Back to GetFilings.com

U. S. Securities and Exchange Commission

Washington, D. C.  20549

FORM 10-KSB

x           ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2004

o            TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to __________________

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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         o            No           x

Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10- KSB or any amendment to this Form 10-KSB.  [ ]

State Issuer’s revenues for its most recent fiscal year: June 30, 2004 = $0.00.

State the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days.    As of September 30, 2004 there were approximately 74,802,842 shares of our common voting stock held by non-affiliates having a market value of $6,732,256 on such date.  Without asserting that any director or executive officer of the issuer, or the beneficial owner of more than five percent of the issuer’s common stock, is an affiliate, the shares of which they are the beneficial owners have been deemed to be owned by affiliates solely for this calculation.

State the number of outstanding shares of each of the Registrant’s classes of common equity, as of the latest practicable date.  As of September 30, 2004, there were 82,653,312 shares of common stock of the Issuer outstanding.

PART I

               DESCRIPTION OF BUSINESS

(a)        Business Development.

Element 21 Golf Company (the "Company) was originally formed in Delaware as OIA, Inc., in 1986.  In 1992 the Company changed its name to Biorelease Corp., and was engaged as in the business of biotechnology from 1992 through 1995.  From mid 1995 through September 2001, the Company sponsored several early stage ventures with funds advanced by affiliates of Dr. R. Bruce Reeves, former President and a current consultant to the Company and in June 2001, the Company changed its name from Biorelease Corp. to BRL Holdings, Inc.  

            Effective November 9, 2001, we acquired 100% of the outstanding common stock of AssureTec Systems, Inc., a Delaware corporation (“Systems”), in a stock for stock transaction.  We issued 6,354,000 shares of restricted common stock and converted outstanding options to acquire 4,750,000 shares of Systems common stock into options to acquire 4,750,000 shares of the Company’s common stock.

On April 1, 2002, we exchanged 2,852,000 shares of Systems common stock that had been issued in connection with the Systems acquisition for 5,704,000 shares of our common stock, from substantially all the founders and consultants from whom our interest in Systems was initially acquired.  In addition, options to acquire 4,750,000 shares of our common stock then held by these individuals were cancelled.  As a result of these transactions and the issuance of additional shares of Systems to employees on the exercise of stock opt ions, the Company’s ownership of Systems decreased to 34.2% of Systems as of June 30, 2003.  

On June 12, 2002 the Company incorporated Tech Ventures, Inc. (now named Assuretec Holdings, Inc. or “Assuretec”) and transferred all of the assets and liabilities of the Company in exchange for 100% ownership of Assuretec common stock.

Effective October 3, 2002, we acquired 100% of the outstanding common stock of Element 21 Golf Company, a Delaware corporation (“Element 21”) in exchange for 42,472,420 restricted shares of our common stock (“the Acquisition”).  We also converted options to acquire 6,432,000 shares of Elem ent 21 common stock into options to acquire 6,432,000 shares of our common stock.  This Acquisition has been accounted for as a “reverse” acquisition using the purchase method of accounting, as the shareholders of Element 21 owned a majority of the outstanding stock of our Company immediately following the Acquisition.  Following the Acquisition, we changed our name to Element 21 Golf Company.

In October 2003, the Company issued 12,287, 082 shares to consultants in exchange for liabilities owed.  

In November 2003, Systems issued convertible preferred to various individuals in exchange for debt of Systems.  On March 31, 2004 Assuretec issued additional common stock and preferred stock which is convertible into common stock.  Assuretec also issued stock to others in exchange for liabilities and shares issued for cash and/or services.  As a result, Assuretec’s ownership of Systems decreased from 34.2% at June 30, 2003 to 26.5% at June 30, 2004.   

In May 2004, the Company issued 20,460,000 shares of the Company’s common stock to consultants in exchange for liabilities owed in the amount of $1,841,401.  This increased the outstanding shares of the Company from 49,906,220 at June 30, 2003 to 82,653,302 at June 30, 2004.

Table of Contents

(b)        Business of the Issuer

Element 21 was formed on September 18, 2002 to acquire partially developed golf technology and to design, develop and market scandium alloy golf club shafts and golf heads. Scandium is Element No. 21 in the Periodic Table of Elements.  When mixed with aluminum, scandium alloys are believed to exhibit properties that outperform titanium with a higher strength to weight ratio of up to 25% and a specific density advantage of 55%.  Scandium alloys are simply lighter, stronger and more cost effective than titanium.  This advanced metal technology was originally developed in the former Soviet Union for military applications during the 1980s. & nbsp;Scandium alloys have been used in intercontinental ballistic missiles, jet aircraft, the Mir space station and most recently, in the International Space Station.  The Company’s plan is to commercialize Scandium’s use in golf shafts and golf heads.

