United States
Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d ) of the Securities
Exchange Act of 1934 For the Period Ended December 31, 1996 or
[ ] Transition Report Under Section 13 or 15(d ) of the Securities Exchange
Act of 1934 For the Transition Period Ended From to
Commission file number 0-25332
GOLF TRAINING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 58-1963120
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3400 Corporate Way, Suite G
Duluth, Georgia 30136
(Address of principal executive offices) (Zip Code)
(770) 623-6400
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 periods 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
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by the court. Yes No
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
Common Stock, $.01 Par Value - 3,324,851 shares as of February 3, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GOLF TRAINING SYSTEMS, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
--------- ---------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents ..............$ 405,499 $2,009,820
Receivables, net ....................... 257,246 164,304
Inventories ............................ 452,137 430,141
Prepayments ............................ 70,999 62,807
--------- ---------
Total Current Assets 1,185,881 2,667,072
Equipment and Improvements, net .......... 527,091 225,626
Other Assets:
Intangible assets, net .................2,596,811 2,760,771
Other .................................. 115,523 271,123
--------- ---------
$4,425,306 $5,924,592
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable .......................$ 117,258 $ 300,316
Accrued expenses ....................... 105,483 112,682
--------- ---------
Total Current Liabilities 222,741 412,998
Stockholders' Equity:
Preferred stock, $.01 par value;
3,000,000 shares authorized:
Series A, $.01 par value; 600
shares authorized, 284.5 and 398
shares issued, respectively ..........2,845,000 3,980,000
Common stock, $.01 par value;
10,00,000 shares authorized;
3,230,774 and 2,393,050 shares
issued, respectively ................. 32,308 23,931
Additional paid-in capital .............9,901,682 8,775,059
Accumulated deficit ...................(8,576,425) (7,267,396)
---------- ----------
Total Stockholders' Equity 4,202,565 5,511,594
---------- ----------
$4,425,306 $5,924,592
========= =========
Note: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
GOLF TRAINING SYSTEMS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ---------------------
1996 1995 1996 1995
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .....................$ 771,253 $ 321,440 $1,057,443 $ 590,109
Cost of sales ................. 478,574 220,780 700,838 433,843
--------- --------- ---------- ---------
Gross margin .................. 292,679 100,660 356,605 156,266
Operating expenses:
Selling and marketing ....... 343,685 276,603 662,991 587,409
General and administrative .. 422,910 382,047 987,125 620,890
Research and development .... 65,277 -- 66,194 --
Non-cash non-recurring items -- 612,000 -- 612,000
--------- --------- --------- ---------
831,872 1,270,650 1,716,310 1,820,299
--------- --------- --------- ---------
Operating loss .............. (539,193) (1,169,990) (1,359,705) (1,622,313)
Other income(expense) ......... 13,930 19,194 50,676 41,720
--------- --------- --------- ---------
Net loss .................... $(525,263) $(1,150,796) $(1,309,029)$(1,622,313)
======== ========== ========== ==========
Net loss per share .......... $(.17) $(.32) $(.41) $(.73)
===== ===== ===== =====
Weighted average
common shares ............... 3,073,484 2,249,348 3,176,509 2,227,958
========= ========= ========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
GOLF TRAINING SYSTEMS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Six Months Ended December 31,
------------------------------
1996 1995
------------ ----------
<S> <C> <C>
Cash flows used in operating activities ........ $(1,281,268) $(963,393)
Cash flows used in investing activities ........ (323,053) (69,613)
Cash flows provided by financing activities .... -- 250,000
----------- ----------
Net increase (decrease) in cash and
cash equivalents ............................ (1,604,321) (783,006)
Cash and cash equivalents at beginning
of period ................................... 2,009,820 1,658,178
----------- ---------
Cash and cash equivalents at end of period .... $ 405,499 $ 875,172
=========== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
GOLF TRAINING SYSTEMS, INC.
Notes to Condensed Consolidated Financial Statements
December 31, 1996
(Unaudited)
1. BASIS OF PRESENTATION The accompanying unaudited condensed financial
statements of Golf Training Systems, Inc. (the Company) have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
items) considered necessary for a fair presentation have been included.
Operating results for the three and six month periods ended December 31, 1996
are not necessarily indicative of the results that may be expected for the year
ended June 30, 1997. For further information, refer to the audited financial
statements and notes thereto included in the Company's Form 10-KSB for the year
ended June 30, 1996.
2. INVENTORIES The components of inventory consist of the following:
<CAPTION>
December 31, June 30,
1996 1996
-------- --------
<S> <C> <C>
Raw materials $143,418 $237,021
Finished goods 308,719 193,120
-------- --------
$452,137 $430,141
======== ========
3. WARRANTS The Company extended the expiration date of 197,374 warrants until
November 25, 1997 at an exercise price of $3.00 per warrant. Such warrants are
callable by the Company if the common stock of the Company trades at a minimum
of $3.75 for ten consecutive days, as defined.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
Net sales (gross sales less returns and allowances) for the three and six month
periods ended December 31, 1996 increased to $771,253 and $1,057,443 from
$321,440 and $590,109, respectively, for the three and six month periods ended
December 31, 1995, an increase of approximately 140% and 79%, respectively.
The increase in sales is the result of the additional acceptance of the
Company's complete product lines introduced during 1996, which incorporate the
Leadbetter Collection, Rotella and Pelz lines. Further, the Company's increased
marketing efforts and strategy into retail distribution as compared to only
minor retail and direct response distribution has furthered the sales growth.
The Company continues to introduce new products being developed by Dave Pelz in
the area of putting and the short game.
Gross margins increased to 38% and 34% in the three and six month periods ended
December 31, 1996, respectively, as compared to approximately 33% and 26% in the
three and six month periods ended December 31, 1995, respectively. These changes
reflect the impact of the increased sales of other new higher margin products.
