SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: (DATE OF EARLIEST EVENT REPORTED) : APRIL 14, 2003
COMMISSION FILE NO. 0-49756
THE WORLD GOLF LEAGUE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 98-0201235
- --------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
258 EAST ALTAMONTE DRIVE, ALTAMONTE SPRINGS, FLORIDA 32701
- -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(407) 331-6272
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(ISSUER TELEPHONE NUMBER)
NOVUS LABORATORIES, INC.
1255 W. Pender Street
Vancouver, B.C., Canada V6E 2V
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FORMER NAME AND ADDRESS
This Form 8-K is an amendment to the Form 8-K filed on February 20, 2003,
April 16, 2003, and June 6, 2003 and provides audited financial statements
of The World Golf League, Inc., a Florida corporation as well as proforma
financial statements.
ITEM 1. CHANGES IN CONTROL OF THE REGISTRANT.
As a result of the acquisition of The World Golf League, Inc., a Florida
corporation ("World Golf"), the control of the Registrant shifted to the former
shareholders of World Golf. The following individual will exercise control of
the Registrant.
Name No. of shares Percentage
- ---- ------------- ----------
Michael S. Pagnano 50,662,520 (1) 26.1%
(1) Includes 3,443,151 shares held of record by Maryann R. Pagnano, the wife of
Michael S. Pagnano, our chief executive officer.
ITEM 2. ACQUISITION OF DISPOSITION OF ASSETS.
On April 15, 2003, the Registrant acquired 84% of the issued and
outstanding shares of World Golf in exchange for 100,520,356 shares of the
Registrant's common stock. Upon 100% shareholder approval of World Golf which is
anticipated, there will be 200,000,000 shares of the Registrant's common stock
outstanding. In connection with the Share Exchange, 81,000,000 shares of
restricted common stock were cancelled by the former Novus Laboratories
shareholders pursuant.
DESCRIPTION OF THE BUSINESS
World Golf is a three-year-old Florida corporation based in Altamonte
Springs, Florida which markets its "Play for Pay" concept directly and through
licensees in the United States and 27 international venues. World Golf was
founded in 1999 to capitalize on the largest participation sport in the world,
26.5 million golfers in the United States and over 60 million worldwide. The
World Golf concept (average golfers playing for substantial prize money with
full handicap) has received tremendous national publicity including the Golf
Channel, Sports Illustrated and several major market news publications. This is
testimony to the tremendous popularity of the World Golf concept. In three short
years World Golf has attracted player interest from all over the world.
Participants in World Golf events have included NFL Hall of Famers Lawrence
Taylor and Rickey Jackson, NHL Hall of Famer Phil Esposito and a host of pro
golfers including Fulton Allem.
World Golf revenues were previously estimated at $2,200,000 in 2002 and
$11,000,000 in 2003. These projections have been modified based on current
market conditions and the company's inability to raise sufficient capital during
the first quarter and second quarter of 2003 to allow it to achieve its
previously stated objectives.
DESCRIPTION OF PRINCIPAL PRODUCTS & SERVICES
World Golf satisfies a need for the average golfer (which represents 99.7%
of the total golf population) to compete in professional-like conditions with
the excitement of prize money. During its market research, World Golf concluded
that given the opportunity to "play for pay," the vast majority of golfers would
participate. Amateur status was not a deciding factor since most of these
players would never play in an USGA or R&A-sanctioned event.
The golfers first compete in local one-day qualifying events, with $105 as
the 2003 membership fee. Twenty five percent of the field advance to the
regional level competition. The top 400 regional qualifiers move on to the
National Final tournament in eight flights to potentially compete for over $1
million dollars (prize money is calculated as 20% of all dues received) in a
54-hole tour-like event. World Golf will organize one national event for each
100,000 members. World Golf also plans to hold a World Championship Ryder
Cup-like event in 2004.
COMPETITIVE BUSINESS CONDITIONS
Currently World Golf is the only organization in the world offering its
concept to the average golfer. There are many mini tours around the world for
scratch golfers who play for prize money. Additionally, there are several
handicapped events offered by mini tours where the player pays a large entrance
fee ($350+) and receives prize money for that event only. World Golf is the only
known entity to provide average golfers a chance to "Play for Pay" in
professional like conditions for an annual membership fee.
NO DEPENDENCE ON ONE OR A FEW CUSTOMERS
World Golf markets to 26.5 million golfers in the United States and 30
million additional golfers internationally. This is accomplished via direct
marketing from World Golf corporate or several licensing agreements in place in
the United States and international markets. The entire worldwide golf
population is a potential customer for the World Golf product. Each golfer is
created equally due to the handicapping system employed by World Golf, which
makes our reliance on a certain segment of the golf population non-existent. For
example the USGA only sponsors events for golfers with a 6 handicap or better.
This only represents 2% of the total golf population.
PATENTS, TRADEMARKS & LICENSES
World Golf has applied for and received a trademark for its logo. This TM
was published on July 22, 2002 in the US Patent & Trademark office. World Golf
has granted marketing licenses to approximately 15 United States markets and 8
international markets. World Golf plans to grant marketing licenses to a total
of 57 United States markets and 27 international markets. The WGL Inc. plans to
retain in house marketing rights to several of the key markets including
Florida, California, Texas, Pennsylvania, Michigan and New York.
NEED FOR GOVERNMENT APPROVAL
World Golf does not need any government approval to market its concept.
RESEARCH & DEVELOPMENT OVER PAST TWO YEARS
World Golf has conducted extensive market research over the past two years
into the feasibility of its concept. This research was conducted in many
different fashions. It included trade shows, Internet response measurement,
direct mail, telemarketing, golf industry marketing data (National Golf
Foundation) and 30 second and 30-minute infomercial response measurement. The
cost of this research has exceeded approximately $500,000.
