SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended Commission File No.
September 30, 1998 33-19107
- --------------------- -------------------
LBO Capital Corp.
(Exact name of Registrant as Specified in its Charter)
Colorado 38-2780733
- ---------------------------- -------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
7001 Orchard Lake Road, Suite 424
West Bloomfield MI 48322-3608
- --------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
(248) 851-5651
(Registrant's Telephone Number Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
As of November 4, 1998, a total of 12,100,000 shares, $.0001 par value common
stock, were issued and outstanding.
<PAGE>
LBO CAPITAL CORP.
Form 10-Q Filing of Quarter Ended September 30, 1998
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets
September 30, 1998 (Unaudited) and December 31, 1997 3
Statements of Operations (Unaudited)
Nine months ended September 30, 1998 and 1997 4
Statements of Cash Flows (Unaudited)
Nine months ended September 30, 1998 and 1997 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Statements (Unaudited) 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
Financial Statements of Ajay Sports, Inc.
as of September 30, 1998 9-x
Signature Page x
Note: No other information is included in answer to any item under Part 11 as
those other Items are either not applicable, or if applicable, the answer is
negative.
<PAGE>
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents $ 37 $ 43
Marketable Securities - Available for Sale 49,858 24,929
------------ ------------
Total Current Assets 49,895 24,972
TOTAL ASSETS $ 49,895 $ 24,972
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable $ 731 $ 4,202
Accounts Payable - Related Entities 210 1,060
Notes Payable - Other 513,601 506,971
Accrued Expenses and Taxes 113,575 73,475
------------ ------------
Total Current Liabilities 628,117 585,708
Stockholders' Equity
Common Stock, $.0001 par value;
Authorized 100,000,000 Shares;
Issued and Outstanding 12,100,000 shares 1,210 1,210
Additional Paid-In Capital 623,094 623,094
Unrealized Gain(Loss) on Available for Sale Securities 1,462 (23,467)
Accumulated Deficit (1,203,988) (1,161,573)
------------ ------------
Total Stockholders' Deficit (578,222) (560,736)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 49,895 $ 24,972
============ ============
</TABLE>
See notes to financial statements.
3
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, For the Nine Months Ended September 30,
1998 1997 1998 1997
------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
REVENUES: $ -0- $ -0- $ -0- $ -0-
EXPENSES:
Professional Services 432 223 113 160
Management Fees 660 670 2,070 2,300
Interest Expense 13,574 13,399 40,099 39,324
Recovery of Bad Debt -0- -0- -0- (810)
Other Expenses 57 75 132 (283)
------------- ------------- ------------- -------------
Total Expenses 14,723 14,367 42,414 40,692
------------- ------------- ------------- -------------
Income (Loss) Before Income Taxes (14,723) (14,367) (42,414) (40,692)
Income Tax Expense (Benefit):
Currently Payable -0- -0- -0- -0-
-------------- -------------- -------------- -------------
Net Income (Loss) $ (14,723) $ (14,367) $ (42,414) $ (40,692)
============== ============== ============== =============
Net Income (Loss) per Share $ (.00) $ (.00) $ (.00) $ (.00)
============== =============== ============== =============
Weighted Average Number of Common Shares
Outstanding 12,100,000 12,100,000 12,100,000 12,100,000
=========== ============ ============ =============
See notes to financial statements.
