U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OF 15(D) OF THE
EXCHANGE ACT
For the transition period from _____________________ to __________________
Commission file number 333-61533
PROFORM GOLF, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-1334921
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5335 WEST 48TH AVENUE, DENVER, COLORADO 80212
(Address of principal executive offices)
(303) 458-1000
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
7,154,915 SHARES OF COMMON STOCK, $.0001 PAR VALUE, AS OF
SEPTEMBER 30, 2000
Transitional Small Business Disclosure Format (check one); Yes No X
Exhibit index on page 15 Page 1 of 18 pages
<PAGE>
PROform golf, inc.
(fka Proformance Research Organization, Inc.)
Balance Sheet
September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets
Cash $ 111,731
Accounts receivable 6,000
Due from employees 4,760
Prepaid expenses 18,625
------------
Total current assets 141,116
------------
Property and equipment - net of accumulated depreciation 79,597
Other assets 312
------------
$ 221,025
============
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current liabilities
Accounts payable $ 361,399
Accrued expense 365,540
Current portion of note payable 10,733
Due to employee 5,476
Notes and bonds payable 69,844
Notes and bonds payable, related parties 373,047
Deferred revenue and deposits payable 393,505
------------
Total current liabilities 1,579,544
------------
Long term debt
Bonds payable 221,000
Bonds payable, related parties 473,431
Notes payable 3,779
------------
Total long term debt 698,210
------------
Commitments and contingencies
Stockholders' deficiency
Preferred stock, Series A, convertible, cumulative, $.0001 stated value,
1,000,000 shares authorized, none issued and outstanding -
Preferred stock, Series B, convertible, cumulative, $.0001 stated value,
1,000,000 shares authorized, none issued and outstanding -
Preferred stock, Series C, convertible, cumulative, $.0001 stated value,
2,000,000 shares authorized, none issued and outstanding -
Common stock, $.0001 par value, 20,000,000 shares authorized,
7,154,915 shares, issued and outstanding 715
Additional paid in capital 6,446,556
Accumulated deficit (8,504,000)
------------
Total stockholders' (deficiency) (2,056,729)
------------
$ 221,025
============
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
PROform golf, inc.
(fka Proformance Research Organization, Inc.)
Statements of Operations
For the nine months and three months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
Nine months Ended Three months Ended
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 703,142 $ 759,169 $ 47,062 $ 333,652
Cost of revenues 279,643 176,865 111,151 62,916
------------ ------------ ------------ ------------
Gross (loss) profit 423,499 582,304 (64,089) 270,736
------------ ------------ ------------ ------------
Operating expenses
Sales, general and administrative 1,743,471 1,988,760 594,454 646,120
Depreciation ` 11,120 6,005 3,710 900
------------ ------------ ------------ ------------
Total operating expenses 1,754,591 1,994,765 598,164 647,020
------------ ------------ ------------ ------------
Operating (loss) (1,331,092) (1,412,461) (662,253) (376,284)
Interest expense 129,728 66,381 38,414 17,091
------------ ------------ ------------ ------------
(Loss) from continuing operations (1,460,820) (1,478,842) (700,667) (393,375)
Discontinued operations
(Loss) from operations of Team Family segment - (1,700) - -
------------ ------------ ------------ ------------
Net (loss) $(1,460,820) $(1,480,542) $ (700,667) $ (393,375)
============ ============ ============ ============
Per share information
Weighted average shares outstanding 5,807,304 4,191,529 6,350,848 4,462,532
============ ============ ============ ============
(Loss) per common share
(Loss) from continuing operations $ (0.25) $ (0.35) $ (0.11) $ (0.09)
(Loss) from discontinued operations NIL NIL NIL NIL
------------ ------------ ------------ ------------
Net (loss) per common share $ (0.25) $ (0.35) $ (0.11) $ (0.09)
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
PROform golf, inc.
(fka Proformance Research Organization, Inc.)
