U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Golf Two, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 5941 04-3625550
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(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
1537 West Orangewood Avenue, Orange, California 92868
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(Address of registrant's principal executive offices) (Zip Code)
(714) 633-1400
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(Registrant's Telephone Number, Including Area Code)
Michael J. Muellerleile
MC Law Group
4100 Newport Place, Suite 830
Newport Beach, California 92660
949.250.8655
Facsimile 949.250.8656
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
-------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
================================== =================== ==================== ======================= ================
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be offering price aggregate registration
to be registered registered per share offering price fee
---------------------------------- ------------------- -------------------- ----------------------- ----------------
Common Stock, $.001 par value 2,418,336 $0.10 $241,833 $22.25
================================== =================== ==================== ======================= ================
The offering price per share for the selling security holders was estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457
of Regulation C.
The Registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
1
Preliminary Prospectus
Golf Two, Inc.,
a Delaware corporation
2,418,336 Shares of Common Stock
This prospectus relates to 2,418,336 shares of common stock of Golf Two, Inc.,
which are issued and outstanding shares of our common stock, acquired by the
selling security holders in private placement transactions which were exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933. Our management believes the selling security holders will offer and
sell the shares at $0.10 per share, making the aggregate offering price to the
public approximately $241,833 if all the shares are sold. Our common stock is
presently not traded on any market or securities exchange, and we have not
applied for listing or quotation on any public market. Our management believes
that the selling security holders want to sell those 2,418,336 shares of our
issued and outstanding common stock at a price of $0.10 per share until the
shares are quoted on the OTC Bulletin Board or Electronic Pink Sheets and
thereafter at prevailing market prices or privately negotiated prices. We will
not receive any of the proceeds from the sale of those shares being offered by
the selling shareholders.
See "Risk Factors" on pages 5 to 7 for factors to be considered before investing
in the shares of our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The information in this prospectus is not complete and may be changed. The
selling security holders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The date of this prospectus is January 21, 2003.
Subject to completion.
2
TABLE OF CONTENTS
Prospectus Summary .........................................................4
Risk Factors................................................................5
Forward Looking Statements..................................................7
Use of Proceeds.............................................................7
Determination of Offering Price.............................................7
Dilution....................................................................7
Selling Security Holders....................................................8
Plan of Distribution........................................................9
Legal Proceedings..........................................................10
Directors, Executive Officers, Promoters and Control Persons...............10
Security Ownership of Certain Beneficial Owners and Management.............11
Description of Our Securities..............................................11
Interest of Named Experts and Counsel......................................11
Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.................................................12
Organization Within Last Five Years........................................12
Description of Business....................................................13
Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................15
Description of Property....................................................17
Certain Relationships and Related Transactions.............................18
Market for Common Equity and Related Stockholder Matters...................18
Executive Compensation.....................................................19
Financial Statements.......................................................20
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................................32
Legal Matters..............................................................32
Experts....................................................................32
Additional Information.....................................................32
Indemnification of Directors and Officers..................................32
Other Expenses of Issuance and Distribution................................32
Recent Sales of Unregistered Securities....................................33
Exhibits...................................................................34
Undertakings...............................................................35
Signatures.................................................................36
Outside Back Cover Page
Dealer Prospectus Delivery Obligation
Until _______, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligations to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
3
Prospectus Summary
------------------
Our business: We incorporated in Delaware on
March 15, 2001. Our principal business
address is 1537 West Orangewood Avenue,
Orange, California 92868. Our telephone
number is 714.633.1400.
We are a developmental stage company and
we plan 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.
Summary financial information: The summary financial information set
forth below is derived from the more
detailed financial statements appearing
elsewhere in this Form SB-2. We have
prepared our financial statements
contained in this Form SB-2 in
accordance with generally accepted
accounting principles in the United
States. All information should be
considered in conjunction with our
financial statements and the notes
contained elsewhere in this Form SB-2.
Income Statement Period from Period from
March 15, 2001 to March 15, 2001 to
December 31, 2001 September 30, 2002
$ $
Revenue 0 0
Loss from Operations (13,703) (131,018)
Net Income (Loss) (14,303) (131,630)
Net Income (Loss) Per Share (.01) (.04)
Balance Sheet December 31, 2001 September 30, 2002
$ $
Total Assets 0 33,617
Total Liabilities 10,478 7,522
Shareholders' Equity (10,478) 26,095
Number of shares being offered: The selling security holders want to
sell 2,418,336 shares of our common
stock. The offered shares were acquired
by the selling security holders in
private placement transactions, which
were exempt from the registration and
prospectus delivery requirements of the
Securities Act of 1933. The selling
security holders will sell their shares
at $0.10 per share until our shares are
quoted on the OTC Bulletin Board and
thereafter at prevailing market prices
or privately negotiated prices.
4
Number of shares outstanding: 7,418,336 shares of our common stock are
issued and outstanding. We have no other
securities issued.
Estimated use of proceeds: We will not receive any of the proceeds
from the sale of those shares being
offered.
RISK FACTORS
In addition to the other information in this prospectus, the following risk
factors should be considered carefully in evaluating our business before
purchasing any of our shares of common stock. A purchase of our common stock is
speculative and involves a significant and substantial number of risks. Any
person who is not in a position to lose the entire amount of his investment
should forego purchasing our common stock.
Risks related to our business:
We are a new company with losses since our formation and we may not be able to
achieve profitable operations or raise sufficient financing to continue with our
business plans.
We were incorporated on March 15, 2001, and have accumulated $131,630 in losses
since our inception. Our lack of operating history makes an evaluation of our
business and prospects very difficult. Our prospects must be considered
speculative considering the risks, expenses and difficulties frequently
encountered in the golf industry. We will encounter difficulties as an early
stage company with little operating capital in the rapidly evolving and highly
competitive golf industry. To implement our business plan and open our planned
locations, we will be required to obtain additional financing. At this time, we
have no firm commitments for such financing. If we are unable to raise
additional financing, our plans to open a retail location will be harmed. If our
planned retail facilities are not successful and if we continue to experience
losses, our ability to continue with our business plan will be harmed. As a
result, our shareholders could lose their entire investment.
A downturn in the economy may affect the willingness of consumers to buy or
upgrade discretionary recreational products such as golf equipment, which could
reduce our sales and hurt our ability to earn revenue.
In general, our proposed products are typically products purchased by consumers
with funds for discretionary spending. Discretionary spending is spending that
occurs for non-essential items. Discretionary spending is affected by many
factors, including, among others, general business conditions, interest rates,
the availability of consumer credit, taxation and consumer confidence in future
economic conditions. Purchases of discretionary items, including our proposed
products and services, could decline during periods when disposable income is
lower or during periods of actual or perceived unfavorable economic conditions.
If discretionary spending is lower, our revenues and profitably will also likely
decline. In addition, if our future customers believe that the economy is on a
downturn, they may reduce or cut discretionary spending due to the desire to
save which typically accompanies a downturn in the economy.
We do not have commitments for additional financing and our inability to obtain
acceptable financing will harm our development and growth strategy as we will be
unable to finance our development and any future expansion.
As of September 30, 2002, we have only $33,617 in cash. We will require
substantial amounts of working capital to continue executing our business plan,
including, but not limited to, funds to secure our initial location and funds
for equipment and inventory. We cannot guaranty that additional financing will
be available. In fact, we have not yet identified the source of any such
funding. We expect to require substantial capital to fund our development and
operating expenses. ^ We cannot be certain that additional financing will be
available to us on favorable terms or at all. If we are unable to obtain
sufficient additional capital when needed, we could be forced to alter our
business strategy, or delay or abandon some of our development plans. Any of
these events would impair our ability to raise revenue and would likely
interfere with our ability to expand our planned operations.
(material omitted)
5
We have no existing brand identity and customer loyalty; if we fail to develop
and maintain our proposed brand, our business could suffer.
Since we have not yet launched the Golf Two brand, we currently do not have
strong brand identity or brand loyalty. We believe that establishing and
maintaining brand identity and brand loyalty is critical to attracting
consumers. In order to attract and retain consumers and vendors and respond to
competitive pressures, we may need to spend substantial funds to create and
maintain brand loyalty among these groups. If our branding efforts are not
successful, our ability to generate significant revenues will be harmed.
Our officers and directors are engaged in other activities which could divert
their time away from our activities and could conflict with our business
interests which could harm our ability to continue proceeding with our plan to
open retail locations.
Our officers and directors engage in other activities. Those activities may
divert our officers and directors' time away from our business activities.
Currently, Mr. Bennett, our president, treasurer and one of our directors spends
approximately 20 hours per week on our activities, and Mr. Bernstein, our
secretary and one of our directors, spends approximately up to 10 hours per week
on our activities. These estimates of time spent on our business activities
could fluctuate. If our officers and directors are not able to devote sufficient
time to our business activities, our ability to operate at a profit could be
harmed. Our officers and directors may have conflicts of interests in allocating
time, services, and functions between the other business ventures in which those
persons may be or become involved. Neither of our officers devotes their entire
business hours to our operations. ^
Risks related to owning our common stock:
Our officers, directors and principal security holders own approximately 70.10%
of our outstanding shares of common stock, allowing these shareholders to
control matters requiring approval of our shareholders. If these individual
choose to sell the shares being registered, they will still own 67.40% of our
outstanding shares of common stock.
