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, 2000 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.)
32751 Middlebelt Road, Suite B
Farmington Hills, MI 48334
- ------------------------------ -------------------
(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 11, 2000 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, 2000
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets
March 31, 2000 (Unaudited) and December 31, 1999 3
Statements of Operations (Unaudited)
Three months ended March 31, 2000 and 1999 4
Statements of Cash Flows (Unaudited)
Three months ended March 31, 2000 and 1999 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, 2000 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,
2000 1999
----------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and Equivalents $ 16 $ 63
Marketable Securities - Available for Sale 29,716 32,600
-------------- ------------
Total Current Assets 29,732 32,663
Other Assets
Investments 321,000 -0-
-------------- ------------
Total Other Assets 321,000 -0-
------------
TOTAL ASSETS $ 350,732 $ 32,663
============== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable 2,231 3,250
Accounts Payable - Related Entities 330 300
Notes Payable - Other 825,801 823,201
Accrued Expenses and Taxes 215,930 194,021
-------------- ------------
Total Current Liabilities 1,044,292 1,020,773
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 (18,680) (15,796)
Accumulated Deficit (1,299,184) (1,596,616)
-------------- ------------
Total Stockholders' Deficit (693,560) (988,109)
-------------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 350,732 $ 32,663
============== ============
See notes to financial statements.
3
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
STATEMENTS OF OPERATIONS
For the Three Months Ended March 31,
2000 1999
-------------- -------------------
<S> <C> <C>
REVENUES:
Interest Income - Other $ 5,219 $ -0-
EXPENSES:
Professional Services 811 428
Management Fees 810 690
Interest Expense 21,910 12,420
Other Expenses 36 140
------------ -------------
Total Expenses 23,566 13,678
------------ -------------
Income (Loss) Before Income Taxes (18,347) (13,678)
Income Tax Expense (Benefit):
Currently Payable -0- -0-
------------ -------------
Net Income (Loss) $ (18,347) $ (13,678)
============ =============
Net Income (Loss) per Share $ (.00) $ (.00)
============ =============
Weighted Average Number of Common Shares
Outstanding 12,100,000 12,100,000
============ =============
See notes to financial statements.
4
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
LBO CAPITAL CORP.
CASH FLOWS
(Unaudited)
March 31, March 31,
2000 1999
---------------------------------------
<S> <C> <C>
Cash Flows for Operating Activities:
Net Loss $ (18,347) $ (13,678)
----------- ----------
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:
Interest Receivable - Other 15,781 -0-
Accounts Payable (1,020) (1,532)
Accounts Payable - Related Entities 30 60
Accrued Expenses and Taxes 21,910 12,420
----------- ----------
Total Adjustments 36,701 10,948
----------- ----------
Net Cash (Used for) Operations 18,354 (2,730)
Cash (Used for) Investing Activities
Purchase of Investments (21,000)
Marketable Securities Available for Sale -0- -0-
----------- ----------
(21,000) -0-
----------- ----------
Cash Flows from Financing Activities:
Proceeds on Notes Payable 2,600 2,700
----------- ----------
Net Cash Provided by Financing Activities 2,600 2,700
----------- ----------
Net Increase (Decrease) in Cash (46) (30)
Cash and Cash Equivalents:
At Beginning of Period 63 73
----------- ----------
At End of Period $ 16 $ 43
=========== ==========
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, 1999. 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, 2000 and
December 31, 1999, and the results of operations and cash flows for the three
month periods ended March 31, 2000 and 1999.
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, 2000 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, 2000.
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.
<PAGE>
On February 29, 2000, the Registrant converted its note receivable from
Pro Golf International, Inc. ("PGI"), and the interest accrued but unpaid on
such note receivable, into common stock of PGI. The conversion was made at the
rate of $60 per common share, the price at which PGI was raising equity capital
under a Confidential Private Placement Memorandum dated February 4, 2000. The
Registrant had initially made an investment in the subordinated debt of the
Registrant on June 23, 1999, as part of the purchase of PGI by the Registrant's
investee company, Ajay Sports, Inc. on that date, and the Registrant had held
the note from PGI until the time of this conversion into common stock. In
exchange for converting the $300,000 note and $21,000 of interest, the
Registrant received 5,350 shares of PGI's common stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(a) Material Changes in Financial Condition
---------------------------------------
Working capital decreased by $21,231 in the three-month period ended March
31, 2000 due to the net loss of $18,347 and the decrease in unrealized gain on
investments of $2,884 for the three months ended March 31, 2000.
(b) Results of Operations
---------------------
Registrant's operations for the three months ended March 31, 2000 resulted
in a loss of $18,347. This was due mainly to interest expense of $21,910 and
management fees of $810 offset by interest income of $5,219.
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, 2000
was $.75 per share. Ajay stock is traded over-the-counter. The approximate
market value of the Registrant's 246,667 shares was $185,000 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 $1.9375 per share at March 31, 2000,
which is $18,680 below cost. These shares could be liquidated to meet cash flow
needs if necessary.
<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, 2000 are filed herewith.
(b) Reports on Form 8-K.
None
<PAGE>
LBO CAPITAL CORP.
FORM 10-Q
For the Quarter Ended March 31, 2000
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 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000753557
<NAME> LBO Capital Corp.
