UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission File No. 0-29015
INTERNET GOLF ASSOCIATION, INC.
(Name of Small Business Issuer in Its Charter)
NEVADA 84-0605867
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
24921 Dana Point Harbor Drive, Suite B-200
Dana Point, California 92629
(Address of Principal Executive Offices) (Zip Code)
(949) 493-9546
(Issuer's Telephone Number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
(None)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.001
(Title of Class)
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 X No
----
Indicate the number of shares outstanding of each of the issuer's class of
common stock as of the latest practicable date:
Title of each class of Common Stock Outstanding as June 30, 2000
----------------------------------------- -----------------------------
Common Stock, $0.001 par value 31,396,250
Transitional Small Business Disclosure Format (check one):
Yes No X
------
1
<PAGE>
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets at June 30, 2000 (Unaudited) and 3
December 31, 1999.
Consolidated Statements of Operations (Unaudited) for the 4
three months ended June 30, 2000 and for the three months
ended June 30, 1999.
Consolidated Statements of Operations for the six months 5
ended June 30, 2000 (unaudited), for the six months ended
June 30, 1999 (unaudited), and for the period from inception
on February 4, 1999 through June 30, 2000.
Consolidated Statements of Cash Flows for the six months 6
ended June 30, 2000 (unaudited), for the six months ended
June 30, 1999 (unaudited) and for the period from inception
on February 4, 1999 to June 30, 2000.
Notes to Interim Financial Statements (Unaudited) 7
at June 30, 2000.
Item 2. Plan of Operations. 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 15
Item 2. Changes in Securities. 15
Item 3. Defaults Upon Senior Securities. 15
Item 4. Submission of Matters to a Vote of Security Holders. 15
Item 5. Other Information. 15
Item 6. Exhibits and Reports on Form 8-K. 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
JUNE 30, 2000 DECEMBER 31, 1999
------------ -------------------
ASSETS
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,420 $ 3,775
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . 22,705 22,705
Other current assets . . . . . . . . . . . . . . . . . . . . . 3,412 652
------------ -------------------
Total current assets . . . . . . . . . . . . . . . . . . . . 31,537 27,132
------------ -------------------
Property and equipment, at cost:
Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 18,935 18,935
Computers. . . . . . . . . . . . . . . . . . . . . . . . . . . 15,118 15,118
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . 1,195 1,195
------------ -------------------
35,248 35,248
Less accumulated depreciation. . . . . . . . . . . . . . . . . (12,510) (4,616)
------------ -------------------
Total property and equipment, net. . . . . . . . . . . . . . 22,738 30,632
------------ -------------------
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 5,500 -
------------ -------------------
$ 59,775 $ 57,764
============ ===================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . . $ 245,553 $ 237,660
Short-term note payable. . . . . . . . . . . . . . . . . . . . 187,500 -
Accrued officers' salary . . . . . . . . . . . . . . . . . . . 32,295 -
Notes payable to officers. . . . . . . . . . . . . . . . . . . 40,000 -
Other short-term borrowings. . . . . . . . . . . . . . . . . . 69,800 -
------------ -------------------
Total current liabilities. . . . . . . . . . . . . . . . . . 575,148 237,660
------------ -------------------
Long-term liabilities:
Convertible note payable, net of unamortized discount
of $145,832 and $204,166 at June 30, 2000 and
December 31, 1999, respectively. . . . . . . . . . . . . . . 187,501 129,167
------------ -------------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . 762,649 366,827
------------ -------------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.001 par value; 5,000,000 shares
authorized; no shares issued and outstanding . . . . . . . . - -
