SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
December 31, 1999 33-19107
- --------------------------- ---------------------
(For the fiscal year ended) (Commission File No.)
LBO CAPITAL CORP.
(Exact name of Registrant as specified in its charter)
Colorado 38-2780733
- ---------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of organization) Number)
7001 Orchard Lake Road, Suite 424
West Bloomfield, MI 48322
- --------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(248) 851-5651
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, $.0001 Par Value
-------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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
As of December 31, 1999, a total of 12,100,000 shares of common stock,
$.0001 par value, were outstanding and the aggregate market value of the voting
stock held by nonaffiliates of the Registrant was approximately $116,488 based
on the average of the bid and asked prices on that date $.03 as reported by The
National Quotation Bureau, Inc.
LBO CAPITAL CORP.
FORM 10-K
PART 1
ITEM 1. BUSINESS
General
- -------
LBO Capital Corp. (the "Registrant") was organized under the laws of the
State of Colorado on October 8, 1987. The Registrant was formed based on the
belief of its management that there are business opportunities that, for one or
more reasons, are available for acquisition by the Registrant.
On March 15, 1988, the Registrant completed a public offering of 3,000,000
Units, each Unit consisting of one share of its common stock, one Callable Class
A Warrant, one Callable Class B Warrant and one Callable Class C Warrant. The
Warrants are detachable from the Units and may be traded separately in the
over-the-counter market. Each Class A Warrant entitles the holder thereof to
purchase at a price of $0.50, one share of Common Stock at any time until
February 26, 1989. Each Class B Warrant entitled the holder thereof to purchase
at a price of $0.75 one share of Common Stock at any time until August 26, 1989.
Each Class C Warrant entitled the holder thereof to purchase at a price of
$1.00, one share of Common Stock at any time until February 26, 1990. The
expiration dates of these warrants were subsequently extended by the Board of
Directors to expire on various dates, the latest being July 25, 2000. A Form 8-K
was filed on July 12, 1999 reporting this extension. The Registrant received net
proceeds of approximately $474,300 after payment of all costs of the offering.
Since its inception, the Registrant has directed its activities toward
evaluating potential business opportunities with the goal of acquiring and
continuing one or more business opportunities. The Registrant may acquire an
existing business which may be a corporation, partnership or sole
proprietorship. One form which such a business combination might take would be
an exchange of the Registrant's stock for stock of the acquired business.
However, the Registrant may exchange its common stock to acquire the assets of
this entity, or may purchase a percentage of the entity outright.
The Registrant has evaluated and attempted to acquire a number of entities
to date.
ACQUISITION OF ASSETS
- ---------------------
Ajay Sports, Inc.
- -----------------
On April 3, 1989 LBO acquired an aggregate of 1,880,000 shares of the
restricted common stock of Ajay Sports, Inc. ("Ajay") for a total cash purchase
price of $182,000.
In 1991, the Registrant pledged 400,000 shares of Ajay to a bank as
collateral for $300,000 in loans to Hendricks Manufacturing Company. On July 1,
1991, this bank declared the loan in default and foreclosed on the shares.
On August 13, 1998, Ajay announced that its board of directors had
authorized the implementation of a 1-for-6 reverse split of the company's common
stock, effective with the commencement of trading on August 14, 1998. The
reverse split was approved by the stockholders of Ajay at the company's annual
meeting on May 29, 1998.
Following the reverse split, holders of Ajay's common stock received one
new share of $.01 par value common stock for every six shares of common stock
currently held. Therefore, the number of Ajay shares held by the Company is
246,667. The reverse split also affected the number and exercise price of the
Company's warrants, such that the Company now holds 33,333 warrants entitling it
to purchase one share of Ajay's common stock at $1.08 per share.
The 246,667 common stock and 33,333 warrants owned by the Registrant
represented 6.7% of the total shares of Ajay common stock outstanding as of
December 31, 1999. The decrease is the result of new shares issued.
