<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For The Quarterly Period Ended December 31, 1998
[ ] Transition report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 033-07811NY
GARY PLAYER DIRECT, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
91-1999113
DELAWARE (formerly 93-0943925)
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
710 AEROVISTA, SUITE B, SAN LUIS OBISPO, CALIFORNIA, 93401
(Address of Principal Executive Offices)
(805) 783-1011
(Issuer's Telephone Number, Including Area Code)
- ------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for 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 __ No X
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes __ No __
<PAGE> 2
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of December 31, 1998: 341,256
shares of Common Stock
Transitional Small Business Disclosure Format (check one):
Yes __ No X
2
<PAGE> 3
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 1998
INDEX
PAGE
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Balance Sheet- December 31, 1998 (Unaudited) 4
Statement of Operations - for the Three Months ended
December 31, 1998 and December 31, 1997 (Unaudited) 5
Statement of Changes in Shareholders' Equity for
the Three Months ended December 31, 1998 and
December 31, 1997 (Unaudited) 6
Statements of Cash Flows - for the Three Months ended
December 31, 1998 and December 31, 1997 (Unaudited) 7
Notes to Financial Statements 8-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 18
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
<TABLE>
<CAPTION>
BALANCE SHEET
DECEMBER 31, 1998
ASSETS December 31, 1998
Current Assets
<S> <C>
Cash $ 4,913
-------
Total Current Assets 4,913
Property and equipment, at cost, net of accumulated depreciation of $8,549 6,302
-------
$ 11,215
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable $ 42,640
Accounts payable 28,553
Accrued interest 41,846
Net liabilities of discontinued operation 1,583,509
---------
TOTAL CURRENT LIABILITIES 1,696,508
Note Payable to bank to be refinanced 1,400,000
Shareholder loans 1,290,908
Stockholders' Equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares
issued and outstanding Common stock, $.001 par value, 50,000,000 shares
authorized, 341,256 shares issued and outstanding
341
Additional paid-in-capital 11,968,151
Deficit accumulated during development stage (16,344,732)
------------
TOTAL SHAREHOLDERS' EQUITY (4,376,240)
-----------
$ 11,215
===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
STATEMENT OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
<S> <C> <C>
General and administrative expenses $ 57,790 $ 61,186
Interest expense 45,911 21,806
Interest (income) (63) -
---------- ---------
(Loss) from continuing operations (103,637) (82,992)
(Losses) gain from discontinued operation - 139,369
(Losses) from discontinuance of operation - -
---------- ---------
- 139,369
Net Income (loss) $ (103,637) $ 56,377
=========== =========
Basic and diluted (loss) per share:
Continuing operations $ (0.30) $ (0.31)
Discontinued operations - 0.52
---------- ---------
$ (0.30) $ 0.21
=========== =========
Weighted average shares outstanding 341,256 267,715
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION)
(FORMERLY GRAFIX TIME CORPORATION D/B/A CARRERA GOLF)
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
QUARTER ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
PAID IN
SHARES AMOUNT CAPITAL
------ ------ ----------
<S> <C> <C> <C>
Balance, September 30, 1998 338,256 $ 338 $11,953,154
Common Stock Sold for Cash 3,000 3 14,997
Net (loss) for the quarter -- -- --
----------- ----------- -----------
Balance, December 31, 1998 341,256 $ 341 $11,968,151
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED DEFICIT TOTAL
------------------- -----
<S> <C> <C>
Balance, September 30, 1998 $(16,241,095) $ (4,287,603)
Common Stock Sold for Cash -- 15,000
Net (loss) for the quarter (103,637) (103,637)
------------ ------------
Balance, December 31, 1998 $(16,344,732) $ (4,376,240)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
<S> <C> <C>
Net income (loss) $ (103,637) $ 56,377
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 777 700
Interest added to shareholder loans 37,080 -
Changes in assets and liabilities:
(Increase) decrease in other accounts receivable - 2,000
(Increase) decrease in net assets of discontinued operation - (343,599)
Increase (decrease) in accounts payable (8,677) (38,396)
Increase (decrease) in net liabilities of discontinued operation (6,783) -
Increase (decrease) in accrued expenses 8,831 (14,905)
Total adjustments 31,228 (394,200)
------------ --------
Net cash (used in) operating activities (72,410) (337,823)
------------ --------
Cash flows from financing activities:
Common stock sold for cash 15,000 -
Proceeds from notes payable 42,640 -
Proceeds from shareholder loans - 200,000
Repayment of notes payable - (110,000)
Proceeds bank line of credit -----------
Net cash provided by financing activities 57,640 200,000
------------ -------
290,000
-------
Increase (decrease) in cash (14,770) (47,823)
Cash and cash equivalents, beginning of period 19,683 215,085
------ -------
Cash and cash equivalents, end of period $ 4,913 $ 167,262
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE> 8
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Note 1. Organization and Summary of Significant Accounting Policies:
The Company was incorporated in New York on April 16, 1986. The Company
previously operated under the names "Mont Blanc Resources, Inc." and "Movies
Marketing, Inc." Its previous business was the distribution of fashion sports
watches and electronic jewelry. These product lines were sold in June 1991.
During April 1991, the Company acquired the rights to continue development of
and begin marketing a unique sunglass product known as Industrial Strength
Eyewear ("ISE"). During September 1993, due to product manufacturing problems
and exhaustion of capital reserves, the Company discontinued its efforts to
develop and market the ISE product line and began searching for a buyer for the
business. The sale of the business was completed during February 1994.
