<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) SEPTEMBER 7, 2000
COLLEGIATE PACIFIC, INC.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-17293 22-2795073
(State or other jurisdiction of (Commission File Number) (I.R.S. employer identification no.)
incorporation or organization)
</TABLE>
13950 SENLAC DRIVE, SUITE 200 75006
(Address of principal executive offices) (Zip Code)
(972) 243-8100
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
On September 21, 2000, Collegiate Pacific, Inc. filed its initial
report on Form 8-K reporting its acquisition of the assets of Kesmil
Manufacturing, Inc. ("Kesmil") through its acquisition of all of the outstanding
common stock of Kesmil. The assets acquired included all equipment, inventory,
product designs and all other technical information necessary to design and
manufacture Kesmil's line of athletic equipment. This Amendment No. 1 to Form
8-K includes the financial statements of Kesmil Manufacturing, Inc. and the pro
forma financial information required by Item 7 of Form 8-K.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The company accomplished the acquisition pursuant to a Stock Purchase
Agreement dated September 7, 2000, by and between the company and Kesmil's
founder, Michael J. Blumenfeld. Mr. Blumenfeld is the company's Chairman of the
Board and Chief Executive Officer. The company agreed to pay the following
aggregate consideration for the Kesmil stock, which represents a multiple of
approximately two times Kesmil's projected annual earnings:
o the company assumed a note payable to Abe Blumenfeld, Mr.
Blumenfeld's father, in the amount of $45,000;
o the company assumed a note payable to Michael J. Blumenfeld in
the amount of $536,000;
o the company assumed Kesmil's accounts payable and accrued
expenses in the amount of $309,099; and
o the company advanced Kesmil $125,154, which represented
Kesmil's working capital requirements from July 1, 2000
through the September 7, 2000 closing date.
The company used cash generated from operations for the advances to Kesmil for
its working capital requirements and will use cash generated from operations to
pay the balance of the purchase price.
A portion of the assets acquired constitute equipment and other
physical property used in connection with manufacturing athletic equipment.
These assets will continue to be utilized by the company for such purposes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
The Independent Auditor's Report and the audited balance
sheets of Kesmil Manufacturing, Inc., as of June 30, 2000, and 1999, related
statements of operations, stockholders' equity (deficit) and cash flows for each
of the years ended June 30, 2000 and 1999, and the notes thereto, are set forth
on pages 2-13 of this current Report on Form 8-K.
-1-
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Kesmil Manufacturing, Inc. Board of Directors
We have audited the accompanying balance sheets of Kesmil Manufacturing, Inc. as
of June 30, 2000 and 1999, and the related statements of operations,
stockholder's deficit, and cash flows for the year ended June 30, 2000 and the
period February 1, 1999 (date of inception) through June 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kesmil Manufacturing, Inc. as
of June 30, 2000 and 1999, and the results of its operations and its cash flows
for the year ended June 30, 2000 and the period February 1, 1999 (date of
inception) through June 30, 1999 in conformity with accounting principles
generally accepted in the United States of America.
/s/ Grant Thornton LLP
Dallas, Texas
August 25, 2000
-2-
<PAGE> 4
KESMIL MANUFACTURING, INC.
BALANCE SHEETS
JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
ASSETS
2000 1999
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,470 $ 24,538
Accounts receivable - affiliate 15,739 270
Inventory 162,900 56,120
---------- ----------
Total current assets 191,109 80,928
Property and equipment, net of accumulated depreciation
of $49,138 in 2000 and $6,564 in 1999 183,371 180,914
Other assets, net 1,249 1,342
---------- ----------
$ 375,729 $ 263,184
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable $ 61,920 $ 40,183
Accrued expenses 272,180 36,800
Notes payable to related parties 581,000 325,000
---------- ----------
Total liabilities 915,100 401,983
Commitments and contingencies -- --
Stockholder's equity:
Common stock, no par value; authorized, issued and
outstanding - 100,000 shares 1,000 1,000
Accumulated deficit (540,371) (139,799)
---------- ----------
Total stockholder's deficit (539,371) (138,799)
---------- ----------
$ 375,729 $ 263,184
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 5
KESMIL MANUFACTURING, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000, AND THE PERIOD
FEBRUARY 1, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
Sales $ 1,015,724 $ 25,270
Cost of sales 1,182,874 124,561
------------ ------------
Gross loss (167,150) (99,291)
Selling, general and administrative expenses 185,861 31,758
------------ ------------
Operating loss (353,011) (131,049)
------------ ------------
Interest expense (47,560) (8,750)
------------ ------------
Net loss $ (400,571) $ (139,799)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 6
KESMIL MANUFACTURING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2000, AND THE PERIOD
FEBRUARY 1, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(400,572) $(139,799)
Adjustments to reconcile net loss to net cash
Used by operating activities:
Depreciation and amortization 42,666 6,588
Change in assets and liabilities, net of effects of business
acquisitions:
Accounts receivable (15,469) (270)
Inventory (106,780) (56,120)
Other assets, net -- (1,366)
Accounts payable 21,737 40,183
Accrued expenses 235,380 36,800
--------- ---------
Net cash used in operating activities (223,038) (113,984)
Cash flows from investing activities:
Purchase of property and equipment (45,030) (187,478)
Cash flow from financing activities:
Proceeds from note payable 256,000 325,000
Proceeds from issuance of common stock -- 1,000
--------- ---------
Net cash provided by financing activities 256,000 326,000
--------- ---------
Increase(decrease) in cash (12,068) 24,538
Cash and cash equivalents at beginning of period 24,538 --
--------- ---------
Cash and cash equivalents at end of period $ 12,470 $ 24,538
========= =========
Cash payments for:
Interest $ 47,560 $ 8,750
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 7
KESMIL MANUFACTURING, INC.
STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE YEAR ENDED JUNE 30, 2000, AND THE PERIOD
FEBRUARY 1, 1999 (DATE OF INCEPTION) THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ACCUMULATED
SHARES AMOUNT DEFICIT TOTAL
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Issuance of common stock 1,000 $ 1,000 $ -- $ 1,000
Net loss -- -- (139,799) (139,799)
--------- --------- --------- ---------
Balances at June 30, 1999 1,000 1,000 (139,799) (138,799)
Net loss -- -- (400,571) (400,571)
--------- --------- --------- ---------
Balances at June 30, 2000 1,000 $ 1,000 $(540,370) $(539,370)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 8
KESMIL MANUFACTURING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(1) GENERAL AND BACKGROUND
Kesmil Manufacturing Inc. ("Kesmil" or the "Company") was incorporated
on February 1, 1999, and began business in June 1999. The Company is a
Texas corporation and is engaged in the manufacture of professional
sports equipment for use in schools, colleges and other institutional
organizations throughout the United States. Collegiate Pacific Inc.
("CPI"), a distributor of sporting goods and majority owned by the sole
stockholder of the Company, is the sole customer. The Company's
operating activities are located in Farmers Branch, Texas.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS
Financial instruments, which are potentially subject to concentrations
of credit risk, consist principally of cash and accounts receivable.
Cash deposits are placed with high credit quality financial
institutions to minimize risk. Accounts receivable are unsecured. The
fair value of these financial instruments and notes payable approximate
their carrying values.
ESTIMATES AND ASSUMPTIONS
Management 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 disclosures of contingent assets and liabilities,
and the reported amounts of revenues and expenses. Actual results could
vary from the estimates used in preparing the accompanying financial
statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories, which consist of goods held for resale, are carried at the
lower of cost or market using the average cost method. Inventories
consist of :
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Raw materials $108,507 $ 56,120
Work-in-process 36,878 --
Finished goods 17,515 --
-------- --------
$162,900 $ 56,120
======== ========
</TABLE>
-7-
<PAGE> 9
KESMIL MANUFACTURING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives (5 to 7
years). The cost of maintenance and repairs is charged to expense as
incurred; significant renewals and betterments are capitalized.
INCOME TAXES
The Company has elected to be taxed as an S Corporation under the
Internal Revenue Code. Accordingly, income taxes are the obligation of
the stockholder, and no income taxes are reflected in the accompanying
financial statements.
(3) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Equipment $ 208,460 $ 182,953
Tooling 19,358 --
Fixtures and fixtures 4,691 4,525
--------- ---------
Total property and equipment 232,509 187,478
Less accumulated depreciation (49,138) (6,564)
--------- ---------
Property and equipment, net $ 183,371 $ 180,914
========= =========
</TABLE>
(4) NOTE PAYABLE TO RELATED PARTIES
The Company has a $536,000 note payable to its shareholder, which bears
interest at 12% per annum and is payable on demand. The Company also
has a $45,000 note payable to a related party, which bears interest,
payable monthly, at 12% per annum and is payable on demand. Accrued
interest on the notes payable was $50,010 and $8,750 at June 30, 2000
and 1999, respectively. Interest expense on the notes payable was
$47,560 and $8,750 for the years ended June 30, 2000 and 1999,
respectively.
(5) RELATED PARTY TRANSACTIONS
All of the Company's sales have been to CPI, a distributor of sporting
goods, which is also majority owned by the stockholder of the Company.
