As filed with the Securities and Exchange Commission on June 24, 1998
Registration No. 333-51501
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
AMENDMENT NO. 1 TO
FORM S-3
Registration Statement
Under The Securities Act of 1933
----------------------
TearDrop Golf Company
(Exact Name of registrant as specified in its charter)
Delaware 57-1056600
(State or other (I.R.S. employer
jurisdiction of identification
incorporation or number)
organization)
1080 Lousons Road
Union, New Jersey
(908) 688-4445
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
Rudy A. Slucker
Chairman and Chief Executive Officer
1080 Lousons Road
Union, New Jersey
(908) 688-4445
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
Copies to:
Jeffrey A. Baumel, Esq.
Gibbons, Del Deo, Dolan, Griffinger & Vecchione
One Riverfront Plaza
Newark, New Jersey 07102
Telephone: (973) 596-4500
Telecopier: (973) 596-0545
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box |X|
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================
Proposed Proposed
Title of Maximum Maximum
Shares Amount to Offering Aggregate Amount of
to be be Price Offering Registration
Registered Registered(1) Per Unit(2) Price(2) Fee(2)
- ---------- ------------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock 1,520,690 Shares (3) $ 10.88 $16,537,504 $4,879
($.01 Par
Value)
TOTAL FEE $8,106*
===========================================================================================
* $8,106 has been previously paid.
</TABLE>
(1) All of the shares of Common Stock being registered hereby are being offered
for the account of selling stockholders who acquired such shares or options or
warrants to purchase such shares from the Company in private transactions. No
other shares of the Company's Common Stock are being registered pursuant to this
offering.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c) of the Securities Act of 1933, as amended, (the "Act")
the registration fee for the Common Stock has been calculated based upon a price
of $10.88 per share, the average of the high and low prices as reported in the
Nasdaq SmallCap Market for the registrant's Common Stock on June 15, 1998.
(3) Pursuant to Rule 416 of the Act there are also being registered hereunder
such additional shares as may be issued to the selling stockholders because of
future stock dividends, stock distributions, stock splits or similar capital
readjustments or, in the case of the holders of options or warrants, the
operation of the anti-dilution provisions thereof.
---------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
PROSPECTUS
1,520,690 Shares of Common Stock
TEARDROP GOLF COMPANY
This Prospectus relates to an offering by certain selling stockholders of
an aggregate of up to 1,520,690 shares of the Company's common stock, $.01 par
value (the "Common Stock"), of which (i) 933,333 shares (the "Conversion
Shares") were issued upon conversion by the securityholders of 70,000 shares of
Series A Cumulative Convertible Preferred Stock ("Series A Preferred Stock"),
(ii) 175,000 shares were issued in connection with the acquisition by the
Company of the assets of the Tommy Armour Golf Company, (iii) 237,357 shares
were issued in connection with the acquisition by the Company of the assets of
RAM Golf Corporation, (iv) 50,000 shares of Common Stock are issuable upon the
exercise of a Common Stock Purchase Warrant (the "Purchase Warrant"), (v)
100,000 shares were issued for consulting services rendered to the Company and
(vi) 25,000 shares of Common Stock are issuable upon the exercise of a Common
Stock Option Agreement ("Option Agreement"). Unless the context otherwise
requires, all of the foregoing shall be referred to collectively as the "Selling
Stockholders."
The Common Stock may be offered from time to time by the Selling
Stockholders through ordinary brokerage transactions in the over-the-counter
markets, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. The Company will not receive any of
the proceeds from the sale of Common Stock by the Selling Stockholders or upon
the conversion of the Preferred Stock. The Company may receive up to $443,750
(exclusive of expenses of this offering, estimated to be $50,000) upon the
exercise of the Purchase Warrant and the Option Agreement. See "Use of Proceeds"
and "Selling Stockholders and Plan of Distribution."
The Series A Preferred Stock was converted by the Holder thereof into
933,333 shares of Common Stock on June 24, 1998. Simultaneously with such
conversion, the Company redeemed 30,000 shares of Series A Preferred Stock for
$3,000,000. See "Description of Securities."
The Common Stock is traded in the Nasdaq SmallCap Market under the symbol
"TDRP". On June 15, 1998, the closing sale price of the Common Stock as reported
by Nasdaq was $10.688.
----------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 24, 1998
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400 Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such material can also be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, the Company is
required to file electronic versions of these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
The trademarks "TearDrop", "Armour", "Tommy Armour", "Ram", "Zebra", the
"Tear Drop Professional Golf Tour", are tradenames and trademarks of the
TearDrop Golf Company and its subsidiaries.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997; (ii) Current Report on Form 8-K for the event dated November 10, 1997;
(iii) Current Report on Form 8-K for the event dated December 29, 1997, (iv)
Current Report on Form 8-K for the event dated February 27, 1998, (v) Final
Proxy Statement dated April 30, 1998, (vi) Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1998 and (vii) Amendment to Proxy Statement dated
May 11, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference herein and to be a part hereof on the date of
filing of such documents.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference, except for the
exhibits to such documents. Requests should be directed to Mr. Joseph Cioni,
TearDrop Golf Company, 1080 Lousons Road, Union, New Jersey, Telephone No. (908)
688-4445.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
financial statements (including the notes thereto) incorporated by reference in
this Prospectus. Each prospective investor is urged to read this Prospectus in
its entirety. Unless otherwise indicated, all information in this Prospectus has
been adjusted to reflect the reincorporation of the Company in the State of
Delaware, effected on October 21, 1996 and a 3,333.33-for-one share conversion
in connection therewith (the "Reincorporation"). This Prospectus contains, in
addition to historical information, forward looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from the results discussed in the forward looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed in "Risk Factors" as well as those factors discussed herein and in the
documents incorporated herein by reference as well as those discussed elsewhere
in this Prospectus.
The Company
TearDrop Golf Company (the "Company" or "TearDrop") designs, develops and
markets throughout the world high-quality, premium priced golf clubs, including
its (a) TearDrop line of putters; (b) its Armour line of irons and woods;
(c) its Ram line of irons, woods, and wedges; and (d) Zebra putters. The
TearDrop, Armour, Ram and Zebra lines of product are used by professional
golfers on the Professional Golf Association ("PGA") Tour, the Senior PGA Tour,
the Ladies PGA Tour and the Nike Tour. In addition, the Company operates a
professional development golf tour for aspiring PGA Tour players.
The Company completed an initial public offering of its Common Stock and
warrants to purchase Common Stock in December 1996. In January 1997, the Company
commenced its extensive marketing and advertising campaign. The Company has
produced and aired a variety of television commercials. The Company also has
aired its feature "the TearDrop Putt of the Week" on the Golf Channel at various
times on a weekly basis. The Company's print advertisements have appeared in
several magazines including Golf Illustrated and Senior Golfer during the months
from May through December. Finally, the Company has enlisted over 30 golf
professionals to promotional agreements, including Tommy Tolles, Tommy Armour
III, Omar Uresti, Tom Byrum, Paul Goydos, George Archer and Jan Stephenson.
