<PAGE>
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 Period Ended June 30, 1996
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or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Transition Period From to
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Commission file number 001-11935
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BLACK ROCK GOLF CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 84-1336891
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6786 South Revere Parkway, Ste. 150D
Englewood, Colorado 80112
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(Address of principal executive office) (Zip Code)
(303) 799 - 9901
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(Registrants telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for
such shorter periods 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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date.
Common Stock, $.001 Par Value---3,150,000 shares outstanding as of July 31, 1996
<PAGE>
Index
Black Rock Golf Corporation
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed balance sheets---June 30, 1996 and December 31, 1995
Condensed statements of operations---Three months ended June 30, 1996
and 1995; Six months ended June 30, 1996 and 1995
Condensed statements of cash flows---Six months ended June 30, 1996
and 1995
Notes to condensed financial statements---June 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other information
Item 1. Legal Proceedings
Item 2. Changes In Securities
Item 3. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
BLACK ROCK GOLF CORPORATION
CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
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(Unaudited) (See Note Below)
Assets
Current Assets
Cash $ 29,541 $ 128,011
Security deposits 272,599 84,163
Accounts Receivable, net 659,143 203,816
Inventories - Note B 1,489,785 637,703
Prepaid Expenses 145,517 41,161
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Total Current Assets 2,596,585 1,094,854
Property, Plant and Equipment 128,086 18,234
Less Allowances for Depreciation (21,209) (3,727)
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Net Property, Plant and Equipment 106,877 14,507
Other Assets 385,908 96,942
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Total Assets $ 3,089,370 $ 1,206,303
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable $ 895,428 $ 143,813
Notes Payable 192,768 44,268
Debentures 800,000 -
Other Current Liabilities 65,150 58,062
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Total Current Liabilities 1,953,346 246,143
Shareholders' Equity
Common stock, par value $.001 per share -
Authorized 10,000,000 shares, issued
and outstanding 2,000,000 shares in
1996 and 2,000,000 in 1995 2,000 2,000
Preferred stock, par value $.001 per share -
authorized 1,000,000 shares, issued
and outstanding 0 shares in
1996 and 0 in 1995 - -
Paid-in capital 1,134,024 958,160
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Total shareholders' equity 1,136,024 960,160
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Total Liabilities and Shareholders' Equity $ 3,089,370 $ 1,206,303
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Note: The balance sheet at December 31, 1995 has been derived from
the audited financial statements at that date but does not include
all of the financial information and footnotes required by generally
accepted accounting principles for complete financial statements.
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
BLACK ROCK GOLF CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $ 3,233,179 $ 727,079 $ 5,525,238 $ 876,558
Cost of sales 1,188,705 280,690 2,052,757 336,688
----------- ----------- ----------- -----------
Gross profit 2,044,474 446,389 3,472,481 539,870
Costs and expenses:
Advertising 1,153,619 503,757 1,893,564 839,546
Marketing 98,308 17,375 182,717 19,717
Selling & administrative 713,587 137,338 1,124,269 171,291
Depr. and amortization 12,011 14,371 59,543 28,742
----------- ----------- ----------- -----------
Operating income (loss) 66,949 (226,452) 212,388 (519,426)
Interest expense 18,955 - 25,265 -
Other income (exp), net 3,089 - 5,099 -
----------- ----------- ----------- -----------
Income (loss) before inc. tax 51,083 (226,452) 192,222 (519,426)
Income taxes 16,358 16,358
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Net income (loss) $ 34,725 $ (226,452) $ 175,864 $ (519,426)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average shares
outstanding (Notes D & E) 2,064,000 2,064,000 2,064,000 2,064,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per share
(Notes D & E) $ 0.02 $ (0.11) $ 0.09 $ (0.25)
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PRO FORMA INFORMATION
Historical income before taxes $ 51,083 $ (226,452) $ 192,222 $ (519,426)
Charges in lieu of income taxes
for Limited Liability Company 16,358 N/A 71,699 N/A
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Pro forma net income $ 34,725 $ (226,452) $ 120,523 $ (519,426)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Pro forma weighted average shares
outstanding after IPO
(Notes C, D & E) 3,214,000 3,214,000 3,214,000 3,214,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Pro forma net income (loss) per
share (Notes C, D & E) $ 0.01 $ (0.07) $ 0.04 $ (0.16)
----------- ----------- ----------- -----------
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</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
BLACK ROCK GOLF CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
Six Months ended June 30,
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1996 1995
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Cash used in operations $ (761,713) $ (920,419)
Cash provided by financing activities
Debentures 800,000
Issuance of common stock 773,900
Additional interim line of credit 148,500
Other assets (175,405)
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Total cash provided by financing activities 773,095 773,900
Cash used in investing activities
Purchase of property, plant and equipment (109,852) (15,335)
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Total cash used in investing activities (109,852) (15,335)
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Decrease in cash $ (98,470) $ (161,854)
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The accompanying notes are an integral part of these
condensed financial statements.
