<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from:
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Commission file number: 33-97770
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LEVEL BEST GOLF, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-3205644
(State or other jurisdiction (I.R.S. Employer
of incorporation or other organization) Identification Number)
14561 58TH STREET NORTH, CLEARWATER, FLORIDA 34620
(Address of principal offices)
(813) 535-7770
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
X Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,690,562 shares of Common
Stock, $.001 par value per share, as of May 19, 1997.
Transitional Small Business Disclosure Format (check one);
Yes X No
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Level Best Golf, Inc.
Balance Sheets
March 31, 1997 and 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash $ 0 $ 1,126
Accounts receivable $ 41,452 $ 33,586
Prepaid expenses $ 9,000
Inventory $ 787,231 $ 254,204
Total current assets $ 837,683 $ 288,916
Property, plant and equipment, at cost:
Office and production equipment $ 113,459 $ 35,539
Less: accumulated depreciation $ 14,449
$ 99,010 $ 35,539
Other assets:
Intangible assets, net $ 6,466 $ 10,229
Deposits $ 15,161
Product design and video production, net of
accum. amortization of $61,158 $ 525,366
$ 546,993 $ 10,229
$ 1,483,686 $ 334,684
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Notes payable $ 88,497
Accounts payable $ 1,089,474 $ 129,049
Accrued expenses-affiliate $ $0 $ 116,405
Loans - other $ 391,762
Accrued expenses $ 7,880
Current portion of long-term debt - related parties $ 255,241
Current portion of long-term debt $ 21,048 $ 21,048
Total current liabilities $ 1,598,661 $ 521,743
Long-term debt $ 47,380 $ 52,643
Stockholder's equity:
Preferred stock, $1000 par value, convertible,
300 shares authorized and outstanding $ 300,000
Common stock$.001 par value, 50,000,000 shares
authorized 3,690,562 and 2,266,210 shares issued and
outstanding 3,691 $ 2,666
Paid in capital $ 3,026,961 $ 623,801
Common stock subscriptions
Accumulated deficit $(3,193,007) $(1,166,169)
$ (162,355) $ (239,702)
Total liabilities and stockholder's equity $ 1,483,686 $ 334,684
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 3
Level Best Golf, Inc.
Statements of Operations
For the three months and six months ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31 Six months ended March 31
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 4,488 $ 38,805 $ 74,688 $ 167,107
Costs and expenses:
Costs of sales $ 2,763 $ 30,632 $ 40,350 $ 60,400
Common shares issued for service $ 55,000 $ 0 $ 92,043 $ 0
Selling, general and administrative $ 366,899 $ 131,690 $ 1,055,217 $ 372,237
$ 424,662 $ 162,322 $ 1,187,610 $ 432,637
Net loss from operations $ (420,174) $ (123,517) $(1,112,922) $ (265,530)
Other income and (expense):
Interest expense $ (2,951) $ (1,732) $ (10,040) $ (7,043)
Interest expense - related party $ 0 $ -- $ (31,254) $
Net loss $ (423,125) $ (125,249) $(1,154,216) $ (272,573)
Net loss per share $ (0.12) $ (0.05) $ (0.33) $ (0.10)
Per share information:
Weighted average number of
common shares outstanding 3,465,045 2,336,690 3,496,726 2,640,280
</TABLE>
See notes to unaudited condensed
financial statements.
<PAGE> 4
Level Best Golf, Inc.