EMPLOYEES
World Golf currently employs 3 full time personnel and 23 licensees.
Additionally, World Golf uses several outsourced support services. This includes
advertising, graphics design and printing, member fulfillment, public relations,
web development, accounting and legal. The WGL Inc. plans on adding several key
staff members in 2003. This includes marketing, finance/administration, golf
operations, licensee support and customer service.
DESCRIPTION OF PROPERTY
World Golf currently occupies 2,500 square foot of office space in
Altamonte Springs, Florida. This space is class A and is on a month-to-month
lease. The cost of this space, all-inclusive is $3,200 per month. World Golf
also has an option for 1,500 square foot of additional space in the same
facility. In addition, World Golf has signage rights on the building, which
includes a 6' by 4' neon logo facing a main artery, which provides exposure to
86,000 vehicles daily.
LEGAL PROCEEDINGS
World Golf currently has one pending lawsuit filed in Seminole County Court
- - Sanford, Florida. This proceeding was filed on November 18, 2002 and is
between the Florida Attorney General Office (plaintiff) and The World Golf
League, Inc. (defendant). The verified complaint alleges misleading and
deceptive advertising. The AG's office is seeking a $10,000 penalty for each
misleading advertisement. World Golf has retained counsel and believes it is
close to making a settlement with the AG's office. It is the opinion of World
Golf counsel that we did not violate the Florida Statutes cited. . The Company
is in negotiations with the State of Florida, Office of Attorney General whereby
the Company will agree to set aside proceeds it receives for payment to
consumers to whom pre-existing indebtedness is owed. In addition, proceeds are
anticipated to be designated for consumers to whom prospective awards shall be
made in association with tournaments to be held by the Company.
We are not involved in any other material pending legal proceedings, other
than routine litigation incidental to our business, to which we are a party or
of which any of our property is subject.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION.
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements
specified in the following information represent estimates of future events and
are subject to uncertainty as to possible changes in economic, legislative,
industry, and other circumstances. As a result, the identification and
interpretation of data and other information and their use in developing and
selecting assumptions from and among reasonable alternatives require the
exercise of judgment. To the extent that the assumed events do not occur, the
outcome may vary substantially from anticipated or projected results, and,
accordingly, no opinion is expressed on the achievability of those
forward-looking statements. No assurance can be given that any of the
assumptions relating to the forward-looking statements specified in the
following information are accurate, and we assume no obligation to update any
such forward-looking statements.
Results of Operations.
Revenues. For the year ended December 31, 2002, we realized revenues of
$320,002 composed of membership fee revenues of $43,150 and license fee revenues
of $276,852. This compared with revenues of $266,253 for the year ended December
31, 2001 composed of membership fee revenues of $76,253 and license fee revenues
of $190,000. Actual revenue was substantially lower from previous estimates
based on the accounting of licensee revenue. The Company realized significantly
less revenue than previously stated in its unaudited financial statements as the
Company internally accounted for licensee revenue based on the cash basis of
accounting rather than accounting for the revenue based on the installment
method of accounting. The Company had also issued shares of its common stock in
conjunction with its license agreements which were internally accounted for as
license fee revenue, but was actually additional paid in capital raised through
the issuance of common stock and accounted for as such in the accompanying
financial statements.
Costs and Expenses. For the year ended December 31, 2002, costs and
expenses were $1,286,115 composed of consulting expense of $289,265, tournament
expense of $474,358, advertising expense of $143,197, settlement expense of
$192,000, other general and administrative expense of $160,915, and interest
expense of $26,380. This was a substantial decrease in costs and expenses from
the year ended December 31, 2001, when costs and expenses totaled $3,160,173.
Such costs and expenses were composed of consulting expense of $1,485,524,
tournament expense of $902,639, advertising expense of $491,329, other general
and administrative expense of $255,681, and interest expense of $25,000. The
majority of the expenses in 2001 were non cash transactions and were in fact
Company shares issued at a value of $1.00 per share to various consultants,
celebrities and a spokesman.
Net loss decreased 1,927,807 or 67% from $2,893,920 for the year ended
December 31, 2001 to $966,113 for the year ended December 31, 2002. The decrease
in net loss is principally due to the decrease in costs and expenses.
Net loss per share decreased from $.39 for the year ended December 31, 2001
to $.12 for the year ended December 31, 2002.
Liquidity and Capital Resources. Our total current assets were $254,248 as
of December 31, 2002. We have a working capital deficit of $1,218,195 at
December 31, 2002.
Our total current liabilities were $1,472,443 as of December 31, 2002,
which is comprised of accounts payable of $923,747, accrued liabilities of
$64,696, note payable to stockholder of $230,000, and deferred license fee
revenue of $254,000.
Management has negotiated an agreement with shareholders of the Company
which were formerly shareholders of Novus Laboratories, Inc., whereby the
Company agreed not to cancel shares in return for receiving monetary
consideration. The Company is in negotiations with the State of Florida, Office
of Attorney General whereby the Company will agree to set aside proceeds it
receives for payment to consumers to whom pre-existing indebtedness is owed. In
addition, proceeds are anticipated to be designated for consumers to whom
prospective awards shall be made in association with tournaments to be held by
the Company. The Company needs to raise approximately $1,000,000 in order to pay
the previous player liabilities and host the rescheduled 2002 National Event. In
addition to meeting the obligations of the past tournament, we need to raise
additional capital to host a future tournament. Such additional capital may be
raised through public or private financing as well as borrowings and other
sources. We cannot guaranty that additional funding will be available on
favorable terms, if at all. If adequate funds are not available, then our
ability to maintain our operations will be in jeopardy. We do not have any
current commitments for financing, other than those mentioned above.
