UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-K
(Mark
One)
|
x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
The Fiscal Year Ended December 31, 2009
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
File No. 3330-153699
|
FEEL
GOLF CO., INC.
|
|
(Exact
name of issuer as specified in its charter)
|
|
|
|
|
California
|
77-0532590
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
|
|
|
|
1354-T
Dayton St.
Salinas,
CA
|
93901
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
(831)
422-9300
|
|
(Registrant’s
telephone number, including area
code)
|
|
|
|
|
Securities
registered under Section 12(b) of the Exchange Act:
|
None.
|
|
|
|
|
Securities
registered under Section 12(g) of the Exchange Act:
|
Common
stock, par value $0.001 per share
|
|
|
(Title
of class)
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes o No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o Nox
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes o No o
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference Part III of this Form 10-K or
any amendment to this Form 10-K. x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
|
o
|
|
Accelerated
filer
|
o
|
|
|
|
|
|
|
|
Non-accelerated
filer
(Do
not check if a smaller reporting company)
|
o
|
|
Smaller
reporting company
|
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No x
Revenues
for twelve months ended December 31, 2009: $485,773.
State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and ask price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter: approximately $303,675. Shares of common stock held by each
executive officer and director of the registrant and each person who
beneficially owns 10% or more of the registrant’s outstanding common stock has
been excluded from the calculation. This determination of affiliated
status may not be conclusive for other purposes.
As of
April 13, 2010, the registrant had 19,900,388 shares issued and outstanding,
respectively.
Documents Incorporated by
Reference: None
TABLE
OF CONTENTS
|
PART I
|
|
|
|
ITEM
1.
|
DESCRIPTION
OF BUSINESS
|
1 |
|
ITEM
2.
|
PROPERTIES
|
6 |
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
6 |
|
ITEM
4.
|
|
6 |
|
PART
II
|
|
|
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
6 |
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
7 |
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
7 |
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
15 |
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
F-1 |
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
16 |
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
17 |
|
PART
III
|
|
|
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
19 |
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
21 |
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
22 |
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
|
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
22 |
|
PART
IV
|
|
23 |
|
ITEM
15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
24 |
|
SIGNATURES
|
|
25 |
|
|
|
|
PART
I
ITEM
1 - Description of Our Business
We were
incorporated on February 14, 2000 in the State of California. From 2000 to 2008,
we operated as a private business and focused on developing products both in the
golf club (equipment) and golf grip (accessory) categories. Research and
Development costs were accounted for under our general selling and
administrative costs (“GS&A”) during this time. Our annual revenues have
historically ranged between approximately $500,000 and $1 million, and resulted
in significant operating losses requiring additional capital from our officers
and directors and additional private individual shareholders, with total
investment and loans to date, of approximately $4 million.
We produce
golf clubs including drivers, irons and wedges - with varying degrees of
loft (angle of attack to the horizontal plane) ranging from 9° to 73° in several
distinct color finishes: Satin, Gun Metal and Designer (Colors of Red, Black,
Bronze, Blue, Green & Yellow). Wedges are golf clubs used primarily for
approach shots generally from 150 yards and closer. Our wedges carry
eight different degrees of loft (46°, 52° 54° 56°, 58° 60°, 64° & 73°)
designed to be used for varying distances and different lies (e.g.: deep rough,
sand, tight lies, etc.).
Our
wedges are pressure cast and made of a blend of soft metals providing what we
believe to be a lower drag-coefficient thereby improving a golfer’s ability for
more accurate shots. Manufacturing and assembly technologies assure
that each wedge has the same Kick Point, Balance Point, Swing Weight, Total
Weight, Length, Frequency and Feel. Our golf clubs and golf grips conform to the
rules of golf as set out by the United States Golf Association (USGA) and The
Royal and Ancient Golf Club (R&A). The following sets forth an
explanation of certain golf terms we use to describe our products:
|
§
|
Kick
Point, also called flex point or bend point, is the point along a shaft's
length at which it exhibits the greatest amount of bend when the tip is
pulled down.
|
|
§
|
Balance
Point is the
point at which a golf shaft achieves equilibrium; the point at which a
shaft’s weight is evenly distributed in both directions when rested on a
single fulcrum point.
|
|
§
|
Swing weight
is a measurement that describes how the weight of a club feels when the
club is being swung.
|
|
§
|
Total
Weight is the total weight of a golf club including the head, shaft and
grip.
|
|
§
|
Length
is the overall length of a golf
club.
|
|
§
|
Frequency
is the process of ensuring that the shaft vibrations of all clubs in a
given set of clubs, match in frequency when struck, so that the feel is
the same for each club.
|
|
§
|
Feel
is the sensation of, or level sensitivity for, playing shots in golf,
especially with respect to short game shots including
putting.
|
In late
2004, we introduced to the market a reverse-taper golf grip named the Full
ReleaseTM Performance
grip. A “reverse taper” golf grip is simply a golf grip whose taper is the
opposite (or reversed) of the industry standard golf grips used today.
Specifically, a reverse taper golf grip is smaller in diameter at the butt end
of a golf grip and gets larger in diameter towards the shaft end – the opposite
of today’s standard golf grips. We believe the reverse taper golf grip is more
ergonomically designed to better fit the fingers of a golfer’s hand promoting
more of a full release swing - the act of freely returning the club head
squarely to the ball at impact producing a powerful golf shot. In 2005, the Full
ReleaseTM Performance
Grip was named “Top Discovery” at the International PGA Show in Orlando, FL, and
was endorsed by the United States Schools of Golf (USSOG) in July 2007, as their
“Official Golf Grip.” We believe the USSOG represents over 60 teaching
facilities throughout the country. We offer two reverse taper golf grips: 1) The
Full Release™ Performance golf grip; and 2) The Pro Release™ Performance golf
grip and we offer a number of different styles and colors for these golf
grips.
The base
manufacturing of all components including club heads, shafts and grips is
currently outsourced. Final assembly and shipping is handled in our corporate
headquarters based in Salinas, CA, utilizing PGA members trained in the art of
club making. Manufacturing assembly techniques are used for compliance with our
design and quality control requirements.
In
February 2010, we launched a totally new wedge design called, the “Lee Miller
Signature” wedges designed by our CEO, Lee Miller. The new wedge line also has
added two additional lofts of 54º and 58º bringing the total number of lofts
available to eight (8). The “Signature” series is available in a QPQ (Melonite
Black) finish as well as a Matte Chrome Satin finish.
We sell
our golf clubs and grips to U.S. and international distributors, wholesalers,
and retailers, including retail sales on our website. We have established
international distribution channels through 30 countries covering the UK, most
of Europe, Canada, Australia, Asian Pacific Rim countries, parts of Western Asia
and South Africa. With respect to the domestic distribution, we have established
a sales staff at our Salinas, CA headquarters and currently have (six) 6
employees.