Ajay's Common Stock ("AJAY") and Units ("AJAYU") are trading on the Nasdaq
Small Cap and the Warrants ("AJAYW") have been traded over-the-counter since
1989 and are reported by the National Quotation Service. The following table
sets forth the range of high and low trade prices for the common stock:
HI LOW
------ ------
1999
----
First Quarter $ 1.063 $ .688
Second Quarter $ 3.000 $ .688
Third Quarter $ 2.063 $ .813
Fourth Quarter $ .938 $ .500
On June 10, 1993, Thomas W. Itin, President and Chairman of the Board of
Directors of the Registrant, was elected to the positions of Chairman of the
Board of Directors and Chief Executive Officer of Ajay Sports, Inc. It is felt
that the direct intervention by the Registrant's management into the operations
of Ajay would have a positive effect on the Ajay earnings and the value of the
Ajay stock held by the Registrant.
Business Ajay Sports, Inc., through its operating subsidiaries Ajay
Leisure Products, Inc., Palm Springs Golf and Leisure Life, Inc., is a leading
manufacturer and distributor of golf bags, clubs, carts, accessories and casual
living furniture throughout the United States.
Enercorp, Inc.
--------------
On November 21, 1994, the Registrant bought 2,667 shares of Enercorp, Inc.
for $8,702. During 1996, the Registrant bought 12,674 additional shares of
Enercorp, Inc. for $39,694.
Enercorp, Inc. is a business development company under the Investment
Company Act of 1940, as amended.
On June 22, 1999, the Company loaned $300,000 to Pro Golf International,
Inc. ("PGI"), a subsidiary of Ajay Sports, Inc. The Company received two
promissory notes that is subordinated to PGI's primary lender. The unpaid
principal balance will bear an interest rate of 10% and will be due and payable
in full on July 22, 2000. The balance ,including interest, at December 31, 1999
was $315,781. The proceeds were used to purchase all the outstanding capital
stock of Pro Golf of America, Inc., franchiser of Pro Golf Discount retail golf
stores. Ajay owns over 80% of the stock of Pro Golf International, with the
remaining shares held by a group of investors.
Competition
- ------------
The Registrant expects to encounter substantial competition in its efforts
to locate businesses for acquisition. The primary competition for desirable
business acquisitions is expected to come from other small companies organized
and funded for purposes similar to the Registrant, small venture capital
partnerships and corporations, small business investment companies and wealthy
individuals. Should the Registrant elect to engage in a leveraged buyout
acquisition, competition may also be anticipated from investment bankers. Many
of these entities have significantly greater experience, resources and
managerial capabilities than the Registrant and are therefore in a better
position than the Registrant to obtain access to businesses.
Employees
- ---------
As of December 31, 1999, the Registrant had no employees.
ITEM 2. PROPERTIES
The Registrant currently uses office space provided by Acrodyne
Corporation, a company whose Chairman and President is also Chairman and
President of the Registrant. The space is used for purposes of administration
and development. While the Registrant does not pay any rent, it does pay a
monthly fee of $150 for the direct operating expenses. The Registrant believes
its current facilities are sufficient for its present business activity.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not a present party to any material pending legal
proceedings and no such proceedings were known as of the filing date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Registrant's shareholders during
the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common Stock
- ------------
The principal market on which the Registrant's common stock, $.0001 par
value, is traded on the Over-The-Counter market.
Prices for the Common Stock have been reported in the National Daily
Quotation Service "Pink Sheets" published by the National Quotation Bureau since
March 15, 1988. The high and low trade price quotations for the Registrant's
Common Stock during the quarters ended on the dates listed below is as follows:
Trade Prices
------------
HI LOW
---- -----
1998
----
First Quarter $ .035 $ .03
Second Quarter $ .03 $ .25
Third Quarter $ .03 $ .02
Fourth Quarter $ .03 $ .02
1999
----
First Quarter $ .025 $ .025
Second Quarter $ .03 $ .025
Third Quarter $ .03 $ .03
Fourth Quarter $ .03 $ .03
On December 31, 1999, the high trade price reported for the Common Stock
was $.03 and the low trade price was $.03.
As of December 31, 1999, the number of record holders of the Registrant's
Common Stock was 265. This figure excludes an undetermined number of
shareholders whose shares are held in "street" or "nominee" name.
The Registrant has never paid a dividend with respect to its Common Stock
and does not intend to pay a dividend in the foreseeable future.
