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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 quarterly period ended September 30, 1996
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number 1-12532
RENAISSANCE GOLF PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 86-0664849
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5812 MACHINE DRIVE, HUNTINGTON BEACH, CALIFORNIA 92649
(Address of Principal Executive Offices)
(714) 897-8213
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act 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
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As of September 30, 1996, the registrant had 5,461,163 shares outstanding of its
Common Stock, $.001 par value.
Transitional Small Business Disclosure Format (check one);
Yes No X
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RENAISSANCE GOLF PRODUCTS, INC.
TABLE OF CONTENTS
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PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of September 30, 1996
and December 31, 1995 1
Statements of Operations for the nine months
ended September 30, 1996 and 1995 2
Statements of Operations for the three months
ended September 30, 1996 and 1995 3
Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II. OTHER INFORMATION 8
SIGNATURES 9
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i
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE GOLF PRODUCTS, INC.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
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September 30, December 31,
1996 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents - $96,927
Accounts receivable, net 158,276 734,366
Inventories, net 743,604 946,055
Prepaid expenses 75,117 45,206
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Total current assets 976,997 1,822,554
PROPERTY AND EQUIPMENT, net 251,722 310,393
INTANGIBLE ASSETS, net 6,925 6,925
OTHER ASSETS 13,155 22,942
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Total assets $1,248,799 $2,162,814
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $579,048 $615,623
Accrued liabilities 145,926 173,802
Accrued royalties 936,738 587,502
Line of credit - 287,901
Notes payable, net of discount 98,375 169,500
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Total current liabilities 1,760,087 1,834,328
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Deferred revenue 267,723 221,628
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STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 150,000 shares
authorized; 250 issued and outstanding 3 3
Common stock, $.001 par value, 20,000,000 shares
authorized; 5,461,163 issued and outstanding 5,461 5,461
Additional paid-in capital 11,438,741 11,438,741
Deficit (12,223,216) (11,337,347)
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Total stockholders' equity (779,011) 106,858
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Total liabilities and stockholders' equity $1,248,799 $2,162,814
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1
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
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1996 1995
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NET SALES $1,381,029 $4,068,476
COST OF SALES 1,004,007 2,901,447
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Gross profit 377,022 1,167,029
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,232,975 2,562,456
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Operating loss (855,953) (1,395,427)
OTHER INCOME (EXPENSE):
Miscellaneous 1,154 597
Interest income 111 6,551
Interest expense (30,381) (96,085)
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Net other expense (29,116) (88,937)
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LOSS BEFORE INCOME TAX EXPENSE (885,069) (1,484,364)
INCOME TAX EXPENSE (800) (800)
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NET LOSS ($885,869) ($1,485,164)
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NET LOSS PER COMMON AND COMMON
EQUIVALENT SHARE ($0.16) ($0.27)
WEIGHTED AVERAGE OUTSTANDING COMMON
AND COMMON EQUIVALENT SHARES 5,461,163 5,445,998
2
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
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1996 1995
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NET SALES $174,871 $1,144,466
COST OF SALES 141,712 852,004
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Gross profit 33,159 292,462
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 347,526 749,445
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Operating loss (314,367) (456,983)
OTHER INCOME (EXPENSE):
Miscellaneous 1,083 (1,949)
Interest income 34 142
Interest expense (5,969) (29,984)
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Net other expense (4,852) (31,791)
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LOSS BEFORE INCOME TAX EXPENSE (319,219) (488,774)
INCOME TAX EXPENSE 0 0
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NET LOSS ($319,219) ($488,774)
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NET LOSS PER COMMON AND COMMON
EQUIVALENT SHARE ($0.06) ($0.09)
WEIGHTED AVERAGE OUTSTANDING COMMON
AND COMMON EQUIVALENT SHARES 5,461,163 5,461,163
3
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
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1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($885,869) ($1,485,164)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 58,725 75,158
Gain (Loss) on sale of property and equipment - 1,057
Bad debt expense 37,103 21,270
Compensation related to stock issuance - 46,000
Net change in operating assets and liabilities:
Accounts receivable 538,987 168,081
Inventories 202,451 646,763
Prepaid expenses (29,911) (44,036)
Other assets 9,787 (8,900)
Accounts payable and accrued expenses (64,451) (126,370)
Accrued royalties 349,236 371,478
Deferred revenue 46,095 -
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Net cash provided by (used in)
operating activities 262,153 (334,663)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (54) (18,022)
Proceeds from sale of property and equipment - 2,215
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Net cash used in investing activities (54) (15,807)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in asset-based line
of credit (287,901) -
Payoff of bank line of credit - (905,000)
Payments on notes payable, net of discount (121,125) 191,636
Proceeds from notes payable 50,000 -
Proceeds from stock issuance related to Bridge
financing - 25,000
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Net cash used in financing activities (359,026) (688,364)
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NET DECREASE IN CASH (96,927) (1,038,834)
CASH and cash equivalents, beginning of period 96,927 1,060,380
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CASH and cash equivalents, end of period - $21,546
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4
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RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
For the nine months and three months ended September 30, 1996 and September 30,
1995
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1. BASIS OF PRESENTATION
The financial statements reflect, in the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position and results of operations for the periods
indicated.