Acquisition
New to
the Feel product line is Caldwell Golf's highly advanced ceramic product
line. In August 2009, Feel Golf acquired the assets of Caldwell Golf
of Carlsbad, CA, for 1,250,000 shares of Feel Golf’s common stock. The fair
market value appraised by a third party certified appraiser was approximately $
3,300,000.
Caldwell
Golf Company reportedly spent years developing Ceramic golf club technology into
a final and an excellent Ceramic product line of putters, drivers and fairway
woods. Caldwell Golf’s flagship product is the "Tsunami"
putter.
Marketing
We
believe the Full Release™ Performances grip’s game improvement characteristics
could be attractive to golfers of all skill levels. With our premium wholesale
price, the global grip market could represent a very significant opportunity
with even minor market share penetration - potentially representing
significant growth in total revenues. With a marketing campaign that we
are ready to implement upon obtaining sufficient marketing capital, we
plan to advertise the benefits of our performance grips and build brand
awareness. We believe our golf grips can either replace the market
and/or take a significant market share, similar to how Metal Woods, Graphite
Shafts, and/or Soft Spikes replaced their respective markets and/or garnered
significant market share. However, there is no guarantee that we will
be able to raise the capital needed to implement its marketing
campaign.
With
respect to U.S. domestic marketing, we have built relationships with several
major golf retail chains in the US including Golfsmith, Golf Galaxy, Edwin
Watts, Golfworks, Pro Golf and PGA Superstores that represent the majority of US
golf equipment sales. We believe that our largest single golf club and golf grip
customer base will be the major retail chains. With this opportunity clearly in
mind, we will initially concentrate efforts to maximize sales results via
marketing efforts geared to increase brand awareness and pre-sell the golfing
customer. While we expect considerable efforts to be directed at the major
retailers and cultivating new, retailing chains, there remains literally tens of
thousands of on course and off course pro shops, club makers and hobbyists for
us to market to.
We
believe our established international distributor network also holds potential
for sales growth and through these distributors’ efforts, to grow our brand name
recognition around the world. We plan to continue marketing directly
to the public through our website and with advertising programs designed to
direct potential customers either to our on-line site or to our in-house sales
personnel. Significant marketing efforts will be directed to this in-house
channel with most sales at retail pricing bringing considerably higher profit
margins than those realized via wholesale channels.
Demand in
the golf industry is partially driven by strong marketing and public relations.
Likewise, successful product launches in golf are partially accomplished through
strategic marketing and strong visibility on
the professional tours. We intend to obtain endorsements of both PGA
Teaching Professionals and Tour players, once capitalized, to further validate
our products to golfers worldwide. To reach the mass market, we anticipate
frequently advertising The Full Release™ Performance grip’s
infomercial on The Golf
Channel in the US. This is a far-reaching media campaign, yet highly
targeted. We believe that a continuous TV Infomercial and TV Spot advertising
strategy is among the strongest product awareness builders that may generate
consumer, major chain golf retailer, golf pro shop, and catalog publishers’
interest.
Additional
strategic advertising and promotion plans includes: industry endorsements,
company press releases, additional TV spots, major golf magazine print
ads, media days for major magazine equipment writers sponsored by us,
weekly schedules with retailer demo days, enhanced and continual in-store
support programs, open-to-the-public as well as privately sponsored clinics, USA
and European PGA Tour staff presence, annual trade-shows, as well as a
continuous in-house production of articles and editorials, as contributing
writers, as offered by leading golf magazines. Our product marketing
emphasizes our belief in the many ways in which our brand products are
performance enhancing. The products’ unique selling points include the
following:
|
§
|
We
believe our products include quality components, excellent design
characteristics and quality control assembly by PGA trained professionals
in compliance with exacting standards. We believe our patented and
proprietary designs are highlighted, including our golf clubs'
blend of hi-finishes that stand out among an otherwise dull product finish
industry. Our club line was originally designed & developed for Tour
players for their own personal use in competitive
play.
|
|
§
|
Quality
manufacturing is a key component of our brand. Our clubs are neither
“customized” for Tour players nor “mass-produced” for the general public.
We believe this is a most important distinction that creates a
category of golf products that are made to exacting standards for
high performance and playability that is unique among the major club
manufacturers.
|
|
§
|
We
believe our products’ high performance characteristics can have a profound
effect on a golfer’s ability to play a better, more consistent game of
golf. With independent testing verification, our marketing
emphasizes that our clubs
and grips provide golfers with better “feel” that allows for more
distance, improved accuracy and the ability for lower
scores.
|
|
§
|
We
believe the Full Release™ Performance Grip’s reverse taper design, our
multi-colored Designer Wedges, our new “Lee Miller Signature” wedges, the
Gun Metal and Yellow Competitor irons, visually differentiate our products
from those of its competitors, imparting the perception of a high quality,
high performance message at first
glance.
|
|
§
|
There
are numerous industry models of commodity class grips available, with MSRP
prices ranging from ~$2 to > $6 per grip. We believe our Full
Release™ Performance grips are
positioned as a major advance in golf equipment technology. Therefore, our
golf grip is premium priced at a Manufacturer’s Suggested Retail Price
(MSRP) of $10 each.
|
|
§
|
Industry
prices for golf wedges range from $25 to over $275 each. Many
well known brands compete in the “professional grade” segment of the
market and have offerings around $125 (MSRP). Our wedges
are priced slightly higher (MSRP: $129 - $149) than many other brands, as
we believe our quality and recognized playability imparts a higher
perceived value to the customer.
|
At
present, we do not have sufficient capital to implement and support our planned
marketing campaign. We intend to raise funds through a private and/or a
secondary public offering to support all of our five distinct sales channels. We
estimate upwards of $3,000,000 in new capital will be required over the
entire time period (18-24 months) of our marketing campaign to support
these sales channels.
|
§
|
Direct
to Consumer: We plan to use direct response marketing in advertisement and
infomercials, running primarily on The Golf Channel, web
sites and national print media. We plan to launch this part of the
marketing campaign at the very beginning of our marketing campaign and run
this throughout the entire campaign on a consistent basis. The
cost to implement this will vary significantly depending upon the amount
of media “air” time that we buy and will be the most significant cost of
the entire marketing campaign. Estimated cost could range
from $250,000 to $1.5 million over the course of our marketing
campaign.
|
|
§
|
Wholesale
Distribution: We plan to employ a well-trained and efficient sales staff
to sell and provide ongoing marketing and in-store support to U.S. major
golf retailers. There are estimated to be more than 18,000 independent
golf specialty stores in the U.S. alone, and over eight major USA retail
golf chains, currently with an estimated 700 outlets and growing. Sales
staff will be assigned to provide ongoing service to the major retail
outlets and larger independents. Our customers also include specialty golf
catalog retailers reaching well over 15 million US golfers annually. We
plan to launch this part of the marketing campaign during the first
quarter of the marketing campaign implementation. We have already
identified a number of prospective support personnel to hire once we
have sufficient capital, contingent upon their availability. The estimated
costs range between $100,000 to $250,000
annually.
|
|
§
|
Internet
Sales: we plan to hire two (2) skilled employees whose duties will be to
aggressively market our line of products on the Internet at retail prices
on our website. We plan to launch this part of the marketing campaign
during the first quarter of implementation and running throughout the
entire campaign for approximately 36 months. The estimated
costs range between $50,000 - $125,000
annually.
|
|
§
|
International:
Our international sales alliances carry our clubs, grips and other
products into dozens of countries. Prominent in the
international arena is Asia, where golf as a sport is rapidly growing and
becoming a national pastime with millions playing the game. We plan on
hiring two (2) experienced golf industry professionals to be responsible
for continuous training to our distributors in Asia and Europe. Our
international distributors are responsible for their own marketing
expenditures, but we also plan to provide them with ongoing training which
we believe should expedite and expand their sales. We
anticipate that with a greater world-wide acceptance of our products by
Tour players - will also facilitate globalization of the Feel Golf brand.