</TABLE>
4
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
CASH FLOWS
(Unaudited)
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Cash Flows for Operating Activities:
Net Loss $ (42,414) $ (40,692)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Changes in Assets and Liabilities:
(Decrease) Increase in:
Accounts Payable (3,472) (2,973)
Accounts Payable - Related Entities (850) (500)
Accrued Expenses and Taxes 40,100 39,324
----------- -----------
Total Adjustments 35,778 35,851
----------- -----------
Net Cash (Used for) Operations (6,636) (4,841)
Cash (Used for) Investing Activities
Marketable Securities Available for Sale -0- -0-
----------- -----------
-0- -0-
Cash Flows from Financing Activities:
Proceeds on Notes Payable 6,630 4,850
----------- -----------
Net Cash Provided by Financing Activities 6,630 4,850
----------- -----------
Net Increase (Decrease) in Cash (6) 9
Cash and Cash Equivalents:
At Beginning of Period 43 78
----------- -----------
At End of Period $ 37 $ 87
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ -0- $ -0-
=========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
LBO CAPITAL CORP
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1. INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of LBO Capital Corp. ("the Company")
have been prepared by the Company without audit by independent accountants,
except for the balance sheet at December 31, 1997. In the opinion of the
Company's management, the financial statements reflect all adjustments necessary
to present fairly the Company's financial position at September 30, 1998 and
December 31, 1997, and the results of operations and cash flows for the nine
month periods ended September 30, 1998 and 1997.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These unaudited financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report 10-K. The results for the nine-month
periods ended September 30, 1998 are not necessarily indicative of future
financial results.
NOTE 2. INVESTMENTS.
As previously reported, the Company had acquired 1,880,000 shares of the
restricted common stock of Ajay Sports, Inc. ("Ajay") in April 1989, for
$182,000. Subsequently, this was reduced to 1,480,000 shares. As a result of
recording the Company's equity in net losses of Ajay, the carrying value of this
investment is zero. The Company also obtained 200,000 warrants of Ajay at that
time. Each warrant entitles the Company to purchase one share of Ajay common
stock at $.18. These warrants expire June 13, 1999.
On August 13, 1998, Ajay announced that its board of directors had
authorized the implementation of a 1-for-6 reverse split of the company's common
stock, effective with the commencement of trading on August 14, 1998. The
reverse split was approved by the stockholders of Ajay at the company's annual
meeting on May 29, 1998.
Following the reverse split, holders of Ajay's common stock will receive
one new share of $.01 par value common stock for every six shares of common
stock currently held. Therefore, the number of Ajay shares held by the Company
is 246,667. The reverse split also affected the number and exercise price of the
Company's warrants, such that the Company now holds 33,333 warrants entitling it
to purchase one share of Ajay's common stock at $1.08.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
(a) Material Changes in Financial Condition
---------------------------------------
Working capital decreased by $17,486 in the nine-month period ended
September 30, 1998 due to the net loss of $42,414 and an increase in unrealized
gain on investments of $24,928 for the nine months ended September 30, 1998.
(b) Results of Operations
---------------------
Registrant's operations for the nine months ended September 30, 1998
resulted in a loss of $42,414. This was due mainly to interest expense of
$40,099.
Liquidity and Capital Resources
- -------------------------------
The Registrant is currently meeting its cash needs from borrowing from an
affiliate company. There is no assurance that this will continue in future
years. The Registrant's principal asset is its investment in marketable
securities of Ajay, which it has held for over eight years. These shares are
carried at a zero value on the Registrant's Balance Sheet as a result of
recording the Registrant's equity in net losses of Ajay. The market value of
Ajay stock on September 30, 1998 as listed in the OTC Bulletin Board was
$0.718750 per share. The approximate market value of the Registrant's 246,667
shares was $177,292 on that date (see Note 2). The Registrant also owns 15,341
shares of Enercorp, Inc. common stock. These shares are carried at their fair
market value of $3.25 per share at September 30, 1998, which is $49,858. These
shares could be liquidated to meet cash flow needs if necessary.
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Pursuant to the provisions of Reg. ss. 210.3-09 of Regulation S-X, the
Registrant is required to file separate financial statements of its equity basis
investee Ajay, which financial statements for September 30, 1998 are filed
herewith.
(b) Reports on Form 8-K.
A Form 8-K was filed on July 20 1998 regarding the extension of the Class
A, Class B, and Class C warrants from July 25, 1998 to July 25, 1999.
7
<PAGE>
LBO CAPITAL CORP.
FORM 10-Q
For the Quarter Ended September 30, 1998
Signature Page
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LBO CAPITAL CORP.