On October 31, 1997 TearDrop Golf Company acquired the assets of Pro Golf
Promotions, LLC. The acquisition gave TearDrop the former Powerbilt Golf Tour, a
professional development tour for aspiring PGA Tour players, as well as an
experienced tour-management team. The tour was immediately renamed "The TearDrop
Professional Golf Tour."
In November 1997, the Company acquired the assets and certain liabilities
of the Tommy Armour Golf Company from U.S. Industries, Inc. for common stock,
preferred stock and cash valued at approximately $22.4 million. With the
acquisition, the Company expanded its operations to include a full line of golf
clubs and equipment.
In December 1997, the Company acquired the assets of the Ram Golf
Corporation for common stock and cash and assumption of certain liabilities with
a value of approximately $4.0 million. With the acquisition of the Ram assets,
the Company's product line was expanded to include Ram irons, woods, wedges and
Zebra putters.
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<PAGE>
The Company's executive offices are located at 1080 Lousons Road, Union,
New Jersey 07083 and its telephone number is (908) 688-4445. The Company was
incorporated in South Carolina in 1992 under the name "Teardrop Putter
Corporation" and merged into the "TearDrop Golf Company," a Delaware
corporation, in October 1996 as part of the Reincorporation.
The Offering
Securities offered by
the Selling Stockholders......... 1,520,690 shares of Common Stock(1)
Securities outstanding
prior to the offering ......... 3,267,096 shares of Common Stock(2)(3)
Securities to be
outstanding after the
offering ...................... 4,787,786 shares of Common Stock(1)(2)
Use of Proceeds ................. The Company will not receive any proceeds
from any sales of Common Stock by the Selling
Stockholders. The Company may receive up to
$443,750 upon the exercise of the Purchase
Warrant and the Option Agreement (exclusive
of expenses of this offering, estimated to be
$50,000), which will be used for working
capital.
Risk Factors ................... The securities offered hereby involve a
high degree of risk. See "Risk Factors."
Nasdaq Small Cap ............... Common Stock - TDRP
Market Symbol
- ----------
(1) Includes (i) 933,333 shares issued upon conversion of 70,000 shares of
Series A Preferred Stock, (ii) 50,000 shares issuable upon exercise of the
Purchase Warrant and (iii) 25,000 shares issuable upon exercise of the
Option Agreement.
(2) Based on shares outstanding on the date of this prospectus. Includes
532,569 shares issued upon exercise of the Company's Redeemable Common
Stock Purchase Warrants ("Warrants"). Does not include shares issuable
upon exercise of (i) 1,195,500 outstanding options and warrants or (ii)
1,000,622 shares issuable upon exercise of the Company's Warrants and an
additional 250,000 shares of Common Stock, both issuable upon exercise of
warrants issued to the Representative of the Underwriters for the
Company's initial public offering (the "Representative's Warrants").
(3) Does not include (i) 50,000 shares issuable upon exercise of the Purchase
Warrant or (ii) 25,000 shares issuable upon exercise of the Option
Agreement.
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<PAGE>
RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk
and should not be made by persons who cannot afford the loss of their entire
investment. Prospective investors, prior to making an investment decision,
should consider carefully, in addition to the other information contained in
this Prospectus and the documents and filings incorporated by reference into
this Prospectus (including the financial statements and notes thereto), the
following factors. This Prospectus contains, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such differences include but are not limited to, those
discussed below, as well as those discussed elsewhere in this Prospectus.
Limited Operating History; History of Losses; Accumulated Deficit;
Substantial Losses From and Declining Sales of Tommy Armour. Although the
business of Tommy Armour Golf and Ram Golf have established names and
reputations, the Company has a short operating history. It commenced operations
in August 1992, shipped its first products in 1993 and commenced substantial
sales activities in 1994. Although the Company had net sales of approximately
$9,624,000 during the year ended December 31, 1997, the Company had losses of
$9,149,000 for the year ended December 31, 1997. At December 31, 1997, the
Company had an accumulated deficit of approximately $11,431,000. In addition, of
the Company's sales during 1997, $6,809,000 or approximately 72%, represented
primarily sales of Armour products that were discontinued and will not be
marketed on a substantial basis in the future. Furthermore, Tommy Armour Golf
had a reduction in sales from approximately $56.2 million in 1996 to
approximately $32.0 million in 1997 and incurred a pre-tax loss of approximately
$31.4 million for its year ended September 30, 1997. The Company believes that
the decline in sales and subsequent loss for Tommy Armour Golf were attributable
primarily to the introduction of a new line of Ti 100 golf clubs in 1997 and the
cessation of production and marketing by Tommy Armour of all other product
lines. The Ti 100 line of clubs did not achieve widespread public acceptance and
were subsequently discontinued. Nevertheless, no assurance can be given that
sales will not continue to decline, that the new line of Tommy Armour golf club,
produced by the Company will meet with widespread consumer acceptance, or that
the Company will not incur losses in the operation of the Tommy Armour Golf
Company in the future. See Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.
Working Capital Shortfalls; Need for Additional Capital. Since its
inception, the Company's internally generated cash flow has not been sufficient
to finance its operations. The Company has experienced severe working capital
shortfalls in the past, which have restricted the Company's ability to conduct
its business. The Company has been primarily dependent upon sales of its equity
securities, bank debt and other financing in order to maintain its operations.
The Company's expenditures and commitments for advertising and marketing have
been substantial and the Company must continue to incur such costs in order to
continue to increase consumer awareness of its products. If the Company's sales
do not increase substantially to cover its expenditures, it will be required to
limit its advertising expenditures and expansion plans or seek additional
financing in order to continue operations. The inability to obtain additional
financing when needed would have a material adverse effect on the Company's
liquidity, and, as a result, the Company could be required to significantly
reduce or suspend its operations, seek a merger partner or sell some or all of
its assets. There can be no assurance that any additional financing
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<PAGE>
will be available to the Company on acceptable terms, if at all, when required
by the Company. See Financial Statements and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.
