AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 2003.
REGISTRATION NO. 333-34294
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE
AMENDMENT NO. 6
TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
----------------
COLLEGIATE PACIFIC INC.
(Name of small business issuer in its charter)
DELAWARE 5091 22-2795073
(State of other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
13950 SENLAC DRIVE, SUITE 100 MICHAEL J. BLUMENFELD
DALLAS, TEXAS 75234 CHIEF EXECUTIVE OFFICER
972. 243.8100 13950 SENLAC DRIVE, SUITE 100
(Address and telephone number of principal DALLAS, TEXAS 75234
executive offices and principal place of 972. 243.8100
business) (Name, address and telephone number
of agent for service)
COPIES TO:
MICHAEL R. DOREY
SAYLES, LIDJI & WERBNER,
A PROFESSIONAL CORPORATION
4400 RENAISSANCE TOWER
1201 ELM STREET
DALLAS, TEXAS 75270
214.939.8700
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1993, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(a), MAY DETERMINE.
================================================================================
Pursuant to Rule 429, this is a combined registration statement that relates to
the securities previously registered by Form SB-2 Registration Statement, No.
333-64471, effective as of October 26, 1998, and the securities being registered
by this registration statement.
COLLEGIATE PACIFIC INC.
CROSS REFERENCE SHEET
FORM SB-2 ITEM NO. AND CAPTION PROSPECTUS CAPTION
Item 1. Front of Registration Statement and Outside Front Cover of Outside Front Cover
Prospectus
Item 2. Inside Front Cover and Outside Back Cover Pages of Prospectus Inside Front and Outside Back Cover
Pages
Item 3. Summary Information and Risk Factors Summary, Risk Factors
Item 4. Use of Proceeds Summary -- Use of Proceeds
Item 5. Determination of Offering Price Not Applicable
Item 6. Dilution Not Applicable
Item 7. Selling Security Holders Summary -- Selling Shareholder
Item 8. Plan of Distribution Summary -- Plan of Distribution
Item 9. Legal Proceedings The Company -- Legal Proceedings
Item 10. Directors, Executive Officers, Promoters and Control Persons Management - Executive Officers and
Directors
Item 11. Security Ownership of Certain Beneficial Owners and Management Management - Security Ownership of
Certain Beneficial Owners and Management
Item 12. Description of Securities Description of Securities
Item 13. Interest of Named Experts and Counsel Not Applicable
Item 14. Disclosure of Commission Position on Indemnification For Indemnification
Securities Act Liabilities
Item 15. Organization Within Last Five Years Not Applicable
Item 16. Description of Business The Company - Business
Item 17. Management's Discussion and Analysis or Plan of Operation Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Item 18. Description of Property The Company - Property
Item 19. Certain Relationships and Related Transactions Management - Certain Relationships
and Related Transactions
Item 20. Market For Common Equity and Related Stockholder Matters Market For Common Equity and Related
Stockholder Matters
Item 21. Executive Compensation Management - Executive Compensation
Item 22. Financial Statements Index to Consolidated Financial
Statements
Item 23. Changes in and Disagreements with Accountants on Accounting and Not Applicable
Financial Disclosures
COLLEGIATE PACIFIC INC.
4,244,607 COMMON STOCK PURCHASE WARRANTS
5,321,874 SHARES OF COMMON STOCK
This Prospectus relates to the issuance and resale of up to:
- 4,244,607 Common Stock Purchase Warrants issued as a special
dividend to each record holder of Common Stock as of May 26,
2000.
- 4,244,607 shares of Common Stock issuable upon exercise of the
Company's Common Stock Purchase Warrants.
Each record holder of Common Stock as of May 26, 2000 received a
special dividend from the Company of one Warrant for each share of Common Stock
owned by the record holder. Each Warrant entitles the holder to purchase one
share of Common Stock at an exercise price of $5.00 per share, subject to
adjustment, at any time prior to May 26, 2005.
This Prospectus also relates to an offering of up to 677,267 shares of
Common Stock by certain stockholders who previously held Notes of the Company.
The Company privately sold Notes in the principal amount of $2,235,000 to
certain officers and directors of the Company and certain third parties. The
Note holders converted the Notes into 677,267 shares of Common Stock, based upon
a conversion price of $3.30 per share, on April 19, 2000.
In addition, this Prospectus relates to an offering of up to 400,000
shares of Common Stock by Michael J. Blumenfeld, the Company's Chief Executive
Officer. Mr. Blumenfeld acquired those 400,000 shares through a Stock Purchase
Agreement dated as of August 18, 1997, by and between Mr. Blumenfeld, Adam
Blumenfeld and the Company. The 400,000 shares being registered by Mr.
Blumenfeld are being done so with the intention that the sale or placement of
the shares may be for the benefit of the Company. The shares or the majority of
net proceeds of a sale, or both, could be used in acquisitions, debt repayment,
working capital advances or other such circumstances that may accrue to the
benefit of the Company.
The Common Stock is quoted on the American Stock Exchange under the
symbol "BOO." The Warrants are quoted on the American Stock Exchange under the
symbol "BOO/WS." On October 24, 2003, the closing price of the Common Stock was
$7.55 per share, and the closing price of the Warrants was $2.60 per Warrant.
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 9 IN THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 28, 2003
The date of this Prospectus is October 28, 2003. No dealer, salesperson
or any other person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offering made hereby and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any of the securities offered hereby to anyone in any
jurisdiction to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to the dates
as of which such information is furnished.
TABLE OF CONTENTS
Available Information ......................................... 3
Summary ....................................................... 3
Risk Factors .................................................. 9
The Company ................................................... 15
Management .................................................... 19
Market for Common Stock and Related Stockholder Matters ....... 27
Management's Discussion and Analysis of Financial Condition and
Results of Operations ......................................... 28
Description of Securities ..................................... 33
Legal Matters ................................................. 37
Experts ....................................................... 37
Indemnification ............................................... 37
Index To Consolidated Financial Statements .................... F-1
Collegiate Pacific Inc. is a Delaware corporation. Our executive
offices are located at 13950 Senlac Drive, Suite 100, Dallas, Texas 75234, and
our telephone number is (972) 243-8100. In this Prospectus, the "Company,"
"Collegiate Pacific," "we," "us," and "our" refer to Collegiate Pacific Inc. and
its subsidiaries. The term "Warrants" refers to the Company's common stock
purchase warrants. The term "Notes" refers to the Company's Subordinated
Convertible Promissory Notes. In addition, "Common Stock" refers to our common
stock, $.01 par value per share. The term "Selling Shareholder" refers to Mr.
Blumenfeld. The Company's fiscal year ends on June 30th. Reference herein to
"fiscal 2000," "fiscal 2001," "fiscal 2002," "fiscal 2003," and "fiscal 2004"
refers to our fiscal years ended June 30, 2000, 2001, 2002, 2003, and 2004,
respectively.
You should rely only on the information contained in this Prospectus.
We have not authorized anyone to provide you with information different from
that contained in this Prospectus. The information contained in this Prospectus
is accurate only as of the date of this Prospectus, regardless of the time of
delivery of this Prospectus or of any sale of the Common Stock.
UNLESS OTHERWISE PROVIDED IN THIS PROSPECTUS, ALL REFERENCES TO SHARES
OF COMMON STOCK TAKE INTO ACCOUNT THE ONE-FOR-FIVE REVERSE STOCK SPLIT THAT
BECAME EFFECTIVE JANUARY 19, 2000.
2
AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and we
file annual, quarterly and other reports and other information with the
Securities and Exchange Commission (the "Commission"). These materials may be
inspected and copied at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549-1004,
at its Northeast Regional Office located at 7 World Trade Center, Suite 1300,
New York, New York 10048 and at its West Regional Office located at 5670
Wilshire Boulevard, Los Angeles, California 90036. You can obtain copies of
these materials at prescribed rates from the Public Reference Section of the
Commission located at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains a Web site that contains reports, proxy statements,
information statements and other information regarding the Company. The
Commission's Web site address is http://www.sec.gov.
The Company is a publicly held corporation and its Common Stock is
traded on the American Stock Exchange under the symbol "BOO." The Warrants are
traded on the American Stock Exchange under the symbol "BOO/WS."
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as it
may determine to furnish or as may be required by law.
We have filed Registration Statements on Form SB-2 (the "Registration
Statements") under the Securities Act of 1933 (the "Securities Act") with the
Commission, with respect to the Common Stock and Warrants offered in this
Prospectus. This Prospectus does not contain all information set forth in the
Registration Statements. We omitted certain parts of the Registration Statements
in accordance with the rules and regulations of the Commission. For further
information about us and the Common Stock and Warrants being offered in this
Prospectus, you should read the Registration Statements and their exhibits and
schedules, which you may read without charge at the public reference rooms at
the offices of the Commission.
SUMMARY
CERTAIN INFORMATION IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS." ALL STATEMENTS, OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE
"FORWARD-LOOKING STATEMENTS" FOR PURPOSES OF THESE PROVISIONS.
THESE STATEMENTS INCLUDE:
- ANY PROJECTIONS OF EARNINGS, REVENUES OR OTHER FINANCIAL
ITEMS;
- ANY STATEMENTS OF THE PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS;
- ANY STATEMENTS CONCERNING PROPOSED NEW PRODUCTS OR SERVICES;
- ANY STATEMENTS REGARDING FUTURE ECONOMIC CONDITIONS OR
PERFORMANCE; AND
- ANY STATEMENT OF ASSUMPTIONS UNDERLYING ANY OF THE FOREGOING.
3
IN SOME CASES, FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE
OF TERMINOLOGY SUCH AS "MAY," "WILL," "EXPECTS," "BELIEVES", "PLANS,"
"ANTICIPATES," "ESTIMATES," "POTENTIAL," OR "CONTINUE," AND VARIATIONS ON SUCH
WORDS AND SIMILAR EXPRESSIONS.
ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN ITS
FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CAN GIVE NO ASSURANCE THAT THESE
EXPECTATIONS OR ANY FORWARD-LOOKING STATEMENTS WILL PROVE TO BE CORRECT. ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THE RESULTS WE PROJECTED OR ASSUMED IN OUR
FORWARD-LOOKING STATEMENTS. THE COMPANY'S FUTURE FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, AS WELL AS ANY FORWARD-LOOKING STATEMENTS, ARE SUBJECT TO
INHERENT RISKS AND UNCERTAINTIES, SOME OF WHICH ARE SUMMARIZED IN THE SECTION
TITLED "RISK FACTORS" BEGINNING ON PAGE 9.
THE COMPANY
We are in the mail order marketing of sports equipment business. We
manufacture and distribute our products primarily to institutional customers
located throughout the United States. Our principal customers include country
clubs, schools, YMCAs, YWCAs and similar recreational organizations, municipal
recreation departments, and other governmental agencies. We offer a broad line
of sporting equipment, including inflatable balls, nets for various sports,
standards and goals for sports, weight lifting equipment, and other recreational
products, and we also provide after-sale customer service through toll-free
numbers.
We believe that prompt delivery of a broad range of products at
competitive prices, coupled with prompt, accessible customer service,
distinguishes Collegiate Pacific from its competitors. We currently market about
3,200 sports and recreational related equipment and products to over 200,000
potential institutional, retail, Internet and sporting good dealer type
customers. Since commencing operations, we have sold products to approximately
35,000 customers.
Our master mailing list currently includes over 200,000 potential
customers, and we intend to distribute approximately 1,300,000 catalogs and
fliers to this audience during fiscal 2004. Michael J. Blumenfeld, the Chief
Executive Officer of the Company with over 30 years of experience in the
industry, supervised the development of this mailing list, and it is carefully
maintained, screened, and cross-checked. We subdivided this mailing list into
various combinations designed to place catalogs in the hands of the individuals
making the purchasing decisions. The master mailing list is also subdivided by
relevant product types, seasons, and customer profiles. We also use other forms
of solicitations such as trade shows, telemarketing, and the Internet.
Collegiate Pacific Inc. was incorporated in Pennsylvania in 1987, and
reincorporated in Delaware in 1999. The Company's executive offices are located
at 13950 Senlac Drive, Suite 100, Dallas, Texas 75234, and its telephone number
at that location is (972) 243-8100.
RECENT DEVELOPMENTS
On October 25, 1999, we acquired certain assets of Mark One Inc., a
distributor of camping and sporting goods related equipment, as well as numerous
items for the recreation, military, and municipal markets.
4
On February 7, 2000, we entered into licensing and distribution
agreements with the Edwards Sports Company, a manufacturer of tennis nets and
tennis court equipment.
On February 29, 2000, we issued $2,235,000 of Subordinated Convertible
Promissory Notes to certain officers and directors of the Company and certain
third parties. Approximately $995,000 of such Notes were issued in exchange for
an equal amount of subordinated notes held by Michael J. Blumenfeld. The
remaining Notes were sold for approximately $1.2 million in cash. We used the
cash proceeds to repay our outstanding commercial bank debt, expand working
capital, and finance stock repurchases. On April 19, 2000, the Note holders
converted the Notes into 677,267 shares of Common Stock, based on a conversion
price of $3.30 per share.
On June 8, 2000, the General Services Administration awarded a
long-term contract to us for the supply of sports and recreational products to
federal and military locations throughout the world.
On September 7, 2000, we acquired Kesmil Manufacturing, Inc., a
manufacturer of a broad line of athletic equipment.
On February 15, 2001, we announced that our Board of Directors
authorized the Company to reduce the strike price of the Warrants issued to each
record holder of the Company's Common Stock as of May 26, 2000, from $10.00 per
share to $5.00 per share, to be effective at 12:00 midnight, Dallas, Texas time,
on Monday, March 12, 2001. As a result, pursuant to the terms of the Warrants,
the cancellation price of the Warrants was automatically reduced from $0.10 per
share of Common Stock purchasable upon exercise of the Warrants to $0.05 per
share. See "Description of Dividend Warrants."
On October 7, 2003, the Company announced that Michael J. Blumenfeld,
the Company's Chief Executive Officer, completed an offering on a firm
commitment basis directly to Roth Capital Partners, LLC, of 1,000,000 Warrants
held by Mr. Blumenfeld at a per warrant price of $1.95. Under the terms of the
offering, Roth Capital immediately exercised the Warrants and the Company issued
1,000,000 shares of Common Stock directly to Roth Capital. Roth Capital sold
these shares to institutional investors at a price of $6.95 per share. The
Company received $5,000,000, before commissions and expenses, from the exercise
of the Warrants. The Company paid a commission to Roth Capital of $450,000 in
connection with the sale of the Warrants in the offering and the issuance to
Roth Capital of the shares of Common Stock upon Roth Capital's exercise of the
Warrants. The Company intends to use the net proceeds it received from the
exercise of the Warrants for working capital and general corporate purposes, as
well as to finance any strategic acquisitions the Company may decide to pursue.
