Note 9. Restatement
Subsequent
to issuance of the September 30,
2008 condensed consolidated financial statements (the 2008 Interim Financial
Statements), our management concluded that it was necessary to restate the
2008 Interim Financial Statements to correct for errors. These errors included
non-recognition of $450,000 of sales and marketing expense and prepaid expense
of $150,000, accounting errors relating to $236,000 in revenue and other
errors, primarily with regard to cut-off related to cost of sales which totaled
approximately $758,000. The
accompanying 2008 Interim Financial Statements for the three and nine months
ended September 30, 2008 have been restated to give effect to correction of
these and other errors (primarily with regard to cut-off) as well as revision
of classification, which together have the result of decreasing total assets by
approximately $780,000 and increasing total liabilities and total stockholders
deficit by approximately $673,000 and $1.5 million, respectively, and
increasing net loss for the three and nine months ended September 30, 2008 by
approximately $930,000 and $1.7 million, respectively, with an increase to net
loss per share of approximately $0.04 and $0.09 per share, respectively.
In
addition, subsequent to the issuance of the September 30, 2007 condensed
consolidated financial statements (the 2007 Interim Financial Statements),
our management concluded that it was necessary to restate the 2007 Interim
Financial Statements to correct for errors. These errors were primarily with
regard to inappropriate revenue recognition of $0.2 million for the three and
nine months ended September 30, 2007, inappropriate
capitalization of tournament signage of approximately $175,000, net of
depreciation expense of approximately $45,000, inappropriate recording of $1.4
million of general and administrative expense relating to share-based
compensation, and non-recognition of $800,000 of sales and marketing expense
relating to share-based compensation. The accompanying 2007 Interim Financial
Statements have been restated to give effect to correction of these and other
errors, primarily with regard to cut-off, which together have the effect of
decreasing revenue for the three and nine months ended September 30, 2007 by
approximately $520,000 and $126,000, respectively and decreasing net loss for
the three and nine months ended September 30, 2007 by approximately $1.8
million and $450,000, respectively, with a decrease of $0.30 and $0.36 in net
loss per share, respectively.
Note 10.
Events
Subsequent to Date of Initial Issuance of These Interim Condensed Consolidated
Financial Statements
Disclosures
with respect to events occurring subsequent to the date of initial issuance of
these interim condensed consolidated financial statements in 2008 are included
in our December 31, 2008 annual consolidated financial statements included in
our December 31, 2008 Annual Report on Form 10-K (our 2008 Annual Financial
Statements) and our March 31, 2009 interim condensed consolidated financial
statements included in our March 31, 2009 Quarterly Report on Form 10-Q (our
2009 Interim Financial Statements). These interim 2008 condensed consolidated
financial statements should be read in conjunction with our 2008 Annual
Financial Statements, including, but not limited to, Note 10 - Subsequent
Events through June 8, 2009, and with our 2009 Interim Financial Statements,
including, but not limited to, Note 10 - Subsequent Events through June 15,
2009.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This
Amendment No. 1 to our Quarterly Report on Form 10-Q/A and the documents
incorporated herein by reference, if any, contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, an amended
(the Securities Act), and Section 21E of the Securities Exchange Act of 1934,
as amended (the Exchange Act). These forward-looking statements reflect our
current views with respect to future events or our financial performance, and
involve certain known and unknown risks, uncertainties and other factors,
including those identified below, which may cause our or our industrys actual
or future results, levels of activity, performance or achievements to differ
materially from those expressed or implied by any forward-looking statements or
from historical results. We intend such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include information concerning
our possible or assumed future results of operations and statements preceded
by, followed by, or that include the words may, will, could, would,
should, believe, expect, plan, anticipate, intend,
estimate,
predict, potential or similar expressions.
Forward-looking
statements are inherently subject to risks and uncertainties, many of which we
cannot predict with accuracy and some of which we might not even anticipate.
Although we believe that the expectations reflected in such forward-looking
statements are based upon reasonable assumptions at the time made, we can give
no assurance that such expectations will be achieved. Future events and actual
results, financial and otherwise, may differ materially from the results
discussed in the forward-looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements. We have no duty to update,
supplement or revise any forward-looking statements after the date of this
report or to conform them to actual results, new information, future events or
otherwise.
