-----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, DmQvIG7oL2oKAbXwBLHmHkguZ512xOYKIZlHEzihxoKjpeuRJDi/SGu4eH8CrLbW V5rk7GrnVMO1JC9dgfhoQA== 0000950123-96-004493.txt : 19960816 0000950123-96-004493.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950123-96-004493 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEADSTRONG GROUP INC CENTRAL INDEX KEY: 0000887315 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 223363311 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-47567 FILM NUMBER: 96614954 BUSINESS ADDRESS: STREET 1: 5 LEXINGTON AVE CITY: EAST BRUNSWICK STATE: NJ ZIP: 08816 BUSINESS PHONE: 9082543433 MAIL ADDRESS: STREET 1: 5 LEXINGTON AVENUE CITY: EAST BRUNSWICK STATE: NJ ZIP: 08816 FORMER COMPANY: FORMER CONFORMED NAME: BULLSEYE MARKETING GROUP INC DATE OF NAME CHANGE: 19930513 10QSB 1 HEADSTRONG GROUP, INC. 1 U.S SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 -------------------------- / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------- ----------- Commission File Number 33-47567-NY ---------------- HEADSTRONG GROUP, INC. ---------------------- (Name of Small Business Issuer in its Charter) Delaware 22-3663311 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5 Lexington Avenue, East Brunswick, N.J. 08816 ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (908) 254-3433 - -------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 --------- --------- ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS Check whether the issuer has filed all documents and reports required to be filed by Section 12,13 or 15(D) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No ------- -------- APPLICABLE ONLY TO CORPORATE REGISTRANTS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. 13,308,134 -------------------------- Transitional Small Business Disclosure Format- (Check one): Yes No X ------- ------- 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following unaudited financial statements for the Company are attached hereto: (a) Balance Sheet as of June 30, 1996; (b) Statements of Operations for the three and six months ended June 30, 1996 and 1995; (c) Statements of Cash Flows for the six months ended June 30, 1996 and 1995 (d) Notes to Financial Statements ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. Results of Operations: Revenue for the three months ended March 31, 1996 of $2,501,004 increased from $2,357,544 for the same period of 1995 principally as a result of sale in 1996 of new helmets which command a higher selling price. Cost of sales decreased from $1,714,960 in 1995 to $1,631,374 in 1996 principally as a result of a change in product mix. The new helmets referred to above are produced at a cost only slightly higher than the Company's opening price point helmets. As a result, cost of sales of these new products is substantially less as a percentage of sales, decreasing from 72.8% in 1995 to 65.2% in 1996. Gross profit, as a result of the change in product mix described above, increased from 27% in 1995 to 34% in 1996. Selling, general and administrative expenses increased from $509,843 for the three months ended March 31, 1995 to $638,722 for the same period of 1996. The increase results from increased sales-related costs due to more customer visits, higher legal costs due to settlement negotiation and agreements with creditors and increased borrowing costs in 1996 as compared with 1995. Net income for the three months ended March 31, increased from $132,741 in 1995 to $230,907 for the same period of 1996 as a result of the increase in gross profit, offset by the increase in selling, general and administrative expenses described above. 3 Liquidity and Capital Resources: The Company's Statements of Cash Flows for the three months ended March 31, 1996 shows the impact of the first of two capital raises and the use of those proceeds in meeting the accumulated obligations of the Company. The receipt of the proceeds aided the Company significantly in being able to purchase needed components for sales orders and meet some of its past-due obligations. With the second capital raise, which was completed in May, 1996, estimated sales growth and profitable operations, the Company believes it will be able to conduct its operations in the ordinary course of business. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. As a result of a severe liquidity shortage during 1995, the Company was unable to make timely payments to some of its vendors. Thirty one of these vendors commenced legal action against the Company for delinquent payments. All of these actions have been settled pursuant to individual agreements by the Company to make periodic payments to these vendors. The Company has fully satisfied its obligations under thirteen of these payment agreements. The Company's obligations under the remaining eighteen settlement agreements total approximately $682,000 between May 1996 and January 1997. The Company has funded its obligations under these settlement agreements through a combination of capital raises and cash flow in the ordinary course of business. During 1995, Richard Berman, a former officer and director of the Company, commenced a legal action against the Company alleging breach of employment contract and wrongful termination. Certain officers and directors of the Company were also named as defendants on claims of breach of fiduciary duty to Mr. Berman in his capacities as officer, director and Stockholder of the Company. In March, 1996, the Company and Mr. Berman executed a settlement agreement pursuant to which the Company is obligated to pay an aggregate of approximately $449,000 to Mr. Berman. The Company is current on its obligations to Mr. Berman pursuant to the settlement agreement. ITEM 2. CHANGES IN SECURITIES ITEM 3. DEFAULTS UPON SENIOR SECURITIES ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS ITEM 5. OTHER INFORMATION 4 ITEM 6. EXHIBITS AND OTHER REPORTS ON FORM 8-K The following documents are filed as part of this report: (a) Financial Statements 5 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HEADSTRONG GROUP, INC. - -------------------------------------------------------------------------------- (Company) By /S/ John J. Willis ------------------------------------------------------------------------------ Printed John J. Willis, Treasurer and CFO -------------------------------------------------------------------- Date August 14, 1996 -------------------------------------------------------------------- By /S/ Dale M. Friedman ------------------------------------------------------------------------------ Printed Dale M. Friedman, Director, President and CEO -------------------------------------------------------------------- Date August 14, 1996 -------------------------------------------------------------------- 6 HEADSTRONG GROUP, INC. Balance Sheet (Unaudited)
