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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
January 24, 1997
(Date of earliest event reported)
Carlyle Golf, Inc.
(Exact name of registrant as specified in charter)
Colorado 0-24160 84-1218066
(State or other juris- (Commission (IRS Employer
diction of incorporation) file number) Identification No.)
10550 East 54th Avenue, Unit E, Denver, CO 80239
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 371-2889
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Filed herewith are the financial statements of Star Point Enterprises,
Inc., substantially all of whose assets were acquired by Carlyle Golf,
Inc. on January 24, 1997, and the pro forma combined financial statements
of the Company giving effect to the acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Audited financial statements of Star Point Enterprises, Inc. at
December 31, 1996 and 1995, and for each of the years in the
two-year period ended December 31, 1996.
(b) Condensed pro forma combined financial statements of Carlyle
Golf, Inc. as of October 31, 1996 and for the year then ended.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
CARLYLE GOLF, INC.
(Registrant)
Dated: April 8, 1997 By: /s/ Jerome M. Hause
Jerome M. Hause
President
CARLYLE GOLF, INC.
PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
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On January 24, 1997, Carlyle Golf, Inc. (Carlyle) acquired substantially
all of the assets of Star Point Enterprises, Inc. (Star Point) doing
business as Pro-Line Cap Company. Star Point is a producer of high
quality sized and adjustable athletic and golf headwear. The business
combination has been accounted for as a purchase and the results of the
operations of Star Point will be included in the operations of Carlyle
beginning February 1, 1997.
The following unaudited pro forma balance sheet as of October 31, 1996
assumes that the acquisition occurred as of that date and reflects the
combination of the historical balance sheet of Carlyle as of October 31,
1996 with the historical balance sheet of Star Point as of December 31,
1996, with pro forma adjustments to give effect to the business
combination.
The following unaudited pro forma combined statement of operations for the
year ended October 31, 1996 combines the historical results of operations
of Carlyle for the year ended October 31, 1996 with the historical results
of operations of Star Point for the year ended December 31, 1996. The pro
forma combined results of operations of Carlyle assume that the business
combination occurred as of November 1, 1995.
The pro forma results of operations are not necessarily indicative of the
results that would have been obtained if the business combination had
occurred as of the beginning of the period presented nor are they
indicative of the future operating results of the combined companies.
These unaudited condensed pro forma combined financial statements should
be read in conjunction with the historical financial statements and
related notes of Carlyle and Star Point.
CARLYLE GOLF, INC.
PRO FORMA COMBINED BALANCE SHEET
(UNAUDITED)
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Carlyle Star Point
historical historical
October 31, December 31, Pro forma Pro forma
ASSETS 1996 1996 adjustments combined
- ------ ----------- ------------ ----------- ---------
Current assets:
Cash $ 12,326 31,369 43,695
Trade receivables, net 585,522 855,326 1,440,848
Inventories 1,782,916 1,409,589 3,192,505
Prepaid expenses 150,319 70,300 220,619
---------- --------- ---------
Total current assets 2,531,083 2,366,584 4,897,667
Property and equipment, 141,659 (a)
net 467,630 886,266 800,000 (b) 2,295,555
Goodwill - - 1,893,579 (c) 1,893,579
Other assets 46,223 22,880 77,120 (d) 146,223
---------- --------- --------- ---------
$3,044,936 3,275,730 2,912,358 9,233,024
========== ========= ========= =========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Notes payable
to bank $ 526,307 2,075,000 (847,556) (e) 1,753,751
Note payable
to stockholder - - 1,243,000 (e) 1,243,000
Current portion of
long-term debt - 329,732 (329,732) (e) -
Current portion
of long-term 50,161 (h)
debt to related 59,113 (i)
parties - 300,065 (300,065) (f) 109,274
Accounts payable 474,599 279,842 176,000 (g) 930,441
Accrued liabilities 86,628 610,816 697,444
---------- --------- ---------
Total current
liabilities 1,087,534 3,595,455 4,733,910
Long-term debt - 88,309 (88,309) (e) -
173,260 (h)
Long-term debt to related 212,691 (i)
parties - 1,640,797 (1,640,797) (f) 385,951
Stockholders' equity (deficit):
Preferred stock - - 1,320,432 (k) 1,320,432
322 (k)
Common stock 4,871 220 (220) (j) 5,193
686,007 (k)
Additional paid-in 149,000 (g)
capital 6,994,703 2,933,706 (2,933,706) (j) 7,829,710
Compensation payable
in stock 117,304 - 117,304
Unearned compensation (78,174) - (78,174)
Accumulated deficit (5,081,302) (4,982,757) 4,982,757 (j) (5,081,302)
---------- --------- ---------
Total stockholders'
equity (deficit) 1,957,402 (2,048,831) 4,113,163
---------- --------- --------- ---------
$3,044,936 3,275,730 2,912,358 9,233,024
========== ========= ========= =========
CARLYLE GOLF, INC.
