UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: May 31, 2000
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission file number 0-10093
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GOLF ROUNDS.COM, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-3664872
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 Kinnelon Road, Suite 104B, Kinnelon, New Jersey 07405
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(Address of principal executive offices)
(973) 492-3520
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of June 27, 2000, the issuer
had 3,447,377 shares of common stock, par value $.01 per share, outstanding.
Transitional Small Business Disclosure Format (check one): Yes __ No X
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PART I - FINANCIAL INFORMATION
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Item 1. - Financial Statements
GOLF ROUNDS.COM, INC.
BALANCE SHEET
(Unaudited)
May 31,
2000
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ASSETS
Current assets:
Cash and cash equivalents $ 3,318,676
Prepaid expenses 33,468
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Total current assets 3,352,144
Intangible assets, net of accumulated
amortization of $197,217 0
Equipment, net of accumulated
depreciation of $3,256 7,711
Security deposits 3,057
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Total assets $ 3,362,912
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities 28,544
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Total current liabilities 28,544
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Stockholders' equity:
Common stock, $.01 par value,
12,000,000 shares authorized,
3,447,377 shares issued and
outstanding 34,474
Additional capital in excess of
par value 4,791,677
Accumulated deficit (1,491,783)
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Total stockholders' equity 3,334,368
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Total liabilities and
stockholders' equity $ 3,362,912
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See accompanying notes to financial statements.
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GOLF ROUNDS.COM, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months
ended May 31,
2000 1999
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Revenues:
Interest $ 43,909 $ 23,044
Other 1,662 0
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Total revenues 45,571 23,044
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Expenses:
General, administrative and other 162,589 32,797
Amortization and depreciation 33,782 16,434
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Total expenses 196,371 49,231
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Net (loss) $ (150,800) $ (26,187)
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Basic and diluted net (loss) per
share $ (.04) $ (.01)
Weighted average number of shares
outstanding 3,447,377 2,099,571
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See accompanying notes to financial statements.
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GOLF ROUNDS.COM, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the nine months
ended May 31,
2000 1999
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Revenues:
Interest $ 91,392 $ 68,526
Other 5,657 0
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Total revenues 97,049 68,526
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Expenses:
General, administrative and other 405,631 63,425
Amortization 134,073 16,434
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Total expenses 539,704 80,018
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Net (loss) $ (442,655) $ (11,492)
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Basic and diluted net (loss) per share $ (.13) $ (.01)
Weighted average number of shares outstanding 3,447,377 $ 2,099,571
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See accompanying notes to financial statements.
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GOLF ROUNDS.COM, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months
ended May 31,
2000 1999
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Cash flows from operating activities:
Net (loss) income $ (442,655) $ (11,492)
Adjustments:
Amortization and depreciation 134,073 16,434
Increase in prepaid expenses (25,211) (9,043)
Increase in security deposit 3,057 0
Increase in accounts payable
and accrued expenses 20,319 46,814
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Net cash provided by
operating activities (316,531) 42,713
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Cash flows from investing activities:
Purchase of equipment (5,588) (1,750)
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Net cash used in investing activities (5,588) (1,750)
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Cash flows from financing activities:
Net proceeds from private placement
of common stock 1,566,672 0
Issuance of common stock in connection
with compensation 38,437 0
Capitalized costs in connection with the
asset purchase of PKG Design 0 (45,000)
Repurchase of common stock (162) (20,578)
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Net cash provided by (used in) financing
activities 1,604,947 (65,528)
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Net increase (decrease) in cash and cash
equivalents 1,282,828 (24,565)
Cash and cash equivalents at beginning
of period 2,035,848 2,151,403
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Cash and cash equivalents at end of period $ 3,318,676 $ 2,126,838
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See accompanying notes to financial statements.
5
<PAGE>
GOLF ROUNDS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements of Golf Rounds.com,
Inc. (the "Company") as of May 31, 2000 and for the three- and nine-month
periods ended May 31, 2000 and May 31, 1999 reflect all material adjustments
that, in the opinion of management, are necessary for a fair presentation of
results for the interim periods. Certain information and footnote disclosures
required under generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the year-end financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended August
31, 1999, as filed with the Securities and Exchange Commission.
The results of operations for the three- and nine-month periods ended
May 31, 2000 and May 31, 1999 are not necessarily indicative of the results to
be expected for the entire fiscal year or for any other period. Prior year's
financial statements have been reclassified to conform to the current year's
presentation.
2. Income Per Share
Income per common share is based on the weighted average number of
shares outstanding. Excluded from the income per share calculations for the
three and nine months ended May 31, 2000 are contingently issuable shares that,
if included, would have an antidilutive effect.
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<PAGE>
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Form 10-QSB contains forward-looking statements that may involve
known and unknown risks, uncertainties and other factors that may cause the
Company's actual results and performance in future periods to be materially
different from any future periods or performance suggested by these statements.
Overview
The Company had been engaged in the wholesale distribution of aluminum
alloys, steel and other specialty metals until it liquidated its assets in the
fourth quarter of its fiscal year of 1992. In May 1999, the Company became a
publisher of Internet websites through its acquisition of PKG Design, Inc., the
developer and owner of two Internet websites: golfrounds.com and skiingusa.com.
