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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment #1
(MARK ONE)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
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 March 31, 1997, the registrant had 9,898,663 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 March 31, 1997 1
and December 31, 1996
Statements of Operations for the three months 2
ended March 31, 1997 and 1996
Statements of Cash Flows for the three months 3
ended March 31, 1997 and 1996
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 9
SIGNATURES 9
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE GOLF PRODUCTS, INC.
BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
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March 31, December 31,
1997 1996
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 82,310 $ 276,012
Accounts receivable, net 251,640 142,539
Inventories, net 717,107 348,640
Prepaid expenses 23,509 10,315
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Total current assets 1,074,566 777,506
PROPERTY AND EQUIPMENT, net 41,277 49,207
OTHER ASSETS 10,656 21,143
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Total assets $ 1,126,499 $ 847,856
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt - 52,935
Accounts payable 559,359 321,294
Accrued liabilities 172,487 453,332
Accrued royalties 184,146 184,146
Deferred revenue - 267,723
Line of credit 100,000 -
Notes payable 225,000 -
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Total current liabilities 1,240,992 1,279,430
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Notes Payable, less current portion 1,049,000 920,500
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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; 9,898,663 issued and outstanding 9,899 5,461
Common stock subscribed, 3,812,500 shares - 762,500
Additional paid-in capital 12,646,053 11,758,741
Accumulated deficit (13,819,448) (13,878,779)
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Total stockholders' deficit (1,163,493) (1,352,074)
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Total liabilities and stockholders' deficit $ 1,126,499 $ 847,856
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
1997 1996
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NET SALES $ 430,800 $ 395,661
COST OF SALES 231,327 261,990
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Gross profit 199,473 133,671
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 386,332 470,836
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Operating loss (186,859) (337,165)
OTHER INCOME (EXPENSE):
Miscellaneous 91 71
Interest income 1,745 1
Interest expense (37,970) (10,758)
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Net other expense (36,134) (10,686)
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LOSS BEFORE INCOME TAX EXPENSE (222,993) (347,851)
PROVISION FOR INCOME TAXES (800) (800)
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LOSS BEFORE EXTRAORDINARY ITEM (223,793) (348,651)
EXTRAORDINARY GAIN-FORGIVENESS OF DEBT 283,124 -
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NET INCOME (LOSS) $ 59,331 ($348,651)
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EARNINGS PER SHARE:
Loss before extraordinary item ($0.02) ($0.06)
Extraordinary gain-forgiveness of debt 0.03 -
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Net income (loss) per common and common
equivalent share $ 0.01 ($0.06)
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WEIGHTED AVERAGE OUTSTANDING COMMON
AND COMMON EQUIVALENT SHARES 9,898,663 5,461,163
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 59,331 ($348,651)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 7,930 19,552
Accretion of discount 3,500 -
Change in allowance for doubtful accounts - 12,969
Gain on forgiveness of debt (283,124) -
Compensation expense recorded in connection
with options 4,250 -
Net change in operating assets and liabilities:
Accounts receivable (109,101) 318,404
Inventories (368,467) 71,382
Prepaid expenses (13,194) (28,067)
Other assets 10,487 9,687
Accounts payable and accrued expenses (27,379) 61,841
Accrued royalties - 120,136
Deferred revenue - (18,299)
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Net cash (used in) provided by
operating activities (715,767) 18,954
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in lines of credit 100,000 (233,608)
Payments on notes payable, net of disount (52,935) (117,773)
Proceeds from notes payable 225,000 50,000
Proceeds from issuance of subordinated
convertible debenture 125,000 -
Proceeds from issuance of common stock 125,000 -
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Net cash provided by (used in) financing
activities 522,065 (301,381)
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NET DECREASE IN CASH (193,702) (82,427)
CASH and cash equivalents, beginning of period 276,012 96,927
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CASH and cash equivalents, end of period $ 82,310 $ 14,500
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RENAISSANCE GOLF PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
For the three months ended March 31, 1997 and March 31, 1996
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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 1996
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 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 antidilutive) 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 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 $1,850,000 as of April 30, 1997.
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 the
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 guaranteed by
the Chairman of the Board of Directors. The Company established a letter of
credit with an accredited bank in the amount of $400,000.
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The letter of credit is secured by the line of credit. The line of credit and
letter of credit expire January 31, 1998. As of April 30, 1997, $100,000 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
will provide 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 is
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 bears an interest rate of 12% and expires
December 31, 1997. Amounts outstanding under the Agreement are collateralized
by the Company's inventory and open customer purchase orders. As of April 30,
1997, the Company had borrowed $488,000 on this revolving promissory note.
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.
3. FORGIVENESS OF DEBT
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 two
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 $15,000.
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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 three months ended March 31, 1997 were $431,000 compared
to $396,000 for the comparable period in 1996, an increase of $35,000 or 9%.
