SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-26344
GOLF-TECHNOLOGY HOLDING, INC.
(Name of Small Business Issuer in its charter)
Idaho 59-3303066
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13000 Sawgrass Village Circle, Suite 30, Ponte Vedra Beach, FL 32082
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: 904/273-8772
Securities registered under Section 12(b) of the Securities Exchange Act:
Title of each class Name of each exchange
on which registered
None None
Securities registered under Section 12(g) of the Securities Exchange Act:
Common Stock $0.001 par value
(Title of Class)
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
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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $3,544,183
State the aggregate market value of the voting stock held by non-
affiliates of the registrant on March, 31, 1997 computed by reference to
the price at which the stock was sold on that date:$10,058,030 (based on
shares traded on the NASDAQ Small Cap Exchange on said date)
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares of each of the issuer's classes of common
equity, as of March 31, 1997: 4,722,080 shares of common stock.
PART I
Item 1. Description of Business
General
Golf-Technology Holding, Inc., an Idaho corporation, formerly known as
THO2 and Rare Metals Exploration, Inc. (the "Company"), through its
subsidiary, Golf-Tec Holding, Inc. ("Golf-Tec"), designs, manufactures,
and markets "Snake Eyes" golf clubs. "Snake Eyes" is the Company's
registered brand and logo. Snake Eyes/R/ golf clubs are tour-quality golf
clubs marketed to the premium-priced segment of the golf equipment market
(see "Business Strategy" and "Competition" below). The Company's initial
products, the Snake Eyes/R/ Sand Wedge, Pitching Wedge, and Lob Wedge,
have been praised in a number of international golf publications and are
used by a number of PGA Tour players. The Company began distribution of
the Snake Eyes/R/ Driver in 1996. The Company has substantially completed
the development of a full set of ten irons and fairway woods. The design
of these products has been completed, and the Company is currently
engineering the manufacturing process. Distribution of the complete set
of irons and fairway woods is expected to begin in late 1997. Sales of
fairway woods are not expected to be a material part of the Company's
revenue in 1997.
Golf-Tec, Inc., the predecessor to the Company's operating subsidiary
Golf-Tec was formed as a Florida corporation in June 1993 to manufacture
and market a line of golf clubs to be developed by Ernest R. Vadersen.
Mr. Vadersen has over 19 years of experience in designing and assembling
custom golf clubs for professional and serious amateur golfers. During
those years, Mr. Vadersen served as a consultant on equipment design and
golf product marketing to some of golf's largest equipment manufacturers
including Spalding, MacGregor, Hogan and Yamaha.
Golf-Tec was formed as a Florida corporation in May 1994 to become the
parent company of Golf-Tec, Inc., and in October 1994, Golf-Tec, Inc., the
subsidiary, merged into its parent, Golf-Tec. Golf-Tec in turn became a
majority-owned subsidiary of 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
during the first quarter of 1995. THO2 changed its name to Golf-
Technology Holding, Inc. in connection with the share exchange, and its
only business is the design, manufacture and marketing of golf clubs.
(See "Business Strategy").
Share Exchange and Company's Prior Business
The Company's subsidiary, Golf-Tec, entered into an agreement dated as
of December 29, 1994 providing for Golf-Tec to become a wholly owned
subsidiary of the Company (then known as THO2) pursuant to a statutory
share exchange, with the stockholders of Golf-Tec being entitled to
receive approximately 93% of the Company's Common Stock immediately
following the exchange. Pursuant to such agreement, the members of the
Company's Board of Directors assumed their positions in December 1994.
Thereafter, the transaction was restructured as a voluntary share exchange
effected only with the shareholders of Golf-Tec as a transaction not
involving a public offering pursuant to Section 4(2) of the Securities Act
of 1933. The purpose and effect of the share exchange was for Golf-Tec to
become the subsidiary of a shell corporation having publicly tradable
shares and for Golf-Tec's shareholders to become shareholders of a public
company as a result. As of December 31, 1996, the holders of
approximately 68% of Golf-Tec's common stock have elected to exchange
their Golf-Tec shares for the Company's Common Stock. As a result, 68% of
Golf-Tec's common stock is owned by the Company and the remaining 32% is
owned by stockholders who have not yet responded to the exchange offer.
Because there is no market for Golf-Tec's common stock, management of the
Company believes that all Golf-Tec stockholders will elect to exchange
their shares for the Company's Common Stock.
THO2 initially was organized as a mining company but is believed to have
engaged in only sporadic activity and to have been dormant for the last
several years. Prior to the share exchange, it had 490 stockholders of
record, who owned 250,071 shares of Common Stock, all of which were
retained in the share exchange and are eligible for resale in the open
market. These shares constitute approximately 5.7% of the Company's
outstanding Common Stock. THO2 had no assets, liabilities or operations
at the time of the share exchange.
Management's knowledge about THO2's prior business is extremely limited.
Management has no way of knowing whether there is any basis for a
contingent liability arising out of acts or omissions of the Company prior
to the share exchange, such as a tax liability or an environmental claim
relating to any real property to which the Company may have held title
many years ago. While management does not believe that any such
contingent liabilities exist, there can be no assurance that any possible
contingent liabilities resulting from the Company's prior business history
have not yet been cut off by applicable statutes of limitations. Because
management knows very little about THO2's prior business, it has no basis
for determining likely sources of contingent liabilities and therefore has
no basis for determining when applicable statutes of limitation would run.
The Golfing Industry
Management believes the game of golf is continuing to grow in popularity
and that the golf equipment industry is necessarily growing right along
with it. Domestically, an aging and increasingly affluent baby boomer
generation is taking up golf. Industry data indicate that there are
currently in excess of 30 million golfers in the U.S. The Company
believes that this pattern of growth is also occurring internationally in
Europe, Australia, Asia and especially in Japan.
To service the equipment needs of golfers, there are more than 100
domestic and international manufacturers of golf clubs. Many of these
companies manufacture low-priced entry-level clubs for the mass market,
typically sold in department stores, discount chains and general sporting
goods outlets. Other companies, including the Company, manufacture clubs
for golfers who seek to purchase premium-priced, tour-quality golf
equipment.
Over the past 25 years, golf club design and manufacturing processes have
changed rapidly. New materials technologies, along with advances in
modeling, testing and manufacturing techniques, have resulted in the
introduction of new club designs. The Company believes the most
significant impact on the industry was the introduction of golf irons
manufactured using the casting process as opposed to the traditional
forging process. The Company further believes that the casting process is
used by over 90% of golf club manufacturers because it is much cheaper
than forging. It is common industry knowledge that cast golf clubs have
porosity, or air bubbles in the metal.
The Company believes that irons made from forging are superior to those
that are cast. The number one iron used by more pros on the PGA Tour than
any other iron is forged, not cast. The Company has developed
relationships that will enable it to produce forged golf clubs at very
strict tolerance levels. These processes eliminate much of the labor
intensive grinding processes used in the traditional forged golf club
industry.
Business Strategy
The Company's strategy is to expand its product line to include a full
range of golf clubs and accessories. The Company believes that its
association with members of the pro tours allow it unique access to the
pacesetters of the golfing world and that the acceptance of the Company's
products by such persons will greatly help the Company's marketing
efforts.
The Company will continue to target the high-quality segment of the golf
consumer market and to access that segment through innovative tour-quality
design, tour-quality manufacturing and distinctive marketing. Management
believes that the Company has demonstrated the ability to implement this
strategy by the current success of its tour-quality Snake Eyes/R/ wedges.
See "Management's Discussion and Analysis."
Tour Quality Image. The Company continues to focus on building and
maintaining the tour-quality image associated with the brand name. The
Company maintains this image, in part, through its interaction with
approximately 14 PGA Tour, Senior PGA Tour and Nike Tour players with whom
the Company maintains a contractual relationship with terms ranging from
twelve to thirty-six months. (A sample contract is included as an exhibit
to this document.)
Players' contracts require players to endorse Snake Eyes/R/ brand logo
worldwide, play specific clubs that has been established and make "best
efforts" to play new Snake Eyes clubs including Snake Eyes/R/ drivers.
The Company utilizes its player staff to test research and development
clubs under actual playing conditions. Player feedback plays a key role
in new product design and development.
The Company is exploring other channels in order to broaden its Tour
Player base. This includes engaging players currently playing the
European Tour. Further, the Company is looking to build future Tour
Player representation through its Collegiate Program. The Collegiate
Program introduces the Company's equipment to the next generation of Tour
Players.
