<PAGE> 1
] UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1999
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
incorporation or organization) Identification No.)
13950 SENLAC DR., #200
DALLAS, TEXAS 75234
(Address of principal executive offices)
TELEPHONE NUMBER (972) 243-8100
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
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
requirements for the past 90 days.
YES [X] NO [ ]
As of May 10, 1999, there were 17,041,833 shares of the Registrant's
Common Stock, with a par value of $0.01 par share, outstanding.
<PAGE> 2
COLLEGIATE PACIFIC, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets
March 31, 1999 (Unaudited) and June 30, 1998 3
Condensed Consolidated Statement of Operations
Three and nine months ended March 31, 1999 and 1998
(Unaudited) 4
Condensed Consolidated Statement of Cash Flows
Nine months ended March 31, 1999 and 1998 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements
(Unaudited) 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 11
SIGNATURES 11
</TABLE>
2
<PAGE> 3
COLLEGIATE PACIFIC, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 449,119 $ 514,494
Accounts receivable, net of the allowance for doubtful
accounts of $25,698 and $15,743, respectively 664,870 685,974
Inventories 1,970,043 2,149,020
Prepaid expenses and other assets 270,100 40,064
----------- -----------
Total current assets 3,354,132 3,389,552
PROPERTY AND EQUIPMENT 242,582 187,042
Less accumulated depreciation (88,203) (66,416)
----------- -----------
154,379 120,626
OTHER ASSETS
License agreements, net of accumulated amortization of
$40,325 and $12,418, respectively 251,342 279,258
Goodwill, net of accumulated amortization of $34,502
and $7,590, respectively 517,244 544,156
Other assets, net 54,626 54,552
----------- -----------
$ 4,331,723 $ 4,388,144
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 260,137 $ 552,618
Accrued interest - shareholder 78,839 145,165
Accrued expenses and other current liabilities 71,422 106,266
Note payable - stockholder -- 754,671
----------- -----------
Total current liabilities 410,398 1,558,720
NOTE PAYABLE - STOCKHOLDER 1,082,649 --
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 50,000,000 shares;
issued and outstanding, 17,041,833 and
17,016,833 shares, respectively 170,418 170,168
Additional paid-in capital 3,326,804 3,320,804
Accumulated deficit (626,926) (629,928)
----------- -----------
2,870,296 2,861,044
Less notes receivable from stockholders (31,620) (31,620)
----------- -----------
Total stockholders' equity 2,838,676 2,829,424
----------- -----------
$ 4,331,723 $ 4,388,144
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements
3
<PAGE> 4
COLLEGIATE PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
------------------------------ ------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 1,784,826 $ 803,080 $ 4,133,851 $ 1,361,731
Cost of sales 1,001,826 433,345 2,553,672 769,376
------------ ------------ ------------ ------------
Gross margin 783,000 369,735 1,580,179 592,355
Selling, general and administrative
expenses 539,498 555,967 1,503,579 1,159,024
------------ ------------ ------------ ------------
Operating profit (loss) 243,502 (186,232) 76,600 (566,669)
Interest expense (29,455) (58,467) (79,037) (131,495)
Other income 1,440 2,331 5,439 7,446
------------ ------------ ------------ ------------
Net earnings (loss) $ 215,487 $ (242,368) $ 3,002 $ (690,718)
============ ============ ============ ============
Net earnings (loss) per share -
basic and diluted $ 0.01 $ (0.01) $ 0.00 $ (0.04)
============ ============ ============ ============
Shares used in computing net loss
per share (basic and diluted) 17,041,833 16,605,269 17,035,838 16,469,090
</TABLE>
See accompanying notes to these consolidated financial statements
4
<PAGE> 5
COLLEGIATE PACIFIC, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Operating activities
Net earnings (loss) $ 3,002 $ (690,718)
Adjustments to reconcile net loss to net cash used
in operating activities
Depreciation and amortization 79,024 28,530
Changes in operating assets and liabilities (426,089) (1,606,749)
----------- -----------
Net cash used in operating activities (344,063) (2,268,937)
Investing activities
Purchase of property and equipment (55,540) (99,005)
Financing activities
Proceeds from borrowings 327,978 2,492,283
Proceeds from issuance of common stock 6,250 69,000
----------- -----------
Net cash provided by financing activities 334,228 2,561,283
----------- -----------
Net decrease in cash and cash equivalents (65,375) 193,341
Cash and cash equivalents at beginning of period 514,494 638,011
----------- -----------
Cash and cash equivalents at end of period $ 449,119 $ 831,352
=========== ===========
</TABLE>
See accompanying notes to these consolidated financial statements
5
<PAGE> 6
COLLEGIATE PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - GENERAL AND BACKGROUND
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. The condensed consolidated financial statements as of
March 31, 1999 and the periods ended March 31, 1999 and 1998 are unaudited
and reflect all 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 consolidated financial statements and notes
thereto, for the year ended June 30, 1998 together with management's
discussion and analysis of financial condition and results of operations,
contained in the Form 10-KSB filed with the Securities and Exchange
Commission. The results of operations for the three and nine months ended
March 31, 1999 are not necessarily indicative of the results for the entire
fiscal year.