Substantial Indebtedness and Repayment Obligations, Subordination. The
Company has borrowed substantial amounts of money to finance the acquisitions of
Tommy Armour and Ram and to fund its continuing operations. The Company had
total liabilities of approximately $31.8 million at December 31, 1997,
approximately $14.2 million of which were current which amounts have increased
to date. As of the date of this Prospectus, approximately $23.7 million is
payable to CoreStates Bank, N.A. (the "Bank" or "CoreStates") pursuant to the
Company's revolving line of credit. Interest expense under the Company's credit
facility could continue to be substantial in the future. The revolving line of
credit is secured by substantially all of the assets of the Company. The loan
agreement with the Bank also provides that the Company meet certain financial
covenants. At December 31, 1997, the Company was in violation of such covenants
and has obtained waivers from CoreStates with respect thereto. The Company is
still not in compliance with such covenants and no assurance can be given that
the Bank will continue to waive such covenant defaults in the future. The
Company is negotiating with the Bank to revise the covenants, although no
assurance can be given that the Bank will agree to any revised terms. In
addition, if the Bank were to demand repayment of the entire outstanding
borrowings under the facility, the Company would be required to identify
alternative financing to satisfy its repayment obligation and to continue its
operations. There can be no assurance that any such alternative funding sources
will be available on a commercially reasonable basis if at all. If it is
unsuccessful in so identifying such financing, the Company may be required to
cease operations. The loan agreement with the Bank also contains provisions
which restrict certain activities of the Company, including the sales of assets,
the declaration of dividends and also provides for various other restrictive
covenants, including the continuing participation of Rudy A. Slucker, the
Chairman of the Board of Directors, in his current management position. See
Financial Statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1997 and "Description of Securities
- - Preferred Stock."
Dependence on Key Personnel; Limited Industry Experience. The Company
believes its success will depend to a significant extent on the efforts and
abilities of certain of its senior management, particularly those of its Chief
Executive Officer and Chairman of the Board, Rudy A. Slucker. The Company
maintains "key person" life insurance in the amount of $1,000,000 on the life of
Mr. Slucker under which the Company is the sole beneficiary. Although the
Company has entered into an employment agreement with Mr. Slucker which expires
on December 31, 1999, the loss of Mr. Slucker or other key management, marketing
or technical employees could have a material adverse effect on the Company's
operating results and financial condition. Management has only a limited history
in the golf club industry. There is strong competition for qualified personnel
in the golf club industry, and the loss of key personnel or an inability on the
Company's part to attract, retain and motivate key personnel could adversely
affect the Company's business, operating results and financial condition. There
can be no assurance that the Company will be able to retain its existing key
personnel or attract additional qualified personnel.
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<PAGE>
Dependence upon Endorsements. As an integral part of its marketing
strategy, the Company seeks to obtain endorsements of its clubs from touring
professionals. Typically, the Company's agreements with its endorsing
professionals provide for the use of the professionals' names in connection with
the marketing of the Company's clubs and the use of the clubs by such
professionals in tournament play. The effect of a particular professional's
endorsement on the successful marketing of the Company's clubs, and the
heightening of awareness of the Company's brand name, is directly related to the
success of such professional in tournament play. However, the amount of
remuneration required to be paid or provided by the Company under a typical
endorsement agreement is not substantially dependent on the tournament success
of such professional. Accordingly, if the Company's endorsing professionals do
not have substantial tour victories, the Company likely will receive less
exposure, yet would still be required to pay endorsement fees. The Company has
entered into endorsement agreements with over 30 touring professionals which
generally are for three-year terms and provide for certain payments by the
Company to the touring professionals in consideration for their using the
Company's equipment and bonuses based on tournament performance. In order to
succeed with its marketing strategy, the Company intends to continue to enter
into endorsement agreements with additional professional golfers. The inability
of the Company to maintain its relationships with its existing endorsing
professionals, to enter into endorsement agreements with additional professional
golfers, or the failure of the Company's endorsing professionals to achieve
tournament success, would diminish the effectiveness of the Company's marketing
strategy and may result in declining sales.
Risks Associated with Management of Growth, Implementation of Growth
Strategy and Potential Inability To Successfully Integrate Acquisitions. The
successful implementation of the Company's expansion strategy will be dependent
on, among other things, consumer acceptance of the Company's new lines of golf
products; the reduction of Company costs; the Company's ability to develop and
introduce new products to consumers and the marketplace; the Company's ability
to enter into endorsement agreements with successful professional golfers; the
Company's ability to identify potential acquisition prospects; the establishment
of additional distribution arrangements; the hiring and retaining of additional
marketing, creative and other personnel; and the successful management of such
growth (including monitoring operations, controlling costs and maintaining
effective quality, inventory and service controls). As the Company continues to
grow, there will be additional demands on the Company's financial, technical and
administrative resources. The failure to maintain and improve such resources or
the occurrence of unexpected difficulties relating to the Company's expansion
strategy, could have a material adverse effect on the Company's business,
prospects, results of operations or financial condition. There can be no
assurance that the Company will be able to implement successfully its business
strategy or otherwise expand its operations. The complete integration and
consolidation into the Company of the product lines acquired upon the
acquisition of the assets of Tommy Armour and Ram as well as any future
corporate acquisitions and new product licensing arrangements will require
substantial management, financial and other resources, and could pose
significant pressure on the financial condition and operating results of the
Company. There can be no assurance that the Company's resources will be
sufficient to accomplish such integration, or that the Company will not
experience difficulties with customers, personnel or others. In addition,
although the Company believes that its acquisition and licensing arrangements
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<PAGE>
will enhance its competitive position and business prospects, there can be no
assurance that such benefits will be realized or that the combination of the
Company with other companies will be successful. Although the Company regularly
evaluates possible acquisition opportunities, the Company is not a party to any
agreements, commitments, arrangements or understanding with respect to any such
acquisition and there can be no assurance that any such acquisitions will be
effected.
Dependence on Major Customers. The Company's sales to its five largest
customers represented approximately 17% of its sales in fiscal 1997 on a pro
forma basis giving effect to the acquisition of substantially all of the assets
of Tommy Armour and Ram. Sales to the Company's top customer, Wal-Mart,
accounted for approximately $3.6 million of the Company's sales in fiscal 1997
(7.5% on a pro forma basis during fiscal 1997 giving effect to the acquisitions
of substantially all of the assets of Tommy Armour and Ram). The Company
anticipates that sales to its top five customers will continue to account for a
significant percentage of its sales. The Company has no long term commitments or
contracts with any of its customers. The loss or decreased sales from one or
more of these customers would have a material adverse effect on the Company's
business, prospects, results of operations or financial condition. Furthermore,
the inability of any of the Company's customers to satisfy any of their
obligations to the Company at any time or on a timely basis could have a
material adverse effect on the business, prospects, results of operations or
financial condition of the Company.
Dependence on Limited Number of Component Suppliers. The Company assembles
all of its clubs at its Morton Grove, Illinois facility. The Company does not
manufacture the components required to assemble its golf clubs. The Company
relies on a limited number of suppliers for club heads, shafts and grips. The
Company does not have written supply agreements with any of its current
suppliers. Therefore, the Company's success will be dependent on maintaining its
relationships with existing suppliers and developing relationships with new
suppliers. Any significant delay or disruption in the supply of components from
the Company's suppliers or any diminution of quality resulting from such
supplier's insufficient controls or inadequate component testing, would have a
material adverse effect on the Company's business, operating results and
financial condition. Further, given the highly seasonal nature of the golf
equipment industry, such adverse effect would be exacerbated should any supply
delay or quality problem occur immediately prior to or during any six month
period ending June 30 (the period during which sales of golf equipment generally
are expected to be the highest). See Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
Consumer Preferences and Industry Trends. The golf industry is
characterized by the frequent introduction of new products and services, and is
subject to changing consumer preferences and industry trends, which may
adversely affect the Company's ability to plan for future design, development
and marketing of its products and services. The Company's success will depend on
the Company's ability to anticipate and respond to these and other factors
affecting the industry. Moreover, if a downturn occurs in the economy, the
leisure industry, including the golf industry, may be particularly vulnerable.
