U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended April 30, 1996
Commission file number 0-24160
CARLYLE GOLF, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-1218066
(State or other jurisdiction
of incorporation) (IRS Employer
Identification No.)
10550 East 54th Avenue, Unit E
Denver, Colorado 80239
(Address of principal executive offices)
(303) 371-2889
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the
past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date:
Class Outstanding at June 6,
1996
Common Stock, $.001 par value 4,258,601
Transitional Small Business Disclosure Format (check one): Yes[
] No[X]
INDEX
PAGE
PART I - Financial Information
ITEM 1 - Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . .3-4
Statements of Operations . . . . . . . . . . . . . . .5
Statements of Cash Flows . . . . . . . . . . . . . . .6
Notes to Financial Statements. . . . . . . . . . . . .7
ITEM 2 - Management's Discussion and Analysis of
Financial Conditions and Results of Operations . . 8-10
PART II - Other Information
ITEMS 1 through 6 . . . . . . . . . . . . . . . . . . .11-12
Signature Page. . . . . . . . . . . . . . . . . . . . . . 13
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CARLYLE GOLF, INC.
BALANCE SHEETS
April 30, 1996 and October 31, 1995
(UNAUDITED)
1996 1995
Assets
Current Assets:
Cash and cash equivalents $ 35,285 $ 55,770
Trade accounts receivable, net of
allowance for doubtful accounts
of $50,000 and $100,000,
respectively 923,545 549,806
Inventories 1,689,190 1,774,658
Prepaid and other assets 189,872 157,828
---------- ---------
Total current assets 2,837,892 2,538,062
Property and equipment, at cost:
Property and equipment 632,829 614,972
Less accumulated depreciation (140,468) (88,634)
---------- ---------
492,361 526,338
Other assets 50,857 90,352
---------- ---------
Total Assets $3,381,109 $3,154,752
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Note payable to bank $1,116,597 $ 561,092
Accounts payable 552,864 301,574
Accrued liabilities 98,826 230,808
Capitalized lease obligations 3,653 10,162
---------- ---------
Total Current Liabilities 1,771,940 1,103,636
Stockholders' Equity:
Preferred stock, $.001 par value,
authorized 2,500,001 shares,
none issued
Common stock, $.001 par value,
authorized 30,000,000 shares;
issued 4,255,201 and 4,221,201
shares, respectively $ 4,255 $ 4,221
Additional paid-in capital 6,006,675 5,937,214
Compensation payable in common
stock (53,000 and 40,500 shares,
respectively) 80,725 98,420
Unearned compensation (143,411) (205,243)
Accumulated deficit (4,339,075) (3,783,496)
---------- ----------
Total Stockholders' Equity 1,609,170 2,051,116
---------- ----------
Total Liabilities and
Stockholders' Equity $3,381,109 $3,154,752
========== ==========
See accompanying notes to financial statements.
CARLYLE GOLF, INC.
Statements of Operations
(UNAUDITED) Quarter Ended April 30, Six Months Ended
April 30,
- - -----------------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
Net revenue $1,392,530 $1,227,088 $1,826,022 $1,633,129
Cost of Sales 1,085,488 862,484 1,469,450 1,199,777
---------- ---------- ---------- ----------
Gross Margin 307,042 364,604 356,572 433,352
Selling, general, and
administrative
expenses 454,599 536,779 856,136 1,083,687
---------- ---------- ---------- ----------
Loss from operations (147,557) (172,175) (499,564) (650,335)
Other income (expenses):
Interest expense (35,514) (626) (56,015) (1,733)
Other - 3,616 - 20,559
---------- ---------- ---------- ----------
(35,514) 2,990 (56,015) 18,826
---------- ---------- ---------- ----------
Net loss $(183,071) $ (169,185) $ (555,579) $ (631,509)
========== ========== ========== ==========
Net loss per
common share $ (0.04) $ (0.04) $ (0.13) $ (0.15)
========== ========== ========== ==========
Weighted average
common shares
outstanding 4,303,278 4,250,521 4,291,472 4,228,613
========== ========= ========= ==========
See accompanying notes to financial statements.