We plan to initiate this part of the marketing campaign during the second
quarter of implementation and run throughout the entire marketing
campaign. Estimated costs range between $50,000 – $150,000
annually.
|
|
§
|
Call
Center and Inside Sales: We plan to assemble an effective in house
telemarketing sales force, which will sell direct to our consumers, handle
both inbound and outbound customer communications and sales, customer
service, thus contributing significantly to over-all profit and revenues.
We have initiated a call center at our corporate headquarters based in
Salinas, CA, with two support personnel. We intend to ramp up
the staff of the call center upon available capital and will increase
staff based upon availability of qualified candidates throughout the
marketing campaign. Estimated costs range between $50,000-
$250,000 annually.
|
Competition
The golf
equipment industry is competitive. We believe that our ten years of history is a
strong indicator that we have excellent products with an established niche
within the golf industry. The following are our
major competitors:
|
§
|
Callaway: a
public company founded in 1982.
|
|
§
|
Cleveland
Golf: founded in 1979.
|
|
§
|
Nike:
entered the golf equipment market with golf shoes apparel, balls and
accessories to grow revenues. In 2001, it launched a new line of golf
clubs.
|
|
§
|
Ping:
a family owned company, founded in
1959.
|
|
§
|
Taylor
Made: a subsidiary of Adidas-Salomon, it was founded in
1979.
|
|
§
|
Titleist:
a part of the Acushnet Company whose brands include Foot Joy, Cobra and
Pinnacle. Acushnet itself is a subsidiary of Fortune Brands,
Inc.
|
|
§
|
The
largest manufacturers and our competitors in the golf grip industry
include:
|
|
§
|
Avon
Grips, Kingwood, TX
|
|
§
|
Golf
Pride Grips, a subsidiary of Eaton Corporation, Laurinburg,
NC
|
|
§
|
Lamkin
Corporation, San Diego, CA
|
|
§
|
Winn
Grips, Huntington Beach CA
|
In this
competitive market, except for one other grip company, we believe we are the
only grip company that produces a reverse-taper golf grip with multiple patent
protections. We believe all of our products are uniquely designed in appearance,
are different in playability and feel, and are beneficial for golfers
of all skill levels.
Intellectual
Property
Our
intellectual property portfolio contains multiple trademarks, 16 patents and
several patent applications.
Trademark
We
currently own ten (10) registered trademarks that protect our company’s name as
well as our products. Our products protected under these trademarks include golf
clubs, golf grips, golf putters, golf bags and golf bags. The ten (10)
registered trademarks are (1) “Feel,” (2) “Feel Golf,” (3) “Sensation,” (4)
“Competitor,” (5) “Dr. Feel,” (6) “Designer Wedges,” (7) “The Dart
Thrower,” (8) “The Heater,” (9) “Full Release,” and (10) “Pro
Release.”
In
addition, we have several other in-use trademarks which are not yet registered
but protected by the common law. These marks, including “Release,” “X-Wrap,” and
‘Butterstick,” are used on other golf clubs and golf grips which are not
protected under the ten (10) registered trademarks as
aforementioned.
Patents
Utility
Patents
We
currently have two issued utility patents titled “Improved Golf Club Grip.”
These utility patents protect a golf club grip with a progressively reducing
diameter from the cap end of the grip to the shaft end of the grip, commonly
referred to as a reverse taper. The external surface of the golf club grip
extends upwardly into an elevated, linear ridge and extends along the grip,
commonly referred to as a reminder ridge. This ridge provides the basis for
consistent positioning of the grip in the user’s hand.
In the
acquisition of Caldwell Golf two (2) additional utility patents were acquired
for the novel construction of golf club heads utilizing ceramics and cork. These
patents have been assigned to Feel Golf by the patent office.
Design
Patents
We also
have nine issued design patents covering a variety of golf club head and grip
designs.
We also
currently have two pending inventions, “Wrap Grip” and “Golf Club Grip” patent,
with the improvement protecting a flared end cap. While the “Improved Golf Club
Grip” patent protects a reminder ridge, it does not protect a grip with multiple
reminder ribs or ridges. The pending “Golf Club Grip” application does, which is
important for the golfer for consistent positioning purposes. In addition, the
“Golf Club Grip” application specifically describes a “Y” shaped reminder rib,
which is not disclosed in the “Improved Golf Club Grip” patent. This “Y” shaped
rib provides for consistent and repeatable finger placement and positioning,
increase the Moment of Inertia relative to the golf club head, reduces the
torques around the longitudinal axis of the club, and allows the golfers to
position the club in such a manner as to induce a controlled draw and fade on
the flight of the ball after impact.
In the
acquisition of Caldwell Golf three (3) additional design patents were also
acquired for the novel design application of golf club heads designed with
ceramics, and cork. These patents have been assigned to Feel Golf by the patent
office.
Upcoming
Applications
We have
several utility and design patent applications that will apply for over the next
few years. Five of these inventions relate specifically to the golf club grip
and will protect the process for making the grip, grips with a cord, notched
underlisting, and metal counterweight. Other applications will cover the
Butterstick, Competitor, and Wedge products.
Although
no patent is guaranteed to be valid, an Examiner at the United States Patent and
Trademark Office found our patented inventions to be eligible after reviewing
the prior art.* In addition, a registered United States Patent is presumed to be
valid.
* Patent
Requirements - Section 101 of the U.S. Patent Act sets forth the general
requirements for a utility patent: Whoever invents or discovers any
new and useful process, machine, manufacture, or composition of matter, or any
new and useful improvements thereof, may obtain a patent, subject to the
conditions and requirements of this title.
ITEM
2 - Description of Property
Our
principal business office is located at 1354-T Dayton St., Salinas,
CA 93901.
ITEM
3 - Legal Proceedings
At this
time the Company has no current litigation. However the Company has
been threatened with a potential lawsuit by Criterion Capital that
is based on an alleged breach of a consulting agreement. In the event that
litigation is commenced the Company intends to defend itself in this matter and
will counterclaim for breach of the consulting agreement by
Criterion.
ITEM
4 – (Removed and Reserved)
None.