There can be no assurance that the Company will be able to anticipate and
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<PAGE>
respond quickly and effectively to changing consumer preferences and industry
trends or that competitors will not develop and commercialize new products that
render the Company's products and services obsolete or less marketable.
International Sales; Reliance on Limited Number of Foreign Distributors.
During the year ended December 31, 1997 sales to international customers
accounted for approximately 24% of the Company's net sales on a pro forma basis.
The Company has operations in Canada and the U.K. from which sales in those
countries and parts of Europe are conducted. The Company also engages foreign
distributors to market and sell the Company's products in other countries.
Although the Company works closely with its foreign distributors, the Company
cannot directly control such distributors' sales and marketing activities and,
accordingly, cannot manage the Company's product sales in these foreign markets
in which such distributors operate. The Company's foreign distributors may also
distribute, either on behalf of themselves or other golf club manufacturers,
other product lines, including product lines that may be competitive with those
of the Company. There can be no assurance that these distributors will
effectively manage the sale of the Company's products worldwide or that their
marketing efforts will prove effective. Additionally, the Company's
international sales may be disrupted or adversely affected by events beyond the
Company's control, including currency fluctuations and political or regulatory
changes.
New Products; USGA Regulation. The Company believes that the introduction
of innovative technologies and club designs will be crucial to its future
success. New models and basic design changes are frequently introduced into the
golf club market but are often met with consumer rejection. Although the Company
has achieved certain successes in the introduction of its golf putters, no
assurance can be given that the Company will be able to continue to design and
manufacture golf clubs that meet with market acceptance. In addition, prior
successful designs may be rendered obsolete within a relatively short period of
time as new products are introduced into the market. There can be no assurance
that the Company will be able to continue to design innovative products that can
achieve market acceptance.
The design of new golf clubs is also greatly influenced by rules and
interpretations of the United States Golf Association ("USGA"). Although the
golf equipment standards established by the USGA generally apply only to
competitive events sanctioned by that organization, it has become critical for
designers of new clubs to assure compliance with USGA standards. To the extent
that the Company's clubs are ruled ineligible under USGA standards, even
non-professional golfers will likely be unwilling to purchase them. No assurance
can be given that any new products will receive USGA approval or that existing
USGA standards will not be revised in ways that adversely affect the sales of
the Company's products.
Management of Growth. The Company's ability to manage its growth
effectively will require it to hire additional management personnel to improve
its operational, financial and management information systems, to accurately
forecast sales demand and calibrate manufacturing to such demand, to control its
overhead, to manage its advertising and marketing programs in conjunction with
actual demand, and to attract, train, motivate and manage its employees
effectively. If the Company's management is unable to manage growth effectively,
the Company's operating results and financial condition will be adversely
affected.
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<PAGE>
Seasonal Business; Quarterly Fluctuations. Golf is primarily a warm
weather sport. The purchasing decisions of most customers are typically made in
the fall and a vast majority of sales are expected to occur during the first six
months of the year. In addition, quarterly results may vary from year to year
due to the timing of new product introductions, orders and sales, advertising
expenditures, promotional periods and shipments. Accordingly, comparisons of
quarterly information of the Company's results of operations may not be
indicative of the Company's overall annual performance. In addition, because of
the acquisitions completed by the Company at the end of 1997, comparisons by the
Company of its operations in the future to the operations during periods prior
to the acquisitions will be particularly difficult. See Financial Statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1997.
Susceptibility to General Economic Conditions. Sales of golf equipment
have historically been dependent on discretionary consumer spending. As a
result, the Company's revenues will be subject to fluctuations based upon
general economic conditions in the United States and in the foreign countries
where the Company sells its products. If there is a general economic downturn or
recession in the United States or in foreign countries in which the Company
markets its clubs, general consumer spending on golf equipment could be expected
to decline, which would have a material adverse effect on the Company's
business, operating results and financial condition.
Uncertainty of Proprietary Rights; Expense of Intellectual Property
Litigation. The Company relies on a combination of patents, trademarks and trade
secret protection to establish and protect the proprietary rights it has in its
products. The ability of the Company's competitors to acquire technologies or
other proprietary rights equivalent or superior to those of the Company or the
inability of the Company to enforce its proprietary rights would have a material
adverse effect on the Company's operating results and financial condition. There
can be no assurance that the Company's competitors will not independently
develop or acquire patented or other proprietary technologies that are
substantially equivalent or superior to those of the Company. There also can be
no assurance that the measures adopted by the Company to protect its proprietary
rights will be adequate to do so or that the Company's products do not infringe
on third party intellectual property rights, including patents. Intellectual
property matters are frequently litigated on allegations that third-party
proprietary rights have been infringed. The Company may have to defend against
such lawsuits, which could be expensive and time-consuming.
Extremely Competitive Industry. The market for high quality,
premium-priced golf clubs is highly competitive and includes a number of
well-established companies that have more readily recognizable brand names and a
larger, more widely known corps of endorsing golf professionals, as well as
greater market access and financial resources than the Company. Many purchasers
of premium clubs desire golf clubs that feature the most recent technology,
innovative designs and recognized brand names. Additionally, purchases are often
made based upon highly subjective decisions that may be influenced by numerous
factors, many of which are out of the Company's control. Golfers' subjective
preferences are subject to rapid and unanticipated changes. As a result, the
Company will face substantial competition from existing and new companies that
market golf clubs which are perceived to enhance performance, are visually
appealing or appeal to other consumer preferences. In addition, the golf club
industry is dominated by a small number of very large corporations such as
Callaway, Fortune Brands, which owns Titleist and Cobra, and Taylor Made, that
have substantial shares of the market and substantially greater financial and
other resources than the Company. Further, the golf club industry is subject to
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rapid and widespread imitation of golf club designs which, notwithstanding the
existence of any proprietary rights, could further hamper the Company's ability
to compete. The Company faces competition on the basis of price, reputation and
qualitative distinctions among available products. There can be no assurance as
to the market acceptance of the Company's golf clubs in relation to its
competition.
Control of the Company by Officers and Directors. The Company's officers
and directors beneficially own approximately 43% of the outstanding shares of
the Company's Common Stock. As a result, such persons, acting together, have the
ability to exercise significant influence over all matters requiring stockholder
approval. The concentration of ownership could delay or prevent a change in
control of the Company. See "Selling Stockholders and Plan of Distribution."