On January 2, 1996, the Company completed an asset purchase agreement with
K.W.A.T., Inc. (formerly Sports Equipment Technology Company, Inc., hereinafter
referred to as "SETCO"), a Colorado development stage corporation engaged in
design, manufacture and sale of golf-related equipment and apparel using the
licensed trade name "Carrera."
Prior to the merger, SETCO was controlled by certain individuals who also
controlled the Company. Accordingly, the merger was accounted for as a
recapitalization of companies under common control, which most resembles the
"pooling of interests" method of accounting. The Company issued 13,333 shares of
its restricted common stock to effect asset purchase. SETCO's most significant
asset at the merger date was a license agreement with Carrera International,
Inc. for the rights to use its trade name in connection with marketing the
Company's products.
The Company's operations and sales of golf related equipment and apparel
commenced during January, 1996 and were discontinued in October, 1998 (see Note
2).
During July 1998, the Company was reincorporated in the State of Delaware and
changed its name to Grafix Corporation. The Company declared a 1 share for 3
shares reverse stock split in connection with the recapitalization.
During March 1999, the Company completed a merger transaction with Golf One
Industries, Inc. (see Note 9) and in connection therewith, declared a 1 share
for 20 shares reverse stock split. The accompanying financial statements and
information presented in the notes thereto have been restated to give effect to
the above described stock splits.
Use of Estimates:
Management of the Company uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that management uses.
Equipment and Depreciation:
Equipment is recorded at cost and is depreciated based upon estimated useful
lives using the straight-line method. Estimated useful lives are 5 years.
Depreciation charged to operations was $777 and $700 for the quarters ended
December 31, 1998 and 1997, respectively.
8
<PAGE> 9
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Loss per share:
Earnings per Share (Basic and Diluted)
Basic Earnings per Share ("EPS") is computed by dividing net income available to
common stockholders by the weighted average number of common stock shares
outstanding during the year. Diluted EPS is computed by dividing net income
available to common stockholders by the weighted-average number of common stock
shares outstanding during the year plus potential dilutive instruments such as
stock options and warrants. The effect of stock options on diluted EPS is
determined through the application of the treasury stock method, whereby
proceeds received by the Company based on assumed exercises are hypothetically
used to repurchase the Company's common stock at the average market price during
the period.
The basic loss per share is computed by dividing the net loss for the period by
the weighted average number of common shares outstanding for the period. Loss
per share is unchanged on a diluted basis since the assumed exercise of common
stock equivalents would have an anti-dilutive effect due to the existence of
operating losses.
Revenue Recognition:
Revenue is recognized at the time the product is shipped. A provision for sales
returns is estimated in the period corresponding to the original sale based on
actual returns experienced in prior periods.
Cash:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with maturity of three months or less to be
cash equivalents.
Fair value of financial instruments
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts and loans receivable, and accounts payable and accruals.
The carrying amounts of these financial instruments approximate fair value
because of their short-term maturities. Financial instruments that potentially
subject the Company to a concentration of credit risk consist principally of
cash and accounts receivable, trade.
During the year the Company did not maintain cash deposits at financial
institutions in excess of the $100,000 limit covered by the Federal Deposit
Insurance Corporation.
Advertising Costs:
The Company's policy is to expense advertising costs at first showing.
Long-Lived Assets:
In accordance with Statement of Financial Accounting Standards No. 121
("FAS 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, the Company reviews for the impairment of
long-lived assets and certain identifiable intangibles whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Under FAS 121, an impairment loss would be recognized when
estimated future cash flows expected to result from the use of the asset and its
eventual disposition is less than its carrying amount. The Company has
identified no such impairment losses.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996. Upon adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation plans using the
intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to
Employees, and has provided in Note 6 information about its stock based
compensation.
9
<PAGE> 10
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Recent Pronouncements:
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all
items that are to be recognized under accounting standards as components of
comprehensive income to be reported in the financial statements. The statement
is effective for all periods beginning after December 15, 1997 and
reclassification financial statements for earlier periods will be required for
comparative purposes. The adoption of SFAS No. 130 has had no impact on the
Company, as the Company has not engaged in transactions that would generate
other comprehensive income as defined in the statement.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides
authoritative guidance on when internal-use software costs should be capitalized
and when these costs should be expensed as incurred. The Company adopted SOP
98-1 at its inception. The adoption of SOP 98-1 has had no impact on the
Company, as the Company has not engaged in transactions that would are whose
accounting treatment is prescribed by the statement.
Effective December 31, 1998, the Company adopted SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131
superseded SFAS No. 14, Financial Reporting for Segments of a Business
Enterprise. SFAS 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS 131 also establishes
standards for related disclosures about products and services, geographic areas,
and major customers. To date, the Company has operated in one business segment
as defined by the statement.
Effective December 31, 1998, the Company adopted the provisions of SFAS No. 132,
Employers' Disclosures about Pensions and Other Post-retirement Benefits ("SFAS
132"). SFAS 132 supersedes the disclosure requirements in SFAS No. 87,
Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for
Post-retirement Benefits Other Than Pensions. The overall objective of SFAS 132
is to improve and standardize disclosures about pensions and other
post-retirement benefits and to make the required information more
understandable. The Company has to date not adopted benefit plans that would
require the disclosures prescribed by the statement.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which
is required to be adopted in years beginning after June 15, 1999. SFAS 133 will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings.