12
The
following factors, among others, could cause our or our industrys future
results to differ materially from historical results or those anticipated: (1)
the availability of additional funds to enable us to successfully pursue our
business plan; (2) the uncertainties related to the appeal and acceptance of
our proprietary method of play and our planned online products; (3) the success
or failure of our development of additional products and services; (4) our
ability to maintain, attract and integrate management personnel; (5) our
ability to secure suitable broadcast and sponsorship agreements; (6) our
ability to effectively market and sell our services to current and new
customers; (7) changes in the rules and regulations governing our business; (8)
the intensity of competition; and (9) general economic conditions. As a result
of these and other factors, we may experience material fluctuations in future
operating results on a quarterly or annual basis, which could materially and
adversely affect our business, financial condition, operating results and stock
price.
On
January 31, 2008, Innovative Consumer Products, Inc. (ICP), a public Nevada
shell corporation, acquired all of the outstanding capital stock of World
Series of Golf, Inc., a privately-held Nevada corporation (WSG-NV) engaged in
the sports entertainment industry.
The
acquisition was consummated pursuant to an Agreement and Plan of Merger, dated
January 31, 2008, whereby WSG-NV merged with and into WSG Acquisition, Inc.
(Acquisition Sub), a newly formed wholly-owned Nevada subsidiary. This
transaction is commonly referred to as a reverse acquisition in which all of
the outstanding capital stock of WSG-NV was effectively exchanged for a
controlling interest in ICP. This type of transaction is considered to be a
recapitalization rather than a business combination. Accordingly, for
accounting purposes, no goodwill or other intangible assets were recorded and
WSG-NV was considered to be the acquirer for financial reporting purposes. Our
historical financial statements for any period prior to January 31, 2008 are
those of WSG-NV. On February 1, 2008, we merged with Acquisition Sub in a short
form merger under Nevada law and changed our name to World Series of Golf,
Inc.
We
are a sports entertainment company that hosts amateur golf tournaments and
events and seeks to create branded products, games, media and entertainment
based on our proprietary golf tournament method of play which we call The
World Series of Golf. We believe our unique method of play enhances the
entertainment value of the skilled game of golf by incorporating elements of
strategy similar to those found in Texas Hold Em, a popular style of the
card game poker.
We
have held a three-day World Series of Golf tournament in Las Vegas, Nevada
during May in each of 2007, 2008 and 2009. Through our media partners, we
broadcast our tournaments on domestic and international television and via
other media outlets, as live events or as a produced series. We also sell
sponsorships for our live tournaments and television coverage. Beginning in the
second half of 2009, we plan to offer through our website,
www.worldseriesofgolf.com
,
a multi-player, online video game based on our unique method of play and a
social network/web community where interested players can communicate with one
another.
We
generate revenue primarily through sponsorship and advertising fees, brand
licensing fees and entry fees paid by the amateur players entering our
tournaments. Once we fully implement our online game strategy, management
expects revenue from subscription fees for online games and sponsorship fees to
become a material percentage of our total revenue.
Cash Position, Going Concern and Recent
Financing Activities
We
have prepared our condensed consolidated financial statements assuming that we
will continue as a going concern, which contemplates realization of assets and
the satisfaction of liabilities in the normal course of business. As of
September 30, 2008, we had an accumulated deficit of approximately $10.2
million, negative cash flows from operations and expect to incur additional
losses in the future as we continue to develop and grow our business. We have
funded our losses primarily through sales of common stock and warrants in
private placements and borrowings from related parties and other investors and
revenue provided by our sponsorships and advertising contracts, licensing
arrangements and tournaments. The further development of our business will
require capital. At September 30, 2008, we had a working capital deficit
(current assets less current liabilities) of approximately $2.3 million and
approximately $0.4 million in cash. Our operating expenses will consume a
material amount of our cash resources.
We
are still in the early stages of executing our business strategy. Our current
cash levels, together with the cash flows we generate from operating
activities, are not sufficient to enable us to execute our business strategy.
We require additional financing to execute our business strategy and to satisfy
our near-term working capital requirements. In the event that we cannot obtain
additional funds, on a timely basis or our operations do not generate
sufficient cash flow, we may be forced to curtail or cease our activities,
which would likely result in the loss to investors of all or a substantial
portion of their investment. We are actively seeking to raise additional
capital through the sale of shares of our capital stock to institutional
investors and through strategic investments. If management deems necessary, we
might also seek additional loans from related parties. However, there can be no
assurance that we will be able to consummate any of these transactions, or that
these transactions will be consummated on a timely basis or on terms favorable
to us.