The increased sales volume was attributable, due in small part to a decrease in
the sales price of certain older inventory and in remaining part to the
Company's re-focused business strategy. 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 and their intended order of attention by the Company 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 intends to modify 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 decreased from $262,000 for the three months ended March 31,
1996 to $231,000 for the comparable period in 1997, a decrease of $31,000 or
12%. The gross profit margin increased from 34% for the three months ended
March 31, 1996 to 46% for the comparable period in 1997. This increase in gross
margins resulted from higher margins on certain product lines which represented
a higher percentage of the sales mix for the three months ended March 31, 1997
as compared to the same period in 1996. The product lines receiving renewed
marketing emphasis represent the lines accounting for a higher percentage of the
sales mix. These lines have traditionally enjoyed the highest margins, which is
one of the reasons the renewed marketing efforts are emphasizing these lines.
Selling, general and administrative costs were $386,000 for the three
months ended March 31, 1997 compared to $471,000 for the comparable period in
1996, a decrease of $85,000 or 18%. The decrease
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resulted primarily from reductions in the following expenses for the three
months ended March 31, 1997 as compared to the same period in 1996 respectively:
lower sales and marketing expenses ($169,000 as compared to $201,000), mainly
consisting of royalties and sales commissions; a decrease in finance and
administrative expenses ($33,000 as compared to $82,000), mainly consisting of
insurance, printing expense, courier cost, office expense, and telephone
expense; a decrease in staff costs ($124,000 as compared to $139,000), mainly
consisting of salaries, medical insurance, and workers compensation insurance; a
decrease in bad debt provision ($0 as compared to $13,000). These decreases
were offset by an increase in professional costs ($53,000 as compared to
$26,000), mainly consisting of consulting, accounting, and legal expenses. The
decrease in selling, general and administrative costs for the three months ended
March 31, 1997 as compared to the same period in 1996 resulted from the
Company's continuing efforts to cut operating expenses.
The Company's interest expense increased from $11,000 for the three months
ended March 31, 1996 to $38,000 for the comparable period in 1997 as a result of
increased interest bearing debt in 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 two
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 $15,000. As a result of these transactions, the Company
recorded $283,000 in extraordinary gain from forgiveness of debt.
The Company experienced net income of $59,000 after the effect of the
$283,000 extraordinary gain from forgiveness of debt for the three months ended
March 31, 1997 compared to a net loss of $349,000 for the comparable period in
1996.
The Company's inventory increased substantially from $348,640 at December
31, 1996 to $717,107 at March 31, 1997 as a result of the Company having
sufficient working capital to fund operations and fill order backlogs for spring
deliveries.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash from operations is generated by sales of golf products
to distributors at wholesale 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) provided by operating activities for 1997 and 1996 was
($716,000) and $219,000, respectively. Working capital at March 31, 1997 was
$(166,000) compared to ($502,000) at December 31, 1996. Cash and cash
equivalents at March 31, 1997 were $82,000 compared to $276,000 at December 31,
1996. Inventories, net of reserves at March 31, 1997 were $717,000 compared to
$349,000 at December 31, 1996, an increase of $368,000. Also, accounts
receivable increased $109,000 from $143,000 at December 31, 1996 to $252,000 at
March 31, 1997. Notes payable for $1,274,000 were outstanding at March 31, 1997
compared to $973,000 at December 31, 1996. Accounts payable and accrued
liabilities increased by $27,000 from December 31, 1996 to March 31, 1997.
There was no net change in accrued royalties. Royalties due and payable
pursuant to the license agreement with Fila Sport for the first quarter of 1997
were paid prior to the end of the quarter.
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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 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; 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 $2,250,000 as of the date of
this filing. 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 a revolving loan from a private trust of up to $1,000,000
based upon open customer sales orders. The Company's management believes that
the proceeds provided by the Financing and through the loan 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
this Financing and cash flow from operations are anticipated to be sufficient
for operations in 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 sales after the initial
infusion of capital from this Financing, 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 the
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 guaranteed by
the Chairman of the Board of Directors. The Company established a letter of
credit with an accredited bank in the amount of $400,000. The letter of credit
is secured by the line of credit. The line of credit and letter of credit
expire January 31, 1998. As of April 30, 1997, $100,000 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
will provide 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 is
adjusted upward or downward on a monthly basis, throughout the term of the note,
based on total open customer purchase orders.
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The revolving promissory note executed pursuant to this agreement bears an
interest rate of 12% and expires December 31, 1997. Amounts outstanding under
the Agreement are collateralized by the Company's inventory and open customer
purchase orders. As of April 30, 1997, the Company had borrowed $488,000 on this
revolving promissory note.
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.
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
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: May 15, 1997 By: \s\KENNETH W. CRAIG
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Kenneth W. Craig
President and Chief Executive Officer
Date: May 15, 1997 By: \s\MONT E. WARREN
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Mont E. Warren
Chief Financial Officer
(Principal Accounting Officer)
9
