<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: March 31, 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 [ ]
3,179,426 shares of Common Stock, par value $.001 per share, were outstanding at
May 12, 1998.
Page 1 of 10
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ROLLERBALL INTERNATIONAL INC.
FORM 10-QSB
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (unaudited)
Balance Sheets -
March 31, 1998 and December 31, 1997 (Audited) 3
Statements of Operations -
Three months ended March 31, 1998 and March 31, 1997 4
Statements of Cash Flows -
Three months ended March 31, 1998 and March 31, 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
Safe Harbor Statement 10
Signatures 10
Page 2 of 10
<PAGE> 3
PART I - FINANCIAL INFORMATION
Rollerball International Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ -- $344,208
Accounts receivable -- 43,508
Due from supplier 9,450 --
Inventory 473,435 479,518
Debt issuance costs 467,811 623,885
Prepaid expenses 138,782 126,387
------- -------
Total Current Assets 1,089,478 1,617,506
Other Assets:
Deferred stock offering costs 330,398 234,594
Property and equipment, net 416,880 435,292
Intangible assets, net of accumulated amortization
of $70,906 (1998) and $61,035 (1997) 562,743 510,464
------- -------
Total Assets $2,399,499 $2,797,856
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Cash overdraft $ 44,984 $ --
Accounts payable 606,391 393,655
Accrued expenses 1,016,633 973,231
Notes payable to stockholders 250,000 250,000
Advances from stockholders 23,159 20,659
Debt 1,800,000 3,475,000
--------- ---------
Total Current Liabilities 3,741,167 5,112,545
Note Payable - Long-term -- 100,000
Commitments
Stockholders' Equity (Deficit):
Preferred stock - $.10 par value, 5,000,000 shares
authorized; no shares issued or outstanding -- --
Common stock - $.001 par value, 50,000,000 shares
authorized; 3,179,426 issued and outstanding (1998),
2,683,568 (1997) 3,179 2,684
Additional paid in capital 4,598,657 2,718,152
Accumulated deficit (5,943,504) (5,135,525)
---------- ----------
Total Stockholders' Equity (Deficit) (1,341,668) (2,414,689)
---------- ----------
Total Liabilities and Stockholders' Equity (Deficit) $2,399,499 $2,797,856
========== ==========
</TABLE>
See accompanying notes
Page 3 of 10
<PAGE> 4
Rollerball International Inc.
Statements of Operations
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---- ----
(unaudited)
<S> <C> <C>
Net sales $ 55,803 $ 599,363
Cost of sales 40,328 358,284
----------- -----------
Gross profit 15,475 241,079
Operating expenses:
Selling and marketing 239,750 418,607
General and administrative 271,719 206,704
----------- -----------
Total operating expenses 511,469 625,311
----------- -----------
Loss from operations (495,994) (384,232)
Interest expense 311,785 111,365
----------- -----------
Loss before provision for income taxes (807,779) (495,597)
Provision for income taxes 200 200
----------- -----------
Net loss $ (807,979) $ (495,797)
=========== ===========
Pro forma net loss per common share
Basic $ (0.24) $ (0.13)
=========== ===========
Diluted $ (0.24) $ (0.13)
=========== ===========
Pro forma weighted average common shares
outstanding
Basic 3,406,093 3,253,701
=========== ===========
Diluted 3,406,093 3,253,701
=========== ===========
</TABLE>
See accompanying notes
Page 4 of 10
<PAGE> 5
Rollerball International Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(807,979) $(495,797)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and Amortization 43,740 31,330
Amortization of debt issuance costs 156,074 49,764
Contribution of accrued salary--principal shareholder 106,000 --
Change in operating assets and liabilities:
Accounts receivable 43,508 (48,516)
Due from supplier (9,450) --
Inventory 6,083 107,278
Prepaid expenses (12,395) 78
Accounts payable 212,737 (126,508)
Accrued expenses 43,401 178,952
------ -------
Net cash used in operating activities (218,281) (303,419)
INVESTING ACTIVITIES
Purchases of property and equipment (15,457) (59,013)
Increase in intangible assets (62,150) (72,136)
--------- ---------
Net cash used in investing activities (77,607) (131,149)
FINANCING ACTIVITIES
Increase in cash overdraft 44,984 --
Deferred stock offering costs (95,804) --
Proceeds from debt -- 200,000
Proceeds on loans to stockholders 2,500 10,000
Debt issuance costs -- (42,000)
--------- ---------
Net cash (used in) provided by financing activities (48,320) 168,000
--------- ---------
Net decrease in cash (344,208) (266,568)
Cash at beginning of period 344,208 394,667
--------- ---------
Cash at end of period $ -- $ 128,099
========= =========
</TABLE>
See accompanying notes
Page 5 of 10
<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.
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 and offering expenses were $5.4 million (see Note 3).