In September, 2002, Element 21 acquired from Dr. Nataliya Hearn, our current 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 golf 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.  Upon completion of the Acquisition, the previous officers and directors of the Company resigned and Dr. Hearn became the Company’s President/ CEO and a Director and Jim Morin and Gerald Enloe also became direct ors.  Mr. Morin also serves as Vice President and Principal Financial Officer.

Prototypes of the first products, a mid range iron combined with 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 devel oped 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 first commence the production and 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.  Second, the Company intends to 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 solely through strategic consultants and without full-time employees.  Consultants Nataliya Hearn, PhD, who is our CEO and President, and David Sindalovsky, both of whom are based in Toronto, Canada, oversee the engineering, alloy supply and production.  Consultants Jim Morin, our Vice-President, Secretary and Treasurer, and Frank Gojny, both of whom are ba sed 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 and operating through family owned companies based in New Hampshire) and Randy Renken (operating through Profit Consultants, Inc.), oversee the management, 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.

Table of Contents

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, for parties other than the Company, about 80,000 pounds per month of high quality products made of high strength aluminum alloys.  In August 2003 the company reached an agreement with Yunan Aluminum to produce, in South Korea, 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 other 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 other scandium aluminum products.  The rights to develop other products not related to the golf industry were retained by the Assignors.  All applications to golf products, covered by the Assignors’ patents, have been acquired by the Company (BRL Holdings d/b/a Element 21 Golf Company).  To insure uninterrupted product availability, Element 21 is working to train two US based manufactures on the processing and production techniques required to produce shafts from the patented Scandium alloys.  

In August 2003 the Company finalized its golf shaft design criteria through the use of the most advanced CAD/CAM computer software programs available today.  These systems are used by the major aerospace companies to produce aircraft such as the Advanced Tactical Fighter, America’s fighter jet for the 21st Century.  Utilizing the designs created and analyzed with this software Element 21’s Korean manufacturer can produce golf shafts to the exacting standards of advanced aerospace products. The manufacturing company has a capacity of processing in excess of 100,000 lbs of material per month which equates t o approximately 450,000 golf shafts.  The company has negotiated a $50,000US credit line with preferential payment terms to begin full production of its golf shafts.  In return the Company has purchased and provided to the manufacturer the semi-automatic testing and calibration equipment necessary to produce high quality golf products on a full production basis.

In April 2004 the Company announced the full implementation of a new Linear Forging Process, a proprietary method utilized in the mass product ion of Scandium Golf shafts.  The unique “Linear Forging Process” utilizes a pulsed energy system in matching the structures’ natural frequency resonance to elongate the metals grains with the least dimensional change to the golf shaft’s design.  The process’ secondary benefit is in providing aligned straightness.  All of these benefits are realized in just a few seconds lending the process to high production rates and significant cost reduction of otherwise labor intensive operation.

The Company is testing certain benefits of scandium on the health of joints in the hands, elbows and back, as scandium clubs have shown significant improvement in reducing damaging shock to the body produced and compounded over time by playing with steel and titanium golf clubs.  This technology has been trademarked as SHOCKBLOK™ scandium technology.   A full report outlining quantifiable health and medical advantages will be made available when the testing is complete.  At this time, there is no certainty that there will be health benefits when compared to other golf shaft technology.

Table of Contents

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.

8.                 Added value to an OEM’s golf club products providing for a longer and more accurate golf shots as tested against steel and graphite shafts manufactured by Royal Precision, Apollo, Aldila®, UST, Penley®, True Temper® and Grafalloy®.

Scandium Metal – “Element 21”

Scandium, a little known element 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 int ensity 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 stockpile of pure scandium oxide, which is available to Element 21 Golf through the rights it acquired from Assignors.  When the curr ent 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.

Table of Contents

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.  As of September 2003, 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:

·        Up to 50% strength increase over high-strength aluminum alloys;

·        Over 20% specific strength advantage over titanium alloys;

·        Significant cost and design advantages over composite materials;

·        Reduction and elimination of surface re-crystalization;

·        Increase in weldability and weld strength;

·        Increase in weld fatigue life of 200%;

·        Reduction and elimination of hot-cracking in welds;

·        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.  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.  

Table of Contents

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:

·       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;

·       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;

·       Scandium alloys are softer than titanium providing superior feel and workability for the player;