U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange
Act of 1934
For the quarterly period ended SEPTEMBER 30, 2000
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______ to _______.
Commission File No. 000-28321
AVID SPORTSWEAR & GOLF CORP.
----------------------------
(Name of Small Business Issuer in Its Charter)
<TABLE>
<CAPTION>
<S> <C>
NEVADA 88-0374969
------ ----------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer Identification No.)
or Organization)
22 SOUTH LINKS AVENUE, STE. 204, SARASOTA, FLORIDA 34236
-------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(941) 330-8051
(Issuer's Telephone Number, Including Area Code)
</TABLE>
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has
been subject to such filing requirements for the past 90 days. Yes |X| No |_|
There were 44,179,406 shares of Common Stock outstanding as of November
10, 2000. This number does not include outstanding options to purchase shares of
Common Stock of the issuer.
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
F-1
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Balance Sheets
ASSETS
<CAPTION>
September 30, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C>
CURRENT ASSETS
Cash $ -- $ 237,407
Accounts receivable, net -- 315,804
Inventory 4,298,807 1,885,390
Prepaid expenses 123,826 20,000
------------- -------------
Total Current Assets 4,422,633 2,458,601
------------- -------------
EQUIPMENT
Machinery and equipment 539,075 378,531
Furniture and fixtures 98,198 253,644
Show booths 745,160 298,479
Computers and software 338,443 --
Leasehold improvements 30,698 29,398
Less: accumulated depreciation (627,607) (502,938)
------------- -------------
Total Equipment 1,123,967 457,114
------------- -------------
OTHER ASSETS
Goodwill, net 2,154,154 2,346,103
Deposits 20,114 15,114
Trademarks 2,902 2,902
------------- -------------
Total Other Assets 2,177,170 2,364,119
------------- -------------
TOTAL ASSETS $ 7,723,770 $ 5,279,834
</TABLE>
F-2
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
2000 1999
---- ----
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 28,355 $ --
Accounts payable 4,662,446 1,504,858
Accrued expenses 349,449 200,865
Equipment leases payable - current 39,698 --
Due to factor 127,823 --
Notes payable - related parties - current 450,000 300,000
Notes payable - current 150,000 1,735,524
Subscribed stock 8,575 12,500
----------------- --------------------
Total Current Liabilities 5,816,346 3,753,747
----------------- --------------------
LONG-TERM LIABILITIES
Equipment leases payable 111,711 --
Notes payable - related parties 651,646 --
----------------- --------------------
Total Long-Term Liabilities 763,357 --
----------------- --------------------
Total Liabilities 6,579,703 3,753,747
----------------- --------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock; 10,000,000 shares authorized of
$0.001 par value, zero issued and outstanding -- --
Common stock; 50,000,000 shares authorized of
$0.001 par value, 44,114,406 and 26,374,022
shares issued and outstanding 44,129 26,374
Additional paid-in capital 13,460,932 7,092,848
Common stock subscription receivable (840,000) (30,000)
Accumulated deficit (11,520,994) (5,563,135)
----------------- --------------------
Total Stockholders' Equity 1,144,067 1,526,087
----------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 7,723,770 $ 5,279,834
----------------- --------------------
</TABLE>
F-3
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES, NET $ 5,912,021 $ 2,340,939 $ 2,244,097 $ 781,808
COST OF GOODS SOLD 5,027,164 1,623,989 1,656,607 402,596
--------------- --------------- --------------- ------------
Gross Margin 884,857 716,950 587,490 379,212
--------------- --------------- --------------- ------------
OPERATING EXPENSES
Selling expenses 2,465,365 529,677 1,178,604 148,456
Depreciation and amortization
expense 321,269 163,010 115,852 71,157
General and administrative expenses 3,773,047 2,409,958 1,120,741 256,456
--------------- --------------- --------------- ------------
Total Operating Expenses 6,559,681 3,102,645 2,415,197 467,069
--------------- --------------- --------------- ------------
Loss from Operations (5,674,824) (2,385,695) (1,827,707) (96,857)
--------------- --------------- --------------- ------------
OTHER INCOME (EXPENSE)
Interest income 1,820 -- 1,632 --
Interest expense (321,902) (39,870) (21,112) (17,500)
Gain on sale of asset 50,206 -- 44,787 --
Loss on abandonment of asset (13,159) -- (13,159) --
--------------- --------------- --------------- ------------
Total Other Income (Expense) (283,035) (39,870) 12,148 (17,500)
--------------- --------------- --------------- ------------
INCOME TAX BENEFIT -- -- -- --
--------------- --------------- --------------- ------------
NET LOSS $ (5,957,859) $ (2,425,565) $ (1,815,559) $ (114,357)
=============== =============== =============== ============
BASIC LOSS PER SHARE $ (0.13) $ (0.16) $ (0.09) $ (0.01)
=============== =============== =============== ============
</TABLE>
F-4
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity
<CAPTION>
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 14,612,000 $14,612 $ 893,193 $ (60,000) $ (527,157)
January 5, 1999, common stock issued for
cash, services and debt, valued at $0.75
per share 590,000 590 441,910 -- --
January 5, 1999, common stock issued for cash
and debt, valued at $0.75 per share 866,670 867 649,133 -- --
January 8, 1999, common stock issued for cash
at $0.75 per share 210,668 211 157,789 -- --
January 8, 1999, warrants issued below market
value -- -- 53,235 -- --
January 11, 1999, common stock issued for
cash and services, valued at $0.75 per
share 560,000 560 419,440 -- --
January 11, 1999, common stock issued for
media services valued at $0.75 per share 800,000 800 599,200 -- --
January 20, 1999, common stock issued for
cash and services valued at $0.75 per share 160,000 160 119,840 -- --
January 27, 1999, common stock issued to
purchase Avid Sportswear valued at $0.75
per share 1,100,000 1,100 823,900 -- --
February 4, 1999, common stock issued for
cash at $0.75 per share 372,002 372 278,630 -- --
---------- -------- ---------- --------- ---------
Balance Forward 19,271,340 $ 19,272 $4,436,270 $ (60,000) $(527,157)
---------- -------- ---------- --------- ---------
</TABLE>
F-5
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Continued)
<CAPTION>
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance Forward 19,271,340 $ 19,272 $ 4,436,270 $ (60,000) $ (527,157)
March 11, 1999, common stock issued for
cash and services valued at $0.75 per
