U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: December 31, 2000
Commission File No. 0-25743
FREEDOM GOLF CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
91-1950699
(IRS Employer Identification No.)
7334 South Alton Way, Bldg. 14-A
Englewood, Colorado
(Address of principal executive offices)
80112
(Zip Code)
(303) 221-0331
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days: Yes
__X__ No ____.
The number of shares of the registrant's only class of common stock issued and
outstanding as of February 14, 2000, was 13,818,906 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three months ended December 31,
2000, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited financial statements and notes thereto included herein. In connection
with, and because it desires to take advantage of, the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward looking statements in the following discussion
and elsewhere in this report and in any other statement made by, or on the
behalf of the Company, whether or not in future filings with the Securities and
Exchange Commission. Forward looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company's control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward looking statements made by, or on
behalf of, the Company. The Company disclaims any obligation to update forward
looking statements.
Comparison of Results of Operations for the three month periods ended
December 31, 2000 and 1999
Total revenues increased from $9,799 in the three month period ended
December 31, 1999, to $28,107 in 2000, an increase of $18,308 (186.8%). We
believe that this increase was attributable to more golfers becoming aware of
our products line through our increased marketing efforts and new visibility,
including those professional golfers who are using our products on the Celebrity
Players Tour. Costs of sales were $11,204 during the three month period ended
December 31, 2000, compared to $5,537 during the similar period in 1999, an
increase of $5,667 (102.3%). This was due primarily to the acquisition of
increased raw materials in order to increase inventory to meet the increased
sales.
Selling, general and administrative expenses were $105,704 during the three
month period ended December 31, 2000, compared to $87,812 during the similar
period in 1999, an increase of $17,892
2
(20.4%). This increase was due primarily to increases in travel and golf
tournament sponsorship, as we continue to attempt to make the golfing public
aware of our product lines, as well as costs associated with our status as a
public company, including increased legal and accounting costs.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2000, we had no cash and $188,020 in inventory.
Also at December 31, 2000, we had outstanding notes payable to
nonaffiliates amounting to $215,747. All of these notes are due within one year
and bear interest at from 7.25% to 15% per annum.
In addition, we have notes payable in the principal amount of $110,850 due
to persons and entities affiliated with our Company. Included in these
obligations are the following:
On December 21, 1999, Heritage Real Estate Development Corp. Defined
Benefit Pension Plan and Trust (the "Heritage Trust") loaned us the principal
sum of $45,200. The Heritage Trust is a pension plan to which John Arney, a
director of the Company, is trustee and beneficiary. This loan accrued interest
at the rate of 15% per annum and was due December 21, 2000. The applicable loan
provided for a conversion feature, wherein the loan was convertible into shares
of our common stock at a conversion price of $.85 per share. As of the date of
this Report, the loan has not been converted. On October 16, 2000, we refinanced
this loan. As a result of this refinancing, the Heritage Trust currently holds
two separate notes. One note is in the principal amount of $40,000, which is
secured by 25 complete regulation sets of graphite Freedom golf clubs, including
logo head covers. This note is due March 6, 2001 and accrues interest at the
rate of 15% per annum, except in the event of a default, when the interest rate
increases to 18% per annum. As additional consideration, we issued a stock
option in favor of Heritage Trust whereby it has the option to purchase 266,667
shares of our common stock at an exercise price of $.15 per share through
December 3, 2003.
Also as a result of this refinancing, we owe Heritage Trust the principal
sum of $10,850, the balance of the principal amount due under the original note,
plus accrued interest. This note also accrues interest at the rate of 15% per
annum, with a default interest rate of 18% per annum. However, this note is not
secured but is guaranteed by our President, Gaylen Johnson. This note is due on
or before February 15, 2001, but is expected to be extended. As additional
consideration, we granted Heritage Trust an option to purchase 72,333 shares of
our common stock at an exercise price of $.15 per share, through December 3,
2003.
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In December 1999, John Arney, individually, loaned us the principal amount
of $20,000, which accrues interest at the rate of 10% per annum. In November
2000, Mr. Arney loaned us an additional $40,000, which note also accrues
interest at the rate of 15% per annum and is due January 16, 2001. These notes
are currently past due and the parties expect to renegotiate the repayment terms
in the near future.
At December 31, 2000, we had outstanding cash working capital advances from
our President amounting to $49,927. The advances are non-interest bearing and
are expected to be repaid out of the proceeds from the debenture offering
described below, provided that sufficient funds are available therefrom.
Our management has recognized that, in order to allow us to implement our
business strategy discussed in our Form 10-KSB for our fiscal year ended
September 30, 2000, as filed with the US Securities and Exchange Commission, it
will be necessary for us to raise additional equity capital of at least $2
million in addition to the funds recently raised by us. Relevant thereto, in
February 2001, we commenced a self-underwritten, "best efforts" private offering
of convertible debentures, each debenture convertible into shares of our common
stock at a conversion price of $.50 per share. The debentures accrue interest at
the rate of 15% per annum and are due 18 months from receipt and acceptance by
us of the relevant subscription. Because marketing of this offering commenced
within the prior two days of the filing of this Report, no subscriptions have
been accepted by us as of yet and there can be no assurances that we will
receive any subscriptions from this offering.
In addition, we intend to continue our discussions with investment bankers
and others to provide or assist in providing additional financing. However, as
of the date of this Report, we do not have any written commitments for any
financing, and no assurance can be given that we will obtain any such financing.
Failure to obtain additional capital into the Company will force management to
reduce expense, which may affect our ability to implement our business plan. If
we are not successful, it is doubtful that we will be able to survive and we
will be forced to liquidate.