Risk Factors.
Dependence Upon External Financing. It is imperative that we raise capital
to stay in business. We require capital of approximately $1,000,000 to satisfy
the obligations of our past tournament and have sufficient capital to host the
2002 tournament. If we are unable to obtain debt and/or equity financing upon
terms that our management deems sufficiently favorable, or at all, it would have
a materially adverse impact upon our ability to pursue our business strategy and
maintain our current operations.
Risk That We Will Be Unable to Collect Monies Owed from Licensees. Revenues
generated from licensees are expected to be our largest source of revenue. In
the event the Company is unable to collect monies owed from licensees, it is
unlikely that it will be able to continue its business model and the Company
will likely be forced to curtail operations.
Risk That We Will Be Unable to Attract New Members. In order for the
Company to be successful in its operations, it will need to attract new members.
In the event the Company is unable to attract new members, it is unlikely that
the Company will be able to continue its business model and the Company will
likely be forced to curtail operations.
Our Auditors Have Expressed Substantial Doubt About Our Ability to Continue
As a Going Concern. Ham, Langston & Brezina, LLP, in their independent auditors'
report, have expressed "substantial doubt" as to our ability to continue as a
going concern based on operating losses we have incurred since inception. Our
financial statements do not include any adjustments that might result from the
outcome of that uncertainty. The going concern qualification is also described
in Note 2 of the notes to our financial statements.
ITEM 5. OTHER EVENTS.
As a result of the acquisition of World Golf and the change in focus of the
Registrant's business, the Registrant changed its name from Novus Laboratories,
Inc. to The World Golf League, Inc. and now trades under the new stock symbol
WGLF. In addition, the former directors and officers of Novus Laboratories, Inc.
resigned and the directors and officers of The World Golf League, Inc. became
the directors and officers of the Registrant. The new directors and officers are
as follows: Michael S. Pagnano-Chief Executive Officer and Director; William
Page-Director; and King Simmons-Director. In March 2003, the Company affected a
10:1 forward stock split.
Pursuant to the Share Exchange Agreement entered into between The World
Golf League, Inc. and Novus Laboratories, Inc., shareholders of Novus
Laboratories ("Novus Shareholders") agreed to raise the company a minimum of
$500,000 or they would cancel 30,000,000 post-split shares of their common
stock. The company and the Novus Shareholders have amended the terms of the
Share Exchange Agreement to provide that a portion of the proceeds received from
the sale of the shares by the Novus Shareholders will be delivered to the
company in lieu of canceling the shares. In addition, the Share Exchange
Agreement stated that in the event $1,000,000 was not raised by the Novus
Shareholders, shareholders of The World Golf League would receive an additional
30,000,000 post-split shares on a pro rata basis as their original shares were
issuable pursuant to the Share Exchange Agreement. As $1,000,000 has not been
raised, The World Golf League will be issuing an additional 30,000,000 shares of
its common stock in the near future.
The World Golf League needs to raise substantial capital to sustain its
operations and in order to host a tournament.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements of The World Golf League, Inc.
(a) Financial Statements of Businesses Acquired
(b) Pro Forma Financial Information
(c) Exhibits:
2.1 Exchange Agreement(1)
(1) Filed as an exhibit to the Form 8-K filed on February 20, 2003.
Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The World Golf League, Inc.
June 30, 2003
/s/ Michael S. Pagnano
- --------------------------------------------
Michael S. Pagnano
Chief Executive Officer
Financial Statements
THE WORLD GOLF LEAGUE, INC.
----------
FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT ACCOUNTANTS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
THE WORLD GOLF LEAGUE, INC.
TABLE OF CONTENTS
----------
PAGE(S)
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Report of Independent Accountants 1
Financial Statements:
Balance Sheet as of December 31, 2002 and 2001 2
Statement of Operations for the years ended
December 31, 2002 and 2001 3
Statement of Cash Flows for the years ended
December 31, 2002 and 2001 4
Statement of Stockholders' Deficit for the
years ended December 31, 2002 and 2001 5
Notes to Financial Statements 6-13
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of
The World Golf League, Inc.
We have audited the accompanying balance sheet of The World Golf League, Inc.
(the "Company") as of December 31, 2002 and 2001, and the related statements of
operations, stockholders' deficit and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The World Golf League, Inc. as
of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has incurred recurring losses and is in a negative
working capital position and a stockholders' deficit position. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Houston, Texas
June 27, 2003
-1-
THE WORLD GOLF LEAGUE, INC.
BALANCE SHEET
DECEMBER 31, 2002 AND 2001
----------
ASSETS 2002 2001
- ----------------------------------------------------- ------------ ------------
Current assets:
Cash and cash equivalents $ 248 $ -
License fee receivable, current 254,000 -
------------ ------------
Total current assets 254,248 -
Property and equipment, net 8,399 7,315
License fee receivable, net of current portion 229,000 -
Other assets 3,800 500
------------ ------------
Total assets $ 495,447 $ 7,815
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -----------------------------------------------------
Current liabilities:
Accounts payable $ 923,747 $ 802,001
Book overdraft - 26,507
Accrued liabilities 64,696 40,590
Note payable to stockholder 230,000 270,000
Deferred license fee revenue, current 254,000 -
------------ ------------
Total current liabilities 1,472,443 1,139,098
Deferred license fee revenue, net of current portion 229,000 -
------------ ------------
Total liabilities 1,701,443 1,139,098
Stockholders' deficit:
Common stock; $0.001 par value; 100,000,000 shares
authorized; 8,467,951 and 7,621,551 shares issued
and outstanding at December 31, 2002 and 2001,
respectively 8,468 7,622
Additional paid-in capital 3,587,432 2,696,878
Accumulated deficit (4,801,896) (3,835,783)
------------ ------------
Total stockholders' deficit (1,205,996) (1,131,283)
------------ ------------
Total liabilities and stockholders' deficit $ 495,447 $ 7,815
============ ============
The accompanying notes are an integral
part of these financial statements.
