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: September 30, 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 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 _____
5,847,994 shares of Common Stock, par value $.001 per share, were outstanding at
Novemer 15, 1999.
Page 1 of 12
<PAGE>
RollerBall International Inc.
FORM 10-QSB
INDEX
Page No.
Part I - Financial Information
Item 1 - Financial Statements (unaudited)
Balance Sheets -
September 30, 1999 and December 31, 1998 (Audited) 3
Statements of Operations -
Three Months and Nine Months
ended September 30, 1999 and 1998 4
Statements of Cash Flows -
Nine Months ended September 30, 1999 and 1998 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 11
Item 5 - Other Information 12
Item 6 - Exhibits and reports on Form 8-K 12
Signature 12
Page 2 of 12
<PAGE>
Part I - Financial Information
RollerBall International Inc.
Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 44,506 $ 132,099
Accounts receivable, net of allowance for doubtful
accounts of $50,000 for September 30, 1999
and December 31, 1998, respectively 309,150 212,770
Due from Supplier 113,696 -
Inventory 994,605 1,468,022
Prepaid expenses and other 286,277 168,884
---------- ----------
Total Current Assets 1,748,234 1,981,775
Property and equipment, net 295,581 382,958
Intangible assets, net of accumulated amortization
of $139,409 (1999) and $102,485 (1998) 536,057 557,760
---------- ----------
Total Assets $2,579,872 $2,922,493
========== ==========
Liabilities and Stockholders' Equity
Current Liabilites:
Accounts payable $ 762,412 $ 681,478
Accrued expenses 700,581 460,804
Notes payable to stockholders 57,000 57,000
Advances from stockholders 21,072 49,129
Debt 90,000 100,000
---------- ----------
Total Current Liabilities 1,631,065 1,348,411
Commitments
Stockholders' Equity:
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; 5,847,994 issued and outstanding (1999),
4,756,693 (1998) 5,848 4,757
Additional paid in capital 10,878,006 10,034,341
Accumulated deficit (9,935,047) (8,465,016)
---------- ----------
Total Stockholders' Equity 948,807 1,574,082
---------- ----------
Total Liabilities and Stockholders' Equity $2,579,872 $2,922,493
</TABLE>
See accompanying notes
Page 3 of 12
<PAGE>
RollerBall International Inc.
Statements of Operations
<TABLE>
<CAPTION>
Nine months ended September 30, Three months ended September 30,
--------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- --------------- ---------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $ 1,582,922 $ 1,087,394 $ 432,590 $ 156,379
Cost of sales 1,032,246 755,690 289,770 131,705
----------- ----------- ---------- -----------
Gross profit 550,676 331,704 142,820 24,674
Operating expenses:
Selling and marketing 630,619 1,179,126 187,916 511,095
General and administrative 1,347,478 1,149,913 438,884 432,223
----------- ----------- ---------- -----------
Total operating expenses 1,978,097 2,329,039 626,800 943,318
----------- ----------- ---------- -----------
Loss from operations (1,427,421) (1,997,335) (483,980) (918,644)
Interest expense 42,410 644,221 14,391 162,246
----------- ----------- ---------- -----------
Loss before provision for income taxes (1,469,831) (2,641,556) (498,371) (1,080,890)
Provision for income taxes 200 200 - -
----------- ----------- ---------- -----------
Net loss $(1,470,031) $(2,641,756) $ (498,371) $(1,080,890)
=========== =========== ========== ===========
Net loss per common share
Basic ($0.28) ($0.62) ($0.09) ($0.23)
=========== =========== ========== ===========
Diluted ($0.28) ($0.62) ($0.09) ($0.23)
=========== =========== ========== ===========
Weighted average common shares
outstanding
Basic 5,172,017 4,285,690 5,719,332 4,754,693
=========== =========== ========== ===========
Diluted 5,172,017 4,285,690 5,719,332 4,754,693
=========== =========== ========== ===========
</TABLE>
See accompanying notes
Page 4 of 12
<PAGE>
RollerBall International Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended September 30,
-------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Operating Activities
Net loss $(1,470,031) $(2,641,756)
Adjustments to reconcile net loss to net cash used in
operating activities:
Allowance for doubtful accounts - 50,000
Depreciation and amortization 135,404 134,307
Amortization of debt issuance costs 3,125 473,424
Change in operating assets and liabilities:
Accounts receivable (96,380) (374,595)
Due from supplier (141,992) 56,218
Inventory 473,417 (1,070,792)
Prepaid expenses 66,982 (223,708)
Accounts payable 101,656 267,161
Accrued expenses 250,392 (402,274)
----------- -----------