SELLING SHAREHOLDER
The following table sets forth the name of the Selling Shareholder, the
number of shares of Common Stock beneficially owned by the Selling Shareholder
as of October 25, 2003, the number of shares that he may offer, and the number
of shares of Common Stock beneficially owned by the Selling Shareholder upon
completion of the offering, assuming all of the shares offered are sold. The
number of shares sold by the Selling Shareholder may depend upon a number of
factors, including, among other things, the market price of the Common Stock.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
-------------------- ------------------------
NUMBER OF PERCENT OF SHARES TO BE NUMBER OF PERCENT OF
NAME OF BENEFICIAL OWNER SHARES(1) CLASS(2) SOLD SHARES(1) CLASS
- ------------------------ ------------ -------------------- ------------ --------- ----------
Michael J. Blumenfeld, 2,916,614(3) 45.3% 1,475,952(4) 1,440,662 25.1%
Chief Executive Officer
of the Company
5
- ----------
(1) As required by SEC regulations, the number of shares shown as
beneficially owned includes shares that could be purchased within 60
days after the date of this Prospectus. The table shows the estimated
total of the shares that would be issued on the exercise of all
Warrants to acquire shares of Common Stock described in this
Prospectus. The actual number of shares of Common Stock issuable upon
the exercise of the Warrants is subject to adjustment and could be
materially less than the number estimated in this table. This variation
is due to factors that cannot be predicted by us at this time. The most
significant of these factors is the future market price of our Common
Stock.
(2) The percentage of the Selling Shareholder is based on the beneficial
ownership of that Selling Shareholder divided by the sum of the current
outstanding shares of Common Stock plus the additional shares, if any,
that would be issued to that Selling Shareholder (but not any other
shareholder) when exercising any Warrant or other right in the future.
(3) Consists of 2,165,207 shares of Common Stock, 10,000 shares issuable
upon exercise of an option expiring February 24, 2009, 20,000 shares
issuable upon exercise of an option expiring August 15, 2010, 75,000
shares issuable upon exercise of an option expiring May 8, 2011, 25,000
shares issuable upon exercise of an option expiring June 24, 2013 and
621,407 shares issuable upon exercise of Warrants expiring May 26,
2005, issued as a special dividend of Warrants on shares of Common
Stock.
(4) Consists of 400,000 shares being registered by Mr. Blumenfeld with the
intention that the sale or placement of these shares may be for the
benefit of the Company. The shares, or the majority of net proceeds of
a sale, or both, could be used in acquisitions, debt repayments,
working capital advances or other such circumstances that may accrue to
the benefit of the Company. Also includes 454,545 shares issued upon
conversion of a Note on April 19, 2000, 621,407 shares issuable upon
exercise of Warrants expiring May 26, 2005, issued as a special
dividend of Warrants on shares of Common Stock.
PLAN OF DISTRIBUTION
The Warrants offered in this Prospectus were issued to each of the
Company's stockholder's on a pro rata basis as a special dividend on May 26,
2000.
The sale of the shares of Common Stock offered in this Prospectus may
be made from time to time directly by the Selling Shareholder, by the Note
holders who converted their Notes into shares of Common Stock, by the
stockholders who exercised their Warrants, or by one or more broker-dealers or
agents.
Shareholders selling their shares of Common Stock or Warrants will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The shares of Common Stock and the Warrants may be
sold in one or more transactions on the Bulletin Board, in negotiated
transactions, or through a combination of such methods of distribution, at
prices related to prevailing market prices or at negotiated prices.
In the event one or more broker-dealers or agents agree to sell the
shares of Common Stock or the Warrants, they may do so by purchasing the shares
of Common Stock or Warrants as principals or by selling the shares of Common
Stock or the Warrants as agent for the shareholders selling their shares. These
broker-dealers may be compensated in the form of discounts, concessions, or
commissions from these shareholders or the purchasers of the shares of Common
Stock or the Warrants. A particular broker-dealer's compensation may be in
excess of customary compensation.
6
Under applicable Exchange Act rules and regulations, any person engaged
in a distribution of the shares of Common Stock or the Warrants may not
simultaneously engage in market-making activities with respect to the Company's
Common Stock or Warrants for the applicable period under Regulation M of the
Exchange Act prior to the commencement of such distribution. In addition,
shareholders selling their shares are subject to applicable provisions, rules
and regulations of the Exchange Act, including Regulation M, which may limit the
timing of purchases and sales of the Common Stock and the Warrants by these
shareholders. All of the foregoing may affect the marketability of the Common
Stock and the Warrants.
To comply with applicable states' securities laws, the Common Stock and
the Warrants will be sold in such jurisdictions only through registered or
licensed brokers or dealers. Additionally, the shares of Common Stock and the
Warrants may not be sold in certain states unless the shares of Common Stock and
the Warrants have been registered or qualified for sale in these states, or an
exemption from registration or qualification is available and is complied with.
USE OF PROCEEDS
The Company did not receive any consideration for the issuance of the
Warrants and will not receive any proceeds from the sale of Warrants by the
Warrant holders.
The Company will receive proceeds only if the Warrants are duly
exercised and paid by the Warrant holders. There can be no assurance that the
Warrant holders will exercise all or any portion of the Warrants. If all the
remaining Warrants are exercised, the Company will receive approximately $14.6
million. There can be no assurance, however, that any additional Warrants will
be exercised. The Company currently plans to use any proceeds received upon
exercise of the Warrants for general corporate purposes. These general corporate
purposes may include working capital, acquisitions, and debt repayment.
The Company did not receive any proceeds from the conversion of the
Notes into shares of Common Stock. However, the conversion of the Notes
constituted a reduction of the Company's outstanding debt by $2,235,000. The
Note holders converted the Notes into shares of Common Stock at a conversion
price equal to $3.30 per share.
The Company will not receive any of the proceeds from the sale of any
other shares of Common Stock by the Selling Stockholder or sales of the shares
of Common Stock acquired by the Warrant holders upon exercise of the Warrants.
DESCRIPTION OF DIVIDEND WARRANTS
The Company issued the Warrants pursuant to a Warrant Agreement between
the Company and Continental Stock Transfer and Trust Company, Inc. Each record
holder of Common Stock as of May 26, 2000 received a special dividend from the
Company of one Warrant for each share of Common Stock owned by the record
holder.
Each Warrant entitles the registered holder to purchase from the
Company, for cash, one share of Common Stock at $5.00 per share. The number of
shares purchasable upon exercise of each Warrant and price per share may be
adjusted under certain conditions.
Holders may exercise the Warrants at any time on or before May 26,
2005, unless extended by the Company. The Warrants are callable and cancelable
at a cancellation price of $.05 per share of Common Stock purchasable upon
exercise of the Warrants. If the Company calls the Warrants for cancellation,
7
holders may exercise the Warrants at any time prior to the close of business on
the business day preceding the date fixed for cancellation.
DESCRIPTION OF NOTES
The Notes were sold to certain officers and directors of the Company
and certain other third parties not affiliated with the Company (the "Note
Holders") pursuant to a Purchase Agreement between the Company and the Note
Holders (the "Purchase Agreement"), dated as of February 29, 2000. The Notes
were general obligations of the Company limited to $2,235,000 in aggregate
principal amount, and bore an interest rate equal to the Prime Rate plus 2 1/2
percentage points. The Notes were convertible at $3.30 per share.
8
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND CAUTIONARY
WARNINGS BEFORE INVESTING IN THE COMMON STOCK OFFERED IN THIS PROSPECTUS. THE
FOLLOWING RISKS AND UNCERTAINTIES ARE NOT THE ONLY ONES FACING THE COMPANY.
THERE ARE ADDITIONAL RISKS AND UNCERTAINTIES THAT WE ARE EITHER UNAWARE OF OR
THAT WE CURRENTLY THINK ARE IMMATERIAL; HOWEVER, THESE RISKS AND UNCERTAINTIES
MAY ALSO IMPAIR THE COMPANY'S BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION, OR RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED.
IN SUCH CASE, THE TRADING PRICE OF THE COMMON STOCK OR WARRANTS COULD DECLINE,
AND INVESTORS COULD LOSE ALL OR PART OF ANY INVESTMENT IN THE COMMON STOCK OR
WARRANTS.
YOU SHOULD ALSO REFER TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS, INCLUDING THE COMPANY'S FINANCIAL STATEMENTS AND THE RELATED NOTES.
LIMITED OPERATING HISTORY
We have a limited operating history upon which to base an evaluation of
the Company and its prospects.
Collegiate Pacific entered into the catalog and mail-order distribution
of sporting goods business only five years ago. The Company generated net income
of approximately $1.3 million and $805 thousand for fiscal 2003 and fiscal 2002,
respectively.
Our prospects must be considered in light of the risk, expenses, and
difficulties frequently encountered by companies in the marketing industry. To
address these risks, we must, among other things:
- effectively develop new relationships and maintain existing
relationships with our suppliers, advertisers and customers;
- provide products at competitive prices;
- respond to competitive developments; and
- attract, retain, and motivate qualified personnel.
We cannot assure you that we will succeed in addressing such risks. Our
failure to do so could have a material adverse effect on the Company's business,
financial condition, or results of operations.
In addition, our limited operating history makes it difficult or
impossible to predict future operating results. We cannot give you any assurance
that our revenues will increase or even continue at their current level, or that
we will continue to maintain profitability or generate cash from operations in
the future.
9
COMPETITION
The sporting goods and related equipment market in which we participate
is highly competitive and it is without a significant barrier to entry.
We compete principally in the institutional market with local sporting
goods dealers and other direct mail companies. Most of our direct mail
competitors have:
- substantially greater financial resources;
- a larger customer base; and
- greater name recognition within the industry.
In addition, our competitors may have larger technical, sales and marketing
resources.
We compete on a number of factors, including price, relationships with
customers, name recognition, product availability, and quality of service. We
cannot give you assurance that we will compete successfully against our
competitors in the future. If we fail to compete successfully, our business,
financial condition, and results of operations will be materially and adversely
affected.
RAW MATERIALS
The general economic conditions in the U.S. or international countries
with which we do business could affect pricing of raw materials such as metals
and other commodities used by suppliers of our finished goods. We cannot assure
you that any price increase incurred by the Company for its products can be
passed to its customers without adversely affecting the Company's operating
results.
ACCOUNTS RECEIVABLE
We monitor the credit worthiness of our customer base on an ongoing
basis, and we have not experienced an abnormal increase in losses in our
accounts receivable portfolio. We believe that allowances for losses adequately
reflect the risk of loss. However, a change in the economic condition or in the
make-up of our customer base could have an adverse affect on losses associated
with the credit terms that we give to our customers.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; SEASONALITY
Our quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, many of which are outside of our
control. We anticipate that our revenues will peak in the third and fourth
quarters of each fiscal year due primarily to the budgeting procedures of many
of our customers and the seasonal demand for the products. The first and second
quarters generally experience lower revenues and higher expenses as a percentage
of sales due to lessening customer demand because of decreased sports
activities, adverse weather conditions inhibiting customer demand, holiday
seasons, and school recesses. Therefore, we do not believe that
quarter-to-quarter comparison of operating results for preceding quarters are
necessarily meaningful. You should not rely on the results of one quarter as an
indication of our future performance.
10
MANAGING POTENTIAL GROWTH
We experienced a period of significant growth and our continued
expansion may significantly strain our management, financial, and other
resources. We believe that improvements in management and operational controls,
and operations, financial and management information systems could be needed to
manage future growth. We cannot assure you that:
- these resources will be available or in a cost-effective form
to the Company which will allow it to sustain growth at the
same levels;
- our current personnel, systems, procedures, and controls will
be adequate to support our future operations;
- we will identify, hire, train, motivate or manage required
personnel; or
- we will successfully identify and exploit existing and
potential market opportunities.
Our failure to have these resources in sufficient form or quantity
during a period of significant growth could have an adverse affect on our
operating results.
FUTURE CAPITAL REQUIREMENTS
Our cash flow from existing operations may not support an expansion of
operations or future acquisitions. We may need to seek additional third-party
financing to raise additional capital needed to support any future growth. If we
cannot obtain adequate funds from third parties we may have to forego strategic
decisions or delay, scale back, or eliminate certain aspects of our operations.
This could have a material adverse effect on our business, financial condition,
and results of operations.
DEPENDENCE ON KEY PERSONNEL
Our performance is substantially dependent on the skills, experience,
and performance of our Chief Executive Officer, Michael J. Blumenfeld, as well
as our ability to retain and motivate other officers and key employees, certain
of whom would be difficult to replace. The Company does not have an employment
agreement with Michael J. Blumenfeld. The Company does not have a "key person"
life insurance policy on any of its officers or other employees.
The loss of services of certain of these executives and personnel could
have a material adverse effect on the Company. We cannot assure you that the
services of our personnel will continue to be available to us. In addition, we
believe that our inability to attract and retain additional qualified employees,
as needed, could have a material adverse effect on the Company.
RISKS RELATED TO INTERNATIONAL SUPPLIERS
A significant amount of our revenues depends upon products purchased
from foreign suppliers, which are located primarily in the Far East. In
addition, we believe that many of the products we purchase from our domestic
suppliers are manufactured overseas.
Accordingly, we are subject to the risks of international business,
including:
- shipment delays;
11
- fluctuation in exchange rates;
- increases in import duties;
- changes in customs regulations;
- adverse economic conditions in foreign countries; and
- political turmoil.
The occurrence of any one or more of the events described above could
adversely affect our business, financial condition, and results of operations
due to an inability to make timely shipments to our customers or by utilizing
other more costly carriers or means of shipping.
RELIANCE ON THIRD PARTY CARRIERS
Our operations depend upon third party carriers to deliver our catalogs
and products to our customers. We ship our products using common carriers,
primarily UPS. The operations of such carriers are outside the Company's
control. Accordingly, our business reputation and operations are subject to many
risks, including:
- shipment delays caused by such carriers;
- labor strikes by the employees of such carriers;
- increases in delivery cost, postage rate increase; and
- other adverse economic conditions.
The occurrence of any one or more of the foregoing could adversely
affect our business, financial condition, and results of operations due to any
inability to make timely shipment to our customers or by utilizing other more
costly carriers or means of shipping.
