U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FILE NO.
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS USERS
UNDER SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
GIFTS OF LEARNING FOUNDATION, INC.
(Name of Small Business Issuer in its Charter)
FLORIDA 65-0423813
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(State or Other Jurisdication (I.R.S. Employer
of Incorporation or Organization) Identification No.)
P.O. Box 30098 Palm Beach Gardens, FL 33420
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(Address of Principal Executive Offices) (Zip Code)
561-691-1700
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(Issuer's Telephone Number)
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
TO BE REGISTERED WHICH EACH CLASS IS TO BE
REGISTERED
N/A N/A
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SECURITIES TO BE REGISTERED UNDER SECTION 12(g) OF THE ACT
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TITLE OF EACH CLASS TO BE REGISTERED
Common Stock Par Value $.001
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Copies of Communications Sent to:
Robert C. Hackney, Esq.
Hackney & Miller, P.A.
2000 PGA Blvd., Suite 4410
N. Palm Beach, FL 33408
Telephone: 561-627-0677 Fax: 561-625-4685
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PART I
FORWARD-LOOKING STATEMENTS. THIS REGISTRATION STATEMENT INCLUDES
"FORWARD-LOOKING STATEMENTS" WHICH REPRESENT THE COMPANY'S OBJECTIVES,
EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING
INDUSTRY PERFORMANCE, THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL
CONDITIONS, GROWTH STRATEGIES AND MARGINS AND GROWTH IN SALES OF THE COMPANY'S
PRODUCTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS REGISTRATION
STATEMENT THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY",
"WILL, "EXPECT", "BELIEVE", "ANTICIPATE", "INTEND", "PLAN", "BELIEVE",
"ESTIMATE", "CONSIDER", OR SIMILAR EXPRESSIONS ARE USED.
YOU SHOULD NOT CONSTRUE ANY FORWARD-LOOKING STATEMENT AS A GUARANTEE OF FUTURE
PERFORMANCE. THESE STATEMENTS INHERENTLY INVOLVE RISKS, UNCERTAINTIES AND
ASSUMPTIONS. THE COMPANY'S FUTURE RESULTS AND STOCKHOLDER VALUES WILL DIFFER
FROM THOSE EXPRESSED IN THESE FORWARD-LOOKING STATEMENTS, AND THOSE VARIATIONS
MAY BE MATERIAL AND ADVERSE. MANY OF THE FACTORS THAT WILL AFFECT THESE RESULTS
AND VALUES ARE BEYOND OUR ABILITY TO CONTROL OR PREDICT. IN ADDITION, WE DO NOT
HAVE ANY INTENTION OR OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS AFTER THIS
OR OTHER CIRCUMSTANCES HAVE CAUSED STATEMENTS EXPRESSED IN THIS REGISTRATION
STATEMENT TO BECOME INCORRECT OR MISLEADING.
ITEM 1. DESCRIPTION OF BUSINESS
The Company. Gifts of Learning Foundation, Inc. was incorporated in Florida in
June, 1993, and does business under the name of Kids Golf.
Business of the Company. The Kids Golf "Drive, Pitch & Putt" is a one-day junior
skills challenge free to every kid on the planet! Junior Golfers compete in
three areas: driving, pitching and putting. The competition affords the
opportunity to compete with other kids worldwide while attending a local golf
program. The Company offers the official "Competition Kit" over the Internet at
the Company's web site at http://www.kidsgolf.com. PGA and LPGA golf
professionals, golf coaches, junior golf directors and parks and recreation
departments worldwide can access the web site and print all the forms needed to
organize a "local, on-site" competition. The Kids Golf "Drive, Pitch & Putt"
revolutionizes the game of golf on a global scale because there are no entry
fees and no travel expenses for the competitors. Boys and girls are entered into
one of four age groups (7 & Under, 8-10, 11-14, and 15-17). Once signed up for
their local one day competition, junior golfers worldwide earn scores in
driving, pitching and putting. After their local competition is held, local
officials send the scores to the Kids Golf headquarters where they are ranked
and posted on the Kids Golf Scoreboard which is accessed via the Kids Golf
website. By using a patent pending scoring system known
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as Kids Slant(TM) scores are tabulated by taking into account adverse weather
conditions, such as wet playing areas and prevailing winds, and creates ideal
playing conditions worldwide. Kids Slant(TM) creates a fair competition for all
participants. At the end of the program period, April through September, the
kids posting the `best' scores in each of the age groups win the Kids Golf
"Drive, Pitch & Putt" World Championship. The top three winners in each age
group receive a championship trophy and 7th - 10th place winners receive a
certificate announcing them as a Kids Golf "Drive, Pitch & Putt" Worldwide
Finalist. The top 10 winners in each category are displayed on the Kids Golf
Scoreboard. Junior golf program directors can purchase trophies, equipment and
apparel for their local winners and competitors through the Kids Golf Pro Shop
on the company web site at http://www.kidsgolf.com. All purchasing can be done
directly on-line and is completely secure and easy for the customer. A portion
of all proceeds from the Pro Shop sales go to the Kids Golf Scholarship Fund.
Kids Golf awards $1,000 scholarships to deserving students worldwide.
Assets of the Company. Kids Golf believes that the key factor ensuring its
long-term financial success is its ability to attract corporate America as both
a sponsor and a partner. Another important ingredient for success is the ability
of Kids Golf to attract parents, kids and golf professionals worldwide to its
web site. This large volume of traffic to the Kids Golf web site will ensure
high product sales, as well as offering attractive advertising opportunities to
corporate America. Kids Golf has many assets that will ensure its prominence and
success in the marketplace:
Jack Nicklaus, Honorary Chairman - Jack Nicklaus, who has been labeled Golfer of
the Century, is the Honorary Chairman of Kids Golf and has appeared in
television commercials and promotional materials for the program since its
inception in 1993. His presence lends credibility to the program and has
attracted many program directors and kids to participate.
Strategic Alliances - Kids Golf is rapidly distinguishing itself as a leader in
the world of junior golf and is the official competition of several national
organizations. A partial list of strategic alliances includes:
o Police Athletic Leagues (1.5 million chapters worldwide)
o National Association of Junior Golfers (membership of 4,000
junior golf program directors and 800,000 junior golfers)
o National Alliance of Youth Sports (250 chapters of its Hook a
Kid on Golf program)
o Minority Golf Association of America
o Boys and Girls Clubs of America
o Parks and Recreation Departments
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All of these organizations have multiple chapters around the country committed
to holding the competition and buying product.
