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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[x] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE PERIOD ENDED MARCH 31, 1998
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-17293
COLLEGIATE PACIFIC, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 22-2795073
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13950 SENLAC DR., #200
DALLAS, TEXAS 75234
(Address of principal executive offices)
TELEPHONE NUMBER (972) 243-8100
(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 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 [X] No [ ]
As of May 11, 1998, there were 16,616,842 shares of the Registrant's
Common Stock outstanding.
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COLLEGIATE PACIFIC, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ITEM 1. CONDENSED FINANCIAL STATEMENTS:
Condensed Statement of Operations 3
Three months ended March 31, 1998
Condensed Balance Sheets 4
March 31, 1998 and December 26, 1997
Condensed Statement of Cash Flows 6
Three months ended March 31, 1998
Notes to Condensed Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 9
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
COLLEGIATE PACIFIC, INC.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1998
--------------
(Unaudited)
<S> <C>
Revenues $ 343,182
Cost of sales 167,252
------------
Gross margin 175,930
Indirect cost and administrative expenses 560,997
Loss from operations (385,067)
Interest and other income, net 1,286
------------
Loss before income taxes (383,781)
Provision for income taxes --
------------
Net loss $ (383,781)
============
Net loss per share (Basic and diluted) $ (0.03)
============
Shares used in computing net loss per share (Basic and diluted) 13,386,376
============
</TABLE>
See accompanying notes. 3
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COLLEGIATE PACIFIC, INC.
CONDENSED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, 1998 December 26, 1997
-------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 762,944 $ 142,866
Accounts receivable, net 158,184 28,845
Notes receivable 57,607 --
Inventories 1,712,323 1,222,073
Prepaid expenses and other assets 55,616 201,890
----------- -----------
Total current assets 2,746,674 1,595,676
----------- -----------
Computer equipment, furniture and leasehold
improvements, at cost
Computer equipment and furniture 92,255 83,674
Leasehold improvements 5,111 5,111
Less accumulated depreciation (8,645) (5,468)
----------- -----------
Net computer equipment, furniture and leasehold
improvements 88,721 83,317
Other assets 79,274 52,498
----------- -----------
$ 2,914,669 $ 1,731,491
=========== ===========
</TABLE>
See accompanying notes. 4
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COLLEGIATE PACIFIC, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, 1998 December 26, 1997
-------------- -----------------
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities
Accounts payable $ 119,765 $ 140,822
Accrued expenses 176,748 119,244
Note payable - shareholder 492,283 2,040,829
----------- -----------
Total current liabilities 788,796 2,200,895
----------- -----------
Stockholders' equity
Common stock 163,460 10
Additional paid-in capital 2,816,598 990
Accumulated deficit (854,185) (470,404)
----------- -----------
Total stockholders' equity 2,125,873 469,404
----------- -----------
$ 2,914,669 $ 1,731,491
=========== ===========
</TABLE>
See accompanying notes. 5
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COLLEGIATE PACIFIC, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
March 31, 1998
--------------
(Unaudited)
<S> <C>
Operating activities
Net loss $ (383,781)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Depreciation and amortization 3,511
Changes in operating assets and liabilities (352,767)
----------
Net cash provided (used) by operating activities (733,037)
----------
Investing activities
Purchase of computer equipment, furniture and leasehold
improvements (32,326)
Other 2,327
Balance of cash in DSSI when acquired 882,660
----------
Net cash provided (used) by investing activities 852,661
----------
Financing activities
Proceeds from issuance of common stock 69,000
Proceeds from long-term debt 431,454
----------
Net cash provided (used) in financing activities 500,454
----------
Net increase (decrease) in cash and cash equivalents 620,078
Cash and cash equivalents at beginning of period 142,866
----------
Cash and cash equivalents at end of period $ 762,944
==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 50,355
==========
</TABLE>
See accompanying notes. 6
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COLLEGIATE PACIFIC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
GENERAL AND BACKGROUND
The condensed financial statements for the three month period ended March 31,
1998 are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
interim period. The condensed financial statements should be read in conjunction
with the financial statements and notes thereto, for the period ended December
26, 1997 together with management's discussion and analysis of financial
condition and results of operations, contained in the proxy statement for
special meeting of shareholders held on February 17, 1998 incorporated herein by
reference. The results of operations for the three months ended March 31, 1998
are not necessarily indicative of the results for the entire fiscal year.
Collegiate Pacific, Inc. (Collegiate) began business in June 1997. Effective
February 17, 1998, Collegiate entered into a reverse acquisition agreement with
DSSI, Inc., a publicly held "shell" corporation. DSSI, Inc. issued 9,900,000
(approximately 62.5%) shares of DSSI, Inc.'s voting common stock in exchange for
all of the outstanding shares of Collegiate (a tax free reorganization). The
public entity then changed its name to Collegiate Pacific, Inc. Collegiate's
year end was previously December 26, but changed to June 30, the public entities
year end. For accounting purposes, the reorganization of Collegiate and the
public company is regarded as an acquisition by public company of all of the
outstanding stock of Collegiate and is accounted for as a recapitalization of
Collegiate, with Collegiate as the acquirer (a reverse acquisition).