The Company had approximately $16 thousand in outstanding receivables
from CPI at June 30, 2000.
-8-
<PAGE> 10
KESMIL MANUFACTURING, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
(6) COMMITMENTS AND CONTINGENCIES
The Company leases its manufacturing and office facility under a
noncancelable operating lease expiring in 2003. A portion of its office
facility is subleased to CPI for $2,000 per month. Rent expense was
approximately $146,000 and $22,000 for the year ended June 30, 2000,
and the period from February 9, 1999 (date of inception) through June
30, 1999, respectively.
The minimum rental commitment under operating leases are as follows:
<TABLE>
<S> <C>
2001 $ 132,208
2002 144,396
2003 132,363
---------
$ 408,967
Less sublease rentals (70,000)
=========
$ 338,467
=========
</TABLE>
(7) SUBSEQUENT EVENTS
On September 7, 2000, CPI purchased all of the common stock of the
Company.
-9-
<PAGE> 11
ITEM 7. CONTINUED.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed combined financial
statements have been derived from the historical financial statements of
Collegiate Pacific, Inc. and Kesmil Manufacturing, Inc. The unaudited pro forma
condensed combined balance sheet as of June 30, 2000 has been presented as if
the acquisition of Kesmil had been consummated as of June 30, 2000. The
unaudited pro forma condensed combined statements of operations for the years
ended June 30, 2000 and 1999, have been presented as if the acquisition had been
consummated as of February 1, 1999 (Kesmil date of inception). Collegiate
Pacific acquired Kesmil on September 7, 2000.
Because the Kesmil stock was acquired from the majority stockholder of
Collegiate Pacific, the unaudited pro forma condensed combined financial
statements give effect to the acquisition of Kesmil in accordance with a manner
similar in nature to the pooling of interests method of accounting for business
combinations and are based upon the assumptions and adjustments described in the
accompanying notes.
The pro forma adjustments do not reflect any operating efficiencies and
cost savings that Collegiate Pacific may achieve with respect to the combined
companies. The pro forma adjustments also do not include any adjustments to
historical revenues for any new products which may be developed and marketed in
the future nor for any future price changes for existing products. The pro forma
adjustments do not include any adjustments to historical amounts for cost of
sales, research and development, sales and marketing, or general and
administrative expenses for any future operating changes.
The unaudited pro forma condensed combined financial results are not
necessarily indicative of the financial position or operating results that would
have occurred had the acquisition been consummated at that date, or at the
beginning of the period for which such transactions have been given effect, nor
of the combined results of future operations.
-10-
<PAGE> 12
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2000
<TABLE>
<CAPTION>
COLLEGIATE PACIFIC, KESMIL PROFORMA
INC. AND MANUFACTURING, ----------------------------------
SUBSIDIARY INC. ADJUSTMENTS COMBINED
------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 768,076 $ 12,470 $ $ 780,546
Accounts receivable 1,384,185 15,739 (15,739)(1) 1,384,185
Inventory 2,323,845 162,900 (71,417)(2) 2,415,328
Prepaid expenses and
other current assets 39,014 -- -- 39,014
----------- ----------- ----------- -----------
Total current assets 4,515,120 191,109 (87,156) 4,619,073
Property and equipment, net of
accumulated depreciation 149,731 183,371 -- 333,102
License agreements, net of
accumulated amortization 468,049 -- -- 468,049
Cost in excess of net tangible
assets acquired, net of
accumulated amortization 588,185 -- -- 588,185
Other assets, net 54,955 1,249 -- 56,204
----------- ----------- ----------- -----------
$ 5,776,040 $ 375,729 $ (87,156) $ 6,064,613
=========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $ 509,614 $ 61,920 $ (15,739)(1) $ 555,795
Accrued expenses 142,822 272,180 -- 415,002
Other current liabilities 34,048 -- -- 34,048
----------- ----------- ----------- -----------
Total current liabilities 686,484 334,100 (15,739) 1,004,845
Notes payable to related parties -- 581,000 -- 581,000
----------- ----------- ----------- -----------
Total liabilities 686,484 915,100 (15,739) 1,585,845
----------- ----------- ----------- -----------
Stockholders' Equity:
Common stock 42,446 1,000 (1,000)(3) 42,446
Additional paid-in capital 6,460,453 -- 1,000 (3) 6,461,453
Accumulated deficit (1,142,900) (540,371) (71,417)(2) (1,754,688)
