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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, 1997
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
For the transition period from to
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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, 1997, the registrant had 11,586,250 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, 1997 1
and December 31, 1996
Statements of Operations for the nine months 2
ended September 30, 1997 and 1996
Statements of Operations for the three months 3
ended September 30, 1997 and 1996
Statements of Cash Flows for the nine months 4
ended September 30, 1997 and 1996
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 11
SIGNATURES 12
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE GOLF PRODUCTS, INC.
BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
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September 30, December 31,
1997 1996
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $83,073 $276,012
Accounts receivable, net 844,444 142,539
Inventories, net 1,404,726 348,640
Prepaid expenses 15,691 10,315
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Total current assets 2,347,934 777,506
PROPERTY AND EQUIPMENT, net 42,973 49,207
OTHER ASSETS 22,506 21,143
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Total assets $2,413,413 $847,856
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt - $52,935
Accounts payable 535,722 321,294
Accrued liabilities 164,682 453,332
Accrued royalties 118,355 184,146
Deferred revenue - 267,723
Line of credit 200,000 -
Notes payable 1,115,796 -
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Total current liabilities 2,134,555 1,279,430
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Notes Payable, less current portion 1,390,700 920,500
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STOCKHOLDERS' DEFICIT:
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; 11,586,250 issued and outstanding 11,586 5,461
Common stock subscribed, 3,812,500 shares - 762,500
Additional paid-in capital 12,988,566 11,758,741
Accumulated deficit (14,111,997) (13,878,779)
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Total stockholders' deficit (1,111,842) (1,352,074)
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Total liabilities and stockholders' deficit $2,413,413 $847,856
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
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1997 1996
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NET SALES $3,726,186 $1,381,029
COST OF SALES 2,749,324 1,004,007
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Gross profit 976,862 377,022
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,446,955 1,232,975
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Operating loss (470,093) (855,953)
OTHER INCOME (EXPENSE):
Miscellaneous 94,134 1,154
Interest income 4,175 111
Interest expense (178,862) (30,381)
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Net other expense (80,553) (29,116)
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LOSS BEFORE INCOME TAX EXPENSE (550,646) (885,069)
PROVISION FOR INCOME TAXES (800) (800)
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LOSS BEFORE EXTRAORDINARY ITEM (551,446) (885,869)
EXTRAORDINARY GAIN-FORGIVENESS OF DEBT 318,228 -
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NET INCOME (LOSS) ($233,218) ($885,869)
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EARNINGS PER SHARE:
Loss before extraordinary item ($0.05) ($0.16)
Extraordinary gain-forgiveness of debt 0.03 -
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Net income (loss) per common and common
equivalent share ($0.02) ($0.16)
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WEIGHTED AVERAGE OUTSTANDING COMMON
AND COMMON EQUIVALENT SHARES 11,586,250 5,461,163
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
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1997 1996
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NET SALES $ 953,342 $ 174,871
COST OF SALES 702,924 141,712
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Gross profit 250,418 33,159
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 510,608 347,526
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Operating loss (260,190) (314,367)
OTHER INCOME (EXPENSE):
Miscellaneous 18,938 1,083
Interest income 620 34
Interest expense (70,043) (5,969)
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Net other expense (50,485) (4,852)
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LOSS BEFORE INCOME TAX EXPENSE (310,675) (319,219)
PROVISION FOR INCOME TAXES 0 0
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LOSS BEFORE EXTRAORDINARY ITEM (310,675) (319,219)
EXTRAORDINARY GAIN-FORGIVENESS OF DEBT 0 0
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NET INCOME (LOSS) ($310,675) ($319,219)
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EARNINGS PER SHARE:
Loss before extraordinary item ($0.03) ($0.06)
Extraordinary gain-forgiveness of debt 0.00 0.00
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Net income (loss) per common and common
equivalent share ($0.03) ($0.06)
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WEIGHTED AVERAGE OUTSTANDING COMMON
AND COMMON EQUIVALENT SHARES 11,586,250 5,461,163
3
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
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1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($233,218) ($885,869)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 21,213 58,725