VOLATILITY OF STOCK PRICE
The price of our common stock is determined in the marketplace and may
be influenced by many factors, including:
- the depth and liquidity of the market for our common stock;
- investor perception of the Company and the industry within
which it competes;
- quarterly variations in operating results; and
- general economic and market conditions.
Historically, the weekly trading volume of our common stock has been
relatively small. Any material increase in public float could have a significant
impact on the price of the common stock. In addition, the stock market has
occasionally experienced extreme price and volume fluctuations that often
12
affect market prices for smaller companies. These extreme price and volume
fluctuations often are unrelated or disproportionate to the operating
performance of the affected companies. Accordingly, the price of the common
stock could be affected by such fluctuations.
OUTSTANDING STOCK OPTIONS
Outstanding options may have an effect on the price of our securities.
We currently have 714,900 outstanding options, each to purchase one share of our
Common Stock, to key employees, officers, and directors under our 1998
Collegiate Pacific Inc. Stock Option Plan. These outstanding options could have
a significant adverse effect on the trading price of our common stock,
especially if a significant volume of the options was exercised and the stock
issued were immediately sold into the public market.
THE EXERCISE OF OUTSTANDING WARRANTS AND OPTIONS COULD HAVE A DILUTIVE EFFECT
As of October 24, 2003, there were 714,900 options and 2,920,003
warrants outstanding and held by shareholders and certain third parties to
purchase 3,634,903 shares of Common Stock. The options and warrants have
exercise prices ranging from $3.88 per share to $9.38 per share. The exercise of
warrants or options and the sale of the underlying shares of common stock (or
even the potential of such exercise or sale) could have a negative effect on the
market price of our common stock, and could have a dilutive impact on other
shareholders by decreasing their ownership percentage of the Company's
outstanding common stock.
If we attempt to raise additional capital through the issuance of
equity or convertible debt securities, the terms upon which we will be able to
obtain additional equity capital, if at all, may be negatively affected since
the holders of outstanding warrants and options can be expected to exercise
them, to the extent they are able, at a time when we would, in all likelihood,
be able to obtain any needed capital on terms more favorable than those provided
in such warrants or options.
DEPENDENCE OF WARRANT HOLDERS ON MAINTENANCE OF CURRENT REGISTRATION STATEMENT;
POSSIBLE LOSS OF VALUE OF WARRANTS
Before exercising the Warrants, a current registration statement (or an
exemption therefrom) must be in effect with the Commission and with the various
state securities authorities in the states where Warrant holders reside. We
intend to keep effective a registration statement covering the Warrants and the
underlying shares while the Warrants are exercisable. However, we expect to
incur substantial continuing expenses for legal and accounting fees in doing so.
There can be no assurance that we will be able to maintain a current
registration statement while the Warrants are exercisable. Our inability to
maintain an effective registration statement and qualification in appropriate
states (or exemptions therefrom) covering the underlying shares would render the
Warrants unexercisable and may deprive them of all or a portion of their value.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
We may redeem each Warrant at $0.05 per Warrant at anytime. Redemption
of the Warrants could force the Warrant holders to exercise the Warrants at a
time when it may be disadvantageous for the holders to do so or to sell the
Warrants at their then current market price when the holders might otherwise
wish to hold the Warrants for possible appreciation. Any holders who do not
exercise warrants prior to their expiration or redemption, as the case may be,
will forfeit the right to purchase the shares of Common Stock underlying the
Warrants.
13
NO ASSURANCES THAT WARRANTS WILL BE EXERCISED
Our ability to obtain additional equity capital from the exercise of
outstanding Warrants is dependent upon whether or not holders of outstanding
Warrants exercise their Warrants and we cannot assure you that any additional
warrants will be exercised. If we do not obtain adequate funds from the exercise
of Warrants, we may have to seek additional third party financing to raise
additional capital needed to support any future growth.
14
THE COMPANY
BUSINESS
The Company was originally incorporated in Pennsylvania in 1987. From
August 1989 to June 16, 1997, the Company developed and marketed drug testing
products under the name of Drug Screening Systems, Inc. On June 16, 1997, the
Company sold substantially all of its assets, changed its name to DSSI
Corporation, and thereafter had no formal operations.
On February 17, 1998, we recommenced business operations by engaging in
the catalog and mail order distribution of sports equipment. This change in our
business was accomplished through the following steps:
- The Company sold a controlling interest in the Company, which
consisted of 2,000,000 shares of our Common Stock, to Michael
J. Blumenfeld and Adam Blumenfeld. The price of the shares was
$1.00 per share, which was the average of the bid and ask
price of the Common Stock on August 18, 1997, the date of the
Stock Purchase Agreement, or a total price of $2 million.
Michael J. Blumenfeld purchased 1,960,000 shares, and Adam
Blumenfeld purchased 40,000 shares;
- Michael J. Blumenfeld sold all of the assets, including the
corporate name, of Collegiate Pacific Inc. f/k/a Nitro Sports
Inc., a Texas corporation, to the Company, at cost. Mr.
Blumenfeld formed that company in 1997 to engage in the
catalog and mail order distribution of sports equipment; and
- the Company changed its name to Collegiate Pacific Inc. at
that time.
We then entered into exclusive distribution agreements with the
following companies:
- Equipmart, Inc., a manufacturer of rollers and component parts
for the tennis industry, on February 24, 1998;
- FunNets, Inc., a manufacturer of plastic frames and nets used
as soccer goals and other related purposes, on March 7, 1998;
and
- Edwards Sports Products Limited, a manufacturer of tennis nets
and court equipment, on February 7, 2000.
On April 14, 1998, the Company acquired Product Merchandising, Inc., a
mail order distribution company that distributes products and equipment for
summer camps.
On May 31, 1998, we merged with Vantage Products International, Inc., a
distributor of baseball netting and other related baseball products.
On December 11, 1998, the Company's stockholders approved the
reincorporation of the Company from the Commonwealth of Pennsylvania to the
State of Delaware, pursuant to a merger agreement with a newly formed Delaware
corporation. The merger and reincorporation as a Delaware corporation was
effective on July 21, 1999.
15
On October 25, 1999, we acquired certain assets of Mark One Inc., a
distributor of camping and sporting good related equipment as well as numerous
items for the recreation, military and municipal markets.
On January 14, 2000, our shareholders approved an amendment to the
Company's Articles of Incorporation authorizing a one-for-five reverse stock
split, which became effective on January 19, 2000.
On February 29, 2000, we issued $2,235,000 of Subordinated Convertible
Promissory Notes to certain officers and directors of the Company and certain
third parties. Approximately $995,000 of such Notes were issued in exchange for
an equal amount of subordinated notes held by Michael J. Blumenfeld. The
remaining Notes were sold for approximately $1.4 million in cash. We used cash
proceeds to repay our outstanding commercial bank debt, to expand working
capital, and to finance stock repurchases.
On April 19, 2000, all of the Note Holders converted their Notes into
677,267 shares of Common Stock.
On June 8, 2000, the General Services Administration awarded a
long-term contract to us for the supply of sports and recreational products to
federal and military locations throughout the world. The contract includes a
most favored vendor provision which provides that all products sold by the
Company to the GSA must be at a price equal to or less than the price charged by
the Company to its other customers. Sales by the Company to the GSA during
fiscal 2001 were not material.
On September 7, 2000, we acquired Kesmil Manufacturing, Inc., a
manufacturer of a broad line of athletic equipment.
We are in the mail order marketing of sports equipment. We manufacture
and distribute our products primarily to institutional customers located
throughout the United States. Our principal customers include country clubs,
schools, YMCAs, YWCAs and similar recreational organizations, municipal
recreation departments, and other governmental agencies. We offer a broad line
of sporting equipment, including inflatable balls, nets for various sports,
standards and goals for sports, weight lifting equipment, and other recreational
products, and we also provide after-sale customer service through toll-free
numbers.
We believe that prompt delivery of a broad range of products at
competitive prices, coupled with prompt, accessible customer service,
distinguishes Collegiate Pacific from its competitors. We currently market about
3,200 sports and recreational related equipment and products to over 200,000
potential institutional, retail, Internet, and sporting good dealer type
customers. Since commencing operations, we have sold products to approximately
35,000 customers.
Our master mailing list currently includes over 200,000 potential
customers, and we intend to distribute approximately 1,300,000 catalogs and
fliers to this audience during fiscal 2004. Michael Blumenfeld, the Chief
Executive Officer of the Company with 30 years of experience in the industry,
supervised the development of this mailing list, and it is carefully maintained,
screened, and cross-checked. We subdivided this mailing list into various
combinations designed to place catalogs in the hands of the individuals making
the purchase decisions. The master mailing list is also subdivided by relevant
product types, seasons, and customer profiles. We also use other forms of
solicitations such as trade shows, telemarketing and the Internet.
Our revenues are not dependent upon any one or a few major customers.
Our institutional customers typically receive annual appropriations for sports
related equipment, which are generally spent in the period preceding the season
in which the sport or athletic activity occurs. While institutions are
16
subject to budget constraints, once allocations have been made, aggregate levels
of expenditures are typically not reduced.
We derive a significant portion of our revenues from the sale of
products purchased directly from suppliers in the Far East. Accordingly, we are
subject to the risks of this international component that may affect our ability
to deliver products in a timely and competitive manner. These risks include:
- shipment delays;
- fluctuation in exchange rates;
- increases in import duties;
- changes in customs regulations;
- adverse economic conditions in foreign countries; and
- political turmoil.
As a result, we attempt to maintain a three to six week supply of
critical inventory items in stock. Although the vast majority of products we
distribute are purchased in final form, a small percentage of the items require
minor fabrication to complete. We have welding machines and an assortment of
tools to aid in this fabrication process. The raw materials used in this process
are in the form of shipping supplies, nuts and bolts, and other commercially
available products. We believe there are multiple suppliers for these products
nationwide.
SEASONAL NATURE OF BUSINESS
We anticipate that our revenues will peak in the third and fourth
quarters of each fiscal year due primarily to the budgeting procedures of many
of our customers and the seasonal demand for our products. We generally
experience lower revenues and higher expenses as a percentage of sales during
the first and second quarters of each fiscal year due to lower customer demand
during those periods. Generally, during the months between July and December of
each fiscal year there is a lower level of sports activities at our
institutional customers, a higher degree of adverse weather conditions, a
greater number of school recesses and we have to contend with the distractions
of the holiday season.
COMPETITION
We compete principally in the institutional market with local sporting
goods dealers and other direct mail companies, which collectively dominate the
institutional market. We compete on a number of factors, including price,
relationships with customers, name recognition, product availability, and
quality of service. We believe that we have an advantage on the institutional
market over traditional sporting goods retailers because our selling prices do
not include comparable price markups attributable to wholesalers, manufacturers,
and distributors. In addition, we believe that we have an advantage over other
direct mail marketers of sporting goods because we offer superior products,
coupled with prompt and accessible service, at the most competitive prices.
EMPLOYEES
We currently employ 66 people on a full-time basis. In addition, we may
hire temporary
17
employees as seasonal increases in demand occur. None of our employees are
represented by any organized labor organization or union, and we believe our
relations with our employees are generally good.
PROPERTIES
We lease approximately 88,000 square feet in Farmers Branch, Texas,
which we use for our corporate headquarters and a warehouse facility. The lease
for this facility expires in October 2007. The Company also leases approximately
1,500 square feet in Memphis, Tennessee, which we use for a sales office. The
lease for this facility expires in 2005. We believe those facilities will be
adequate for our business needs for the foreseeable future. We do not own any
real property.
LEGAL PROCEEDINGS
None.
18
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The directors and executive officers of the Company are:
POSITIONS AND OFFICES HELD
NAME AGE WITH THE COMPANY
- ---------------------- ---- -----------------------------------------------
Michael J. Blumenfeld 57 Chairman of the Board and Chief Executive Officer
Adam Blumenfeld 33 President and Director
Arthur J. Coerver 60 Chief Operating Officer and Director
Harvey Rothenberg 61 Vice President Marketing and Director
William R. Estill 54 Chief Financial Officer, Secretary and Treasurer
Chad H. Edlein 33 Vice President Corporate Development
Jeff Davidowitz 47 Director
William H. Watkins, Jr 62 Director
Robert W. Hampton 56 Director
Michael J. Blumenfeld has served as the Company's Chairman of the Board
and Chief Executive Officer since February 1998. Mr. Blumenfeld served as
President of the Company from February 1998 to January 2000. From July 1997
until February 1998, Mr. Blumenfeld served as President and Chief Executive
Officer of Collegiate Pacific, Inc., a Texas corporation, that sold all of its
assets to the Company in February 1998. From 1992 until November 1996, Mr.
Blumenfeld served as Chairman of the Board and Chief Executive Officer of Sport
Supply Group, Inc., a company engaged in the direct mail marketing of sports
related equipment. Mr. Blumenfeld is Adam Blumenfeld's father.
Adam Blumenfeld is the Company's President and has served in that
capacity since joining the Company in January 2000. Mr. Blumenfeld is also a
member of the Company's Board of Directors. From January 1998 through December
1999, Mr. Blumenfeld was Vice President of Sales and Marketing of Sport Supply
Group, Inc., a company engaged in the direct mail marketing of sports related
equipment. Mr. Blumenfeld's other positions with Sport Supply Group included
Vice President of Youth Sales from January 1995 to January 1998, and Director of
Youth Sales from August 1993 to December 1994. Mr. Blumenfeld is Michael
Blumenfeld's son.
Arthur J. Coerver is the Company's Chief Operating Officer and has
served in that capacity since joining the Company in February 1998. From 1991
through 1997, Mr. Coerver was Vice President of Sales and Marketing of Sport
Supply Group, Inc., a company engaged in the direct mail marketing of sports
related equipment. Mr. Coerver is also a member of the Company's Board of
Directors.
Harvey Rothenberg has served as the Company's Vice President of
Marketing and served in that capacity since February 1998. From 1977 to 1998,
Mr. Rothenberg served as Vice President of Sales for Sport Supply Group, Inc., a
company engaged in the direct mail marketing of sports related equipment. Mr.
Rothenberg is also a member of the Company's Board of Directors.
William R. Estill joined the Company in July 1999 as Chief Financial
Officer and Treasurer, and has been Secretary since August 1999. From December
1997 until February 1999, Mr. Estill served as Vice President of Finance for
FWT, Inc., a manufacturer of telecommunication structures. From May 1996 to
November 1997, Mr. Estill served as Chief Financial Officer of Bearcom, Inc.
