<PAGE> 1
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: June 30, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
- ------ THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------ --------------
Commission File No. 000-29662
RollerBall International Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 95-4478767
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9255 Doheny Road, Suite 2705 Los Angeles, CA 90069
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 275-5313
-----------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark 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
-----
4,748,750 shares of Common Stock, par value $.001 per share, were outstanding at
August 14, 1998.
Page 1 of 10
<PAGE> 2
ROLLERBALL INTERNATIONAL INC.
FORM 10-QSB
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)
Balance Sheets -
June 30, 1998 and December 31, 1997 (Audited) 3
Statements of Operations -
Three Months and Six Months ended June 30, 1998
and 1997 4
Statements of Cash Flows -
Six months ended June 30, 1998 and 1997 5
Notes to Financial Statements 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds 10
Signatures 11
Page 2 of 11
<PAGE> 3
PART I - FINANCIAL INFORMATION
RollerBall International Inc.
Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 978,292 $ 344,208
Accounts receivable, net of allowance for doubtful
accounts of $50,000 and $0 for June 30, 1998 and
December 31, 1997, respectively 791,042 43,508
Inventory 639,236 479,518
Debt issuance costs 310,003 623,885
Prepaid expenses 952,340 126,387
----------------- ----------------
Total Current Assets 3,670,913 1,617,506
Other Assets:
Deferred stock offering costs - 234,594
Property and equipment, net 424,529 435,292
Intangible assets, net of accumulated amortization
of $81,285 (1998) and $61,035 (1997) 562,364 510,464
----------------- ----------------
Total Assets $ 4,657,806 $ 2,797,856
================= ================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 628,833 $ 393,655
Accrued expenses 432,880 973,231
Notes payable to stockholders 70,000 250,000
Advances from stockholders 15,159 20,659
Debt 100,000 3,475,000
----------------- ----------------
Total Current Liabilities 1,246,872 5,112,545
Note Payable - Long-term - 100,000
Commitments
Stockholders' Equity (Deficit):
Preferred stock - $.10 par value, 10,000,000 shares
authorized; no shares issued or outstanding - -
Common stock - $.001 par value, 50,000,000 shares authorized; 4,748,750
issued and outstanding (1998), 2,683,568 (1997) 4,749 2,684
Additional paid in capital 9,990,287 2,718,152
Accumulated deficit (6,584,102) (5,135,525)
----------------- ----------------
Total Stockholders' Equity (Deficit) 3,410,934 (2,414,689)
----------------- ----------------
Total Liabilities and Stockholders' Equity (Deficit) $ 4,657,806 $ 2,797,856
================= ================
</TABLE>
See accompanying notes
Page 3 of 11
<PAGE> 4
ROLLERBALL INTERNATIONAL INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
------------------------------ ------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 1,186,473 $ 1,329,307 $ 1,130,670 $ 729,944
Cost of sales 767,154 879,115 726,826 520,831
----------- ----------- ----------- -----------
Gross profit 419,319 450,192 403,844 209,113
Operating expenses:
Selling and marketing 668,031 611,601 428,281 192,994
General and administrative 717,690 534,030 445,971 327,326
----------- ----------- ----------- -----------
Total operating expenses 1,385,721 1,145,631 874,252 520,320
----------- ----------- ----------- -----------
Loss from operations (966,402) (695,439) (470,408) (311,207)
Interest expense 481,975 542,849 170,190 431,484
----------- ----------- ----------- -----------
Loss before provision for income taxes (1,448,377) (1,238,288) (640,598) (742,691)
Provision for income taxes 200 -- -- (200)
----------- ----------- ----------- -----------
Net loss $(1,448,577) $(1,238,288) $ (640,598) $ (742,491)
=========== =========== =========== ===========
Pro forma net loss per common share
Basic ($ 0.37) ($ 0.38) ($ 0.14) ($ 0.23)
=========== =========== =========== ===========
Diluted ($ 0.37) ($ 0.38) ($ 0.14) ($ 0.23)
=========== =========== =========== ===========
Pro forma weighted average common shares
outstanding
Basic 4,051,189 3,253,701 4,696,285 3,253,701
=========== =========== =========== ===========
Diluted 4,051,189 3,253,701 4,696,285 3,253,701
=========== =========== =========== ===========
</TABLE>
See accompanying notes
Page 4 of 11
<PAGE> 5
ROLLERBALL INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,448,576) $(1,238,288)
Adjustments to reconcile net loss to net cash used in
operating activities:
Allowance for doubtful accounts 50,000 --