Common stock, $0.001 par value; 100,000,000 shares
authorized; 31,396,250 and 31,394,250 shares issued and
outstanding at June 30, 2000 and December 31, 1999,
respectively (including 0 and 108,750 shares committed and
not issued at June 30, 2000 and December 31, 1999,
respectively). . . . . . . . . . . . . . . . . . . . . . . . 31,397 31,395
Additional paid-in capital . . . . . . . . . . . . . . . . . . 1,117,924 958,376
Deficit accumulated during the development stage . . . . . . . (1,852,195) (1,298,834)
------------ -------------------
Total stockholders' deficit. . . . . . . . . . . . . . . . . (702,874) (309,063)
------------ -------------------
$ 59,775 $ 57,764
============ ===================
</TABLE>
3
<PAGE>
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
THREE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 2000 JUNE 30, 1999
-------------------- --------------------
Revenues . . . . . . . . . . . . . . . . . . . . . . $ 8,348 $ -
Cost of revenues . . . . . . . . . . . . . . . . . . 1,434 -
-------------------- --------------------
Gross profit . . . . . . . . . . . . . . . . . . . . 6,914 -
-------------------- --------------------
Operating expenses:
General and administrative . . . . . . . . . . . . 57,083 172,726
Payroll and related. . . . . . . . . . . . . . . . 52,848 60,971
Advertising and related. . . . . . . . . . . . . . 1,935 176,675
Depreciation . . . . . . . . . . . . . . . . . . . 2,842 12,360
-------------------- --------------------
114,708 422,732
-------------------- --------------------
Loss from operations . . . . . . . . . . . . . . . . (107,794) (422,732)
Interest expense, net of interest income of $133 and
$0, respectively . . . . . . . . . . . . . . . . . 39,804 -
-------------------- --------------------
Loss before provision for taxes. . . . . . . . . . . (147,598) (422,732)
Provision for taxes. . . . . . . . . . . . . . . . . - 800
-------------------- --------------------
Net loss . . . . . . . . . . . . . . . . . . . . . . $ (147,598) $ (423,532)
==================== ====================
Basic and diluted net loss per common share. . . . . $ (0.01) $ (0.05)
==================== ====================
Basic and diluted weighted average common
shares outstanding . . . . . . . . . . . . . . . . 31,396,250 8,936,590
==================== ====================
</TABLE>
4
<PAGE>
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEBRUARY 4, 1999
(DATE OF
SIX MONTHS SIX MONTHS INCEPTION)
ENDED JUNE 30, ENDED JUNE 30, THROUGH
2000 1999 JUNE 30, 2000
------------------ ----------- ---------------
Revenues . . . . . . . . . . . . . . . . $ 20,575 $ - $ 62,575
Cost of revenues . . . . . . . . . . . . 9,972 - 43,281
------------------ ----------- ---------------
Gross profit . . . . . . . . . . . . . . 10,603 - 19,294
------------------ ----------- ---------------
Operating expenses:
General and administrative . . . . . . 359,069 172,726 963,667
Payroll and related. . . . . . . . . . 112,337 60,971 307,091
Advertising and related. . . . . . . . 5,871 176,675 472,118
Depreciation . . . . . . . . . . . . . 7,894 12,360 12,511
------------------ ----------- ---------------
485,171 422,732 1,755,387
------------------ ----------- ---------------
Loss from operations . . . . . . . . . . (474,568) (422,732) (1,736,093)
Interest expense, net of interest income
of $133, $0 and $2,100, respectively . 78,793 - 115,302
------------------ ----------- ---------------
Loss before provision for taxes. . . . . (553,361) (422,732) (1,851,395)
Provision for taxes. . . . . . . . . . . - 800 800
------------------ ----------- ---------------
Net loss . . . . . . . . . . . . . . . . $ (553,361) $ (423,532) $ (1,852,195)
================== =========== ===============
Basic and diluted net loss per common
share. . . . . . . . . . . . . . . . . $ (0.02) $ (0.05)
================== ===========
Basic and diluted weighted average
common shares outstanding. . . . . . . 31,395,646 8,936,590
================== ===========
</TABLE>
5
<PAGE>
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEBRUARY 4, 1999
(DATE OF
SIX MONTHS SIX MONTHS INCEPTION)
ENDED JUNE 30, ENDED JUNE 30, THROUGH
2000 1999 JUNE 30, 2000