The accompanying interim financial statements should be read in conjunction
with the financial statements and related notes included in the Company's 1995
10-KSB as filed with the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to the Securities and Exchange Commission rules and
regulations.
The results of operations for the interim period covered by this report may
not necessarily be indicative of operating results for the full fiscal year.
Net loss per common and common equivalent share was computed based on the
net loss divided by the weighted average number of common and common equivalent
shares outstanding (unless antidilutive) during the years presented.
2. STOCKHOLDER'S EQUITY
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 "ACCOUNTING FOR STOCK BASED COMPENSATION"
("Statement 123"). Statement 123 is primarily a disclosure standard for the
Company because the Company will continue to account for employee stock options
under Accounting Principle Board Opinion No. 25. The Company adopted Statement
123 effective January 1, 1996.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the nine months ended September 30, 1996 were $1,381,000
compared to $4,068,000 for the comparable period in 1995, a decrease of
$2,687,000 or 66.1%. Net sales for the three months ended September 30, 1996
were $175,000 compared to $1,144,000 for the comparable period in 1995, a
decrease of $969,000 or 84.7%. This decrease is due mainly to the lack of
sufficient working capital to fund inventory purchase requirements. The
Company's business is seasonal in nature. Therefore, operating results for one
or more quarters may not be indicative of future trends or operating results for
the full fiscal year.
Cost of sales decreased from $2,901,000 for the nine months ended September
30, 1995 to $1,004,000 for the comparable period in 1996, a decrease of
$1,897,000 or 65.4%. Cost of sales decreased from $852,000 for the three months
ended September 30, 1995 to $142,000 for the comparable period in 1996, a
decrease of $710,000 or 83.3%. The gross profit margin decreased from 28.7% for
the nine months ended September 30, 1995 to 27.3% for the comparable period in
1996. The gross profit margin decreased from 25.5% for the three months ended
September 30, 1995 to 18.9% for the comparable period in 1996. These decreases
are due primarily to lower margins and discounts given on certain product lines
which represented a higher percentage of the sales mix in 1996 as compared to
1995.
Selling, general and administrative costs were $1,233,000 during the nine
months ended September 30, 1996 compared to $2,562,000 for the comparable period
in 1995, a decrease of $1,329,000 or 51.9%. Selling, general and
administrative costs were $348,000 during the three months ended September 30,
1996 compared to $749,000 for the comparable period in 1995, a decrease of
$401,000 or 53.5%. The decrease resulted primarily from lower sales and
marketing expenses ($505,000 for the nine months ended September 30, 1996 as
compared to $1,388,000 for the same period in 1995 and $142,000 for the three
months ended September 30, 1996 as compared to $428,000 for the same period in
1995), mainly consisting of advertising, athletic endorsements, demo program,
outbound freight expenses, sales promotion, tour promotion, and sales
commissions; a decrease in finance and administrative expenses ($235,000 for the
nine months ended September 30, 1996 as compared to $316,000 for the same period
in 1995 and $67,000 for the three months ended September 30, 1996 as compared to
$96,000 for the same period in 1995), mainly consisting of insurance, office
expense, and telephone expenses; a decrease in staff costs ($362,000 for the
nine months ended September 30, 1996 as compared to $558,000 for the same period
in 1995 and $109,000 for the three months ended September 30, 1996 as compared
to $157,000 for the same period in 1995), a decrease in professional costs
($61,000 for the nine months ended September 30, 1996 as compared to $128,000
for the same period in 1995 and $18,000 for the three months ended September 30
,1996 as compared to $18,000 for the same period in 1995), mainly consisting of
consulting and legal expenses.
The Company's interest expense decreased from $96,000 for the nine months
ended September 30, 1995 to $30,000 for the comparable period in 1996 and
decreased from $30,000 for the three months ended September 30, 1995 to $6,000
for the comparable period in 1996 as a result of decreased interest bearing debt
in 1996.
6
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The Company experienced a net loss of $886,000 for the nine months ended
September 30, 1996 compared to $1,485,000 for the comparable period in 1995, a
decrease of $599,000 or 40.3%. The Company experienced a net loss of $319,000
for the three months ended September 30, 1996 compared to $489,000 for the same
period in 1995, a decrease of $170,000 or 34.8%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash from operations is generated by sales of golf products to
domestic retailers and international distributors at wholesale prices. Sales to
domestic accounts are typically due 30 to 90 days after shipment while sales to
international distributors are generally paid by letter of credit facilities or
wire transfer upon shipment. Net cash provided by operating activities for the
nine months ended September 30, 1996 was $262,000 compared to net cash used in
operating activities of $335,000 for the comparable period in 1995. The Company
had a working capital deficit of $783,000 at September 30, 1996 compared to a
deficit of $12,000 at December 31, 1995. Cash and cash equivalents at September
30, 1996 were $0 compared to $97,000 at December 31, 1995. Inventories at
September 30, 1996 were $744,000 compared to $946,000 at December 31, 1995, a
decrease of $202,000. Also, accounts receivable decreased $576,000 from
$734,000 at December 31, 1995 to $158,000 at September 30, 1996. The
outstanding line of credit amount pursuant to an asset based lending arrangement
was $0 at September 30, 1996 and has been terminated. Notes payable for $98,000
were outstanding at September 30, 1996. Accounts payable and accrued
liabilities decreased $64,000 from December 31, 1995 to September 30, 1996.
