U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
|X| Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange Act
of 1934
For the quarterly period ended MARCH 31, 2001
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _______ to _______.
Commission File No. 000-28321
Avid Sportswear & Golf Corp.
(Name of Small Business Issuer in Its Charter)
Nevada 88-0374969
- ------ ----------
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
22 South Links Avenue, Ste. 204, Sarasota, Florida 34236
- -------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(941) 330-8051
(Issuer's Telephone Number, Including Area Code)
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, and (2)
has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
There were 70,086,002 shares of Common Stock outstanding as of March
31, 2001. This number does not include outstanding options to purchase shares of
Common Stock of the issuer.
PART I
FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
2
AVID SPORTSWEAR & GOLF CORP.
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2001 AND DECEMBER 31, 2000
F-1
AVID SPORTSWEAR & GOLF CORP.
Consolidated Balance Sheets
ASSETS
March 31, 2001 December 31, 2000
-------------- -----------------
(Unaudited)
CURRENT ASSETS
Cash $ 42,141 $ 25,452
Accounts receivable, net 2,810,630 75,719
Inventory 1,756,521 1,961,464
Due from factor, net 307,461 816,663
Prepaid expenses 238,356 134,900
Related party receivable 149,919 -
Other current assets 51,217 71,540
-------------- -----------------
Total Current Assets 5,356,245 3,085,738
-------------- -----------------
EQUIPMENT
Machinery and equipment 484,495 484,495
Furniture and fixtures 92,844 90,263
Computers and software 412,146 408,046
Office equipment 49,770 49,770
Show booths 460,927 460,927
Leasehold improvements 31,470 31,470
Less: accumulated depreciation (539,060) (468,861)
-------------- -----------------
Total Equipment 992,592 1,056,110
-------------- -----------------
OTHER ASSETS
Goodwill, net 2,026,188 2,090,171
Debt offering costs 116,243 66,405
Deposits 30,790 15,789
Trademarks 2,902 2,902
-------------- -----------------
Total Other Assets 2,176,123 2,175,267
-------------- -----------------
TOTAL ASSETS $ 8,524,960 $ 6,317,115
-------------- -----------------
F-2
AVID SPORTSWEAR & GOLF CORP.
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, 2001 December 31, 2000
-------------- -----------------
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ - $ 87,534
Accounts payable 7,008,511 5,086,000
Accrued expenses 221,082 479,688
Notes payable - related parties - 166,557
Notes payable 50,000 100,000
Capital leases - current portion 44,279 44,279
Customer deposits - 86,677
----------- -----------
Total Current Liabilities 7,323,872 6,050,735
----------- -----------
SUBORDINATED DEBT
Notes payable - related parties 100,000 547,126
Note payable 561,525 561,525
----------- -----------
Total Subordinated Debt 661,525 1,108,651
----------- -----------
LONG-TERM DEBT
Convertible debentures 941,300 300,000
Capital leases - long term portion 114,894 122,954
----------- -----------
Total Long-Term Debt 1,056,194 422,954
----------- -----------
Total Liabilities 9,041,591 7,582,340
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock; 10,000,000 shares
authorized of $0.001 par value, zero
issued and outstanding - -
Common stock; 150,000,000 shares
authorized of $0.001 par value,
70,086,002 and 46,429,406 shares issued
and outstanding, respectively 70,086 46,429
Additional paid-in capital 15,252,843 13,855,035
Common stock subscription receivable (1,212,900) (942,000)
Accumulated deficit (14,626,662) (14,224,689)
----------- -----------
Total Stockholders' Equity (Deficit) (516,631) (1,265,225)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 8,524,960 $ 6,317,115
=================== ==================
F-3
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
March 31
--------
2001 2000
---- ----
SALES, NET $ 6,621,395 $ 1,029,308
COST OF GOODS SOLD 4,720,863 774,293
-------------- --------------
Gross Margin 1,900,532 255,015
-------------- --------------
OPERATING EXPENSES
Shipping expenses 100,630 87,355
Design expense 73,424 13,132
Selling expenses 917,528 510,997
Depreciation and amortization expense 139,810 95,596
General and administrative expenses 915,452 1,883,627
-------------- --------------
Total Operating Expenses 2,146,844 2,590,707
-------------- --------------
(Loss) from Operations (246,312) (2,335,692)
-------------- --------------
OTHER INCOME (EXPENSE)
Interest income - 188
Interest expense (155,661) (250,971)
Gain on sale of assets - 5,419
-------------- --------------
Total Other Income (Expense) (155,661) (245,364)
INCOME TAX BENEFIT - -
-------------- --------------
NET LOSS $ (401,973) $ (2,581,056)
-------------- --------------
BASIC AND DILUTED LOSS PER SHARE $ (0.01) $ (0.09)
============== ==============
F-4
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Deficit)
Common Stock
--------------------------- Additional
Additional Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
Balance, December 31, 1999 26,374,022 $ 26,374 $ 7,092,848 $ (30,000) $ (5,563,135)
January 17, 2000, common stock issued for
services, valued at $0.30 per share
1,200,000 1,200 358,800 - -
January 25, 2000, common stock issued to a
related party for conversion of debt,
valued at $0.38 per share 1,241,874 1,241 464,461 - -
February 1, 2000, common stock issued to a
related party for conversion of debt,
valued at $0.44 per share 695,583 696 303,274 - -
March 6, 2000, cancellation of common
stock subscription receivable (100,000) (100) (14,900) 15,000 -
May 17, 2000, through July 11, 2000, common
stock issued pursuant to SB-2 valued at
$0.35 per share 14,702,927 14,703 5,131,322 (527,000) -
Stock offering costs - - (268,815) - -
June 30, 2000, common stock issued for
services valued at $0.35 per share 15,000 15 5,235 - -
November 15, 2000, common stock issued for
services valued at $0.16 per share 300,000 300 46,575 - -
December 15, 2000, common stock issued for
subscription at $0.20 per share 2,000,000 2,000 398,000 (400,000) -
Warrants and options issued below market
value per FAS 123 valuations - - 338,235 - -
Net loss for the year ended December 31, - - - - (8,661,554)
2000
---------- --------- ----------- ------------- --------------
Balance, December 31, 2000 46,429,406 $ 46,429 $13,855,035 $ (942,000) $ (14,224,689)
---------- --------- ----------- ------------- --------------
F-5
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Stock
--------------------------- Additional
Additional Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
Balance, December 31, 2000 46,429,406 $ 46,429 $13,856,035 $ (942,000) $ (14,224,689)
January 10, 2001, common stock issued for
conversion of debt, non-related, valued
at $0.065 per share (unaudited) 374,509 374 24,025 - -
January 19, 2001, common stock issued for
conversion of debt, non-related, valued at
$0.05 per share (unaudited) 360,000 360 17,640 - -
January 23, 2001, common stock issued for
conversion of debt, non-related, valued at
$0.05 per share (unaudited) 1,332,000 1,332 65,268 - -
January 25, 2001, common stock issued for
conversion of debt, non-related, valued at
$0.05 per share (unaudited) 190,000 190 9,310 - -
January 30, 2001, common stock issued for
conversion of debt, non-related, valued at
$0.05 per share (unaudited) 280,000 280 13,720 - -
January 30, 2001, common stock issued for
conversion of debt to related party,
valued at $0.085 per share (unaudited) 11,500,000 11,500 966,000 - -
January 31, 2001, cancellation of common
stock (unaudited) (1,200,000) (1,200) (358,800) - -
February 5, 2001, common stock issued for
conversion of debt, non-related, valued
at $0.05 per share (unaudited) 82,000 82 4,018 - -
February 13, 2001, common stock issued for
conversion of debt, non-related, valued at
$0.05 per share (unaudited) 812,000 812 39,788 - -
February 14, 2001, common stock issued for
conversion of debt, non-related, valued at
$0.05 per share (unaudited) 11,078 11 554 - -
---------- -------- ----------- ----------- ------------
Balance Forward 60,170,993 $ 60,170 $14,636,558 $ (942,000) $(14,224,689)
---------- -------- ----------- ----------- ------------
F-6
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Stock
--------------------------- Additional
Additional Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
Balance Forward 60,170,993 $ 60,170 $14,636,558 $ (942,000) $(14,224,689)
February 19, 2001, common stock issued for
conversion of debt, non-related, valued
at $0.08 per share (unaudited) 2,310,547 2,311 182,533 - -
February 19, 2001, common stock issued for
conversion of debt interest,
non-related, valued at $0.09 per share
(unaudited) 425,939 426 37,909 - -
February 27, 2001, common stock issued for
conversion of debt, non-related, valued
at $0.568 per share (unaudited) 245,775 246 13,714 - -
February 28, 2001, common stock issued for
conversion of debt, non-related, value
at $0.05 per share (unaudited) 80,769 81 4,119 - -
February 28, 2001, common stock issued for
conversion of debt, non-related, valued
at $0.05 per share (unaudited) 80,000 80 3,920 - -
March 13, 2001, common stock issued for
conversion of debt, non-related valued
at $0.048 per share (unaudited) 595,679 596 28,397 - -
March 13, 2001, common stock issued for
cash, non-related, valued at $0.05 per
share (unaudited) 4,000,000 4,000 196,000 (200,000) -
March 21, 2001, common stock issued for
conversion of debt, non-related, valued
at $0.0312 per share (unaudited) 176,300 176 5,324 - -
March 30, 2001, common stock issued for
cash, valued at $0.05 per share
(unaudited) 2,000,000 2,000 98,000 (100,000) -
Receipt of stock subscription receivable
(unaudited) - - - 29,100 -
---------- -------- ----------- ---------- ------------
Balance Forward 70,086,002 $ 70,086 $15,206,474 (1,212,900) $(14,224,689)
---------- -------- ----------- ---------- ------------
F-7
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Common Stock
--------------------------- Additional
Additional Paid-in Subscriptions Accumulated
Shares Amount Capital Receivable Deficit
------ ------ ------- ---------- -------
Balance Forward 70,086,002 $ 70,086 $15,206,474 $ (1,212,900) $(14,224,689)
Discount on debentures issued at less than
market value - - 46,371 - -
Net loss for the three months ended March
31, 2001 (unaudited)
- - - - (401,973)
---------- ---------- ----------- ------------ ------------
Balance, March 31, 2001 (unaudited) 70,086,002 $ 70,086 $15,252,845 $ (1,212,900) $(14,626,662)
========== ========== =========== ============ ============
F-8
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
---------
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (401,973) $ (2,581,056)
Adjustments to reconcile net (loss) to net cash
used in operating activities:
Depreciation and amortization 139,061 95,596
Common stock issued for services - 327,613
Conversion of debt below market value 352,041 -
Change in allowance for bad debt (52,633) -
Changes in operating assets and liabilities:
Increase (decrease) in due from factor 602,832 -
(Increase) decrease in accounts receivable (2,775,908) (209,123)
(Increase) decrease in inventory 204,943 397,294
(Increase) decrease in other assets (98,134) 5,000
Increase (decrease) in accounts payable 1,922,193 (324,356)
Increase (decrease) in other current liabilities (540,839) 243,513
------------- -------------
Net Cash Used in Operating Activities (648,417) (2,045,519)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,682) (457,179)
------------- -------------
Net Cash Used in Investing Activities (6,682) (457,179)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt offering costs (54,418) -
Payments on notes payable (50,000) (35,416)
Proceeds from related party notes payable 86,486 1,182,024
Payments on related party notes payable (205,320) -
Proceeds from convertible debentures 874,000 -
Proceeds from subscribed stock 29,100 1,773,675
Payments on capital leases (8,060) -
------------- -------------
Net Cash Provided by Financing Activities 671,788 2,920,283
NET INCREASE (DECREASE) IN CASH 16,689 417,585
------------- -------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25,452 237,407
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42,141 $ 654,992
============= =============
F-9
AVID SPORTSWEAR & GOLF CORP.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended
March 31,
---------
2001 2000
---- ----
CASH PAID FOR:
Interest $ - $ 36,592
Income tax $ - $ -
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for subsidiary $ $ 825,000
Issuance of common stock for debt $ 949,426 $ -
Issuance of common stock for subscription $ 300,000 $ -
Conversion of debt below market value $ 352,041 $ -
F-10
AVID SPORTSWEAR & GOLF CORP.
Notes to the Consolidated Financial Statements
March 31, 2001 and December 31, 2000
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have
been prepared by the Company without audit. In the opinion
of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the
consolidated financial position, results of operations and
cash flows at March 31, 2001 and 2000 and for all periods
presented have been made.
Certain information and footnote disclosures normally
included in consolidated financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's December 31, 2000 audited
consolidated financial statements. The results of
operations for the period ended March 31, 2001 and 2000 are
not necessarily indicative of the operating results for the
full years.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are
prepared using generally accepted accounting principles
applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the
normal course of business. However, the Company has
generated significant losses from operations for the three
months ended March 31, 2001 and 2000 and has current
liabilities in excess of current assets at March 31, 2001.
For the three months ended March 31, 2001, the Company
anticipates a significant increase in sales volume from the
2000 level, requiring cash in excess of the cash generated
from operations. Management has secured necessary cash to
date from additional cash investments by existing
shareholders and from the proceeds of a private placement
of additional shares of Company stock; additional required
cash is anticipated from borrowing from a senior lender.
However, there can be no assurance that the Company will be
able to raise the additional required cash.
F-11
ITEM 2. MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS. THIS FILING CONTAINS
FORWARD-LOOKING STATEMENTS, INCLUDING STATEMENTS REGARDING, AMONG OTHER THINGS,
(A) OUR COMPANY'S PROJECTED SALES AND PROFITABILITY, (B) OUR COMPANY'S GROWTH
STRATEGIES, (C) ANTICIPATED TRENDS IN OUR COMPANY'S INDUSTRY, (D) OUR COMPANY'S
FUTURE FINANCING PLANS AND (E) OUR COMPANY'S ANTICIPATED NEEDS FOR WORKING
CAPITAL. IN ADDITION, WHEN USED IN THIS FILING, THE WORDS "BELIEVES,"
"ANTICIPATES," "INTENDS," "IN ANTICIPATION OF," "EXPECTS," AND SIMILAR WORDS ARE
INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED LARGELY ON OUR COMPANY'S EXPECTATIONS AND ARE SUBJECT TO A
NUMBER OF RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND OUR COMPANY'S
CONTROL. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CHANGES IN TRENDS IN THE ECONOMY AND OUR COMPANY'S
INDUSTRY, DEMAND FOR OUR COMPANY'S PRODUCTS, UNEXPECTED CHANGES IN FASHION
TRENDS, PRIOR SEASON INVENTORIES, COMPETITION, REDUCTIONS IN THE AVAILABILITY OF
FINANCING AND AVAILABILITY OF RAW MATERIALS, THE SEASONAL NATURE OF OUR
COMPANY'S BUSINESS, THE EXTREMELY COMPETITIVE NATURE OF THE GOLF APPAREL AND
SPORTSWEAR INDUSTRIES AND OTHER FACTORS. IN LIGHT OF THESE RISKS AND
UNCERTAINTIES, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS FILING WILL IN FACT OCCUR.
OVERVIEW
Through our wholly-owned subsidiary, we design, manufacture and
market distinctive premium and moderately-priced sportswear. We sell our
products primarily through golf pro shops and resorts, corporate sales accounts
and better specialty stores. Until May 2001, our sportswear was marketed under
three distinct labels: Avid Sportswear, British Open Collection and Dockers
Golf. In May 2001, the Dockers Golf label was terminated by the licensor. From
our incorporation on September 19, 1997 until March 1, 1999, we had no
operations. On March 1, 1999, we acquired Avid Sportswear, Inc., which has been
in the business of designing, manufacturing and marketing golf apparel since
October 6, 1988. For accounting purposes, the acquisition was treated as a
purchase of Avid Sportswear, Inc. All of our business operations are conducted
through Avid Sportswear, Inc.
RECENT EVENTS
On May 9, 2001, we received a letter from Levi Strauss & Co. that,
effective May 9, 2001, it was terminating the Dockers Trademark License
Agreement between our company's wholly-owned subsidiary, Avid Sportswear, Inc.
and Levi Strauss & Co. as a result of Avid Sportswear, Inc.'s second quality and
closeout or end of season sales being greater than 25% of the company's total
product sales during the Year 2000. Due to the loss of this license, our
operating results for the quarter ended March 31, 2001 may not be indicative of
future results. The loss of this license may have a material adverse effect on
our results of operations in future periods. The loss of this license my result
in lower sales and a higher net loss in future periods.
On May 17, 2001, Barnum Mow, the President of Avid Sportswear, Inc.
resigned. In addition, on May 14, 2001, the Chief Financial Officer of Avid
Sportswear, Inc. was terminated by the Company.
Plan of Operations
ADDITIONAL FUND RAISING ACTIVITIES. As of March 31, 2001, we had
$42,141 cash-on-hand. We have historically funded our operations through a
combination of internally generated cash, funds loaned to our company by certain
of our officers and directors and through the sale of securities. We may need to
raise additional funds to meet expected demand for our products for the
remainder of 2001 and beyond. Our current liabilities exceeded our current
assets as of March 31, 2001. If we underestimate demand or incur unforeseen
expenses in our product design or other areas, such funds may be required
earlier.
We registered on behalf of certain shareholders 14,988,640 shares of
common stock issued pursuant to our company's private offerings, which
registration statement became effective on July 28, 2000. In addition, we
registered on behalf of certain shareholders 55,500,000 shares of common stock
issued, or to be issued, pursuant to our company's line of credit, which
registration statement became effective on January 8, 2001. The sale of these
shares is permitted in most states pursuant to registration or exemptions from
registration. These shares of common stock may be offered and sold from time to
time by selling shareholders of our company, and none of the proceeds generated
from such sales will be available to our company. See "Certain Business Risk
Factors - The selling shareholders intend to sell their shares of common stock
in the market, which sales may cause our stock price to decline."
SUMMARY OF ANTICIPATED PRODUCT DEVELOPMENT. We spent approximately
$280,000 and $417,000 on product development in 1999 and 2000, respectively, and
expect to spend approximately $300,000 on product development in 2001 in
preparation for future seasons and in designing products for the Dockers Golf
and British Open Collection labels. The Company is reevaluating its product
develoment efforts in light of the termination of the Dockers Golf Label. We are
also in default of our license agreement the British Collection Open label.
3
SIGNIFICANT PLANT AND EQUIPMENT PURCHASES. In 2000, we purchased
computer hardware and software, telephone and embroidery equipment at a cost of
approximately $734,000. In 2001, we do not anticipate purchasing additional
equipment.
CHANGES IN NUMBER OF EMPLOYEES. We currently have 62 employees. As
shown in the following chart, we anticipate hiring additional personnel during
2001 in connection with our expected growth plans. We believe that these
personnel will be adequate to accomplish the tasks set forth in the plan. The
Company is reevaluating hiring needs in light of the termination of the Dockers
Golf label.
PROJECTED
CURRENT EMPLOYEES
DEPARTMENT EMPLOYEES 2001
---------- --------- ----
Marketing and Sales 7 9
Embroidery and Sewing 25 30
Warehousing and Delivery 9 11
Design and Production Control 3 4
Administrative and Other
Support Positions 18 20
-------- --------
Total Employees 62 74
-------- --------
Independent Contractors - Sales 33 36
-------- --------
Management's Discussion and Analysis
RESULTS OF OPERATIONS
The following table sets forth, for the periods presented, the
percentage of net sales represented by certain items in our company's
Consolidated Statement of Operations for the three months ended March 31, 2001
and 2000:
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 2001 MARCH 31, 2000
Sales, net 100.0% 100.0%
Cost of goods sold (71.3%) (75.2%)
Gross margin 28.7% 24.8%
Operating expenses (32.4%) (251.8%)
(Loss) from operations (3.7%) (226.9%)
Interest expense (2.4%) (24.4%)
Net loss (6.1%) (250.8%)
4
THREE-MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
Our results of operations for the three-month periods ended March
31, 2001 and 2000, respectively, included three months of operations of our
wholly-owned subsidiary, Avid Sportswear, Inc.