------------------ ----------- ---------------
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . $(553,361) $(423,532) $(1,852,195)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization. . . . . . . . . 66,228 12,360 100,011
Value of shares issued for services. . . . . . 1,750 - 129,408
Estimated fair market value of warrants issued
for services . . . . . . . . . . . . . . . . 157,800 - 157,800
Value of shares subscribed for services and
beneficial conversion in connection with
consulting services. . . . . . . . . . . . . - 25,000 146,500
Write-off of note receivable to stockholder. . - - 10,000
Changes in operating assets and liabilities:
Inventories. . . . . . . . . . . . . . . . . . - (22,043) (22,705)
Other current assets . . . . . . . . . . . . . (2,760) - (3,412)
Accounts payable and accrued expenses. . . . 22,893 34,805 245,553
Other assets . . . . . . . . . . . . . . . . (5,500) - (5,500)
Accrued officer salary . . . . . . . . . . . 32,295 - 32,295
---------- ---------- ------------
Net cash used in operating activities. . . . . . (280,655) (373,410) (1,062,245)
---------- ---------- ------------
Cash flows from investing activities:
Issuance of note receivable to stockholder . . . - - (10,000)
Purchases of property and equipment. . . . . . . - (25,853) (35,248)
Cash paid for transaction costs. . . . . . . . . - (125,000) (125,000)
Loan to related party. . . . . . . . . . . . . . - (1,000) -
Software development costs . . . . . . . . . . . - (21,100) -
---------- ---------- ------------
Net cash used in investing activities. . . . . . - (172,953) (170,248)
---------- ---------- ------------
Cash flows from financing activities:
Proceeds from sale of common stock . . . . . . . - 397,500 616,250
Payments for redemption of common stock. . . . . (15,000) - (15,000)
Issuance costs of shares sold . . . . . . . . . - (47,250) (120,637)
Proceeds from short-term note payable. . . . . . 187,500 - 187,500
Proceeds from notes payable to officers. . . . . 40,000 - 40,000
Proceeds from convertible note payable . . . . . - - 200,000
Proceeds from other short-term borrowings. . . . 69,800 - 69,800
---------- ---------- ------------
Net cash provided by financing activities. . . . 282,300 350,250 977,913
---------- ---------- ------------
Net change in cash . . . . . . . . . . . . . . . . 1,645 (196,113) (254,580)
Cash at beginning of period. . . . . . . . . . . . 3,775 - -
Cash acquired. . . . . . . . . . . . . . . . . . . - 260,000 260,000
---------- ---------- ------------
Cash at end of period. . . . . . . . . . . . . . . $ 5,420 $ 63,887 $ 5,420
========== ========== ============
</TABLE>
6
<PAGE>
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
STATEMENT OF CASH FLOWS - CONTINUED
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEBRUARY 4, 1999
(DATE OF
SIX MONTHS SIX MONTHS INCEPTION)
ENDED JUNE 30, ENDED JUNE 30, THROUGH
2000 1999 JUNE 30, 2000
------------------ ----------- ---------------
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest. . . . . . . . . . . . . $ 8,462 $ - $ 8,462
============= =========== ===============
Income taxes. . . . . . . . . . . $ - $ - $ 800
============= =========== ===============
</TABLE>
7
<PAGE>
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
-------------------------------------------------------------------
PRINCIPLES
----------
Management's Representation
----------------------------
The financial statements included herein have been prepared by Internet Golf
Association, Inc. and subsidiaries (the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information normally included in the financial statements prepared in accordance
with generally accepted accounting principles has been omitted pursuant to such
rules and regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
the financial statements be read in conjunction with the audited financial
statements and notes for the fiscal year ended December 31, 1999 included in the
Company's amended registration statement on Form SB-2 filed with the Securities
and Exchange Commission on May 2, 2000. The interim results are not necessarily
indicative of the results for the full year.
