-----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, N0mngqjSgdj9jisV51rrdNXiOu/0KJ9wIunaloy+fjMqnjMGxPacGcuW4cbYvmhX s0/VhNnXPCi3Z53bbGh4Zw== /in/edgar/work/0001021408-00-003158/0001021408-00-003158.txt : 20001024 0001021408-00-003158.hdr.sgml : 20001024 ACCESSION NUMBER: 0001021408-00-003158 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20001023 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARBITE GOLF INC CENTRAL INDEX KEY: 0001095102 STANDARD INDUSTRIAL CLASSIFICATION: [5090 ] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-28707 FILM NUMBER: 744335 BUSINESS ADDRESS: STREET 1: 6330 NANCY RIDGE DRIVE STREET 2: SUITE 107 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 8586250065 10QSB 1 0001.txt FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ____________________ FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 Commission file Number: 0-28707 CARBITE GOLF, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) British Columbia, Canada 33-0770893 (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 9985 HUENNEKENS STREET SAN DIEGO, CA 92121 (Address of Principal Executive Offices) Registrant's Telephone Number (858) 625-0065 Check Whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ____ No X --- On September 15, 2000, 25,371,750 shares of the Registrant's Common Stock, no par value, were outstanding.
Index Page No. PART I FINANCIAL INFORMATION 3 Item 1. Financial Statements: 3 Condensed Consolidated Balance Sheet 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II OTHER INFORMATION Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CARBITE GOLF INC CONDENSED CONSOLIDATED BALANCE SHEET JUNE 30, 2000 (UNAUDITED) ________________________________________________________________________________ ASSETS Current Assets Cash $ 1,437,254 Accounts Receivable 2,084,299 Note Receivable 253,238 Inventory 2,347,015 Prepaid Expenses 364,530 Future Tax Assets 150,000 ________________________________________________________________________________ Total Current Assets 6,636,336 Capital Assets 747,478 Patents and Trademarks Net of Amortization 84,427 Goodwill Net of Amortization 2,065,481 Other Non-Current Assets (Deferred Costs) 184,574 ________________________________________________________________________________ Total Assets $ 9,718,296 ================================================================================ LIABILITIES AND STOCKHOLDERS EQUITY Current Liabilities Accounts Payable 843,318 Accrued Liabilities 404,600 Bank Loan 519,150 Income Tax Payable 33,977 Other Current Liabilities 37,208 ________________________________________________________________________________ Total Current Liabilities $ 1,838,253 - -------------------------------------------------------------------------------- Shareholders Equity Share Capital 11,260,612 Deficit (3,380,569) Total Stockholders Equity 7,880,043 - -------------------------------------------------------------------------------- TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 9,718,296 ================================================================================ 3 CARBITE GOLF INC CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS JUNE 30, 2000 (UNAUDITED)
Three months ended June 30, Six months ended June 30 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------- Net Sales $ 4,951,448 $ 5,491,681 $ 9,197,324 $ 9,606,810 Cost of Goods Sold 2,778,665 2,956,414 4,969,913 5,076,159 - ----------------------------------------------------------------------------------------------------------- Gross Profit 2,172,783 2,535,267 4,227,411 4,530,651 Operating Expenses Selling Expenses 1,774,684 1,782,656 3,173,584 2,736,828 Gen. and Admin. Expenses 620,197 376,300 1,186,845 795,834 Research & Development Costs 151,013 112,541 294,462 228,321 - ----------------------------------------------------------------------------------------------------------- Income from Operations (376,977) 263,770 (427,479) 769,668 Amortization (129,678) (105,627) (254,065) (203,235) Interest income (expense) (24,404) (4,356) ( 19,823) (5,565) Other Expense 0 (37,524) 0 (247,367) - ----------------------------------------------------------------------------------------------------------- Net Income (531,059) 116,263 (701,367) 313,481 =========================================================================================================== Basic and Diluted Earnings Per Share (.02) .01 (.03) .01 ===========================================================================================================
4 CARBITE GOLF INC CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS JUNE 30, 2000
Six months ended June 30, Three Months ended June 30, 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------------------------------------------------- Cash Flows used in Operating Activities Net Loss (701,367) $ 313,481 (531,059) $ 116,263 Adjustments to Net Loss to Cash Used in Operations: Gain/(loss) on other discontinued operation (67,203) (67,203) Deferred Costs on Unrecognized Sales 97,662 151,000 46,267 89,434 Amortization 156,403 145,000 79,351 72,500 Depreciation 84,908 67,203 44,484 36,289 Changes in Operating Assets and Liabilities: Inventories 34,570 (81,820) 163,621 (544,572) Accounts Receivable 76,049 (1,111,117) 154,894 (312,078) Other Current (315,510) (522,484) (13,531) 111,711 Accounts Payable and Accrued Liabilities 471,968 204,848 458,969 (255,202) - ----------------------------------------------------------------------------------------------------------------------------------- Cash Used in Operating Activities (95,317) (901,092) 402,996 (752,858) - ----------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Purchases of Capital Equipment (219,030) (283,765) (45,274) (107,024) Other Investment (35,725) (41,947) (7,100) (20,252) - ----------------------------------------------------------------------------------------------------------------------------------- Cash Used in Investing Activities (254,755) (325,712) (52,374) (127,276) - ----------------------------------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Net Borrowings (payments) under Line of Credit 327,225 112,425 0 112,425 Repayment of L/T Debt (6,817) (6,429) (3,424) (4,305) Change in Foreign Currency 358 5,396 0 4,091 Net Proceeds From Sale of Common Stock 805,891 663,096 425,038 60,545 - ----------------------------------------------------------------------------------------------------------------------------------- Cash Provided by Financing Activities 1,126,657 774,488 421,614 172,756 - ----------------------------------------------------------------------------------------------------------------------------------- Net Increase (Decrease) in Cash 776,585 (452,316) 772,236 (707,378) Cash at Beginning of Period 660,669 1,154,678 665,018 1,409,740 - ----------------------------------------------------------------------------------------------------------------------------------- Cash at End of Period $1,437,254 $ 702,362 $1,437,254 $ 702,362 ===================================================================================================================================
5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - QUARTERLY FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements and related notes as of June 30, 2000 and for the three-month periods ended June 30, 2000 and 1999 are unaudited but include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of financial position and results of operations of the Company for the interim periods. The results of operations for the three-month period ended June 30, 2000 are not necessarily indicative of the operating results to be expected for the full fiscal year. The information included in this report should be read in conjunction with the Company's audited consolidated financial statements and notes thereto and the other information, including risk factors, set forth for the year ended December 31, 1999 in the Company's Form 10-SB. Readers of this Quarterly Report on Form 10-QSB are strongly encouraged to review the Company's Form 10-SB. Copies are available from the Company's Investor Relations Department at 9985 Huennekens Street, San Diego, CA 92121. NOTE 2 - ACCOUNTS RECEIVABLE Accounts Receivable at June 30, 2000 were $2,414,568 with a reserve for doubtful accounts of ($330,269) for net receivables of $2,084,299. At June 30, 2000, the Company added $135,000 to the Reserve to reflect on-going credit problems with several of our dot.com customers and one specific large retailer, Golf Day. NOTE 3 - NOTES RECEIVABLE During the Second Quarter, the Company accepted a secured Promissory Note from a customer for the full amount of its outstanding trade receivables. As of June 30, 2000, that debt is carried as a Note Receivable. The balance due at June 30, 2000 was $253,238. NOTE 4 - INVENTORY Inventories consist of: Raw materials $1,719,149 Work-in-progress 843,696 Obsolescence reserve ( 215,830) ---------- $2,347,015 At June 30, 2000, the Company completed a periodic review of inventory and charged $215,830 to inventory obsolescence reserve to account for products which have been de-emphasized or will be closed out in the future. 6 NOTE 5 - BANK LOAN We have a $1,000,000 Revolving Line of Credit with Scripps Bank in San Diego, California, which is at the lender's general reference rate of interest and is collateralized by accounts receivable. As of June 30, 2000, we had drawn $519,150 under that Line of Credit. NOTE 6 - LETTER OF CREDIT COMMITMENTS The Company purchases some components from overseas vendors through Letter of Credit financing. At June 30, 2000, we had $208,121 in such Letters of Credit outstanding with Scripps Bank, San Diego and $404,076 with Inabata America Corporation. The Letters of Credit with Scripps Bank are generally due and payable by the Company upon shipment of the product by our vendors. The Letters of Credit with Inabata are due and payable by the Company when it takes delivery of the products after arrival in the United States. NOTE 7 - EARNINGS PER SHARE Earnings per share are calculated by dividing the loss available to common shareholders by the weighted average of shares outstanding during the period. At June 30, 2000, there were 23,526,486 common shares outstanding. The computation of diluted loss per share excludes the effect of the exercise of share options and share purchase warrants outstanding because their effect would be antidilutive due to losses incurred by the Company during this period. At June 30, 2000, there were 3,159,740 share options and 1,291,250 share purchase warrants outstanding. 7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements, which involve substantial risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in this section and elsewhere in this Quarterly Report on Form 10-QSB. RESULTS OF OPERATIONS Net Sales. Net conso1idated sa1es through the second quarter of 2000 were $4,951,448 compared to $5,491,681 through the second quarter of 1999, a decrease of 10%. Net sales were negatively effected by unsuccessful telemarketing campaigns which have since been discontinued and by continued delay in the full roll out of our Polar Balanced Wedge product. For the six months ended June 30, 2000, net sales were down 4%, $9.2 million versus $9.6 million. Domestic retail sales were $400,000 over the comparable period in 1999. Gross Margin. Gross Margins for the Quarter were 44% versus 46% in 1999. For the six months ended June 30, 2000, gross margins were relatively unchanged, 47% versus 46%. Operating Expenses. Operating expenses for the Quarter were increased over 1999, $2,545,894 versus $2,271,497. Operating expenses for the six months through June 2000 were $827,766, or 23.4% higher than year to date June 1999. Operating expenses in 2000 were 47.1% of sales, compared to 28.5% in 1999. These increases were primarily in Sales/Marketing, G&A, and R&D as noted below. Sales and Marketing Expense. Sales and Marketing expenses for the three months were the same, but increased 16% over the same six-month period in 1999. The additional spending was principally in commissions and sales and marketing personnel. Commissions increased substantially as the Company experimented with outside telemarketing call centers with commissions of 20-25% on gross sales. Those projects will be discontinued. General and Administrative Expense. General and Administrative expense for the Quarter and for the six months up 40.7%. This increase resulted from additional management personnel, additional occupancy costs at our new building, and on going transition expense of a new computer system, $135,000 increase in bad debt reserves, and a $25,000 finders fee for the arrangement of financing. Research and Development. Research and Development expenses were up 29% in the first half of 2000 versus the first half of 1999. Additional manpower is being utilized to bring new products to market, such as the Polar Balanced wedge, and work on improving the current putter technology. Other Expenses. Amortization of deferred costs and depreciation are higher in 2000 than in 1999. These costs are consistent with previous expenditures in the first quarter. Other expenses year to date June 2000 are $338,973 compared to $270,458 year to date June 1999. Income Taxes. As in the first quarter of 2000, the company has not recorded a provision for income taxes for the six months-ended 2000 8 Capital Expenditures. Capital expenditures through the second quarter of 2000 were $45,274. These dollars were spent on five new computer stations, inventory storage racks, and general production tooling. Capital expenditures in the future will fit the current strategic plans for growth and profitability. Inventory Reserve. At June 30, 2000, the Company charged $215,000 to an Inventory Obsolescence reserve to account for products which will be de- emphasized or closed out in the future as the Company moves to focus on its core products - putters and wedges using the patented Polar Balanced technology. Accounts Receivable. At June 30, 2000, the Company increased its allowance for doubtful accounts by $150,000 in order to reflect the on-going shake out among dot.com vendors and large retailers who have been aggressive buyers of our products. LIQUIDITY AND CAPITAL RESOURCES We have historically financed our business through cash flow from operations and the private placement of equity and/or debt securities, supplemented with short-term borrowings from commercial lenders. In May, 2000, we raised $400,000 through private equity placements made in the United States. Net cash from operating activities for the quarter ended June 30, 2000 was $402,596 compared to net cash used of $752,858 in the same quarter in 1999. For the six months ending June 30, 2000, net cash used in operating activities was $95,317 compared to $901,092 net cash used for the same period in 1999. As of June 30, 2000, we had drawn $519,150 under our $1,000,000 Credit Facility with Scripps Bank in San Diego. 9 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting on May 24, 2000, the shareholders voted and approved the following: the appointment of KPMG, LLP, and Charter Accountants as auditors; the increase in the number of directors for the ensuing year from five (5) to six (6); approval of the granting of 155,000 stock options to seven employees of the Company; and election of the following persons to be Directors: Chester Shira; Michael Spacciapolli; David Nairne; Jim Henderson; David Williams; John Pierandozzi. The Board elected the following to be officers: Chester Shira, Chairman; Mike Spacciapoli, Vice Chairman; John Pierandozzi, President and CEO; Andy Robertson, Executive Vice President and COO; Stan Sopczyk, VP of Operations; and Joe Sery, VP of Engineering. ITEM 5. OTHER INFORMATION On April 18, 2000, we granted options to purchase an aggregate of 220,000 shares of common stock to 3 directors--David Williams (80,000 at $.37 Cdn), James Henderson (80,000 at $.37 Cdn) and David Nairne (60,000 at $.37 Cdn). All options expire April 18, 2005. On May 15, 2000, the Company renewed for six months its $1,000,000 Line of Credit with Scripps Bank. That line will expire in November 2000. On May 23, 2000, the Company issued 100,000 shares of common stock at a deemed price of $.40 Canadian per share to Paul Michaels as a finders fee for services rendered in arranging for the $500,000 Letter of Credit financing with Inabata America Corporation. No underwriters were used in this transaction and we relied upon the exceptions provided by Section 4(2) and/or Regulation D of the Securities Act. On May 15, 2000, the Company entered into an Asset Purchase Agreement with Carizma Golf, San Diego, to acquire substantially all the assets of Carizma, including its products and intellectual property in exchange for Carbite Golf common stock. The assets were valued at $301,200 and will be purchased by the issuance of 792,632 shares of Carbite common stock at a deemed price per share of $.38US. Carbite will also pay Carizma royalty on all Putterball and Power Ti- Pod sales for a period of 5 years. The shares will be issued upon regulatory approval by the Canadian Venture Exchange. On June 12, 2000 the Company accepted a private placement of up to 1,052,632 Units at a price of $.38US per Unit to raise gross proceeds of up to $400,000. Each Unit will consist of one common share and one non-transferable share purchase warrant. Four such warrants, once exercised, will entitle the holder to purchase one additional common share of the Company at a price of $.38US per share for a period of two years from the later of the date of the advancement of funds or the date as specified by the Company in conjunction with the regulatory authorities. The shares and warrants will issue upon 10 approval from the Canadian Venture Exchange. No underwriters were used in this transaction and we relied upon the exceptions provided by Section 4(2) and/or Regulation D of the Securities Act. On June 30, 2000, the Board of Directors expanded the Board from 6 to 7 members and appointed Ballard F. Smith of McCall, Idaho, former President and CEO of the San Diego Padres Baseball Club, to its Board of Directors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The exhibits filed as part of this report are listed below: Exhibit No. Description ----------- ----------- 10.18 Asset Purchase Agreement Between Carbite Golf and Carizma Golf dated May 15, 2000 27.1 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the Quarter ending June 30, 2000. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CARBITE GOLF, INC. Date: October 15, 2000 By: /s/ John Pierandozzi ---------------------- John Pierandozzi President and CEO 11 EX-10.18 2 0002.txt ASSET PURCHASE AGREEMENT EXHIBIT 10.18 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT is entered into as of this 15th day of May, 2000, by and between CARBITE, INC., a California corporation, (hereinafter referred to as "Carbite"), CARBITE GOLF, INC., a British Columbia corporation, and CARIZMA GOLF COMPANY, a California corporation (hereinafter referred to as "Carizma"). WHEREAS, Carizma is a manufacturer and distributor of golf products; WHEREAS, Carbite is a manufacturer and distributor of golf products and is a wholly-owned subsidiary of Carbite Golf, Inc.: WHEREAS, Carbite has agreed to purchase certain assets of Carizma; NOW, THEREFORE, in consideration of the mutual covenants and undertakings set forth below, the parties hereto agree as follows: 1. Purchase and Sale of Assets. --------------------------- A. Carbite agrees to purchase and Carizma agrees to sell, transfer, and assign, the assets of Carizma set forth in Schedule A hereto (the "Assets"). B. Carizma shall take all steps necessary to enable it to provide Carbite good and marketable title to all the Assets, free and clear of all liens, mortgages, encumbrances, equities or claims. C. On or before May 15, 2000, Carizma shall provide to Carbite: (i) possession of the Assets (ii) all deeds of conveyance, bills of sale, transfers and assignments in form and content satisfactory to Carbite appropriate to effectively vest a good and marketable title to the Assets in Carbite free and clear of all Liens; (iii) all consents, approvals, assignments or other instruments necessary to assign to and perfect Carbite's interest in the Intellectual Property Rights and to maintain the registration or recording of those rights. (iv) certified copies of such resolutions of the directors and/or officers of Carizma as are required to be passed to authorize the execution, delivery and implementation of this Agreement. 2. Issuance of Common Shares of Carbite Golf, Inc. ---------------------------------------------- A. Carbite Golf, Inc. shall issue to Carizma or its assignee 792,632 common shares in the capital stock of Carbite Golf, Inc. at a deemed price per share of $0.38. B. Such issuance of shares shall be subject to regulatory approval by the Canadian Venture Exchange and Carbite and Carbite Golf, Inc. shall use their best efforts to expeditiously secure such approval. Such shares shall be subject to the one-year hold period required by the Canadian Venture Exchange and shall bear a Rule 144 legend. 3. Bonus Payment. ------------- A. For a period of five (5) years from the date of this Agreement, Carbite shall pay to Carizma a bonus payment of $2.00 on each net unit sold (gross units sold less returns) of Putterballs and $7.50 on each net unit sold (gross units sold less returns) of Power Ti-Pods which shall be due and payable to Carizma within sixty (60) days after Carbite receives payment from its customer on such sales. B. Carbite shall pay to golf professional, Fred Gibson, $1.00 on each net unit sold (gross units sold less returns) of Putterballs from the date of this Agreement through October 20, 2001. C. If the aggregate bonus payments to Carizma at any time during the five-year period exceed $220,000, the rate of the bonus payment for the remainder of the period shall be reduced to $1.50 on the Putterball and $5.00 on the Power Ti-Pods. D. Carbite shall use its best efforts to sell the Putterballs and Power Ti-Pods transferred under this Agreement, but shall not be subject to any minimum number of sales. E. The bonus payment shall not be payable on items distributed without charge for samples, marketing, or promotional purposes. F. Within thirty (30) days following the end of every other month. Carbite shall provide Carizma a written statement setting forth the bonus payments earned in the preceding sixty (60) days. The first such statement shall be delivered on or before August 31, 2000. G. Carizma shall have the right, upon ten (10) days written notice, to inspect the sales records of Carbite relating to the Power Ti- Pods and Putterball. 4. Private Placement. ----------------- On or before May 30, 2000, Carizma shall tender or cause to be tendered to Carbite a private placement of $400,000 for common shares at a deemed price of $0.38 per share and share purchase warrants (a "Unit") in the capital stock of Carbite Golf, Inc. Each Unit shall consist of one common share and one-quarter of one share purchase warrant, which share purchase warrant shall have an expiry date of two (2) years from the date of subscription and the exercise price of such share purchase warrants shall be $0.38 per share. 5. Representation and Warranties. ----------------------------- A. Carizma represents and warrants that: 2 (i) Carizma is a corporation duly incorporated pursuant to the laws of the State of California and the legal and beneficial owner of the Assets and has the due right, power and corporate authority to transfer the Assets to Carbite; (ii) the Assets are of good and merchantable quality and are free and clear of any and all mortgages, security interests or other encumbrances; (iii) Carizma is not party to or bound by any express or implied product warranties or representations or product guarantees other than those warranties, if any, implied by law. (iv) As to the Intellectual Property Rights, Carizma also represents and warrants that: a. none of the Intellectual Property Rights are subject to any outstanding order, judgment, decree, stipulation or agreement restricting the use thereof by Carizma or restricting the sale or licensing thereof by Carizma to any person; b. Carizma has no knowledge that would cause a person to believe that the use of the Intellectual Property Rights conflicts with, infringes upon or violates any trademark, trade name, trademark or trade name registration, service mark, brand mark or brand name or any pending application relating thereto, or any trade secret, know-how, programs or processes, or any similar rights, of any person; c. all registrations and filings necessary to preserve the rights of Carizma in and to the Intellectual Property Rights have been made. (v) The values listed for the Assets in Schedule A are not the lower of cost or fair market value. B. Carbite, Inc. represents and warrants that it is a corporation duly incorporated and validly existing and in good standing under the laws of the State of California, that it has the power and capacity to enter into this Agreement and carry out its terms, and that the Agreement has been duly and validly authorized by all necessary corporate action on the part of Carbite. C. Carbite Golf, Inc. represents and warrants that: (i) It is a corporation duly incorporated, validly existing and in good standing under the laws of British Columbia, that it has the power and capacity to enter into this Agreement and carry out its terms, and that the Agreement has been duly and validly authorized by all necessary corporate action on the part of Carbite Golf, Inc. 3 (ii) It is a reporting issuer in the Province of British Columbia and listed on the Canadian Venture Exchange. 6. Indemnities. ----------- A. Carizma agrees to indemnify and save harmless Carbite and Carbite Golf, Inc. from and against any and all losses, claims, damages, liabilities, and costs incurred or suffered by Carbite or Carbite Golf, Inc. (including lost profits, consequential damages, interest, penalties, fines, monetary sanctions, attorney fees and costs) by reason or resulting from, in connection with, or arising in any manner whatsoever out of (i) the breach of any representation, warranty or covenant or the inaccuracy of any representation of Carizma contained or referred to in this Agreement or in any agreement, instrument or document delivered by or on behalf of Carizma in connection therewith and (ii) any disputes between Carizma and its shareholders, directors, vendors, or any other third parties, specifically including but not limited to the pending litigation entitled General Titanium v. Carizma --------------------------- Golf Company in San Diego County. ------------ B. Carbite agrees to indemnify and save harmless Carizma from and against any and all losses, claims, damages, liabilities, and costs incurred or suffered by Carizma (including lost profits, consequential damages, interest, penalties, fines, monetary sanctions, attorney fees and costs) by reason or resulting from, in connection with, or arising in any manner whatsoever out of the breach of any warranty or covenant or the inaccuracy of any representation of Carbite contained or referred to in this Agreement or in any agreement, instrument or document delivered by or on behalf of Carbite in connection therewith. C. Carbite Golf, Inc. agrees to indemnify and save harmless Carizma from and against any and all losses, claims, damages, liabilities, and costs incurred or suffered by Carizma (including lost profits consequential damages, interest, penalties, fines, monetary sanctions, attorney fees and costs) by reason or resulting from, in connection with, or arising in any manner whatsoever out of the breach of any warranty or covenant or the inaccuracy of any representation of Carbite Golf, Inc. contained or referred to in this Agreement or in any agreement, instrument or document delivered by or on behalf of Carbite Golf, Inc. in connection therewith 4 7. Regulatory Approval. ------------------- The issuance of shares and warrants in Carbite Golf, Inc. referenced in this Agreement are subject to approval by the Canadian Venture Exchange and will be subject to the one-year hold period required by the Canadian Venture Exchange and shall bear a Rule 144 legend. 8. Miscellaneous. ------------- A. Waiver. Any waiver by Carbite of the strict performance by ------ Carizma of the covenants herein contained or any failure on the part of Carizma to enforce the same shall not extend to or be taken in any manner whatsoever to effect a waiver of any subsequent or other breach of any such covenant. B. Governing Law. This Agreement shall be construed and enforced in ------------- accordance with the laws of the State of California, U.S.A. C. Arbitration. Should there be a disagreement or a dispute between ----------- the parties hereto with respect to this agreement or the interpretation thereof, the same shall be referred to a single arbitrator pursuant to applicable arbitration legislation in effect in the State of California, U.S.A., and any amendments or regulation pertaining thereto, and shall be governed by the rules of the American Arbitration Association and in respect of a disagreement or dispute, the determination of such arbitrator shall be final and binding upon the parties hereto. Each of the Parties hereto agrees to bear 50% of the costs of such arbitration proceedings and the prevailing party shall be entitled to recover reasonable attorneys fees. D. Successors. This Agreement shall inure to the benefit of and be ---------- binding upon the parties hereto and their respective heirs, executors, administrators, successors and permitted assigns. E. Notices. All notices, requests, demands, directions, and other ------- communications provided for hereunder shall be deemed to have been given, delivered or made if they are in writing and either mailed by certified mail, return receipt requested, telegraphed, telefaxed, or actually delivered to the applicable party at the following address: To Carbite, Inc. or Carbite Golf, Inc. 9985 Huennekens Street San Diego, California U.S.A. 92121 Telephone: (619) 625-0065 / Fax: (619) 625-0752 Attention: Mr. Michael Spacciapolli, President 5 To Carizma Golf Company: 1011 Santa Helena, Pk Ct Solana Beach, California U.S.A. 92075 Attention: Chuck Jones With a copy to: Ballard Smith: 1381 Lick Creek Road McCall, Idaho 83638 All notices, requests, demands, directions and other communications shall be deemed to have been received: when telefaxed, on transmission; when mailed, on the third calendar day after being deposited in the mail, addressed as described above; and when telegraphed or delivered, when actually received. F. Entire Agreement. This Agreement contains the entire agreement between the ---------------- parties hereto and no modification of same shall be binding upon the parties unless the same is in writing and is signed by the respective parties hereto. G. Severability. Should any part of this Agreement be declared or held invalid ------------ for any reason, such invalidity shall not affect the validity of the remainder which shall continue in force and effect and be construed as if this Agreement had been executed without the invalid portion and it is hereby declared the intention of the parties hereto that this Agreement would have been executed without reference to any portion which may, for any reason, be hereafter declared or held invalid. H. No Deemed Partnership. Nothing contained in this Agreement shall, except to --------------------- the extent specifically authorized hereunder, be deemed to constitute either party a partner, agent or legal representative of the other party. I. Further Assurances. The parties shall promptly execute or cause to be ------------------ executed all documents, deeds, conveyances or any other instruments of further assurance which may be reasonably necessary or advisable to carry out fully the intent of this Agreement. J. Counterparts. This Agreement may be executed in several parts in the same ------------ form and such parts so executed shall together form one original agreement and such parts if more than one shall be read together and construed as if all the signing parties hereto had executed one copy of this Agreement. K. Currency. All references to currency herein are to currency of the United -------- States of America. 6 IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day and year first written above. CARBITE, INC. BY: /s/ Michael Spacciapolli --------------------------- Name: Michael Spacciapolli Title: President CARBITE GOLF, INC. BY: /s/ Michael Spacciapolli --------------------------- Name: Michael Spacciapolli Title: President CARIZMA GOLF COMPANY BY: /s/ Charles G. Jones --------------------------- Name: Charles G. Jones Title: President 7 SCHEDULE "A" ------------ ASSETS 1. Golf Products 11,500 Putterballs @ $12.00 180 Power Ti-Pods @ $90.00 7,800 Putters @ 15.00 Molds and molding equipment Valued at $271,200 2. Other A. Marketing materials including brochures, print advertisements, artwork, shirts, caps and infomercials, 60 second spot and images of pro golfer endorsers B. Furniture, equipment, computers, storage and display racks C. Intellectual Property Rights, specifically including: the names and trademarks "Carizma," "Putterball," and "Balorizite", the internet URL "carizmagolf.com", and the pending patent on the Putterball Valued at $ 30,000 Total Value $301,200 8 EX-27.1 3 0003.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF JUNE 30, 2000, THE STATEMENTS OF OPERATIONS, AND THE CASH FLOWS FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 AND FOOTNOTES THERE TO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND NOTES THERETO. 3-MOS 3-MOS DEC-31-2000 DEC-31-1999 APR-01-2000 APR-01-1999 JUN-30-2000 JUN-30-1999 1,437,254 702,362 0 0 2,039,576 2,415,712 0 0 2,347,015 2,081,071 6,636,336 6,003,907 747,478 587,196 44,484 36,289 9,718,296 9,296,006 1,838,253 996,842 0 0 0 0 0 0 11,260,612 10,437,829 (3,380,569) (2,138,665) 9,718,296 9,296,006 4,951,448 5,491,681 4,951,448 5,491,681 2,778,665 2,956,414 2,778,665 2,956,414 2,545,894 2,271,497 0 0 24,404 4,356 (531,059) 116,263 0 0 (531,059) 116,263 0 0 0 0 0 0 (531,059) 116,263 (.02) .01 (.02) .01
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