<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 19, 1996
REGISTRATION NO. 333-4873
=============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------
AMENDMENT NO. 2
to
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
------
U.S. GOLF AND ENTERTAINMENT INC.
(Name of small business issuer in its charter)
<TABLE>
<S> <C> <C>
Delaware 7999 11-3320969
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
4 Henry Street
Commack, New York 11725
(516) 499-7007
(Address and telephone number of principal executive
offices and principal place of business)
------
Edward C. Ross, Chairman
U.S. Golf and Entertainment Inc.
4 Henry Street
Commack, New York 11725
(516) 499-7007
(Name, address and telephone number of agent for service)
------
Copies to:
Norman M. Friedland, Esq. Harold E. Berritt, Esq.
David R. Fishkin, Esq. Michael G. Taylor, Esq.
Ruskin, Moscou, Evans & Faltischek, Rubin Baum Levin
P.C. Constant Friedman & Bilzin
170 Old Country Road 200 South Biscayne Boulevard
Mineola, New York 11501 25th Floor
(516) 663-6600 Miami, Florida 33131
(516) 663-6641 (fax) (305) 374-7580
(305) 374-7593 (fax)
------
Approximate Date of Proposed Sale to the Public: As soon as practicable
after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box: [X]
------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
=============================================================================
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Security (1) Price (1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001 per share(2) 1,265,000 $5.00 $6,325,000 $2,181.03
- -----------------------------------------------------------------------------------------------------------------
Stock Purchase Warrants(3) ............ 110,000 $ .001 $110 $.038
- -----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(4) ............................. 110,000 $6.50 $715,000 $246.55
- -----------------------------------------------------------------------------------------------------------------
Common Stock, par value $.001 per
share(5) ............................. 700,000 $5.00 $3,500,000 $1,206.90
- -----------------------------------------------------------------------------------------------------------------
Total Registration Fee(6) ................................................................... $3,634.52
================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Based on the offering of 1,100,000 shares of Common Stock and 165,000
shares of Common Stock pursuant to the over-allotment.
(3) To be issued to the Underwriter; the resale thereof is also covered
hereby.
(4) Represents shares of Common Stock issuable upon the exercise of the
Stock Purchase Warrants; the resale thereof is also covered hereby.
(5) Represents shares of Common Stock held by the Selling Stockholders (the
"Additional Stock"); the resale thereof is also covered hereby.
(6) A Registration Fee of $13,141 was paid in connection with the initial
filing of the Registration Statement on May 31, 1996.
Also registered hereunder are an indeterminable number of shares of Common
Stock which may be issued pursuant to anti-dilution provisions of the Stock
Purchase Warrants.
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Item Number Caption in Form SB-2 Location in Prospectus Page
------------- ------------------------------------------ -------------------------------------------- --------
<S> <C> <C> <C>
1. Forepart of the Registration Statement and N/A
Outside Front Cover Page of Prospectus ... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages N/A
of Prospectus ............................ Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors ..... Prospectus Summary; Risk Factors 3; 6-11
4. Use of Proceeds .......................... Use of Proceeds 12
5. Determination of Offering Price .......... Outside Front Cover Page; Underwriting 33
6. Dilution ................................. Dilution 13
7. Selling Security Holders ................. Selling Stockholders; Plan of Distribution 30
8. Plan of Distribution ..................... Outside Front Cover Page; Selling Stockholders;
Plan of Distribution; Underwriting 30; 33
9. Legal Proceedings ........................ Business - Legal Proceedings 22
10. Directors, Executive Officers, Promoters
and Control Persons ...................... Management 23
11. Security Ownership of Certain Beneficial
Owners and Management .................... Principal Stockholders 26
12. Description of Securities ................ Description of Securities; Underwriting 27; 33
13. Interest of Named Experts and Counsel .... Legal Matters 35
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities .............................. Management -- Limitation of Liability and
Indemnification Matters 25
15. Organization Within Last Five Years ...... Certain Transactions 27
16. Description of Business .................. Prospectus Summary; Capitalization; 3; 14;
Management's Discussion and Analysis of Financial 16-18;
Condition and Results of Operations; Business; 19-22;
Financial Statements F1-F15
17. Management's Discussion and Analysis of
Plan of Operation ........................ Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-18
18. Description of Property .................. Business - Properties 21
19. Certain Relationships and Related
Transactions ............................. Certain Transactions 27
20. Market for Common Equity and Related
Stockholder Matters ...................... Shares Eligible for Future Sale; Description of
Securities 29; 27
21. Executive Compensation ................... Management 23-26
22. Financial Statements ..................... Financial Statements F1-F15
23. Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosures .............................. Inapplicable N/A
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 19, 1996
U.S. GOLF AND ENTERTAINMENT INC.