TRENDS
While no assurances can be provided, we anticipate that our revenues will
increase beginning in February 2001. We commenced our formal marketing plan at
the annual PGA show held in Orlando, Florida during the last week in January
2001. We expect that the demand for our products will be dependent upon, among
other things, market acceptance for our concept in golf clubs, our operations
and general economic conditions that are cyclical in nature. In addition, our
success is also dependent upon our ability to finance our proposed operations,
either with debt or equity.
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We also understand that new designs and changes from traditional lines of
golf clubs may meet with consumer rejection. We have planned our manufacturing
capabilities based upon our forecasted demand for our products. Actual demand
for such products may exceed or be less that our forecasted demand. If we are
unable to produce sufficient quantities of our golf clubs in time to fulfill
actual demand, such inability may limit our sales and adversely affect our
financial performance.
INFLATION
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation had a material affect on
the results of operations during the three month period ended December 31, 2000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES
During the three month period ended December 31, 2000, we sold an aggregate
of 280,000 shares of our common stock for gross proceeds of $70,000 ($.25 per
share). The shares were sold to one accredited investor. These shares were
valued at quoted market price at the date the share issuance was approved by our
board of directors.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
None
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FREEDOM GOLF CORPORATION
Balance Sheet
December 31, 2000
(Unaudited)
ASSETS
------
2000
----------
Current assets:
Accounts receivable - trade $ 447
Inventory 188,020
----------
Total current assets 188,467
Property and equipment, at cost, net of
accumulated depreciation of $8,460 8,189
Deposit 2,000
Patents, net of accumulated amortization of $16,111 83,887
----------
$ 282,543
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Note payable - bank 15,551
Note payable - others 154,546
Note payable - related party 110,850
Accounts payable - trade 83,267
Advances from officer 49,927
Accrued salaries 291,325
Accrued interest - related party 5,365
Accrued expenses 17,522
----------
728,353
Stockholders' equity:
Common stock, $.001 par value,
50,000,000 shares authorized,
13,818,906 shares issued and outstanding 13,819
Additional paid-in capital 2,213,232
Unearned services (187,500)
Accumulated deficit (2,485,361)
----------
(445,810)
----------
$ 282,543
==========
See accompanying notes to unaudited financial statements.
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FREEDOM GOLF CORPORATION
Statements of Operations
Three Months Ended December 31, 2000 and 1999
(Unaudited)
Three Months Ended
December 31,
2000 1999
----------- -----------
Sales, net $ 28,107 $ 9,799
Cost of sales 11,204 5,537
----------- -----------
16,903 4,262
Selling, general and administrative expenses 105,704 87,812
----------- -----------
Income (loss) from operations (88,801) (83,550)
Other income and (expense):
Interest expense (7,993) (2,597)
Other income 13 49
----------- -----------
(7,980) (2,548)
Income (loss) before income taxes (96,781) (86,098)
Provision for income taxes - -
----------- ------------
Net income (loss) $ (96,781) $ (86,098)
=========== ===========
Basic and fully diluted earnings (loss) per share:
Net income (loss) $ (0.01) $ (0.01)
=========== ===========
Weighted average shares outstanding 13,725,573 11,048,213
=========== ===========
See accompanying notes to unaudited financial statements.
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FREEDOM GOLF CORPORATION
Statements of Cash Flows
Three Months Ended December 31, 2000 and 1999
Three Months Ended
December 31,
2000 1999
----------- -----------
Net income (loss) $ (96,781) $ (86,098)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,499 2,094
Interest added to loan balance 5,650 -
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 1,318 (3,011)
(Increase) decrease in inventory (84,926) (60,518)
(Increase) decrease in prepaid expenses 38,800 20,530
Increase (decrease) in accounts payable 2,157 (21,140)
Increase (decrease) in accrued salaries (13,175) 18,000
Increase (decrease) in accrued expenses 2,737 39,507
----------- -----------
Total adjustments (44,940) (4,538)
----------- -----------
Net cash provided by operating activities (141,721) (90,636)
----------- -----------
Cash flows from financing activities:
Common stock sold for cash 70,000 52,100
Repayment of bank loan (1,594) (5,807)
Proceeds from notes payable 70,000 87,870
Repayment of notes payable (12,282) -
----------- -----------
Net cash (used in) financing activities 126,124 134,163
----------- -----------
Increase (decrease) in cash (15,597) 43,527
Cash and cash equivalents,
beginning of period 15,597 246
----------- -----------
Cash and cash equivalents,
end of period $ - $ 43,773
=========== ===========
See accompanying notes to unaudited financial statements.
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Freedom Golf Corporation
Notes to Unaudited Financial Statements
December 31, 2000
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
provisions of Regulation SB. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included. These
financial statements should be read in conjunction with
information provided in the Company's report on Form 10- K for
the year ended September 30, 2000.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the
full year.
Income (loss) per share was computed using the weighted
average number of common shares outstanding.
During the three months ended December 31, 2000, the Company
received gross proceeds from the sale of common stock
aggregating $70,000. The shares were sold at a price of $.25
per share, which was equivalent to the trading value common
stock at the sale date.
Additionally during the quarter, the Company received gross
proceeds $70,000 from the issuance of notes payable, added
accrued interest of $5,650 to a note balance and repaid notes
aggregating $12,282.
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FREEDOM GOLF CORPORATION
(Registrant)
Dated: February 15, 2001
By:s/ Gaylen P. Johnson
---------------------------------
Gaylen P. Johnson, President
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Freedom Golf Corporation
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 2000
EXHIBITS Page No.
EX-27 Financial Data Schedule.....................................12
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