U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996
[ ] Transition report pursuant Section 13 or 15(d) of the Exchange Act of
1934
For the transition period from to
Commission file number 0-26344
Golf Technology Holding, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Idaho 59-3303066
(State or Other Jurisdiction of (I.R.S. Employer ID #)
Incorporation or Organization)
13000 Sawgrass Village Circle, #30, Ponte Vedra Beach, Florida 32082
(Address of Principal Executive Offices)
904/273-8772
(Issuer's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date: $.001 par value Common
Stock - 3,918,408 as of May 9, 1996
Page 1 of 15
Exhibit Index begins on sequential Page 14
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of March 31, 1996 . . . . . . . . . . . 3
Statements of Operations for the three month
periods ended March 31, 1996 and 1995 . . . . . . . . 4
Statements of Cash Flows for the three month periods ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION AND SIGNATURES
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1
GOLF TECHNOLOGY HOLDING, INC.
BALANCE SHEET
March 31,
Assets 1996
(Unaudited)
Current assets:
Accounts receivable
Trade $227,270
Employees 3,328
--------
230,598
Inventories 274,736
Other current assets 105,177
--------
Total current assets 610,511
--------
Property and equipment, at cost:
Furniture and fixtures 42,687
Machinery and equipment 345,162
Leasehold improvements 45,814
--------
433,663
Less accumulated depreciation 87,489
--------
346,174
Notes receivable from related parties, net 34,105
Certificates of deposits, restricted 47,771
Deposits 287,032
Other assets 27,791
--------
Total assets $1,353,384
=========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Bank Overdraft 4,725
Notes payable 650,000
Notes payable to related parties 295,000
Accounts payable 1,374,237
Accrued liabilities 80,128
---------
Total current liabilities 2,404,090
---------
Stockholders' equity (deficit):
Preferred stock, Series A 9% Cumulative
Convertible, $.001 par value per share;
aggregate involuntary liquidation
preference of $2,012,404 ($5.17 share),
5,000,000 shares authorized 390
Common stock, $.001 par value, 25,000,000
shares authorized 3,883
Additional paid-in capital 3,982,624
Accumulated deficit (5,037,603)
-----------
Total stockholders' equity (deficit) (1,050,706)
-----------
Total liabilities and stockholders'
equity (deficit) $1,353,384
=========
See accompanying notes to financial statements.
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
STATEMENTS OF OPERATIONS
Three months ended
March 31,
1996 1995
(Unaudited)
Net Sales $551,070 $271,851
Cost of sales 187,172 117,836
-------- -------
Gross profit 363,898 154,015
Selling and marketing expenses 591,773 377,216
General and administrative expenses 525,316 247,918
Research and development costs 144,925 83,379
-------- -------
Operating income (loss) (898,116) (554,498)
-------- -------
Other income (expense):
Interest income 884 5,843
Interest expense (26) (64)
Other, net 5,211 3,187
-------- -------
6,069 8,966
Net income (loss) before income taxes (892,047) (545,532)
Income taxes - -
-------- --------
Net income (loss) (892,047) ($545,532)
Preferred stock cumulative dividends (64,404) -
-------- --------
Net income (loss) for common stockholders $(956,451) (545,532)
======== ========
Net income (loss) per average
outstanding common share $(0.25) (0.15)
======== ========
Average outstanding common shares 3,775,796 3,718,408
========= =========
See accompanying notes to financial statements.
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
STATEMENTS OF CASH FLOWS
Three months ended
March 31,
1996 1995
(unaudited)
Cash flows from operating activities:
Net loss $(892,047) ($545,532)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 16,899 8,682
Write-off of note receivable
Changes in operating assets
and liabilities:
Accounts receivable - trade (112,855) (134,727)
Accounts receivable - employees 10,596 (5,993)
Inventories (111,117) (17,827)
Other current assets and
other assets 15,350 (67,219)
Deposits (118,061) 11,348
Accounts payable and
accrued liabilities 377,136 215,729
--------- --------
Net cash used in operating
activities (814,099) (535,539)
--------- --------
Cash flows from investing activities:
Investment in certificates of
deposit, restricted (388) (202)
Notes receivable due from
related parties (7,235) (87,436)
Capital expenditures (24,113) (69,810)
-------- --------
Net cash used in investing
activities (31,736) (157,448)
-------- --------
Cash flows from financing activities:
Bank Overdraft 4,725 -
Notes payable 495,000 -
Net proceeds from issuance of
preferred and common stock 320,200 -
Deferred costs related to preferred
stock offering - (42,125)
Collection of account receivable -
related party - 137,638
------- --------
Net cash provided by
financing activities 819,925 95,513
------- --------
Net change in cash (25,910) (597,474)
Cash balance, beginning of period 25,910 658,754
------- --------
Cash balance, end of period $ - 61,280
======= ========
See accompanying notes to financial statements.
