U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ___________
Commission file number 0 - 24608
---------
FOTOBALL USA, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 33 - 0614889
---------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3738 Ruffin Road, San Diego, California, 92123
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(619) 467 - 9900
----------------------------------
(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 April 30, 1999, the Company had 2,699,242 shares of its common
stock issued and outstanding.
Transitional Small Business Disclosure Format Yes ( ) No (X)
1<PAGE>
FOTOBALL USA, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets as of December 31, 1998 and
March 31, 1999 3
Condensed Statements of Operations for the three months
ended March 31, 1998 and 1999 4
Condensed Statements of Cash Flows for the three months
ended March 31, 1998 and 1999 5
Notes to Condensed Financial Statements 6-8
Item 2. Management's Discussion and Analysis or
Plan of Operations 9-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
2<PAGE>
Part I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
FOTOBALL USA, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
December 31, 1998 March 31, 1999
----------------- --------------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 8,498 $ 120,824
Accounts receivable less allowances of
$157,000 in 1999 and $147,000 in 1998 3,041,633 3,503,450
Inventories 3,438,552 3,835,130
Prepaid expenses and other 157,608 197,351
Deferred income taxes
90,000 --
------------- -------------
TOTAL CURRENT ASSETS 6,736,291 7,656,755
------------- -------------
PROPERTY AND EQUIPMENT, net 1,126,551 1,379,375
------------- -------------
OTHER ASSETS
Deposits and other 31,767 30,385
------------- -------------
TOTAL OTHER ASSETS 31,767 30,835
------------- -------------
$ 7,894,609 $ 9,066,515
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 400,000 $ 1,175,000
Current portion of capital leases 95,970 131,192
Accounts payable and accrued expenses 1,315,831 1,250,923
Income taxes payable 39,800 --
------------- -------------
TOTAL CURRENT LIABILITIES 1,851,601 2,557,115
CAPITAL LEASES, net of current portion 154,503 332,841
------------- -------------
TOTAL LIABILITIES 2,006,104 2,889,956
------------- -------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
authorized -1,000,000 shares; issued
and outstanding-none
Common stock, $.01 par value;
authorized - 15,000,000 shares;
issued and outstanding - 2,699,242 shares 26,992 26,992
Additional paid-in capital 8,590,994 8,595,869
Accumulated deficit (2,729,481) (2,446,302)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 5,888,505 6,176,559
------------- -------------
$ 7,894,609 $ 9,066,515
============= =============
See accompanying notes to condensed financial statements
3<PAGE>
FOTOBALL USA, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
-----------------------------
1998 1999
------------ ------------
SALES $ 3,761,403 $ 5,593,349
COST OF SALES 2,423,082 3,469,360
------------ ------------
GROSS PROFIT 1,338,321 2,123,989
------------ ------------
OPERATING EXPENSES
Royalties 235,925 469,796
Marketing 447,630 589,998
General and administrative 501,097 566,848
Depreciation and amortization 76,780 98,107
------------ ------------
TOTAL OPERATING EXPENSES 1,261,432 1,724,749
------------ ------------
INCOME BEFORE OTHER (INCOME)
EXPENSE AND INCOME TAX 76,889 399,240
------------ ------------
OTHER (INCOME) EXPENSE
Interest expense 9,806 26,660
Interest income (8,083) (599)
------------ ------------
TOTAL OTHER (INCOME) EXPENSE 1,723 26,061
------------ ------------
INCOME BEFORE INCOME TAX 75,166 373,179
INCOME TAX EXPENSE 29,900 90,000
------------ ------------
NET INCOME $ 45,266 $ 283,179
============ ============
NET INCOME PER COMMON SHARE
BASIC $ .02 $ .10
============ ============
DILUTED $ .02 $ .10
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
BASIC 2,691,842 2,699,242
============ ============
DILUTED 2,691,842 2,926,385
============ ============
See accompanying notes to condensed financial statements
4<PAGE>
FOTOBALL USA, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31
-----------------------------
1998 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 45,266 $ 283,179
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 81,067 102,030
Amortization of stock compensation expense 2,625 4,875
Changes in operating assets and liabilities:
Accounts receivable (596,983) (461,817)
Inventories 52,788 (396,578)
Prepaid expenses and other (10,846) (39,743)
