
with acquisition of Cineports - - 1,051,065
Write off of acquired asset - - 5,000
Write off of un-collectable other
receivable - - 30,000
Debt forgiveness from creditors - - (139,992)
Write off of capitalized
production costs - - 150,273
Write off of other investment
previously paid with common
stock (Note B) - - 62,500
Expenses paid by principal
shareholder - - 26,925
Expenses paid by shareholders in
exchange for common stock 40,000 - 65,000
(Increase) decrease in other receivable - - (30,000)
Increase (decrease) in accounts payable
and accrued expenses, net (93,330) 105,088 300,240
---------- --------- ---------
Net cash used in operating activities (36,523) (109,774) (1,472,485)
Cash flows from 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 activities - - (149,563)
Cash flows from financing activities:
Advances from officer, net of repayments 4,368 13,567 189,323
Other advances, net - - 45,000
Proceeds from issuance of
notes payable - 31,250 1,115,665
Proceeds from issuance of
common stock (Note B) 28,000 50,000 272,200
---------- --------- ---------
Net cash provided by financing activities 32,368 94,817 1,622,188
Net increase (decrease) in cash and
equivalents (4,155) (14,957) 140
Cash and cash equivalents at the
beginning of the period 4,295 15,459 -
Cash and cash equivalents at the end
of the period $ 140 $ 502 $ 140
See accompanying notes to the unaudited condensed consolidated financial
information
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Period July 29,
1997(Date of Inception) to
Six Months Ended June 30, June 30, 2003
2003 2002
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the period for interest $ - $ - $ -
Cash paid during the period for taxes - - -
Common Stock issued for services 386,026 1,020,875 2,742,678
Common Stock issued in connection with
acquisition of Cineports - - 1,197,396
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 - - 233,498
Common stock issued in exchange
for interest 169,679 - 183,749
Stock options issued in exchange
for services rendered - - 661,365
Warrants issued in connection with
acquisition of Cineports - - 1,051,065
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 the unaudited condensed consolidated financial
information
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2003
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
- -------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Accordingly, the results from operations for the six-month period ended June 30,
2003, are not necessarily indicative of the results that may be expected for the
year ended December 31, 2003. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated December 31, 2002
financial statements and footnotes thereto included in the Company's SEC Form
10-KSB.
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 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, 2003, the Company has accumulated losses of $8,515,052.
The consolidated financial statements include the accounts of Cavalcade of
Sports Media, Inc. and its wholly-owned subsidiaries, Cavalcade of Sports
Network, Inc, Cineports.com, Inc., Sports Broadcasting Network, Inc., and Ethnic
Broadcasting Company, Inc. Significant intercompany transactions and accounts
have been eliminated in consolidation.
Reclassification
- ----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
Stock Based Compensation
- --------------------------
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation-Transition and
Disclosure-an amendment of SFAS 123." This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in APB Opinion No. 25
and related interpretations. Accordingly, compensation expense for stock options
is measured as the excess, if any, of the fair market value of the Company's
stock at the date of the grant over the exercise price of the related option.
The Company has adopted the annual disclosure provisions of SFAS No. 148 in its
financial reports for the year ended December 31, 2002 and for the quarter ended
June 30, 2003. The Company has no awards of stock-based employee compensation
issued and outstanding at June 30, 2003.
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2003
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements
- -------------------------------
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES. SFAS 149 amends SFAS No. 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The adoption of SFAS 149 will not
have a material impact on the Company's results of operations or financial
position.
In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL
INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS 150
establishes standards on the classification and measurement of certain financial
instruments with characteristics of both liabilities and equity. The provisions
of SFAS 150 are effective for financial instruments entered into or modified
after May 31, 2003 and to all other instruments that exist as of the beginning
of the first interim financial reporting period beginning after June 15, 2003.
The adoption of SFAS 150 will not have a material impact on the Company's
results of operations or financial position.
NOTE B - CAPITAL STOCK
The Company has authorized 10,000,000 shares of preferred stock, with a par
value of $.001 per share. As of June 30, 2003, the Company has no preferred
stock issued and outstanding. The company has authorized 100,000,000 shares of
common stock, with a par value of $.001 per share. As of June 30, 2003 and
December 31, 2002, the Company has 25,608,724 and 18,741,014 shares of common
stock issued and outstanding, respectively.
In January 2003, the Company issued an aggregate of 1,689,000 shares of common
stock to consultants for services in the amount of $260,490. All valuations of
common stock issued for services were based upon the value of the services
rendered, which did not differ materially from the fair value of the Company's
common stock during the period the services were rendered.
In February 2003, the Company issued an aggregate of 1,300,500 shares of common
stock to consultants for services in the amount of $87,036. All valuations of
common stock issued for services were based upon the value of the services
rendered, which did not differ materially from the fair value of the Company's
common stock during the period the services were rendered. In addition, the
Company issued an aggregate of 200,000 shares of common stock in exchange for
$8,000 net of costs and fees.