SALES, NET. Sales, net increased $5.6 million, or 543.3%, from $1.0
million to $6.6 million in the three months ended March 31, 2001 compared to the
same period in the prior year. This increase was primarily attributable to
increased sales efforts in connection with the Dockers Golf product line.
COST OF GOODS SOLD. Cost of goods sold increased $3.9 million, or
509.7%, from $0.8 million to $4.7 million in the three months ended March 31,
2001 compared to the same period in the prior year. Cost of goods sold as a
percentage of sales, net, decreased from 75.2% in the three months ended March
31, 2000 to 71.3% in the three months ended March 31, 2001. This decrease was
primarily attributable to the reduced need to give concessions to customers
caused by late shipping and the decreased liquidation of inventory from prior
seasons.
GROSS PROFIT. Gross profit increased $1.6 million in the three
months ended March 31, 2001 compared to the same period in the prior year. Gross
profit as a percentage of sales, net increased from 24.8% to 28.7% in the three
months ended March 31, 2000 and 2001, respectively. This increase was primarily
attributable to the increase in sales, net and the decrease of cost of goods
sold in the current period compared to the same period in the prior year.
SELLING EXPENSES. Selling expenses increased $0.4 million, or 79.6%,
from $0.5 million to $0.9 million in the three months ended March 31, 2001
compared to the same period in the prior year. This increase was primarily
attributable to increased sales efforts in connection with the Dockers Golf
product line.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses decreased $1.0 million, or 51.4%, from $1.9 million to $0.9 million in
the three months ended March 31, 2001 compared to the same period in the prior
year. This decrease was primarily attributable to the infrastructure development
costs of our wholly-owned subsidiary, Avid Sportswear, Inc. incurred in the
three months ended March 31, 2000. The infrastructure development supported the
sales growth in 2000 and is expected to support additional growth in future
periods.
INTEREST EXPENSE. Interest expense decreased $95,310 or 38.0%, in
the three-month period ended March 31, 2001, compared to the same period in the
prior year. This decrease consisted primarily of the reduction of senior lender
debt and related party debt.
NET LOSS. Net loss decreased $2.2 million, or 84.4%, from $2.6
million to $0.4 million in the three months ended March 31, 2001 compared to the
same period in the prior year. This decrease was primarily attributable to the
increase in sales, net in the three-month period ended March 31, 2001.
LIQUIDITY AND CAPITAL RESOURCES. As of March 31, 2001, we had
$42,141 cash-on-hand and our current liabilities exceeded our current assets. A
discussion of how we generated and used cash in the three-month period follows:
OPERATING ACTIVITIES. Our operating activities used $0.6 million in
cash during the three-month period ended March 31, 2001, consisting mainly of a
net loss of $0.4 million and an increase in accounts receivable of $2.7 million.
These items were partially offset by depreciation and amortization expenses of
$0.1 million, an increase in accounts payable of $1.9 million, a decrease in
inventory of $0.2 million, and an increase in due from factor of $0.6 million
and a decrease in other current liabilities of $0.5 million.
INVESTING ACTIVITIES. Our investing activities used $6,682 in cash
during the three-month period ended March 31, 2001, consisting mainly of the
cost of purchased equipment.
5
FINANCING ACTIVITIES. Financing activities provided net cash of $0.7
million, generated mainly by the issuance of convertible debentures for cash of
$0.9 million and proceeds from subscribed stock of $29,000, partially offset by
payments of notes payable of $0.3 million.
Due to our significant quarterly losses, we will need to rely on
external financing to fund our operations for the foreseeable future. Expenses
decreased in the three months ended March 31, 2001 due to, among other things,
the reduction in general and administrative expenses. If we underestimate demand
or incur unforeseen expenses in our product design or other areas, such funds
may be required earlier.
In August 2000, we entered into a factoring, letter of credit and
revolving inventory facility. Under the terms of these arrangements, we assign
substantially all invoices for collection, typically on a non-recourse basis. We
may borrow up to 75% of eligible accounts receivable with a factoring commission
rate on the net sales factored and interest on the amounts advanced at the
factor's index rate plus 4.29%. The index rate was 6.2% at December 31, 2000,
corresponding to an interest rate of 10.49%. In addition, currently, we may
borrow up to 10% of eligible inventory, subject to a borrowing limit of
$2,500,000. In addition, a letter of credit facility was established that is not
to exceed $3,500,000, subject to a reserve of 60% of available borrowing under
the revolving facility. The term of the facility is one year and will
automatically renew unless either party gives sixty days' notice of its intent
not to renew.
As of August 18 2000, the outstanding balance of the company's loan
with First State Bank, including all collateral security and guarantees
associated therewith, were assigned to Earl T. Ingarfield, Michael LaValliere
and Lido Capital Corporation in consideration of payment in full of all
outstanding indebtedness to First State Bank.
In November 2000, our company raised $300,000 in gross proceeds and
$255,000 in net proceeds from the sale of convertible debentures. See "Item 2.
Changes in Securities and Use of Proceeds."
On November 28, 2000, we entered into a Line of Credit with GMF
Holdings, Inc. Pursuant to the Line of Credit, GMF Holdings, Inc. agreed to
acquire up to $10 million of our debentures. The debentures are convertible into
shares of our common stock at a conversion price equal to 80% of the closing bid
price on the Over-the-Counter Bulletin Board or other principal market on which
our company's common stock is traded for the 10 days immediately following the
notice date of conversion. The timing of each sale and the number of debentures
to be sold is at our discretion, subject to various conditions, including an
effective registration of the conversion shares. The dollar amount that our
company can request under any individual sale is subject to the average trading
volume of our common stock for the preceding 40-day trading period. The maximum
term of the Line of Credit is 30 months from the date of the agreement. The
agreement contains various representations, warranties and covenants by us,
including limitations on our ability to sell common stock or common stock
equivalents, sell assets, merge, or enter into certain other transactions.
Through May 15, 2001, our company has raised $874,000 from the sale of
debentures pursuant to the Line of Credit.
In December 2000, our company raised $400,000 form the sale of
2,000,000 shares of Common Stock.
On January 19, 2001, we received a letter form IMG that our company
is in default of the license with The Championship Committee Merchandising
Limited for failure to pay timely our royalty payments for the second, third and
fourth quarters of 2000 of approximately $94,000.
On May 9, 2001, we received a letter from Levi Strauss & Co. that,
effective May 9, 2001, it was terminating the Dockers Trademark License
Agreement between our company's wholly-owned subsidiary, Avid Sportswear, Inc.
and Levi Strauss & Co. as a result of Avid Sportswear, Inc.'s second quality and
closeout or end of season sales being greater than 25% of the company's total
product sales during the Year 2000. The loss of this license may have a material
adverse effect on our results of operations in future periods. The loss of this
license my result in lower sales and a higher net loss in future periods.
