1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For Period Ended June 30, 2000
---------------------------------------------------------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Act of 1934
For the transition period from to
----------------------- -------------------------
Commission File Number 0-22965
----------------------------------------------------------
FREEDOM GOLF CORPORATION formerly Auric Enterprised, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 91-1950699
------------------------ ---------------------------
(State of Incorporation) (I.R.S. Employer ID Number)
7334 S. Alton Way, Bldg. 14-A Englewood, CO 80112
- ---------------------------------------- ---------------------
(Address of principle executive offices) (city) (State) (zip)
(303) 221-0331
-------------------------------------------------
Registrant's telephone number including area code
--------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
[X] YES [ ] NO
Transitional Small Business Disclosure format (check one)
[ ] YES [X] NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest date: 12,643,206
2
FREEDOM GOLF CORPORATION
BALANCE SHEET
JUNE 30, 2000
ASSETS
CURRENT ASSETS
Cash $ --
Accounts receivable - trade, net of
allowance for doubtful accounts of $2,281 14,891
Inventory 113,177
Deposit with vendor 38,800
Prepaid expenses 29,974
-----------
Total current assets 196,842
-----------
Property and equipment, at cost, net of
accumulated depreciation of $6,050 10,598
Deposit 2,000
Patents, net of accumulated amortization of $12,778 87,221
-----------
Total assets $ 296,661
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - bank $ 17,937
Notes payable - other 225,505
Bank overdraft 19,546
Accounts payable - trade 102,831
Advances from officers 7,581
Accrued salaries 286,500
Accrued expenses 14,158
-----------
Total current liabilities 674,058
-----------
STOCKHOLDERS' EQUITY
Common stock, $.001 value, 50,000,000 shares
authorized 12,643,206 issued and outstanding 12,643
Paid in capital 2,313,537
Unearned services (201,389)
Accumulated deficit (2,502,188)
-----------
Total stockholders' equity (377,397)
-----------
Total liabilities and stockholders' equity $ 296,661
===========
3
FREEDOM GOLF CORPORATION
STATEMENT OF OPERATIONS
Three Month Period Ended Nine Month Period Ended
----------------------------- -----------------------------
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
Sales - net $ 64,745 $ 24,470 $ 101,427 $ 69,630
Cost of sales (56,073) (14,320) (79,138) (28,998)
------------ ------------ ------------ ------------
Gross profit 8,672 10,150 22,289 40,632
------------ ------------ ------------ ------------
Selling, general and administrative expenses 143,003 60,651 1,137,511 247,125
------------ ------------ ------------ ------------
Loss from operations (134,331) (50,501) (1,115,222) (206,493)
Other income and (expense)
Interest expense (6,001) (5,089) (19,652) (11,701)
Interest income 4 -- 70 24
------------ ------------ ------------ ------------
Net (loss) $ (140,328) $ (55,590) $ (1,134,804) $ (218,170)
============ ============ ============ ============
Basic and fully diluted
(loss) per share: $ (.01) $ (.01) $ (.09) $ (.02)
============ ============ ============ ============
Weighted average shares outstanding 12,643,206 6,796,100 12,207,873 6,685,516
============ ============ ============ ============
4
FREEDOM GOLF CORPORATION
STATEMENT OF CASH FLOWS
Nine Month Period Ended
----------------------------
June 30, 2000 June 30, 1999
------------- -------------
Net loss $(1,134,804) $ (218,170)
----------- -----------
Adjustments to reconcile net loss to
net cash provided by operating activities
Common stock issued for services 807,500 --
Depreciation and amortization 6,283 9,921
Changes in assets and liabilities:
Increase in accounts receivable (11,864) (3,205)
(Increase) decrease in inventory (64,992) (8,652)
Increase in prepaid expenses and deposits (28,250) --
Increase (decrease) in accounts payable 58,860 (7,993)
Increase in accrued salaries 54,000 107,300
Increase (decrease) in accrued expenses 8,066 (34,159)
----------- -----------
Total adjustments 829,603 75,866
----------- -----------
Net cash provided by (used in)
operating activities (305,201) (142,304)
----------- -----------
Cash flow from investing activities:
Purchase of equipment (4,709) (3,998)
----------- -----------
Net cash used by investing activities (4,709) (3,998)
----------- -----------
Cash flow from financing activities:
Common stock sold for cash 230,600 152,660
Bank overdraft 19,546
Proceeds from notes payable 129,570 14,000
Payment on notes payable (70,052) (16,137)
----------- -----------
Net cash provided by financing activities 309,664 150,253
----------- -----------
(Decrease) increase in cash (246) 3,951
Cash and cash equivalents,
beginning of period 246 --
----------- -----------
Cash and cash equivalents,
end of period $ -- $ 3,951
=========== ===========
5
FREEDOM GOLF CORPORATION
STATEMENT OF CASH FLOWS, CONTINUED
Nine Month Period Ended
----------------------------
June 30, 2000 June 30, 1999
------------- -------------
Supplemental schedule of noncash investing and
financing activities $ --
Issuance of 800,000 shares of common stock as part
of merger $760,000 $ --
6
FREEDOM GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions incorporated in Regulation 10-SB of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments and accruals) considered necessary for a fair
presentation have been included.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full year. The accompanying
financial statements should be read in conjunction with the Company's annual
financial statements for the period.