CARLYLE GOLF, INC.
Statements of Cash Flows
(UNAUDITED) Quarter Ended April 30, Six Months End
April 30,
- - --------------------------------------------------------------------
1996 1995 1996 1995
---- ---- ---- ----
Cash flows from
operating
activities:
Net loss $(183,071) $ (169,185) $ (555,579) $ (631,509)
Adjustments to
reconcile net loss
to net cash used by
operating
activities:
Depreciation 26,069 16,395 51,834 23,328
Amortization
of deferred
compensation 36,019 35,681 77,404 45,001
Issuance of stock
for services,
net 17,001 - 36,229 29,521
Changes in operating
assets and
liabilities:
(Increase) decrease
in:
Trade receivables (495,679) (404,555) (373,739) (320,894)
Inventories 328,383 (79,138) 85,468 (386,364)
Prepaid and other
assets 33,945 (14,787) 7,451 (48,039)
Increase (decrease)
in:
Accounts payable (71,454) 165,150 251,290 (8,687)
Accrued liabilities(21,032) 14,424 (131,982) 77,479
Other liabilities - (22,121) - 18,987
--------- ---------- ---------- ---------
Net cash used by
operating activities (329,819) (458,136) (551,624) (1,201,177)
--------- ---------- ---------- ----------
Cash flows from investing
activity -
Purchase of property
and equipment (4,990) (76,453) (17,857) (416,142)
--------- ---------- ---------- ----------
Cash flows from
financing activities:
Repayment of
capitalized lease
obligations (3,707) (2,244) (6,509) (5,401)
Proceeds from note
payable to
bank, net 324,375 - 555,505 -
--------- ---------- ---------- ----------
Net cash provided
(used) by financing
activities 320,668 (2,244) 548,996 (5,401)
--------- ---------- ---------- ----------
Net decrease in cash (14,141) (536,833) (20,485) (1,622,720)
--------- ---------- ---------- ----------
Cash and cash equivalents,
beginning of period 49,426 640,394 55,770 1,726,281
--------- ---------- ---------- ----------
Cash and cash equivalents,
end of period $ 35,285 $ 103,561 $ 35,285 $ 103,561
========= ========== ========== ==========
Supplemental disclosure
of cash flow
information -
Cash paid for interest $ 31,678 $ 908 $ 52,088 $ 1,733
========= ========== ========== ==========
See accompanying notes to these financial statements.
CARLYLE GOLF, INC.
NOTES TO FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS:
The unaudited financial statements have been prepared
pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such
rules and regulations. In the opinion of management, the
accompanying financial statements contain all of the normal
recurring adjustments necessary to present fairly the
financial position of the Company as of April 30, 1996, and
the results of its operations, and its cash flows for the
period then ended.
The operating results for the six month period ended April
30, 1996 are not necessarily indicative of the results that
may be expected for the year ending October 31, 1996. The
accompanying financial statements should be read in
conjunction with the audited financial statements of the
Company and notes thereto for the fiscal year ended
October 31, 1995.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net sales for the quarter ended April 30, 1996, were $1,392,530,
an increase of $165,442, or 13%, from net sales of $1,227,088 for
the same quarter in 1995. Net sales for the six months ended
April 30, 1996, were $1,826,022, an increase of $192,893, or 12%,
from net sales of $1,633,129 for the same period in 1995. The
relatively modest increase in net sales is primarily attributable
to weather related delays in current season shipments and the
shipment of a significant amount of prior season inventory which
was sold at reduced prices.
Cost of goods sold as a percentage of net sales was 78% and 70%
for the quarters ended April 30, 1996 and April 30, 1995,
respectively. The Company's decrease in gross margin from the
prior year is primarily due to a larger proportion of sales of
older inventory which was sold at lower prices. Management
believes that the Company will improve its gross margin during
the remainder of 1996 as a result of increased shipments of the
Company's current lines. However, the gross margin will continue
to be affected negatively by the sale of older inventory for the
rest of the fiscal year.