13
Discussion of Cash Flows
We
used cash of approximately $1.3 million in our operating activities in the nine
months ended September 30, 2008, compared to $2.6 million in the nine months
ended September 30, 2007. Cash used in operating activities relates primarily
to funding net losses, partially offset by amortization of discount on debt and
share-based payments of consulting and other expenses. We expect to use cash
for operating activities in the foreseeable future as we continue our operating
activities.
Our
investing activities used cash of approximately $21,000 in the nine months
ended September 30, 2008 compared to $6,000 in the nine months ended September
30, 2007. Changes in cash from investing activities are due to purchases of
equipment.
Our
financing activities provided cash of approximately $1.5 million in the nine
months ended September 30,2008 compared to approximately $2.4 million in the
nine months ended September 30,2007. Changes in cash from financing activities
are due to proceeds from issuance of common stock and warrants and proceeds
from issuance of convertible notes payable and warrants.
Recent Financing Activities
In
May and June 2008, we issued convertible promissory notes in an aggregate
amount of $1,135,000. The notes bore interest at 6% per annum and are repayable
on or before October 31, 2008. The notes and related accrued interest were
convertible into shares of our common stock at $1.00 per share at the option of
the holder. The convertible promissory notes were issued together with warrants
with an exercise price of $1.05 per share, exercisable for three years. Terms
of the convertible notes and warrants provide that the conversion price of the
notes and the exercise price of the warrant will be reduced in the event of
subsequent financings at an effective price per share less than the conversion
or exercise price, subject to certain exceptions. In September 2008, the
conversion price of certain of the convertible notes in an aggregate principal
amount of $235,000 was reduced from $1.00 to $0.50. In addition, the conversion
price of certain of the warrants to purchase an aggregate of 235,000 shares of
common stock was reduced from $1.05 to $0.50. In December 2008, $900,000 of the
convertible notes were converted into common stock at $1.00 per share. The
remaining $235,000 convertible notes are currently in default.
In
February, March and May 2008, we raised net proceeds of approximately $380,000
through the issuance of 304,000 units at $1.25 per unit, each unit comprised of
one share of common stock and one three-year warrant to purchase one share of
common stock at an exercise price of $2.00 per share. In addition, in October
2008, we issued 120,000 shares of our common stock to a consultant in
connection with the offering.
Going Concern
In
our Annual Report on Form 10-K for the year ended December 31, 2008, our
independent auditors included an explanatory paragraph in its report relating
to our consolidated financial statements for the years ended December 31, 2008 and
2007, which states that we have incurred negative cash flows from operations
since inceptions and have a substantial accumulated deficit. These conditions
give rise to substantial doubt about our ability to continue as a going
concern. Our ability to expand operations and generate additional revenue and
our ability to obtain additional funding will determine our ability to continue
as a going concern. Our condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Summary
We
are dependent on existing cash resources and external sources of financing to
meet our working capital needs. Current sources of liquidity are insufficient
to provide for budgeted and anticipated working capital requirements. We will
therefore be required to seek additional financing to satisfy our working
capital requirements. No assurances can be given that such capital will be
available to us on acceptable terms, if at all. In addition to equity financing
and strategic investments, we may seek additional related party loans. If we
are unable to obtain any such additional financing or if such financing cannot
be obtained on terms acceptable to us, we may be required to delay or scale
back our operations, including the development of our online game, which would
adversely affect our ability to generate future revenues and may force us to
curtail or cease our operating activities.
To
attain profitable operations, managements plan is to execute its strategy of
(i) increasing the number of tournaments; (ii) leveraging the existing
tournament to generate ancillary revenue streams via Internet TV or other
venues; (iii) continuing the ongoing development of the online game; and (iv)
continuing to build sponsorship, advertising and related revenue, including
license fees related to the sale of branded merchandise. We will continue to be
dependent on outside capital to fund our operations for the foreseeable future.
Any financing we obtain may further dilute or otherwise impair the ownership
interest of our current stockholders. If we fail to generate positive cash
flows or fail to obtain additional capital when required, we could modify,
delay or abandon some or all of our plans. These factors, among others, raise
substantial doubt about our ability to continue as a going concern.