Statements of Cash Flows
For the nine months ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(1,460,820) $(1,480,542)
Adjustments to reconcile net loss
to net cash (used in) operating activities:
Depreciation and amortization 11,120 6,005
Changes in assets and liabilities 136,334 671,998
------------ ------------
Net cash (used in) operating activities (1,313,366) (802,539)
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (24,432) (7,599)
------------ ------------
Net cash (used in) investing activities (24,432) (7,599)
------------ ------------
Cash flows from financing activities:
Proceeds from notes and bonds payable, related party 290,000 842,152
Payment on notes and bonds payable, related party (170,011) -
Net proceeds from issuance of preferred stock series C - 66,667
Net proceeds from issuance of common stock 791,040 63,333
Proceeds from note and bonds payable 565,000 -
Payments on note and bonds payable (26,500) (17,725)
------------ ------------
Net cash provided by financing activities 1,449,529 954,427
------------ ------------
Net increase in cash 111,731 144,289
Beginning - cash - 4,770
------------ ------------
Ending - cash $ 111,731 $ 149,059
============ ============
Non-cash transactions:
Common stock issued in consideration for loans $ 1,994,500 $ -
Common stock issued in consideration for services rendered $ 495,000 $ -
Cash paid for:
Interest $ 29,133 $ 1,120
Income taxes $ - $ -
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
PROform golf, inc.
(fka Proformance Research Organization, Inc.)
Notes to Unaudited Financial Statements
ACCOUNTING POLICIES
Basis of presentation - The accompanying unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and Item 310 (b) of Regulation S-B. 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 only of normal recurring adjustments)
necessary for a fair presentation of the financial information for the periods
indicated have been included. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year. For further information, refer to the financial statements and notes
therto, included in the Company's Form 10-KSB for the year ended December 31,
1999.
Net loss per share - The net loss per share amounts are based on the weighted
average number of common shares outstanding for the period. Potential common
shares and the computation of diluted earnings per share are not considered, as
their effect would be anti-dilutive.
NOTES AND BONDS PAYABLE, RELATED PARTY
Pursuant to agreements entered into $1,689,500 of the notes and bonds payable
converted to the Company's $0.0001 par value common stock on August 11,2000, the
effective date of an offering allowing for the public trading of the $0.0001 par
value common stock (see Stockholders' Equity - Common Stock).
Additionally, pursuant to agreements entered into $205,000 of notes payable
converted to the Company's $0.0001 par value common stock during the quarter
ended September 30, 2000.
STOCKHOLDERS' EQUITY
Preferred Stock
During the three months ended September 30, 2000, 202,000 shares of $0.0001 par
value preferred stock was automatically converted into 202,000 shares of $0.001
par value common stock.
Common Stock
On August 11, 2000 the Company completed a registration of approximately
2,839,800 shares of its $.0001 par value common stock to allow public trading of
those securities. Of the shares registered, 747,800 shares were issued to
holders of $1,689,500 of convertible notes payable and 202,000 shares were
issued to holders of the Company's Series "C" Preferred stock. Additionally,
5
<PAGE>
PROform golf, inc.
(fka Proformance Research Organization, Inc.)
Notes to Unaudited Financial Statements
(continued)
690,000 existing common shares and 1,200,000 shares underlying warrants to
purchase common shares were included in the registration.
During the three months ended September 30, 2000 the holders of notes payables
in the amount of $205,000 converted their notes into 205,000 shares of $0.0001
par value common stock.
Additionally, during the three months ended September 30, 2000 accrued expenses,
due to various individuals, totaling $190,000 were converted to 190,000 shares
of $0.0001 par value common stock.
CONTINUING LOSSES, DEFICIT IN EQUITY AND NEGATIVE WORKING CAPITAL
The financial statements have been prepared in conformity with generally
accepted accounting principles, which contemplates continuation of the company
as a going concern. However, the Company has sustained substantial operating
losses in recent years. In addition, the Company has used substantial amounts of
working capital in its operations. Further, at September 30, 2000, current
liabilities exceeded current assets by $1,438,428 and total liabilities exceed
total assets by $2,056,729.
These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The ability of the Company to continue operations
as a going concern is dependent upon its success in (1) obtaining additional
capital; (2) paying its obligations timely; and (3) ultimately achieving
profitable operations. The financial statements do not include any adjustments,
which might result from the outcome of these uncertainties.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
Over the past three and a half years, we have expanded from five
Destination Golf Schools to twenty-six Destination Golf Schools, which are under
contract for full or partial year operation. Recently, management has decided to
redirect its efforts towards acquisitions and the establishment of Learning
Centers.