1,100,000 SHARES OF COMMON STOCK
This Prospectus relates to an offering (the "Offering") of 1,100,000
shares of common stock, par value $.001 per share (the "Common Stock"), of
U.S. Golf and Entertainment Inc. (the "Company").
This Prospectus also relates to the resale of up to an additional 700,000
shares of Common Stock (the "Additional Stock") on behalf of certain selling
stockholders (the "Selling Stockholders") and such shares of Common Stock
will not be offered as part of the underwritten offering; however, if such
shares are sold prior to the second anniversary of the date of this
Prospectus (the "Effective Date"), the Selling Stockholders will receive a
maximum of $2.90 per share in the case of 500,000 shares of Common Stock and
a maximum of $1.25 per share in the case of 200,000 shares of Common Stock,
and the proceeds from any sale of these shares of Additional Stock in excess
of the sale price of $2.90 per share or $1.25 per share, as the case may be,
shall inure to the Company as working capital. See "Certain Transactions" and
"Selling Stockholders; Plan of Distribution."
As of September 30, 1996, the Company and its constituents had accumulated
losses of $736,517. The Company is continuing to incur losses and could incur
significant additional losses for the foreseeable future. Prior to the
Offering, there has been no market for the Securities. The offering price of
the shares of Common Stock was determined by negotiation between the Company
and the Underwriter and is not necessarily related to the Company's assets,
book value, results of operations, or other established criteria of value,
and should not be regarded as any indication of the future market price of
the Securities. See "Risk Factors," "Description of Securities" and
"Underwriting."
------
THE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE CONSIDERED ONLY BY
PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. IN
ADDITION, PURCHASERS OF THE SECURITIES WILL SUFFER IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS" ON PAGES 6-10
OF THIS PROSPECTUS AND "DILUTION."
------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
===============================================================================
Underwriter's Proceeds to
Discounts the Company
Price to the Public and Commissions (1) (2)(3)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock $5.00 $.50 $4.50
- -------------------------------------------------------------------------------
Total Offering (3) $5,500,000 $550,000 $4,950,000
===============================================================================
</TABLE>
FIRST UNITED EQUITIES CORPORATION
200 GARDEN CITY PLAZA
GARDEN CITY, NEW YORK 11530
(516) 739-4500
THE DATE OF THIS PROSPECTUS IS _________________, 1997
<PAGE>
(Continued from preceding page)
- ------
(1) See "Underwriting" for additional compensation to the Underwriter
consisting of (i) three (3%) percent of the gross proceeds of the
Offering ($165,000, or $189,750 if the Over-Allotment Option (as defined
below) is exercised in full as a non-accountable expense allowance, of
which $25,000 has been paid to date, (ii) warrants (the "Stock Purchase
Warrants") exercisable for four years, commencing one year from the
Effective Date, to purchase 110,000 shares of Common Stock at a price of
$6.50 per share, (iii) a right of first refusal regarding future public
and private offerings of the Company's securities for three years
following the Effective Date, (iv) a $108,000 financial consulting fee
pursuant to a 3-year consulting agreement, and (v) a fee of 5% of the
first $5,000,000 and 2.5% of the excess over $5,000,000 of the
consideration received or paid by the Company in connection with certain
mergers, acquisitions or joint ventures introduced by the Underwriter to
which the Company is a party for a period of three (3) years from the
Effective Date. In addition, the Company has agreed to indemnify the
Underwriter against civil liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting" for other
agreements between the Company and the Underwriter which may be
considered additional underwriting compensation.
(2) Assuming the Over-Allotment Option is not exercised, and before deducting
offering expenses payable by the Company. The Selling Stockholders will
not bear any expense related to the Offering.
(3) The Company has granted to the Underwriter a 45-day option to purchase up
to an additional 165,000 shares of Common Stock at the price to the
public less Underwriter's discounts and commissions, solely to cover over
allotments, if any (the "Over-Allotment Option"). If the Over-Allotment
Option is exercised in full the total price to the public, Underwriter's
discounts and commissions and proceeds to the Company will be $6,325,000,
$632,500 and $5,692,500, respectively. See "Underwriting".