14
Consolidated Results of Operations
Percentage
comparisons have been omitted within the following table where they are not
considered meaningful. All amounts, except amounts expressed as a percentage,
are presented in thousands in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Change
|
|
Nine Months Ended
September 30,
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
(RESTATED)
|
|
2007
(RESTATED)
|
|
$
|
|
%
|
|
2008
(RESTATED)
|
|
2007
(RESTATED)
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sponsorship and advertising
|
|
$
|
100
|
|
$
|
|
|
$
|
100
|
|
|
|
|
$
|
964
|
|
$
|
783
|
|
$
|
181
|
|
23
|
%
|
|
Licensing
|
|
|
95
|
|
|
|
|
|
95
|
|
|
|
|
|
892
|
|
|
|
|
|
892
|
|
|
|
|
Player entry fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
543
|
|
|
261
|
|
|
282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
195
|
|
|
|
|
|
195
|
|
|
|
|
|
2,399
|
|
|
1,044
|
|
|
1,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
27
|
|
|
72
|
|
|
(45
|
)
|
(63
|
)%
|
|
|
2,698
|
|
|
3,014
|
|
|
(316
|
)
|
(10
|
)%
|
|
Sales and marketing
|
|
|
217
|
|
|
853
|
|
|
(636
|
)
|
(75
|
)%
|
|
|
1,133
|
|
|
1,297
|
|
|
(164
|
)
|
(13
|
)%
|
|
General and administrative
|
|
|
383
|
|
|
232
|
|
|
151
|
|
65
|
%
|
|
|
1,428
|
|
|
670
|
|
|
758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
627
|
|
|
1,157
|
|
|
(530
|
)
|
(46
|
)%
|
|
|
5,259
|
|
|
4,981
|
|
|
278
|
|
6
|
%
|
|
Interest expense
|
|
|
(728
|
)
|
|
(30
|
)
|
|
(698
|
)
|
|
|
|
|
(1,077
|
)
|
|
(53
|
)
|
|
(1,024
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,160
|
)
|
$
|
(1,187
|
)
|
$
|
27
|
|
2
|
%
|
|
$
|
(3,937
|
)
|
$
|
(3,990
|
)
|
$
|
53
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparison of the
Three and Nine Months Ended September 30, 2008 to the Three and Nine Months
Ended September 30, 2007
Restatement
.
Subsequent to issuance of the September 30, 2008 condensed consolidated
financial statements (the 2008 Interim Financial Statements), our management
concluded that it was necessary to restate the 2008 Interim Financial
Statements to correct for errors. These errors included non-recognition of
$450,000 of sales and marketing expense and prepaid expense of $150,000,
accounting errors relating to $236,000 in revenue and other errors, primarily
with regard to cut-off related to cost of sales which totaled approximately
$758,000. The accompanying 2008 Interim Financial Statements for the three and
nine months ended September 30, 2008 have been restated to give effect to
correction of these and other errors (primarily with regard to cut-off) as well
as revision of classification, which together have the result of decreasing
total assets by approximately $780,000 and increasing total liabilities and
total stockholders deficit by approximately $673,000 and $1.5 million,
respectively, and increasing net loss for the three and nine months ended
September 30, 2008 by approximately $930,000 and $1.7 million, respectively,
with an increase to net loss per share of approximately $0.04 and $0.09 per
share, respectively.
In
addition, subsequent to the issuance of the September 30, 2007 condensed
consolidated financial statements (the 2007 Interim Financial Statements),
our management concluded that it was necessary to restate the 2007 Interim
Financial Statements to correct for errors. These errors were primarily with
regard to inappropriate revenue recognition of $0.2 million for the three and
nine months ended September 30, 2007, inappropriate capitalization of
tournament signage of approximately $175,000, net of depreciation expense of
approximately $45,000, inappropriate recording of $1.4 million of general and
administrative expense relating to share-
15
based
compensation, and non-recognition of $800,000 of sales and marketing expense
relating to share-based compensation. The accompanying 2007 Interim Financial
Statements have been restated to give effect to correction of these and other
errors, primarily with regard to cut-off, which together have the effect of
decreasing revenue for the three and nine months ended September 30, 2007 by
approximately $520,000 and $126,000, respectively and decreasing net loss for
the three and nine months ended September 30, 2007 by approximately $1.8
million and $450,000, respectively, with a decrease of $0.30 and $0.36 in net
loss per share, respectively.