-----------------
(Registrant)
By s\Thomas W. Itin
----------------------------
Thomas W. Itin, President,
Chairman of Board of Directors
Date signed: November 13, 1998
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000753557
<NAME> LBO Capital Corp.
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 37
<SECURITIES> 49,858
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 49,895
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,895
<CURRENT-LIABILITIES> 628,117
<BONDS> 0
0
0
<COMMON> 1,210
<OTHER-SE> (579,432)
<TOTAL-LIABILITY-AND-EQUITY> 49,895
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,315
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,099
<INCOME-PRETAX> (42,414)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,414)
<EPS-PRIMARY> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, 1998 December 31,
(Unaudited) 1997
------------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 20 $ 234
Marketable securities 500 -
Trade accounts receivable, net 2,823 5,060
Inventories 5,332 6,398
Prepaid expenses and other current assets 546 304
Deferred tax benefit 363 363
--------- ---------
Total current assets 9,584 12,359
Fixed assets, net 1,637 1,723
Other assets 187 106
Deferred tax benefit 756 756
Goodwill 1,632 1,670
--------- ---------
Total assets $ 13,796 $ 16,614
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to affiliates $ 100 $ 160
Notes payable to bank 195 107
Current portion of capital lease 3 4
Accounts payable 1,219 3,204
Accrued expenses 513 684
--------- ---------
Total current liabilities 2,030 4,159
Notes payable to affiliates - long term 1,587 4,212
Notes payable to banks - long term 6,416 9,017
Commitments and contingencies - -
Stockholders' equity:
Preferred stock, 10,000,000 shares authorized,
Series B, $0.01 par value, 12,500 shares
outstanding at liquidation value 1,250 1,250
Series C, $0.01 par value, 296,170 shares
outstanding at stated value 2,962 2,962
Series D, $0.01 par value, 6,000,000 shares 60 -
Common stock, $0.01 par value 100,000,000 shares authorized,
3,956,815 shares outstanding 39 233
Additional paid-in capital 14,446 9,313
Accumulated deficit (14,994) (14,532)
---------- ---------
Total stockholders' equity 3,763 (774)
---------- ---------
Total liabilities and stockholders' equity $ 13,796 $ 16,614
========== =========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales $ 4,214 $ 6,854 $ 20,803 $ 24,039
Cost of sales 3,619 6,248 17,284 20,356
------ ------ ------ ------
Gross profit 595 606 3,519 3,683
Selling, general and 857 1,248 3,063 3,710
administrative expenses ------ ------ ------ ------
Operating income (loss) (262) (642) 456 (27)
Non-operating expense:
Interest expense, affiliates 69 96 245 157
Interest expense, non-affiliates 194 234 668 889
Other, net 100 24 2 44
------ ------ ------ ------
Total non-operating expense 363 354 915 1,090
------ ------ ------ ------
Loss before income taxes (625) (996) (459) (1,117)
Net loss $ (625) $ (996) $ (459) $ (1,117)
====== ====== ====== ======
Basic and diluted earnings per share* $ (0.18) $ (0.28) $ (0.19) $ (0.36)
====== ====== ====== ======
Weighted average common shares outstanding 3,920 3,879 3,892 3,879
====== ====== ====== ======
* Computed by dividing net income or loss, after reduction for undeclared,
cumulative preferred stock dividends, by the weighted average number of
common shares outstanding.
