Fuse Medical, Inc. - Quarter Report: 2009 May (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: May 31, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Golf Rounds.com, Inc.

(Exact name of registrant as specified in its charter)

Delaware		59-1224913
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

111 Village Parkway, Building #2, Marietta, Georgia 30067
(Address of principal executive offices) (Zip Code)

770-951-0984

N/A
if changed since last report)

     Check 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 þ No o

     State the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: As of July 1, 2009, the issuer had 3,447,377 shares of common stock, par value $.01 per share, outstanding.

     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 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 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. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer   o (Do not check if a smaller reporting company)		Smaller reporting company þ

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):

Yes þ No o

 

 

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Operations

Condensed Consolidated Statements of Cash Flow

Notes to Condensed Consolidated Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4T. Controls and Procedures

PART II — OTHER INFORMATION

Item 1. Legal Proceedings*

Item 1A. Risk Factors*

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds*

Item 3. Defaults Upon Senior Securities*

Item 4. Submission of Matters to a Vote of Security Holders*

Item 5. Other Information*

Item 6. Exhibits

SIGNATURES

EXHIBIT INDEX

Exhibit 31.1

Exhibit 32.1

EX-31.1

EX-32.1

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY

		May 31, 2009				August 31,
		(Unaudited)				2008
Assets
Current assets:
Cash and cash equivalents		$	2,053,763			$	2,137,198
Prepaid expenses			21,500				27,000
Total current assets			2,075,263				2,164,198
Total assets		$	2,075,263			$	2,164,198
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses		$	565			$	3,828
Total current liabilities			565				3,828
Stockholders’ equity:
Common stock, $0.01 par value; 12,000,000 shares authorized, 3,447,377 issued and outstanding			34,473				34,473
Additional paid-in capital			4,892,639				4,892,639
Accumulated deficit			(2,852,414	)			(2,766,742	)
Total stockholders’ equity			2,074,698				2,160,370
Total liabilities and stockholders’ equity		$	2,075,263			$	2,164,198

See accompanying notes to condensed consolidated financial statements.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY

		For the Three Months Ended
		May 31,				May 31,
		2009				2008
Expenses:
General, administrative and other		$	25,858			$	28,330
Total operating expenses			25,858				28,330
Loss from operations			(25,858	)			(28,330	)
Other income:
Interest income			938				10,144
Total other income			938				10,144
Net loss		$	(24,920	)		$	(18,186	)
Net loss per common share — basic and diluted		$	(0.01	)		$	(0.01	)
Weighted average number of common shares outstanding — basic and diluted			3,447,377				3,447,377

See accompanying notes to condensed consolidated financial statements.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		For the Nine Months Ended
		May 31,				May 31,
		2009				2008
Expenses:
General, administrative and other		$	96,247			$	103,433
Total operating expenses			96,247				103,433
Loss from operations			(96,247	)			(103,433	)
Other income:
Interest income			10,575				47,532
Total other income			10,575				47,532
Net loss		$	(85,672	)		$	(55,901	)
Net loss per common share — basic and diluted		$	(0.02	)		$	(0.02	)
Weighted average number of common shares outstanding — basic and diluted			3,447,377				3,447,377

See accompanying notes to condensed consolidated financial statements.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY

		For the Nine Months Ended
		May 31,				May 31,
		2009				2008
Cash flows from operating activities:
Net loss		$	(85,672	)		$	(55,901	)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses			5,500				(5,810	)
(Decrease) increase in accounts payable and accrued expenses			(3,263	)			388
Net cash used in operating activities			(83,435	)			(61,323	)
Net decrease in cash and cash equivalents			(83,435	)			(61,323	)
Cash and cash equivalents at beginning of period			2,137,198				2,204,485
Cash and cash equivalents at end of period		$	2,053,763			$	2,143,162

See accompanying notes to condensed consolidated financial statements.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY

NOTE 1 — BASIS OF PRESENTATION

(A) Interim Financial Statements

The accompanying unaudited condensed consolidated balance sheet of Golf Rounds.com, Inc. and its wholly owned subsidiary, DPE Acquisition Corp. (collectively, the “Company”), as of May 31, 2009, and the unaudited condensed consolidated statements of operations for the three and nine months ended May 31, 2009 and 2008 and the unaudited condensed consolidated statements of cash flows for the nine months ended May 31, 2009 and 2008 reflect all material adjustments which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the year-end audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended August 31, 2008, as filed with the Securities and Exchange Commission on November 7, 2008.

