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.
March 31, 1999 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 May 3, 1999 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 March 31, 1999
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets
March 31, 1999 (Unaudited) and December 31, 1998 3
Statements of Operations (Unaudited)
Three months ended March 31, 1999 and 1998 4
Statements of Cash Flows (Unaudited)
Three months ended March 31, 1999 and 1998 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 8-x
Financial Statements of Ajay Sports, Inc.
as of March 31, 1999 x
Signature Page
Note: No other information is included in answer to any item under Part II as
those other Items are either not applicable, or if applicable, the answer is
negative.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1999 1998
-------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents $ 43 $ 73
Marketable Securities - Available for Sale 40,271 46,023
------------ ------------
Total Current Assets 40,314 46,096
TOTAL ASSETS $ 40,314 $ 46,096
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable 2,231 3,763
Accounts Payable - Related Entities 270 210
Notes Payable - Other 517,601 514,901
Accrued Expenses and Taxes 138,739 126,319
------------ ------------
Total Current Liabilities 658,841 645,193
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 (8,126) (2,373)
Accumulated Deficit (1,234,705) (1,221,027)
------------ ------------
Total Stockholders' Deficit (618,527) (599,097)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 40,314 $ 46,096
============ ============
</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 March 31,
1999 1998
-------------- --------------
<S> <C> <C>
REVENUES: $ -0- $ -0-
EXPENSES:
Professional Services 428 140
Management Fees 690 720
Interest Expense 12,420 13,151
Other Expenses 140 30
----------- -------------
Total Expenses 13,678 14,041
----------- -------------
Income (Loss) Before Income Taxes (13,678) (14,041)
Income Tax Expense (Benefit):
Currently Payable -0- -0-
----------- -------------
Net Income (Loss) $ (13,678) $ (14,041)
=========== =============
Net Income (Loss) per Share $ (.00) $ (.00)
=========== =============
Weighted Average Number of Common Shares
Outstanding 12,100,000 12,100,000
============ =============
</TABLE>
See notes to financial statements.
4
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
CASH FLOWS
(Unaudited)
March 31, March 31,
1999 1998
------------------------------
<S> <C> <C>
Cash Flows for Operating Activities:
Net Loss $ (13,678) $ (14,041)
----------- -----------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in:
Prepaid Expenses and Deposits -0- -0-
(Decrease) Increase in:
Accounts Payable (1,532) (1,415)
Accounts Payable - Related Entities 60 720
Accrued Expenses and Taxes 12,420 13,151
----------- -----------
Total Adjustments 10,948 12,456
----------- -----------
Net Cash (Used for) Operations (2,730) (1,585)
Cash (Used for) Investing Activities
Marketable Securities Available for Sale -0- -0-
----------- -----------
-0- -0-
Cash Flows from Financing Activities:
Proceeds on Notes Payable 2,700 1,590
----------- -----------
Net Cash Provided by Financing Activities 2,700 1,590
----------- -----------
Net Increase (Decrease) in Cash (30) 5
Cash and Cash Equivalents:
At Beginning of Period 73 43
----------- -----------
At End of Period $ 43 $ 48
=========== ===========
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, 1998. In the opinion of the
Company's management, the financial statements reflect all adjustments necessary
to present fairly the Company's financial position at March 31, 1999 and
December 31, 1998, and the results of operations and cash flows for the three
month periods ended March 31, 1999 and 1998.
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 three-month
periods ended March 31, 1999 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 received 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 per share.
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 $19,431 in the three-month period ended March
31, 1999 due to the net loss of $13,678 and the decrease in unrealized gain on
investments of $5,753 for the three months ended March 31, 1999.
(b) Results of Operations
---------------------
Registrant's operations for the three months ended March 31, 1999 resulted
in a loss of $13,678. This was due mainly to interest expense of $12,420 and
management fees of $690.
Liquidity and Capital Resources
The Registrant is currently meeting its cash needs from borrowing from a
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 nine 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 March 31, 1999
was $0.687 per share. Ajay stock is traded over-the-counter. The approximate
market value of the Registrant's 246,667 shares was $169,460 on that date. The
Registrant also owns 15,341 shares of Enercorp, Inc. common stock. These shares
are carried at their fair market value of $2.625 per share at March 31, 1999,
which is $8,126 below cost. These shares could be liquidated to meet cash flow
needs if necessary.