Net cash used in operating activities (677,427) (3,732,015)
Investing Activities
Purchases of property and equipment (14,103) (87,534)
Increase in intangible assets (12,221) (85,201)
----------- -----------
Net cash used in investing activities (26,324) (172,735)
Financing Activities
Net proceeds from issuance of common stock 654,215 5,007,448
Payments on debt (10,000) (1,300,000)
Payments of notes payable - (193,000)
Payments on loans to stockholders (28,057) (5,500)
Exercise of warrants - 137,846
----------- -----------
Net cash provided by financing activities 616,158 3,646,794
----------- -----------
Net decrease in cash (87,593) (257,956)
Cash at beginning of period 132,099 344,208
----------- -----------
Cash at end of period $ 44,506 $ 86,252
=========== ===========
</TABLE>
See accompanying notes
Page 5 of 12
<PAGE>
ROLLERBALL INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization
RollerBall International Inc. (the Company) develops, manufactures,
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 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 $5.0 million in proceeds, net of underwriting discounts and commissions
and 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, 1998 is derived from audited
financial statements which are included in the Company's Form 10-KSB 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. Financing
In February 1999, the Company entered into an Accounts Receivable
financing agreement with a factor whereby it sells its eligible receivables to
the factor and receives an 85% advance rate on those receivables. The Company
pays interest at prime plus 4.25% and additional finance fees at a rate of 1.5%
per month on the advanced funds. The Company had gross sales to the factor
during the nine months ended September 30, 1999 of $345,593, received $239,349
in advances on those receivables and incurred $45,664 in financing fees.
Page 6 of 12
<PAGE>
4. Net Loss Per Common Share
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.
5. Sale of Stock
During April and May 1999, the Company received a total of $30,556 in
net proceeds for the issuance of 30,101 shares of common stock to several of its
current investors as well as new investors in private transactions under Section
4(2) of the Securities Act of 1933.
In April, May and June 1999, the Company received an aggregate of
$500,000 in net proceeds for the issuance of 670,000 shares of common stock
pursuant to a private placement with one of it's shareholders. Net proceeds
totaled approximately $464,000 after expenses associated with the private
placement.
During August and September 1999, the Company received a total of
$160,000 in gross proceeds for the issuance of 211,200 shares of common stock to
several of its current investors as well as new investors in private
transactions under Section 4(2) of the Securities Act of 1933.
Page 7 of 12
<PAGE>
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.
Three Months and Nine Months Ended September 30, 1999 Compared to the Three
Months and Nine Months Ended September 30, 1998
Net sales for the three months ended September 30, 1999 and 1998 were
$432,590 and $156,379, respectively, which is an increase of $276,211 or
approximately 177%. This increase is due to an increase in sales to the Home
Shopping Network, Internet sales, and continued retail distribution as compared
to the same period ending September 30, 1998. Net sales for the nine months
ended September 30, 1999 and 1998 were $1,582,922 and $1,087,394, respectively,
which is an increase of $495,528 or approximately 46%. This increase is
primarily attributable to the increased domestic distribution in retail outlets
in addition to internet and Home Shopping Network sales the Company has
experienced during the nine months ended September 30, 1999 as compared to the
same period ending September 30, 1998.
Gross margin for the three months ended September 30, 1999 was 33%
which represents an increase of 17.2% in the gross margin percent as compared to
the three months ended September 30, 1998. Gross margin for the nine months
ended September 30, 1999 was 34.8% which represents an increase of 4.3% in the
gross margin percent as compared to the nine months ended September 30, 1998.
The increases relate primarily to the new line of skates being sold at higher
margins in both the three months and the nine months ended September 30, 1999 as
opposed to the same periods ending September 30, 1998. In addition, cost
reductions were experienced in the three and nine months ended September 30,
1999 as opposed to the same periods ending September 30, 1998 due to
negotiations with the Company's overseas manufacturers.
