`UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)
/X/    Quarterly  Report  pursuant  to  Section  13 or 15(d)  of the  Securities
       Exchange Act of 1934

                 For the Quarterly Period Ended August 31, 2002

                                       OR

/ /    Transition  Report  pursuant  to  Section  13 or 15(d) of the  Securities
       Exchange Act of 1934

                         Commission File Number: 0-25247

                              SPORTING MAGIC, INC.
        (Exact name of small business issuer as specified in its charter)

           Delaware                                              95-4675095
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)


                 7625 Hamilton Park Drive, Building #2, Suite 12
                          Chattanooga, Tennessee 37421
              (Address and zip code of principal executive offices)


       Registrant's telephone number, including area code: (423) 296-8213


            Traditional Small Business Disclosure Format (Check one): Yes /X/ No / /

            The number of shares of Registrant's  common stock,  par value $.001
per share, issued and outstanding as of October 15, 2002 was 10,999,225.






                              SPORTING MAGIC, INC.

                                TABLE OF CONTENTS

                         Part I - Financial Information

Item 1.  Financial Information..............................................................................................1

            Condensed Consolidated Balance Sheet as of August 31, 2002......................................................1
            Condensed Consolidated Statements of Operations for the three and nine months ended
                  August 31, 2001 and 2002..................................................................................2
            Condensed Consolidated Statements of Cash Flows for the nine months ended
                   August 31, 2001 and 2002.................................................................................3
            Notes to Condensed Consolidated Financial Statements............................................................4

Item 2.  Management's Discussion and Analysis or Plan of Operation..........................................................8

                           Part II - Other Information

Item 4.  Submission of Matters To a Vote of Security Holders...............................................................11

Item 6.  Exhibits and Reports on Form 8-K..................................................................................12

                                       ii





Item 1.   Financial Information

                              SPORTING MAGIC, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET

                                                                   At August 31,
                                                                       2002
                                                                   -------------
                                                                    (unaudited)
Assets

Current Assets:
   Cash ........................................................     $   151,845
   Restricted investment .......................................         277,848
   Accounts receivable, net ....................................       3,151,652
   Inventories .................................................       3,931,357
   Prepaid expenses ............................................         740,171
   Deferred taxes ..............................................         169,767
   Other current assets ........................................          44,532
                                                                     -----------
              Total current assets .............................       8,467,172
Property, plant and equipment, net .............................       1,871,455
Goodwill .......................................................         976,029
Other intangible assets, net ...................................         332,309
                                                                     -----------
              Total Assets .....................................     $11,646,965
                                                                     ===========

Liabilities and Shareholders' Equity

Current liabilities:
   Accounts payable ............................................     $ 1,796,659
   Accrued expenses and other current liabilities ..............         646,826
   Short-term debt and current maturities ......................       4,925,936
                                                                     -----------
              Total current liabilities ........................       7,369,421
   Long-term debt, less current maturities .....................       1,843,024
                                                                     -----------
              Total liabilities ................................       9,212,445
   Commitments and contingencies ...............................            --
   Stockholders' equity ........................................       2,434,520
                                                                     -----------
              Total Liabilities and Stockholders' Equity .......     $11,646,965
                                                                     ===========


The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                       1




                              SPORTING MAGIC, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   Three Months Ended August 31,
                                                   -----------------------------
                                                        2001            2002
                                                   -------------   -------------
                                                     (unaudited)     (unaudited)

Net sales ......................................   $  2,608,499    $  3,819,229
Cost of sales ..................................      1,894,876       2,481,735
                                                   ------------    ------------
Gross profit ...................................        713,623       1,337,494
General administrative and selling expenses ....        514,429       1,152,031
                                                   ------------    ------------
Operating income ...............................        199,194         185,463
Other expense ..................................        (86,491)       (113,023)
                                                   ------------    ------------
Income before provision for income taxes .......        112,703          72,440
Provision for income taxes .....................           --             9,718
                                                   ------------    ------------
Net income .....................................        112,703          62,722
                                                   ============    ============
Net income per share, basic and diluted ........   $       0.02    $       0.01
                                                   ============    ============
Weighted average shares outstanding ............      6,000,000      10,999,225
                                                   ============    ============



                                                    Nine Months Ended August 31,
                                                    ----------------------------
                                                         2001           2002
                                                    ------------    -----------
                                                     (unaudited)     (unaudited)

Net sales ........................................   $ 5,711,565    $ 7,979,656
Cost of sales ....................................     4,187,093      5,600,365
                                                     -----------    -----------
Gross profit .....................................     1,524,472      2,379,291
General administrative and selling expenses ......     1,157,349      2,460,162
                                                     -----------    -----------
Operating income .................................       367,123        (80,871)
Other expense ....................................      (249,912)      (246,401)
                                                     -----------    -----------
Income (loss) before benefit from income taxes ...       117,211       (327,272)
Benefit from income taxes ........................          --         (169,767)
                                                     -----------    -----------
Net income (loss) ................................       117,211       (157,505)
                                                     ===========    ===========
Net income per share, basic and diluted ..........   $      0.02    $     (0.02)
                                                     ===========    ===========
Weighted average shares outstanding ..............     6,000,000      9,206,791
                                                     ===========    ===========


The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                       2





                              SPORTING MAGIC, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                   Nine months ended August 31,
                                                                   ----------------------------
                                                                        2001           2002
                                                                   ------------   -------------
                                                                   (unaudited)     (unaudited)
Cash flows from operating activities:
     Net income (loss) .........................................   $   117,211    $  (157,505)
     Adjustments to reconcile net income (loss) to net cash used
     in operating activities:
     Depreciation and amortization .............................       127,377        229,638
     Bad debt expense ..........................................        87,256         69,324
     Deferred taxes ............................................          --         (169,767)
     Changes in operating assets and liabilities:
         Accounts receivable ...................................    (1,172,196)       388,506
         Inventories ...........................................      (311,920)      (667,023)
         Prepaid expenses ......................................         8,207       (420,879)
         Other assets ..........................................       (13,749)       (40,534)
         Accounts payable ......................................       413,517       (756,825)
         Accrued expenses and other liabilities ................        68,040        376,876
                                                                   -----------    -----------
               Total adjustments ...............................      (793,468)      (990,684)
                                                                   -----------    -----------
Net cash used in operating activities ..........................      (676,257)    (1,148,189)
                                                                   -----------    -----------
Cash flows from investing activities:
     Purchases of property, plant and equipment ................       (83,739)      (195,545)
     Cash paid for acquisition costs ...........................          --         (366,180)
     Cash received from acquisition ............................          --           80,846
                                                                   -----------    -----------
     Net cash used in investing activities .....................       (83,739)      (480,879)
                                                                   -----------    -----------
Cash flows from financing activities:
    Proceeds from loans and notes payable, bank ................       715,724      7,629,790
    Repayments of long terms debt, loans and notes payable, bank          --       (6,288,051)
    Due from stockholder .......................................                        8,859
    Issuance of common stock ...................................          --          325,103
                                                                   -----------    -----------
Net cash provided by financing activities ......................       715,724      1,675,701
                                                                   -----------    -----------
Net increase (decrease) in cash ................................       (44,272)        46,633
Cash, beginning of period ......................................        80,993        105,212
                                                                   -----------    -----------
Cash, end of period ............................................   $    36,721    $   151,845
                                                                   ===========    ===========

Supplemental Information:
Cash paid during the period for interest .......................   $   252,987    $   246,008
                                                                   ===========    ===========
Cash paid during the period for income taxes ...................   $      --      $      --
                                                                   ===========    ===========

Noncash Investing and Financing Activities:
Purchase of equipment through capital leases ...................   $    55,960    $   142,183
Equity securities issued in connection with the acquisition of
    CMJ Ventures, Inc. .........................................          --      $   606,200


The accompanying notes to the condensed consolidated financial statements are an
integral part of these statements.

                                       3






                              SPORTING MAGIC, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.          Organization and Operations of Company

Pursuant to the terms and conditions of a stock exchange consummated on February
1, 2002, Sporting Magic, Inc., a Delaware corporation ("SPMA"), acquired all the
issued and  outstanding  common  equity of Next,  Inc.,  a Delaware  corporation
("Next" or the  "Company")  engaged in the design,  development,  marketing  and
distribution  of branded  promotional  products and  imprinted  sportswear  (the
"Exchange").  Since  SPMA did not have any  meaningful  operations  prior to the
consummation of the Exchange,  the Exchange was treated as a recapitalization of
Next,  and accounted for on a historical  cost basis for all periods  presented.
Moreover,  the  financial  statements  set forth in this  report for all periods
prior to  February 1, 2002 are the  financial  statements  of Next.  For further
information on the Exchange,  please see the Current Report on Form 8-K filed by
the Company with the  Securities  and Exchange  Commission on February 19, 2002,
and as amended by the Current Report on Form 8-K/A filed by the Company on April
8, 2002 (collectively, the "Form 8-K").

2.          Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The  condensed  consolidated  financial  statements  contained  herein have been
prepared in accordance with generally accepted accounting principles for interim
financial statements, the instructions to Form 10-QSB and Item 310 of Regulation
S-B. Accordingly,  these financial statements do not include all the information
and footnotes  required by generally accepted  accounting  principles for annual
financial  statements.  In addition,  certain comparative figures presented have
been  reclassified  to conform the prior  year's data to the  Company's  current
financial statements.  In the opinion of management,  the accompanying condensed
consolidated   financial  statements  contain  all  the  adjustments   necessary
(consisting only of normal  recurring  accruals) to fairly present the financial
position of the Company at August 31, 2002,  and its results of  operations  and
cash flows for the three and nine months ended August 31, 2001 and 2002.

Operating  results for the nine months ended August 31, 2002 are not necessarily
indicative  of the  results  that may be  expected  for the fiscal  year  ending
November 30, 2002.