Potential Limited Trading Market; Possible Volatility of Stock Price;
Potential Effects of "Penny Stock" Rules. Although the Common Stock and Warrants
are quoted on the Nasdaq SmallCap Market ("Nasdaq"), in order to continue such
quotation, the Company must satisfy certain maintenance criteria. The failure to
meet these maintenance criteria may result in the Common Stock or Warrants no
longer being eligible for quotation on Nasdaq and trading, if any, of the Common
Stock and the Warrants would thereafter be conducted in the non-Nasdaq
over-the-counter market. As a result of such delisting, an investor may find it
more difficult to dispose of or to obtain accurate quotations as to the market
value of the Company's Securities. In addition, if the Common Stock was to
become delisted from trading on Nasdaq and the trading price of the Common Stock
was less than $5.00 per share, trading in the Common Stock would also be subject
to the requirements of certain rules promulgated under the Exchange Act, which
require additional disclosure by broker-dealers in connection with any trades
involving a stock defined as a penny stock (generally, any non-Nasdaq equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions). Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). For these types of
transactions, the broker-dealer must make a special suitability determination
for the purchaser and must have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers by
such requirements may discourage them from effecting transactions in the Common
Stock and Warrants, which could severely limit the liquidity of the Common Stock
and Warrants and the ability to sell the Common Stock and Warrants in the
secondary market.
In the absence of an active trading market, purchasers of the Common Stock
may experience substantial difficulty in selling their Securities. The trading
price of the Company's Common Stock is expected to be subject to significant
fluctuations in response to variations in quarterly operating results, changes
in analysts' earnings estimates, announcements of technological innovations by
the Company or its competitors, general conditions in the golf club industry and
other factors. In addition, the stock market is subject to price and volume
fluctuations that affect the market prices for companies and that are often
unrelated to operating performance. See "Selling Stockholders and Plan of
Distribution."
Shares Eligible for Future Sale. Sales of the Company's Common Stock in
the public market after this Offering could adversely affect the market price of
the Common Stock.
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Effect of Outstanding Options and Warrants and Potential Issuances of
Bonus Shares. As of the date of this Prospectus, there are outstanding options
to purchase an aggregate of 1,195,500 shares of Common Stock at per-share
exercise prices ranging from $2.50 to $7.50. The Company has reserved 450,000
shares for issuance under the 1996 Employee Stock Option Plan, has granted
five-year options to acquire 500,000 shares of Common Stock to Rudy A. Slucker,
the Chairman of the Board, President and Chief Executive Officer of the Company
and has granted options to purchase up to an aggregate of 92,500 shares of
Common Stock to touring golf professionals who perform consulting and
promotional services for the Company. Under the promotional agreements with the
Company's golf professionals, the Company may be required to grant additional
stock options if the professional satisfies certain conditions such as winning a
golf tournament. If the Company's professionals win a large number of
tournaments, the number of additional options granted could be substantial. The
exercise of such outstanding options and Representatives' Purchase Option would
dilute the then-existing stockholders' percentage ownership of the Company's
stock, and any sales in the public market of Common Stock underlying such stock
options could adversely affect prevailing market prices for the Common Stock.
Moreover, the terms upon which the Company would be able to obtain additional
equity capital could be adversely affected since the holders of such securities
can be expected to exercise them at a time when the Company would, in all
likelihood, be able to obtain any needed capital on terms more favorable to the
Company than those provided in such stock options. The Company's employment
agreement with Rudy A. Slucker, its Chairman and Chief Executive Officer
provides that Mr. Slucker is entitled to receive a bonus equal to 10% of the
Company's pre-tax net income starting with the year ending December 31, 1998.
Such bonus will be payable to the extent of 50% of such amount in cash and the
remaining 50% in the form of Common Stock of the Company. The issuance of these
additional shares could also have an adverse effect on the liquidity of the
Company's Common Stock. See "Selling Stockholders and Plan of Distribution."
Potential Adverse Effects of Preferred Stock Issuance. The Board of
Directors has the authority, without further stockholder approval, to issue up
to 1,000,000 shares of preferred stock, in one or more series, and to fix the
number of shares and the rights, preferences and privileges of any such series.
The issuance of preferred stock by the Board of Directors could affect the
rights of the holders of the Common Stock. For example, such an issuance could
result in a class of securities outstanding that would have dividend,
liquidation, or other rights superior to those of the Common Stock or could make
a takeover of the Company or the removal of management of the Company more
difficult. The Board of Directors does not currently intend to issue any
additional shares of preferred stock in the foreseeable future. See "Description
of Securities-Preferred Stock."
No Dividends. The Company has never declared or paid dividends on its
Common Stock and currently does not intend to pay dividends in the foreseeable
future. The payment of dividends in the future will be at the discretion of the
Board of Directors. The Company, Tommy Armour and the Bank are parties to an
Agreement whereby the payment of dividends and redemption payment are restricted
under certain circumstances including (i) where the Company has failed to make
payments or otherwise failed to comply with covenants in, or an Event of Default
has occurred under, the loan agreement (except where such breach, failure or
Event of Default is cured by the Company or waived by the Bank), (ii) where the
Bank accelerates the indebtedness, or (iii) where there occurs an insolvency
event.
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USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders. The Company may receive up to $331,250 upon the
exercise of the Purchase Warrant (exclusive of expenses of this offering,
estimated to be $50,000), which will be used for working capital. The Company is
obligated to apply 70% of the proceeds received upon the exercise of the
Purchase Warrant, if any, to the redemption of the shares of Series A Preferred
Stock. The Company has agreed to pay certain expenses in connection with this
offering, currently estimated to be approximately $50,000.
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company is 11,000,000, consisting of
10,000,000 shares of Common Stock, $.01 par value, and 1,000,000 shares of
Preferred Stock, $.01 par value. As of the date of this Prospectus, 3,267,096
shares of Common Stock are outstanding and held of record by approximately 70
stockholders.
Preferred Stock
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of Preferred Stock without further stockholder approval. The
Preferred Stock may be divided into such classes or series as the Board of
Directors may determine by resolution. The Board of Directors is authorized to
determine and alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and to fix the
number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors has no current plans to
issue any additional shares of Preferred Stock.
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Common Stock
The holders of shares of Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders. Subject
to preferences that may be applicable to any outstanding shares of preferred
stock, the holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available for the payment of dividends. See "Risk Factors -- No
Dividends or Redemptions." In the event of a liquidation, dissolution or winding
up of the Company, subject to the liquidation preferences of preferred stock,
the holders of Common Stock are entitled to receive any declared and unpaid
dividends, in addition to being entitled to share ratably in all assets
remaining after payment of liabilities and liquidation preferences of any then
outstanding shares of preferred stock. Holders of Common Stock have no
preemptive rights or rights to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock.
All outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable, and the shares of Common
Stock issued upon completion of this Offering have been duly authorized and,
when issued, will be fully paid and nonassessable.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. In general, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Company's Certificate of Incorporation contains a provision
eliminating a director's liability to the Company or its stockholders for
monetary damages for a breach to fiduciary duty, except to the extent the
Delaware General Corporation Law prohibits the elimination of such liability
(such as in circumstances involving wrongful acts, such as the breach of a
director's duty or loyalty or acts or
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<PAGE>
omissions which involve intentional misconduct or a knowing violation of law).
The Company's Certificate of Incorporation also contains a provision obligating
the Company to indemnify its directors and officers to the fullest extent
permitted by law.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment to protect against
dilution in the event of stock dividends, stock splits, combinations,
subdivisions and reclassifications. No assurance can be given that the market
price of the Company's Common Stock will exceed the exercise price of the
Warrants at any time during the exercise period.
Transfer Agent and Registrar
The transfer agent and registrar for the Company's securities is
Continental Stock Transfer & Trust Company, New York, New York.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 1,520,690 shares of Common Stock (including the
933,333 shares of Common Stock issued upon conversion of the Series A Preferred
Stock) may be offered and sold pursuant to this Prospectus by the Selling
Stockholders. Except for TA Liquidation Corp. which is owned by U.S. Industries,
Inc., and which has designated a member of the board of directors of the
Company, none of the Selling Stockholders has any relationship with the Company
other than as a securityholder. The president of U.S. Industries serves as the
designee of TA Liquidation Corp. to the Board of Directors.
The 933,333 shares of Common Stock issued upon the conversion of the
Series A Preferred Stock and the 175,000 shares being offered by TA Liquidation
Corp., were issued in connection with the acquisition by the Company of the
assets of the Tommy Armour Golf Company. The Company has filed this Prospectus
pursuant to a Registration Rights Agreement between the Company and TA
Liquidation Corp.
The 237,357 shares being offered by JRH Golf Corporation includes 187,357
shares of Common Stock and 50,000 shares issuable upon the exercise of a
Purchase Warrant issued to JRH Golf Corporation in connection with the
acquisition by the Company of the assets of Ram Golf Corporation. The Company
has filed this Prospectus pursuant to a Registration Rights Agreement between
the Company and JRH Golf Corporation and is obligated to bear the expenses
related thereto.
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<PAGE>
The 100,000 shares being offered by Millenium Holdings Group, Inc. and
employees were issued for consulting services rendered to the Company during
1997.
The 50,000 shares of Common Stock and the Option Agreement providing for
the purchase of 25,000 shares of Common Stock for $4.50 per share being
offered by Pro Golf Promotions, L.L.C. were issued in connection with the
acquisition of the assets of Pro Golf Promotions, L.L.C., including the former
Powerbilt Golf Tour.
The following table sets forth certain information with respect to the
Selling Stockholders:
===============================================================================
Beneficial
Ownership of Shares
Shares of Beneficially
Common Owned
Stock Prior Shares to be Sold After the
Selling Stockholder to Sale (1) in the Offering Offering (2)
- --------------------------------------------------------------------------------
TA Liquidation Corp. 1,108,333(3) 1,108,333 0
- --------------------------------------------------------------------------------
J.R.H. Golf Corporation 237,357(4) 237,357 0
- --------------------------------------------------------------------------------
Millenium Holdings 55,000 55,000 0
Group, Inc.
- --------------------------------------------------------------------------------
Sharon Allen(5) 1,000 1,000 0
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Brian John(5) 14,000 14,000 0
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Herbert Tabin(5) 15,000 15,000 0
- --------------------------------------------------------------------------------
Gary J. Schultheis(5) 15,000 15,000 0
- --------------------------------------------------------------------------------
Pro Golf Promotions, L.L.C.(6) 75,000 75,000 0
================================================================================
(1) Includes shares of Common stock issuable upon exercise of options or
warrants which are exercisable within 60 days from the date of this Prospectus.
Unless otherwise noted, the Company believes that all of the persons named in
the above table have sole voting power with respect to all shares of Common
Stock beneficially owned by them.
(2) Assumes all of the shares of Common Stock offered hereby are sold by the
Selling Stockholders.
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(3) Includes 933,333 shares of Common Stock issued upon conversion of the
Preferred Stock into Common Stock.
(4) Includes up to 50,000 shares of Common Stock issuable upon the exercise of
the Purchase Warrant.
(5) Each of these persons are employees of Millenium Holdings Group, Inc.
(6) Includes options to purchase 25,000 shares of Common Stock for $4.50 per
share.
The Common Stock held by the Selling Stockholders, and the Common Stock
issuable to the Selling Stockholders upon exercise of the Purchase Warrant may
be offered and sold from time to time as market conditions permit in the
over-the-counter market, or otherwise, at prices and terms then prevailing or at
prices related to the then-current market price, or in negotiated transactions.
The Selling Stockholders will act independently of the Company in making
decisions with respect to the timing, manner and size of each sale. The shares
offered hereby may be sold by one or more of the following methods, without
limitation: (a) a block trade in which a broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction; (b) purchases by a broker or
dealer as principal and resale by such broker or dealer for its account pursuant
to this Prospectus; (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (d) face-to-face transactions between
sellers and purchasers without a broker-dealer. In effecting sales, brokers or
dealers engaged by the Selling Stockholders may arrange for other brokers or
dealers to participate. Such broker or dealers may receive commissions or
discounts from Selling Stockholders in amounts to be negotiated. Such brokers
and dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Act, in connection with such sales.
The Selling Stockholders may also pledge shares of Stock as collateral for
margin accounts and such shares could be resold pursuant to the terms of such
accounts. The Company has been advised by the Selling Stockholders that they
have not made any arrangements relating to the distribution of the shares
covered by this Prospectus.
Each Registration Rights Agreement provides that the Company will
indemnify the Selling Stockholders against certain liabilities, including
certain liabilities under the Securities Act. Additionally, the Company will pay
the expenses, estimated to be $50,000, in connection with this offering, other
than transfer taxes, discounts, commissions, fees or expenses of underwriters,
selling brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Stock, or legal expenses of any person other
than the Company and the Selling Stockholders.
In addition, any shares covered by this Prospectus which qualify for sale
pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to this
Prospectus.
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LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Gibbons, Del Deo, Dolan, Griffinger & Vecchione, a Professional
Corporation, Newark, New Jersey.
EXPERTS
The consolidated financial statements of TearDrop Golf Company
incorporated by reference in TearDrop Golf Company's Annual Report (Form 10-KSB)
for the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The statements of operations, stockholders' equity, and cash flows of
TearDrop Golf Company for the year ended December 31, 1996, have been
incorporated herein by reference in reliance on the report of Rothstein, Kass &
Company, P.C., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
The combined financial statements of Tommy Armour Golf Company as of
September 30, 1997 and 1996 and for the three years ended September 30, 1997
incorporated in this Prospectus by reference to the TearDrop Golf Company Annual
Report on Form 10-KSB for the year ended December 31, 1997, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts to auditing and
accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. (the "Commission") a registration statement (the "Registration
Statement"), under the Act with respect to the securities offered by this
Prospectus. This Prospectus, filed as part of such Registration Statement, does
not contain all of the information set forth in, or annexed as exhibits to, the
Registration Statement, certain portions of which have been omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and this offering, reference is made to
the Registration Statement, including the exhibits filed therewith, which may be
inspected without charge at the Office of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies of the Registration Statement may be
obtained from the Commission at its principal office upon payment of prescribed
fees. Statements contained in this Prospectus as to the contents of any contract
or other document are not necessarily complete and, where the contract or other
document has been filed as an exhibit to the Registration Statement, each
statement is qualified in all respects by reference to the applicable document
filed with the Commission.