Development Stage Company
---------------------------
The Company has been in the development stage since its formation. During the
development stage, the Company is primarily engaged in raising capital,
obtaining financing, advertising and promoting the Company and administrative
functions along with developing the interface and related web site
(www.igalinks.com). The Company will host state-of-the-art online interactive
multimedia golf tournaments via an online interface with Access Software's Links
LS '99. This site will allow golf enthusiasts to compete in interactive,
multi-media, PGA-style golf tournaments over the internet for potential cash
prizes and access a variety of related products and services.
Risks and Uncertainties
-------------------------
The Company is a start up company subject to the substantial business risks and
uncertainties inherent to such an entity, including the potential risk of
business failure.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern, which contemplates, among other things, the
realization of assets and satisfaction of liabilities in the normal course of
business. The Company's losses from operations through June 30, 2001 and lack
of operational history, among other matters, raise substantial doubt about its
ability to continue as a going concern. The Company intends to fund operations
through additional debt and equity financing arrangements which management
believes will be sufficient to fund its capital expenditures, working capital
requirements and other cash requirements through its proposed public offering.
There is no assurance the Company will be able to obtain sufficient additional
funds when needed, or that such funds, if available, will be obtainable
on terms satisfactory to the Company.
8
<PAGE>
INTERNET GOLF ASSOCIATION, INC. AND SUBSIDIARIES
(DEVELOPMENT STAGE COMPANIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
-------------------------------------------------------------------
PRINCIPLES, CONTINUED
----------------------
The future of the Company's operations depends in part on its continuing
alliance with Access Software, creator of Links LS '99 (the golf software
program the Company plans to use to provide the gameplay for the online
tournaments). The Company has no reason to believe that this alliance will not
continue; however, if it does not continue, it could have a significant adverse
effect on the Company's operations.
Principles of Consolidation
-----------------------------
The consolidated financial statements include the accounts of CVI Systems, Inc.
and IGAT, Inc., wholly owned subsidiaries and non-operating entities in their
development stages and Executive Golf Outings, LLC ("EGO"), a company that
organizes and hosts corporate golf events. All significant intercompany
balances and transactions have been eliminated in consolidation. Minority
interest related to EGO is not reported separately in the financial statements
as the amount is immaterial as of and for the period ended June 30, 2000.
Earnings Per Share
--------------------
The Company has adopted Statement of Financial Accounting Standards No. 128
("SFAS 128"), "Earnings Per Share." Under SFAS 128, basic earnings per share is
computed by dividing income available to common shareholders by the
weighted-average number of common shares assumed to be outstanding during the
period of computation. Diluted earnings per share is computed similar to basic
earnings per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. Because the Company has incurred net losses, basic and diluted loss
per share are the same as additional potential common shares would be
anti-dilutive.
Segment Information
--------------------
The Company has adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 changes the way public companies report information
about segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly reports
issued to shareholders. It also requires entity-wide disclosures about the
products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers. As the Company is
currently in the development stage, the Company does not yet have any reportable
segments.
9
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
-------------------------------------------------------------------
PRINCIPLES, CONTINUED
----------------------
Recent Accounting Pronouncements
----------------------------------
The FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS
133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities on the balance sheet at their fair value. This
statement, as amended by SFAS 137, is effective for financial statements for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Company
does not expect the adoption of this standard to have a material impact on its
results of operations, financial position or cash flows as it currently does not
engage in any derivative or hedging activities.
In March 2000, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-2 "Accounting for Web Site Development Costs" to be applicable to
all web site development costs incurred for the quarter beginning after June 30,
2000. The consensus states that for specific web site development costs, the
accounting for such costs should be accounted for under AICPA Statement of
Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." Accordingly, certain web site
development costs which are presently being expensed as incurred, will be
capitalized and amortized. The Company has not yet assessed the potential
effect of the adoption of EITF Issue No. 00-2 on the financial statements.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin 101 ("SAB 101"), "Revenue Recognition," which outlines the basic
criteria that must be met to recognize revenue and provides guidance for
presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the Securities and Exchange
Commission. The effective date of this pronouncement is the fourth quarter of
the fiscal year beginning after December 15, 1999. The Company believes that
adopting SAB 101 will not have a material impact on its financial position and
results of operations.