The shares of Common Stock offered by this Prospectus are offered by the
Underwriter on a firm commitment basis subject to prior sale, when, as and if
accepted by the Underwriter and subject to certain other conditions. The
Underwriter reserves the right to withdraw, cancel or modify the Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates evidencing the Common Stock will be made at the offices of the
Underwriter, 200 Garden City Plaza, Garden City, New York, 11530 on or about
, 1996.
------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
A SIGNIFICANT AMOUNT OF THE COMMON STOCK TO BE SOLD IN THIS OFFERING MAY
BE SOLD TO CUSTOMERS OF THE UNDERWRITER. THIS MAY AFFECT THE MARKET FOR AND
LIQUIDITY OF THE COMPANY'S COMMON STOCK IN THE EVENT THAT ADDITIONAL
BROKER-DEALERS DO NOT MAKE A MARKET IN THE COMPANY'S COMMON STOCK, OF WHICH
THERE CAN BE NO ASSURANCE.
ALTHOUGH THE UNDERWRITER HAS NO OBLIGATION TO DO SO, THE UNDERWRITER MAY
FROM TIME TO TIME ACT AS A MARKET MAKER AND OTHERWISE EFFECT TRANSACTIONS IN
THE COMPANY'S COMMON STOCK. IF THE UNDERWRITER PARTICIPATES IN THE MARKET, IT
MAY BECOME A DOMINATING INFLUENCE IN THE MARKET FOR THE COMMON STOCK.
HOWEVER, THERE IS NO ASSURANCE THAT THE UNDERWRITER WILL BE A DOMINATING
INFLUENCE. THE PRICES AND LIQUIDITY OF THE COMMON STOCK OFFERED HEREBY MAY BE
SIGNIFICANTLY AFFECTED BY THE DEGREE OF THE UNDERWRITER'S PARTICIPATION IN
SUCH MARKET. THE UNDERWRITER MAY DISCONTINUE SUCH ACTIVITIES AT ANY TIME OR
FROM TIME TO TIME. SEE "RISK FACTORS -- NO PRIOR TRADING MARKET."
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2, pursuant to the
Securities Act of 1933, as amended (the "Act"), with respect to the Common
Stock offered by this Prospectus. This Prospectus does not contain all the
information set forth in said Registration Statement and the exhibits
thereto. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to said Registration Statement and
exhibits which may be inspected without charge at the Commission's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Registration Statement including the exhibits thereto, can also be
accessed through the EDGAR terminals in the Commission's Public Interest
Rooms in Washington D.C. or through the World Wide Web at http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such interim reports as it deems
appropriate or as may be required by law. The Company's fiscal year ends
December 31.
The Company will provide without charge to each person who receives this
Prospectus, upon written or oral request of such person, a copy of the
Registration Statement (excluding exhibits) by contacting the Company at 4
Henry Street, Commack, New York 11725, telephone (516) 499-7007, attention:
Chief Financial Officer.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including risk factors, and the financial statements appearing
elsewhere in this Prospectus. The Common Stock offered hereby involves a high
degree of risk, including, without limitation, risks relating to the
Company's limited history of operations, operating losses which are expected
to continue, potential need for additional funds, intense competition,
dependence on key personnel, and the compensation payable to the Underwriter.
See "Risk Factors." Unless otherwise indicated, (i) all information in this
Prospectus assumes no exercise of the Underwriter's over-allotment option and
(ii) reference to the Company means the Company and its constituent entities.
THE COMPANY
U.S. Golf and Entertainment Inc. (the "Company") is seeking to become a
national owner/operator of upscale, high-volume, golf practice and
instructional centers and related recreational facilities. The Company's
facilities are intended to provide attractive and affordable practice and
teaching venues to a large and increasing golf population. The Company
currently operates the Commack Golf and Family Recreation Center, a modern
19-acre, 120-tee facility located in central Long Island (the "Commack Golf
Center"). The Commack Golf Center offers year-round facilities for driving,
pitching, putting, chipping and sand play, as well as an 18-hole miniature
golf course, a snack bar, a full-service pro shop and a golf learning center.
The Company's management believes that their business experience, marketing
skills and industry relationships will provide the Company with opportunities
to acquire and/or open other golf practice facilities and learning centers.
Over the past decade, the popularity of golf throughout the United States
and the demand for golf courses and golf driving range facilities has
experienced continued growth. According to the National Golf Foundation
("NGF"), the number of golfers in the United States increased to
approximately 25 million players in 1995 from approximately 21.2 million
players in 1987. Management believes that this trend will continue for the
foreseeable future as golf becomes an increasingly popular recreational
activity. Industry statistics of the NGF indicate that women and juniors are
learning and playing golf in increasing numbers. Management believes these
population segments will be important factors in increasing the demand for
golf practice and instructional facilities of the type the Company presently
owns and intends to open in the future.