Pro Forma Combined Statement of Operations
(Unaudited)
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Carlyle Star Point
historical historical
October 31, December 31, Pro forma Pro forma
1996 1996 adjustments combined
----------- ------------ ----------- ---------
Net revenue $ 4,131,278 6,233,978 10,365,256
Cost of sales 3,385,876 4,536,465 7,922,341
---------- --------- ---------
Gross profit 745,402 1,697,513 2,442,915
126,239 (l)
Selling, general and 20,000 (m)
administrative 28,332 (n)
expenses 1,933,395 2,705,754 33,333 (o) 4,847,053
---------- --------- ---------
Loss from
operations (1,187,993) (1,008,241) (2,404,138)
Other income (expenses):
Interest expense (109,813) (205,960) (315,773)
Interest expense to 134,944 (p)
related parties - (134,944) (35,000) (q) (35,000)
Other, net - 32,775 32,775
---------- --------- --------- ---------
(109,813) (308,129) (317,998)
---------- --------- --------- ---------
Net loss $(1,297,806) (1,316,370) (107,960) (2,722,136)
========== ========= ========= =========
Net loss per common
share $ (.29) (.56)
========== =========
Weighted average common
shares outstanding 4,535,045 4,857,420
========== =========
CARLYLE GOLF, INC.
Notes to Pro Forma Combined Financial Statements
October 31, 1996
(Unaudited)
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(1) Basis of Presentation
On January 24, 1997, Carlyle acquired substantially all of the assets
of Star Point in accordance with the terms of the Asset Purchase
Agreement. In connection with the acquisition, Carlyle also
purchased a building that was leased by Star Point from a related
party as an office and manufacturing facility. The acquisition of
the assets of Star Point and the purchase of the building are
collectively referred to as the "Acquisition". In connection with
the Acquisition, Carlyle issued 322,375 shares of common stock of
Carlyle, 1,320,432 shares of preferred stock of Carlyle, and options
to purchase 200,000 shares of common stock of Carlyle at $2.08 per
share. Carlyle also issued a mortgage note payable for approximately
$223,000, secured by the building, and assumed liabilities of Star
Point aggregating approximately $3,300,000. Carlyle also entered
into an agreement with the owner of Star Point to pay him an
aggregate of approximately $325,000 over a three-year period. Direct
costs associated with the acquisition were approximately $325,000.
The total purchase price for the Acquisition of $6,033,121, includes
(i) the estimated fair value of the equity securities issued, (ii)
the amount of the mortgage note payable issued of $223,421, (iii)
liabilities assumed of $3,319,405, (iv) the present value of future
payments due to the owner of Star Point, and (v) direct costs of
$325,767.
Also in connection with the Agreement, Star Point advanced $1,243,000
to Carlyle under the terms of a note payable. The amount advanced
was used to repay certain long-term debt of Star Point and to repay a
portion of Star Point's line of credit. Carlyle also entered into a
new line of credit with a bank, the proceeds from which were used to
pay off the balance of Star Point's line of credit.
(2) Pro Forma Adjustments
The following adjustments were recorded to give effect to the
combination of Carlyle and Star Point.
(a) Adjustment to record the fair value of property and equipment
acquired in the business combination.
(b) Adjustment to record the fair value of the building acquired
from a related party of Star Point in connection with the
business combination.
(c) Adjustment to record goodwill, representing the excess of the
purchase price over the net assets acquired.
(d) Adjustment to record the fair value of other assets acquired
from Star Point.