As a result of such ownership by our officers, directors and principal security
holders, investors will have no control over matters requiring approval by our
security holders, including the election of directors. Our officers and
directors can control matters requiring approval by our security holders,
including the election of directors, even if they sell all their shares being
registered by this registration statement.
We are registering 200,000 shares of common stock owned by our officers and
directors. Those officers and directors may sell those shares as soon as
possible, which could decrease the price of our common stock and reduce their
desire to see us succeed.
In the event that these individuals sell their shares, the price of our common
stock could decrease significantly. Also, a conflict of interest will occur
between their duties to us and their personal interest in selling their shares.
We cannot assure you that these individuals will not sell those shares as soon
as they are registered. Moreover, if our officers and directors decide to sell a
significant number of their shares, investors will likely lose confidence in our
ability to earn revenues and may see such a sale as a sign that our business is
failing. Each of these factors by independently or collectively, could harm the
market price of our stock.
6
Our officers, directors and principal security holders own a controlling
percentage of our outstanding shares of common stock, which allows them to make
key decisions regarding our future course of action. Those decisions may not
necessarily increase the value of our shares, causing our investors to lose
their investment in us.
Because our officers and directors own a controlling percentage of our
outstanding shares of common stock, they may make decisions that are not in our
best interest or that might not increase the value of our shares. Those
decisions may include corporate actions such as a merger or other transaction
that might result in the dilution of shareholders' interest or reduction in
value of our common stock. Such concentrated control may also make it difficult
for our shareholders to receive a premium for their shares of our common stock
transactions which require shareholder approval.
(material omitted)
Because we lack a public market for shares of our common stock, the selling
security holders will arbitrarily determine the offering price of the shares.
Therefore, investors may lose all or part of their investment if the price of
their shares is too high.
Our common stock is not publicly traded and we do not participate in an
electronic quotation medium for securities. ^ The selling security holders will
sell their shares at a price of $0.10 per share until the shares are quoted on
the OTC Bulletin Board or Electronic Pink Sheets and thereafter at prevailing
market prices or privately negotiated prices. We cannot guaranty that an active
public market for our stock will develop or be sustained. Therefore, the selling
security holders may arbitrarily determine the offering price of shares of our
common stock. Accordingly, purchasers may lose all or part of their investments
if the price of their shares is too high. A purchase of our stock in this
offering would be unsuitable for a person who cannot afford to lose his entire
investment.
Forward Looking Statements
--------------------------
Information in this prospectus contains "forward looking statements" which can
be identified by the use of forward-looking words such as "believes",
"estimates", "could", "possibly", "probably", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or other variations or similar
words. No assurances can be given that the future results anticipated by the
forward-looking statements will be achieved. The following matters constitute
cautionary statements identifying important factors with respect to those
forward-looking statements, including certain risks and uncertainties that could
cause actual results to vary materially from the future results anticipated by
those forward-looking statements. Among the key factors that have a direct
bearing on our results of operations are the effects of various governmental
regulations, the fluctuation of our direct costs and the costs and effectiveness
of our operating strategy. Other factors could also cause actual results to vary
materially from the future results anticipated by those forward-looking
statements.
We expect to require substantial capital to fund our development and operating
expenses. We anticipate that our available funds will be sufficient to meet our
anticipated needs for working capital and capital expenditures through the next
12 months. Our anticipation of the time through which our financial resources
will be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of a
number of factors, including those described elsewhere in the risk factor
section.
Use of Proceeds
---------------
We will not receive any proceeds from the sale of shares of our common stock
being offered by the selling security holders.
7
Determination of Offering Price
-------------------------------
^ The selling security holders will offer and sell the shares at $0.10 per share
until our shares are quoted on the OTC Bulletin Board and thereafter at
prevailing market prices or privately negotiated prices.
Dilution
--------
The shares offered for sale by the selling security holders are already
outstanding and, therefore, do not contribute to dilution.
Selling Security Holders
------------------------
The following table sets forth information concerning the selling security
holders including:
1. the number of shares owned by each selling security holder prior to
this offering;
2. the total number of shares that are to be offered for each selling
security holder; and
3. the total number of shares and the percentage of common stock that
will be owned by each selling security holder upon completion of the
offering.
The shares offered for sale constitute all of the shares known to us to be
beneficially owned by the selling security holders. None of the selling security
holders has held any position or office with us, except as specified in the
following table. Other than the relationships described below, none of the
selling security holders had or have any material relationship with us. None of
the selling security holders is a broker-dealer or an affiliate of a
broker-dealer to our knowledge.
-------------------------------- ---------------------------------- ---------------------------------- ----------------------------
Name of Selling Security Holder Amount of Shares of Common Stock Amount of Shares of Common Stock Amount of Shares and the
Owned by Selling Security Holder to be Offered by the Selling Percentage of Common Stock
Before the Offering Security Holder Owned by Selling Security
Holder After the
Offering is Complete
-------------------------------- ---------------------------------- ---------------------------------- ----------------------------
Jeff & Dawn Miller 66,667 66,667 0
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Mark Bartolo 33,333 33,333 0
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Shakeel Sorathia 100,000 100,000 0
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Lisa Kristin Forman 16,667 16,667 0
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Linda Bennett 133,333 133,333 0
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Kevin R. Moore 66,667 66,667 0
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Gina M. Sharp 66,667 66,667 0
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Anita L. De Barros 66,667 66,667 0
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Young Hom & Shellee Hom 16,667 16,667 0
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James M. Butchy 166,667 166,667 0
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8
Daniel R. Bernstein,
secretary, director 2,033,333 33,333 2,000,000 shares (26.96%)
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Ronald Rosenow 166,667 166,667 0
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Yvonne Homan 33,333 33,333 0
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William P. Ridley 33,333 33,333 0
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Howard Lawrence Hull III 16,667 16,667 0
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Glen Kangas 16,667 16,667 0
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Martha Gewertz 33,333 33,333 0
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Keri Ann Keele 10,000 10,000 0
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Leon Matthews &
Julie Webster-Matthews 16,667 16,667 0
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Gerda Osward 66,667 66,667 0
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Barbara J. Moore 66,667 66,667 0
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Robert DeLuna 66,667 66,667 0
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William H. Boren 16,667 16,667 0
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Becky Moore 66,667 66,667 0
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Curtis A. Stickfort 33,333 33,333 0
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Michelle Bennett, spouse of
David Bennett, our president,
treasurer and director 166,667 166,667 0
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Kent S. Handleman 66,667 66,667 0
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Edward C. Ball 33,333 33,333 0
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Phillip M. Handleman 166,667 166,667 0
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Albert DiPaolo 33,333 33,333 0
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Bradley Podosin 100,000 100,000 0
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George Scott Watrous 50,000 50,000 0
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James T. Smith 33,333 33,333 0
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Harry R. Steele 33,333 33,333 0
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Carol Jean Gehlke 325,000 325,000 0
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Plan of Distribution
--------------------
The selling security holders will sell their shares at $0.10 per share until our
shares are quoted on the OTC Bulletin Board and thereafter at prevailing market
prices or privately negotiated prices. The selling security holders may sell our
common stock in negotiated transactions or otherwise. The selling security
holders may sell our common stock at prices then prevailing or at negotiated
prices. The shares will not be sold in an underwritten public offering.
The shares may be sold directly or through brokers or dealers. If the selling
security holders decide to enter into agreements after this registration
statement is declared effective to sell their shares to a broker-dealer as
principal, then we will file a post-effective amendment to the registration
statement identifying the broker-dealer, providing the required information
regarding the plan of distribution and file the agreement as an exhibit. The
methods by which the shares may be sold include:
o purchases by a broker or dealer as principal and resale by such broker
or dealer for its account;
o ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and
o privately-negotiated transactions.
Brokers and dealers engaged by selling security holders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions or
discounts from selling security holders, or, if any such broker-dealer acts as
agent for the purchaser of such shares, from such purchaser, in amounts to be
negotiated. Broker-dealers may agree with the selling security holders to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a selling
security holder, to purchase as principal any unsold shares at the price
required to fulfill the broker-dealer commitment to such selling security
holder. Broker-dealers who acquire shares as principal may resell those shares
from time to time in the over-the-counter market or otherwise at prices and on
terms then prevailing or then related to the then-current market price or in
negotiated transactions and, in connection with such resales, may receive or pay
commissions.
9
The selling security holders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933. Any profit on the sale
of shares by the selling security holders and any commissions or discounts given
to any such broker-dealer may be deemed to be underwriting commissions or
discounts. The shares may also be sold pursuant to Rule 144 under the Securities
Act of 1933 beginning one year after the shares were issued.