<PAGE>
BLACK ROCK GOLF CORPORATION
Notes to Condensed Financial Statements
(Unaudited)
June 30, 1996
Note A---Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three- and six-month periods ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1996. For further information, refer to the
Company's Registration Statement on Form SB -2 (No. 333 - 4890 - D), as amended.
Note B---Inventories
The components of inventory consist of the following:
June 30, December 31,
1996 1995
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(000's omitted)
Work in Process $ 333,033 $ 164,063
Finished Goods 1,156,752 473,640
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Total Inventory $ 1,489,785 $ 637,703
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<PAGE>
BLACK ROCK GOLF CORPORATION
Notes to Condensed Financial Statements
(Unaudited)---Continued
Note C---Income Taxes
The Company reorganized to a C corporation, incorporated in the state of
Delaware, from a Colorado limited liability company effective April 1, 1996.
Prior to April 1, 1996, all of the limited liability company's earnings or
losses were passed through to its individual members. The Company has
included in its statements of operations, pro forma information to include
charges in lieu of income taxes as if the Company had been a C corporation
for all periods presented. This amounts to a pro forma charge of $55,341 in
total income tax related charges for total income tax of $71,699 for the
six-month period ended June 30, 1996.
Note D---Earnings Per Share
The earnings per share calculation has been provided both excluding and
including the common shares issued in the Company's Initial Public Offering.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletins and
Staff Policy, common and common equivalent shares issued during the 12-month
period prior to an initial public offering at prices below the public offering
price are presumed to have been issued in contemplation of the initial public
offering, even if anti-dilutive, and have been included in the calculations
as if these common and common equivalent shares were outstanding for all periods
presented (using the Treasury stock method and the initial public offering price
for the Common Stock). As a result, pro forma weighted average common shares
outstanding assumes the issuance of 64,000 shares of Common Stock underlying
outstanding warrants for all periods presented. See Note E---Subsequent Events.
<PAGE>
BLACK ROCK GOLF CORPORATION
Notes to Condensed Financial Statements
(Unaudited)---Continued
Note E---Subsequent Events
The Company completed its Initial Public Offering of common stock on July 24,
1996. A total of 1,000,000 shares were sold in this offering. In addition,
the underwriter exercised its option to purchase an additional 150,000 shares
of Common Stock. The excess proceeds from this sale (after repayment of
outstanding debt) have been invested in short term Treasury Bills pending the
utilization of the funds for marketing and media, product testing and design,
inventory purchases for existing and new products and for general corporate
and working capital purposes.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
In addition to historical information, this discussion and analysis contains
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those anticipated,
including but not limited to, (i) delays in the delivery of the Company's
products, (ii) infomercials and other marketing channels producing worse
than anticipated sales, and (iii) the risks and uncertainties described in
reports and other documents filed by the Company with the Securities and
Exchange Commission, including the Prospectus dated July 19, 1996 and the
Company's Registration Statement on Form SB - 2 (No. 333 - 4890 - D).