The results of operations for the three and nine months ended May 31, 2009 and 2008 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other period.

(B) Principles of Consolidation

The condensed consolidated financial statements include the accounts of Golf Rounds.com, Inc. and its wholly owned subsidiary DPE Acquisition Corp. (formed on September 2, 2003). Intercompany transactions and accounts have been eliminated in consolidation.

(C) Loss Per Share

Net loss per common share is based on the weighted average number of common shares outstanding during the applicable period. Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period. Excluded from the net loss per share calculations for the nine months ended May 31, 2009 and 2008 are contingently issuable shares of 845,251 and 815,251, respectively, which, if included, would have an anti-dilutive effect.

(D) Use of Estimates

In preparing condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.

(E) Fair Value of Financial Instruments

Cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses are recorded in the financial statements at cost, which approximates fair market value because of the short-term maturity of those instruments.

(F) Recently Adopted or Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 became effective for the Company on September 1, 2008, and accordingly, the Company has adopted this pronouncement. In February 2008, the FASB issued Staff Position No. 157-2 (“FSP 157-2”), which delays the effective date of SFAS 157 one year for all nonfinancial assets and nonfinancial liabilities, except those recognized or disclosed at fair value in the financial statements on a recurring basis.

SFAS No. 157 established a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 — observable inputs such as quoted prices in active markets.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2009 AND 2008
(Unaudited)

	•		Level 2 — inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.
	•		Level 3 — unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

The Company’s cash equivalents and short-term investments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level 1 of the fair value hierarchy include money market securities and high-quality liquid corporate and government debt securities. The assets and liabilities measured at fair value under SFAS 157 in the third quarter of fiscal 2009 did not have a material impact on our condensed consolidated financial statements as the securities were carried at similar values before the adoption of SFAS 157.

In May 2009, the FASB issued SFAS No. 165 “Subsequent Events.” This statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. This statement is effective for interim or annual financial periods ending after June 15, 2009. The Company believes that the adoption of the above recent pronouncement will not have a material effect on the Company’s results of operations, financial position, or cash flows.

GOLF ROUNDS.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2009 AND 2008
(Unaudited)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-looking statements

When used in this Report, words or phrases such as “will likely result,” “management expects,” “we expect,” “will continue,” “is anticipated,” “estimated” or similar expressions are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on any such forward-looking statements, each of which speak only at the date made. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. We have no obligation to publicly release the result of any revisions which may be made to any forward-looking statements to reflect anticipated or unanticipated events or circumstances occurring after the date of such statements. Forward-looking statements involve a number of risks and uncertainties including, but not limited to, general economic conditions, our ability to find a suitable company to effect a business combination with, competitive factors and other risk factors as set forth in Exhibit 99.1 of our Annual Report on Form 10-KSB for the year ended August 31, 2008.

The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes included in this Report.

Overview

General

Golf Rounds.com, Inc. (the “Company”) was incorporated in 1968 as a Delaware corporation, which is also authorized to conduct business in New Jersey and Georgia. Until the fourth quarter of fiscal 1992, the Company was engaged in the wholesale distribution of aluminum alloys, steel and other specialty metals under the name American Metals Service, Inc. In the fourth quarter of fiscal 1992, the Company liquidated its assets and did not conduct any business operations until May 1999. In May 1999, the Company acquired the assets of PKG Design, Inc., the developer of two (2) sports - related Internet websites: golfrounds.com and skiingusa.com. In connection with the acquisition of these websites, the Company changed its name to Golf Rounds.com, Inc.

In August 2001, the Company determined to cease operations of its golfrounds.com and skiingusa.com websites since continued maintenance of these websites was not a productive use of the Company’s resources.