The Commack Golf Center was opened in March, 1995, and had incurred losses
of $423,419 for the period from March 1, 1995 to December 31, 1995 and
$313,098 for the nine month period ended September 30, 1996, on revenues of
$719,374 and $710,967, respectively, for such periods.
The Company's strategy involves opening new golf practice centers and
acquiring existing well-located centers. The Company recognizes that the
fragmented state of the golf practice industry (according to the Golf Range
and Recreation Association of America, more than 90% of the approximately
1,900 stand-alone golf driving ranges in the United States are managed by
individual owner-operators) presents numerous opportunities for the Company
to acquire, upgrade and renovate golf facilities and to realize economies of
scale through efficiencies of management, purchasing and marketing. The
Company's management team, which includes Chuck Workman who has more than 25
years experience in operating and managing golf facilities, believes that it
has the necessary industry experience and, upon consummation of the Offering,
will have the financial resources to effectively implement its strategy. The
Company currently has no definitive agreements with respect to the
acquisition or development of additional golf practice centers or related
recreational facilities, except for an option to acquire, from its Senior
Vice President at fair market value, rights to operate a golf practice
facility and pro shop at Bethpage State Park, a well-known multiple golf
course facility.
The Company's executive offices are located at 4 Henry Street, Commack,
New York 11725. The Company's telephone number is (516) 499-7007.
3
<PAGE>
THE OFFERING
Securities Offered by the
Company(1) .................. Common Stock -- 1,100,000 shares of Common
Stock
Offering Price .............. $5.00 per share of Common Stock
Securities Offered by the
Selling Stockholders......... The Prospectus also relates to the offer and
resale of up to 700,000 shares of Common
Stock by certain Selling Stockholders (the
"Additional Stock"). Such shares of Common
Stock will not be offered as part of the
underwritten offering. If sold within two
(2) years of the Effective Date, the Company
will receive the proceeds of the sale of
Common Stock by the Selling Stockholders in
excess of $2.90 per share in the case of
500,000 shares of Common Stock to be sold by
certain of the Selling Stockholders, or
$1.25 per share in the case of 200,000
shares of Common Stock to be sold by certain
other Selling Stockholders. All of the
Additional Stock is subject to an eighteen
(18) month lock-up period from the Effective
Date. However, the Underwriter may, in its
sole discretion, release any or all of the
Additional Stock from such lock-up at any
time on or after to the Effective Date. See
"Selling Stockholders; Plan of
Distribution."
Common Stock Outstanding:
Prior to the Offering(2) .... 1,245,000 shares of Common Stock
After the Offering(2)(3) ... 2,345,000 shares of Common Stock.
Use of Proceeds.............. Repayment of Bridge Loans and certain short
term liabilities; leasing, acquisition and
opening of golf centers and related
recreational facilities; development of
additional recreational facilities at the
Commack Golf Center and working capital. See
"Use of Proceeds."
Proposed NASDAQ
Symbol (4) .............. Common Stock -- USGO
4
<PAGE>
- ------
(1) Does not include 165,000 shares of Common Stock reserved for issuance
upon the exercise of the Underwriter's Over-Allotment Option.
(2) Does not include: (i) 900,000 shares of Common Stock reserved for
issuance upon the exercise of options under the Company's 1996 Stock
Option Plan, of which options to purchase an aggregate of 650,000 have
been granted to Messrs. Stuart Goldstein, Edward Ross and Chuck Workman,
executive officers of the Company; and (ii) 100,000 shares of Common
Stock reserved for issuance upon the exercise of options under the
Company's 1996 Non-Employee Director Stock Option Plan, of which options
to purchase 5,000 shares have been granted to Mr. Garry Howatt, a
non-employee director of the Company's Board of Directors. See
"Management -- Stock Option Plans" and "Certain Transactions."
(3) Does not include: (i) up to 110,000 shares of Common Stock issuable upon
the exercise of the Stock Purchase Warrants; or (ii) up to 165,000 shares
of Common Stock issuable upon the exercise of the Underwriter's
Over-Allotment Option; or (iii) 110,000 shares of Common Stock issuable
upon the exercise of warrants issued pursuant to a private offering to
accredited investors of an aggregate of (x) 110,000 common stock purchase
warrants (the "Bridge Warrants") and (y) $836,000 of 15% promissory notes
(the "Bridge Loans"), pursuant to a Confidential Private Placement
Memorandum dated October 23, 1996 (the "PPM").