share 1,220,000 1,220 913,780 -- --
March 11, 1999, common stock issued for
cash at $0.75 per share 83,334 83 62,417 -- --
March 11, 1999, common stock issued for
cash at $0.75 per share 18,334 18 13,732 -- --
May 28, 1999, common stock issued for
cash at $0.75 per share 101,100 101 75,724 -- --
September 20, 1999, common stock issued
for cash and services valued at $0.75
per share 50,000 50 37,450 -- --
December 28, 1999, common stock issued
for conversion of debt to equity at
$0.22 per share 5,344,200 5,344 1,170,380 -- --
Conversion of debt below market value
-- -- 293,381 -- --
December 31, 1999, common stock issued
for cash at $0.35 per share 285,714 286 99,714 -- --
Stock offering costs -- -- (10,000) -- --
Receipt of stock subscription -- -- -- 30,000 --
Net loss for the year ended
December 31,1999 -- -- -- -- (5,035,978)
---------- --------- ----------- --------- ----------
Balance, December 31, 1999 26,374,022 $ 26,374 $ 7,092,848 $ (30,000) $(5,563,135)
========== ========= =========== ========= ==========
</TABLE>
F-6
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Continued)
<CAPTION>
Additional
Common Stock Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1999 26,374,022 $ 26,374 $ 7,092,848 $ (30,000) $(5,563,135)
January 17, 2000, common stock issued for
services at $0.30 per share (unaudited)
1,200,000 1,200 358,800 (90,000) --
January 17, 2000, options granted below
market value (unaudited) -- -- 75,000 -- --
January 25, 2000, common stock issued for
conversion of debt to equity at $0.375
per share (unaudited) 1,241,874 1,242 464,461 -- --
February 1, 2000, common stock issued for
conversion of debt to equity at $0.437
per share (unaudited) 695,583 696 303,274 -- --
March 6, 2000, canceled 100,000 shares
common stock, issued in February 1998,
at $0.15 per share and canceled subscription
receivable in the amount of $15,000
(unaudited) (100,000) (100) (14,900) 15,000 --
Common stock issued for conversion of
subscribed stock at $0.35 per share
(unaudited) 5,103,357 5,103 1,781,072 -- --
Common stock issued for cash at $0.35 per
share (unaudited) 7,955,218 7,955 2,740,763 (735,000) --
Common stock issued for conversion of debt
at $0.35 per share (unaudited) 1,294,352 1,294 451,729 -- --
Common stock issued for consulting contract
at $0.58 per share (unaudited) 350,000 350 202,650 -- --
Common stock issued for consulting services
at $0.35 per share (unaudited) 15,000 15 5,235 -- --
Net loss for the nine months ended
September 30, 2000 (unaudited) -- -- -- -- (5,957,859)
---------- --------- ----------- --------- -----------
Balance, September 30, 2000 (unaudited)
44,129,406 $44,129 $13,460,932 $ (840,000) $(11,520,994)
========== ========= =========== ========= ===========
</TABLE>
F-7
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
For the Nine Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (5,957,859) $(2,425,565)
Adjustments to reconcile net (loss) to net cash used in operating
activities:
Depreciation and amortization 321,269 163,010
Common stock issued for services, discounts 707,185 1,475,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 315,804 199,061
(Increase) decrease for prepaid insurance (103,826) (8,165)
(Increase) decrease in inventory (2,413,417) (467,272)
(Increase) decrease in deposits (5,000) --
Increase (decrease) in cash overdraft 28,355 --
Increase (decrease) in accounts payable 3,157,588 294,012
Increase (decrease) in accrued expenses 148,584 119,827
Increase (decrease) in leases payable 151,409 --
Increase (decrease) in due to factor 127,823 --
------------ -----------
Net Cash Used in Operating Activities (3,522,085) (650,092)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (796,173) (365,977)
------------ -----------
Net Cash Used in Investing Activities (796,173) (365,977)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash purchased with Avid Sportswear, Inc. -- 40,282
Payment to Avid shareholders -- (725,000)
Proceeds from notes payable -- 1,340,735
Payments on notes payable (1,499,521) (2,006,061)
Proceeds from related party notes payable 1,784,404 --
Issuance of common stock for cash 2,013,718 1,859,576
Receipt of related party receivable -- 352,300
Proceeds from subscribed stock 1,782,250 --
------------ -----------
Net Cash Provided by Financing Activities 4,080,851 861,832
------------ -----------
NET INCREASE (DECREASE) IN CASH (237,407) (154,237)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 237,407 154,237
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -- $ --
============ ===========
</TABLE>
F-8
<PAGE>
<TABLE>
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<CAPTION>
For the Nine Months Ended
September 30,
-------------
2000 1999
---- ----
<S> <C> <C>
CASH PAID FOR:
Interest $ 63,415 $ 36,592
Income tax $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES
Issuance of common stock for subsidiary $ -- $ 275,000
Issuance of common stock for debt $ 1,222,696 $ --
Issuance of common stock for services, discounts $ 707,185 $1,475,000
</TABLE>
F-9
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared by the Company without audit. In the opinion of management,
all adjustments (which include only normal recurring adjustments)
necessary to present fairly the consolidated financial position,
results of operations and cash flows at September 30, 2000 and 1999
and for all periods presented have been made.
Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1999 audited
consolidated financial statements. The results of operations for the
periods ended September 30, 2000 and 1999 are not necessarily
indicative of the operating results for the full years.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
generally accepted accounting principles applicable to a going
concern, which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company has generated significant losses from
operations for the years ended December 31, 1998 and 1999, and for
the nine months ended September 30, 2000 and has current liabilities
in excess of current assets at September 30, 2000. For the year
ended December 31, 2000, the Company anticipates a significant
increase in sales volume from the 1999 level, requiring cash in
excess of the cash generated from operations. Management has secured
necessary cash to date from additional cash investments by existing
shareholders and from the proceeds of a private placement of
additional shares of Company stock; additional required cash is
anticipated from borrowing from a senior lender. However, there can
be no assurance that the Company will be able to raise the
additional required cash.