Management believes that there are many single-location golf school and
multiple-site golf school operations whose owners may see certain advantages to
being part of a larger organization with several locations. Management believes
that we can acquire such existing golf schools using a combination of stock and
as little cash as possible. We believe the acquisition of currently operating
golf schools will significantly increase our revenue base. We are currently in
various stages of discussions with approximately nineteen companies that
represent almost forty sites. However, as of the date of this report, there are
no understandings, agreements, or arrangements for any acquisitions. With the
appropriate financing, our plan is to expand to 200 Destination Golf Schools
over the next three years.
As of September 30, 2000, we had twenty-one distributors covering
thirty-two of 100 territories. Our distributors sell our classes and Premium
Links(TM) packages. We believe that adding additional sites makes our Premium
Links(TM) packages more desirable because it enables corporate purchasers to
redeem the lessons at more locations nationwide. In order to distinguish
ourselves from our competition, we made a strategic decision to open several
sites for our Destination Golf Schools, despite the fact that there are certain
one-time expenses associated with opening each site, and despite the fact that
our existing sites were not operating at capacity.
For each Destination Golf School, we employ a site manager and a number
of certified instructors based on anticipated demand. We provide training for
our site managers and certified instructors at our expense. We believe these
steps are necessary to establish the infrastructure to achieve our goal of
becoming the world's largest golf school. Our business plan and infrastructure
have been developed in an attempt to capitalize upon economies of scale which we
believe we can achieve through acquisitions of additional golf schools. At our
present stage of development, our operations are too small to benefit from these
economies of scale.
Originally, most site contracts for our Destination Golf Schools
provided for a fixed amount of monthly rent. As of September 30, 2000, all of
our site contracts provide for rent on a per student basis, reducing our fixed
costs. In the future, we intend to negotiate only contracts which provide for
rent on a per student basis. We have also attempted to reduce our expenses by
reducing the number of full-time employees and relying upon distributors to
market and sell our products. We believe this, coupled with asking our creditors
to convert promissory notes into equity investments, attempting to increasing
our revenues, and seeking additional equity investments, will alleviate our cash
flow problem which resulted from our delay in financing.
7
<PAGE>
Our Destination Golf Schools have opened at varying times over the past
three and a half years. Management expects decreased revenues from Destination
Golf School operations in May and September each year. We close down some of our
warm weather sites in May, with the staff of those sites moving to a summer
site, and close our summer sites in September, with the staff returning to their
warm weather sites. In each case, we expect a one week lag between the closing
of one site and the opening of the other site. As of September 30, 2000, our 26
Destination Golf Schools remained under contract for full or partial year
operation. Also, our operations are subject to the effects of inclement weather
from time to time even during the seasons that they are open. As a result of
changes in the number of facilities open from period to period, closing certain
of the Destination Golf Schools during local off-seasons, and overall
seasonality of the golf business, results of operations for any particular
period may not be indicative of the results of operations for any other period.
As of September 2000, management has made a strategic decision to
access [LICENSE?] the rights to our teaching curriculum to entrepreneurs to be
utilized at an individual Learning Center. To date the Company has granted five
licenses of such rights. The establishment of Learning Centers provides for
multiple points of purchase within a limited geographical area in comparison to
a "distributorship". [WHAT ARE THE MULTIPLE POINTS OF PURCHASE] The Learning
Center will also serve as a point of redemption for Premium Links(TM).
We have entered into a strategic alliance with the "Saturday Series Pro
Am," a Professional/Amateur ("Pro Am") event. The Pro Am recognized that many
touring professionals do not make "the cut" at major tour stops around the
nation. By offering a Pro Am tournament event on Saturdays, the Pro-Am provides
corporate members across the nation the opportunity to play with touring
professionals. Proceeds from the event offset travel and lodging costs incurred
by professionals while qualifying for various events. We intend to combine our
corporate marketing efforts and create executive golf outing packages that will
result in revenues for both companies.
In an effort to reduce interest expenses and debt payments, some of the
persons to whom we have issued promissory notes agreed to convert those notes
into common stock. On August 11, 2000, the date our registration statement was
declared effective by the Securities and Exchange Commission, those notes were
converted to shares of our common stock.