Deferred income taxes 29,900 90,000
Accounts payable and accrued expenses 17,051 (64,908)
Income taxes payable -- (39,800)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (379,132) (522,762)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (28,121) (108,420)
Change in long-term deposits (27,109) 1,382
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (55,230) (107,038)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of capital lease obligations (26,617) (32,874)
Net additions to short-term credit facilities - 775,000
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (26,617) 742,126
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS (460,979) 112,326
CASH AND EQUIVALENTS, Beginning of period 764,855 8,498
------------ ------------
CASH AND EQUIVALENTS, End of period $ 303,876 $ 120,824
============ ============
See accompanying notes to condensed financial statements
5<PAGE>
FOTOBALL USA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
1. CONSENSED FINANCIAL STATEMENTS
The condensed balance sheet as of March 31, 1999, the condensed
statements of operations for the three months ended March 31, 1998 and
1999, and the condensed statements of cash flows for the three months
ended March 31, 1998 and 1999 have been prepared by the Company
without audit. In the opinion of management, all adjustments (which
include only normal reoccurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows
for all periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted, pursuant to the rules and
regulations of the Securities and Exchange Commission. It is
suggested that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included
in the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998.
The results of operations for the three months ended March 31, 1999
are not necessarily indicative of the results of operations to be
expected for the year ending December 31, 1999.
2. DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
Significant Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities as of the date of the financial statements and the
reported amounts of revenue and expenses during the period.
Significant estimates have been made by management with respect to the
realizability of the Company's deferred tax assets and the provision
for discontinued and excess inventories. Actual results could differ
from these estimates making it reasonably possible that a change in
these estimates could occur in the near term.
Dependence Upon Licensing Arrangements - The Company's business is
based primarily upon its use of the insignia, logos, names, colors,
likenesses and other identifying marks and images borne by many of its
products pursuant to license arrangements with NFL, Professional
Baseball, and to a lesser extent, Colleges. The Company's licensing
arrangements expire at various times through March 31, 2000. The
following table summarizes, in descending order of 1998 revenue
contribution, the Company's significant license agreements and their
terms:
Licensor Product Term Expiration Date
-------- ------------ ---------------
NFL Team Logo Football 2 years March 31, 2000
MLBPA Baseball 1 year (2 year option) December 31, 1999
MLBP Baseball 3 years December 31, 1999
6<PAGE>
FOTOBALL USA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(continued)
The Company believes that its relationships with these licensors are
satisfactory and anticipates that each of the license agreements will
be renewed on acceptable terms and conditions. The non-renewal or
termination of one or more of the Company's licenses, particularly
with NFL or Professional Baseball, could have a material adverse
effect on the Company's business.
Dependence on Promotions Business - The Company's promotions business
depends primarily upon a series of one-time projects with its
customers. In prior years, the Company's promotions business
contributed the largest percentage of the Company's total sales and
earnings and as such resulted in significant reliance upon generating
promotion sales sufficient to operate profitably. The large increase
in the Company's retail business in 1998 reduced the importance of the
promotions business in determining the Company's profitability. During
the year ended December 31, 1998, 25% of the Company's sales was
derived from promotions, of which one customer accounted for aggregate
sales of $1,383,000 or 7% of total sales. During the year ended
December 31, 1997, 33% of the Company's sales was derived from
promotions of which one customer accounted for aggregate sales of
approximately $2,438,000 or 20% of total sales.