PART
II
ITEM
5 - Market for Common Equity and Related Stockholder Matters
Market
Information
Our
common stock has been quoted on the OTC Bulletin Board under the symbol
"FEEL.OB" since February 27, 2009. The table below sets forth
the high and low bid prices for our common stock for the period indicated based
on reports of transactions on the Over-the-Counter Bulletin Board. Such prices
reflect inter-dealer prices, without retail markup, markdowns or commissions and
may not necessarily represent actual transactions.
|
Price
Information
|
|
|
Financial
Quarter Ended
|
|
High
|
|
|
Low
|
|
|
From
February 27, 2009 to March 31, 2009
|
|
|
0.30
|
|
|
|
0.30
|
|
|
June
30, 2009
|
|
|
0.30
|
|
|
|
0.05
|
|
|
September
30, 2009
|
|
|
0.25
|
|
|
|
0.05
|
|
|
December
31, 2009
|
|
|
0.30
|
|
|
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
Holders
As of
April 9, 2010 in accordance with our transfer agent records, we have 74 record
holders of our Common Stock.
Dividends
To date,
we have not declared or paid any dividends on our common stock. We currently do
not anticipate paying any cash dividends in the foreseeable future on our common
stock, when issued pursuant to this offering. Although we intend to retain our
earnings, if any, to finance the exploration and growth of our business, our
Board of Directors will have the discretion to declare and pay dividends in the
future.
Payment
of dividends in the future will depend upon our earnings, capital requirements,
and other factors, which our Board of Directors may deem relevant.
Stock
Option Grants
To date,
we have not granted any stock options.
ITEM
6 - SELECTED FINANCIAL DATA
Not
applicable.
ITEM
7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The
following plan of operation provides information which management believes is
relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto. This section includes a number of forward-looking
statements that reflect our current views with respect to future events and
financial performance. Forward-looking statements are often identified by words
like believe, expect, estimate, anticipate, intend, project and similar
expressions, or words which, by their nature, refer to future events. You should
not place undue certainty on these forward-looking statements. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from our
predictions.
Overview
During
the year ended December 31, 2009, we raised capital primarily from officers of
the Company. This capital allowed us to continue day-to-day
operations. During the fiscal year ended 2009, we issued a
total of 2,310,600 shares of common stock for services and 1,250,000 for the
acquisition of the assets of Caldwell Golf Corporation. The services
rendered included accounting, legal, consulting and marketing. In
exchange for the 1,250,000 shares of common stock issued to the owners of
Caldwell Golf Corporation, we acquired assets valued at $3,274,507 based on a
fair market valuation obtained from a qualified third party business valuation
specialist. The Company received inventory valued at $1,878,653 of
inventory, $524,235 of property and equipment, and $871,620 in patents, and
trademarks and other intangible assets. These valuations were
conducted pursuant to the Uniform Standards of Professional Valuation Practice
(USAP), the code of Ethics and Business Valuation Standards of the Institute of
Business Analysts, and the regulations of the Financial Accounting Standards
Board (FASB).
Our
financial statements as of December 31, 2009, reflect a net operating loss of
$935,599. This is based on gross revenues of $485,773, cost of sales
of $202,954, operating expenses of $1,124,093 and other expenses including
interest and taxes of $94,325.
During
the year ended December 31, 2008, we were able to secure funding from several
shareholders in the aggregate amount of approximately $122,500. These
financings allowed us to continue operations and pay for the related legal and
accounting costs of filing to become and maintain a public company.
Our
financial statements as of December 31, 2008, reflect a net operating loss for
year of $1,347,705. This is based on gross revenues of $693,388, cost
of sales of $245,077, operating expenses of $1,727,151 and other expenses
including interest and taxes of $68,865.
The net
operating loss for the year ending December 31, 2009, decreased by $412,106 or
31% from December 31, 2008. Gross Sales for 2009, decreased by
$207,615 or 30% primarily as a result of a decrease in golf club sales primarily
a result of the downturn in the economy and its effect on retail sales in
leisure and luxury goods.
The
fluctuation in percentage of sales per product category per reporting
period, is based on what management believes, not only relates to the current
recession, but has been a lack of adequate marketing capital to further educate
consumers and build brand awareness on its golf grips since their introduction,
and that the company’s golf grips are not as established in the marketplace yet,
as its golf clubs are - which have a longer product history and greater product
recognition.
Research
and development costs were negligible during both years and we do not plan any
research & development for the future 12 months.
Over the
course of our ten years of operating history, we have incurred substantial
operating losses and we may not be able to continue our business. As of December
31, 2009, we have an accumulated deficit of $6,389,283 with a net loss of
$935,599 that was generated for the year ended December 31,
2009.
We have
historically experienced cash flow difficulties primarily because our expenses
have exceeded our revenues. We expect to incur additional operating losses for
the immediate near future. These factors, among others, raise significant doubt
about our ability to continue as a going concern. If we are unable to generate
sufficient revenue from our operations to pay expenses or we are unable to
obtain additional financing on commercially reasonable terms, our business,
financial condition and results of operations will be materially and adversely
affected. We can provide no assurance that we will obtain additional
financing sufficient to meet our future needs on commercially reasonable terms
or otherwise. There can be no assurance that we will be able to maintain
operations as a going concern without an additional infusion of capital from
other sources and there can be no guarantee we will be successful in obtaining
capital from such sources. If we are unable to obtain the necessary
financing, our business, operating results and financial condition will be
materially and adversely affected.
We have
four employees and our success is dependent on our ability to retain and attract
personnel to operate our business, and there is no assurance that we can do so.
Once we are sufficiently capitalized, we will need to recruit new executive
managers and hire employees to help us execute our business strategy and help
manage the growth of our business. Our business could suffer if we were unable
to attract and retain highly skilled personnel or if we were to lose any key
personnel and not be able to find appropriate replacements in a timely
manner.
We expect
to derive a substantial portion of our future revenues from the sales of our
golf grips and we have yet to fully launch our initial marketing phase. Although
we believe our products and technologies to be commercially
viable, if markets for our products fail to develop further or
develop more slowly than expected or are subject to substantial competition, our
business, financial condition and results of operations will be materially and
adversely affected.
We also
depend on marketing relationships and if we fail to maintain or establish them,
our business plan may not succeed.
We expect
our future marketing efforts will focus in part on developing additional
business relationships with retailers and distributors that will market our
products to their customers. The success of our business depends on selling our
products and technologies to a large number of distributors and retail
customers.
The
market for golf grips and golf clubs is highly competitive. There are a number
of other established providers that have greater resources, including more
extensive research and development, marketing and capital than we do and have
greater name recognition and market presence. These competitors could reduce
their prices and thereby decrease the demand for our products and technologies.
We expect competition to intensify in the future, which could also result in
price reductions, fewer customers and lower gross margins.
Our total
sales in 2009 were lower than total sales from 2008. We expect sales
to improve this year when we are able to market the inventory acquired from the
Caldwell Golf acquisition and through planned advertising
campaigns. However, with the recent economic and market uncertainties
here in the United States as well as internationally, there can be no assurance
that our sales will continue to grow and/or be maintained at their present
level, and may in fact, decline in the
future.
