UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005
[ ] 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: 000-50283
Golf Two, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 04-3625550
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1521 West Orangewood Avenue, Orange, California 92868
--------------------------------------------------------------------------------
(Address of principal executive offices)
(714)350-7323
(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of March 31, 2005, there were
7,418,336 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - MARCH 31, 2005
(UNAUDITED)
ASSETS
Current assets -
cash and cash equivalents $ 34,613
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities -
accounts payable and accrued expenses $ 6,247
------------
Notes Payable, Shareholders 74,909
------------
Stockholders' deficit:
Preferred stock, $0.001 par value, 5,000,000 shares authorized;
no shares issued or outstanding -
Common stock, $0.001 par value, 50,000,000 shares authorized;
7,418,336 issued and outstanding 7,418
Additional paid-in capital 153,607
Deficit accumulated during development stage 207,568
------------
(46,543)
------------
$ 34,613
============
2
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE PERIOD
ENDED MARCH 31, FROM MARCH 15,
------------------------------------------------- 2001 (INCEPTION)
2005 2004 TO MARCH 31, 2005
---------------------- ----------------------- ---------------------
Net revenue $ - $ - $ -
General and administrative expenses 13,830 9,112 204,568
---------------------- ----------------------- ---------------------
Loss from operations (12,718) (9,112) (204,568)
Other income (expense):
Interest income - - 300
Interest expense (500) (500) (3,300)
---------------------- ----------------------- ---------------------
Loss before provision for income taxes (14,330) (9,612) (207,568)
Provision for income taxes - - -
---------------------- ----------------------- ---------------------
Net loss $ (14,330) $ (9,612) $ (207,568)
====================== ======================= =====================
Net loss available to common stockholders
per common share - basic and dilutive:
Loss per common share $ (0.00) $ - $ (0.03)
====================== ======================= =====================
Weighted average common shares
outstanding - basic and dilutive 7,418,336 7,418,336 6,164,851
====================== ======================= ======================
3
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
DEFICIT
COMMON STOCK ADDITIONAL ACCUMULATED
---------------------------- PAID-IN DURING DEVELOPMENT TOTAL STOCKHOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY (DEFICIT)
-------------- ------------- ---------------- ---------------- ---------------
Balance at March 15, 2001, - $ - $ - $ - $ -
date of incorporation
Issuance of Founders Shares for
services at $0.01 per share
(March 2001) 2,325,000 2,325 - - 2,325
Capital contribution for office space - - 1,500 - 1,500
Net loss - - - (14,303) (14,303)
-------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 2001 2,325,000 2,325 1,500 (14,303) (10,478)
Issuance of common stock for
services at $0.03 per share
(February 2002) 3,000,000 3,000 87,000 - 90,000
Issuance of common stock for cash
at $0.03 per share (April 2002) 2,093,336 2,093 60,707 - 62,800
Capital contribution for office space
and interest expense - - 1,400 - 1,400
Net loss - - - (123,572) (123,572)
-------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 2002 7,418,336 7,418 150,607 (137,875) 20,150
Capital contribution for office space and
interest expense - - 1,500 - 1,500
Net loss - - - (30,070) (30,070)
-------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 2003 7,418,336 7,418 152,107 (167,945) (8,420)
Capital contribution for office space - - 1,200 - 1,200
Net loss - - - (25,293) (25,293)
-------------- ------------- ---------------- ---------------- --------------
Balance at December 31, 2004 7,418,336 7,418 153,307 (193,238) (32,513)
Capital contribution for office space (unaudited) - - 300 - 300
Net loss (unaudited) - - - (14,330) (14,330)
-------------- ------------- ---------------- ---------------- --------------
Balance at March 31, 2005 (unaudited) 7,418,336 $ 7,418 $ 153,607 $ (207,568) $ (46,543)
============== ============= ================ ================ ==============
4
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months For the period
ended March 31, from March 15,
--------------------------------------------- 2001 (inception)
2005 2004 to March 31, 2005
---------------------- --------------------- ----------------------
Cash flows provided by (used for) operating activities:
Net loss $ (14,330) $ (9,612) $ (207,568)
---------------------- --------------------- ----------------------
