-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JziC0CtsoWERD5/f+ScaSdEVTBAO6UQWBDkiaM3szcwT4kQeyI2wC7/9rFHFo40g /T+rDtdHd4egeVw7dzkxdw== 0000950124-97-004316.txt : 19970815 0000950124-97-004316.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950124-97-004316 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SLED DOGS CO CENTRAL INDEX KEY: 0000918573 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 841168832 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-12850 FILM NUMBER: 97660763 BUSINESS ADDRESS: STREET 1: 212 THIRD AVE STE 420 CITY: MINNEAPOLIS STATE: MN ZIP: 55401 BUSINESS PHONE: 6123599020 MAIL ADDRESS: STREET 1: 212 THIRD AVENUE SUITE 420 CITY: MINNEAPOLIS STATE: MN ZIP: 55401 FORMER COMPANY: FORMER CONFORMED NAME: SNOWRUNNER INC DATE OF NAME CHANGE: 19940203 10QSB 1 FORM 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1997 Commission file number 1-12850 THE SLED DOGS COMPANY (Exact name of small business issuer as specified in its charter) 212 3rd Avenue North, Suite 420 Minneapolis, Minnesota 55401 (Address of principal executive offices) Incorporated under the laws of I.R.S. Identification Number ---------------------------- the State of Colorado 84-1168832 (612) 359-9020 (Small business issuer's telephone number including area code) ------------------------------------- Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- ------------------------------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 13,513,193 shares of Common Stock, $.01 par value per share, outstanding as of August 13, 1997. 2 THE SLED DOGS COMPANY FORM 10-QSB QUARTERLY REPORT FOR THE QUARTER ENDED JUNE 30, 1997 TABLE OF CONTENTS
Page ---- Part I - Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1997 and March 31, 1997 3 Condensed Consolidated Statements of Operations for the Three Months ended June 30, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows for the Three Months ended June 30, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements - June 30, 1997 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 10
3 THE SLED DOGS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 1997 March 31 ASSETS (Unaudited) 1997 ------------- --------------- Current assets: Cash and cash equivalents $ (14,933) $ 11,542 Accounts receivable, less allowance for doubtful accounts of $136,543 and $167,000 at June 30, 1997 and March 31, 1997, respectively 177,269 225,168 Other receivables 2,204 - Inventories 883,596 940,226 Prepaid expenses 76,672 23,385 ------------- ------------- Total current assets 1,124,808 1,200,321 Property and equipment, less accumulated depreciation of $246,137 and $1,023,125 at June 30, 1997 and March 31, 1997, respectively 329,131 341,769 Patents, less accumulated amortization of $171,328 and $159,253 at June 30, 1997 and March 31, 1997, respectively 144,131 151,575 ------------- ------------- Total assets $ 1,598,070 $ 1,693,665 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Line of credit $ 555,029 $ 619,727 Short term notes payable 150,000 - Accounts payable 1,374,644 1,308,700 Accrued expenses and other liabilities 137,911 458,235 ------------- ------------- Total current liabilities 2,217,584 2,386,662 Convertible subordinated debt 623,750 150,000 Shareholders' equity Convertible preferred stock, Series A, $1.00 par value: Authorized shares - 1,500,000 Issued and outstanding shares - 0 - June 30, 1997 and March 31, 1997 - - Common Stock, $.01 par value Authorized shares - 50,000,000 Issued and outstanding shares - 13,513,193 at June 30, 1997 and at March 31, 1997, respectively 135,132 135,132 Additional paid-in capital 13,596,661 13,596,638 Accumulated deficit (14,975,057) (14,574,767) ------------- ------------- Total shareholders' equity (1,243,264) (842,997) ------------- ------------- Total liabilities and shareholders' equity $ 1,598,070 $ 1,693,665 ============= =============
See notes to condensed consolidated financial statements 3 4 THE SLED DOGS COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
Three Months Ended June 30 1997 1996 -------------- ------------- Net sales $ 55,208 $ (108,665) Cost of goods sold (26,435) 246,787 ----------- ----------- Gross margin 81,643 (355,452) Costs and expenses: General and administrative 419,040 245,742 Sales and marketing 7,932 724,185 Research and development 16,659 56,127 ----------- ----------- Total costs and expenses 443,631 1,026,054 Interest expense 38,338 9,070 Interest income and other (income) expense (36) (20,941) ----------- ----------- Net loss $ (400,290) $(1,369,635) =========== =========== Net loss per common share $ (0.03) $ (0.12) =========== =========== Weighted average number of common equivalent shares outstanding 13,153,193 11,749,999 =========== ===========
See notes to condensed consolidated finanacial statements 4 5 THE SLED DOGS COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED JUNE 30 1997 1996 ------------------ ---------------- OPERATING ACTIVITIES Net loss $ (400,290) $ (1,369,635) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 53,212 74,327 Loss on asset disposal - 17,538 Changes in operating assets and liabilities: Receivables 45,695 271,372 Inventories (12,570) 186,651 Prepaid expenses 15,912 91,443 Accounts payable (53,947) 285,320 Other accrued expenses (200,434) 22,145 ------------ ------------- Net cash used in operating activities (552,422) (420,839) INVESTING ACTIVITIES Purchases of property and equipment (28,500) (34,482) Acquisition of patents and trademarks (4,629) (8,116) Proceeds from the sale of fixed assets - 800 ------------ ------------- Net cash used in investing activities (33,129) (41,798) FINANCING ACTIVITIES Net proceeds from convertible subordinated debt 473,750 - Net proceeds from short term notes 150,000 - Net proceeds from warrants issued 24 - Payments on line of credit (64,698) - ------------ ------------- Net cash provided by financing activities 559,076 - ------------ ------------- Net decrease in cash and cash equivalents (26,475) (462,637) Cash and cash equivalents at beginning of year 11,542 1,115,888 ------------ ------------- Cash and cash equivalents at end of period $ (14,933) $ 653,251 ============ ============= Interest paid $ 25,649 $ 11,258 ============ =============