Depreciation and Amortization 88,110 64,993
Amortization of debt issuance costs 313,882 441,099
Change in operating assets and liabilities:
Accounts receivable (797,534) (139,967)
Due from supplier 2,332 --
Inventory (159,718) (61,740)
Prepaid expenses (825,953) 764
Accounts payable 232,845 (93,430)
Accrued expenses (351,851) 193,935
----------- -----------
Net cash used in operating activities (2,896,463) (832,634)
INVESTING ACTIVITIES
Purchases of property and equipment (57,097) (85,533)
Increase in intangible assets (72,150) (123,725)
----------- -----------
Net cash used in investing activities (129,247) (209,258)
FINANCING ACTIVITIES
Deferred stock offering costs 234,594 --
Net proceeds from issuance of common stock 4,772,854 --
Proceeds from debt -- 700,000
Payments on debt (1,300,000) --
Payment on Notes Payable (180,000) --
Proceeds on loans to stockholders -- --
Payments on loans to stockholders (5,500) (5,147)
Exercise of warrants 137,846 87,750
Debt issuance costs -- (97,000)
----------- -----------
Net cash provided by financing activities 3,659,794 685,603
----------- -----------
Net increase/(decrease) in cash 634,084 (356,289)
Cash at beginning of period 344,208 394,667
----------- -----------
Cash at end of period $ 978,292 $ 38,378
=========== ===========
</TABLE>
See accompanying notes
Page 5 of 11
<PAGE> 6
ROLLERBALL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization
RollerBall International Inc. (the "Company") develops, manufacturers,
distributes and markets inline skates, and related accessories under the
RollerBall trademark in the United States and throughout Europe, Asia and North
America through independent sales representatives and distributors. The Company
was incorporated in Delaware on March 7, 1994. The Company's fiscal year ends on
December 31st.
On April 8, 1998, the Company completed an initial public offering (the
Offering) of 1,250,000 shares of the Company's common stock at a price of $5.00
per share. The proceeds to the Company, net of underwriting discounts and
commissions was $5.4 million, and was $4.8 million net of offering expenses.
2. Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the results
of operations for the periods presented have been included.
The financial data at December 31, 1997 is derived from audited
financial statements which are included in the Company's Form SB-2 (No.
333-33567) which closed on April 8, 1998 and should be read in conjunction with
the audited financial statements and notes thereto. Interim results are not
necessarily indicative of results for the full year.
The preparation of financial statements in conformity 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.
3. Initial Public Offering
On March 31, 1998, the Company's Registration Statement on Form SB-2
was deemed effective and on April 8, 1998, the offering closed and the Company
received $4.8 million in proceeds, net of underwriting discounts and commissions
and offering expenses. In connection with the offering, the Company's
outstanding 12% Debentures in the principal amount of $1,859,525 converted into
equity on the effective date and
Page 6 of 11
<PAGE> 7
$1,500,000 of debt was paid in cash. In addition, immediately prior to the
effective date of the Registration Statement, a reverse stock split was effected
on the basis of .594237 to 1. Further, Mr. Jack Forcelledo, the Company's
founder, chairman and principal stockholder agreed to surrender for cancellation
600,000 shares of common stock. All references to share and per share amounts
have been retroactively restated to reflect the stock split and the
cancellation. Lastly, 862,540 shares of common stock and 247,936 warrants were
issued in connection with certain Bridge Loans and Notes Payable.
4. Pro Forma Net Loss Per Common Share
Pro forma net loss per common share has been computed (Basic and
diluted) for all periods presented and is based on the weighted average number
of shares outstanding during the period including the 12% Subordinated
Convertible Debentures ("12% Debentures") which automatically converted upon the
closing of the Company's initial public offering (using the as if converted
method from the date of issuance), the shares issued to holders of certain
Bridge Notes and Notes Payable, and all that were issued upon closing of the
Company's initial public offering. Pursuant to Securities and Exchange
Commission Staff Accounting Bulletins, common stock equivalents issued during
the 12-month period prior to the initial public offering are included in the
calculation as if they were outstanding for all periods (using the treasury
stock method at the assumed public offering price). There are no common stock
equivalents resulting from dilutive stock options.
