<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended Commission File Number
MAY 31, 1996 0-25682
BULLET SPORTS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3561882
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
2803 S. YALE STREET
SANTA ANA, CALIFORNIA 92704
(Address of principal executive offices)
Issuer's telephone number, including area code:
(714) 966-0310
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) of the Exchange Act of 1934 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 __X__ No _____
4,078,867 shares of the Registrant's Common Stock, par value $.001 per share
were outstanding as of July 10, 1996.
Transitional Small Business Disclosure Format (check one): Yes _____ No __X__
This document consists of 13 pages, of which this is page 1
<PAGE>
BULLET SPORTS INTERNATIONAL, INC.
FORM 10-QSB
FOR THE QUARTER ENDED MAY 31, 1996
INDEX
Facing sheet............................................................... 1
Index...................................................................... 2
Part I FINANCIAL INFORMATION
Item 1 Financial Statements:
a) Condensed Consolidated Balance Sheet at May 31, 1996
(Unaudited).................................................. 3
b) Condensed Consolidated Statements of Operations for the
three months ended May 31, 1996 and 1995 (Unaudited)......... 4
c) Condensed Consolidated Statements of Cash Flows for the
three months ended May 31, 1996 and 1995 (Unaudited)......... 5
d) Notes to Condensed Consolidated Financial Statements
(Unaudited).................................................. 6
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 9
Part II OTHER INFORMATION................................................. 11
Item 1 Legal Proceedings................................................. 11
Item 3 Defaults Upon Senior Securities................................... 11
Item 6 Exhibits and Reports on Form 8-K.................................. 12
Signatures................................................................. 13
-2-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
May 31, 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 668,464
Accounts receivable trade, less allowance for sales returns
and doubtful accounts of $216,770................................ 1,876,753
Inventories....................................................... 2,703,666
Prepaid expenses and other........................................ 286,141
Restricted certificates of deposit................................ 1,500,000
----------
Total current assets............................................ 7,035,024
----------
Property and equipment, at cost:
Automotive equipment.............................................. 15,194
Computer systems.................................................. 126,189
Furniture, fixtures and equipment................................. 451,803
Leasehold improvements............................................ 65,172
----------
658,358
Less accumulated depreciation and amortization.................... (137,644)
----------
Total property and equipment, net............................... 520,714
----------
Other assets:
Deposits.......................................................... 13,174
----------
Total other assets.............................................. 13,174
----------
$7,568,912
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit.......................................... $1,699,054
Short-term notes payable.......................................... 39,008
Accounts payable.................................................. 2,408,660
Accrued expenses and other........................................ 564,040
Current portion of capital lease obligations...................... 12,575
----------
Total current liabilities....................................... 4,723,337
----------
Long-term liabilities:
Long-term lease obligations, less current portion................. 86,237
----------
Total long-term liabilities..................................... 86,237
----------
Stockholders' equity:
Series A, 6% non-voting cumulative convertible preferred stock -
par value $.001; 500,000 shares authorized, 2,500 issued
and outstanding.................................................. 22,500
Series B, 8.75% non-voting cumulative convertible preferred
stock - par value $.001; 8,700 shares authorized, 6,950 issued
and outstanding.................................................. 5,359,959
Series C, 8.75% non-voting cumulative convertible preferred
stock - par value $.001; 2,000 authorized, issued and
outstanding...................................................... 1,815,727
Common stock - par value $.001; 10,000,000 shares authorized,
3,748,867 issued and outstanding................................. 3,749
Additional paid-in capital........................................ 3,306,429
Accumulated deficit............................................... (7,749,026)
----------
Total stockholders' equity...................................... 2,759,338
----------
$7,568,912
==========
See accompanying notes to condensed consolidated financial statements
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<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For The Three Months Ended May 31, 1996 and 1995
(Unaudited)
1996 1995
---------- ----------
Net sales............................................ $2,444,241 $4,623,236
Cost of goods sold................................... 2,077,762 3,295,292
---------- ----------
Gross profit......................................... 366,479 1,327,944
Selling, general and administrative expenses......... 1,058,632 1,327,717
