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 JULY 31, 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 September 9, 1996
Common Stock, $.001 par value 4,867,274
Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]
INDEX
PAGE
PART I - Financial Information
ITEM 1 - Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
ITEM 2 - Management's Discussion and Analysis of
Financial Conditions and Results of Operations 7 - 9
PART II - Other Information
ITEMS 1 through 6 10
Signature Page
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
CARLYLE GOLF, INC.
BALANCE SHEETS
July 31, 1996 and October 31, 1995
(UNAUDITED)
- --------------------------------------------------------------------------
1996 1995
------- -----
ASSETS
Current Assets:
Cash and cash equivalents $ 53,928 $ 55,770
Trade accounts receivable, net
of allowance for doubtful
accounts of $50,000 and $100,000,
respectively 950,607 549,806
Inventories 1,459,728 1,774,658
Prepaid and other current assets 144,361 157,828
---------- ----------
Total current assets 2,608,624 2,538,062
Property and equipment, at cost:
Property and equipment 654,867 614,972
Less accumulated depreciation (167,665) (88,634)
---------- ----------
487,202 526,338
---------- ----------
Other assets 51,860 90,352
---------- ----------
Total Assets $3,147,686 $3,154,752
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable to bank $ 375,757 $ 561,092
Accounts payable 317,120 301,574
Accrued liabilities 106,447 230,808
Capitalized lease obligations 2,560 10,162
---------- ----------
Total current liabilities 801,884 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 4,890,474 and 4,221,201
shares, respectively 4,890 4,221
Additional paid-in capital 7,009,050 5,937,214
Compensation payable in common stock
(55,000 and 40,500 shares, respectively) 83,350 98,420
Unearned compensation (110,003) (205,243)
Accumulated deficit (4,641,485) (3,783,496)
---------- ----------
Total Stockholders' Equity 2,345,802 2,051,116
---------- ----------
Total Liabilities and Stockholders' Equity $3,147,686 $3,154,752
========== ==========
See accompanying notes to financial statements.
CARLYLE GOLF, INC.
Statements of Operations
(UNAUDITED) Quarter Ended July 31, Nine Months Ended July 31,
- --------------------------------------------------------------------------
1996 1995 1996 1995
----- ----- ----- -----
Net revenue $1,289,000 $1,061,011 $3,115,022 $2,694,140
Cost of Sales 1,038,782 812,676 2,508,232 2,012,453
---------- ---------- ---------- ----------
Gross Margin 250,218 248,335 606,790 681,687
Selling, general,
and administrative
expenses 517,238 568,961 1,373,374 1,652,647
---------- ---------- ---------- ----------
Loss from
operations (267,020) (320,626) (766,584) (970,960)
Other income
(expenses):
Interest expense (35,390) (2,927) (91,405) (4,660)
Other - 648 - 21,207
---------- ---------- ---------- ----------
(35,390) (2,279) (91,405) 16,547
---------- ---------- ---------- ----------
Net loss $ (302,410) $ (322,905) $ (857,989) $ (954,413)
========== ========== ========== ==========
Net loss per
common share $ (0.07) $ (0.08) $ (0.20) $ (0.23)
========== ========== ========== ==========
Weighted average
common shares
outstanding 4,572,309 4,252,434 4,385,768 4,237,543
========= ========= ========= =========
See accompanying notes to financial statements.
CARLYLE GOLF, INC.
Statements of Cash Flows
(UNAUDITED) Quarter Ended July 31, Nine Months Ended July 31,
- --------------------------------------------------------------------------
1996 1995 1996 1995
----- ----- ----- -----
Cash flows from
operating
activities:
Net loss $ (302,410) $ (322,905) $ (857,989) $ (954,413)
Adjustments to
reconcile net
loss to net
cash used by
operating
activities:
Depreciation 27,197 20,376 79,031 43,703
Amortization
of deferred
compensation 36,032 58,476 124,437 103,157
Issuance of
stock for
services, net - 108,050 25,228 341,560
Bad debt expense - 1,653 27,763 1,736
Changes in
operating
assets and
liabilities:
(Increase)
decrease in:
Trade
receivables (27,062) 27,537 (428,564) (293,440)
Inventories 229,462 135,032 314,930 (251,332)
Prepaid and
other assets 44,508 (208,888) 51,959 (460,596)
Increase
(decrease) in:
Accounts
payable (235,744) (260,592) 15,546 (269,279)
Accrued
liabilities 7,621 98,204 (124,361) 175,683
Other
liabilities - (9,095) - 9,892
--------- --------- --------- --------
Net cash used by
operating
activities (220,396) (352,152) (772,020) (1,553,329)
---------- ---------- ---------- ----------
Cash flows from
investing activity -
Purchase of property
and equipment (22,038) (14,360) (39,895) (430,502)
---------- ---------- ---------- ----------
Cash flows from
financing activities:
Repayment of
capitalized lease
obligations (1,093) (3,275) (7,602) (8,676)
Proceeds from
(repayments of)
note payable
to bank, net (740,840) 305,438 (185,335) 305,438
Proceeds from
issuance of
common stock 1,003,010 - 1,003,010 -
---------- ---------- ---------- ----------
Net cash
provided
(used) by
financing
activities 261,077 302,163 810,073 296,762
---------- ---------- ---------- ----------
Net increase
(decrease)
in cash 18,643 (64,349) (1,842) (1,687,069)
---------- ---------- ---------- ----------
Cash and cash
equivalents,
beginning of
period 35,285 103,561 55,770 1,726,281
---------- ---------- ---------- ----------
Cash and cash
equivalents,
end of period $ 53,928 $ 39,212 $ 53,928 $ 39,212
========== ========== ========== ==========
Supplemental
disclosure of cash
flow information -
Cash paid for
interest $ 42,414 $ 8,424 $ 94,502 $ 10,157
========== ========== ========== ==========
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 July 31, 1996, and the results of its operations, and
its cash flows for the period then ended.
The operating results for the nine month period ended July 31, 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 July 31, 1996, were $1,289,000, an
increase of $227,989, or 21%, from net sales of $1,061,011 for the same
quarter in 1995. Net sales for the nine months ended July 31, 1996, were
$3,115,022, an increase of $420,882, or 16%, from net sales of $2,694,140
for the same period in 1995. Unit sales for the quarter ended July 31,
1996, were 55% higher than for the same period in 1995. Unit sales for
the nine months ended July 31, 1996, were 53% higher than for the same
period in 1995. The disparity between the increase in unit volume as
compared to the increase in dollar volume was a result of the liquidation
of prior season inventory.
Cost of goods sold as a percentage of net sales was 81% and 77% for the
quarters ended July 31, 1996 and July 31, 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 maintain or slightly
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 40% for the quarter ended July 31, 1996 from 54% for the same
quarter in 1995. Selling, general and administrative expenses for the
nine months ended July 31, 1996 were 44% of net sales as compared to 61%
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.
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 $4,641,485
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 July 31, 1996, the Company completed a private
placement of the Company's common stock to an inside investor group which
raised $1,023,100. 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. 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 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 in the near future.
The Company has funded its operations from inception through July 31, 1996
from both the proceeds of its initial public offering and a subsequent
private placement, 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 $970,389 at July 31, 1996.
As of July 31, 1996, the Company had $53,928 in cash and cash equivalents
on hand and working capital of $1,806,740.
Operating activities produced negative cash flows of $220,396 for the
quarter ended July 31, 1996, and of $772,020 for the nine months ended
July 31, 1996. The primary uses of cash were to fund the Company's year
to date net loss and to finance current inventory purchases.
The Company's investing activities were comprised of property and
equipment purchases totaling $22,038 for the quarter ended July 31, 1996,
and $39,895 for the nine month period ended July 31, 1996. These
purchases consist of miscellaneous office and warehouse equipment.
Financing activities produced positive cash flows of $261,077 for the
quarter ended July 31, 1996, and $810,073 for the nine months ended July
31, 1996. The primary use of cash received from the funding of the
private placement was to reduce the line of credit and trade payables.
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
Not applicable
Item 5 Other Information
Not applicable
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Stock Purchase Agreement between the Company and
certain insiders dated April 1, 1996
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
Carlyle Golf, Inc.
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: September 13, 1996 By:/s/WILLIAM A. CLYMOR
William A. Clymor,
Chairman of the Board and Chief
Executive Officer
Date: September 13, 1996 By:/s/WENDY K. WILLIAMS
Wendy K. Williams
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ----------------
10.1 Stock Purchase Agreement
between the Company and
certain insiders dated
April 1, 1996 Filed herewith electronically
27 Financial Data Schedule Filed herewith electronically