Statements of Cash Flows
For the six months ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,154,216) $(272,573)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization $ 25,739 $ 2,420
Common stock issued for services and other
non cash items $ 219,918
(Increase) in receivables $ (28,314) $ (34,441)
(Increase) decrease in inventory $ (630,875) $ (11,411)
(Increase) decrease in other assets $ (6,084)
Increase in accounts payable and accruals $ 863,965 $ 14,355
Total adjustments $ 444,349 $ (29,277)
Net cash provided by (used in) operations $ (709,867) $(301,650)
Cash flows from investing activities:
Acquisition of designs and video production $ (389,110)
Acquisition of property and equipment $ (47,451) $ (22,469)
Nest cash provided by (used in ) investing activities $ (436,561) $ (22,469)
Cash flows from financing activities:
Increase (decrease) in notes payable-affiliates $ 0 $ 27,706
Proceeds from notes and long term debt $ 391,762 $ (10,522)
Repayment of long-term debt $ 17,194
Proceeds from the issuance of stock $ 690,549 $ 300,000
Net cash provided by (used in ) financing activities $ 1,099,505 $ 317,184
Net increase (decrease) in cash and cash equivalents $ (46,923) $ (6,935)
Beginning cash and cash equivalents $ 46,923 $ 8,061
Ending cash and cash equivalents $ 0 $ 1,126
Supplemental cash flow information:
Non-cash investing and financing activities:
Conversion of notes payable-affiliates
to common stock $ 903,721 $ 0
</TABLE>
See notes to unaudited condensed financial statements.
<PAGE> 5
LEVEL BEST GOLF, INC.
Notes to the Financial Statements ( Unaudited )
In the opinion of management, the accompanying financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the balance sheets of Level Best Golf, Inc. (the
"Company") as of March 31, 1997 and 1996 and the results of its operations for
the three months and the six months ended March 31, 1997 and 1996, in
accordance with generally accepted accounting principles. The results for
interim periods are not necessarily indicative of results for a full year.
These interim financial statements, including the notes thereto, are
condensed and do not include all disclosures required by generally accepted
accounting principles. Such interim period financial statements should be
read in conjunction with the Company's financial statements which are included
in the Company's 1996 Form 10-KSB.
Notes payable to affiliate decreased by $924,331 due to exchange of
the debt for 375,745 shares of Common Stock. The price and the number of
shares exchanged for the debt was determined by the average of the bid and ask
price for the stock as of the date of the exchange. The accrued expenses to
Affiliates decreased by $468,683 due to the contribution to paid-in capital of
the accrued expenses due to officers/shareholders of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Except for the historical information contained herein, the matters
discussed in this item are forward-looking statements involving risks and
uncertainties which may cause actual results to materially differ. Those risks
and uncertainties include, but are not limited to, economic, competitive,
industry and market factors affecting the Company's operations, markets,
products and prices, and other factors discussed in the Company's filings with
the Securities and Exchange Commission.
RESULTS OF OPERATION FOR THE QUARTERS ENDED MARCH 31, 1997 AND 1996
The Company experienced a net operating loss of ($423,125) and
($1,154,216) for the quarter ended and the six months ended March 31,1997
compared to ($125,249) and ($ 272,573) for the quarter ended and six months
ended March 31, 1996. Net sales and cost of sales for the quarter ended
and the six months ended March 31, 1997 were $4,488 and $2,763 and $74,688 and
$40,350, respectively, as compared to net sales and cost of
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sales of $38,805 and $30,632, and $167,107 and $60,400 for the quarter and
six months ended March 31, 1996.
During the quarter the company begin building inventory and securing
orders for its products from top retail and sporting goods chains.
Additionally, the company completed the production of the ANGLEIRON(TM) and
SCRATCH SCORE GOLF infomercials that will be aired during the second quarter of
1997.
Selling, general and administrative expenses for the quarter and the
six months ended March 31, 1997 were $366,899 and $1,055,217, respectfully, as
compared to $131,690 and $372,237 for the same periods in 1996. The increase
of $682,980 over the same six month period last year resulted from monies
expended to launch the Company's product line into retail and prepare for the
release of the infomercials during the next quarter. Additionally, cost
increases resulted from seeking capital. Some of the categories these monies
were expended for included advertising, sales promotion, consulting, and
public relations. Stock issued for services during the three months ended
March 31, 1997 was $55,000.00 for advertising and consulting.
Net cash used in operations was $709,867 for the six months ended March
31, 1997 as compared to $301,650 for the six months ended March 31, 1996.
Acquisition of assets increased by $436,561 resulting from the development of
the infomercials for the ANGLEIRON(TM) and SCRATCH SCORE GOLF. Notes payable to
affiliate decreased by $435,038 and accrued expenses affiliates decreased by
$468,683 reflecting the conversion of the affiliate debt to equity.