Management believes that the adoption of SFAS No. 133 will have no impact on the
Company, as the Company has not engaged in transactions that would are whose
accounting treatment is prescribed by the statement.
Note 2. Discontinued Operation
During September 1998, the Company discontinued the operation of its Carrera
Golf operation due to its inability to generate profit from the operation and
the absence of adequate financing to continue the operation.
10
<PAGE> 11
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
For the three months ended December 31, 1998 and 1997, respectively, the
operating results of the Carrera Golf operation were as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Revenues $ -- $1,051,312
Costs of Sales -- 667,198
Administrative (103,637) 244,745
--------- ----------
Gain (loss) from division $(103,637) $139,369
</TABLE>
The Company received $42,640 and issued Promissory Notes in that amount in
the quarter ended December 31, 1998.
Note 3. Notes Payable:
The Company had an aggregate of $110,000 in unsecured notes payable to unrelated
individuals at September 30, 1997. During October 1997, the notes plus accrued
interest were repaid in full.
Note 4. Note Payable-Bank Line of Credit:
At September 30, 1997 the Company had received $939,000 against a $1,000,000
credit line facility with a bank. During 1998, the credit line was increased to
$1,400,000 and additional advances of $461,000 were received. The credit line
bears interest at the bank's prime rate (8.3% at September 30, 1998), and is
personally guaranteed by the Company's principal stockholder. The line was
repaid in full in January 1999 (see Note 9).
Note 5. Notes Payable-Stockholder:
The Company has been advanced an aggregate of $725,000 by its principal
stockholder or a Company under his control at September 30, 1997. The advances
bear interest at 10% to 15% per annum and are secured by the Company's
inventory, accounts receivable, and other assets. During 1998, an additional
$575,000 of advances were made and $175,000 was repaid in cash. Additionally,
during 1998, interest aggregating $128,828 was added to the loan balance. A
portion of the advances were converted into common stock during January 1999
(see Note 9).
11
<PAGE> 12
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Note 6. Stockholders' Equity:
The Company was a defendant, along with its major shareholder, in a civil
lawsuit filed by its former president. The suit sought compensatory and punitive
damages of $2.5 million for claims breach of contract and improper dismissal.
During 1998, the suit was settled by the shareholder who paid an aggregate of
$270,000 to the former officer. The Company has recorded the full amount of the
settlement as an expense in its statement of operations and has accounted for
the payment as a contribution of capital by the shareholder.
During the year ended September 30, 1998, the Company issued 40,501 shares of
its common stock to an officer, an employee and others for services valued at
$149,916.
Additionally during 1998, the Company sold an aggregate of 30,615 shares of its
common stock for cash of $361,584.
Note 7. Commitments and Contingencies:
The Company has been notified of a claim under the license agreement between the
Company and Carrera Optyl Marketing GmbH ("Carrera"). The claim is for payment
of an aggregate of $532,500 of unpaid royalties asserted by Carrera, the
licensor. The claim also asserts the cancellation of the license agreement as of
August 24, 1999, which would prevent the Company from any further activity using
the Carrera name. The Company intends to seek a mutually satisfactory resolution
of this matter with the licensor, however, the full amount of the claim has been
included in the caption "Net liabilities of discontinued operation" in the
Company's balance sheet at September 30,1998.
On or about December 21, 1998, a lawsuit was brought in the District Court of
Arapahoe County, Colorado by the Company's landlord to recover amounts allegedly
due under the Company's lease of office space in Englewood, Colorado. The suit
alleges breach of the lease and seeks monetary damages. The Company has accrued
the full amount of the claim ($20,266) that has been included in the caption
"Net liabilities of discontinued operation" in the Company's balance sheet at
September 30, 1998.
In September 1997, a lawsuit was brought in the County Court of Tarrant County,
Texas by J. Russell Walker, the Company's former vice president. The suit seeks
monetary damages related to an alleged breach of a 1996 employment agreement and
other damages. The Company has accrued the expected settlement amount of the
claim ($20,000) that has been included in the caption "Net liabilities of
discontinued operation" in the Company's balance sheet at September 30, 1998.
In January 1999, a lawsuit was brought in the District Court, City and County of
Denver, State of Colorado by Patrick Burke, a golf professional under contract
with the Company. The suit seeks monetary damages related to an alleged breach
of a 1994 independent contractor agreement and other damages. The Company has
accrued the full amount of the claim ($135,000) that has been included in the
caption "Net liabilities of discontinued operation" in the Company's balance
sheet at September 30, 1998.
In April 1999, a lawsuit was brought in the District Court, County of Arapahoe,
State of Colorado by General Motors Acceptance Corporation, pursuant to a motor
vehicle lease contract with the Company. The suit seeks monetary damages related
to an alleged breach of the May 1998 lease agreement and other damages. The
Company has accrued the full amount of the claim ($8,573) that has been included
in the caption "Net liabilities of discontinued operation" in the Company's
balance sheet at September 30, 1998.
12
<PAGE> 13
GARY PLAYER DIRECT, INC.
(FORMERLY GRAFIX CORPORATION D/B/A CARRERA GOLF)
(FORMERLY GRAFIX TIME CORPORATION)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(continued)
Note 8. Income Taxes:
The Company has adopted Financial Accounting Standards Board Statement No. 109,
Accounting for Income Taxes. Deferred income taxes may arise from temporary
differences resulting from income and expense items reported for financial
accounting and tax purposes in different periods. Deferred taxes are classified
as current or non-current, depending on the classifications of the assets and
liabilities to which they relate. Deferred taxes arising from temporary
differences that are not related to an asset or liability are classified as
current or non-current depending on the periods in which the temporary
differences are expected to reverse.