From April 1985 to May 1996, Mr. Estill served as Vice President, Chief
Financial Officer, Secretary and Treasurer for Sport Supply Group, Inc., a
company engaged in the direct mail marketing of sports related equipment. Mr.
Estill was also a member of the Board of Directors during his tenure with Sport
Supply Group, Inc. Mr.
19
Estill holds a Bachelor of Business Administration degree in Accounting from the
University of Texas at Arlington and passed the CPA exam in 1983.
Chad H. Edlein joined the Company in July 1997. From 1994 to 1997 Mr.
Edlein served as Marketing Manager for Sport Supply Group, Inc., a company
engaged in the direct mail marketing of sports related equipment.
Jeff Davidowitz is the President of Penn Footwear, a private investment
company and has served in that capacity since 1991. Mr. Davidowitz is also a
member of the Company's Board of Directors and serves on its Audit and Stock
Option Committees.
William H. Watkins, Jr. is a partner in the public accounting firm of
Watkins Uiberall, PLLC, and has served in that capacity since December 1971.
Since 1994, Mr. Watkins has also served as a member of the Tennessee Board of
Regents and as the board's Chairman of Finance and Administration. Since July
2003, he has also served as the Chairman of the Board of BKR International's
Americas Region. Mr. Watkins is also a member of the Company's Board of
Directors and serves on its Audit and Stock Option Committees.
Robert W. Hampton is a director and Group Vice President of Jones
International, Ltd. Since 1985, Mr. Hampton has held various executive positions
at Jones International, Ltd., a holding company whose subsidiaries conduct
business in several areas including cable television programming, radio
programming, advertising sales representation, education and software
development. Prior to joining Jones International, Ltd., Mr. Hampton held
various management positions at Xerox Corporation. Mr. Hampton is also a member
of the Company's Board of Directors and serves on its Audit and Stock Option
Committees.
20
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table summarizes the total compensation, for each of the
last three fiscal years, earned by the Named Executive Officers -- Mr. Michael
Blumenfeld the Chief Executive Officer and the four other executive officers who
earned over $100,000 and who were serving as an executive officer at the end of
fiscal 2003.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- SECURITIES
FISCAL UNDERLYING
NAME AND PRINCIPAL POSITIONS YEAR SALARY ($) OPTIONS
- ---------------------------- ------ ---------- ------------
Michael J. Blumenfeld 2003 172,000 25,000
Chairman of the Board and 2002 160,000 --
Chief Executive Officer 2001 140,000 95,000
Adam Blumenfeld 2003 162,000 50,000
President 2002 150,000 --
2001 138,650 45,000
Harvey Rothenberg 2003 125,000 25,000
Vice President, Marketing 2002 115,000 --
2001 105,400 40,000
Arthur J. Coerver 2003 136,000 25,000
Chief Operating Officer 2002 128,000 --
2001 118,200 40,000
William Estill 2003 160,000 40,000
Chief Financial Officer 2002 152,500 --
2001 151,800 40,000
21
STOCK OPTIONS
The following table sets forth certain information about the stock
option awards that were made to the Named Executive Officers during fiscal 2003.
All of these options are transferable to family members under specified
conditions.
OPTION GRANTS IN LAST FISCAL YEAR
PERCENTAGE OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE PRICE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE
Michael J. Blumenfeld 25,000 18.1% $ 6.08 6/24/13
Adam Blumenfeld 25,000 18.1% 6.08 6/24/13
25,000 16.2% 4.90 7/26/12
Harvey Rothenberg 10,000 7.2% 6.08 6/24/13
15,000 9.7% 4.90 7/26/12
Arthur J. Coerver 10,000 7.2% 6.08 6/24/13
15,000 9.7% 4.90 7/26/12
William Estill 20,000 14.5% 6.08 6/24/13
20,000 13.0% 4.90 7/26/12
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE MONEY OPTIONS (1)
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- ------------- ----------- -------------
Michael J. Blumenfeld 130,000 0 $ 231,750 $ 0
Adam Blumenfeld 95,000 0 137,500 0
Harvey Rothenberg 68,000 0 97,650 0
Arthur J. Coerver 69,000 0 97,650 0
William Estill 80,000 0 112,100 0
(1) Amounts were calculated using the closing price of Collegiate Pacific's
common stock on the last trading day of the fiscal year ($6.65).
22
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE FUTURE ISSUANCE UNDER
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, PRICE OF OUTSTANDING OPTIONS (EXCLUDING SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (a))
------------- ------------------- ------------------- --------------
(a) (b) (c)
Equity Compensation Plans 714,900 $5.25 203,600
Approved by Security Holders
Equity Compensation Plans Not -- -- --
Approved by Security Holders
---------- -------- ---------
Total 714,900 $5.25 203,600
23
DIRECTOR COMPENSATION
Messrs. Michael and Adam Blumenfeld, Coerver, and Rothenberg, who are
the directors that are also Collegiate Pacific employees, do not receive any
additional compensation for serving on the Board of Directors.
Annual Retainer Fee. Each non-employee director receives an annual
retainer fee of $7,500. The director receives that amount in cash. Also, each
director receives an annual grant of options to acquire 2,500 shares of the
company's common stock with an exercise price equal to the prevailing market
price of the company's common stock on the date granted.
Other Benefits. Collegiate Pacific reimburses directors for the
reasonable expenses associated with attending Board meetings and provides them
with liability insurance coverage for their activities as directors of
Collegiate Pacific.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
with respect to beneficial ownership of shares of Common Stock as of March 12,
2003, for:
- all persons who are beneficial owners of 5% or more of the
Company's Common Stock;
- each director and nominee for director;
- the Company's Chief Executive Officer and the other Named
Executive Officer in the Summary Compensation Table above; and
- all executive officers and directors as a group.
24
TOTAL AS A
OPTIONS/WARRANTS PERCENTAGE OF
NUMBER OF EXERCISABLE TOTAL SHARES
SHARES WITHIN 60 BENEFICIAL OUTSTANDING
BENEFICIAL OWNER OWNED DAYS OWNERSHIP (IF 1% OR MORE)(a)
---------------- ----- ---- --------- ------------------
Michael J. Blumenfeld 2,165,207 751,407 2,916,614 45.3%
13950 Senlac Drive, Suite 100
Dallas, TX 75234
Adam Blumenfeld 242,100 332,100 574,200 9.5%
13950 Senlac Drive, Suite 100
Dallas, TX 75234
Jeff Davidowitz 140,302(b) 50,502 190,804 3.3%
Arthur J. Coerver 36,790(c) 107,790(c) 144,580 2.5%
William H. Watkins, Jr. 43,803(d) 54,803(d) 98,606 1.7%
Harvey Rothenberg 17,117(e) 77,217(e) 94,334 1.7%
Robert W. Hampton -- 7,500 7,500 --
Chadd Edlein 14,000 60,000 74,000 1.5%
William R. Estill -- 80,000 80,000 1.3%
Directors and executive
officers as a group (9 persons) 2,659,319 1,521,319 4,180,638 58.6%
- ----------------------------
(a) - Based on the number of shares outstanding (5,689,764) at the
close of business on October 24, 2003.
(b) - Includes (i) 34,751 shares and 34,751 shares issuable upon
exercise of a warrant held by Penn Footwear Retirement Trust
of which Mr. Davidowitz is a trustee, (ii) 67,551 shares and
3,751 shares issuable upon exercise of a warrant held by JIBS
Equities of which Mr. Davidowitz is a general partner, (iii)
9,000 shares held by Penn Footwear of which Mr. Davidowitz is
President and a shareholder, (iv) 4,000 shares held by
Oldfield Company of which Mr. Davidowitz is President and a
shareholder, (v) 10,000 shares held by DVD Partners of which
Mr. Davidowitz is a general partner, and (vi) 10,000 shares
held by 3D Partners of which Mr. Davidowitz is general
partner.
(c) - Includes (i) 6,060 shares held in trust for the benefit of Mr.
Coerver, (ii) 1,212 shares held in trust for the benefit of
Mr. Coerver's spouse, and (iii) 30,303 shares issuable upon
exercise of a warrant held in trust for the benefit of Mr.
Coerver.
(d) - Includes 30,303 shares held in trust for the benefit of Mr.
Watkins and 30,303 shares issuable upon exercise of a warrant
held in trust for the benefit of Mr. Watkins.
(e) - Includes (i) 1,687 shares and 1,687 shares issuable upon
exercise of a warrant held in trust for the benefit of Mr.
Rothenberg's minor child, (ii) 3,430 shares held in trust for
the benefit of Mr. Rothenberg, (iii) 4,500 shares issuable
upon exercise of employee stock options held by Mr.
Rothenberg's spouse, and (iv) 3,030 shares issuable upon
exercise of a warrant held in trust for the benefit of Mr.
Rothenberg.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 2000, the Company issued $2,235,000 of Notes to certain
officers and directors of the Company and certain third parties. Approximately
$995,000 of the Notes were issued to Michael J. Blumenfeld in exchange for an
equal amount of subordinated notes originally issued to Mr. Blumenfeld in
exchange for cash. The remaining notes were issued in exchange for cash in the
amount of approximately $1.4 million. In April 2000, all of the note holders
converted the outstanding balance under the Notes into shares of Common Stock at
a conversion price of $3.30 per share, resulting in the issuance of 677,267
shares of Common Stock.
25
The following table sets forth the principal amount of the notes and
the number of shares the notes were converted into by each officer and director
of the Company.
NUMBER OF SHARES
ISSUED UPON
PRINCIPAL AMOUNT CONVERSION
NAME OF NOTE HOLDER OF NOTE($) OF NOTE
- ----------------------- ---------------- ----------------
Michael J. Blumenfeld 1,500,000 454,545
William A. Watkins, Jr. 100,000 30,303
Arthur J. Coerver 50,000 15,151
Jeff Davidowitz 150,000 45,455
Harvey Rothenberg 15,000 4,545
On September 7, 2000, the Company acquired the stock of Kesmil
Manufacturing, Inc., a manufacturing company owned by Michael J. Blumenfeld, the
majority stockholder and Chief Executive Officer of the Company, for the
assumption of approximately $581 thousand in notes payable to the stockholder
and a stockholder and relative of Mr. Blumenfeld, and the assumption of other
liabilities of approximately $400,000. In connection with the amendment to the
Company's Line of Credit in August 2002, those notes payable were repaid in full
by the Company. The Company was the sole customer of the acquired company and
the acquisition was accounted for similar to a pooling of interest. During
fiscal 2000, the Company purchased approximately $1.0 million of certain
inventory items from Kesmil.
26
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET
The Company's common stock trades on the American Stock Exchange under
the symbol "BOO" and its redeemable common stock purchase warrants trade on the
American Stock Exchange under the symbol "BOO/WS." Prior to June 7, 2000, the
Company's common stock traded on the NASD's Bulletin Board. The redeemable
common stock purchase warrants did not trade until May 2000.
The tables below set forth the high and low sales prices for the common
stock and the redeemable common stock purchase warrants during each of the
periods indicated, as reported on the American Stock Exchange.
COMMON STOCK FISCAL 2004 FISCAL 2003 FISCAL 2002
-------------- ----------- ----------- -----------
CALENDAR PERIOD LOW HIGH LOW HIGH LOW HIGH
--------------- --- ---- --- ---- --- ----
July 1 - September 30 $6.50 $8.10 $4.70 $6.15 $3.88 $5.65
October 1 - December 31 5.75 6.35 4.90 5.93
January 1 - March 31 4.15 5.92 5.00 7.12
April 1 - June 30 4.56 6.65 4.70 7.50
WARRANTS FISCAL 2004 FISCAL 2003 FISCAL 2002
--------- ----------- ----------- -----------
CALENDAR PERIOD LOW HIGH LOW HIGH LOW HIGH
- --------------- --- ---- --- ---- --- ----
July 1 - September 30 $3.06 $1.50 $1.10 $1.75 $0.83 $0.83
October 1 - December 31 1.00 1.80 0.90 1.25
January 1 - March 31 0.65 1.29 1.00 2.65
April 1 - June 30 0.65 1.80 1.05 2.81
HOLDERS
As of October 24, 2003, there were approximately 351 holders of record
of our common stock, and there were 5,689,764 shares of common stock issued and
outstanding and 2,920,003 common stock purchase warrants issued and outstanding.
DIVIDENDS
On September 19, 2002, the Company announced for the first time that it
would pay a cash dividend of $0.02 per share on October 11, 2002, to all
shareholders of record on September 30, 2002. The Company also declared a
quarterly cash dividend of $0.02 per share on its outstanding common stock for
the fiscal quarters ended December 31, 2002 and March 31, 2003. The quarterly
dividend for the quarters ended June 30, 2003 and September 30, 2003, was
increased to $0.025 per share. Future dividends may be paid only when, as, and
if declared by the Company's Board of Directors in its sole discretion, and will
be dependent upon then existing conditions, including the Company's financial
condition, results of operations, contractual restrictions, capital
requirements, business prospects, and such other factors as the Board deems
relevant. We currently do not anticipate paying any stock dividends in the
foreseeable future.
27
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
BACKGROUND
Collegiate Pacific Inc. ("we," "us," "our," or the "Company") is in the
mail order marketing of sports equipment business. We manufacture and distribute
our products primarily to institutional customers located throughout the United
States. Our principal customers include country clubs, schools, YMCAs, YWCAs and
similar recreational organizations, municipal recreation departments, and other
governmental agencies. We offer a broad line of sporting equipment and other
recreational products, as well as provide after-sale customer service. We
currently market about 3,200 sports and recreational related equipment and
products to over 200,000 potential institutional, retail, Internet, and sporting
good dealer type customers. Since commencing operations in early 1998, we have
sold our products to approximately 35,000 customers. References herein to
"fiscal 2002," "fiscal 2003" and "fiscal 2004" refer to our fiscal years ended
or ending, as the case may be, June 30, 2002, 2003, and 2004, respectively.
FISCAL YEAR ENDED JUNE 30, 2003 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2002
Net Sales. Net sales for the fiscal year ended June 30, 2003, increased
by approximately $4.2 million, or approximately 25.0%, compared to the same
period in 2002. We attribute the growth in net sales primarily to an increase in
the sale of manufactured products to all of our customers, an overall increase
in catalog sales, and a slight increase in dealer-related and camp-related
sales. We believe future net sales will continue to rise from current levels,
however, no assurances can be made that any future increases in net sales will
be at the same rate. We also believe that seasonality in our net sales will
continue to be a factor in future periods because of the budgeting procedures of
our customers and the seasonal demand for our products. As a result, we continue
to see an increase in demand for our products during the third and fourth
quarters of our fiscal year (January - June).