We have filed the registration statement, of which this prospectus forms a part,
with respect to the sale of the shares by the selling security holders. The
selling security holders may not sell any or all of the offered shares.
Under the Securities Exchange Act of 1934 and the regulations thereunder, any
person engaged in a distribution of the shares of our common stock offered by
this prospectus may not simultaneously engage in market making activities with
respect to our common stock during the applicable "cooling off" periods prior to
the commencement of such distribution. Also, the selling security holders are
subject to applicable provisions which limit the timing of purchases and sales
of our common stock by the selling security holders.
We have informed the selling security holders that, during such time as they may
be engaged in a distribution of any of the shares we are registering by this
registration statement, they are required to comply with Regulation M. In
general, Regulation M precludes any selling security holder, any affiliated
purchasers and any broker-dealer or other person who participates in a
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase, any security which is the subject of the distribution
until the entire distribution is complete. Regulation M defines a "distribution"
as an offering of securities that is distinguished from ordinary trading
activities by the magnitude of the offering and the presence of special selling
efforts and selling methods. Regulation M also defines a "distribution
participant" as an underwriter, prospective underwriter, broker, dealer, or
other person who has agreed to participate or who is participating in a
distribution.
Regulation M prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security, except
as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of our common stock to be more than it would
otherwise be in the absence of these transactions. We have informed the selling
security holders that stabilizing transactions permitted by Regulation M allow
bids to purchase our common stock if the stabilizing bids do not exceed a
specified maximum. Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling security
holders and distribution participants are required to consult with their own
legal counsel to ensure compliance with Regulation M.
Legal Proceedings
-----------------
There are no legal actions pending against us nor are any legal actions
contemplated by us at this time.
Directors, Executive Officers, Promoters and Control Persons
------------------------------------------------------------
Executive Officers and Directors. Our officers and directors are specified on
the table below:
=================== =============== ===========================================
Name Age Position
------------------- --------------- -------------------------------------------
David Bennett 37 President, Treasurer, Director
------------------- --------------- -------------------------------------------
Daniel Bernstein 42 Secretary, Director
=================== =============== ===========================================
David Bennett. Mr. Bennett has been our president, treasurer and one of our
directors since February 2002. Mr. Bennett is responsible for marketing,
business development and day to day operations of our management. From August
2001 to the present, Mr. Bennett has been employed as a programmer and manager
by Cyberbucks.com which is a brokerage and order fulfillment company that
locates buyers for products for sale by other companies. Cyberbucks.com also
performs outsourcing for independent sales companies. Independent sales
companies are firms that do not sell their own inventory, but that of other
companies. From 1994 to 2000, Mr. Bennett was the president and manager of
10
Beneducci, Inc., which performed accounts receivable financing for small
businesses. While with these companies, Mr. Bennett acquired several types of
business experience, including effective business management skills, order
processing, customer service, finance management, marketing (including mass
mailing, telesales, e-commerce, direct sales, paper media), business
negotiations, arranging for private financing, forming strategic alliances,
staffing and staff management and computer and programming knowledge. From 1982
to 1994, Mr. Bennett was a manager, partner and technician of Ramco
Refrigeration. Mr. Bennett's background in marketing and management has given
Mr. Bennett the necessary experience to understand the market trends essential
for the implementation of our business strategy. Mr. Bennett is not an officer
or director of any reporting company.
Daniel Bernstein. Mr. Bernstein has been our secretary and one of our directors
since our inception in March 2001. From 1982 to the present, Mr. Bernstein has
been self-employed as a builder, specializing in steep hillside contemporary
homes. Mr. Bernstein graduated with a Masters in architectural design from the
Southern California Institute of Architecture in 1987. Mr. Bernstein earned a
Bachelor of Science in economics from the University of California, Los Angeles
in 1982. Mr. Bernstein also possesses a general contractor's license in the
state of California. Mr. Bernstein is not an officer or director of any
reporting company.
There is no family relationship between any of our officers or directors. There
are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony,
nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.
Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of January 21, 2003 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.
================= ========================================= =================================== ===============================
Title of Class Name of Beneficial Owner Amount of Beneficial Owner Percent of Class
----------------- ----------------------------------------- ----------------------------------- -------------------------------
Common Stock David Bennett 42.69%
1537 West Orangewood Avenue 3,166,667 shares(1)
Orange, CA 92868 president, treasurer, director
----------------- ----------------------------------------- ----------------------------------- -------------------------------
Common Stock Daniel Bernstein 27.41%
1537 West Orangewood Avenue 2,033,333 shares
Orange, CA 92868 secretary, director
----------------- ----------------------------------------- ----------------------------------- -------------------------------
Common Stock All directors and named executive 70.10%
officers as a group 5,200,000 shares
================= ========================================= =================================== ===============================
(1) Michelle Bennett, who is the spouse of David Bennett, our president,
treasurer and director, owns 166,667 shares of our common stock.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.
Changes in Control. Our management 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.
11
Description Of Our Securities
-------------------------------
Description of Capital Stock. Our authorized capital stock consists of
50,000,000 shares of $.001 par value common stock, of which 7,418,336 are issued
and outstanding as of January 21, 2003, and 5,000,000 shares of $.001 par value
preferred stock, of which no such shares are issued and outstanding as of
January 21, 2003. Holders of shares of our common stock are entitled to receive
dividends when and as declared by our Board of Directors from funds legally
available therefore. All the shares of our common stock have equal voting rights
and, according to the opinion of our legal counsel, are nonassessable. Each
shareholder of our common stock is entitled to share ratably in any assets
available for distribution to holders our equity securities upon our
liquidation. Holders of our common stock do not have preemption rights.
Dividend Policy. We have never declared or paid a cash dividend on our capital
stock. We do not expect to pay cash dividends on our common stock in the
foreseeable future. We currently intend to retain our earnings, if any, for use
in our business. Any dividends declared in the future will be at the discretion
of our Board of Directors and subject to any restrictions that may be imposed by
our lenders.
Preferred Stock. We are authorized to issue 5,000,000 shares of $.001 par value
preferred stock, of which no such shares are issued and outstanding. We have not
designated the right and preferences of our preferred stock. The availability or
issuance of these shares could delay, defer, discourage or prevent a change in
control.
Interest of Named Experts and Counsel
-------------------------------------
No expert or our counsel was hired on a contingent basis, or will receive a
direct or indirect interest in us.
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
------------------------------------------------------------------------
Article Seventh of our Certificate of Incorporation provides, among other
things, that our directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or
redemption by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless the act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Section 17 of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 145 of the Delaware General Corporation Law.
Indemnification Agreements. We will enter into indemnification agreements with
each of our executive officers. We will agree to indemnify each such person for
all expenses and liabilities, including criminal monetary judgments, penalties
and fines, incurred by such person in connection with any criminal or civil
action brought or threatened against such person by reason of such person being
or having been our officer or director or employee. In order to be entitled to
indemnification by us, such person must have acted in good faith and in a manner
such person believed to be in our best interests. With respect to criminal
actions, such person must have had no reasonable cause to believe his or her
conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in that act and is, therefore, unenforceable.
12
Organization Within Last Five Years
------------------------------------
Transactions with Promoters. Daniel Bernstein was issued 2,000,000 shares of our
common stock in exchange for his services as our promoter. The value of the
services performed by Mr. Bernstein was approximately $2,000, which represented
the fair value of the common stock on the date of issuance.
Description of Business
-----------------------
Our Background. We were incorporated pursuant to the laws of the State of
Delaware on March 15, 2001.
Our Business. We are a developmental stage company and we plan to initiate,
establish and operate retail golf stores which will feature indoor golf
instruction and custom golf clubs. We intend to operate retail locations which
will offer custom-fitted golf clubs tailored to our customers' needs and
marketed under the Golf Two brand name. We also hope to promote our retail
store, our brand name and various products for sale by means of our website. We
expect that 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 eventually include two virtual reality golf simulators, two computer swing
analysis systems and a club fitting analysis system. We also plan to offer
private label and brand name golf merchandise and related products for sale at
each retail store. We propose to locate our first retail location in either
Orange County or Riverside County, California. We have not yet determined the
precise location of this store. However, we plan to lease such a site rather
than purchase it. We hope to enter into negotiations for a potential retail
location after raising enough funds to launch our operations and begin
generating revenues. We believe we will need approximately $475,000 to open our
first retail location. We believe our first retail location will require that we
enter into a lease, obtain our initial inventory, hire and train staff, obtain
furniture, fixtures and equipment, make any necessary leasehold improvements,
hire staff, and obtain signage and advertising.
We seek to promote the enjoyment of the game of golf by helping golfing
enthusiasts of all levels play better. As such, we intend to offer indoor golf
training available and individualized, quality golf clubs and related products
to our clientele.
Our Proposed Products. We anticipate that our retail locations will eventually
offer customized golf clubs made on site and tailored to our customers' needs.