The deferred tax asset (approximately $5,400,000) related to the Company's
operating loss carryforward of approximately $16,000,000 at September 30, 1998
has been fully reserved since the Company believes that it is more likely than
not that future income from operations will not be available to utilize the
deferred tax asset. The net operating loss carryforwards expire through 2012.
The reserve amount increased by approximately $100,000 as a result of the
operating loss incurred in the quarter ended December 31, 1998. As a result of a
significant change in the ownership of the Company in March 1999 as described in
Note 9, the Company's ability to utilize the tax benefit of the operating loss
may be in doubt.
Note 9. Subsequent Events.
On February 11, 1999, the Company completed a debt restructuring with its then
principal shareholder, whereby approximately $2.8 million of the Company's debt
was retired, including $1,400,000 due to a bank and guaranteed by the
shareholder and approximately $1,400,000 of notes payable to the shareholder and
to a company under his control. The Company entered into a new 2-year promissory
note with the shareholder, in the face amount of $650,000. This new note is
secured by the receivables and inventory of the Company. Interest accrues on the
new note for the 2-year period, and the entire note, with accrued interest, is
due on February 11, 2001. Additionally, the Company issued to the shareholder
550,000 shares of its restricted common stock to complete the refinancing.
On March 29, 1999 the Company completed a merger with Golf One Industries, Inc.
("Golf One"). Pursuant to the terms of the Agreement of Merger, the Company
issued 3,642,990 shares of its common stock to Golf One's shareholders and
lenders, resulting in a change of control of the Company. As part of the 1999
Merger with Golf One, the Company effected a one-for-twenty reverse split of its
issued and outstanding common stock, Golf One was merged into the Company, and
the Company effected a name change to "Gary Player Direct, Inc." The merger is
expected to be accounted for as reverse acquisition.
Note 10. Basis of Presentation:
The accompanying financial statements have been prepared on a "going concern"
basis which contemplates the realization of assets and the liquidation of
liabilities in the ordinary course of business.
The Company has incurred losses during the years ended September 30, 1998 and
1997 aggregating $4,547,738 and $118,447, respectively and has negative equity
of $4,287,603 and a working capital deficit of $1,640,854 at September 30, 1998.
During the periods presented the Company has not generated positive cash flow
from operations and there can be no assurance that the trend will not continue.
Profitable operations are dependent upon, among other factors, the Company's
ability to obtain equity or debt financing and its ability to successfully
market its products.
The Company is unable to project a level of revenue that would allow a reversal
of its history of operating losses in the near future. In this regard the
Company discontinued the operation of its Carrera Golf operation and completed
the merger as described in Note 9.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
report. Please note that this report was prepared and filed in November, 1999
with respect to the quarter ended December 31, 1998, and accordingly this report
addresses and reflects not only matters relevant to the reporting period, but
also certain events and matters during subsequent periods through and including
October 1999 (the "Subsequent Period") which management believes are material
and/or relevant to the reader's understanding of this report. The events of the
Subsequent Period that are addressed herein are included because this report for
the quarter ended December 31, 1998 and reports of the Company for the fiscal
year ended March 31, 1999, and the quarter ended June 30, 1999 had not been
filed with the Securities and Exchange Commission (the "Commission"). The events
of the Subsequent Period included a substantial transition in the Company's
Board and management and the Company's engagement of new auditors and legal
counsel in October 1999, which is more fully described in Item 5, "Other
Information" below and the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 1998 (the "1998 Form 10-K"), which 1998 Form 10-KSB was
filed with the Commission on October 29, 1999 and is hereby incorporated by
reference. Accordingly, the information contained herein is qualified to the
extent of the knowledge possessed by the Company's new management team as of the
date of this report with respect to the affairs of the Company.
GENERAL
Grafix Corporation d/b/a Carrera Golf (the "Company") was a Delaware
corporation at December 31, 1998 that owned a license (the "Carrera License") to
manufacture, sell and distribute golf products (golf clubs, bags, accessories
and apparel) under the Carrera brand name worldwide. The Company originally
obtained a Carrera license by purchasing the assets of Sports Equipment
Technology Company ("SETCO") in January, 1996. The Company was in the product
research and development stage until approximately July, 1996.
In January, 1997, the Company negotiated a new licensing agreement with
Carrera Optyl Marketing GmbH, a subsidiary of Safilo Group GmbH, Italy
("Safilo") to use the "Carrera" name on the Company's products. The Carrera
License is for a term of five years, with an additional automatic renewal of
five years. The Carrera License obligates the Company to pay Safilo a royalty on
sales, and includes annual minimum royalties. In August, 1999, the Company
received a termination letter notifying the Company that it was in default under
the licensing agreement for unpaid royalties and that Carrera intends to
terminate the licensing agreement. Carrera asserts that $532,500 in unpaid
royalties is due as of October, 1999. It is anticipated that the Company will
recognize very little revenue, if any, from the sale of Carrera Golf branded
products in the period subsequent to the fiscal year ended September 30, 1998.