Accretion of discount 7,700 -
Change in allowance for doubtful accounts 40,295 37,103
Gain on forgiveness of debt (318,228) -
Non-cash reduction in accrued liabilities (94,694) -
Compensation expense recorded in connection
with options 10,950 -
Net change in operating assets and liabilities:
Accounts receivable (742,200) 538,987
Inventories (1,056,086) 202,451
Prepaid expenses (5,376) (29,911)
Other assets (1,363) 9,787
Accounts payable and accrued expenses 338,700 (64,451)
Accrued royalties (65,791) 349,236
Deferred revenue (267,723) 46,095
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Net cash (used in) provided by operating
activities (2,365,821) 262,153
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (14,979) (54)
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Net cash used in investing activities (14,979) (54)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in lines of credit 200,000 (287,901)
Payments on notes payable, net of discount (1,457,159) (121,125)
Proceeds from notes payable 2,520,020 50,000
Proceeds from issuance of subordinated convertible
debentures 462,500 -
Proceeds from issuance of common stock 462,500 -
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Net cash used in financing activities 2,187,861 (359,026)
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NET DECREASE IN CASH (192,939) (96,927)
CASH and cash equivalents, beginning of period 276,012 96,927
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CASH and cash equivalents, end of period $83,073 -
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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, 1997 and September 30,
1996
_________________________________________________________________________
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 10-KSB
for the period ended December 31, 1996 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 income (loss) per common and common equivalent share was computed based
on the net income (loss) divided by the weighted average number of common and
common equivalent shares outstanding (unless anti-dilutive) during the years
presented.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards 128, EARNINGS PER SHARE ("SFAS 128"), which is effective
for financial statements issued for periods ending after December 15, 1997. The
effect on the Company of adopting SFAS 128 has not yet been determined.
2. FINANCING
In October 1996, the Company, offered for sale in a private offering (the
"Financing") up to a maximum of 100 units at an issue price of $25,000 per unit
(the "Units"), each Unit consisting of (i) a Convertible Subordinated Debenture
due November 1, 2001 in the principal amount of $12,500 bearing interest,
payable quarterly in arrears on March 31, June 30, September 30 and December 31
of each year commencing on June 30, 1997, 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 (the "Debenture"); and (ii) 62,500 shares of
Common Stock, par value $.001 (the "Unit Shares"), at a price of $.20 per share
for a total of $12,500 for the Unit Shares. The Debenture is convertible at any
time from issuance prior to maturity at the rate of $.50 per share and is
redeemable by the Company at any time after the closing price of the Company's
Common Stock equals or exceeds $1.50 per share for 20 consecutive trading days.
The Financing has resulted in the infusion of $2,500,000 to the Company.
In January 1997, the Company entered into a line of credit agreement with a
bank in which the Company can borrow up to $400,000 in connection with a letter
of credit established in accordance with the Fila Sport License Agreement the
Company holds from Fila Sport S.p.A. The line bears interest at the bank's
prime rate plus 1.5% and is collateralized by essentially all of the Company's
assets and is personally guaranteed by the Chairman of the Board of Directors.
The line of credit secures the letter of credit. The line of
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credit and letter of credit expire January 31, 1998. As of September 30,
1997, $200,000 had been drawn down on the line of credit.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on March 31, 1997 which
made available to the Company up to the maximum aggregate principal amount of
the lesser of $1,000,000, and 50% of the aggregate of all open customer purchase
orders. The amount outstanding on the loan and revolving promissory note was
adjusted upward or downward on a monthly basis, throughout the term of the note,
based on total open customer purchase orders. The revolving promissory note
executed pursuant to this agreement bore interest at the rate of 12% per annum
and was to expire December 31, 1997. Amounts outstanding under the Agreement
were collateralized by the Company's inventory and open customer purchase
orders. As of September 30, 1997, the Company had borrowed $386,000 on this
revolving promissory note. In October 1997, the Company borrowed an additional
$435,000 on this revolving promissory note. The outstanding balance on the note
was paid in full together with interest and fees in October 1997.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on May 9, 1997 to
provide the Company $1,078,000. The promissory note executed pursuant to this
agreement bore interest at the rate of 12% per annum and involved a loan
origination fee of $5,390. The outstanding balance on the note was paid in full
together with interest and fees in June 1997.