Prior to the acquisition, PKG Design had entered into an agreement with Lycos,
Inc. ("Lycos"), a major Internet guide. Under the agreement, Lycos incorporated
golfrounds.com into the Lycos website so that its customers could use Lycos to
obtain information about golf (the "Lycos Agreement"). The non-interest revenues
were insignificant and almost all were derived from selling advertisements,
often called banners, to reach Lycos customers. The Lycos Agreement was canceled
by Lycos effective December 5, 1999. On December 2, 1999, the Company entered
into a content licensing and distribution agreement with TicketMaster OnLine -
CitySearch, Inc. ("TMCS"). Under the agreement, TMCS will include the Company's
golf content on the TMCS Internet websites. In exchange, the Company will
receive a portion of net receipts generated from advertising banners,
sponsorships or other devices on the TMCS sites. There can be no assurance that
these revenues will be significant.
The Company's business is characterized by rapid technological change,
new product development and evolving industry standards. Inherent in the
Company's business are various risks and uncertainties, including its limited
operating history, unproven business model and the limited history of commerce
on the Internet.
The Company's success may depend in part upon the emergence of the
Internet as a communications medium, prospective product development efforts and
acceptance of the Company's brand name and products in the marketplace.
The Company was incorporated in 1968 under the laws of the State of
Florida. Its executive offices were located in Miami, Florida until September
1992 when such offices were relocated to Bedminster, New Jersey. In June 1999
the Company reincorporated in the state of Delaware. In April 2000 the Company's
executive offices were relocated to Kinnelon, New Jersey.
Effective on February 3, 2000, Paul O. Koether, John W. Galuchie, Jr.
and Thomas K. Van Herwarde resigned as directors of the Company and Robert H.
Donehew, Larry Grossman and John F. McCarthy, III took office as the new
directors of the Company. The change in composition of the board occurred in
connection with the sale on January 24, 2000 by Messrs. Koether, Galuchie and
Van Herwarde and certain other sellers of 500,000 shares of the Company's common
stock to seven purchasers. Mr. Van Herwarde remains President of the Company. In
connection with the sale, Mr. Koether and several entities he controls gave a
designee of the purchasers irrevocable proxies to vote an additional 449,690
shares of common stock owned by Mr. Koether and the entities he controls.
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Results of Operations
Available cash is invested in U.S. Treasury Securities with original
maturities of less than three months. For the nine months ended May 31, 2000
interest income was $91,392 compared to $68,526 for the comparable period of the
prior fiscal year. The increase in interest income was due to additional capital
resulting from the private placement of common stock in March 2000 and higher
rates of return on U.S. Treasury Securities owned by the Company.
General, administrative and other expenses were $405,631 for the nine
months ended May 31, 2000, compared to $63,425 for the nine months ended May 31,
1999. The increase in general, administrative and other expenses was due
primarily to increases in salary expenses to develop the golfrounds.com and
skiingusa.com Internet sites, increased health insurance expenses and increased
legal fees relating to various corporate transactions. General, administrative
and other expenses for the nine-month period ended May 31, 2000 consisted
primarily of salary expenses of $147,729, health insurance expenses of $67,891,
legal expenses of $52,478 and stockholder services expenses of $21,646.
Amortization expense of $131,479 was incurred in connection with the acquisition
of PKG Design, Inc. Until March 31, 2000, a management fee of $12,500 per
quarter was paid to a company with which the Company was formerly affiliated for
accounting, financial and administrative management. The fee was based on the
former affiliate's estimated costs. Beginning April 1, 2000, management is
handling these tasks internally and such management fee will no longer be paid.
Until September 1, 1999, the Company self-insured the first $20,000 of
employee medical claims per employee per year. From September 1, 1999 until
March 31, 2000, the Company self-insured the first $50,000 of employee medical
claims per employee per year. Effective as of March 31, 2000, the Company no
longer self-insures its employees' medical claims.
Liquidity and Capital Resources
At May 31, 2000, cash and cash equivalents and working capital were
approximately $3,318,676. U.S. Treasury Securities of approximately $3,132,316
mature at various dates through August 10, 2000 and bear interest rates ranging
from 5.84% to 6.18%.
On March 16, 2000, the Company sold an aggregate of 1,333,005 shares
of common stock in a private placement that resulted in $1,566,672 of additional
capital for the Company.
Year 2000 Compliance
The Year 2000 problem is the result of certain computer programs being
written using two digits, rather than four digits, to define the applicable
year. Any computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, or not recognize the
date at all. If not corrected, this could result in system failures or
miscalculations that could result in service or other interruptions. To date, we
have not experienced any significant Year 2000 problems.
Testing and compliance monitoring as part of our Year 2000 program
will continue to ensure that system changes and additions are Year 2000
compliant.
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<PAGE>
PART II - OTHER INFORMATION
Item 2. - Changes in Securities
On May 3, 2000, the Company issued a five-year option to purchase
20,000 shares of its common stock, par value $.01 per share, at a price of
$2.625 per share, to Anthony Charos, who was appointed to the Company's board of
directors on such date. The Company relied upon Section 4(2) of the Securities
Act for an exemption from registration for this private transaction.
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
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10.1 Form of option agreement for options issued as of
May 3, 2000 (incorporated by reference to Exhibit
10.2 to the Company's Quarterly Report on Form
10-QSB filed on April 14, 2000).
27 Financial Data Schedule.
(b) Reports on Form 8-K
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None.
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SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
GOLF ROUNDS.COM, INC.
Dated: July 6, 2000 By: /s/ Robert H. Donehew
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Robert H. Donehew
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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