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Non-cash issuance of common stock for services - - 92,325
Non-cash contribution to capital 300 800 5,900
Increase (decrease) in liabilities -
accounts payable and accrued expenses 4,247 3,790 6,247
---------------------- --------------------- ----------------------
Total adjustments 4,547 4,590 104,472
---------------------- --------------------- ----------------------
Net cash used for operating activities (9,783) (5,022) (103,096)
---------------------- --------------------- ----------------------
Cash flows provided by (used for) financing activities:
Proceeds from notes payable shareholders 24,909 - 84,909
Payments on note payable shareholders - - (10,000)
Proceeds from issuance of common stock - - 62,800
---------------------- --------------------- ----------------------
Net cash provided by financing activities 24,909 - 137,709
---------------------- --------------------- ----------------------
Net increase (decrease) in cash 15,126 (5,022) 34,613
Cash, beginning of period 19,487 50,730 -
---------------------- --------------------- ----------------------
Cash, end of period $ 34,613 $ 45,708 $ 34,613
====================== ===================== ======================
Supplemental disclosure of cash flow information:
Income taxes paid $ 800 $ 800 $ 4,000
====================== ===================== ======================
Interest paid $ - $ - $ -
====================== ===================== ======================
5
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Supplemental disclosure of non-cash financing activities:
In April 2001, the Company entered into a $10,000 non-interest bearing note with
a stockholder. The note was due upon demand and repaid in April 2002. The
Company recorded $800 of interest expense on this note at 8% per annum as a
contribution to capital for the period from March 15, 2001 (inception) to
December 31, 2002.
An officer of the Company provides office space to the Company for $100 per
month on a month-to-month basis, which was recorded as a contribution to
capital. Total office expense for the three months ended March 31, 2005 and 2004
and for the period from March 15, 2001 (inception) to March 31, 2005 amounted to
$300, $300, and $5,900, respectively (unaudited).
In March 15, 2001, the Company issued 2,325,000 shares of its common stock in
exchange for services to incorporate the Company, totaling $2,325. The Founder
Shares were valued at the par value of the Company's common stock, which
represented its fair market value on the date of issuance.
In February 2002, 3,000,000 shares of common stock were issued at $0.03 per
share in exchange for prior services rendered for a total of $90,000, which
represented its fair market value on the date of issuance.
On November 5, 2003, the Company was loaned $50,000 by a stockholder in exchange
for a promissory note. For the three months ended March 31, 2005 and 2004 and
for the period from March 15, 2001 (inception) to March 31, 2005, the Company
recorded interest expense of $500, $500 and $2,800, respectively, related to
this note (unaudited).
On March 1, 2005, the Company was loaned $24,909 by a stockholder in exchange
for a promissory note which was non-interest bearing. Interest was not imputed
as the amount would be immaterial to the financial position at March 31, 2005
and results of operations over the 5 years of accretion.
6
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND THE
PERIOD FROM MARCH 15, 2001 (INCEPTION) TO MARCH 31, 2005
(1) Summary of Significant Accounting Policies:
NATURE OF BUSINESS:
Golf Two, Inc. (the "Company") is currently a development stage company under
the provisions of Statement of Financial Accounting Standards ("SFAS") No. 7 and
was incorporated under the laws of the State of Delaware on March 15, 2001. The
Company plans to operate retail golf stores that will feature indoor golf
instruction and sell custom golf clubs throughout California. As of March 31,
2005, the Company has not produced revenues since inception (unaudited) and will
continue to report as a development stage company until significant revenues are
produced.
INTERIM FINANCIAL STATEMENTS:
The accompanying unaudited financial statements for the three months ended March
31, 2005 include all adjustments (consisting of only normal recurring accruals),
which, in the opinion of management, are necessary for a fair presentation of
the results of operations for the periods presented. Interim results are not
necessarily indicative of the results to be expected for a full year. The
unaudited financial statements should be read in conjunction with the audited
financial statements included in the 10-KSB, as filed with the Securities and
Exchange Commission on April 7, 2005 for the year ended December 31, 2004.
BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. However, the Company
has no established source of revenue and, without realization of additional
capital, it would be unlikely for the Company to continue as a going concern.
This matter raises substantial doubt about the Company's ability to continue as
a going concern.
Management recognizes that the Company must generate additional resources to
enable it to continue operations. Management intends to continue to raise
additional financing through debt financing and equity financing or other means
and interests that it deems necessary, with a view to moving forward and
sustaining a prolonged growth in its strategy phases. However, no assurance can
be given that the Company will be successful in raising additional capital.
Furthermore, there can be no assurance, assuming the Company successfully raises
additional equity, that the Company will achieve profitability or positive cash
flow. If management is unable to raise additional capital and expected
significant revenues do not result in positive cash flow, the Company will not
be able to meet its obligations and may have to cease operations.
7
(1) Summary of Significant Accounting Policies, Continued:
BASIS OF PRESENTATION, CONTINUED:
The Company's expenses will significantly increase as it begins to implement its
business plan and currently has no source of revenue. Management hopes that the
Company's initial source of revenue will be sales from its proposed website. On
November 5, 2003, the Company entered into a promissory note for $50,000 with
one of its shareholders, payable by November 5, 2008, at the rate of 4% per year
calculated yearly, in order to engage a web developer. However, management
estimates that its proposed website will not be operational until the second
quarter of 2005 at the earliest. Management's plans to establish a operational
website have been hindered by its inability to raise the necessary funds.
Management hopes that, once operational, the website will become a source of
revenue to the Company.
Subsequently, the Company plans to locate and begin developing its first brick
and mortar retail location, which management anticipates will not occur before
the fourth quarter of 2005 at the earliest. Management's plans to establish a
brick and mortar retail location have been hindered by its inability to raise
the necessary funding. To begin that step, management recognizes that the
Company's funding needs will be significantly greater and it will require
additional sources of funding since the Company is not yet able to generate
revenues from operations. Because the Company does not currently have the funds
it believes are needed to open its first retail location, and because revenues
that may be generated from operation of the Company's proposed website are
likely not to be sufficient, the Company hopes to raise an additional $475,000,
the amount management estimates it needs need to open its first retail location.
Management projects that such financing will need to be raised through
borrowings and equity financing. Management hopes to begin raising this amount
during the second quarter of 2005. If the Company fails to raise this amount by
the end of 2005, management will focus the Company's efforts on its proposed
internet operations and website. If the Company is unable to raise the necessary
funds to finance its proposed internet operations and website, the Company will
likely reevaluate its business plan.
8
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
USE OF ESTIMATES:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reported periods. Actual results could materially differ from those
estimates.
(2) STOCKHOLDERS' DEFICIT:
Preferred Stock
---------------
The Company is authorized to issue 5,000,000 shares of preferred stock, par
value at $.001 per share. As of March 31, 2005, none of the shares were issued
or outstanding (unaudited).
Common Stock
------------
In March 2001, the Company issued 5,650,000 shares of its common stock in
exchange for services to incorporate the Company. In February 2002, the Board of
Directors declared that the Company had not received consideration for the
issuance of 3,325,000 shares of the previously issued shares and canceled those
shares leaving 2,325,000 shares totaling $2,325. The Founder Shares were valued
at the par value of the Company's common stock, which represented its fair
market value on the date of issuance. The Company has not recognized the
issuance of the cancelled shares in the financial statements.
9
(2) STOCKHOLDERS' DEFICIT, CONTINUED:
Common Stock
------------
In February 2002, 3,000,000 shares of common stock were issued at $0.03 per
share in exchange for prior services rendered for a total of $90,000, which
represented its fair market value on the date of issuance.
In April 2002, the Company performed a private placement and issued 2,093,366
shares of its common stock at $0.03 per share for an aggregate total of $62,000.
