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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended September 29, 2002.
[ ] 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: 0-14146
WOMEN'S GOLF UNLIMITED, INC.
----------------------------
(Exact Name of Registrant as Specified in its Charter)
New Jersey 22-2388568
- ---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18 Gloria Lane, Fairfield, NJ 07004
- ----------------------------- -----
(Address of Principal Executive Office) (Zip Code)
(973) 227-7783
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-- --
On September 29, 2002, 3,227,273 shares of common stock, $.01 par value, were
issued and outstanding.
WOMEN'S GOLF UNLIMITED, INC.
FORM 10-Q
FOR QUARTERLY PERIOD ENDED SEPTEMBER 29, 2002
INDEX
-----
PART I. FINANCIAL INFORMATION Page Number
Item 1. FINANCIAL STATEMENTS
Balance Sheets -
September 29, 2002 and December 31, 2001 2
Statements of Operations -
Three Months Ended September 29, 2002
and September 28, 2001 3
Statements of Operations -
Nine Months Ended September 29, 2002
and September 28, 2001 4
Statements of Cash Flows -
Nine Months Ended September 29, 2002
and September 28, 2001 5
Notes to Financial Statements 6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 10
PART II. OTHER INFORMATION 10
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
CERTIFICATIONS 12
EXHIBIT INDEX 14
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
WOMEN'S GOLF UNLIMITED, INC.
BALANCE SHEETS
AS OF SEPTEMBER 29, 2002
AND DECEMBER 31, 2001
(UNAUDITED)
September 29, December 31,
2002 2001
------------ -----------
ASSETS
Current Assets
Cash $ 716 $ 7,717
Accounts Receivable - Net 1,809,699 3,092,565
Inventories 4,183,209 4,406,117
Prepaid Expenses 69,505 137,799
Deferred Income Taxes 258,000 173,000
----------- -----------
Total Current Assets 6,321,129 7,817,198
Plant and Equipment - Net 137,883 140,347
Non-Current Deferred Income Taxes 93,000 30,000
Intangible Asset- Net 2,937,056
Goodwill - Net 4,896,568
Other Assets - Net 94,942 110,255
----------- -----------
Total Assets 9,584,010 12,994,368
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current Portion Long-Term Debt 779,224 $ 1,307,243
Short-term Borrowings 2,257,496 3,780,465
Accounts Payable 683,995 373,189
Accrued Expenses 402,485 348,310
Other Current Liabilities 4,000 19,735
----------- -----------
Total Current Liabilities 4,127,200 5,828,942
Long-Term Liabilities
Long-Term Debt, less Current Portion 0 202,413
----------- -----------
Total Liabilities 4,127,200 6,031,355
----------- -----------
Shareholders' Equity
Common Stock, $.01 Par; 12,000,000 Shares
Authorized: 3,227,213 & 3,225,173 Issued
& Outstanding at September 29, 2002 and
December 31, 2001, respectively 32,272 32,252
Additional Paid in Capital 6,352,716 6,350,736
Retained Earnings (Accumulated Deficit) (928,178) 580,025
----------- -----------
Total Shareholders' Equity 5,456,810 6,963,013
----------- -----------
Total Liabilities and Shareholders' Equity $ 9,584,010 $12,994,368
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
2
WOMEN'S GOLF UNLIMITED, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
SEPTEMBER 29, 2002 AND SEPTEMBER 28, 2001
(UNAUDITED)
September 29, September 28,
2002 2001
---- ----
Net Sales $ 2,387,272 $ 3,484,474
Cost of Goods Sold 1,578,749 2,035,107
----------- -----------
Gross Profit 808,523 1,449,367
----------- -----------
Operating Expenses:
Selling 505,615 705,338
General & Administrative 555,299 664,519
----------- -----------
Total Operating Expenses 1,060,914 1,369,857
Operating Income (Loss) (252,391) 79,510
----------- -----------
Other Income (Expense)
Interest Expense (47,514) (115,290)
Other Income (Expense) 32,000 96,154
----------- -----------
(15,514) (19,136)
----------- -----------
Income (Loss) Before Income Taxes (267,905) 60,374
Provision for Income Taxes (102,985) (307)
----------- -----------
Net Income (Loss) $ (164,920) $ 60,681
----------- -----------
Earnings (Loss) per Common Share
Basic $ (0.05) $ 0.02
=========== ===========
Diluted $ (0.05) $ 0.02
=========== ===========
Weighted Average Number of Common