6
CERTAIN BUSINESS RISK FACTORS
We are subject to various risks, which may have a material adverse
effect on our company's business, financial condition and results of operations.
Certain risks are discussed below:
OUR DOCKERS TRADEMARK LICENSE HAS BEEN TERMINATED BY LEVI STRAUSS
& CO.
THE PRESIDENT OF OUR WHOLLY-OWNED SUBSIDIARY, AVID SPORTSWEAR, INC.,
RESIGNED ON MAY 17, 2001.
On May 17, 2001, Barnum Mow resigned as President of our wholly-
owned subsidiary, Avid Sportswear, Inc. On April 24, 2001, Mr. Mow resigned as a
director of our company and as a director of Avid Sportswear, Inc. The
operations of our company largely depended on the efforts and abilities of Mr.
Mow. Our failure to attract and retain a replacement for Mr. Mow could have a
material adverse effect on our results of operations in future periods. Our
company is evaluating circumstances surrounding Mr. Mow's separation from our
company and Avid Sportswear, Inc.
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL
Our success largely depends on the efforts and abilities of key
executives and consultants, including Earl T. Ingarfield, our Chairman and Chief
Executive Officer and Jerry L. Busiere, our Secretary, Treasurer and a Director.
The loss of the services of either of these people could materially harm our
business because of the cost and time necessary to replace and train such
personnel. Such a loss would also divert management attention away from
operational issues. We do not have an employment agreement with Mr. Busiere. We
have entered into a three year employment agreement with Mr. Ingarfield. We do
not maintain key-man life insurance policies on any of these people. On May 17,
2001, Barnum Mow, the President of Avid Sportswear, Inc., resigned.
WE HAVE HISTORICALLY LOST MONEY AND LOSSES MAY CONTINUE IN THE
FUTURE
We have historically lost money. In the three months ended March 31,
2001, we sustained a loss of $0.4 million. In the years ended December 31, 2000
and December 31, 1999, we sustained losses of $8.7 million and $5.0 million,
respectively. Future losses are likely to occur, which losses may increase
materially due to the termination of the Dockers Golf label. For the years ended
December 31, 2000 and 1999, our independent auditors have noted that our company
does not have significant cash or other material assets to cover its operating
costs and to allow it to continue as a going concern. As of March 31, 2001, our
current liabilities exceeded our current assets. Our ability to obtain
additional funding will determine our ability to continue as a going concern.
Accordingly, we may experience significant liquidity and cash flow problems if
we are not able to raise additional capital as needed and on acceptable terms.
No assurances can be given that we will be successful in reaching or maintaining
profitable operations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS
We have relied on significant external financing to fund our
operations. Such financing has historically come from a combination of
borrowings and sale of common stock from third parties and funds provided by
certain officers and directors. We may need to raise additional capital to fund
our anticipated operating expenses. We cannot assure you that financing whether
from external sources or related parties will be available if needed or on
favorable terms. The sale of our common stock to raise capital may cause
dilution to our existing shareholders. Our inability to obtain adequate
financing will result in the need to curtail business operations. Any of these
events would be materially harmful to our business and may result in a lower
stock price.
WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION FROM OUR
INDEPENDENT AUDITOR
Our independent auditors have added an explanatory paragraph to
their audit opinions issued in connection with the 2000 and 1999 financial
statements, as well as our financial statements as of March 31, 2001, which
states that our company does not have significant cash or other material assets
to cover its operating costs and to allow it to continue as a going concern. Our
ability to obtain additional funding will determine our ability to continue as a
going concern. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
WE HAVE BEEN AND CONTINUE TO BE SUBJECT TO A WORKING CAPITAL DEFICIT
AND ACCUMULATED DEFICIT
We had a working capital deficit of $3.0 million and $1.3 million at
December 31, 2000 and 1999, respectively. At March 31, 2001, we had a working
capital deficit of $2.0 million. We had an accumulated deficit of $5.6 million
and $760,099 at December 31, 2000 and 1999, respectively. At March 31, 2001, we
had an accumulated deficit of $14.6 million.
WE FACE SUBSTANTIAL COMPETITION IN OUR BUSINESS
The sportswear and outerwear segments of the apparel industry are
highly competitive. Competition is based primarily on brand recognition, product
differentiation and quality, style and production flexibility. Our future growth
and financial success depend on our ability to further penetrate and expand our
distribution channels, including golf, corporate, international and retail
sales. We encounter substantial competition in the golf distribution channel
from Polo/Ralph Lauren, Cutter & Buck, Ashworth, Antiqua and Izod. Many of our
competitors are significantly larger and more diversified than we are and have
substantially greater resources available for developing and marketing their
7
products. Many of our competitors' brands also have greater name recognition
than our brands. In addition, our competitors may be able to enter the emerging
e-commerce marketplace more quickly or more efficiently than us. We cannot
assure you that we will successfully compete in this industry.
WE HAVE BEEN IN BUSINESS FOR A SHORT PERIOD OF TIME
Because we have been in business for a short period of time, there
is limited information upon which investors can evaluate our business. We were
formed on September 19, 1997 but did not begin significant operations until the
purchase of our wholly-owned subsidiary on March 1, 1999. You should consider
the likelihood of our future success to be highly speculative in view of our
limited operating history, as well as the complications frequently encountered
by other companies in the early stages of development, particularly companies in
the highly competitive sports apparel industry.
WE MAY BE UNABLE TO MANAGE GROWTH
Successful implementation of our business strategy requires us to
manage our growth. Growth could place an increasing strain on our management and
financial resources. To manage growth effectively, we will need to:
o Implement changes in certain aspects of our business;
o Enhance our information systems and operations to respond to
increased demand;
o Attract and retain qualified personnel; and o Develop, train and
manage an increasing number of management-level and other
employees.
If we fail to manage our growth effectively, our business, financial
condition or operating results could be materially harmed, and our stock price
may decline.
WE RELY ON FOREIGN SUPPLIERS AND BUY MANY PRODUCTS USING LETTERS OF
CREDIT
We obtain all of our garments from independent foreign and domestic
suppliers. We do not have formal agreements with these suppliers. Our reliance
on foreign suppliers may be effected by economic, political, governmental and
labor conditions in such foreign countries. This may delay or cut-off our
ability to source materials needed in production or may increase the price of
such materials. Such events would harm our business. In addition, several of our
suppliers have required us to obtain a letter of credit prior to purchasing any
garments. We may have to utilize a significant portion of our available working
capital to secure these letters of credit.
IMPORT RESTRICTIONS MAY HARM US
Our imported materials are subject to certain quota restrictions and
U.S. customs duties, which are a material part of our cost of goods. A decrease
in quota restrictions or an increase in customs duties could harm our business
by making needed materials scarce or by increasing the cost of such materials.
OUR COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY
Our common stock has experienced, and is likely to experience in the
future, significant price and volume fluctuations, which could adversely affect
the market price of our common stock without regard to our operating
performance. In addition, we believe that factors such as quarterly fluctuations
in our financial results, announcements by other designers and marketers of
sportswear, and changes in the overall economy or the condition of the financial
markets could cause the price of our common stock to fluctuate substantially.
OUR COMMON STOCK MAY BE DEEMED TO BE "PENNY STOCK"
Our common stock may be deemed to be "penny stock" as that term is
defined in Rule 3a51-1 promulgated under the Securities Exchange Act of 1934.
Penny stocks are stock:
o With a price of less than $5.00 per share;
8
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the Nasdaq automated quotation
system (Nasdaq listed stock must still have a price of not less
than $5.00 per share); or
o In issuers with net tangible assets less than $2.0 million (if
the issuer has been in continuous operation for at least three
years) or $5.0 million (if in continuous operation for less than
three years), or with average revenues of less than $6.0 million
for the last three years.
Broker/dealers dealing in penny stocks are required to provide
potential investors with a document disclosing the risks of penny stocks.
Moreover, broker/dealers are required to determine whether an investment in a
penny stock is a suitable investment for a prospective investor. These
requirements may reduce the potential market for our common stock by reducing
the number of potential investors. This may make it more difficult for investors
in our common stock to resell shares to third parties or to otherwise dispose of
them. This could cause our stock price to decline.
OUR STOCK PRICE COULD DECLINE DUE TO SEASONAL FLUCTUATIONS IN THE
DEMAND FOR OUR PRODUCTS AND GENERAL ECONOMIC CONDITIONS
Our business has been, and will continue to be, highly seasonal, and
our quarterly operating results will fluctuate due to the seasonality of our
sales of sportswear, among other things. Our sales tend to be highest during our
first and second calendar quarters (i.e., January through June), and lowest
during our third and fourth calendar quarters (i.e., July through December).
Other factors contributing to the variability of our operating results include:
o Seasonal fluctuation in consumer demand;
o The timing and amount of orders from key customers; and
o The timing and magnitude of sales of seasonal remainder
merchandise and availability of products.
In addition, any downturn, whether real or perceived, in general
economic conditions or prospects could change consumer spending habits and
decrease demand for our products.
As a result of these and other factors, our operating results may
fall below market analysts' expectations in some future quarters, and our stock
price may decline.
OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY
FLUCTUATE SIGNIFICANTLY
Historically, there has been a limited public market for our common
stock and there can be no assurance that an active trading market for our common
stock will develop. As a result, this could adversely affect our shareholders'
ability to sell our common stock in short time periods, or possibly at all. Our
common stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations which could adversely affect the
market price of our common stock without regard to our operating performance. In
addition, we believe that factors such as quarterly fluctuations in our
financial results, announcements by other designers and marketers of sportswear,
and changes in the overall economy or the condition of the financial markets
could cause the price of our common stock to fluctuate substantially.
OUR OFFICERS AND DIRECTORS EXERCISE CONTROL OF THE COMPANY
Our executive officers and directors beneficially own approximately
44.5% of our outstanding common stock. As a result, these shareholders acting
together would be able to exert significant influence over most matters
requiring shareholder approval, including the election of directors. They would
also be able to delay or deter a change in control, which may result in
shareholders not receiving a premium on their stock.
9
WE FACE RISKS RELATED TO COLLECTION OF RECEIVABLES
We extend credit to our customers based on an assessment of their
financial circumstances, generally without requiring collateral. Our business is
seasonal and we may, in the future, offer customer discounts for placing
pre-season orders and extended payment terms for taking delivery before the peak
shipping season. Any such extended payment terms increase our exposure to the
risk of uncollectible receivables. Some of our customers have experienced
financial difficulties in the past, and future financial difficulties of
customers could materially harm our business. Effective August 2000, we assign
our accounts receivable to a factor which assumes credit risk, generally on a
nonrecourse basis. As of May 15, 2001, $1,083,666 of factored accounts
receivable are at our company's credit risk.
WE COULD FAIL TO ANTICIPATE CHANGES IN FASHION TRENDS
Fashion trends can change rapidly, and our business is particularly
sensitive to such changes because we typically design and arrange for the
manufacture of our apparel substantially in advance of sales of our products to
consumers. We cannot assure you that we will accurately anticipate shifts in
fashion trends, or in the popularity of golf, and adjust our merchandise mix to
appeal to changing consumer tastes in apparel in a timely manner. If we misjudge
the market for our products or are unsuccessful in responding to changes in
fashion trends or in market demand, we could experience insufficient or excess
inventory levels, missed market opportunities or higher markdowns, any of which
could substantially harm our business and our brand image.
OUR PLANNED PURSUIT OF ACQUISITIONS INVOLVES RISKS THAT MAY
ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION
As part of our growth strategy, we plan to pursue acquisitions.
Candidates for acquisition include businesses that are anticipated to allow us
to:
o Achieve economies of scale in terms of purchasing, distribution
and profitability;
o Enhance our name recognition and reputation;
o Obtain rights to well-recognized brand names;
o Fill a perceived market niche; or
o Acquire products offering new price points.
If we are not correct when we assess the value, strengths,
weaknesses, liabilities and potential profitability of acquisition candidates or
we are not successful in integrating the operations of the acquired businesses,
our results of operations or financial position could be adversely effected and
we could lose money. We also may not be successful in finding desirable
acquisition candidates or completing acquisitions with candidates that we
identify. Future acquisitions that we finance through issuing equity securities
could be dilutive to existing shareholders. In addition, future acquisitions may
10
require additional capital and the consent of our lenders. There can be no
assurances that our lenders will consent to any capital raising or acquisitions.
FUTURE SALES BY OUR SHAREHOLDERS MAY ADVERSELY AFFECT OUR STOCK
PRICE AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS
Sales of our common stock in the public market following our most
recent private offering could lower the market price of our common stock. Sales
may also make it more difficult for us to sell equity securities or
equity-related securities in the future at a time and price that our management
deems acceptable or at all. Of the 70,086,002 shares of our common stock
outstanding as of March 31, 2001 (assuming no exercise of options or warrants),
26,667,097 shares are freely tradable without restriction, unless purchased by
our "affiliates." The remaining 43,418,905 shares of common stock held by
existing shareholders are "restricted securities" and may be resold in the
public market only if registered or pursuant to an exemption from registration.
Upon completion of our most recent private offering, and assuming
all shares registered in that offering are resold in the public market, there
will be an additional 55,500,000 shares of our common stock outstanding
(including warrants issued in connection with our Line of Credit). All of these
shares of common stock may be immediately resold in the public market upon
effectiveness of the accompanying registration statement and the sale to the
investor under the terms of the Line of Credit Agreement. These consist of
50,000,000 shares of common stock to be issued under the Line of Credit,
1,680,000 shares of common stock to be issued upon exercise of warrants issued
in connection with the Line of Credit, 300,000 shares of common stock previously
issued in connection with consulting services provided, or to be provided, to
our company, 2,000,000 shares of common stock previously issued by our company,
320,000 shares of common stock to be issued upon exercise of warrants issued in
connection with consulting services provided, or to be provided, to our company,
and 1,200,000 shares of common stock to be issued upon conversion of debentures
previously issued by our company.
In addition, we have issued options to purchase a total of 1,939,477
shares of our common stock at exercise prices ranging from $0.30 to $0.375 per
share under our 2000 Stock Incentive Plan.
EXISTING SHAREHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION FROM OUR
SALE OF SHARES UNDER THE LINE OF CREDIT OR THE EXERCISE OF WARRANTS
The sale of shares pursuant to our Line of Credit will have a
dilutive impact on our shareholders. As a result, our net income per share could
decrease in future periods, and the market price of our common stock could
decline. In connection with the Line of Credit, we issued warrants to purchase
1,680,000 shares of common stock at an exercise price of $0.35 per share. The
issuance of such shares pursuant to the conversion of debentures purchased under
the Line of Credit and the shares issuable upon exercise of the warrants would
have a further dilutive effect on our common stock and could lower the price of
our common stock. In addition, the lower our stock price is the more shares of
common stock we will have to issue under the Line of Credit. If our stock price
is lower, then our existing shareholders would experience greater dilution.
THE INVESTOR UNDER THE LINE OF CREDIT WILL PAY LESS THAN THE
THEN-PREVAILING MARKET PRICE OF OUR COMMON STOCK
The common stock to be issued upon conversion of the debenture
purchased under the Line of Credit will be issued at a 20% discount to the
lowest closing bid price for the 10 days immediately following the notice date
of conversion. These discounted sales could cause the price of our common stock
to decline.
THE SELLING SHAREHOLDERS INTEND TO SELL THEIR SHARES OF COMMON STOCK
IN THE MARKET, WHICH SALES MAY CAUSE OUR STOCK PRICE TO DECLINE
The selling shareholders in our most recent private offering intend
to sell in the public market the shares of common stock purchased in that
offering. Our company filed a registration statement registering such shares
11
subsequent to the closing date of such private offering. That means that up to
55,500,000 shares of common stock, the number of shares registered in that
offering, may be sold. Such sales may cause our stock price to decline.
OUR COMMON STOCK HAS BEEN RELATIVELY THINLY TRADED AND WE CANNOT
PREDICT THE EXTENT TO WHICH A TRADING MARKET WILL DEVELOP
Our common stock is traded on the Over-the-Counter Bulletin Board.
Our common stock is thinly traded compared to larger more widely known companies
in our industry. Thinly traded common stock can be more volatile than common
stock trading in an active public market. We cannot predict the extent to which
an active public market for the common stock will develop or be sustained after
this offering.
12
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not aware of any legal proceedings involving our company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a), (b) and (d) None.
(c) SALES OF UNREGISTERED SECURITIES.
On November 28, 2000, we entered into a Line of Credit with GMF
Holdings, Inc. Pursuant to the Line of Credit, GMF Holdings, Inc. agreed to
acquire up to $10 million of our debentures. The debentures are convertible into
shares of our common stock at a conversion price equal to 80% of the closing bid
price on the Over-the-Counter Bulletin Board or other principal market on which
our company's common stock is traded for the 10 days immediately following the
notice date of conversion. The timing of each sale and the number of debentures
to be sold is at our discretion, subject to various conditions, including an
effective registration of the conversion shares. The dollar amount that our
company can request under any individual sale is subject to the average trading
volume of our common stock for the preceding 40-day trading period. The maximum
term of the Line of Credit is 30 months from the date of the agreement. The
agreement contains various representations, warranties and covenants by us,
including limitations on our ability to sell common stock or common stock
equivalents, sell assets, merge, or enter into certain other transactions.
Through May 15, 2001, our company has raised $874,000 from the sale of
debentures pursuant to the Line of Credit.
With respect to the sale of unregistered securities referenced
above, all transactions were exempt from registration pursuant to Section 4(2)
of the Securities Act of 1933 (the "1933 ACT"), and Regulation D promulgated
under the 1933 Act. In each instance, the purchaser had access to sufficient
information regarding our company so as to make an informed investment decision.
More specifically, each purchaser signed a written subscription agreement with
respect to their financial status and investment sophistication in which they
represented and warranted, among other things, that they had:
o the ability to bear the economic risks of an investment in the
shares of common stock of our company;
o a certain net worth sufficient to meet the suitability standards
of our company; and
o been provided with all material information requested by the
purchaser or his or her representatives, and been provided an
opportunity to ask questions of and receive answers from our
company concerning our company and the terms of the offering.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Barnum Mow, the President of our wholly-owned subsidiary, Avid
Sportswear, Inc., resigned effective May 17, 2001. On April 24, 2001, Mr. Mow
resigned as a director of our company and as a director of Avid Sportswear, Inc.
Our company is evaluating circumstances surrounding Mr. Mow's separation from
our company and Avid Sportswear, Inc.
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
EXHIBIT NO. DESCRIPTION LOCATION
2.01 Stock Purchase and Sale Agreement dated as of Incorporated by reference to Exhibit 2.01 to the
December 18, 1998 among our company, Avid Registrant's Registration Statement on Form 10-SB
Sportswear, Inc. and the shareholders of Avid (the "Registration Statement")
Sportswear, Inc.
3.01 Articles of Incorporation filed on September Incorporated by reference to Exhibit 3.01 to the
19, 1997 with the Nevada Secretary of State Registration Statement
3.02 Amended Articles of Incorporation filed on May Incorporated by reference to Exhibit 3.02 to the
12, 1999 with the Nevada Secretary of State Registration Statement
3.03 Certificate of Amendment to Articles of Incorporated by reference to Exhibit 3.03 to the
Incorporation filed on May 27, 1999 with the Registration Statement
Nevada Secretary of State
3.04 Bylaws Incorporated by reference to Exhibit 3.04 to the
Registration Statement
4.01 2000 Stock Incentive Plan Incorporated by reference to Exhibit 4.01 to
Amendment No. 2 to the Registration Statement.
10.01 Agreement dated as of December 8, 1998 between Incorporated by reference to Exhibit 10.01 to the
the Championship Committee Merchandising Registration Statement
Limited and Avid Sportswear Inc.
10.02 Lease dated as of March 1, 1999 between F & B Incorporated by reference to Exhibit 10.02 to the
Industrial Investments, LLC and Avid Registration Statement
Sportswear, Inc.
10.03 Lease dated as of April 30, 1999 between Links Incorporated by reference to Exhibit 10.03 to the
Associates, Ltd. and our company Registration Statement
10.04 Employment Agreement dated as of September 11, Incorporated by reference to Exhibit 10.04 to the
1999 between Barnum Mow and Avid Sportswear, Registration Statement
Inc.
10.05 Trademark License Agreement dated as of May Incorporated by reference to Exhibit 10.05 to
10, 1999 between Levi Strauss & Co. and Avid Amendment No. 2 to the Registration Statement
Sportswear, Inc.
10.06 Employment Agreement dated as of January 1, Incorporated by reference to Exhibit 10.06 to the
1999 between David E. Roderick and Avid Registration Statement
Sportswear, Inc.
10.07 Promissory Note in the original principal Incorporated by reference to Exhibit 10.07 to the
amount of $180,000 dated as of June 4, 1999 Registration Statement
from our company to First State Bank
10.08 Commercial Security Agreement dated as of Incorporated by reference to Exhibit 10.08 to the
November 17, 1999 between First State Bank and Registration Statement
our company
14
EXHIBIT NO. DESCRIPTION LOCATION
10.09 Promissory Note dated as of November 17, 1999 Incorporated by reference to Exhibit 10.09 to the
in the original principal amount of $1,000,000 Registration Statement
given by our company to First State Bank
10.10 Business Loan Agreement dated as of November Incorporated by reference to Exhibit 10.10 to the
17, 1999 between First State Bank and our Registration Statement
company
10.11 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.11 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $550,000 given by our company to
Earl Ingarfield
10.12 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.12 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $1,000,000 given by our company to
Lido Capital Corporation
10.13 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.13 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $125,000 given by our company to
Michael E. LaValliere
10.14 Convertible Revolving Demand Note dated as of Incorporated by reference to Exhibit 10.14 to
December 1, 1999 in the original principal Amendment No. 2 to the Registration Statement
amount of $500,000 given by our company to
Thomas Browning
10.15 Revolving Demand Note dated as of December 1, Incorporated by reference to Exhibit 10.15 to
1999 in the original principal amount of Amendment No. 2 to the Registration Statement
$200,000 given by our company to Daniel Paetz
10.16 Executive Employment Agreement effective as of Incorporated by reference to Exhibit 10.16 to
February 1, 2000 between our company and Earl Amendment No. 2 to the Registration Statement
T. Ingarfield
10.17 Consulting Agreement dated as of June 22, 2000 Incorporated by reference to Exhibit 10.17 to the
between Persia Consulting Group, Inc. and our Registrant's Registration Statement on Form SB-2
company
10.18 Form of Factoring Agreement between our Incorporated by reference to Exhibit 10.18 to the
company and GE Capital Commercial Services, Registrant's Form 10-QSB filed on November 17, 2000
Inc.
10.19 Form of Factoring Agreement Guaranty/Letter of Incorporated by reference to Exhibit 10.19 to the
Credit Supplement between our company and GE Registrant's Form 10-QSB filed on November 17, 2000
Capital Commercial Services, Inc.
10.20 Form of Factoring Agreement - Inventory Incorporated by reference to Exhibit 10.20 to the
Supplement (with advances) between our Registrant's Form 10-QSB filed on November 17, 2000
company and GE Capital Commercial Services,
Inc.
10.21 Form of Letter of Agreement between our Incorporated by reference to Exhibit 10.21 to the
company and GE Capital Commercial Services, Registrant's Form 10-QSB filed on November 17, 2000
Inc.
15
EXHIBIT NO. DESCRIPTION LOCATION
10.22 Form of Convertible Debenture Incorporated by reference to Exhibit 10.22 to the
Registrant's Form 10-QSB filed on November 17, 2000
10.23 Form of Registration Rights Agreement between Incorporated by reference to Exhibit 10.23 to the
our company and purchasers of convertible Registrant's Form 10-QSB filed on November 17, 2000
debentures
10.24 Line of Credit Agreement dated as of Incorporated by reference to Appendix "A" to the
November 28, 2000 between our company and GMF Registrant's Proxy Statement (the "Proxy
Holdings, Inc. Statement")
10.25 Form of Debenture dated as of November 28, Incorporated by reference to Appendix "B" to the
2000 given by our company Registrant's Proxy Statement
10.26 Registration Rights Agreement dated as of Incorporated by reference to Appendix "C" to the
November 28, 2000 between our company and GMF Registrant's Proxy Statement
Holdings, Inc.
10.27 Form of Warrant dated as of November 28, 2000 Incorporated by reference to Appendix "D" to the
given by our company Registrant's Proxy Statement
10.28 Registration Rights Agreement dated as of Incorporated by reference to Appendix "E" to the
November 28, 2000 between our company and the Registrant's Proxy Statement
May Davis Group, Inc.
10.29 Placement Agent Agreement as of November 28, Incorporated by reference to Appendix "F" to the
2000 between our company and the May Davis Registrant's Proxy Statement
Group, Inc.
10.30 Escrow Agreement dated as of November 28, 2000 Incorporated by reference to Appendix "G" to the
among our company, the May Davis Group, Inc. Registrant's Proxy Statement
and First Union National Bank
10.31 Amendment to Employment Agreement effective Incorporated by reference to Exhibit 10.31 to the
January 31, 20001 between our company and Registrant's Form 10-KSB filed on April 17, 2000
Barnum Mow
10.32 Forbearance Agreement as of February 16, 2001 Incorporated by reference to Exhibit 10.32 to the
between our company and GE Capital Commercial Registrant's Form 10-KSB filed on April 17, 2000
Services, Inc.
11.01 Statement re: Computation of Earnings Not Applicable
15.01 Letter on unaudited interim financial Not Applicable
information
16.01 Letter on Change in Certifying Accountant Not Applicable
21.01 Subsidiaries of our company Incorporated by reference to Exhibit 21.01 to the
Registration Statement
23.01 Consent of Independent Accountants Not Applicable
24.01 Power of Attorney Not Applicable
16
27.01 Financial Data Schedule Not Applicable
99.01 Letter dated May 9, 2001 from Levi Strauss Incorporated by reference to Exhibit 20.01 to the
& Co. Registrant's Form 8-K filed May 18, 2001
(B) REPORTS ON FORM 8-K.
Our company filed a Form 8-K on May 18, 2001 with respect to the
letter Avid Sportswear, Inc. received dated May 9, 2001 from Levi Strauss & Co.
terminating the Trademark License Agreement dated as of May 10, 1999 between
Levi Strauss & Co. and Avid Sportswear, Inc.
17
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.
Date: May 23, 2001 AVID SPORTSWEAR & GOLF CORP.
By: /s/ Jerry L. Busiere
--------------------------------------
Jerry L. Busiere, Secretary