In addition to our customized golf-clubs, we plan to offer our customers related
products such as private label and brand name golf merchandise and accessories,
related clothing items, instructional golf books and videos and golf novelty
items. We anticipate that initially, we will not design or manufacture custom
golf clubs, but purchase them from a supplier. Customized golf clubs are those
fitted to a player's height and playing preferences, in terms of length,
material and other features. Initially, we hope to either order custom
components for on-site assembly, or outsource for products made to customers'
specifications. We have not yet identified the source of the products we intend
to offer, nor have we entered into any agreements to obtain such products. In
addition, we have not yet entered into any agreements with suppliers of the
following: private label and brand name golf merchandise and accessories,
related clothing items, instructional golf books and videos or golf novelty
item. However, we plan to promote our selection of products by means of our
website, which we hope will include an online ordering capability.
Our Proposed Services. We seek to promote the enjoyment of the game of golf by
helping golfing enthusiasts of all levels play better. We intend to offer indoor
golf training available and individualized, quality golf clubs and related
products to our clientele. We hope to offer our customers with on-site, indoor,
individual instructional lessons with trained and qualified golf instructors
utilizing the virtual reality equipment available on the market. We anticipate
providing our customers with access to introductory, intermediate and advanced
golf instruction and technique analysis. By providing these classes, we hope to
build a client base familiar with our products and services and gain increased
exposure to our brand name. We anticipate that we will engage golf teaching
instructors and golf professionals as independent contractors, whom we plan to
compensate by splitting the fees they generate at our facilities from customers
they serve. We expect to identify suitable candidates through personal contacts
of our affiliates, notices at local golf courses and driving ranges, and other
advertising methods. We also plan to compensate these independent contractors by
offering a commission on sales of merchandise to students. Therefore, we do not
anticipate that hiring such individuals will incur upfront costs on our part.
13
We anticipate that our virtual reality golf simulators will allow a customer to
simulate swinging various types of clubs in various terrains and weather
situations, to practice their swings and try different equipment. The type of
simulator we anticipate using contains virtual reality simulations of some
famous golf courses, which allows customers to use their own clubs and golf
balls to simulate driving, chipping, and putting. The simulator reproduces the
sounds and visual images of the ball being hit because the simulator measures
the spin, flight and trajectory of the ball as it leaves the club's face, and
accurately portrays shots such as hooks, fades and "dead center" perfect shots.
This allows the player to accurately simulate driving, chipping, and putting,
not too mention bunker shots or missed shots, such as balls bouncing off trees,
splashing in water, or hitting cart paths.
We also expect that our computer swing analysis systems will work in conjunction
with the virtual reality golf simulator. The swing and club fitting analysis
systems are aspects of a computer program that uses algorithms to analyze a
player's swing. The results produced by this software are then interpreted by a
golf pro who then can suggest changes to the customer's swing and equipment. We
have not yet decided whether to purchase this equipment, lease it, or arrange
for a per-use fee arrangement with the vendor. We do not yet have any
contractual arrangements with any such equipment providers.
Based on our management's research, we anticipate that the cost of a simulator
of this type will range from $8,500 to $20,000 for a previously owned and
refurbished simulator, to approximately $40,000 for a new simulator. We have not
yet decided whether to lease or purchase such equipment, either new or used. Our
management anticipates making this decision depending on the level of funding we
raise.
Our Business Strategy. As the popularity of golf continues to grow, we expect
that easy and affordable access to proper training and specialized equipment and
products is in high demand and will continue to remain so. We hope to be
strategically positioned to fill the growing need for golfing instruction
demanded by golf enthusiasts in the United States and what we believe to be the
ever-growing number of new golf enthusiasts. We propose to offer our customers:
o computerized swing analysis;
o indoor golf practice and simulation;
o golf lessons and instruction for beginners and experts alike;
o customized golf clubs tailored to an individual's particular needs;
and
o related private label and brand-name gold merchandise.
Furthermore, we will strive to maintain clean, well-merchandised, attractive
stores that we believe will appeal to high-caliber clientele. We hope to become
a premier "center" where golfing enthusiasts of all abilities will feel welcomed
and comfortable such that they will enjoy the time they spend with us and will
want to return.
Our Target Markets and Marketing Strategy. We anticipate that our primary target
market will consist of golfers throughout California, specifically patrons of
nearby golf courses, country clubs, driving ranges and putting greens. We plan
to market and promote our retail stores locally. We anticipate that our
marketing initiatives will include:
o utilizing direct response print advertisements placed primarily in
specialized golf industry print media such as magazines and local
newspapers;
o advertising by television, radio, banners, affiliated marketing and
direct mail in California and surrounding areas; and,
o word of mouth advertising based on the customer loyalty and high
quality service.
14
Growth Strategy. We seek to establish a profitable retail golf store and
training facility with the intention of expanding our efforts in areas outside
California. Our strategy is to provide unparalleled customer service and
high-quality, competitively-priced merchandise and offer on-site, indoor,
individual instructional lessons with trained and qualified golf instructors
utilizing the finest virtual reality equipment available on the market, thereby
creating a fun, friendly and comfortable atmosphere which we believe will
achieve unequaled customer satisfaction. We intend to initiate growth throughout
California by establishing more alliances with leading and local vendors and
long-term customer relationships and aim to replicate this model in many markets
across the United States.
Our Competition. We expect to face significant competition from existing golf
stores. We will compete with traditional golf retail locations that are either
independent shops or part of large regional or national retail chains such as
Roger Dunn or Nevada Bob's. Current and new competitors may be able to establish
new locations relatively quickly. We anticipate we will also compete directly
with other companies and businesses that have several golf retail locations
which will be competitive with the golf retail stores developed by us. We cannot
guaranty that we will be able to compete effectively with those competitors.
Many of those competitors have greater financial and other resources, and more
experience in the establishment of golf retail facilities, than we have. Because
we have not yet begun to compete in this market, we do not have a competitive
position relative to other firms. However, once we launch our operations, we
hope to compete on the basis of price, quality of products and personalized
service to our customers.
Our operations and our ability to generate revenues will be harmed if we are
unable to establish a positive reputation as a provider of golf products. Our
success will depend on our ability to compete in the highly competitive retail
golf industry. To succeed, we must establish our reputation for providing
quality golf products and instruction. We must establish our initial presence in
Orange County, California. We may not be able to compete effectively in this
region with traditional golf retail locations that are already established. If
we do not compete effectively, our ability to earn revenue will be affected and
we may not be able to continue our planned operations.
Government Regulation. Each retail location facility we establish will be
subject to licensing and reporting requirements by numerous governmental
authorities. These governmental authorities include federal, state and local
health, environmental, labor relations, sanitation, building, zoning, fire and
safety departments. Difficulties in obtaining or failure to obtain the necessary
licenses or approvals could delay or prevent the development or operation of a
given retail location. Any problems that we may encounter in renewing such
licenses in one jurisdiction, may impact our licensing status on a federal,
state or local level in other relevant jurisdictions.
Our Research and Development. We are not currently conducting any research and
development activities other than the development of our website. We do not
anticipate conducting such activities in the near future.
Intellectual Property. We do not presently own any patents, copyrights,
licenses, concessions or royalties. We use "Golf Two" as our trade name on our
website, and own the trademark "Golf Two," though we have not applied for any
state or federal trademark registration. We own the Internet domain name
www.golftwo.com. Under current domain name registration practices, no one else
can obtain an identical domain name, but someone might obtain a similar name, or
the identical name with a different suffix, such as ".org", or with a country
designation. The regulation of domain names in the United States and in foreign
countries is subject to change, and we could be unable to prevent third parties
from acquiring domain names that infringe or otherwise decrease the value of our
domain names. If we offer golf club designs owned by others, we will seek the
appropriate intellectual property licenses for the sale of those products. We do
not currently have any contractual arrangements for the manufacture of any
custom or private label golf clubs.
Employees. As of January 21, 2003, we have two part-time employees, who are our
officers. We do not currently anticipate that we will hire any employees in the
next six months, unless we complete our business development. From time-to-time,
we anticipate that we will use the services of independent contractors and
consultants to support our business development. We anticipate that we will
engage golf teaching instructors and golf professionals as independent
contractors, whom we plan to compensate by splitting the fees they generate at
our facilities from customers they serve. We also plan to compensate these
independent contractors by offering a commission on sales of merchandise to
students. We believe our future success depends in large part upon the continued
service of our senior management personnel and our ability to attract and retain
highly qualified managerial personnel.
15
Facilities. Our headquarters are located at 1537 West Orangewood Avenue, Orange,
California 92868. We believe that our facilities are adequate for our current
needs and that additional suitable space will be available on acceptable terms
as required. We do not own any real estate.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
---------------------------------------------------------------------------
For the nine month period ended September 30, 2002.
---------------------------------------------------
Liquidity and Capital Resources. We have cash of $33,617 as of September 30,
2002. Our total assets were $33,617 as of September 30, 2002. Our total
liabilities were $7,522 as of September 30, 2002. In April 2002, we sold
2,093,336 shares of our common stock for $0.03 per share. The net proceeds from
the sale of those shares were $62,800. Those proceeds were used to provide us
with additional working capital.