Units
- -----
Prices for the Units have been reported in the National Daily Quotation
Service "Pink Sheets" published by the National Quotation Bureau since March 15,
1988. The high and low quotations for the Registrant's Units during the quarters
ended on the dates listed below is as follows:
Trade Price
-----------
HI LOW
---- -----
1998
----
First Quarter $ .035 $ .03
Second Quarter $ .03 $ .025
Third Quarter $ .03 $ .02
Fourth Quarter $ .03 $ .02
1999*
-----
*No units traded in 1999.
Each Unit consists of one share of the Registrant's Common Stock, one
Callable Class A Warrant, one Callable Class B Warrant and one Callable Class C
Warrant.
Warrants
- --------
No ask or bid quotations were reported by the National Quotation Bureau, Inc.
since December, 1989.
*Prices are inter-dealer quotations as reported by the National Quotation
Bureau, Inc., New York, New York, without adjustment for retail mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
ITEM 6. SELECTED FINANCIAL DATA
December 31
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Working Capital $(672,330) $(599,097) $(560,736) $(498,352) $(427,094)
Cash 63 73 43 78 78
Marketable
Securities 32,600 46,023 24,972 28,765 8,000
Notes Receivable 300,000 0 0 0 0
Interest Receivable 15,780 0 0 0 0
Total Assets 348,443 49,096 24,972 28,843 8,251
Total Liabilities 1,020,773 645,193 585,708 527,195 435,345
Shareholders'
Equity (672,330) (599,097) (560,736) (498,352) (427,094)
December 31
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
Total Operating
Revenue $15,781 $0 $0 $0 $0
Total Operating
Exp. 75,590 59,454 8,549 52,328 35,173
Net income (loss)
before equity loss
of affiliate (59,809) (59,454) (58,549) (52,325) (35,173)
Equity in net loss
of affiliated
company 0 0 0 0 0
Net income (loss) (59,809) (59,454) (58,549) (52,328) (35,173)
Net Income (loss)
per common share ( .00) ( .00) ( .00) ( .00) ( .00)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
Working capital at December 31, 1999 was decreased by $73,232 from the
period ended December 31, 1998. This was mainly caused by a net loss of $59,809,
a decrease of $13,423 in the market value of securities available for sale.
On December 2, 1996, the Registrant had a change in its borrowing
arrangements. The Registrant borrowed $325,790 from Dearborn Wheels, Inc. to
repay a note payable to Michigan National Bank. The principal balance as of
December 31, 1999, was $823,201 and the interest due was $194,021. The loan is
at prime plus 2% interest and is secured by all the intangible assets of the
Registrant. Dearborn Wheels, Inc. is held in majority by the Registrant's
President's spouse.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements required to be furnished hereunder are attached
hereto under Item 14.
Supplementary Financial Schedules for which provision is made in
applicable Regulations of the Securities and Exchange Commission, have been
omitted or the required information is not required under the related
instructions, or the information is presented in the Financial Statements and
Notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors and Executive Officers
The following table sets forth the name, address, age and position of each
officer and director of the Registrant:
Term
Name and Address Age Position as Director
- --------------------------------------------------------------------------------
Thomas W. Itin 65 President and Since
7001 Orchard Lake Rd. Chairman of the Inception
West Bloomfield, MI 48322 Board of Directors
Anthony B. Cashen 63 Secretary, Since
RD 2 Box 203 Treasurer and Inception
Ghent, NY 12075 Director
Robert W. Schwartz 55 Director Since
120 DeFreest Drive March 28,
Troy, NY 12180 1991
All directors of the Registrant will hold office until their successors
have been elected and qualified or until their death, resignation or removal.
The bylaws of the Registrant provide that the number on the Board of Directors
shall be determined by resolution of the Board of Directors.
The officers of the Registrant are elected at the annual meeting of the
Board of Directors and hold office until their successors are chosen and
qualified or until their death, resignation or removal.
The Registrant is subject to Section 13(a) of the Securities Exchange Act
of 1934 and is therefore not required to identify or disclose information
concerning its significant employees.
There are no family relationships between any director, executive officer
or person nominated or chosen by the Registrant to become a director or
executive officer.