RESULTS OF OPERATIONS
NET LOSS. We incurred net losses of $700,667 and $1,460,820 for the
three and nine months ended September 30, 2000, as compared to losses of
$393,375 and $1,480,542 for the comparable 1999 fiscal periods, an increase of
approximately 78% during the comparable three- month period and a decrease of
approximately 1% during the comparable nine-month period. The increase in the
three-month loss for 2000 is due primarily to decreased revenues during the
period, which were primarily the result of the Company's increased focus and
effort on acquiring competing golf schools. In addition, costs of revenues
during the three-months ended September 30, 2000 were $111,151, compared to
$62,916 during the comparable 1999 period. The increase in the Company's
revenues was due primarily to the expanded number of schools with fewer
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<PAGE>
students attending. Revenues decreased by $56,027 in the current year, but
operating expenses also decreased by $240,174. The decreased nine-month net loss
is due primarily to decreased operating expenses during the 2000 period.
Operating expenses decreased by 12% during the nine-months ended September 30,
2000, from $1,994,765 in 1999 to $1,754,591 in 2000.
TOTAL REVENUE. We had total revenue of $703,142 for the nine-months
ended September 30, 2000, compared to $759,169 of total revenue for the
comparable 1999 fiscal period. The decrease in total revenue was attributable
primarily to management's decision to focus on acquiring other golf schools and
licensing our teaching curriculum, rather than selling classes and
distributorships. Also, as explained below in "Seasonality," we experience
increased activity in the winter months. As explained above, revenues for the
three-months ended September 30, 2000 were $47,062, compared to $333,652,
showing an 86% decrease from last year, due to a decrease in the number of
classes sold which was the result of management focusing its efforts on the
"Saturday Series" program. Also, the decrease during 2000 reflects fewer
distributorship sales during the period.
COST OF REVENUE. Cost of revenues for the nine-months ended September
30, 2000 was $279,643 or 40% of total revenue, compared to $176,865 or 23% of
total revenue for the 1999 period. Cost of revenues consists primarily of
instructor salaries and site fees (calculated on a "per head" basis). Cost of
revenues increased as a percentage of total revenues for the three months ended
September 30, 2000 (236% in 2000 compared to 19% in 1999) due primarily to the
expanded number of schools open during the 2000 period with fewer students. The
Company was unable to maximize its profitability due to lower student/instructor
ratios. Management believes the acquisition of existing schools will address
this problem.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, consisting primarily of marketing and advertising
expenses, expenses associated with recruiting and training Destination Golf
School site managers and instructors, salaries for administrative, sales and
marketing staff, and rent at our headquarters, decreased slightly to $1,754,591
for the nine-months ended September 30, 2000 from $1,994,765 for 1999, and
$598,164 for the three-months ended September 30, 2000 from $647,020 for 1999.
LIQUIDITY AND CAPITAL RESOURCES
The cash requirements of funding our operations and expansion have
exceeded cash flow from operations. At September 30, 2000, our working capital
deficiency was $1,438,428, as compared to $3,206,485 at December 31, 1999. To
date, we have satisfied our capital needs primarily through debt and equity
financing.
At September 30, 2000, short-term notes payable and bonds was $442,891,
as compared to $2,034,500 at December 31, 1999. The decrease was due to the
conversion of this debt into equity as explained below.
We filed a registration statement for a public offering, which was
declared effective in February 1999. Due to material changes during the term of
the offering, we did not complete that
9
<PAGE>
offering. Since we were in need of cash for ongoing operations, we incurred
additional short-term debt, sold Series C preferred stock and common stock, and
issued warrants exercisable for shares of common stock. We determined that it
would be in our best interests not to proceed with an initial public offering,
but instead to register shares to be issued to our creditors, holders of the
Series C preferred stock, certain common shareholders, and the common shares
issuable upon exercise of certain warrants. Our registration statement was
declared effective by the Securities and Exchange Commission on August 11, 2000.
On that date, all of the outstanding shares of Series C preferred stock were
converted automatically into 202,000 shares of common stock. Additionally, on
August 11, 2000, $1,689,500 in short-term notes payable and bonds was paid by
converting the debt into 747,800 shares of common stock.
During the three months ended September 30, 2000, $205,000 of debt was
paid through the issuance of 205,000 shares of restricted common stock which was
not registered.
During the period, creditors in the amount of $190,000 agreed to settle
their accounts payable for 190,000 shares of the Company's $.0001 par value
Common Stock.
Of the $698,210 in long-term debt outstanding at September 30, 2000,
$473,431 is payable to persons who are stockholders in the Company, and bears
interest at a fixed rate of 8%, is unsecured and is convertible (principal and
unpaid interest) into our common stock at a rate of $1.00 per share at anytime.