(e) Adjustment to record funds advanced by Star Point under the
terms of a note payable to Star Point and the use of the funds
to repay a portion of the note payable to bank and to repay
other debt of Star Point.
CARLYLE GOLF, INC.
Notes to Pro Forma Combined Financial Statements, Continued
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(2) Pro Forma Adjustments (continued)
(f) Adjustment to eliminate long-term debt to related parties which
was not assumed by Carlyle.
(g) Adjustment to record the estimated direct costs of the
acquisition.
(h) Adjustment to record the mortgage note payable issued in
connection with the acquisition of the building.
(i) Adjustment to record the present value of the future payments
due to the owner of Star Point.
(j) Common stock, additional paid-in capital and accumulated deficit
have been adjusted to eliminate the historical equity accounts
of Star Point.
(k) Adjustment to record the estimated fair value of the common
stock and preferred stock and options issued in the transaction.
(l) Adjustment to record amortization of goodwill recorded in the
acquisition over a 15-year period.
(m) Adjustment to record depreciation expense relating to the
building acquired over its estimated useful life of 40 years.
(n) Adjustment to record additional depreciation expense relating to
the equipment acquired over its estimated useful life.
(o) Adjustment to record amortization of other assets acquired over
a three-year period.
(p) Adjustment to eliminate interest expense on related party debt
which was not assumed by Carlyle.
(q) Adjustment to record interest expense related to the mortgage
note payable and obligation to the owner of Star Point.
Independent Auditors' Report
----------------------------
Board of Directors
Star Point Enterprises, Inc.:
We have audited the accompanying balance sheets of Star Point Enterprises,
Inc. as of December 31, 1996 and 1995, and the related statements of
operations, stockholder's 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 Star Point
Enterprises, 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.
KPMG Peat Marwick LLP
Denver, Colorado
April 1, 1997
STAR POINT ENTERPRISES, INC.
Balance Sheets
December 31, 1996 and 1995
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ASSETS 1996 1995
- ------ ---------- ----------
Current assets:
Cash $ 31,369 126,560
Trade accounts receivable, less allowance
for doubtful accounts and discounts of
$317,000 in 1996 and $406,000
in 1995 (note 4) 855,326 848,736
Inventories (notes 2 and 4) 1,409,589 1,815,571
Prepaid expenses 70,300 89,022
---------- ----------
Total current assets 2,366,584 2,879,889
Property and equipment, net (notes 3 and 4) 886,266 1,161,132
Noncompete agreements, net of accumulated
amortization of $922,201 in 1995 - 59,933
Other assets 22,880 22,880
---------- ----------
$3,275,730 4,123,834
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
- -------------------------------------
Current liabilities:
Revolving line of credit (note 4) $ 2,075,000 823,956
Current portion of long-term debt (note 5) 329,732 614,818
Current portion of long-term debt to
related parties (note 6) 300,065 59,316
Accounts payable 279,842 250,465
Accrued interest to related parties 165,981 126,220
Accrued commissions 87,841 149,615
Accrued royalties 65,625 123,195
Other accrued expenses 291,369 319,562
---------- ----------
Total current liabilities 3,595,455 2,467,147
Long-term debt (note 5) 88,309 480,742
Long-term debt to related parties (note 6) 1,640,797 1,908,406
Stockholder's deficit:
Common stock, $.01 par value; 1,000,000
shares authorized; 22,000 shares issued
and outstanding 220 220
Additional paid-in capital 2,933,706 2,933,706
Accumulated deficit (4,982,757) (3,666,387)
---------- ----------
Total stockholder's deficit (2,048,831) (732,461)
---------- ----------
Commitments and contingencies (notes 8 and 9) $3,275,730 4,123,834
========== ==========
See accompanying notes to financial statements.
STAR POINT ENTERPRISES, INC.
Statements of Operations
Years Ended December 31, 1996 and 1995
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1996 1995
---------- ----------
Net sales $6,233,978 8,532,266
Cost of sales 4,536,465 6,352,904
---------- ----------
Gross profit 1,697,513 2,179,362
Selling, general and administrative expenses 2,535,604 2,952,892
Amortization of noncompete agreements 59,333 195,600
Depreciation expense 110,817 101,573
---------- ----------
Operating loss (1,008,241) (1,070,703)
Other income (expense):
Interest expense (205,960) (341,310)
Interest expense to related parties (note 6) (134,944) (140,248)
Miscellaneous, net 32,775 39,554
---------- ----------
(308,129) (442,004)
---------- ----------
Net loss $(1,316,370) (1,512,707)
========== ==========
See accompanying notes to financial statements.
