UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
AMENDMENT NO. 1 TO
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file Number: 0-28707
CARBITE GOLF, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
British Columbia, Canada 33-0770893
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
9985 HUENNEKENS STREET
SAN DIEGO, CA 92121
(Address of Principal Executive Offices)
Registrant's Telephone Number (858) 625-0065
Check Whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ____
No X
-----
On September 15, 2000, 25,371,750 shares of the Registrant's Common Stock, no
par value, were outstanding.
Index Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements: 3
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II OTHER INFORMATION
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 11
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARBITE GOLF INC
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(UNAUDITED)
- ------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 665,018
Accounts Receivable 2,538,346
Inventory 2,510,636
Prepaid Expenses 294,959
Future Tax Assets 150,000
- ------------------------------------------------------------------------------
Total Current Assets 6,158,959
Capital Assets 751,258
Patents and Trademarks Net of Amortization 88,859
Goodwill Net of Amortization 2,137,978
Other Non-Current Assets (Deferred Costs) 232,114
- ------------------------------------------------------------------------------
Total Assets $ 9,369,168
==============================================================================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts Payable 603,016
Accrued Liabilities 185,932
Bank Loan 559,783
Income Tax Payable 33,977
- ------------------------------------------------------------------------------
Total Current Liabilities $ 1,382,708
- ------------------------------------------------------------------------------
Shareholders Equity
Share Capital 10,835,612
Deficit (2,849,152)
Total Stockholders Equity 7,986,460
- ------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 9,369,168
==============================================================================
3
CARBITE GOLF INC
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 31, 2000
(UNAUDITED)
Three months ended March 31,
2000 1999
- ------------------------------------------------------------------------------
Net Sales $ 4,245,876 $ 4,115,129
Cost of Goods Sold 2,243,546 2,119,600
- ------------------------------------------------------------------------------
Gross Profit 2,002,330 1,995,529
Operating Expenses
Selling Expenses 1,398,900 954,172
General And Administrative Expenses 506,423 415,679
Research and Development Costs 143,449 115,780
- ------------------------------------------------------------------------------
Income from Operations (46,442) 509,898
Amortization (128,447) (101,628)
Interest income (expense) 4,581 (1,209)
Other Expense 0 (209,843)
- ------------------------------------------------------------------------------
Net Income (170,308) 197,218
==============================================================================
Basic and Diluted Earnings per Share (.01) .01
==============================================================================
4
CARBITE GOLF INC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
MARCH 31, 2000
(UNAUDITED)
-----------
Three months ended March 31,
2000 1999
- --------------------------------------------------------------------------------
Cash Flows used in Operating Activities
Net Loss (170,308) 197,218
Adjustments to Net Loss to Cash Used in Operations:
Additional Paid in Capital
Deferred Costs on Unrecognized Sales 51,395 61,566
Amortization 77,052 72,500
Depreciation 40,424 30,914
Changes in Operating Assets and Liabilities:
Inventories (129,051) 462,752
Accounts Receivable (78,845) (799,039)
Other Current (128,804) (634,195)
Accounts Payable and Accrued Liabilities (160,176) 460,050
- --------------------------------------------------------------------------------
Cash Used in Operating Activities (498,313) (148,234)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchases of Capital Equipment (173,756) (176,741)
Other Investment (28,625) (21,695)
- --------------------------------------------------------------------------------
Cash Used in Investing Activities (202,381) (198,436)
- --------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Net Borrowings (payments) under Line of Credit 327,225 0
Repayments of L/T Debt (3,393) (2,124)
Change in Foreign Currency 358 1,305
Net Proceeds From Sale of Common Stock 380,853 602,551
- --------------------------------------------------------------------------------
Cash Provided by Financing Activities 705,043 601,732
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Cash 4,349 255,062
Cash at Beginning of Period 660,669 1,154,678
- --------------------------------------------------------------------------------
Cash at End of Period $ 665,018 $1,409,740
================================================================================
5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - QUARTERLY FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements and related notes
as of March 31, 2000 and for the three month periods ended March 31, 2000 and
1999 are unaudited but include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of financial position and results of operations of the Company for the
interim periods. The results of operations for the three-month period ended
March 31, 2000 are not necessarily indicative of the operating results to be
expected for the full fiscal year. The information included in this report
should be read in conjunction with the Company's audited consolidated financial
statements and notes thereto and the other information, including risk factors,
set forth for the year ended December 31, 1999 in the Company's Form 10-SB.
Readers of this Quarterly Report on Form 10-QSB are strongly encouraged to
review the Company's Form 10-SB. Copies are available from the Company's
Investor Relations Department at 9985 Huennekens Street, San Diego, CA 92121.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts Receivable at March 31, 2000 were $2,842,572 with a reserve for
doubtful accounts of ($304,226) for net receivables of $2,538,346.