NOTE 3 - DUE TO FACTOR
In August 2000, Avid Sportswear, Inc. (Avid), the wholly-owned
subsidiary of Avid Sportswear and Golf Corp., entered into a
factoring, revolving credit and trade finance agreement with a
factor. Under this agreement, which has an initial term expiring in
August 2001 and continuing on an annual basis thereafter, Avid
assigns substantially all of its accounts receivable to the factor,
typically on a non-recourse basis. Avid may request advances up to
75% of the eligible net sales and up to 40% of eligible inventory.
Advances against inventory may not exceed $2,500,000 at any one
time. The factor charges Avid a fee on the net sales factored and
interest on the amounts advanced at the factor's index rate plus
4.29%. The index rate was 6.5%, at September 30, 2000, corresponding
to an interest rate of 10.79%. Avid is subject to financial
covenants under the agreement including the requirement to maintain
a minimum tangible net worth and minimum working capital. Such
covenants are effective on December 31, 2000.
F-10
<PAGE>
AVID SPORTSWEAR & GOLF CORP.
Notes to the Consolidated Financial Statements
September 30, 2000 and December 31, 1999
NOTE 3 - DUE TO FACTOR (Continued)
Outstanding factored receivables:
Without recourse $ 796,308
With recourse 860,405
1,656,713
----------
Advances (1,651,350)
----------
$ 5,363
==========
Avid has an agreement with the factor to open letters of credit to
facilitate the purchase of inventory. Letters of credit are opened
as needed, subject to factor approval, and are secured by the
acquired inventories. Open letters of credit may not exceed
$3,500,000 at any time. The amount of open letters of credit was
$710,453 at September 30, 2000.
Obligations due to the factor under the factoring agreement are
collateralized by a continuing security interest in all of the
assets of Avid, except fixed assets, and are guaranteed by the
parent. All indebtedness due to the factor is additionally
guaranteed by a shareholder up to a limit of $375,000.
NOTE 4 - SUBSEQUENT EVENTS
CONVERTIBLE DEBENTURES
The Company has raised $300,000 in gross proceeds and $255,000 in
net proceeds in the form of convertible debentures. Terms of the
convertible debentures are as follows: 6% convertible debentures
principal and accrued interest due by November 1, 2005. The
debenture holders are entitled to convert all or any part of the
principal amount plus accrued interest into shares of the Company's
common stock equal to either (a) an amount equal to 120% of the
closing bid price of the Company's common stock as of the date of
the debenture issuance or (b) an amount equal to 80% of the lowest
closing bid price for twenty trading days immediately preceding the
conversion date. The Company is obligated to register the resale of
the conversion shares under the Securities Act of 1933. The
debentures are subordinate and junior in right of payment to all
accounts payable of the Company incurred in the ordinary course of
business and/or bank debt of the Company not to exceed $500,000. The
Company shall have the right to require the debenture holders to
convert any unpaid principal and accrued interest on the debentures
by giving the debenture holder not less than five days prior written
notice if the closing bid price of the Company's common stock is
$1.25 or higher per share for ten consecutive trading days or upon
the five year anniversary of the debenture issuance.
SUBSCRIPTION RECEIVABLE
The Company has received $125,000 of the subscription receivable.
F-11
<PAGE>
ITEM 2. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. THIS FILING CONTAINS
FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A) OUR COMPANY'S PROJECTED SALES AND PROFITABILITY, (B) OUR COMPANY'S GROWTH
STRATEGIES, (C) ANTICIPATED TRENDS IN OUR COMPANY'S INDUSTRY, (D) OUR COMPANY'S
FUTURE FINANCING PLANS, (E) OUR COMPANY'S ANTICIPATED NEEDS FOR WORKING CAPITAL
AND (F) BENEFITS RELATED TO THE ACQUISITION OF AVID SPORTSWEAR, INC., A
CALIFORNIA CORPORATION. IN ADDITION, WHEN USED IN THIS FILING, THE WORDS
"BELIEVES," "ANTICIPATES," "INTENDS," "IN ANTICIPATION OF," "EXPECTS," AND
SIMILAR WORDS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE BASED LARGELY ON OUR COMPANY'S EXPECTATIONS AND
ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR
COMPANY'S CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CHANGES IN TRENDS IN THE ECONOMY AND
OUR COMPANY'S INDUSTRY, DEMAND FOR OUR COMPANY'S PRODUCTS, UNEXPECTED CHANGES IN
FASHION TRENDS, PRIOR SEASON INVENTORIES, COMPETITION, REDUCTIONS IN THE
AVAILABILITY OF FINANCING AND AVAILABILITY OF RAW MATERIALS, THE SEASONAL NATURE
OF OUR COMPANY'S BUSINESS, THE EXTREMELY COMPETITIVE NATURE OF THE GOLF APPAREL
AND SPORTSWEAR INDUSTRIES AND OTHER FACTORS. IN LIGHT OF THESE RISKS AND
UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS FILING WILL IN FACT OCCUR.
OVERVIEW
Through our wholly-owned subsidiary, we design, manufacture and market
distinctive premium and moderately-priced sportswear. We sell our products
primarily through golf pro shops and resorts, corporate sales accounts and
better specialty stores. Our sportswear is marketed under three distinct labels:
Avid Sportswear, British Open Collection and Dockers Golf. From our
incorporation on September 19, 1997 until March 1, 1999, we had no operations.
On March 1, 1999, we acquired Avid Sportswear, Inc., which has been in the
business of designing, manufacturing and marketing golf apparel since October 6,
1988. For accounting purposes, the acquisition was treated as a purchase of Avid
Sportswear, Inc. All of our business operations are conducted through Avid
Sportswear, Inc.
PLAN OF OPERATIONS
ADDITIONAL FUND RAISING ACTIVITIES. As of September 30, 2000, we had no
cash-on-hand. We have historically funded our operations through a combination
of internally generated cash, funds loaned to our company by certain of our
officers and directors and through the sale of securities. We may need to raise
additional funds to meet expected demand for our products for the remainder of
2000 and beyond. Our current liabilities exceeded our current assets as of
September 30, 2000. Expenses have increased due to, among other things, the
addition of the Dockers Golf and British Open Collection labels. If we
underestimate demand or incur unforeseen expenses in our product design or other
areas, such funds may be required earlier.