Economic
factors that can affect all manufacturing businesses include increases in
fuel/freight costs and for global manufacturer’s, currency fluctuations.
Fuel/Freight costs can impact product costs and shipping costs of any
manufacturer and without corresponding price increases of its products, a
manufacturer’s profits could decline or even result in losses. While a global
manufacturer may only transact business in US dollars, if a buyer/distributor in
another country, whose currency has experienced a devaluation in relation to the
US dollar, could result in a reduction or even elimination of demand for
the manufacturer’s products in that country.
These
factors and others (unknown) could occur within the global marketplace that
could negatively impact operations of any business, including the golf industry
(manufacturing of golf clubs and golf grips) to the extent that such operations
could cease temporarily or permanently, based on the Company’s ability to
respond to such global economic factors.
Our
business is subject to rapid changes in technology that may adversely affect our
business. We can provide no assurances that further research and development by
competitors will not render our technology obsolete or uncompetitive. We compete
with a number of companies that have technologies and products similar to those
offered by us and have greater resources, including more extensive research and
development, marketing and capital than we do. If our technology is rendered
obsolete or we are unable to compete effectively, our business, operating
results and financial condition will be materially and adversely
affected.
We rely
on a combination of trade secrets, trademark law, and other measures to protect
our trademarks, license, proprietary technology and know-how. However, we can
provide no assurance that competitors will not infringe upon our rights in our
intellectual property or that competitors will not similarly make claims against
us for infringement. If we are required to be involved in litigation involving
intellectual property rights, our business, operating results and financial
condition will be materially and adversely affected.
It is
possible that third parties might claim infringement by us with respect to past,
current or future technologies. We expect that participants in our markets will
increasingly be subject to infringement claims as the number of services and
competitors in our industry grows. Any claims, whether meritorious or not, could
be time-consuming, result in costly litigation and could cause service upgrade
delays or require us to enter into royalty or licensing agreements. These
royalty or licensing agreements might not be available on commercially
reasonable terms or at all.
New
technologies such as the products developed by us may contain defects when first
introduced. Our introduction of technology with defects or quality problems may
result in adverse publicity, product returns, reduced orders, uncollectible or
delayed accounts receivable, product redevelopment costs, loss of or delay in
market acceptance of our products or claims by customers or others against us.
Such problems or claims may have a material and adverse effect on our business,
financial condition and results of operations.
Plan
of Operation
While we
make golf clubs and golf grips, our primary business and marketing plans will
initially be focused on our golf grips and wedges. We believe we can launch an
aggressive but well-directed marketing campaign to rapidly grow our revenue and
significantly maximize our market potential. To reach the mass
market, we will more frequently advertise our grips, the Full ReleaseTM Performance
grips in particular, on The Golf Channel in the
U.S. We plan to develop additional strategic advertising and promotion plans
including key industry endorsements, press releases, additional TV spots, major
golf magazine print ads, our sponsored media days for major magazine equipment
writers, weekly schedules with retailer demo days, enhanced and continual
in-store support programs, open-to-the public as well as privately sponsored
clinics, annual trade-shows, and continuous in-house productions of articles and
editorials.
As noted
previously, we currently do not have the necessary capital to implement our
marketing campaign and if successful in raising sufficient capital for
marketing, there can be no assurance that this capital and/or increased
marketing efforts will increase revenues. There can also be no
assurance we will be successful in raising sufficient marketing capital to
implement this campaign. Assuming we are able to raise sufficient capital in
support of our marketing strategy, we plan to develop five distinct sales
channels:
|
§
|
Direct
to Consumer: We plan to use direct response marketing in advertisement and
infomercials, running primarily on Golf Channel, websites and national
print media.
|
|
§
|
Wholesale
Distribution: We plan to employ a well-trained and efficient sales staff
to sell and provide ongoing marketing and in-store support to U.S. major
golf retailers.
|
|
§
|
Internet
Sales: We plan to hire skilled employees to aggressively market our line
of products on the Internet at retail prices on our
website.
|
|
§
|
International:
Asia is a prominent international market where golf as a sport is rapidly
growing. We plan to hire Company Representatives to be responsible for
continuous training our distributors in Asia and Europe, although our
international distributors are responsible for their own marketing
expenditures.
|
|
§
|
Call Center
and Inside Sales: We plan to further assemble an effective in house
telemarketing sales force to sell direct to our consumers and handle both
inbound and outbound customer communications and
sales.
|
Results
of Operations
The golf
industry as reported by several industry organizations has been in a state of
flux, though the total number of worldwide golfers as reported by the industry
has increased, primarily due to the increase in golf as a major sport in
Asia. However, there can be no assurance that the golf industry will
continue growing and may in fact decline. We believe there have been
no industry trends that have significantly affected (positively or negatively)
our operating results including fluctuations in revenues for the reporting
periods below. Based on input from our
major customers, we believe that sufficient marketing capital is essential
to growing revenues in the highly competitive golf industry.
Current
economic factors both in the US and internationally may have a direct impact on
future revenues positively and/or negatively - for example: 1) fluctuating
fuel costs that effects shipping and product production costs for all
manufacturers regardless of industry; or 2) currency fluctuation of the US
dollar and that of other foreign currencies for global manufacturers, regardless
of industry.
Years
Ended December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
December
31,
|
|
December
31,
|
|
Increase
|
|
Increase
|
|
|
2009
|
|
2008
(Restated)
|
|
(Decrease)
|
|
(Decrease)
|
|
Revenues
|
|
$
|
485,773
|
|
$
|
693,388
|
|
$
|
(207,615)
|
|
(30)%
|
|
Cost
of Sales
|
|
|
202,954
|
|
|
245,077
|
|
|
(42,123)
|
|
(17)%
|
|
Gross
Profit
|
|
|
282,819
|
|
|
448,311
|
|
|
(165,492)
|
|
(37)%
|
|
Operating
Expenses
|
|
|
1,124,093
|
|
|
1,727,151
|
|
|
(603,058)
|
|
(35)%
|
|
Other
Expenses
|
|
|
93,508
|
|
|
68,065
|
|
|
25,443
|
|
37%
|
|
Income
Taxes
|
|
|
817
|
|
|
800
|
|
|
17
|
|
2%
|
|
Net
Loss
|
|
$
|
(935,599)
|
|
$
|
(1,347,705)
|
|
$
|
412,106
|
|
(31)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and Fully Diluted Loss Per Common Share
|
|
$
|
(0.06)
|
|
$
|
(0.10)
|
|
$
|
0.04
|
|
|
|
Weighted
Average Basic and Fully Diluted Common Share Outstanding
|
|
|
15,012,361
|
|
|
13,597,513
|
|
|
|
|
|
Revenues
For the
year ended December 31, 2009, revenues decreased 30% from the year ended
December 31, 2008. The slow economy and uncertain financial sector
has negatively impacted our sales and plans to expand
operations. We intend on implementing a targeted marketing
and advertising campaign in 2010 and will focus on expanding sales of our highly
profitable golf grip products as opposed to our golf clubs. However,
we will require capital, likely in the form of an equity issuance or from a
merger, if we are to finalize and implement our marketing and advertising
plans. If capital is raised to fund advertising and marketing
expenditures then the Company's revenues could increase
dramatically. If we are unable to raise capital then we will likely
maintain revenues within a similar range as 2009 assuming we are able to
continue operations.
