UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8 - K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report April 23, 1998
COMMISSION FILE NO. 0-24812
DIVOT GOLF CORPORATION (F/K/A BRASSIE GOLF CORPORATION)
- ------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1781650
- -------------------------------- -----------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
One Tampa City Center, Suite 200, Tampa, FL 33602
- ------------------------------------------------------------------------------
(Address of principal executive offices)
(813) 222-0611
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter 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 |_|
1
Exhibit Index is on Page 4
<PAGE>
DIVOT GOLF CORPORATION
FORM 8 - K/A
TABLE OF CONTENTS
Item 1. Changes in Control of Registrant - None
Item 2. Acquisition or Disposition of Assets - None
Item 3. Bankruptcy or Receivership - None
Item 4. Changes in Registrant's Certifying Accountant - None
Item 5. Other Events.....................................................Page 3
Item 6. Resignations of Registrant's Directors - None
Item 7. Financial Statements and Exhibits................................Page 3
Signatures................................................................Page 7
2
<PAGE>
ITEM 5. Other Events
The purpose of this current report on Form 8-K/A is to file the financial
statements for Miller Golf, Inc. ("Miller Golf") as of March 31, 1998, September
30, 1997, and September 30, 1996 and for the six month period ended March 31,
1998 and for each of the two years in the period ended September 30, 1997 and
the unaudited pro forma combined condensed financial statements and related
notes thereto, both of which are in connection with the Company's acquisition on
April 8, 1998 of all the issued and outstanding shares of capital stock of
Miller Golf. This information serves to: (i) comply with the requirements of
Item 310(c)of Regulation S-B and Article 11 of Regulation S-X; and (ii) provide
the required financial statements and pro forma financial information of the
business acquired amending the Current Report on Form 8K, dated April 23, 1998,
which was filed with the Securities and Exchange Commission on April 23, 1998.
The pro forma financial information also includes (i) adjustments to reflect the
conversion of certain convertible secured notes into shares of preferred stock
as discussed in the Company's Current Report on Form 8-K, dated June 12, 1998
and (ii) adjustments to reflect the sale of the Company's leasehold interest in
the golf course assets at the Gauntlet at Curtis Park ("Curtis Park") as
discussed in the Company's Current Report on Form 8-K/A, dated May 26, 1998.
Item 7. Financial Statements and Exhibits
Financial Statements
(a) Financial Statements of Business Acquired
Miller Golf, Inc. Financial Statements for the six month period
ended March 31, 1998 and for the two years in the period ended
September 30, 1997 and Independent Auditor's Report.
(b) Pro Forma Financial Information
Unaudited Pro Forma Combined Condensed Financial Statements
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
(c) Exhibits
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned herein duly authorized.
DIVOT GOLF CORPORATION
By: /s/ Clifford F. Bagnall
-------------------------
Clifford F. Bagnall
Chief Financial Officer
Date: June 19, 1998
3
<PAGE>
FORM 8-K/A
CURRENT REPORT
EXHIBIT INDEX
Item/Exhibit No. Document Page
- ---------------- -------- ----
Item 7 (a) Financial Statements of Business Acquired 5
Item 7 (b) Pro Forma Financial Information 22
4
<PAGE>
ITEM 7(a)
Audited Financial Statements
Miller Golf, Inc.
Six-month period ended March 31, 1998 and
years ended September 30, 1997 and 1996
with Report of Independent Auditors
5
<PAGE>
Miller Golf, Inc.
Audited Financial Statements
Six-month period ended March 31, 1998 and years ended September
30, 1997 and 1996
Contents
Report of Independent Auditors.................................................1
Financial Statements
Balance Sheets ................................................................2
Statements of Operations.......................................................4
Statements of Changes in Shareholders' Equity..................................5
Statements of Cash Flows.......................................................6
Notes to Financial Statements..................................................7
6
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Miller Golf, Inc.