Gross Profit. The Company's gross profit for the fiscal year ended June
30, 2003, increased by approximately $1.6 million, or approximately 25.0%,
compared to the same period in 2002. As a percentage of net sales, gross profit
was approximately 37.0% for each of the fiscal years ended June 30, 2003 and
2002. The increase in gross profit was primarily due to the increase in the
Company's net sales over the prior year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the fiscal year ended June 30, 2003, increased by
approximately $1.5 million, or approximately 29%, compared to the same period in
2002. As a percentage of net sales, selling, general and administrative expenses
increased to approximately 32.4% from 31.4% for fiscal 2002. In anticipation of
achieving an increase in net sales, the Company increased selling, general and
administrative expenses as follows:
- we hired additional personnel hired to manage our increase in
net sales, which increased our salary and personnel related
costs by approximately $516 thousand;
- we mailed additional catalogs to existing and new customers,
as well as an increased our distribution of fliers and
promotional literature, which increased our advertising and
trade show expenses by approximately $504 thousand;
- we increased our property, casualty, and liability insurance
coverage, which increased our overall cost of insurance by
approximately $70 thousand; and
28
- we leased additional warehouse space to support our increase
in sales, which increased our rent and common ground
maintenance expenses by approximately $143 thousand.
Operating Profit. Operating profit increased by approximately $29
thousand for the fiscal year ended June 30, 2003, compared to the same period in
fiscal 2002. As a percentage of net sales, the operating profit decreased to
approximately 4.6% compared to 5.6% for the fiscal year ended June 30, 2002. The
slight decrease was primarily attributable to the increase in selling, general
and administrative expenses.
Interest Expense. Interest expense decreased by approximately $56
thousand for the fiscal year ended June 30, 2003, compared to the fiscal year
ended June 30, 2002. As a percentage of net sales, interest expense was
approximately 0.4% and 0.8% for the fiscal years ended June 30, 2003 and 2002,
respectively. The decrease in interest expense was due to the net cash provided
by our operating activities during fiscal 2003 and fiscal 2002, which was used
to reduce the outstanding balance of the Company's borrowings, as well as lower
interest rates during fiscal 2003. Approximately $5 thousand of the interest
expense in fiscal 2003 and $86 thousand of the interest expense in fiscal 2002
was for interest paid on the note payable to Michael J. Blumenfeld. See
"Liquidity and Capital Resources."
Income Taxes. The Company recorded an income tax benefit of
approximately $350 thousand for the fiscal year ended June 30, 2003, due to the
elimination of its valuation allowance on net deferred tax assets in the current
year. Based on the Company's operating results for the fiscal year ended June
30, 2003, and projections of future taxable income, management has determined
that it is more likely than not that the Company will realize its deferred tax
assets. Accordingly, the valuation allowance has been eliminated as at June 30,
2003. Income tax expense for the fiscal year ended June 30, 2003, would have
been approximately $330 thousand had the Company been fully taxed on its fiscal
2003 net income. The Company recorded no income taxes in fiscal 2002 due to its
valuation allowance being equal to its net deferred tax assets.
Due to the elimination of the valuation allowance at June 30, 2003, the
Company will record tax expense on all future net income at the Company's
effective tax rate and, accordingly, income tax expense (benefit) and net income
after taxes in future periods may not be comparable to amounts recorded in
fiscal 2003 and fiscal 2002.
Net Income. Net income increased by approximately $448 thousand or
55.6% for the fiscal year ended June 30, 2003, compared to the same period in
fiscal 2002. As a percentage of net sales, net income increased to approximately
5.9% for the fiscal year ended June 30, 2003 compared to 4.8% for the fiscal
year ended June 30, 2002. The increase was attributable to increased sales
activity, an increase in gross profit and the effect of the elimination of the
valuation allowance on all deferred tax assets during fiscal 2003, all of which
was partially offset by the increase in selling, general and administrative
expenses.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations for the fiscal year ended June 30,
2003, was approximately $214 thousand, compared to net cash provided by
operations of approximately $867 thousand for the same period in 2002. The
decrease in cash flow provided by operations was due primarily to an increase in
our investment in working capital.
The increase in cash and accounts receivable at June 30, 2003, compared
to June 30, 2002, was attributable to the increase in sales realized by the
Company during fiscal 2003, and the increase in
29
inventory, accounts payable and accrued expenses was primarily attributable to
the Company's acquisition of inventory to support the increased demand for its
products during fiscal 2003.
The Company used approximately $222 thousand in cash for investing
activities during fiscal 2003, the primary component of which was the purchase
of property and equipment. The Company expects to spend approximately $200
thousand for capital expenditures in fiscal 2004.
The Company generated approximately $106 thousand in cash from
financing activities for the fiscal year ended June 30, 2003. Cash was used to
repay borrowings on the note payable to stockholder of approximately $353
thousand in August 2002, purchase treasury shares of approximately $120 thousand
and to pay quarterly dividends to its stockholders of approximately $257
thousand. The company borrowed $800 thousand to finance these activities and
issued common stock upon its receipt of approximately $37 thousand from the
exercise of stock options held by its employees.
Current assets as of June 30, 2003, totaled approximately $7.1 million,
thereby providing the Company with working capital of approximately $5.1
million.
The Company's principal external source of liquidity is its $5.0
million revolving line of credit with Bank of America, N.A. (the "Line of
Credit"). The Line of Credit matures on July 15, 2004, and is secured by all of
the Company's assets. At the Company's option, borrowings under the Line of
Credit bear interest at the prevailing prime rate plus 0.5% (4.75% at June 30,
2003) or 3 month LIBOR plus 3% (4.14% at June 30, 2003). The Line of Credit
permits the Company to borrow against up to 85% of its eligible accounts
receivable and 40% of its eligible inventory, but not to exceed $5 million. As
of June 30, 2003, approximately $800 thousand was outstanding under the Line of
Credit, leaving the Company with approximately $2.8 million of additional
availability under the terms of the borrowing base formula of the Line of
Credit. Approximately $2.5 million was available at June 30, 2002. The Line of
Credit contains customary covenants and the Company must maintain certain
financial ratios pertaining to its net worth and ratio of debt to net worth. The
Company is currently in compliance with all financial covenants and management
does not believe that the financial covenants set forth in the Line of Credit
will have an adverse impact on its operations or future plans.
Since June 30, 2003, the Company has received approximately $6.3
million from the exercise of approximately 1,324,604 of the approximately
4,200,000 outstanding warrants that were issued as a dividend to all
stockholders of record on May 26, 2000. The per share exercise price of the
warrants is $5.00 per share and the warrants expire on May 26, 2005. If the
remaining 2,920,003 warrants were exercised, the Company would receive
approximately $14.6 million from the exercise of those warrants. No assurances,
however, can be made that any additional warrants will be exercised.
On October 7, 2003, the Company announced that Michael J. Blumenfeld,
the Company's Chief Executive Officer, completed an offering on a firm
commitment basis directly to Roth Capital Partners, LLC, of 1,000,000 Warrants
held by Mr. Blumenfeld at a per warrant price of $1.95. Under the terms of the
offering, Roth Capital immediately exercised the Warrants and the Company issued
1,000,000 shares of Common Stock directly to Roth Capital. Roth Capital sold
these shares to institutional investors at a price of $6.95 per share. The
Company received $5,000,000, before commissions and expenses, from the exercise
of the Warrants. The Company paid a commission to Roth Capital of $450,000 in
connection with the sale of the Warrants in the offering and the issuance to
Roth Capital of the shares of Common Stock upon Roth Capital's exercise of the
Warrants. The Company intends to use the net proceeds it received from the
exercise of the Warrants for working capital and general corporate purposes, as
well as to finance any strategic acquisitions the Company may decide to pursue.
30
We believe the Company will satisfy its short term and long-term
liquidity needs from borrowings under the Line of Credit, cash flows from
operations, and proceeds received from the exercise of outstanding warrants. We
may experience periods of higher borrowing under the Line of Credit due to the
seasonal nature of the Company's business cycle. We are actively seeking
expansion through acquisitions and/or joint ventures, and the success of such
efforts may require additional bank debt, equity financing, or private
financing.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are more fully described in Note 2
to our consolidated financial statements. However, certain of our accounting
policies are particularly important to the portrayal of our financial position
and results of operations and require the application of significant judgment by
our management. Management of the Company is required to make certain estimates
and assumptions during the preparation of consolidated financial statements in
accordance with generally accepted accounting principles. These estimates and
assumptions impact the reported amount of assets and liabilities and disclosures
of contingent assets and liabilities as of the date of the consolidated
financial statements. They also impact the reported amount of net income during
any period. Actual results could differ from those estimates. In applying those
policies, our management uses its judgment to determine the appropriate
assumptions to be used in the determination of certain estimates. Those
estimates are based on our historical experience, terms of existing contracts,
our observance of trends in our industry, information provided by our customers
and information available from other outside sources, as appropriate. Our
significant accounting policies include:
Allowance for Doubtful Accounts. We have demonstrated the ability to
make reasonable and reliable estimates of allowances for doubtful accounts based
on significant historical experience. We have historically included an allowance
for doubtful accounts in our financial statements, which we believe is a
reasonable estimate of uncollectible accounts. Because estimating our
uncollectible accounts requires significant management judgment and that our use
of different estimates that we reasonably could have used would have an impact
on our reported accounts receivable balance, we believe that the accounting
estimate related to our allowance for doubtful accounts is a "critical
accounting estimate." Management of the Company has discussed the development
and selection of this critical accounting estimate with the audit committee of
our board of directors and the audit committee has reviewed the company's
disclosure relating to it in this MD&A.
In preparing our financial statements for the fiscal year ended June
30, 2003, we estimated our allowance for doubtful accounts to be $121.1
thousand, and we reduced our accounts receivable by that amount. Our June 30,
2003 estimate for our allowance for doubtful accounts was approximately $25
thousand more than our estimate for the fiscal year ended June 30, 2002. Our
estimate of our allowance for doubtful accounts is based on our significant
historical experience with actual write-offs of uncollectible doubtful accounts.
In addition to the other considerations discussed above, our estimate of
doubtful accounts in future periods may change based on general economic
conditions that exist at the time we make our estimate. The increase in the
amount of our allowance for doubtful accounts for the fiscal year ended June 30,
2003 was due to the increase in accounts receivable at June 30, 2003 compared to
June 30, 2002.
31
Deferred Taxes. Estimates of deferred income taxes and the significant
items giving rise to the deferred assets and liabilities reflect management's
assessment of actual future taxes to be paid on items reflected in the financial
statements, giving consideration to both timing and the probability of
realization. Actual income taxes could vary from these estimates due to future
changes in income tax law or based upon review of our tax returns by the IRS, as
well as operating results of the Company that vary significantly from budgets.
Because estimating our deferred taxes payable requires significant management
judgment and that our use of different estimates that we reasonably could have
used would have an impact on our reported deferred tax balances, we believe that
the accounting estimate related to our deferred income taxes is a "critical
accounting estimate." Management of the Company has discussed the development
and selection of this critical accounting estimate with the audit committee of
our board of directors and the audit committee has reviewed the company's
disclosure relating to it in this MD&A.
Long-Lived Assets. We assess the recoverability of the carrying value
of long-lived assets periodically. If circumstances suggest that long-lived
assets may be impaired, and a review indicates that the carrying value will not
be recoverable, the carrying value is reduced to its estimated fair value. As of
June 30, 2003, the balance sheet includes approximately $800 thousand of
goodwill and intangible assets, net, and $550 thousand of fixed assets, net. The
Company has concluded that no impairment write-off is necessary. Because
estimating the recoverability of the carrying value of long-lived assets
requires significant management judgment and that our use of different estimates
that we reasonably could have used would have an impact on our reported net
long-lived assets, we believe that the accounting estimates related to our
impairment testing are "critical accounting estimates." Management of the
Company has discussed the development and selection of this critical accounting
estimate with the audit committee of our board of directors and the audit
committee has reviewed the company's disclosure relating to it in this MD&A.
32
DESCRIPTION OF SECURITIES
GENERAL
As of the closing of the offering, the Company's authorized capital
stock will consist of 50,000,000 shares of Common Stock, par value $.01 per
share and 1,000,000 shares of Preferred Stock, par value $0.01 per share.
COMMON STOCK
The holders of shares of Common Stock are entitled to one vote per
share on all matters to be voted on by stockholders. The holders of Common Stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of legally available funds. See
"Dividends." In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities then outstanding. The Common Stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and nonassessable.
PREFERRED STOCK
As of the date of this Prospectus, there are no outstanding shares of
Preferred Stock. The Board of Directors may authorize the issuance of Preferred
Stock in one or more series and may determine, with respect to any such series,
the designations, powers, preferences, and rights of such series, and its
qualifications, limitations, and restrictions, including, without limitation:
- The designation of the series;
- The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the
designations for such series) increase or decrease (but not
below the number of shares of such series then outstanding);
- Whether dividends, if any, will be cumulative or noncumulative
and the dividend rate of the series;
- The conditions upon which and the dates at which dividends, if
any, will be payable, and the relation that such dividends, if
any, will bear to the dividends payable on any other class or
classes of stock;
- The redemption rights and price or prices, if any, for shares
of the series;
- The terms and amounts of any sinking fund provided for the
purchase or redemption of share of the series;
- The amounts payable on and the preferences, if any, of shares
of the series, in the event of any voluntary or involuntary
liquidation, dissolution, or winding up of the affairs of the
Company;
- Whether the shares of the series will be convertible into
shares of any other class or
33
series, or any other security, of the Company or any other
corporation, and, if so, the specification of such other class
or series or such other security, the conversion price or
prices or rate or rates, any adjustments, the date or dates as
of which such shares will be convertible and all other terms
and conditions upon which such conversion may be made; and
- The voting rights, if any, of the holders of shares of such
series.