Below is a summary description of educational and professional background
of each executive officer and director of the Registrant.
Thomas W. Itin. Mr. Itin has served as the Chairman and President of the Board
- ---------------
of Directors of the Registrant since inception. Mr. Itin was elected Chairman of
the Board and President of Ajay Sports, Inc. in June of 1993, and is the largest
single stockholder. Mr. Itin has been a director of Williams Controls, Inc., a
publicly held company since its inception in November 1988. Mr. Itin serves on
the Cornell University Council and is Chairman of the Technology Transfer
Committee of the Council. Mr. Itin has been Chairman, President and Owner of TWI
International Inc. since he founded that entity in 1967. TWI acts as consultant
for mergers, acquisitions, financial structuring, new ventures and asset
management. Mr. Itin also is the owner and principal officer of Acrodyne
Corporation since 1962. Mr. Itin was awarded a Masters of Business
Administration degree from New York University and received a Bachelor of
Sciencee degree from Cornell University.
Anthony B. Cashen. Mr. Cashen has served as the Registrant's Secretary,
- --------------------
Treasurer and Director since inception. He has also served as a director of Ajay
Sports, Inc. since 1993. For the past five years and until his retierment in
December 1999, Mr. Cashen has served as managing partner, then as a Senior
Partner of LAI Ward Howell a publicly held management consulting and executive
recruiting firm located in New York City. He currently serves as a Director of
Immucell Corp., and Williams Controls, Inc., both publicly held companies.
Previously, Mr. Cashen has been an officer and principal of the investment firms
A.G. Becker Inc. and Donaldson, Lufkin and Jenrette, Inc. He received an MBA
from the Johnson Graduate School of Management at Cornell University, and a
Bachelor of Science degree from Cornell University.
Robert W. Schwartz. Mr. Schwartz has served as Director of the Registrant since
- ------------------
March 28, 1991. Since 1985 he has been Chairman and President of Schwartz,
Gordon, Heslin & Associates, Inc., a management and financial consulting firm in
Troy, New York. From 1987 until 1991 he was a Director and Vice President and
Treasurer of ESARCO International, Inc., a publicly held company which licenses
and markets all-terrain trucks. Previously Mr. Schwartz was President and
Director of Winsources, Inc., a telephone equipment supplier, President and
Director of Cordian Corporation of Latham, New York, a telephone equipment
manufacturer, and Vice President of Finance of Garden Way Manufacturing Company,
Inc., a manufacturer of rototillers and outdoor equipment. Mr. Schwartz received
a B.S. degree in industrial and labor relations from Cornell University and did
graduate work at State University of New York at Albany.
ITEM 11. EXECUTIVE COMPENSATION
The Registrant reimburses its directors for expenses incurred by them in
connection with business performed on the Registrant's behalf, including
expenses incurred in attending meetings. In addition, directors receive a fee of
$250 for each Board of Directors meeting attended. No such reimbursements were
made for the period from January 1, 1990 to December 31, 1999. While none of the
officers received any salary, such individuals are reimbursed for all
accountable expenses incurred on behalf of the Registrant.
See Item 13 - Certain Business Relationships and Related Transactions
under Acrodyne Corporation for additional information.
The Registrant has no defined benefit and actuarial plan providing for
payments to employees upon retirement. The Registrant also has no plans for
awarding stock options. No other compensation was paid to officers or directors
of the Registrant from January 1, 1990 to December 31, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information as of March 31, 2000 with respect
to beneficial ownership of the Registrant's Common stock by each person known by
the Registrant to be the beneficial owner of more than five percent thereof, by
the executive officers and directors of the Registrant and by all executive
officers and directors of the Registrant as a group:
Common Stock
Beneficially Percent
Owned (1) of Class
-------------------------------------
Thomas W. Itin 7,717,073 (2)(3)(4) 57.2%
Anthony B. Cashen 400,000 (4) 3.3%
Robert W. Schwartz 100,000 (4) .8%
Officers and Directors 8,217,073 (3) 61.3%
as a group (3 persons)
James T. Emerson 695,000 5.7%
221 E. Colonial Drive
Orlando, FL 32801
(1) Without giving effect to the exercise of outstanding Warrants except
as noted in footnote 4 below.