Selling and marketing expenses increased approximately 24% and 13% in the three
and six month periods ended December 31, 1996, respectively, as compared to the
three and six month periods ended December 31, 1995. The increased selling and
marketing expenses reflect the growth in sales and increased selling effort by
the Company, particularly into the retail distribution channel. General and
administrative, depreciation and amortization and research and development
expenses increased approximately 28% and 70% for the three and six month periods
ended December 31, 1996 over comparable amounts for the three and six month
periods ended December 31, 1995. The increase reflects the Company's increase in
operations, specifically those associated with the development of Sports
Training Systems, LLC (STS) which develops certain motion capture licensing
rights for golf swing analysis and training, and the Company's newer product
lines from Pelz and Rotella. As the Company moves from its product development
stage into the distribution stage, management is currently intent on achieving
the proper level of selling and administrative expenses to match its expected
level of operations.
The Company had a net loss of $525,263 ($.17 per share) and $1,309,029 ($.41 per
share) for the three and six month periods ended December 31, 1996,
respectively, compared to a net loss of $1,150,796 ($.32 per share) and
$1,622,313 ($.73 per share) for the three and six month periods ended December
31, 1995, respectively. The net loss and net loss per share amounts primarily
reflect the increased cost of operations from the additional expenses from Pelz
and Rotella product lines as well as additional expenses of STS partially offset
by a reduction in the noncash charge for the issuance of warrants to a
consultant of the Company during the three month period ended December 31, 1995.
LIQUIDITY AND SOURCES OF CAPITAL
At December 31, 1996, the Company had working capital of $963,140, including
$405,499 of cash and cash equivalents. The Company's strategy of growth into the
retail market and international sales and the continued introduction of new
products will require additional funds to implement. The Company is currently
seeking additional capital to meet these needs. The Company has no commitments
and no assurance additional funds will be available or if so, will be sufficient
to continue to implement such strategy.
The Company had a negative cash flow from operations of $1,604,321 for the six
month period ended December 31, 1996 and a negative cash flow from operations of
$783,006 for the six month period ended December 31, 1995. The negative cash
flow from operations reflects the increased expenses discussed above.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which the Company is a party
or of which any of their property is subject.
Item 2. Changes in Securities.
(a) Not applicable.
(b) Not applicable.
Item 3. Defaults Upon Senior Securities.
(a) Not applicable.
(b) Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of stockholders on November 25, 1996 and
December 23, 1996. Proposal 1 was to amend the Company's Certificate of
Incorporation to divide the Board of directors into three classes of Directors.
1,165,063 votes were cast to approve, 1,875,578 votes were cast against or
abstained from voting. The Proposal was defeated. The following directors were
elected at the meeting to serve a one year term expiring in 1997 (Proposal 2) at
the annual meeting of the stockholders: Wayne C. McDonald, George P. Lee III,
Parker Smith, Nicholas J. Aquilino, Richard E. White, Daniel A. Gordon, and
Thomas W. Tripp, 2,559,660 votes were cast to approve, 484,031 votes were cast
against or abstained from voting. Proposal 3 was to increase the number of
shares of common stock authorized for issuance and to remove certain exercise
and vesting requirements for Director Options under the Company's 1994 Stock
option Plan, 2,359,089 shares were cast to approve and 678,702 shares were cast
against or abstained from voting.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 11 Statement Re: Computation of Earnings Per Share.
(b) Reports on Forms 8-K.
Report filed as of October 30, 1996 regarding certain matters pertaining
to the conversion rights of the preferred stock holders.
<PAGE>
SIGNATURES
Pursuant to 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.
GOLF TRAINING SYSTEMS, INC.
---------------------------
(Registrant)
Date February 12, 1997 /s/ Wayne C. McDonald
------------------- --------------------------
Wayne C. McDonald
Chairman and Chief Executive Officer
<PAGE>
GOLF TRAINING SYSTEMS, INC.
EXHIBIT 11 - Statement Re: Computation of Earnings Per Share
<CAPTION>
Three Months Ended Six Months ended
December 31, December 31,
---------------------- ----------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary and fully diluted:
Weighted average shares
outstanding during the period 3,073,484 2,330,799 3,176,509 2,209,409
Effect of common stock
acquisition rights and
warrants granted subsequent
to October 19, 1993computed
in accordance with the
treasury stock method as
required by the SEC (1). -- 18,549 -- 18,549
--------- --------- ---------- ---------
Total weighted average
common shares 3,073,484 2,249,348 3,176,509 2,227,958
========= ========= ========= =========
Net loss $(525,263) $(1,150,796) $(1,309,029) $(1,622,313)
Net loss per share $(.17) $(.32) $(.41) $(.73)
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common and Preferred Stock issued and stock options and warrants granted at
prices below the assumed initial public offering price of $6.00 per share during
the twelve-month period immediately preceding the initial filing date of the
Company's Registration Statement for its initial public offering have been
included as outstanding for all periods presented using the treasury stock
method.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> OCT-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 405
<SECURITIES> 0
<RECEIVABLES> 169
<ALLOWANCES> 5
<INVENTORY> 452
<CURRENT-ASSETS> 1,186
<PP&E> 772
<DEPRECIATION> 245
<TOTAL-ASSETS> 4,425
<CURRENT-LIABILITIES> 223
<BONDS> 0
0
2,845
<COMMON> 9,901
<OTHER-SE> 1,325
<TOTAL-LIABILITY-AND-EQUITY> 4,203
<SALES> 1,057
<TOTAL-REVENUES> 1,057
<CGS> 701
<TOTAL-COSTS> 1,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,309)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,309)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,309)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> 0
</TABLE>