-2-
THE WORLD GOLF LEAGUE, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
----------
2002 2001
----------- ------------
Revenue:
Membership fee revenue $ 43,150 $ 76,253
License fee revenue 276,852 190,000
----------- ------------
Total revenue 320,002 266,253
----------- ------------
Costs and expenses:
Consulting expense 289,265 1,485,524
Tournament expense 474,358 902,639
Advertising expense 143,197 491,329
Settlement expense 192,000 -
Other general and administrative expense 160,915 255,681
Interest expense 26,380 25,000
----------- ------------
Total costs and expenses 1,286,115 3,160,173
----------- ------------
Net loss $ (966,113) $(2,893,920)
=========== ============
Weighted average shares outstanding 8,183,147 7,404,449
=========== ============
Loss per share (basic and fully diluted) $ (0.12) $ (0.39)
=========== ============
See accompanying notes to financial statements.
-3-
THE WORLD GOLF LEAGUE, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
----------
2002 2001
---------- ------------
Cash flows from operating activities:
Net loss $(966,113) $(2,893,920)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 1,514 1,340
Common stock issued for services - 1,000,000
Common stock issued as settlement expense 192,000 -
Changes in operating assets and liabilities:
Other assets (3,300) -
Accounts payable 121,746 695,335
Accrued liabilities 24,106 40,590
---------- ------------
Net cash used in operating activities (630,047) (1,156,655)
---------- ------------
Cash flows from investing activities:
Capital expenditures (2,598) -
---------- ------------
Net cash used in investing activities (2,598) -
---------- ------------
Cash flows from financing activities:
Proceeds from issuance of note payable-stockholder - 270,000
Payments on note payable-stockholder (40,000) -
Increase (decrease) in book overdraft (26,507) (54,095)
Proceeds from issuance of common stock 699,400 940,750
---------- ------------
Net cash provided by financing activities 632,893 1,156,655
---------- ------------
Increase in cash and cash equivalents 248 -
Cash and cash equivalents, beginning of year - -
---------- ------------
Cash and cash equivalents, end of year $ 248 $ -
========== ============
Supplemental disclosure of cash flow information:
Cash paid for interest expense $ 1,380 $ -
========== ============
Cash paid for income taxes $ - $ -
========== ============
Non-cash investing and financing activity:
Sale of licenses recorded on the installment method $ 483,000 $ -
========== ============
See accompanying notes to financial statements.
-4-
THE WORLD GOLF LEAGUE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
----------
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- ------- ---------- ------------ ------------
Balance at December 31, 2000 5,301,501 $ 5,302 $ 758,448 $ (941,863) $ (178,113)
Common stock issued for services 1,000,000 1,000 999,000 - 1,000,000
Common stock issued for cash in connection with
license agreements 100,000 100 99,900 - 100,000
Common stock issued for cash, net of offering costs 1,220,050 1,220 839,530 - 840,750
Net loss - - - (2,893,920) (2,893,920)
--------- ------- ---------- ------------ ------------
Balance at December 31, 2001 7,621,551 7,622 2,696,878 (3,835,783) (1,131,283)
Common stock issued for cash in connection with
license agreements 342,250 342 386,908 - 387,250
Common stock issued as a settlement 192,000 192 191,808 - 192,000
Common stock issued for cash 312,150 312 311,838 - 312,150
Net loss - - - (966,113) (966,113)
--------- ------- ---------- ------------ ------------
Balance at December 31, 2002 8,467,951 $ 8,468 $3,587,432 $(4,801,896) $(1,205,996)
========= ======= ========== ============ ============
See accompanying notes to financial statements.
-5-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS
----------
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------------
BACKGROUND
----------
The World Golf League, Inc. (the "Company") was founded in 1999 and is based in
Altamonte Springs, Florida. The Company has developed a "Play for Pay" concept,
whereby amateur golfers worldwide compete in various golf tournaments for an
opportunity to win actual prize money. The Company markets this concept
directly and through licensees in the United States and internationally.
USE OF ESTIMATES
------------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect reported amounts and related disclosures.
Actual results could differ from those estimates.
REVENUE RECOGNITION
--------------------
Annual membership fee and royalty revenue are recognized ratably over the year.
The Company enters into license agreements with third parties whereby the
licensee has the right to develop and manage the Company's marketing concept in
an exclusive territory in the United States or internationally. The license
agreements generally require an initial down payment and two equal annual
installment payments for the initial license fee and monthly royalty payments of
15% of gross revenue generated by the licensee.
The licensee must meet certain market penetration figures in its territory
annually as defined in the agreement. If the licensee does not meet the
performance requirements the licensee could forfeit half of the original license
fee or be required to invest an additional 15% of the original license fee to
renew the license for one year. If the licensee meets the performance criteria
the license automatically renews each year for life.
The Company recognizes the initial license fee as revenue using the installment
method of accounting because the initial license fee is usually collectible over
a two-year period and there is no reasonable basis for estimating the
receivable's collectibility. The initial license fee is not recognized as
revenue until all initial services, as required by the license agreement, have
been performed by the Company.
CONCENTRATIONS OF CREDIT RISK
--------------------------------
Financial instruments which subject the Company to concentrations of credit risk
include cash and cash equivalents and license fee receivables.
The Company maintains its cash in well known banks selected based upon
management's assessment of the banks' financial stability. Balances
periodically exceed the $100,000 federal depository insurance limit; however,
the Company has not experienced any losses on deposits.