We have audited the accompanying balance sheets of Miller Golf, Inc. as of March
31, 1998, September 30, 1997, and September 30, 1996, and the related statements
of operations, shareholders' equity and cash flows for the six-month period
ended March 31, 1998 and for each of the two years in the period ended September
30, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Miller Golf, Inc. at March 31,
1998, September 30, 1997, and September 30, 1996 and the results of its
operations and its cash flows for the six-month period ended March 31, 1998 and
for each of the two years in the period ended September 30, 1997 in conformity
with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Raleigh, North Carolina
May 1, 1998
7
<PAGE>
Miller Golf, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 156,311 $ 84,809 $ 47,668
Accounts receivable, less allowance for doubtful accounts
of $30,600 at March 31, 1998, $26,600 at September 30,
1997, and $28,900 at September 30, 1996
1,348,808 1,279,483 1,417,706
Other receivables 59,041 94,258 12,906
Inventory 1,259,960 1,142,040 1,124,442
Prepaid expenses and deposits 283,743 132,304 132,421
Deferred tax asset 82,800 79,200 31,200
--------------------------------------------------------
Total current assets 3,190,663 2,812,094 2,766,343
Property and equipment:
Machinery and leasehold improvements 725,352 725,352 721,962
Furniture and fixtures 286,426 285,709 285,709
Equipment 596,824 589,606 551,665
--------------------------------------------------------
1,608,602 1,600,667 1,559,336
Accumulated depreciation (1,441,722) (1,410,500) (1,332,767)
--------------------------------------------------------
166,880 190,167 226,569
Deferred tax asset 96,200 96,200 164,500
Other assets 112,394 117,033 107,416
--------------------------------------------------------
Total assets $ 3,566,137 $ 3,215,494 $ 3,264,828
========================================================
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C>
Liabilities and shareholders' equity Current liabilities:
Accounts payable $ 250,651 $ 275,489 $ 277,101
Accrued expenses 314,794 348,329 301,579
Income taxes payable - 97,246 309,097
Line of credit 1,242,977 683,913 754,001
Current portion of long-term debt - 12,666 50,000
Notes payable - related party 104,698 103,847 44,015
--------------------------------------------------------
Total current liabilities 1,913,120 1,521,490 1,735,793
Long-term debt, less current portion - - 12,667
Notes payable - related party, less current portion 10,653 20,851 39,962
Deferred taxes 23,300 23,300 21,200
Commitments and contingencies (Notes 11 and 12)
Shareholders' equity:
Common Stock, $1 par value, 250,000 shares
authorized, 114,000 shares issued and outstanding
114,000 114,000 114,000
Additional paid-in capital 386,000 386,000 386,000
Retained earnings 3,514,278 3,545,067 3,350,420
Less cost of Common Stock held in treasury, 82,000
shares (2,202,160) (2,202,160) (2,202,160)
Notes receivable from shareholders (193,054) (193,054) (193,054)
--------------------------------------------------------
Total shareholders' equity 1,619,064 1,649,853 1,455,206
--------------------------------------------------------
Total liabilities and shareholders' equity $ 3,566,137 $ 3,215,494 $ 3,264,828
========================================================
</TABLE>
See accompanying notes.
9
<PAGE>
Miller Golf, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Six-month period
ended March 31 Year ended September 30
1998 1997 1996
--------------------------------------------------------
<S> <C> <C> <C>
Sales $ 3,419,782 $ 8,983,132 $ 9,918,366
Cost of sales 2,231,733 5,535,424 6,316,556
--------------------------------------------------------
Gross profit 1,188,049 3,447,708 3,601,810
Selling, general and administrative expenses 1,283,592 2,973,095 3,021,277
--------------------------------------------------------
(Loss) income from operations (95,543) 474,613 580,533
Other income (expense):
Life insurance proceeds - - 1,750,680
Interest expense (46,700) (121,248) (201,694)
Interest income 7,754 14,417 69,028
Other income (expense) 100,000 (2,835) 9,434
--------------------------------------------------------
61,054 (109,666) 1,627,448
(Loss) income before taxes (34,489) 364,947 2,207,981
Provision for income taxes (3,700) 170,300 196,500
========================================================
Net (loss) income $ (30,789) $ 194,647 $ 2,011,481
========================================================
</TABLE>
See accompanying notes.
10
<PAGE>
Miller Golf, Inc.
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Additional Retained Notes Receivable
Stock Paid-In Capital Earnings Treasury Stock from Shareholders Total
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 $ 114,000 $ 386,000 $ 1,338,939 $ (52,160) $ (202,500) $ 1,584,279
Purchases of treasury stock - - - (2,150,000) - (2,150,000)
Repayments of principal - - - - 9,446 9,446
Net income - - 2,011,481 - - 2,011,481
-------------------------------------------------------------------------------------------------
Balance at September 30, 1996 114,000 386,000 3,350,420 (2,202,160) (193,054) 1,455,206
Net income - - 194,647 - - 194,647
-------------------------------------------------------------------------------------------------
Balance at September 30, 1997 114,000 386,000 3,545,067 (2,202,160) (193,054) 1,649,853
Net loss - - (30,789) - - (30,789)
=================================================================================================
Balance at March 31, 1998 $ 114,000 $ 386,000 $ 3,514,278 $ (2,202,160) $ (193,054) $ 1,619,064
=================================================================================================
</TABLE>
See accompanying notes.