The notes are due on January 1, 2003; however, the holders of the notes may
require us to redeem the notes, in whole or in part, upon the first two
anniversary dates of the notes (January 1, 2001 and January 1, 2002), by giving
notice to us at least 90 days before the anniversary date. We are required to
register, under the Securities Act, the shares into which the notes may be
converted. The notes may be prepaid without penalty. If we default on the
note(s), the holder(s) are entitled one share of our common stock for every $100
per month for each month the note(s) are in default. Additionally, $221,000 is
payable to unrelated persons and bears interest at a fixed rate of 10% and is
unsecured. The notes are due July 2002. The notes may be prepaid without
penalty.
The remainder of our long-term debt relates to a note for an automobile
which bears interest at the rate of 8.9% and is payable in 42 monthly
installments. As of September 30, 2000, there were 16 remaining installments.
Since we have already received cash proceeds from the issuance of our
stock, our existing operations must be able to generate enough cash to cover
existing commitments and obligations, such as lease rent for the facilities,
instructors' salaries, and officers' salaries. We are obligated under a
five-year employment agreement to pay William D. Leary, our president, an annual
salary of $120,000.
As described above, at September 30, 2000, we had a significant working
capital deficit. Therefore, our business plan is dependent upon our ability to
acquire existing golf schools and establish Learning Centers and we will need to
raise additional capital to fund our operations and to take advantage of any
acquisition opportunities. In that event, we cannot assure you that
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<PAGE>
additional capital would be available at all, at an acceptable cost, or on a
basis that would be timely to allow us to finance our operations or any
expansion opportunities.
As stated in the notes to the financial statements, at September 30,
2000, our current liabilities exceeded current assets by $1,438,428 and
our total liabilities exceeded total assets by $2,056,729. These
factors, among others, raise substantial doubt about our ability to continue as
a going concern.
SEASONALITY
Throughout much of the United States, the golf business is seasonal,
operating primarily in the summer and additionally in the spring and fall.
However, in much of the Southern United States, golf is played either year-round
or all year except for the summer. This is primarily due to an outdoor playing
season limited by inclement weather or excessive heat. We believe that business
at our Destination Golf Schools will be seasonal with increased activity in the
winter as students take winter vacations to warm weather destinations, and
decreased activity in the summer. In particular, we expect decreased revenues
from Destination Golf School operations in May and September each year. We
anticipate the closing of our warm weather sites in May, with the staff of those
sites moving to a summer site, and anticipate closing our summer sites in
September, with the staff returning to their warm weather sites. In each case,
we expect a one week lag between the closing of one site and the opening of the
other site. For example, our site manager and certified instructors for Wildfire
will generally move to Pole Creek or Haymaker for the summer and the staff from
Rhodes Ranch in Las Vegas will move to Lake Okoboji, Iowa for the summer.
Also, our operations are subject to the effects of inclement weather
from time to time even during the seasons that they are open. The timing of any
new facility openings, the seasons our facilities are open, the effects of
unusual weather patterns and the seasons in which students are inclined to
attend golf schools are expected to cause our future results of operations to
vary significantly from quarter to quarter.
Accordingly, period-to-period comparisons will not necessarily be
meaningful and should not be relied on as indicative of future results. In
addition, our business and results of operations could be materially and
adversely affected by future weather patterns that cause our sites to be closed,
either for an unusually large number of days or on particular days on which we
had booked a special event or a large number of students. Because most of the
students at our Destination Golf Schools attend the school on vacation, the
student may not be able to or interested in rescheduling attendance at one of
our sites. As a result, student-days lost to inclement weather may truly
represent a loss, rather than merely a deferral, of revenue.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In addition to the cases described below, there are other collection
cases which have been filed against us in Denver County Court, Denver,
Colorado. These cases are either pending or have been reduced to
judgment.
On January 28, 2000, Imperial Palace Casino Inc. filed suit against us
in the District Court of Clark County, Nevada, asserting claims for
damages, interest, attorney's fees and costs arising from alleged
nonpayment of hotel room and other charges. A default judgment was
entered by the court on May 9, 2000, in the amount of $15,552.40 plus
postjudgment interest.