Effective March 21, 1997, the Company borrowed $225,000 from a stockholder.
The borrowing was paid in full plus interest at a rate of 1% per month in April
1997. In May 1997, the Company again borrowed $225,000 from this stockholder at
an interest rate of 1% per month. The promissory note executed pursuant to this
agreement bears an interest rate of 1% which is payable monthly and expires
December 31, 1997.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on August 5, 1997 to
provide the Company $505,000. The promissory note executed pursuant to this
agreement bore interest at the rate of 12% per annum and involved a loan
origination fee of $2,525. As of September 30, 1997, the Company had borrowed
$505,000 on this revolving promissory note. The outstanding balance on the note
was paid in full together with interest and fees in October 1997.
Subsequent to the period of this interim report, the Company and the
Company's Chairman of the Board of Directors jointly entered into a loan and
security agreement with a lender on October 29, 1997 to provide the Company the
maximum aggregate principal amount of the lesser of $5,000,000, or 80% of the
Company's current assets. The amount outstanding on the loan and revolving
promissory note is adjusted upward or downward throughout the term of the note,
based on total current assets , which for purposes of the agreement mean cash,
accounts receivable aged less than 90 days, and inventory. The revolving
promissory note executed pursuant to this agreement bears an interest rate of
12% and expires December 31, 1999. As further consideration for this loan and
security agreement, warrants to purchase 400,000 shares of the Company's common
stock were issued which are exercisable 200,000 at $1.50; 100,000 at $2.00; and
100,000 at $3.00 and which expire December 31, 2002. Amounts outstanding under
the agreement are collateralized by the Company's inventory, open orders,
accounts and all other assets of the Company. As of October 31, 1997, the
Company had borrowed $1,764,000 on this revolving promissory note.
3. FORGIVENESS OF DEBT
The Company entered into an agreement with a third party regarding certain
prepaid royalties. The
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third party released the Company from any obligation to repay the prepaid
royalties and required no additional services from the Company. The result
was an extraordinary gain from forgiveness of debt in the amount of $268,000.
In addition, the Company entered into agreements with five third parties
regarding the reduction and settlement of certain trade payables. The third
parties released the Company from any obligations to repay these negotiated
amounts resulting in an extraordinary gain from forgiveness of debt in the
amount of $50,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, other than statements of historical fact, included in
this Form 10-QSB, including without limitation the statements under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" are, or may be deemed to be, "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934. Such forward-looking
statements involve assumptions, known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of Renaissance Golf Products, Inc. (the "Company") to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements contained in this Form 10-QSB. Such
potential risks and uncertainties include, without limitation, competitive
pricing and other pressures from other golf equipment manufacturers, economic
conditions generally and in the Company's primary markets, consumer spending
patterns, perceived quality and value of the Company's products, availability
of capital, cost of labor (foreign and domestic), cost of raw materials,
occupancy costs and other risk factors detailed herein and in other of the
Company's filings with the Securities and Exchange Commission. The
forward-looking statements are made as of the date of this Form 10-QSB and
the Company assumes no obligation to update the forward-looking statements or
to update the reasons actual results could differ from those projected in
such forward-looking statements. Therefore, readers are cautioned not to
place undue reliance on these forward-looking statements.