Year 2000 Compliance
- --------------------
The Company does not anticipate the year 2000 compliance requirements will have
a material impact on earnings. The Company has initiated replacement of the
Company's most significant computer programs with new updates that are warranted
to be year 2000 compliant. Installation of these updates is anticipated to be
completed prior to June 30, 1999. All other programs subject to year 2000
concerns will be evaluated utilizing internal and external resources to
reprogram, replace or test each of them.
7
<PAGE>
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 March 31, 1999 are filed herewith.
(b) Reports on Form 8-K.
None
8
<PAGE>
LBO CAPITAL CORP.
FORM 10-Q
For the Quarter Ended March 31, 1999
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: May 14, 1999
9
<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> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<EXCHANGE-RATE> 1
<CASH> 43
<SECURITIES> 40,271
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 40,314
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 40,314
<CURRENT-LIABILITIES> 658,841
<BONDS> 0
0
0
<COMMON> 1,210
<OTHER-SE> (619,737)
<TOTAL-LIABILITY-AND-EQUITY> 40,314
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 1,258
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,420
<INCOME-PRETAX> (13,678)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,678)
<EPS-PRIMARY> (.00)
<EPS-DILUTED> (.00)
</TABLE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. FINANCIAL STATEMENTS
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, 1999 December 31,
(Unaudited) 1998
<S> <C> <C>
ASSETS - -
Current assets:
Cash $ 27 $ 6
Marketable securities 418 396
Trade accounts receivable, net 3,351 1,889
Inventories 5,882 5,680
Prepaid expenses and other 597 485
- -
Total current assets 10,275 8,456
Fixed assets, net 1,656 1,708
Other assets 142 179
Deferred tax benefit 1,119 1,119
Goodwill 1,610 1,621
- -
Total assets $ 14,802 $ 13,083
= =
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 195 $ 195
Current portion of capital lease 4 4
Accounts payable 2,268 2,225
Accrued expenses 567 380
- -
Total current liabilities 3,034 2,804
Notes payable to affiliates - long term 1,587 1,587
Notes payable to banks - long term 7,856 5,951
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, 264,177 shares
outstanding at stated value 2,642 2,642
Series D, $0.01 par value, 6,000,000 shares 60 60
Common stock, $.01 par value 100,000,000 shares authorized,
3,956,815 shares outstanding 40 40
Additional paid-in capital 14,766 14,762
Accumulated deficit (16,472) (16,006)
Accumulated unrealized (losses) gains on securities 39 (7)
- -
------------ -------------
Total stockholders' equity 2,325 2,741
------------ -------------
Total liabilities and stockholders' equity $ 14,802 $ 13,083
============ =============
</TABLE>
2
<PAGE>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months
Ended March 31,
1999 1998
------------ ------------
Net sales $ 4,263 $ 7,598
Cost of sales 3,595 6,330
Gross profit 668 1,268
Selling, general and 851 1,028
administrative expenses
Operating income (loss) (183) 240
Non-operating expense:
Interest expense, net 253 335
Other, net 26 (136)
----------- ------------
Total non-operating expense 279 199
----------- ------------
Income (loss) before income taxes (462) 41
Income tax expense (benefit) - -
----------- ------------
Net income (loss) $ (462) $ 41
============ ============
Basic and diluted earnings per share * $ (0.14) $ (0.01)
============ ============
Weighted average common shares
outstanding 3,957 3,879
============ ============
Net income (loss) as reported above (462) 41
Undeclared cumulative preferred dividends (91) (99)
------------- ------------
Loss applicable to common stock $ (553) $ (58)
============= ============
* Computed by dividing net income or loss, after reduction for preferred stock
dividends, by the weighted average number of common shares outstanding.