Principles of Consolidation

The accompanying  unaudited condensed  consolidated financial statements include
the accounts of the Company and its wholly owned  subsidiaries.  All significant
intercompany balances and transactions have been eliminated.

Customer Base

Historically,  the  Company's  customer  base has been  comprised  primarily  of
national and regional mass merchandise and specialty  retailers.  However,  with
the acquisition of CMJ Ventures Inc.  ("CMJ"),  which sells to over five hundred
specialty retailers,  and the introduction of additional major product lines and
distribution  channels,  such as its Motor  Sports  Division,  which  sells to a
dealer network of over nine hundred customers, the Company is actively expanding
its customer base.  For instance,  during the nine months ended August 31, 2002,
the Company  acquired  four new mass  merchant  retail  customers  and generated
approximately  90.5%  of its  sales  from  ten  customers  and new  distribution
channels  compared to three customers for the same period last year. As a result
of the this  effort,  the  Company has  lessened  its  dependence  on one of its
largest  customers,  which has been  operating as a debtor in  possession  under
Chapter 11 of the United States  Bankruptcy Code since January 2002.  During the
nine months ended August 31, 2002, sales to this customer were $2,868,151 (35.9%
of sales)  compared  to  $2,792,659  (48.9% of sales) for same period last year.
During the three  months  ended August 31,  2002,  sales to this  customer  were
$1,402,109 (36.7% of sales) compared to $1,596,152 (61.2% of sales) for the same
period last year. While the Company expects that the dependency on this customer
will continue to decrease in future periods,  there can be no assurance that the
Company's efforts will be successful.  At August 31, 2002,  accounts  receivable
from such customer was $1,385,461, all of which is within its terms and of which
$710,000  has  been  collected  to  date.  The  Company  has an  additional  net

                                       4





receivable  from this customer of $382,901,  which  resulted from sales prior to
its debtor in  possession  filing.  The Company's  management  believes that its
credit risk exposure,  based on current  information  available on the financial
strength of its customers and previously  recorded  reserves,  is limited.  Such
estimate could change in the future.

New Pronouncements

SFAS No. 144,  "Accounting for the Impairment or Disposal of Long-Lived Assets";
SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement  No. 13, and Technical  Corrections";  SFAS No. 146,  "Accounting  for
Costs  Associated with Exit or Disposal  Activities" and SFAS No.141,  "Business
Combinations,"  all became effective for the Company during 2002. The provisions
and interpretations of these pronouncements, that are applicable to the Company,
had no material effect on the Company's financial statements.

SFAS No. 142,  "Goodwill and Other  Intangible  Assets" became effective for the
Company during 2002. SFAS 142 requires,  among other things,  the discontinuance
of goodwill amortization.  In addition, the standard includes provisions for the
reclassification  of  certain  existing  recognized   intangibles  as  goodwill,
reassessment   of  the  useful   lives  of  existing   recognized   intangibles,
reclassification  of certain intangibles out of previously reported goodwill and
the identification of reporting units for purposes of assessing potential future
impairment  of  goodwill.  SFAS 142 also  requires  the  Company  to  complete a
transitional goodwill impairment test six months from the date of adoption.  The
provisions  of these  interpretations  that are  applicable  to the Company were
implemented on a prospective  basis as of January 1, 2002, which had no material
effect on the Company's financial statements.


3.          Inventories

Inventory is valued at the lower of cost or market.  Cost is  determined  by the
first-in,  first-out method, and market represents the lower of replacement cost
or net  realizable  value.  Inventories  as of August 31, 2002  consisted of the
following:

            Raw materials...........                  $      3,382,574
            Work in process.........                           218,645
            Finished goods..........                           330,138
                                                      ----------------------
                                                      $      3,931,357
                                                      ======================

4.          Deferred and Income Taxes

Income  taxes have been  computed in  accordance  with  Statement  of  Financial
Accounting  Standards No. 109,  "Accounting for Income Taxes" ("SFAS 109"). This
standard  requires,  among other things,  recognition  of future tax expenses or
benefits,   measured  using  enacted  tax  rates,  attributable  to  taxable  or
deductible  temporary  differences  between financial  statements and income tax
reporting bases of assets and liabilities.

Next had  previously  elected  to be  treated  as an "S"  corporation  under the
Internal  Revenue Code and relevant state statutes.  As a result of the Exchange
(See Note 1), the taxable  status of Next as an S corporation  was terminated as
of December 1, 2001. Accordingly, no provision or liability for federal or state
income  taxes  has been  included  in the  accompanying  condensed  consolidated
financial  statements  for the period from  December 1, 2000 through  August 31,
2001.