Selling, general and administrative expenses decreased as a
percentage of net sales to 33% for the quarter ended April 30,
1996 from 44% for the same quarter in 1995. Selling, general and
administrative expenses for the six months ended April 30, 1996
were 47% of net sales as compared to 66% for the same period in
1995. The decreases reflect the absence of certain non-recurring
expenses included in 1995, as well as reductions in 1996.
Loss per share was $(.04) for both the quarters ended April 30,
1996 and 1995. Loss per share was $(.13) for the six months
ended April 30, 1996, as compared to $(.15) for the same period
in 1995. The loss per share for the quarter end periods are
based on 4,303,278 and 4,250,521 weighted average shares
outstanding for 1996 and 1995, respectively. The loss per share
for the six month periods are based on 4,291,472 and 4,228,613
weighted average shares outstanding for 1996 and 1995,
respectively.
The Company currently sells to domestic and foreign customers.
The Company obtains a letter of credit, when deemed necessary, on
foreign sales. The Company requires remittance in United States
currency on all foreign sales. Therefore, there is no risk
associated with currency fluctuation on foreign sales.
Liquidity and Capital Resources
During its earliest years of operations, the Company focused on
developing its products, marketing strategy and distribution
network as the foundation for growth. Despite a recent focus on
increasing sales volumes, improving margins and better managing
inventory, the Company has continued to incur losses from
operations, which amount to $4,339,075 since the Company's
inception. The ability of the Company to achieve profitable
operations is dependent ultimately upon its ability to increase
sales and improve gross margins.
During the quarter ended April 30, 1996, the Company announced
the impending private placement of the Company's common stock to
an inside investor group to raise $1,023,100. The transaction
will be completed during June 1996. The proceeds of the
transaction will be used to finance future growth and working
capital needs. Should the Company require additional capital in
the future to fund its operations and to sustain growth, the
Company may sell additional debt or equity securities to raise
the needed capital. However, there can be no assurance that
additional capital will be available from private or public
markets.
The Company is continuing its efforts to improve gross margins by
controlling the quantity of inventory purchases to correspond
more closely to its sales orders. As of April 30, 1996, the
remaining Spring 1996 inventory was 38% of the total quantity
purchased as compared to 57% of Spring 1995 inventory remaining
as of April 30, 1995. These percentages do not include open
orders as of those dates. The Company has also reduced
corporate overhead, including salary reductions for key
management personnel. The Company continues to reduce inventory
levels by disposing of older styles in bulk sales, which sales
also improve the Company's liquidity. The Company expects that,
with funds provided through increased sales, improved gross
margins, expense reductions, liquidation of older inventory and
the additional equity to be raised in the private placement, it
will be able to fund its growth through fiscal 1996 and into
fiscal 1997. There can be no assurance, however, that the
Company will achieve the level of sales, gross profit margins and
expense reductions needed to achieve profitable operations during
fiscal 1996.
The Company has funded its operations from inception through
April 30, 1996 from both the proceeds of its initial public
offering and from a working capital line of credit obtained from
a bank. The $1,500,000 line of credit is secured by accounts
receivable, inventory and equipment. Advances under the line of
credit are limited to certain percentages of accounts receivable
and inventory. The borrowing limit was approximately $1,117,000
at April 30, 1996, all of which was drawn down on that date.
Management believes that funds available under the working
capital line of credit, together with the additional capital to
be raised in the June 1996 private placement, will be sufficient
to meet the Company's working capital requirements through fiscal
1996. If available funds are insufficient, or if working capital
requirements are greater than estimated, the Company may be
required to obtain additional financing. There can be no
assurance that the Company will be able to obtain the additional
financing to meet its working capital requirements.
As of April 30, 1996, the Company had $35,284 in cash and cash
equivalents on hand. As of April 30, 1996, the Company had
working capital of $1,065,952.