Intellectual Property- Kids Golf owns valuable intellectual property which
establishes its dominance as an industry leader and innovator:
o Kids Slant(TM), a patent pending scoring system that takes
into account adverse weather conditions, thereby creating
ideal playing conditions for all competitors.
o Kids Slant(TM) creates the first sporting competition ever to
use and identify the Internet as an evaluative tool for
sporting competitions.
o Worldwide databases of golf directors and golf courses, junior
golfers, and local chapters of several national organizations.
o The trademark "Kids Golf" and design.
o The Kids Golf globe logo in international colors.
o A total of six (6) Kids Golf and "Drive, Pitch & Putt"
trademarks are pending.
Kids Golf vigorously defends its intellectual property and will pursue all legal
action necessary to do so.
As general policy, the Company files domestic and foreign patent applications to
protect the Company's technological position and new product development. The
Company intends to continue to apply wherever necessary to protect its patents
in countries in which it operates. Although the Company believes that the
patents provide some competitive advantage and market protection, the Company's
success depends primarily upon its proprietary know-how, innovative skills,
technical competence and marketing abilities. Furthermore, there is no assurance
that these patents will not be challenged, invalidated or circumvented in the
future. The Company plans to apply for additional patents for future products
but the Company's applications may not be granted and any new products developed
by the Company may not be patentable. Because the majority of the Company's
business is based on intellectual capital and inventory and distribution
functions are outsourced, the Company has been able to control costs and
expenses. With new marketing and advertising alliances, the Company believes it
will increase sales so it will break-even in the near future.
Products. The Company sells an entire line of trophies, equipment and apparel to
reward competitors and participants on a global scale. Participant certificates
and promotional banners are also available. All Kids Golf products are adorned
with the colorful Kids Golf logo that kids find attractive. Prices are very
competitive and the Company's research suggests that junior golf programs
already have funds allocated toward trophies
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and apparel for kids in their program. Also, Kids Golf products can be
customized and co-branded to promote sponsors or organizations.
Distribution. Customers place product orders directly on-line through the Kids
Golf Pro Shop at http://www.kidsgolf.com. The Pro Shop is a Yahoo! Internet
store. Ordering is secure and confidential. Kids Golf is notified immediately by
e- mail when an order is placed. CardService International captures the credit
card funds and approves all transactions. Manhattan Trophies warehouses and
fulfills all trophy orders and ships them directly to the customer. Monark
Monograms warehouses and fulfills all apparel orders and ships them directly to
the customer.
Competition. Management of the Company believes that it has no "true"
competitors. While there are junior golf skills challenges in America (Golf
Channel's "Drive, Chip and Putt", and the National Junior's "Putt, Pitch &
Drive" are two examples), none of these use the Internet as both an evaluative
tool for participants and the means for distributing a "Competition Kit" to golf
program directors. The other junior skills challenges are "tiered" and require
participants to compete in regional, super-regional, and national competitions
to receive national rankings. The participants must travel to these various
competitions and generally incur all related travel expenses. None of these
junior skills challenges are worldwide.
Employees. Currently the Company employs 1 full-time and 1 part-time employee.
It anticipates increasing the staff with 2 new employees during the year 2000.
Key Employees. The Company's key employee is A. James Mallamo.
Reports to Security Holders. Once this Registration Statement becomes effective,
the Company will become a reporting company with the Securities and Exchange
Commission ("SEC"), and will thereafter provide an annual report to its security
holders, which will include audited financial statements. The public may read
and copy any materials filed with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file
electronically with the SEC. The address of that site is www.sec.gov. The
Company currently maintains its own Internet address at http://www.kidsgolf.com.
Industry Overview. According to the National Golf Foundation, and independent
industry source, there are three million junior golfers in the U.S. This figure
represents a 22% increase in the last two years. Junior golf is the fastest
growing segment of the golf community. Furthermore, these juniors represent a
very attractive segment of the population; the average household income of a
family with a junior golfer is $71,250. Independent industry sources state that
the number of junior golf programs grows by 20%
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annually. While these figures are impressive, only 10% of the 51 million juniors
in America today play golf. Thus, there is great growth opportunity in this
market.
The Company estimates that the Kids Golf "Drive, Pitch & Putt" competition will
attract 250,000 participants by the year 2001, making it the world's largest
junior golf program. The ability to attract families of a high socioeconomic
status on a global scale for relatively low operating expense makes Kids Golf
the perfect partner to corporate America. The program will attract parents,
kids, junior golf coaches and program directors everywhere to the Company's web
site, generating corporate sponsorship sales, and maximizing sales of Kids Golf
products worldwide on the Internet.
The Internet is an increasingly significant global medium for communications,
information and commerce. International Data Corporation estimates that the
number of web users grew to approximately 70 million by the end of 1997 and will
grow to approximately 320 million by 2002. The Company believes that the growth
in internet usage has resulted from a number of factors, including the large and
growing installed base of PCs in the workplace and home, advances in the
performance and speed of PCs and modems, improvements in network infrastructure,
easier and cheaper access to the Internet and increased awareness of the
Internet among businesses and consumers.
Kids Golf believes that a significant opportunity exists for the retailing of
its merchandise on the Internet, while affording junior golfers worldwide the
opportunity to compete in a major competition for free without leaving their
hometown. Using the Internet as both an evaluative tool, and the means for
distributing the program to junior golf directors, provides a unique opportunity
for reaching customers while keeping overhead costs low.
Analysis. Using the Internet to make the competition available free to everyone,
as well as the evaluative tool for ranking competitors worldwide, offers many
advantages over the traditional venues for golf competitions. Merchandise
retailing via the Internet offers many advantages to both businesses and
customers when compared to traditional methods of retailing. Internet-based
companies can offer their customers the convenience of 24 hours a day, seven day
a week service. Kids Golf can serve international youth competitors, and pursue
international product sales without significant operating cost.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS OF THE
COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS REGISTRATION STATEMENT.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION CONTAINED
IN THIS REGISTRATION STATEMENT CONTAINS "FORWARD-LOOKING STATEMENTS" THAT
INVOLVE RISK AND UNCERTAINTIES. THESE STATEMENTS MAY BE IDENTIFIED BY THE USE OF
FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "EXPECTS,"
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"MAY," "WILL," "SHOULD" OR "ANTICIPATES" OR THE NEGATIVE THEREOF OR SIMILAR
EXPRESSIONS OR BY DISCUSSIONS OF STRATEGY. THE CAUTIONARY STATEMENTS MADE IN
THIS REGISTRATION STATEMENT SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED
FORWARD-LOOKING STATEMENTS WHEREVER THEY APPEAR IN THIS REGISTRATION STATEMENT.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN
THIS REGISTRATION STATEMENT. IMPORTANT FACTORS THAT COULD CAUSE OR CONTRIBUTE TO
SUCH DIFFERENCES INCLUDE THOSE DISCUSSED UNDER THE CAPTION ENTITLED "RISK
FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.