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================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by the Company, the Selling
Stockholders or any Underwriter. This Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy and security other than the Common
Stock offered by this Prospectus, or an offer to sell or a solicitation of an
offer to buy any security by any person in any jurisdiction in which such offer
or solicitation would be unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, imply that the
information in this Prospectus is correct as of any time subsequent to the date
of this Prospectus.
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TABLE OF CONTENTS
Page
----
Available Information...................................................... 2
Information Incorporated by Reference ..................................... 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 5
Use of Proceeds............................................................ 13
Description of Securities.................................................. 13
Delaware Law and Certain Charter and By-Law Provisions .................... 14
Selling Stockholders and Plan of
Distribution............................................................. 15
Legal Matters.............................................................. 18
Experts.................................................................... 18
Additional Information..................................................... 18
================================================================================
================================================================================
1,520,690 Shares of
Common Stock
- --------------------------------------------------------------------------------
TEARDROP GOLF COMPANY
- --------------------------------------------------------------------------------
PROSPECTUS
- --------------------------------------------------------------------------------
June 24, 1998
================================================================================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Expenses payable in connection with the issuance and distribution of
the securities being registered (estimated except in the case of the
registration fee) are as follows:
Amount
------
Registration Fee $ 2,950.00
Printing 2,000.00
Legal Fees and Expenses 20,000.00
Accounting Fees and Expenses 20,000.00
Transfer Agents and Registrars Fees 2,000.00
Miscellaneous 3,050.00
TOTAL $50,000.00
==========
The above fees will be paid by the Company.
Item 15. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) liability for dividends paid or stock
repurchased or in violation of the Delaware General Corporation Law; or (iv) any
transaction from which the director derived an improper personal benefit.
Section 102(b)(7) does not authorize any limitation on the ability of the
corporation or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Seven of the Company's Certificate of Incorporation provides that
no director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except that a director shall not be relieved from liability: (a) for any breach
of the director's duty of loyalty to the Company or its stockholders; (b) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (c) under Section 174 of the General Corporation Law
of Delaware; or (d) for any transaction from which the director derived an
improper personal benefit.
II-2
<PAGE>
Item 16. Exhibits
(a) Exhibits
Exhibit No.
Exhibit No. Description
----------- -----------
3.1+ Certificate of Incorporation
3.2+ Certificate of Merger
3.3+ Agreement and Plan of Merger dated October 21, 1996 between
the Company and TearDrop Putter Corporation, a South
Carolina Corporation
3.4+ By-Laws
3.5* Certificate of Designation
4.1+ Warrant Agreement
4.2+ Specimen Common Stock Certificate
4.3+ Specimen Warrant Certificate
5.1 Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione
10.1+ Employment Agreement with Rudy A. Slucker
10.2+ Employment Agreement with John Zeravica
10.3+ Stock Option Plan
10.4+ Form of Stock Option Agreement
10.7+ Form of Promissory Note in the original principal amount of
$400,000 to be issued by the Company to Rudy A. Slucker
10.15+ Standard Form of Player Endorsement Agreement
10.17+ Property Lease dated August 3, 1995 between the Company and
Albert H. Politi
10.18+ Equipment Lease dated November 30, 1995 between the Company
and Packaging Management Associates, Inc.
10.21+ Financial Consulting Agreement between the Company and GKN
Securities Corp.
10.22+ Advertising Agreement dated November 13, 1996 between the
Company and the Golf Channel, Inc.
10.23+ Form of Lock-up Agreement
10.24+ Property Lease dated August 10, 1997 between the Company and
Dolo Realty Co.
10.25* Asset Purchase Agreement dated as of October 31, 1997 among
Tommy Armour Golf Company, USI Canada, Inc., Tommy Armour
Golf (Scotland) Ltd., USI American Holdings, Inc., TearDrop
Acquisition Corp. and TearDrop Golf Company
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<PAGE>
10.26* Registration Agreement dated as of October 31, 1997 between
TearDrop Golf Company and Tommy Armour Golf Company
10.27* Loan and Security Agreement dated as of November 10, 1997
among TearDrop Golf Company, TearDrop Acquisition Corp. and
CoreStates Bank, N.A.
10.27(a)** First Amendment to Loan and Security Agreement dated as of
January 9, 1998 among TearDrop Golf Company, Tommy Armour
Golf Company, TearDrop Ram Golf Company and CoreStates Bank,
N.A.
10.28** Asset Purchase Agreement dated as of December 23, 1997 among
TearDrop Golf Company, TearDrop Ram Golf Company, Ram Golf
Corporation and Ram Golf UK, Ltd.
10.29** Registration Agreement dated as of December 29, 1997 between
TearDrop Golf Company and Ram Golf Corporation
10.30** Warrant dated December 29, 1997 made by TearDrop Golf
Company in favor of Ram Golf Corporation
10.31*** Settlement Agreement dated March 31, 1998 among TA
Liquidation Corp., formerly known as Tommy Armour Golf
Company, Tommy Armour Golf (Scotland) Ltd., and USI Canada,
Inc.; USI American Holdings, Inc., and Tommy Armour Golf
Company, formerly known as TearDrop Acquisition Corp. and
TearDrop Golf Company
16**** Letter from Rothstein, Kass & Company, P.C. to the
Commission dated March 2, 1998
21*** Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
23.2 Consent of Rothstein, Kass & Company, P.C.
23.3 Consent of Price Waterhouse LLP
23.4 Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione
(contained in Exhibit 5.1)
- ----------
+ Previously filed with the Securities and Exchange Commission as an
Exhibit to the Company's Registration Statement on Form SB-2 (File No.
333-14647) and incorporated herein by reference.
* Previously filed with the Securities and Exchange Commission as an
Exhibit to the Company's Current Report on Form 8-K filed on November 26, 1997
and incorporated herein by reference.
** Previously filed with the Securities and Exchange Commission as an
Exhibit to the Company's Current Report on Form 8-K filed on January 13, 1998
and incorporated herein by reference.
*** Previously filed with the Securities and Exchange Commission as an
Exhibit to the Company's Report on Form 10-KSB filed on April 6, 1998.
**** Previously filed with the Securities and Exchange Commission as an
Exhibit to the Company's Current Report on Form 8-K filed on March 4, 1998 and
incorporated herein by reference.