In April 2003, the Company issued an aggregate of 420,000 shares of common stock
to consultants for services in the amount of $12,600. All valuations of common
stock issued for services were based upon the value of the services rendered,
which did not differ materially from the fair value of the Company's common
stock during the period the services were rendered. In addition, the Company
issued an aggregate of 130,000 shares of common stock in exchange for $5,000 net
of costs and fees. The Company also issued an aggregate of 666,667 shares of
common stock to shareholders in exchange for operating expenses of $20,000
previously paid by the shareholders.
In May 2003, the Company issued an aggregate of 530,000 shares of common stock
to consultants for services in the amount of $25,900. All valuations of common
stock issued for services were based upon the value of the services rendered,
which did not differ materially from the fair value of the Company's common
stock during the period the services were rendered. In addition, the Company
issued an aggregate of 500,000 shares of common stock in exchange for $15,000
net of costs and fees. The Company also issued an aggregate of 665,000 shares of
common stock to shareholders in exchange for operating expenses of $20,000
previously paid by the shareholders.
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2003
(UNAUDITED)
NOTE B - CAPITAL STOCK (CONTINUED)
During April and May 2003, the Company issued an aggregate of 766,543 shares of
common stock at $1.25 per share to its capital note holders in exchange for
conversion of $788,500 of capital notes and $169,679 of accrued interest (see
Note C).
NOTE C - NOTES PAYABLE
Notes payable at June 30, 2003 and December 31, 2002 are as follows:
June 30, 3003 December 31, 2002
------------- -----------------
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. $ 11,000 $ 457,000
12 % convertible subordinated payable, unsecured and due
December 31, 2001; 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, 2001, then interest accrues at 18% per annum
until paid in full. The Company is in default under the terms
of the Note Agreements. - 342,500
12 % convertible subordinated payable, unsecured and due
December 31, 2002; 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, 2002, then interest accrues at 18% per annum
until paid in full. The Company is in default under the terms
of the Note Agreements. 31,250 31,250
Note payable on demand to accredited investor; interest
payable monthly at 18% per annum; unsecured; guaranteed by
the Company's President 52,415 52,415
Note payable on demand to accredited investor; interest
payable monthly at 18% per annum; unsecured; guaranteed
by the Company's President 100,000 100,000
------- -------
194,665 983,165
Less: current portion (194,665) (983,165)
--------- -------
$ - $ -
============= ============
During April and May 2003, the Company issued an aggregate of 766,543 shares of
common stock at $1.25 per share to its capital note holders in exchange for
conversion of $788,500 of capital notes and $169,679 of accrued interest. As of
June 30, 2003, accrued interest remained unpaid approximately $240,000. The
Company plans to issue additional shares of common stock in the third quarter of
2003 to its Capital Note holders to fully repay the Capital Notes and all unpaid
accrued interest in connection with the notes.
CAVALCADE OF SPORTS MEDIA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
JUNE 30, 2003
(UNAUDITED)
NOTE D - GOODWILL AND OTHER INTANGIBLE ASSETS - ADOPTION OF STATEMENT 142
In July 2001, the Financial Accounting Standards Board 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). SFAS No. 141 addresses financial accounting
and reporting for business combinations. This statement requires the purchase
method of accounting to be used for all business combinations, and prohibits the
pooling-of-interests method of accounting. This statement is effective for all
business combinations initiated after June 30, 2001 and supercedes APB Opinion
No. 16, "Business Combinations" as well as Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises."
SFAS No. 142 addresses how intangible assets that are acquired individually or
with a group of other assets should be accounted for in financial statements
upon their acquisition. This statement requires goodwill amortization to cease
and for goodwill to be periodically reviewed for impairment for fiscal years
beginning after December 31, 2001. SFAS No. 142 supercedes APB Opinion No. 17,
"Intangible Assets." The Company adopted the provisions of this standard for its
second quarter of fiscal 2002.
Upon adoption of SFAS 142 in the second quarter of 2002, the Company recorded a
one-time, non-cash charge of approximately $294,282 to reduce the carrying value
of its goodwill. Such charge is non-operational in nature and is reflected as a
cumulative effect of an accounting change in the accompanying consolidated
statement of operations. In calculating the impairment charge, the fair value of
the impaired reporting unit was estimated at the fair value of assets underlying
the business, thereby eliminating the goodwill element entirely.