Accrued royalties increased $349,000 from December 31, 1995 to September 30,
1996.
The Company strives to maintain a sufficient inventory of golf club
components, bags, and accessories to fulfill orders. Generally, the Company
does not maintain a substantial finished product inventory. Management believes
that all of the golf club components and other products manufactured for the
Company by suppliers are readily available from a variety of sources.
Management believes that additional capital will be required to meet
operating needs and capital expenditures for the next 12 months. In March 1995
the Company obtained a $1,000,000 borrowing facility with a national asset-based
lender to assist in funding its domestic and international operations. As of
June 30, 1996 this line of credit has been paid in full and the asset-based
lending arrangement has been terminated.
The Company's royalty payments to Fila Sport S.p.A. for use of the
FILA-Registered Trademark- trademark are $771,000 in arrears as of September 30,
1996. On October 21, 1996, the Company finalized a new license agreement with
Fila Sport S.p.A. ("Fila"). The license agreement between the Company and Fila
provides for the production, advertising and sale of certain golf products
bearing the FILA-Registered Trademark- trademarks in North America, South
America, Europe, the Middle East and Africa and extends through the year 2000
with an option to renew for an additional five years. The new agreement
provides for a reduced minimum royalty schedule starting at $400,000 for 1997
and increasing by $100,000 each year. The new agreement does not allow the
Company to distribute Fila-Registered Trademark--trademark products in Asia or
Australia. In addition, the agreement requires payment of $675,000 for past due
royalties on or before November 20, 1996 and the opening of an irrevocable
letter of credit in the amount of $400,000 to secure the payment of 1997 minimum
annual royalties.
7
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On October 31, 1996, a financing plan was finalized to raise $2,500,000
through a private offering (the "Unit Offering") of units (the "Units")
comprised of restricted shares of Common Stock (the "Unit Shares") offered at a
price of $.20 per share and 60-month convertible subordinated debentures (the
"Unit Debentures") bearing interest at the rate of 10% per annum for the first
24 months and bearing interest thereafter at the prime rate charged by the
Company's bank plus four points. Each Unit will be priced at $25,000 and will
consist of 62,500 Unit Shares for a total consideration of $12,500 for the Unit
Shares and a Unit Debenture in the principal amount of $12,500 convertible to
Common Stock at $.50 per share and not subject to price adjustment. The Company
will offer 100 Units to raise $2,500,000. The Unit Offering is anticipated to
be completed by December 15, 1996.
The financing plan calls for the election of John B. Hewlett as Chairman of
the Board and Kenneth W. Craig as a Director and President, Chief Operating
Officer. Miles T. Doody will continue to serve as a Director and Chief
Executive Officer. In addition, the Company agreed to grant a total of
4,127,000 non-qualified stock options exercisable at a price of $.50 per share
and expiring on December 31, 2006. Certain of the options vest upon completion
of the financing while others vest upon achievement of certain sales targets.
These options are not subject to any price adjustment.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 "ACCOUNTING FOR STOCK BASED COMPENSATION"
("Statement 123"). Statement 123 is primarily a disclosure standard for the
Company because the Company will continue to account for employee stock options
under Accounting Principle Board Opinion No. 25. The Company adopted Statement
123 effective January 1, 1996.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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
Not Applicable
8
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SIGNATURES
Pursuant to 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.
RENAISSANCE GOLF PRODUCTS, INC.
Date: November 12, 1996 By: /S/MONT WARREN
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Mont E. Warren
Chief Financial Officer
(Principal Accounting Officer)
9
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 158,276
<ALLOWANCES> (193,046)
<INVENTORY> 743,604
<CURRENT-ASSETS> 976,997
<PP&E> 595,070
<DEPRECIATION> 343,348
<TOTAL-ASSETS> 1,248,799
<CURRENT-LIABILITIES> 1,760,087
<BONDS> 267,723
0
3
<COMMON> 5,461
<OTHER-SE> 779,011
<TOTAL-LIABILITY-AND-EQUITY> 1,248,799
<SALES> 1,251,428
<TOTAL-REVENUES> 1,381,029
<CGS> 1,004,007
<TOTAL-COSTS> 1,232,975
<OTHER-EXPENSES> (1,265)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (30,381)
<INCOME-PRETAX> (885,069)
<INCOME-TAX> (800)
<INCOME-CONTINUING> (885,869)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (885,869)
<EPS-PRIMARY> (.16)
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