The Company's Tour representatives are required to sit on the player's
advisory board for equipment and, in most cases, wear golf shirts and head
gear displaying the Company's logo. These players are as follows:
Name Tour Tour
Wins
Bill Kratzert PGA Tour 4
Andy Bean PGA Tour 11
Doug Tewell PGA Tour 4
John Mahaffey PGA Tour 10
Mark Hayes PGA Tour 3
Skip Kendall PGA Tour -
Marco Dawson PGA Tour -
Doug Barron PGA Tour -
Mark Carnevale NIKE Tour 2
Clark Dennis NIKE Tour -
Carl Paulson NIKE Tour -
Bruce Devlin Senior PGA Tour 9
Bob Dickson Senior PGA Tour 2
Will Sowles Senior PGA Tour 5
Tour acceptance is further evidenced by the Darrell Survey, which is the
official club count of both the PGA Tour and the Senior PGA Tour. The
Darrell Survey is conducted on the first tee on the first day of
competition at each tournament site. The surveys list the individual
players who used the wedges during specific tournament play. Sand wedges,
as defined by the survey, include lob wedges. Snake Eyes wedges
represents approximately 10% of all wedges played by PGA and Senior PGA
tour player in 1996. The Darrell Survey numbers vary from week to week
due to the weekly changes in the field of players and changes in the
individual players' club preferences. There is no guarantee that any
player listed in the survey as playing a particular club will play the
same club in subsequent events. Reference to the Darrell Survey is
intended for the sole purpose of providing a basis and context for the
term "acceptance" as used in this document.
There exists a degree of risk associated with making PGA Tour players'
usage of the Company's products as a basis for advertising. Tour players'
preferences and loyalties and their performance and ratings may change
from time to time. The Company is aware of this risk and has advertising
campaigns designed to educate the consumer on the technical and
performance characteristics of its products. These campaigns will be used
in place of the Tour acceptance campaigns should the need arise.
Research and Development
The Company is engaged in continuing materials research and product
development. All clubhead designs are initiated by Ernest R. Vadersen,
the Company's Chairman and Chief Executive Officer. Mr. Vadersen's
clubhead designs have been used to win many major championships around the
world for over nineteen years. Mr. Vadersen directs all product
development projects utilizing a team comprised of senior and middle
management. The Company is dedicated to the continuing research and
development of improved production techniques and metallurgical advances.
Products currently in the development stage are a complete set of ten
irons, and three fairway woods. The irons will be introduced in mid 1997,
and the fairway woods will be introduced in late 1997. Product design has
been completed on the irons and is in process on the fairway woods. The
Company is currently engineering the manufacturing process on the irons.
The Company's expenses for research and development in 1996 and 1995 were
$517,000 and $620,000 respectively. A substantial portion of these costs
were related primarily to design and development of the Snake Eyes/R/
Driver.
The design of new golf equipment is greatly influenced by rules and
interpretations of the United States Golf Association (USGA). Although
the golf equipment standards established by the USGA generally apply only
to competitive events sanctioned by that organization, it has become
critical for designers of new clubs to assure compliance with USGA
standards. The Company's product design and development process involves
coordination with the USGA staff regarding such compliance. The Company
has no knowledge of current or pending USGA rules or anticipated changes
in rules that would adversely impact the Company's products or operations.
Products
Snake Eyes/R/ Sand Wedge (#11 Iron). The original Sand Wedge is carbon
steel forged to tolerances of three grams in weight, shadow graph
integrity in shape and one degree in deflective angle. The Sand Wedge is
manufactured to a loft of 56 degrees. The Company believes that its method
of production produces a consistently high-quality product which golf
professionals are able to recognize. Everyone playing a Snake Eyes golf
club, professional or amateur, is playing with the same precisely
manufactured golf club.
Snake Eyes/R/ Lob Wedge (#12 Iron). The Lob Wedge has exactly the same
characteristics as the Sand Wedge. In addition, the Lob Wedge is designed
with a bottom that was tested by Tour players specifically as a lob wedge,
as opposed to being manufactured by just adding weight and width to the
bottom of the club. The Lob Wedge has been introduced in lofts of 58, 60
and 62 degrees.
Snake Eyes/R/ Pitching Wedge (#10 Iron). The Pitching Wedge has a
multiple-use sole so it can be hit for long bunker shots as well as
pitched out of the grass, or hit out of the fairway or deep rough. The
center of gravity is high to eliminate the skid factor of the ball running
up the clubface. The hosel is the same as the Company's other two wedges
-- tapered, with three different sizes and shapes. The Pitching Wedge has
been introduced in lofts of 48, 50 and 52 degrees.
Snake Eyes/R/ Driver. The Driver has an innovative design. The Company's
metal wood has face progression. The difficulty in designing face
progression in a metal wood relates to the fact that internal tooling in
the casting process has been restrictive. The Company has developed a
method to control the tooling negatives and create this face progression,
which gives the Company an opportunity to face-weight and three-point
balance the golf club: one directly in the tail behind the hit, a second
in the toe of the club, and a third in the heel of the club. In addition,
the wall construction and crown of the club have been designed so they
become geometric braces, and force energy forward through the golf ball.
Test results from Tour players reportedly show an average increase in
driving distance of up to 15 yards. The club is offered in a new metal,
exclusively formulated by the Company, called PV522. The Driver has been
introduced in lofts of 9, 10 and 11 degrees.
The Driver also features a proprietary O.E.T. (Optimum Energy Transfer)
shaft system including two designs: 44" Viper shaft for the "hitter", and
the 45" Python shaft for the "swinger". Each shaft is available in a
variety of flex to accommodate the individual.
Snake Eyes/R/ Putters. The Putter line was introduced in 1996. This
collection includes seven models featuring a variety of blade, flange and
mallet type designs. The Company's Putters optimize feel by combining the
right shaft, right grip and proprietary optimally sensitive, soft metals.
These elements are combined in traditional classic shapes of proven design
emphasizing advances in structure, balance and cosmetics.
Snake Eyes/R/ Fairway Woods. The Fairway Woods are being designed with
characteristics similar to the Driver. The Fairway Woods will have design
characteristics that emphasize the playability of long fairway shots.
These Fairway Woods are expected to be available to the public sometime in
late 1997.
Snake Eyes/R/ Irons. Snake Eyes/R/ Irons are muscle back, forged irons.
Each club is balanced independently: a 1-iron is a 1-iron, a pitching
wedge is a pitching wedge. The balance point and center of gravity are
related to each iron, so that its effective launch angle when striking a
shot is as close to primary as possible. These irons are expected to be
available to the public sometime in mid-1997, on a limited basis. The
Company is currently engineering the manufacturing process for the set of
irons.
Competition
The Company competes in the premium-price segment of the golf club
manufacturing industry. The Company's Wedges sell to end users for
approximately $200 each, compared with $50 to $90 for entry-level clubs
produced for the mass market. The Company's Drivers sell for
approximately between $250 and $350, which is in the range for premium
drivers in the industry. The market for these golf clubs is highly
competitive and a number of established companies compete in this market,
many of which have greater financial and other resources than the Company.
The Company's competitors include Callaway Golf Company, Karsten
Manufacturing Corporation (Ping), Taylor-Made Golf Company, Cobra Golf
Incorporated and Tommy Armour Golf Company.
The golf club industry is generally characterized by rapid and widespread
imitation of popular golf club designs pioneered by new or existing
competitors. Many purchasers of premium-priced clubs desire golf clubs
that feature the latest technological innovations and cosmetic designs,
and their purchasing decisions are often the result of highly subjective
preferences which can be influenced by many factors, including, among
others, advertising, media and product endorsements. The Company could
therefore face substantial competition from existing or new competitors
that introduce and successfully promote golf clubs perceived to offer
advantages over the Company's products.
Manufacturing and Quality Control
In the belief that the key to a successful club is consistency in
production, the Company has established tight production tolerances. All
components are produced to the Company's exacting specifications. Before
acceptance, each component is compared to master models created by the
Company. Each and every club component must meet or exceed the following
tolerances or the component is rejected: 10/1,000 of an inch in grinding
integrity; 3.0 grams maximum chrome plating; 3 cycles shaft variance; 2.5
grams weight variance; and 1.5 grams grip weight variance. The Company
does not know the exact tolerances of its competitors and does not infer
that the Company's tolerances are more stringent than that of the
competition.
The Company obtains its raw materials from a variety of sources and, like
other manufacturers of golf clubs, subcontracts certain portions of the
manufacturing process, including club head forging and finish. The
Company purchases all shafts for its wedges from True Temper Sports, the
largest supplier of steel golf shafts in the industry. The Company
purchases all of its driver shafts from True-Temper and HST. The grips
for all the Company's clubs are purchased from Eaton-Golf Pride. All of
the above-named vendors are well established in the industry and provide
products to most of the major club manufacturers. The Company assembles
all of its golf clubs at its Ponte Vedra Beach, Florida location using
industry standard methods. The Company does not believe its shafts,
grips, or assembly methods give it any material competitive advantage or
disadvantage.