Net loss as reported above $ (625) $ (996) $ (459) $ (1,117)
Undeclared cumulative preferred dividends (90) (99) (288) (297)
------ ------ ------ ------
Loss applicable to common stock $ (715) $ (1,095) $ (747) $ (1,414)
====== ====== ====== ======
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS), (UNAUDITED)
Nine Months
Ended September 30,
1998 1997
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (459) $ (1,117)
Adjustments to reconcile net cash flows from
operating activities:
Depreciation and amortization 273 292
Change in assets [(increase)/decrease] and
liabilities [increase/(decrease)]:
Marketable securities (500) -
Trade accounts receivable, net 2,237 (730)
Inventories 1,066 958
Prepaid expenses and other current assets (242) (418)
Other assets (81) 86
Accounts payable (1,985) 401
Accrued expenses (172) 333
------- -------
Net cash used in
operating activities 137 (195)
------- -------
Cash flows from investing activities:
Acquisitions of property, plant, equipment (153) (220)
------- -------
Net cash used in
investing activities (153) (220)
------- -------
Cash flows from financing activities:
Net reduction in bank loans (2,513) (2,500)
Increases in advances from affiliates 2,315 3,051
Dividends paid - (82)
------- -------
Net cash provided by
financing activities (198) 469
------- -------
Net increase (decrease) in cash (214) 54
Cash at beginning of period 234 64
------- -------
Cash at end of period $ 20 $ 118
======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest $ 899 $ 880
======= =======
Cash paid for income tax - -
======= =======
</TABLE>
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cautionary Statement: This report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, those statements relating to development
of new products, the financial condition of the Company, the ability to increase
distribution of the Company's products, integration of businesses the Company
has acquired, disposition of any current business of the Company, and the
Company's relationship with Williams Controls, Inc., a related company. These
forward-looking statements are subject to the business and economic risks faced
by the Company. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of the factors
described above and other factors described elsewhere in this report.
Note 1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by Ajay Sports, Inc. (the "Company") without audit and pursuant to the
rules and regulations of the Securities and Exchange Commission. In the opinion
of the Company, the financial statements reflect all adjustments, which consist
only of normal recurring adjustments, necessary to present fairly the financial
position of the Company at September 30, 1998 and the results of operations for
the three and nine-month periods ended September 30, 1998 and 1997 and the cash
flows for the same nine-month periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the SEC rules and regulations dealing
with interim financial statements. However, the Company believes that the
disclosures made in the condensed financial statements included herein are
adequate to make the information presented not misleading. These condensed
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
The year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.
The interim period results are not necessarily indicative of results which may
be expected for any other interim period or for the full year. Certain costs are
estimated for the full year and allocated to interim periods based on activity
associated with the interim period. Accordingly, such costs are subject to year
end adjustment.
4
<PAGE>
Note 2. INVENTORIES
The major classes of inventories (rounded to thousands) are as follows:
September 30, December 31,
1998 1997
------------- ------------
Raw Materials $ 1,261 $ 1,499
Work in Process 1,136 1,026
Finished Goods 2,935 3,873
------------- ------------
$ 5,332 $ 6,398
============= ============
Note 3. DEBT
On June 30, 1998, the Company restructured its credit facility with Wells Fargo
Bank, National Association ("Wells") to separate its credit facility from that
of Williams Controls, Inc. and its subsidiaries ("Williams"). The credit
facility as restructured provides for maximum borrowing capacity of $10,025,000,
consisting of a revolving credit facility of up to $9,500,000 and a term loan of
$525,000. As a result of this transaction, the Company no longer has joint and
several liability, cross collateral agreements or guarantees with Williams with
respect to Williams' Wells Fargo credit facility. The Company's new asset-based
credit facility from Wells provides the Company with approximately $700,000 of
increased loan availabilities and borrowing capability against inventory and
accounts receivable. The interest rate on the revolver is prime plus 1% and
prime plus 1.5% on the term loan.
In connection with the restructuring of the Wells Fargo Bank credit facility,
the Company entered into an agreement with Williams under which Williams agreed
to make certain additional advances to the Company. As a result of these
additional investments plus assumption of certain liabilities and potential
additional payments to the bank, the debt and equity investments could reach
$8,650,000 with an initial 3-year effective annual cost of 8.75% inclusive of
interest, dividends and fees. On June 30, 1998, Williams converted $5,000,000 of
this debt into 6,000,000 shares of a newly created series of preferred stock of
the Company, the Series D Cumulative Convertible Non-Voting Preferred Stock.