We registered on behalf of certain shareholders 14,988,640 shares of
common stock issued pursuant to our company's private offerings, which
registration statement became effective on July 28, 2000. The sale of these
shares is permitted in most states pursuant to registration or exemptions from
registration. These shares of common stock may be offered and sold from time to
time by selling shareholders of our company, and none of the proceeds generated
from such sales will be available to our company. See "Certain Business Risk
Factors - Sales of common stock by private placement investors may cause our
stock price to decline."
SUMMARY OF ANTICIPATED PRODUCT DEVELOPMENT. We spent approximately
$350,000 on product development in 1999 and expect to spend approximately
$500,000 on product development in 2000 in preparation for future seasons and in
designing products for the Dockers Golf and British Open Collection labels.
Because these product development efforts are in their infancy, we expect these
efforts to continue into the foreseeable future. Initially, these efforts are
expected to focus on golf-related apparel and may eventually include other types
of apparel. Even after our product lines mature, we expect product development
to remain a significant expense due to changing fashions and other factors. We
commenced a national roll-out of our Dockers Golf and British Open Collection
labels in the Fall of 2000.
3
<PAGE>
SIGNIFICANT PLANT AND EQUIPMENT PURCHASES. In 2000, we expect to purchase
computer hardware and software, telephone and embroidery equipment. We estimate
that the cost of this equipment to be approximately $1,000,000.
CHANGES IN NUMBER OF EMPLOYEES. We currently have 62 employees. As shown
in the following chart, we anticipate hiring additional personnel during 2001 in
connection with our expected growth plans. We believe that these personnel will
be adequate to accomplish the tasks set forth in the plan.
PROJECTED
CURRENT EMPLOYEES
DEPARTMENT EMPLOYEES 2001
---------- --------- ----
Marketing and Sales 7 9
Embroidery and Sewing 25 30
Warehousing and Delivery 9 11
Design and Production Control 3 4
Administrative and Other
Support Positions 18 20
-------- --------
Total Employees 62 74
-------- --------
Independent Contractors - 33 36
Sales
-------- --------
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the percentage
of net sales represented by certain items in our company's Consolidated
Statement of Operations for the nine months ended September 30, 2000 and 1999
and the three months ended September 30, 2000 and 1999:
<TABLE>
PERCENTAGE OF SALES
<CAPTION>
NINE MONTHS NINE MONTHS ENDED THREE MONTHS THREE MONTHS
ENDED SEPTEMBER 30, ENDED ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, SEPTEMBER 30,
2000 2000 1999
---- ---- ----
<S> <C> <C> <C> <C>
Sales, net 100.0% 100.0% 100.0% 100.0%
Cost of goods sold (85.0%) (69.4%) (73.8%) (51.5%)
Gross margin 15.0% 30.6% 26.2% 48.5%
Operating expenses (111.0%) (132.5%) (107.6%) (60.9%)
(Loss) from operations (96.0%) (101.9%) (81.5%) (12.4%)
Interest expense (5.4%) (1.7%) (0.9%) (2.2%)
Net loss (100.8%) (103.6%) (80.9%) (14.6%)
</TABLE>
4
<PAGE>
THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Our results of operations for the three-month period ended September 30,
1999, included three months of operations of our wholly-owned subsidiary, Avid
Sportswear, Inc. We acquired Avid Sportswear, Inc. on March 1, 1999. Our results
of operations in the three-month period ended September 30, 2000, also included
three months of operations of our wholly-owned subsidiary.
SALES, NET. Sales, net increased $1.5 million, or 187.0%, from $0.8
million to $2.2 million in the three months ended September 30, 2000 compared to
the same period in the prior year. This increase is attributable to sales in
connection with the introduction of the Dockers Golf and British Open
Collection.
COST OF GOODS SOLD. Cost of goods sold increased $1.3 million, or 311.5%,
from $0.4 million to $1.7 million in the three months ended September 30, 2000
compared to the same period in the prior year. Cost of goods sold as a
percentage of sales, net, increased from 51.5% in the three months ended
September 30, 1999 to 73.8% in the three months ended September 30, 2000. This
increase was primarily attributable to increased sales, net and the higher cost
of materials and freight incurred in connection with the introduction of the
Dockers Golf and British Open Collection product lines, as well as the need to
give concessions to customers caused by late shipping, and the liquidation of
inventory from prior seasons.
GROSS PROFIT. Gross profit increased $0.2 million in the three months
ended September 30, 2000 compared to the same period in the prior year. Gross
profit as a percentage of sales, net decreased from 48.5% to 26.2% in the three
months ended September 30, 1999 and 2000, respectively. This decrease was
primarily attributable to the increase in cost of goods sold in the current
period compared to the same period in the prior year.
SELLING EXPENSES. Selling expenses increased $1.0 million, or 693.9%, from
$0.1 million to $1.2 million in the three months ended September 30, 2000
compared to the same period in the prior year. This increase was primarily
attributable to the start-up costs incurred in connection with the introduction
of the Dockers Golf and British Open Collection product lines.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $0.9 million, or 337.0%, from $0.3 million to $1.1 million in the
three months ended September 30, 2000 compared to the same period in the prior
year. This increase was primarily attributable to the start-up costs incurred in
connection with the introduction of the Dockers Golf and British Open
Collection product lines.
INTEREST EXPENSE. Interest expense increased $3,612 or 20.6%, in the
three-month period ended September 30, 2000, compared to the same period in the
prior year. This increase consisted primarily of interest paid in connection
with bank loans. We anticipate an increase to interest expense in future periods
due to our increased borrowings, including a new factoring arrangement.
NET LOSS. Net loss increased $1.7 million, or 1,487.6%, from $0.1 million
to $1.8 million in the three months ended September 30, 2000 compared to the
same period in the prior year. This increase was primarily attributable to the
increase in cost of goods sold, selling expenses and general and administrative
expenses in the three-month period ended September 30, 2000.
NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999
Our results of operations for the nine-month period ended September 30,
1999, included seven months of operations of our wholly-owned subsidiary, Avid
Sportswear, Inc. Our results of operations in the nine-month period ended
September 30, 2000, included nine months of operations of our wholly-owned
subsidiary.
SALES, NET. Sales, net increased $3.6 million, or 152.6%, from $2.3
million to $5.9 million in the nine months ended September 30, 2000 compared to
the same period in the prior year. This increase is primarily attributable to
the introduction of the Dockers Golf and British Open Collection product lines.