OVERVIEW
As it seeks to expand aggressively, the Company believes that its operating
expenses will significantly increase as a result of its financial commitments to
the on-going development of, and improvements to its web site, as well as its
future strategic relationships with junior golf professionals worldwide, and the
development of new marketing channels.
Strategy. The objective of the Kids Golf "Drive, Pitch & Putt" competition is to
create the world's largest junior golf program. This will attract program
directors, parents, and kids around the world to the Company's web site;
generate corporate sponsorship sales and advertising; and maximize sales of Kids
Golf products on the Internet worldwide.
Kids Golf's strategy to achieve its objective includes:
The Kids Golf "Drive, Pitch & Putt" Competition. The "Drive, Pitch & Putt"
competition will encourage children everywhere to participate because it is free
to all kids worldwide. Kids Golf believes it will capture a large market share
of the world of junior golf because no other competition has:
1. Worldwide participation with no travel expenses.
2. No entry fees for competitors or program directors.
3. Appeal to beginners to the sport as well as accomplished golfers.
4. A "turnkey" program to enhance existing junior golf programs.
The Kids Golf Internet Web Site. The Kids Golf web site at
http://www.kidsgolf.com is the Company's main marketing tool. The site is
state-of-the-art and attracts parents, children, and other companies by its
cutting edge graphics and design. The Company has ensured that their web site is
highly placed on all major search engines both foreign and domestic. Searching
by the key words "junior golf", "kids golf ", or "Drive Pitch Putt" will bring
up the Kids Golf web site in a top five position on most major portals. The Kids
Golf Scoreboard will increase the number of unique impressions on the site
dramatically as parents and children visit the scoreboard to check the scores of
all kids who participate in the Kids Golf "Drive, Pitch & Putt" competition. The
Kids Golf web site has special feature sections such as photo albums from
special events, and sub-
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sections for large organizations where their children can go to their own home
page and see how they compete with their peers in their organization, as well as
kids around the world. Also these special sections will draw traffic and
attention to the Kids Golf web site.
Kids Golf Product Sales on the Internet. The Kids Golf Pro Shop at
http://www.kidsgolf.com, offering a complete line of Kids Golf products on the
Internet, will enjoy an important advantage over the competition: A web site
attracting numerous "hits" daily as parents and children worldwide visit the
site to check the Kids Golf Scoreboard and print the Competition Kit. Given the
number of children who play golf worldwide, there is great income potential from
product sales.
Pro Shop. Kids Golf strives to make the online "Pro Shop" a complete outlet for
golf products for the junior golfer. The store is designed to be easy to use and
to enable the ordering process to be completed with a minimum of customer
effort. Customers enter the store through either the Kids Golf web site at
http://www.kidsgolf.com, or through the Yahoo! shopping mall.
Merchandising. Kids Golf believes that its ability to offer its product line of
branded clothing and accessories with the Kids Golf multi-colored, modern logo
has a significant competitive advantage. The attraction of the skills challenge,
along with the awards and apparel to enhance the competition, make the
merchandising truly unique. Offering a free competition on the Internet draws
people to the Kids Golf web site and, consequently, the Pro Shop. Marketing in
this manner has the advantage of attraction rather than promotion to the
customers.
Purchasing. In paying for orders, customers may use credit cards, personal
checks or money orders. For convenience, Kids Golf enables customers the option
to store credit card information on the Company's secure server, thereby
avoiding the need to re-enter this information when making future purchases.
Customers are offered a variety of shipping options, including overnight
delivery. The Company offers a money-back return policy. Customers can custom
order Kids Golf products with their own logo in addition to the Kids Golf logo.
This is very attractive option for corporate sponsors and large organizations.
Distribution and Fulfillment. Kids Golf's inventory is owned and held by outside
vendors and shipped directly from the vendors to customers. The Company will
continue to seek additional vendors in order to provide high-quality products
and efficient order fulfillment.
Multilingual Capabilities. Kids Golf plans to offer foreign language versions of
its web site that contain translations of account registration and ordering
instructions, and will support its international sales efforts with customer
service representatives fluent in these languages.
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Kids Golf Corporate Sponsorship Sales. Because the Kids Golf "Drive, Pitch &
Putt" competition is free to all kids worldwide, it offers corporate America the
ideal sponsorship opportunity to enhance image, good will and product sales. The
Company will continue to develop promotional and sponsorship alliances.
Intellectual Property. The Company has valuable intellectual property that
establishes its prominence as an industry leader and innovator. Kids Golf will
finalize all legal proceedings regarding its patents and trademarks and initiate
any legal action necessary to protect them.
Marketing and Promotion. The Kids Golf marketing and promotion strategy is
designed to broaden awareness of the Kids Golf "Drive, Pitch & Putt" competition
and the Kids Golf brand of products, increase customer traffic to the Company's
web site, and encourage new and repeat purchases. Kids Golf utilizes multiple
channels to market and promote its brand, including strategic alliances, online
and traditional advertising, and direct marketing. Kids Golf believes that the
use of multiple marketing channels reduces reliance on any one source of
customers, maximizes brand awareness and lowers average customer acquisition
cost.
Strategic Alliances. Kids Golf believes that strategic alliances with industry
leaders can be a significant source of new customers. Kids Golf has formed a
variety of strategic agreements and contractual relationships with the following
industry leading companies that promote the Company, and provide critical
services to the Company to maintain its status as a world-class Internet-based
electronic commerce enabled business:
Jack Nicklaus, Honorary Chairman. Jack Nicklaus and Golden Bear Golf, Inc. have
supported Kids Golf since its inception in 1993. Mr. Nicklaus continues to help
promote the Company by allowing his name, likeness and testimonials to be used
in a variety of television and print advertisements.