(2) These shares are held of record by entities of which Mr. Itin is
either a principal or a beneficiary.
(3) Includes 300,000 shares held by Mr. Itin's wife, Shirley B. Itin,
either as beneficiary or custodian, of which Mr. Itin disclaims any
beneficial ownership.
(4) These shares include warrants granted on June 3, 1992 expiring
December 4, 2000, to purchase one share of common stock per warrant
for $.04. (Thomas W. Itin, 1,000,000, Anthony B. Cashen, 200,000,
Robert W. Schwartz, 100,000)
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others.
- ---------------------------------------
None of the Registrant's officers and directors devote their full time to
the Registrant's affairs and such persons may be affiliated with other business
entities and enterprises, some of which may be formed for similar purposes as
the Registrant and thus be in direct competition with the Registrant. Such
activities may result in such persons being exposed to conflicts of interests
from time to time. The Registrant has adopted no conflict of interest policy
with respect to such transactions. However, the officers and directors of the
Registrant recognize their fiduciary obligation to treat the Registrant and its
shareholders fairly in any such future activities.
Certain Business Relationships.
- ------------------------------
In the Registrant's last full fiscal year the Registrant made payments for
property and services in excess of five percent of the Registrant's consolidated
gross revenues to Acrodyne, a company whose Chairman, President and major
stockholder of the Registrant. The Board of Directors of the Registrant has
reviewed and approved the use of Acrodyne and has determined that the fees
charged the Registrant by Acrodyne are as favorable as could be incurred by any
other independent, third party business consultant. It is anticipated that the
Registrant will continue to utilize Acrodyne in the future. The total sum which
the Registrant paid Acrodyne for the year ended December 31, 1999 was $3,300 for
the above mentioned consulting services and out-of-pocket travel expenses, staff
time spent for accounting, record keeping, and utilities, but did not include
fees for services of the Chairman.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The Financial Statements are listed in the "Index to Financial Statements"
filed as part of this Annual Report, on page F-2.
(a) (2) Financial Statement Schedules
Supplementary Financial Schedules for which provision is made in
applicable Regulations of the Securities and Exchange Commission, have been
omitted or the required information is not required under the related
instructions, or the information is presented in the Financial Statements and
Notes thereto.
Pursuant to the provisions of Rule 3-09 of Regulation S-X, the Registrant
is required to file separate audited financial statements of its equity basis
investee, Ajay Sports, Inc. ("Ajay"). Ajay's audited financial statements for
December 31, 1999 are filed within this report.
(a) (3) Exhibits
The Articles of Incorporation and By-Laws of the Corporation are incorporated by
reference to the Registrant's Registration Statement on Form S-18, effective
December 16, 1987. Exhibit 27.0 Financial Data Schedule is filed herewith.
(b) Reports on Form 8-K.
A Form 8-K was filed on July 12, 1999 regarding the extension of the expiration
date of the Registrant's warrants from July 25, 1999 to July 25, 2000. A Form
8-K was filed on December 1, 1999 to extend the exercise period of the
Registrant's warrants issued to its directors from December 4, 1999 to December
4, 2000.
SIGNATURES
Pursuant to the requirements of 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, thereto duly authorized.
LBO CAPITAL CORP.
(Registrant)
By: \s\Thomas W. Itin
-------------------------
Thomas W. Itin, President
& Chief Financial Officer
Date: April 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the (date)
Signature Title
- ----------- -------------------------
\s\Thomas W. Itin Chairman of the Board of Directors,
- --------------------- Chief Executive Officer and President
Thomas W. Itin
\s\Anthony B. Cashen Secretary, Treasurer and Director
- ---------------------
Anthony B. Cashen
\s\Robert W. Schwartz Director
- -----------------------
Robert W. Schwartz
LBO CAPITAL CORP.
TABLE OF CONTENTS
-------------------
Page
Independent Auditor's Report
Financial Statements:
Balance Sheets ........................................................ F2
Statements of Operations .............................................. F3
Statements of Changes in Stockholders' Deficit......................... F4
Statements of Cash Flows .............................................. F5
Notes to Consolidated Financial Statements ........................... F6-F10
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of LBO Capital Corp
We have audited the accompanying balance sheet of LBO Capital Corp., as of
December 31, 1999, and the related statements of operations, changes in
stockholders' deficit, and cash flows for the year ended December 31, 1999.