11
<PAGE>
Miller Golf, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Six-month period Year ended
ended September 30
March 31, 1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net (loss) income $ (30,789) $ 194,647 $ 2,011,481
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation 31,222 77,733 102,356
Deferred taxes (3,600) 22,400 (178,560)
Changes in operating assets and liabilities:
Accounts receivable and other receivables (34,108) 56,871 137,070
Inventory (117,920) (17,598) 80,275
Prepaid expenses and deposits (151,439) 117 115,591
Other assets 4,639 (9,617) 252,700
Accounts payable (24,838) (1,612) (283,669)
Accrued expenses (33,535) 46,750 20,850
Income taxes payable (97,246) (211,851) 288,988
----------------------------------------------------
Net cash (used in) provided by operating activities (457,614) 157,840 2,547,082
Investing activities
Purchases of property and equipment (7,935) (41,331) (26,054)
----------------------------------------------------
Net cash used in investing activities (7,935) (41,331) (26,054)
Financing activities
Proceeds from line of credit 4,134,301 9,655,113 10,135,898
Principal payments on line of credit (3,575,237 (9,725,201) (10,456,991)
Net (payments) proceeds from notes payable - related party (9,347) 40,721 -
Payments on long-term debt (12,666) (50,001) (45,000)
Repayments on notes receivable from shareholders - - 9,446
Purchase of treasury stock - - (2,150,000)
----------------------------------------------------
Net cash provided by (used in) financing activities 537,051 (79,368) (2,506,647)
Net increase in cash 71,502 37,141 14,381
Cash at beginning of year 84,809 47,668 33,287
----------------------------------------------------
Cash at end of year $ 156,311 $ 84,809 $ 47,668
====================================================
Supplemental disclosures of cash flow information
Cash paid for interest $ 42,095 $ 103,764 $ 183,895
====================================================
Cash paid for income taxes $ 208,992 $ 359,651 $ 78,012
====================================================
</TABLE>
See accompanying notes.
12
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements
March 31, 1998
1. Business of the Company
Miller Golf, Inc. (the "Company") is engaged in the manufacturing and
distribution of golf accessories, specialties and promotional items, which are
sold principally to golf courses, pro shops, recreational facilities, and event
sponsoring organizations in the United States and Puerto Rico.
2. Summary of Significant Accounting Policies
Revenue Recognition
Revenues, net of allowance for estimated future returns, are recognized at the
time merchandise is shipped to the customer.
Concentration of Credit Risk
The Company's primary financial instrument subject to potential concentration of
credit risk is accounts receivable which are unsecured. The Company provides an
allowance for doubtful accounts based on its analysis of potentially
uncollectible accounts. As of March 31, 1998, the Company had no significant
concentrations of credit risk with any individual customers.
Inventory
Inventory is stated at cost (using the first-in, first-out cost flow assumption)
and has been adjusted for slow-moving or obsolete items.
Inventory consists of the following:
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
--------------------- ------------------ -------------------
<S> <C> <C> <C>
Raw materials $ 321,874 $ 310,949 $ 293,935
Work in process 55,303 47,460 51,876
Finished goods 896,783 785,631 780,631
--------------------- ------------------ -------------------
Total 1,273,960 1,144,040 1,126,442
Less inventory reserves 14,000 2,000 2,000
===================== ================== ===================
$ 1,259,960 $ 1,142,040 $ 1,124,442
===================== ================== ===================
</TABLE>
13
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Property and Equipment
Property and equipment accounts are stated at cost. Depreciation for both
financial reporting and income tax purposes is computed using accelerated
methods.
Expenditures for major renewals and betterments that extend the useful lives of
the property and equipment are capitalized. Expenditures for maintenance and
repairs are charged to expense as incurred.