Series D is convertible into the Company's common stock at the rate of 0.55556
common shares for each preferred share. The Company delivered a promissory note
to Williams for the unconverted portion of the debt. This note is secured by a
lien on the Company's assets which is junior to the liens held by the Company's
bank lenders. Williams continues to own approximately 17.3% of the outstanding
common stock of the Company and holds options to purchase an additional
1,851,667 shares of common stock. Williams also continues to have rights, which
were negotiated in 1994, to utilize for a fair market fee, excess floor space
and related resources in the Company's manufacturing facilities in Wisconsin and
Mexico.
The Company believes that the combination of the Wells and Williams refinancing
agreements will result in an improved working capital position enabling the
Company to pay down past due accounts payable. It also has increased liquidity,
providing the Company with additional availability under its bank credit
facility and strengthened the Company's capital structure by increasing equity.
5
<PAGE>
Note 4. BUSINESS SEGMENT REPORTING
The relative contributions to net sales, operating profit and identifiable
assets of the Company's industry segments for the quarter and nine months ended
September 30, 1998 and 1997 (unaudited) are as follows (in thousands):
- ------------------------------------------------------------------------------
Quarter Ended September 30, 1998
- ------------------------------------------------------------------------------
GOLF
----------------------
Mass Specialty
-------- ----------
Furniture Merchant Golf Stores Corporate Consolidated
--------- -------- ----------- --------- ------------
Net Sales $ 285 $ 3,795 $ 134 $ - $ 4,214
Operating Profit/(Loss) (286) 211 (104) (83) (262)
Total Assets 1,875 9,879 2,043 - 13,797
Depreciation/Amortization 24 57 11 - 92
Capital Expenditures 40 38 - - 78
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Quarter Ended September 30, 1997
- ------------------------------------------------------------------------------
GOLF
--------------------
Mass Specialty
-------- -----------
Furniture Merchant Golf Stores Corporate Consolidated
--------- -------- ----------- --------- ------------
Net Sales $ 403 $ 5,424 $ 1,027 $ - $ 6,854
Operating Profit/(Loss) (340) 200 (374) (128) (642)
Total Assets 2,365 11,981 4,367 - 18,713
Depreciation/Amortization 31 54 14 - 99
Capital Expenditures 47 72 2 - 121
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Nine Months Ended September 30, 1998
- ------------------------------------------------------------------------------
GOLF
-------------------
Mass Specialty
-------- ---------
Furniture Merchant Golf Stores Corporate Consolidated
--------- -------- ----------- --------- ------------
Net Sales $ 3,235 $ 16,442 $ 1,126 $ - $ 20,803
Operating Profit/(Loss) (27) 1,229 (344) (402) 456
Total Assets 1,875 9,879 2,043 - 13,797
Depreciation/Amortization 73 167 33 - 273
Capital Expenditures 102 51 - - 153
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Nine Months Ended September 30, 1997
- ------------------------------------------------------------------------------
GOLF
------------------
Mass Specialty
-------- ----------
Furniture Merchant Golf Stores Corporate Consolidated
--------- -------- ----------- --------- ------------
Net Sales $ 3,764 $ 16,755 $ 3,520 $ - $ 24,039
Operating Profit/(Loss) 103 833 (726) (237) (27)
Total Assets 2,365 11,981 4,367 - 18,713
Depreciation/Amortization 67 167 58 - 292
Capital Expenditures 102 105 13 - 220
- ------------------------------------------------------------------------------
The year-on-year $2.3 million reduction in total assets in the specialty golf
store segment results from the Company closing its California golf club
manufacturing and office facility and reducing its golf club receivables and
inventories. Year-to-date nine-months sales are off by $2.4 million in the
specialty golf store channel due to de-emphasizing golf club sales.
6
<PAGE>
Note 5. DIVIDENDS
Dividends on Series B and C Convertible Preferred Stock have not been declared
for 1997 or 1998 due to unavailability of funds. Dividends are in arrears on
Series B in the amount of $981,500 and on Series C in the amount of $508,620.
Dividends are permitted to be paid under the Wells bank credit agreement when
sufficient funds become available.
7
