September 26, 2005
Via U.S. Mail
Mr. Derek Swanson
Staff Attorney
Division of Corporate Finance
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
100 F. St NE
Washington, DC 20549
(202) 551-3366
RE: Execute Sports, Inc. Comment Letter dated September 8, 2005
Form SB2/A
File No. 333-125868
Dear Mr. Swanson,
In response to your comments in your letter dated September 23, 2005 regarding
our amended Form SB-2, we have made enclosed the following responses 1 through
7.
Sincerely,
Donald Dallape
Chairman and CEO
Execute Sports, Inc.
1284 Puerta Del Sol, Suite 150
San Clemente, CA 92673
Re Comment 1: We added the following explanation of events and circumstances
that occurred in the second half of 2004 that resulted in gross loss of
approximately $131,000 on sales of $267,000:
During the second half of fiscal year 2004, the Company achieved sales of
$266,671 and a gross loss of $131,420. The gross loss was primarily due to
$112,262 of inventory adjustments related to damaged goods and an inventory
revaluation to the lower of cost or market.
Re: Comment 2 and 3: We made a mistake in our disclosure that the 2004 inventory
write down was included in Selling, general and administrative expenses. Upon
further review of our financial data, we noted that the $106 thousand write down
of inventory to the lower of cost or market was, in fact, included and
represented in the Cost of goods sold.
We are updating our disclosure on page 34 and our notes to the December 31, 2004
financial statement Note C, Inventory.
Page 31, paragraph 5
Results of Operations for the Years Ended December 31, 2004 and December 31,
2003
Inventory decreased $187 thousand to $112 thousand as of December 31, 2004
compared to $299 thousand as of December 31, 2003. The decrease was primarily
the result of a physical inventory and periodic assessment that resulted in a
$106 thousand write-down of inventory to the lower of cost or market with the
remaining $81 thousand decrease due to improved inventory management and
purchasing of product against specific purchase orders rather than for stock.
The inventory write down was expensed in 2004 and is included in cost of goods
sold.
December 31, 2004 financial statement notes page F-13
NOTE C - INVENTORY
Inventories are comprised of finished goods ready for resale and are stated at
the lower of cost or market, as determined using the average costing method.
During the year ended December 31, 2004, the Company took a $106 thousand charge
to cost of goods sold to reduce inventory to the lower of cost or market. The
following table represents the major components of inventory at December 31,
2004 and 2003.
--------------------------------------------------------
2004 2003
--------------------------------------------------------
Finished goods $111,741 $299,186
======== ========
--------------------------------------------------------
Re: Comment 4. We inadvertently included the weighted average shares outstanding
in the Statement of Operations under the Three Months Ended June 30, 2004 column
and have moved the 7,532,196 shares and related EPS calculation to the Column
for the Six Months Ended June 30, 2005.
In addition, we have updated the table on page 4 to show these shares and
related EPS as well as our disclosure on page 29.
We have amended our table for the Statement of Operations for the June 30, 2005
period to show the 7,532,196 shares in the 6 months ended June 30, 2005 column
on pages 29 and F-25:
EXECUTE SPORTS, INC.
(formerly Padova International U.S.A., Inc.)
Statements of Operations
Three and Six Months Ended June 30, 2005 and 2004
(Unaudited)
====================================================================================================================================
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
REVENUES
Sales $ 580,498 $ 490,906 $ 1,258,893 $ 1,117,517
Cost of sales 460,924 358,825 880,230 737,222
------------ ------------ ------------ ------------
Gross profit 119,574 132,081 378,663 380,295
EXPENSES
General and administrative expenses 2,564,605 65,902 2,729,722 146,944
Selling and advertising 63,563 50,746 109,272 122,720
Depreciation expense 1,488 1,583 2,977 3,130
------------ ------------ ------------ ------------
Total expense 2,629,656 118,231 2,841,970 272,793
Income (loss) from operations (2,510,081) 13,849 (2,463,307) 107,501
OTHER INCOME AND EXPENSES
Interest income -- -- -- 1
Interest expense 4,520 25,591 55,676 58,952
------------ ------------ ------------ ------------
Total other income and expenses (4,520) (25,591) (55,676) (58,951)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (2,514,601) $ (11,741) $ (2,518,983) $ 48,550
============ ============ ============ ============
Weighted average shares outstanding 13,688,039 -- 7,532,196 --
============ ============ ============ ============
Earnings per share $ (0.184) $ -- $ (0.334) $ --
============ ============ ============ ============
We have also amended the shares out and EPS calculation for the 6 months ended
June 30, 2005 in our table in the Financial Summary Data section as follows:
Year ended December 31, Six Months ended June 30,
------------------------------- -------------------------------
2004 2003 2005 2004
----------- ----------- ----------- -----------
Revenues $ 1,384,188 $ 726,048 $ 1,258,893 $ 1,117,517
Operating Expenses 630,216 295,991 2,841,970 272,793
Net (Loss) Income (540,490) (288,854) (2,518,983) 48,550
Weighted Avg. Shares Out 224,773 -- 7,532,196 --
Net (Loss) Income Per Common Share
Basic and Diluted $ (2.40) -- $ (0.334) --
Year ended December 31, Six Months ended June 30,
------------------------------- -------------------------------
2004 2003 2005 2004
----------- ----------- ----------- -----------
Cashflows Used in Operating Activities (127,222) (250,413) (437,506) (26,183)
Net loss (540,490) (288,854) (2,518,983) 48,550
Cash and Cash Equivalents (end of period) 5,154 40,244 52,060 32,405
Total Current Assets 306,110 424,238 1,457,412 607,259
Total Assets 327,916 447,567 1,476,241 628,218
Total Current Liabilities 1,137,925 886,586 1,162,071 1,018,687
Total Stockholder's Equity (810,009) (439,019) 314,170 (390,470)
Re: Comment 5. We have replaced the previously filed Exhibit 16.1 with the
revised letter in referred to in our second set of responses to your comments.
In addition, we have filed a currently dated consent from Traci J. Anderson as
Exhibit 23.3.
Re: Comment 6: We have filed a currently dated consent from Bedinger & Company
as Exhibit 23.1.
Re: Comment 7: We have filed a revised Exhibit 10.20 dated June 5, 2005.