RESULTS OF OPERATIONS
Net sales for the nine months ended September 30, 1997 were $3,726,000
compared to $1,381,000 for the comparable period in 1996, an increase of
$2,345,000 or 169.8%. Net sales for the three months ended September 30,
1997 were $953,000 compared to $175,000 for the comparable period in 1996, an
increase of $778,000 or 444.6%. These increases are attributable to the
Company's re-focused business strategy and improved working capital. The
Company has determined to re-focus its business strategy and marketing
efforts to place greater emphasis on market niches which have been the most
consistently productive since the Company's inception and which are the most
closely aligned with Fila Sport's interests and marketing emphasis:
high-fashion design and value. The areas of renewed marketing emphasis are
as follows (i) golf bags and accessories generally; (ii) ladies bags, clubs
and accessories; (iii) men's clubs and accessories; and (iv) junior's bags,
clubs and accessories. Although the Company has begun modifying its
marketing emphasis, it will continue with its general business strategy of
providing unique, innovative, quality products which utilize and promote the
Fila Sport image. 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 increased from $1,004,000 for the nine months ended
September 30, 1996 to $2,749,000 for the comparable period in 1997, an
increase of $1,745,000 or 173.8%. Cost of sales increased from $142,000 for
the three months ended September 30, 1996 to $703,000 for the comparable
period in 1997, an
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increase of $561,000 or 395.1%. The gross profit margin decreased from 27.3%
for the nine months ended September 30, 1996 to 26.2% for the comparable
period in 1997. The gross profit margin increased from 18.9% for the three
months ended September 30, 1996 to 26.3% for the comparable period in 1997.
This increase for the three months ended September 30, 1997 is due primarily
to higher margins on larger sales volumes as compared to the same period in
1996.
Selling, general and administrative costs were $1,447,000 during the nine
months ended September 30, 1997 compared to $1,233,000 for the comparable period
in 1996, an increase of $214,000 or 17.4%. Selling, general and administrative
costs were $511,000 during the three months ended September 30, 1997 compared to
$348,000 for the comparable period in 1996, an increase of $163,000 or 46.8%.
The net increase in selling, general and administrative costs is comprised of
increases and decreases in certain categories as follows; an increase in sales
and marketing expenses ($714,000 for the first nine months of 1997 as compared
to $348,000 for the same period in 1996 and $219,000 for the three months ended
September 30, 1997 as compared to $142,000 for the same period in 1996), mainly
consisting of advertising, demo program, sales promotion, and sales commissions;
a decrease in administrative expenses ($120,000 for the first nine months of
1997 as compared to $235,000 for the same period in 1996 and $48,000 for the
three months ended September 30, 1997 as compared to $67,000 for the same period
in 1996), mainly consisting of insurance, office expense, and telephone
expenses; an increase in staff costs ($369,000 for the first nine months of 1997
as compared to $362,000 for the same period in 1996 and $129,000 for the three
months ended June 30 ,1997 as compared to $109,000 for the same period in 1996);
an increase in professional costs ($176,000 for the first nine months of 1997 as
compared to $61,000 for the same period in 1996 and $76,000 for the three months
ended June 30 ,1997 as compared to $18,000 for the same period in 1996), mainly
consisting of consulting and legal expenses.
The Company's interest expense increased from $30,000 for the nine months
ended September 30, 1996 to $179,000 for the comparable period in 1997 and
increased from $6,000 for the three months ended September 30, 1996 to $70,000
for the comparable period in 1997. The increase in interest expense resulted
from an increase in interest bearing debt incurred to fund increased sales
during 1997.
The Company entered into an agreement with a third party regarding certain
prepaid royalties. The third party released the Company from any obligation to
repay the prepaid royalties and required no additional services from the
Company. The result was an extraordinary gain from forgiveness of debt in the
amount of $268,000. In addition, the Company entered into agreements with five
third parties regarding the reduction and settlement of certain trade payables.
The third parties released the Company from any obligations to repay these
negotiated amounts resulting in an extraordinary gain from forgiveness of debt
in the amount of $50,000.
The Company experienced a net loss of $233,000 for the nine months ended
September 30, 1997 compared to a net loss of $886,000 for the comparable period
in 1996, a decrease in losses of $653,000. The Company experienced a net loss
of $311,000 for the three months ended September 30, 1997 compared to a net loss
of $319,000 for the same period in 1996, a decrease in losses of $8,000.