The nine-month period ended September 30, 2000, included nine months of
operating results of our wholly-owned subsidiary, Avid Sportswear, Inc. compared
to seven months of operating results in the same period in the prior year.
5
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COST OF GOODS SOLD. Cost of goods sold increased $3.4 million, or 209.6%,
from $1.6 million to $5.0 million in the nine months ended September 30, 2000
compared to the same period in the prior year. Cost of goods sold as a
percentage of sales, net, increased from 69.4% in the nine months ended
September 30, 1999 to 85.0% in the nine months ended September 30, 2000. This
increase was primarily attributable to increased sales, net and the higher cost
of materials and freight incurred in connection with the introduction of the
Dockers Golf and British Open Collection product lines, as well as the need to
give concessions to customers caused by late shipping, and the liquidation of
inventory from prior seasons.
GROSS PROFIT. Gross profit increased $0.2 in the nine months ended
September 30, 2000 compared to the same period in the prior year. Gross profit
as a percentage of sales, net decreased from 30.6% to 15.0% in the nine months
ended September 30, 1999 and 2000, respectively. This decrease was primarily
attributable to the increase in cost of goods sold in the current period
compared to the same period in the prior year.
SELLING EXPENSES. Selling expenses increased $1.9 million, or 365.5%, from
$0.5 million to $2.5 million in the nine months ended September 30, 2000
compared to the same period in the prior year. This increase was primarily
attributable to the start-up costs incurred in connection with the introduction
of the Dockers Golf and British Open Collection product lines.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased $1.4 million, or 56.6%, from $2.4 million to $3.8 million in the nine
months ended September 30, 2000 compared to the same period in the prior year.
This increase was primarily attributable to the start-up costs incurred in
connection with the introduction of the Dockers Golf and British Open Collection
product lines.
INTEREST EXPENSE. Interest expense increased $0.3 million, or 707.4%, in
the nine-month period ended September 30, 2000, compared to the same period in
the prior year. This increase consisted primarily of $0.2 million of interest
expense to reflect a discount given in connection with the conversion of debt to
equity. In total, during the nine-month period ended September 30, 2000, $1.2
million of debt was converted into 3.2 million shares of common stock at an
average price of $0.38 per share.
NET LOSS. Net loss increased $3.5 million, or 145.6%, from $2.4 million to
$6.0 million in the nine months ended September 30, 2000 compared to the same
period in the prior year. This increase was primarily attributable to the
increase in cost of goods sold, selling expenses, general and administrative
expenses and interest expense in the nine-month period ended September 30, 2000.
LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2000, we had no
cash-on-hand and our current liabilities exceeded our current assets. A
discussion of how we generated and used cash in the nine-month period follows:
OPERATING ACTIVITIES. Our operating activities used $3.7 million in cash
during the nine-month period ended September 30, 2000, consisting mainly of a
net loss of $6.0 million and an increase in inventory of $2.4 million. These
items were partially offset by common stock issued for services valued at $0.7
million, depreciation and amortization expenses of $0.3 million, an increase in
accounts payable of $2.4 million, a decrease in accounts receivable of $0.3
million, an increase in leases payable of $0.2 million and an increase in due to
factor of $0.1 million and an increase in accrued expenses of $0.1 million.
INVESTING ACTIVITIES. Our investing activities used $0.8 million in cash
during the nine-month period ended September 30, 2000, consisting mainly of the
purchase of embroidery equipment, an exhibit booth for trade shows and computer
equipment.
FINANCING ACTIVITIES. Financing activities provided net cash of $4.1
million, generated mainly by the proceeds from related party notes payable of
$1.8 million, the issuance of common stock for cash of $2.0 million and proceeds
from subscribed stock of $1.8 million, partially offset by payments of notes
payable of $1.5 million.
Due to our significant quarterly losses and the anticipated demand for our
Dockers Golf and British Open Collection product lines, we will need to rely on
external financing to fund our operations for the foreseeable future. Expenses
6
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increased in the three months ended September 30, 2000 due to, among other
things, the roll-out of the Dockers Golf and British Open Collection labels. If
we underestimate demand or incur unforeseen expenses in our product design or
other areas, such funds may be required earlier.
In August 2000, we entered into a factoring, letter of credit and
revolving inventory facility. Under the terms of these arrangements, we assign
substantially all invoices for collection, typically on a non-recourse basis. We
may borrow up to 75% of eligible accounts receivable with a factoring commission
rate on the net sales factored and interest on the amounts advanced at the
factor's index rate plus 4.29%. The index rate was 6.5% at September 30, 2000,
corresponding to an interest rate of 10.79%. In addition, we may borrow up to
40% of eligible inventory, subject to a borrowing limit of $2,500,000. In
addition, a letter of credit facility was established that is not to exceed
$3,500,000, subject to a reserve of 60% of available borrowing under the
revolving facility. The term of the facility is one year and will automatically
renew unless either party gives sixty days' notice of its intent not to renew.
In August 2000, the outstanding balance of the company's loan with First
State Bank, including all collateral security and guarantees associated
therewith, were assigned to Earl T. Ingarfield, Michael LaValliere and Lido
Capital Corporation in consideration of payment in full of all outstanding
indebtedness to First State Bank.
On August 10, 2000, we received a letter from Dockers Golf that our
company was in default of the license with Dockers Golf for failure to pay
timely our royalty payments for May and June 2000. We have subsequently cured
this default to the satisfaction of Dockers Golf.
In November 2000, our company raised $300,000 in gross proceeds and
$255,000 in net proceeds from the sale of convertible debentures. See "Item 2.
Changes in Securities and Use of Proceeds."
CERTAIN BUSINESS RISK FACTORS
We are subject to various risks, which may have a material adverse effect
on our company's business, financial condition and results of operations.
Certain risks are discussed below:
WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE FUTURE
We have historically lost money. In the nine months ended September 30,
2000, we sustained a loss of $6.0 million. In the years ended December 31, 1999
and December 31, 1998, we sustained losses of $5.0 million and $0.5 million,
respectively. The losses for 1998 exclude the operating results of our
wholly-owned subsidiary because it was not acquired until March 1, 1999.