Treasury shares, at cost (255,443) -- -- (255,443)
----------- ----------- ----------- -----------
5,104,556 (539,371) (71,417) 4,493,768
Less notes received from
Stockholders (15,000) -- -- (15,000)
----------- ----------- ----------- -----------
Total stockholders' equity 5,089,556 (539,371) (71,417) 4,448,768
----------- ----------- ----------- -----------
$ 5,776,040 $ 375,729 $ (87,156) $ 6,064,613
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
-11-
<PAGE> 13
COLLEGIATE PACIFIC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
KESMIL PRO FORMA
COLLEGIATE PACIFIC, INC. MANUFACTURING, ---------
AND SUBSIDIARY INC. ADJUSTMENTS COMBINED
------------------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 10,065,781 $ 1,015,724 $ (1,015,724)(4) $ 10,065,781
Cost of sales 6,498,002 1,182,874 (949,361)(5) 6,731,515
------------ ------------ ------------ ------------
Gross profit (loss) 3,567,779 (167,150) (66,363)(6) 3,334,266
Selling, general and administrative
expenses 3,851,661 185,862 -- 4,037,523
------------ ------------ ------------ ------------
Operating loss (283,882) (353,012) (66,363) (703,257)
Other income (expense):
Interest expense (153,874) (47,560) -- (201,434)
Interest income 7,066 -- -- 7,066
------------ ------------ ------------ ------------
Total other income (expense) (146,808) (47,560) -- (194,368)
Loss before provision for
income taxes (430,690) (400,572) (66,363) (897,625)
Provision for income taxes 51,748 -- -- 51,748
------------ ------------ ------------ ------------
Net loss $ (482,438) $ (400,572) $ (66,363) $ (949,873)
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited pro forma condensed statement of operations.
-12-
<PAGE> 14
COLLEGIATE PACIFIC, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
KESMIL PRO FORMA
COLLEGIATE PACIFIC, INC. MANUFACTURING, ---------
AND SUBSIDIARY INC. ADJUSTMENTS COMBINED
------------------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 6,813,333 $ 25,270 $ (25,270)(4) $ 6,813,333
Cost of sales 4,367,382 124,561 (20,216)(5) 4,471,727
----------- ----------- ----------- -----------
Gross profit (loss) 2,445,951 (99,291) (5,054)(6) 2,341,606
Selling, general and administrative
expenses 2,343,434 31,758 -- 2,375,192
----------- ----------- ----------- -----------
Operating profit (loss) 102,517 (131,049) (5,054) (33,586)
Other income (expense):
Interest expense (110,534) (8,750) -- (119,284)
Interest income 11,373 -- -- 11,373
----------- ----------- ----------- -----------
Total other income (expense) (99,161) (8,750) -- (107,911)
Income (loss) before provision for
income taxes 3,356 (139,799) (5,054) (141,497)
Provision for income taxes 33,890 -- -- 33,890
----------- ----------- ----------- -----------
Net loss $ (30,534) $ (139,799) $ (5,054) $ (175,387)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited pro forma condensed statement of operations.
-13-
<PAGE> 15
COLLEGIATE PACIFIC INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEETS AND STATEMENTS OF OPERATIONS
Note A: The Pro forma Statements give effects to the following pro forma
adjustments for the respective fiscal year years:
(1) Elimination of intercompany receivables and payables.
(2) Elimination of cumulative effect of intercompany profit in inventory.
(3) Elimination of Kesmil common stock.
(4) Elimination of intercompany sales.
(5) Elimination of intercompany cost of sales.
(6) Elimination of current year intercompany profit in inventory.
Listed below are the exhibits filed as a part of this report.
2.1 -- Stock Purchase Agreement by and between Collegiate Pacific Inc. and
Michael J. Blumenfeld dated September 7, 2000. Incorporated herein by
reference to Exhibit 2.1 to the company's Report on Form 8-K dated
September 21, 2000.
99.1 -- Press release dated September 7, 2000. Incorporated herein by
reference to Exhibit 99.1 to the company's Report on Form 8-K dated
September 21, 2000.
-14-
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Collegiate
Pacific Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 21, 2000 COLLEGIATE PACIFIC, INC.
By: /s/ William R. Estill
------------------------------------------
William R. Estill, Chief Financial Officer
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
2.1 Stock Purchase Agreement by and between Collegiate Pacific Inc. and
Michael J. Blumenfeld dated September 7, 2000. Incorporated herein by
reference to Exhibit 2.1 to the company's Report on Form 8-K dated
September 21, 2000.
99.1 Press release dated September 7, 2000. Incorporated herein by reference
to Exhibit 99.1 to the company's Report on Form 8-K dated September 21,
2000.
</TABLE>