COMMON STOCK PURCHASE WARRANTS
Special Dividend of Warrants
Each Warrant entitles the holder to purchase one share of Common Stock
at an exercise price of $5.00 per share. Warrants are exercisable through May
26, 2005 provided that at the time of exercise the Common Stock is qualified for
sale or exempt from qualification under applicable state securities laws. The
Company has the right at any time to call the Warrants for cancellation by
giving at least 30 days, but not more than 90 days, notice, at a price of $0.05
per Warrant. Holders of Warrants automatically forfeit their rights to purchase
the shares of Common Stock issuable upon exercise of such Warrants unless the
Warrants are exercised before the close of business on the business day
immediately prior to the date set for redemption. A notice of redemption shall
be mailed to each of the registered holders of the Warrants by First Class mail,
postage prepaid, at least 30 days before the date fixed for redemption. The
notice of redemption shall specify the redemption price, the date fixed for
redemption, the place where the Warrant certificates shall be delivered and the
redemption price to be paid, and that the right to exercise a Warrant shall
terminate at 5:00 p.m. (New York City time) on the business day immediately
preceding the date fixed for redemption.
The Warrants may be exercised upon surrender of the Warrant
certificate(s) on or prior to the expiration or the redemption date at the
offices of Continental Stock Transfer & Trust Company, the Company's warrant
agent with the subscription form on the reverse side of the certificate(s)
completed and executed as indicated, accomplished by payment (in the form of a
certified or cashier's check payable to the order of the Company) of the full
exercise price for the number of warrants being exercised.
The exercise price and number and kind of shares of Common Stock or
other securities or assets purchasable on exercise of the Warrants and the
cancellation price are subject to adjustment if the Company:
- Combines or subdivides its outstanding shares of Common Stock,
including stock splits effected through a dividend; or
- Merges or consolidates with another corporation.
There will be no adjustment to the Warrants if the Company:
- Makes any cash dividends or asset distributions with respect
to outstanding shares of Common Stock;
- Sells additional shares of Common Stock; or
- Sells all or substantially all of its assets.
34
- In the event of any other type of recapitalization or
reorganization of the Company, the Company may, at its option,
provide for adjustment to the Warrants' terms.
The Company is not required to issue fractional shares of Common Stock,
and, in lieu of a fractional share, the Company will make a cash payment based
upon the current market value of such fractional shares. The Warrants holder
will not have any right as a shareholder of the Company unless or until the
holder exercises the Warrants.
SUBORDINATED CONVERTIBLE PROMISSORY NOTES
GENERAL. The Notes were general obligations of ours limited to
$2,235,000 in aggregate principal amount. The Notes bore interest at a variable
rate equal to the Prime Rate plus 2 1/2 percentage points per year.
NOTE HOLDERS. The following table and accompanying footnotes identify
each of the Note Holders based upon information provided to the Company, set
forth as of April 19, 2000, the date the Note Holders converted their Notes into
shares of Common Stock. This information also states the principal amount of the
Notes, the number of shares the Notes were converted into, shares beneficially
held by or acquired by, as the case may be, each Note Holder. Beneficial
ownership is stated as of the conversion of the Notes. Percentages are based on
3,679,340 shares of Common Stock outstanding on April 19, 2000.
Number of Shares Number of Shares
Principal Amount Issued Upon Conversion Beneficially
Name of Note Holder of Note of Note(1) Owned(2) Percent of Class(3)
- ------------------- ---------------- ---------------------- ---------------- -------------------
Michael J. Blumenfeld, $1,500,000 454,545 4,344,614(4) 67.7%
Chief Executive Officer of
the Company
Watkins Brothers Trust $ 100,000 30,303 88,606(5) 2.0%
Arthur J. Coerver, IRA $ 20,000 6,060 100,580(6) 1.9%
Arthur J. Coerver $ 26,000 7,878 100,580(6) 1.9%
Colleen C. Coerver, IRA $ 4,000 1,212 100,580(6) 1.9%
Penn Footwear Retirement $ 50,000 15,151 305,606(7) 6.8%
Trust
Davidowitz Foundation Inc. $ 50,000 15,151 32,302(8) *
JIBS Equities, L.P. $ 50,000 15,151 305,606(7) 6.8%
William Davidowitz $ 100,000 30,303 110,660(9) 2.5%
Robert W. Philip or Sharon $ 50,000 15,151 48,302(10) 1.1%
A. Philip Joint Tenants
with Right of Survivorship
Myrna G. Kulp(11) $ 100,000 30,303 65,926 1.5%
Harvey Rothenberg and $ 5,000 1,515 18,432(12) *
Elizabeth Rosenberg
Harvey Rothenberg, IRA $ 10,000 3,030 18,432(12) *
H. I. Schendle IRA Rollover $ 50,000 15,151 48,902(13) 1.1%
Eric Green GST Trust $ 120,000 36,363 72,726 1.7%
Total $2,235,000 677,267
*Less than one percent.
- ----------
(1) The number of shares issued upon conversion of the Notes is based on a
conversion price equal to $3.30 per share, with the Note Holder receiving
a cash payment in lieu of any fractional shares that would otherwise be
issued.
(2) As required by SEC regulations, the number of shares shown as
beneficially owned includes shares that could be purchased within 60 days
after the date of this Prospectus. The table shows the total shares
issued on the conversion of all
35
of outstanding Notes as well as the shares issuable upon the exercise of
all Warrants to acquire shares of Common Stock described in this
Prospectus. The actual number of shares of Common Stock issuable upon the
exercise of the Warrants is subject to adjustment and could be materially
less than the number estimated in this table. This variation is due to
factors that cannot be predicted by us at this time. The most significant
of these factors is the future market price of our Common Stock.
(3) The percentage of each Note Holder is based on the beneficial ownership
of that Note Holder divided by the sum of the current outstanding shares
of Common Stock plus the additional shares, if any, that would be issued
to that Note Holder (but not any other shareholder) when exercising any
Warrant or other right in the future.
(4) Consists of 1,719,462 shares of Common Stock, 454,545 shares issued upon
conversion of a Note on April 19, 2000, 10,000 shares issuable upon
exercise of an option expiring February 24, 2009, 20,000 shares issuable
upon exercise if an option expiring August 15, 2010, and 2,140,607 shares
issuable upon exercise of a Warrant expiring May 26, 2005, issued as a
special dividend of warrants on shares of Common Stock issued upon
conversion of a Note on April 19, 2000.
(5) Consists of 13,500 shares of Common Stock, 30,303 shares held in trust
for the benefit of Mr. Watkins issued upon conversion of a Note on April
19, 2000, 1,000 shares issuable upon exercise of an option expiring
February 24, 2009, 13,500 shares issuable upon exercise of a Warrant
expiring May 26, 2005, and 30,303 shares held in trust for the benefit of
Mr. Watkins issuable upon exercise of a Warrant expiring May 26, 2005
issued as a special dividend of warrants on shares of Common Stock issued
upon conversion of a Note on April 19, 2000.
(6) Consists of 22,640 shares of Common Stock, 6,060 shares held in trust for
the benefit of Mr. Coerver issued upon conversion of a Note on April 19,
2000, 1,212 shares held in trust for the benefit of Mr. Coerver's spouse
issued upon conversion of a Note on April 19, 2000, 7,878 shares issued
upon conversion of a Note on April 19, 2000, 5,000 shares issuable upon
exercise of an option expiring February 24, 2009, 22,640 shares issuable
upon exercise of a Warrant expiring May 26, 2005, 6,060 shares held in
trust for the benefit of Mr. Coerver issuable upon exercise of a Warrant
expiring May 26, 2005 issued as a special dividend of warrants on shares
of Common Stock issued upon conversion of a Note on April 19, 2000, 1,212
shares held in trust for the benefit of Mr. Coerver's spouse issuable
upon exercise of a Warrant expiring May 26, 2005 issued as a special
dividend of warrants on shares of Common Stock issued upon conversion of
a Note on April 19, 2000, and 7,878 shares issuable upon exercise of a
Warrant expiring May 26, 2005 issued as a special dividend of warrants on
shares of Common Stock issued upon conversion of a Note on April 19,
2000.
(7) Consists of 122,000 shares of Common Stock, 30,303 shares issued upon
conversion of a Note on April 19, 2000, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 122,000 shares issuable
upon exercise of a Warrant expiring May 26, 2005, and 30,303 shares
issuable upon exercise of a Warrant expiring May 26, 2005 issued as a
special dividend of warrants on shares of Common Stock issued upon
conversion of a Note on April 19, 2000.
(8) Consists of 1,000 shares of Common Stock, 15,151 shares issued upon
conversion of a Note on April 19, 2000, 1,000 shares issuable upon
exercise of a Warrant expiring May 26, 2005, and 15,151 shares issuable
upon exercise of a Warrant expiring May 26, 2005 issued as a special
dividend of warrants on shares of Common Stock issued upon conversion of
a Note on April 19, 2000.
(9) Consists of 8,500 shares of Common Stock, 15,151 shares issued upon
conversion of a Note on April 19, 2000, 1,000 shares issuable upon
exercise of an option expiring February 24, 2009, 8,500 shares issuable
upon exercise of a Warrant expiring May 26, 2005, and 15,151 shares
issuable upon exercise of a Warrant expiring May 26, 2005 issued as a
special dividend of warrants on shares of Common Stock issued upon
conversion of a Note on April 19, 2000.
(10) Consists of 25,000 shares of Common Stock, 30,303 shares issued upon
conversion of a Note on April 19, 2000, 25,000 shares issuable upon
exercise of a Warrant expiring May 26, 2005, and 30,303 shares issuable
upon exercise of a Warrant expiring May 26, 2005 issued as a special
dividend of warrants on shares of Common Stock issued upon conversion of
a Note on April 19, 2000.
(11) Myrna G. Kulp is Michael J. Blumenfeld's sister-in-law.
(12) Consists of 12,200 shares of Common Stock, 1,687 shares of Common Stock
held in trust for the benefit of Mr. Rothenberg's child, 3,030 shares
held in trust for the benefit of Mr. Rothenberg issued upon conversion of
a Note on April 19, 2000, 1,515 shares issued upon conversion of a Note
on April 19, 2000, 20,000 shares issuable upon exercise of an option
expiring August 15, 2010, 3,000 shares issuable upon exercise of an
option expiring February 24, 2009, 1,000 shares issuable upon exercise of
an option expiring February 24, 2009 held by Mr. Rothenberg's spouse,
1,687 shares issuable upon exercise of a Warrant expiring May 26, 2005,
12,200 shares held in trust for the benefit of Mr. Rothenberg issuable
upon exercise of a Warrant expiring May 26, 2005 issued as a special
dividend of warrants on shares of Common Stock issued upon conversion of
a Note on April 19, 2000, and 1,515 shares issuable upon exercise of a
Warrant expiring
36
May 26, 2005 issued as a special dividend of warrants on shares of Common
Stock issued upon conversion of a Note on April 19, 2000.
(13) Consists of 9,300 shares of Common Stock, 15,151 shares issued upon
conversion of a Note on April 19, 2000, 9,300 shares issuable upon
exercise of a Warrant expiring May 26, 2005, and 15,151 shares issuable
upon exercise of a Warrant expiring May 26, 2005 issued as a special
dividend of warrants on shares of Common Stock issued upon conversion of
a Note on April 19, 2000.
WARRANT AGENT, STOCK TRANSFER AGENT AND REGISTRAR
The warrant agent, stock transfer agent and registrar for the Common
Stock is Continental Stock Transfer & Trust Company.
STOCKHOLDER REPORTS
The Company furnishes its stockholders with annual reports containing
audited financial statements and may furnish its stockholders quarterly or
semi-annual reports containing unaudited financial information.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Section 203 of the Delaware General Corporation Law
The Company is subject to the provisions of Delaware General
Corporation Law ("DGCL") Section 203 (the "Anti-takeover Law") regulating
corporate takeovers. The Anti-takeover Law prevents certain Delaware
corporations from engaging, under certain circumstances, in a "business
combination" (which includes a merger or sale of more than 10% of the
corporation's assets) with any "interested stockholder" (defined as a
stockholder who acquires 15% or more of the corporation's outstanding voting
stock without the prior approval of the corporation's Board of Directors) for
three years following the date that such stockholder became an "interested
stockholder." A Delaware corporation may "opt out" of the Anti-takeover Law with
an express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from an
amendment approved by at least a majority of the outstanding voting shares. The
Company has not "opted out" of the application of the Anti-takeover Law.
LEGAL MATTERS
The validity of the Shares and the Warrants offered hereby will be
passed upon for the Company by Sayles, Lidji & Werbner, A Professional
Corporation, Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company as of June 30,
2003 and June 30, 2002, and for the years then ended, are included in the
Registration Statement of which this Prospectus is a part in reliance on the
report of Grant Thornton LLP, independent certified public accountants, which
report is included herein. The consolidated financial statements audited by
Grant Thornton LLP have been included herein in reliance on their reports given
on their authority as experts in accounting and auditing.
INDEMNIFICATION
The Company's Bylaws provide that any officer or director who is made a
party to or is threatened to be made a party to or is otherwise involved in any
action, suit, or proceeding, whether civil,
37
criminal, administrative, or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she is or was an officer or a director of the
Company or is or was serving at the request of the Company as a director or an
officer of another entity shall be indemnified and held harmless by the Company
to the fullest extent authorized by the DGCL against all expense, liability, and
loss reasonably incurred or suffered by such person in connection therewith. The
right to indemnification includes the right to be paid by the Company for
expenses incurred in defending any such proceeding in advance of its final
disposition. Officers and directors are not entitled to indemnification if such
persons did not meet the applicable standard of conduct set forth in the DGCL
for officers and directors.
DGCL Section 145 provides, among other things, that the Company may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that the person is or was a
director, officer, employee or agent of the Company, or is or was serving at the
Company's request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding. The power to indemnify applies (a) if such person is successful
on the merits or otherwise in defense of any action, suit or proceeding, or (b)
if such person acted in good faith and in a manner he reasonably believed to be
in the best interest, or not opposed to the best interest, of the Company and
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The power to indemnify applies to actions
brought by or in the right of the Company as well, to the extent of expenses
(including attorneys' fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the Company, except that no indemnification
shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Company, unless and only to the
extent that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
The indemnification provisions contained in the Company's Bylaws are
not exclusive of any other rights to which a person may be entitled by law,
agreement, vote of stockholders or disinterested directors or otherwise.
Insofar as indemnification by the Company for liabilities arising under
the Securities Act may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, the Company has
been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Index to Consolidated Financial Statements................................................... F-1
Report of Independent Certified Public Accountants........................................... F-2
Consolidated Balance Sheets as of June 30, 2003 and 2002..................................... F-3
Consolidated Statements of Income for the years ended June 30, 2003 and 2002................. F-4
Consolidated Statements of Stockholders' Equity for the years ended June 30,
2003 and 2002................................................................................ F-5
Consolidated Statements of Cash Flows for the years ended June 30, 2003 and 2002............. F-6
Notes to Consolidated Financial Statements................................................... F-7
F-1
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Stockholders and Board of Directors of Collegiate Pacific Inc.