Cost
of Sales
For the
year ended December 31, 2009, our costs of sales decreased 17% from the year
ended December 31, 2008. This decrease is in line with the decrease
experienced in revenues. Overall our pricing structure, product
make-up and sales mixes have stayed constant from 2008.
If our
marketing plans are implemented and successful, we believe we can maintain our
current gross margins. However, if wholesale pricing opportunities present
themselves, we will likely be aggressive with our pricing in the hope of
obtaining significant wholesale contracts which further expand our operations.
If we succeed in obtaining significant wholesale contracts, our gross margins
may decrease in 2010.
Gross
Profit
For the
year ended December 31, 2009, our gross profit decreased 37% from the year ended
December 31, 2008. Our retail sales growth in 2008 and continued cost cutting
and management of shipping costs for customer orders generated significant gross
margin gains in 2008. However, the poor economy during 2009 has hurt
our retail sales which drove down our gross margins.
Operating
Expenses
For the
year ended December 31, 2009, our operating expenses decreased by $603,058, or
35%. Stock issued for services during 2009 totaled 2,310,600 shares valued at
$626,150 as compared with stock issued for services in 2008 which totaled
approximately 1.2 million shares valued at approximately $1.2
million. This decrease in expense recognized from the issuance of
stock for services accounted for almost the entire decrease in
expenses. Advertising and rent decreases were offset by increases in
salaries and other selling and general administrative costs. We
expect that if we are able to raise capital, advertising and marketing expenses
will increase in 2010. Professional fees relating to maintaining compliance as a
public company in the United States of America will also increase as compared to
2009 if we are successful in raising money through additional lending, the sale
of stock and/or through a merger. Otherwise, most operating expenses
should be comparable to 2009.
Other
Expenses
For the
year ended December 31, 2009, our other expenses increased $25,443 from the year
ended December 31, 2008. Interest expense on debts owed to a trust controlled by
our Chief Executive Officer and a trust controlled by a former member of the
Company's Board of Directors increased by a net of approximately $30,000 due to
additional borrowings we made from these individuals.
Net
Loss
For the
year ended December 31, 2009, our net loss decreased 31% over the year ended
December 31, 2008. Of this total loss of $936,000, approximately $650,000 was
due to non-cash, stock based compensation expense. An additional
$105,000 is depreciation and $37,000 in accrued interest.
Currently,
our revenues are not large enough to create a breakeven scenario. We
need capital to expand operations and develop new contacts to function as
distributors. If we are able to raise capital in 2010, then revenue
will likely increase as a result of advertising and marketing and the
possibility of us becoming profitable will be more likely.
LIQUIDITY
AND CAPITAL RESOURCES
For
the Years Ended December 31, 2009 and December 31, 2008
At
December 31, 2009, we had cash of $6,848 as compared to cash of $5,220 as of
December 31, 2008. Net cash used in operating activities for the year ended
December 31, 2009 was $(6,088), as compared to net cash provided by operating
activities of $23,148 for the year ended December 31, 2008. This decrease of
$29,236 in cash provided by operating activities as compared to the comparable
period of the prior year is reflective of the decline in sales due to the slow
economy in 2009. Management attempted to curb as much discretionary spending as
possible without hurting the future prospects of the company.
Cash
flows used in investing activities totaled $(15,011) and $(29,072) for the year
ended December 31, 2009 and 2008, respectively. We limited, as much as possible,
our capital expenditures in order to conserve cash during the year.
Cash
flows provided by financing activities totaled $22,727 and $8,330 in 2009 and
2008, respectively. Our cash from financing activities in 2009 consisted
primarily of capital being lent from a trust controlled by our Chief Executive
Officer. These advances totaled $109,830 with repayments of $(87,103)
being made during the year. In 2008, we raised a total of $77,500 in
capital through a private placement and made repayments to a trust controlled by
our Chief Executive Officer of $108,493. The trust also advanced a total of
$45,097 during 2008.
At the
present level of business activity, our ongoing monthly gross operating cash
disbursements are expected to average approximately $62,000. As of December 31,
2009, we had positive working capital of $1,598,768. Of this working
capital, $1,929,647 is made up of inventory, much of which was acquired during
the fourth quarter of the year as part of the Caldwell Golf
acquisition.
RECENT
ACCOUNTING PRONOUNCEMENTS AFFECTING US
In
January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation
(Topic 810): Accounting and Reporting for Decreases in Ownership of a
Subsidiary. This amendment to Topic 810 clarifies, but does not change, the
scope of current US GAAP. It clarifies the decrease in ownership provisions of
Subtopic 810-10 and removes the potential conflict between guidance in that
Subtopic and asset derecognition and gain or loss recognition guidance that may
exist in other US GAAP. An entity will be required to follow the amended
guidance beginning in the period that it first adopts FAS 160 (now included in
Subtopic 810-10). For those entities that have already adopted FAS 160, the
amendments are effective at the beginning of the first interim or annual
reporting period ending on or after December 15, 2009. The amendments should be
applied retrospectively to the first period that an entity adopted FAS 160. The
Company does not expect the provisions of ASU 2010-02 to have a material effect
on the financial position, results of operations or cash flows of the
Company.
In
January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic
505): Accounting for Distributions to Shareholders with Components of Stock and
Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to
Topic 505 clarifies the stock portion of a distribution to shareholders that
allows them to elect to receive cash or stock with a limit on the amount of cash
that will be distributed is not a stock dividend for purposes of applying Topics
505 and 260. Effective for interim and annual periods ending on or after
December 15, 2009, and would be applied on a retrospective basis. The Company
does not expect the provisions of ASU 2010-01 to have a material effect on the
financial position, results of operations or cash flows of the
Company.
In
December 2009, the FASB issued Accounting Standards Update 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities. This Accounting Standards Update
amends the FASB Accounting Standards Codification for Statement 167. The Company
does not expect the provisions of ASU 2009-17 to have a material effect on the
financial position, results of operations or cash flows of the
Company.
In
December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This
Accounting Standards Update amends the FASB Accounting Standards Codification
for Statement 166. The Company does not expect the provisions of ASU 2009-16 to
have a material effect on the financial position, results of operations or cash
flows of the Company.
In
October 2009, the FASB issued Accounting Standards Update 2009-15, Accounting
for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance
or Other Financing. This Accounting Standards Update amends the FASB Accounting
Standard Codification for EITF 09-1. The Company does not expect the provisions
of ASU 2009-15 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In
October 2009, the FASB issued Accounting Standards Update 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software Elements. This
update changed the accounting model for revenue arrangements that include both
tangible products and software elements. Effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or
after June 15, 2010. Early adoption is permitted. The Company does not expect
the provisions of ASU 2009-14 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In
October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances that under existing US
GAAP. This amendment has eliminated that residual method of allocation.
Effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. The Company does not expect the provisions of ASU 2009-13 to have a
material effect on the financial position, results of operations or cash flows
of the Company.
In
September 2009, the FASB issued Accounting Standards Update 2009-12, Fair Value
Measurements and Disclosures (Topic 820): Investments in Certain Entities That
Calculate Net Asset Value per Share (or Its Equivalent). This update provides
amendments to Topic 820 for the fair value measurement of investments in certain
entities that calculate net asset value per share (or its equivalent). It is
effective for interim and annual periods ending after December 15, 2009. Early
application is permitted in financial statements for earlier interim and annual
periods that have not been issued. The Company does not expect the provisions of
ASU 2009-12 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In July
2009, the FASB ratified the consensus reached by EITF (Emerging Issues Task
Force) issued EITF No. 09-1, (ASC Topic 470) "Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance" ("EITF 09-1"). The
provisions of EITF 09-1, clarifies the accounting treatment and disclosure of
share-lending arrangements that are classified as equity in the financial
statements of the share lender. An example of a share-lending arrangement is an
agreement between the Company (share lender) and an investment bank (share
borrower) which allows the investment bank to use the loaned shares to enter
into equity derivative contracts with investors. EITF 09-1 is effective for
fiscal years that beginning on or after December 15, 2009 and requires
retrospective application for all arrangements outstanding as of the beginning
of fiscal years beginning on or after December 15, 2009. Share-lending
arrangements that have been terminated as a result of counterparty default prior
to December 15, 2009, but for which the entity has not reached a final
settlement as of December 15, 2009 are within the scope. Effective for
share-lending arrangements entered into on or after the beginning of the first
reporting period that begins on or after June 15, 2009. The Company does not
expect the provisions of EITF 09-1 to have a material effect on the financial
position, results of operations or cash flows of the Company.
Critical
Accounting Policies
Our
discussion and analysis of its financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosure of contingent assets and liabilities. We base our estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our financial
statements.
Inventory
Inventories
acquired in connection with our Caldwell acquisition are valued at their fair
market value based on an independent appraisal. Our remaining inventories are
stated at the lower of cost or market using the first-in, first-out (FIFO) cost
method of accounting. Inventories are adjusted for estimated
obsolescence and written down to net realizable value based upon estimates of
future demand and market conditions.
Property
and Equipment
Property
and equipment is located at the Company's headquarters in Salinas, California
and is recorded at cost less accumulated depreciation, except for certain
equipment acquired in connection with the Caldwell acquisition, which were
valued at their fair market value based on an independent appraisal.
Depreciation and amortization is calculated using the straight-line method over
the expected useful life of the asset, after the asset is placed in service. The
Company generally uses the following depreciable lives for its major
classifications of property and equipment:
|
Description
|
|
Useful
Lives
|
|
Computer
hardware
|
|
3-7
years
|
|
Computer
software
|
|
3-5
years
|
|
Furniture
and Office Equipment
|
|
7
years
|
|
Production
Equipment
|
|
7
years
|
|
Leasehold
improvements
|
|
10
years
|
Valuation
of Long-Lived Assets
Long-lived
tangible assets and definite-lived intangible assets are reviewed for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The Company uses an
estimate of undiscounted future net cash flows of the assets over the remaining
useful lives in determining whether the carrying value of the assets is
recoverable. If the carrying values of the assets exceed the expected future
cash flows of the assets, the Company recognizes an impairment loss equal to the
difference between the carrying values of the assets and their estimated fair
values. Impairment of long-lived assets is assessed at the lowest levels for
which there are identifiable cash flows that are independent from other groups
of assets. The evaluation of long-lived assets requires the Company to use
estimates of future cash flows. However, actual cash flows may differ from the
estimated future cash flows used in these impairment tests. As of December 31,
2009, management does not believe any of the Company’s assets were
impaired.
Goodwill
and Intangible Assets
The
Company adopted ASC 805, Business
Combinations, and ASC 350, Goodwill and Other Intangible
Assets, effective June 2001 and revised in December, 2007. ASC 805
requires the use of the purchase method of accounting for any business
combinations initiated after June 30, 2002, and further clarifies the criteria
to recognize intangible assets separately from goodwill. Under ASC 350, goodwill
and indefinite−life intangible assets are no longer amortized, but are reviewed
for impairment annually.
Revenue
Recognition
In
accordance with SAB104, the Company recognizes revenues from the sale of its
products when the following fundamental criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred or services have
been rendered, (iii) the price to the customer is fixed or determinable and (iv)
collection of the resulting receivable is reasonably assured. The
Company records revenue from foreign customers when payment is
received.
Stock-Based
Compensation
Effective
July 1, 2005, the Company adopted the provisions of ASC 718. The Company has
adopted the fair value based method of accounting for stock-based employee
compensation in accordance with ASC 718. The Company values issuances of stock
at the clearer of the value of the services received or stock issued and uses
the Black-Scholes valuation model to value and record expenses relative to share
based payments when granted and vested.
Off-Balance Sheet
Arrangements
We do not
have any off-balance sheet arrangements, financings, or other relationships with
entities or other persons, also known as “special purpose entities”
(SPEs).
ITEM
7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are
subject to certain market risks, including changes in interest rates and
currency exchange rates. We do not undertake any specific actions to limit those
exposures.
ITEM
8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index
to Financial Statements
|
REPORT
OF INDEPENDENT REGISTERED ACCOUNTING FIRM
|
F-2
|
|
|
|
|
BALANCE
SHEETS
|
F-3
|
|
|
|
|
STATEMENTS
OF OPERATIONS
|
F-4
|
|
|
|
|
STATEMENTS
OF STOCKHOLDERS' DEFICIENCY
|
F-5
|
|
|
|
|
STATEMENTS
OF CASH FLOWS
|
F-6
|
|
|
|
|
NOTES
TO THE FINANCIAL STATEMENTS
|
F-7
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FEEL GOLF CO., INC.:
We have
audited the accompanying balance sheets of Feel Golf Co, Inc. (the
"Company") as of December 31, 2009 and 2008 (as restated), and the related
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended. The Company's management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial
statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. 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 the Company as of December 31, 2009
and 2008 (as restated), and the results of its operations and its cash flows for
each of the years in the two year period ended December 31, 2009, in conformity
with accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in the notes to the
financial statements, the Company has incurred significant losses in 2009 and
2008 and has an accumulated deficit of approximately $6,400,000. These matters
raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans concerning these matters are also
described in the notes to the financial statements. The financial
statements do not include adjustments that might result from the outcome of this
uncertainty.