The estimated lives are as follows:
Machinery and leasehold improvements 7 - 31.5 years
Furniture and fixtures 7 years
Equipment 5 - 7 years
Long-Lived Assets
Upon indication of impairment, the Company's policy for assessing impairment of
long-lived assets is to calculate the undiscounted projected future cash flows
of the asset expected to be generated over the remaining useful life of the
asset. This amount is compared to the carrying value of the asset to determine
if the asset is impaired. The Company adjusts the net book value of the
underlying assets if the sum of expected future cash flows is less than book
value. Based on the application of this policy, no impairments have been
recognized.
Use of Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
14
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Advertising Costs
The Company expenses advertising costs as incurred, except for direct response
advertising, which is capitalized as prepaid advertising and amortized over its
expected period of future benefits. Total advertising expense was $113,779,
$241,353 and $258,882 for the six-month period ended March 31, 1998 and the
years ended September 30, 1997 and 1996, respectively.
Impact of Recently Issued Accounting Standard
In 1997, the FASB issued Statement No. 130, "Reporting Comprehensive Income"
("SFAS 130") and Statement No. 131, "Disclosures About Segments of an Enterprise
and Related Information" ("SFAS 131"), which are both effective for fiscal years
beginning after December 15, 1997. SFAS 130 addresses reporting amounts of other
comprehensive income and SFAS 131 addresses reporting segment information. The
Company does not believe that the adoption of these new standards will have a
material impact on its financial statements.
3. Prepaid Expenses and Deposits
Prepaid expenses and deposits consist of the following:
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Prepaid advertising $ 38,221 $ 43,148 $ 42,995
Prepaid insurance 66,065 39,334 41,583
Other prepaid expenses 62,576 33,347 34,043
Prepaid income taxes 107,181 - -
Deposits and advances 9,700 16,475 13,800
==================== ==================== ====================
$ 283,743 $ 132,304 $ 132,421
==================== ==================== ====================
</TABLE>
15
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
4. Notes Receivable from Shareholders
During 1995, two employees of the Company purchased 9,000 shares of the
Company's common stock in exchange for promissory notes. If the employees
receive an annual bonus, then they are subject to payments on the note equal to
one-third of the bonus which will first reduce accrued interest and then the
outstanding principal balance. Interest accrues on the unpaid balance at a rate
of 7% per annum. The unpaid principal balance and accrued interest are due and
payable on July 14, 2000. The notes are secured by a security interest in 9,000
shares of the Company's common stock.
5. Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
---------------- -------------------- ------------------
<S> <C> <C> <C>
Accrued and withheld payroll taxes $ 20,950 $ 9,410 $ 10,276
Accrued payroll and payroll related expenses 131,755 173,266 121,710
Accrued commissions 79,282 66,495 77,016
Accrued pension 27,807 39,973 49,976
Accrued professional fees 55,000 59,185 42,601
---------------- -------------------- ------------------
$ 314,794 $ 348,329 $ 301,579
================ ==================== ==================
</TABLE>
6. Debt
The Company has a short-term line of credit of $2,000,000 which is secured by
inventory, accounts receivable, fixtures, machinery and equipment. Interest is
paid by the Company at a rate of 1% per annum over the bank's prime rate through
February 18, 1997, after which time interest is paid at a rate of .75% per annum
over the bank's prime rate (8.5% at March 31, 1998). The line of credit, which
expires March 31, 2000, requires the Company to maintain certain financial
covenants principally relating to cash flow. The outstanding balance at May
1998, September 30, 1997, and September 30, 1996 was $1,242,977, $683,913 and
$754,001, respectively.
The Company also has a $100,000 line of credit for the purpose of equipment
acquisitions. The outstanding balance accrues interest at 1% over the bank's
prime rate (8.5% at March 31, 1998) and is cross-collateralized with the
short-term line of credit. Based on the line of credit agreement, the
outstanding balance under this line of credit will be converted to a five-year
term note at the end of each fiscal year. As of March 31, 1998, there was no
outstanding balance on this line of credit.
16
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
7. Notes Payable - Related Party
Periodically, the President and majority shareholder have advanced the Company
funds for cash shortfalls. There is no set repayment schedule and accordingly,
the amounts have been included as current liabilities. Interest accrues at prime
(8.5% at March 31, 1998) plus .75% adjusted periodically by executive management
as they deem necessary. Amounts outstanding at March 31, 1998, September 30,
1997, and September 30, 1996 were $84,736, $84,736 and $26,500, respectively.
The Company has an unsecured note payable from a shareholder payable in fixed
monthly installments of $1,821 including interest at 8.75%. Amounts outstanding
at March 31, 1998, September 30, 1997, and September 30, 1996 were $30,615,
$39,962 and $57,477, respectively.