During the later part of 1995 and early 1996, the Company's production was
impaired due to a single relationship with a vendor which polishes and
chromes clubheads. The Company has since engaged two additional vendors
to do this work allowing for production to resume as scheduled. The
Company believes that it is not dependent on a single supplier and that in
the event one of the suppliers experiences production problems, it would
not materially affect the Company's performance.
Marketing and Sales
In keeping with the Company's decision to focus primarily on the high
end of the equipment market, the Company has aimed its marketing efforts
primarily at golf professionals, custom pro-shops, custom assembly
organizations and up-scale golf specialty shops. The Company's marketing
operations are composed of 30 independent sales representatives servicing
the green grass market; direct sales to select club pros, custom pro shops
and custom club assemblers; direct sales and distributor/wholesale
arrangements covering off-shore markets in Europe and Asia; and direct
marketing channels such as catalogs. These efforts are supported with
coverage in select golfing publications, televisions commercials and
general press.
Customer Service and Support. The Company believes that its
relationships with its customers, which primarily consist of on-course
golf professionals, selected off-course golf specialty store operators and
direct retail customers, have and will continue to be a major factor in
its success. The Company employs former on-course PGA professionals as
part of its customer service personnel to enhance its understanding of the
customers' needs.
The Company has a distribution agreement with Palawan Pearls, Inc.,
d/b/a SunTrex Corporation, for the exclusive distribution of Snake Eyes/R/
Golf Clubs to Japan and most of the Pacific Rim countries. The agreement
requires certain minimum quantities annually during its three year
duration expiring December 1998.
The Company has a five year licensing agreement, which expires March 2000,
whereby the Company licenses its Snake Eyes/R/ name and logo to Michael
Thomas, Ltd. for use in manufacturing and distribution of soft goods,
including shirts, hats, visors and sweaters. The Company will receive
royalties on gross sales based on a graduated scale.
The Company is optimistic about future results from the SunTrex and
Michael Thomas contracts but does not anticipate revenues from the
contracts to be material over the coming year.
Employees
At December 31, 1996, the Company had 25 full-time employees including
Mr. Vadersen, Chairman and Chief Executive Officer and Mr. Hutchins, Chief
Operating and Financial Officer. The Company believes its employee
relationships are satisfactory.
The Company is relies heavily on its founder, Ernest R. Vadersen. There
is strong competition for qualified personnel in the golf club industry,
and the loss of Mr. Vadersen's services could adversely affect the
Company's business. The Company has entered into an employment agreement
with Mr. Vadersen through May 1999. See "Executive Compensation." The
Company is the beneficiary on key man insurance policies on the life of
Mr. Vadersen totaling $4,000,000.
Patents and Trademarks
The Company has registered its logo and brand name in the United States.
The Company has also registered its logo in Japan and is currently in the
process of registering its name there. The Company is in the process of
applying for patents on certain technical designs on its wedges and
driver.
Government Regulation
The Company's facilities are subject to numerous federal, state and
local laws and regulations designed to protect the environment from waste
emissions and hazardous substances. The Company is also subject to the
federal Occupational Safety and Health Act and other laws and regulations
affecting the safety and health of employees in the production areas of
its facilities. The Company believes it is in compliance in all material
respects with all applicable environmental and occupational safety
regulations.
Item 2. Description of Property
The Company's philosophy on real estate investments is to lease required
properties and invest in making golf clubs. The Company presently leases
approximately 3,335 square feet of space at its corporate headquarters in
Ponte Vedra Beach, Florida pursuant to a lease that expires on July 31,
1997. The related cost for such space is approximately $3,300 per month.
Additionally, the Company leases 3,500 feet of space at an adjacent shop
facility pursuant to a lease that expires on August 30, 1997. The related
cost for shop space is approximately $4,700 per month. The corporate
headquarters and shop facility are located in close proximity to PGA Tour
headquarters, which is also in Ponte Vedra Beach, Florida.
The shop facility houses the Company's assembly, testing, and fitting
operations which includes standard, traditional equipment as well as
state-of-the-art measuring, testing and production machinery such as:
precision frequency analyzers for the evaluation of the flex rates of club
shafts; loft and lie fixtures for setting the correct club angles of both
woods and irons; specialty grinding and polishing equipment for research
and development and production use; high precision measuring devices for
shaft lengths for all types of woods and irons; a fully computerized and
integrated shipping, labeling and tracking system for efficient order
fulfillment; and proprietary, custom designed work stations to maximize
employee productivity.
The Company is currently negotiating to either sub-lease or buyout the
lease related to approximately 12,000 square feet of manufacturing and
office space located in Ann Arbor, Michigan pursuant to a lease that began
on May 1, 1995 and expires on April 30, 2000. The Company estimates that
this lease will be resolved by June 1997. The rent schedule for this
facility is as follows:
Lease Year Monthly
Ended Rent
4/30/1997 7,000
4/30/1998 7,250
4/30/1999 7,500
4/30/2000 7,750
This facility previously housed the Company's manufacturing and research
and development operations and its driver assembly operation. These
operations have been moved to the Ponte Vedra Beach, Florida shop
facility.
Management believes the properties herein described are adequate to handle
current and short term projected business.
Item 3. Legal Proceedings
There are no material proceedings to which the Company is a party.
In February 1968, a permanent injunction was entered by the U.S. District
Court for the District of Idaho against the Company prohibiting the
Company from (1) offering or selling its Common Stock or any other
securities unless such securities were first registered with the
Securities and Exchange Commission or exempt from such registration,
(2) or making material misstatements or omissions in the offer or sale of
its securities. This injunction stemmed from the disposition of shares
between 1963 and 1968 by two of the Company's incorporators without
registration under the Securities Act of 1933 or exemptions from
registration thereunder. The Company does not believe that the continued
existence of this injunction will have a material adverse effect on the
Company as the Company intends to comply with such Act.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The 250,071 shares of Common Stock that have been outstanding since the
late 1960s have been eligible for trading on the NASDAQ Small Cap market
exchange since August 15, 1996. Previously, the shares had been eligible
for trading on the Over-the-Counter Board since February 1, 1995. The
following table sets forth, based on information provided by market makers
in the Common Stock, the high and low bid prices for the Common Stock for
the quarters indicated. The quotations represent bid prices between
dealers and do not include retail mark-up, mark-down or commissions, and
do not represent actual transactions. As of March 31, 1997, there were
696 holders of record of Common Stock.
1996 High Bid Low Bid
1st Quarter $8.75 7.50
2nd Quarter 8.50 6.25
3rd Quarter 8.50 6.25
4th Quarter 6.88 1.75
1995 High Bid Low Bid
1st Quarter $9.50 7.00
2nd Quarter 11.13 9.00
3rd Quarter 9.00 6.25
4th Quarter 8.38 7.50
The Company anticipates that for the foreseeable future, earnings will be
retained for the development of its business. Accordingly, the Company
does not anticipate paying dividends on the Common Stock in the
foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend on, among
other things, future earnings, capital requirements, the general financial
condition of the Company and general business conditions.
Item 6. 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 years ended December 31, 1996 and 1995, 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.
Results of Operations
The Company's net sales for the year ended December 31, 1996 and 1995,
were $3,544,000 and $1,270,000, respectively. The Company's gross profit
for the year ended December 31, 1996 was $1,799,000 compared to $673,000
for the year ended December 31, 1995. The Company has continued to build
on its initial success regarding (1) product development, (2) raising
capital, (3) maintaining and developing supply sources, (4) refining the
design and manufacturing processes, and (5) gaining acceptance on the PGA
and Senior PGA Tours. The company maintains full scale marketing efforts
through contractual relationships with approximately 30 independent sales
representatives and the retention of The Cox Group, a New York City
advertising agency. Management attributes the increase in sales and gross
profit for the year ended December 31, 1996 to the expansion of its
national marketing efforts, introduction of expanded product line and
increase in product availability beginning in April 1996.
Operations resulted in net losses of $5,686,000 and $3,262,000 for the
years ended December 31, 1996 and 1995, respectively. The net losses for
both years were primarily due to marketing expenses, research and
development costs, increased staff levels and shortage of product. The
Company experienced a shortage of deliverable product in late 1995 and
early 1996 due to a lack of consistent deliveries from primary vendors. The
1996 loss was also impacted by a write-down of non-recoverable assets and
lease accrual of $441,048 relating to the Company's Ann Arbor, Michigan
facility.
Selling and marketing expenses increased to $4,015,000 for the year ended
December 31, 1996 from $2,113,000 for the same period in 1995. This
increase in selling and marketing expenses was due to the expansion of a
national advertising campaign which included monthly major magazine
advertising in Golf Digest as well as regular television advertising on
ESPN and The Golf Channel. Additionally, selling and marketing expenses
increased due to tour promotion expenses increasing from $636,000 for the
year ended December 31, 1995 to $1,026,000 for the same period in 1996.
The primary reason for the Tour Promotion expenses increase was due to
increased player contract expenses.
Research and development costs were $517,000 for the year ended December
31, 1996 compared to $620,000 for the same period in 1995. These costs
were expended primarily on the development of the Snake Eyes/R/ Driver,
which was introduced to the market during 1996.
General and administrative expenses were $2,511,000 for the year ended
December 31, 1996, up from $1,202,000 for the same period in 1995. The
majority of this increase was due to increases in legal expenses, office
salaries, rent and depreciation. These expenses increased relative to
growth at the corporate office facility and shop, as well as expanded
operations at the Driver production facility in Ann Arbor, Michigan and
distribution operations in Europe. Legal fees were impacted by increased
corporate activity.
Other expenses during 1995 included a bad debt allowance of $378,000 for
an uncollectible note receivable and advances to a former employee. These
funds were loaned to Donald R. Cook, to keep his company in business while
it helped to develop the Snake Eyes/R/ driver product. The Company
expected to eventually purchase the assets of Mr. Cook's company, Sunshine
Sports, Inc., but was unable to do so due to unreported liabilities and
various liens on said assets.
Liquidity and Capital Resources
The Company has financed its operations and investment in assets
primarily through the sale of equity securities. (See "Recent Sales of
Unregistered Securities" appearing elsewhere in this document.) The
Company received net proceeds from the sale of equity securities of
$5,956,000 and $1,820,000 during the years ended December 31, 1996 and
1995, respectively.
Net cash used by operating activities was $5,605,000 for the year ended
December 31, 1996 and $2,489,000 for the comparable period of 1995. This
increase in use of funds was primarily the result of the increased net
loss described in "Results of Operations" above. The increase in the use
of funds for the same 1996 period was also the result of an increase in
inventories of $815,000, increase in accounts receivable of $399,000 and
increase in prepaid and other assets of $329,000. The principal operating
activity that resulted in a decrease in the use of funds for the same
period was an increase in accounts payable and accrued liabilities of
$938,000. Increased sales for the year ended December 31, 1996 was the
primary factor influencing the increases in trade receivables and
inventories.
Capital expenditures by the Company totaled $720,000 for the year ended
December 31, 1996 as compared to $291,000 for the comparable period of
1995. This increase was primarily for the production equipment and
leasehold improvements for the Company's Ann Arbor, Michigan facility.
Working capital and cash totaled $(2,226,000) and $60,000, respectively,
at December 31, 1996 compared to $(1,091,000) and $26,000 at December 31,
1995. The decrease in working capital is principally due to the large
operating loss described in "Results of Operations" above.
Recurring losses and the negative working capital at December 31, 1996
cause serious concerns about the Company's liquidity and its ability to
continue operations at current levels and expand its product lines.
During January 1997, the Company successfully issued a private Series C
3.33% Convertible Preferred Stock Offering which netted proceeds of
$2,900,000. In addition, management projects that the Company will be
profitable and will have positive cash flow from operations in 1997 based
on current sales orders and expense levels. However, it is not certain
that the Company will be able to realize management's sales projections.
Based on communications with current and prospective investors, the
Company believes that it will be able to raise sufficient capital, if
needed, 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, the Company's ability to raise further capital
is uncertain.
The Company has not declared and therefore not paid accumulated dividends
on its Series A Preferred stock. Dividends on Series A Preferred Stock
cannot be declared or paid until the Company has accumulated profits. If
the Company had accumulated profits at December 31, 1996 and 1995, it
would have accumulated dividends payable on Series A Preferred Stock in
the amounts of $238,000 and $63,000, respectively, for the years then
ended.
Item 7. Financial Statements
The financial statements and independent auditor's report are filed as
part of this report. See Index to Financial Statements attached hereto.
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Executive Officers and Directors
The following table sets forth the current directors and executive
officers of the Company:
Name Age Position
Ernest R. Vadersen 52 Chairman of the Board, Chief
Executive Officer
Harold E. Hutchins 42 Secretary, Chief Operating and
Financial Officer
Melvin Simon 70 Director
Jonathan Berstein 50 Director
Kevin Moore 42 Director
Larry Movsovitz 58 Director
Doug Tewell 47 Director
Ernest Vadersen of Ponte Vedra Beach, Florida, has served in his
capacity with Golf-Tec, Inc. since its formation in June 1993 and with the
Company since December 1994. From August 1989 to May 1993, Mr. Vadersen
was a self-employed, independent consultant to Ben Hogan Golf Company,
Macgregor Golf and Yamaha International.
Harold Hutchins of Jacksonville, Florida, has served as Golf-Tec Inc. and
the Company since August 1994 and December 1994, respectively. In
addition to Chief Financial Officer duties, Mr. Hutchins assumed the
position of Chief Operating Officer in August 1996. From January 1990 to
August 1994, Mr. Hutchins was Comptroller of Holmes Lumber Company, a $60
million building material supplier.
Melvin Simon of Indianapolis, Indiana, business affiliations are Simon
Properties and Indiana Pacers. Other Director affiliation includes the
Simon DeBartolo Group.
Jonathan Bernstein of New York, New York, business affiliation is as
Partner, Pryor Cashman Sherman & Flynn.
Kevin Moore of New York, New York, business affiliation is with The Clark
Estates. Other Director affiliations include Hiltox Corporation of
America, Ducommun Inc. and Premiumwear, Inc.
Larry Movsovitz of Jacksonville, Florida, business affiliation is
Movsovitz and Sons Inc. (Albert Fisher Co.). Other Director affiliation
includes Rosecliff Incorporated.
Doug Tewell of Edmond, Oklahoma, business affiliations are the PGA Tour
and the Golf Channel.
Directors of the Company are elected annually at the annual meeting of
stockholders and serve until the next annual meeting of stockholders and
until their successors are elected and qualified. Under the Company's
Bylaws, the number of directors constituting the entire Board of Directors
shall be fixed, from time to time, by the directors then in office, who
may decrease or increase the number of directors by majority action
without soliciting stockholder approval.
Compliance with Section 16(a) of Exchange Act
Ernest R. Vadersen, Chairman of the Board, President, Chief Executive
Officer, Treasurer and principal shareholder of the Company, made a gift
of 4,500 shares of Common Stock in October 1995. Such gift should have
been reported to the Securities and Exchange Commission (SEC) on a Form 5
no later than February 14, 1996, but through inadvertence was not. The
gift has been subsequently reported to the SEC.
Item 10. Executive Compensation
The Company has five year employment agreements expiring in January 1999
with each of Messrs. Ernest R. Vadersen and Harold E. Hutchins. These
agreements provide for annual salaries of $100,000 and $72,000 to
Mr. Vadersen and Mr. Hutchins, respectively. These salaries are to be
reviewed annually by the Board of Directors and may be increased at that
time. Under the employment agreements, Mr. Vadersen has received stock
options to purchase 500,000 shares of Common Stock at an exercise price of
$1.65 per share: 180,000 shares became exercisable on May 15, 1995; 80,000
shares became exercisable on January 3, 1996 and the balance will become
exercisable ratably on each anniversary date thereof through January 3,
1999, and Mr. Hutchins has received stock options to purchase 250,000
shares of Common Stock at an exercise price of $1.65 per share: 90,000
shares became exercisable on May 15, 1995; 40,000 shares became
exercisable on January 3, 1996 and the balance will become exercisable
ratably on each anniversary date thereof through January 3, 1999. The
above described options were granted to Messrs. Vadersen and Hutchins
pursuant to the Company's 1995 Stock Option Plan, which is a substitute
for the 1994 Stock Option Plan of the Company's subsidiary, Golf-Tec.
The following table summarizes the compensation paid or accrued by the
Company to the Company's executive officers for services rendered during
fiscal 1996. The Company did not grant any restricted stock awards or
stock appreciation rights or make any long-term incentive plan payout
during 1996.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation Awards
Annual Securities
Name and Principal Compensation(1) Underlying
Position Year Salary Bonus Options/SAR's
Ernest R. Vadersen 1996 $100,000 - -
President and Chief 1995 100,000 - -
Executive Officer 1994 100,000 7,087 500,000
Harold E. Hutchins 1996 72,000 25,000 -
Chief Financial and 1995 72,000 - 12,500
Operating Officer 1994 72,000 3,885 250,000
(1) The Company paid no compensation to its executive officers under
any long term compensation or retirement plans. The incremental
cost of certain incidental personal benefits does not exceed the
lesser of $50,000 or 10% of compensation for any named executive
officer of the Company.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
% of
Number Total Market
of Options Price of
Securities Granted on Exercise Underlying
Underlying Employees Price Security on
Options in Fiscal ($ per Date of Expiration
Name Granted Year share Grant Date
Ernest R.
Vadersen NONE
Harold E.
Hutchins NONE
The following table sets forth information concerning the value of
unexercised options as of December 31, 1996 held by the executives named
in the Summary Compensation Table above. No options were exercised during
1996.
FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year at Fiscal Year End
End Exercisable (E)/ Exercisable (E)/
Name Unexercisable (U) Unexercisable (U)
Ernest R. Vadersen $260,000 (E) $221,000 (E)
204,000 (U) 240,000 (U)
Harold E. Hutchins 142,500 (E) 121,125 (E)
120,000 (U) 102,000 (U)
Directors are compensated as follows: $5,000 annual fee, $1,000 per
meeting attendance fee, $1,000 expense reimbursement per meeting, and
$5,000 options per year (commencing in 1997) with a strike price to
be determined at the annual meeting.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of March 15, 1997, with
respect to the beneficial ownership of Common Stock by (a) each person
known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding Common Stock, (b) the directors and executive
officers of the Company, individually, and (c) directors and executive
officers of the Company as a group.
Number of Shares Percentage
Beneficially of Voting
Name (1) Owned(2) Securities(3)
Ernest R. Vadersen 1,490,000(4) 26.67%
13000 Sawgrass Village
Circle, #30
Ponte Vedra, FL 32082
Harold E. Hutchins 267,500(5) 4.97%
13000 Sawgrass Village
Circle, #30
Ponte Vedra, FL 32082
Jonathan Bernstein 24,167(6) .47%
410 Park Avenue
New York, NY 10022
Kevin Moore 37,001(7) .72%
30 Wall Street
New York, NY 10005
Melvin Simon 140,000(8) 2.75%
115 W. Washington St.
Indianapolis, IN 46204
Larry Movsovitz 295,000(8) 5.76%
3100 Hilton St.
Jacksonville, FL 32203
Doug Tewell 5,000(8) .10%
3100 Hilton St.
Jacksonville, FL 32203
Clark Partners III, L.P. 1,691,667(9) 24.85%
30 Wall Street
New York, NY 10005
All directors and 2,258,668 38.30%
executive officers
as a group (7
persons)
(1) The directors are Messrs. Vadersen, Hutchins, Simon, Bernstein,
Moore, Movsovitz and Tewell, and the executive officers are Messrs.
Vadersen and Hutchins.
(2) Unless otherwise noted, all shares are owned directly, with sole
voting and dispositive power.
(3) Includes 394,600 shares of Series A Preferred Stock which became
voting stock in April 1996. The amounts shown represent Common
Stock and Series A Preferred Stock as a single class.
(4) Includes 470,000 shares issuable upon exercise of stock options
that are immediately exercisable and 10,000 shares held by Mr.
Vadersen as voting trustee for the benefit of a friend, over which
Mr. Vadersen has sole voting and investment power.
(5) Consists of 267,500 shares issuable upon exercise of stock options
that are immediately exercisable.
(6) Includes 3,000 shares issuable upon exercise of stock options and
warrants that are immediately exercisable.
(7) Includes 15,834 shares issuable upon exercise of stock options and
warrants that are immediately exercisable.
(8) Includes 5,000 shares issuable upon exercise of stock options that
are immediately exercisable.
(9) Includes 1,429,167 shares issuable upon conversion of the Company's
Series C Preferred Stock and 262,500 shares issuable upon exercise
of stock warrants that are immediately exercisable.
Item 12. Certain Relationships and Related Transactions
A former director of the Company, served as President and a director of
Coleman and Company Securities, Inc., a registered broker-dealer
("Coleman"). Coleman served as the placement agent for the 1994 private
placement by the Company's subsidiary, Golf-Tec, of 1,468,337 shares of
common stock, for which Coleman received selling commissions of $220,251,
an expense allowance of $55,063 and warrants to purchase 146,834 shares of
Common Stock at an exercise price of $1.80 per share. In May 1994,
Coleman acquired 800,000 shares of the Company's subsidiary, Golf-Tec,
pursuant to its agreement with Golf-Tec to act as placement agent and
financial consultant. These shares were assigned by Coleman to certain of
its affiliates, in exchange for the payment by them to Golf-Tec of $0.01
per share, the purchase price called for in such agreement, and then were
exchanged for an identical number of shares of Common Stock of the Company
in March 1995.
Coleman also was serving as the placement agent for a private placement
by the Company of up to $5 million aggregate amount of the Company's
Cumulative Convertible Series A Preferred Stock (the "Series A Preferred
Stock") which began in January 1995. Coleman received selling commissions
and an expense allowance equal to 10% and 2.5%, respectively, of the sales
price of the Series A Preferred Stock plus warrants to purchase at an
exercise price of $6.00 per share one share of Series A Preferred Stock
(or the number of shares of Common Stock into which such shares of Series
A Preferred Stock would be convertible) for each ten shares of Series A
Preferred Stock placed by Coleman in the offering. As of December 31,
1995, Coleman had received selling commissions of $282,875 and an expense
allowance of $17,474 in connection with the offering. Coleman had been
retained by the Company to provide financial consulting services for a
term of three years ending December 1997, for which it will received
$3,000 per month during the first 12 months thereafter. Subsequent to
December 31, 1996, the Company has negotiated a settlement and has paid
$20,000 to sever this agreement, effective immediately.
Item 13. Index to Exhibits
(3) Charter and Bylaws:
* (a) Amended and Restated Articles of Incorporation dated
December 29, 1994
* (b) Articles of Amendment dated April 26, 1995
* (c) Statement of Resolution establishing Series A Preferred
Stock dated April 26, 1995
* (d) Bylaws
** (e) Statement of Resolution establishing Series B Preferred
Stock dated May 17, 1996
(5) Material Contracts:
(a) Agreements with Coleman & Company Securities, Inc.
* (i) Letter Agreement dated April 26, 1994, as
amended by letter dated May 22, 1995
* (ii) Placement Agreement dated as of January 19, 1995
* (b) Lease dated June 14, 1994 between Golf-Tec Holding, Inc.
and Village Professional Center, Inc. for the Company's
headquarters in Ponte Vedra Beach, Florida
* (c) Lease dated March 23, 1995 between the Company and
Dorothy C. Hoffman, Harry B. Korman, Rissman Investment
Company and Dennis A. Darin, Jr. for the Company's
facilities in Ann Arbor, Michigan
* (d) Employment Agreement dated as of May 23, 1994 between
Golf-Tec Holding, Inc. and Ernest R. Vadersen
* (e) Employment Agreement dated as of May 23, 1994 between
Golf-Tec Holding, Inc. and Harold E. Hutchins
* (f) Form of Tour Player Agreement
* Filed as an exhibit to the Registrant's Form 10-SB filed with the
Securities Exchange Commission on June 30, 1995
** Filed as an exhibit to the Registrant's Form 10-SB filed with the
Securities Exchange Commission on June 30, 1996
* (g) 1995 Option Plan
* (h) Form of Stock Option Agreement
* (8) Acquisition Agreement and Plan of Reorganization dated as of
December 29, 1994 by and between THO2 and Rare Metals
Exploration, Inc. and Golf-Tec Holding, Inc.
(12)
* (a) Subsidiaries of the Registrant
* Filed as an exhibit to the Registrant's Form 10-SB filed with the
Securities Exchange Commission on June 30, 1995
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
Index to Financial Statements
Independent Auditors' Report F-2
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Operations for the years ended December 31, 1996
and 1995 F-4
Statements of Stockholders' Equity for the years ended
December 31, 1996 and 1995 F-5
Statements of Cash Flows for the years ended
December 31, 1996 and 1995 F-6
Notes to Financial Statements F-7
<PAGE>
Independent Auditors' Report
The Board of Directors
Golf-Technology Holding, Inc.
