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GolfGear International, Inc. (GEAR)
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CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" A
strong management team and unique Forged Face Insert technology enhancing the future of
GolfGear International
Bio of CEO, Michael A. Piraino is president, chief operating officer, chief financial
officer and a director of GolfGear International, Inc. (OTCBB: GEAR). A veteran chief executive officer and chief financial officer of publicly
traded companies, Piraino most recently was founder and CEO of CEO Resources LLC, an
executive management resources company providing interim CEO services, merger and
acquisition and capital funding advisory services to clients. His lengthy career in
building a number of successful companies also has been complemented by his success in
company acquisitions and integrating them into existing organizations. In 2001, he was president and chief operating officer of ENFRASTRUCTURE,
INC., Aliso Viejo, Calif. Prior to that he was president and chief executive officer
of SM&A (formerly Emergent Information Technologies, Inc.), Newport Beach,
Calif. Additionally, he has held top management positions with Data Processing
Resources Corporation, Newport Beach; Syncor International Corporation, Chatsworth,
Calif.; and Total Pharmaceutical Care, Inc., Torrance, Calif. A Certified Public
Accountant, he was with Deloitte & Touche for nine years. During his career, Piraino has raised more than $350 million in equity
and debt financing, and he has negotiated, closed and integrated more than 30
acquisitions. He has taken two companies through the IPO process. A native of Los Angeles, he is a graduate of Loyola University of Los
Angeles where he earned a bachelor of science and accounting degree in 1975. Piraino
is the former president of Wilshire Country Club, Los Angeles, where he is a member and
carries a mid single-digit handicap. He has two children and resides in Newport
Beach. Company Profile: CEOCFOinterviews: Mr. Piraino, please give us a brief history of
GolfGear International? Mr. Piraino: “The company was founded in 1989 by Don Anderson. Don had been in golf all of his life with a number of companies including; Wilson Sporting Goods Company (owned by Amer Group, PLC), and Northwestern. He started GolfGear in 1989; it was incorporated in 1990 and exists today as GolfGear International.” CEOCFOinterviews: Your website says “The finest golf equipment” will you tell us about it? Mr. Piraino: “Don, who is a golf-club designer, has made it a lifelong mission to create the finest golf equipment available. Over the past dozen years he has been dedicated to the technology side of golf. In fact, he has invented and patented the technology surrounding the Forged Face Insert. There are a number of patents but the cornerstone of our Tsunami equipment line is the Forged Face Insert technology, which is in the drivers, the fairway woods and throughout the iron line. That single technology has created a situation, where based on independent testing by RANKMARK.COM, an independent testing firm, GolfGear’s Tsunami driver has ranked number one in distance. The idea and the execution were great and we now have the confirmation from independent testing sources that we are now making the longest golf club. That is what translates into the claim that we make the best equipment.” CEOCFOinterviews: Can you explain what differentiates your technology? Mr. Piraino: “The technology essentially is a cast uni-body construction made of a specific Titanium material. The face is made out of 10-2-3 Beta Titanium; it is a special alloy that was developed by the Aerospace and Defense Industry a number of years ago, which was used initially for landing gear on jumbo jets. It is extremely strong with a very fine grain structure, and, as a result, that particular material when heated and forged and treated, creates the hardest hitting surface available. That insert is then welded robotically to the uni-cast body to create the overall club structure and then it is finished, painted and polished. CEOCFOinterviews: Are there any issues with the golf regulatory agencies? Mr. Piraino: ”Yes, the USGA (United States Golf Association) is the governing body of golf in the U.S., and internationally it is the Royal and Ancient. Those two bodies regulate golf rules, etiquette and equipment. Every driver that is made and sold in the U.S. must be tested and conformed to USGA regulations - the C.O.R. (co-efficient of restitution regulation). There are regulations so the golf ball doesn’t travel too far. Every driver on the market today must pass those very stringent regulations. All of our drivers have been tested and passed. Just last month, we introduced our 360CC and 400CC driver at the PGA show in Orlando, and those received USGA approval in December of last year.” CEOCFOinterviews: What is the difference between the new ones and the old ones? Mr. Piraino: “There are some structural differences. On the
sole, for example, we incorporate a weight port, which allows us to weight the head. The weighting
of golf clubs is a key component to how the club feels in one’s hand; it
can’t be too heavy or too light. By designing the weight port into the sole of the
club, we have created a situation where we can weight the overall club head, to within one
gram, so it is very precise. The other feature of the club is the unique wave design on
the dome of the club itself; that is not only pleasing to look at but also it actually
provides structural reinforcement to the head. CEOCFOinterviews: How does this compare price-wise with other items out there and is price a factor for your customers? Mr. Piraino: “Price is always a factor. Let’s face it, we are dealing with a fairly selective group of buyers; there are about 25-26 million golfers in the market place. One would say the demographics suggest that they are a little more affluent group than the U.S. average; as a result, they are discriminatory about the selection process. We have found that if you give them the performance and reasonable value for the money, price is not going to be an issue. We have priced our product to be in the mid upper-end of the range; the MSRP (Manufacturers Suggested Retail Price) of our product is $399.00, which is consistent with the top clubs on the market today.” CEOCFOinterviews: I know you are rolling out a sales and marketing strategy, what is changing? Mr. Piraino: “A lot of things are changing. The biggest news
is the addition of Chris Holiday as Senior Vice President of Sales and Marketing. Chris
was the head of U.S. sales at Callaway Golf Company (NYSE: ELY), and spent a dozen years
at Callaway. He was hired as a field sales rep by Mr. Callaway back in the early 90’s
and prior to that he ran a successful chain of golf retail outlets in Colorado. Here is a
guy with thirty years of golf experience, including the retail side, which is our