Variability of Gross Margins - Historically, the Company has realized
higher gross margins on its retail sales as compared to promotional
sales. In 1997, the Company realized gross margins of 36%, excluding a
$1,175,000 provision for discontinued and excess inventory. In 1998,
the Company realized gross margins of 39%. The increase was primarily
due to the greater concentration of higher margin retail sales in 1998
as compared to 1997. The Company's gross margins fluctuate,
particularly between quarters, based in part on the concentration of
promotions and retail sales during the reporting period. The type of
product sold, the size of the promotion and extent of competition also
create variability in realized gross margins.
Variability of Operating Results; Seasonality; Dependence Upon
Baseball Related Sales - The Company has historically experienced
significant quarter-to-quarter variability in its sales and net
income. This was due in part to the seasonality of its licensed
sports product business combined with a significant concentration of
its business from baseball. The second factor which in prior years
significantly contributed to the variability of the Company's
operations was its dependence on promotions business as more fully
explained above. The Company realized increasing sales and
profitability in each quarter of 1998 primarily due to significant
increases in its retail businesses.
7<PAGE>
FOTOBALL USA, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
THREE MONTHS ENDED MARCH 31, 1998 AND 1999
(continued)
Dependence Upon Key Personnel - The success of the Company is largely
dependent on the personal efforts of Michael Favish, its President and
Chief Executive Officer. Mr. Favish has entered into a five-year
employment agreement with the Company, commencing on August 11, 1994,
which, among other things, precludes Mr. Favish from competing with
the Company for a period of two years following termination of his
employment with the Company. The loss of the services of Mr. Favish
would have a material adverse effect on the Company's business and
prospects. The Company and Mr. Favish are discussing an extension of
Mr. Favish's employment agreement. The Company maintains "key man"
life insurance on the life of Michael Favish in the amount of
$1,000,000.
Dependence on Suppliers - In 1998, the Company purchased approximately
87% of its raw materials and finished retail and promotions goods,
consisting primarily of synthetic baseballs, footballs, basketballs,
hockey pucks and playground balls, from six companies located in
China, with two manufacturers accounting for 77% of total raw
materials and finished goods purchased. China currently holds most
favored nation ("MFN") trading status with the United States. Any
conditions imposed by the President of the United States and any
legislation in the United States revoking or placing further
conditions on China's MFN trading status could have a material adverse
effect on the cost of all of the Company's products because products
originating from China could be subjected to substantially higher
rates of duty.
3. INVENTORIES
Inventories are valued at the lower of cost or market. Cost is
determined on the first-in first-out (FIFO) method. Inventories
consist of the following:
Finished goods December 31, 1998 March 31, 1999
----------------- --------------
$ 808,407 $ 1,950,179
Raw material 1,668,408 1,884,951
----------- ------------
Total inventory $ 2,476,815 $ 3,835,130
=========== ============
8<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
Results of Operations:
The following table sets forth certain operating data (in dollars
and as a percentage of the Company's sales) for the periods presented:
(unaudited)
Three Months Ended
March 31,
----------------------------------
1998 1999
----------------------------------
Sales $ 3,761,403 100% $ 5,593,349 100%
Cost of Sales 2,423,082 64 3,469,360 62
Operating Expenses 1,261,432 34 1,724,749 31
Operating Income 76,889 2 399,240 7
Interest Expense 9,806 1 26,660 1
Interest Income 8,083 1 599 1
Income Before Income Tax 75,166 2 373,179 7
Income Tax Expense 29,900 1 90,000 2
Net Income $ 45,266 1% $ 283,179 5%
Three Months Ended March 31, 1998 and 1999:
Sales:
Sales were $5,593,000 for the three months ended March 31, 1999,
an increase of 49% from sales of $3,761,000 for the three months ended
March 31, 1998. The increase was due to the Company's retail business
realizing substantial increases over the prior year period and
moderate increases in its promotions sales. Retail sales were
$4,541,000 for the three months ended March 31, 1999, an increase of
62% from retail sales of $2,796,000 for the three months ended March
31, 1998. Retail sales increases were primarily attributable to the
$1,200,000 or 164% increase in football-related sales and, to a lesser
extent, the $252,000 or 27% and $259,000 or 259% increases in baseball
and playground ball related sales, respectively. Contributing also to
the rapid retail sales growth are national account sales, which are
expanding both in sales per store and the number of stores serviced.