We have audited the accompanying balance sheets of Golf-Technology
Holding, Inc. as of December 31, 1996 and 1995, and the related statements
of operations, stockholders' equity (deficit), and cash flows for the
years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Golf-Technology
Holding, Inc. as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 1(b) to
the financial statements, the Company has suffered recurring losses from
operations which raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are also
described in note 1(b). The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
KPMG Peat Marwick LLP
Jacksonville, Florida
March 25, 1997
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Current assets:
Cash $ 60,106 25,910
Accounts receivable NET OF
ALLOWANCE OF $232,652 IN
1996 AND $34,552 IN 1995 527,149 128,339
Inventories (note 2) 1,061,815 163,619
Prepaid Inventory 171,764 36,642
Equipment for sale (note 3) 275,000 -
Prepaid Expenses 128,888 43,750
Other 62,735 37,803
---------- ---------
Total current assets 2,287,457 436,063
---------- ---------
Property and equipment,net (note 3) 237,166 338,960
Notes receivable from related parties,
net (note 8) 70,737 26,870
Certificates of deposits, restricted 122,771 47,383
Deposits 141,302 168,971
Other 21,678 30,123
---------- ---------
Total assets $ 2,881,111 1,048,370
========= =========
Liabilities and Stockholders'
Equity (Deficit)
Current liabilities:
Notes payable (note 4) - 205,000
Notes payable to related
parties (note 4) 737,500 245,000
Accounts payable 1,892,433 1,032,927
Accrued liabilities 122,721 44,302
--------- ---------
Total current liabilities 2,752,654 1,527,229
--------- ---------
Stockholders' equity (deficit)
(notes 4, 7, 8, 9 and 12):
Preferred stock, Series A 9%
Cumulative Convertible,
$.001 par value per share;
aggregate involuntary liquidation
preference of $2,233,238 ($5.73
share), 5,000,000 shares authorized 390 373
Preferred stock, Series B Convertible,
$.001 par value per share; aggregate
involuntary liquidation preference of
$9,231,000 ($1,000.00 share), 9,231
shares authorized 9 -
Common stock, $.001 par value,
25,000,000 shares authorized 4,350 3,758
Additional paid-in capital 9,853,375 3,662,566
Accumulated deficit
(9,729,667) (4,145,556)
--------- ---------
Total stockholders'
equity (deficit) 128,457 (478,859)
--------- ---------
Commitments and contingent liabilities
(notes 6, 9 and 13)
Total liabilities and stock-
holders' equity (deficit) $ 2,881,111 1,048,370
========= =========
See accompanying notes to financial statements.
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
Statements of Operations
Years ended December 31, 1996 and 1995
1996 1995
Net sales $ 3,544,183 1,269,843
Cost of sales 1,745,007 596,921
--------- ---------
Gross profit 1,799,176 672,922
Selling and marketing expenses 4,015,190 2,112,963
General and administrative expenses 2,511,347 1,202,178
Research and development costs 517,322 619,547
Other (note 3) 441,048
--------- ---------
Operating loss
(5,685,731) (3,261,766)
Other income (expense):
Interest income 32,891 9,918
Interest expense (43,191) (5,866)
Write-off of note receivable (note 8) - (378,034)
Royalty income 53,033 17,670
Other, net 58,887 (1,015)
--------- ---------
Net loss before income taxes
(5,584,111) (3,619,093)
Income taxes (note 5) - -
--------- ---------
Net loss
(5,584,111) (3,619,093)
Preferred stock cumulative
dividends (note 12) (175,093) (62,745)
--------- ---------
Net loss for common stockholders $(5,759,204) (3,681,838)
========= =========
Net loss per average outstanding
common share $ (1.41) (.98)
========= =========
Average outstanding common shares 4,093,280 3,743,450
========= =========
See accompanying notes to financial statements.
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
Statements of Stockholders' Equity (Deficit)
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Additional Accu-
Preferred Stock Common Stock paid-in mulated
Shares Amount Shares Amount capital deficit Total
<S> <C> <C> <S> <C> <S>
Balance,
December 31, 1994 - $ - 3,718,408 $ 3,718 1,905,603 (526,463) 1,382,858
Issuance of stock - - 40,000 40 193,710 - 193,750
Issuance of stock,
net of issuance
cost of $307,249 372,600 373 - - 1,555,378 - 1,555,751
Other - - - - 7,875 - 7,875
Net loss - - - - - (3,619,093) (3,619,093)
------- ----- --------- ------ --------- --------- ---------
Balance,
December 31, 1995 372,600 373 3,758,408 3,758 3,662,566 (4,145,556) (478,859)
Issuance of stock,
net of issuance
cost of $22,400 17,000 17 - - 109,983 - 110,000
Issuance of stock - - 591,668 592 1,122,007 - 1,122,599
Issuance of stock,
net of issuance cost
of $1,191,172 9,231 9 - - 4,958,819 - 4,958,828
Net loss - - - - - (5,584,111) (5,584,111)
------ --- --------- ------ --------- --------- ---------
Balance,
December 31, 1996 398,831 $ 399 4,350,076 $ 4,350 9,853,375 (9,729,667) 128,457
======= === ========= ====== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
Statements of Cash Flows
Years ended December 31, 1996 and 1995
1996 1995
Cash flows from operating activities:
Net loss $ (5,584,111) (3,619,093)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation and amortization 156,113 64,353
Write-off of note receivable - 378,034
Write-off of non-recoverable equipment
and lease accrual 441,048 -
Stock compensation - 75,000
Changes in operating assets
and liabilities:
Accounts receivables (398,810) (69,015)
Inventories (898,196) (66,913)
Prepaid Inventory (135,122) -
Prepaid and other assets (110,070) (95,117)
Deposits and other assets 28,169 (124,971)
Accounts payable and accrued
liabilities 895,925 968,764
--------- ----------
Net cash used in operating
activities (5,605,054) (2,488,958)
--------- ---------
Cash flows from investing activities:
Investment in certificates of deposit,
restricted (75,388) (57,383)
Maturities of certificates of deposit,
restricted - 55,000
Notes receivable due from related parties (43,867) (120,884)
Capital expenditures (720,422) (290,633)
--------- ---------
Net cash used in investing activities (839,677) (413,900)
--------- ---------
Cash flows from financing activities:
Proceeds from notes payable 1,225,000 450,000
Repayment of notes payable (702,500) -
Net proceeds from issuance of preferred
and common stock 5,956,427 1,820,014
--------- ---------
Net cash provided by financing
activities 6,478,927 2,270,014
--------- ---------
Net change in cash 34,196 (632,844)
Cash balance, beginning of period 25,910 658,754
--------- ---------
Cash balance, end of period $ 60,106 25,910
========= =========
Supplemental Disclosures:
Cash paid for interest $ 26,900 -
========= =========
Notes payable converted to common stock $ 235,000 -
========= =========
See accompanying notes to financial statements.
<PAGE>
GOLF-TECHNOLOGY HOLDING, INC.
Notes to Financial Statements
December 31, 1996 and 1995
(1) Summary of Significant Accounting Policies and Other Information
(a) Nature and Development of Business
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 or 93%, of the
Company's outstanding shares of common stock immediately
following the exchange.
As of December 31, 1996, 2,343,334 or 68%, of Golf-Tec's
outstanding shares of common stock have been exchanged for
shares of the Company's outstanding 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.
(b) Liquidity and Capital Resources
The Company has financed its operations and investment in
assets principally through the sale of equity securities.
The Company has incurred operating losses since its
inception.
Recurring losses and the negative working capital at
December 31, 1996 cause concerns about the Company's
liquidity and its ability to continue operations at
current levels and expand its product lines. Subsequent
to December 31, 1996, the Company has successfully issued
a private Series C 3.33% Convertible Preferred Stock
offering which netted proceeds of $2,900,000 to the
Company. Management projects that the Company will be
profitable and will have positive cash flow from
operations in 1997 based on current sales orders and
expense levels. However, it is not certain that the
Company will be able to realize management's sales
projections.
Based on communications with current and prospective
investors, the Company believes that it will be able to
raise capital, if needed, 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, the Company's ability to raise further
capital is uncertain.
(c) Revenue Recognition
Sales are recognized at the time goods are shipped, net of
allowance for sales returns.
(d) Inventories
Inventories are valued at the lower of cost or market.
Cost is determined using the first-in, first-out (FIFO)
method.
(e) Property and Equipment
Property and equipment is stated at cost. Depreciation is
computed using the straight-line and accelerated methods
over estimated useful lives of five to fifteen years.
Repairs and maintenance costs are charged to expense as
incurred.
(f) Advertising Costs
Advertising costs are expensed as incurred.
(g) Research and Development
Research and development costs are expensed as incurred.
(h) Income Taxes
The Company uses the asset and liability method of
accounting for income taxes. Deferred tax assets are
recognized for the future tax consequences attributable to
differences between the financial statement carrying
amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary
differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that
includes the enactment date.
(i) Stock Option Plan
Prior to January 1, 1996, the Company accounted for its
stock option plan in accordance with the provisions of
Accounting Principles Board ("APB") Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations. As such, compensation expense would be
recorded on the date of grant only if the current market
price of the underlying stock exceeded the exercise price.
On January 1, 1996, the Company adopted SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits
entities to recognize as expense over the vesting period
the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities
to continue to apply the provisions of APB Opinion No. 25
and provide pro forma net income and pro forma earnings
per share disclosures for employee stock options grants
made in 1995 and future years as if the fair-value-based
method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure
provisions of SFAS No. 123.
(j) Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(k) Impairment of Long -Lived Assets and Long-Lived Assets to
Be Disposed Of
The Company adopted the provisions of SFAS No 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, on January 1, 1996.
This Statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment
whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset of
future net cash flows expected to be generated by the
asset. If such assets are considered impaired, the
impairment to be recognized is measured by the amounts by
which the carrying amount of the assets exceed the fair
value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this Statement did not
have a material impact on the Company's financial
position, results of operations, or liquidity.
(l) Earnings (Loss) Per Common Share
Earnings (loss) per share are calculated by dividing the
net income (loss) for common stockholders by the weighted
average number of common shares outstanding. The stock
options, warrants and the convertible preferred stock were
not considered in the calculation since their inclusion
would be anti-dilutive.
(m) Significant Customers
Approximately 12% and 10% of the Company's 1996 sales were
from two customers.
(n) Reclassification
Certain 1995 amounts have been reclassified to conform to
the presentation adopted in 1996.
(2) Inventories
Inventories consist of the following at December 31, 1996 and
1995:
1996 1995
Components $ 599,424 96,414
Finished Goods 462,391 67,205
----------- -------
$ 1,061,815 163,619
=========== =======
(3) Property and Equipment
Property and Equipment, at cost, consist of the following at
December 31, 1996 and 1995:
1996 1995
Furniture and fixtures $ 56,390 42,687
Machinery and equipment 309,489 321,049
Leasehold improvements 11,885 45,814
----------- -------
377,764 409,550
Less accumulated
depreciation 140,598 70,590
----------- -------
$ 237,166 338,960
=========== =======
On December 1, 1996, the Company transferred the operations of a
subsidiary manufacturing plant in Ann Arbor, Michigan, to its
manufacturing plant at its headquarters in Ponte Vedra Beach,
Florida. The Company has recorded a charge to operations of
$441,048 for the year ended December 31, 1996, related to the
write-off of non-recoverable equipment and accrual of lease
obligation (see note 6). Estimated recoverable equipment, net, of
$275,000 has been recorded and is included in current assets as of
December 31, 1996.
Subsequent to December 31, 1996, the Company has realized net
proceeds approximating $275,000 from the sale of the recoverable
equipment referred to above.
(4) Notes Payable
Notes payable at December 31, 1995
consists of the following:
Unsecured promissory note, 12%,
due May 11, 1995 $ 50,000
Unsecured demand note, 10%, subject
to 5% late charge 30,000
Unsecured demand notes, due upon
the closing of any stock subscription
offering through November 30, 1996 or
demand thereafter, non-interest
bearing, 24% upon default 125,000
-------
$ 205,000
=======
During 1996, the $100,000 of unsecured demand notes, non-interest
bearing, were converted to 66,668 shares of the Company's common
stock. All other notes payable were repaid during 1996.
Notes payable to related parties at December 31, 1996 and 1995
consists of the following:
1996 1995
Unsecured demand note, non-interest
bearing $ 32,500 5,000
Unsecured demand note, 10%, due upon
closing of any stock subscription
through October 31, 1997 or
demand thereafter 650,000 -
Unsecured promissory note, non-interest
bearing, due September 13, 1995 - 30,000
Secured promissory note, non-interest
bearing, due September 13, 1995 - 30,000
Promissory note, non-interest bearing,
18% upon default, due
December 29, 1996 55,000 180,000
------ -------
$ 737,500 245,000
======= =======
Subsequent to December 31, 1996, all outstanding notes payable to
related parties, except for the non-interest bearing demand note
($32,500), have been paid in full.
During 1996, $135,000 of the promissory note was converted to
180,000 shares of the Company's common stock. During 1995, in
exchange for the unsecured promissory note, the Company issued to
a shareholder 1,000 warrants exercisable for five years at an
exercise price of $5.00 per share.
(5) Income Taxes
The Company since inception has had operating losses; therefore,
no income tax expense has been incurred. At December 31, 1996,
the Company had a net operating loss carryforward of approximately
$9,578,000 which is available to offset future taxable income
through the year 2011. A valuation allowance equal to the
deferred tax asset (approximately $3,604,000) related to the net
operating loss carryforward has been recorded since it is
considered more likely than not that the deferred tax asset will
not be realized based upon recent losses.
(6) Leases
The Company leases its corporate headquarters under a
noncancelable operating lease expiring July 31, 1997. The lease
requires the Company to pay all maintenance, insurance, and
property taxes, and is subject to normal escalation provisions.
Rent expense was $39,600 and $38,907 for the years ended December
31, 1996 and 1995, respectively.
During June, 1996, the Company entered a noncancelable operating
lease for manufacturing space expiring July 31, 1997. Rent expense
was $23,300 for the year ended December 31, 1996.
During March, 1995, the Company entered a noncancelable operating
lease for manufacturing and office space effective May 1, 1995
expiring April 30, 2000. Rent expense was $83,000 and $54,000 for
the years ended December 31, 1996 and 1995, respectively. The
Company is currently negotiating to either sub-lease or buyout
this lease. The Company has accrued $42,000 as of December 31,
1996 for the estimated future net expenditures required under this
lease.
Future minimum lease payments under the leases, are as follows:
1997 $ 142,000
1998 89,000
1999 92,000
2000 31,000
Thereafter 0
--------
$ 354,000
========
(7) Stock Option Plan
The Company's Board of Directors have adopted a stock award and
incentive plan (the Plan) for its officers, directors, selected
employees and independent contractors of the Company . The Plan
reserved 1,250,000 shares of common stock and provided that the
term of each award be determined by the Board of Directors.
The options granted may be either nonqualified or incentive stock
options and the exercise price may not be less than 110% of the
fair market value of the Company's common stock at the date of
grant. The options expire five to ten years from the date of
grant, unless otherwise provided in the option agreement.
The Company applies APB Opinion No. 25 in accounting for its Plan
and, accordingly, no compensation cost has been recognized for its
stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant
date for its stock options issued in 1996 and 1995 under SFAS No.
123, the impact on the Company's net loss and net loss per share
for the years ended December 31, 1996 and 1995 would have been
immaterial. This pro forma information applies only to options
granted in 1996 and 1995. Therefore, the full impact of calculat-
ing compensation cost for stock options under SFAS No. 123 is not
considered in the pro forma net loss and net loss per share
amounts referred to because compensation cost is reflected over
the options' vesting period and compensation cost for options
granted prior to January 1, 1995 is not considered.
Stock option activity during the periods indicated is as follows:
Number of Weighted-Average
Shares Exercise Price
Balance at
December 31, 1994 755,000 $ 1.65
Granted 26,500 1.62
Exercised - -
Forfeited - -
Expired - -
------- ----
Balance at
December 31, 1995 781,500 1.63
Granted - -
Exercised - -
Forfeited - -
Expired - -
------- ----
Balance at
December 31, 1996 781,500 1.63
======= ====
At December 31, 1996, the range of exercise prices and weighted-
average remaining contractual life of outstanding options was
$1.50 - $1.65 and 5.73 years, respectively.
At December 31, 1996 and 1995, the number of options exercisable
was 421,500 and 301,500, respectively, and the weighted average
exercise price of those options was $1.61 and $1.59, respectively.
(8) Related Party Transactions
(a) Employment Agreements
The Company has employment agreements with the Chairman
and Chief Operating and Financial Officer which provide
for 1996 salaries of $100,000 and $72,000, respectively.
(b) Notes Receivable
The Company has made advances to shareholders of the
Company. As of December 31, 1996 and 1995, related
outstanding balances were $70,737 and $26,870,
respectively. 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, 1998.
Accordingly, the outstanding balances at December 31, 1996
have been classified as long term.
Employee advances of $378,034 were written-off during 1995.
(c) Private Placement Agent
A former director of the Company served as President and a
director of Coleman and Company Securities, Inc., a
registered broker-dealer (Coleman) hired by the Company to
act as its exclusive placement agent for raising capital
investment. Affiliates of Coleman were allowed to
purchase 800,000 shares of the Company's common stock at
$.01 per share in connection with the formation of the
Company. Coleman holds warrants to purchase 146,834
shares of common stock at an exercise price of $1.80 per
share. The warrants are exercisable for five years.
Coleman had been retained by the Company to provide financial
consulting services for a three-year term expiring December 15,
1999, for which it received $3,000 per month. Subsequent to
December 31, 1996, the Company has negotiated a settlement and has
paid $20,000 to sever this agreement, effective immediately.
(9) Representation Agreements
The Company has representation agreements with thirteen PGA, PGA
Senior and NIKE Tour players. The Company has agreed to pay
certain incentives based upon performance under the agreements,
including minimum annual compensation totaling $561,250, $190,000,
$75,000 AND $150,000 FOR 1997, 1998, 1999 AND 2000, respectively;
five year stock options for 10,000 shares of the Company's
preferred capital stock; bonuses of $10,000 to $50,000 per win
of an official tour event or "Major" championship; bonus up to
$40,000 based on a member's ranking on the PGA Tour Money List
for 1997 and 1998, and, bonus up to $100,000 based on a member's
PGA Tour earnings for 1997. The Company incurred expenses for
representation agreements of $842,900 and $536,250 in 1996 and
1995, respectively.