<PAGE>
GOLF TECHNOLOGY HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The Company. Golf Technology Holding, Inc. (the "Company") designs,
manufactures and markets Snake Eyes/R/ golf clubs. Snake Eyes/R/ are
tour-quality golf clubs marketed to the premium-priced segment of the golf
equipment market.
The predecessor to the Company's operating subsidiary, Golf-Tec
Holding, Inc. ("Golf-Tec"), was formed as a Florida corporation in June
1993 under the name Golf-Tec, Inc. to manufacture and market a line of
golf clubs to be developed by its sole stockholder and director. Golf-Tec
was formed as a Florida corporation in May 1994 to become the parent
company of Golf-Tec Inc., which was merged into Golf-Tec in October 1994.
During the first quarter of 1995, Golf-Tec was acquired by THO2 and
Rare Metals Exploration, Inc., an Idaho corporation incorporated in June
1963 ("THO2"), pursuant to a voluntary share exchange effected between
Golf-Tec's stockholders and THO2 on a one-for-one share basis. THO2
changed its name to Golf-Technology Holding, Inc. in connection with the
share exchange. Subsequent to the acquisition, the former shareholders of
Golf-Tec have the right to an ownership interest in 3,468,337 of
3,883,408, or 89%, of the Company's outstanding shares of common stock.
As of March 31, 1996, 2,343,334 of 3,468,337, or 68%, of Golf Tec's
outstanding shares of common stock have been exchanged for 2,343,334 of
3,883,408, or 60%, of the Company's outstanding shares of common stock.
Management anticipates that the remaining 1,125,003, or 32%, of Golf-Tec's
outstanding shares of common stock will be exchanged for shares in the
Company.
For accounting purposes, the acquisition has been treated as a
recapitalization of Golf-Tec with Golf-Tec as the acquirer. THO2 had zero
net tangible assets (no assets or liabilities) at the date of acquisition.
The historical financial statements prior to 1995 are those of Golf-Tec,
except the number of shares outstanding have been retroactively restated
to reflect the shares outstanding after the recapitalization.
2. Basis of Presentation. The accompanying interim unaudited financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission, and reflect all adjustments which, in
the opinion of management, are necessary to properly state the results of
operations and financial position. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the
information presented not misleading. The results of operations are not
necessarily indicative of the results for the full year. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-KSB, as filed with the
Securities and Exchange Commission on April 1, 1996.
3. Liquidity and Capital Resources. The Company has financed its
operations and investment in assets principally through the sale of equity
securities and is currently offering Common Stock to private investors.
The Company has incurred operating losses since its inception.
The negative working capital at March 31, 1996 and, more specifically,
the bank overdraft and receivables total of $225,873 compared to total
current liabilities total of $2,399,365 cause serious concerns about the
Company's liquidity and its ability to continue operations at current
levels and expand its product lines. Based on communications with the
Company's investment banker and with prospective investors, the Company
believes that it will raise sufficient capital which, together with
projected cash flow from operations, will be sufficient to meet the
Company's working capital needs for at least the next two years. However,
it is not certain that the Company will be able to raise all the capital
it needs. In addition, if the capital is raised, management projects that
the Company will be profitable and will have positive cash flow from
operations in 1996 based on current sales order and expense levels.
4. Notes Receivable. The Company has made advances to a shareholder of
the Company of $26,870 in 1994. The advances do not bear interest and are
due upon demand; however, the Company does not intend to demand repayment
of the advances prior to January 1, 1997. Accordingly, the outstanding
balance at March 31, 1996 has been classified as long term.
5. Representation Agreements. The Company has representation
agreements with seventeen PGA Tour members. The Company has agreed to pay
certain incentives based upon performance under the agreements, including
minimum annual compensation totaling $793,333, $243,750 and $15,000 for
1996, 1997 and 1998, respectively; 2,500 shares of the Company's common
capital stock for 1996; five year stock options for 10,000 shares of the
Company's common capital stock; bonuses of $10,000 to $50,000 per win of
an official PGA Tour event, the Masters, the U.S. Open or the British
Open; bonuses up to $20,000 and $40,000 based on a member's ranking on the
PGA Tour Money List for 1996 and 1997, respectively; and, bonuses up to
$40,000 and $100,000 based on a member's percentage of PGA Tour earnings
for 1996 and 1997, respectively. The Company incurred expenses for
representation agreements of $197,000 for the three months ended March 31,
1996, and $536,250 in 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following management's discussion and analysis of financial
condition and results of operations addresses the performance of the
Company for the three month periods ended March 31, 1995 and 1996
(unaudited) and should be read in conjunction with the Company's Financial
Statements (including the notes thereto) appearing elsewhere in this
document. As the Company's acquisition of Golf-Tec has been accounted for
as a recapitalization, the discussion below refers to the operations of
Golf-Tec and its subsidiary, Golf-Tec, Inc., prior to the share exchange
as those of the Company on a consolidated basis.
