SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________________

Commission File No. 0-15260

Element 21 Golf Company

(Exact name of small business issuer as specified in its charter)

Delaware		88-0218411
(State or other jurisdiction of incorporation or organization)		(Internal Revenue Service Employer Identification No.)

200 Queens Quay East, Unit #1, Toronto, Ontario, Canada, M5A 4K9 

---

(Address of principal Executive offices Zip Code)

416-362-2121

---

Issuer's telephone number, including area code

 

 

---

Former name, former address and formal fiscal year if changed since last report

 

Indicate, by check mark, whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   Yes  x  No   o

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).

Yes  o  No   x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the last practicable date, 121,479,253 shares of common stock, par value $.01 per share as of November 9, 2007.

Transitional Small Business Disclosure Format (Check One) Yes  x  No   o

 

 

---

 

Item 1 - Financial Statements

ELEMENT 21 GOLF COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30, 2007			June 30, 2007
		(unaudited)
- ASSETS -
CURRENT ASSETS:
Cash		$	813,057		$	1,751,178
Accounts receivable - net of allowance for doubtful accounts of $15,000			80,134			123,155
Inventories			1,015,482			921,820
Prepaid expenses and other current assets			508,317			158,147
TOTAL CURRENT ASSETS			2,416,990			2,954,300
FIXED ASSETS - NET			190,337			244,234
TOTAL ASSETS		$	2,607,327		$	3,198,534
- LIABILITIES AND SHAREHOLDERS’ DEFICIT -
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	1,095,413		$	697,649
Accrued interest			-			46,750
Deferred revenue			-			17,300
Convertible notes			-			475,000
Derivative liability			3,033,278			2,386,011
TOTAL CURRENT LIABILITIES			4,128,691			3,622,710
LONG-TERM LIABILITIES:
Accounts payable - related parties			482,076			482,076
Loans and advances - officers/shareholders			140,321			95,006
			622,397			577,082
SHAREHOLDERS’ DEFICIT:
Preferred stock, $.10 par value, authorized 2,447,000 shares, no shares issued and outstanding			-			-
Series A Preferred stock, $.001 par value, authorized 2,200,000 shares, 2,113,556 shares issued and outstanding			2,114			2,114
Series B Preferred stock, $.01 par value, authorized 353,000 shares, 352,946 shares issued and outstanding			35,295			35,295
Common stock, $.01 par value; 300,000,000 shares authorized, 121,401,862 and 118,882,645 shares issued and outstanding at September 30, and June 30, 2007, respectively			1,214,020			1,188,826
Additional paid-in capital			19,333,696			18,987,733
Accumulated deficit			(22,728,886	)		(21,215,226	)
TOTAL SHAREHOLDERS’ DEFICIT			(2,143,761	)		(1,001,258	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT		$	2,607,327		$	3,198,534

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007

(Unaudited)

NOTE 1 NATURE OF BUSINESS AND OPERATIONS:

Element 21 Golf Company and subsidiaries (the “Company” and or “Element 21”) designs, develops and has begun to market, Scandium alloy golf products.  The first products manufactured using the Company’s proprietary technology have been recently produced and the Company commenced distribution to wholesalers and retail markets during the last quarter of its fiscal year ended June 30, 2006.

In June, 2007 the Company began an expansion into recreational fishing equipment. On June 21, 2007, the Company entered into a non-exclusive, world-wide patent license with Advanced Light Alloys Corporation (Advanced) by which Element 21 was licensed by Advanced to make, use, and sell fishing equipment utilizing certain of Advanced’s patents.

The Company is subject to a number of risks similar to those of other companies in the early stages of operations.  Principal among these risks are dependencies on key individuals, competition from other current or substitute products and larger companies, the successful marketing of its products and the potential need to obtain adequate additional financing necessary to fund future operations.

The accompanying unaudited consolidated condensed financial statements have been prepared from the books and records of Element 21 on the same basis as the annual financial statements and are consistent with the instructions to Form 10-QSB and Rule 310 of Regulation S-B.  Accordingly, the accompanying financial statements do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. All significant inter-company accounts and transactions have been eliminated in consolidation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the period ended September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending June 30, 2008. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report for the year ended June 30, 2007.

NOTE 2 FUTURE OPERATIONS/GOING CONCERN:

These interim financial statements have been presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has only recently begun producing revenues; however, not on any consistent basis.  Even with the generation of revenues from the sale of golf products now being produced and sold, the Company expects to incur expenses in excess of revenues for an indefinite period.

Key financial information follows:

 

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Cautionary Statement Regarding Forward-Looking Information

Under the Private Securities Litigation Reform Act of 1995, companies are provided with a “safe harbor” for making forward-looking statements about the potential risks and rewards of their strategies.  Forward-looking statements often include the words “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” or similar expressions.  In this Form 10-QSB/A, forward-looking statements also include:

▪	statements about our business plans;

▪	statements about the potential for the development, regulatory approval and public acceptance of new services;

▪	estimates of future financial performance;

▪	predictions of national or international economic, political or market conditions;

▪	statements regarding other factors that could affect our future operations or financial position; and

▪	other statements that are not matters of historical fact.

These statements may be found under “Management’s Discussion and Analysis or Plan of Operation” as well as in this Form 10-QSB. Our ability to achieve our goals depends on many known and unknown risks and uncertainties, including changes in general economic and business conditions.  These factors could cause our actual performance and results to differ materially from those described or implied in forward-looking statements.  

These forward looking statements speak only as of the date of this Form 10-QSB.  We believe it is in the best interest of our investors to use forward-looking statements in discussing future events.  However, we are not required to, and you should not rely on us to, revise or update these statements or any factors that may materially affect actual results, whether as a result of new information, future events or otherwise.  You should carefully review the risk factors described in this Form 10-QSB and also review the other documents we file from time to time with the Securities and Exchange Commission (“SEC”).

Results of Operations

Three Months Ended September 30, 2007 and 2006

For the three months ended September 30, 2007 the Company had revenue of $131,131 and incurred costs of sales of $59,543 and general and administrative expenses of $939,261. Included in general and administrative expenses is a non-cash charge of $183,577, representing the value of common shares issued for services provided by consultants. This resulted in a net loss of $1,513,660, as compared with the three months ended September 30, 2006 in which the Company had revenue of $1,227, incurred costs of sales of $14,823 and general and administrative expenses of $1,252,067 (including a non-cash charge of $798,830 representing the value of common shares issued for services provided by consultants), resulting in a net loss of $2,034,581.  After adjusting for the non-cash charges, general and administrative expenses increased by approximately $317,000, primarily due to increases in marketing, promotional and engineering expenses due to expanded operations as well as increases in accounting and legal expenses.

Financial Condition, Liquidity and Capital Resources

The Company has negative working capital as of September 30, 2007 of $1,711,701.  The Company retains consultants who are also significant stockholders of the Company to perform development and public company reporting activities in exchange for stock of the Company.  At June 30, 2007, we had a working capital deficiency of $668,410.  Our continuation as a going concern will require that we raise significant additional capital.

Absent continued issuances of common stock for services by these consultants and continued advances by stockholders of the Company, the Company cannot manufacture its golf shaft or fishing product lines or market its products based on its technologies.  The Company is actively searching for capital to implement its business plans, supply the Company with products for distribution, and develop collateral materials for its potential customer base.  There can be no assurance that such capital will be raised on terms acceptable to the Company and if this capital is raised, it, may cause significant dilution to the Company’s stockholders.

 

 

Page 12

---