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, 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 November 11, 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 September 30, 1999
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets
September 30, 1999 (Unaudited) and December 31, 1998 3
Statements of Operations (Unaudited)
Three and Nine months ended September 30, 1999 and 1998 4
Statements of Cash Flows (Unaudited)
Nine months ended September 30, 1999 and 1998 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Statements
(Unaudited) 7-8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 8-x
Financial Statements of Ajay Sports, Inc.
as of September 30, 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>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LBO CAPITAL CORP.
BALANCE SHEETS
(Unaudited)
September 30, December 31,
1999 1998
-------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents $ 85 $ 73
Interest Receivable - Other 8,219
Note Receivable - Other 300,000 -0-
Marketable Securities - Available for Sale 43,139 46,023
------------ ------------
Total Current Assets 351,443 46,096
TOTAL ASSETS $ 351,443 $ 46,096
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable 731 3,763
Accounts Payable - Related Entities 240 210
Notes Payable - Other 821,751 514,901
Accrued Expenses and Taxes 172,433 126,319
------------ ------------
Total Current Liabilities 995,155 645,193
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 (5,257) (2,373)
Accumulated Deficit (1,262,758) (1,221,027)
------------ ------------
Total Stockholders' Deficit (643,712) (599,097)
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 351,443 $ 46,096
============ ============
See notes to financial statements.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LBO CAPITAL CORP.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, For the Nine Months Ended September 30,
1999 1998 1999 1998
------------- ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
REVENUES:
Interest Income - Other $ 7,561 $ -0- $ 8,219 $ -0-
EXPENSES:
Professional Services 513 432 1,152 113
Management Fees 840 660 2,460 2,070
Interest Expense 21,074 13,574 46,114 40,099
Other Expenses 30 57 225 132
----------- ------------- ---------- -------------
Total Expenses 22,456 14,723 49,950 42,414
----------- ------------- ---------- -------------
Income (Loss) Before Income Taxes (14,895) (14,723) (41,731) (42,414)
Income Tax Expense (Benefit):
Currently Payable -0- -0- -0- -0-
----------- ------------- ---------- -------------
Net Income (Loss) $ (14,895) $ (14,723) $ (41,731) $ (42,414)
=========== ============= ========== =============
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.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
LBO CAPITAL CORP.
CASH FLOWS
(UNAUDITED)
September 30, September 30,
1999 1998
---------------------------------------
<S> <C> <C>
Cash Flows for Operating Activities:
Net Loss $ (41,731) $ (42,414)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Changes in Assets and Liabilities:
(Decrease) Increase in:
Interest Receivable - Other (8,219) -0-
Accounts Payable (3,032) (3,472)
Accounts Payable - Related Entities 30 (850)
Accrued Expenses and Taxes 46,114 40,100
----------- ----------
Total Adjustments 34,893 35,778
----------- ----------
Net Cash (Used for) Operations (6,838) (6,636)
Cash (Used for) Investing Activities
Note Receivable - Other (300,000) -0-
Marketable Securities Available for Sale -0- -0-
----------- ----------
(300,000) -0-
----------- ----------
Cash Flows from Financing Activities:
Proceeds on Notes Payable 306,850 6,630
----------- ----------
Net Cash Provided by Financing Activities 306,850 6,630
----------- ----------
Net Increase (Decrease) in Cash 12 (6)
Cash and Cash Equivalents:
At Beginning of Period 73 43
----------- ----------
At End of Period $ 85 $ 37
=========== ==========
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ -0- $ -0-
=========== ==========
See notes to financial statements.
5
</TABLE>
<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 September 30, 1999 and
December 31, 1998, and the results of operations and cash flows for the nine
month periods ended September 30, 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 nine-month
periods ended September 30, 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.
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 nine 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>
NOTE 3: NOTE RECEIVABLE
On June 22, 1999, the Company loaned $300,000 to Pro Golf International,
Inc. ("PGI"), a subsidiary of Ajay Sports, Inc. The Company received a
promissory note that is subordinated to PGI's primary lender. The unpaid
principal balance will bear an interest rate of 10% and will be due and payable
in full on July 22, 2000. The proceeds were used to purchase all the outstanding
capital stock of Pro Golf of America, Inc., franchiser of Pro Golf Discount
retail golf stores. Ajay owns over 80% of the stock of Pro Golf International,
with the remaining shares held by a group of investors. The Company borrowed the
funds from an unrelated company to loan to PGI.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
(a) Material Changes in Financial Condition
---------------------------------------
Working capital decreased by $44,615 in the nine-month period ended
September 30, 1999 due to the net loss of $41,731 and a decrease in unrealized
gain on investments of $2,884 for the nine months ended September 30, 1999.
(b) Results of Operations
---------------------
Registrant's operations for the nine months ended September 30, 1999
resulted in a loss of $26,836. This was due mainly to interest expense of
$25,040 and management fees of $1,620.
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 September 30,
1999 was $.813 per share. Ajay stock is traded over-the-counter. The approximate
market value of the Registrant's 246,667 shares was $200,540 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 $2.812 per share at September 30,
1999, which is $5,257 below cost. These shares could be liquidated to meet cash
flow needs if necessary.
7
<PAGE>
Change in Accountants
- ----------------------
On August 27, 1999, the Registrant filed a Form 8-K regarding the Registrant's
engagement with the accounting firm of J.L. Stephan Co., P.C. to act as its
independent accounting firm, to replace Hirsch Silberstein & Subelsky, P.C. The
decision by Hirsch Silberstein & Subelsky, P.C. to resign was a result of one of
its members, Ronald N. Silberstein, leaving the firm to become Ajay Sports,
Inc.'s Chief Financial Officer and Chief Administrative Officer. Following Mr.
Silberstein's departure, the Registrant was advised that the firm will
concentrate its practice of providing accounting related services to individuals
and privately held businesses.
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 November 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.
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, 1999 are filed
herewith.
(b) Reports on Form 8-K.
On August 27, 1999, the Registrant filed a Form 8-K regarding the
Registrant's engagement with the accounting firm of J.L. Stephan Co., P.C. to
act as its independent accounting firm, to replace Hirsch Silberstein &
Subelsky, P.C.
8
<PAGE>
LBO CAPITAL CORP.
FORM 10-Q
For the Quarter Ended September 30, 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: November 11, 1999
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000753557
<NAME> LBO Capital Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 85
<SECURITIES> 43,139
<RECEIVABLES> 308,219
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 351,443
<PP&E> 8,639
<DEPRECIATION> 8,639
<TOTAL-ASSETS> 351,443
<CURRENT-LIABILITIES> 995,155
<BONDS> 0
0
0
<COMMON> 1,210
<OTHER-SE> (644,922)
<TOTAL-LIABILITY-AND-EQUITY> 351,443
<SALES> 0
<TOTAL-REVENUES> 8,219
<CGS> 0
<TOTAL-COSTS> 3,836
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,114
<INCOME-PRETAX> (41,731)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41,731)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
September 30, 1999 December 31,
(Unaudited) 1998
ASSETS ------------------- ---------------
<S> <C> <C>
Current assets:
Cash $ 434 $ 6
Marketable securities 387 396
Trade accounts receivable, net 2,914 1,889
Inventories 4,232 5,680
Prepaid expenses and other 863 485
-------------- -------------
Total current assets 8,830 8,456
Fixed assets, net 1,677 1,708
Other assets 213 179
Deferred tax benefit 5,741 1,119
Goodwill 1,588 1,621
Trademarks 6,989 -
-------------- -------------
Total assets $ 25,038 $ 13,083
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 8,538 $ 195
Current portion of capital lease 4 4
Accounts payable 3,770 2,225
Accrued expenses 1,036 380
-------------- --------------
Total current liabilities 13,348 2,804
Notes payable to affiliates - long term 2,087 1,587
Notes payable to banks - long term 5,547 5,951
Notes payable 2,070 -
-------------- --------------
Total liabilities 23,052 10,342
Minority Interest in Subsidiary 24 -
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, 217,939 shares
outstanding at stated value 2,179 2,642
Series D, $0.01 par value, 6,000,000 shares 60 60
Common stock, $.01 par value 100,000,000 shares authorized,
4,091,091 and 3,956,815 shares outstanding, respectively 41 40
Additional paid-in capital 15,527 14,762
Accumulated deficit (17,104) (16,006)
Accumulated unrealized (losses) gains on securities 9 (7)
-------------- --------------
Total stockholders' equity 1,962 2,741
-------------- --------------
Total liabilities and stockholders' equity $ 25,038 $ 13,083
============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Three Months Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
---- ---- ---- ----
Net sales $ 2,684 $ 4,214 $ 11,507 $ 20,803
Cost of sales 2,081 3,619 9,719 17,284
--------- --------- --------- ---------
Gross profit 603 595 1,788 3,519
Selling, general and 1,855 857 3,692 3,063
administrative expenses --------- --------- --------- ---------
Operating income (1,252) (262) (1,904) 456
Non-operating expense:
Interest expense, net 409 263 937 913
Other, net 61 100 (131) 2
--------- --------- ---------- ---------
Total non-operating expense 470 363 1,068 915
--------- --------- ---------- ---------
Income (loss) before income taxes (1,722) (625) (2,971) (459)
Income tax expense (benefit) (603) - (878) -
--------- --------- ---------- ---------
Net income (loss) $ (1,119) $ (625) $ (2,093) $ (459)
========= ========= ========== =========
Basic and diluted earnings per share* $ (0.28) $ (0.18) $ (0.53) $ (0.19)
========= ========= ========== =========
Weighted average common shares outstanding 3,957 3,920 3,957 3,892
========= ========= ========== =========
* Computed by dividing net income or loss, after reduction for preferred stock
dividends, by the weighted average number of common shares outstanding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSAN)S), (UNAUDITED)
Nine Months
Ended September 30,
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,093) $ (459)
Adjustments to reconcile to net cash flows from
operating activities:
Depreciation and amortization 303 273
Change in assets [(increase)/decrease] and
liabilities [increase/(decrease)]:
Trade accounts receivable, net (1,025) 2,237
Inventories 1,448 1,066
Prepaid expenses and other current assets (377) (242)
Other assets (34) (81)
Deferred tax benefits (3,624)
Accounts payable 1,545 (1,985)
Accrued expenses 656 (172)
Trademarks (6,989) -
-------------- --------------
Net cash used in operating activities (10,190) 637
-------------- --------------
Cash flows from investing activities:
Acquisitions of fixed assets (234) (153)
-------------- --------------
Net cash used in investing activities (234) (153)
-------------- --------------
Cash flows from financing activities:
Net change in notes payable to banks 7,939 (2,513)
Net proceeds from notes payable to affiliates 500 2,315
Net proceeds from notes payable 2,070 -
Net change from conversion of preferred stock 303 -
Net change in marketable securities 16 (500)
Net change to minority interest 24 -
-------------- ---------------
Net cash provided by financing activities 10,852 (698)
-------------- ---------------
Net increase (decrease) in cash 428 (214)
Cash at beginning of period 6 234
-------------- ---------------
Cash at end of period $ 434 $ 20
============== ===============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 622 $ 899
============== ===============
Cash paid for income tax - -
============== ===============
</TABLE>
<PAGE>
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, 1999 and the results of operations for
the three and nine-month periods ended September 30, 1999 and 1998 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, 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 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.
<PAGE>
2. INVENTORIES
The major classes of inventories (rounded to thousands) are as follows:
September 30, December 31,
1999 1998
Raw Materials $1,086 $1,493
Work in Process 1,103 1,052
Finished Goods 2,043 3,135
----- -----
$4,232 $ 5,680
===== =====
3. NOTES PAYABLE TO BANKS
On February 2, 1999, the Company entered an agreement with Wells Fargo Bank for
a seasonal over advance of up to $750,000 beginning February 2, 1999. The full
amount of this over advance is due on December 1,1999. The interest rate on
advances outstanding on the over advance is prime plus 2%.
On June 23, 1999 the Company, through a newly formed subsidiary, Pro Golf
International, Inc. increased its borrowings by $8,500,000 with a 75-day bridge
loan from Comerica Bank. The proceeds of this loan were used toward the purchase
of 100% of the outstanding common stock of Pro Golf of America, Inc. The loan is
due on the earlier of demand or March 15, 2000. The company is in the process of
converting this loan into long-term financing. The Company expects the
refinancing to be completed during the first quarter of 2000.
<PAGE>
4. SEGMENT INFORMATION
The contribution to net sales, operating income (loss) and identifiable assets
of the Company's industry segments for the quarter and nine months ended
September 30, 1999 and 1998 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Quarter Ended September 30, 1999
GOLF
----------------------
Mass
Furniture Merchant Specialty Franchise Corporate Consolidated
--------- -------- Golf --------- --------- -------------
Stores
----------
Net Sales $ 260 $ 1,264 $ 165 $ 995 $ - $ 2,684
Operating Profit/(Loss) (483) (639) (30) 45 (146) (1,253)
Total Assets 2,137 7,822 1,623 12,854 - 24,436
Depreciation/Amortization 30 58 13 6 - 107
Capital Expenditures 0 25 - 81 - 106
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Quarter Ended September 30, 1998
GOLF
----------------------
Mass Specialty
Furniture Merchant Golf Franchise Corporate Consolidated
--------- -------- Stores --------- --------- ------------
---------
Net Sales $ 285 $ 3,795 $ 134 $ - $ - $ 4,214
Operating Profit/(Loss) (286) 211 (104) - (83) (262)
Total Assets 1,875 9,879 2,042 - - 13,797
Depreciation/Amortization 24 57 11 - - 92
Capital Expenditures 40 38 - - - 78
- --------------------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1999
GOLF
----------------------
Mass
Furniture Merchant Specialty Franchise Corporate Consolidated
--------- -------- Golf --------- --------- -------------
Stores
---------
Net Sales $ 4,425 $ 5,690 $ 397 $ 995 $ - $ 11,507
Operating Profit/(Loss) (71) (1,224) (100) 45 (554) (1,904)
Total Assets 2,137 8,425 1,623 12,854 - 25,038
Depreciation/Amortization 84 174 39 6 - 303
Capital Expenditures 77 69 - (12) - 134
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1998
GOLF
----------------------
Mass Specialty
Furniture Merchant Golf Franchise Corporate Consolidated
--------- -------- Stores --------- --------- ------------
---------
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 - 81 - 234
- ----------------------------------------------------------------------------------------------------
The franchise segment was added late during the second quarter of 1999 upon the
completion of the acquisition of Pro Golf.
</TABLE>
<PAGE>
5. DIVIDENDS
Dividends on Series B and C Convertible Preferred Stock have not been
declared for 1997, 1998 or 1999 due to unavailability of funds. Dividends
are in arrears on Series B in the amount of $1,081,575 and on Series C in
the amount of $762,747. Dividends are permitted to be paid under the credit
agreement when sufficient funds become available.