National Junior Golf Organizations. Kids Golf is very attractive to several
national organizations because it enhances their program. These organizations
use their own marketing sources (newsletters, direct mailings, press releases,
etc) to promote their alliance with Kids Golf because the partnership enhances
our mutual credibility, visibility, and goodwill. These alliances provide Kids
Golf with free marketing and promotion to large groups of program directors and
junior golfers, as well as a large customer base. A partial list of these
organization is: National Police Athletic Leagues, the National Association of
Junior Golfers, The National Alliance of Youth Sports, The Boys and Girls Clubs
of America, the Minority Golf Association of America, and Parks and Recreation
Departments nationwide.
Yahoo Store. Kids Golf is registered as a Yahoo Store Merchant. When consumers
enter the Kids Golf Pro Shop to look for and purchase golf clothing and
accessories, they are automatically linked into the Yahoo Store site. In
addition, consumers accessing the Yahoo shopping mall directly can be linked to
the Kids Golf web site by entering words
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such as Kids Golf, golf, golf clothing, etc. The Yahoo Store is one of the
largest shopping sites on the web with thousands of merchants.
CardService International. Kids Golf will be utilizing Cardservice's software
and services on its Internet Pro Shop (http://www.kidsgolf.com) to provide the
most advanced and secure transaction service on the Internet. Cardservice is one
of the world's leading providers of secure electronic commerce payment
technologies.
Venue Advertising. The Company has retained Venue, Inc. to place all advertising
and marketing campaigns. Venue is a full service advertising and marketing firm
with international capabilities.
Timeline Communications. Timeline Communications is a web design firm in
Florida. They house and maintain the Kids Golf web site and produce all
graphics, layout, and design. They use "cutting edge" graphics to attract
customers and sponsors to the Kids Golf web site. The innovative design of the
Kids Golf web site is a marketing tool in itself and it helps promote the
Company's image.
Trade Shows. The Company uses golf trade shows to create awareness of its
program. Kids Golf creates large, colorful displays for these trade shows that
include a product display and a multimedia presentation. The Company hires
experienced hosts to help explain the program and the products to customers and
program directors.
Direct Mailings. The Company sends a colorful brochure explaining its program to
junior golf directors worldwide utilizing several large databases.
Press and Publications. The Company advertises in several national magazines. In
addition, many publications feature stories about Kids Golf free of charge
because of the novelty and newsworthiness of the program. Kids Golf sends out
press releases on a regular basis to inform the press of special events and
current news. The company has an attractive press package.
Web Site Cross-Links. The Kids Golf web site tries to be colorful and exciting
and is a popular cross-link to several golf sites nationwide. This helps drive
new traffic to the Company's web site. The Company also monitors popular
Internet search engines on a regular basis to ensure prominent placement.
Special Events. The Company participates in selected high profile special
events. These events increase the Company's visibility and goodwill while
providing heavy media coverage and unique marketing opportunities. A few
examples include the MGAA's Kids Day at the 1999 U.S. Open and the First Tee/
Tiger Woods clinic that culminated in a Kids Golf "Drive, Pitch & Putt"
competition in San Francisco.
Distribution and Fulfillment. Kids Golf currently does not carry any inventory
and relies exclusively on third party vendors for distribution and fulfillment.
The Company believes that this distribution strategy allows it to offer
extensive selection while avoiding
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the high fixed costs and capital requirements associated with owning and
warehousing product inventory. In the future, however, as sales increase, the
Company may find that it is more cost effective to maintain its own inventory
and handle distribution and fulfillment inhouse.
Kids Golf has used primarily Monark Monograms, Manhattan Trophies, and Ivy Art
to fulfill its customer orders.
RESULTS OF OPERATIONS
Three months ended March 31, 2000 Compared to Three months ended March 31, 1999
Revenues. The Company had virtually no revenues during either period.
Operating Expenses. Operating expenses totaled $187,179 for the three months
ended March 31, 200, a decrease of 56.5% from $430,206 for the three months
ended March 31, 1999. This decrease was due to a decrease from $265,000 to
$30,987 in the category of stock issued for consulting fees. In addition,
General and Administrative expenses decreased from $108,351 to $81,859. Since
the Company was in an organizational stage during early 1999, it is anticipated
that stock issued for consulting fees will not be a recurring expense.
Liquidity and Capital Resources. At March 31, 2000, the Company had cash
balances totaling $11,563 compared to a cash balance of $144,657 as of December
31, 1999.
The Company's primary liquidity needs are to pay general and administrative
expenses, funding continuing web site design and development expenses, and
marketing. Historically, the Company has funded its operations through
shareholder loans, bank borrowings, and the sale of common stock.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues. Revenues decreased by 77.3% to $1,877 for the year ended December 31,
1999 compared to $8,151 for the year ended December 31, 1998. The Company views
this decrease as nonmaterial since it was in the development stage and revenue
levels were not significant for either year.
Operating Expenses. Operating expenses totaled $1,355,101 for the year ended
December 31, 1999 an increase of 1151% from $108,313 for the year ended December
31, 1998. The increase in operating expenses during the current year was
primarily attributable to the costs associated with additional employees and
related general and administrative expenses, increased costs of marketing, and
stock issued as consulting fees.
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Liquidity and Capital Resources. At December 31, 1999, the Company had cash
balances totaling $144,657.
The Company's primary liquidity needs are to pay general and administrative
expenses, funding continuing web site design and development expenses, and
marketing. Historically, the Company has funded its operations through
shareholder loans, bank borrowings, and the sale of common stock.
Access to future capital
The Company ability to access borrowings and generate investments in the company
and to meet its debt service and other obligations will be dependent upon its
future performance and its cash flows from operations, which will be subject to
financial, business and other factors, certain of which are beyond the Company's
control, such as prevailing economic conditions. The Company cannot assure you
that, in the event it was to require additional financing, such additional
financing would be available on terms permitted by agreements relating to
existing indebtedness or otherwise satisfactory to it. The Company believes that
funds generated by its operations will not be sufficient to finance estimated
capital expenditure requirements and to fund its existing operations and that
additional capital will be required.
ITEM 3. DESCRIPTION OF PROPERTY
Facilities. The Company's administrative offices are located at 356 Golfview
Road in Palm Beach Gardens, Florida. The lease on these premises has expired and
we are now leasing on a month-to-month basis. Kids Golf plans to expand its
staff and office space in late 2000, to meet its growth requirements.
