SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
AMENDMENT 1
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 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 _____
4,926,693 shares of Common Stock, par value $.001 per share, were outstanding at
May 14, 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 -
March 31, 1999 (As Amended) and December 31, 1998 (Audited) 3
Statements of Operations -
Three Months ended March 31, 1999 (As Amended) and 1998 4
Statements of Cash Flows -
Three Months ended March 31, 1999 (As Amended) 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 and Use of Proceeds 10
Item 5 - Other Information 11
Item 6 - Exhibits and reports on Form 8-K 11
Signatures 12
Page 2 of 12
<PAGE>
PART I - FINANCIAL INFORMATION
RollerBall International Inc.
Balance Sheets
AS AMENDED
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------------- -----------------
(unaudited)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 22,749 $ 132,099
Accounts receivable, net of allowance for doubtful
accounts of $50,000 for March 31, 1999
and December 31, 1998, respectively 91,824 212,770
Due from factor 34,218 -
Inventory 1,139,662 1,468,022
Consignment Inventory 179,422 -
Debt issuance costs - 3,125
Prepaid expenses and other 394,344 165,759
------------------- -----------------
Total Current Assets 1,862,219 1,981,775
Property and equipment, net 348,012 382,958
Intangible assets, net of accumulated amortization
of $113,268 (1999) and $102,485 (1998) 554,927 557,760
------------------- -----------------
Total Assets $ 2,765,158 $ 2,922,493
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilites:
Accounts payable $ 762,433 $ 681,478
Accrued expenses 509,338 460,804
Notes payable to stockholders 57,000 57,000
Advances from stockholders 51,629 49,129
Debt 100,000 100,000
------------------- -----------------
Total Current Liabilities 1,480,400 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; 4,926,693 issued and
outstanding (1999), 4,756,693 (1998) 4,927 4,757
Additional paid in capital 10,221,671 10,034,341
Accumulated deficit (8,941,840) (8,465,016)
------------------- -----------------
Total Stockholders' Equity 1,284,758 1,574,082
------------------- -----------------
Total Liabilities and Stockholders' Equity $ 2,765,158 $ 2,922,493
=================== =================
</TABLE>
See accompanying notes
Page 3 of 12
<PAGE>
RollerBall International Inc.
Statements of Operations
AS AMENDED
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------------------------------
1999 1998
----------------------- ----------------------
(unaudited)
<S> <C> <C>
Net sales $ 332,822 $ 55,803
Cost of sales 210,133 40,328
----------------------- ----------------------
Gross profit 122,689 15,475
Operating expenses:
Selling and marketing 169,578 239,750
General and administrative 414,478 271,719
----------------------- ----------------------
Total operating expenses 584,056 511,469
----------------------- ----------------------
Loss from operations (461,367) (495,994)
Interest expense 15,257 311,785
----------------------- ----------------------
Loss before provision for income taxes (476,624) (807,779)
Provision for income taxes 200 200
----------------------- ----------------------
Net loss $ (476,824) $ (807,979)
======================= ======================
Net loss per common share
Basic ($0.10) ($0.24)
======================= ======================
Diluted ($0.10) ($0.24)
======================= ======================
Weighted average common shares
outstanding
Basic 4,820,026 3,406,093
======================= ======================
Diluted 4,820,026 3,406,093
======================= ======================
</TABLE>
See accompanying notes
Page 4 of 12
<PAGE>
RollerBall International Inc.
Statements of Cash Flows
AS AMENDED
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------------------------
1999 1998
---------------------- --------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (476,824) $ (807,979)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 45,729 43,740
Amortization of debt issuance costs 3,125 156,074
Contribution of accrued salary--principal shareholder - 106,000
Change in operating assets and liabilities:
Accounts receivable 120,946 43,508
Due from factor (34,218) -
Inventory 148,938 6,083
Prepaid expenses (69,381) (12,395)
Accounts payable 109,251 212,737
Accrued expenses 48,534 43,401
---------------------------------------------
Net cash used in operating activities (103,900) (208,831)
INVESTING ACTIVITIES
Purchases of property and equipment - (15,457)
Increase in intangible assets (7,950) (62,150)
---------------------- --------------------
Net cash used in investing activities (7,950) (77,607)
FINANCING ACTIVITIES
Increase in cash overdraft - 44,984
Deferred stock offering costs - (95,804)
Proceeds on loans to stockholders 2,500 2,500
---------------------- --------------------
Net cash provided by (used in) financing activities
2,500 (48,320)
---------------------- --------------------
Net decrease in cash
(109,350) (334,758)
Cash at beginning of period
132,099 344,208
---------------------- --------------------
Cash at end of period $ 22,749 $ 9,450
====================== ====================
</TABLE>
See accompanying notes
Page 5 of 12
<PAGE>
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 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 1.5% per
month on the advanced funds. The Company had gross sales to the factor during
the three months ended March 31, 1999 of $252,214, received $209,357 in advances
on those receivables and incurred $8,639 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. First Quarter Adjustment
During the first quarter of 1999, the company recorded a sale of
$257,936 based on shipments to Dunham's Sports in March, 1999. Dunham's has a
corporate payment policy of paying for the goods as they are sold on a monthly
basis. Because the entire shipment was not sold on or before December 31, 1999,
the sales have been deemed a consignment sale and were reversed from the total
sales number for 1999 as a result of RollerBall's year-end 1999 audit. This
reversal of sales was based on the recommendation of the Company's auditors as a
result of the audit for the year ending December 31, 1999.