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 audit. The financial statements of LBO Capital Corp. as of December 31,
1998 and 1997 were audited by other auditors whose reports dated March 23, 1999
and March 24, 1998 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits 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 LBO Capital Corp. as of
December 31, 1999, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/S/ J L Stephan Co, PC
- -----------------------
J L Stephan Co, PC
Traverse City, Michigan
March 30, 2000
F1
LBO CAPITAL CORP.
BALANCE SHEETS
As of December 31, 1999 and 1998
1999 1998
----------------------------------------
ASSETS
Current Assets:
Cash and Equivalents $ 63 $ 73
Marketable Securities - Available for Sale 32,600 46,023
Interest Receivable 15,780 0
Notes Receivable 300,000 0
-------------- ------------
Total Current Assets 348,443 46,096
-------------- ------------
TOTAL ASSETS $ 348,443 $ 46,096
============== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts Payable 3,250 3,763
Accounts Payable - Related Entities 300 210
Notes Payable - Other 823,201 514,901
Accrued Expenses and Taxes 194,021 126,319
-------------- ------------
Total Current Liabilities 1,020,773 645,193
Stockholders' Equity
Common Stock, $.0001 par value;
Authorized 100,000,000 Shares;
Issued and Outstanding 12,100,000 shares 1,210 1,210
Additional Paid-In Capital 623,094 623,094
Unrealized Gain(Loss) on Available for Sale Securities (15,796) (2,373)
Accumulated Deficit (1,280,836) (1,221,027)
-------------- ------------
Total Stockholders' Deficit (672,330) (599,097)
-------------- ------------
TOTAL LIABILITIES & STOCKHOLDERS' DEFICIT $ 348,443 $ 46,096
============== ============
The accompanying notes are an integral part of of this
financial statement.
F2
LBO CAPITAL CORP.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
-------------- ---------------------- --------------
REVENUES: $ 15,781 $ -0- $ -0-
------------ ------------- --------------
EXPENSES:
Professional Services 4,243 3,659 3,820
Management Fees 3,300 2,790 2,900
Interest Expense 67,701 52,843 52,735
Other Expenses 346 162 (906)
------------ ------------- --------------
Total Expenses 75,590 59,454 58,549
------------ ------------- --------------
Income (Loss) Before Income Taxes (59,809) (59,454) (58,549)
Income Tax Expense (Benefit):
Currently Payable -0- -0- -0-
------------ ------------- --------------
Net Income (Loss) $ (59,809) $ (59,454) $ (58,549)
============ ============= ==============
Net Income (Loss) per Share $ (.00) $ (.00) $ (.00)
============ ============= ==============
Weighted Average Number of Common Shares
Outstanding 12,100,000 12,100,000 12,100,000
============ ============= ==============
The accompanying notes are an intergral
part of this financial statement
F3
STATEMENTS OF CHANGES
IN STOCKHOLDERS' DEFICIT
For the Years Ended
December 31, 1999, 1998,
and 1997
Additional Total
Common Stock Paid-In Accumulated Other Stockholders'
---------------------------- Comprehensive
Shares Amount Capital Deficit Income Deficit
--------- --------- ----------- ------------ ----------- -----------
Balances at
December 31, 1996 12,100,000 $ 1,210 $ 623,094 $ (1,103,024) $(19,632) $ (498,352)
Unrealized Gain (Loss) on Securities (3,835)
Net Loss for the Year
Ended December 31, 1997 -0- -0- -0- (58,549) (62,384)
----------- ---------- ----------- ----------- ----------- ------------
Balances at
December 31, 1997 12,100,000 $ 1,210 $ 623,094 $ (1,161,573) $(23,467) $ (560,736)
Unrealized Gain (Loss) on Securities 21,094
Net Loss for the Year
Ended December 31, 1998 -0- -0- -0- (59,454) (38,361)
----------- ---------- ----------- ------------ ----------- -----------
Balances at
December 31, 1998 12,100,000 $ 1,210 $ 623,094 $ (1,221,027) $(2,373) $ (599,097)
Unrealized Gain (Loss) on Securities (13,423)
Net Loss for the Year
Ended December 31, 1999 -0- -0- -0- (59,809) (73,232)
----------- --------- ----------- ------------ ----------- ----------
Balances at
December 31, 1999 12,100,000 $ 1,210 $ 623,094 $ (1,280,836) $(15,796) $ (672,330)
=========== ========== =========== ============ ========== ==========
