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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 March 31, 2000
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)
11585 SOUTH STATE STREET, DRAPER, UTAH 84020
(Address of Principal Executive Offices)
(801) 501-0200
(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
--- ---
As of March 31, 2000, the registrant had 9,429,475 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
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of March 31, 2000 and 1
December 31, 1999
Statements of Operations for the Three Months 2
Ended March 31, 2000 and March 31, 1999
Statements of Cash Flows for the Three Months Ended 3
March 31, 2000 and March 31, 1999
Notes to Financial Statements for the Three 4
Months ended March 31, 2000 and March 31, 1999
Item 2. Management's Discussion and 5
Analysis of Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 2. Changes in Securities 6
Item 3. Defaults Upon Senior Securities 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 5. Exhibits and Reports on Form 8-K 6
SIGNATURES 7
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RENAISSANCE GOLF PRODUCTS, INC.
BALANCE SHEETS
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
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March 31, December 31,
2000 1999
------------ ------------
(unaudited)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 77,682 $ 47,798
Accounts receivable, net 4,671 233,172
Inventories, net 1,584,076 1,628,248
Deposits made on inventory 120,424 155,234
Prepaid expenses 18,729 12,047
------------ ------------
Total current assets 1,805,582 2,076,499
PROPERTY AND EQUIPMENT, net 428,355 446,069
OTHER ASSETS 18,000 --
------------ ------------
Total assets 2,251,937 2,522,568
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit, net of discount 5,063,234 5,000,000
Accounts payable 386,707 295,716
Accrued liabilities 636,337 486,161
Accrued royalties 624,355 568,355
Current portion of notes payable 529,416 532,650
------------ ------------
Total current liabilities 7,240,049 6,882,882
------------ ------------
Notes Payable, less current portion -- --
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.01 par value, 150,000 shares
authorized; 75,000 and 750 issued and
outstanding as of 3-31-00 and 12-31-99 , respectively 750 750
Common stock, $.001 par value, 40,000,000 shares
authorized; 9,429,475 and 9,429 issued and
outstanding as of 3-31-00 and 12-31-99 , respectively 9,429 9,429
Additional paid-in capital 20,092,443 20,092,443
Accumulated deficit (25,090,734) (24,462,936)
------------ ------------
Total stockholders' equity (deficit) (4,988,112) (4,360,314)
------------ ------------
Total liabilities and stockholders' equity (deficit) $ 2,251,937 $ 2,522,568
============ ============
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The accompanying notes are an integral part of the financial statements
1
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
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2000 1999
(unaudited) (unaudited)
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NET SALES $ 408,280 $ 984,473
COST OF SALES 328,144 750,906
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Gross profit 80,136 233,567
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 592,560 635,646
----------- -----------
Operating loss (512,424) (402,079)
OTHER INCOME (EXPENSE):
Interest Income 531 1,748
Interest Expense (115,389) (162,789)
Other 142 (23,231)
----------- -----------
Net other expense (114,716) (184,272)
----------- -----------
LOSS BEFORE INCOME TAX EXPENSE (627,140) (586,351)
PROVISION FOR INCOME TAXES (598) --
----------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (627,738) (586,351)
EXTRAORDINARY ITEMS -- --
----------- -----------
NET LOSS $ (627,738) $ (586,351)
=========== ===========
EARNINGS PER SHARE-BASIC:
Loss before extraordinary item $ (0.07) $ (0.08)
Extraordinary gain-forgiveness of debt 0.00 0.00
----------- -----------
Net loss per common and common
equivalent share $ (0.07) $ (0.08)
=========== ===========
WEIGHTED AVERAGE OUTSTANDING COMMON
AND COMMON EQUIVALENT SHARES-BASIC 9,429,475 7,524,537
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
2
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RENAISSANCE GOLF PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
AS OF MARCH 31, 2000 AND MARCH 31, 1999
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2000 1999
(unaudited) (unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(627,798) $ (586,351)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 29,559 32,603
Change in Inventory for Adjustments/Reserve for Inventory Obsolescence 1,416 (75,000)
Change in allowance for doubtful accounts 10,843 --
Net change in operating assets and liabilities:
(Increase) Decrease in accounts receivable 217,658 16,003
(Increase) Decrease in inventories 42,756 292,430
(Increase) Decrease in prepaid expenses 28,128 (161,083)
(Increase) Decrease in other assets -- (15,401)
(Decrease) Increase in accounts payable & accrued expenses 297,167 (893,931)
Less payment with equity -- 585,224
--------- -----------
Net cash used in operating activities (271) (805,506)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property & equipment (11,845) (7,268)
Deposit on Leasehold Improvement (18,000) --
--------- -----------
Net cash used in investing activities (29,845) (7,268)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable, net of disount -- (18,040)
Proceeds from notes payable 60,000 28,381
Proceeds from issuance of preferred stock -- 1,000,000
Net cash provided by financing activities 60,000 1,010,341
--------- -----------
NET INCREASE (DECREASE) IN CASH 29,884 197,567
CASH and cash equivalents, beginning of period 47,798 63,184
--------- -----------
CASH and cash equivalents, end of period $ 77,682 $ 260,751
========= ===========
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The accompanying notes are an integral part of the financial statements
3
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RENAISSANCE GOLF PRODUCTS, INC.