The following table presents the impact of SFAS 142 on net income (loss) and net
income (loss) per share as SFAS 142 been in effect for the quarter and first six
months ended June 30, 2002:
For the Three Months Ended June 30, For the Six Months Ended June 30,
2003 2002 2003 2002
Net Loss $ (120,172) $ (1,097,448) $ (539,068) $ (1,530,189)
Adjustments:
Amortization of goodwill - - - -
Impairment of goodwill - 294,282 - 294,282
Adjusted net (loss) $ (120,172) $ (803,166) $ (539,068) $ (1,235,907)
Shares used to compute
basic and diluted net
loss per common share 24,402,251 11,913,943 22,600,420 11,732,079
Adjusted basic and
diluted net loss per
share $ (0.00) $ (0.07) $ (0.02) $ (0.11)
Reported basic and diluted net
loss per common share $ (0.00) $ (0.09) $ (0.02) $ (0.13)
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 amended annual report (10-KSB) dated May 13, 2003
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. Several important factors 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.
Because 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
2003 as the Company transitions from a development stage company to an active
growth and acquisition stage company.
Costs and Expenses
- ------------------
From our inception through June 30, 2003, we have not generated any revenues. We
have incurred losses of $120,172 during this period, as compared with losses of
$803,166 during the second quarter of 2003 (before cumulative effect of change
in accounting). 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 June 30, 2003, we had a working capital deficit of $1,198,676. As a result
of our operating losses from our inception through June 30, 2003, we generated a
cash flow deficit of $1,472,485 from operating activities.Cash flows used in
investing activities was $ 149,563 during the period July 29, 1997 (date of
Company's inception) through June 30, 2003. We met our cash requirements during
this period through the private placement of $ 272,200 of common stock, $
1,115,665 from the issuance of convertible notes (net of repayments and costs),
and $ 234,323 from advnaces from the Company's prinicpal shareholders and
others.
THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS HAVE STATED IN THEIR
REPORT INCLUDED IN THE COMPANY'S DECEMBER 31, 2002 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.
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. 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.
By adjusting its operations and development to the level of capitalization,
Management believes it has sufficient capital resources to meet projected cash
flow deficits. 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.
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 sale of any material property , plant or equipment
during the next 12 months. We do not anticipate the acquisition of any material
property, plant or equipment during the next 12 months.
The Company intends to aggregate more than 10,000 hour of vintage sports
programming by purchase or license, and presently owns approximately 7,500, with
access to an additional 2,500 hours. 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.
Number of Employees
- -------------------
From our inception through the period ended June 30, 2003, 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 during
the fourth quarter of 2003. 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 May 13, 2003 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.
Item 3. Controls and Procedures
Based on the evaluation by Mr. Litwak, President and Chief Financial Officer of
the Company, of the effectiveness of the Company's disclosure controls and
procedures conducted as of a date within 90 days of the filing date of this
quarterly report, Mr. Litwak concluded that, as of the evaluation date, (i)
there were no significant deficiencies or material weaknesses of the company's
disclosure controls and procedures, (ii) there were no significant changes in
the internal controls or in other factors that could significantly affect
internal controls subsequent to the evaluation date, and (iii) no corrective
actions were required to be taken.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
With the exception of the actions described below, we are not aware of any legal
proceedings pending, threatened or contemplated against any of our officers or
directors, respectively, in their capacities as such.
On March 5, 2003, an action went before the Supreme Court of the State of New
York, Nassau County on entitled Arthur Muchnick et. ano v. Cavalcade of Sports
Media, Inc. et ano (Index No. 157350/02), in which the Court granted summary
judgment in favor of Mr. and Mrs. Muchnick and against Cavalcade in the amount
of $35,774.16 plus interest at 18% per annum from Sefports Media, Inc. et ano
(Index No. 15737/02) the Court granted summary judgment in favor of Mr. and Mrs.
Zabon against Cavalcade in the amount of $35,774.16 plus interest at 18% per
annum from September 4, 2002. In addition, in the Zabon action, the Court also
awarded summary judgment personally against Mr. Ed Litwak in the amount of
$25,000 plus interest.
Item 2. Changes in Securities
During the month of April, 2003, the Company issued 130,000 shares to an
individual in exchange for a $5,000 loan. This issuance was considered exempt
from registration by reason of Section 4(2) of the Securities Act of 1933. On
April 14, 2003, we issued 666,667 shares to an individual in exchange for
financial and advisory services. This issuance was also considered exempt from
registration by reason of Section 4(2) of the Securities Act of 1933.
On May 20, 2003, we issued 665,000 shares of our Common Stock to three
shareholders in exchange for their cash contribution to the Company's operating
expenses. These issuances were considered exempt from registration by reason of
Section 4(2) of the Securities Act of 1933.
On June 3, 2003, we issued 100,000 shares to an individual in exchange for
a $5,000 loan. This issuance was considered exempt from registration by reason
of Section 4(2) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
Exhibit 31: Certification pursuant to Sarbanes-Oxley, Section 302
Exhibit 32: Certification pursuant to Sarbanes-Oxley, Section 906
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
CAVALCADE OF SPORTS MEDIA, INC.
Date: August 13, 2003
By: /s/ Ed Litwak
Ed Litwak, President