NOTE 3 - INVENTORY
Inventories consist of:
Raw materials $1,869.263
Finished goods 541,373
__________
$2,510,636
NOTE 4 - BANK LOAN
We have a $1,000,000 Revolving Line of Credit with Scripps Bank in San Diego,
California, which is at the lender's general reference rate of interest and is
collateralized by accounts receivable. As of March 31, 2000, we had drawn
$519,150 under that Line of Credit.
NOTE 5 - LETTER OF CREDIT COMMITMENTS
The Company purchases some components from overseas vendors through Letter of
Credit financing. At March 31, 2000, we had $338,641 in such Letters of Credit
outstanding with Scripps Bank, San Diego. These Letters of Credit are generally
due and payable by the Company upon shipment of the products by our vendors.
6
NOTE 6 - EARNINGS PER SHARE
Earnings per share are calculated by dividing the loss available to common
shareholders by the weighted average of shares outstanding during the period.
At March 31, 2000, there were 23,426,486 common shares outstanding. The
computation of diluted loss per share excludes the effect of the exercise of
share options and share purchase warrants outstanding because their effect would
be antidilutive due to losses incurred by the Company during this period. At
March 31, 2000, there were 2,939,740 share options and 1,291,250 share purchase
warrants outstanding.
NOTE 7 - DIFFERENCES BETWEEN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN CANADA
AND THE UNITED STATES
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in Canada (Canadian GAAP) which differ
in certain respects from those principles and practices that the Company would
have followed had its consolidated financial statements been prepared in
accordance with accounting principles and practices generally accepted in the
United States (U.S. GAAP).
Had the Company followed U.S. GAAP, the deferred cost and goodwill section of
the balance sheet contained within the consolidated financial statements would
have been reported as follows:
================================================================================
Three months ended March 31, 2000
Canadian GAAP U.S. GAAP
Deferred costs $ 232,114 $ -0-
Goodwill 2,137,978 2,489,141
================================================================================
Had the Company followed U.S. GAAP, the shareholders' equity section of the
balance sheet contained within the consolidated financial statements would have
been reported as follows:
================================================================================
Three months ended March 31, 2000
Canadian GAAP U.S. GAAP
Shareholders' equity:
Share capital $10,835,612 $ 10,835,612
Additional paid-in capital -0- 668,174
Deficit (2,849,152) (3,414,259)
================================================================================
$ 7,986,460 $ 8,089,527
================================================================================
7
Had the Company followed U.S. GAAP, the statement of operations contained within
the consolidated financial statements would have been reported as follows:
================================================================================
Three months ended March 31, 2000
Income (loss) from operations under Canadian GAAP $ (174,889)
Reversal of amortization of deferred costs 22,280
Deferred costs incurred (28,625)
Goodwill amortized (11,837)
================================================================================
Income (loss) from operations under U.S. GAAP $ (193,071)
================================================================================
Net income (loss) under Canadian GAAP $ (170,308)
Deferred costs incurred (28,625)
Amortization of deferred costs 22,280
Goodwill amortized (11,837)
================================================================================
Net income (loss) under U.S. GAAP, being
Comprehensive income (loss) under U.S. GAAP $ (188,490)
================================================================================
Net income (loss) per share under U.S. GAAP - basic
and diluted $ (.01)
================================================================================
Had the Company followed U.S. GAAP, the statements of cash flows contained
within the consolidated financial statements would have been reported as
follows:
================================================================================
Three months ended March 31, 2000
Cash provided by (used in) operating activities
under Canadian GAAP $(498,313)
Deferred costs incurred (28,625)
================================================================================
Cash used in operating activities under U.S. GAAP $(526,938)
================================================================================
Cash used in investing activities under Canadian Basis $(202,381)
Deferred costs incurred 28,625
================================================================================
Cash used in investing activities under U.S. basis $(173,756)
(a) Reference should be made to note 11(a) - (e) of audited consolidated
Financial Statement for years ending December 31, 1999 and 1998 for a
qualitative explanation of the differences between U.S. GAAP and Canadian GAAP
as applied to the Company.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements which involve substantial risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth in this section and elsewhere in this
Quarterly Report on Form 10-QSB.
RESULTS OF OPERATIONS
Net Sales. Net consolidated sales through the first quarter of 2000 were
$4,245,876, a 3% increase compared to $4,115,129 in the first quarter of 1999.
Putter sales were essentially flat even though we introduced no new models.
Wedge sales were below our projections due to the delayed launch of our Polar
Balanced Wedge product.
Gross Profit. Gross margins decreased approximately 3% due to "close out"
sales of slower moving putters.
Operating Expenses. Operating Expenses for the first quarter of 2000 were
$2,048,772 up 38% compared to $1,485,631 for 1999, due to increases in Sales and
Marketing, General and Administrative, and Research and Development noted below.
Sales and Marketing. Sales and Marketing expense increased 32% over the
same quarter last year, principally due to increases in commission expense and
sales staff. Commissions were up due to (i) the use of outside call rooms for
telemarketing campaigns where commissions are 20-25% on gross sales and (ii) a
portion of 1999 sales were not paid until First Quarter 2000 due to a computer
software error. Salaries in the sales department were up as we added sales
personnel. Marketing expenses were also higher due to production and testing
expenses for an infomercial which had not yet been rolled out.
General and Administrative Expense. General and Administrative expenses
were $506,423, an increase of 21% from $408,036 in the first quarter of 1999.
These increases were primarily due to an increase in wages and salaries. Moving
costs and higher rent also contributed in increased G&A as we completed our move
from an 18,000 square foot facility to a 26,000 square foot facility in February
2000.
Research and Development Expense. Research and Development expenses
increased 24% in the first quarter of 2000 compared to the first quarter of
1999. This increase was in wages and salaries to cover additional work on new
products and improvement of current technologies.
Other Expenses. Other expenses were higher in deferred costs and
depreciation, but the same for amortization of goodwill. There were more
infomercial costs to expense in the first quarter of 2000 compared to1999.
Depreciation was higher by $9,510 in 2000 because of the purchase of new
computer information systems software.
9
Income Taxes. The company has not recorded a provision for income taxes
for the current three-month period, as losses have been incurred to this point
in the current year.
Capital Expenditures. Capital Expenditures in the first quarter of 2000
were $95,338, compared to $198,437 in the first quarter of 1999. $56,970 was
paid for a secondary Polar Balanced Putter tooling and $11,675 for Yipless
Putter robots that demonstrate Carbite Technology in a retail environment. The
remaining balance was used in set-up of our new building for equipment and
production support.
LIQUIDITY AND CAPITAL RESOURCES
We have historically financed our business through cash flow from
operations and the private placement of equity and/or debt securities,
supplemented with short-term borrowings from commercial lenders. In March,
2000, we raised $550,000 through a private equity placement with a director,
resident in Canada. Net cash used by operating activities was $498,313 for the
quarter ended March 31, 2000 compared to $148,234 net cash used for the same
quarter in 1999. As of March 31, 2000, we had drawn $519,150 under our
$1,000,000 Credit Facility at Scripps Bank, San Diego.
PART II
OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On February 4, 2000, we moved to a new headquarters building at 9985
Huennekens Street, San Diego, California. We are leasing the building under a
four-year lease dated October 29, 1999 that calls for base rent of $20,185 per
month. This facility provides 26,000 square feet of office, warehouse,
manufacturing, and research and development space and should provide adequate
facilities for growth in the foreseeable future.
David Williams, the President of Roxborough Holdings in Toronto, Canada,
was appointed to the Company's Board of Directors at a Board meeting on February
17, 2000.
On March 15, 2000, we completed an Amended and Restated Endorsement
Agreement with pro golfer, Fuzzy Zoeller. The basic terms of the agreement are
the same as the original agreement in August, 1999, i.e., a five-year
Endorsement Agreement whereby Zoeller will play, endorse, and assist in the
development of Carbite products worldwide. The Agreement calls for payments to
Zoeller in a combination of cash and stock of $138,000 for the first six months
(August 1999 to February 2000) and five annual payments of cash and stock
thereafter with a dollar value of $300,000 in Year 2, $300,000 in Year 3,
$500,000 in Year 4, $550,000 in Year 5 and $575,000 in Year 6. We have the
right to terminate the arrangement if 2001 sales do not reach $25 million. This
agreement simply clarifies the procedures for the issuance of shares to Zoeller.
10
On March 17, 2000, a private placement of 1,000,000 shares was completed
with David Williams, a Director, for $.55 CDN per share. 500,000 warrants were
attached with an exercise price of $.55 CDN per share with an expiration date of
March 17, 2001. No underwriters were used in this transaction and we have
relied upon the exemptions provided by Section 4(2) and/or Regulation D of the
Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The exhibits filed as part of this report are listed below:
Exhibit No. Description
----------- -----------
* 10.17 Amended and Restated Endorsement
Agreement with Fuzzy Zoeller Productions
dated as of March 15, 2000
27.1 Financial Data Schedule
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
Quarter ended March 31, 2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CARBITE GOLF, INC.
Date: February 28, 2001 By: /s/ John Pierandozzi
------------------------
John Pierandozzi
President and CEO
* Previously filed.
11