(10) Distribution Agreement
The Company has a distribution agreement whereby Palawan Pearls,
Inc. d/b/a SunTrex Corporation (SunTrex) has the exclusive rights
to sell golf clubs under the Company's trademarks in the Pacific
Rim countries for a period expiring January 24, 1998. Based on the
agreement, SunTrex is required to purchase minimum annual
quantities from the Company at terms and prices specified in the
agreement. These terms and prices are subject to negotiation by
the parties.
(11) Licensing Agreement
The Company has a licensing agreement whereby Michael Thomas, Ltd.
(Thomas) has the exclusive rights for the design, manufacture, and
distribution of clothing under the Company's trademarks for a
period expiring March 31, 2000, including a three to five year
renewal option. Under the agreement, Thomas is required to pay
licensing fees on total sales on a graduated scale.
(12) Preferred Stock
In 1995, the Company issued 372,600 shares of its Series A 9%
Cumulative Convertible Preferred Stock (Preferred Stock) for net
proceeds of approximately $1,555,751. Coleman served as placement
agent for the offering and received selling commissions and an
expense allowance equal to 10% and 2.5%, respectively, of the
sales price of the Preferred Stock, plus one warrant for every ten
shares placed by Coleman in the offering. The warrants are for
the purchase of one share of the Preferred Stock or the number of
shares of the Company's common stock into which such shares of
Preferred Stock would be convertible, at an exercise price of
$6.00 per share and are exercisable for four years commencing one
year following the completion of the offering. Coleman received
selling commissions of $236,300 and an expense allowance of
$46,575 in connection with the offering.
The Company has not declared and, therefore, not paid accumulated
dividends on its Series A preferred stock. Dividends on Series A
preferred stock cannot be declared or paid until the Company has
accumulated profits. If the Company had accumulated profits at
December 31, 1996 and 1995, it would have accumulated dividends
payable on preferred stock in the amounts of $237,838 and $62,745,
respectively. Because the Company has not paid dividends on its
preferred stock, the preferred stock converted from non-voting to
voting preferred stock in April 1996.
On May 20, 1996, the Company issued 9,231 shares of its Series B
Convertible Preferred stock, $1,000 face value, at a discount of
$3,081,000 for net proceeds of $5,098,628, including brokers fees
of $1,051,372. The holder of each issued and outstanding share of
Series B Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors of the Company, out of the
assets at the time legally available for such purpose, dividends
at a rate of $32.50 per share per annum. No dividends shall be
declared and paid on the Series B Preferred Stock unless all
accrued but unpaid dividends on the Company's existing Series A
Preferred Stock have been declared and paid in cash. Such
dividends are not cumulative. If all shares of Series B Preferred
Stock have not been converted into common stock by April 30, 1997,
such dividends shall begin to accumulate on all shares of Series B
Preferred Stock which remain outstanding at such time.
Upon liquidation, dissolution or winding up of the Company,
holders of Series B Preferred stock are entitled to receive
liquidation distributions equivalent to $1,000 per share before
any distribution to holders of Common Stock. The liquidation
preference of the Series B Preferred Stock shall be junior in
right of payment to the liquidation preference of the Company's
existing class of Series A Preferred Stock. The Series B
Preferred Stock is convertible at any time commencing forty-five
days after the last day on which there is an original issuance of
the Series B Preferred Stock. The conversion price equals the
lesser of the average closing bid for the five days prior to
conversion or $6.05. Each share of Series B Preferred Stock
outstanding on December 31, 1997 automatically shall be converted
into Common Stock on such date at the conversion price then in
effect.
On January 31, 1997, the Company issued 4,500 shares of its Series
C 3.33% Convertible Preferred stock, $1,000 face value issued at a
discount of $1,498,500, for net proceeds of $2,900,000, including
brokers fees of $100,000. The stock was issued pro-rata, in two
separate parcels of 1,875 and 2,625 shares to Common shareholders
of the Company. The holders of the issued stock shall be
beneficially entitled similar to that of Series B Preferred
shareholders. Series C dividends are payable annually in arrears,
at the option of the Company in cash or additional shares of
Series C Stock. No dividends shall be declared and paid on the
Series C Preferred Stock (other than a dividend payable solely in
shares of Series C Preferred Stock) unless all accrued but unpaid
dividends on the Company's existing Series A Preferred Stock have
been declared and paid in cash. Such dividends are not cumulative.
If all shares of Series C Preferred Stock have not been converted
into common stock by December 31, 1997, such dividends shall begin
to accumulate on all shares of Series C Preferred Stock which
remain outstanding at such time.
Upon liquidation, dissolution or winding up of the Company,
holders of Series C Preferred stock are entitled to receive
liquidation distributions equivalent to $1,000 per share before
any distribution to holders of Common Stock. The liquidation
preference of the Series C Preferred Stock shall be junior in
right of payment to the liquidation preference of the Company's
existing class of Series A Preferred Stock and shall be a pari
passu basis with the right of payment to the liquidation preference
of the Company's existing class of Series B Preferred Stock. The
Series C Preferred Stock is convertible at any time commencing
forty-five days after the last day on which there is an original
issuance of the Series C Preferred Stock. The conversion price
equals the lesser of the average closing bid for the five days
prior to conversion or $2.25. Each share of Series C Preferred
stock outstanding on June 30, 2002 automatically shall be converted
into Common Stock on such date at the conversion price then in
effect.
In conjunction with this offering, warrants have been issued to
purchase 501,724 shares of Common Stock of the Company at a
strike price of $3.00 - $3.625 per share and are exercisable
starting January 1, 1998 through December 31, 2002. Proceeds
from this offering have been used to repay the $650,000, 10%
unsecured demand note payable to related party (see Note 4)
as mandated by the Series C subscription.
(13) Commitment and Contingent Liabilities
THO2 initially was organized as a mining company but is believed
to have engaged in only sporadic activity and to have been dormant
for the last several years. Management's knowledge about THO2's
prior business is extremely limited. Management has no way of
knowing whether there is any basis for a contingent liability
arising out of acts or omissions of the Company prior to the share
exchange, such as a tax liability or an environmental claim
relating to any real property to which the Company may have held
title many years ago. While management does not believe that any
such contingent liabilities exist, there can be no assurance that
any possible contingent liabilities resulting from the Company's
prior business history have not yet been cut off by applicable
statutes of limitations. Because management knows very little
about THO2's prior business, it has no basis for determining
likely sources of contingent liabilities and therefore has no
basis for determining when applicable statutes of limitation would
run.
The Company is involved in litigation on matters and is subject to
certain claims which arise in the normal course of business, none
of which, in the opinion of management, is expected to have a
material adverse effect on the Company's consolidated financial
position or results of operations.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereinto duly authorized.
GOLF-TECHNOLOGY HOLDING, INC.
Date: March 28, 1997 By: /s/ Ernest R. Vaderesen
Ernest R.Vaderesen
President and Chief Executive Officer
Date: March 28, 1997 By: /s/ Harold E. Hutchins
Harold E. Hutchins
Chief Operating and Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date: March 28, 1997 By: /s/ Ernest R. Vaderesen
Ernest R.Vaderesen
Chairman
Date: March 28, 1997 By: /s/ Harold E. Hutchins
Harold E. Hutchins
Secretary
Date: March 28, 1997 By: /s/ Jonathan Bernstein
Jonathan Bernstein
Director
Date: March 28, 1997 By: /s/ Larry Movsovitz
Larry Movsovitz
Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF GOLF-TECHNOLOGY HOLDING, INC. AS OF AND FOR THE YEAR ENDED
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BYY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 60,106
<SECURITIES> 0
<RECEIVABLES> 759,801
<ALLOWANCES> 232,652
<INVENTORY> 1,061,815
<CURRENT-ASSETS> 2,287,457
<PP&E> 377,764
<DEPRECIATION> 140,598
<TOTAL-ASSETS> 2,881,111
<CURRENT-LIABILITIES> 2,752,654
<BONDS> 737,500
0
399
<COMMON> 4,350
<OTHER-SE> 123,708
<TOTAL-LIABILITY-AND-EQUITY> 2,881,111
<SALES> 3,544,183
<TOTAL-REVENUES> 3,544,183
<CGS> 1,745,007
<TOTAL-COSTS> 4,015,190
<OTHER-EXPENSES> 3,469,717
<LOSS-PROVISION> 320,187
<INTEREST-EXPENSE> 43,191
<INCOME-PRETAX> (5,584,111)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,584,111)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,584,111)
<EPS-PRIMARY> (1.41)
<EPS-DILUTED> 0
</TABLE>