On September 19, 2003, the Company and its wholly owned subsidiary, DPE Acquisition Corp., (formed on September 2, 2003), entered into an agreement and plan of reorganization and merger with Direct Petroleum Exploration, Inc. (“DPE”), which was not consummated. The Company continues to maintain the subsidiary for use in any other potential future acquisition. This subsidiary is currently inactive and has no operations.

Our Business Plan

Our current business plan is to serve as a vehicle for the acquisition of or merger or consolidation with another company (a “target business”). We intend to use our available working capital of $2,074,698 (as of May 31, 2009), capital stock, debt or a combination of these to effect a business combination with a target business which we believe has significant growth potential. The business combination may be with a financially stable, mature company or a company that is in its early stages of development or growth, which could include companies seeking to obtain capital and to improve their financial stability.

We will not restrict our search to any particular industry. Rather, we may investigate businesses of essentially any kind or nature and participate in any type of business that may, in our management’s opinion, meet our business objectives as described in this report. We emphasize that the description in this report of our business objectives is extremely general and is not meant to restrict the discretion of our management to search for and enter into potential business opportunities. We have not chosen the particular business in which we will engage and have not conducted any market studies with respect to any business or industry for you to evaluate the possible merits or risks of the target business or the particular industry in which we may ultimately operate. To the extent we enter into a business combination with a financially unstable company or an entity in its early stage of development or growth, including entities without established records of sales or earnings, we will become subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, to the extent that we effect a business combination with an entity in an industry characterized by a high level of risk, we will become subject to the currently unascertainable

GOLF ROUNDS.COM, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 2009 AND 2008
(Unaudited)

risks of that industry. An extremely high level of risk frequently characterizes certain industries that experience rapid growth. In addition, although we will endeavor to evaluate the risks inherent in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

Critical Accounting Policies and Use of Estimates

The preparation of our condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue and expense, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and various other assumptions that we believe 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 that it is important for investors to be aware that there is a particularly high degree of subjectivity involved in estimating the fair value of stock-based compensation, that the expenses recorded for stock-based compensation in the Company’s financial statements may differ significantly from the actual value realized by the recipients of the stock awards, and that the expenses recorded for stock-based compensation will not result in cash payments from Golf Rounds.com.

Recently Adopted or Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 became effective for the Company on September 1, 2008, and accordingly, the Company has adopted this pronouncement. In February 2008, the FASB issued Staff Position No. 157-2 (“FSP 157-2”), which delays the effective date of SFAS 157 one year for all nonfinancial assets and nonfinancial liabilities, except those recognized or disclosed at fair value in the financial statements on a recurring basis.

SFAS No. 157 established a three-tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows:

•

Level 1 — observable inputs such as quoted prices in active markets.

	•        Level 2 — inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.
	•        Level 3 — unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

The Company’s cash equivalents and short-term investments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of investments that are generally classified within Level 1 of the fair value hierarchy include money market securities and high-quality liquid corporate and government debt securities. The assets and liabilities measured at fair value under SFAS 157 in the third quarter of fiscal 2009 did not have a material impact on our condensed consolidated financial statements as the securities were carried at similar values before the adoption of SFAS 157.

The Company’s prepaid expenses, accounts payable and accrued expenses are recorded in the financial statements at cost, which approximates fair market value because of the short-term maturity of those instruments.

In May 2009, the FASB issued SFAS No. 165 “Subsequent Events.” This statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. This statement is effective for interim or annual financial periods ending after June 15, 2009. The Company believes that the adoption of the above recent pronouncement will not have a material effect on the Company’s results of operations, financial position, or cash flows.

Results of Operations

We have had no revenues (other than interest and dividend income) since 1992 and will not generate any revenues (other than interest and dividend income) until, at the earliest, the completion of a business combination.

Three months ended May 31, 2009 compared to three months ended May 31, 2008

Other income (interest) for the three months ended May 31, 2009 decreased to $938 from $10,144 for the three months ended May 31, 2008, a decrease of 90.8%. The decrease in interest income was due to the lower rates of interest paid to us on our U.S. Treasury Securities and money market fund investments, which are reported as cash and cash equivalents.