Results of Operations
Revenues and expenses during the three-month period ended June 30, 1996 and
the six month period ended June 30, 1996 were much greater than revenues and
expenses during the corresponding three and six-month periods ended in 1995
because (i) the Company commenced operations in February 1995, and (ii)
during the three and six-month periods ended June 30, 1996 the Company had
significantly more employees, more established marketing methods and
distribution channels, its infrastructure and management team in place, and
spent more money on advertising and marketing which, in turn, generated
greater sales. During 1995, the Company tracked revenue based on the product
that was sold. During 1996, the Company changed the manner in which it
tracked revenue based on the marketing channels that generated the revenue,
and, therefore, comparisons of revenue components cannot practically be made
between revenue generated during 1996 and 1995.
Three-month and six-month periods ended June 30, 1996 compared with
the three-month and six-month periods ended June 30, 1995
Net revenues increased $2,506,100 or 344.68% from $727,079 during the
three-month period ended June 30, 1995 to $3,233,179 during the three-month
period ended June 30, 1996. Net revenues increased $4,648,680 or
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations (continued)
530.33% from $876,558 during the six-month period ended June 30, 1995 to
$5,525,238 during the six-month period ended June 30, 1996. The revenue
increase is a direct result of additional sales personnel, expanded
distribution channels i.e., ProShop Direct, direct mailings, and the
increased airtime for the Company's infomercials.
Cost of goods sold increased $908,015 or 323.49% from $280,690 for the
three-month period ended June 30, 1995 to $1,188,705 for the three-month
period ended June 30, 1996. Cost of goods sold increased $1,716,069 or
509.69% from $336,688 for the six-month period ended June 30, 1995 to
$2,052,757 for the six-month period ended June 30, 1996. The gross margin
for the three-month period ended June 30, 1996 was 63.23% compared to the
three-month period ended June 30, 1995 of 61.39%. For the six month period
ended June 30, 1996 the gross margin was 62.85% compared to 61.59% for the
same period ended June 30, 1995. Price reductions for individual components
from the Company's suppliers reduced the per unit cost of goods sold, thereby
increasing the gross margin for the three and six-month periods ended June
30, 1996 compared to the corresponding periods ended June 30, 1995
Advertising expenses increased $649,862 or 129.00% from $503,757 for the
three-month period ended June 30, 1995 to $1,153,619 for the three-month
period ended June 30, 1996. Advertising expenses increased $1,054,018 or
125.55% from $839,546 for the six-month period ended June 30, 1995 to
$1,893,564 for the six-month period ended June 30, 1996. This increase is
the direct result of more infomercial airtime, infomercial dubbing and
shipping costs, and magazine advertising costs.
Marketing expenses increased $80,933 or 465.80% from $17,375 for the
three-month period ended June 30, 1995 to $98,308 for the three-month period
ended June 30, 1996. Marketing expenses increased $163,000 or 826.70% from
$19,717 for the six-month period ended June 30, 1995 to
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations (continued)
$182,717 for the six-month period ended June 30, 1996. The increased
marketing expenses are the result of the Company's increased efforts to
attract more ProShop Direct participants. The number of ProShop Direct
participants was approximately 2,600 as of June 30, 1996. The ProShop Direct
distribution program did not commence until the first week of June, 1995.
Selling and administrative expenses increased $576,249 or 419.58% from
$137,338 for the three-month period ended June 30, 1995 to $713,587 for the
three-month period ended June 30, 1996. Selling and administrative expenses
increased $952,978 or 556.35% from $171,291 for the six-month period ended
June 30, 1995 to $1,124,269 for the six-month period ended June 30, 1996. The
increase in selling and administrative expenses is the result of an increase
in the number of employees, additional space requirements for these
employees, warehouse space for an expanded product line and other costs
associated with selling and administration such as telephone and office
supplies. The Company has increased its number of employees from 5 full time
and 3 part time employees at June 30, 1995 to 22 full time and 15 part time
employees as of June 30, 1996. The additional full time employees at June
30, 1996 were added in the following departments: 7 in sales, 2 in customer
service, 2 in fulfillment, 1 in information systems, 1 in media, 2 in
administration and 2 in executive management. The increase in part time
employees has been primarily in the Company's outbound telemarketing (sales)
department.