STAR POINT ENTERPRISES, INC.
Statements of Stockholder's Deficit
Years Ended December 31, 1996 and 1995
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Common stock Additional Total
------------ paid-in Accumulated stockholder's
Shares Amount capital deficit deficit
------ ------ ---------- ----------- -------------
BALANCE, JANUARY 1,
1995, as previously
reported 1,000 10 549,990 (1,746,127) (1,196,127)
Restatement adjustments
(note 10) - - - (407,553) (407,553)
------ --- ------- ---------- ----------
BALANCE, JANUARY 1,
1995, as restated 1,000 10 549,990 (2,153,680) (1,603,680)
Issuance of common
shares (note 6) 21,000 210 2,237,695 - 2,237,905
Capital contribution
(note 6) - - 146,021 - 146,021
Net loss - - - (1,512,707) (1,512,707)
------ ---- --------- ---------- ----------
BALANCE, DECEMBER 31,
1995 22,000 220 2,933,706 (3,666,387) (732,461)
Net loss - - - (1,316,370) (1,316,370)
------ ---- --------- ---------- ----------
BALANCE, DECEMBER 31,
1996 22,000 $ 220 2,933,706 (4,982,757) (2,048,831)
====== ===== ========= ========== ==========
See accompanying notes to financial statements.
STAR POINT ENTERPRISES, INC.
Statements of Cash Flows
Years Ended December 31, 1996 and 1995
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1996 1995
---------- ----------
Cash flows provided by operating activities:
Net loss $(1,316,370) (1,512,707)
Adjustments to reconcile net income to
net cash provided by (used in) in
operating activities:
Provision for write-down of inventories 185,358 653,473
Depreciation and amortization 350,597 524,140
Changes in operating assets and liabilities:
Trade accounts receivable, net (6,590) 444,499
Inventories 220,624 512,064
Prepaid expenses 18,722 55,023
Accounts payable 29,377 (144,566)
Accrued interest to related parties 39,761 134,708
Accrued commissions (61,774) (53,526)
Accrued royalties (57,570) (16,085)
Other accrued expenses (28,193) (86,950)
---------- ----------
Net cash provided by (used in) operating
activities (626,058) 510,073
---------- ----------
Cash flows from investing activities -
purchases of property and equipment (15,800) (606)
---------- ----------
Cash flows from financing activities:
Proceeds from revolving line of credit 1,251,044 3,400,520
Payments on revolving line of credit - (5,201,564)
Proceeds from long-term debt - 800,000
Payments on long-term debt (643,115) (831,487)
Payments on obligations under capital leases (34,402) (24,242)
Proceeds from long-term debt to related
parties - 1,100,000
Payments on long-term debt to related parties (26,860) (20,594)
Capital contribution - 146,021
Proceeds from issuance of common stock - 210
---------- ----------
Net cash provided by (used in) financing
activities 546,667 (631,136)
---------- ----------
Net decrease in cash (95,191) (121,669)
Cash, beginning of year 126,560 248,229
---------- ----------
Cash, end of year $ 31,369 126,560
========== ==========
Supplemental cash flow information:
Cash paid during the year for interest $ 286,661 477,784
========== ==========
Debt and accrued interest contributed to
equity $ - 2,237,695
========== ==========
See accompanying notes to financial statements.
STAR POINT ENTERPRISES, INC.
Notes to Financial Statements
December 31, 1996 and 1995
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(1) Summary of Significant Accounting Policies
Nature of Business and Formation of Company
Star Point Enterprises, Inc. (the Company) is primarily engaged in
the business of manufacturing customized headwear under the name of
Pro-Line Cap Company. The Company sells licensed headwear of
professional teams, college teams, and other organizations throughout
the United States. Subsequent to December 31, 1996, the Company sold
substantially all of its assets to Carlyle Golf, Inc. See note 11.