Operating activities produced negative cash flows of $329,819 for
the quarter ended April 30, 1996, and $551,624 for the six months
ended April 30, 1996. The primary uses of cash were to fund the
Company's year to date net loss and to finance current inventory
purchases.
Financing activities produced positive cash flows of $320,668 for
the quarter ended April 30, 1996, and $548,996 for the six months
ended April 30, 1996. The primary use of cash from the funding
of the line of credit was to reduce trade payables.
The Company's investing activities were comprised of property and
equipment purchases totaling $4,990 for the quarter ended April
30, 1996, and $17,857 for the six month period ended April 30,
1996. The purchases include miscellaneous office and warehouse equipment.
Forward Looking Statements
To the extent that this report includes predictions of the
Company's future performance or discloses the expectations of
management of the Company as to such performance, such statements
are forward looking statements the accuracy of which cannot be
guaranteed by the Company or its management. For example, a
downturn in general economic conditions, adverse developments in
the "green grass" golf apparel industry, unanticipated problems
with or delays by the Company's cutting and sewing contractors or
fabric suppliers, or the failure of presently anticipated funding
sources to materialize or continue, among other possibilities,
could cause these forward looking statements to prove to be
incorrect.
Part II - Other Information
Item 1 Legal Proceedings
Not applicable
Item 2 Changes in Securities
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on
April 1, 1996. At the meeting, William A. Clymor, W. Clayton
Cole, Kenneth R. LaBounty, G. Richard Oscarson, Michael D. Reid
and Jerome M. Hause were elected as directors. Also approved at
the meeting was the ratification of the appointment of KPMG Peat
Marwick LLP as the independent public accountants for the Company
for the year ending October 31, 1996, and an amendment to the
Company's Stock Purchase and Redemption and Nonqualified Stock
Option Plan for Club Professionals and PGA Tour Players (the
"Plan") to remove the limitation on the maximum number of shares
subject to stock grants.
The number of votes cast for or withheld for each director
nominee was as follows:
Nominee For Withheld
------- --- --------
William A. Clymor 3,479,705 891
W. Clayton Cole 3,479,705 891
Kenneth R. LaBounty 3,479,705 891
G. Richard Oscarson 3,479,705 891
Michael D. Reid 3,479,705 891
Jerome M. Hause 3,475,705 4,891
The number of votes cast for and against, and abstentions
from, ratification of the selection of KPMG Peat Marwick LLP as
the Company's independent auditors for the year ending October
31, 1996 was as follows:
For Against Abstain
--- ------- -------
3,461,639 5,570 13,387
The number of votes cast for and against, and abstentions
from, approval of the amendment to the Plan was as follows:
Part II - Other Information (continued)
For Against Abstain
--- ------- -------
3,261,385 30,467 26,966
Because the election of directors, retention of auditors and
amendment to the Plan were considered routine under applicable
stock exchange rules, all proxy shares held in the names of
brokers as nominees which were not voted at the meeting by the
beneficial holders thereof were voted by the brokers in favor of
the nominees for the Board of Directors, the retention of the
auditors and the amendment to the Plan.
Item 5 Other Information
Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Carlyle Golf, Inc. Stock
Purchase and Redemption and Nonqualified Stock
Option Plan for Club Professionals and PGA Tour
Players.
27 Financial Data Schedule
(b) Reports on Form 8-K
A Report on Form 8-K dated April 1, 1996 under Item 5
of Form 8-K reported the announcement of a private
investment of a minimum of one million dollars in the
Company's common stock.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CARLYLE GOLF, INC.
(Registrant)
Date: June 13, 1996 By:/s/ William A. Clymor
William A. Clymor,
Chairman of the Board and
Chief Executive Officer
Date: June 13, 1996 By:/s/ Wendy K. Williams
Wendy K. Williams
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
10.1 Amended and Restated Carlyle Golf,
Inc. Stock Purchase and Redemption
Nonqualified Stock Option Plan for
Club Professionals and PGA Tour
Players Filed Electronically
Herewith
27 Financial Data Schedule Filed Electronically
Herewith