In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"),"Accounting for
Certain Transactions involving Stock Compensation," an interpretation of APB 25.
FIN 44 clarifies the application of APB 25 for (a) the definition of employee
for purposes of applying APB 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence for various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN
10
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
PRINCIPLES, CONTINUED
----------------------
44 is effective July 1, 2000, but certain provisions cover specific events that
occur after either December 15, 1998, or January 12, 2000. The adoption of
certain other provisions of FIN 44 prior to March 31, 2000 did not have a
material effect on the financial statements. The Company does not expect that
the adoption of the remaining provisions will have a material effect on the
financial statements.
Reclassification
----------------
Certain reclassifications have been made to the February 4, 1999 (date of
inception) through June 30, 2000 financial statements in order to conform to the
classification used in the current quarter.
NOTE 2 - NOTES PAYABLE
--------------------------
Short-Term Note Payable
-------------------------
On January 12, 2000, the Company borrowed $187,500 for working capital purposes
from a third party. The note requires monthly interest payments of 8%, with all
unpaid principal and accrued interest due August 31, 2000. The note holder has
tentatively agreed to convert the note to common stock at $1.00 per share.
During the quarter ending June 30, 2000, $3,750 of interest expense was
recognized.
Notes Payable to Officers
----------------------------
In March 2000, the Company borrowed $40,000 for working capital purposes from
an officer of the Company. The notes require monthly interest payments of 8%
with all unpaid principal and accrued interest due on demand.
Other Short-Term Borrowings
-----------------------------
During the quarter ended June 30, 2000, the Company borrowed an aggregate of
$69,800 from an unrelated third party. The principal amount is unsecured, bears
no interest, and is due on demand.
11
<PAGE>
------
NOTE 3 - STOCKHOLDERS' EQUITY
---------------------------------
On January 3, 2000, the Company issued warrants to purchase 40,000 shares of the
Company's common stock to outside consultants pursuant to various agreements.
The warrants, which have exercise prices ranging from $1.83 to $2.00, vest
immediately and are exercisable through January 1, 2002. During the six months
ended June 30, 2000, $8,200 of SFAS 123 expense was recognized.
On March 1, 2000, the Company issued warrants to purchase 19,000 shares of the
Company's common stock to outside consultants pursuant to a consulting
agreement. The warrants, which have an exercise price of $2.00, vest
immediately and are exercisable through March 1, 2002. During the six months
ended June 30, 2000, $9,600 of SFAS 123 expense was recognized.
On February 24, 2000, the Company issued 2,000 restricted shares and warrants to
purchase 200,000 shares of the Company's common stock to directors. The
warrants, which have an exercise price of $1.00, vest immediately and are
exercisable through February 24, 2002. During the six months ended June 30,
2000, $1,750 of expense for the stock issuance and $140,000 of SFAS 123 expense
for the warrant issuance was recognized.
NOTE 4 - SUBSEQUENT EVENTS
------------------------------
Pursuant to the stock purchase agreement (the "Acquisition Agreement") effective
July 1, 2000, the Company completed a transaction whereby they acquired 80% of
the issued and outstanding membership interests of Franlink, LLC, a California
limited liability company ("Franlink"). Pursuant to the agreement, the Company
is to issue a $64,000 non-interest bearing note payable to the current owners of
Franlink, due November 1, 2000, and transfer 32,000 shares of the Company's
common stock with an aggregate value stated in the agreement of $32,000. The
Company is also required to contribute $10,000 in cash to Franlink as part of
the closing. This acquisition will be accounted for as a purchase by the
Company, and the accounts of Franlink will be consolidated in future financial
statements.
The Company is in the process of compiling the information for pro forma
financial statements. As a result, a pro forma balance sheet and statement of
operations as of and for the period ended June 30, 2000 are not presented here.
As of June 30, 2000, the Company had contributed $5,000 to Franlink as part of
the $10,000 required contribution. This amount has been classified in other
assets in the accompanying balance sheet as of June 30, 2000.