/s/
Farber Hass Hurley LLP
Camarillo,
California
April 5,
2010
|
FEEL
GOLF CO., INC.
|
|
|
Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
December
31,
|
|
|
|
2009
|
|
2008
|
|
|
|
|
|
(Restated)
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
|
|
$ |
6,848 |
|
|
$ |
5,220 |
|
|
Accounts
receivable, net
|
|
|
17,484 |
|
|
|
33,933 |
|
|
Barter
receivable
|
|
|
64,828 |
|
|
|
65,577 |
|
|
Receivable
from shareholder
|
|
|
17,137 |
|
|
|
18,137 |
|
|
Inventory,
net
|
|
|
1,929,647 |
|
|
|
146,773 |
|
|
Prepaid
expenses
|
|
|
48,032 |
|
|
|
12,146 |
|
|
Total
Current Assets
|
|
|
2,083,976 |
|
|
|
281,786 |
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY,
PLANT and EQUIPMENT, net
|
|
|
523,653 |
|
|
|
45,096 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
Intellectual
property, net
|
|
|
828,039 |
|
|
|
- |
|
|
Other
assets
|
|
|
3,952 |
|
|
|
4,396 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
3,439,620 |
|
|
$ |
331,278 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
394,458 |
|
|
$ |
298,651 |
|
|
Short-term
related party payable
|
|
|
- |
|
|
|
234,515 |
|
|
Total
Current Liabilities
|
|
|
394,458 |
|
|
|
533,166 |
|
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
RELATED PARTY NOTES PAYABLE
|
|
|
796,437 |
|
|
|
539,195 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
1,190,895 |
|
|
|
1,072,361 |
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Common
stock, $0.001 par value; 100,000,000 shares
|
|
|
|
|
|
|
|
|
|
authorized,
19,406,175 and 15,845,575 shares
|
|
|
|
|
|
|
|
|
|
issued
and outstanding, respectively
|
|
|
19,407 |
|
|
|
15,846 |
|
|
Additional
paid-in capital
|
|
|
8,618,601 |
|
|
|
4,696,755 |
|
|
Accumulated
deficit
|
|
|
(6,389,283 |
) |
|
|
(5,453,684 |
) |
|
Total
Stockholders' Equity (Deficit)
|
|
|
2,248,725 |
|
|
|
(741,083 |
) |
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$ |
3,439,620 |
|
|
$ |
331,278 |
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
FEEL
GOLF CO., INC.
|
|
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Years Ended
|
|
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
(Restated)
|
|
|
|
|
|
|
|
|
|
|
REVENUES,
NET
|
|
$ |
485,773 |
|
|
$ |
693,388 |
|
|
COST
OF SALES
|
|
|
202,954 |
|
|
|
245,077 |
|
|
GROSS
PROFIT
|
|
|
282,819 |
|
|
|
448,311 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Salaries
|
|
|
148,142 |
|
|
|
131,663 |
|
|
Advertising
|
|
|
45,288 |
|
|
|
73,035 |
|
|
Rent
|
|
|
38,740 |
|
|
|
46,735 |
|
|
Professional
fees
|
|
|
693,287 |
|
|
|
1,310,722 |
|
|
Depreciation
|
|
|
105,267 |
|
|
|
23,681 |
|
|
Other
selling, general and administrative expenses
|
|
|
93,369 |
|
|
|
141,315 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
1,124,093 |
|
|
|
1,727,151 |
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(841,274 |
) |
|
|
(1,278,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME AND (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
97 |
|
|
|
322 |
|
|
Interest
expense
|
|
|
(36,301 |
) |
|
|
(30,494 |
) |
|
Interest
expense - related party
|
|
|
(57,304 |
) |
|
|
(37,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE TAXES
|
|
|
(934,782 |
) |
|
|
(1,346,905 |
) |
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
(817 |
) |
|
|
(800 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$ |
(935,599 |
) |
|
$ |
(1,347,705 |
) |
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS PER COMMON SHARE
|
|
$ |
(0.06 |
) |
|
$ |
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF BASIC AND
|
|
|
|
|
|
|
|
|
|
DILUTED
COMMON SHARES OUTSTANDING
|
|
|
15,012,361 |
|
|
|
13,597,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
FEEL
GOLF CO., INC.
|
|
|
Statements
of Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
Balance,
December 31, 2007 (Restated)
|
|
|
13,537,349 |
|
|
$ |
13,537 |
|
|
$ |
2,357,838 |
|
|
$ |
(4,105,979 |
) |
|
$ |
(1,734,604 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued in debt conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
$1.00 per Share
|
|
|
1,000,000 |
|
|
|
1,000 |
|
|
|
999,000 |
|
|
|
- |
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash at $1.00 per share
|
|
|
77,500 |
|
|
|
78 |
|
|
|
77,422 |
|
|
|
- |
|
|
|
77,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for services at $1.00 per share
|
|
|
1,230,726 |
|
|
|
1,231 |
|
|
|
1,229,495 |
|
|
|
- |
|
|
|
1,230,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of services donated by shareholder
|
|
|
- |
|
|
|
- |
|
|
|
33,000 |
|
|
|
- |
|
|
|
33,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
December 31, 2008
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,347,705 |
) |
|
|
(1,347,705 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008 (Restated)
|
|
|
15,845,575 |
|
|
$ |
15,846 |
|
|
$ |
4,696,755 |
|
|
$ |
(5,453,684 |
) |
|
$ |
(741,083 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commons
stock issued for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at
an average of $0.27 per share
|
|
|
2,310,600 |
|
|
|
2,311 |
|
|
|
623,839 |
|
|
|
- |
|
|
|
626,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
issued for purchase of assets
|
|
|
1,250,000 |
|
|
|
1,250 |
|
|
|
3,273,257 |
|
|
|
- |
|
|
|
3,274,507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of services donated by shareholder
|
|
|
- |
|
|
|
- |
|
|
|
24,750 |
|
|
|
- |
|
|
|
24,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ended
December 31, 2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(935,599 |
) |
|
|
(935,599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2009
|
|
|
19,406,175 |
|
|
$ |
19,407 |
|
|
$ |
8,618,601 |
|
|
$ |
(6,389,283 |
) |
|
$ |
2,248,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
FEEL
GOLF CO., INC.
|
|
|
Statements
of Cash Flows
|
|
|
|
|
For
the Years Ended
|
|
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
(Restated)
|
|
|
Net
Loss
|
|
$ |
(935,599 |
) |
|
$ |
(1,347,705 |
) |
|
Adjustments
to Reconcile Net Loss to Net
|
|
|
|
|
|
|
|
|
|
Cash
Used by Operating Activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
105,267 |
|
|
|
23,681 |
|
|
Stock
issued for services
|
|
|
626,150 |
|
|
|
1,230,726 |
|
|
Services
donated by company officer
|
|
|
24,750 |
|
|
|
33,000 |
|
|
Write-off
of property, plant and equipment
|
|
|
- |
|
|
|
1,623 |
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
16,449 |
|
|
|
(13,802 |
) |
|
Barter
receivable
|
|
|
749 |
|
|
|
5,566 |
|
|
Inventory
|
|
|
95,781 |
|
|
|