(4) The Company has applied for listing on the NASDAQ SmallCap Market. A
NASDAQ SmallCap listing provides no assurance that an active, liquid
trading market will develop or, if developed, will be sustained.
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
Commencement of
Operations From Nine Months
March 1, 1995 to Ended September 30,
Statement of Operations Data December 31, 1995 1996
--------------------------------------------- ----------------- -------------------
(Unaudited)
<S> <C> <C>
Operating Revenue ........................... $ 719,374 $ 710,967
Operating Expenses .......................... $1,021,666 $ 906,902
Selling, General and Administrative Expenses $ 87,555 $ 95,969
Loss From Operations ........................ $ (389,847) $(291,904)
Interest Expense ............................ $ 33,572 $ 21,194
Net Loss .................................... $ (423,419) $(313,098)
Pro Forma Net Loss(1) ....................... $ (889,419) $(733,098)
Pro Forma Net Loss Per Share(1) ............. $ (.71) $ (.59)
</TABLE>
<TABLE>
<CAPTION>
December 31,
1995(1) September 30, 1996 (Unaudited)
-------------- --------------------------------------------
As
Actual Pro Forma Adjusted(2)
------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents . $ 345 $ 52,717 $ 287,592 $3,602,230
Working Capital (Deficit) . $ (999,223) $ (660,557) $ (656,682) $3,203,931
Total Assets .............. $3,053,334 $2,972,790 $3,207,665 $6,436,690
Current Liabilities ....... $1,132,493 $ 757,446 $ 988,446 $ 442,471
Total Stockholders' Equity $1,752,581 $1,983,983 $1,987,858 $5,762,858
</TABLE>
- ------
(1) Reference is made to Note 1 of Notes to Financial Statements of the
Company.
(2) Assumes (i) net proceeds of $4,380,000 from the issuance of 1,100,000
shares of Common Stock and (ii) the repayment of debt. See "Use of
Proceeds."
5
<PAGE>
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk, and should not be purchased by persons who cannot afford the loss of
their entire investment. Prospective investors should carefully consider the
following risk factors, in addition to other information set forth in this
Prospectus, prior to purchasing the securities.
Limited History. The Company's only golf practice and instructional
center, a 120-hitting tee facility located in central Long Island, (the
"Commack Golf Center") opened in March, 1995 and, accordingly, has only a
limited history of operations. The Commack Golf Center revenues during the
first nine months of the current calendar year were $710,967 as compared to
$719,374 for the preceding ten month period. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company's
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by a small business in a highly competitive industry.
Net Losses Since Inception. Net losses for the Company were $423,419 for
the period from March 1, 1995 to December 31, 1995 (on revenues of $719,374),
and were $313,098 for the nine months ended September 30, 1996 (on revenues
of $710,967). Management believes it incurred net losses at the Commack Golf
Center for several reasons, which include one-time start-up expenses; an
unusually harsh winter season that extended through April, 1996; the fact
that the miniature golf course and related recreation amenities were not
operational until the summer of 1996; the unforseen delay in implementing a
well-publicized golf instruction program (including group and private
lessons); and the construction activity which was occurring on a neighboring
parcel, which impacted on the Commack Golf Center's upscale image. The
Company's operating expenses can be expected to continue to increase as a
result of the Company's proposed expansion strategy. See "Possible
Difficulties in Implementing Expansion Strategy" below. Accordingly, although
the Company has experienced increased revenues at the Commack Golf Center in
the first nine months of fiscal year 1996 (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations"), the Company
expects to continue to incur losses until revenues generated by expanded
operations are sufficient to offset operating and expansion costs. There can
be no assurance, however, that the Company will operate profitably in the
future or that the Company will successfully acquire or develop other
profitable operating facilities. See "Business" and "Financial Statements."
Dependence on Single Location. The Commack Golf Center is the only
facility currently operated by the Company. Accordingly, a variety of factors
relating to operating at only one location could affect the ongoing viability
of the Company's business. These factors include local economic conditions,
adverse publicity, accidents that could damage or destroy the Commack Golf
Center and competition from other golf facilities.