General, administrative and other expenses for the three months ended May 31, 2009 decreased to $25,858 from $28,330 for the three months ended May 31, 2008, a decrease of 8.7%. The decrease was due to lower directors and officers liability insurance expenses of $1,860, legal expenses of $896, dues and subscriptions of $134, office expenses of $101, offset by higher stockholder service expenses of $500, bank charges of $18 and taxes and license expenses of $1.

General, administrative and other expenses for the three months ended May 31, 2009 consisted of payroll expenses of $8,132, directors and officers liability insurance expenses of $7,000, audit and accounting fee expenses of $2,750, legal expenses of $2,737, office sharing expenses of $2,700, stockholder service expenses of $2,000, taxes and license expenses of $515, and bank charges of $24.

Nine months ended May 31, 2009 compared to nine months ended May 31, 2008

Other income (interest) for the nine months ended May 31, 2009 decreased to $10,575 from $47,532 for the nine months ended May 31, 2008, a decrease of 77.8%. The decrease in interest income was due to the lower rates of interest paid to us on our U.S. Treasury Securities and money market fund investments, which are reported as cash and cash equivalents.

General, administrative and other expenses for the nine months ended May 31, 2009 decreased to $96,247 from $103,433 for the nine months ended May 31, 2008, a decrease of 6.9%. The decrease was due to lower directors and officers liability insurance expenses of $3,690, legal expenses of $2,457, taxes and licenses of $1,457, office expenses of $101, dues and subscriptions of $27, bank charges of $18, and franchise taxes of $5, offset by higher stockholder service expenses of $487 and postage expenses of $82.

General, administrative and other expenses for the nine months ended May 31, 2009 consisted of payroll expenses of $24,280, directors and officers liability insurance expenses of $23,500, legal expenses of $16,759, audit and accounting fee expenses of $15,500, office sharing expenses of $8,100, stockholder service expenses of $5,019, taxes and license expenses of $2,638, dues and subscriptions of $279, postage expenses of $82, and bank charges of $90.

Liquidity and capital resources

General

As of May 31, 2009, cash and cash equivalents were $2,053,763, which includes $2,052,844 invested in a money market with an effective yield of 0.03% and $919 in a non-interest bearing checking account. As of May 31, 2009, working capital was $2,074,698.

The Company’s total liabilities at May 31, 2009 were $565, which was comprised of accrued taxes and licenses of $515 and payroll liabilities of $50.

Cash flows used in operating activities for the nine months ended May 31, 2009 of $83,435 stems from both a net loss of $85,672 and a decrease in accounts payable and accrued expenses of $3,263, offset by a decrease in prepaid expenses of $5,500.

Currently, our working capital is sufficient to last for more than 24 months. If we acquire a business, our-post acquisition capital needs may be more substantial and our current capital resources may not be sufficient to meet our requirements. We currently believe that if we need capital in the future, we will be able to raise capital through sales of equity and institutional or investor borrowings, although we cannot assure you we will be able to obtain such capital. We anticipate that after any acquisition we may complete in accordance with our business plan, we will use substantially all our then existing working capital to fund the operations of the acquired business. In addition, we believe that the new business operations will require additional capital to fund operations and the further development and marketing of the acquired technologies.

Contractual obligations

The Company has no material contractual obligations other than those relating to employment as described in our Annual Report on Form 10-KSB for the year ended August 31, 2008.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES.

Disclosures and Procedures

Pursuant to Rules adopted by the Securities and Exchange Commission, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules. This evaluation was done as of the end of the period covered by this report under the supervision and with the participation of the Company’s principal executive officer (who is also the principal financial officer). There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the evaluation. Based upon that evaluation, he believes that the Company’s disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, summarized and processed timely. The principal executive officer is directly involved in the day-to-day operations of the Company.

This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Quarterly Report.

Changes in Internal Controls

There was no change in the Company’s internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 6. EXHIBITS.

Exhibit 31.1		Section 302 Certification of President and Treasurer
Exhibit 32.1		Section 906 Certification

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.