The Company owns all computer equipment and software necessary to operate an
Internet based business. The Company carries sufficient insurance coverage on
the property and all computers.
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the number of shares of Kids Golf's common stock,
beneficially owned as of December 31, 1999, and as adjusted to reflect the sale
of all Common Stock hereby offered by the Company by (i) owners of more than 10%
of the Company's Common Stock; (ii) each director of the Company; and (iii) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Number of Shares of Common Stock Percentage of Beneficial Ownership
Beneficially Owned
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
A. James Mallamo 7,500,000* 64.5 %
12553 Woodmill Drive
Palm Beach Gardens, FL 33418
Stephen P. Rowe 2,500,000 21.5 %
9266 Sable Ridge Circle
Boca Raton, FL 33428
All executive officers
and directors of the
Company as a group. 7,500,000* 64.5 %
</TABLE>
* 1,000,000 shares are held by Mallamo Family Limited Partnerships, a Nevada
Limited Partnership established for Estate Planning Purposes; and 6,500,000
shares are held by Mallamo International, LLC, a Nevis Limited Liability
Company.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c ) of Regulation S-B.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS
As of the date of this Filing, the following sets forth the following
information regarding the key management of the Company.
<TABLE>
<CAPTION>
Name Age Position with the Company
------------------------------------- ----------------------------------- -----------------------------------
<S> <C> <C>
A. James Mallamo 52 President, Chief Executive
Officer, and Director
</TABLE>
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Biography Information on Director and Executive Officer:
A. James Mallamo. Mr. Mallamo has been a Director of the Company since its
inception in June 1993. Prior to taking on the full-time responsibilities of
President in January 1996, he was employed as Director of Special Projects for
WPTV-TV, the NBC television affiliate in West Palm Beach, Florida, from January,
1982, to December, 1995. Mr. Mallamo also worked as a Financial Consultant for
Merrill Lynch in Palm Beach Gardens, Florida during 1998. Since December of
1998, he has been full-time President, Chief Executive Officer and Director of
the Company. Mr. Mallamo earned a Bachelor of Science Degree in Business
Administration from Fairmont State College in West Virginia.
ITEM 6. EXECUTIVE COMPENSATION
For the last completed fiscal year, A. James Mallamo, who served as President in
1999, received $60,000 in compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions between the Company and any director, officer or
large shareholder, or any party related thereto.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock
General
The authorized capital of the Company consists of 15,000,000 shares of common
stock, $0.001 par value. There are currently 11,620,000 shares of common stock
issued and outstanding.
Voting Rights.
The holders of shares of common stock are entitled to one vote for each share
held of record on all matters to be voted on by shareholders. The holders are
not permitted to vote their shares cumulatively. Accordingly, the holders of
common stock holding, in the aggregate, more than fifty percent (50%) of the
total voting rights can elect all the directors of the Company.
14
<PAGE>
Miscellaneous Rights and Provisions.
Holders of common stock have no preemptive or other subscription rights,
conversion rights, redemption or sinking fund provisions. In the event of the
dissolution, whether voluntary or involuntary, of Kids Golf, each share of
common stock is entitled to share ratably in any assets available for
distribution to holders of the equity of the Company after satisfaction of all
liabilities and payment of the applicable liquidation preference of any
outstanding shares of preferred stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
Market Information.
Currently the Company's equity is not publicly traded.
Holders.
As of June 30, 2000 the Company has a total of 59 holders of its common stock.
Dividend Policy.
The holders of common stock are entitled to receive ratably such dividends when,
as and if declared by the board of directors out of funds legally available
therefore. In the event of liquidation, dissolution or winding up of the
Company, the holders of common stock are entitled to share ratably in all assets
remaining which are available for distribution to them after payment of
liabilities and after provision has been made for each class of stock, if any,
having preference over the common stock. Holders of common stock, as such, have
no conversion, preemptive or other subscription rights, and there are no
redemption provisions applicable to the common stock.
Kids Golf has not paid dividends on its common stock. The payment by the Company
of future dividends, if any, is within the discretion of the board of directors
and will depend upon the Company's earnings, if any, its capital requirements
and financial condition, as well as other relevant factors. Kids Golf does not
intend to declare any dividends on its common stock in the foreseeable future,
but instead intends to retain all earnings, if any, for advertising, marketing,
development and expansion of its business operations.
15
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
From time-to-time, Kids Golf may be involved in litigation relating to claims
arising out of its ordinary course of business. There are no legal actions
pending against the Company nor are any such legal actions contemplated.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company pursuant to Item 304 of Regulations S-B.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
AND USE OF PROCEEDS
From November 8, 1998 through April 6, 1999, the Company issued 1,000,000 shares
of it's common stock to a total of 57 individuals in an offering exempt from
registration under Rule 504 of Regulation D promulgated pursuant to the
Securities Act of 1933. The proceeds from the sale of these securities were used
to operate the Company during this same time period.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Limitations of Liability of Directors. The Florida Business Corporation Act
eliminates the personal liability of Kids Golf's directors to the Company and
its shareholders for monetary damages as a result of a breach of fiduciary duty
with certain exceptions. Such a provision makes it more difficult to assert a
claim and obtain damages from a director in the event of breach of his fiduciary
duty.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
PART F/S
16
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
INDEX TO FINANCIAL STATEMENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-1
FINANCIAL STATEMENTS
Balance Sheet F-2
Statements of Operations F-3
Statements of Stockholders' Equity (Deficiency) F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 - F-13
17
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Gifts of Learning Foundation, Inc. d/b/a Kids Golf
Fort Lauderdale, Florida
We have audited the accompanying balance sheet of Gifts of Learning Foundation,
Inc. d/b/a Kids Golf (a development stage enterprise) as of December 31, 1999,
and the related statements of operations, and cash flows for each of the two
years then ended, and the related statement of stockholders' equity (deficiency)
for period June 16, 1993 to December 31, 1993 and each of the six years ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gifts of Learning Foundation,
Inc. d/b/a Kids Golf as of December 31, 1999, and the results of its operations
and its cash flows for each of the two years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 2 to the
financial statements, the Company is subject to certain risks and uncertainties,
which raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
The accompanying balance sheet of Gifts of Learning Foundation, Inc. d/b/a Kids
Golf as of March 31, 2000, and the related consolidated statements of
operations, stockholders' deficiency, and cash flows for the three months ended
March 31, 2000 and 1999 were not audited by us, and, accordingly, we do not
express an opinion or any other form of assurance on them.