Page 7 of 11
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SAFE HARBOR STATEMENT
Certain statements in this Form 10-QSB, including information set forth
under Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995 (the Act). The Company
desires to avail itself of certain "safe harbor" provisions of the Act and is
therefore including this special note to enable the Company to do so.
Forward-looking statements in this Form 10-QSB or hereafter included in other
publicly available documents filed with the Securities and Exchange Commission,
reports to the Company's stockholders and other publicly available statements
issued or released by the Company involve known and unknown risks, uncertainties
and other factors which could cause the Company's actual results, performance
(financial or operating) or achievements to differ from the future results,
performance (financial or operating) or achievements expressed or implied by
such forward-looking statements. Such future results are based upon management's
best estimates based upon current conditions and the most recent results of
operations.
THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE AND SIX
MONTHS ENDED JUNE 30, 1997
Net sales for the three months ended June 30, 1998 and 1997 were
$1,130,670 and $729,944, respectively, which is an increase of $400,726, or
approximately 55%. This increase is primarily due to the availability of
proceeds from the Company's initial public offering which closed in April 1998,
after which inventory purchased from such proceeds was received and shipped to
customers in June 1998. Sales in June 1998 accounted for 55% of the entire
previous 1997 fiscal year sales volume. Net sales for the six months ended June
30, 1998 and 1997 were $1,186,473 and $1,329,307, respectively, which is a
decrease of $142,834, or approximately 11%. This decrease was primarily
attributable to the lack of funds necessary for the first several months of 1998
to purchase the inventory needed to fulfill sales orders as the proceeds from
the Company's initial public offering were not received until April 8, 1998.
Gross profit for the three months ended June 30, 1998 and 1997 was
$403,844 and $209,113, respectively, which represents an increase of $194,731.
The increase in gross profit was primarily due to increased sales volume for the
first three months of 1998 as compared to the same period in 1997. Gross margin
for the three months ended June 30, 1998 was 35.7% which represents an increase
of 7.1% as compared to the three months ended June 30, 1997. Gross margin for
the six months ended June 30, 1998 was 35.3% which represents an increase of
1.4% as compared to the six months ended June 30, 1997. The increases relate to
the Company's cost reductions negotiated with its
Page 8 of 11
<PAGE> 9
overseas suppliers in fiscal 1998. The Company would have experienced higher
gross margins had it not had to incur over $80,000 in air freight charges to
insure timely shipments to customers. These air freight charges, which
represented 6.8% of net sales, are not expected in future periods.
Selling and marketing expenses for the three months ended June 30, 1998
and 1997 were $428,281 and $192,994, respectively, which represents an increase
of $235,287. Selling and marketing expenses for the six months ended June 30,
1998 and 1997 were $668,031 and $611,601, respectively, which represents an
increase of $56,430. The increases are due to the addition of selling
consultants and warehousing expenses related to anticipated increased volume for
future periods following the initial public offering.
General and administrative expenses for the three months ended June 30,
1998 and 1997 were $445,971 and $327,326, respectively, which represents an
increase of $118,645, or 36.2%. General and administrative expenses for the six
months ended June 30, 1998 and 1997 were $717,690 and $534,030, respectively,
which represents an increase of $183,660, or 34.4%. The increases were primarily
due to an increase in salaries, primarily the addition of a Chief Financial
Officer, Marketing Manager and consulting expenses for a public relations firm.
In addition, the Company experienced a related increase in insurance expenses,
primarily the addition of officer's life insurance and Directors and Officers
insurance. Several of these expenses were necessary to successfully complete the
Company's initial public offering which went effective March 31, 1998.
The Company's interest expense for the three months ended June 30, 1998
and 1997 was $170,190 and $431,484, respectively, which represents a decrease of
$261,294. Interest expense for the six months ended June 30, 1998 and 1997 was
$481,975 and $542,849, respectively, which represents a decrease of $60,874.