Interest expense for the three and six-month periods ended June 30, 1996
amounted to $18,955. This expense is a result of the Company's line of credit
through its banking relationship and the Debentures issued in March, April and
May 1996. This debt, along with accrued interest, was retired with the proceeds
from the Company's initial public offering in July 1996. There was no
outstanding debt for the three-month or six-month periods ended June 30, 1995.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations (continued)
Income tax expense for the three-month period ended June 30, 1996 was $16,358
compared to $0 income tax expense for the three-month period ended June 30,
1995. The Company reorganized to a C corporation, incorporated in the state
of Delaware, from a Colorado limited liability company effective April 1,
1996. Prior to April 1, 1996 all of the limited liability company's earnings
or losses were passed through to its individual members. The Company has
included in its statements of operations pro forma information to include
charges in lieu of income taxes for the 1st quarter 1996 as if the Company
had been a C corporation for all periods presented. This charge amounts to
an additional $55,341 or $71,699 in total income tax related charges for the
six-month period ended June 30, 1996.
Net income for the three-month period ended June 30, 1996 was $34,725
compared to a loss of $226,452 for the three-month period ended June 30,
1995. For the first six months of 1996, pro forma net income of $126,466
compares to a loss of $519,426 for the same six-month period in 1995. The
improvement in net income and pro forma net income was the result of improved
sales as a result of the Company's expanded distribution channels and the
national coverage and acceptance of the Company's products through its
increased airtime for infomercials. Also, at June 30, 1995 the Company was
still in its infancy, having commenced operations in February 1995.
Liquidity and Sources of Capital
Cash flows used in operations were $761,713 for the six-month period ended
June 30, 1996 as compared to $920,419 for the six-month period ended June
30, 1995. Security deposit requirements increased by $188,436 primarily due
to the Company's increased inventory needs from its foreign suppliers and the
increased office and warehouse space needs; accounts receivable increased by
$455,327 as a result of increased sales and inventories increased by $852,082
to support future sales. These items were
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Sources of Capital (continued)
partially offset by an increase in accounts payable of $751,615. Outside
sources of capital resulted in the issuance of $800,000 in debentures and
drawing down $148,500 from the Company's bank line of credit. The Company
believes that available cash from its recent initial public offering and
from future operations will be sufficient to meet its normal operating
requirements, including new product testing and design, inventory for new
products and increased marketing and media expenses.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company knows of no material pending or threatened legal proceedings to
which the registrant is a party or to which any of its property is subject.
Item 2. Changes in Securities
The Company completed its Initial Public Offering of common stock on July 24,
1996. A total of 1,000,000 shares were sold in this offering. In addition,
the underwriter exercised its option to purchase an additional 150,000 shares
of common stock. A portion of the net proceeds received by the Company was
used to repay all outstanding Debentures, bank line of credit and other
indebtedness, including accrued interest (approximately $1,075,000).
Item 3. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three-months
ended June 30, 1996
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Black Rock Golf Corporation
-----------------------------------------------
(Registrant)
Date 10/1/96 /s/ Jackson D. Rule., Jr.
----------------- ------------------------------------------------
Jackson D. Rule, Jr., President & C.E.O.
Date 10/1/96 /s/ Gerald D. Fick
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Gerald D. Fick, C.F.O., Treasurer & Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 29,541
<SECURITIES> 0
<RECEIVABLES> 659,143
<ALLOWANCES> 0
<INVENTORY> 1,489,785
<CURRENT-ASSETS> 2,596,585
<PP&E> 128,086
<DEPRECIATION> 21,209
<TOTAL-ASSETS> 3,089,370
<CURRENT-LIABILITIES> 1,953,346
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> 1,134,024
<TOTAL-LIABILITY-AND-EQUITY> 3,089,370
<SALES> 5,525,238
<TOTAL-REVENUES> 5,525,238
<CGS> 2,052,757
<TOTAL-COSTS> 3,260,093
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,265
<INCOME-PRETAX> 192,222
<INCOME-TAX> 71,699
<INCOME-CONTINUING> 120,523
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,523
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