The consolidated financial statements for the period ended March 31, 1999
include the accounts of Collegiate Pacific, Inc. ("CPI") and its wholly
owned subsidiaries Product Merchandising, Inc. ("PMI") and Vantage Products
International, Inc. ("VPI") (collectively referred to as the "Company").
The consolidated financial statements for the period ended March 31, 1998
include the accounts of "CPI" and its wholly owned subsidiary "VPI". See
Note 2.
NOTE 2 - BUSINESS COMBINATIONS
On May 31, 1998 the Company acquired "VPI" by issuing 400,000 shares of its
common stock in exchange for all outstanding "VPI" common stock. The
acquisition was accounted for as a pooling of interests and, accordingly,
the assets and liabilities and results of operations of "VPI" have been
included in the Company's consolidated financial statements as if the
transaction occurred on July 1, 1997.
On April 14, 1998 the Company acquired all common stock of "PMI" for
$200,000 cash and 137,500 shares of the Company's common stock. The
acquisition was accounted for as a purchase and accordingly, the net assets
and results of operation of "PMI" have been included in the Company's
consolidated financial statements commencing on April 14, 1998.
Unaudited pro forma financial information for the three and nine months
ended March 31, 1998 as though the acquisition of "PMI" had occurred on
July 1, 1997 is as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, 1998 March 31, 1998
---------------- ----------------
<S> <C> <C>
Revenues $ 919,236 $2,042,631
Net loss (343,498) (755,220)
Net loss per common share
(basic and diluted) (0.02) (0.05)
</TABLE>
6
<PAGE> 7
COLLEGIATE PACIFIC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE 3 - NOTE PAYABLE TO STOCKHOLDER
The note payable to stockholder (also the president of the Company) is
uncollateralized and bears interest at an annual rate of 12%. The note was
due on demand. On March 31, 1999, the note was converted to a long-term
obligation due April 10, 2001. Accrued interest on this note totaled
$78,839 at March 31, 1999, and is included in accrued expenses.
7
<PAGE> 8
COLLEGIATE PACIFIC, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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.
On May 31, 1998 the Company acquired Vantage Products International, Inc.
("VPI"). The acquisition was accounted for as a pooling and accordingly, the
assets and liabilities and results of operations of VPI have been included in
the Company's consolidated financial statements as if the transaction occurred
on July 1, 1997.
On April 14, 1998 the Company acquired all common stock of Product
Merchandising, inc. ("PMI"). The acquisition was accounted for as a purchase and
accordingly, the net assets and results of operation of PMI have been included
in the Company's consolidated financial statements commencing on April 14, 1998.
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, 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.
The following discussion should be read in conjunction with the Company's Form
10-KSB and consolidated financial statements for the fiscal year ended June 30,
1998, the financial statements and related notes for the periods ended March 31,
1999 and 1998 included herein.
REVENUES
For the quarter ended March 31, 1999 revenues rose 122%, from $803,080 to
$1,784,826, and for the nine months rose 204%, from $1,361,731 to $4,133,851.
The Company attributes the growth in revenues to an increase in marketing
activity, the acquisition of PMI and the growth in its customer base. As the
result of expanded operations the Company believes future revenues will rise
materially from current levels.
8
<PAGE> 9
COLLEGIATE PACIFIC, INC.
GROSS MARGIN
For the quarter ended March 31, 1999, gross margin decreased from 46% to 44%,
and for the nine months ended March 31, 1999, decreased from 43% to 38%. The
decreases were primarily the result of lower product selling prices as the
Company completes its start up phase which includes the introduction of new
products below traditional selling prices. The Company anticipates that gross
margins will improve in the fourth quarter.
OPERATING EXPENSES
Selling, general and administrative (SG&A) expenses decreased by 3% for the
quarter ended March 31, 1999. As a percentage of sales, SG&A expenses decreased
from 69% to 30%. For the nine months ended March 31, 1999, SG&A expenses
increased by 30%, but as a percentage of sales decreased from 85% to 36%. The
decrease in SG&A expense as a percentage of sales is due to the Company's
establishing an infrastructure in 1997 capable of handling substantially higher
sales volume.
LIQUIDITY AND SOURCES OF CAPITAL
The Company has no commercial bank debt but has recently received two proposals
from nationally recognized institutions offering to fund its future operations
and expansion and is evaluating these proposals.
Cash and cash equivalents totaled $449,000 at March 31, 1999 compared to
$514,000 at June 30, 1998. Cash used in operations of $344,000 in the nine
months ended March 31, 1999 resulted primarily the use of cash to pay current
liabilities. For the comparable 1998 period, cash used in operations of
$2,269,000 resulted primarily from the Company's net loss and increases in
inventory.
Current assets totaled $3,354,000 at the end of the second quarter, providing
the Company with working capital of $2,944,000.
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 requirements for fiscal year 1999.
The Company's principal commitments at March 31, 1999 consisted of obligations
under operating leases for facilities.
9
<PAGE> 10
COLLEGIATE PACIFIC, INC.
YEAR 2000 ISSUE
The Company's assessment of its Year 2000 issues is not complete; however, the
Company has taken actions to assess the nature and extent of the work required
to make its systems, products and infrastructure Year 2000 ready. The Company
intends to work toward making its internal information technology Year 2000
ready, which may include replacing or updating existing computer systems as
needed. Additionally, the Company plans to evaluate the Year 2000 readiness of
its consultants, vendors and suppliers. Where the Company determines that
critical consultants, vendors or suppliers are not Year 2000 ready, the Company
will monitor their progress and take appropriate actions. The Company believes
it is taking the necessary steps to resolve year 2000 issues and, based on
current progress and future plans, the Company believes that the Year 2000 date
change will not significantly affect the Company's ability to deliver services
to its customers on a timely basis; however, given the uncertain consequences of
failure to resolve significant year 2000 issues, there can be no assurance that
any one or more such failures would not have a material adverse effect on the
Company. The Company has not determined the cost of completing its compliance
with the Year 2000.
10
<PAGE> 11
COLLEGIATE PACIFIC, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27.1 Financial Date Schedule
REPORTS ON FORM 8-K
None
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: May 17, 1999
----------------------------------------- --------------------
Mike Blumenfeld
President and Chief Financial Officer
11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 449,119
<SECURITIES> 0
<RECEIVABLES> 690,568
<ALLOWANCES> (25,698)
<INVENTORY> 1,970,043
<CURRENT-ASSETS> 3,354,132
<PP&E> 242,582
<DEPRECIATION> (88,203)
<TOTAL-ASSETS> 4,331,723
<CURRENT-LIABILITIES> 410,398
<BONDS> 1,082,649
170,418
0
<COMMON> 0
<OTHER-SE> 2,668,258
<TOTAL-LIABILITY-AND-EQUITY> 4,331,723
<SALES> 1,784,826
<TOTAL-REVENUES> 1,784,826
<CGS> 1,001,826
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,455
<INCOME-PRETAX> 215,487
<INCOME-TAX> 0
<INCOME-CONTINUING> 215,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,487
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