Results of Operations.
Revenues. We have realized no revenues during the period ended September 30,
2002. We anticipate that we will generate more revenues as we commence
operations and build our customer base.
Operating Expenses. For the nine month period ended September 30, 2002, our
total expenses were $117,315, which were represented by general and
administrative expenses. Of that amount, $90,000 was represented by stock issued
in exchange for services. For the period ended September 30, 2002, we
experienced a net loss of $117,327.
For the Period from March 15, 2001, our date of formation, through December 31,
2001.
-------------------------------------------------------------------------------
Liquidity and Capital Resources. We had no cash as of December 31, 2001.
Results of Operations. We did not yet realize any revenue from operations for
the period from March 15, 2001, our date of formation, through December 31,
2001. Our expenses of $13,703 consist of start-up costs from formation through
December 31, 2001.
Our Plan of Operation for the Next Twelve Months. To effectuate our business
plan during the next twelve months, we must locate a suitable location for our
planned retail location, market our products and services and develop our brand
image. Our operations to date have been focused on developing our brand name and
attempting 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. We estimate that we will require at least $475,000
to open our initial retail location. We do not expect to achieve that level of
funding within the next twelve months, and therefore we do not anticipate being
able to open our initial retail location in that timeframe. However, we hope to
open our initial retail location once we have raised that amount, which we hope
to accomplish through various steps, such as seeking investors from associates
of our management, obtaining funds from our officers, obtaining a bank or Small
Business Administration loan, raising funds from venture capital sources, or
wait until a public market develops for shares of our common stock.
The table below lists the milestones we need to accomplish to achieve our goals.
The estimates of funds required are only projections of what hope to raise. We
may not be able to complete these steps in the timeframes estimated. We will
revise these timeframes based on our success in raising funds. There is no
guarantee that we will be able to complete these steps in the timeframes
estimated, nor that we will be able to raise the funds that we require to
accomplish all of these steps.
16
Specifically, the steps we anticipate we will need to take are as follows:
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Milestones Steps Needed Estimated Timeframe Estimated Cost
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Complete development website to 1. Engage webmaster within next six months $7,500
promote our brand name and services 2. Design webpage contents
and take product orders 3. Deploy developed website
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Locate a suitable retail location for 1. Identify suitable property within next eight months $175,000
our initial store and enter into a 2. Negotiate lease
six-month lease 3. Enter lease
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Furnish and equip retail location 1. Identify furniture, fixtures, within three months of $75,000
equipment needed securing a store
2. Identify signage needed location
3. Make purchase or lease arrangements
4. Arrange for installation
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Acquire and stock inventory 1. Identify products and quantities within three months of $60,000
2. Negotiate terms with suppliers securing a store
3. Order initial quantities location
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Acquire golf simulators and other 1. Decide on simulator lease or within three months of $20,000
specialized equipment purchase securing store location
2. Negotiate terms with supplier
3. Take delivery and arrange for
installation
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Advertising by means of direct mail, 1. Identify local areas to target media to coincide with $12,500
flyers and magazine inserts 2. Design advertising content retail opening-
3. Arrange for distribution
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Hire and train sales staff 1. Identify staffing needs to precede retail $125,000
2. Solicit applications opening
3. Interview candidates
4. Provide management salary
5. Hire staff
6. Conduct training
7. Review performance
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Engage golf pro / instructor staff 1. Identify candidates if needed to precede retail fee-split or
2. Negotiate terms of service opening pay
3. Engage candidates commissions
---------------------------------------- -------------------------------------------------- ------------------------ ---------------
Our plan of operation is materially dependent on our ability to raise additional
working capital. We believe that we have sufficient cash resources to fund most
of our initial development plans, such as finishing the development of our
website. However, we will need additional capital to finance our proposed retail
location. We estimate that we will require at least $475,000 to open our initial
retail location. We believe that this amount will be needed to enter into a
premises lease, acquire inventory, fixtures and equipment, and obtain signage
and advertising. We hope to open our initial retail location in the next twelve
months if we have adequate funding to do so. There is no guaranty that we will
be able to arrange for financing. We may raise the necessary funds through
equity financings or through loans from banks or other lending institutions. We
may not be able to arrange for loans on favorable terms. Such additional capital
may be raised through public or private financing.
We hope to be able to raise the $475,000 that we need to open our first retail
location through a variety of sources, using a combination of debt and equity
funding. We do not expect to achieve that level of funding within the next
twelve months, and therefore we do not anticipate being able to open our initial
retail location in that timeframe. However, we hope to open our initial retail
location once we have raised that amount, which we hope to raise from the
following types of sources: investors that are associates of our officers and
directors, loans or other funds contributed by our officers, obtaining a bank
and/or Small Business Administration loan, raising funds from angel or venture
capital sources, or waiting until a public market develops for shares of our
common stock. We cannot guaranty that additional funding will be available on
favorable terms, if at all.
17
We may not be able to raise the funds necessary to complete the steps as listed
on the above time table, which is an estimate only. If we do not raise the funds
required for each step in the time frame specified, then we will revise our time
table to reflect a slower rate of accomplishing these steps. If adequate funds
are not available, then our ability to commence operations may be harmed.
We have cash of $33,617 as of September 30, 2002. In the opinion of management,
available funds will satisfy our working capital requirements through the next
twelve months. For the next twelve months, we anticipate that our day-to-day
expenses will be approximately $1,000 per month until and unless we secure our
first location. We believe that our expenses will significantly increase once we
begin renovating and developing our first location. 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.
We are not currently conducting any research and development activities 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. We have estimated that a refurbished or
remanufactured golf simulator will cost between $8,500 and $20,000, and that a
new simulator would cost up to $40,000 to purchase. We may arrange to lease such
equipment instead of purchasing it. 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.
Description of Property
-----------------------
Property held by us. As of the date specified in the following table, we held
the following property:
============================================= ===============================
Property September 30, 2002
--------------------------------------------- -------------------------------
Cash $33,617
--------------------------------------------- -------------------------------
Property and Equipment, net $0
============================================= ===============================
Our Facilities. Our headquarters are located at 1537 West Orangewood Avenue,
Orange, California 92868. David Bennett, our president, treasurer and one of our
directors, currently provides office space to us totaling $100 per month on a
month-to-month basis, which is recorded as a contribution to capital. We do not
have a written lease or sublease and Mr. Bennett does not expect to be paid or
reimbursed for providing office facilities.
Certain Relationships and Related Transactions
----------------------------------------------
David Bennett, our president, treasurer and one of our directors, currently
provides office space to us valued at $100 per month on a month-to-month basis,
which is recorded as a contribution to capital.
In April 2001, we entered into a $10,000 ^ note with Carol Jean Gehlke, a
stockholder. The note was due upon demand and repaid in April 2002. Although the
note, by its terms, did not specify that interest was to accrue, we recorded
interest expense on this note at 8% per annum as a contribution to capital,
since that note was with a related party.
With regard to any future related party transaction, we plan to fully disclose
any and all related party transactions, including, but not limited to, the
following:
o disclosing such transactions in prospectuses where required;
o disclosing in any and all filings with the Securities and Exchange
Commission, where required;
o obtaining disinterested directors consent; and
o obtaining shareholder consent where required.
18
Market for Common Equity and Related Stockholder Matters
--------------------------------------------------------
Reports to Security Holders. Our securities are not listed for trading on any
exchange or quotation service. We are not required to comply with the timely
disclosure policies of any exchange or quotation service. The requirements to
which we would be subject if our securities were so listed typically include the
timely disclosure of a material change or fact with respect to our affairs and
the making of required filings. Although we are not required to deliver an
annual report to security holders, we intend to provide an annual report to our
security holders, which will include audited financial statements.
When this registration statement becomes effective, we will be a reporting
company pursuant to the Securities Exchange Act of 1934. We will be required
file annual, quarterly and periodic reports with the Securities and Exchange
Commission. The public may read and copy any materials filed with the Securities
and Exchange Commission at the Security and Exchange Commission'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 Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.
There are no shares of our common stock that can be sold pursuant to Rule 144.
There are no outstanding options or warrants to purchase, or securities
convertible into, shares of our common stock. There are no outstanding shares of
our common stock that we have agreed to register under the Securities Act for
sale by security holders. The approximate number of holders of record of shares
of our common stock is thirty-six.
There have been no cash dividends declared on our common stock. Dividends are
declared at the sole discretion of our Board of Directors.