Additionally, the Company's entertainment/amusement-related business
experienced significant growth during the first quarter of 1999 and
this growth is expected to accelerate in the second half of 1999 due
to certain millennium related projects. The Company expects that, in
1999, its retail business should continue to grow at a rapid rate and
should represent a significant percentage of the Company's aggregate
sales. The Company will, however, continue to pursue promotions
business aggressively, focusing on leveraging its sports league
relationships. For the three months ended March 31, 1999, promotions
sales were $1,052,000, or 19% of sales, as compared to promotions
sales of $965,000, or 26% of sales, for the three months ended March
31, 1998. Promotions sales increased by 9% or $87,000 due to an
increase in football, hockey and lapel pin promotions sales offset in
part by a decrease in baseball-related sales.
9<PAGE>
Gross Profit:
Gross profit was $2,124,000 for the three months ended March 31,
1999, an increase of 59% from gross profit of $1,338,000 for the three
months ended March 31, 1998. Gross profit as a percentage of sales
increased from 36% for the three months ended March 31, 1998 to 38%
for the three months ended March 31, 1999. Gross profit increased
both on an absolute basis and as a percentage of sales due primarily
to the significant gross margin contribution in the quarterly period
ending March 31, 1999 from its full-size football product line. As
previously noted, the Company's gross margins fluctuate, particularly
between quarters, based on several factors including sales and product
mix (See Footnote 2, "Notes to Condensed Financial Statements"). The
Company anticipates that its gross margins for the fiscal year ending
December 31, 1999 should be consistent with the gross margins realized
during the fiscal year ended December 31, 1998.
Operating Expenses:
Operating expenses were $1,725,000, or 31% of sales, for the
three months ended March 31, 1999, as compared to operating expenses
of $1,261,000, or 34% of sales, for the three months ended March 31,
1998. The increase in operating expenses on an absolute basis was due
to increases in the Company's variable costs, such as royalties and
marketing expenses, as a result of significantly higher sales.
Operating expenses also increased due to increases in general and
administrative expenses.
Royalties expenses were $470,000 for the three months ended March
31, 1999, an increase of 99% from royalties expenses of $236,000 for
the three months ended March 31, 1998. Royalties expenses as a
percentage of sales increased to 8% of sales for the three months
ended March 31, 1999 from 6% of sales for the three months ended March
31, 1998, due to the increased concentration of higher royalty bearing
sales in 1999 as compared to 1998. Royalties expense increased in
1999 due to several factors: a greater concentration of both retail
sales and products, such as the football product lines, that carry
higher royalty rates. Additionally, royalty rates on the Company's
MLB product lines increased from 9% to 11% in 1999. Finally, the
Company's entertainment character license business, such as Rugrats
carry higher royalty rates. All of these factors should contribute in
the future to higher royalty expenses both in absolute terms and as a
percentage of sales. As previously noted, the Company is dependent
upon its licensing arrangements and their successful renewal (See
Footnote 2, "Notes to Condensed Financial Statements"). Most of the
Company's significant licenses expire on December 31, 1999 except for
the NFL Team Logo license, which expires on March 31, 2000. The
Company anticipates that royalties expenses as a percentage of sales
for the fiscal year ending December 31, 1999 should be moderately
higher than the percentage of royalties expenses realized during the
first quarter of 1999 due to the greater concentration of higher royalty
bearing sales such as retail and entertainment character licensed sales.
10<PAGE>
Marketing expenses were $590,000 for the three months ended March
31, 1999, an increase of 32% from marketing expenses of $448,000 for
the three months ended March 31, 1998. Marketing expenses as a
percentage of sales decreased to 11% of sales for the three months
ended March 31, 1999 from 12% of sales for the three months ended
March 31, 1998. The increase in marketing expenses of $142,000 was
primarily the result of higher wages and related expenses and
significantly higher outside sales commissions corresponding to the
significant sales increases during the quarter. The Company
anticipates that marketing expenses for the year ending December 31,
1999 in absolute terms, should be higher than marketing expenses in
1998 but as a percentage of sales should be lower than the percentage
of marketing expenses realized in 1998.