(3) RELATED PARTY TRANSACTIONS:
Office Space
------------
A stockholder of the Company provided office space to the Company at $100 per
month on a month-to-month basis, which was recorded as a contribution to
capital. Total office expense for the three months ended March 31, 2005 and 2004
amounted to $300 and $300, respectively, and for the period from March 15, 2001
(inception) to March 31, 2005 amounted to $5,900 (unaudited).
Notes Payable, Shareholders
---------------------------
On November 5, 2003, the Company was loaned $50,000 by a shareholder in exchange
for a promissory note. The principal is due and payable on November 5, 2008 with
interest payable on the unpaid balance at 4% per annum. Total interest expense
for the three months ended March 31, 2005 and 2004 amounted to $500 and $0,
respectively, and for the period from March 15, 2001 (inception) to March 31,
2005 amounted to $2,800 (unaudited).
(4) NOTE PAYABLE:
On March 1, 2005, the Company was issued a note in the amount of $24,909 by a
shareholder, with principal due in five years and is non-interest bearing.
Interest was not imputed as the amount would be immaterial to the financial
position at March 31, 2005 and results of operations over the 5 years of
accretion.
10
ITEM 2. PLAN OF OPERATION
THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE",
"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR
SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN
COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY
IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT
TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND
OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA
AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM
AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE
EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY
FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED
ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. WE CANNOT GUARANTY
THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED
IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE
ANY SUCH FORWARD-LOOKING STATEMENTS.
CRITICAL ACCOUNTING POLICY AND ESTIMATES. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. These accounting policies are described at
relevant sections in this discussion and analysis and in the notes to the
consolidated financial statements included in our Quarterly Report on Form
10-QSB for the three months ended March 31, 2005.
11
We incorporated in Delaware on March 15, 2001. We are a development stage
company and we plan to market and sell our goods and services by means of our
proposed website, www.golftwo.com. In November, we engaged Pacific Coast
Consulting to develop our website. We anticipate that the cost for developing
our website will be approximately $17,500, and that our website will be
completed by the third quarter of 2005. We have not taken any other steps to
implement our business plan except for engaging this website consultant and
obtaining $74,909 in loans from shareholders as described herein.
Once we have sufficient funds, as discussed below, we hope to initiate,
establish and operate retail golf stores which will feature indoor golf
instruction and custom golf clubs. Each retail location will offer custom-fitted
golf clubs, individualized to our customers' needs and marketed under the Golf
Two brand name. Golf instruction and training will be conducted on-site by
in-store staff under the direction of a professional at each store.
We anticipate that our retail stores will be approximately 5,000 square feet and
will include two virtual reality golf simulators, two computer swing analysis
systems and a club fitting analysis system. Private label and brand name golf
merchandise and related products will also be available for sale at each retail
store. We seek to promote the enjoyment of the game of golf by helping golfing
enthusiasts of all levels play better. Accordingly, we intend to offer indoor
golf training available and individualized, quality golf clubs and related
products to our clientele.
LIQUIDITY AND CAPITAL RESOURCES. We have cash of $34,613 as of March 31, 2005.
Our total assets were also $34,613 as of March 31, 2005. Our current liabilities
were $6,247 as of March 31, 2005, consisting only of accounts payable. We also
had $74,909 in notes payable to stockholders as follows: on March 1, 2005, we
entered into a promissory note for $24,909, which is payable in five years, and
bears no interest; in late 2003, we borrowed $50,000 from a different
stockholder, as previously disclosed. We believe our cash is sufficient to pay
our day to day expenses for the next twelve months.
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND MARCH 31, 2004.
RESULTS OF OPERATIONS.
REVENUES. We have realized no revenues from our inception on March 15, 2001 to
March 31, 2005.
OPERATING EXPENSES. For the three months ended March 31, 2005, our operating
expenses were $13,830, which was represented by solely by general and
administrative expenses. We also had $500 in interest expense. Therefore, for
the three months ended March 31, 2005, we experienced a net loss of $14,330.