In June 1995, one of the Company's vendors, which polishes and chromes
clubheads, had a work slowdown due to labor contract negotiations. The
same vendor had a work stoppage in July 1995. This happened at a time
when the Company's sales orders were exceeding projections. This
situation resulted in the Company receiving only limited product shipments
during the second half of 1995, with only slight increases during the
first three months of 1996, and therefore, the Company was able to ship
and invoice only a small number of orders during that period. During the
same period, the Company's sales orders continued to climb, and as of
March 31, 1996, the Company had sales orders of approximately $3,089,381.
The Company has recently developed a relationship with two additional
polishing and chroming vendors and is now receiving product from three
vendors. The Company now projects it will be current in shipping orders
by August, 1996.
For the Three Months Ended March 31, 1996
The Company's net sales (unaudited) for the three month period ending
March 31, 1996 and 1995 were $551,100 and $271,900, respectively.
Management attributes the increase in sales for the three months ended
March 31, 1996 to the national marketing efforts made during 1995, as well
as the limited increase in product availability beginning in January,
1996.
The Company's gross profit for the three months ended March 31, 1996
was $363,900 compared to $154,000 for the three months ended March 31,
1995. The increase is attributed to the national marketing efforts made
during 1995, as well as the limited increase in product availability
beginning in January, 1996.
Operations resulted in net losses of $892,000 and $545,500 for the
three months ended March 31, 1996 and March 31, 1995, respectively. The
net loss for the three months ended March 31, 1995 is attributable
primarily to the beginning of a national advertising campaign which
included monthly major magazine advertising as well as weekly television
advertising on ESPN.
The significant operating loss incurred during the three months ended
March 31, 1996 was primarily due to four factors: research and
development costs, tour player contract expenses, increased staffing, and
shortage of deliverable product. Research and development costs increased
from $83,400 for the three months ended March 31, 1995 to $145,000 for the
same period in 1996. These costs were expended primarily on the
development of the Snake Eyes/R/ Driver, which was introduced to the
market in April 1996. Tour player contract expenses increased from
$85,000 for the three months ended March 31, 1995 to $197,000 for the same
period in 1996. General and administrative expenses were $525,300 for the
three months ended March 31, 1996, up from $248,000 for the same period in
1995. The majority of this increase was due to the adding of new
employees in the administration and production departments to handle the
increased order volume, and the increase in professional fees which was
related to the offering of securities and the related disclosures. The
Company experienced a shortage of deliverable product due to a lack of
deliveries from a primary vendor as noted in the previous discussion of
revenues. Although there was an increase in product flow and availability
beginning January, 1996, the level of product flow was not adequate to
meet shipping requirements until April, 1996.
Liquidity and Capital Resources
The negative working capital at March 31, 1996 and, more specifically,
the bank overdraft and receivables total of $225,873 compared to total
current liabilities total of $2,399,365 cause serious concerns about the
Company's liquidity and its ability to continue operations at current
levels and expand its product lines. Based on communications with the
Company's investment banker and with prospective investors, the Company
believes that it will raise sufficient capital which, together with
projected cash flow from operations, will be sufficient to meet the
Company's working capital needs for at least the next two years. However,
it is not certain that the Company will be able to raise all the capital
it needs. In addition, if the capital is raised, management projects that
the Company will be profitable and will have positive cash flow from
operations in 1996 based on current sales order and expense levels.
PART II. OTHER INFORMATION AND SIGNATURES
Item 6.Exhibits and Reports on Form 8-K
A. Exhibits:
11. Computation of Earnings Per Share
27. Financial Data Schedule
B. Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
GOLF TECHNOLOGY HOLDING, INC.
DATE: May 10, 1996 By: /s/ Harold E. Hutchins
Harold E. Hutchins, Vice
President and Chief
Financial Officer
<PAGE>
PART III. INDEX TO EXHIBITS
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
Exhibit 11
GOLF TECHNOLOGY HOLDING, INC.
COMPUTATION OF EARNINGS PER SHARE
For the Three Month
Period Ended
March 31, 1996
Weighted average number of
common shares outstanding 3,775,796
Net earnings available for common
stockholders (956,451)
Earnings per common share (0.25)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 303,026
<ALLOWANCES> 75,756
<INVENTORY> 274,736
<CURRENT-ASSETS> 610,511
<PP&E> 433,663
<DEPRECIATION> 87,489
<TOTAL-ASSETS> 1,353,384
<CURRENT-LIABILITIES> 2,404,090
<BONDS> 0
0
0
<COMMON> 3,883
<OTHER-SE> (1,054,979)
<TOTAL-LIABILITY-AND-EQUITY> 1,353,384
<SALES> 551,070
<TOTAL-REVENUES> 551,070
<CGS> 187,172
<TOTAL-COSTS> 1,262,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 42,487
<INTEREST-EXPENSE> 6,069
<INCOME-PRETAX> (892,047)
<INCOME-TAX> 0
<INCOME-CONTINUING> (892,047)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (892,047)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> 0
</TABLE>