The ultimate realization of deferred tax assets is dependent upon the attainment
of  forecasted  results  of  operations.  Management  has taken  these and other
factors into  consideration  in recording  the  deferred tax  estimate.  The tax
effects of temporary  differences that give rise to significant  portions of the
deferred tax asset and liabilities at August 31, 2002 are as follows:

                                       5





Deferred tax asset and (liabilities):


                     Accounts receivable....................         $   142,296
                     Net operating loss carryforwards.......             211,071
                     Adoption of tax depreciation method....            (183,600)
                                                                     ------------
                     Net deferred tax asset.................         $   169,767
                                                                     ============


5.          Short Term and Long Term Debt

Short-term and long-term debt at August 31, 2002 consisted of the following:

                                      Short Term   Long Term
                                      ----------   ---------
          Revolving credit facility   $3,678,622   $     --
          Notes payable ...........    1,021,444         --
          Notes payable ...........      155,512    1,731,849
          Capital lease obligations       70,358      111,175
                                      ----------   ----------
                Total .............   $4,925,936   $1,843,024
                                      ==========   ==========

All of the Company's debt is  collateralized by various assets and guaranteed by
certain of its principal stockholders. The Company extended the maturity date of
two notes aggregating to $795,711 from May 3, 2003 to December 1, 2003.

6.          Stockholders' Equity

Stockholders' Equity is comprised of the following:

                                                           At August 31,
                                                               2002
                                                           -------------
                                                           (unaudited)
Common stock, $.001 par value; 25,000,000 shares
    authorized, 10,999,225 shares issued and outstanding   $    11,000
Additional paid in capital .............................     1,267,973
Retained earnings ......................................     1,210,797
Unearned compensation ..................................       (55,250)
                                                           -----------
Total stockholders' equity .............................   $ 2,434,520
                                                           ===========


RAE & Company ("RAE"), a financial consulting firm whose sole stockholder is
the Company's Chief Financial Officer, purchased 750,000 shares of the Company's
common stock for $325,000.

The Company  assumed the 2001 Next Stock  Option Plan (the "Next  Plan") and all
pre-existing options granted thereunder.  Pursuant to the terms of the Next Plan
and the  assumption  agreement,  any options to acquire  shares of Next's common
stock  previously  granted  under the plan  shall be  replaced  with  options to
acquire shares of the Company's common stock.  503,000 options have been granted
under the Plan,  with each option  vesting on the  two-year  anniversary  of the
grant date.  These options are subject to forfeiture  should the grantee fail to
be employed by the Company on the vesting  date and are being  amortized  over a
two year period.

On June 21, 2002, the Company amended the  non-compete  agreement it had entered
into with its former  President in  connection  with the Exchange  (see Note 1).
Under the terms of the revised agreement, the non-compete period was extended to
five years; the cash  consideration was reduced by $225,000;  the Company issued
an  additional  110,000  shares  of  common  stock;  and  the  former  President
surrendered all of his preferred stock in Next.

                                       6





7.          Earnings Per Share

The Company accounts for earnings per share ("EPS") in accordance with Statement
of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings Per Share". SFAS
128 requires the  presentation of basic and fully diluted EPS. Basic and diluted
EPS for the three month and nine month  periods  ended  August 31, 2001 and 2002
were  calculated  on the basis of the weighted  average  number of common shares
outstanding  during  such  three and nine month  periods,  divided by the income
available  to  common  stockholders.  Outstanding  stock  options  have not been
considered in the  computation  of diluted  earnings per share amounts since the
effect  of  their   inclusion   would  not  be  material.   The  effect  of  the
recapitalization of Next (See Note 1) has been given retroactive  application in
the EPS calculation. The common stock issued and outstanding with respect to the
pre-Exchange  Sporting Magic,  Inc., and other shares issued,  has been included
since the effective date of the Exchange.

8.          Recent Developments

Acquisition of CMJ Ventures, Inc.

Effective  June 1, 2002,  the Company  acquired  all the issued and  outstanding
equity capital of CMJ Ventures,  Inc., a Florida corporation  ("CMJ"), in a like
stock  exchange  for  1,400,000  shares  of the  Company's  common  stock  ("CMJ
Acquisition").  The results of  operations  of CMJ are included in the condensed
consolidated  financial  statements of the Company  commencing June 1, 2002. The
Company has provided  certain  services and sold merchandise to CMJ prior to the
effective date of the CMJ acquisition.  All intercompany  sales and transactions
have been eliminated in the condensed consolidated  statements since the date of
the acquisition.

The acquisition  was accounted for as a purchase,  and  accordingly,  assets and
liabilities  were  valued  in  terms  of  their  current  condition  as  at  the
acquisition  date.  Intangible  assets  recorded  pursuant  to  the  acquisition
valuation are subject to  adjustment,  if necessary,  over a twelve month period
from the  acquisition  date.  For further  information  on the CMJ  Acquisition,
historical,  pro  forma,  and other  financial  information,  including  but not
limited to the purchase price allocation,  please see the Current Report on Form
8-K filed by the Company with the Securities and Exchange Commission on June 17,
2002, and as amended by the Current Report on Form 8-K/A filed by the Company on
August 15,  2002.  The  following  pro-forma  condensed  combined  statement  of
operations has been prepared as if the  acquisition of CMJ was consummated as of
the beginning of each of the periods presented herein.  The pro-forma results of
operations  are not  necessarily  indicative of the combined  results that would
have been achieved had the acquisition  occurred at the beginning of the period,
nor is it necessarily  indicative of the results of operations that may occur in
the future:


                                                Pro-Forma Statement of Operations
                                                  Nine Months Ended August 31,
                                                 -------------------------------
                                                      2001             2002
                                                 -------------  ----------------
                                                  (unaudited)     (unaudited)

Net sales ....................................   $  7,003,722   $  8,350,728
Expenses .....................................      6,766,528      8,588,844
                                                 ------------   ------------
Net income (loss) ............................        237,194       (238,116)
                                                 ============   ============
Net income (loss) per share, basic and diluted   $       0.03   $      (0.02)
                                                 ============   ============
Weighted average shares outstanding ..........      7,400,000     10,136,727
                                                 ============   ============

                                       7





Item 2.     Management's Discussion and Analysis or Plan of Operation.

            Certain  statements  contained  in  this  Quarterly  Report  on Form
10-QSB,   including,   without  limitation,   statements  containing  the  words
"believe",  "anticipate,  "estimate",  "expect",  and words of  similar  import,
constitute "forward-looking statements." You should not place any undue reliance
on these forward-looking  statements.  The Company's actual results could differ
materially from those anticipated in these  forward-looking  statements for many
reasons,  including  the  risks  faced by the  Company  as  described  below and
elsewhere in this report,  and in other documents the Company has filed with the
Securities and Exchange Commission.

            The discussion and analysis below should be read in conjunction with
the unaudited condensed  consolidated interim financial statements and the notes
thereto included elsewhere in this report.

Background Information

            The  Company  designs,  develops,  markets and  distributes  branded
promotional  products and  imprinted  sportswear  throughout  the United  States
primarily under licensing agreements.

Plan of Operations

            The Company's major current customers, prior to its acquisitions and
other  expansion  programs,  have  been  comprised  primarily  of  national  and
specialty  retail chains.  These customers have highly seasonal  business cycles
with peak  revenues in the second half of the calendar  year.  Therefore,  large
portions of the Company's sales have traditionally occurred in the months of May
through November.

            To  offset  this  seasonal   pattern  of  sales,   the  Company  has
implemented the following:

     o      A strategic sales and marketing plan focused on the  diversification
            and expansion of the Company's  retail customer base,  along with an
            expansion of the products offered by the Company. For instance,  the
            Company  has  recently  acquired  the  license  to  manufacture  and
            distribute   products  bearing  various  "motor  sports"  logos  and
            trademarks  that it intends to sell to existing  customers  while at
            the same time attracting new ones.

     o      An aggressive  acquisition  program that targets companies servicing
            other segments of the promotional  products and imprinted sportswear
            industry  not  currently  serviced by the  Company,  especially  the
            corporate segment.  Such strategic  acquisition  targets will enable
            the  Company to more  effectively  utilize its  marketing  and sales
            expertise,  acquire  the  ability to cross  distribute  its  branded
            products and licenses  throughout a wider  distribution base, lessen
            its  dependency  on retail  customers and reduce  overall  operating
            costs by merging its services and distribution facilities.

Recent Developments

            As discussed above, effective June 1, 2002, the Company acquired all
of the issued and  outstanding  equity capital of CMJ in a like stock  exchange.
CMJ, a sales and marketing  company,  distributes  products  primarily under its
license  programs,  the American  Biker(R) line, which specializes in motorcycle
merchandizing,  and the Rag Tops Sportswear(R)  line, a premier line in the gift
and souvenir markets. Additionally, CMJ operates a promotional products division
that services major corporate clients and national  retailers.  CMJ's customers,
distribution  network  and  licenses  diversify,  complement,  and  bolster  the
Company's  existing  customer and  distribution  bases. The Company expects that
future  sales and  earnings  will  continue to show strong  growth.  The Company
further expects that the operations of CMJ will be integrated into the Company's
operations  within  a  reasonable  time  period  without  incurring  significant
expenses or other costs.

                                       8





Future Acquisitions

            The  Company  is  actively   engaged  in  discussions  with  various
acquisition   candidates  and  expects  to  grow  through  the   combination  of
complimentary  businesses.  Management believes that additional  acquisitions by
the Company will allow it to  diversify  its  customer  and  distribution  base;
lessen its dependence on current large customers and enhance  stockholder value.
Although the  Company's  management  believes  that these  acquisitions  will be
completed in the near future, there are no definitive agreements with respect to
any  such  acquisitions  and  there  can be no  assurances  that  they  will  be
accomplished in the near term or at all.

Results of Operations

            The  following  table  sets  forth  certain  items in the  Company's
condensed  consolidated  statement of  operations  for the three and nine months
ended August 31, 2001 and 2002. These  statements  should be read in conjunction
with the audited financial statements of Next as filed in the Form 8-K.