On May 22, 2000, a claim was filed against us by The Pressroom, Inc. in
the Small Claims Court for Denver, County, Colorado. The Pressroom,
Inc. alleged that we failed to pay for goods and services provided to
us by The Pressroom, Inc., and was seeking $2,632.68 in damages plus
interests and costs. We settled this case by paying $2,901.01 and it
was dismissed with prejudice on July 17, 2000.
On or about June 7, 2000, a complaint was filed against us by Tim
O'Hara Photography, Inc. in Denver County Court, Denver, Colorado. The
plaintiff has alleged that we failed to pay for photography work
performed for us. Tim O'Hara Photography, Inc. is seeking damages of
$2,876.18, plus interest, costs and any other items allowed by law or
agreement. A judgment was entered against us on July 10, 2000, and a
garnishment has been issued against our bank account in the amount of
$2,992.18. A satisfaction of judgment was filed on or about September
21, 2000 with the Denver County Court by Tim O'Hara Photography, Inc.
On or about June 19, 2000, a complaint was filed against us by
Continental Collection Agency, as assignee of Sterling Point
Apartments, in Arapahoe County Court, Littleton, Colorado. Continental
Collection Agency asserted a claim for damages of $1,006.62, interest,
and any other items allowed by law or agreement, plus costs and
attorney's fees arising out of alleged non-payment of rent by us. We
settled this case on August 17, 2000, in exchange for a dismissal with
prejudice of the claim, each party bearing its own costs and fees. As
of November 17, 2000, the Company had paid $500 of the amount due to
Continental Collection Agency.
On June 22, 2000, a complaint was filed against us and William D.
Leary, the president and a director and controlling shareholder of
PROform golf, inc., by Communigraphics Corporation in the District
Court for the City and County of Denver, Colorado. Communigraphics
Corporation has alleged breach of contract,
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breach of account, breach of guaranty, and wrongful retention of
products and services based upon an alleged failure to pay for
brochures, folders, postcards and inserts printed by Communigraphics
Corporation. Communigraphics Corporation is seeking damages of
$47,418.04, plus interest at 18%, costs and attorneys' fees. Our
response to Communigraphics Corporation's claims was filed on August
25, 2000. We are attempting to settle these claims for payments
totaling approximately $30,000; however, if we are unable to settle
these claims we intend to defend ourselves against them.
During the quarter ended September 30, 2000, we had one lawsuit filed
against us in the Small Claims Court for Denver County, Colorado, on
August 10, 2000 by Bonnie MacDonald. Ms. MacDonald claims that we have
failed to repay a bridge loan in the amount of $5,000. She is seeking
damages of $5,000 plus interest and costs. On or about September 25,
2000, our bank account was garnished for $5,114.80.
In addition to these claims, an action was filed against us in Denver
County Court, Denver, Colorado by Chase Business Brokers, Inc.
("Chase") on November 3, 2000. Chase alleges that we filed to pay it a
referral fee in connection with a contract. Chase is claiming damages
in the amount of $10,000, together with proper interest and costs. We
have until December 5, 2000 to file an answer to the allegations. We
are disputing the claims and intend to defend ourselves against these
claims.
Given our present financial situation, we cannot give any assurances
that there will not be additional lawsuits filed against us. Our
ability to continue operations is dependent upon management's ability
to raise additional funds (including debt and equity financing) and/or
to negotiate settlements and arrangements with our creditors and
vendors.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended September 30, 2000, shareholders of the
Company holding a majority of the issued and outstanding shares of
common stock authorized an amendment to the Company's Certificate of
Incorporation to increase in the number of authorized shares of
preferred stock. The Company also filed a Certificate of Designations
creating the Series C Preferred Stock. The Series C Preferred Stock is
redeemable by the Corporation at a price of $5.00 per
share and the holders are entitled to be paid $0.0001 per share in the
event of liquidation of the Company prior to any payments to the
holders of stock ranking junior to the Series C Preferred Stock. The
Series C Preferred Stock is convertible into shares of common stock on
a one-for-one basis, subject to certain adjustments. The holders of
Series C Preferred Stock are no entitled to any voting rights based
upon their ownership of Series C Preferred Stock, except as required by
law. On August 11, 2000, all 202,000 outstanding shares of Series C
Preferred
13
<PAGE>
Stock were automatically converted into shares of common stock, as
described below.