RACHLIN COHEN & HOLTZ LLP
Fort Lauderdale, Florida
June 7, 2000
F-1
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 11,563 $ 144,657
Prepaid licensing fees 6,000 8,000
Other current assets 4,450 10,905
----------- -----------
Total current assets 22,013 163,562
Property and Equipment 1,726 1,867
Web Site Design Costs 31,321 37,585
----------- -----------
Total assets $ 55,060 $ 203,014
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 26,865 $ 20,074
Accrued expenses 68,025 57,758
Stockholder loans payable 12 3,120
----------- -----------
Total current liabilities 94,902 80,952
----------- -----------
Commitments and Contingencies -- --
Stockholders' Equity (Deficiency):
Common stock, $.001 par value; 15,000,000 shares authorized;
issued and outstanding, 11,620,000 shares at March 31, 2000
(unaudited) and 11,595,000 shares at December 31, 1999 11,620 11,595
Additional paid-in capital 1,609,380 1,584,405
Deficit accumulated during the development stage (1,660,842) (1,473,938)
----------- -----------
Total stockholders' equity (deficiency) (39,842) 122,062
----------- -----------
Total liabilities and stockholders' equity (deficiency) $ 55,060 $ 203,014
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
June 16, 1993
Three Months Ended Year Ended (Inception) to
March 31, December 31, March 31,
2000 1999 1999 1998 2000
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 113 $ -- $ 1,877 $ 8,151 $ 39,308
------------ ------------ ------------ ------------ ------------
Costs and Expenses:
Salaries 62,633 25,609 167,236 -- 229,869
Marketing and promotion 11,700 31,246 123,630 2,832 166,940
Stock issued as consulting fees 25,000 265,000 595,000 -- 620,000
General and administrative 87,846 108,351 471,112 113,632 691,800
------------ ------------ ------------ ------------ ------------
187,179 430,206 1,356,978 116,464 1,708,609
------------ ------------ ------------ ------------ ------------
Operating Loss (187,066) (430,206) (1,355,101) (108,313) (1,669,301)
Interest Income 162 -- 8,297 -- 8,459
------------ ------------ ------------ ------------ ------------
Net Loss $ (186,904) $ (430,206) $ (1,346,804) $ (108,313) $ (1,660,842)
============ ============ ============ ============ ============
Loss Per Common Share $ (0.02) $ (0.04) $ (0.12) $ (0.01)
============ ============ ============ ============
Weighted Average Shares Outstanding 11,616,400 10,435,312 11,270,384 10,020,731
============ ============ ============ ============
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GIFT OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the
Common Stock Paid-In Development
Shares Amount Capital Stage Total
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Inception (June 16, 1993) to December 31, 1993:
Issuance of founders' shares ($.001 per share) 10,000,000 $ 10,000 $ (9,000) $ -- $ 1,000
Net loss -- -- -- (555) (555)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1993 10,000,000 10,000 (9,000) (555) 445
Year Ended December 31, 1994:
Net loss -- -- -- (314) (314)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1994 10,000,000 10,000 (9,000) (869) 131
Year Ended December 31, 1995:
Net income -- -- -- 712 712
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1995 10,000,000 10,000 (9,000) (157) 843
Year Ended December 31, 1996:
Net loss -- -- -- (18,337) (18,337)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 10,000,000 10,000 (9,000) (18,494) (17,494)
Year Ended December 31, 1997:
Net loss -- -- -- (327) (327)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 10,000,000 10,000 (9,000) (18,821) (17,821)
Year Ended December 31, 1998:
Sale of common stock ($1 per share) 187,000 187 186,813 -- 187,000
Net loss -- -- -- (108,313) (108,313)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 10,187,000 10,187 177,813 (127,134) 60,866
Year Ended December 31, 1999:
Sale of common stock ($1 per share) 813,000 813 812,187 -- 813,000
Issuance of common stock for services ($1 per share) 595,000 595 594,405 -- 595,000
Net loss -- -- -- (1,346,804) (1,346,804)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 11,595,000 11,595 1,584,405 (1,473,938) 122,062
Three Months Ended March 31, 2000 (Unaudited):
Issuance of common stock for services ($1 per share) 25,000 25 24,975 -- 25,000
Net loss -- -- -- (186,904) (186,904)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 (Unaudited) 11,620,000 $ 11,620 $ 1,609,380 $(1,660,842) $ (39,842)
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GIFT OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
June 16, 1993
Three Months Ended Year Ended (Inception) to
March 31, December 31, March 31,
2000 1999 1999 1998 2000
----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $ (186,904) $ (430,206) $(1,346,804) $ (108,313) $(1,660,842)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services 25,000 265,000 595,000 -- 620,000
Depreciation and amortization 6,405 -- 12,775 -- 19,180
Changes in operating assets and liabilities:
Increase (decrease) in other assets 8,455 -- (18,905) -- (10,450)
Increase in accounts payable 6,791 3,243 14,227 5,960 26,865
Increase in accrued expenses 10,267 -- 57,758 -- 68,025
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities (129,986) (161,963) (685,949) (102,353) (937,222)
----------- ----------- ----------- ----------- -----------
Cash Flows from Investing Activities:
Expenditures for web site design costs -- -- (50,114) -- (50,114)
Expenditures for property and equipment -- -- (2,113) -- (2,113)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities -- -- (52,227) -- (52,227)
----------- ----------- ----------- ----------- -----------
Cash Flows from Financing Activities:
Proceeds from sale of common stock -- 319,500 813,000 187,000 1,000,000
Proceeds from stockholder loans -- -- 54,465 8,460 94,670
Payment of stockholder loans (3,108) (5,650) (55,552) (22,253) (93,658)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities (3,108) 313,850 811,913 173,207 1,001,012
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Cash (133,094) 151,887 73,737 70,854 11,563
Cash, Beginning 144,657 70,920 70,920 66 --
----------- ----------- ----------- ----------- -----------
Cash, Ending $ 11,563 $ 222,807 $ 144,657 $ 70,920 $ 11,563
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
Gifts of Learning Foundation, Inc. d/b/a Kids Golf ("the
Company"), a Florida corporation, was incorporated on June 16,
1993.