Notes To Financial Statements For The Three
Months Ended March 31, 2000 and March 31, 1999
1. BASIS OF PRESENTATION
In the opinion of management, the unaudited financial statements reflect
all normally recurring adjustments necessary to fairly present the Company's
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-A for the period ended December 31, 1999, which has been filed with the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in the Company's annual financial statements have been omitted
from the quarterly financial statements based upon Securities and Exchange
Commission rules and regulations.
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 year 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
Year 2000 - For the quarter ended March 31, 2000, a related party
shareholder and officer of the company loaned the company $60,000 on a note with
interest at 8% per annum. All other transactions were funded through Company
operations. Subsequent to the end of the quarter, on April 4, 2000, the same
related party shareholder and officer loaned an additional $40,000 to the
Company.
Year 1999 - During 1998, the Company entered into a series of Loan and
Credit Agreements, as amended, with the AKA Charitable Remainder Unitrust #1
("AKA"). The line of credit currently provides for the Company to draw the
maximum aggregate principal amount of the lesser of $5,000,000, or 80% of the
Company's current assets. The Company is not currently in compliance with
conditions of the Loan and Credit Agreement by having drawn on the credit line
beyond 80% of the Company's current assets and having not made interest payments
for approximately six months.
During 1999, the Company offered Preferred Stock under Rule 506 to three
accredited investors who were also officers, directors, or beneficial owners of
the Company's stock. Ralph Rasmussen, a Director and Trustee for AKA Charitable
Remainder Unitrust #1 ("AKA"), a greater than 10% beneficial owner of the
Company's stock; and John B. Hewlett, the Company's Chief Executive Officer,
purchased shares. The Preferred Stock shares were offered at $20 per share and
are convertible at any time into shares of Common Stock at the rate of 20 shares
of Common Stock for one share of Preferred Stock.
AKA purchased 50,000 shares of Convertible Preferred Stock for $1,000,000.
AKA also received 1,000,000 common stock purchase warrants exercisable at $1.00
for up to 10 years. In the event the Company fails to comply with the repayment
terms of the loan agreements with AKA, the conversion rate increases from 20 to
one, to 100 to one for AKA. The Preferred Stock pays dividends at the rate of 5%
during 1999 (payable in shares of Common Stock), and 6% thereafter (payable in
shares of Common Stock or cash at AKA's election).
John B. Hewlett purchased 25,000 shares of Convertible Preferred Stock for
$500,000. Mr. Hewlett also received 500,000 common stock purchase warrants
exercisable at $1.00 per share and valid for up to 10 years. The shares were
paid for through the conversion of two outstanding promissory notes totaling
$350,000 plus interest for a total of $403,000, and unreimbursed expenses
totaling $97,000. The Shares are convertible at any time into shares of Common
Stock at the rate of 20 shares of Common Stock for one share of Preferred Stock.
The Preferred Stock pays dividends at the rate of 5% during 1999 (payable in
shares of Common Stock), and 6% thereafter (payable in shares of Common Stock or
cash at Mr. Hewlett's election).
4
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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 three months ended March 31, 2000, were $408,000 compared
to $984,000 for the comparable period in 1999, a decrease of $576,000 or 59%.
The decreased sales volume was attributable to the change in marketing strategy
of phasing out discounted sales in preference to selling directly to corporate
customers. The Company also moved to a new location during the first quarter
which interrupted sales and shipments.
The Company continues to implement re-focused business strategies 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 of
high-fashion design and value.
Cost of sales decreased from $751,000 for the three months ended March 31,
1999, to $328,000 for the comparable period in 2000, a decrease of $423,000 or
56%. The gross profit margin decreased from 23% for the three months ended March
31, 1999 to 20% for the comparable period in 2000. This decrease in gross
margins resulted from price/volume mix and a tighter golf products market due to
competitive factors including excess inventories among competitors. Selling
obsolete inventory contributed to the reduced margin.
Selling, general, and administrative costs were $593,000 for the three
months ended March 31, 2000 compared to $636,000 for the comparable period in
1999, a decrease of $43,000 or 7%. Measures were implemented to reduce staff
(mostly through attrition) and consolidated operations have contributed to
reducing these expenses.
The Company's interest expense decreased from $163,000 for the three months
ended March 31, 1999 to $115,000 for the comparable period in 2000 as a result
of interest on the AKA loans interest rate being reduced from 12% to 8% per
annum during November 1999.
The Company experienced a net loss before extraordinary item and net loss
per share before extraordinary item of $628,000 and $0.07, respectively, for the
three months ended March 31, 2000, compared to a net loss before extraordinary
item and net loss per share before extraordinary item of $586,000 and $0.08,
respectively, for the comparable period in 1999.