During the quarter ended September 30, 2000, the registrant issued
1,142,800 shares of common stock in payment of $2,084,500 in debt. The
resale of 747,800 of those shares was covered by the registration
statement filed by the Company. There was no issuance cost.
Additionally, the registrant issued 202,000 shares of common stock upon
conversion of the outstanding Series C Preferred Stock in connection
with the effective date of the registration statement. The resale of
those shares was covered by the registration statement filed by the
Company. The registrant also issued 190,000 shares of common stock at a
deemed value of $1.00 per share for accounting and consulting expenses.
The sale and issuance of the shares of common stock were deemed to be
exempt from registration under Section 4(2) of the Securities Act of
1933. Appropriate legends were affixed to the stock certificates issued
in the above transactions. The securities were offered and sold by the
registrant without any underwriters. All of the purchasers were deemed
to be sophisticated with respect to an investment in securities of the
registrant by virtue of their financial condition and/or relationship
to members of management of the registrant.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
At September 30, 2000, the Company was in default on the payment of
principal and interest on approximately $432,047 of debt.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By written consent dated July 24, 2000 shareholders of the Company
holding 2,921,451 of the 5,810,117 outstanding shares (50.3%) of the
Company's common stock approved and adopted amendments to the Company's
Certificate of Incorporation changing the name of the Corporation to
PROform golf, inc. and increasing the number of shares of preferred
stock from 1,000,000 shares to 3,000,000 shares.
ITEM 5. OTHER INFORMATION
Not Applicable.
14
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
<TABLE>
<CAPTION>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation (1)<F1> N/A
3.1a Articles of Amendment dated July 25, 2000 (2))<F2> N/A
3.1b Statement of Series C Preferred Stock (2)<F2> N/A
3.2 Bylaws (1)<F2> N/A
3.2a Amendment to Section 3.1 of the Company's Bylaws (2)<F2> N/A
4.1 Reference is made to Exhibits 3.1, 3.1a, 3.1b, 3.2 and 3.2a N/A
10.1 Distribution Agreement between the Company and Dave Bisbee, dated August 22, 1996 N/A
(1))<F1>
10.2 Distribution Agreement between the Company and William D. Leary (1))<F1> N/A
10.3 Lease between Fernal Inc. and William D. Leary and the Company, dated May 1, 1997, N/A
as amended by an Addendum to Lease between Mach One and World Associates, Inc.
dated April 4, 1998 (1))<F1>
10.4 Common Stock Purchase Agreement with Proformance Research Organization/Weiner, N/A
Inc. dated July 15, 1998 (1))<F1>
10.5 Sublease dated April 21, 1998 between Mach One Corporation and Proformance N/A
Research Organization, Inc. (1))<F1>
10.6 Employment Agreement between the Company and William D. Leary dated July 1, 1998 N/A
(1))<F1>
10.7 Consulting Services Agreement between Sunkyong U.S.A., Inc. and the Company dated N/A
May 6, 1997 (1))<F1>
10.8 Amendment to Common Stock Purchase Agreement with Proformance Research N/A
Organization/Weiner, Inc. dated November 2, 1998 (1))<F1>
10.9 Consulting Agreement between the Company and J. Paul Consulting dated March 1, N/A
2000 (2)<F2>
10.10 Convertible Promissory Note dated November 9, 1999 between the Company and John N/A
C. Weiner (2)<F2>
10.11 Convertible Promissory Note dated December 31, 1999 between the Company and N/A
William D. Leary, as amended (2)<F2>
10.12 Convertible Promissory Note dated March 27, 2000 between the Company and John C. N/A
Weiner (2)<F2>
10.13 Form of Distribution Agreement (2)<F2> N/A
15
<PAGE>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
11 Statement re: computation of per share earnings See the Financial
Statements
27 Financial Data Schedule 18
----------------------------
<FN>
(1))<F1> Incorporated by reference to the exhibits filed with the Registration Statement on Form SB-2, File No. 333-61533.
(2)<F2> Incorporated by reference to the exhibits filed with the Registration Statement on Form SB-2, File No. 333-42438.
</FN>
</TABLE>
B) REPORTS ON FORM 8-K:
None.
16
<PAGE>
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.
PROFORM GOLF, INC.
(Registrant)
Date: November 20, 2000 By:/S/ WILLIAM D. LEARY
-------------------------------------
William D. Leary, President
17