The Company's Articles of Incorporation initially authorized the
Company to issue and have outstanding at any one time 1,000
shares of common stock, par value $1.00 per share. On December 2,
1998, the Company filed amended Articles of Incorporation to
increase the authorized shares to 15,000,000 and change the par
value to $.001. In November 1998, the Company effected a 10,000
for 1 stock split. These transactions have been given retroactive
effect in these financial statements.
Business
The Company is an Internet marketing company that advertises and
promotes Drive, Pitch and Putt competitions worldwide via an
e-commerce site. The Company sells a line of trophies and golf
apparel to the sites that host the competitions.
Unaudited Financial Information
The accompanying financial statements as of March 31, 2000 and
for the three months ended March 31, 2000 and 1999 and cumulative
from inception are unaudited. However, in the opinion of
management, such financial statements contain all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair presentation of financial position, results of operations
and cash flows for such periods. Results of interim periods are
not necessarily indicative of results to be expected for an
entire year.
Use of Estimates
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles. In
preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amount of
assets and liabilities as of the date of the balance sheet and
operations for the period. Although these estimates are based on
management's knowledge of current events and actions it may
undertake in the future, they may ultimately differ from actual
results.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash.
F-6
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentrations of Credit Risk (Continued)
From time to time during the year, the Company had deposits in
financial institutions in excess of the federally insured limits.
At December 31, 1999, the Company had deposits of approximately
$54,000 in excess of federally insured limits. The Company
maintains its cash with high quality financial institutions,
which the Company believes limits these risks.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash,
accounts payable, accrued expenses and loans from stockholder.
The carrying amounts of such financial instruments, as reflected
in the balance sheet, approximate their estimated fair value as
of March 31, 2000 and December 31, 1999. The estimated fair value
is not necessarily indicative of the amounts the Company could
realize in a current market exchange or of future earnings or
cash flows.
Property and Equipment
Property and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the assets. Gain or loss on disposition of assets is
recognized currently. Repairs and maintenance, which do not
extend the lives of the respective assets, are charged to expense
as incurred. Major replacements or betterments are capitalized
and depreciated over the remaining useful lives of the assets.
Web Site Design
Web site design includes costs incurred by the Company to develop
the Company's web site. Pursuant to Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," the Company has capitalized the costs
incurred to develop the web site. Amortization is computed using
the straight-line method over the estimated useful lives of the
assets.
Income Taxes
The Company was taxed under the provisions of Subchapter S of the
Internal Revenue Code up to the time of sale of common stock to a
disqualified entity in 1999. Under the Subchapter S provisions,
the Company generally does not pay federal corporate tax, but
rather, the stockholders' share of income or loss is included in
their individual tax returns. The Company terminated the S
Corporation election effective March 19, 1999.
F-7
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes (Continued)
The Company accounts for its income taxes using Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," which requires recognition of deferred tax
liabilities and assets for expected future tax consequences of
events that have been included in the financial statements or tax
returns. Under this method, deferred tax liabilities and assets
are determined based on the differences between the financial
statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are
expected to reverse.
Revenue Recognition
The Company recognizes revenue when merchandise is shipped to
customers. Allowances for estimated returns are provided when
sales are recorded.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs
were approximately $15,000 (unaudited), $124,000 and $3,000 for
the period ended March 31, 2000, December 31, 1999 and 1998,
respectively.
Stock-Based Compensation
The Company accounts for stock-based compensation issued to
employees using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees". Compensation cost for stock options, if
any, is measured as the excess of the estimated market price of
the Company's stock at the date of grant or agreement in
principle to grant the option, if earlier, over the amount the
recipient must pay to acquire the stock.
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation," established accounting
and disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. The
Company has elected to retain its current method of accounting as
described above, and has adopted the disclosure requirements of
SFAS No. 123. The Company follows SFAS No. 123 in accounting for
stock-based compensation issued to non-employees.
Loss Per Common Share
Loss per common share has been computed by dividing net loss by
the weighted average shares outstanding. Diluted income per
common share assumes exercising common stock equivalents granted.
The Company has not granted any common stock equivalents.
F-8
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting Comprehensive Income" and No. 131,
"Disclosures About Segments of an Enterprise and Related
Information". SFAS No. 130 establishes standards for reporting
and displaying comprehensive income, its components and
accumulated balances. SFAS No. 131 establishes standards for the
way that public companies report information about operating
segments in annual financial statements and requires reporting of
selected information about operating segments in interim
financial statements issued to the public. Both SFAS No. 130 and
SFAS No. 131 are effective for periods beginning after December
15, 1997. The Company adopted these new accounting standards in
1998, and their adoption had no effect on the Company's financial
statements and disclosures.
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires companies to recognize all
derivatives contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated
as a hedge, the objective of which is to match the timing of the
gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or
(ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging instrument, the gain
or loss is recognized in income in the period of change. On June
30, 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133." In June, 2000, the
FASB issued SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities." SFAS No. 133 as
amended by SFAS No. 137 and 138 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives
contracts to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new
standard on January 1, 2001 to affect its financial statements.
NOTE 2. SUMMARY OF CERTAIN RISKS AND UNCERTAINTIES
Development Stage Enterprise
As described above, the Company was incorporated on June 16,
1993, and, since that time, has been primarily involved in
organizational activities, developing a strategic plan for the
marketing of its products, and raising capital. Planned
operations, as described above, have not commenced to any
significant extent. Accordingly, the Company is considered to be
in the development stage, and the accompanying financial
statements represent those of a development stage enterprise.
F-9
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 2. SUMMARY OF CERTAIN RISKS AND UNCERTAINTIES (Continued)
Going Concern Considerations
The accompanying financial statements have been presented in
accordance with generally accepted accounting principles, which
assume the continuity of the Company as a going concern. However,
as discussed above, the Company is in the development stage and,
accordingly, has generated virtually no revenue to date and has
incurred significant net losses in 1999 and 1998 and subsequent
thereto. This condition raises substantial doubt as to the
ability of the Company to continue as a going concern.
Management's Plans
Management's plans with regard to these matters include pursuing
additional capital, increasing marketing and advertising for
exposure to current markets, generating sales through
sponsorships via e-commerce, and expanding its current product
line.