Inventories
Inventories are stated at the lower of cost or market. The costs of
inventories are at standard costs which approximate costs determined
on a first-in, first-out (FIFO) basis.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the
lesser of the estimated useful lives or the terms of the lease of the
respective assets on a straight-line basis. Upon sale or retirement,
the related cost and accumulated depreciation are eliminated from the
accounts and gains and losses are recognized in income. Repairs and
maintenance which do not extend the lives or improve the respective
assets are charged to expense as incurred.
Noncompete Agreements
In connection with prior acquisitions, certain amounts were paid to
former stockholders and officers for noncompete agreements. These
agreements are being amortized using the straight-line method over
their five-year lives.
Federal and State Income Taxes
Effective May 1, 1991, the Company's stockholder elected that the
Company be taxed as an "S corporation" as provided by the Internal
Revenue Code. As a result, income tax is not imposed at the corporate
level, and the Company's taxable income is reportable by the
individual stockholder.
Use of 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 reflected on those
statements. Actual results could differ from those estimates.
Reclassification
Certain amounts in the December 31, 1995 financial statements have
been reclassified to conform with the December 31, 1996 presentation.
STAR POINT ENTERPRISES, INC.
Notes to Financial Statements, Continued
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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 to future net cash
flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is
measured by the amount 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 or results of operations.
(2) Inventories
Inventories consisted of the following:
December 31,
-------------------------
1996 1995
---------- ----------
Raw materials $ 397,673 436,209
Work in process 170,080 129,828
Finished goods 841,836 1,249,534
---------- ----------
$1,409,589 1,815,571
========== ==========
The Company recorded inventory writedowns of $185,358 and $653,473 in
1996 and 1995, respectively, to reduce the cost of certain
merchandise to its estimated net realizable value.
(3) Property and Equipment
Property and equipment consisted of the following:
December 31, Useful
1996 1995 lives
---------- ---------- ------------
Furniture and fixtures $ 70,462 64,145 7-10 years
Machinery and equipment 2,073,942 2,064,460 3-10 years
Leasehold improvements 162,004 162,004 lease term
---------- ----------
2,306,408 2,290,609
Accumulated depreciation
and amortization (1,420,142) (1,129,477)
---------- ----------
$ 886,266 1,161,132
========== ==========
STAR POINT ENTERPRISES, INC.
Notes to Financial Statements, Continued
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(4) Revolving Line of Credit
The Company has a revolving line of credit with a financial
institution that provides for borrowings up to $2,250,000 which are
collateralized by cash balances, receivables, inventories and
equipment. The line of credit bears interest at the bank's prime
rate plus .5% (8.75% at December 31, 1996) and is guaranteed by the
Company's stockholder. Advances under the line are payable on demand
and the line of credit expires in March 1998, unless extended.
(5) Long-Term Debt
Long-term debt consisted of the following:
December 31,
-------------------------
1996 1995
---------- ----------
Note payable to a financial institution,
bearing interest at the financial
institution's prime rate plus 1%
(9.25% at December 31, 1996),
quarterly principal payments of
$60,000 or 80% of the proceeds
of specifically identified inventory,
whichever is greater; interest payable
monthly, unpaid principal and interest
due in February 1997; collateralized
by certain inventories, receivables,
equipment and the personal guarantee
of the Company's stockholder. $ 88,338 519,321
Notes payable to a financial institution,
bearing interest at 10.50%; monthly
principal and interest payments of
$18,113; unpaid principal and interest
due in May 1998; collateralized by
equipment. 272,280 450,723
Note payable to financial institution,
bearing interest at 9.69%; monthly
principal and interest payments of
$2,900; unpaid principal and interest
due in May 1998; collateralized by
equipment. 45,887 79,577
Capitalized lease obligations 11,536 45,939
--------- ----------
418,041 1,095,560
Less current portion 329,732 614,818
--------- ----------
Long-term debt $ 88,309 480,742
========= ==========
Maturities of long-term debt include $329,732 in 1997 and $88,309 in
1998.
STAR POINT ENTERPRISES, INC.