Assuming the purchase of our wholly-owned subsidiary had occurred on January 1,
1998 instead of on March 1, 1999, we would have sustained losses of $1.5 million
in 1998. Future losses are likely to occur. For the years ended December 31,
1999 and 1998, our independent auditors have noted that our company does not
have significant cash or other material assets to cover its operating costs and
to allow it to continue as a going concern. As of September 30, 2000, our
current liabilities exceeded our current assets. Our ability to obtain
additional funding will determine our ability to continue as a going concern.
Accordingly, we may experience significant liquidity and cash flow problems if
we are not able to raise additional capital as needed and on acceptable terms.
No assurances can be given that we will be successful in reaching or maintaining
profitable operations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS
We have relied on significant external financing to fund our operations.
Such financing has historically come from a combination of borrowings and sale
of common stock from third parties and funds provided by certain officers and
directors. We may need to raise additional capital to fund our anticipated
operating expenses and future expansion. Among other things, external financing
may be required to cover our operating costs and to fulfill our obligations
under the licenses for the "Dockers Golf" and "British Open Collection" brands.
These licenses require the payment of minimum guaranteed royalties, whether we
sell licensed products or not. We cannot assure you that financing whether from
external sources or related parties will be available if needed or on favorable
terms. The sale of our common stock to raise capital may cause dilution to our
existing shareholders. Our inability to obtain adequate financing will result in
the need to curtail business operations, and may also jeopardize our ability to
satisfy the guaranteed minimum royalty obligations referred to above. Any of
these events would be materially harmful to our business and may result in a
lower stock price.
7
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WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FROM OUR INDEPENDENT
AUDITOR
Our independent auditors have included an explanatory paragraph to their
audit opinions issued in connection with the 1999 and 1998 financial statements,
and to their review report to our financial statements as of September 30, 2000,
which states that our company does not have significant cash or other material
assets to cover its operating costs and to allow it to continue as a going
concern. Our ability to obtain additional funding will determine our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
WE HAVE BEEN AND CONTINUE TO BE SUBJECT TO A WORKING CAPITAL DEFICIT AND
ACCUMULATED DEFICIT
We had a working capital deficit of $1.3 million and $93,000 at December
31, 1999 and 1998, respectively. At September 30, 2000, we had a working capital
deficit of $1.4 million. We had an accumulated deficit of $5.6 million and
$760,099 at December 31, 1999 and 1998, respectively. At September 30, 2000, we
had an accumulated deficit of $11.5 million.
SALE OF COMMON STOCK BY PRIVATE PLACEMENT INVESTORS MAY CAUSE OUR STOCK
PRICE TO DECLINE
We have filed a Form SB-2 Registration Statement registering 14,988,640
shares of our common stock on behalf of selling shareholders with the Securities
and Exchange Commission. This Registration Statement was declared effective July
28, 2000 by the Securities and Exchange Commission. The sale of these shares is
permitted in most states pursuant to registration or exemptions from
registration. Such sales without corresponding demand may cause our stock price
to decline.
WE FACE SUBSTANTIAL COMPETITION IN OUR BUSINESS
The sportswear and outerwear segments of the apparel industry are highly
competitive. Competition is based primarily on brand recognition, product
differentiation and quality, style and production flexibility. Our future growth
and financial success depend on our ability to further penetrate and expand our
distribution channels, including golf, corporate, international and retail
sales. We encounter substantial competition in the golf distribution channel
from Polo/Ralph Lauren, Cutter & Buck, Ashworth, Antiqua and Izod. Many of our
competitors are significantly larger and more diversified than we are and have
substantially greater resources available for developing and marketing their
products. Many of our competitors' brands also have greater name recognition
than our brands. In addition, our competitors may be able to enter the emerging
e-commerce marketplace more quickly or more efficiently than us. We cannot
assure you that we will successfully compete in this industry.
WE HAVE BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME
Because we have been in business for a short period of time, there is
limited information upon which investors can evaluate our business. We were
formed on September 19, 1997 but did not begin significant operations until the
purchase of our wholly-owned subsidiary on March 1, 1999. You should consider
the likelihood of our future success to be highly speculative in view of our
limited operating history, as well as the complications frequently encountered
by other companies in the early stages of development, particularly companies in
the highly competitive sports apparel industry.
WE MAY BE UNABLE TO MANAGE GROWTH
Successful implementation of our business strategy requires us to manage
our growth. Growth could place an increasing strain on our management and
financial resources. To manage growth effectively, we will need to:
o Implement changes in certain aspects of our business;
o Enhance our information systems and operations to respond to
increased demand;
o Attract and retain qualified personnel; and
o Develop, train and manage an increasing number of management-level
and other employees.
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If we fail to manage our growth effectively, our business, financial
condition or operating results could be materially harmed, and our stock price
may decline.
WE RELY ON FOREIGN SUPPLIERS AND BUY MANY PRODUCTS USING LETTERS OF CREDIT
We obtain all of our garments from independent foreign and domestic
suppliers. We do not have formal agreements with these suppliers. Our reliance
on foreign suppliers may be effected by economic, political, governmental and
labor conditions in such foreign countries. This may delay or cut-off our
ability to source materials needed in production or may increase the price of
such materials. Such events would harm our business. In addition, several of our
suppliers have required us to obtain a letter of credit prior to purchasing any
garments. We may have to utilize a significant portion of our available working
capital to secure these letters of credit.
IMPORT RESTRICTIONS MAY HARM US
Our imported materials are subject to certain quota restrictions and U.S.
customs duties, which are a material part of our cost of goods. A decrease in
quota restrictions or an increase in customs duties could harm our business by
making needed materials scarce or by increasing the cost of such materials.
OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY
Our common stock has experienced, and is likely to experience in the
future, significant price and volume fluctuations, which could adversely affect
the market price of our common stock without regard to our operating
performance. In addition, we believe that factors such as quarterly fluctuations
in our financial results, announcements by other designers and marketers of
sportswear, and changes in the overall economy or the condition of the financial
markets could cause the price of our common stock to fluctuate substantially.
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK"
Our common stock may be deemed to be "penny stock" as that term is defined
in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934. Penny
stocks are stock:
o With a price of less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation system
(Nasdaq listed stock must still have a price of not less than $5.00
per share); or
o In issuers with net tangible assets less than $2.0 million (if the
issuer has been in continuous operation for at least three years) or
$5.0 million (if in continuous operation for less than three years),
or with average revenues of less than $6.0 million for the last
three years.