These decreases were primarily attributable to the Company's decreased interest
payable on debt repaid from the proceeds of the initial public offering. In
addition, amortization of debt issuance costs included in interest have
decreased in 1998 as the terms of the notes the costs were attributed to have
expired.
Net loss for the three months ended June 30, 1998 and 1997 was $640,598
and $742,491, respectively, which represents a decrease of $101,893, or 13.7%.
The decrease in net loss for this period resulted primarily from the increase in
sales for the period and a decrease in interest expense attributable to retired
debt and the associated significant non cash debt issuance costs being amortized
into interest expense. Net loss for the six months ended June 30, 1998 and 1997
was $1,448,577 and $1,238,288, respectively, which represents an increase of
$210,289, or 17%. The increase in net loss for this period is primarily
attributable to the lack of sales activity for the first five months of fiscal
1998 due to lack of inventory to meet sales orders which was, in turn, due to
the timing of the initial public offering. The net loss was also the result of
continued operating expenses to maintain the Company's activity prior to the
IPO.
Page 9 of 11
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
In April 1998, the Company received $6,250,000 in gross proceeds for the
issuance of 1,250,000 shares of common stock pursuant to its initial public
offering. Net proceeds totaled approximately $4.8 million after expenses
associated with the offering. Upon completion of the Company's initial public
offering, $2,259,525 of notes were automatically converted into equity and
$1,500,000 of notes were paid in full with the proceeds from the offering. The
Company anticipates that cash from the initial public offering together with
cash expected to be provided by operations will be sufficient to satisfy normal
operating obligations over the next fiscal year.
The Company is currently in discussions with several banking institutions with
respect to obtaining a credit line facility for working capital and letter of
credit purposes. No assurance can be given that such discussions will result in
additional funding.
Property and equipment expenditures totaled $57,097 and expenditures for other
assets totaled $72,150 for the six months ended June 30, 1998. Expenditures for
other assets primarily include legal fees paid to develop various patents and
trademarks.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On April 8, 1998, the Company closed its initial public offering in which it
sold 1,250,000 shares of common stock at a price of $5.00 per share for gross
proceeds of $6,250,000. Net of underwriting commissions and offering expenses,
the Company received net proceeds of approximately $4,800,000. As of June 30,
1998, the Company has used approximately $1,200,000 of the proceeds for
inventory purchases, $1,500,000 for repayment of Notes and Loans Payable,
$55,000 for molds and tooling purchases, $45,000 for marketing and advertising,
$122,000 for the payment of accrued officer's salary, $461,000 for accrued
expenses and the remainder for working capital and operating purposes. The
Company had approximately $1,000,000 remaining as of June 30, 1998.
Page 10 of 11
<PAGE> 11
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 thereunto duly authorized.
ROLLERBALL INTERNATIONAL INC.
August 14, 1998 /s/ Jack Forcelledo
- -------------------- -----------------------------------
DATE JACK FORCELLEDO
PRESIDENT & CHIEF EXECUTIVE OFFICER
/s/ Kenneth B. Teasdale
-----------------------------------
KENNETH B. TEASDALE
CHIEF FINANCIAL OFFICER
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 978,292
<SECURITIES> 0
<RECEIVABLES> 841,042
<ALLOWANCES> 50,000
<INVENTORY> 639,236
<CURRENT-ASSETS> 3,670,913
<PP&E> 736,362
<DEPRECIATION> 311,833
<TOTAL-ASSETS> 4,657,806
<CURRENT-LIABILITIES> 1,246,872
<BONDS> 0
0
0
<COMMON> 4,749
<OTHER-SE> 3,406,185
<TOTAL-LIABILITY-AND-EQUITY> 3,410,934
<SALES> 1,186,473
<TOTAL-REVENUES> 1,186,473
<CGS> 767,154
<TOTAL-COSTS> 767,154
<OTHER-EXPENSES> 1,385,721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 481,975
<INCOME-PRETAX> (1,448,377)
<INCOME-TAX> 200
<INCOME-CONTINUING> (1,448,577)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,448,577)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