Continued
-6-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-------------------------------------------------------------------------
CONCENTRATIONS OF CREDIT RISK, CONTINUED
--------------------------------------------
License fee receivables arise from the sale of new licenses to various companies
or individuals throughout the world. Collateral is generally not required for
credit granted.
CASH EQUIVALENTS
-----------------
For purposes of reporting cash flows, the Company considers all short-term
investments with an original maturity of three months or less to be cash
equivalents.
PROPERTY AND EQUIPMENT
------------------------
Property and equipment are recorded at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets, which range
from five to seven years. Expenditures for major renewals and betterments that
extend the original estimated economic useful lives of the applicable assets are
capitalized. Expenditures for normal repairs and maintenance are charged to
expense as incurred. The cost and related accumulated depreciation of assets
sold or otherwise disposed of are removed from the accounts, and any gain or
loss is included in operations.
INCOME TAXES
-------------
The Company uses the liability method of accounting for income taxes. Under
this method, deferred income taxes are recorded to reflect the tax consequences
on future years of temporary differences between the tax basis of assets and
liabilities and their financial amounts at year-end. The Company provides a
valuation allowance to reduce deferred tax assets to their net realizable value.
LOSS PER SHARE
----------------
Basic and diluted loss per share is computed on the basis of the weighted
average number of shares of common stock outstanding during each period. Common
equivalent shares from common stock options and warrants are excluded from the
computation as their effect would dilute the loss per share for all periods
presented.
STOCK-BASED COMPENSATION
-------------------------
The Company accounts for its stock compensation arrangements under the
provisions of Accounting Principles Board ("APB") No. 25 "Accounting for Stock
Issued to Employees". The Company provides disclosure in accordance with the
disclosure-only provisions of Statement of Financial Accounting Standard
("SFAS") No. 123 "Accounting for Stock-Based Compensation".
IMPAIRMENT OF LONG-LIVED ASSETS
----------------------------------
In the event that facts and circumstances indicate that the carrying value of a
long-lived asset, including associated intangibles, may be impaired, an
evaluation of recoverability is performed by comparing the estimated future
undiscounted cash flows associated with the asset or the asset's estimated fair
value to the asset's carrying amount to determine if a write-down to market
value or discounted cash flow is required.
Continued
-7-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
---------------------------------------
The Company includes fair value information in the notes to financial statements
when the fair value of its financial instruments is different from the book
value. When the book value approximates fair value, no additional disclosure is
made.
COMPREHENSIVE INCOME
---------------------
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income".
Comprehensive income includes such items as unrealized gains or losses on
certain investment securities and certain foreign currency translation
adjustments. The Company's financial statements include none of the additional
elements that affect comprehensive income. Accordingly, comprehensive income
and net income are identical.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
--------------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations,"
which requires all business combinations initiated after June 30, 2001 be
accounted for using the purchase method. In addition, SFAS No. 141 further
clarifies the criteria to recognize intangible assets separately from goodwill.
Specifically, SFAS No. 141 requires that an intangible asset may be separately
recognized only if such an asset meets the contractual-legal criterion or the
separability criterion. The implementation of SFAS No. 141 did not have a
material impact on the Company's results of operations or financial position.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," under which goodwill and intangible assets with indefinite useful lives
are no longer amortized but will be reviewed for impairment annually, or more
frequently if certain events or changes in circumstances indicate that the
carrying value may not be recoverable. The impairment test for goodwill involves
a two-step process: step one consists of a comparison of the fair value of a
reporting unit with its carrying amount, including the goodwill allocated to
each reporting unit. If the carrying amount is in excess of the fair value, step
two requires the comparison of the implied fair value of the reporting unit
goodwill with the carrying amount of the reporting unit goodwill. Any excess of
the carrying value of the reporting unit goodwill over the implied fair value of
the reporting unit goodwill will be recorded as an impairment loss. The
impairment test for intangible assets with indefinite useful lives consists of a
comparison of fair value to carrying value, with any excess of carrying value
over fair value being recorded as an impairment loss. Intangible assets with
finite useful lives will continue to be amortized over their useful lives and
will be reviewed for impairment in accordance with SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." The implementation of SFAS No.
142 did not have a material impact on the Company's results of operations or
financial position.
Continued
-8-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
-------------------------------------------------------------------------
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS, CONTINUED
--------------------------------------------------------
In August 2001, the FASB issued SFAS No. 144, which supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and certain provisions of APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." SFAS No. 144 retains the fundamental provisions of SFAS No. 121
related to: (i) the recognition and measurement of the impairment of long-lived
assets to be held and used, and (ii) the measurement of long-lived assets to be
disposed by sale. It provides more guidance on estimating cash flows when
performing recoverability tests, requires long-lived assets to be disposed of
other than by sale to be classified as held and used until disposal, and
establishes more restrictive criteria to classify long-lived assets as held for
sale. In addition, SFAS No. 144 supersedes the accounting and reporting
provisions of APB Opinion No. 30 for the disposal of a segment of a business.
However, it retains the basic provisions of APB Opinion No. 30 to report
discontinued operations separately from continuing operations and extends the
reporting of a discontinued operation to a component of an entity. The
implementation of SFAS No. 144 did not have a material impact on the Company's
results of operations or financial position.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities and supersedes
Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. In addition, SFAS No. 146 establishes that fair value is the objective for
initial measurement of the liability. SFAS No. 146 is effective for exit or
disposal activities initiated after December 31, 2002. The Company does not
expect the adoption to have a significant impact on the Company's financial
position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation", which amends SFAS No. 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair value method of
accounting for stock based employee compensation. It also amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the effects on
reported net income of an entity's accounting policy decisions with respect to
stock based employee compensation. Finally, SFAS No. 148 amends APB Opinion No.