Notes to Financial Statements, Continued
- --------------------------------------------------------------------------
(6) Long-Term Debt to Related Parties
Long-term debt to related parties consisted of the following:
December 31,
-------------------------
1996 1995
---------- ----------
Notes payable to related parties,
bearing interest at rates from 3% to
8.5%; monthly principal and interest
payments of $11,473, beginning August
1996 and $19,237 beginning January
1997, unpaid principal and interest
due through January 2002; personally
guaranteed by the Company's
stockholder. $1,270,322 1,276,872
Note payable to stockholder, bearing
interest at prime plus 1.0% (9.25%
at December 31, 1996); monthly
principal payments of approximately $2,000
plus interest; unpaid principal and
interest due in July 2000; uncollateralized
and subordinated to the revolving line
of credit. 670,540 690,850
---------- ----------
1,940,862 1,967,722
Less current portion 300,065 59,316
---------- ----------
Long-term debt to related parties $1,640,797 1,908,406
========== =========
Maturities of long-term debt to related parties include $300,065 in
1997, $282,589 in 1988, $299,470 in 1999, $875,606 in 2000, $176,867
in 2001 and $6,265 thereafter.
During 1995, the sole stockholder purchased 21,000 shares of common
stock in exchange for $210 in cash, $2,100,000 of notes payable to
the stockholder, and accrued interest of $137,695. Also during 1995,
the sole stockholder contributed $146,021 in cash to the Company as a
capital contribution.
Interest expense on long-term debt to related parties totaled
$134,944 in 1996 and $140,248 in 1995.
In January 1997, the sole stockholder forgave $309,792 of outstanding
debt and $34,151 of accrued interest to the Company. In addition,
other related parties forgave $107,469 of accrued interest. Such
transactions have not been reflected in the accompanying financial
statements.
(7) Distributorship Agreements
Approximately 17% and 16% in 1996 and 1995, respectively, of total
sales are a result of distributorship agreements which entitle the
Company to manufacture and sell headwear of professional athletic
organizations. The distributorship agreements expired in December
1996.
STAR POINT ENTERPRISES, INC.
Notes to Financial Statements, Continued
- --------------------------------------------------------------------------
(8) Related Party Transactions
The Company is committed to a ten-year noncancelable operating lease
agreement with a related party for certain land and buildings which
expires April 12, 2001. Total rent expense under the agreement,
including utility costs, was approximately $203,296 in 1996 and
$109,000 in 1995.
Future minimum lease payments on this noncancelable operating lease
are as follows:
Year ending December 31:
1997 $129,996
1998 129,996
1999 129,996
2000 129,996
2001 36,832
--------
Total minimum payments $556,816
========
In addition, the Company leases a warehouse from a related party on a
month-to-month basis. Rental expense amounted to approximately
$36,000 in 1996 and $42,000 in 1995.
(9) Self Insurance
The Company is self-insured for medical claims up to $25,000 per plan
year for each individual covered by its employee medical benefit
plan. Claims in excess of $25,000 are covered by a stop-loss
insurance policy which provides coverage to $975,000 (there is a
$1,000,000 life time benefit per employee in the Company's medical
benefit plan). The Company is also self-insured for workers
compensation claims up to $100,000. The Company has a general
liability insurance policy which limits its exposure to workers
compensation claims. This policy insures claims in excess of $100,000
with an aggregate coverage of $900,000.
Accrued liabilities at December 31, 1996, include amounts management
believes adequate to cover the estimated claims arising prior to
year-end that have not yet been paid, including claims incurred but
not yet reported.
(10) Restatement
The accompanying financial statements for the year ended December 31,
1995 have been restated to expense headwear design costs that were
previously deferred and to increase the provision for obsolete and
excessive inventory. The effect of these adjustments was to increase
the previously reported loss by $617,462 and to increase the
accumulated deficit by $407,553 at January 1, 1995.
(11) Subsequent Event
On January 24, 1997, the Company sold substantially all of its assets
to Carlyle Golf, Inc. (Carlyle). Consideration for the assets sold
included preferred stock and common stock of Carlyle and the
assumption of substantially all of the Company's liabilities, except
for notes payable to related parties. The notes payable to related
parties were exchanged for shares of preferred stock of Carlyle. The
accompanying financial statements reflect the historical activities
of the Company and do not reflect the effects of the acquisition by
Carlyle.