8. Employee Retirement Plan
The Company has a noncontributory defined contribution pension plan that covers
all salaried employees employed for at least six months and 1,000 hours of
service within the year. Factory employees are covered by a noncontributory
union pension plan. Pension expenses charged to operations are as follows:
<TABLE>
<CAPTION>
Six-month
period ended
March 31 Year ended September 30
1998 1997 1996
---------------- -------------------- ------------------
<S> <C> <C> <C>
Salaried employees $ 24,375 $ 47,543 $ 53,804
Hourly and factory employees 17,425 37,142 40,717
================ ==================== ==================
Total $ 41,800 $ 84,685 $ 94,521
================ ==================== ==================
</TABLE>
The Company has a voluntary cash or deferred salary arrangement qualified under
Section 401(k) of the Internal Revenue Code which became effective July 1, 1983.
All salaried employees, and effective October 1, 1993, all union employees are
eligible to participate and elections may be made to contribute from 1% to 15%
of salary, to a statutory maximum. The Company has a matching program of up to a
maximum 6% of covered compensation for salaried employees and 4% of covered
compensation for union employees. Contributions made were $41,387, $84,220 and
$74,331 for the six-month period ended March 31, 1998 and for the years ended
September 30, 1997 and 1996, respectively.
17
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
9. Income Taxes
Federal and state income taxes are computed on net income of the Company
adjusted for permanent differences between income for financial reporting and
income for tax purposes. The resulting tax is computed using the statutory rates
of respective governing agencies.
Deferred income taxes result primarily from timing differences between financial
and tax income and are accounted for as required by Statement No. 109 of the
Financial Accounting Standards Board.
The tax effects of temporary differences at March 31, 1998, September 30, 1997,
and September 30, 1996 that give rise to significant portions of deferred tax
assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
------------------ ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 13,800 $ 13,800 $ 11,700
Other, net 9,500 9,500 9,500
------------------ ----------------- ------------------
Total deferred tax liabilities 23,300 23,300 21,200
Deferred tax assets:
Inventory 53,200 47,100 19,500
Insurance 9,100 21,400 -
Alternative minimum tax credit carryforward
96,200 96,200 164,500
Bad debts 12,300 10,700 11,700
Net operating loss 8,200 - -
------------------ ----------------- ------------------
Total deferred tax assets 179,000 175,400 195,700
================== ================= ==================
Net deferred tax asset $ 155,700 $ 152,100 $ 174,500
================== ================= ==================
</TABLE>
For the period ended March 31, 1998, the Company incurred a federal net
operating loss of approximately $24,000 that expires during the year 2018. An
alternative minimum tax credit of approximately $164,500 arose in the year ended
September 30, 1996. Approximately $68,300 of the credit was used in the year
ended September 30, 1997. The remaining credit has an indefinite carryforward
period.
18
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
9. Income Taxes (continued)
The provision for income taxes for the six-month period ended March 31, 1998 and
for the years ended September 30, 1997 and 1996, respectively, consists of the
following:
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
------------------ ----------------- ------------------
<S> <C> <C> <C>
Current expense:
Federal $ - $ 96,800 $ 319,100
State - 51,000 47,900
------------------ ----------------- ------------------
- 147,800 367,000
Deferred expense (benefit):
Federal (4,400) 29,600 (172,100)
State 700 (7,100) 1,600
================== ================= ==================
(3,700) 22,500 (170,500)
================== ================= ==================
$ (3,700) $ 170,300 $ 196,500
================== ================= ==================
</TABLE>
A reconciliation of the provision for income taxes to income tax expense,
computed by applying the statutory federal income tax rate to pre-tax earnings
at March 31, 1998, September 30, 1997, and September 30, 1996 is as follows:
<TABLE>
<CAPTION>
March 31 September 30
1998 1997 1996
------------------ ----------------- ------------------
<S> <C> <C> <C>
Income tax expense at statutory federal rate $ (10,000) $ 124,100 $ 750,700
Income tax expense at statutory state rate (1,800) 22,900 138,400
Increase (decrease) resulting from:
Life insurance proceeds - - (705,000)
Non-deductible expenses 6,700 23,300 9,200
Other 1,400 - 3,200
================== ================= ==================
$ (3,700) $ 170,300 $ 196,500
================== ================= ==================
</TABLE>
19
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
10. Treasury Stock
The Company has periodically repurchased shares of common stock from its
shareholders. Treasury stock consists of the following at March 31, 1998,
September 30, 1997, and September 30, 1996:
<TABLE>
<CAPTION>
Fiscal Year End of Number of Shares
Common Stock Repurchase Repurchased Cost
- ------------------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
September 30, 1994 4,000 $ 52,160
September 30, 1996 78,000 2,150,000
================= ==================
82,000 $ 2,202,160
================= ==================
</TABLE>
11. Leases
The Company leases certain automobiles and office space under operating leases
which expire at various times through 2005. Total rent expense for the Company
was approximately $145,000, $291,000 and $291,000 for the six-month period ended
March 31, 1998 and the years ended September 30, 1997 and 1996, respectively.