customer’s perspective. He was with the biggest and most successful golf company in
the world for the last dozen years. We are just delighted to have someone like that, with
those kinds of credentials, on our team. He will lead the sales and marketing effort. CEOCFOinterviews: Please tell us about the manufacturing process of your golf clubs. Mr. Piraino: “Our manufacturing process is quite involved. We have excellent and reliable sources. We have master club makers and a special tour department and we can custom make anything, whether it is weight, angle, shaft or grip. Our basic materials come from a couple of different places. The heads are cast, finished, manufactured and finished in Taiwan and they come over as completed components. The shafts are manufactured by Graphite Design, Inc., which is located in San Diego, and all the minor components are ordered from suppliers here in the United States. We do all the final assembly here in Huntington Beach.” CEOCFOinterviews: Do you need to maintain much inventory? Mr. Piraino: “Inventory is always an issue; we are a small company and we have to manage our working capital extremely carefully. You can certainly get into a situation where you have over-bought and have too much inventory; it is easy to over order and it takes a level of precision and study to make sure that your ordering levels are inline with your sales forecast. The thing that makes this more complicated is that the lead time involved with getting heads, grips and shafts which can be six to ten weeks sometimes. There is a level of science or maybe even more of an art to look ahead and forecast 90 to 120 days and then back that up into a manufacturing forecast and further back up into what components we need to make those particular inventory items. We try to keep some inventory on hand because some retailers would like to have the product the next day, but we try to keep that to a minimum just to minimize our investment in working capital.” CEOCFOinterviews: In addition to your Tsunami line, tell me about your other products and how big a part they play for you? Mr. Piraino: “They have been a big part of the company’s past; I don’t expect they will be a huge part of the company’s future. We are building the marketing program around the Tsunami line. The other lines that the company has are the Players junior line, which is broken down by age group. The lengths of the clubs vary by age group and they are very high-quality sets, which we sell in sets or as individual clubs complete with bag, glove and a hat. The idea is to get kids started. A younger golfer will be an adult golfer and, hopefully, they will be somewhat loyal to the brand. In addition to the players equipment, we have a line of women’s clubs called Diva that sells as a complete set (woods and irons). We have had some success with the Diva line, which some of our customers stock as part of their regular line; it is a very competitively priced and a high quality product. Finally, we have the Leading Edge® Championship Putter line. The product itself has had quite a bit of success. That is a line of standard length putters, plus belly length putters and what is becoming more popular; the very long putter. We really offer a complete line when you look at the Tsunami line, special clubs for women, special clubs for juniors and our putter line.” CEOCFOinterviews: Can you tell us about your agreement with Nike Golf? Mr. Piraino: “The Nike Golf (Nike, Inc. NYSE: NKE) agreement is a very significant development in the history of the company. The most important thing it does is lend credibility to the technology claims that the company has under its ten patents. I think it is the recognition by an independent group that is known for innovation and marketing, that this is a technology that actually means something. Our agreement with Nike Golf grants them a non-exclusive long-term worldwide license to manufacture and sell golf clubs under the patents that we have covering our Forged Face Insert technology. Should they manufacture a line of clubs that incorporates the GolfGear technology that they have licensed, we would then enjoy a royalty stream from the sale of those products. That is a significant development; it occurred in August of last year (2002) and we are having on-going discussions with a number of other companies in hopes of striking similar agreements.” CEOCFOinterviews: What is the cash and credit position of the company? Mr. Piraino: “I would say, frankly, that the company in the past has been under-funded. It remains in that situation today; But, at the same time, we have several hundred thousand dollars of cash on hand, a small bank line and we have had continuing support from our investor group. Last summer, the company was successful at raising a couple million dollars in convertible debentures. It has had to rely on private markets, private equity and private debt instruments in order to continue to sustain itself. From that standpoint, it is a challenge. We are working through those details. We are in the market today looking for additional financing and we are hoping that will come-to-pass over the next several months.” CEOCFOinterviews: Why is this the right time for the big marketing push? Mr. Piraino: “I think you want to roll out the products when
you are absolutely confident that they are working. Three years ago, it was working but it
didn’t have the independent testing verification, and the tour validation that we
have today and there was additional technology that we wanted to introduce. There is an
old golf expression “drive for show and putt for dough”. It used to be years ago
that the people who were the excellent putters were the top money winners; today that
situation is reversed where the long-hitters of the world are ‘ruling the roost’
in terms of the money list and major victories. I think our clubs play right into that and
the market is very receptive. CEOCFOinterviews: What should shareholders and potential investors know about GolfGear? Mr. Piraino: “I think the company is poised for growth here in 2003. We have what we believe is the best product in the market, and we are rebuilding the management team. I joined the company at the end of last year and now I see us attracting people like Chris Holiday. We are attracting some investment capital and last week’s PGA show attracted the interest of the industry. We are quite excited about the prospects for “2003.” CEOCFOinterviews: In closing, what would you like to say about the future of GolfGear? Mr.
Piraino: “My view is that given the proprietary nature of the technology, I
think our current stock price is an attractive stock price, relative to the market place.
But, of course, buyers would have to make that decision on their own. We are not resting
on our laurels with the Tsunami line; we have a full development pipeline where we
are working on the next generation of Tsunami products. We are also working on some
forged carbon steel wedges. |