Revenue
. We
generate revenue primarily through a combination of (i) the sale of
sponsorships and advertising in connection with our tournaments, (ii) the
license of our proprietary marks/brands, and (iii) entry fees paid by the
players entering our golf tournaments. During 2008, a significant portion of
our revenue was derived from a small number of customers, as follows (as a
percentage of total revenue):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
Custom
Group, Ltd.
|
|
|
49
|
%
|
|
0
|
%
|
|
37
|
%
|
|
0
|
%
|
Pocket
Kings, Ltd.
|
|
|
51
|
%
|
|
0
|
%
|
|
17
|
%
|
|
0
|
%
|
The Mirage
Casino Hotel
|
|
|
0
|
%
|
|
39
|
%
|
|
19
|
%
|
|
39
|
%
|
Revlon
Consumer Corp.s Mitchum
|
|
|
0
|
%
|
|
18
|
%
|
|
0
|
%
|
|
18
|
%
|
Blue Ocean
Worldwide
|
|
|
0
|
%
|
|
13
|
%
|
|
0
|
%
|
|
13
|
%
|
Other
|
|
|
0
|
%
|
|
30
|
%
|
|
27
|
%
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
2008 and 2007, approximately 70% and 100%, respectively, of our annual revenue
was earned in the second quarter of the year due to the fact that we hold our
tournament during the month of May.
Sponsorship
and advertising revenue
. Sponsorship and advertising
revenue is comprised of in-kind barter and trade revenue and advertising
revenue from our sponsors. We record barter and in-kind revenue at gross, and
record the related sponsorship expenses to cost of sales when used. Revenue
from our sponsorship partners increased in the three and nine months ended
September 30, 2008 compared to the three and nine months ended September 30,
2007.
Sponsorship
and advertising revenue in the third quarter of 2008 was comprised of the
european production rights portion of our contract with Pocket Kings, Ltd.
During the nine months ended September 30, 2008, we recognized revenue of
approximately $454,000 related to our sponsorship and advertising package with
The Mirage Casino and Hotel and $395,000 related to our contract with Pocket
Kings, Ltd. Sponsorship and advertising revenue in the three and nine months
ended September 30, 2007 primarily represented the fair value of our
sponsorship and advertising package with The Mirage, which we recorded at
$405,000, $188,000 for our sponsorship package with Mitchum (through Van
Wagner, a sales agent), and $134,000 in additional barter revenue recorded in
trade for vendor credits.
Licensing
revenue
. During the three and nine months ended
September 30, 2008, we recorded revenue related to our licensing contract with
the Custom Group. There was no licensing revenue recorded during 2007.
Player
entry fees revenue.
Player entry fees revenue is
comprised of the tournament entry fees paid by the amateur players in our live
events, which were $10,000 per player for our 2007 and 2008 events. Revenue
related to player entry fees is recorded during the second quarter as the
tournament takes place in May. We record player entry fees revenue on a net
basis, in that we do not record gifted or sponsored buy-ins to player entry
fees revenue with an offset to expense. Revenue from player entry fees
increased in the nine months ended September 30, 2008 compared to the nine
months ended September 30, 2007. In 2008, we had 80 playing positions, with 54
players paying the full entry fee and 23 sponsored players. In 2007, the year
in which we held our inaugural event, we had 60 players, with 26 players paying
the full entry fee and 28 sponsored players.
Cost of revenue.
Cost of revenue primarily consists of barter transactions, player payout
(tournament prizes), media production costs and other event costs. Cost of
revenue decreased slightly in the three and nine months ended September 30,
2008 compared to the three and nine months ended September 30, 2007. Our
inaugural event was held in 2007, which resulted in costs being higher for the
tournament.
Sales and marketing.
Sales and marketing expense consists primarily of consulting, public relations,
sales materials and advertising. Sales and marketing decreased in the three and
nine months ended September 30, 2008 compared to the three and nine months
ended September 30, 2007 due to higher sales and marketing expenses in 2007
related to promotional activities related to the
16
inaugural
event and the inclusion during 2007 of $800,000 in non-cash sales and marketing
expense related to the fair value of shares of our common stock issued pursuant
to the Custom Group agreement. This was partially offset in the current year by
the inclusion in the three and nine months ended September 30, 2008 of $150,000
and $450,000, respectively, of fair value of shares of our common stock issued
to a consulting group which provided public relations and promotional services.