The eventual outcome of the success of management's plans cannot
be ascertained with any degree of certainty. The accompanying
financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
NOTE 3. INCOME TAXES
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." SFAS No. 109 is an asset and
liability approach for computing deferred income taxes.
A reconciliation of income tax computed at the statutory federal
rate to income tax expense (benefit) is as follows:
<TABLE>
<CAPTION>
Three Months Ended Year Ended
March 31, December 31,
2000 1999 1999 1998
--------- --------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Tax provision at the statutory rate of 34% $ (64,000) $(146,000) $(458,000) $ (37,000)
State income taxes, net of federal income tax (5,000) (26,000) (40,000) (3,000)
Loss as Subchapter S Corporation -- 172,000 156,000 40,000
Other -- -- 8,000 --
Change in valuation allowance 69,000 -- 334,000 --
--------- --------- --------- ---------
Income tax expense $ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
F-10
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3. INCOME TAXES (Continued)
The net tax effects of temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes are reflected in
deferred income taxes. Significant components of the Company's
deferred tax assets are as follows:
March 31, December 31,
2000 1999
--------- ---------
(Unaudited)
Benefit of net operating loss carryforwards $ 172,000 $ 114,000
Stock-based compensation 231,000 220,000
Less valuation allowance (403,000) (334,000)
--------- ---------
Net deferred tax assets $ -- $ --
========= =========
The Company was taxed as a Subchapter S Corporation from inception
(June 16, 1993) through March 19, 1999. At March 31, 2000 and December
31, 1999, the Company had net operating loss carryforwards for federal
income tax purposes of approximately $464,000 (unaudited) and $308,000,
respectively, which are available to offset future federal taxable
income, if any, through 2019.
As of March 31, 2000 and December 31, 1999, sufficient uncertainty
exists regarding the realizability of these deferred tax assets and,
accordingly, a 100% valuation allowance has been established.
NOTE 4. PROPERTY AND EQUIPMENT
Estimated Useful March 31, December 31,
Lives (Years) 2000 1999
------------- ---- ----
(Unaudited)
Computer equipment 5 $2,113 $2,113
Less accumulated depreciation 387 246
------ ------
$1,726 $1,867
====== ======
Depreciation expense for the three months ended March 31, 2000
and the year ended December 31, 1999 was $141 (unaudited) and
$246, respectively.
F-11
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 5. WEB SITE DESIGN COSTS
Estimated Useful March 31, December 31,
Lives (Years) 2000 1999
------------- ---- ----
(Unaudited)
Web site design costs 2 $50,114 $50,114
Less accumulated amortization 18,793 12,529
------- -------
$31,321 $37,585
======= =======
Amortization expense for the three months ended March 31, 2000
and the year ended December 31, 1999 was $6,264 (unaudited) and
$12,529, respectively.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its facility under a one year operating lease
expiring in April, 2000. Rent expense is approximately $1,450 per
month.
Employment Agreement
During 1999, the Company entered into a no term employment
agreement, which may be terminated by either party. The agreement
provides, among other things, for an annual salary of
approximately $45,000 and expense reimbursements.
Consulting Agreements
On October 25, 1999, the Company entered into a three year
licensing agreement, payment due annually, with National
Association of Junior Golfers ("NAJG"). NAJG grants the Company
rights to use NAJG's trademark, name, mailing list and to receive
exposure through the NAJG website. The cost of the license
acquired is being amortized over the life of the agreement. As of
March 31, 2000 (unaudited) and December 31, 1999, approximately
$8,000 was included in other current assets as licensing fees.
The remaining future payments due are as follows:
Year ending December 31,
2000 $12,500
2001 15,000
-------
$27,500
F-12
<PAGE>
GIFTS OF LEARNING FOUNDATION, INC.
d/b/a KIDS GOLF
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 7. COMMON STOCK
In 1993, the Company issued 1,000 shares of common stock in
exchange for services with a value of $1,000. Subsequently, those
1,000 shares became 10,000,000 shares as a result of a 10,000 for
1 split authorized by the Board of Directors on November 25,
1998.
During November 1998 to April 1999, the Company raised capital
through the private placements of equity securities. The private
placements of equity securities were exempt from registration in
reliance on Rule 504 under Regulation D promulgated under the
Securities Act of 1933. The common stock was offered by the
Company without the services of a placement agent. The Company
sold 1,000,000 shares at $1 per share.
In March 1999, the Company issued 275,000 shares of common stock
pursuant to two consulting agreements with consultants in payment
of fees. During 1999, the Company issued 320,000 shares of common
stock in exchange for services. The 595,000 shares issued were
recorded at $1 per share as a charge to consulting fees, with a
corresponding credit to additional paid-in capital.
In January 2000, the Company issued 25,000 shares of common stock
in exchange for services (unaudited). These shares were recorded
at $1 per share as a charge to consulting fees, with a
corresponding credit to additional paid-in capital.
F-13
<PAGE>
PART III
ITEM 1. AND ITEM 2 INDEX AND DESCRIPTION OF EXHIBITS
Exhibit Number Document and Description
-------------- ------------------------
2.1 Articles of Incorporation
2.2 Articles of Amendment to
Articles of Incorporation
2.3 Bylaws
6.1 Endorsement Contract between
National Association of Junior Golfers
and Gifts of Learning Foundation, Inc.
6.2 Lease Agreement between Michael F.
Nicoladis and James A. Mallamo re
Office Facilities
23.1 Consent of Rachlin Cohen & Holtz LLP -
Auditors to the Company
27.1 Financial data schedule for the
year ended December 31, 1999
27.2 Financial data schedule for the three
months ended March 31, 2000
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 2, 2000 GIFTS OF LEARNING FOUNDATION, INC.
By: /S/ A. JAMES MALLAMO
---------------------------------
A. James Mallamo
Its: President
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DOCUMENT AND DESCRIPTION
-------------- ------------------------
2.1 Articles of Incorporation
2.2 Articles of Amendment to Articles of Incorporation
2.3 Bylaws
6.1 Endorsement Contract between National Association of
Junior Golfers and Gifts of Learning Foundation, Inc.
6.2 Lease Agreement between Michael F. Nicoladis and James A.
Mallamo re Office Facilities
23.1 Consent of Rachlin Cohen & Holtz LLP - Auditors to the Company
27.1 Financial data schedule for the year ended December 31, 1999
27.2 Financial data schedule for the three months ended
March 31, 2000