Shares Outstanding -
Basic 3,226,481 3,224,372
Diluted 3,237,335 3,327,514
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
3
WOMEN'S GOLF UNLIMITED, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED
SEPTEMBER 29, 2002 AND SEPTEMBER 28, 2001
(UNAUDITED)
September 29, September 28,
2002 2001
---- ----
Net Sales $ 9,924,405 $ 13,408,408
Cost of Goods Sold 5,961,439 7,740,162
------------ ------------
Gross Profit 3,962,966 5,668,246
------------ ------------
Operating Expenses:
Selling 1,852,887 2,942,239
General & Administrative 1,689,396 2,067,136
------------ ------------
Total Operating Expenses 3,542,283 5,009,375
Operating Income 420,683 658,871
------------ ------------
Other Income (Expense)
Interest Expense (194,142) (365,204)
Other Income (Expense) 255,017 237,606
------------ ------------
60,875 (127,598)
------------ ------------
Income Before Income Taxes 481,558 531,273
Provision for Income Taxes 183,313 260,416
------------ ------------
Income before Cumulative
Effect of Accounting Change 298,245 270,857
------------ ------------
Cumulative Effect of Accounting
Change (1,806,448)
------------ ------------
Net Income (Loss) $ (1,508,203) $ 270,857
============ ============
Earnings per Common Share from before
Accounting Change Basic $ 0.09 $ 0.08
============ ============
Diluted $ 0.09 $ 0.08
============ ============
Loss per Common Share from Cumulative
Effect of Accounting Change
Basic $ (0.56) $ (0.00)
============ ============
Diluted $ (0.56) $ (0.00)
============ ============
Income (Loss) per Share Basic $ (0.47) $ 0.08
============ ============
Diluted $ (0.47) $ 0.08
============ ============
Weighted Average Number of Common
Shares Outstanding -
Basic 3,225,503 3,223,484
Diluted 3,248,742 3,227,517
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
4
WOMEN'S GOLF UNLIMITED, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 29, 2002 AND SEPTEMBER 28, 2001
(UNAUDITED)
September 29, September 28
2002 2001
OPERATING ACTIVITIES
Net Income (Loss) $(1,508,203) $ 270,857
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided By Operating Activities:
Depreciation 49,995 81,433
Amortization 153,064 274,239
Goodwill Impairment Lady Fairway 1,806,448
Deferred Income Taxes (148,000) (6,000)
Bad Debt Provision 216,000 221,115
Issuance of Common Stock 2,000 2,000
Changes in Assets and Liabilities:
Accounts Receivable 1,066,866 504,578
Inventories 222,908 (479,954)
Prepaid Expenses 68,294 (115,914)
Other Assets 15,313 11,284
Accounts Payable 310,806 (204,127)
Accrued Expenses 54,155 (14,648)
Other Current and Non-Current Liabilities (15,735) (45,806)
----------- -----------
NET CASH PROVIDED BY OPERATIONS 2,293,911 499,057
----------- -----------
INVESTING ACTIVITIES
Purchases of Equipment (47,531) (44,854)
----------- -----------
FINANCING ACTIVITIES
Repayments of long-term debt (730,412) (374,794)
Repayment Revolving Line of Credit, Net (1,522,969) (85,610)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (2,253,381) (460,404)
----------- -----------
DECREASE IN CASH (7,001) (6,201)
CASH - BEGINNING OF PERIOD 7,717 9,886
----------- -----------
CASH - END OF PERIOD $ 716 $ 3,685
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash Paid During the Period For:
Interest $ 263,357 $ 320,517
=========== ===========
Income Taxes $ 165,434 $ 158,868
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
5
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements of Women's Golf Unlimited,
Inc., (the "Company") have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial reporting. In the opinion of management, all material adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months and
three months ended September 29, 2002 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 2002. The
unaudited financial statements and related notes are presented as permitted by
Form 10-Q and do not contain certain information included in the Company's
annual financial statements and notes thereto. For further information, refer
to the Company's annual financial statements and notes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended December 31,
2001.