                                                                Three Months Ended             Nine Months Ended
                                                                     August 31,                    August 31,
                                                             ---------------------------    --------------------------
                                                                  2001          2002           2001            2002
                                                             ------------    -----------    ------------   -----------
                                                              (unaudited)    (unaudited)    (unaudited)    (unaudited)
Net sales.................................................    $ 2,608,499    $ 3,819,229    $ 5,711,565    $ 7,979,656
Cost of sales .............................................     1,894,876      2,481,735      4,187,093      5,600,365
                                                              -----------    -----------    -----------    -----------
Gross profit ..............................................       713,623      1,337,494      1,524,472      2,379,291
                                                              -----------    -----------    -----------    -----------
Operating and Other Expenses:
   General and administrative .............................       325,416        489,159        800,636      1,164,710
   Royalty and commission expense .........................       189,013        398,934        356,713        619,446
   Corporate cost .........................................          --          291,185           --          703,253
   Interest expense .......................................       103,029         96,775        291,451        254,962
   Other income ...........................................       (16,538)       (10,999)       (41,539)       (35,808)
                                                              -----------    -----------    -----------    -----------
      Total operating and other expense ...................       600,920      1,265,054      1,407,261      2,706,563
                                                              -----------    -----------    -----------    -----------
Income (loss) before income taxes .........................       112,703         72,440        117,211       (327,272)
Provision (Benefit) of income taxes .......................          --            9,718           --         (169,767)
                                                              -----------    -----------    -----------    -----------
Net income (loss)..........................................   $   112,703    $    62,722    $   117,211    $  (157,505)
                                                              ===========    ===========    ===========    ===========

Net Sales

            Net sales increased  46.4% to $3,819,229  (three months ended August
31,  2002) from  $2,608,499  (three  months ended  August 31,  2001).  Net sales
increased  39.71% to  $7,979,656  (nine  months  ended  August  31,  2002)  from
$5,711,565  (nine  months  ended  August  31,  2001).  This  growth  in sales is
primarily attributable to increased sales to the Company's four largest existing
customers  supplemented  by two new mass merchant  accounts  recently  acquired.
Additionally,  the Company  has  expanded  its product  line sales at two of its
large specialty retail customers.  Management  believes that future sales growth
will  continue  primarily  through  the  diversification  and  expansion  of the
Company's customer base and its expanded product offerings.

Cost of Sales

            Cost of sales  was  65.0% of the  Company's  net sales for the three
months ended August 31, 2002 compared to 72.6% for the three months ended August
31, 2001. This reduction in cost resulted chiefly from a reduction in the prices
paid by the Company for raw materials combined with the favorable product mix of
sales.  Cost of sales was 70.2% of the  Company's  net sales for the nine months
ended  August 31, 2002  compared to 73.3% for the nine months  ended  August 31,
2001. The decrease in cost of sales was primarily  attributable to the favorable
sales product mix.

                                       9





            Expenses  included in cost of sales were  primarily  raw  materials,
labor,  shipping supplies,  and the depreciation of both the Company's principal
manufacturing  facility  in  Indiana  and its  equipment.  Depreciation  amounts
included in the cost of sales were $145,541 for the nine months ended August 31,
2002 compared to $97,727 for the nine months ended August 31, 2001.

Operating and Other Expenses

            General and  administrative  expenses  were  $489,159  (12.8% of net
sales) for the three months ended August 31, 2002 compared to $325,416 (12.5% of
sales) for the three months ended  August 31, 2001.  General and  administrative
expenses were  $1,164,710  (14.6% of net sales) for the nine months ended August
31, 2002  compared to  $800,636  (14.0% of net sales) for the nine months  ended
August 31, 2001. This increase in expenses  primarily resulted from the addition
of new sales and  licensing  personnel  to  further  expand  and  diversify  the
Company's existing customer base.

            Royalty and commission  expenses were $398,934 (10.45% of net sales)
for the three months ended  August 31, 2002  compared to $189,013  (7.25% of net
sales) for the three  months ended  August 31,  2001.  Year-to-date  royalty and
commission  expense  as of August  31,  2002 was  $619,446  (7.8% of net  sales)
compared  to  $356,713  (6.3% of net  sales)  for the same  period in 2001.  The
increase in expense was  directly  related to sales  increase and sales mix with
higher royalty expense percentages.

            To effectively implement its growth and acquisition plan, along with
enabling the Company to meet its expanded  public  reporting  requirements,  the
Company has recently  hired a number of new full time personnel and retained the
services of additional  legal,  accounting and investment  professionals.  While
these actions have resulted in significant costs during the current period,  the
Company  believes that such costs are necessary for the Company to implement its
strategic plan of future growth and diversification.  Total expenses incurred by
the Company for such  internal and outside  professional  services for the three
and nine months ended August 31, 2002 were $291,185 and $703,253,  respectively.
The Company had no similar costs during the same period in the prior year.

            Interest  expense relates to the Company's short and long-term debt.
Interest expense was $96,775 for the three months ended August 31, 2002 compared
to $103,029 for the three months ended August 31, 2001. Year-to-date expense was
$254,962  as of August 31, 2002  compared to $291,451  during the same period in
2001. The primary reason for the reduced interest expense was a reduction in the
rates charged on the Company's debt.

            Other  income  is  comprised  primarily  of a  grant  from  a  local
municipality  where the Company  operates  its  manufacturing  and  distribution
facility.


            The provision for income taxes for the three months ended August 31,
2002 was $9,718,  whereas no income tax provision  was recorded  during the same
period in the prior year (see Note 4). The income tax provision during the three
months  ended  August 31, 2002 was  attributable  to a decrease in deferred  tax
assets recorded in the first quarter. Year-to-date, the Company has recognized a
tax benefit of $169,767,  which is  attributable  to the recognition of deferred
tax assets arising from the Company's  year-to-date  net operating loss adjusted
for by book and income tax recognition temporary differences.

Financial  Position,  Capital  Resources,  and  Liquidity  - August 31, 2002 and
November 30, 2001:

            At August 31, 2002 working  capital was  $1,097,751,  representing a
decrease of $563,956  from working  capital at November 30, 2001 of  $1,661,707.
This decrease in working  capital was primarily due to the seasonal  increase in
working  capital debt of  $2,031,702,  offset by the  conversion  of $792,670 in
short-term debt to long-term debt.

                                       10





Liquidity and Capital Resources

            The Company  has  historically  financed  its  operations  through a
combination  of  earnings  and debt.  The  Company's  principal  sources of debt
financing  are its  revolving  line of credit with AmSouth  Bank and  promissory
notes issued by First Federal Bank.  The AmSouth  credit  facility has a maximum
limitation of $3,700,000, of which $3,678,622 has been drawn upon by the Company
as of August 31, 2002. This credit  facility  matures on October 31, 2002 and is
governed by various financial covenants. The First Federal Bank Promissory Notes
consist of one  principal  sum of  $795,711  due  December  1, 2003 and  another
principal sum of $750,000 due December 5, 2002.

            The  Company  is  presently  in  discussions  with  several  lending
institutions  that have  indicated  a desire to replace  the  Company's  current
revolving  credit  facility.   In  addition,   the  Company  believes  that  its
relationship  with its  existing  banks is such that they  would be  willing  to
extend their  facilities  beyond the due date if  necessary.  Should the Company
fail to secure a new credit facility following maturity or default on any of its
promissory notes, it would lead to a materially  adverse affect on the Company's
liquidity and ability to finance operations.

            The  Company's  principal  use of  cash is for  operating  expenses,
interest and  principal  payments on its  long-term  debt,  working  capital and
capital  expenditures.  Cash used in operations for the nine months ended August
31, 2002 was $1,148,189 as compared to $676,257 for the nine months ended August
31, 2001. The increase in cash used stemmed  primarily  from  increased  working
capital expenses.

            Cash used for investing  activities was $480,879 for the nine months
ended  August 31, 2002  compared to $83,739 for the nine months ended August 31,
2001. The Company's investing  activities during these periods was primarily the
purchase of new equipment.

            Net cash provided by financing  activities  was  $1,675,701  for the
nine months ended August 31, 2002 compared to $715,724 for the nine months ended
August 31,  2001.  This net increase of $959,977  related to proceeds  from bank
loans that were offset by debt and repayment of debt.


                          PART II -- OTHER INFORMATION

Item 4.   Submission of Matters to a Vote of Security Holders

            Our Annual  Meeting  of  Stockholders  was held on August 15,  2002.
Votes were cast with  respect to the  election of six  directors of the Board of
Directors to serve until the 2002 Annual Meeting of Stockholders as follows:

                                                                   Number of Shares of Common
                                 Number of Shares of Common     Stock as to which Authority to Vote
Nominees                            Stock Voted in Favor                   was Withheld
--------                            --------------------                   ------------

Dan F. Cooke                               9,500,023                           484
William B. Hensley, III                    9,500,023                           484
Sean M. Garber                             9,500,023                           484
Ronald J. Metz                             9,500,023                           484
G. Michael Cross                           9,500,023                           484
Salvatore Geraci                           9,500,023                           484

                                       11





At the Annual Meeting, the stockholders also approved the following:

       1.     An amendment to the Company's  Certificate of  Incorporation  by a
              vote of 9,161,258  shares in favor,  503 shares against,  with the
              holders of 50 shares  abstaining.  This amendment:  (i) authorized
              the board of  directors  to change  the name of the  Company  from
              Sporting  Magic,  Inc. to Next Inc. (ii) updated the provisions of
              the Certificate of  Incorporations  to be consistent with Delaware
              law (iii) increased the authorized  common stock to 50,000,000 and
              (iv)  provided  for the  issuance  of up to  10,000,000  shares of
              "blank check" preferred stock;

       2.     Adoption  of the 2002  Stock  Option  Plan by a vote of  9,160,199
              shares in favor,  1,152  shares  against,  with the holders of 460
              shares abstaining.; and

       3.     Ratification  of the  appointment of Marcum &  Kliegman LLP as
              the  independent  auditors for the fiscal year ending November 30,
              2002 by a vote of 9,499,884  shares in favor,  417 shares against,
              with the holders of 206 shares abstaining.

Item 6.   Exhibits and Reports on Form 8-K


(a)         Exhibits

            99.1          Certfication  of Chief  Executive  Officer  and  Chief
                          Financial Officer pursuant to 18 U.S.C.  1350, Section
                          906 of the Sarbanes-Oxley Act of 2002.

(b)         Reports on Form 8-K

            The  Company  filed a Current  report  on Form 8-K on July 17,  2002
under Item 8 - Change in Fiscal Year. The Company also filed a Current Report on
Form 8-K/A on August 15, 2002 under Item 7 - Financial Statements and Exhibits.

                                   SIGNATURES

            In  accordance  with  the  requirements  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.




                                                SPORTING MAGIC, INC.

October 15, 2002                                By: /s/ Dan Cooke
                                                    ----------------------------
                                                    Dan Cooke
                                                    Chief Executive Officer

                                                By: /s/ Charles Thompson
                                                    ----------------------------
                                                    Charles Thompson
                                                    Chief Financial Officer and
                                                    Principal Accounting Officer

                                       12




                                 CERTIFICATIONS

          I, Dan Cooke,  Chairman  of the Board and Chief  Executive  Officer of
Sporting Magic, Inc., certify that:

          (1) I have reviewed this  quarterly  report on Form 10-QSB of Sporting
Magic, Inc.;

          (2) Based on my knowledge,  this quarterly report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
in order to make the statements made, in light of the circumstances  under which
such  statements were made, not misleading with respect to the period covered by
this quarterly report;

          (3)  Based  on my  knowledge,  the  financial  statements,  and  other
financial  information included in this quarterly report,  fairly present in all
material respects the financial condition,  results of operations and cash flows
of the  registrant  as of, and for,  the  periods  presented  in this  quarterly
report;

          (4) The registrant's  other  certifying  officer and I are responsible
for establishing and maintaining  disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  (a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period during which this quarterly report is being prepared;

                  (b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within ninety days prior to the filing date
of this quarterly report (the "Evaluation Date"); and

                  (c) presented in this quarterly  report our conclusions  about
the effectiveness of the Company's  disclosure  controls and procedures based on
our evaluation as of the Evaluation Date;

          (5) The registrant's  other  certifying  officer and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee of the  registrant's  board of directors  (or persons  performing  the
equivalent function):

                  (a) all significant deficiencies in the design or operation of
internal  controls  which could  adversely  affect the  registrant's  ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

                  (b)  any  fraud,  whether  or  not  material,   that  involves
management or other  employees who have a significant  role in the  registrant's
internal controls; and

          (6) The registrant's  other certifying officer and I have indicated in
this quarterly report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 15, 2002

                                          /s/ Dan Cooke
                                          --------------------------
                                          Dan Cooke
                                          Chairman of the Board and
                                          Chief Executive Officer
                                          (Principal Executive Officer)

                                       13





          I, Charles Thompson,  Chief Financial Officer of Sporting Magic, Inc.,
certify that:

          (1) I have reviewed this  quarterly  report on Form 10-QSB of Sporting
Magic, Inc.;

          (2) Based on my knowledge,  this quarterly report does not contain any
untrue  statement of a material fact or omit to state a material fact  necessary
in order to make the statements made, in light of the circumstances  under which
such  statements were made, not misleading with respect to the period covered by
this quarterly report;

          (3)  Based  on my  knowledge,  the  financial  statements,  and  other
financial  information included in this quarterly report,  fairly present in all
material respects the financial condition,  results of operations and cash flows
of the  registrant  as of, and for,  the  periods  presented  in this  quarterly
report;

          (4) The registrant's  other  certifying  officer and I are responsible
for establishing and maintaining  disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

                  (a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period during which this quarterly report is being prepared;

                  (b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within ninety days prior to the filing date
of this quarterly report (the "Evaluation Date"); and

                  (c) presented in this quarterly  report our conclusions  about
the effectiveness of the Company's  disclosure  controls and procedures based on
our evaluation as of the Evaluation Date;

          (5) The registrant's  other  certifying  officer and I have disclosed,
based on our most recent evaluation,  to the registrant's auditors and the audit
committee of the  registrant's  board of directors  (or persons  performing  the
equivalent function):

                  (a) all significant deficiencies in the design or operation of
internal  controls  which could  adversely  affect the  registrant's  ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

                  (b)  any  fraud,  whether  or  not  material,   that  involves
management or other  employees who have a significant  role in the  registrant's
internal controls; and

          (6) The registrant's  other certifying officer and I have indicated in
this quarterly report whether or not there were significant  changes in internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 15, 2002

                                         /s/ Charles Thompson
                                         --------------------------
                                         Charles Thompson
                                         Chief Financial Officer
                                         (Principal Accounting Officer)

                                       14`