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor. These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to resell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.
OUR STOCK PRICE COULD DECLINE DUE TO SEASONAL FLUCTUATIONS IN THE DEMAND
FOR OUR PRODUCTS AND GENERAL ECONOMIC CONDITIONS
Our business has been, and will continue to be, highly seasonal, and our
quarterly operating results will fluctuate due to the seasonality of our sales
of sportswear, among other things. Our sales tend to be highest during our first
and second calendar quarters (i.e., January through June), and lowest during our
third and fourth calendar quarters (i.e., July through December). Other factors
contributing to the variability of our operating results include:
9
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o Seasonal fluctuation in consumer demand;
o The timing and amount of orders from key customers; and
o The timing and magnitude of sales of seasonal remainder merchandise
and availability of products.
In addition, any downturn, whether real or perceived, in general economic
conditions or prospects could change consumer spending habits and decrease
demand for our products.
As a result of these and other factors, our operating results may fall
below market analysts' expectations in some future quarters, and our stock price
may decline.
OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY
FLUCTUATE SIGNIFICANTLY
Historically, there has been a limited public market for our common stock
and there can be no assurance that an active trading market for our common stock
will develop. As a result, this could adversely affect our shareholders' ability
to sell our common stock in short time periods, or possibly at all. Our common
stock has experienced, and is likely to experience in the future, significant
price and volume fluctuations which could adversely affect the market price of
our common stock without regard to our operating performance.
OUR OFFICERS AND DIRECTORS EXERCISE CONTROL OF THE COMPANY
Our executive officers and directors beneficially own approximately 52.9%
of our outstanding common stock. As a result, these shareholders acting together
would be able to exert significant influence over most matters requiring
shareholder approval, including the election of directors. They would also be
able to delay or deter a change in control, which may result in shareholders not
receiving a premium on their stock.
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL
Our success largely depends on the efforts and abilities of key executives
and consultants, including Earl T. Ingarfield, our Chairman and Chief Executive
Officer, Jerry L. Busiere, our Secretary, Treasurer and a Director, and Barnum
Mow, Chief Executive Officer and President of our wholly-owned subsidiary and a
Director of our company. The loss of the services of any of these people could
materially harm our business because of the cost and time necessary to replace
and train such personnel. Such a loss would also divert management attention
away from operational issues. We do not have an employment agreement with Mr.
Busiere. We have entered into three year employment agreements with Mr.
Ingarfield and Mr. Mow, respectively. We do not maintain key-man life insurance
policies on any of these people.
WE COULD FAIL TO ANTICIPATE CHANGES IN FASHION TRENDS
Fashion trends can change rapidly, and our business is particularly
sensitive to such changes because we typically design and arrange for the
manufacture of our apparel substantially in advance of sales of our products to
consumers. We cannot assure you that we will accurately anticipate shifts in
fashion trends, or in the popularity of golf, and adjust our merchandise mix to
appeal to changing consumer tastes in apparel in a timely manner. If we misjudge
the market for our products or are unsuccessful in responding to changes in
fashion trends or in market demand, we could experience insufficient or excess
inventory levels, missed market opportunities or higher markdowns, any of which
could substantially harm our business and our brand image.
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OUR FLEXIBILITY TO USE ANY CASH FROM OUR OPERATIONS OR EXTERNAL FINANCING
MAY BE LIMITED DUE TO MINIMUM ROYALTY PAYMENTS
We are required to pay minimum royalty payments under the licenses for the
"Dockers Golf" and "British Open Collection," whether we sell licensed products
or not. Our ability to use available cash as we see fit may be restricted due to
our obligation to pay these minimum royalty payments. This could place a strain
on our ability to pay other bills or to spend such cash in the most productive
manner. As a result, we may not be able to purchase equipment, to take advantage
of corporate opportunities or to maximize our operating results.
OUR PLANNED PURSUIT OF ACQUISITIONS INVOLVES RISKS THAT MAY ADVERSELY
AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION
As part of our growth strategy, we plan to pursue acquisitions. Candidates
for acquisition include businesses that are anticipated to allow us to:
o Achieve economies of scale in terms of purchasing, distribution and
profitability;
o Enhance our name recognition and reputation;
o Obtain rights to well-recognized brand names;
o Fill a perceived market niche; or
o Acquire products offering new price points.
If we are not correct when we assess the value, strengths, weaknesses,
liabilities and potential profitability of acquisition candidates or we are not
successful in integrating the operations of the acquired businesses, our results
of operations or financial position could be adversely effected and we could
lose money. We also may not be successful in finding desirable acquisition
candidates or completing acquisitions with candidates that we identify. Future
acquisitions that we finance through issuing equity securities could be dilutive
to existing shareholders. In addition, future acquisitions may require
additional capital and the consent of our lenders. There can be no assurances
that our lenders will consent to any capital raising or acquisitions.
11
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PART II
OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
We are not aware of any legal proceedings involving our company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a), (b) and (d) None.
(c) SALES OF UNREGISTERED SECURITIES.
In June, 2000, our company issued 15,000 shares of common stock to
Undiscovered Equities Research Corp. in exchange for consulting services
provided under a Consulting Agreement dated June 28, 2000 and $10,000. The
consulting services were valued at $5,250.
In November 2000, our company raised $300,000 in the form of convertible
debentures. The debentures are at an interest rate of 6% with the principal and
accrued interest due November 1, 2005. The debenture holders are entitled to
convert all or any part of the principal amount plus accrued interest into
shares of the Company's common stock equal to either (a) an amount equal to 120%
of the closing bid price of the Company's common stock as of the date of the
debenture issuance or (b) an amount equal to 80% of the lowest closing bid price
for twenty trading days immediately preceding the conversion date. The Company
is obligated to register the resale of the conversion shares under the
Securities Act of 1933. The debentures are subordinate and junior in right of
payment to all accounts payable of the Company incurred in the ordinary course
of business and/or bank debt of the Company not to exceed $500,000. The Company
shall have the right to require the debenture holders to convert any unpaid
principal and accrued interest on the debentures by giving the debenture holder
not less than five days prior written notice if the closing bid price of the
Company's common stock is $1.25 or higher per share for ten consecutive trading
days or upon the five year anniversary of the debenture issuance.