Penny Stock Regulation. Shares of our common stock are subject to rules adopted
by the Securities and Exchange Commission that regulate broker-dealer practices
in connection with transactions in "penny stocks". Penny stocks are generally
equity securities with a price of less than $5.00, other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in those securities is provided by the exchange or system. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, deliver a standardized risk
disclosure document prepared by the Securities and Exchange Commission, which
contains the following:
o a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary trading;
o a description of the broker's or dealer's duties to the customer and
of the rights and remedies available to the customer with respect to
violation to such duties or other requirements of securities' laws;
o a brief, clear, narrative description of a dealer market, including
"bid" and "ask" prices for penny stocks and the significance of the
spread between the "bid" and "ask" price;
o a toll-free telephone number for inquiries on disciplinary actions;
o definitions of significant terms in the disclosure document or in the
conduct of trading in penny stocks; and
o such other information and is in such form including language, type,
size and format, as the Securities and Exchange Commission shall
require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must
provide the customer the following:
o the bid and offer quotations for the penny stock;
o the compensation of the broker-dealer and its salesperson in the
transaction;
o the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the
market for such stock; and
o monthly account statements showing the market value of each penny
stock held in the customer's account.
19
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
Holders of shares of our common stock may have difficulty selling those shares
because our common stock will probably be subject to the penny stock rules.
Executive Compensation
-----------------------
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to us payable to our Chief
Executive Officer and our other executive officers whose total annual salary and
bonus exceeded $50,000 during the years ending December 31, 2001 and 2002. Our
Board of Directors may adopt an incentive stock option plan for our executive
officers which would result in additional compensation.
=================================== ======= ============= ============= ===================== =====================
Name and Principal Position Year Annual Bonus ($) Other Annual All Other
Salary ($) Compensation ($) Compensation
----------------------------------- ------- ------------- ------------- --------------------- ---------------------
David Bennett - president, 2002 None None None $90,000(1)
treasurer
----------------------------------- ------- ------------- ------------- --------------------- ---------------------
Scott Watrous - former president, 2001 None None None None
treasurer
----------------------------------- ------- ------------- ------------- --------------------- ---------------------
Daniel Bernstein - secretary 2002 None None None None
----------------------------------- ------- ------------- ------------- --------------------- ---------------------
Daniel Bernstein - secretary 2001 None None None $2,000(1)
=================================== ======= ============= ============= ===================== =====================
(1)Represents stock issued for services.
Compensation of Directors. Our current directors are also our employees and
receive no extra compensation for their service on our board of directors.
Employment Contracts. We anticipate that we will enter into an employment
agreement with David Bennett, although we do not currently know the terms of
that employment agreement.
Stock Option Plan. We anticipate that we will adopt a stock option plan,
pursuant to which shares of our common stock will be reserved for issuance to
satisfy the exercise of options. The stock option plan will be designed to
retain qualified and competent officers, employees, and directors. Our Board of
Directors, or a committee thereof, shall administer the stock option plan and
will be authorized, in its sole and absolute discretion, to grant options
thereunder to all of our eligible employees, including officers, and to our
directors, whether or not those directors are also our employees. Options will
be granted pursuant to the provisions of the stock option plan on such terms,
subject to such conditions and at such exercise prices as shall be determined by
our Board of Directors. Options granted pursuant to the stock option plan shall
not be exercisable after the expiration of ten years from the date of grant.
20
Financial Statements
--------------------
INDEPENDENT AUDITORS' REPORT
Board of Directors
Golf Two, Inc.
Newport Beach, California
We have audited the accompanying balance sheets of Golf Two, Inc. (A Development
Stage Company) as of September 30, 2002 and December 31, 2001, the related
statements of operations, stockholders' equity (deficiency) and cash flows for
the period from March 15, 2001 (inception) to December 31, 2001, nine months
ended September 30, 2002 and the periods from March 15, 2001 (inception) to
September 30, 2002 and 2001. These financials statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide 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 Golf Two, Inc. as of September
30, 2002 and December 31, 2001 and the results of its operations and its cash
flows for the period from March 15, 2001 (inception) to December 31, 2001, nine
months ended September 30, 2002 and the periods from March 15, 2001 (inception)
to September 30, 2002 and 2001 in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
accompanying financial statements, the Company has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also discussed in
Note 1. These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Stonefield Josephson, Inc.
------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
December 4, 2002
21
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
December 31, September 30,
2001 2002
------------------- -------------------
Current assets -
cash and cash equivalents $ - $ 33,617
------------------- -------------------
Total assets $ - $ 33,617
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable $ - $ 7,522
Accounts payable-related party 478 -
Note payable-related party 10,000 -
------------------- -------------------
Total current liabilities 10,478 7,522
------------------- -------------------
Stockholders' equity (deficiency):
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
no shares issued or outstanding, respectively - -
Common stock, $0.001 par value, 50,000,000 shares authorized,
7,418,336 and 2,325,000 issued and outstanding, respectively 2,325 7,418
Additional paid-in capital 1,500 150,307
Deficit accumulated during development stage (14,303) (131,630)
------------------- -------------------
Total stockholders' equity (deficiency) (10,478) 26,095
------------------- -------------------
Total liabilities and stockholders' equity (deficiency) $ - $ 33,617
=================== ===================
See accompanying independent auditors' report and notes to financial statements.
21
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the For the For the
period from For the period from period from
March 15, 2001 nine months March 15, 2001 March 15, 2001
(inception) to ended (inception) to (inception) to
December 31, 2001 September 30, 2002 September 30, 2001 September 30, 2002
-------------------- ------------------------ -------------------- -----------------------
Revenue $ - $ - $ - $ -
General and administrative expenses 13,703 117,315 13,403 131,018
-------------------- ------------------------ -------------------- -----------------------
Loss from operations (13,703) (117,315) (13,403) (131,018)
Other income expenses:
Interest income - 188 - 188
Interest expense (600) (200) (400) (800)
-------------------- ------------------------ -------------------- -----------------------
Loss before income taxes (14,303) (117,327) (13,803) (131,630)
Provision for income taxes - - - -
-------------------- ------------------------ -------------------- -----------------------
Net loss $ (14,303) $ (117,327) $ (13,803) $ (131,630)
==================== ======================== ==================== =======================
Net loss available to common stockholders
per common share - basic and dilutive:
Loss per common share ($0.01) ($0.02) ($0.01) ($0.04)
==================== ======================== ==================== =======================
Weighted average common shares
outstanding - basic and dilutive 2,325,000 6,065,818 2,325,000 2,936,114
==================== ======================== ==================== =======================
See accompanying independent auditors' report and notes to financial statements.
22
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
Deficit
accumulated
Common stock Additional during Total
---------------------------------- paid-in development stockholders'
Shares Amount capital stage equity (deficiency)
----------------- --------------- -------------- ---------------- --------------------
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 and interest expense - - 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 inserestt expense - - 1,100 - 1,100
Net loss - - - (117,327) (117,327)
----------------- --------------- -------------- ---------------- -------------------
Balance at September 30, 2002 7,418,336 $ 7,418 $ 150,307 $ (131,630) $ 26,095
================= =============== ============== ================ ===================
See accompanying independent auditors' report and notes to financial statements.
23
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the For the For the
period from For the period from period from
March 15, 2001 nine months March 15, 2001 March 15, 2001
(inception) to ended (inception) to (inception) to
December 31, 2001 September 30, 2002 September 30, 2001 September 30, 2002
------------------- -------------------- ------------------ ------------------
Cash flows used for operating activities:
Net loss $ (14,303) $ (117,327) $ (13,803) (131,630)
------------------- -------------------- ------------------ ------------------
Adjustments to reconcile net loss to net cash used
for operating activities:
Non-cash issuance of common stock for services 2,325 90,000 2,325 92,325
Non-cash additional paid-in-capital contributed 1,500 1,100 1,000 2,600
Increase (decrease) in liabilities:
Accounts payable - 7,522 - 7,522
Accounts payable-related party 478 (478) 478 -
------------------- -------------------- ------------------ ------------------
Total adjustments 4,303 98,144 3,803 102,447
------------------- -------------------- ------------------ ------------------
Net cash used for operating activities (10,000) (19,183) (10,000) (29,183)
------------------- -------------------- ------------------ ------------------
Cash flows provided by financing activities:
Proceeds from note payable-related party 10,000 - 10,000 10,000
Repayment of note payable-related party - (10,000) - (10,000)
Proceeds from issuance of common stock - 62,800 - 62,800
------------------- -------------------- ------------------ ------------------
Net cash provided by financing activities 10,000 52,800 10,000 62,800
------------------- -------------------- ------------------ ------------------
Net increase in cash and cash equivalents - 33,617 - 33,617
Cash and cash equivalents, beginning of period - - - -
------------------- -------------------- ------------------ ------------------
Cash and cash equivalents, end of period $ - $ 33,617 $ - $ 33,617
=================== ==================== ================== ==================
Supplemental disclosure of cash flow information:
Income taxes paid $ - $ - $ - $ -
=================== ==================== ================== ==================
Interest paid $ - $ - $ -
=================== ==================== ================== ==================
24
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
STATEMENTS OF CASH FLOWS, CONTINUED
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 September 30, 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. For the Period from
March 15, 2001 (Inception) to September 30, 2002, the company
recognized $1,800 of office expense.
In March 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 was the fair market value of the
Company's common stock on the date of issuance.
See accompanying independent auditors' report and notes to financial statements.
25
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(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.