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) deemed
effective March 31, 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 $5.4 million, net of underwriting discounts and commissions and
offering expenses. In connection with the offering, the 12% Debentures in the
principal amount of $1,775,000 converted into equity on the effective date. In
addition, immediately prior to the
Page 6 of 10
<PAGE> 7
effective date of the Registration Statement, a reverse stock split was effected
and the principal stockholder/officer 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. The following presentation reflects the pro forma balance sheet of
the Company as of March 31, 1998 reflecting the application of net proceeds:
<TABLE>
<CAPTION>
March 31, 1998
--------------
Actual Pro Forma
------ ---------
<S> <C> <C>
Total Assets $ 2,399,499 $ 5,659,467
=========== ===========
Total Current Liabilities $ 3,741,167 $ 1,457,135
Total Stockholders' Equity (Deficit) $(1,341,668) $ 4,202,332
----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ 2,399,499 $ 5,659,467
=========== ===========
</TABLE>
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 the Bridge Notes and 1997
Loan Shares, 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 10
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH
31, 1997
Net sales for the three months ended March 31, 1998 and March 31, 1997
were $55,803 and $599,363, respectively, which is a decrease of $543,560. This
decrease was primarily attributable to the lack of funds necessary 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 March 31, 1998 and 1997 was
$15,475 and $241,079, respectively, which represents a decrease of $225,604. The
decrease in gross profit was primarily due to decreased sales volume for the
first three months of 1998 as compared to the same period in 1997. Gross margin
for the three months ended March 31, 1998 was 27.7% which represents a decrease
of 12.5% as compared to the three months ended March 31, 1997. The decrease
relates to the Company reducing prices in order to sell prior year models in
anticipation of current year models being received. Management does not expect a
continued gross margin decrease in future quarters as the Company will be
marketing and selling its new line of skates.
Selling and marketing expenses for the three months ended March 31, 1998
were $239,750 which represents a decrease of $178,857, or 42.7%, as compared to
the three months ended March 31, 1997. The decrease is due to a reduction in
rates under several royalty agreements. In addition, due to decreased sales
volume, royalty expense and sales commissions for the three months ended March
31, 1998 are significantly lower than the same period ended March 31, 1997.
Lastly, the Company decreased its trade show expenditures for the three months
ended March 31, 1998 as compared to the same period in 1997.
General and Administrative expenses for the three months ended March 31,
1998 were $271,719, which represents an increase of $65,015, or 31.5%, as
compared to the three months ended March 31, 1997. The increase was 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. 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 March 31, 1998
was $311,785, which represents an increase of $200,420 as compared to the three
months ended March 31, 1997. This increase was primarily attributable to the
Company's
Page 8 of 10
<PAGE> 9
increased interest payable on debt incurred including amortization of debt
issuance costs during the three months ended March 31, 1998, pursuant to the
1997 Bridge Notes and Sercap loan. Amortization of debt issuance costs included
in interest were $156,074 and $49,764 for the three months ended March 31, 1998
and 1997, respectively. Management expects a large decrease in interest expense
in the future as $3,475,000 of debt on which the Company was making interest
payments during the three months ended March 31, 1998 was either converted into
equity or paid from the proceeds of the initial public offering.
Net loss for the three months ended March 31, 1998 was $807,979 which
represents an increase of $312,182, or 63%, as compared to the three months
ended March 31, 1997. The increase in net loss resulted primarily from the
increase in interest expense attributable to current debt as a result of the
1997 Bridge Notes, Sercap loan and the associated significant non cash debt
issuance costs being amortized into interest expense. In addition, losses
occurred due to the decrease in the Company's sales coupled with increased
expenditures for general and administrative expenses for the three months ended
March 31, 1998 compared to the three months ended March 31, 1997.
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 $5.4 million after expenses
associated with the offering.
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.
Upon completion of the Company's initial public offering, $2,175,000 of notes
were automatically converted into equity and $1,300,000 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.
Property and equipment expenditures totaled $15,457 and expenditures for other
assets relating to trademarks totaled $62,150 for the three months ended March
31, 1998. Expenditures for other assets primarily include legal fees paid to
develop various patents and trademarks.
Page 9 of 10
<PAGE> 10
PART II - OTHER INFORMATION
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.
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.
May 15, 1997 /s/ Jack Forcelledo
DATE JACK FORCELLEDO
PRESIDENT & CHIEF EXECUTIVE OFFICER
/s/ Kenneth B. Teasdale
KENNETH B. TEASDALE
CHIEF FINANCIAL OFFICER
Page 10 of 10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 9,450
<ALLOWANCES> 0
<INVENTORY> 473,435
<CURRENT-ASSETS> 1,089,478
<PP&E> 416,880
<DEPRECIATION> 277,842
<TOTAL-ASSETS> 2,399,499
<CURRENT-LIABILITIES> 3,741,167
<BONDS> 0
0
0
<COMMON> 3,179
<OTHER-SE> 4,596,657
<TOTAL-LIABILITY-AND-EQUITY> 2,399,499
<SALES> 55,803
<TOTAL-REVENUES> 55,803
<CGS> 40,328
<TOTAL-COSTS> 40,328
<OTHER-EXPENSES> 511,469
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 311,785
<INCOME-PRETAX> (807,779)
<INCOME-TAX> 200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (807,979)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