3
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS), (UNAUDITED)
Three Months
Ended March 31,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (462) $ 41
Adjustments to reconcile to net cash flows from
operating activities:
Depreciation and amortization 95 101
Change in assets [(increase)/decrease] and
liabilities [increase/(decrease)]:
Trade accounts receivable, net (1,462) (939)
Inventories (202) (367)
Prepaid expenses and other current assets (112) -
Other assets 3 (155)
Deferred tax benefits - -
Accounts payable 43 796
Accrued expenses 187 25
-
-------- ---------
Net cash used in operating activities (1,910) (498)
-------- ---------
Cash flows from investing activities:
Acquisitions of fixed assets (19) (23)
-------- ---------
Net cash used in investing activities (19) (23)
-------- ---------
Cash flows from financing activities:
Proceeds from notes payable to affiliates - 12
Net change in note payables to banks 1,904 374
Net change in marketable securities 46 -
-------- ---------
Net cash provided by financing activities 1,950 386
-------- ---------
Net increase (decrease) in cash 21 (135)
Cash at beginning of period 6 234
-------- ---------
Cash at end of period $ 27 $ 99
======== =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 254 $ 286
======== =========
Cash paid for income tax - -
======== =========
</TABLE>
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
This report contains forward-looking statements including statements containing
words such as "believes", "anticipates", "expects" and the like. All statements
other than statements of historical fact included in this report are forward
looking statements. The Company believes that its expectations reflected in its
forward looking statements are reasonable, but it can give no assurance that the
expectations ultimately will prove to be correct. Important factors including,
without limitation, statements relating to planned acquisitions, 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, could
cause the Company's actual results to differ materially from those anticipated
in these forward-looking statements. The Company does not intend to update the
forward looking statements contained in this report.
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 material adjustments, which
consist only of normal recurring adjustments, necessary to present fairly the
financial position of the Company at March 31, 1999 and the results of
operations for the three-month periods ended March 31, 1999 and 1998 and the
cash flows for the same three-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, 1998.
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 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.
5
<PAGE>
2. INVENTORIES
The major classes of inventories (rounded to thousands) are as follows:
March 31,1999 December 31,1998
Raw Materials $1,439 $1,493
Work in Process 1,301 1,052
Finished Goods 3,142 3,135
--------- ---------
$5,882 $5,680
========= =========
3. NOTES PAYABLE TO BANKS
On February 2, 1999, the Company entered an agreement with Wells for a seasonal
over advance of up to $750,000 beginning February 2, 1999. Half of the over
advance, or up to $375,000, is due to Wells by June 1, 1999 with the other half,
or up to $375,000, due to Wells by July 1, 1999. The interest rate on advances
outstanding on the over advance is prime plus 2%. The Company does not believe
it will have the funds to repay the over advance due on June 1, 1999 and July 1,
1999 and has requested an extension of the over advance. The over advance would
be paid back with the collection of seasonal trade accounts receivable.
4. SEGMENT INFORMATION
The contribution to net sales, operating income (loss) and identifiable assets
of the Company's two industry segments for the quarter ended March 31, 1999 and
1998 (unaudited) are as follows (in thousands):
- ------------------------------------------------------------------------------
Quarter Ended March 31, 1999
----------------------------------------------------------
GOLF
Mass Specialty
Furniture Merchant Golf Stores Corporate Consolidated
--------- -------- ----------- --------- ------------
Net Sales $ 2,268 $ 1,954 $ 41 $ - $ 4,263
Operating 316 (310) (35) (154) (183)
Profit/(Loss)
Total Assets 4,019 8,997 1,786 - 14,802
Depreciation/ 24 58 13 - 95
Amortization
Capital 19 - - - 19
Expenditures
6
<PAGE>
- ------------------------------------------------------------------------------
Quarter Ended March 31, 1998
- ------------------------------------------------------------------------------
GOLF
Mass Specialty
Furniture Merchant Golf Stores Corporate Consolidated
--------- -------- ----------- --------- ------------
Net Sales $ 1,760 $ 520 $ - $ - $ 7,598
Operating 220 273 (110) (143) 240
Profit/(Loss)
Total Assets 2,930 12,061 2,872 - 17,863
Depreciation/ 26 55 20 - 101
Amortization
Capital 23 - - - 23
Expenditures
- ------------------------------------------------------------------------------
5. DIVIDENDS
Dividends on Series B and C Convertible Preferred Stock have not been declared
in 1998 or 1999 due to unavailability of funds. Dividends are permitted to be
paid under the Wells loan agreement when sufficient funds become available.
Dividends are in arrears on Series B in the amount of $1,031,575 and on Series C
in the amount of $642,218.
7
<PAGE>