In early 1996, the Company entered into a distributorship agreement
with Citizen Trading Group, Tokyo, Japan ("Citizen"), for a distribution of all
Carrera Golf products in Japan. Citizen placed its first order with the Company
in July, 1996 and Citizen was the Company's primary customer, accounting for
over 90 percent of the Company's sales at December 31, 1998. In October, 1998,
Citizen withheld payment for a substantial order, citing concerns about the
ability of the Company to continue operations. Citizen also claimed an offset
for certain returned goods from 1996. The Company protested this action by
Citizen, and at December 31, 1998, the Company had not filled another order from
Citizen, which has been reflected in the Company's financial statements in the
calculation of loss from discontinuance of operations. As of the date of this
report, the Company is not dependent upon Citizen nor any one customer or group
of customers.
Please see Item 5, "Other Information" below for further information
regarding events occurring after December 31, 1998 and pursuant to the
Succession Plan and Agreement.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
At December 31, 1998, the Company reported $11,215 in cash, property
and equipment. The Company also reported $84,486 in short-term notes payable and
accrued interest on those notes and $28,553 on accounts payable. Due to the lack
of liquid assets at December 31, 1998, the Company could not continue to service
its debt. The dispute with Citizen caused a serious cash flow crisis for the
Company in addition to the downturn in the Asian economies. As a result, during
the quarter ended December 31, 1998 the Company discontinued operations of its
primary business activity and sought merger candidates to improve its liquidity
and financial viability.
RESULTS OF OPERATIONS
The Company had no revenue from operations in the quarter ended
December 31, 1998 as compared to $1,051,312 during the same quarter in 1997.
Administrative expenses for the quarter ended December 31, 1998 and 1997 were
$103,637 and $244,745 respectively. The Company reported a net loss of $103,637
for the quarter compared to a gain of $56,377 during the same quarter in 1997.
The Company reported the discontinuance of operations of its primary business
activity in Form 10-KSB for the year ended September 30, 1998.
14
<PAGE> 15
PLAN OF OPERATIONS FOR THE COMPANY
As of October 1999 and following the implementation of the Succession
Plan and Agreement, the Company and the new Board and management team have
adopted immediate near-term and long-term business strategies. The immediate
strategies address the following objectives:
1. Bring the Company current in its Securities and Exchange Commission
reporting obligations;
2. Restructure existing obligations with creditors and taxing
authorities;
3. Access additional capital through available equity sources;
4. Modify business operations to attain profitability; and
5. Complete the acquisition of the assets of the Gary Player Golf
Equipment Division of the Gary Player Group. There can be no assurance
that the Company will be successful in achieving any of the
above-stated objectives.
Subsequent to the date of the 1999 Merger, the Company has continued to
sustain substantial losses and has had substantially reduced sales of its Gary
Player branded golf products. As of March 31, 1999, the Company's sales revenues
(net of returns and all allowances) for the fiscal year then ended were
approximately $5,800,000 resulting in an estimated loss of approximately
$12,300,000. In addition, at March 31, 1999 the Company had an estimated working
capital deficit of approximately $12,000,000 or total liabilities of
approximately $13,000,000 substantially all of which were past due. (All March
31, 1999 results contained herein are unaudited) At March 31, 1999 and
continuing to the date of this report the Company was a party to a substantial
number of pending and threatened litigation matters, many of which are material.
The Company has also received numerous customer complaints relating to
non-payment of customer refunds or the failure to receive their purchased goods.
The Company was also notified, subsequent to the date of the 1999 Merger, that
it was in default of the Direct Marketing Agreement with The Player Group and
the Asset Purchase Agreement with the Company and the Player Group. The Company,
in connection with the Succession Plan and Agreement, obtained an extension
until October 25, 1999 to amend the Direct Marketing Agreement and the Asset
Purchase Agreement, such that they would no longer be in default. As of the date
of this report, The Player Group has agreed to forebear from exercising any of
their remedies provided the closing on the Asset Purchase Agreement occurs
within the next forty five (45) days.
On November 9, 1999, the Company and the Gary Player Group, Inc.
("GPG") executed an amendment to the Direct Marketing Agreement originally dated
November 1, 1996 (the "Amendment"). Pursuant to the Amendment, the parties have
agreed that upon the payment of $505,000 by the Company, the requirements of the
Direct Marketing Agreement would be deemed satisfied with respect to all
outstanding amounts due and owing through October 31, 1999. In addition, the
Amendment provides that upon receipt by GPG of the $505,000 referenced above,
all existing defaults between the Company and GPG shall be waived. The
Amendment provides that GPG may terminate the Direct Marketing Agreement only
(i) if the Company conducts its business in such a manner as to materially and
adversely affect the reputation of Gary Player or (ii) if the Company shall
fail to pay any amount due under the Direct Marketing Agreement as and when
due. Pursuant to the Amendment, the Company received the consent of GPG for the
use of Gary Player Direct, Inc. as the Company's corporate name and the name of
any of its subsidiaries. Furthermore, the Amendment provides that upon receipt
by GPG of the $505,000 referenced above, GPG has agreed to release any claim it
may have to inventory or the proceeds of such inventory that it may have
transferred to the Company and that the Company may have sold in the course of
its business.