The financial statement impact for the first quarter of 1999 is as
follows:
Three Months
Ended March 31, 1999
As Reported Restated
----------- ---------
Consignment Inventory $--0-- $179,422
Accounts Receivable, net $349,760 $91,824
Net Sales $590,758 $332,822
Operating Loss $382,853 $461,367
Loss Per Share $0.08 $0.10
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 ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
Net sales for the three months ended March 31, 1999 and 1998 were
$332,822 and $55,803, respectively, which is an increase of $277,019 or
approximately 496%. This increase was primarily attributable to the Company
having the necessary inventory to fulfill sales orders during the three months
ended March 31, 1999. For the three months ended March 31, 1998, the Company did
not have the funds 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 margin for the three months ended March 31, 1999 was 36.9% which
represents an increase of 9.2% in the gross margin percent as compared to the
three months ended March 31, 1998. The increase relates to the new line of
skates being sold at higher margins in the three months ended March 31, 1999 as
opposed to the same period ending March 31, 1998 where prices were lowered to
sell older inventory in anticipation for the new skate line to be received.
Selling and marketing expenses for the three months ended March 31,
1999 and 1998 were $169,578 and $239,750, respectively, which represents a
decrease of $70,172, or 29.3%. The decrease primarily relates to the Company not
participating in one of the annual sporting goods trade shows during the three
months ended March 31, 1999 as the continued depressed state of the inline
industry did not warrant the additional expense related to maintaining a
presence at the show. In relation to not attending the show, the Company's
research and development expense as well as the brochure
Page 8 of 12
<PAGE>
expense decreased during the three months ended March 31, 1999 as compared to
the same period ended March 31, 1998.
General and administrative expenses for the three months ended March
31, 1999 and 1998 were $414,478 and $271,719, respectively, which represents an
increase of $142,759, or 52.5%. The increase was primarily due to an increase of
$65,248 related to salaries and consulting fees, primarily the addition of full
time services from the Vice President of Design and Development and the Vice
President of Administration as well as a public relations firm. In addition, the
Company experienced an increase of $25,303 related to insurance expenses,
primarily the addition of Directors and Officers insurance.
The Company's interest expense for the three months ended March 31,
1999 and 1998 was $15,257 and $311,785, respectively, which represents a
decrease of $296,528. This decrease was 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 March 31, 1999 and 1998 was
$476,824 and $807,979, respectively, which represents a decrease of $409,669, or
41.0%. The decrease in net loss for this period is primarily attributable to the
increased sales activity as compared to the prior period coupled with the
increased gross profit margin as well as the decrease in interest expense. The
Company continues to expect increased gross profit margins and decreased
interest expense over the next several quarters as compared to the previous
year's quarters.
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. 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 with a current
investor to raise additional equity capital for the Company. There can be no
assurances that the transaction will be consumated. The Company intends to
locate additional sources of financing in the near term which financings may
include equity and/or debt components. There can be no assurance that the
Company will be successful in these efforts.
Page 9 of 12
<PAGE>
Net cash used in operating activities for the three months ended March 31, 1999
and 1998 was $103,900 and $208,281, respectively. The decrease was attributable
to a decrease in the net loss for the three months ended March 31, 1999 as
compared to the same period in the prior year. This was offset primarily by an
increase in inventory of $148,938. Working captial at March 31, 1999 was
$381,819 as compared to $633,364 at December 31, 1998. The decrease is primarily
attributable to the net loss for the three months ended March 31, 1999.
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.
Expenditures for other assets totaled $7,950 for the three months ended March
31, 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 March 31, 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 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 $5,000,000. As of March 31,
1999, the Company has used approximately $1,200,000 of the proceeds for
inventory purchases, $1,500,000 for repayment of Notes and Loans Payable,
$89,000 for molds and tooling purchases, $205,000 for marketing and advertising,
$122,000 for the payment of accrued officer's salary, $545,000 for accrued
expenses and the remainder for working capital and operating purposes.
Page 10 of 12
<PAGE>
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 forms and potential investors.
The term of this agreement is fourteen months.
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 maintainance
rules. Included in this plan is the addtitional equity capital the Company plans
to raise from a current investor. There can be no assurances that the
transaction will be consumated. 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 - None
(b). Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
Page 11 of 12
<PAGE>
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 26, 2000 /s/ Jack Forcelledo
- ------------ ---------------------------------------
DATE JACK FORCELLEDO
PRESIDENT & CHIEF EXECUTIVE OFFICER
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 22,749
<SECURITIES> 0
<RECEIVABLES> 141,824
<ALLOWANCES> 50,000
<INVENTORY> 1,319,084
<CURRENT-ASSETS> 1,862,219
<PP&E> 766,790
<DEPRECIATION> 418,778
<TOTAL-ASSETS> 2,765,158
<CURRENT-LIABILITIES> 1,480,400
<BONDS> 0
0
0
<COMMON> 4,927
<OTHER-SE> 1,279,831
<TOTAL-LIABILITY-AND-EQUITY> 2,765,158
<SALES> 332,822
<TOTAL-REVENUES> 332,822
<CGS> 210,133
<TOTAL-COSTS> 210,133
<OTHER-EXPENSES> 584,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,257
<INCOME-PRETAX> (476,624)
<INCOME-TAX> 200
<INCOME-CONTINUING> (476,824)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (476,824)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