28, "Interim Financial Reporting", to require disclosure of those effects in
interim financial statements. SFAS No. 148 is effective for fiscal years ended
after December 15, 2002. The adoption of SFAS No. 148 did not have a
significant impact on its financial reporting at December 31, 2002 and the
Company does not expect it to have a significant impact on its financial
reporting for future interim periods.
Continued
-9-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
2. GOING CONCERN CONSIDERATIONS
------------------------------
During the years ended December 31, 2002 and 2001, the Company has continued to
accumulate payables to its vendors and to the golfers who have won prize money
and has experienced negative financial results as follows:
2002 2001
------------ ------------
Net loss $ (966,113) $(2,893,920)
Negative cash flows from operations $ (630,047) $(1,156,655)
Negative working capital $(1,218,195) $ 1,139,098)
Accumulated deficit $(4,801,896) $(3,835,783)
Stockholders' deficit $(1,205,996) $(1,131,283)
Management has developed specific current and long-term plans to address its
viability as a going concern as follows:
* Effective April 14, 2003, the Company entered into a reverse merger
transaction with Novus Laboratories, Inc., which was listed on the NASDAQ
Bulletin Board, to gain access to public capital markets, to increase
attractiveness of its equity and to create liquidity for stockholders.
* The Company is also attempting to raise funds through debt and/or equity
offerings. If successful, these additional funds would be used to pay down
liabilities and to provide working capital.
* In the long-term, the Company believes that cash flows from continued
growth in its operations will provide the resources for continued operations.
There can be no assurance that the Company will have the ability to implement
its business plan and ultimately attain profitability. The Company's long-term
viability as a going concern is dependent upon three key factors, as follows:
* The Company's ability to obtain adequate sources of debt or equity funding
to meet current commitments and fund the continuation of its business operations
in the near term.
* The ability of the Company to control costs and expand revenues.
* The ability of the Company to ultimately achieve adequate profitability
and cash flows from operations to sustain its operations.
Continued
-10-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
3. LICENSE FEE RECEIVABLE
------------------------
License fee receivables consist of installment payments due from the licensees
for initial license fees. An allowance for doubtful accounts is provided, when
appropriate, based on past experience and other factors which, in management's
judgment, deserve current recognition in estimating probable bad debts. Such
factors include circumstances with respect to specific accounts receivable,
growth and composition of accounts receivable, the relationship of the allowance
for doubtful accounts to accounts receivable and current economic conditions.
As of December 31, 2002 the allowance for doubtful accounts is $70,000.
4. PROPERTY AND EQUIPMENT
------------------------
Property and equipment consisted of the following at December 31, 2002 and 2001:
2002 2001
-------- --------
Furniture and equipment $11,981 $ 9,383
Less: accumulated depreciation (3,582) (2,068)
-------- --------
Property and equipment, net $ 8,399 $ 7,315
======== ========
Depreciation expense for the years ended December 31, 2002 and 2001 was $1,514
and $1,340, respectively.
5. NOTE PAYABLE TO STOCKHOLDER
------------------------------
Note payable to stockholder consisted of the following at December 31, 2002 and
2001:
2002 2001
-------- --------
Note payable to a stockholder, principal due in
installments of $45,000 on March 15, 2003;
$45,000 on May 15, 2003; $25,000 on July 15,
2003; and $11,500 per month for ten months
beginning September 1, 2003; interest is due
on demand and accrues at 9% per year. This
note is not collateralized. $230,000 $270,000
-------- --------
Total note payable to stockholder $230,000 $270,000
======== ========
Continued
-11-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
6. INCOME TAXES
-------------
The Company has incurred losses since its inception and, therefore, has not been
subject to federal income taxes. As of December 31, 2002, the Company had net
operating loss ("NOL") carryforwards for income tax purposes of approximately
$3,500,000 which expire in various tax years through 2022. Under the provisions
of Section 382 of the Internal Revenue Code the ownership change in the Company
that resulted from the merger of the Company could severely limit the Company's
ability to utilize its NOL carryforward to reduce future taxable income and
related tax liabilities. Additionally, because United States tax laws limit the
time during which NOL carryforwards may be applied against future taxable
income, the Company may be unable to take full advantage of its NOL for federal
income tax purposes should the Company generate taxable income.
The composition of deferred tax assets and liabilities and the related tax
effects at December 31, 2002 and 2001 are as follows:
2002 2001
------------ ----------
Deferred tax assets:
Net operating losses $ 1,220,483 $ 960,360
Valuation allowance (1,220,483) (960,360)
------------ ----------
Total deferred tax assets $ - $ -
============ ==========
The difference between the income tax benefit in the accompanying statement of
operations and the amount that would result if the U.S. Federal statutory rate
of 34% were applied to pre-tax loss for the years ended December 31, 2002 and
2001 is as follows:
2002 2001
----------------------------------- -------------------
AMOUNT % AMOUNT %
--------------------------- ------- ---------- -------
Benefit for income tax at
federal statutory rate $ (328,478) (34.0)% $(983,933) (34.0)%
Increase in valuation
allowance 260,123 26.9 640,760 22.1
Expenses not deductible for
tax purposes 68,355 0.7 343,173 11.9
--------------------------- ------- ---------- -------
$ - 0.0% $ - _ 0.0%
=========================== ======= ========== =======
7. COMMITMENTS AND CONTINGENCIES
-------------------------------
LICENSE AGREEMENTS
-------------------
Per certain of the license agreements, the Company is required to issue one
share of its common stock for each two dollars of the initial license fee paid
by the licensee. As of December 31, 2002 the Company is committed to issue
495,500 shares of its common stock to certain licensees once the installment
payments on their initial license fee are received.