The near term business strategy is to fully capitalize on the rights
received by license agreement to use the Gary Player brand name. The most
successful international golfer of his generation, Mr. Player has achieved the
kind of worldwide recognition reserved for only a handful of figures in the
world of sports. The Company believes that completing the acquisition of the
Gary Player Golf Equipment Division will allow it to market and sell an expanded
array of golf equipment and accessories worldwide. The assets of the golf
equipment operations of The Gary Player Group ("GPG") include principally two
licenses which together give the Company the perpetual, worldwide, exclusive
right to use the name and likeness of Gary Player, the professional golfer, and
ancillary marks, including Black Knight(tm) and the Knight's Head Logo, in
connection with the manufacture, marketing and distribution of golf clubs,
accessories and apparel for an annual license fee and a royalty payable based on
net receipts. As part of the Player acquisition, the Company will also acquire
existing sub-licenses based on the Player licenses, certain inventory and
accounts receivable.
The Company plans to expand its Internet sales strategy over the coming
months, creating strategic alliances to further market the Company's products.
Additionally, it is the Company's objective to increase direct response,
television marketing through utilization of an infomercial featuring Mr. Player
and the continued telemarketing activities that have been the primary source of
revenue to date. Over the longer term, the Company looks to engage in strategic
acquisitions of golf related businesses that complement or diversify the
Company's existing product mix and possibly enter into sub-license agreements
with third parties.
YEAR 2000
The Company has reviewed its operations and administrative systems relative
to year 2000 matters. The Company's review includes a series of initiatives to
ensure that all of the Company's computer equipment and software will function
properly into the next millennium. Computer hardware and software includes
systems generally thought of as information-technology dependent, such as
accounting, data processing, and telephone equipment ("IT systems"), as well as
systems not obviously information-technology dependent, such as telecopier
machines and security systems ("non-IT systems"). These systems may contain
embedded technology, which requires that the Company's review including broad
identification, assessment, remediation and testing efforts.
Based upon its identification and assessment efforts to date, the
Company believes that its IT systems will not require replacement or
modification. However, in the ordinary course of business, the Company
periodically replaces computer equipment and software, and in so doing, seeks to
acquire only year 2000 compliant software and hardware. The Company plans to
complete its assessment of its non-IT systems during November 1999. The Company
presently believes that its planned modifications or replacements
15
<PAGE> 16
of existing IT systems and non-IT systems will be completed on a timely basis so
as to avoid any of the potential year 2000-related disruptions or malfunctions
of the computer equipment and software it has identified.
The Company intends to complete its survey of vendors and services
providers by November 1999 to determine where external year 2000 compliance or
noncompliance might materially affect the Company's operations.
At this point in the review process, the Company cannot reasonably estimate the
cost of achieving year 2000 compliance; however, the Company does not anticipate
the cost of implementing its year 2000 efforts to be material. The Company plans
to determine the year 2000 readiness of its then key suppliers, identify
alternative sources for materials and services in the event that lack of year
2000 compliance is indicated, and make inquires regarding the year 2000
readiness of any potential strategic partners. Management is continuing to
examine the year 2000 issues as they potentially impact the Company, and will be
developing contingency plans as necessary.
SAFE HARBOR STATEMENT
The Private Securities Litigation Reform Act of 1995 provides a new
"safe harbor" for certain forward-looking statements. Statements contained in
this report that are not historical facts and are forward-looking statements
that involve risks and uncertainties that could cause actual results to differ
materially from those stated in the forward-looking statements. Factors that
could cause actual results to differ materially include, among others: economic
and competitive conditions in the markets served by the Company affecting the
demand for the Company's products, product pricing, market acceptance, access to
distribution channels, availability of new financing, ability to cure license
defaults, ability to timely file past due SEC reports, and other risks detailed
form time-to-time in the Company's Securities and Exchange Commission filings
and press releases.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was named as a defendant in four lawsuits. The
nature and status of such lawsuits at December 31, 1998 are
described in the Company's 1998 Form 10-KSB filed on October
29, 1999, Item 3, "Legal Proceedings", which is hereby
incorporated by reference.
ITEM 2. CHANGES IN SECURITIES
The Company's Board of Directors and shareholders approved a
1:3 reverse stock split of the Company's issued and
outstanding common stock, effective August 1, 1998. The stock
split was reported on a Current Report on Form 8-K dated
August 7, 1998 filed with the Commission. Pursuant to the
merger with Golf One, the Company also approved a 1:20 reverse
stock split that occurred on May 5, 1999, which is more fully
described in the Company's 1998 Form 10-KSB, Item 1,
"Description of Business-Business Strategy," which is hereby
incorporated by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the
quarter ended December 31, 1998.
ITEM 5. OTHER INFORMATION
On July 30, 1998, the Company reincorporated in Delaware pursuant to a
merger agreement by which Grafix Time Corporation, a New York corporation,
merged with and into Grafix Corporation, a Delaware corporation (the "1998
Merger"). A Certificate of Merger was filed with the Delaware Secretary of
State. As a result of the 1998 Merger, the Company has a new Certificate of
Incorporation and adopted new By-laws under the Delaware General Business laws,
a copy of which documents were filed as exhibits to the Current Report on Form
8-K filed with the Commission on August 7, 1998 describing the 1998 Merger and
which exhibits are hereby incorporated by reference. The Certificate of
Incorporation and By-laws of the Company resulting from the 1998 Merger continue
to be the Certificate of Incorporation and By-laws of the Company after the 1999
Merger.