See notes to condensed consolidated financial statements 5 6 THE SLED DOGS COMPANY NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED JUNE 30, 1997 (UNAUDITED) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X. 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 accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended June 30, 1997 are not necessarily indicative of the results that may be expected for the year ended March 31, 1998. NOTE 2 - NET LOSS PER SHARE In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted by the Company on March 31, 1998. At that time, the Company will be required to change the method currently used to compute net loss per share and to restate all prior periods. There is no impact expected as a result of applying FASB Statement No. 128 on the calculation of net loss per share for quarters ended June 30, 1997 and June 30, 1996. 7 PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following information should be read in conjunction with the consolidated condensed financial statements and the notes thereto included in Item 1 of this Quarterly Report, and the financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Annual Report on Form 10-KSB for the year ended March 31, 1997. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1997, the Company had no availability under its asset-based line of credit with Norwest Credit, Inc. ("NCI"). The line of credit bears interest at prime plus 4%, had a maximum borrowing level of $2 million and expired June 30, 1997. The Company has signed a Forbearance Agreement with NCI. The Forbearance Agreement states that NCI is willing to forbear from exercising its rights and remedies as a secured creditor (the line of credit is secured by all of the Company's assets) until the earlier of September 30, 1997, failure by the Company to perform its obligations under this Forbearance Agreement, or the occurrence of any Event of Default under its Loan Agreement with NCI other than those existing and known to NCI on June 30, 1997. The Forbearance Agreement further states that all amounts due under the Loan Agreement shall become due and payable on October 1, 1997. If not paid by October 1, 1997, then, at NCI's option, the Company will begin self liquidating the assets of the Company pursuant to a Liquidation Agreement, or turn over to NCI, immediately upon demand by NCI, all property of the Company pursuant to a Repossession and Occupancy Agreement. At August 8, 1997, the Company was in default of the Forbearance Agreement regarding certain payments to NCI. At June 30, 1997, the Company was in default of the Loan Agreement regarding the minimum book net worth covenant which increases the rate of interest by two percentage points. At June 30, 1997, there were outstanding borrowings under the line of $555,029 that also included an overdraft amount of $274,821 (i.e., borrowings in excess of available collateral). The Company is currently pursuing alternative sources of asset-based lines of credit. However, there can be no assurances that an asset-based line of credit will be obtained. As of this date, the Company has secured approximately $750,000 of its $1.5 million private loan unit offering. Each unit of the offering consists of a $50,000 convertible subordinated secured promissory note and a warrant to purchase 100,000 shares of common stock at $.0625 per share. The notes are convertible into common stock of the Company at $.0625 per share. In the event this offering is not successfully completed, the Company will be required to cease operations. Even if the Company raises the maximum proceeds in this offering, the Company will require significant additional capital in order to continue operations. The Company is exploring other financing alternatives such as the exercise of existing warrants through a discount exercise price and the completion of a shareholder rights offering. There can be no assurance the Company will be able to obtain such capital. The Company continues to work on generating additional cash and working capital internally through the collection of existing receivables and sales of excess/obsolete inventory. The Company also has taken many steps to conserve cash such as: 1) Rescheduling payments to the majority of its creditors allowing new capital to be used for moving the business forward into the 1997/1998 season; 2) Reducing headcount from 16 to 10 and 3) Significantly reducing fiscal 1998 planned expenses. The Company is behind in its rescheduled payments to creditors. The Company has reached settlement agreements with four major creditors that require specific payments on specific dates. The Company is behind in its payments to all four of these creditors. The Company's cash and cash equivalents were $(14,933) at June 30, 1997, compared to $11,542 at March 31, 1997, a decrease of $26475. The Company's working capital position at June 30, 1997 was a negative $1,092,776. During the three months ended June 30, 1997, The Company's operations used net cash of $552,422, primarily to fund operating losses and accounts payable. 