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 March 31, 1997 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 - 3,442,749 shares as of April 28, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GOLF TRAINING SYSTEMS, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
------------ -------------
(Unaudited) (Note)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents .......................................... $ 235,635 $ 2,009,820
Receivables, net ................................................... 296,005 164,304
Inventories ........................................................ 386,574 430,141
Prepayments ........................................................ 55,157 62,807
------------ -------------
Total Current Assets ............................................... 973,371 2,667,072
Equipment and Improvements, net ....................................... 516,500 225,626
Other Assets:
Intangible assets, net ............................................. 2,513,484 2,760,771
Other .............................................................. 115,523 271,123
------------ -------------
$ 4,118,878 $ 5,924,592
============ =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable ................................................... $ 195,203 $ 300,316
Accrued expenses ................................................... 143,377 112,682
------------ -------------
Total Current Liabilities .......................................... 338,580 412,998
Stockholders' Equity:
Preferred stock, $.01 par value;
3,000,000 shares authorized:
Series A, $.01 par value; 600 shares authorized,
225.5 and 398 shares issued, respectively ...................... 2,255,000 3,980,000
Common stock, $.01 par value;
10,00,000 shares authorized; 3,442,749 and
2,393,050 shares issued, respectively ............................ 34,427 23,931
Additional paid-in capital ......................................... 10,490,929 8,775,059
Accumulated deficit ................................................ (9,000,058) (7,267,396)
------------- -------------
Total Stockholders' Equity ......................................... 3,780,298 5,511,594
------------ -------------
$ 4,118,878 $ 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 Nine Months Ended
March 31, March 31,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ...................................... $ 853,001 $ 460,990 $ 1,910,445 $ 1,051,100
Cost of sales .................................. 539,365 338,154 1,240,203 771,706
----------- ----------- ------------ -----------
Gross margin ................................... 313,636 122,836 670,242 279,393
Operating expenses:
Selling and marketing ....................... 315,054 309,162 978,045 899,483
General and administrative .................. 359,556 270,629 1,346,682 888,898
Research and development .................... 68,246 -- 134,440 --
Non-cash non-recurring items ................ -- (306,000) -- 306,000
----------- ------------ ------------ -----------
742,856 273,791 2,459,167 2,094,381
----------- ----------- ------------ -----------
Operating loss .............................. (429,220) (150,955) (1,788,925) (1,814,988)
Other income (expense) ......................... 5,587 12,076 56,263 53,795
----------- ----------- ------------ -----------
Net loss ....................................... $ (423,633) $ (138,879) $ (1,732,662) $ (1,761,193)
============ ============= ============= =============
Net loss per share ............................. $ (.13) $ (.06) $(.55) $ (.77)
======= ======= ====== =======
Weighted average common shares ................. 3,330,186 2,326,730 3,123,961 2,274,175
=========== =========== ============ ===========
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>
Nine Months Ended March 31,
-------------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash flows used in operating activities .............................. $ (1,427,424) $ (1,285,187)
Cash flows used in investing activities .............................. (346,761) (98,613)
Cash flows provided by financing activities .......................... -- 250,000
------------- -------------
Net increase (decrease) in cash and cash equivalents .............. (1,774,185) (1,133,800)
Cash and cash equivalents at beginning of period ..................... 2,009,820 1,658,178
------------- -------------
Cash and cash equivalents at end of period ........................... $ 235,635 $ 524,378
============= =============
The accompanying notes are an integral part of the condensed consolidated
financial statements.
<PAGE>
GOLF TRAINING SYSTEMS, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 1997
(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 nine month periods ended March 31, 1997 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>
March 31, June 30,
1997 1996
--------------- ---------------
<S> <C> <C>
Raw materials $ 132,865 $ 237,021
Finished goods 253,709 193,120
--------------- ---------------
$ 386,574 $ 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 nine month
periods ended March 31, 1997 increased to $853,001 and $1,910,445 from $460,990
and $1,051,100, respectively, for the three and nine month periods ended March
31, 1996, an increase of approximately 85% and 82%, respectively.
The increase in sales is the result of the continued 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 in fiscal 1997 as compared to only
minor retail and direct response distribution in fiscal 1996 has accounted for
the sales growth in both volumes and dollars.
Gross margins increased to 37% and 35% in the three and nine month periods ended
March 31, 1997, respectively, as compared to approximately 27% in the three and
nine month periods ended March 31, 1996, respectively. These changes reflect the
impact of the increased sales of all products and of other new higher margin
products introduced during fiscal 1996.