---------- ----------
Income (loss) from operations........................ (692,153) 227
---------- ----------
Other income (expense):
Interest income................................... 16,706 2,282
Interest expense.................................. (75,805) (92,875)
---------- ----------
Net other income (expense)..................... (59,099) (90,593)
---------- ----------
Loss before provision for income taxes............... (751,252) (90,366)
Provision for Income taxes........................... 1,650 10,248
---------- ----------
Net loss............................................. $(752,902) $(100,614)
========== ==========
Per share information:
Net loss per share................................ $ (0.20) $ (0.18)
========== ==========
Weighted average shares outstanding............... 3,748,867 871,402
========== ==========
See accompanying notes to condensed consolidated financial statements
-4-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended May 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $ (752,902) $ (100,614)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization...................................... 34,840 153,214
Changes in operating assets and liabilities:
Increase in accounts receivable trade............................ (316,889) (702,337)
Decrease (Increase) in inventories............................... 763,106 (591,975)
Decrease (Increase) in prepaid expenses and other................ (164,091) 101,171
Increase (Decrease) in accounts payable.......................... (852,978) 211,002
Increase (Decrease) in accrued expenses.......................... (146,560) 54,654
----------- ----------
Net cash used in operating activities.................................. (1,435,474) (874,885)
----------- ----------
Cash flows from investing activities:
Purchases of property and equipment................................. (73,917) (34,983)
Increase in restricted certificates of deposit...................... (500,000) --
Other, net.......................................................... (2,690) --
----------- ----------
Net cash used in investing activities................................. (576,607) (34,983)
----------- ----------
Cash flows from financing activities:
Net proceeds from issuances of preferred stock...................... 1,811,825 --
Net proceeds from issuances of common stock......................... -- 1,125,000
Collection of subscription receivable............................... 1,261,157 --
Proceed from issuance of notes payable.............................. -- 206,381
Repayments of notes payable......................................... (30,101) --
Net repayments of revolving credit facility......................... (443,370) (400,000)
Repayment of capital lease obligations.............................. 14,505 --
----------- ----------
Net cash provided by financing activities............................. 2,614,016 931,381
----------- ----------
Net increase in cash and cash equivalents............................. 601,935 21,513
Cash and cash equivalents, beginning of period........................ 66,529 661,900
----------- ----------
Cash and cash equivalents, end of period.............................. $ 668,464 $ 683,413
=========== ==========
Supplemental disclosures of cash flow information --
Cash paid during the year for:
Interest.......................................................... $ 76,990 $ 92,875
=========== ==========
Income taxes...................................................... $ 1,650 $ --
=========== ==========
Supplemental schedule of non-cash investing and financing activities:
1996
The Company issued 250 shares of Series C Preferred Stock for notes
payable, related accrued interest and less exchange costs for a net total of
$224,142.
</TABLE>
See accompanying notes to condensed consolidated financial statements
-5-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- BUSINESS OF THE COMPANY, BASIS OF PRESENTATION AND GOING CONCERN
DESCRIPTION OF THE BUSINESS -- Bullet Sports International, Inc.
("Company") and the business acquired by its subsidiary, Bullet-Cougar Golf
Corporation ("Bullet-Cougar"), on January 18, 1995 have been engaged since
1979 in the manufacturing and assembling of golf clubs and the wholesale
distribution of golf clubs, bags and accessories.
INTERIM FINANCIAL INFORMATION -- The accompanying condensed consolidated
financial statements which present the financial position of Bullet Sports
International, Inc. and subsidiary as of May 31, 1996 and the results of
operations for the three months ended May 31, 1996 and 1995 have been
prepared by the Company without audit. All significant intercompany accounts
and transactions have been eliminated in consolidation. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
have been made which are necessary to present fairly the financial position,
results of operations and cash flows of the Company at May 31, 1996 and for
the three months then ended.
Although the Company believes that the disclosure in the unaudited condensed
consolidated financial statements is adequate for a fair presentation
thereof, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. Audited financial statements were
included in the Company's annual report on Form 10-KSB under the Securities
Exchange Act of 1934 for the year ended February 29, 1996. These May 31, 1996
unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's annual report or Form 10-KSB for the year
ended February 29, 1996.
The results of operations for the interim period ended May 31, 1996 are not
necessarily indicative of the results for the full year.