8 PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Company's investing activities for the three months ended June 30, 1997 consisted of capital expenditures of $28,500 for manufacturing molds for the 1997/1998 season. The Company also spent $4,629 on additional patents and trademarks. The Company's financing activities for the three months ended June 30, 1997 provided cash of $559,076 that consisted of $473,750 in net proceeds from the convertible loan unit offering and $150,000 from short term notes, offset by $64,698 in payments on the Company's line of credit. RESULTS OF OPERATIONS NET SALES The Company's net sales for the first quarter ended June 30, 1997 were $55,208, compared to net sales of $(108,665) reported for the same quarter last year. This quarter historically has contained the least amount of revenue due to the seasonality of the business. The increase in sales results for the first quarter can be attributed primarily to two sales of obsolete inventory and the considerable amount of returns that occurred in the quarter ended June 30, 1996 versus the quarter ended June 30, 1997. COST OF GOODS SOLD AND GROSS MARGIN A comparison of gross margin as a percentage of net sales is not meaningful due to the adjustments made in the respective quarters. Gross margin for the quarter ended June 30, 1996 was ($355,452) as product returns exceeded sales, resulting in negative sales for the quarter, combined with a cost of goods sold adjustment of $250,000 to reserve for inventory obsolescence. Gross margin for the quarter ended June 30, 1997 was $81,643 as sales consisted of obsolete product that had previously been reserved for (i.e., therefore no cost was recognized), combined with a $60,000 reduction in product costs due to a settlement with a supplier. GENERAL AND ADMINISTRATIVE General and administrative expenses for the first quarter ended June 30, 1997 were $419,040, compared to $245,742 for the quarter ended June 30, 1996, an increase of $173,298, or 71%. The increase was due to one-time legal fees and investment banking commissions associated with the convertible private loan unit offering. In fiscal 1998 and beyond, the Company expects general and administrative expenses to decrease as a percentage of net sales, if it controls these costs, and if its net sales base increases. SALES AND MARKETING Sales and marketing expenses for the first quarter ended June 30, 1997 were $7,932, compared to $724,185 for the same period last year, a decrease of $716,253, or 99%. The decrease from the prior year quarter was due to the elimination of the one-time production expense for the infomercial "Yellow Snow;" and the reduction in staff of four employees. The Company expects to minimize sales and marketing expenses in fiscal 1998 to conserve operating capital. 9 PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - CONTINUED RESEARCH AND DEVELOPMENT Research and development expenses for the quarter ended June 30, 1997 were $16,659, compared to $56,127 for the quarter ended June 30,1996, a decrease of $39,468, or 70%. The decrease from the prior year quarter was due to a reduction in development costs for future generation snow skate products versus the costs incurred in fiscal 1996 developing the new K9 model. The Company expects research and development expenses to increase if there is demand for alternative boot and base structures to accommodate different snow skating styles and venues. INTEREST EXPENSE Interest expense for the first quarter ended June 30, 1997 was $38,338, compared to $9,070 for the quarter ended June 30, 1996, an increase of $29,268. The increase was due to the balance outstanding on the line of credit this fiscal year versus the prior fiscal year. INTEREST AND OTHER (INCOME) EXPENSE Interest and other (income) expense for the first quarter ended June 30, 1997 was $(36), compared to $(20,941) for the quarter ended June 30, 1996, a decrease of $20,905. The decrease from the prior year quarter was due to less interest income earned as cash balances during the quarter ended June 30, 1997 were much lower than the cash balances during the quarter ended June 30, 1996. NET LOSS The net loss of $400,290 for the first quarter ended June 30, 1997 was $969,345 better than the net loss of $1,369,635 reported for the same period in the prior year. The improvement in net loss for the quarter was primarily due to the elimination of certain non-recurring expenses incurred in last year's quarter ( the "Yellow Snow" infomercial production expense and a provision for inventory obsolescence) and a reduction in operating expenses. Forward-looking statements contained in this Form 10-QSB are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties. Certain important factors could cause results to differ materially from those anticipated by some statements made in this Form 10-QSB. Among the factors that could cause results to differ materially are the following: lack of availability of financing; inability to control costs or expenses; manufacturing and distribution problems; and lack of market acceptance of the Company's products. Reference is also made to the risk factors contained in the Company's Registration Statement on Form S-3 (No. 33-80875), which are incorporated herein by reference. 10 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits None b. Form 8-K A Form 8-K was filed June 19, 1997 to report that the Company was delisted from the Nasdaq SmallCap Market. A form 8-K was filed August 7, 1997 to report the Company's first quarter results for fiscal 1998 and announce a new director; and to report that the Company had signed a Forbearance Agreement with Norwest Credit, Inc., its asset-based lender. 11 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE SLED DOGS COMPANY Dated: August 13, 1997 /s/ Kent Rodriguez ---------------------------------------------- Kent Rodriguez, Chairman (Principal Executive Officer) /s/ Michael P. Wise ---------------------------------------------- Michael P. Wise, Chief Financial Officer (Principal Financial and Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 MAR-31-1998 APR-01-1997 JUN-30-1997 3-MOS (14,933) 0 313,812 136,543 883,596 1,124,808 576,268 246,137 1,598,070 2,217,584 623,750 135,132 0 0 (1,378,396) 1,598,070 55,208 55,208 (26,435) 443,631 0 0 38,338 (400,290) 0 (400,290) 0 0 0 (400,290) (.03) 0
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