TRENDS AND UNCERTAINTIES
The Company continues to focus its efforts on the retail market
development of its products through presentations to major sporting goods
chains and other retailers and tradeshows. In May, 1997 the Company begins
airing infomercials for its ANGLEIRON(TM) and SCRATCH SCORE GOLF products.
Seasonal fluctuations affect the sales of the Company's products with
Father's day and the Christmas season being two strong buying periods. Also,
the spring season produces strong orders well into the summer months. Major
retailers such as Service Merchandise, The Sports Authority and Jumbo Sports
have placed orders for the Company's products. The continuation of obtaining
additional types of new business and markets is uncertain and the continued
success of any of the Company's new marketing strategies for generating
revenue is uncertain.
<PAGE> 7
Inasmuch as a major portion of the Company's activities is in the
development and marketing of golf training aids, the Company's business
operations may be adversely affected by competitors and prolonged recessionary
periods.
Liquidity and Capital Resources
The Company was in the developmental stage through the fiscal year
ended September 30, 1995. The Company will begin airing infomercials during
May, 1997. The infomercials will emphasize the Company's premier products,
the ANGLEIRON (TM) and SCRATCH SCORE GOLF, and provide brand identity for the
complete "Level Best Golf" product line.
In June, 1996 the Company entered into a 3-year lease for its current
facility at a monthly rental rate of $6,000. Other than this lease, the
Company has no material commitments for capital expenditures. The Company has
an option to buy its current facility at a price of $600,000. The Company
intends to purchase its new facility when it can obtain acceptable mortgage
financing for not less than 80% of the purchase price. The Company may elect
to pay all or part of the purchase price with the proceeds realized, if any,
from the sale of Common Stock pursuant to the exercise of outstanding Warrants,
although there is no assurance that sufficient proceeds will be received from
such exercise for such purposes.
The Company has incurred an operating loss of $1,154,216 for the six
months ended March 31, 1997 and has incurred operating losses of $1,145,195,
$1,473,182, and $385,126, respectively, for the fiscal years ended 1996, 1995
and 1994. Through the first six months of fiscal 1997, the Company has not
generated positive cash flow from operations.
At March 31, 1997 the Company had a negative working capital of
$760,978. The Company's independent auditors have qualified their opinion of
the Company's financial statements for the fiscal year ended September 30,
1996, to the effect that there is substantial doubt about the ability of the
Company to continue as a going concern.
PART II
ITEM 2. CHANGES IN SECURITIES
During January through March, 1997 the Company issued a total of
444,520 shares of its Common Stock without registering them pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). The Company
issued:
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375,745 shares to retire affiliate debt of $924,331; 44,500 shares for
services; 2,000 shares to two new board members and sold 22,275 shares for cash
at $2.75 per share. The Company issued the shares in reliance upon the
exemption from registration contained in section 4(2) of the Securities Act.
<PAGE> 9
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.
LEVEL BEST GOLF, INC.
Date: May 19, 1997 By: /s/ Curt Rodgers
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Curt Rodgers, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL STATEMENT EXTRACTED FROM BALANCE SHEET
AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FOOTNOTES AND DISCLOSURES IN THE MANAGEMENT DISCUSSION.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 83,942
<ALLOWANCES> 18,329
<INVENTORY> 787,231
<CURRENT-ASSETS> 852,844
<PP&E> 706,449
<DEPRECIATION> 75,607
<TOTAL-ASSETS> 1,483,686
<CURRENT-LIABILITIES> 1,598,661
<BONDS> 47,380
0
0
<COMMON> 3,691
<OTHER-SE> (166,046)
<TOTAL-LIABILITY-AND-EQUITY> 1,483,686
<SALES> 4,488
<TOTAL-REVENUES> 4,488
<CGS> 2,763
<TOTAL-COSTS> 2,763
<OTHER-EXPENSES> 416,861
<LOSS-PROVISION> 5,038
<INTEREST-EXPENSE> 2,951
<INCOME-PRETAX> (423,125)
<INCOME-TAX> 0
<INCOME-CONTINUING> (423,125)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (423,125)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