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. This matter raises substantial
doubt about the Company's ability to continue as a going
concern. These financial statements do not include any
adjustments relating to the recoverability and classification
of recorded asset amounts, or amounts and classification of
liabilities that might be necessary should the Company be
unable to continue as a going concern.
Management intends to continue to raise additional financing
through joint venturing of projects, exchange of asset, debt
financing, equity financing or other means and interests which
it deems necessary with a view to moving forward and
sustaining a prolonged growth in its strategy phases.
Management believes these steps will be sufficient to provide
the Company with the ability to continue in existence.
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.
See accompanying independent auditors' report
26
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(1) Summary of Significant Accounting Policies, Continued:
Comprehensive Income:
SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for the reporting and display of comprehensive
income and its components in the financial statements. As of
September 30, 2002 and for the period from March 15, 2001
(inception) to September 30, 2002, the Company has no items
that represent other comprehensive income and, therefore, has
not included a statement of Comprehensive Income in the
consolidated financial statements.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with
original maturities of three months or less to be cash
equivalents.
Basic and Diluted Loss Per Share:
In accordance with SFAS No. 128, "Earnings Per Share," the
basic income/loss per common share is computed by dividing net
loss available to common stockholders by the weighted average
number of common shares outstanding. Diluted loss per common
share is computed similar to basic loss per common 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. As of September 30,
2002, the Company does not have any equity or debt instruments
outstanding that can be converted into common stock.
Income Taxes:
The Company accounts for income taxes under SFAS 109,
"Accounting for Income Taxes." Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statements carrying amounts
of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred
tax assets and liabilities of a change in tax rates is
recognized in income in the period the enactment occurs. A
valuation allowance is provided for certain deferred tax
assets if it is more likely than not that the Company will not
realize tax assets through future operations.
See accompanying independent auditors' report
27
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(1) Summary of Significant Accounting Policies, Continued:
Stock-Based Compensation:
SFAS No. 123, "Accounting for Stock-Based Compensation,"
encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans
at fair value. The Company has chosen to continue to account
for employee stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion
No. 25, "Accounting for Employee Stock Issued to Employees,"
and related interpretations. Accordingly, compensation cost
for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the
grant over the amount an employee must pay to acquire the
stock. Stock-based compensation for non-employees is measured
under the fair value method.
Fair Value of Financial Instruments:
The estimated fair values of cash and cash equivalents, accounts
payable and accrued expenses, none of which are held for trading
purposes, approximate their carrying value because of the short
term maturity of these instruments.
Advertising Costs:
Advertising costs are expensed as incurred. There were no
advertising expenses for the period from March 15, 2001
(inception) to September 30, 2002.
Segment Reporting:
Based on the Company's integration and management strategies,
the Company operated in a single business segment. For the
period from March 15, 2001 (inception) to September 30, 2002,
all revenues have been derived from domestic operations.
New Accounting Pronouncements:
In July 2001, the FASB issued SFAS No. 141 "Business
Combinations." SFAS No. 141 supersedes Accounting Principles
Board ("APB") No. 16 and requires that any business
combinations initiated after June 30, 2001 be accounted for as
a purchase; therefore, eliminating the pooling-of-interest
method defined in APB 16. The statement is effective for any
business combination initiated after June 30, 2001 and shall
apply to all business combinations accounted for by the
purchase method for which the date of acquisition is July 1,
2001 or later. The Company has implemented this pronouncement
and has concluded that the adoption has no material impact to
the financial statements.
See accompanying independent auditors' report
28
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(1) Summary of Significant Accounting Policies, Continued:
New Accounting Pronouncements, Continued:
In July 2001, the FASB issued SFAS No. 142, "Goodwill and
Other Intangibles." SFAS No. 142 addresses the initial
recognition; measurement and amortization of intangible assets
acquired individually or with a group of other assets (but not
those acquired in a business combination) and addresses the
amortization provisions for excess cost over fair value of net
assets acquired or intangibles acquired in a business
combination. The statement is effective for fiscal years
beginning after December 15, 2001, and is effective July 1,
2001 for any intangibles acquired in a business combination
initiated after June 30, 2001. The Company has implemented
this pronouncement and has concluded that the adoption has no
material impact to the financial statements.
In October 2001, the FASB recently issued SFAS No. 143,
"Accounting for Asset Retirement Obligations," which requires
companies to record the fair value of a liability for asset
retirement obligations in the period in which they are
incurred. The statement applies to a company's legal
obligations associated with the retirement of a tangible
long-lived asset that results from the acquisition,
construction, and development or through the normal operation
of a long-lived asset. When a liability is initially recorded,
the company would capitalize the cost, thereby increasing the
carrying amount of the related asset. The capitalized asset
retirement cost is depreciated over the life of the respective
asset while the liability is accreted to its present value.
Upon settlement of the liability, the obligation is settled at
its recorded amount or the company incurs a gain or loss. The
statement is effective for fiscal years beginning after June
30, 2002. The Company does not expect the adoption to have a
material impact to the Company's financial position or results
of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets". Statement
144 addresses the accounting and reporting for the impairment
or disposal of long-lived assets. The statement provides a
single accounting model for long-lived assets to be disposed
of. New criteria must be met to classify the asset as an asset
held-for-sale. This statement also focuses on reporting the
effects of a disposal of a segment of a business. This
statement is effective for fiscal years beginning after
December 15, 2001. The Company has implemented this
pronouncement and has concluded that the adoption has no
material impact to the financial statements.
See accompanying independent auditors' report
29
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(1) Summary of Significant Accounting Policies, Continued:
New Accounting Pronouncements, Continued:
In April 2002, the FASB issued Statement No. 145, "Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." This Statement
rescinds FASB Statement No. 4, "Reporting Gains and Losses
from Extinguishment of Debt", and an amendment of that
Statement, FASB Statement No. 64, "Extinguishments of Debt
Made to Satisfy Sinking-Fund Requirements" and FASB Statement
No. 44, "Accounting for Intangible Assets of Motor Carriers".
This Statement amends FASB Statement No. 13, "Accounting for
Leases", to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The
Company does not expect the adoption to have a material impact
to the Company's financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities". SFAS No.
146 requires companies to recognize costs associated with exit
or disposal activities when they are incurred rather than at
the date of a commitment to an exit or disposal plan, as
previously required under Emerging Issues Task Force ("EITF")
Issue 94-3. A fundamental conclusion reached by the FASB in
this statement is that an entity's commitment to a plan, by
itself, does not create a present obligation to others that
meets the definition of a liability. SFAS No. 146 also
establishes that fair value is the objective for initial
measurement of the liability. The provisions of this statement
are effective for exit or disposal activities that are
initiated after December 31, 2002. The Company does not expect
the adoption to have a material impact to the Company's
financial position or results of operations.
See accompanying independent auditors' report
30
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(2) Related Party Transactions:
Note Payable - Related Party
----------------------------
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 interest expense on this note at 8%
per annum as a contribution to capital.
Office Expense
--------------
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.
31
GOLF TWO, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PERIOD FROM MARCH 15, 2001 (INCEPTION)
TO DECEMBER 31, 2001, NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND THE
PERIODS FROM MARCH 15, 2001 (INCEPTION)
TO SEPTEMBER 30, 2002 AND 2001
(3) Stockholders' Equity:
Preferred Stock
---------------
The Company is authorized to issue 5,000,000 shares of Preferred stock,
par value at $.001 per share. As of September 30, 2002 and December 31,
2001, none of the shares were issued and outstanding.
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.
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 was the fair market value of the Company's common stock
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 $62,800.
(4) Provision for Income Taxes:
The reconciliation of the effective income tax rate to the federal
statutory rate for the year ended December 31, 2001, the period ended
September 30, 2002, and the periods from March 15, 2001 (inception) to
September 30, 2002 and 2001 is as follows:
For the
For the period period from For the period
from March 15, For the nine March 15, 2001 from March 15,
2001 (inception) months ended (inception) to 2001 (inception)
to December 31, September 30, September 30, to September 30,
2001 2002 2001 2002
------------------------------------------------------------------------
Computed "expected" tax (benefit) $ 200 $ 39,900 $ 4,400 $ 44,500
Increase (decrease) in income taxes
resulting from increase in valuation (200) (39,000) (4,400) (44,500)
allowance -------------- -------------- ------------- --------------
$ - $ - $ - $ -
-------------- -------------- ------------- --------------
Deferred tax assets and liabilities reflect the net effect of temporary
differences between the carrying amount of assets and liabilities for
financial reporting purposes and amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and
liabilities at September 30, 2002 and December 31, 2001 are as follows:
September 30, December 31,
2002 2001
----------------- ------------------
Deferred tax assets: $ 44,500 $ 4,600
44,500 4,600
Net operating loss carryforwards
Less valuation allowance
$ - $ -
================= ==================
At December 31, 2001 and September 30, 2002, the Company has provided a
100% valuation allowance for the deferred tax asset since management
has not been able to determine that the realization of that asset is
more likely than not. The net change in the valuation allowance for the
nine months ended September 30, 2002 and the year ended December 31,
2001 was an increase of $39,900 and $200, respectively. As of September
30, 2002, the Company had net operating loss carryforwards ("NOLs") of
approximately $131,000. If unused, the NOLs will begin to expire on
2019.