The accompanying notes are an integral
part of this financial statement
F4
LBO CAPITAL CORP.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, and 1997
1999 1998 1997
------------------------------------------------------------------------
Cash Flows for Operating Activities:
Net Loss $ (59,809) $ (59,454) $ (58,549)
-------------- ------------- -------------
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Changes in Assets and Liabilities:
(Increase) Decrease in:
Prepaid Expenses and Deposits -0- -0- -0-
(Decrease) Increase in:
Accounts Payable (423) (440) 499
Accrued Expenses and Taxes 67,702 51,994 52,836
-------------- ------------- -------------
Total Adjustments 67,279 51,554 53,335
-------------- ------------- -------------
Net Cash (Used for) Operations 7,470 (7,900) (5,214)
-------------- ------------- -------------
Cash (Used for) Investing Activities
Investment (300,000) -0- -0-
-------------- ------------- -------------
(300,000) 0 -0-
Cash provided by (used for) Financing Activities:
Proceeds from Notes - Other 308,300 7,930 5,180
Interest Income (15,781) -0- -0-
-------------- ------------- -------------
Net Cash Provided by Financing Activities 292,519 7,930 5,180
-------------- ------------- -------------
Net Increase (Decrease) in Cash (11) 30 (35)
Cash and Cash Equivalents:
At Beginning of Period 73 43 78
-------------- ------------- -------------
At End of Period $ 63 $ 73 $ 43
============== ============= =============
The accompanying notes are an integral part of
this financial statement
F5
LBO CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
Note 1. Summary of Significant Accounting Policies
Organization and Business
LBO Capital Corp. (the "Company") was incorporated on October 8,
1987 under the laws of the State of Colorado. The Company is engaged
in evaluating and investing in other companies. The Company was
considered to be in the development stage in 1987 and began
operations on March 15, 1988.
Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less cash equivalents.
Equipment and Depreciation
Equipment was stated at cost. Depreciation was computed for
financial reporting purposes on a straight-line basis over an
estimated life of 5 years. Depreciation expense for the years ended
December 31, 1999, 1998 and 1997 was $0, $0 and $0 respectively. At
December 31, 1995, the remaining computer equipment that was
previously leased to an investee was determined to be obsolete and
written off the books of the Company.
Income Taxes
At December 31, 1999, the Company has a net operating loss available
for carryforward totaling approximately $1,023,141. The operating
loss carryforward expires in various amounts by the year ended
December 31, 2020.
Net Loss Per Share
Net loss per share is computed using weighted average shares
outstanding without giving effect to the common stock warrants, as
the effect would be antidilutive.
Note 2. Marketable Securities
The Company's marketable securities available for sale are recorded at
fair market value.
LBO CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
Market Value
----------------------------------------------------
Investment Per Share Aggregate
1999
----
Enercorp, Inc. $48,397 $2.125 $32,600
1998
----
Enercorp, Inc. $ 48,397 $3.000 $46,023
Note 3. Investments
On April 3, 1989, the Company acquired an aggregate of 1,880,000
restricted common shares of Ajay Sports, Inc. ("Ajay") for a total
purchase price of $182,000. As a result of recording the Company's equity
in net losses of Ajay, the carrying value of this investment is zero at
December 31, 1999 and 1998. The Company also obtained 200,000 stock
warrants of Ajay at that time.
In March 1991, the Company pledged 400,000 shares of its Ajay investment
as security for bank loans to an acquisition candidate. On June 1 1991,
the bank declared the loan in default and foreclosed on the shares.
On August 13, 1998, Ajay announced that its board of directors had
authorized the implementation of a 1-for-6 reverse split of the company's
common stock, effective with the commencement of trading on August 14,
1998. The stockholders of Ajay at the company's annual meeting on May 29,
1998 approved the reverse split.