12
<PAGE>
ITEM 2. PLAN OF OPERATION
CAUTIONARY STATEMENTS:
This Quarterly Report on Form 10-QSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. The Company intends that such
forward-looking statements be subject to the safe harbors created by such
statutes. The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Accordingly, to
the extent that this Quarterly Report contains forward-looking statements
regarding the financial condition, operating results, business prospects or any
other aspect of the Company, please be advised that the Company's actual
financial condition, operating results and business performance may differ
materially from that projected or estimated by the Company in forward-looking
statements. The differences may be caused by a variety of factors, including
but not limited to adverse economic conditions, intense competition, including
intensification of price competition and entry of new competitors and products,
adverse federal, state and local government regulation, inadequate capital,
unexpected costs and operating deficits, increases in general and administrative
costs, lower sales and revenues than forecast, loss of customers, customer
returns of products sold to them by the Company, termination of contracts, loss
of supplies, technological obsolescence of the Company's products, technical
problems with the Company's products, price increases for supplies, inability to
raise prices, failure to obtain new customers, litigation and administrative
proceedings involving the Company, the possible acquisition of new businesses
that result in operating losses or that do not perform as anticipated, resulting
in unanticipated losses, the possible fluctuation and volatility of the
Company's operating results, financial condition and stock price, inability of
the Company to continue as a going concern, losses incurred in litigating and
settling cases, adverse publicity and news coverage, inability to carry out
marketing and sales plans, loss or retirement of key executives, changes in
interest rates, inflationary factors and other specific risks that may be
alluded to in this Quarterly Report or in other reports issued by the Company.
In addition, the business and operations of the Company are subject to
substantial risks that increase the uncertainty inherent in the forward-looking
statements. The inclusion of forward-looking statements in this Quarterly
Report should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved.
COMPANY OVERVIEW
Internet Golf organizes and conducts interactive golf tournaments on the
internet. Through our web site, which became operational in May 1999 and which
is located at www.IGALinks.com, persons interested in participating can become a
-----------------
member of the Internet Golf Association, also called the IGA. Once a member,
participants can enroll in one or more virtual golf tournaments and, if their
score is good enough relative to other members playing in the same tournament,
potentially win cash prizes. To date we have held two test tournaments on our
web site.
On February 4, 1999, our founders formed Internet Golf Association, Inc. in
the State of Nevada for the purpose of organizing and hosting internet based,
interactive golf tournaments. On May 7, 1999, Internet Golf Association, Inc.
was acquired by another Nevada corporation named Champion Ventures, Inc.
Champion had previously been in several different industries, most recently
mining, but had no significant operations for the three years prior to their
acquisition of us. Immediately following the transaction, our founders owned a
majority of the outstanding stock of Champion, and thus had control of Champion.
For accounting purposes we recorded the transaction as a reverse acquisition
whereby Internet Golf Association, Inc. was treated as having acquired Champion.
Following the transaction, Champion changed its name to Internet Golf
Association, Inc., and the former Internet Golf Association, which is now a
wholly-owned subsidiary of Champion, changed its name to IGAT, Inc.
The material steps in the organization and development of our business
during the next twelve months (assuming receipt of adequate funding) include the
following:
* Complete the functionality of our web site;
* Form new strategic alliances in the golf industry to enhance our golf
portal and improve our name recognition in the golf industry;
* Develop and subsequently increase our advertising revenues; and
* Increase IGA memberships.
These steps involve substantial risk to our business. The biggest risks
to our Company's success involve the potential inability to generate sufficient
members for our site which would make generation of advertising revenues
difficult or impossible.
13
<PAGE>
RESULTS OF OPERATIONS
Internet Golf has been in its development stage since its inception on
February 4, 1999. The Company had no operations prior to the May 7, 1999
combination with Champion. Consequently, the operating results for the period
ended June 30, 1999 are not meaningful for comparison purposes. For the three
month period ended June 30, 2000, the Company generated $8,348 in revenues and
gross profit of $6,914, and a total loss of operations of $107,794. From
inception through June 30, 2000, Internet Golf has generated $62,575 in gross
revenues with gross profit of $19,294 and a total loss of operations of
$1,736,097.