This is in comparison to the three months ended March 31, 2004, where we had
operating expenses of $9,112, also represented solely by general and
administrative expenses. Our operating expenses were lower for the period ending
in 2005 because during the same period ending in 2004 we were preparing our
application for eligibility for quotation on the Over the Counter Bulletin
Board. For the three months ended March 31, 2004, we also had $500 in interest
expense, making our net loss $9,612.
12
OUR PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. To effectuate our business
plan during the next twelve months, we plan to begin marketing our products and
services by means of our proposed website and develop our brand image. We have
been focused on developing our brand name and have reserved the domain name
www.golftwo.com, though our website is not yet operational. Our operations to
date have been focused on engaging a website contractor, which we were able to
do by borrowing funds from one of our shareholders, and locating sources of
additional funding needed to further implement our business plan. We have not
taken any other steps to implement our business plan to date. Our next step will
be to attempt to establish strategic relationships with providers of golf
products. In the next twelve months, we hope to accomplish the steps listed
below to implement our business plan:
o Complete development of our website to promote our brand name and
services and take product orders;
o Begin advertising by means of direct mail, flyers and magazine inserts to
develop brand name recognition;
o Engage golf pro / instructor staff;
o Explore possibl suitable retail locations for our initial store; and
o Explore debt financing options
In November 2003, we engaged Pacific Coast Consulting to develop our website,
located at www.golftwo.com. The site is currently under construction. We
anticipate that the total cost for developing our website will be approximately
$17,500, and that our website will be completed by the second quarter of 2005.
We hope to use our website to market our proposed selection of customized golf
clubs which we hope to obtain from local independent golf retailers, such as
golf pro shops located at golf courses.
During the time our website is being developed, we plan to review the website
templates for each page of our website as they become available from our website
contractor. We also plan to begin marketing space on our website to potential
suppliers of golf equipment, which we hope to engage as "Community Members" on
our site. We propose to use mailers, telemarketing, search engines and other
media to promote our brand name among potential suppliers.
Before our website goes "live", we will allow potential suppliers or "Community
Members" to view these templates after they are uploaded to the privately
viewable version of our website as it is being constructed. During this phase,
we hope to conclude agreements with these potential suppliers for us to sell
their products on our website.
13
Also, during the time our site is under construction, we also plan to locate the
specific golf shops, course pro shops and other potential suppliers whom we hope
to engage as part of our supplier base. Each potential supplier will be notified
of the terms and conditions of being one of our "Community Members" and how and
when they will be able to begin uploading their inventory to our site. We will
not go live with our site until we have engaged a minimum number of Community
Members. We believe that some of the marketing tools that we will be using to
attract "Community Members" are available at a nominal cost.
In addition to our proposed online "Community," we hope to utilize two
fulfillment companies to help us fulfill our internet orders. One of our
officers and directors personally knows the owners of two independent
fulfillment companies, and they have verbally agreed to provide us with a net
discount once a volume of orders is established. We envision that these
companies will purchase, stock and finance all orders and a complete inventory
product line that will be available to customers online. We believe that this
will give us a very large product line with minimal capital outlay. We plan to
generate revenues from the commissions of everything sold from our site.
As our website is being launched, we intend to take steps to acquire and operate
from our first retail location, which we believe will require approximately
$475,000 in funding to lease a site and prepare it for retail operations. We are
continuing to locate additional funds sufficient to finance this proposed retail
location, though we have not yet been able to do so to date. Once we have
secured financing, we plan to enter into a lease for the premises we will use
for our retail location. Once the lease has been secured, we will arrange to
begin tenant improvements, begin vendor procurement for inventory, install
fixtures and equipment, hire and train employees, and undertake other necessary
efforts to begin operations. To date, we have identified two potential locations
and have begun discussions with the owners of these properties, though we have
not yet begun discussions regarding possible lease terms. We have also begun
discussions with one of our officers and directors, who is an architect, who we
believe will assist us with quantifying the costs of the tenant improvements
that we would require, depending on which of the two proposed premises are
leased. In addition, we have spoken with a tenant improvement specialist at
Bickel Underwood Architect located in Newport Beach, California as to the scope
of this type of project.