Following the reverse split, holders of Ajay's common stock received one
new share of $.01 par value common stock for every six shares of common
stock currently held. Therefore, the number of Ajay shares held by the
Company is 246,667. The reverse split also affected the number and
exercise price of the Company's warrants, such that the Company now holds
33,333 warrants entitling it to purchase one share of Ajay's common stock
at $1.08 per share. These warrants expire June 30, 2000.
All of the Ajay shares are pledged as security for a note payable (see
note 4).
The stock of Ajay is traded over-the-counter and is reported by the
National Quotation Service. The following table sets forth the range of
high and low trade prices given quarterly by NASDAQ.
LBO CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
HI LOW
---- -----
1999
First Quarter $ 1.063 $ .688
Second Quarter $ 3.000 $ .688
Third Quarter $ 2.063 $ .813
Fourth Quarter $ .938 $ .500
Note 4. Note Receivable
On June 22, 1999, the Company loaned $300,000 to Pro Golf International,
Inc. ("PGI"), a subsidiary of Ajay Sports, Inc. The Company received two
promissory notes that is subordinated to PGI's primary lender. The unpaid
principal balance will bear an interest rate of 10% and will be due and
payable in full on July 22, 2000. The balance ,including interest, at
December 31, 1999 was $315,781. The proceeds were used to purchase all the
outstanding capital stock of Pro Golf of America, Inc., franchiser of Pro
Golf Discount retail golf stores. Ajay owns over 80% of the stock of Pro
Golf International, with the remaining shares held by a group of
investors.
Note 5. Notes Payable
During 1998, the Company borrowed $308,300 from Dearborn Wheels, Inc. The
proceeds were used to meet current operating needs and the investment in
Pro Golf International.
On December 2, 1996, the Registrant had a change in its borrowing
arrangements. The Registrant borrowed $325,790 from Dearborn Wheels, Inc.
to repay a note payable to Michigan National Bank. The principal balance
as of December 31, 1998, was $514,901. The loan is at prime plus 2%
interest and is secured by all the intangible assets of the Registrant.
Dearborn Wheels, Inc. is held in majority by the Registrant's President's
spouse. This note bears interest of prime plus 2%, matures on September
27, 2000 and is secured by all the assets of the Company.
Note 6. Capital Stock
The Company completed a public offering on March 15, 1988 consisting of
3,000,000 units at $.20 each. Each unit consisted of one common share, one
callable class A common stock purchase warrant, one callable Class B
common stock purchase warrant and one callable Class C common stock
purchase warrant. Each Class A warrant entitles the warrant holder to
purchase one share of common stock for $.50, each Class B warrant entitles
the warrant holder to purchase one share of common stock for $.75, and
each Class C common stock purchase warrant entitles the warrant holder to
purchase one share of common for $1.00. The Class A, B and C warrants were
originally exercisable within twelve, eighteen and twenty-four months
respectively, from February 26, 1988. All warrants have been extended
until July 25, 2000. As of December 31, 1999, no warrants had been
exercised. The Company has the right to call any or all warrants at a
redemption price of $.0001 per warrant.
On June 3, 1992 the Company issued 3,000,000 shares of its common stock,
valued at $.04 per share (fair market value on that date, per the National
Quotation Bureau, Inc.), to an officer and director in exchange for a
reduction of $120,000 in a note to a related company.
The Company granted to its directors a total of 1,300,000 warrants,
expiring December 4, 2000. Each warrant enables the owner to purchase one
share of common stock for $.04 per share.
Note 7. Management Fees
The Company does not employ any personnel. Per a management fee agreement
with Acrodyne Corporation, a related entity, the Company pays direct labor
costs plus overhead for management services rendered.
Note 8. Cash Flows Disclosure
Interest and income taxes paid for the years ended December 31, 1999, 1998
and 1997 were as follows:
1999 1998 1997
-------- ---------- -----------
Interest $ -0- $ -0- $ -0-
========== ========== ===========
Income Taxes $ -0- $ -0- $ -0-
========== ========== ===========
LBO CAPITAL CORP.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999, 1998 and 1997
Note 9. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.