Operating expenses and costs for the three month period ended June 30, 2000
were $114,708 and consisted primarily of payroll and general and administrative
expenses. The net loss for the quarter ended June 30, 2000 was $147,598.
FINANCIAL CONDITION
Our financial statements at December 31, 1999 include an auditors' report
containing a modification regarding an uncertainty about our ability to continue
as a going concern. Our financial statements also include an accumulated
deficit of $1,852,195 as of June 30, 2000 and other indications of weakness
in our present financial position.
As of June 30, 2000, Internet Golf had assets of $59,775, consisting
primarily of cash of $5,420, inventories of $22,705, and property, plants and
equipment of $22,738.
Liabilities consist of accounts payable and accrued expenses of $245,553
and a long term convertible note (net of unamortized debt discount) of $187,500.
Effective August 15, 2000, the holder of the convertible note had agreed to
convert it to common stock at a rate of $1.00 per share.
Stockholders' deficit consists of common stock of $31,397 (31,396,250
shares at $.001 par value), and additional paid-in capital of $1,117,924, offset
by an accumulated deficit of $1,852,195.
LIQUIDITY AND CAPITAL RESOURCES
To date Internet Golf has financed its operations through the sale of
securities in private placements to investors, which to date have totaled
$616,250 in gross proceeds to Internet Golf, as well as a convertible note of
$200,000 from an unaffiliated investor, a note from another unaffiliated
investor for $187,500, and loans from officers of $40,000.
On May 18, 2000, Internet Golf commenced a registered offering of common
stock through an offering registered on Form SB-2. This offering is for a total
of 3,000,000 shares of common stock at $1.00 per share. The offering provided
that only after $650,000 had been placed in escrow could the Company receive
proceeds from this offering. The escrow had to be met by August 15, 2000. As
of June 30, 2000, the escrow had not been broken. As of the date of this
10-QSB, however, the Company has received sufficient proceeds and has advised
the escrow agent to release the escrow.
Internet Golf had cash of $5,420 as of June 30, 2000.
For the six month period ended June 30, 2000, Internet Golf used cash of
$280,655 for operations, and was provided cash of $282,300 from financing
activities (from the proceeds of a short term note of $187,500, a note
payable to an officer of $40,000 and other short term borrowings of
$69,800 offset by payments for redemption of common stock of $15,000).
Internet Golf presently has no outstanding commitments for material capital
expenditures.
On January 12, 2000, we entered into a promissory note with Alster Finance,
an unrelated entity. Alster invested $187,500 in Internet Golf in the note.
The note is unsecured, and is payable in one payment together with accrued
interest at 8% per annum on August 31, 2000. The due date for the note was
extended by Alster and Alster has tentatively agreed to convert the Note to
common stock at $1.00 per share.
At our current level of cash expenditures, our cash needs can be met from
existing resources (assuming no substantial cash inflow from operations) through
August 30, 2000. If we are successful in selling the minimum amount of stock in
a proposed public offering of our stock which commenced in May 2000, our cash
needs would be met for a period through December 31, 2000. If we are successful
in selling the maximum amount of stock in that offering, our cash needs would be
met for a period of at least 18 months. If we are unable to sell the stock in
the proposed offering, we would be required to seek alternative financing to
remain in business. That financing could include debt or equity offerings.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company may from time to time be involved in various claims, lawsuits,
disputes with third parties, actions involving allegations of discrimination, or
breach of contract actions incidental to the operation of its business. The
Company is not currently involved in any such litigation that it believes could
have a materially adverse effect on its financial condition or results of
operations.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders for a vote during the period
covered by this report
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27.1 Financial Data Schedule
(B) REPORTS ON FORM 8-K
None.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTERNET GOLF ASSOCIATION, INC.
By /s/ Vincent Castagnola
----------------------------------
Vincent Castagnola
President & CEO
Dated: August 17, 2000
16
<PAGE>