General and administrative expenses were $567,000 for the three
months ended March 31, 1999, an increase of 13% from general and
administrative expenses of $501,000 for the three months ended March
31, 1998. This $66,000 increase is a result of several factors,
including higher legal and professional services costs. The Company
anticipates that general and administrative expenses will continue to
increase in each of the remaining quarters of 1999 as a result of the
need to expand the Company's infrastructure to accommodate
substantially higher anticipated sales in the future.
Other Income (Expense) and Income Taxes:
Interest expense was $27,000 for the three months ended March 31,
1999, an increase of $17,000 from interest expense of $10,000 for the
three months ended March 31, 1998. The increase reflects an increase
in interest charges on the line of credit as a result of a higher
average loan balance during the period, combined with an increase in
interest charges from capitalized leases. Total capitalized equipment
and machinery leases were $464,000 at March 31, 1999, an increase of
$143,000 from $321,000 at March 31, 1998. The Company anticipates
that interest expense in future periods will increase moderately
reflecting additional capital lease purchases and higher line of
credit usage as more fully explained in "Liquidity and Capital
Resources" below.
Interest income was insignificant for the three months ended
March 31, 1999, as compared to interest income of $8,000 for the three
months ended March 31, 1998. This decrease is due to the Company
having insignificant cash balances available for investment during the
three months ended March 31, 1999 as compared to the prior year
period. The Company anticipates that interest income in 1999 will be
insignificant.
11<PAGE>
Income tax expense was $90,000 for the three months ended March 31, 1999,
an effective tax rate of 24%, as compared to income tax expense of $29,900,
or 40% for the prior year period. The deferred tax asset of $90,000 at
December 31, 1998 was eliminated as a result of the income tax expense
recognized during the three month period ended March 31, 1999. Had the
Company been taxed at a combined federal and state effective tax rate of 40%,
then earnings per share would have been as follows:
Income before income taxes $ 373,179
Proforma Income tax expense 149,272
---------
Proforma Net Income $ 223,907
=========
Proforma Diluted Earnings per Share $ .08
=========
As of March 31, 1999 the Company had gross deferred tax assets of
$1,091,000, consisting of unutilized loss carryforwards, which will
expire through 2012. The full amount of the deferred tax assets was
offset by a valuation allowance due to uncertainties associated with
the future realization of these loss carryforwards.
Liquidity and Capital Resources:
The Company's net working capital increased by $216,000 from
December 31, 1998 to March 31, 1999, to a net working capital surplus
of $5,100,000 at March 31, 1999 from a net working capital surplus of
$4,884,000 at December 31, 1998. Cash flow used in operations
increased by $144,000 from cash used in operations of $379,000 for the
three months ended March 31, 1998 to cash used in operations of
$523,000 for the three months ended March 31, 1999. This increase was
primarily the result of increases in accounts receivable and inventory
during the periods. Accounts receivable increased by $462,000 or 15%
from December 31, 1998 to March 31, 1999. This increase is due
primarily to a greater percentage of sales derived from national
retail accounts, which typically require longer repayment terms than
the Company's normal thirty-day credit terms. Since the Company
expects an increasing contribution from national retailers in the
future, it expects a corresponding moderate increase in its accounts
receivable days sales outstanding. Inventories increased by $396,000
or 12% due to rapid growth of its retail business. The Company's
expanding line of products, and its expectation of increasing demand
for these products in future periods also contributed to the increase.