In November 2000, our company issued 300,000 shares of common stock to
unrelated parties in exchange for consulting services provided to the company.
These consulting services were valued at $46,875.
With respect to the sale of unregistered securities referenced above, all
transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 (the "1933 ACT"), and Regulation D promulgated under the
1933 Act. In each instance, the purchaser had access to sufficient information
regarding our company so as to make an informed investment decision. More
specifically, each purchaser signed a written subscription agreement with
respect to their financial status and investment sophistication in which they
represented and warranted, among other things, that they had:
o the ability to bear the economic risks of an investment in the
shares of common stock of our company;
o a certain net worth sufficient to meet the suitability standards of
our company; and
o been provided with all material information requested by the
purchaser or his or her representatives, and been provided an
opportunity to ask questions of and receive answers from our company
concerning our company and the terms of the offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Not applicable.
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
<S> <C> <C>
2.01 Stock Purchase and Sale Agreement dated as of Incorporated by reference to Exhibit 2.01 to the
December 18, 1998 among our company, Avid Registrant's Registration Statement on Form 10-SB
Sportswear, Inc. and the shareholders of Avid (the "Registration Statement")
Sportswear, Inc.
3.01 Articles of Incorporation filed on September Incorporated by reference to Exhibit 3.01 to the
19, 1997 with the Nevada Secretary of State Registration Statement
3.02 Amended Articles of Incorporation filed on May Incorporated by reference to Exhibit 3.02 to the
12, 1999 with the Nevada Secretary of State Registration Statement
3.03 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3.03 to the
Incorporation filed on May 27, 1999 with the Registration Statement
Nevada Secretary of State
3.04 Bylaws Incorporated by reference to Exhibit 3.04 to the
Registration Statement
4.01 2000 Stock Incentive Plan Incorporated by reference to Exhibit 4.01 to
Amendment No. 2 to the Registration Statement.
10.01 Agreement dated as of December 8, 1998 between Incorporated by reference to Exhibit 10.01 to the
the Championship Committee Merchandising Registration Statement
Limited and Avid Sportswear Inc.
10.02 Lease dated as of March 1, 1999 between F & B Incorporated by reference to Exhibit 10.02 to the
Industrial Investments, LLC and Avid Registration Statement
Sportswear, Inc.
10.03 Lease dated as of April 30, 1999 between Links Incorporated by reference to Exhibit 10.03 to the
Associates, Ltd. and our company Registration Statement
10.04 Employment Agreement dated as of September 11, Incorporated by reference to Exhibit 10.04 to the
1999 between Barnum Mow and Avid Sportswear, Registration Statement
Inc.
10.05 Trademark License Agreement dated as of May Incorporated by reference to Exhibit 10.05 to
10, 1999 between Levi Strauss & Co. and Avid Amendment No. 2 to the Registration Statement
Sportswear, Inc.
10.06 Employment Agreement dated as of January 1, Incorporated by reference to Exhibit 10.06 to the
1999 between David E. Roderick and Avid Registration Statement
Sportswear, Inc.
10.07 Promissory Note in the original principal Incorporated by reference to Exhibit 10.07 to the
amount of $180,000 dated as of June 4, 1999 Registration Statement
from our company to First State Bank
10.08 Commercial Security Agreement dated as of Incorporated by reference to Exhibit 10.08 to the
November 17, 1999 between First State Bank and Registration Statement
our company
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EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
10.09 Promissory Note dated as of November 17, 1999 Incorporated by reference to Exhibit 10.09 to the
in the original principal amount of $1,000,000 Registration Statement
given by our company to First State Bank
10.10 Business Loan Agreement dated as of November Incorporated by reference to Exhibit 10.10 to the
17, 1999 between First State Bank and our Registration Statement
company
10.11 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.11 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $550,000 given by our company to
Earl Ingarfield
10.12 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.12 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $1,000,000 given by our company to
Lido Capital Corporation
10.13 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.13 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $125,000 given by our company to
Michael E. LaValliere
10.14 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.14 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $500,000 given by our company to
Thomas Browning
10.15 Revolving Demand Note dated as of December 1, Incorporated by reference to Exhibit 10.15 to
1999 in the original principal amount of Amendment No. 2 to the Registration Statement
$200,000 given by our company to Daniel Paetz
10.16 Executive Employment Agreement effective as of Incorporated by reference to Exhibit 10.16 to
February 1, 2000 between our company and Earl Amendment No. 2 to the Registration Statement
T. Ingarfield
10.17 Consulting Agreement dated as of June 22, 2000 Incorporated by reference to Exhibit 10.17 to the
between Persia Consulting Group, Inc. and our Registrant's Registration Statement on Form SB-2
company
10.18 Form of Factoring Agreement between our Provided herewith
company and GE Capital Commercial Services,
Inc.
10.19 Form of Factoring Agreement Guaranty/Letter of Provided herewith
Credit Supplement between our company and GE
Capital Commercial Services, Inc.
10.20 Form of Factoring Agreement - Inventory Provided herewith
Supplement (with advances) between our
company and GE Capital Commercial Services,
Inc.
10.21 Form of Letter of Agreement between our Provided herewith
company and GE Capital Commercial Services,
Inc.
10.22 Form of Convertible Debenture Provided herewith
10.23 Form of Registration Rights Agreement Provided herewith
between our company and purchasers of
convertible debentures
15
<PAGE>
EXHIBIT
NO. DESCRIPTION LOCATION
--- ----------- --------
11.01 Statement re: Computation of Earnings Not Applicable
15.01 Letter on unaudited interim financial Not Applicable
information
16.01 Letter on Change in Certifying Accountant Not Applicable
21.01 Subsidiaries of our company Incorporated by reference to Exhibit 21.01 to the
Registration Statement
23.01 Consent of Independent Accountants Not Applicable
24.01 Power of Attorney Not Applicable
27.01 Financial Data Schedule Provided herewith
</TABLE>
(B) REPORTS ON FORM 8-K.
None.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 13, 2000 AVID SPORTSWEAR & GOLF CORP.
By: /s/ Jerry Busiere
------------------------------------
Jerry Busiere, Secretary
17