1) EARNINGS (LOSS) PER SHARE
Basic earnings per share ("EPS") excludes dilution and is computed by dividing
net income (loss) available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if stock options or other contracts to issue
common stock were exercised and resulted in the issuance of common stock that
then shared in the earnings of the Company. Diluted EPS is computed using the
treasury stock method when the effect of common stock equivalents would be
dilutive. The only reconciling item between the denominator used to calculate
basic EPS and the denominator used to calculate diluted EPS is the dilutive
effect of stock options issued to employees of the Company and other parties.
The Company has issued no other potentially dilutive common stock equivalents.
2) NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible
Assets. This accounting standard addresses financial accounting and reporting
for goodwill and other intangible assets and requires that goodwill amortization
be discontinued and replaced with periodic tests of impairment. A two-step
impairment test is used to first identify potential goodwill impairment and then
measure the amount of goodwill impairment loss, if any. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001, and is required to
be applied at the beginning of the fiscal year. Impairment losses that arise due
to the initial application of this standard will be reported as a cumulative
effect of a change in accounting principle. The first step of the goodwill
impairment test, which must be completed within six months of the effective date
of this standard, will identify potential goodwill impairment. The second step
of the goodwill impairment test, which must be completed prior to the issuance
of the annual financial statements, will measure the amount of goodwill
impairment loss, if any. As of the first quarter of 2002, the Company has
completed these steps.
In accordance with SFAS No. 142, goodwill amortization was discontinued as of
January 1, 2002. The Company recorded a goodwill impairment of $1,806,448, or
($.56) per basic and diluted share, related to the Lady Fairway acquisition as a
cumulative effect of change in
6
accounting principle in the first quarter of 2002. In addition, the Company
stopped amortizing approximately $1.2 million of an intangible asset deemed to
have an indefinite useful life, primarily related to the Lady Fairway trademark.
The Company estimated the fair value of the associated sole unit by using a
present value of future cash flows model. Based on the current level of the
intangible asset deemed to have an indefinite useful life, the adoption of SFAS
No. 142 will reduce annual amortization expense by approximately $150,000.
Amortization expense related to intangible assets deemed to have a definite
useful life is approximately $153,000 as of September 29, 2002. If the adoption
of this statement occurred on January 1, 2001, Net Income (loss) from continuing
operations and Earnings per Share, Basic and Diluted would have been as follows:
Three Months Ended Nine Months Ended
September 29, September 28, September 29, September 28,
2002 2001 2002 2001
------------------------------------- -----------------------------------
Reported net income (loss) (164,920) 60,681 1,508,203 270,857
Goodwill amortization 37,934 113,802
Adjusted net income (loss) (164,920) 98,615 1,508,203 384,659
Reported basic and diluted EPS (0.05) 0.02 (0.47) 0.08
Goodwill amortization 0.01 0.04
Adjusted basic EPS (0.05) 0.03 (0.47) 0.12
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities which nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring). This accounting standard, which is effective for exit or
disposal activities that are initiated after December 31, 2002, addresses
financial accounting and reporting for costs associated with exit or disposal
activities. The adoption of SFAS No. 146 is not expected to have a material
effect on the Company's financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This accounting standard, which is effective for fiscal years beginning after
May 15, 2002, requires, among other things, that debt extinguishments used as a
part of an entity's risk management strategy no longer meet the criteria for
classification as extraordinary items. The adoption of SFAS No. 145 is not
expected to have a material effect on the Company's financial position or
results of operations.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of
Disposal of Long-Lived Assets." This statement will be effective for fiscal
years beginning after December 15, 2001. This statement established a single
accounting model, based upon the framework established in SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," for long-lived assets to be disposed of by sale or to address
significant implementation issues. The adoption of FAS No. 144, does not have a
material effect on the Company's financial statements.
INVENTORIES
Inventories are valued at the lower of cost, determined on the basis of the
first-in, first-out method, or market.
Inventories at September 29, 2002 and December 31, 2001 consisted of the
following components:
9/28/02 12/31/01
------- --------
Raw Materials $ 752,977 $ 793,101
Finished Goods 3,430,232 3,613,016
---------- ----------
$4,183,209 $4,406,117
========== ==========
7
SHORT TERM BORROWINGS
The Company has a secured revolving line of credit allowing a maximum credit
limit of $8,000,000, less 50% of the aggregate face amount of all outstanding
letters of credit, and subject to various borrowing bases through September 30,
2003. The availability of funds under this line of credit varies as it is based,
in part, on a borrowing base of 80% of eligible accounts receivable and 60% of
qualified inventory. Substantially all of the Company's assets are used as
collateral for the credit line. Interest rates are at prime plus one-quarter
percent, paid monthly; the interest rate was 5.00% as of September 29, 2002 and
5.00% as of December 31, 2001. The Company's remaining availability on the line
of credit, as of September 29, 2002 was approximately $ 1,836,000.
The credit facility contains certain covenants, which, among other items,
require the maintenance of certain financial ratios including tangible net worth
and working capital. Any event of default under the credit facility permits the
lender to cease making additional loans there-under. The Company was in
compliance with all covenants and conditions of the facility as of September 29,
2002.
QUARTERLY ENDS
The Company reports its interim financial statements as of the Friday closest to
month-end of the quarter. Therefore, the interim quarters for fiscal 2002 will
end on March 31, 2002, June 30, 2002 and September 29, 2002. The Company reports
its year-end financial statements as of December 31.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
- -------------
RESULTS OF OPERATIONS
- ---------------------
Net Sales for the three-months and nine-month periods ended September 29, 2002
were $2,387,272 and $9,924,405 respectively, compared to $3,484,474 and
$13,408,408 for the same periods in 2001. Management attributes this 26.0%
decrease for the nine-month period to the softness in the equipment industry
caused by the general economic slowdown and bad weather in parts of the country
in the spring. The Square Two brand was down 23.1% and the NancyLopezGolf brand
was down 21.8% for the nine-months ended September 29, 2002. The Lady Fairway
shoe brand was down 37.8% for the nine-months ended September 29, 2002, which
was the result of excess inventory at the retail level and managements decision
to completely begin to change the product and marketing associated with Lady
Fairway. The effect of these changes to the Lady Fairway brand will not be felt
until 2003. Net sales for the three-month period ended September 29, 2002 were
32.5% less than the same period in 2001. The Square Two brand was down 23.2%,
the NancyLopezGolf brand was down 21.8% and Lady Fairway was down 37.8% for the
three-months ended September 29, 2002.
Gross profit as a percentage of sales for the three-month and nine-month periods
ended September 29, 2002 was 33.9% and 40.0% respectively, as compared to 41.6%
and 42.3% for the same periods in 2001. Management attributes this decrease to
lower revenue and a higher amount of shoe closeouts in 2002.
Selling expenses for the three-month and nine-month periods ended September 29,
2002 were $505,615 and $1,852,887, compared to $705,338 and $ 2,942,239 for the
same periods in 2001. The nine-month decrease of approximately $1,089,000 is a
result of a decrease in advertising, due to no television campaign done in 2002
and reduced national show expense as well as a
8
reduction in commissions, due to decreased sales. The three-month decrease of
approximately $200,000 was due to no television campaign done in 2002 and a
reduction of commissions.
General and Administrative expenses for the three-month and nine-month periods
ended September 29, 2002 were $555,299 and $1,689,396 respectively, compared to
$664,519 and $2,067,136 the same periods in 2001. The three-month and nine-month
decreases are mainly due to the consolidation of Lady Fairway operations into
the New Jersey facility as well as decreased Legal, professional fees and FASB
142, Amortization of Goodwill, which states Lady Fairway Goodwill can no longer
be expensed in 2002, but was in 2001. Goodwill for Lady Fairway for the
three-month and nine-month periods ended September 28, 2001 was approximately
$38,000 and $114,000 respectively.
Interest expense for the three-month and nine-month periods ended September 29,
2002 was $47,514 and $194,142 respectively, compared to $115,290 and $365,204
for the same periods in 2001. The average loan balance for the nine-month period
ended September 29, 2002 was $4,038,509 compared to $4,717,793 for the same
period in 2001. For the three-months ended September 29, 2002, the average loan
balance was $2,480,954 compared to $3,733,741 for the same period in 2001. The
decrease in the average outstanding balance resulted mainly from better
management of inventories and receivables. Interest rates for the three-month
and nine-month periods ended September 29, 2002 are lower than the same periods
in 2001, therefore decreasing the interest paid on the term loan, line of credit
and promissory note. In addition, the balance on the promissory note has
decreased due to payments, therefore reducing the interest on the principal.
Other income (expense) for the three-month and nine-month periods ended
September 29, 2002 was $32,000 and $255,017 respectively compared to $96,154 and
$237,606 for the same periods in 2001. The three-month period ended September
29, 2002, other income (expense) was $32,000 compared to $96,154 for the same
period in 2001. This decrease is due to timing of payments for royalty income
from international distributors.
The provision for income taxes for the three-month and nine-month periods ended
September 29, 2002 was ($102,985) and $183,313 respectively, compared to $307
and $260,416 for the same periods in 2001. This decrease is mainly the result of
the amortization in 2001 of Goodwill associated with the acquisition of the Lady
Fairway Product Line, which is not deductible for tax purposes. Per SFAS No.
142, amortization was discontinued in 2002.
The Company's net income (loss) before Cumulative Effect of Accounting Change
for the three-month and nine-month periods ended September 29, 2002 was
($164,920) and $298,245 respectively compared to $60,681 and $270,857 for the
same periods in 2001. The decrease in net income for the three-months ended
September 29, 2002 was a result of decreased net revenue as well as decreased
margins, offset by reduced selling of approximately $200,000, general and
administrative expense $109,000 and interest $68,000. The increase in net income
of $27,388 for the nine-months ended September 29, 2002 was a result of
decreased net revenue and a decrease to margin, offset by a reduction of selling
expense of approximately $1,089,000, reduced general and administrative of
$378,000 and reduced interest of $171,000. In addition, other income has
increased $17,000.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
The Company's working capital increased by $205,673 for the nine-month period
ended September 29, 2002, compared to December 31, 2001. Current assets
decreased by $1,496,069, offset by a decrease in current liabilities of
$1,701,742. Accounts receivable decreased by
9
approximately $1,283,000 and Inventory decreased by $223,000, which was typical
for the Company due to the cyclical nature of the golf industry. In addition,
Prepaid expenses decreased approximately $68,000 offset by an increase in taxes
of approximately $85,000. The short-term borrowings of the Company decreased by
approximately $1,523,000. In addition, accounts payable increased by
approximately $311,000, Accrued Expenses increased approximately $56,000 and
Other Current Liabilities decreased by $16,000 for the nine-month period ended
September 29, 2002.
Cash provided by operations was $2,293,911 for the nine-month period ended
September 29, 2002, compared to $499,057 for the same period ended September 28,
2001. Cash used by financing activities totaled $2,253,381 for the nine-months
ended September 29, 2002, compared to $460,404 for the same period ended
September 28, 2001. During the nine-month period ended September 29, 2002 cash
used for the payment of equipment purchased was $47,531 compared to cash used of
$44,854 for the same period ended September 28, 2001. Cash paid for interest
charges on short and long-term borrowing was $263,357 and $320,517 for the
nine-month periods ended September 29, 2002 and September 28, 2001,
respectively.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
----------------------------------------------------------
Within 90 days prior to the date of this Quarterly Report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's Chief Executive Officer/Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer/Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective. There were no significant
changes in the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation.
Disclosure controls and procedures are the controls and other procedures of the
Company that are designed to ensure that the information required to be
disclosed by the Company in its reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in its reports filed under the Exchange Act is accumulated and
communicated to the Company's management, including the principal executive
officer and principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.
The Company's exposure to market risks is limited to interest rate risks
associated with the variable interest rates on its revolving line of credit,
term loan and promissory note. Changes in the interest rates affect the
Company's earnings and cash flows, but not the fair value of the Company's debt
instruments. If the indebtedness outstanding at December 31, 2001 were to remain
constant, a 1.0% increase in interest rates occurring on January 1, 2002 would
result in an increase in interest expense for the following 12 months of
approximately $46,956. There have been no material changes in the market risks
faced by the Company since December 31, 2001.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(a) The exhibits listed on the attached Exhibit Index are filed as part of this
report.
(b) The Company filed no reports on for 8K during the quarter for which this
report is filed.
10
SIGNATURES
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 thereunto duly authorized.
WOMEN'S GOLF UNLIMITED, INC.
11/13/2002 /s/ Douglas A. Buffington
- ---------------- -------------------------
Dated By:
Douglas A. Buffington
Director, President, Chief
Financial Officer, Chief Operating
Officer and Treasurer
11
CERTIFICATION
I, Douglas A Buffington, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Women's Golf
Unlimited, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I am responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date");
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/s/Douglas A. Buffington
- ---------------------------------------------
Director, President, Chief Financial Officer,
Chief Operating Officer and Treasurer
12
CERTIFICATION
I, Robert L. Ross, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Women's Golf
Unlimited, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I am responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date");
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 13, 2002
/s/Robert L. Ross
- ----------------------------
Chairman of the Board and
Chief Executive Officer
13
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT*
3.1 Amended and Second Restated Certificate of Incorporation of
the registrant dated June 28, 1991 (incorporated by reference
to Exhibit 3.1 to the registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1991).
3.2 Certificate of Amendment to the Amended and Second Restated
Certificate of Incorporation of the registrant (incorporated
by reference to Exhibit 99.0 to the registrant's current
report on Form 8-K reporting the event dated June 12, 2001).
3.3 Amended and Restated By-laws of the registrant dated December
6, 1991 (incorporated by reference to Exhibit 3.2 of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1991).
4.1 Common Stock Purchase Warrant in favor of Wesmar Partners
dated February 28, 1988 (incorporated by reference to Exhibit
4.4 of the registrant's Registration Statement No. 33-37371 on
Form S-3).
4.2 Common Stock Purchase Warrant in favor of Wesmar Partners
dated February 28, 1988 (incorporated by reference to Exhibit
4.5 of the registrant's Registration Statement No. 33-37371 on
Form S-3).
4.3 Stock Option Agreement between the registrant and Wesmar
Partners dated February 29, 1988 (incorporated by reference to
Exhibit 4.6 of the registrant's Registration Statement No.
33-37371 on Form S-3).
10.0 Loan and Security Agreement between the registrant and
Midlantic Bank, National Association dated December 29, 1994
(incorporated by reference to Exhibit 99 of the registrant's
Current Report on Form 8-K dated December 26, 1994).
10.1 First Amendment to Loan and Security Agreement between the
registrant and Midlantic Bank, National Association made as of
April 9, 1996 (incorporated by reference to Exhibit 10.1 of
the registrant's Annual Report on Form 10-K for the year ended
December 31, 2000).
10.2 Second Amendment to Loan and Security Agreement between
registrant and PNC Bank, National Association as successor in
interest of Midlantic Bank, National Association made as of
December 1, 1997 (incorporated by reference to Exhibit 10.12
of the registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).
10.3 Fourth Amendment to Loan and Security Agreement between the
registrant and PNC Bank, National Association dated as of July
3l, 2000 (incorporated by reference to Exhibit 10.14 to the
registrant's Registration Statement No. 333-47908 on Form
S-4).
14
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT*
10.4 Fifth Amendment to Loan and Security Agreement between the
registrant and PNC Bank, National Association made of January
3, 2001 (incorporated by reference to Exhibit 10.4 of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 2000).
10.5 Sixth Amendment to Loan and Security Agreement between the
registrant and PNC Bank, National Association made as of
August 13, 2001 (incorporated by reference to Exhibit 10.20 of
the registrant's Quarterly Report on Form 10-Q for the quarter
ended September 28, 2001).
10.6 Replacement Promissory Note of the registrant in favor of
James E. Jones dated December 29, 2000 and letter agreement in
connection with same (incorporated by reference to Exhibit
10.6 of the registrant's Annual Report on Form 10-K for the
year ended December 31, 2001).
10.7 Lease between the registrant and Kobrun Investments, III,
L.L.C. dated August 30, 2001 (incorporated by reference to
Exhibit 10.7 of the registrant's Annual Report on Form 10-K
for the year ended December 31, 2001).
10.8 Amended and Restated Licensing Agreement between Ladies
Professional Golf Association and the registrant dated January
1, 1999 (incorporated by reference to Exhibit 10.2 of the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1999).
10.9 Endorsement Agreement between the registrant and Kathy
Whitworth dated October 13, 1999 (incorporated by reference to
Exhibit 10.13 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1999).
10.10 Licensing Agreement between Nancy Lopez Enterprises, Inc. and
the registrant made as of July 31, 2000 (incorporated by
reference to Exhibit 10.10 of the registrant's Annual Report
on Form 10-K for the year ended December 31, 2000).
10.11 License Agreement between the registrant and Raymond Lanctot
Ltee/Ltd. dated June 28, 1999 (incorporated by reference to
Exhibit 10.12 to the registrant's Annual Report on Form 10-K
for the year ended December 31, 1999).
10.12 Asset Purchase Agreement among the registrant, APGC Holdings
Company, LLC and The Arnold Palmer Golf Company dated July 31,
2000 (incorporated by reference to Exhibit 2.0 to the
registrant's Current Report on Form 8-K reporting the event
dated July 31, 2000).
10.13 Agreement and Plan of Reorganization, dated as of June 22,
2000, among the registrant, S2 Golf Acquisition Corp., Ladies
Golf Equipment Company, Inc., James E. Jones and Brian
Christopher (incorporated by reference to Exhibit 2.0 of the
registrant's Registration Statement No. 333-47908 on Form
S-4).
10.14 1992 Stock Plan for Independent Directors of S2 Golf Inc.
dated December 29, 1992 (incorporated by reference to Exhibit
10.11 to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1992).
15
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT*
10.15** 1998 Employee Stock Plan of the registrant (incorporated by
reference to Exhibit 10.15 to the registrant's Annual Report
on Form 10-K for the year ended December 31, 2000).
10.16** Agreement between the registrant and Randy A. Hamill dated
January 2, 1997 (incorporated by reference to Exhibit 10.10 to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1997).
10.17** Employment Agreement between the registrant and Douglas A.
Buffington, made April 3, 2001 and effective as of January 1,
2001 (incorporated by reference to Exhibit 10.17 of the
registrant's Quarterly Report on Form 10-Q for the quarter
ended March 30, 2001).
10.18** Consulting Services Agreement between the registrant and MR &
Associates made as of December 15, 2000, effective as of
January 1, 2000 (incorporated by reference to Exhibit 10.18 of
the registrant's Annual Report on Form 10-K for the year ended
December 31, 2000).
10.19** Employment Agreement among the registrant, S2 Golf Acquisition
Corp. and James E. Jones dated as of January 1, 2001
(incorporated by reference to Exhibit 10.19 of the
registrant's Annual Report on Form 10-K for the year December
31, 2000).
10.20 Agreement and Plan of Merger between the registrant and its
wholly-owned subsidiary S2 Golf Acquisition Corp. dated as of
June 15, 2001 (incorporated by reference to Exhibit 10.20 of
the registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001).
10.21 Sixth Amendment to Loan and Security Agreement between the
registrant and PNC Bank, National Association made as of
August 13, 2001 (incorporated by reference to Exhibit 10.21 of
the registrant's Quarterly Report on Form 10-Q for the quarter
ended September 28, 2001)
* In the case of incorporation by reference to documents filed by the
registrant under the Exchange Act, the registrant's file number under the
Act is 0-14146.
** Management contract or management compensatory plan or arrangement.
16