Continued
-12-
THE WORLD GOLF LEAGUE, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
----------
7. COMMITMENTS AND CONTINGENCIES, CONTINUED
-------------------------------------------
LEASE OBLIGATIONS
------------------
The Company rents office space in Altamonte Springs, Florida on a month-to-month
basis at $3,200 per month. Rent expense was $32,355 and $29,416 during the
years ended December 31, 2002 and 2001, respectively.
LITIGATION
----------
The Company is currently a party to certain litigation arising in the normal
course of business. Management believes that such litigation will not have a
material impact on the Company's financial position, results of operations or
cash flows.
8. RELATED PARTY TRANSACTIONS
----------------------------
Included in consulting expense for the years ended December 31, 2002 and 2001 is
approximately $138,000 and $210,000, respectively, paid to an
officer/stockholder of the Company for consulting services.
Included in accrued liabilities in the December 31, 2002 and 2001 balance sheet
is $50,000 and $25,000, respectively, of interest due to a stockholder of the
Company.
9. SUBSEQUENT EVENTS
------------------
Effective April 14, 2003 the Company entered into an agreement whereby the
Company agreed to exchange 100% of the issued and outstanding shares of its
common stock for approximately 60% of the issued and outstanding shares of Novus
Laboratories, Inc. (a non-operating public shell corporation). The agreement
represented a recapitalization of the Company with accounting treatment similar
to that used in a reverse acquisition, except that no goodwill or intangible is
recorded. A recapitalization is characterized by the merger of a private
operating company into a non-operating public shell corporation with nominal net
assets and typically results in the owners and managers of the private company
having effective or operating control after the transaction. The Company
emerged as the surviving financial reporting entity under the agreement, but
Novus Laboratories, Inc. (which changed its name to The World Golf League, Inc.)
remained as the legal reporting entity.
-13-
Pro Forma Financial Information
THE WORLD GOLF LEAGUE, INC.
-----------
UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND MARCH 31, 2003
THE WORLD GOLF LEAGUE, INC.
UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS
The following unaudited proforma combined financial statements give effect to
the reverse merger of Novus Laboratories, Inc. ("Novus") by The World Golf
League, Inc. ("WGL"). The transaction will be accounted for using the purchase
method of accounting, whereby the purchase price is allocated to the assets
acquired and liabilities assumed based on their estimated fair values. The fair
values of the assets and liabilities of Novus have been combined with the
recorded values of the assets and liabilities of WGL in the unaudited proforma
combined financial statements. The unaudited proforma combined balance sheet
represents the combined financial position of Novus and WGL as of December 31,
2002 and March 31, 2003, assuming that the reverse merger had occurred as of
those dates. The unaudited proforma combined statements of operations give
effect to the reverse merger of Novus and WGL by combining their results of
operations for the year ended December 31, 2002 and for the three month period
ended March 31, 2003 assuming that the reverse merger had occurred at the
beginning of the periods.
The unaudited proforma combined financial statements are based on the estimates
and assumptions set forth in the notes to these financial statements, which are
preliminary and have been made solely for purposes of developing this proforma
information. The unaudited proforma combined financial statements are presented
for illustrative purposes only. The proforma adjustments are based upon
available information and assumptions that management believes are reasonable.
The unaudited proforma combined financial statements are not necessarily an
indication of the results that would have been achieved had such transactions
been consummated as of the dates indicated or that may be achieved in the
future.
The unaudited proforma combined financial statements should be read in
conjunction with the historical financial statements and related notes of Novus
and WGL, appearing elsewhere in this document.
THE WORLD GOLF LEAGUE, INC.
UNAUDITED PROFORMA COMBINED BALANCE SHEET
DECEMBER 31, 2002
----------
THE NOVUS LAB-
WORLD GOLF ORATORIES, PRO-FORMA PRO-FORMA
ASSETS LEAGUE, INC. INC. ADJUSTMENTS COMBINED
- --------------------------------- -------------- --------- ------------- ------------
Current assets:
Cash and cash equivalents $ 248 $ - $ - $ 248
License fee receivable, current 254,000 - - 254,000
-------------- --------- ------------- ------------
Total current assets 254,248 - - 254,248
Property and equipment, net 8,399 - - 8,399
License fee receivable, net of
current portion 229,000 - - 229,000
Other assets 3,800 - - 3,800
-------------- --------- ------------- ------------
Total assets $ 495,447 $ - $ - $ 495,447
============== ========= ============= ============
LIABILITIES AND STOCKHOLDERS'
- ---------------------------------
DEFICIT
- ----------
Current liabilities:
Accounts payable $ 923,747 $ 10,950 $ - $ 934,697
Accrued liabilities 64,696 - - 64,696
Note payable to stockholder 230,000 - - 230,000
Deferred license fee revenue,
current 254,000 - - 254,000
-------------- --------- ------------- ------------
Total current liabilities 1,472,443 10,950 - 1,483,393
Deferred license fee revenue, net
of current portion 229,000 - - 229,000
-------------- --------- ------------- ------------
Total liabilities 1,701,443 10,950 - 1,712,393
Stockholders' deficit:
Common stock 8,468 6,000 216,532(1) 231,000
Additional paid-in capital 3,587,432 47,968 (270,500)(1) 3,364,900
Accumulated deficit (4,801,896) (64,918) 53,968(1) (4,812,846)
-------------- --------- ------------- ------------
Total stockholders' deficit (1,205,996) (10,950) - (1,216,946)
-------------- --------- ------------- ------------
Total liabilities and
stockholders' deficit $ 495,447 $ - $ - $ 495,447
============== ========= ============= ============
THE WORLD GOLF LEAGUE, INC.