Page 8 of 12
<PAGE>
Selling and marketing expenses for the three months ended September 30,
1999 and 1998 were $187,916 and $511,095, respectively, which represents a
decrease of $323,179, or 63.2%. Selling and marketing expenses for the nine
months ended September 30, 1999 and 1998 were $630,619 and $1,179,126,
respectively, which represents a decrease of $548,507, or 46.5%. The decreases
relate primarily to the Company making significant cost reductions. In addition
to not participating in two of the annual sporting goods trade shows, the
Company decreased research and development, brochure, promotional and travel
expense during the three and nine months ended September 30, 1999 as compared to
the same periods ended September 30, 1998.
General and administrative expenses for the three months ended
September 30, 1999 and 1998 were $438,884 and $432,223, respectively, which
represents an increase of $6,661, or 1.5%. General and administrative expenses
for the nine months ended September 30, 1999 and 1998 were $1,347,478 and
$1,149,913, respectively, which represents an increase of $197,565, or 17.2%.
The increases primarily relate to the first six months of 1999 and were
primarily due to increases of $211,440 related to salaries and professional
fees. The increase in salaries primarily relates to the addition of full time
services including the position of the Vice President of Design and Development
and the Vice President of Administration. The increase in professional fees
primarily relates to legal fees incurred in the defense of the Company's
registered trademarks. The Company has reached an agreement where no litigation
was necessary.
The Company's interest expense for the three months ended September 30,
1999 and 1998 was $14,391 and $162,246, respectively, which represents a
decrease of $147,855. The Company's interest expense for the nine months ended
September 30, 1999 and 1998 was $42,410 and $644,221, respectively, which
represents a decrease of $601,811. 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 were fully amortized in 1998.
Net loss for the three months ended September 30, 1999 and 1998 was
$498,371 and $1,080,890, respectively, which represents a decrease of $582,519,
or 53.9%. Net loss for the nine months ended September 30, 1999 and 1998 was
$1,470,031 and $2,641,756, respectively, which represents a decrease of
$1,171,725, or 44.4%. The decrease in net loss for these periods are primarily
attributable to the increased sales activity experienced in the first and third
quarters 1999 as compared to the same periods ended 1998 as well as with the
increased gross profit margin as well as the decrease in interest expense.
Page 9 of 12
<PAGE>
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 $5.0 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.
During April and May 1999, the Company received a total of $30,556 in
gross proceeds for the issuance of 30,101 shares of common stock to several of
its current investors as well as new investors in private transactions under
Section 4(2) of the Securities Act of 1933.
In April, May and June 1999, the Company received an aggregate of
$500,000 in gross proceeds for the issuance of 670,000 shares of common stock
pursuant to a private placement with one of it's shareholders. Net proceeds
totaled approximately $464,000 after expenses associated with the private
placement.
During August and September 1999, the Company received a total of
$160,000 in gross proceeds for the issuance of 211,200 shares of common stock to
several of its current investors as well as new investors in private
transactions under Section 4(2) of the Securities Act of 1933.
Due to the continued depressed state of the inline skate market, lack
of sales and the inability to obtain inventory, the Company will require
additional capital to continue operations. The Company is currently in
negotiations to raise additional equity capital for the Company. There can be no
assurances that any transaction will be consummated. The Company intends to
locate additional sources of financing in the near term which financings may
include equity and/or debt components. The company has engaged an investment
banker to assist the company in arranging a $300,000 bridge financing and a $1.5
million to $3.0 million additional equity financing. There can be no assurance
that the Company will be successful in these efforts.
Net cash used in operating activities for the nine months ended
September 30, 1999 and 1998 was $677,427 and $3,732,015, respectively. The
decrease was attributable to a decrease in the net loss for the nine months
ended September 30, 1999 as compared to the same period in the prior year. In
addition, significant cash was used to purchase inventory and pay down accrued
expenses during the nine months ended September 30, 1998. Working capital at
September 30, 1999 was $117,169 as compared to $633,364 at December 31, 1998.