GOING CONCERN -- The Company experienced operating losses during the
fiscal year ended February 29, 1996 and continues to suffer operating losses,
declining revenues, negative cash flows from operations, loss of liquidity as
a result of cash assets pledged to the lender, and continuing noncompliance
with existing lender covenants. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management believes
that the Company will not have sufficient cash to meet minimum operating
requirements through fiscal 1997 unless the Company is successful in raising
additional capital.
The Company is pursuing renegotiation of its existing credit facility, as
well as exploring alternative financing options to fund ongoing operations
including the exercise of existing warrants. Management is also attempting to
reduce selling, general and administrative expenses and restructure its
marketing and sales efforts to reverse the declining sales trend and attain
profitability.
Management believes that unless the Company is able to restructure its credit
facility, reduce collateral requirements pledged on its line of credit,
improve profitability by increasing revenues and gross margins while at the
same time reducing selling, general and administrative expenses, the Company
will not attain profitable operating levels nor generate sufficient cash to
meet minimum operating requirements. If management's plans in connection
with these matters are not successful, it would have a material adverse
effect on the Company's financial condition. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
PER SHARE INFORMATION -- Net loss per share information is computed
based on the weighted average shares of common stock and common stock
equivalents outstanding during the periods presented. No stock options are
included in the computation of per share information as their effect would be
anti-dilutive.
-6-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 2 -- INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market.
Costs include materials, labor and manufacturing overhead. Below is a
summary of the components of inventories at May 31, 1996:
Raw materials $1,286,808
Work in process 9,929
Finished goods 1,406,929
----------
$2,703,666
==========
NOTE 3 -- FINANCING TRANSACTIONS
On August 25, 1995, Bullet-Cougar entered into a revolving line of credit
with a financial services corporation. The $3,000,000 line of credit extends
to August 31, 1997 with interest at 1.50% over the prime rate (8.25% at May
31, 1996), payable monthly. The credit line is secured by Bullet-Cougar's
inventory and accounts receivable, as defined, and a $1,500,000 letter of
credit secured by certificates of deposit. During the three months ended May
31, 1996, Bullet-Cougar increased the letter of credit to $1,500,000 from
$1,000,000 and the lender rescinded the termination notice it issued in the
prior fiscal year. However, the Bullet-Cougar continues to be in a state of
noncompliance with certain financial covenants under the revolving line of
credit, and is subject to additional demands for collateral from the lender
or to a termination of the revolving line of credit.
On May 23, 1996, noteholders exchanged four short-term notes payable and
related accrued interest for preferred stock as set forth in Note 4.
NOTE 4 -- STOCKHOLDERS' EQUITY
On March 21, 1996, 235,050 shares of Series A, 6% Non-Voting Cumulative
Convertible Preferred Stock were converted into 3,134 shares of Series B
8.75% Non-Voting Cumulative Convertible Preferred Stock at $675.00 per share
for a total value of $2,115,450. The Company received no proceeds from this
conversion. In conjunction with the above conversion, the Company granted
warrants to purchase 313,400 shares of the Company's common stock at $2.95
per share through February 2001.
On March 21, 1996, the Company issued 250 shares of Series B, 8.75%
Non-Voting Cumulative Convertible Preferred Stock in a private offering at
$880.96 per share for net proceeds of $220,240 and granted warrants to
purchase 25,000 shares of the Company's common stock at $2.95 per share
through February 2001.
From April 18, 1996 through May 22, 1996, the Company issued 1,750 shares of
Series C, 8.75% Non-Voting Cumulative Convertible Preferred Stock, which has
similar terms and liquidation preferences as the Series B Preferred Stock, in
a private offering at $888.52 to $911.47 per share for total net proceeds of
$1,591,585 and granted warrants to purchase 271,582 shares of the Company's
common stock at $2.95 per share through February 2001.
On May 23, 1996, the Company issued 250 shares of Series C, 8.75% Non-Voting
Cumulative Convertible Preferred Stock in exchange for four short-term
promissory notes, related accrued interest and less exchange costs for a net
total of $224,142. The Company received no proceeds from this exchange. The
noteholders received warrants to purchase 40,290 shares of the Company's
common stock at $2.87 per share through February 2001.