We have cash of $34,613 as of March 31, 2005. In the opinion of management,
available funds will not satisfy our working capital requirements through the
next twelve months if we are to take additional steps to implement our business
plan. We believe that our expenses will significantly increase as we begin to
implement our business plan. In late 2003, we entered into a promissory note for
$50,000 with one of our shareholders, payable by November 5, 2008, at the rate
of 4% per year calculated yearly. These funds allowed us to engage a web
developer, as we have no other source of revenues. We estimate that our proposed
website, our only potential source of revenue, will not be operational until
late mid 2005. On March 1, 2005, we entered into a promissory note with a
stockholder for $24,909, which is payable in five years and is non interest
bearing; Once we locate and begin developing our first brick and mortar retail
location, which we anticipate will not occur before 2006, our funding needs will
be significantly greater and we will require additional sources of funding since
we are not yet able to generate revenues from operations. We do not currently
have the funds we believe we need to open our first retail location, but hope to
raise an additional $475,000, the amount we estimate we need to open our first
retail location, within the next 12 to 18 months. We will need to raise this
amount through borrowings and equity financing since we have no other source of
revenue. Since we have not yet raised this amount, we are focusing our efforts
on our internet operations and website. Our forecast for the period for which
our financial resources will be adequate to support our operations involves
risks and uncertainties and actual results could fail as a result of a number of
factors.
14
We are not currently conducting any research and development activities
other than the development of our website and do not anticipate conducting such
activities in the near future. Unless we raise funds to accommodate additional
expenditures, we do not anticipate that we will purchase any significant
equipment. In the event that we generate significant revenues and expand our
operations, then we may need to hire additional employees or independent
contractors as well as purchase or lease additional equipment. We do not
anticipate incurring expenses to hire a golf pro or instructor staff, at least
initially, in that we hope to engage such individuals on a fee-splitting or
commission basis.
Off-Balance Sheet Arrangements. There are no off balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
are material to investors.
ITEM 3. CONTROLS AND PROCEDURES
-------------------------------
The Company's Chief Executive Officer/Principal Financial Officer evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of March 31, 2005. Based on that evaluation, the Company's
Chief Executive Officer/Principal Financial Officer concluded that,
notwithstanding the material weakness discussed in the following paragraph, as
of the evaluation date the Company's disclosure controls and procedures are
designed to and are effective to give reasonable assurance that the information
the Company must disclose in reports filed with the Securities and Exchange
Commission is properly recorded, processed, summarized, and reported as
required.
There were no changes in the Company's internal control over financial reporting
during the quarter ended March 31, 2005 that materially affected, or were
reasonably likely to materially affect the Company's internal control over
financial reporting. However, as a result of these reviews, our independent
registered accountants reported to our Audit Committee adjustments with regard
to the interim financial statements prepared for the periods ending March 31,
2005 that needed to be made. Management acknowledged that this recommended
adjustment to the interim financial statements reflects a material weakness
under standards established by the Public Company Accounting Oversight Board
("PCAOB"). This material weakness issue has been discussed in detail among
management, our Audit Committee, and our independent registered public
accountants. These adjustments in themselves may not be material, however, the
independent registered accountants have discovered adjustments each period,
which were not in the individual a material weakness, but all taken together,
and the fact that this situation has not been corrected, indicates a material
weakness. The Company will continue to evaluate its internal controls and
procedures to identify any required improvements.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
--------------------------
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
--------------------------------------------------------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
----------------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
--------------------------
None.
ITEM 6. EXHIBITS
31. Rule 13a-14(a)/15d-14(a) Certifications.
32. Section 1350 Certifications.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Golf Two, Inc.,
a Delaware corporation
May 19, 2005 By: /s/ David Bennett
-----------------------------------
David Bennett
principal executive, accounting and
financial officer, president, treasurer,
and a director
16