Future minimum lease payments, by year and in the aggregate, under operating
leases during the next five years and thereafter are as follows:
1998 (nine months) $ 231,125
1999 304,350
2000 302,998
2001 326,862
2002 and thereafter 1,272,525
=====================
$ 2,437,860
=====================
The Company leases its corporate office and warehouse space from the President
and majority shareholder of the Company. The lease is for a period of ten years
expiring in December 2005.
Terms of the lease required the Company to pay real estate taxes, repairs,
maintenance and insurance on the leased premises. The rent during the option
period is adjusted to reflect increases, but not decreases, in cost of living
based on the consumer price index for urban consumers.
Annual rent expense paid to the shareholder for the six-month period ended March
31, 1998 and the years ended September 30, 1997 and 1996 was $145,350, $290,700
and $285,000, respectively.
20
<PAGE>
Miller Golf, Inc.
Notes to Financial Statements (continued)
12. Commitments and Contingencies
Letters of credit may be issued up to a maximum of the available balance under
the Company's short-term line of credit to vendors for overseas inventory
purchases (see Note 6). Interest accrues annually at prime (8.5% at March 31,
1998) plus 1%. Letters of credit outstanding at March 31, 1998, September 30,
1997 and September 30, 1996 were $29,634, $148,862 and $36,950, respectively.
13. Subsequent Events
On April 3, 1998, the shareholders' of Miller Golf, Inc. entered into a Stock
Purchase Agreement with Brassie Golf Corporation ("Brassie"), whereby Brassie
will purchase one hundred percent of the outstanding shares of Miller Golf, Inc.
for a total purchase price of $4,300,000, consisting of $3,000,000 in cash,
800,000 shares of Brassie's common stock (valued at $300,000 on the date of
closing), and a $1,000,000 note payable with principal and accrued interest due
on September 30, 1998.
21
<PAGE>
DIVOT GOLF CORPORATION
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma combined condensed financial statements
include the historical and pro forma effects of the April 8, 1998 acquisition of
Miller Golf, Inc. ("Miller Golf "). These pro forma financial statements also
include (i) the historical and pro forma effects of the issuance of $3.0 million
of convertible secured notes in April 1998 and the subsequent exchange of such
notes for shares of the Company's 1997 Convertible Preferred Stock, and (ii) the
sale of the Company's leasehold interest in the golf course assets at the
Gauntlet at Curtis Park ("Curtis Park").
The following unaudited pro forma combined condensed financial statements have
been prepared by the management of Divot Golf Corporation, Inc. formerly known
as Brassie Golf Corporation, Inc. (the "Company") from its historical
consolidated financial statements and the historical financial statements of
Miller Golf which are included in this Current Report on Form 8-K/A. The
unaudited pro forma combined condensed statements of operations reflect
adjustments as if the transactions had occurred on January 1, 1997. The
unaudited pro forma combined condensed balance sheet reflects adjustments as if
the transactions had occurred on March 31, 1998. See "Note 1 - Basis of
Presentation." The pro forma adjustments described in the accompanying notes are
based upon preliminary estimates and certain assumptions that management of the
Company believes are reasonable in the circumstances.
The unaudited pro forma combined condensed financial statements are not
necessarily indicative of what the financial position or results of operations
actually would have been if the transaction had occurred on the applicable dates
indicated. Moreover, they are not intended to be indicative of future results of
operations or financial position. The unaudited pro forma combined condensed
financial statements should be read in conjunction with the historical
consolidated financial statements of the Company and related notes thereto which
are included in the Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1998, which was filed with the Securities and Exchange
Commission (the "Commission") on May 15, 1998, and in the Company's Annual
Report on Form 10-KSB filed with the Commission on March 31, 1998. The unaudited
pro forma combined condensed financial statements should be read in conjunction
with the historical financial statements of Miller Golf which are included in
this Current Report on Form 8-K/A.
22
<PAGE>
DIVOT GOLF CORPORATION
PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Convertible Divot Golf
Divot Golf Sale of Secured Note Pro Forma Combined
Historical Miller Golf Curtis Park(d) Financing Adjustments Pro Forma
------------- -------------- -------------- ------------ ------------- --------------
Current assets:
Cash (deficit) $ (148,362) $ 156,311 $ 263,434 $3,000,000(c) $(3,000,000)(a) $ 271,383
Cash restricted 126,012 (126,012)
Accounts and notes receivable 429,577 1,407,849 (63) 1,837,363
Accounts receivable from related
parties 25,358 25,358
Inventories and other current assets 892,494 1,626,503 (170,494) 100,000 (a) 2,448,503
------------ -------------- -------------- ---------- ------------- --------------
Total current assets 1,325,079 3,190,663 (33,135) 3,000,000 (2,900,000) 4,582,607
Property and equipment, net 7,169,858 166,880 (4,416,950) 2,919,788
Goodwill, net 325,729 2,580,936(b) 2,906,665
Intangible assets, net 651,627 (177,590) 474,037
Other Assets 208,594 208,594
------------ -------------- -------------- ----------- -------------- --------------
Total assets $ 9,472,293 $ 3,566,137 $(4,627,675) $ 3,000,000 $ (319,064) $11,091,691
============ ============== ============== =========== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Convertible Divot Golf
Divot Golf Sale of Secured Note Pro Forma Combined
Historical Miller Golf Curtis Park(d) Financing Adjustments Pro Forma
------------- -------------- --------------- ------------ -------------- ---------------
Liabilities And Shareholders Equity:
Accounts payable and accrued
expenses $ 1,160,892 $ 565,445 $ (323,556) $ $ $ 1,402,781
Accrued interest payable 76,818 (61,025) 15,793
Income tax payable 181,793 181,793
Long-term debt and capital
lease obligations 5,878,668 (4,766,894) 3,000,000(c) 1,000,000(a) 2,111,774
(3,000,000)(c)
Notes payable - related Party 115,351 115,351
Line of Credit 1,242,977 1,242,977
Accrued discount on convertible
debentures 51,489 51,489
Deferred taxes 23,300 23,300
Shareholders' Equity:
Preferred Stock 283 3(c) 286
Common Stock 48,344 114,000 (114,000) 49,144
800(a)
Additional paid-in capital 33,421,991 386,000 2,999,997(c) 299,200(a) 37,450,188
729,000(e) (386,000)
Accumulated deficit (31,028,264) 3,514,278 523,800 (729,000)(e) (3,514,278) (31,233,464)
Less cost of Common stock
held in treasury (2,202,160) 2,202,160
Less cost of Convertible
Preferred Stock held in
Treasury, 281,250 shares (210,937) (210,937)
Notes Receivable from shareholders (193,054) 193,054
Foreign currency translation
adjustment (108,784) (108,784)
------------ ------------- ---------------- ---------- -------------- ---------------
Total shareholders' equity 2,122,633 1,619,064 523,800 $3,000,000 (1,319,064) 5,946,433
------------ ------------- ---------------- ---------- -------------- ---------------
Total liabilities and shareholders' $9,472,293 $ 3,566,137 $ (4,627,675) $3,000,000 $ (319,064) $11,091,691
equity ============ ============= ================ ========== ============== ===============
</TABLE>
23
<PAGE>
DIVOT GOLF CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Divot Golf
Divot Golf Sale of Pro Forma Combined
Historical Miller Golf Curtis Park (g) Adjustments Pro Forma
------------------ ------------------ ----------------- --------------- --------------
Operating Revenues $ 137,468 $ 1,493,917 $ (130,530) $ $ 1,500,855
Operating Expenses (1,359,857) (1,606,374) 247,018 (2,719,213)
Depreciation & Amortization (85,322) (11,920) 72,421 (32,262)(f) (57,083)
------------------ ------------------ ----------------- --------------- --------------
Operating Loss (1,307,711) (124,377) 188,909 (32,262) (1,275,441)
Interest Expense (206,131) (28,125) 73,542 (160,714)
Other Expense, net (338,146) 523,800(h) 185,654
------------------ ------------------ ----------------- ----------------- -------------
Net Loss Before Extraordinary Items $ (1,851,988) $ (152,502) $ 786,251 $ (32,262) $(1,250,501)
================== ================== ================= ================= =============
Net Loss Per Share Before
Extraordinary Item $ (.04) $ (.03)
=================== =============
Weighted Average Shares Outstanding 46,756,200 46,756,200
=================== =============
</TABLE>
24
<PAGE>
BRASSIE GOLF CORPORATION
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Divot Golf
Divot Golf Sale of Pro Forma Combined
Historical Miller Golf Curtis Park (i) Adjustments Pro Forma
------------------ ----------------- ------------------- ------------ ----------------
Operating Revenues $ 4,093,599 $ 8,983,132 $ (1,566,144) $ $ 11,510,587
Operating Expenses (5,788,985) (8,430,786) 1,071,830 (13,147,941)
Depreciation & Amortization (871,222) (77,733) 463,305 (129,048)(f) (614,698)
------------------ ----------------- ------------------- ------------ ----------------
Operating Profit (Loss) (2,566,608) 474,613 (31,009) (129,048) (2,252,052)
Interest Expense (683,755) (121,248) 282,674 (522,329)
Loss on sale of subsidiaries (1,826,164) (1,826,164)
Other Expense, net (910,507) (158,718) 523,800(h) (545,425)
----------------- ----------------- ----------------- ------------ ----------------
Net Loss Before Extraordinary Item $ (5,987,034) $ 194,647 $ 775,465 $ (129,048) $ (5,145,970)
================= ================= ================= ============ ================
Net Loss Per Share Before
Extraordinary Item $ (.22) $ (.17)
================= ================
Weighted Average Shares Outstanding 29,724,100 29,724,100
================= ================
</TABLE>
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma combined condensed statements of
operations present the historical results of operations of the Company and
Miller Golf for the three months ended March 31, 1998 and for the year
ended December 31, 1997 with pro forma adjustments as if the transaction
had taken place on January 1, 1997. The unaudited pro forma combined
condensed statement of operations for the year ended December 31, 1997, is
presented using the combined historical results of the Company for the year
then ended, and those of Miller Golf for its most recent fiscal year ended
September 30, 1997. The unaudited pro forma combined condensed statement of
operations for the three month period ended March 31, 1998, is presented
using the combined historical results of the Company and those of Miller
Golf for the three months ended March 31, 1998. The unaudited pro forma
combined condensed balance sheet presents the historical balance sheets of
the Company and Miller Golf as of March 31, 1998, with pro forma
adjustments as if the transaction had been consumated as of March 31, 1998
in a transaction accounted for as a purchase in accordance with generally
accepted accounting principles.
Certain reclassifications have been made to the historical financial
statements of the Company and Miller Golf to conform to the pro forma
combined condensed financial statement presentation.
2. PRO FORMA ADJUSTMENTS
The following adjustments give pro forma effect to the transaction:
(a) To record purchase price consideration:
Cash deposit paid on February 2, 1998 $ 100,000
Cash paid at closing financed by
$3.0 million convertible debentures,
subsequently converted to convertible
preferred stock, 2,900,000
Short term debt issued to Miller Golf's
former shareholders 1,000,000
Common Stock issued as deposit 200,000
Common Stock issued at closing 100,000
-----------
$ 4,300,000
===========
(b) To record the cost in excess of net assets acquired of approximately
$2.6 million.
(c) To reflect adjustments representing $3.0 million of convertible
secured notes issued to finance Miller acquisition and subsequent
exchange of such notes for 3,000 shares of the Company's 1997
Convertible Preferred Stock.
(d) Represents the historical balance sheet of Curtis Park as of March 31,
1998, as adjusted for the Company's gain on the sale of assets.
(e) To record adjustment to reflect discount feature of Convertible
Preferred Stock. Convertible Preferred Stock is convertible at
the lessor of (i) $.70 or (ii) 75% of the average of the closing
bid price of a share of common stock of the Company during the
ten trading days prior to such conversion.
(f) To record amortization of the cost in excess of acquired net assets
over an estimate life of 20 years. Such amortization expense is
subject to possible adjustment resulting from the completion of
valuation analysis and final post-closing adjustments.
(g) Reflects the historical statement of operations of Curtis Park for the
three months ended March 31, 1998.
(h) Reflects the Company's gain on the sale of Curtis Park.
(i) Reflects the historical statement of operations of Curtis Park for the
year ended December 31, 1997.
26
<PAGE>