16
<PAGE> 17
Also during the Subsequent Period, on March 29, 1999 the Company
completed a merger (the "1999 Merger") with Golf One Industries, Inc. ("Golf
One"). Pursuant to the terms of the Agreement of Merger, a copy of which was
filed with the Commission as an exhibit to a Current Report on Form 8-K dated
March 29, 1999 which is incorporated herein by reference, Golf One was merged
into the Company. As part of the merger with Golf One, the Company effected a
name change to "Gary Player Direct, Inc." In connection with the 1999 Merger,
the Company issued 3,642,990 shares of its common stock to Golf One's
shareholders and lenders and effectuated a 1:20 reverse stock split of its
issued and outstanding common stock. As a result of the 1999 Merger, Golf One's
shareholders and lenders acquired 80% of the Company. A copy of the Certificate
of Merger filed with the Delaware Secretary of State was filed with the
Commission as an exhibit to the aforementioned 8-K report. As a result of the
1999 Merger, substantially all of the operations of the Company relate to the
operations of the Gary Player line of branded products and the focus of the
Company's activities going forward will be the development of revenue from
manufacturing, marketing, licensing and distributing golf equipment and apparel
resulting from licenses acquired from the Gary Player Group, Inc. ("GPG"). As a
result of a lack of financing affecting the Carrera Golf branded products during
the fiscal year end September 30, 1998 and the twelve month period subsequent to
the 1999 Merger and a deterioration in relations between the Company and
Citizen's Trading Group of Japan, ("Citizen") the Company has recognized very
little revenue from the sale of Carrera Golf branded products. The Company is
currently reviewing its relationship with Citizen and its licensing arrangement
with Carrera Optyl GmbH, a subsidiary or Safilo SpG ("Safilo").
The 1999 Merger was accounted for as a purchase of the Company by Golf
One in a "reverse acquisition" because the existing stockholders of the Company
did not have voting control of the combined entity after the Merger. In a
reverse acquisition, the accounting treatment differs from the legal form of the
transaction, as the continuing legal entity is not considered to be the acquirer
and the financial statements of the combined entity are those of the accounting
acquirer (Golf One), including any comparative prior year financial statements
presented by the combined entity after the business combination. Accordingly,
the past reverse acquisition financial statements of the Company will consist of
the comparative historical financial statements of Golf One, the accounting
acquirer, with accompanying disclosure concerning the change in capital
structure effected at the acquisition date.
In connection with the 1999 Merger, the Company changed its fiscal year
end from September 30th to March 31st, which is the fiscal year end of Golf One.
As a result of the name change, the Company's Nasdaq trading symbol was
also changed, from "CRRA" to "GPLY" to more accurately reflect the Company's
name following the merger. During September 1999, the NASD notified the
Company's market makers that the Company's shares would no longer be eligible
for quotation on the NASD Bulletin Board on or about October 20, 1999 if the
Company was not current in its reporting obligations. The Company issued a press
release on October 21, 1999 stating that its shares had become ineligible for
quotation on the NASD Bulletin Board pending completion and filing of the
Commission reports noted above and that the Company intended to file all 1998
reports within one week and the outstanding 1999 reports in November 1999. The
financial statements reflecting the 1999 Merger which were to have been filed
with the Commission with a Form 8-K-A report have not been filed as of the date
of this report and it is the Company's intention to file such financial
statements with the Commission as soon as practicable as part of a report on
Form 10-KSB for the twelve months ended March 31, 1999.
In addition, other material developments during the Subsequent Period
included the following:
1. The Company's financial statements filed herewith for the year ended
September 30, 1998 reflect discontinued operations of the primary
business activities at September 30, 1998. The Company shows
liabilities in excess of realizable value of assets of $4,287,603 at
September 30, 1998. Subsequent to September 30, 1998, the Company's
management sought to obtain additional financing and or merger
candidates to improve its liquidity and financial viability.
2. Golf One Industries is in the business of manufacturing and selling
golf equipment under the license names Gary Player and Black Knight.
The Company had sustained substantial losses from operations through
the date of the 1999 Merger. The merged entity resulting from the 1999
Merger, Gary Player Direct, Inc., has continued to sustain substantial
operating losses through September 30, 1999 and through the date of
this report.
3. Subsequent to March 29, 1999, the Company has entered into several
financing agreements, including debt and equity issuances, to provide
liquidity and maintain operations. In spite of these capital raising
activities, the Company has substantial liabilities at September 30,
1999 and through the date of this report including, unpaid federal and
state payroll taxes in excess of $1,000,000, customer refund liability
in excess of $1,000,000, and significant litigation pending with
respect to deficient obligations arising as a result of the Company's
working capital deficit.
4. During September 1999, the NASD notified the Company's market makers
that the Company's shares would no longer be eligible for quotation on
the NASD Bulletin Board on or about October 20, 1999 if the Company was
not current in its reporting obligations. The Company issued a press
release on October 21, 1999 stating that its shares had become
ineligible for quotation
17
<PAGE> 18
on the NASD Bulletin Board pending completion and filing of the
Commission reports noted above and that the Company intended to file
all 1998 reports within one week and the outstanding 1999 reports in
November 1999.
5. Effective October 14, 1999 the Company entered into a Succession
Plan and Agreement (the "Succession Plan and Agreement") pursuant to
which the existing Board of Directors and senior management of the
Company were replaced with new directors and senior management.
Additional information regarding the Succession Plan and Agreement is
contained in a press release issued by the Company on October 19, 1999
which was filed as an exhibit to a Current Report on Form 8-K filed
October 25, 1999. The Succession Plan and Agreement was filed with the
Commission as an exhibit to the aforementioned 8-K report.
On November 9, 1999, the Company and the Gary Player Group, Inc
("GPG") executed an amendment to the Direct Marketing Agreement originally dated
November 1, 1996 (the "Amendment"). Pursuant to the Amendment, the parties have
agreed that upon the payment of $505,000 by the Company, the requirements of
the Direct Marketing Agreement would be deemed satisfied with respect to all
outstanding amounts due and owing through October 31, 1999. In addition, the
Amendment provides that upon receipt by GPG of the $505,000 referenced above,
all existing defaults between the Company and GPG shall be waived. The
Amendment provides that GPG may terminate the Direct Marketing Agreement only
(i) if the Company conducts its business in such a manner as to materially and
adversely affect the reputation of Gary Player or (ii) if the Company shall
fail to pay any amount due under the Direct Marketing Agreement as and when
due. Pursuant to the Amendment, the Company received the consent of GPG for the
use of Gary Player Direct, Inc. as the Company's corporate name and the name of
any of its subsidiaries. Furthermore, the Amendment provides that upon receipt
by GPG of the $505,000 referenced above, GPG has agreed to release any claim it
may have to inventory or the proceeds of such inventory that it may have
transferred to the Company and that the Company may have sold in the course of
its business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
10.1 Amendment to Direct Marketing Agreement (filed herewith)
27.1 Financial Data Schedule (filed herewith)
b) Form 8-K Reports during the Quarter Ended December 31, 1998
None.
18
<PAGE> 19
SIGNATURE
In accordance with 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.
GARY PLAYER DIRECT, INC (FORMERLY KNOWN
AS GRAFIX CORPORATION)
/s/ Marc B. Player
By:____________________________________
Marc B. Player
Chief Executive Officer
(Principal Executive Officer)
/s/ Carl Casareto
By: ____________________________________
Carl Casareto,
Executive Vice President and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: November 9, 1999
19
<PAGE> 1
Exhibit 10.1
[Gary Player Direct Logo]
November 9, 1999
VIA FACSIMILE: 561-624-0304
- ----------------------------
Mr. Marc B. Player
Gary Player Group, Inc.
3930 RCA Boulevard
Suite 3001
Palm Beach, Florida 33410
RE: AMENDMENT TO DIRECT MARKETING AGREEMENT
Dear Marc:
This letter relates to and shall amend the Direct Marketing Agreement
dated the 1st day of November, 1996 (the "Direct Marketing Agreement") between
Gary Player Golf Equipment, Inc. and Gary Player Direct, Inc. (successor by
merger to Golf One Industries, Inc.) (the "Company") and confirm our
understanding with respect to the treatment of payments to be made by the
Company to Gary Player Golf Equipment, Inc.
We agree as follows:
1. All references in the Direct Marketing Agreement to Gary
Player Golf Equipment, Inc. or GPGE shall refer to Gary Player
Golf Equipment and Gary Player Group, Inc.
2. Payments totaling $505,000 shall be paid by Gary Player
Direct, Inc. to GPGE which will be deemed to satisfy all
amounts outstanding under the Direct Marketing Agreement as of
October 31, 1999.
3. Upon receipt of such payment, GPGE waives all existing
non-payment defaults that currently exist or may have occurred
under the Direct Marketing Agreement, and agrees that the
Direct Marketing Agreement shall be considered in full force
and effect.
4. Section 16(c) (failure to meet Minimum Sales Requirement)
shall be deleted from the Direct Marketing Agreement as a
ground for termination. Section 16 is revised to provide that
GPGE may terminate the Direct Marketing Agreement only if
after the date hereof (i) the Company conducts its business in
such a manner as to materially and adversely affect the
reputation of Gary Player or (ii) the Company shall fail to
pay any amount due under the Direct Marketing Agreement as and
when due. Under (i) or (ii) above, before it may terminate
GPGE must give written notice
[Gary Player Direct, Inc. Letterhead]
<PAGE> 2
to the Company specifying the nature of the alleged default.
The Company shall have thirty (30) days to cure the default or
if such cure is incapable of being remedied within thirty (30)
days, the Company has diligently pursued a cure and shall
continue to pursue a cure to completion.
5. As long as the Direct Marketing Agreement is in full force and
effect, GPGE consents to the use of, and to the extent
necessary licenses the use of, the name "Gary Player Direct,
Inc." as the Company's corporate name or the name of any of
its subsidiaries. GPGE shall execute, and shall cause its
affiliates to execute, any and all further documents and
instruments necessary to fully vest such rights in the Company
and to confirm this consent and license.
6. Any payments made to vendors of GPGE from and after the date
hereof and prior to the closing on the Asset Purchase
Agreement between the Company and the Gary Player Group, Inc.
shall be deemed to have been made to GPGE and applied against
the payments to be made pursuant to the Direct Marketing
Agreement, and shall reduce dollar for dollar the amount of
Assumed Liabilities to be assumed by the Company pursuant to
the Asset Purchase Agreement between the Company and Gary
Player Group, Inc.
7. GPGE has transferred certain inventory to the Company that
the Company may have sold in the course of its business.
Provided payment is made as provided in 2 above, GPGE
releases any claim to any such inventory or the proceeds of
such inventory.
If the above meets with your approval, kindly execute where indicated
below and return to me by facsimile and regular mail.
Sincerely,
/s/ Thomas P. Gallagher
Thomas P. Gallagher, Chairman of
the Board of Directors
Agreed and Accepted:
GARY PLAYER GROUP, INC.
By: /s/ Marc B. Player
------------------
Marc B. Player
Title: CEO and Director
----------------
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