Cash and equivalents aggregated $121,000 at March 31, 1999, an
increase of $113,000 from cash and equivalents of $8,000 at December
31, 1998. This increase reflects the increased borrowings under the
credit line at March 31, 1999. The Company also utilized cash
resources for the acquisition of non-current assets, including
property and equipment. For the next twelve months, the Company
anticipates that its capital expenditure requirements will approximate
$600,000, which will be used to purchase additional product molds,
production machinery, leasehold improvement and office and computer
equipment. It is anticipated that a significant amount of the
Company's capital expenditures will be financed through capital
leases.
12<PAGE>
At March 31, 1999, the Company has commitments for minimum
guaranteed royalties under licensing agreements totaling $487,000 in
the aggregate through 2000, of which $383,000 is due at various times
during 1999. Based upon the net income realized by the Company during
the first quarter of 1999 and the expectation of continuing increases
in its retail business, management expects these guaranteed royalties
to be funded from operating cash flows.
In December 1998, the Company amended and renewed a one-year
credit agreement with Scripps Bank, increasing the amount of the credit
line to $3,500,000. This credit line is collateralized by the assets
of the Company and actual borrowings are limited to available
collateral, as defined in the agreement. Borrowings under the
credit line bear interest at the bank's prime rate plus .75%.
The credit line contains financial covenants requiring the Company to
maintain minimum net worth levels, minimum working capital and debt
to equity ratios. The credit line expires April 15, 2000.
Outstanding borrowings under the credit line totaled $1,175,000 at
March 31, 1999 as compared to no borrowings at March 31, 1998.
The Company has a $3,000,000 line of credit facility (the
"facility") with Merrill Lynch International Bank Limited at an
interest rate of 1.75% above the London Interbank Offering Rate term
that the Company chooses to select. Any borrowing under the line of
credit, which is used solely to collateralize the issuance of stand-by
letters of credit to manufacturers, are required to be secured by cash
collateral deposited with Merrill Lynch equal to the credit
outstanding. The line of credit extends until December 10, 2001.
There was no borrowing under the line of credit as of March 31, 1999.
Management believes that the Company's existing cash position,
credit facilities, combined with internally generated cash flows, will
be adequate to support the Company's liquidity and capital needs at
least through the end of 1999.
Cautionary Statement Pursuant to Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995:
This report contains "forward-looking statements" within the
meaning of the federal securities laws. These forward-looking
statements include, among others, statements concerning the Company's
outlook for 1999, overall sales, gross margin, and operating expense
trends, the Company's expectations as to funding its capital
expenditures and operations during 1999, and other statements of
expectations, beliefs, future plans and strategies, anticipated events
or trends, and similar expressions concerning matters that are not
historical facts. The forward-looking statements in this report are
subject to risks and uncertainties that could cause actual results to
differ materially from those expressed in or implied by the
statements.
13<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K for the three months ended
March 31, 1999 - None
14<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FOTOBALL USA, INC
--------------------------------
(Registrant)
Dated: May 14, 1999 BY: /s/ Michael Favish
----------------------
Michael Favish
President and Chief Executive Officer
Dated: May 14, 1999 BY: /s/ David G. Forster
----------------------
David G. Forster
Executive Vice President-Finance,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMA-
TION EXTRACTED FROM THE FINANCIAL STATEMENTS
CONTAINED IN THE FOTOBALL USA, INC. FORM 10-QSB
FOR THE PERIOD ENDED MARCH 31, 1999, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 120,824
<SECURITIES> 0
<RECEIVABLES> 3,660,450
<ALLOWANCES> 157,000
<INVENTORY> 3,835,130
<CURRENT-ASSETS> 7,656,755
<PP&E> 2,888,290
<DEPRECIATION> 1,508,915
<TOTAL-ASSETS> 9,066,515
<CURRENT-LIABILITIES> 2,557,115
<BONDS> 0
0
0
<COMMON> 26,992
<OTHER-SE> 6,149,567
<TOTAL-LIABILITY-AND-EQUITY> 9,066,515
<SALES> 5,593,349
<TOTAL-REVENUES> 5,593,349
<CGS> 3,469,360
<TOTAL-COSTS> 1,724,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,660
<INCOME-PRETAX> 373,179
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<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