ASSETS June 30, 1996 ------------- CURRENT ASSETS: Cash $ 118,058 Accounts Receivable 3,911,104 Inventory 1,081,362 Accounts Receivable-Stockholders 310,474 Prepaid Expenses 459,081 Other Current Assets 75,470 ----------- Total Current Assets 5,955,549 Other Assets 396,600 PROPERTY AND EQUIPMENT: Tooling and Equipment 1,171,503 Transportation Equipment 17,874 ----------- Total 1,189,377 Less-Accumulated Depreciation (370,644) ----------- Property and Equipment-Net 818,733 ----------- $ 7,170,882 =========== LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts Payable 1,592,014 Accrued Expenses 1,100,382 Litigation Reserve 174,615 Loans From Factor 597,405 Subordinated Notes Payable 863,582 Payroll Taxes Payable 300,197 ----------- Total Current Liabilities 4,628,195 CONVERTIBLE NOTES PAYABLE 316,668 ----------- STOCKHOLDERS DEFICIT Common Stock, Class A, par value $.0001, 20,000,000 shares authorized, 13,308,134 shares issued and outstanding 1,331 Common Stock, Class B, par value $.0001, 5,000,000 shares authorized, none issued and outstanding 0 Preferred Stock, par value $.001, 1,000,000 shares authorized, 86,325 shares issued and outstanding 86 Additional Paid-in Capital 10,122,308 Accumulated Deficit (7,897,706) ----------- 2,226,019 ----------- $ 7,170,882 ===========
The accompanying notes to financial statements are an integral part of this balance sheet. 7 HEADSTRONG GROUP, INC. Statements of Operations For The Three Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ---- ---- NET SALES $ 2,311,234 $2,727,464 COST OF SALES 1,441,582 1,909,773 ----------- ---------- Gross Profit 869,652 817,691 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 629,105 591,258 ----------- ---------- Operating Profit 240,547 226,433 Income Tax Expense 0 0 ----------- ---------- NET INCOME $ 240,547 $ 226,433 =========== ========== NET INCOME PER SHARE $ 0.02 $ 0.05 =========== ========== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 12,084,680 5,030,900 =========== ==========
The accompanying notes to financial statements are an integral part of these statements. 8 HEADSTRONG GROUP, INC. Statements of Operations For the Six Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ---- ---- NET SALES $ 4,812,236 $5,085,008 COST OF SALES 3,072,955 3,624,733 ----------- ---------- Gross Profit 1,739,281 1,460,275 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,267,826 1,101,101 ----------- ---------- Operating Profit 471,455 359,174 Income Tax Expense 0 0 ----------- ---------- NET INCOME $ 471,455 $ 359,174 =========== ========== NET INCOME PER SHARE $ 0.05 $ 0.07 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,255,060 5,030,900
The accompanying notes to financial statements are an integral part of these statements. 9 HEADSTRONG GROUP, INC. Statements of Cash Flows For the six Months Ended June 30, 1996 and 1995 (Unaudited)
1996 1995 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 471,455 $ 359,174 Adjustments to reconcile net income to net cash (used) provided in/by operating activities- Depreciation 90,000 50,000 Changes in operating assets and liabilities- (Increase) in accounts receivable (3,238,439) (1,159,004) (Increase) in accounts receivable-stockholders (100,409) (16,583) (Increase)Decrease in inventories 204,269 222,192 (Increase) in prepaid expenses (282,290) (388,094) Decrease (Increase) in other assets 109,371 (209,987) Increase (Decrease) in bank overdraft 0 (17,595) (Decrease) in accounts payable (521,429) (713,497) (Decrease) in accrued expenses (499,101) (53,419) (Decrease) in loans from factor 312,720 (1,011,554) (Decrease) in litigation reserve (293,385) 0 (Decrease) in payroll taxes payable (262,672) (69,696) ----------- ----------- Net cash (used in) operating activities (4,009,910) (2,901,225) ----------- ----------- CASH FLOW USED IN INVESTING ACTIVITIES- Purchase of property and equipment (179,062) (191,016) CASH FLOWS FROM FINANCING ACTIVITIES- Proceeds from the sale of common stock 4,957,555 0 Proceeds form the issuance of convertible debt 58,332 150,000 Proceeds (Repayment) of Debt (255,685) 2,942,567 ----------- ----------- Net cash provided by financing activities 4,760,202 3,092,567 ----------- (Decrease) in cash (44,641) 326 CASH, Beginning of period 45,517 450 ----------- ----------- Cash, End of period $ 876 $ 776 =========== ===========
The accompanying notes to financial statements are an integral part of these statements. 10 HEADSTRONG GROUP, INC Notes to Financial Statements 1. Basis of presentation The unaudited financial statements are subject to year-end adjustments and audit, but the Company believes all adjustments, consisting only of normal and recurring adjustments, necessary to present fairly the financial position, results of operations and changes in cash flows for the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full year. Footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with the published rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-KSB for the most recent fiscal year. 2. Income Taxes No income tax expense is recorded for the three months ended March 31, 1995 and 1996 as a result of the utilization of net operating loss carry forwards. 11 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 27 FINANCIAL DATA SCHEDULE EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 118,058 0 4,702,044 790,940 1,081,362 5,955,549 1,189,377 370,644 7,170,882 4,628,195 0 86 0 1,331 2,224,602 7,170,882 2,311,234 2,311,234 1,441,580 629,105 0 0 0 240,547 0 0 0 0 0 0 .02 0
-----END PRIVACY-ENHANCED MESSAGE-----