-7-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 5 -- COMMON STOCK OPTIONS
The following table summarizes stock option and warrant transactions for the
three months ended May 31, 1996:
<TABLE>
<CAPTION>
Number of
options and Weighted
warrants Exercise average price
shares price per share per share
----------- --------------- -------------
<S> <C> <C> <C>
Outstanding at February 29, 1996:
Options ............................ 855,000 $0.50 to $6.00 $3.13
Warrants ........................... 319,100 $2.95 to $2.95 $2.95
Granted ................................. 950,272 $2.00 to $2.95 $2.65
Exercised ............................... (-0-) $0.00 to $0.00 $0.00
Forfeited ............................... (300,000) $5.75 to $5.75 $5.75
--------- -------------- -----
Outstanding at May 31, 1996 ............. 1,824,372 $0.50 to $6.00 $2.45
========= ============== =====
</TABLE>
All of the stock options and warrants at May 31, 1996 are exercisable.
NOTE 6 -- SUBSEQUENT EVENTS
On June 24, 1996, the Company issued a key employee 5,000 shares and two
Company officers/directors 50,000 shares each of common stock under the
Company's 1994 Employee Stock Compensation Plan in settlement of liabilities
recorded as of February 29, 1996. These issuances were recorded at an
estimated fair market value of $2.13 per share based on the closing price of
the common stock on March 11, 1996 (the date the Company approved the number
of shares to be issued for services performed).
On June 24, 1996, the Company issued its two principal legal firms 70,000
shares of common stock under the Company's 1994 Employee Stock Compensation
Plan in settlement of liabilities recorded as of February 29, 1996. These
issuances were recorded at an estimated fair market value of $2.13 per share
based on the closing price of the common stock on March 11, 1996 (the date
the Company approved the number of shares to be issued for legal services
performed).
On June 24, 1996, the Company issued a financial public relations consultant
50,000 shares of common stock under the Company's 1994 Employee Stock
Compensation Plan at an estimated fair market value of $2.19 per share based
on the closing price of the common stock on March 18, 1996, the effective
date of the one year financial public relations contract with the
consultant for which the shares are compensation. In addition, the Company
issued options which are immediately exercisable to purchase 300,000 shares
of the Company's common stock at $2.00 per share through March 17, 1999.
On June 24, 1996, the Company issued a legal firm 20,000 shares of common
stock under the Company's 1994 Employee Stock Compensation Plan at an
estimated fair market value of $3.56 per share based on the closing price of
the common stock on June 24, 1996 for legal services performed. The fair
market value of the stock issued is a 1997 fiscal year operating expense.
-8-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion is intended to assist in an understanding of the
Company's financial position and results of operations for the three months
ended May 31, 1996 as compared to the same periods for the prior year. The
Company's financial statements and the notes thereto contain detailed
information that should be referred to in conjunction with the following
discussion.
RESULTS OF OPERATIONS
NET SALES -- Net revenues decreased to $2,444,000 for the three months ended
May 31, 1996 compared to $4,623,000 for the corresponding period of the prior
year, a decrease of $2,179,000 or 47%. The Company is currently operating
with approximately a third less independent sales representatives compared to
the corresponding period of the prior year and has a less experienced group
of in-house telemarketers, both of which unfavorably affected our sales
level. In addition, the Company experienced a significant reduction in
revenue from a large customer who introduced its own in house product line.
Finally, the Company believes that demand for the Company's products has
decreased as certain customers were unsure of the Company's ability to
deliver product in sufficient quantities and on a timely basis.
GROSS PROFIT ON SALES -- The gross profit decreased in the three months ended
May 31, 1996 by $962,000 or 72% to $366,000 from $1,328,000 in the three
months ended May 31, 1995, and the gross profit percentage decreased
significantly during the current period to 15.0% compared to 28.7% in the
corresponding period of the prior year. The decrease in gross profit
resulted from the decrease in sales volumes, higher relative production cost
due to lower sales and production volumes, and an inability to increase unit
sales prices to offset higher cost of purchased products and raw materials.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES -- Selling, general and
administrative expenses were $1,059,000 and $1,328,000 for the three months
ended May 31, 1996 and 1995, respectively, or 43.3% and 28.7% of total
revenues. The largest decreases in expenses were attributable to advertising
and endorsements which declined to $109,000 during the current three month
period from $191,000 in the corresponding period last year, and the
elimination of amortization expense for goodwill, trademarks and patents.