Possible Difficulties in Implementing Expansion Strategy. The Company's
ability to significantly increase revenue and operating cash flow over time
depends in large part upon its success in operating, acquiring and opening
additional golf centers and related recreational facilities. There can be no
assurance that suitable expansion opportunities will be available, or that
the Company will be able to open or acquire facilities on satisfactory terms,
if at all. The construction of new golf practice centers is subject to all of
the delays and uncertainties associated with construction projects generally.
In addition, the Company's ability to expand will be dependent on an
availability of additional financing, and there can be no assurance that such
financing will be available or, if available, on terms acceptable to the
Company. See "--Additional Financing Requirements" below.
To successfully implement its expansion strategy, the Company must develop
administrative operating systems and procedures to manage multiple facilities
and there can be no assurance that these systems and procedures can be
developed or implemented in an efficient, cost-effective manner. If new
facilities are opened in the future, they must be integrated into the
Company's existing operations, and there can be no assurance that these
additional facilities can be easily assimilated into the Company's operating
structure. If the Company is not able to efficiently develop appropriate
operating systems and procedures or integrate acquired or newly-opened
centers with its existing operations, the Company's financial condition and
results of operations could be materially adversely affected. The Company
currently has no definitive agreements with respect to the acquisition or
opening of additional golf practice centers other than an option to acquire,
from its Senior Vice President, the rights
6
<PAGE>
to operate the golf practice facility and pro shop at Bethpage State Park.
There can be no assurance that this option would be exercised prior to
mid-1997, nor can there be any assurance that such option will be exercised
at all, or, if it is exercised, that it will be on terms that are favorable
to the Company.
Significant Competition. The golf driving range business is competitive
and includes competition from golf courses as well as other forms of
recreation. Certain of the Company's competitors have considerably greater
financial, marketing, personnel and other resources than the Company, as well
as greater experience and customer recognition than the Company. In the Long
Island market, the Company faces strong competition from other freestanding
golf driving ranges and from numerous public and private golf courses which
offer golf practice facilities. While management believes that the location
and the amenities associated with the Commack Golf Center provide it with
certain competitive advantages, there can be no assurance that the Company
will be able to successfully compete with its competitors.
Seasonal Results. The Company's revenues from the Commack Golf Center for
the period from April through October are expected to account for the
greatest portion of the Company's operating revenue. Similar results are
expected for the other facilities the Company may open or acquire. This
seasonal pattern is expected to cause the Company's results of operations to
vary significantly from quarter to quarter. Accordingly, period-to-period
comparisons are not necessarily meaningful and should not be relied on as
indicative of future results. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Additional Financing Requirements. Management believes that the proceeds
of the Offering and the cash flow from the Commack Golf Center operations
will be sufficient to permit the Commack Golf Center to conduct its
operations as currently contemplated for a minimum of 18 months. Although
such belief is based on management's best judgment, there can be no assurance
that the assumptions underlying this belief will prove accurate or that
circumstances beyond the Company's control will not materially adversely
affect the Company's financial condition and results of operations, requiring
the Company to seek additional capital.
Possible Inability to Obtain Debt Financing. The Company's expansion
strategy is dependent upon the availability of the capital to be raised in
the Offering and the availability of debt financing to cover approximately
50% of the cost of developing each additional facility. There can be no
assurance, however, that such debt financing will be available or that the
funds to be raised in this Offering in combination with such debt financing
will be sufficient to enable the Company to acquire and/or develop additional
golf and related recreational facilities. In connection with any such debt
financing, the Company may be required to pledge its assets to a lender, may
be restricted in its ability to incur additional obligations or to make
capital expenditures, and/or may be required to abide by certain financial
covenants. Moreover, if the Company defaults on any of its obligations with
respect to any such debt financing, the lender could declare its loan to
become immediately due and payable and subject the Company's assets to
foreclosure.
Dependence Upon Key Employees. The Company is heavily dependent on the
services of Stuart Goldstein, the Company's President and Chief Executive
Officer. Mr. Goldstein has entered into an employment agreement with the
Company which provides that he will work full-time for the Company. In
addition, Messrs. Edward Ross and Chuck Workman have entered into employment
agreements with the Company that provide that Messrs. Ross and Workman will
provide services to the Company on an as-needed basis. Each of Messrs.
Goldstein, Ross and Workman is subject to a covenant not to compete with the
Company which prohibits each of them from competing with the Company during
the terms of their respective employment agreements and for a period of two
(2) years thereafter in the United States. The loss of the services of either
Messr. Goldstein, Ross or Workman could materially adversely affect the
Company. See "Management."