Selling and marketing expenses increased approximately 2% and 9% in the three
and nine month periods ended March 31, 1997, respectively, as compared to the
three and nine month periods ended March 31, 1996. The relative change in
selling and marketing expenses reflect the efforts to increase sales and
increased selling effort by the Company which began during fiscal 1996,
particularly into the retail distribution channel. General and administrative,
depreciation and amortization and research and development expenses increased
approximately 58% and 67% for the three and nine month periods ended March 31,
1997 over comparable amounts for the three and nine month periods ended March
31, 1996. The increase reflects the Company's increase in operations,
specifically those associated with the development of the commercial application
of STS 3D motion capture technology to golf instruction, 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 $423,633 ($.13 per share) and $1,732,662 ($.55 per
share) for the three and nine month periods ended March 31, 1997, respectively,
compared to a net loss of $138,879 ($.06 per share) ($444,879 pre noncash items)
and $1,761,193 ($.77 per share) for the three and nine month periods ended March
31, 1996, respectively. The net loss and net loss per share amounts primarily
reflect the increased sales and cost of operations from the additional expenses
from Pelz and Rotella product lines as well as additional expenses of STS
partially offset by a $306,000 reduction in the noncash charge for the issuance
of warrants to a consultant of the Company during the three month period ended
March 31, 1996.
Liquidity and Sources of Capital
At March 31, 1997, the Company had working capital of $634,791, including
$235,635 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 and financing 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 $1,427,424 for the nine
month period ended March 31, 1997 and a negative cash flow from operations of
$1,285,187 for the nine month period ended March 31, 1996. The negative cash
flow from operations reflects the increased expenses and levels of operations
discussed above.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company has reached an impasse in its efforts to negotiate a
mutually acceptable restructuring of its Sports Training Systems
("STS") business venture with Biomechanics, Inc. and its affiliates. As
a result, the Company on April 25, 1997 filed a lawsuit in the Superior
Court of Cobb County, Georgia against Biomechanics, Inc. and its
affiliates for failure to perform their duties in connection with the
development of the 3D motion capture technology for commercial
application to golf training, instruction and teaching. The Company has
a 57% ownership interest in STS, which licensed the use of the
technology for golf applications. The Company is unable to forecast
when STS may begin to license third parties to operate retail golf
learning centers utilizing the 3D motion capture technology to analyze
individual golf swings on a fee basis.
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.
Not applicable.
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.
Exhibit 27 Financial Data Schedule
(b) Reports on Forms 8-K.
Report filed as of February 17, 1997 regarding the election of
Daniel A. Gordon as Chief Executive Officer.
<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 May 9, 1997 /s/ Daniel A. Gordon
---------------------------------------- ------------------------------
Daniel A. Gordon
Chief Executive Officer
<PAGE>
GOLF TRAINING SYSTEMS, INC.
EXHIBIT 11 - Statement Re: Computation of Earnings Per Share
<CAPTION>
Three Months Ended Nine Months ended
March 31, March 31,
------------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Primary and fully diluted:
Weighted average shares outstanding
during the period .............................. 3,330,186 2,288,021 3,123,961 2,235,466
Effect of common stock acquisition rights
and warrants granted subsequent to
October 19, 1993 computed in accordance
with the treasury stock method as required
by the SEC (1). ............................... -- 38,709 -- 38,709
----------- ----------- ----------- -----------
Total weighted average common shares ............. 3,330,186 2,326,730 3,123,961 2,274,175
=========== =========== =========== ===========
Net loss .......................................... $ (423,633) $ (138,879) $ (1,732,662) $ (1,761,193)
============ ============= ============= =============
Net loss per share ................................ $(.13) $(.06) $(.55) $(.77)
===== ===== ====== ======
(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> 9-MOS
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Mar-31-1997
<CASH> 236
<SECURITIES> 0
<RECEIVABLES> 303
<ALLOWANCES> 7
<INVENTORY> 387
<CURRENT-ASSETS> 973
<PP&E> 777
<DEPRECIATION> 260
<TOTAL-ASSETS> 4,119
<CURRENT-LIABILITIES> 339
<BONDS> 0
0
2,255
<COMMON> 34
<OTHER-SE> 1,491
<TOTAL-LIABILITY-AND-EQUITY> 4,119
<SALES> 853
<TOTAL-REVENUES> 853
<CGS> 539
<TOTAL-COSTS> 743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (424)
<INCOME-TAX> 0
<INCOME-CONTINUING> (424)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (424)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> 0
</TABLE>