The Company's inventory decreased from $1,628,000 at December 31, 1999 to
$1,584,000 at March 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2000, John B. Hewlett loaned the Company
$100,000 on a promissory note bearing interest at 8% per annum and due December
31, 2001.
Based upon the operating history, the Company's auditors during the past
several years have expressed concern about the Company's ability to continue
operations. The Company believes these concerns are primarily founded upon the
Company's lack of working capital resulting from the Company operating at a loss
which causes the Company to rely upon outside capital to fund ongoing
operations. During 1998 and 1999, the Company took action to cut operating
expenses by reducing its work force and bringing certain independent contractor
functions in house. The Company is also pursuing a new marketing plan during
2000. The Company believes these changes will help move existing inventory and
reduce its cash flow concerns, but it is unlikely that these changes alone will
provide sufficient capital to fund ongoing operations.
The Company's cash used in operating activities for the three months ended
March 31, 2000 and March 31, 1999 were $(628,000) and $(586,000), respectively.
Working capital at March 31, 2000 was $(5,434,000) compared to $(4,806,000) at
December 31, 1999. Cash and cash equivalents at March 31, 2000 were $78,000
compared to $48,000 at December 31, 1999. Inventories, net of reserves at March
31, 2000 were $1,584,000 compared to $1,628,000 at December 31, 1999, a decrease
of $44,000. Also, accounts receivable decreased $229,000 from $233,000 at
December 31, 1999 to $5,000 at March 31, 2000. The revolving line of credit of
$5,000,000, net of discounts, on December 31, 1999 increased to $5,063,000 as of
March 31, 2000 because of
5
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interest accruing on the note. Notes payable for $529,000 were outstanding at
March 31, 2000 compared to $533,000 at December 31, 1999. Accounts payable and
accrued liabilities increased by $241,000 from December 31, 1999 to March 31,
2000. Royalties due and payable pursuant to the license agreement with Fila
Sport for the first and part of the second quarter of 1999 were paid current
prior to the end of the second quarter. Fila royalties accrued and unpaid at
December 31, 1999 were $450,000 compared to $506,000 as of March 31, 2000. This
unpaid balance of Fila royalties puts the Company in noncompliance on its
agreement with Fila.
Historically the Company has funded itself through operations, the sale of
stock, and borrowing. Most recently the Company has raised equity through a
private offering of its stock and through negotiating loan agreements as are
outlined throughout this report. The Company plans to continue to use these
methods to fund operations. Potential investors are being approached to lend to
or invest in the Company. The Company has reduced operating expenses to help
reduce its reliance on outside funding.
The golf business is seasonal because of winter condition throughout much
of the World, especially the Northern United States. This seasonality causes the
Company's sales to vary by quarter; accordingly, operating results can vary
substantially from quarter to quarter and one quarter's results may not be
representative of the Company's annual results.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is currently maintaining a legal action in the Utah Third
District Court on January 6, 1999 entitled RENAISSANCE GOLF PRODUCTS, INC. VS.
BRAD OLIVER, case number 990900097, for Breach of Contract, Quantum Meruit,
Fraud and Intentional Interference with Prospective Economic Advantage. The
essence of the case is Brad Oliver receiving inventory valued at approximately
$131,951.04 for resale and not making payment for the goods received. Settlement
discussions are ongoing and the Company intends to obtain a settlement for the
full amount of the goods received by Mr. Oliver. The Company believes that the
prospects for obtaining a judgement against Mr. Oliver for the full amount of
the claim are good. The prospects for the Company collecting any awarded damages
from Mr. Oliver are unknown because Mr. Oliver's personal financial
circumstances are unknown to the Company.
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
The Company has moved and it currently occupies approximately 29,230 square
feet of office, manufacturing, and warehouse space located at 11585 South State
Street, Draper, Utah 84020. The lease provides for rent of approximately
$216,000 per year and expires in March 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Not Applicable.
6
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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: May 11, 2000 By:
-----------------------------------
John B. Hewlett
Chairman of the Board
Date: May 11, 2000 By:
-----------------------------------
Michael Hammond
Controller
Chief Financial Officer
7
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET OF RENAISSANCE GOLF PRODUCTS INC. AND SUBSIDIARY AS OF MARCH 31,
2000 AND THE CONSOLIDATED STATEMENT OF OPERATIONS AND CASH FLOWS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 77,682
<SECURITIES> 0
<RECEIVABLES> 4,671
<ALLOWANCES> 0
<INVENTORY> 1,584,076
<CURRENT-ASSETS> 1,805,582
<PP&E> 428,355
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,251,937
<CURRENT-LIABILITIES> 7,240,049
<BONDS> 0
750
0
<COMMON> 9,429
<OTHER-SE> (4,998,291)
<TOTAL-LIABILITY-AND-EQUITY> 2,251,937
<SALES> 408,280
<TOTAL-REVENUES> 408,280
<CGS> 328,144
<TOTAL-COSTS> 920,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115,389
<INCOME-PRETAX> (627,738)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (627,738)
<EPS-BASIC> (.07)
<EPS-DILUTED> 0
</TABLE>