The Company's inventory increased substantially from $349,000 at December
31, 1996 to $1,405,000 at September 30, 1997 as a result of the Company having
sufficient working capital from newly invested capital and borrowed funds to
fund operations and meet inventory purchase requirements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash from operations is generated by sales of golf products
to distributors at wholesale
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prices. Sales to domestic accounts are typically due 30 to 90 days after
shipment while sales to international distributors are paid by letter of
credit facilities or wire transfer upon shipment.
Net cash used in operating activities for the nine months ended September
30, 1997 was $2,366,000 and net cash provided by operating activities for the
same period in 1996 was $262,000. Working capital at September 30, 1997 was
$213,000 compared to a deficit of $502,000 at December 31, 1996. Cash and cash
equivalents at September 30, 1997 were $83,000 compared to $276,000 at December
31, 1996. Inventories, net of reserves at September 30, 1997 were $1,405,000
compared to $349,000 at December 31, 1996, an increase of $1,056,000. Also,
accounts receivable increased $742,000 from $143,000 at December 31, 1996 to
$844,000 at September 30, 1997. Notes payable for $2,506,000 were outstanding
at September 30, 1997 compared to $973,000 at December 31, 1996. Accounts
payable and accrued liabilities increased by $339,000 from December 31, 1996 to
September 30, 1997. Accrued royalties decreased by $66,000 from December 31,
1996 to September 30, 1997. Royalties due and payable pursuant to the license
agreement with Fila Sport for the first, second, and third quarter of 1997 were
paid prior to the end of each quarter respectively.
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.
In October 1996, the Company, through the Financing, offered up to a
maximum of 100 Units at an issue price of $25,000 per Unit, each Unit consisting
of (i) a Convertible Subordinated Debenture due November 1, 2001 in the
principal amount of $12,500 bearing interest, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year commencing on
September 30, 1997, 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; and (ii) 62,500 Unit Shares at a price of $.20 per share for a
total of $12,500 for the Unit Shares. The Debenture is convertible at any time
from issuance prior to maturity at the rate of $.50 per share and is redeemable
by the Company at any time after the closing price of the Company's Common Stock
equals or exceeds $1.50 per share for 20 consecutive trading days.
The Financing has resulted in the infusion of $2,500,000 to the Company.
Financing has permitted the Company to pay off accrued royalties to Fila Sport
and certain other outstanding liabilities, while also adding to working capital.
Additionally, the infusion of capital resulted in the Company being able to
obtain loans various sources. The Company's management believes that the
proceeds provided by the Financing and through the loans will permit the Company
to experience a positive cash flow sufficient to purchase inventory and increase
sales. As a result, management believes the capital infusion and the increased
sales levels will provide working capital sufficient for the Company to continue
operations for the next year; although, additional capital will be needed to
implement all of management's marketing strategies over time.
Throughout the Company's operating history, net losses have caused
significant cash flow problems, particularly during the last two years. At
December 31, 1994, the Company had cash and cash equivalents of $1,060,380. At
December 31, 1995 and December 31, 1996, the Company's available cash and
equivalents totaled $96,927 and $276,012 respectively. Although the proceeds of
the Financing, the loans, and cash flow from operations are anticipated to be
sufficient for operations well into 1997, the Company will likely require
additional capital for future development and the marketing of existing and
future product lines. In the event the Company cannot fund operations through
the infusion of capital from the Financing, the loans, and
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operations and if the Company is unable to secure additional financing in the
future, its ability to pursue its business strategy, its financial position,
and its results of operations for future periods may be adversely impacted.
In January 1997, the Company entered into a line of credit agreement with a
bank in which the Company can borrow up to $400,000 in connection with a letter
of credit established in accordance with the Fila Sport License Agreement. The
line bears interest at the bank's prime rate plus 1.5% and is collateralized by
essentially all of the Company's assets and is personally guaranteed by the
Chairman of the Board of Directors. The line of credit is secured by the letter
of credit. The line of credit and letter of credit expire January 31, 1998. As
of September 30, 1997, $200,000 had been drawn down on the line of credit.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on March 31, 1997 which
provided the Company up to the maximum aggregate principal amount of the lesser
of $1,000,000, and 50% of the aggregate of all open customer purchase orders.