SUBSEQUENT EVENTS
Subsequent to March 31, 1998, Collegiate entered into two agreements to
purchase 100% of the outstanding common stock of a Florida and a Tennessee
corporation. These acquisitions were executed in April and May 1998. The
Florida purchase consisted of cash of $200,000 and the exchange of 137,500
shares of Collegiate for all of the shares of the Florida corporation. The
Tennessee purchase consisted of the issuance of 400,000 shares of Collegiate
common shares for all outstanding shares of the Tennessee corporation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains certain forward-looking statements such as the Company's or
management's intentions, hopes, beliefs, expectations, strategies, predictions
or any other variation thereof or comparable phraseology of the Company's future
activities or other future events or conditions within the meaning of Section
27A of the Securities Act and Section 21E of the Securities Exchange Act of
1934, as amended, which are intended to be covered by the safe harbors created
thereby. Investors are cautioned that all forward-looking statements involve
risks and uncertainty, including without limitation, variations in quarterly
results, volatility of the Company's stock price, entry into the market of new
competitors and the sufficiency of the Company's working capital. Although the
Company believes that the assumptions underlying the forward-looking statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore, there can be no assurance that the forward-looking statements
included in this report will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
GENERAL
The Company is engaged in the national distribution of sports equipment to the
institutional and retail markets realizing the vast majority of its revenues in
response to catalog mailings and telemarketing efforts. The market for this
merchandise is estimated to consist of approximately 250,000 locations which
have annual expenditures of some $4 billion for sports equipment. The management
of the Company has extensive experience in this business having been the founder
of several successful mail order companies in the sports equipment industry. For
the quarter ended March 31, the Company has expensed all costs associated with
the reverse merger with DSSI and all
7
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costs in the development of its catalog business including advertising, postage
and printing. As the result of acquisitions completed in April and May, the
Company anticipates that future quarterly revenues will rise substantially from
current levels.
The Company first commenced limited national advertising programs in
January\February 1998 with expanded programs commencing in March 1998. While
this initial period was utilized to test the mailing lists and order
fulfillment programs, the Company realized a gross margin in excess of 51%
which is believed to be the highest in the industry . March, the first full
month of unlimited advertising, resulted in a near breakeven operating period
when excluding non-recurring or development type expenses. Thru May 11 the
Company has achieved a market penetration resulting in about 7,000 customers
consisting in response to its catalogs and the newly acquired operations. The
Company since inception has achieved an average invoice value of about $300
which is projected to rise substantially as the result of recent acquisitions.
The Company anticipates the continued expansion of its catalog business for
sports equipment and is in various stages of discussions with several national
recognized manufactures for exclusive licensing and/or joint venture
relationships. The Company continues to pursue a number of acquisition targets
that meet its criteria.
The Company was not in operation during the comparative preceding three month
period, accordingly, no comparative discussion is applicable. The Company's
summarized results of operations for the three months ended March 31, 1998 are
as follows: the Company generated revenues of $343,182 with a net loss of
$383,781 for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $762,944 at March 31, 1998 compared to
$142,866 at December 26, 1997. The increase in cash was due primarily to cash
generated from long term debt proceeds of $431,454, cash proceeds from the
issuance of shares of $69,000, and the cash available in the public shell entity
of $882,660 at the date of the reverse merger. This increase was partially
offset by cash used to purchase computer equipment, the net loss, and the
increase in net operating assets and liabilities.
The Company is in discussions with several commercial banks to provide
traditional asset base financing for its existing and future operations. The
Company has also received a letter of intent from an investment banking firm for
the proposed placement of $7.5 million of newly issued stock. The proceeds of
this placement would be used to finance future acquisitions and expand working
capital. The Company has no material commitments outstanding.
The decrease in the note payable to shareholder is primarily due to the payoff
of the note to purchase the stock of the public shell during February of 1998.
Longer term cash requirements, other than normal operating expenses, are
anticipated for the enhancement of existing products, financing anticipated
growth, and the possible acquisition of other businesses complimentary to the
Company's business. The Company believes that its existing cash and cash
equivalents and anticipated cash generated from operations will be sufficient to
satisfy its currently anticipated cash requirement for fiscal year 1998.
The Company's principal commitments at March 31, 1998 consisted of obligations
under operating leases for facilities.
8
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
3.1 Articles of Incorporation of the Company (incorporated by
reference from the Company's Registration Statement on Form S-18,
File No. 33-19770-NY), as amended (incorporated by reference from
the Company's Current Report on Form 8-K filed February 18, 1998.
3.2 Bylaws of the Company (incorporated by reference from the
Company's Registration Statement on Form S-18, File No.
33-19770-NY).
REPORTS ON FORM 8-K
On February 18, 1998, the Company filed a Current Report on Form 8-K disclosing
the sale of a majority stock position in connection with the acquisition by the
Company of all the outstanding common shares of Collegiate Pacific, Inc. a Texas
Corporation. Financial statements with respect to this transaction were filed
with and are incorporated by reference from the Company's definitive proxy
statement on Schedule 14A filed with the Securities and Exchange Commission on
January 30, 1998.
SIGNATURES
Pursuant with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
COLLEGIATE PACIFIC, INC.
By: /s/ Mike Blumenfeld Dated:
------------------------------------------ ------------------
Mike Blumenfeld
President and Chief Financial Officer
9
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> DEC-27-1997
<PERIOD-END> MAR-31-1998
<CASH> 762,944
<SECURITIES> 0
<RECEIVABLES> 215,791
<ALLOWANCES> 0
<INVENTORY> 1,712,323
<CURRENT-ASSETS> 2,746,674
<PP&E> 97,366
<DEPRECIATION> (8,645)
<TOTAL-ASSETS> 2,914,669
<CURRENT-LIABILITIES> 788,796
<BONDS> 0
0
0
<COMMON> 163,460
<OTHER-SE> 2,816,598
<TOTAL-LIABILITY-AND-EQUITY> 2,914,669
<SALES> 343,182
<TOTAL-REVENUES> 343,182
<CGS> 167,252
<TOTAL-COSTS> 167,252
<OTHER-EXPENSES> 560,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (383,781)
<INCOME-TAX> 0
<INCOME-CONTINUING> (383,781)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (383,781)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> 0
</TABLE>