Prior Business Bankruptcy Filings Involving Company Executive. Two real
estate investment partnerships in which Edward C. Ross, the Company's
Chairman, serves as the chief executive of the corporate general partner,
Coastal Riverview Development Corp. ("Coastal") and Conrans Plaza Associates
("Conrans"), have experienced financial difficulties. In February, 1994, Mr.
Ross was President of Coastal, which served as the general partner of
Coventry Shopping Plaza Associates ("Coventry"), a limited partnership and
the owner and operator of a shopping center in Providence, Rhode Island. On
February 1, 1994, Coventry filed a petition for reorganization under Chapter
11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court, Eastern District
of New York. The petition was dismissed at the debtor's request in October,
1994. Mr. Ross was also President of
7
<PAGE>
Coastal when it was the general partner of Conrans, a limited partnership
which owned and operated a shopping center in East Hanover, New Jersey and
which filed a petition for reorganization under Chapter 11 in the U.S.
Bankruptcy Court, Eastern District of New York on July 11, 1995, Conrans
successfully emerged from these proceedings in March, 1996.
Dependence on Discretionary Consumer Spending. The amount spent by
consumers on discretionary items, such as golf and family and entertainment
activities, is dependent upon consumers' levels of discretionary income,
which may be adversely affected by general or local economic conditions. A
decrease in consumer spending on such activities will have a material adverse
effect on the Company's financial condition and results of operations.
Underwriter Compensation. In connection with the Offering, the Company
will be obligated to pay the Underwriter $715,000 of the proceeds for
commissions and expenses (not taking into account the full exercise of the
Underwriter's Over-Allotment Option that increases this amount to $822,250).
Additionally, the Company is obligated to retain the Underwriter as its
financial consultant for thirty-six (36) months at a cost of $108,000,
payable in an amount equal to $3,000 per month. These funds, therefore, will
not be available to the Company to meet its working capital needs or for
expansion purposes.
Termination Provisions of Commack Golf Center Lease. The lease for the
Commack Golf Center is scheduled to expire in April, 2010, subject to
renewals to April, 2020. The lease provides the landlord with a variety of
remedies, including termination rights and eviction, in the event the Company
breaches any one of a number of covenants, including its obligation to make
timely rent payments and maintenance of adequate insurance coverage. (See
"Business-- Properties"). If this lease is terminated, the Company will be
materially adversely affected.
Arbitrary Determination of Offering Price; Potential Price Volatility. The
offering price of the Common Stock has been determined by negotiation between
the Company and the Underwriter and is not necessarily related to the
Company's assets, book value, results of operations, or other established
criteria of value. As of September 30, 1996, the Common Stock had an actual
loss per share of $0.21. There has been significant volatility in the market
price of securities of companies with small capitalizations. Period-to-period
fluctuations in the Company's revenues and financial results may have a
significant impact on the Company's business and on the market price of the
Company's securities. See "Underwriting."
Immediate and Substantial Dilution. Investors in this Offering will
experience immediate and substantial dilution of the net tangible book value
of their shares of Common Stock ($2.62 per share, or 52%). In addition, if
the Company obtains additional funds through private or public equity or debt
financings, or if the Company issues options pursuant to the Company's 1996
Stock Option Plan, or if the Company issues stock in connection with
acquisitions at prices below fair market value, the purchasers of the
Securities may experience substantial dilution as a consequence of such
future financings, option grants or acquisitions. See "Dilution," "Use of
Proceeds," "Capitalization," "Management -- Stock Option Plans" and
"Underwriting."
Adverse Effect of Uninsured Losses. The Company carries property and
liability insurance in amounts it deems adequate. While the Company will make
every effort to maintain adequate insurance by industry standards, the
Company could suffer a loss from a casualty or liability for an event not
covered by insurance or in amounts in excess of coverage. Any such loss could
have a material adverse effect on the Company.
Management's Broad Discretion in Application of Proceeds. $3,314,638 (or
74.2%), of the net proceeds of the Offering, after repayment of the Bridge
Loans and certain short-term liabilities, will be used for working capital
and for the acquisition, opening and operation of additional golf and
recreation centers. Accordingly, management will have broad discretion as to
the allocation and use of such proceeds. See "Use of Proceeds."