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
II-4
<PAGE>
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the Prospectus any facts or events arising after the
effective date of the prospectus (or the most recent post-effective amendments
thereto) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement; and
(iii) Include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be filed with a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That for determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration of
the securities offered, and the offering of the securities at that time to be
the initial bona fide offering thereof.
(3) To remove by registration by means of a post-effective amendment any
of the securities that remain unsold at the termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer, or controlling person of the registrant in the successful
defense of any action, suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Union, State of New Jersey, on the 24th day of June,
1998.
TearDrop Golf Company
By: /s/ Rudy A. Slucker
---------------------------
Rudy A. Slucker, Chairman
and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement on Form S-3 has been signed by the
following persons in the capacities and on the dates stated. Each person whose
signature appears below hereby constitutes and appoints Rudy A. Slucker as such
person's true and lawful attorney-in-fact and agent with full power of
substitution for such person and in such person's name, place and stead, in any
and all capacities, to sign and to file with the Securities and Exchange
Commission, any and all amendments and post-effective amendments to this
Registration Statement, with exhibits thereto and other documents in connection
therewith, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or any substitute therefor, any lawfully
do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated:
Signature Title Date
--------- ----- ----
/s/ Rudy A. Slucker Chairman of the June __, 1998
- --------------------------- Board of Directors,
Rudy A. Slucker and Chief Executive Officer)
/s/ Joseph A. Cioni Vice President and June 17, 1998
- --------------------------- Chief Financial Officer
Joseph A. Cioni
/s/ Bruce Nagel Director June 17, 1998
- ---------------------------
Bruce Nagel
/s/ Fred Hochman Director June __, 1998
- ---------------------------
Fred Hochman
II-6
<PAGE>
/s/ Jeffrey Baker Director June __, 1998
- ---------------------------
Jeffrey Baker
/s/ Leslie Goodman Director June __, 1998
- ---------------------------
Leslie Goodman
/s/ John Raos Director June __, 1998
- ---------------------------
John Raos
II-7
<PAGE>
Exhibit No. Description Page No.
- ----------- ----------- --------
5.1 Opinion of Gibbons, Del Deo, Dolan, Griffinger & Vecchione,
regarding legality of securities being registered.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Rothstein, Kass & Company, P.C.
23.3 Consent of Price Waterhouse LLP.
23.4 Consent of Gibbons, Del Deo, Dolan, Griffinger & Vecchione
(included in Exhibit 5).
[LETTERHEAD OF GIBBONS, DEL DEO, DOLAN, GRIFFINGER & VECCHIONE]
June 24, 1998
TearDrop Golf Company
1080 Lousons Road
Union, New Jersey 07083
Ladies and Gentlemen:
You have requested our opinion with respect to the public offering and
sale by you, TearDrop Golf Company, a Delaware corporation (the "Company"),
pursuant to Amendment No. 1 to Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), of (i) a maximum of 1,520,690 shares of Common Stock, par value $.01 per
share ("Common Stock") of the Company, of which 933,333 shares were issued
upon conversion by the securityholders of 70,000 shares of Series A Reedemable
Convertible Preferred Stock ("Series A Preferred Stock") of the Company, 50,000
shares of Common Stock are issuable upon the exercise of a Common Stock Purchase
Warrant and 25,000 shares of Common Stock are issuable upon exercise of a Common
Stock Option Agreement.
We have examined originals, or copies certified or otherwise identified to
our satisfaction, of such documents and corporate and public records as we deem
necessary as a basis for the opinion hereinafter expressed. With respect to such
examination, we have assumed the genuineness of all signatures appearing on all
documents presented to us as originals, and the conformity to the originals of
all documents presented to us as conformed or reproduced copies. Where factual
matters relevant to such opinion were not independently established, we have
relied upon certificates of appropriate state and local officials, and upon
certificates of executive officers and responsible employees and agents of the
Company.
Based upon the foregoing, it is our opinion that each of the outstanding
Common Stock and the Series A Preferred Stock has been duly and validly
authorized and issued and is fully
<PAGE>
TearDrop Golf Company
June 24, 1998
Page 2
paid and nonassessable. The Common Stock issued upon the conversion of the
Series A Preferred Stock, issuable upon exercise of the Common Stock Purchase
Warrant and upon exercise of the Common Stock Option Agreement, when duly issued
in accordance with the terms thereof, will be duly and validly issued and fully
paid and nonassessable.
We hereby consent to the use of this opinion as Exhibit 5.1 to the
Registration Statement, and to the use of our name as your counsel in connection
with the Registration Statement and in the Prospectus forming a part thereof. In
giving this consent, we do not thereby concede that we come within the
categories of persons whose consent is required by the Act or the General Rules
and Regulations promulgated thereunder.
Very truly yours,
/s/ GIBBONS, DEL DEO, DOLAN, GRIFFINGER
& VECCHIONE
GIBBONS, DEL DEO, DOLAN, GRIFFINGER &
VECCHIONE
A Professional Corporation
-2-
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 31, 1998, in Pre-effective Amendment No. 1 to the
Registration Statement (Form S-3) and related Prospectus of TearDrop Golf
Company for the registration of 1,520,690 shares of its Common Stock.
/s/ Ernst & Young LLP
Chicago, Illinois
June 24, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
TearDrop Golf Company on Form S-3 (File No. 333-14647) of our report dated
January 31, 1997, on our audit of the statements of operations, stockholders'
equity, and cash flows of TearDrop Golf Company for the year ended December 31,
1996. We also consent to the reference to our firm under the caption "Experts."
/s/ Rothstein, Kass & Company, P.C.
Roseland, New Jersey
June 24, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 8, 1998, relating to the combined financial statements of Tommy Armour
Golf Company as of September 30, 1997 and 1996 and for the three years ended
September 30, 1997, appearing on page F-23 of TearDrop Golf Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Chicago, Illinois
June 24, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the audited
financial statements of TearDrop Golf Company for fiscal year ended December 31,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001025566
<NAME> TearDrop Golf Company
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Dec-31-1997
<EXCHANGE-RATE> 1
<CASH> 257,000
<SECURITIES> 0
<RECEIVABLES> 8,803,000
<ALLOWANCES> 1,047,000
<INVENTORY> 21,269,000
<CURRENT-ASSETS> 29,591,000
<PP&E> 5,325,000
<DEPRECIATION> 183,000
<TOTAL-ASSETS> 40,022,000
<CURRENT-LIABILITIES> 14,156,000
<BONDS> 17,661,000
10,000,000
0
<COMMON> 27,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,022,000
<SALES> 9,624,000
<TOTAL-REVENUES> 9,624,000
<CGS> 7,543,000
<TOTAL-COSTS> 18,649,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 143,000
<INTEREST-EXPENSE> 124,000
<INCOME-PRETAX> (9,149,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,149,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,149,000)
<EPS-PRIMARY> (4.10)
<EPS-DILUTED> (4.10)
</TABLE>