See accompanying independent auditors' report.
32
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
---------------------------------------------------------------------------
In July 2002, our Board of Directors appointed Stonefield Josephson, Inc.,
independent accountant, to audit our financial statements for the period from
March 15, 2001, our date of formation, through September 30, 2002. Prior to our
appointment of Stonefield Josephson, Inc. as our auditor, our financial
statements had not been audited. Prior to engaging Stonefield Josephson, Inc.,
we had not consulted with them on the application of accounting principles to a
specific transaction, either completed or proposed; or the type of audit opinion
that might be rendered on our financial statements. There have been no
disagreements with our accountant since our formation required to be disclosed
pursuant to Item 304 of Regulation S-B.
Legal Matters
-------------
The validity of the issuance of the shares of common stock offered by the
selling security holders has been passed upon by MC Law Group, located in
Newport Beach, California.
Experts
--------
Our financial statements for the period from March 15, 2001, our date of
formation, through September 30, 2002, appearing in this prospectus which is
part of a Registration Statement have been audited by Stonefield Josephson,
Inc., and are included in reliance upon such reports given upon the authority of
Stonefield Josephson, Inc., as experts in accounting and auditing.
Additional Information
----------------------
We have filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission pursuant to the Securities Act of 1933 with respect to the
common stock offered by the selling security holders. This prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules to the Registration Statement. For further information
regarding us and our common stock offered hereby, reference is made to the
Registration Statement and the exhibits and schedules filed as a part of the
Registration Statement.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
-----------------------------------------
Article Seventh of our Certificate of Incorporation provides, among other
things, that our directors shall not be personally liable to us or our
shareholders for monetary damages for breach of fiduciary duty as a director,
except for liability:
o for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; or
o for unlawful payments of dividends or unlawful stock purchase or
redemption by us.
Accordingly, our directors may have no liability to our shareholders for any
mistakes or errors of judgment or for any act of omission, unless such act or
omission involves intentional misconduct, fraud, or a knowing violation of law
or results in unlawful distributions to our shareholders.
Our Certificate of Incorporation provides that we will indemnify our directors
to the extent permitted by Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary under the
Delaware General Corporation Law. Our Certificate of Incorporation also provides
that to the extent that Delaware General Corporation Law is amended to permit
further indemnification, we will so indemnify our directors.
Section 145 of the Delaware General Corporation Law provides that a corporation
shall have the power to indemnify any person who was or is a party or is
threatened to be made a party to or is involved in any pending, threatened, or
completed civil, criminal, administrative, or arbitration action, suit, or
proceeding, or any appeal therein or any inquiry or investigation which could
result in such action, suit, or proceeding, because of his or her being or
33
having been our director, officer, employee, or agent or of any constituent
corporation absorbed by us in a consolidation or merger or by reason of his or
her being or having been a director, officer, trustee, employee, or agent of any
other corporation or of any partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or such enterprise, serving as such at our request
or of any such constituent corporation, or the legal representative of any such
director, officer, trustee, employee, or agent, from and against any and all
reasonable costs, disbursements, and attorney's fees, and any and all amounts
paid or incurred in satisfaction of settlements, judgments, fines, and
penalties, incurred or suffered in connection with any such proceeding.
Section 17 of our Bylaws also provides that our officers and directors shall be
indemnified and held harmless by us to the fullest extent permitted by the
provisions of Section 145 of the Delaware General Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised 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.
Other Expenses of Issuance and Distribution
-------------------------------------------
We will pay all expenses in connection with the registration and sale of the
common stock by the selling security holders. None of the expenses will be borne
by the selling security holders. The estimated expenses of issuance and
distribution are set forth below.
========================================= ==================== ================
Registration Fees Approximately $22.25
----------------------------------------- -------------------- ----------------
Transfer Agent Fees Approximately $650.00
----------------------------------------- -------------------- ----------------
Costs of Printing and Engraving Approximately $500.00
----------------------------------------- -------------------- ----------------
Legal Fees Approximately $10,000.00
----------------------------------------- -------------------- ----------------
Accounting Fees Approximately $2,500.00
----------------------------------------- -------------------- ----------------
Total Approximately $13,672.25
========================================= ==================== ================
Recent Sales of Unregistered Securities
-----------------------------------------
There have been no sales of unregistered securities within the last three years
which would be required to be disclosed pursuant to Item 701 of Regulation S-B,
except for the following:
In April 2002, we issued 2,093,336 shares of our common stock to thirty-four
investors for $0.03 per share. The shares were issued as a result of a private
placement offering. There was no general solicitation used in this offering. The
shares were issued in a transaction which we believe satisfies the requirements
of that exemption from the registration and prospectus delivery requirements of
the Securities Act of 1933, which exemption is specified by the provisions of
Section 4(2) of that act and Rule 506 of Regulation D promulgated pursuant to
that act by the Securities and Exchange Commission. Specifically, the offer was
made to "accredited investors", as that term is defined under applicable federal
and state securities laws, and no more than 35 non-accredited investors. We
believe that each purchaser who was not an accredited investor has such
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of the prospective investment. Each investor was
given adequate access to sufficient information about us to make an informed
investment decision. There were no commissions paid on the sale of these shares.
The net proceeds to us were $62,800.
In February 2002, we issued 3,000,000 shares of our common stock to David
Bennett, our president, treasurer and one of our directors. We believe that Mr.
Bennett has such knowledge and experience in financial and business matters that
he is capable of evaluating the merits and risks of the prospective investment.
In addition, Mr. Bennett had sufficient access to material information about us
because he was our president, treasurer and one of our directors. The shares
were issued in a transaction which we believe satisfies the requirements of that
certain exemption from the registration and prospectus delivery requirements of
the Securities Act of 1933, which exemption is specified by the provisions of
Section 4(2) of the Securities Act of 1933, as amended. The shares were issued
in exchange for services provided to us, which were valued at $90,000. That
amount represented the fair value of the common stock on the date of issuance.
22
In March 2001, we issued 2,325,000 shares of our common stock to two
individuals, one of which was Daniel Bernstein, our secretary and one of our
directors, who was issued 2,000,000 shares. The other shareholder was Carol Jean
Gehlke, who was issued 325,000 shares. We believe that those shareholders have
such knowledge and experience in financial and business matters that they are
capable of evaluating the merits and risks of the prospective investment. The
shares were issued in a transaction which we believe satisfies the requirements
of that certain exemption from the registration and prospectus delivery
requirements of the Securities Act of 1933, which exemption is specified by the
provisions of Section 4(2) of the Securities Act of 1933, as amended. The shares
were issued in exchange for services provided to us, which were valued at
$2,325. That amount represented the fair value of the common stock on the date
of issuance. Also in March 2001, we issued 2,000,000 shares to Scott Watrous,
1,000,000 shares to Bruce Younker, and 325,000 shares to Robert Younker, but
canceled those shares in February 2002 due to failure to receive consideration
for those shares.
Exhibits
--------
Copies of the following documents are filed with this Registration
Statement as exhibits:
Exhibit No.
----------
3.1 Certificate of Incorporation*
3.2 Bylaws*
5. Opinion Re: Legality
11. Statement Re: Computation of Per Share Earnings**
23.1 Consent of Auditors
23.2 Consent of Counsel***
24. Power of Attorney is included on the Signature Page of the
Registration Statement
* Included in Registration Statement filed on September 20, 2002
** Included in Financial Statements
*** Included in Exhibit 5
Undertakings
------------
A. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities, other than the payment by us of expenses incurred or paid by
our director, officer or controlling person in the successful defense of any
34
action, suit or proceeding, is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
B. We hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) To specify in the prospectus any facts or events
arising after the effective date of the Registration
Statement or most recent post-effective amendment
thereof which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered, if the total dollar value of
securities offered would not exceed that which was
registered, and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Securities and Exchange Commission pursuant to Rule
424(b), Section 230.424(b) of Regulation S-B, if, in
the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective Registration Statement; and
(iii) To include any additional or changed material
information with respect to the plan of distribution
not previously disclosed in the Registration
Statement or any material change to such information
in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
35
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
we certify that we have reasonable grounds to believe that we meet all of the
requirements of filing on Form SB-2 and authorized this Registration Statement
to be signed on our behalf by the undersigned, in the city of Orange,
California, on January 21, 2003.
Golf Two, Inc.
a Delaware corporation
By: /s/ David Bennett
-----------------------------------------
David Bennett
Its: principal executive, accounting and
financial officer, president, treasurer,
and a director
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates stated:
/s/ David Bennett January 21, 2003
-------------------------------------------- ----------------
David Bennett
principal executive, accounting and
financial officer, president, treasurer
and a director
/s/ David Bennett January 21, 2003
-------------------------------------------- ----------------
Daniel Bernstein
secretary and a director