General and administrative
.
General
and administrative expense consists primarily of salaries and other
personnel-related expenses to support our tournament operations, non-cash
stock-based compensation for general and administrative personnel, professional
fees, such as accounting and legal, corporate insurance and facilities costs.
The significant increase in general and administrative expenses in the three
and nine months ended September 30, 2008 compared to the three and nine months
ended September 30, 2007 resulted primarily from an overall increase in 2008 as
compared to 2007 in consulting fees and salaries paid to administrative
personnel in support of tournament operations.
Interest
Expense
.
In 2007, we borrowed a total of $985,000
pursuant to a promissory note with the chairman of our board of directors. The
note bore interest at a rate of 12% per annum and matured on November 9, 2007.
An origination fee of $10,000 was recorded as debt discount and amortized over
the life of the debt, and 197,000 shares of common stock were also issued as an
origination fee and recorded at their fair value of $1.00 per share as
determined by our board of directors after taking into account recent stock
sales and amortized to interest expense during 2007.
In
January 2008, the note was replaced by a second promissory note in the
principal amount of $961,000, bearing interest at a rate of 12% per annum. This
new note was due on January 1, 2009. During the three and nine months ended
September 30, 2008, we recorded interest expense of approximately $28,000 and
$86,000 related to this note.
In
addition, in the second quarter of 2008, we borrowed an aggregate of $1,135,000
pursuant to convertible promissory notes, bearing interest at 6% per annum,
with a discount of $1.1 million that was recorded and is being amortized to
interest expense during 2008. We recognized interest expense related to the
amortization of the discount of approximately $0.7 million and approximately
$1.0 million during the three and nine months ended September 30, 2008,
respectively.
Off-Balance Sheet Arrangements
As
of September 30, 2008, we did not have any off-balance sheet arrangements, as
defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
ITEM
4T. CONTROLS AND PROCEDURES.
(a)
Disclosure Controls and Procedures. As described above in the Explanatory
Note to this Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the
quarter ended September 30, 2008 and Note 9 to our unaudited consolidated
financial statements, our management determined it was necessary to restate our
unaudited interim financial statements as of and for the three and nine months
ended September 30, 2008 and 2007.
As
stated in our Quarterly Report on Form 10-QSB for the period ended September
30, 2008 as originally filed, our management evaluated, under the supervision
and with the participation of our then Chief Executive Officer/Chief Financial
Officer (CEO/CFO), the effectiveness of our disclosure controls and procedures
as of September 30, 2008. Based on that initial evaluation, our then CEO/CFO
concluded that, as of September 30, 2008, our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934), were effective.
Subsequent
to that evaluation and in connection with the restatement and filing of this
Amendment No. 1 to our Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 2008, our management, under the supervision and with the
participation of our current CEO/CFO, reevaluated the effectiveness of our
disclosure controls and procedures and concluded that our disclosure controls
and procedures were not effective as of September 30, 2008 in light of the need
for the restatements reported herein. Under Item 9A(T) of our Annual Report on
Form 10-K for the year ended December 31, 2008 (the Annual Report), we
described the remediation efforts we are undertaking in order to correct the
deficiencies in our disclosure controls.
(b) Internal
Control over Financial Reporting. There were no changes in our internal
controls over financial reporting or in other factors during the fiscal quarter
ended September 30, 2008 that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting. As previously
reported in Item 9A(T) of the Annual Report, we still had numerous material
weaknesses in our internal control over financial reporting as of December 31,
2008. In the Annual Report we described the remediation efforts we have begun
to undertake in order to correct such material weaknesses.
17
PART II OTHER INFORMATION
ITEM
6. EXHIBITS
The
exhibits required by this item are listed on the Exhibit Index attached hereto.
18
SIGNATURES
In accordance with the requirements of the
Exchange Act, the registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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|
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Dated: August 5, 2009
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WORLD SERIES OF GOLF, INC.
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|
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By:
|
/s/ Joseph F. Martinez
|
|
|
|
|
|
Joseph F. Martinez
|
|
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Chief Executive Officer,
Chief Financial Officer,
|
|
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and Principal Accounting
Officer
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19
EXHIBIT
INDEX
|
|
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Exhibit
No.
|
|
Description
of Exhibit
|
|
|
|
|
|
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31.1
|
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Certification
of our Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
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32.1
|
|
Certification
of our Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
20
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