The amount outstanding on the loan and revolving promissory note was adjusted
upward or downward on a monthly basis, throughout the term of the note, based on
total open customer purchase orders. The revolving promissory note executed
pursuant to this agreement bore interest at the rate of 12% per annum and was to
expire December 31, 1997. Amounts outstanding under the Agreement were
collateralized by the Company's inventory and open customer purchase orders. As
of September 30, 1997, the Company had borrowed $386,000 on this revolving
promissory note. In October 1997, the Company borrowed an additional $435,000
on this revolving promissory note. The outstanding balance on the note was paid
in full together with interest and fees in October 1997.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on May 9, 1997 to
provide the Company $1,078,000. The promissory note executed pursuant to this
agreement bore interest at the rate of 12% per annum and involved a loan
origination fee of $5,390. The outstanding balance on the note was paid in full
together with interest and fees in June 1997.
Effective March 21, 1997, the Company borrowed $225,000 from a stockholder.
The borrowing was paid in full plus interest at a rate of 1% per month in April
1997. In May 1997, the Company again borrowed $225,000 from this stockholder at
an interest rate of 1% per month. The promissory note executed pursuant to this
agreement bears an interest rate of 1% which is payable monthly and expires
December 31, 1997.
The Company and the Company's Chairman of the Board of Directors jointly
entered into a loan and security agreement with a lender on August 5, 1997 to
provide the Company $505,000. The promissory note executed pursuant to this
agreement bore interest at the rate of 12% per annum and involved a loan
origination fee of $2,525. As of September 30, 1997, the Company had borrowed
$505,000 on this revolving promissory note. The outstanding balance on the note
was paid in full together with interest and fees in October 1997.
Subsequent to the period of this interim report, the Company and the
Company's Chairman of the Board of Directors jointly entered into a loan and
security agreement with a lender on October 29, 1997 to provide the Company the
maximum aggregate principal amount of the lesser of $5,000,000, or 80% of the
Company's current assets. The amount outstanding on the loan and revolving
promissory note is adjusted upward or downward on a monthly basis, throughout
the term of the note, based on total current assets , which for purposes of the
agreement mean cash, accounts receivable aged less than 90 days, and inventory.
The revolving promissory note executed pursuant to this agreement bears an
interest rate of 12% and expires December 31, 1999. As further consideration
for this loan and security agreement, warrants to purchase
10
<PAGE>
400,000 shares of the Company's common stock were issued which are
exercisable 200,000 at $1.50; 100,000 at $2.00; and 100,000 at $3.00 and
which expire December 31, 2002. Amounts outstanding under the agreement are
collateralized by the Company's inventory, open orders, accounts and all
other assets of the Company. As of October 31, 1997, the Company had
borrowed $1,764,000 on this revolving promissory note.
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
11
<PAGE>
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 19, 1997 By: \s\ KENNETH W. CRAIG
----------------- -------------------------------------
Kenneth W. Craig
President and Chief Executive Officer
Date: November 19, 1997 By: \s\ MONT E. WARREN
----------------- -------------------------------------
Mont E. Warren
Chief Financial Officer
(Principal Accounting Officer)
12
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 83,073
<SECURITIES> 0
<RECEIVABLES> 844,444
<ALLOWANCES> 0
<INVENTORY> 1,404,726
<CURRENT-ASSETS> 2,347,934
<PP&E> 42,973
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,413,413
<CURRENT-LIABILITIES> 2,134,555
<BONDS> 0
0
3
<COMMON> 11,586
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (1,111,842)
<SALES> 3,726,186
<TOTAL-REVENUES> 3,726,186
<CGS> 2,749,324
<TOTAL-COSTS> 1,446,955
<OTHER-EXPENSES> (98,309)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,862
<INCOME-PRETAX> (550,646)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 318,228
<CHANGES> 0
<NET-INCOME> (233,218)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> 0
</TABLE>