UNAUDITED PROFORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
----------
THE NOVUS LAB-
WORLD GOLF ORATORIES, PRO-FORMA PRO-FORMA
LEAGUE, INC. INC. ADJUSTMENTS COMBINED
-------------- ----------- --------------- -------------
Revenue:
Membership fee revenue $ 43,150 $ - $ - $ 43,150
License fee revenue 276,852 - - 276,852
-------------- ----------- --------------- -------------
Total revenue 320,002 - - 320,002
-------------- ----------- --------------- -------------
Costs and expenses:
Consulting expense 289,265 - - 289,265
Tournament expense 474,358 - - 474,358
Advertising expense 143,197 - - 143,197
Settlement expense 192,000 - - 192,000
Other general and administra-
tive expense 160,915 6,417 - 167,332
Interest expense 26,380 - - 26,380
-------------- ----------- --------------- -------------
Total costs and expenses 1,286,115 6,417 - 1,292,532
-------------- ----------- --------------- -------------
Net loss $ (966,113) $ (6,417) $ - $ (972,530)
============== =========== =============== =============
Weighted average shares
outstanding 8,183,147 6,000,000 211,768,435(2) 225,951,582
============== =========== =============== =============
Loss per share (basic and fully
diluted) $ (0.12) $ (0.00) $ 0.11(2) $ (0.01)
============== =========== =============== =============
THE WORLD GOLF LEAGUE, INC.
UNAUDITED PROFORMA COMBINED BALANCE SHEET
MARCH 31, 2003
----------
THE NOVUS LAB-
WORLD GOLF ORATORIES, PRO-FORMA PRO-FORMA
ASSETS LEAGUE, INC. INC. ADJUSTMENTS COMBINED
- --------------------------------- -------------- --------- ------------- ------------
Current assets:
Cash and cash equivalents $ - $ - $ - $ -
License fee receivable, current 254,000 - - 254,000
-------------- --------- ------------- ------------
Total current assets 254,000 - - 254,000
Property and equipment, net 8,085 - - 8,085
License fee receivable, net of
current portion 229,000 - - 229,000
-------------- --------- ------------- ------------
Total assets $ 491,085 $ - $ - $ 491,085
============== ========= ============= ============
LIABILITIES AND STOCKHOLDERS'
- ------------------------------
DEFICIT
- ----------
Current liabilities:
Accounts payable $ 1,030,310 $ 10,950 $ - $ 1,041,260
Book overdraft 1,562 - - 1,562
Accrued liabilities 71,425 - - 71,425
Note payable to stockholder 230,000 - - 230,000
Deferred license fee revenue,
current 254,000 - - 254,000
-------------- --------- ------------- ------------
Total current liabilities 1,587,297 10,950 - 1,598,247
Deferred license fee revenue, net
of current portion 229,000 - - 229,000
-------------- --------- ------------- ------------
Total liabilities 1,816,297 10,950 - 1,827,247
Stockholders' deficit:
Common stock 8,468 81,000 141,532(1) 231,000
Additional paid-in capital 3,637,412 - (222,532)(1) 3,414,880
Accumulated deficit (4,971,092) (91,950) 81,000(1) (4,982,042)
-------------- --------- ------------- ------------
Total stockholders' deficit (1,325,212) (10,950) - (1,336,162)
-------------- --------- ------------- ------------
Total liabilities and
stockholders' deficit $ 491,085 $ - $ - $ 491,085
============== ========= ============= ============
THE WORLD GOLF LEAGUE, INC.
UNAUDITED PROFORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003
----------
THE NOVUS LAB-
WORLD GOLF ORATORIES, PRO-FORMA PRO-FORMA
LEAGUE, INC. INC. ADJUSTMENTS COMBINED
-------------- ------------ --------------- -------------
License fee revenue $ - $ - $ - $ -
Operating, general and adminis-
trative expense 169,196 467 - 169,663
-------------- ------------ --------------- -------------
Net loss $ (169,196) $ (467) $ - $ (169,663)
============== ============ =============== =============
Weighted average shares out-
standing 8,467,951 81,000,000 141,532,049(2) 231,000,000
============== ============ =============== =============
Net loss per share (basic and
fully diluted) $ (0.02) $ (0.00) $ 0.02(2) $ (0.00)
============== ============ =============== =============
THE WORLD GOLF LEAGUE, INC.
NOTES TO UNAUDITED PROFORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
- -----------------------
WGL acquired Novus in a reverse merger in which WGL stockholders are to receive
150,000,000 shares of Novus common stock in exchange for all of their WGL common
stock. The reverse merger is treated as an acquisition and accounted for under
the purchase method of accounting. The fair values of the assets and
liabilities of Novus have been combined with the recorded values of the assets
and liabilities of WGL in the unaudited proforma combined financial statements.
PROFORMA ADJUSTMENTS
- ---------------------
1. The historical financial statements of Novus, included in these proforma
financial statements, as of and for the year ended December 31, 2002
exclude the effects of a 2.7 to 1 forward stock split, a 10 to 1 forward
stock split and the issuance of 150,000,000 shares to the WGL shareholders.
Instead, these transactions were recorded as proforma adjustments in the
accompanying unaudited proforma combined financial statements. The Novus
historical financial statements included in these proforma financial
statements as of and for the three months ended March 31, 2003 include the
effects of a 2.7 to 1 forward stock split on February 12, 2003, a 10 to 1
forward stock split on March 21, 2003, but exclude the issuance of
150,000,000 shares of common stock to be issued to the WGL stockholders.
Instead, this transaction was recorded as a proforma adjustment in the
accompanying unaudited proforma combined financial statements.
2. The proforma combined per share amounts are based on the combined weighted
average of Novus common shares and WGL common shares (adjusted for the 2.7
to 1 and the 10 to 1 forward stock split) for all periods presented based
on WGL stockholders receiving 150,000,000 shares of Novus common shares for
all of the WGL common shares outstanding.