We have audited the accompanying consolidated balance sheets of
Collegiate Pacific Inc. and Subsidiary as of June 30, 2003 and 2002, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Collegiate Pacific Inc. and Subsidiary as of June 30, 2003 and 2002, and the
consolidated results of their operations and their consolidated cash flows for
the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Grant Thornton LLP
Dallas, Texas
August 15, 2003
F-2
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2003 AND 2002
ASSETS
2003 2002
---- ----
Current assets:
Cash and cash equivalents $ 365,713 $ 267,362
Accounts receivable, net of allowance for doubtful accounts
of $121,139 in 2003 and $96,181 in 2002 2,702,551 1,990,997
Inventories 3,691,615 2,984,803
Prepaid expenses and other current assets 218,030 149,442
Current portion of deferred income taxes 102,171 --
-------------- -------------
Total current assets 7,080,080 5,392,604
Property, plant and equipment, net of accumulated depreciation
of $629,205 in 2003 and $445,635 in 2002 541,055 502,275
Other assets:
License agreements, net of accumulated amortization of
$118,915 in 2003 and $82,759 in 2002 116,514 152,670
Goodwill 544,375 544,375
Deferred income taxes 304,646 --
Other assets, net 238,654 260,798
-------------- -------------
Total assets $ 8,825,324 $ 6,852,722
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
2003 2002
---- ----
Current liabilities:
Accounts payable $ 1,642,732 $ 1,154,398
Accrued expenses 205,505 128,648
Dividends payable 107,704 --
Income taxes payable 54,789 --
Other current liabilities -- 7,553
-------------- -------------
Total current liabilities 2,010,730 1,290,599
Line of credit 800,000 --
Notes payable to stockholders -- 353,063
-------------- -------------
Total liabilities 2,810,730 1,643,662
Stockholders' equity:
Common stock, $.01 par value; authorized 50,000,000 shares,
Issued: 4,308,169 in 2003 and 4,300,659 in 2002 43,082 43,007
Additional paid-in capital 6,387,090 6,607,546
Retained earnings(accumulated deficit) 201,065 (945,080)
Treasury shares, at cost: 80,326 shares in 2003 and 59,526
Shares in 2002 (616,643) (496,413)
-------------- -------------
Total stockholders' equity 6,014,594 5,209,060
-------------- -------------
Total liabilities and stockholders' equity $ 8,825,324 $ 6,852,722
============== =============
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
---- ----
Net sales $ 21,075,893 $ 16,901,125
Cost of sales 13,268,532 10,654,442
------------ ------------
Gross profit 7,807,361 6,246,683
Selling, general and administrative expenses 6,839,005 5,307,390
------------ ------------
Operating profit 968,356 939,293
------------ ------------
Other income (expense):
Interest expense (84,525) (140,888)
Interest income 3,200 63
Miscellaneous 17,186 7,020
------------ ------------
Total other expense (64,139) (133,805)
------------ ------------
Income before provision for income taxes 904,217 805,488
Income tax benefit (349,632) --
------------ ------------
Net income $ 1,253,849 $ 805,488
============ ============
Weighted average shares of common stock outstanding -basic 4,225,784 4,225,213
============ ============
Weighted average shares of common stock outstanding -diluted 4,669,574 4,669,008
============ ============
Net income per share of common stock - basic $ 0.30 $ 0.19
============ ============
Net income per share of common stock - diluted $ 0.27 $ 0.17
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
ADDITIONAL RETAINED EARNINGS RECEIVABLE
COMMON STOCK PAID-IN (ACCUMULATED TREASURY SHARES FROM
SHARES AMOUNT CAPITAL DEFICIT) SHARES AMOUNT STOCKHOLDER TOTAL
---------- --------- ---------- --------- ------ --------- ----------- ----------
Balances at July 1, 2001 4,264,773 $ 42,648 $6,452,278 $(1,750,568) 36,226 $(366,470) $(4,995) $4,372,893
Issuance of stock for
Cash 20,000 200 64,400 -- -- -- -- 64,600
Purchase of stock for cash -- -- -- -- 23,300 (129,943) -- (129,943)
Issuance of stock for
amendment to license agreement 15,886 159 90,868 -- -- -- -- 91,027
Payment of notes
receivable from
Stockholder -- -- -- -- -- 4,995 4,995
Net income -- -- -- 805,488 -- -- -- 805,488
---------- --------- ---------- ----------- ------ --------- ------- ----------
Balances at June 30, 2002 4,300,659 43,007 6,607,546 (945,080) 59,526 (496,413) -- 5,209,060
Issuance of stock for
Cash 7,510 75 36,455 -- -- -- -- 36,530
Cash dividends -- -- (256,911) (107,704) -- -- -- (364,615)
Purchase of stock
for cash -- -- -- -- 20,800 (120,230) -- (120,230)
Net income -- -- -- 1,253,849 -- -- -- 1,253,849
---------- --------- ---------- ----------- ------ --------- ------- ----------
Balances at June 30, 2003 4,308,169 $ 43,082 $6,387,090 $ 201,065 80,326 $(616,643) $ -- $6,014,594
========== ========= ========== =========== ====== ========= ======= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
---- ----
Cash flows from operating activities:
Net income $ 1,253,849 $ 805,488
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 183,571 187,209
Amortization 58,300 60,984
Bad debt expense 78,373 53,116
Deferred income taxes (406,817) --
Change in operating assets and liabilities:
Accounts receivable (789,927) (247,034)
Inventories (706,812) (197,634)
Prepaid expenses and other current assets (68,588) (3,114)
Other assets, net (7,553) --
Accounts payable 488,334 212,269
Accrued expenses 76,857 4,458
Income taxes payable 54,789 --
Other liabilities -- (8,591)
----------- -----------
Net cash provided by operating activities 214,376 867,151
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (222,351) (166,012)
Cash received from notes receivable from stockholders -- 4,995
----------- -----------
Net cash used in investing activities (222,351) (161,017)
----------- -----------
Cash flow from financing activities:
Net change in revolving line of credit 800,000 (420,000)
Payments on notes payable to stockholders (353,063) (302,937)
Payment of dividends (256,911) --
Cash paid for treasury shares (120,230) (129,943)
Proceeds from issuance of common stock 36,530 64,600
----------- -----------
Net cash provided by (used in) financing activities 106,326 (788,280)
----------- -----------
Increase (decrease) in cash 98,351 (82,146)
Cash and cash equivalents at beginning of year 267,362 349,508
----------- -----------
Cash and cash equivalents at end of year $ 365,713 $ 267,362
=========== ===========
Noncash investing and financing activities:
Common stock issued for amendment to license agreement $ -- $ 91,027
=========== ===========
Cash payments for:
Income taxes $ -- $ --
=========== ===========
Interest $ 84,525 $ 162,071
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
(1) GENERAL AND BACKGROUND
Collegiate Pacific Inc. ("CPI") was incorporated on April 10, 1997 and
began business in June 1997. The Company is a Delaware corporation and is
primarily engaged in the mail order marketing of professional sports equipment
to schools, colleges and other organizations throughout the United States.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of CPI and
its wholly owned subsidiary Kesmil Manufacturing, Inc. ("KM" and, together with
CPI, the "Company"). Significant intercompany accounts and transactions have
been eliminated.
FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS
Financial instruments, which are potentially subject to concentrations
of credit risk, consist principally of cash, accounts receivable and notes
payable. Cash deposits are placed with high credit quality financial
institutions to minimize risk. Accounts receivable are unsecured. The fair value
of these financial instruments approximate their carrying values due to their
short-term nature or their index tied to market rates.
ESTIMATES AND ASSUMPTIONS
Management uses estimates and assumptions in preparing financial
statements in accordance with accounting principles generally accepted in the
United States of America. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could vary from the estimates used in preparing the accompanying financial
statements.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
ACCOUNTS RECEIVABLE
The Company's accounts receivable are due primarily from customers in
the institutional and sporting goods dealer market. Credit is extended based on
evaluation of each customer's financial condition and, generally collateral is
not required except on credit extension to international customers. Accounts
receivable are generally due within 30 days and are stated in amounts due from
customers net of an allowance for doubtful accounts. Accounts outstanding longer
than contractual payment terms are considered past due. The Company records an
allowance on a specific basis by considering a number of factors, including the
length of time the trade accounts receivable are past due, the Company's
previous loss history, the customer's current ability to pay its obligation to
the Company, and the condition of the general economy and the industry as a
whole. The Company writes-off accounts receivable when they become
uncollectible, and payments subsequently received on such receivables are
credited against write-offs in the period the payment is received.
F-7
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
Changes in the Company's allowance for uncollectible accounts for the
years ended June 30, 2003 and 2002 are as follows:
Year Ended June 30,
-------------------
2003 2002
---- ----
Beginning balance $ 96,181 $ 87,187
Bad debt expense 78,373 53,116
Accounts written off, net of recoveries (53,415) (44,122)
--------- ---------
Ending balance $ 121,139 $ 96,181
========= =========
INVENTORIES
Inventories are carried at the lower of cost or market using the
average cost method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives (5 to 7 years).
The cost of maintenance and repairs is expensed as incurred and significant
renewals and betterments are capitalized.
GOODWILL
Goodwill represents the excess of the purchase price paid and
liabilities assumed over the estimated fair market value of assets acquired.
Goodwill is tested for impairment annually and whenever there is an impairment
indicator. Impairment will be recognized if the fair value of goodwill is less
than the carrying amount of the goodwill.
LICENSE AGREEMENTS AND TRADEMARKS
License agreements represent amounts paid to acquire exclusive
distribution rights for specific products and are amortized over their estimated
useful lives of 5 to 10 years.
Trademarks represent amounts paid to acquire the rights to brand
specific products or categories of products with recognizable brands in certain
sporting good categories and are amortized over 15 years.
VALUATION OF LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of depreciable
and amortizable long-lived assets whenever events or changes in circumstances
indicate that the carrying amount may not be fully recoverable. If the total of
the expected future undiscounted cash flows is less than the carrying amount of
the asset, a loss is recognized based on the amount by which the carrying value
exceeds the asset's fair value.
STOCK BASED COMPENSATION
At June 30, 2003, the Company has a stock-based employee compensation
plan, which is described more fully in Note 9. The Company accounts for the plan
under the recognition and measurement principles of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. No stock-based compensation cost is reflected in net income, as
all options granted under the plan had an exercise price equal to the market
price of the underlying common stock on the date of grant. The following table
illustrates the effect on net income
F-8
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
and income per share if the Company had applied the fair value recognition
provisions of Financial Accounting Standards Board ("FASB") SFAS No. 123,
"Accounting for Stock-based Compensation," to stock-based employee compensation.
Year Ended June 30,
-------------------
2003 2002
---- ----
Net income, as reported $ 1,253,849 $ 805,488
Stock based compensation expense recorded $ -- $ --
Deduct: Total stock-based employee
compensation expense determined using
the fair value based method for all awards,
net of related tax effects (1,109,690) (98,325)
------------- -------------
Pro forma income $ 144,159 $ 707,163
============= =============
Income per share:
Basic - as reported $ 0.30 $ 0.19
Basic - pro forma $ 0.03 $ 0.17
Diluted - as reported $ 0.27 $ 0.17
Diluted - pro forma $ 0.03 $ 0.15
INCOME TAXES
The Company utilizes the asset and liability approach in its reporting
for income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.
ADVERTISING
Advertising expenses for the fiscal years ended June 30, 2003 and 2002
were approximately $1.8 million and $1.3 million, respectively. No advertising
costs were capitalized at June 30, 2003 or 2002.
INCOME PER SHARE
Basic income per common share is computed by dividing the net income by
the weighted average number of shares of common stock outstanding. Diluted
income per share is computed based on weighted average number of shares
outstanding increased by the effect of stock options and warrants when dilutive.
REVENUE RECOGNITION
The Company recognizes revenue upon its shipment of inventory to
customers. A provision is made for returns, which are based upon historical
rates of return experienced by the Company.
F-9
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
SHIPPING AND HANDLING COSTS
Shipping and handling costs are included in cost of sales.
(3) INVENTORIES
Inventories consist of the following:
June 30,
--------
2003 2002
---- ----
Raw materials $ 310,871 $ 232,064
Work in progress 83,229 42,587
Finished goods 3,297,515 2,710,152
---------- ----------
$3,691,615 $2,984,803
========== ==========
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
June 30,
--------
2003 2002
---- ----
Fixtures and equipment $ 796,203 $ 597,763
Manufacturing equipment 374,057 350,147
----------- -----------
Total property and equipment 1,170,260 947,910
Less accumulated depreciation (629,205) (445,635)
----------- -----------
Property and equipment, net $ 541,055 $ 502,275
=========== ===========
(5) INTANGIBLE ASSETS
Intangible assets consist of the following:
June 30,
-----------------------------------------------
2003 2002
----------------------- -----------------------
Gross Gross
carrying Accumulated carrying Accumulated
value Amortization value amortization
----- ------------ ----- ------------
Amortizable intangible assets
- -----------------------------
License agreements $235,429 $118,915 $235,429 $ 82,759
Trademarks 330,642 108,090 330,642 86,048
-------- -------- -------- --------
Total amortizable intangible assets $566,071 $227,005 $566,071 $168,807
======== ======== ======== ========
Intangible assets not subject to amortization
- ---------------------------------------------
Goodwill $544,375 $ -- $544,375 $ --
======== ======== ======== ========
Amortization expense related to intangible assets totaled approximately $58
thousand and $61 thousand during the years ended June 30, 2003 and 2002,
respectively. The aggregate estimated amortization expense for intangible assets
for each of the fiscal years ending June 30 is as follows:
F-10
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
Year ended
June 30,
- ----------
2004 $ 49,066
2005 49,066
2006 32,171
2007 31,146
2008 31,146
(6) LINE OF CREDIT
On August 22, 2002, the Company and Bank of America, N.A. agreed to
amend the terms of the Company's existing revolving line of credit (the "Line of
Credit") by increasing the line from $2.5 million to $5.0 million and extending
the term of the facility to July 15, 2004. The Line of Credit allows the Company
to borrow up to 85% of its eligible accounts receivable and up to 40% of its
eligible inventories. This facility includes a provision for letters of credit.
At the Company's option, borrowings under the Line of Credit bear interest at
the prevailing prime rate plus 0.5% (4.75% at June 30, 2003) or LIBOR plus 3%.