<MULTIPLIER> 1
<CURRENCY> US Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
<EXCHANGE-RATE> 1
<CASH> 16
<SECURITIES> 29,716
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 350,732
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 350,732
<CURRENT-LIABILITIES> 1,044,292
<BONDS> 0
0
0
<COMMON> 1,210
<OTHER-SE> (694,770)
<TOTAL-LIABILITY-AND-EQUITY> 350,732
<SALES> 0
<TOTAL-REVENUES> 5,219
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,657
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,910
<INCOME-PRETAX> (18,347)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,347)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
March 31, 2000 December 31,
(Unaudited) 1999
--------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 264 $ 101
Marketable securities - available for sale 333 348
Trade accounts receivable, net 4,363 3,247
Inventories 3,317 3,969
Prepaid expenses and other 997 1,179
-------------- ---------------
Total current assets 9,274 8,844
Fixed assets, net 1,512 1,693
Other assets 7,023 7,037
Deferred tax benefit 7,172 6,582
Goodwill 1,566 1,577
-------------- ---------------
Total assets $ 26,547 $ 25,733
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 1,530 $ 995
Accounts payable 5,363 5,043
Accrued expenses 1,548 1,099
-------------- ---------------
Total current liabilities 8,441 7,137
Notes payable to affiliates - long term 2,087 2,087
Notes payable to banks - long term 13,725 13,886
Notes payable - long term 1,200 2,070
Commitments and contingencies - -
-------------- ---------------
Total liabilities 25,453 25,180
-------------- ---------------
Minority Interest in Subsidiary 16 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 2,179
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 shares outstanding 41 41
Additional paid-in capital 16,840 15,500
Accumulated deficit (19,337) (18,470)
Accumulated other comprehensive income 45 (31)
-------------- -------------
Total stockholders' equity 1,078 529
-------------- -------------
Total liabilities and stockholders' equity $ 26,547 $ 25,733
============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
Three Months
Ended March 31,
2000 1999
----------- -----------
<S> <C> <C>
Net sales $ 4,758 $ 4,263
Cost of sales 3,827 3,595
------------- ------------
Gross profit 931 668
Selling, general and
adminisrative expenses 1,474 851
-------------- ------------
Operating income (loss) (543) (183)
Non-operating expense:
Interest expense, net 502 253
Other, net 284 26
--------------- ------------
Total non-operating expense 786 279
--------------- ------------
(Loss) before minority interest and income taxes (1,329) (462)
Minority interest in (loss) of subsidiary 8 -
--------------- ------------
(Loss) before income taxes (1,321) (462)
Income tax (benefit) 462 -
--------------- ------------
Net (loss) $ (867) $ (462)
=============== ============
Basic and diluted earnings (loss) per share $ (0.23) $ (0.14)
=============== ============
Weighted average common shares outstanding 4,091 3,957
=============== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AJAY SPORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS), (UNAUDITED)
Three Months
Ended March 31,
2000 1999
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (867) $ (462)
Adjustments to reconcile to net cash flows from
operating activities:
Depreciation and amortization 303 95
Change in assets [(increase)/decrease] and
liabilities [increase/(decrease)]:
Trade accounts receivable, net (1,116) (1,462)
Inventories 652 (202)
Prepaid expenses and other current assets 182 (112)
Other assets 24 3
Deferred tax benefits (590) -
Accounts payable 320 43
Accrued expenses 449 187
------------- -------------
Net cash used in operating activities (643) (1,910)
------------- -------------
Cash flows from investing activities:
Acquisitions of fixed assets (18) (19)
------------- -------------
Net cash used in investing activities (18) (19)
------------- -------------
Cash flows from financing activities:
Net change in notes payable 520 1,904
Sales of common stock of subsidiary 297 -
Net change in marketable securities 15 46
Minority interest in loss of subsidiary (8) -
------------- ------------
Net cash provided by financing activities 824 1,950
------------- ------------
Net increase (decrease) in cash 163 21
Cash at beginning of period 101 6
------------- -------------
Cash at end of period $ 264 $ 27
============= =============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 502 $ 254
============= =============
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 March 31, 2000 and the results of operations for the
three and nine-month periods ended March 31, 2000 and 1999 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, 1999.
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:
March 31, December 31,
1999 1999
Raw Materials $1,086 $ 827
Work in Process 1,103 903
Finished Goods 2,043 2,239
----- -----
$4,232 $ 3,969
===== =====
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 June 2, 2000. 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
was 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 second quarter of 2000. At March 31,
2000, the principal balance due on this loan was $8,425,000.
<PAGE>
4. SEGMENT INFORMATION
The contribution to net sales, operating income (loss) and identifiable assets
of the Company's industry segments for the quarter ended
March 31, 2000 and 1999 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Quarter Ended March 31, 2000
GOLF
----------------------
Specialty
Mass Golf
Furniture Merchant Stores Franchise Corporate Consolidated
--------- -------- ---------- --------- --------- -------------
Net Sales $ 1,960 $ 1,298 $ 165 $ 809 $ - $ 4,758
Operating Profit/(Loss) 232 (624) (53) 50 (148) (543)
Total Assets 2,137 3,377 6,325 14,685 - 26,524
Depreciation/Amortization 30 43 13 217 - 303
Capital Expenditures 1 - - 17 - 18
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Quarter Ended March 31, 1999
GOLF
----------------------
Specialty
Mass Golf
Furniture Merchant Stores Franchise Corporate Consolidated
--------- -------- --------- --------- --------- ------------
Net Sales $ 2,268 $ 1,954 $ 41 $ - $ - $ 4,263
Operating Profit/(Loss) 316 (310) (35) - (154) (183)
Total Assets 4,019 8,997 1,786 - - 14,802
Depreciation/Amortization 24 58 13 - - 95
Capital Expenditures 19 - - - - 19
- --------------------------------------------------------------------------------------------------
</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.