During the three months ended May 31, 1995, the Company incurred amortization
expense of $114,000 whereas there wasn't any amortization expense this three
months because all goodwill, trademark and patents costs were written off at
the end of the last fiscal year ended February 29, 1996.
INTEREST INCOME -- Interest income increased from $2,000 in the three months
ended May 31, 1995 to $16,000 in the three months ended May 31, 1996, because
of the Company's restricted certificates of deposit which are required under
terms of the Company's revolving line of credit.
INTEREST EXPENSE -- Interest expense for the three months ended May 31, 1996
decreased by $17,000 to $76,000, principally due to a lower average principal
balance on the Company's revolving line of credit during the reporting period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at May 31, 1996, was $2,312,000 which
represents a $2,504,000 increase from the deficit at the beginning of the
fiscal year. Cash and cash equivalents increased by $602,000 to $668,000 at
May 31, 1996, due to an increase in equity capital raised through the
issuance of preferred stock. Accounts receivable increased by $317,000 or
20% to $1,877,000 at May 31, 1996 because of a seasonal increase in sales.
Inventory decreased by $763,000 or 22% to $2,704,000 at May 31, 1996, due to
lower buying and the seasonal increase in sales. Prepaid expenses and other
current assets increased by $164,000 to $286,000 at May 31, 1996, primarily
due to a prepaid for a one year financial public relations contract.
Accounts payable decreased by $853,000 or 26% to $2,409,000 at May 31, 1996
because new equity capital was used to reduce payables and because of lower
product and raw material purchases.
-9-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONTINUED)
In the prior fiscal year, the Company fell out of compliance with certain
financial covenants, causing the lender to lower the borrowing limit to
$3,000,000 and to increase the securing letter of credit to $1,500,000
($1,000,000 on February 14, 1996 and $1,500,000 since April 2, 1996). The
letter of credit is secured by certificates of deposit which mature September
26, 1996 and are shown on the May 31, 1996 Balance Sheet as restricted
certificates of deposit. The letter of credit and securing certificate of
deposit adversely effect the Company's liquidity and have the effect of
substantially lowering the effective borrowings under the revolving credit
facility and, also, effectively increasing the cost of funds. At May 31,
1996, borrowings under the credit facility totaled $1,699,000 and as of June
30, 1996, the borrowings totaled $1,879,000 with a $1,986,000 borrowing
limit. The Company continues to be in the state of noncompliance with
financial covenant for net earnings and is therefore subject to additional
demands for collateral from the lender or to a termination of the revolving
line of credit. The Company is currently pursuing renegotiation of the
financial covenants with the lender to assure continuing compliance.
Additionally, the Company is actively seeking replacement financing as more
fully discussed below.
For the quarter ended May 31, 1996, the Company utilized cash from operations
and investing activities of $1,435,000 and $577,000, respectively. The cash
requirements of the Company in the quarter ended May 31, 1996 were
principally met by funds received from financing activities as outlined below:
On February 29, 1996, the Company entered into a subscription agreement with
two significant stockholders for the purchase of 2,000 shares of Series B
Preferred Stock for $1,000 per share and a total value of $2,000,000. Prior
to the Series B Preferred Stock subscription, the Company had $500,000 in
notes payable to these stockholders. As a result, $500,000 of the Series B
Preferred Stock subscription was used to retire the notes on February 29,
1996. The $1,500,000 remainder of the subscription agreement, net of
issuance costs, were received on March 6, 1996.
During March, April and May 1996, the Company issued 2,000 shares of Series B
and Series C Preferred Stock for net cash proceeds of $1,812,000, after
offering costs of $188,000. In addition, on May 23, 1996, the Company
issued 250 shares of Series C, Preferred Stock in exchange for four
short-term promissory notes, related accrued interest and less exchange costs
for a net total of $224,000.