As of June 30, 2003, approximately $800 thousand was outstanding under the Line
of Credit, leaving the Company with approximately $2.8 million of additional
availability under the terms of the borrowing base formula of the Line of
Credit. Approximately $2.5 million was available at June 30, 2002. The Line of
Credit contains customary covenants and the Company must maintain certain
financial ratios pertaining to its net worth and ratio of debt to net worth. The
Company is currently in compliance with all financial covenants and management
does not believe that the financial covenants set forth in the Line of Credit
will have an adverse impact on its operations or future plans.
(7) FEDERAL INCOME TAXES
The temporary differences that give rise to the deferred tax assets or
liabilities are as follows:
June 30,
------------------------
2003 2002
---- ----
Deferred tax assets
Accounts receivable $ 44,821 $ 32,702
Inventories 26,236 23,807
Net operating loss carryforward 361,842 383,782
Other 2,379 1,496
--------- ---------
Total deferred tax assets 435,278 441,787
Deferred tax liabilities
Property and equipment (25,491) (21,867)
Intangible assets (2,970) --
--------- ---------
Total deferred tax liabilities (28,461) (21,867)
--------- ---------
Net deferred taxes 406,817 419,920
Valuation allowance -- (419,920)
--------- ---------
Net deferred tax assets $ 406,817 $ --
========= =========
Based on the Company's operating results and projections of future
taxable income, management has determined that it is more likely than not the
Company will realize its deferred tax assets. Accordingly, at June 30, 2003, the
Company eliminated the valuation allowance on its net deferred tax assets.
F-11
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
Deferred tax assets and liabilities included in the balance sheet are
as follows:
June 30,
--------
2003 2002
-------- --------
Current deferred tax asset $102,171 $ --
Noncurrent deferred tax asset 304,646 --
-------- --------
$406,817 $ --
======== ========
The provision for income taxes consists of the following:
Year ended June 30,
----------------------
2003 2002
---- ----
Federal
Current $ 40,080 $ --
Deferred (373,832) --
State
Current 17,105 --
Deferred (32,985) --
--------- -------
$(349,632) $ --
========= =======
Following is a reconciliation of income taxes at the Federal statutory
rate to income tax expense:
Year ended June 30,
------------------------
2003 2002
---- ----
Tax expense at the Federal statutory rate $ 307,433 $ 273,866
Change in valuation allowance (419,920) (309,425)
Increase in available net operating loss carry-forwards (259,237) --
Other 4,987 11,636
State income taxes 17,105 23,923
--------- ---------
Income tax expense (benefit) $(349,632) $ --
========= =========
At June 30, 2003, the Company had net operating loss carry-forwards,
which related to pre-1998 operations of the former Drug Screening Systems, Inc.
("DSSI"), the predecessor to the Company. Because of the ownership change rules
of the Internal Revenue Code (the "Code"), the Company's ability to use the DSSI
net operating loss carryforwards are limited to approximately $1 million, in
accordance with the provisions of the Code, and expire in 2011. The increase in
available net operating loss carry-forwards relates to the DSSI net operating
loss carry-forwards.
(8) RELATED PARTY TRANSACTIONS
During each of the fiscal years ended June 30, 2003 and 2002, the
Company paid the majority stockholder of the Company approximately $5 and $86
thousand, respectively, in interest on notes payable assumed in conjunction with
the purchase of KM. The Company repaid the note payable to the majority
stockholder in full in August 2002.
F-12
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
(9) STOCK OPTIONS AND WARRANTS
On December 11, 1998, the Company's stockholders approved a new stock
option plan, (the "1998 Collegiate Pacific Inc. Stock Option Plan"). This plan
authorized the Company's Board of Directors to grant employees, directors and
consultants of the Company up to an aggregate of 400,000 shares of the Company's
common stock, $0.01 par value per share. The options vest in full upon the
employee's one-year anniversary date of employment with the Company or the award
date if the employee has been employed for at least one year on the grant date.
The number of shares available under the 1998 Collegiate Pacific Inc. Stock
Option Plan was increased to 1,000,000 upon approval by the Company's
stockholders on March 20, 2001.
A summary of the Company's employee and director option activity for
the fiscal years ended June 30, 2003 and 2002 is as follows:
Weighted
Average
Exercise
Options Price
------- -----
Outstanding at July 1, 2001 514,200 5.16
Granted 15,000 4.11
Exercised (20,000) 3.23
Forfeited or cancelled (11,000) 7.26
-------
Outstanding at June 30, 2002 498,200 5.16
Granted 292,200 5.46
Exercised (7,500) 4.86
Forfeited or cancelled (10,000) 7.57
-------
Outstanding at June 30, 2003 772,900 $ 5.25
======= =========
Exercisable at June 30, 2002 456,200 $ 5.13
======= =========
Exercisable at June 30, 2003 769,900 $ 5.24
======= =========
The fair value of these options was estimated at the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions: expected volatility of 100% for fiscal 2003, and 121% for fiscal
2002; risk-free interest rates of 3.10% for fiscal 2003, and 4.76% for fiscal
2002; dividend yield of 2.0% to 0% for fiscal 2003 and fiscal 2002,
respectively, and expected lives of five years.
The weighted average fair value of options granted in fiscal 2003 and 2002 was
$3.80 and $3.45 per share, respectively.
F-13
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
The following table summarizes additional information about stock
options at June 30, 2003:
Outstanding Exercisable
------------------------------- --------------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Life Exercise Exercise
Exercise price Shares (In Years) Price Shares Price
- -------------- ------ ---------- ------- ------ --------
$3.88-4.81 266,700 7.8 $ 3.90 266,700 $ 3.90
$4.90-6.13 474,700 8.6 $ 5.73 471,700 $ 5.73
$ 9.38 31,500 5.7 $ 9.38 31,500 $ 9.38
------- -------
772,900 769,900
======= =======
On May 26, 2000, each record holder of our common stock received a
special dividend from the Company of one warrant for each share of common stock
owned by the record holder. The Company issued the warrants pursuant to a
warrant agreement between the Company and Continental Stock Transfer and Trust
Company, Inc. Each warrant entitles the holder to purchase from the Company, for
cash, one share of common stock at $5.00 per share. The total number of warrants
issued was 4,244,607. The number of shares purchasable upon exercise of each
warrant and price per share may be adjusted under certain conditions. Holders
may exercise the warrants at any time on or before May 26, 2005, unless extended
by the Company. The warrants are callable and cancelable at anytime by the
Company at a cancellation price of $0.05 per share of common stock purchasable
upon exercise of the warrants. If the Company calls the warrants for
cancellation, holders may exercise the warrants at any time prior to the close
of business on the business day preceding the date fixed for cancellation. At
June 30, 2003, 10 warrants had been exercised.
(10) LEASES
The Company leases office and warehouse facilities located in Dallas,
Texas and Memphis, Tennessee under the terms of operating leases, which expire
at various dates through 2008. Rent expense approximated $339 thousand for the
fiscal year ended June 30, 2003, and $269 thousand for the fiscal year ended
June 30, 2002.
Future minimum lease commitments on all operating leases with terms in
excess of one year are as follows:
Year ended
June 30,
- ----------
2004 $ 357,996
2005 352,452
2006 341,364
2007 341,364
2008 115,788
----------
$1,508,964
==========
F-14
COLLEGIATE PACIFIC INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
(11) INCOME PER SHARE
Summarized basic and diluted income per common share for the years
ended June 30, 2003 and 2002 are as follows:
Year Ended June 30, 2003 Year Ended June 30, 2002
-------------------------------------- ------------------------
Net Per share Net income Per share
income Shares amount income Shares amount
------ ------ ------ ------ ------ ------
Basic income
per share $1,253,849 4,225,784 $ 0.30 $ 805,488 4,225,213 $ 0.19
Effect of dilutive
options
and warrants -- 443,790 (0.03) -- 443,795 (0.02)
---------- --------- -------- ---------- --------- --------
Diluted income
per share $1,253,849 4,669,574 $ 0.27 $ 805,488 4,669,008 $ 0.17
========== ========= ======== ========== ========= ========
For fiscal 2003 and 2002, stock options and warrants covering 274,875 and
2,430,229 shares, respectively, were excluded in the computations of diluted
income per share because their effect was antidilutive.
F-15
PART II
ITEM 27. EXHIBITS
The Exhibits to this Registration Statement are listed in the Index to
Exhibits of this Registration Statement, which Index is incorporated herein by
reference.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on October 28, 2003.
COLLEGIATE PACIFIC INC.
By: /s/ Michael J. Blumenfeld
-----------------------------------------
Michael J. Blumenfeld,
Chairman, Chief Executive Officer
and Director (Principal Executive Officer)
Pursuant to the requirements of the Securities Act, this Registration
Statement or amendment thereto has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Michael J. Blumenfeld Chairman, Chief Executive Officer and October 28, 2003
- ------------------------- Director (Principal Executive Officer)
Michael J. Blumenfeld
* President and Director October 28, 2003
- --------------------------------------
Adam Blumenfeld
* Chief Financial Officer, Secretary and October 28, 2003
- -------------------------------------- Treasurer (Principal Accounting and
William R. Estill Financial Officer)
* Chief Operating Officer and Director October 28, 2003
- --------------------------------------
Arthur J. Coerver
* Vice President Marketing and Director October 28, 2003
- --------------------------------------
Harvey Rothenberg
* Director October 28, 2003
- --------------------------------------
Jeff Davidowitz
* Director October 28, 2003
- --------------------------------------
William H. Watkins, Jr.
/s/ Robert W. Hampton Director October 28, 2003
- --------------------------------------
Robert W. Hampton
*By Power of Attorney
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2.1 Stock Purchase Agreement dated August 18, 1997 with Michael J.
Blumenfeld.(1)
2.2 Agreement and Plan of Merger dated July 20, 1999, for the
reincorporation of the company in Delaware.(2)
3.1 Articles of Incorporation of the company filed on December 15, 1998.(3)
3.2 By-Laws of the company.(3)
3.3 Certificate of Amendment to Certificate of Incorporation of the company
filed on January 18, 2000.(4)
4.1 Specimen Certificate of Common Stock, $0.01, par value, of the
company.(3)
4.2 Specimen Common Stock Purchase Warrant.(4)
5.1 Opinion of Sayles, Lidji & Werbner, A Professional Corporation*
10.1 Warrant Agency Agreement dated as of June 4, 1993 between the company
and Continental Stock Transfer & Trust Company, as Warrant Agent.(5)
10.2 Form of Underwriter's Unit Purchase Warrant of the company.(6)
10.3 Form of Underwriter's Warrant of the company.(6)
10.4 1994 Stock Option Plan of the company.(7)
10.5 Employee Restricted Stock Plan of the company.(8)
10.6 Lease dated July 1, 1997 between the company, as tenant, and
Post-Valwood, Inc., as landlord.(9)
10.7 Exclusive Distribution Agreement dated February 24, 1998, between the
company and Equipmart, Inc.(9)
10.8 Exclusive Distribution Agreement dated March 7, 1998, between the
company and FunNets, Inc.(9)
10.9 Exclusive Distribution Agreement dated March 21, 1998, between the
company and Pro Gym Equipment, Inc.(9)
10.10 Stock Acquisition Agreement dated April 14, 1998, between the company
and Product Merchandising, Inc.(9)
10.11 1998 Collegiate Pacific Inc. Stock Option Plan.(2)
10.12 Promissory Note dated March 31, 1999 from the company to Michael J.
Blumenfeld in the principal amount of $1,082,648.75.(10)
10.13 Warrant Agreement dated as of May 26, 2000, between the company and
Continental Stock Transfer & Trust Company, as Warrant Agent, with the
form of Common Stock purchase warrant attached.(4)
10.14 Stock Purchase Agreement dated September 7, 2000, by and between the
company and Michael J. Blumenfeld.(11)
10.15 Assumed Notes Payable dated September 6, 2000 executed by the company
payable to Michael Blumenfeld and Abe Blumenfeld in the stated
aggregate principal amount of $581,000.(12)
10.16 First Amendment to Stock Option Plan.(14)
10.17 Revolving Line of Credit Agreement dated December 26, 2001, by and
between Bank of American, N.A. and the company.(14)
10.18 Engagement Agreement dated January 15, 2002, by and between NetCap
Ventures, Inc. and the company.(16)
10.19 First Amendment to Revolving Line of Credit dated July 15, 2002, by and
between Bank of America, N.A. and the company. (15)
10.20 Second Amendment to Revolving Line of Credit dated August 22, 2002, by
and between Bank of America, N.A. and the company. (15)
21 Subsidiaries of the company(15)
23.1 Consent of Sayles, Lidji & Werbner, A Professional Corporation
(included in Exhibit 5.1)*
23.2 Consent of Grant Thornton LLP*
24.1 Power of Attorney (included in Part II of this Registration
Statement.(11)
- ------------
* Filed herewith
(1) Previously filed as an exhibit to the company's Form 8-K/A filed on
September 11, 1997.
(2) Previously filed as an exhibit to the company's Definitive Proxy Statement
for its Annual Meeting held on December 11, 1998.
(3) Previously filed as an exhibit to the company's Form 8-A dated September 9,
1999.
(4) Previously filed as an exhibit to the company's Registration Statement on
Form SB-2 (No. 333-34294) dated April 7, 2000, as amended.
(5) Previously filed as an exhibit to the company's Form 8-A dated June 28,
1993.
(6) Previously filed as an exhibit to the company's Current Report on Form 8-K
filed on July 12, 1993.
(7) Previously filed as an exhibit to the company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1994.
(8) Previously filed as an exhibit to a Post-Effective Amendment to the
company's Registration Statement on Form S-1, File No. 33-19770-NY.
(9) Previously filed as an exhibit to the company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1998.
(10) Previously filed as an exhibit to the company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 1999.
(11) Previously filed as an exhibit to the company's Report on Form 8-K filed on
September 21, 2000.
(12) Previously filed as an exhibit to the company's Quarterly Report on Form
10-QSB for the fiscal quarter ended September 30, 2000.
(13) Previously filed as an exhibit to the company's Registration Statement on
Form SB-2 (No. 333-34294) dated April 30, 2001.
(14) Previously filed as an exhibit to the company's Quarterly Report on Form
10-QSB for the fiscal quarter ended December 31, 2001.
(15) Previously filed as an exhibit to the company's Annual Report on Form
10-KSB for the fiscal year ended June 30, 2002.
(16) Previously filed as an exhibit to the company's Registration Statement on
Form SB-2 (No. 333-34294) dated January 23, 2002.