Basic loss per share was computed using the weighted average number of common
shares outstanding.
The Company was incorporated as Auric Enterprises (Auric) in Nevada in October
1998. On December 10, 1999, the stockholders' of the Company approved a merger
with Freedom Golf Corporation (Freedom), a Colorado corporation. Under the terms
of the agreement, each common share of Freedom will receive a share of Auric
common stock. This transaction was accounted for as a reverse acquisition,
whereby the financial statements of Freedom will continue carry forward. In
conjunction with the transaction, Auric changed its name to Freedom. Freedom is
a golf club manufacturer specializing in custom built woods and irons.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Statements used in this discussion that relate to future plans, events,
financial results or performance are forward-looking statements as defined under
the Private Securities Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties which could cause actual results to
differ materially from those anticipated. Readers are cautioned not to place
undue reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. Readers also are
urged to carefully review and consider the various disclosures made by the
Company which describe certain factors which affect the Company's business,
including the disclosures made under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Certain Factors
Affecting Freedom Golf Corporation" below, as well as the Company's other
periodic reports on Forms 10-K and 10-Q and Current Reports on Form 8-K filed
with the Securities and Exchange Commission.
7
FREEDOM GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
Readers also should be aware that while the Company communicates with securities
analysts, the Company has a policy against issuing or confirming financial
forecasts or projections issued by others. Accordingly, to the extent that
reports issued by securities analysts contain any projections, forecasts or
opinions, such reports are not the responsibility of the Company, and
stockholders should not assume that the Company agrees with any statement or
report issued by any analyst.
CERTAIN FACTORS AFFECTING FREEDOM GOLF CORPORATION
RESTRUCTURING
In the first quarter of 2000, the Company went through a merger agreement with
Auric Enterprises, Inc. Since Auric Enterprises was a publicly traded company,
Freedom was the surviving company. Immediately upon the closing of the merger
Auric Enterprises, Inc.
agreed to a name change to Freedom Golf Corporation and a symbol change to FGLC.
SALES; GROSS MARGIN; SEASONALITY
During the three-month period ending June 30, 2000, the Company's Gross Profit
was about 85.4% of what it had been during the same period in 1999. The Company
believes that this decrease was due to several reasons. One, the Company's
President/CEO has handling the day to day operation of the Company, all
negotiations for the Company and was the lone salesman for the Company. The
President of the Company has been pursuing additional financing and has not had
the time to pursue sales as well. The hiring of Key personnel in the Sales and
Operations Department of the Company will hopefully take place in the last
quarter of fiscal year 2000, but if it does not happen, the lack of qualified
personnel to assist in building the Company could do further damage to the
revenue stream of the Company.
NEW PRODUCT INTRODUCTION
The Company believes that the introduction of new, innovative golf equipment is
imperative to is future success. Even though the Company faces certain risks
with such bold moves, Management deems it necessary to introduce new and unique
products such as the Freedom 345 Fairway Wood. The 345 Fairway Wood is a
combination 3, 4 and 5 fairway wood combined into one club.
8
FREEDOM GOLF CORPORATION
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
Company understands that new designs and changes from the traditional line of
golf clubs may be met with consumer rejection. It is also possible that cloning
of the 345 Fairway Wood may occur and possibly have an adverse effect on the
Company's revenues. The Company plans its manufacturing capacity based upon the
forecasted demand for its products. Actual demand for such product may exceed to
be less than forecasted demand. If the Company is unable to produce sufficient
quantities of this new product in time to fulfill actual demand, especially
during the Company's hopefully busy second and third quarters, it could limit
the Company's sales and adversely affects its financial performance.
Trends and Uncertainties. Demand for the Company's products will be dependent
on, among other things, market acceptance for the Company's concept, its
operations and general economic conditions that are cyclical in nature. Inasmuch
as a major portion of the Company's activities will be the receipt of revenues
from the sales of its products, the Company's business operations, may be
adversely affected by the Company's inability to obtain the necessary financing,
competitors and prolonged recessionary periods.
Capital and Source of Liquidity. The Company requires substantial capital in
order to meet its ongoing corporate obligations and in order to continue and
expand its current and strategic business plan. Initial working capital has been
obtained by private sale of common stock. The company has received $170,000 from
the exercise of warrants through the date of this report. These funds will be
used for inventory, repay debt and provide working capital. The Company needs to
have adequate capital to market its products.
Results of Operations. Net sales increased from $24,470 in 1999 to $64,745 in
2000. This increase is due to golf clubs being used as barter to give the
Company additional exposure. Accordingly, the Company also had increased Cost of
sales because of the barter practice being used for Company exposure. It is the
Company's intent to development advertising for both the television and print
media. It is expected that when funds become available that advertising
expenditures will significantly increase.
Selling and general administrative expenses increased from $60,651 in 1999 to
$143,003 in 2000. The increase is due mainly to increased travel trying to gain
the funding necessary for marketing and inventory plus higher legal and
accounting fees incurred because of the Company being public.
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
10
SIGNATURES
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 thereunto duly authorized.
Freedom Golf Corporation
(Registrant)
Date: August 9, 2000
By: /s/ Gaylen P. Johnson
---------------------------------------
Gaylen P. Johnson
11
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule