SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 2, 2002
BRL HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 000-15260 88-0218411
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(State of other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
200 Perimeter Road, Manchester, New Hampshire 03103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603)-641-8443
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Items 2, 5 and 7. Acquisitions, Financial Statements, And Other Matters
As described in the Form 8-K and Form 8-K/A of BRL Holdings, Inc. that
were filed with the Securities And Exchange Commission (the "SEC") on or about
October 3, 2002 and November 6, 2002, respectively, reporting an event occurring
October 2, 2002 (the "Prior 8-Ks"), the Company has acquired Element 21 Golf
Company, a Delaware corporation (referred to as "Element 21 Golf" or the
"Acquired Entity").
This Form 8-K/A-2, which is being mailed to the stockholders of BRL
Holdings, Inc. (referred to as "BRL" or the "Company"), includes financial
statements of the Acquired Company for the period from its inception (September
17, 2002) to and as of September 30, 2002, which was essentially the last
business day prior to the date of the acquisition. This document also includes
pro forma financial statements for the Company as of September 30, 2002 and for
the period from September 17, 2002 through September 30, 2002 as if the merger
had taken place on September 17, 2002, which was the date of inception of the
Acquired Entity.
As the Company's stockholders were notified through an Information
Statement mailed to them on or about December 2, 2002 (the "Information
Statement"), the Company has obtained stockholder approval to change its name to
"Element 21 Golf Company" and to increase the number of authorized shares of
common stock to 100,000,000 from 50,000,000. The Company intends to effect these
changes 21 days from the date of mailing this document to you.
This document is intended to provide you with information concerning
the Company, the Acquired Entity, and various aspects of the transactions
described above. We previously provided certain information concerning these
matters through the Prior 8-Ks and through the Information Statement. We will
provide you with copies of the Prior 8-Ks and/or the Information Statement if
you so request.
BUSINESS OF THE COMPANY
Element 21 Golf has acquired from Dr. Nataliya Hearn, our Chief
Executive Officer, and David Sindalovsky, a consultant to the Company (the
"Assignors"), the exclusive right to use, produce and sell a specified range of
scandium aluminum alloy for golf club shafts and heads. Although these rights do
not cover all mixes of scandium aluminum alloy, the Company believes that any
scandium aluminum alloy outside the range of its patent protected rights cannot
be used to produce golf club shafts or heads in an economically feasible manner.
Prototypes of the first products, a metal wood and several flex
strength shafts, have been produced and tested. The scandium alloy shaft, when
combined with a conforming iron head, has been accepted as complying with the
rules of golf by the USGA (the United States Golf Association). Scandium alloy
shafts engineered for use with driver and fairway metal woods are just
completing development and will be tested against competitive shafts over the
next several months. The independent tests already conducted by Golf Labs Inc.
showed a remarkable 10-20 yard distance improvement when scandium shafts are
tested against the best Graffaloy graphite and True Temper steel shafts
respectively. Other clubs and products are currently being developed and tested.
Dependent in part on its ability to obtain approximately $1.5 M in funding, of
which there is no assurance, the Company intends to commence the production and
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roll-out of its first golf products: a complete scandium metal wood driver with
scandium alloy shaft to be sold to the retail golfer through a direct marketing
program. Secondly, the Company will commence the sale of scandium shafts to
leading golf shaft distributors for distribution as a branded high performance
shaft to be resold to fabricators and golf shops worldwide. Following the
receipt of additional investor funds, of which there is no assurance, the
Company expects to broaden its retail offering to include additional
combinations of proprietary heads and shafts.
The Company operates globally solely through strategic consultants and
without full-time employees. Consultants Nataliya Hearn, PhD, who is our CEO and
President, and David Sindalovsky, who are based in Toronto, Canada, oversee the
engineering, alloy supply and production. Consultants Jim Morin, who is our
Vice-President, Secretary and Treasurer, and Frank Gojny, who are based in
California, oversee the development, testing and USGA approval for the golf
products, and consultants Bruce Reeves and Kevin McGuire (formerly officers of
BRL Holdings operating through Robertson Financial Advisors LLC based in New
Hampshire) and Randy Renken (operating through Profit Consultants, Inc.),
oversee the accounting and public company compliance issues. This structure
allows the Company to avoid having large marketing, administrative and
development organizations in order to be responsive to fluctuations in the
marketplace that have plagued other start-up golf companies.
The Company has a strategic supply agreement with an affiliate of
Kamensk-Uralsky Metallurgical Works Joint Stock Company, located in a number of
locations in Russia, also known as OAO KUMZ. Under this agreement, concentrated
scandium alloy shall be produced to the specification of Element 21 Golf by the
KUMZ affiliate. KUMZ also will transfer the latest innovations in scandium
alloys to Element 21 Golf as such become available. KUMZ is a well-established,
diversified producer of aluminum, aluminum alloys and products for aerospace,
shipbuilding, automotive, and other industries. KUMZ is also the world's largest
facility specializing in scandium alloy products. Initially scandium work began
20-25 years ago with the development of aluminum-scandium aerospace alloys for
fighter aircraft.
The second strategic partner is Yunan Aluminum, which is in the
business of manufacturing precision tubing for outdoor recreation and sporting
markets. Yunan Aluminum was established in 1979 in South Korea, and now
manufactures about 80,000 pounds per month of high quality products made of high
strength aluminum alloys. Yunan Aluminum reprocesses, in South Korea, alloy
concentrate shipped by KUNZ on behalf of Element 21 Golf and produces scandium
golf shafts and club components exclusively for Element 21 Golf Company.
ADVANTAGE OF SCANDIUM ALLOYS
Element 21 Golf derives its name from the 21st element in the "Periodic
Table of the Elements", which is the unique metal "scandium" (the beginning of a
new millennium). Scandium, when mixed with aluminum, has a higher
strength-to-weight ratio than titanium and 50% more strength than high strength
aluminum alloys. Markets for scandium aluminum include almost anything where
aluminum is currently used, for example, from transportation and military
applications to high-end sports products of all kinds. After years of market
research and development, the Assignors determined that the most productive and
profitable application of scandium was in the sports market. Based on that, the
Assignors together with other founders of Element 21 Golf, formed Element 21
Corporation to become a production, marketing, and distribution company for
scandium aluminum sports products. The Assignors continue to hold a minority
interest in Element 21 Corporation. All applications to golf products covered by
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the Assignors' patents have been acquired by the Company (BRL Holdings dba
Element 21 Golf Company).
ELEMENT 21'S COMPETITIVE ADVANTAGE
We believe that we have a competitive advantage in our industry for the
following reasons:
1. License and supply agreements for scandium aluminum alloys in
place.
2. Longtime association with the world's largest producer of the
highest quality scandium master alloy.
3. Strategic association with the world's largest producer of
scandium products, which has over 20 years experience in producing
scandium aluminum billet, extruded products, and forged products.
Lowest production costs due to location, size, and experience, as
well as the advantage of waste control during the production
process.
4. Experienced team of alloy developers, processing specialists,
production specialists, light metal sports equipment designers,
and product marketing specialists.
5. Knowledge and association with several production paths of
semi-finished and finished scandium products.
6. Consulting agreements with leading golf product development and
marketing experts.
7. Growing demand for high performance golf products.
SCANDIUM METAL - "ELEMENT 21"
This little known element scandium was developed primarily in secret
aerospace programs in the former Soviet Union. It was used as an additive to
aluminum alloys to create the highest strength aluminum-scandium alloys and
alloys with significantly enhanced weldability. These super-alloys were used in
missiles and MIG-29 aircraft and are currently used in MIG-31 and Sukhoi-27
aircraft. We believe that the rights we have acquired from the Assignors cover
aluminum-scandium alloys that have achieved the highest "strength-to-weight
ratio" for golf applications.
Scandium is most often found in nature as an oxide in relatively low
concentrations, from 5 to 100 parts per million. It is rarely concentrated in
nature due to its lack of affinity to combine with the common ore-forming
anions. Therefore it is usually derived as a by-product from uranium and other
mineral leaching operations. The cost of scandium is directly related to the
relatively high cost of processing and its lack of widespread use in commercial
products. It has not been commercially mined in the United States or Europe
because only small quantities have been used, primarily in high intensity halide
lamps, lasers, electronics, high tech ceramics, and research applications.
However, in the former Soviet Union, scandium has been produced in
significantly larger quantities since it was an additive to aluminum alloys to
produce ultra high strength aluminum-scandium alloys for military aerospace
uses. In Russia there is now less scandium production due to reduced military
spending. Currently, however, Russia still possesses the world's largest
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stockpile of pure scandium oxide, which is available to Element 21 Golf through
the rights it acquired from Assignors. When the current supply is exhausted,
scandium can be obtained through reactivating production of various waste
streams of already identified ore processing sites in Russia. In addition,
several possible North American scandium production sites have also been
identified, if there is sufficient demand to justify the investment.
HISTORY OF COMMERCIAL ALUMINUM-SCANDIUM ALLOYS
Aluminum-scandium alloys for sports applications were developed using
the expertise of Russian and Ukrainian scientific institutes. To date, in excess
of 75 tons of aluminum-scandium master alloy have been sold for the production
of over 2,500,000 pounds of final product, including several sports products,
and for a variety of civil and government funded transportation related
development programs.
In 1997 Easton Sports' baseball and softball bats constituted the first
production of a large-scale scandium sports product. The ultra-light high
strength Easton bats, known, as the Scandium/Sc 7000 Redline series quickly
became the most successful new product launch in Easton's 75-year history. To
date, Easton has sold in excess of $800,000,000 of scandium aluminum baseball
and softball bats. Easton then produced a weldable aluminum-scandium alloy for
use in bicycle frames, and handle bars. Both products have been highly
successful and the frame is now considered one of the lightest in the industry
and used by many top-racing teams. In addition to baseball bats and bicycle
frames, scandium golf shaft, metal wood drivers, putters, lacrosse sticks,
bicycle seat posts and handlebars, and hockey stick prototypes have been
developed.
ALUMINUM-SCANDIUM PRODUCT ADVANTAGES
Scandium alloys have advantages over other high strength aluminum and
titanium alloys and composite materials, especially in heavily drawn and worked
products:
o Up to 50% strength increase over high-strength aluminum alloys;
o Over 20% specific strength advantage over titanium alloys;
o Significant cost and design advantages over composite materials;
o Reduction and elimination of surface recrystalization;
o Increase in weldability and weld strength;
o Increase in weld fatigue life of 200%;
o Reduction and elimination of hot-cracking in welds;
o Increased plasticity, durability, and formability.
SPORTS EQUIPMENT
As athletes and marketers demand improvement in sports equipment,
designers push material limitations when using existing metals and alloys. Most
aluminum products in the sports market today have alloy development origins from
the 1930's, while other high-performance alloys were developed in the 1960's.
Titanium and composite materials have replaced aluminum in some sporting goods;
however, these materials are more expensive and more difficult to process.
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Consequently, they have found major acceptance only in the highest end of the
market.
Element 21 Golf's objective is to develop and market new golf products
where scandium alloys can provide measurable advantages over existing high-end
aluminum alloys, stainless steel, titanium and composite materials.
GOLF PRODUCTS
Scandium golf products have outstanding potential in the industry based
on several factors:
- Results of player and robotic testing indicates scandium aluminum's
superior performance over a leading titanium club, and
- Improved distance and less dispersion, allowing longer more accurate
results, which are impossible to achieve with current metals.
The interest in scandium has been supported by several performance and
marketing features:
o Scandium alloys strategically incorporated into the production of metal
woods and irons can result in heads with a larger sweet spot for more
consistency and accuracy;
o If increased club head size is not required, the reduced density and
improved strength allows flexibility in placing perimeter weighting that
can affect the trajectory (flight path) of the ball;
o Scandium alloys are softer than titanium providing superior feel and
workability for the player;
o Scandium alloys are lower in cost and easier to fabricate than titanium;
o The specific yield strength advantage of scandium alloys over steel and
high-end aluminum alloys enables the design of shafts at substantially
reduced weight and higher performance;
o The homogeneous nature of scandium alloys allow for consistent shaft
production, a problem inherent with graphite shafts.
GOLF SHAFTS
Scandium golf shafts provide the lightweight and flexibility of
graphite with the favorable playing characteristics of steel. Steel dominates
the shaft market for irons, while graphite is the most popular shaft material
for metal woods. Graphite shafts are generally more expensive than steel, and
golfers often experience inconsistency from club to club due to reproducibility
problems inherent with graphite. Prototype shafts with several flex strengths
have been produced, tested initially with irons and accepted as complying with
the rules of golf by the USGA. The independent tests conducted by Golf Labs Inc.
showed remarkable 10-20 yard distance improvement when scandium shafts tested
against the best Graffaloy graphite and True Temper steel shafts respectively.
To view these test results online, go to www.e21golf.com.
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The market for golf shafts was estimated by Golfdatatech to be close to
30 million units in the US and 60 million units worldwide in 1999. Golfdatatech
estimates that the premium shaft market that Element 21 Golf's scandium shaft
will initially be targeting represents a market size of approximately 27 million
units worldwide.
METAL WOODS / PUTTERS
Element 21 Golf has made its own designs, and has completed mechanical
and player testing on several prototypes. This effort has provided Element 21
Golf with several sales and marketing options. These options include the sale of
semi-finished products to the likes of Taylor Made and other original equipment
manufacturers (OEMs), the sale of finished heads to OEMs, and/or the Company's
own direct sale of scandium products to the market place.
Element 21 Golf intends to introduce a scandium driver and other
fairway metal woods through the production and airing of a script-to-screen
infomercial planned for the second quarter of calendar 2004, assuming completion
of the additional financing, of which there is no assurance, following
completion and market testing of its infomercial. Based on positive performance
and marketing features afforded by scandium, and the general market condition of
golf, the Company believes this approach will be successful. To assist in this
process, the Company has access to consultants with experience in infomercials
from both marketing and production aspects. It is important to note that we
believe that we would be in a position to introduce a number of new scandium
golf products over time, including putters, fairway metal woods, and irons.
According to Golfdatatech, the 1999-world retail golf club (metal
woods, irons, putters) market was worth approximately $4.8 billion. Golfdatatech
estimates that the US market represents about 50% of the world market, with
approximately $2.4 billion in sales, including over $1.0 billion in metal wood
sales. In 1999, titanium metal woods represented about 40% of all premium sales
with the most popular price being $399 and up.
STRATEGIC RELATIONSHIPS
To effectively conduct its business on an international scale, Element
21 Golf Company has begun to secure strategic alliances with aluminum producers,
suppliers, sub-contractors, and design engineers.
As discussed earlier, the Company has a strategic partnership agreement
with OAO KUMZ, which is located in Russia. Under this agreement, scandium alloys
licensed to Element 21 Golf shall be produced exclusively by KUMZ. Since 1994
KUMZ has established an ISO-9001 quality assurance system.
Element 21 Golf also has a relationship with Yunan Aluminum in Korea.
Yunan will reprocess the master alloy prepared by KUNZ and produce the initial
shafts and clubs with pricing and supply already contracted.
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SCANDIUM RAW MATERIAL SUPPLY
The raw material that goes into production of scandium alloys comes
from scandium oxide, which has about 60% pure scandium metal content. Scandium
oxide is used in the production of "master alloy", which consists of 2% Scandium
metal and 98% pure aluminum. The master alloy is then added to aluminum and
other alloy ingredients to create a concentration of approximately 0.1% - 0.3%
scandium in the final alloy used in products. These are then known as scandium
alloys or aluminum-scandium alloys, which have the technical advantages needed
for production of high performance equipment for sports, transportation,
military and aerospace applications and are the subject of the Assignors'
patents. 1 kg of Scandium oxide will produce approximately 28 kg of master
alloy, and just under 500 kilograms (or 1,100 pounds) of aluminum-scandium 0.1%
alloy, the most common alloy used.
Disclosure Regarding Forward-Looking Statements And Cautionary Statements
Forward-Looking Statements.
This Current Report on Form 8-K/A-2 includes "forward-looking
statements." All statements other than statements of historical fact included in
this Report, including without limitation under all sections concerning our
business and products and pro forma financial statements, regarding our
financial position, business strategy, plans and objectives of our management
for future operations and capital expenditures, and other matters, other than
historical facts, are forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements and the assumptions
upon which the forward-looking statements are based are reasonable, we can give
no assurance that such expectations will prove to have been correct.
Additional statements concerning important factors that could cause
actual results to differ materially from our expectations are disclosed in the
following "Cautionary Statements" section and elsewhere in this Report. All
written and oral forward-looking statements attributable to us or persons acting
on our behalf subsequent to the date of this Report are expressly qualified in
their entirety by the following Cautionary Statements.
Cautionary Statements.
In addition to the other information contained in this Report, the
following Cautionary Statements should be considered when evaluating the
Company, its business and products, and the forward-looking statements contained
in this Report:
1. Prior losses; no earnings history. At all times since our inception, we
have incurred losses from operations. See the financial statements included
in of this Current Report.
2. We have limited assets and working capital and minimal shareholders'
equity, and we might not be able to continue in business without the
infusion of additional capital. We have very limited assets, a negative
working capital and limited financial resources. Our financial condition
may not improve. We require additional capital to conduct our business and
there is no assurance that the needed capital will be available to us.
Because of these factors, in its report of its review of our unaudited
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financial statements as of and for the period ended March 31, 2003, our
independent auditor has stated that there is substantial uncertainty
concerning our ability to continue as a going concern. In addition,
issuance of additional equity or equity-related securities will dilute the
ownership of existing shareholders and our issuance of debt securities
could increase the risk of our survival.
3. Our industry encounters constant technological and other changes. The golf
club industry is characterized by constantly developing technology. These
changes in technology could affect the market for our products and
necessitate additional improvements and developments to our products. We
cannot predict that our research and development activities will lead to
the successful introduction of new or improved products or that we will not
encounter delays or problems in these areas. The cost of completing new
technologies and/or quality and delivery expectations could adversely
affect operating results during any financial period or periods.
4. Protection of product design. We attempt to protect our product designs by
obtaining patents or patent rights, when available. This protection may not
be sufficient to prevent our competitors from developing products that
perform in a manner that is similar to or better than our products.
Competitors' successes may result in decreased margins and sales of our
products.
5. Limited financial resources. We have limited financial resources available
that may restrict our ability to grow. Additional capital from sources
other than operating cash flow will be necessary to properly market
existing products and to develop new products. We cannot predict that this
financing will be available from any source.
6. Intense competition. The golf industry is highly competitive, and we
compete with substantially larger companies. These competitors have larger
sales forces and more highly developed marketing programs as well as larger
administrative staffs and more available service personnel. The larger
competitors also have greater financial resources available to develop and
market competitive products. The presence of these competitors could
significantly affect our attempts to develop our business.
7. Other companies may produce scandium aluminum alloy golf club shafts and
heads. Our patent production covers a specified range of scandium and
aluminum alloy content. There are other ratios and amounts that are not
covered and may be used by competitors. If any were able to do this
successfully, it could have a material adverse effect on our business.
8. Availability of competent and cost-effective manufacturing contractors. Our
business plan requires that we manufacture our products at third-party
manufacturing facilities under manufacturing contracts on which we are
dependent for high quality and cost-effective production. We cannot be
assured that manufacturing contracts with high quality and cost-effective
manufacturers will be available to us at a cost consistent with our budget.
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9. No full-time employees; dependence or strategic consultants and other
contracting individuals. We operate solely through strategic consultants
and without any full-time employees. As a result, we are completely
dependent on the services of a number of contracting individuals, including
our Chief Executive Officer, Chief Financial Officer, and Chief Operating
Officer. There is no assurance that these or other competent personnel will
continue to be available to us at a cost within our budget.
10. Trading of our shares and possible volatile prices. Historically, there has
been no public market for our shares. We cannot predict that any trading
volume will be sustained. The prices of our shares should be anticipated to
be highly volatile. If there is a relatively low trading price for our
shares, many brokerage firms may not effect transactions and may not deal
with low priced shares, as it may not be economical for them to do so. This
could have an adverse effect on sustaining a market for our shares.
Further, we believe it is improbable that any investor will be able to use
our shares as collateral in a margin account. We intend for our shares to
be quoted on the OTC Bulletin Board, but there is no assurance that the
Company's shares will be accepted by the Bulletin Board. If the Company's
shares are not accepted for quotation on the OTC Bulletin Board, they will
be quoted, if at all, in the "pink sheets". Because of the matters
described above, a holder of our shares may be unable to sell shares when
desired, if at all.
11. No dividends with respect to our shares. It is extremely unlikely that we
will pay any dividends on our shares in the foreseeable future. We
currently intend that any earnings that we may realize will be retained in
the business for further development and expansion.
MANAGEMENT AND KEY PERSONNEL
The following is a summary of the business experience of each of our
current directors and executive officers and key consultants:
Gerald Enloe of Houston, Texas, serves as a Director and our Chairman
of our Board. Mr. Enloe has served as President and CEO of Houston Industrial
Materials, Inc. since 1991.
David Sindalovsky is a Canadian citizen who was born in 1965 in the
Russian Federation. He graduated from University of Toronto and commenced work
in the fertilizer industry in 1988. Mr. Sindalovsky conducted the first ever
"private" export deals out of the former USSR with over 400,000 tons of
chemicals exported utilizing the newly created mechanisms for internal eastern
European currency exchanges. Since 1997 Mr. Sindalovsky developed supply and
production of scandium alloys, including organization of scandium supply
produced in Russia transportation to North America and Asia for conversion into
proprietary scandium products knowledge of the production requirements and
processes. Mr. Sindalovsky oversees as a consultant the supply of scandium alloy
for use in the Company's products, coordinates with the Company's golf
consultants in California, and manages the Company's relationships with both
Yunan Aluminum in Korea and KUMZ in Kiev.
Earlier Mr. Sindalovsky was involved in developing a program for
storage of spent fuel in Russia. He developed the first tolling agreements in
Russia and Ukraine, for chemical commodities with Mitsui & Co., managed
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construction and engineering of large trans-shipment port facility for liquid
chemicals, lube oil and ethyl alcohol and negotiated sales of chemical
commodities, chartering of large cargo vessels, negotiated letters of credit.
Mr. Sindalovsky has been active in international sports industries,
including representing Russian soccer and hockey players with various
professional clubs in Europe. Mr. Sindalovsky was Vice-President of Russian
Tennis Federation 1999-2001 and owned and operated professional soccer club of
St. Petersburg, Russia 1991-1993.
Mr. Sindalovsky has been a consultant to:
- Director of Revenue Services of Russia, Alexander Pochinok 1998-2000
- Deputy Prime Minister of Russia, Oleg Sysuev 1998-2000
- Minister of Petrochemical Industries of Russia, Sergey Ivanov 1994-1996
- Secretary of State of Russia, Gennady Burbulis 1992-1994
Nataliya Hearn, Ph.D., P. Eng., is a Canadian citizen with a Ph.D. in Civil
Engineering from Cambridge University and is a registered professional engineer.
Dr. Hearn serves as President and CEO of the Company. Dr. Hearn is currently a
tenured Associate Professor at the University of Windsor and an Adjunct
Professor at the University of Toronto. Dr. Hearn is currently a Director of
Magnesium Alloy Corporation, Director of New Product Development and Marketing
at Link-Pipe Inc., and Director of R&D at Materials Service Life LLC. Dr. Hearn
has considerable experience in technology transfer, evaluation, and
government/industry grants. Dr. Hearn's managing experience involves:
o evaluation, exploration and organization of Ukrainian gold deposits, by the
Canadian geologists together with the Ukrzoloto and Ashurst teams;
o management of teams for testing and evaluation of damaged concrete in
construction defects litigation in the USA; and
o management of concept development, implementation, financing and marketing
of new products in trenchless technology repair business.
R. Bruce Reeves, Ph.D. formerly Chairman, Cofounder, Chief Executive
Officer and Director of the Company, will consult for the Company and assist Dr.
Hearn and the Board of Directors in the area of capital formation, financial
reporting and corporate governance. Dr. Reeves has over twenty-five years of
experience in start-up ventures, and has spent over ten years in high-tech
business and product development, including five years with General Electric
Company on several new business development operations. In 1998, Dr. Reeves
successfully led the acquisition of Meridian Instruments, a leading developer of
laser based imaging instrumentation. Under Dr. Reeves' leadership, the Meridian
manufacturing assets subsequently were sold to Genomic Systems, a biotechnology
genomic instrumentation company. Dr. Reeves also serves as Chairman and CEO of
the Company's affiliated venture, AssureTec Systems, Inc., a development stage
company producing automated ID document management and authentication hardware
and software.
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GOLF INDUSTRY EXPERIENCE OF ELEMENT 21 TEAM
Jim Morin of Mission Viejo, California, serves as Executive Vice
President of Product Development, Treasurer and Secretary of our Company. He has
been associated with the golf industry for the past 20 years. Mr. Morin is an
owner and officer of Hyper Industries, a golf development and marketing company.
In his capacity with Hyper Industries, Mr. Morin has worked with Tommy Armour,
Cleveland, Echelon, Calloway, Cobra, McHenry Metals Golf, Taylor Made, Lynx and
other golf companies. Mr. Morin has extensive experience in high performance
golf alloys, design, testing and production of clubs and shafts that will be of
particular value to us in our planned operations.
Below are products and relationships developed by Mr. Morin, his
associate Mr. Frank Gojny, and their affiliated consulting activities:
Adams Golf
o Design and testing of multiple layered striking face of Titanium and die
cast in Aluminum body.
o Presented use of spring stainless steel for striking face in aluminum body.
o Prepared patent filing for golf club head design.
o Performed researched on constant bulge and roll at varying lofts and swing
speeds.
Tommy Armour Golf
o Introduced Beryllium Copper to the putter and iron programs
o Supported design for casting and processing of BeCu alloys.
Cleveland Golf Co.
o Introduced the use of Beryllium Copper alloys for use in putters and irons.
Echelon Golf
o Supported design and casting of Titanium golf club metal woods.
o Supported laser welding and repairs of Titanium heads.
o Licensed "Black Ice" striking face technology.
o Supported Hybrid Golf Shaft Program.
o Supported Infomercial as technical advisors.
o Initiated patent application for "Black Ice" high friction striking face.
o Supplied raw material for Titanium heads.
Callaway Golf
o Introduced the technology for a variable thickness metal wood face.
o Provided demonstration articles of Titanium/Carbon bubble golf shafts.
o Provided technical support for the fabrication of powder injection molding
of Titanium golf heads.
o Introduced MMC's (Metal Matrix Composites) technology for striking faces.
o Introduced LCR's (Liquid Crystal Polymer) technology for lightweight golf
shafts.
o Introduced plastic injection molded, hybrid composite golf shafts of
Titanium flake/lcp
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Aldila
o Demonstrated hybrid composite shafts of Titanium/Graphite Epoxy.
o Demonstrated Titanium foil composite shafts - tube wrap technology.
o Introduced toughening agent with hydroxil functionality for epoxy systems.
Cast Alloys
o Supplied Alpha-Beta & Beta titanium alloys for casting of golf products
o Provided technical support for grain refinement of Titanium alloys for
golf.
o Salvaged damaged golf heads using laser cutting and welding.
Cobra Golf
o Supplied titanium golf club driver heads through Williams Titanium.
o Provided demonstration articles of aluminum metal matrix composites.
McHenry Metals Golf
o Initiated company's development with high dynamic performance striking
face.
o Provided design support for golf club products.
o Provided material selection - Beta Titanium.
o Provided manufacturing support.
o Supplied raw material (Titanium).
o Established manufacturing procedures.
o Filed patent application for method of manufacturing high dynamic striking
faces.
Benneton Sports/Prince Golf
o Initiated engineering designs for golf club products.
o Integrated design technology.
o Conducted play testing of prototype golf heads.
o Performed study in multiple face Titanium striking faces.
o Filed for company patents
o Developed micro-light golf grips.
o Introduced advanced polymer epoxy systems.
o Licensed Hyper Light resin system.
o Licensed Hyper Strength hybrid golf shaft filler system.
o Implemented high performance forged striking faces into club line.
Lynx Golf
o Supported Titanium head production through Williams Titanium.
Taylor Made Golf
o Provided advanced technical support in design, construction, materials and
manufacturing.
o Supported development of hybrid composite golf shafts
o Introduced Titanium metal matrix composite, die cast heads.
o Introduced Titanium flake golf club heads.
o Introduced Titanium Polymetrix golf club heads.
Page 13 of 34
o Developed thermal spray, polymer protective coatings.
o Introduced Press/sinter/forge technology.
o Supplied hybrid composite materials.
o Supplied Hyper Light polymer system for golf shafts.
o Demonstrated compression loading reinforcement for golf shafts.
o Introduced hybrid flag wrap/filament wound golf shaft technology.
o Demonstrated Titanium/polymer golf ball technology.
o Supported the development of copper/tungsten weighting for irons.
o Demonstrated cast Titanium irons with forged Titanium inserts.
o Introduced & demonstrated Titanium powdered metal golf head technology.
o Demonstrated Bi-metallic golf club head technology.
o Developed Extreme Dynamic Response striking face technology.
o Provided contract-engineering support for advanced material & process
technology.
UST Sports
o Licensed our Titanium/Graphite Epoxy golf shaft technology.
o Licensed our Hybrid Composite Technology for golf shafts.
o Provided lightweight reinforcement materials for golf shafts.
Graffalloy
o Licensed Titanium/Graphite Epoxy technology.
o Developed foil gage tube manufacturing processes.
o Provided manufacturing technology support.
Much of the work for the above companies included sales and marketing
consulting and participation in the drafting of sales and advertising
literature.
Element 21 Golf recently completed prototype testing of a scandium
metal-shafted club equipped with a commercially available component metal head.
Professional player and computerized testing demonstrated that scandium clubs
hit the ball farther than clubs fabricated with three leading high performance
competitive graphite and metal shafts while providing a better "feel". Element
21 Golf has made its own designs, and has completed mechanical and player
testing on several prototypes. This effort has provided Element 21 Golf with
several sales and marketing options. These options include the sale of
semi-finished products to other original equipment manufacturers and/or the
Company's own direct sale of scandium products to the market place.
Stockholders are directed to the Company's web site www.e21golf.com
where recent press releases can be found as well as independent test results of
the company's shafts against the leading high performance golf shafts in the
world.
ELEMENT 21 GOLF ACQUISITION
Effective October 2, 2002, we acquired 100% of the outstanding common
stock of Element 21 Golf Company, a recently formed Delaware corporation
("Element 21"), in a stock for stock transaction ("the Acquisition"). Following
the issuance of shares under the initial phase of the Acquisition, we had issued
Page 14 of 34
47,906,220 shares out of a total of 50,000,000 common shares authorized. For
further information regarding the Acquisition, see the Prior 8-Ks, which were
filed with the Securities and Exchange Commission on or about October 3, 2002
and November 6, 2002, respectively, and which are incorporated herein by
reference. This Report may be reviewed on the Internet at www.sec.gov in the
EDGAR Archives; or on request to our address and/or telephone number on the
cover page of this Information Statement, a copy of this Report will be promptly
provided at no cost. To complete the Acquisition, we agreed to issue up to
48,904,420 shares of our common stock consisting of the issuance of 42,472,420
shares of "restricted securities" (common stock) which has already been issued,
and the assumption of certain options granted by Element 21 Golf to its
officers, directors and consultants to purchase 6,432,000 shares of our common
stock, in recognition of $0.001 options to purchase a like amount of shares of
Element 21 Golf held by these individuals.
The option holders had rendered services for stock, initially valued by
Element 21 Golf and our Board of Directors at $0.001 per share. 7,270,000 shares
of the 42,472,420 shares of Element 21 Golf exchanged under the Acquisition were
issued pursuant to Rule 701 of the Securities and Exchange Commission, and we
adopted this designation. The tables below under this heading provide certain
information about the 701 shares and the 6,432,000 outstanding options to be
exchanged under the Element 21 Golf Acquisition.
An Information Statement was previously mailed to our stockholders on
or about December 2, 2002, a copy of which will be provided upon request.
The Acquisition also provided for (i) mutual representations and
warranties regarding various matters customary in these types of transactions;
(ii) prohibitions on both parties on changes in business operations until the
completion of the Acquisition; (iii) a 100% dividend on our outstanding common
stock, to be payable also on the shares and options exchanged under the Element
21 Golf Acquisition, and the spin-off following closing of two of our
subsidiaries with the Element 21 Golf stockholders and option holders waiving
these spin-off dividends; (iv) the payment by Element 21 Golf of $33,000 for the
estimated legal costs of the spin-off dividends; the assumption of a one time
consulting agreement with R. Bruce Reeves, who then served as our President and
one of our directors, in the amount of $120,000; and the payment at closing by
Element 21 Golf to us of an additional $55,684 in costs and expenses; (v) mutual
indemnification provisions; and (vi) the indemnification from our subsidiaries
that will be the subject of the spin-off dividends of all liabilities associated
with such subsidiary and/or its business, property or assets.
The following tables contain information regarding the recipients of
the 701 shares discussed above and the outstanding options exchanged under the
Element 21 Golf Acquisition:
701 Stockholder Table
Name and Address Number of Shares*
---------------- ----------------
Tom Sawyer, Esq. 1,900,000
1151 CR 325
Lexington, Texas 78947
Page 15 of 34
Name and Address Number of Shares*
---------------- ----------------
Dimitry Sindalovsky 1,800,000
99 Harbour Square
Suite 3106
Toronto, Ontario M5J 2H2
Randy Renken, Esq. 1,800,000
316 Main Street, Suite L
Humble, TX 77338
R. Bruce Reeves, Ph.D. 1,200,000
754 Straw Hill
Manchester, NH 03104
John Lowy, Esq. 450,000
75 First Neck Lane
S Hampton, NY 11968
Anna Herbst 10,000
87-10 Clover Place
Holliswood, NY 11423
Andrew McGough 30,000
28 Aleadra Way
Basking Ridge, NJ 07920
Kevin McGuire 80,000
148 Robinson Rd
Hudson, NH 03051
Total: 7,270,000
* Shares issued under Rule 701 of the Securities and Exchange
Commission may be freely publicly resold by those stockholders who are not our
"affiliates" in "broker's transactions" where the broker does no more than
execute the sales order, as agent for the holder, there is no solicitation of
prospective buyers and only usual and customary sales commissions are paid, and
by our "affiliates," if any, who hold any of these securities, in compliance
with all terms and provisions of Rule 144, except the required one year holding
period. None of these holders are believed to be our "affiliates". All of these
holders of shares issued under Rule 701 have agreed that none of these shares
would be resold within the first 30 days after they were acquired, and that
thereafter, subject to effecting sales in "broker's transactions," and further
subject to our being current in all reports that are required to be filed by us
with the Securities and Exchange Commission, that no holder will sell more than
one-sixth of his or her holdings in the six consecutive months following the
Acquisition, on a cumulative basis.
Page 16 of 34
The following table lists the 6,432,000 option shares to be issued
after the amendment to increase our authorized shares becomes effective:
Stock Option Table
Options Exercisable Options Exercisable After
Holders and Addresses Immediately March 31, 2003*
--------------------- ----------- --------------
Dimitry Sindalovsky 650,000 700,000
99 Harbour Square,
Suite 3106
Toronto, Ontario M5J 2H2
Tom Sawyer, Esq. 1,550,000 -0-
1151 CR 325
Lexington, Texas 78947
Randy Renken, Esq. 650,000 700,000
316 Main Street, Suite L
Humble, TX 77338
R. Bruce Reeves, PhD. -0- 1,635,000
754 Straw Hill
Manchester, NH 03104
John Lowy, Esq. 447,000 -0-
75 First Neck Lane
S Hampton, NY 11968
Anna Herbst 5,000 -0-
87-10 Clover Place
Holliswood, NY 11423
Kevin McGuire 95,000 -0-
148 Robinson Rd
Hudson, NH 03051
Totals: 3,397,000 3,035,000
* It is our present intention to include the shares underlying these
outstanding options in a registration statement to be filed with the Securities
and Exchange Commission on Form S-8 and further subject to our being current in
all reports that are required to be filed by us with the Securities and Exchange
Commission, that all sales during the period six consecutive months following
the filing of the Form S-8, on a cumulative basis, will be sold subject to
approval of the Company's "Leak-out Committee".
Page 17 of 34
See the Table of Contents for information concerning the location of
each of the attached Exhibits described in the caption "Exhibits" herein.
Reasons for the Acquisition
The BRL Board of Directors and management of BRL have concluded that
the acquisition of Element 21 Golf provides BRL with an extremely attractive
business and is therefore in BRL's and our stockholders' best interests. By
acquiring Element 21 Golf, management believes that BRL is receiving a
subsidiary with a business plan that offers outstanding potential based on its
post-Acquisition status as a publicly traded corporation.
The Element 21 Golf Acquisition is designed to enhance Element 21
Golf's ability to seek future funding of its operations. Although BRL's current
stockholders will be diluted by the Element 21 Golf Acquisition, the Board of
Directors and management of BRL believe that this transaction is in BRL's and
its stockholders' best interests for the reasons stated herein.
Effective Date
The initial phase of the Element 21 Golf Acquisition has been
consummated. Twenty-one days following the mailing date of this Form 8-K/A-2 to
our stockholders, we will (a) change our corporate name to Element 21 Golf
Company, (b) increase our authorized common shares to 100,000,000 and (c) issue
the 6,432,000 BRL shares and options described above plus issue additional
shares for services provided since the Acquisition and file the registration
statement on Form S-8 to register these shares.
Conditions to the Element 21 Golf Agreement
The obligation of BRL and Element 21 Golf to the closing of the Element
21 Golf Acquisition was subject to certain conditions which were deemed
satisfied, including the following:
(1) 100% of the Element 21 Golf shares of common stock shall have been
delivered in exchange for our shares.
(2) Each shareholder of Element 21 shall have executed a release from any
rights to distribution of spin off shares in any subsidiary of our company.
(3) Other items contained in the Acquisition Agreement that were discussed and
attached to the Prior 8-Ks.
Page 18 of 34
TRANSACTIONS WITH RELATED PARTIES
In addition to the other transactions described in this Current Report
and in the Information Statement on Form 14 C that was filed with the Securities
and Exchange Commission on November 25, 2002 and that was mailed to our
shareholders on or about December 2, 2002, the following describes certain
transactions between the Company and its officers, directors and/or significant
shareholders. A copy of the December 2002 Information Statement will be made
available without charge to any stockholder requesting such.
Prior to the Acquisition, Dr. Bruce Reeves, formerly CEO and Chairman
of the Company, and currently a consultant to the Company, beneficially owned
approximately 49.5% of the Company's outstanding common stock. Dr. Reeves
currently beneficially owns approximately 3.8% of the Company's outstanding
common stock.
The Company's wholly owned subsidiary Tech Ventures, Inc. owns
2,813,200 shares of AssureTec Systems, Inc. (approximately 16% of the fully
diluted AssureTec shares). AssureTec Systems is a Delaware company which was
originally a wholly owned subsidiary of the Company. Dr. Reeves currently serves
as President and sole director of Tech Ventures, Inc. Dr. Reeves also serves at
Chairman and CEO of AssureTec Systems and currently beneficially owns
approximately 58.2% of AssureTec Systems and under a three-year employment
contract with AssureTec Systems, Dr. Reeves will receive a salary of $162,000
per year, which is currently being accrued until substantial profitability or
capitalization occurs.
As of March 31, 2003, AssureTec Systems owes $947,238 to an entity
owned by Dr. Reeves and his family. Under an option agreement between Dr. Reeves
and AssureTec Systems, at the close of each quarter, any advances from Dr.
Reeves made to AssureTec Systems may be convertible into stock at the option of
Dr. Reeves at a price of $.25 per share. Upon its written request, AssureTec
Systems may "put" the conversion of the cumulative balance of advances made by
Dr. Reeves to him, forcing conversion of all balances owed to him into shares of
AssureTec's common stock at a price of $.20 per share. In the event AssureTec
Systems exercises its put to convert into stock amounts owed to Dr. Reeves, the
shares received by Dr. Reeves shall receive a preference on liquidation over the
common stockholders of AssureTec Systems. If Dr. Reeves exercises his option to
convert amounts owed to him by AssureTec into stock, this liquidation preference
shall not apply.
AssureTec Systems has entered into a three-year lease of the building
where both AssureTec Holdings and AssureTec Systems are located. The lease calls
for monthly payments of $3,544. The lease has been guaranteed by an entity
controlled by Dr. Reeves and his family.
PRO FORMA FINANCIAL INFORMATION
SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information is provided to
show how BRL Holdings' balance sheet as of September 30, 2002 and its statement
of operations for the period ended September 30, 2002 would have looked if the
Acquisition had been completed on September 17, 2002, which is the date of
inception of Element 21 Golf Company. The pro forma statement of operations for
Page 19 of 34
this period is derived from the unaudited stub financial statements of Element
21 Golf Company as of and for the period of inception (September 17, 2002) ended
September 30, 2002 (attached as Exhibit 1) and BRL Holdings' unaudited financial
statements for the three months ended September 30, 2002, combined and adjusted
to give effect to the Acquisition.
The financial statements of Element 21 Golf Company for this period
from inception to September 30, 2002 have been reviewed by the independent
auditor, Stephen A. Diamond. Mr. Diamond's report on the financial statements of
Element 21 Golf from inception to September 30, 2002 is included as Exhibit 2.
The information should be read in conjunction with the financial statements,
related notes, and other financial information included elsewhere in this Form
8-K/A-2. The unaudited pro forma financial information was prepared using the
purchase method of accounting. The pro forma financial information reflects the
reverse acquisition of BRL Holdings by Element 21 Golf Company, the accounting
acquirer. If the merger had actually been completed on those dates, the acquired
company might have performed differently. You should not rely on the pro forma
financial information as an indication of the results that would have been
achieved if the merger had taken place earlier or the future results that will
be experienced after completion of the merger.
Authorization of Additional Shares
On the effective date 21 days following the mailing of this Form
8-K/A-2 to our stockholders, the Board of Directors shall be authorized to issue
100,000,000 shares of common shares instead of the 50,000,000 currently
authorized shares. These additional shares may be issued by vote of our Board of
Directors without further consent or approval by the stockholders of the
Company, except in certain circumstances, such as a merger, which is not
contemplated at this time. The terms and consideration for each subsequent
issuance of shares, except where a stockholder vote is required, shall be
entirely within the discretion of the Board of Directors. These additional
authorized common shares, if and when issued, shall have no rights or
preferences over the existing outstanding common shares and shall be identical
thereto.
Resolutions to change our name and to affect the authorized capital
increase outlined above were unanimously adopted by the Board of Directors and
all seven stockholders named under the caption "Voting Securities and Principal
Holders Thereof," who collectively owned 59.9% of our outstanding voting
securities, by written consent, in accordance with Sections 141 and 228,
respectively, of the Delaware Law. No other votes are required or necessary to
effect the amendments.
The effective date of the name change and increase in our authorized
capital will be 21 days from the mailing of this Information Statement to our
stockholders.
NOTICE
SEVEN MAJORITY STOCKHOLDERS OF OUR COMPANY WHO HAVE CONSENTED TO THE
CHANGE OF OUR COMPANY'S NAME AND THE INCREASE OF OUR AUTHORIZED CAPITAL OWNED A
SUFFICIENT NUMBER OF OUR VOTING SECURITIES TO ADOPT THESE AMENDMENTS TO THE
ARTICLES OF INCORPORATION AND HAVE DONE SO, TO BE EFFECTIVE 21 DAYS AFTER THE
Page 20 of 34
MAILING OF THIS FORM 8-K/A-2 TO OUR STOCKHOLDERS; NO FURTHER CONSENTS, VOTES OR
PROXIES ARE NEEDED, AND NONE ARE REQUESTED.
BY ORDER OF THE BOARD OF DIRECTORS
September 17, 2003 /s/ Nataliya Hearn, Ph. D.
--------------------------
Nataliya Hearn, Ph.D.
President and Director
Page 21 of 34
EXHIBIT 1
Proforma Financial Statements
September 30, 2002
(Unaudited)
Proforma Balance Sheet
BRL Holdings Proforma Totals
-------- ------
Element 21 Eliminations Note
Assets $ - 2,222 - $ 2,222
===== ===== ========
Current Liabilities 72,809 - 72,809
------------- ------ ------
-
Stockholders' Deficit
Preferred stock - - - -
Stockholders Deficit
Common stock 21,236 54,338 403,488 1(a,b,c) 479,062
Additional paid in capital
3,216 7,956,081 (8,272,132) 1(c) (312,835)
Accumulated deficit (9,296) (8,081,006) (7,868,644) 1(a,b,c) (221,658)
----------- ----------- ----------- ---------
15,156 (70,587) - (55,431)
Stockholder Subscriptions
receivable
(15,156) - (15,156)
-------- ------------------ ---------------- --------
Total stockholders deficit -
(70,587) - (70,587)
Total liabilities and
stockholders deficit $ - $ 2,222 $ - $ 2,222
====== ======== ==============
Page 22 of 34
EXHIBIT 1 (cont.)
Proforma Statement of Operations
For the initial period from
September 17, 2002 to September 30, 2002
(Unaudited)
BRL
Holdings Proforma
Totals
-------- ------
Element 21 Eliminations Note
Costs: $ $ $ $
Purchased technology (2,445) - (24,452) (2a) (26,897)
Administrative Expenses
(6,851) (38,822) (149,088) (2a) (194,761)
- ------- -------- --------- ---------
Net Loss $(9,296) $(38,822) $(212,362) $(221,658)
======== ========= ========== ==========
Fully diluted shares 54,529,020
----------
Fully diluted earnings per
share $ (0.00)
=========
Note 1: The unaudited pro forma combined condensed balance sheet is based on the
unaudited balance sheet of BRL Holdings, Inc as of September 30, 2002 after
giving effect to the pro forma adjustments, if any, resulting from the merger of
BRL Holdings, Inc. and Element 21 Golf Company as if the transaction took place
as of September 17, 2002 accounted for as a reverse acquisition of BRL Holdings,
Inc. and Element 21 Golf Company.
(a) Record shares issued in connection with the purchase and to expense the
purchase price allocated to intangible assets acquired giving the
uncertainty associated with the Company's ability to continue as a going
concern
(b) Record the 2 for 1 stock split effected in the form of a stock dividend
(c) Inter-company eliminations.
Note 2: The unaudited pro forma combined condensed statement of operations for
the period ended September 30, 2002 is derived from the unaudited financial
statements of BRL Holdings, Inc. as of and for the three months ended September
30, 2002 after giving effect to the pro forma adjustments, if any, resulting
from the merger of BRL Holdings, Inc. and Element 21 Golf Company as if the
merger took place as of September 17, 2002 (the date of formation of Element 21)
and includes BRL Holdings, Inc. and Element 21 Golf Company Inc.
Page 23 of 34
EXHIBIT 2
UNAUDITED REVIEW OF ELEMENT 21 GOLF FINANCIALS
INCEPTION TO SEPTEMBER 30, 2002
Following is an unaudited review report from our auditor dated December
23, 2002 containing the unaudited interim financial statements for Element 21
Golf Company, ("Element 21") prepared in accordance with accounting standards
for interim reporting. Additionally, incorporated by reference, is the Company's
Form 10-QSB for period ended December 31, 2002, filed with the Securities and
Exchange Commission on February 19, 2003 containing the unaudited consolidated
financial statement for the Company and Element 21 Golf from October 1, 2002 to
the period ended December 31, 2002.
(a) The financial statements of Element 21.
Page 24 of 34
ELEMENT 21 GOLF COMPANY
REPORT ON INTERIM FINANCIAL STATEMENTS
The initial period from September 17, 2002 through September 30, 2002
With Accountants' Review Report
Page 25 of 34
ACCOUNTANTS' INTERIM REVIEW REPORT
To the Board of Directors
Element 21 Golf Company
I have reviewed the accompanying balance sheet of Element 21 Golf Company as of
September 30, 2002 and the statements of operations, and cash flows and deficit
for the initial period beginning September 17, 2002 through September 30, 2002.
These financial statements are the responsibility of the Company's management.
I performed my review in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified Public
Accountants for a review of interim financial statements by an entity's auditor.
Such an interim review consists principally of applying analytical procedures to
financial data, and making enquiries of, and having discussions with, persons
responsible for financial and accounting matters. An interim review is
substantially less in scope than an audit, whose objective is the expression of
an opinion regarding the financial statements; accordingly I do not express an
opinion. An interim review does not provide assurance that I would become aware
of any or all significant matters that might be identified in an audit.
Based on my review I am not aware of any material modification that needs to be
made for these interim financial statements to be in accordance with United
States generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements as of October 4, 2002 the Company has not begun operations,
has no working capital, an accumulated deficit of $9,296, and a total
stockholders' deficit of $0 and for the initial period from September 17, 2002
through September 30, 2002 has incurred a net loss of $9,296, all of which raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
This report is solely for the use of the Board of Directors of Element 21 Golf
Company to assist it in discharging its regulatory obligation to review these
financial statements, and should not be used for any other purpose. Any use that
a third party makes of this report, or any reliance or decisions made based on
it, are the responsibility of such third parties. I accept no responsibility for
loss or damages, if any, suffered by any third party as a result of decisions
made or actions taken based on this report.
Toronto, Ontario, Canada "Stephen A. Diamond"
December 23, 2002 Chartered Accountant
Page 26 of 34
ELEMENT 21 GOLF COMPANY
INTERIM BALANCE SHEET
September 30, 2002
(Unaudited)
ASSETS
Total assets $ 0
=======
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Total liabilities
0
Stockholders' equity
Preferred stock-authorized 5,000,000 shares, no shares outstanding 0
Common stock-authorized 50,000,000 shares, 21,236,210 shares outstanding at September 21,236
30, 2002
Additional paid in capital 3,216
Accumulated deficit (9,296)
-------
15,156
Less stockholders' subscription receivable (15,156)
--------
Total stockholders' deficit
0
Total liabilities and stockholders' deficit $ 0
=======
The accompanying accountants' review report is an integral
part of these financial statements.
Page 27 of 34
ELEMENT 21 GOLF COMPANY
INTERIM STATEMENT OF OPERATIONS
For the initial period from September 17, 2002 through September 30, 2002
(Unaudited)
Costs and expenses:
Purchased technology $ (2,445)
General and administrative costs (6,851)
-------
Total costs and expenses (9,296)
Net (loss) $(9,296)
========
The accompanying accountants' review report is an integral part of these
financial statements.
Page 28 of 34
ELEMENT 21 GOLF COMPANY
INTERIM STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE INITIAL PERIOD FROM SEPTEMBER 17, 2002 TO SEPTEMBER 30, 2002
Common Stock Common Stock Additional Total
Number of Shares Amount Paid in Capital Accumulated Subscription Stockholders'
--------- ------ -------
Deficit Receivable Equity
Founders shares issued 15,156,000 $15,156 $ $ $(15,156) $ 0
Common stock issues
for purchased
technology 2,445,210 2,445 2,445
Common stock issued
for services 3,635,000 3,635 3,635
Options to purchase
common stock 3,216 3,216
Net loss (9,296) (9,296)
Balance September 30,
2002 21,236,210 21,236 3,216 $ (9,296) $ (15,156) $ 0
========== ========= ======== =========== ========== ===============
The accompanying accountants' review report is an integral part of these
financial statements.
Page 29 of 34
ELEMENT 21 GOLF COMPANY
INTERIM STATEMENT OF CASH FLOW
September 30, 2002
(Unaudited)
Cash flows from operating activities:
Net loss $ (9,296)
Adjustments for non-cash items: -
Common stock issued for purchased technologies 2,445
Common stock and options to purchase common stock for services
6,851
Net cash used in operating activities ( 0)
--------
Cash flows from investing activities: -
Cash flows from financing activities
Stock subscription receivable (15,156)
Common stock issued on capitalization by founders 15,156
------
Net cash provided by financing activities 0
------
Net increase in cash 0
Cash and cash equivalents, beginning of the year 0
------
Cash and cash equivalents, end of the year, $ 0
======
The accompanying accountants' review report is an integral part of these
financial statements.
Page 30 of 34
ELEMENT 21 GOLF COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
1. Organization and Summary of Significant Accounting Policies
Reporting Entity
The financial statements and related notes have been prepared from the
books and records of Element 21 Golf Company ("Element 21" or the
"Company"). As further discussed in Note 4, as of the consummation of
the transactions and events discussed therein, the Company will become
a wholly owned subsidiary of BRL Holdings, Inc., a publicly traded
entity (BRLN - OTCBB). The Company is a development stage entity formed
on September 17, 2002 to design, develop and market scandium alloy golf
clubs.
Future Operations/Going Concern
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has yet to
commence operations, has no assets, no working capital, an accumulated
deficit of $9,296, and a total stockholders' equity of $0 and for the
initial period from September 17, 2002 through September 30, 2002 has
incurred a net loss of $9,296, all of which raise substantial doubt
about its ability to continue as a going concern.
Page 31 of 34
ELEMENT 21 GOLF COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
1. Summary of Significant Accounting Policies (Continued)
Loss Per Common Share
Loss per common share is computed using the weighted-average
number of common shares outstanding during each period.
As of September 30, the net loss per share was calculated as follows:
2002
Net loss $ (9,296)
Weighted Average Shares 21,236,210
----------
Basic and diluted loss per share $ (0.00)
=========
2. Purchased Technology
On September 27, 2002 the Company entered into a technology transfer
agreement with two of the Company's shareholders. The terms of the
agreement call for the transfer of technology to manufacture golf clubs
from scandium alloy developed by these shareholders in exchange for
2,445,210 shares of common stock of the Company. The Company has
recorded this transaction at $2,445, an amount equal to the par value
of the shares issued which also approximates their fair market value.
3. Equity
As of September 30, 2002 the founders of the Company were issued
15,156,000 shares of common stock at a par value of $.001 per share
that also approximates their fair market value. These shares were
issued pending the receipt of consideration for the shares; accordingly
such amount is reflected in the financial statement as subscriptions
receivable.
The Company has entered into consulting agreements with various
individuals, some of which are founders, under which their services
were paid for by the issuance of common stock and or options to
purchase common stock. As of September 30, 2002, 3,635,000 shares and
options to purchase 3,216,000 shares of common stock with no exercise
price were issued under these consulting agreements. The Company has
recorded these transactions at $6,851, an amount equal to the par value
of the shares, which also approximates their fair market value.
Page 32 of 34
ELEMENT 21 GOLF COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
4. Subsequent Events
On October 4, 2002, the Company was acquired by BRL Holdings, Inc.
("BRL"), a publicly traded company, under an Amended and Restated
Agreement (The "Agreement") wherein BRL would issue 42,472,420 shares
of its common stock to shareholders of Element 21 Golf and assume
Element 21 Golf's obligations under consulting agreements allowing for
the purchase of 3,216,000 of Element 21 Golf shares which would then be
convertible to 6,432,000 additional shares of BRL common stock to be
issued following approval of an increase of authorized common shares
from 50 million to 100 million shares. This acquisition will be
accounted for as a reverse acquisition, using the purchase method of
accounting, with Element 21 Golf treated as the acquirer for accounting
purposes.
5. Related Party Transactions
Dr. R Bruce Reeves, a shareholder of the Company who has also served as
consultant to it, and his Affiliates owned approximately 49.5% of BRL
immediately prior the acquisition referenced in Note 4.
Item 7(c) Exhibits
Exhibit No. Exhibit Description
2.1 Restated Element 21 Golf Agreement and Plan of
Reorganization dated September 19, 2002(1)
Schedule A Element 21 Golf Company 701
Shareholders(1)
Schedule B Stockholder Waiver(1)
Schedule C Technology Transfer Agreement(1)
Schedule D Investment Letter(1)
Schedule E Element 21 Golf Disclosure
Statement(1)
Schedule BRL Holdings Disclosure Statement(1)
Schedule G BRL Holdings Certification(1)
Schedule H Element 21 Certification(1)
Schedule I Assignment and Indemnity
Agreement(1)
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99.1 Amended Form 10b-17 regarding 1005 Dividend(1)
99.2 Form 10-b-17 regarding Tech Ventures Dividend(1)
99.3 Form 10b-17 regarding Advanced Conductor Dividend(1)
99.4 Form 10-QSB for the period ended December 31, 2002(2)
99.5 Schedule 14C Information Statement pursuant to Section
14(c) of the Securities Exchange Act of 1934(3)
------------------------------
(1) Incorporated by reference to the Company's Amended Current Report on
Form 8-K/A, filed on November 6, 2002.
(2) Incorporated by reference to the Company's Quarterly Report on Form
10-QSB, filed on February 19, 2003.
(3) Incorporated by reference to the Company's Definitive Information
Statement on Schedule 14C, filed on November 25, 2002.
Page 34 of 34