The Company is pursuing renegotiation of its existing credit facility, as
well as exploring alternative financing options to fund ongoing operations
including the exercise of existing warrants. Management believes that the
Company will not have sufficient cash to meet minimum operating requirements
through fiscal 1997 unless the Company is successful in raising additional
capital. Management is also attempting to reduce selling, general and
administrative expenses and restructure its marketing and sales efforts to
reverse the declining sales trend and to attain profitability. Management
believes that unless the Company is able to restructure its credit facility,
reduce collateral requirements pledged on its line of credit, improve
profitability by increasing revenues and gross margins while at the same time
reducing selling, general and administrative expenses, the Company, will not
have sufficient cash to meet minimum operating requirements. If management's
plans in connection with these matters are not successful, it would have a
material adverse effect on the Company's financial condition.
-10-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
In March 1996, W. O. Crisman, III, individually, and
W. O. Crisman, III, d/b/a Otey Crisman Golf Company, a sole
proprietorship, filed an action in the United States District Court
for the Southern District of Alabama against the Company seeking
declaratory relief and damages for claimed breaches of contract and
fraud arising out of the Company's June 13, 1995 acquisition of the
business and assets of the Otey Crisman Golf Company. The Company
disputed these claims. The Company and the plaintiff have entered
into settlement negotiations, but no settlement agreement has been
executed. The Otey Crisman Golf Company was a supplier to the
Company prior to the initiation of the lawsuit.
In March 1996, KZ-Golf, Inc. filed an action in the Orange County
Superior Court (California) against the Company seeking damages for
breach of contract. The complaint alleges that the plaintiff
contracted on behalf of itself and as agent for two Taiwanese
manufacturers to supply Bullet-Cougar with titanium and zirconium
insert golf club heads. Plaintiff filed the action on its own behalf
and on behalf of the Taiwanese manufacturers, Wonderswing Development
Corp. and Performax Golf and Composite, Inc. and seeks approximately
$337,000 in lost profit damages based on Bullet-Cougar's purported
anticipatory repudiation of the purported contract. Bullet-Cougar
denies the existence of any such contract. Furthermore, it is
Bullet-Cougar's position that even if a contract is found to have
existed, several conditions precedent did not occur and/or were
not performed by plaintiff. Discovery in this case is ongoing.
The Company has become subject to various other lawsuits, claims and
other legal matters in the ordinary course of conducting its
business. The Company believes, based on experience to date, that
the ultimate resolution of such items, individually or in the
aggregate, will not have a material adverse effect on the Company's
financial position or results of operations.
ITEM 2: CHANGES IN SECURITIES
(a) NOT APPLICABLE
(b) NOT APPLICABLE
ITEM 3: DEFAULTS UPON SENIOR SECURITIES
The Company is out of compliance on its revolving line of credit
because it doesn't meet the financial covenants for minimum net
earnings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5: OTHER INFORMATION
NOT APPLICABLE
-11-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARY
PART II
OTHER INFORMATION (CONTINUED)
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) NOT APPLICABLE
(b) Reports on Form 8-K
On April 24, 1996, the Company announced the private placement of
Series B and C Preferred Stock and the preliminary unaudited results
of operations for the fiscal year ended February 29, 1996.
-12-
<PAGE>
BULLET SPORTS INTERNATIONAL, INC. AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BULLET SPORTS INTERNATIONAL, INC.
Registrant
Date: July 18, 1996
/s/ JOHN A. HAAS
----------------
John A. Haas
President and Chief Executive Officer
/s/ MARK GREEN
----------------
Mark Green
Chief Financial Officer (Principal
Financial and Accounting Officer)
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAY 31, 1996
FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> MAY-31-1996
<CASH> 668,464
<SECURITIES> 0
<RECEIVABLES> 1,876,753
<ALLOWANCES> 216,770
<INVENTORY> 2,703,666
<CURRENT-ASSETS> 7,035,024
<PP&E> 658,358
<DEPRECIATION> 137,644
<TOTAL-ASSETS> 7,568,912
<CURRENT-LIABILITIES> 4,723,337
<BONDS> 0
0
7,198,186
<COMMON> 3,749
<OTHER-SE> (4,442,597)
<TOTAL-LIABILITY-AND-EQUITY> 7,568,912
<SALES> 2,444,241
<TOTAL-REVENUES> 2,444,241
<CGS> 2,077,762
<TOTAL-COSTS> 3,136,394
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,805
<INCOME-PRETAX> (751,252)
<INCOME-TAX> 1,650
<INCOME-CONTINUING> (752,902)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (752,902)
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