The decrease is primarily attributable to the net loss and the decrease in
inventory for the nine months ended September 30, 1999.
Page 10 of 12
<PAGE>
Property and equipment expenditures totaled $14,103 and expenditures
for other assets totaled $12,221 for the nine months ended September 30, 1999.
Expenditures for other assets primarily include legal fees paid to develop
various patents and trademarks.
Year 2000
The Company has conducted a review to identify which systems, both
internal and external, will be affected by the Year 2000 problem. The majority
of the Company's business processing applications operate on a network computer
system. Management believes the network hardware and operating system are now
Year 2000 compliant as of September 30, 1999. If the current systems are not
fully Year 2000 compliant, the Company estimates that the cost associated with
becoming Year 2000 compliant will not materially affect its future operating
results or financial condition. While the Company currently believes that it
will be able to implement its Year 2000 conversion project in a timely manner,
failure to do so could have a material adverse impact on the Company's
operations.
Part II - Other Information
Item 2. Changes in Securities
In March 1999, the Company issued 150,000 shares of restricted common
stock to a consulting group in exchange for various financial services including
but not limited to introducing the Company to financial firms and potential
investors. The term of this agreement is fourteen months.
During April and May 1999, the Company received a total of $30,556 in
gross proceeds for the issuance of 30,101 shares of common stock to several of
its current investors as well as new investors in private transactions under
Section 4(2) of the Securities Act of 1933.
In June 1999, the Company received $500,000 in gross proceeds for the
issuance of 670,000 shares of common stock pursuant to a private placement with
one of it's shareholders. Net proceeds totaled approximately $464,000 after
expenses associated with the private placement.
During August and September 1999, the Company received a total of
$160,000 in gross proceeds for the issuance of 211,200 shares of common stock to
several of its current investors as well as new investors in private
transactions under Section 4(2) of the Securities Act of 1933.
Page 11 of 12
<PAGE>
Item 5. Other Information
On April 20, 1999, the Company received notice from the Nasdaq SmallCap
Stock Market regarding its non-compliance with the net tangible assets
requirement to maintain its listing. Under Nasdaq rules, to maintain listing on
the Nasdaq Smallcap market the Company must have $2,000,000 of net tangible
assets. The Company does not currently comply with this maintenance requirement.
The Company has requested a hearing in which it will submit a plan which sets
forth a strategy to bring the Company into compliance with the listing
maintenance rules. The hearing date has been set for November 18, 1999. There
can be no assurances that the strategy will be consummated. There can be no
assurance that the Nasdaq Smallcap Market will accept the Company's plan and
determine not to delist the Company's common stock. In the event that the
Company is unable to maintain continued quotation on the Nasdaq SmallCap Market,
quotation, if any, of the Common Stock would be in the over-the-counter market
in what are commonly referred to as the pink sheets of the National Quotation
Bureau, Inc. or on the National Association of Securities Dealers OTC Electronic
Bulletin Board. As result, an investor may find it more difficult to dispose of
or to obtain accurate quotations as to the price of such securities.
Item 6. Exhibits and reports on Form 8-K
(a). Exhibits - Exhibit 27 - Financial Data Schedule
(b). Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
<PAGE>
SIGNATURE
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.
November 15, 1999 /s/ Jack Forcelledo
DATE JACK FORCELLEDO
PRESIDENT & CHIEF EXECUTIVE OFFICER
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 44,506
<SECURITIES> 0
<RECEIVABLES> 472,846
<ALLOWANCES> 50,000
<INVENTORY> 994,605
<CURRENT-ASSETS> 1,748,234
<PP&E> 295,581
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,579,872
<CURRENT-LIABILITIES> 1,631,065
<BONDS> 0
5,848
0
<COMMON> 0
<OTHER-SE> 942,959
<TOTAL-LIABILITY-AND-EQUITY> 2,579,872
<SALES> 1,582,922
<TOTAL-REVENUES> 1,582,922
<CGS> 1,032,246
<TOTAL-COSTS> 1,032,246
<OTHER-EXPENSES> 1,978,097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,410
<INCOME-PRETAX> (1,469,831)
<INCOME-TAX> 200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,470,031)
<EPS-BASIC> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