Possible Adverse Consequences of Environmental Regulation. Golf and
recreational centers use and store various hazardous materials. Under various
federal, state and local laws, ordinances and regulations, an owner or
operator of real property is generally liable for the costs of removal or
remediation of hazardous sub-
8
<PAGE>
stances that are released on its property, regardless of whether the owner or
operator knew of, or was responsible for, the release of such hazardous
materials. The Company has not been advised of any non-compliance or
violation of any environmental laws, ordinances or regulations and the
Company believes that it is in substantial compliance with all such laws,
ordinances and regulations applicable to the Commack Golf Center. The
Company, however, has not performed any environmental studies on the Commack
Golf Center and, as a result, there may be potential liabilities and/or
conditions of which the Company is not aware. If any such liabilities or
conditions arise with respect to the Commack Golf Center or any other
facility which may be constructed, acquired or operated by the Company in the
future, there could be a material adverse effect on the Company.
Limited Liability of Directors. As permitted by the Delaware General
Corporation Law, the Company's Certificate of Incorporation eliminates
personal liability of a director to the Company and its stockholders for
monetary damages for breach of fiduciary duty as a director, except in
certain circumstances. Accordingly, stockholders may have limited rights to
recover money damages against the Company's directors for breach of fiduciary
duty.
No Prior Trading Market. Prior to the Offering, there has not been a
public market for the Company's securities. There can be no assurance that
the Common Stock will be quoted on NASDAQ SmallCap Market or that an active
trading market will develop or be sustained after the Offering. The absence
of an active trading market would reduce the liquidity of an investment in
the Company's securities. The Underwriter has indicated that it intends to
act as a market maker and otherwise effect transactions in the Company's
securities. To the extent the Underwriter participates, it may be a
dominating influence in any market that might develop, and the degree of
participation by the Underwriter may significantly affect the price and
liquidity of the Company's securities. The Underwriter may discontinue such
activities at any time or from time to time.
Possible Delisting from NASDAQ System and Market Illiquidity. If the
Common Stock is initially quoted on NASDAQ SmallCap Market (as to which there
can be no assurance), then continued inclusion of such securities on NASDAQ
SmallCap Market will require that (i) the Company maintain at least
$2,000,000 in total assets and $1,000,000 in capital and surplus, (ii) the
minimum bid price for the Common Stock be at least $1.00 per share, (iii) the
public float consist of at least 100,000 shares of Common Stock, valued in
the aggregate at more than $200,000, (iv) the Common Stock have at least two
active market makers, and (v) the Common Stock be held by at least 300
holders. If the Company is unable to satisfy NASDAQ's maintenance
requirements, the Company's securities may be delisted from NASDAQ SmallCap
Market. In such event, trading, if any, in the Common Stock would thereafter
be conducted in the over-the-counter market in the so-called "pink sheets" or
the Electronic Bulletin Board of the National Association of Securities
Dealers, Inc. (the "NASD") and it would be more difficult to dispose of the
Common Stock or to obtain as favorable a price for such securities.
Consequently, the liquidity of the Company's securities could be impaired,
not only in the number of securities that could be bought and sold at a given
price, but also through delays in the timing of transactions. In addition,
there could be a reduction in security analysts' and the news media's
coverage of the Company, which could result in lower prices for the Company's
securities than might otherwise be attained and in a larger spread between
the bid and asked prices for the Company's securities.
Penny Stock Regulation. Broker-dealer practices in connection with
transactions in "penny stocks" are regulated by certain penny stock rules
adopted by the Securities and Exchange Commission (the "SEC") . Penny stocks
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver
a standardized risk disclosure document that provides information about penny
stocks and the risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of each
penny stock held in the customer's account. In addition, the penny stock
rules generally require that prior to a transaction in a penny stock the
broker-dealer must make a special written determination that the penny stock
is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have
the effect of reducing the level of trading activity in the secondary market
for a stock that becomes subject to the penny stock rules. If the Securities
become subject to the penny stock rules, investors in the Offering may find
it more difficult to sell their Securities.
9
<PAGE>
Adverse Consequences Associated with Shares of Common Stock Reserved for
Issuance. The Company has reserved 110,000 shares of Common Stock for
issuance upon the exercise of the Stock Purchase Warrants, an aggregate of
900,000 shares of Common Stock for issuance upon the exercise of options, of
which 650,000 have been granted to Messrs. Stuart Goldstein, Edward Ross and
Chuck Workman and 250,000 that may be granted in the future pursuant to the
Company's 1996 Stock Option Plan, and an aggregate of 100,000 shares of
Common Stock for issuance upon exercise of options, of which 5,000 have been
granted to Mr. Garry Howatt and 95,000 which may be granted in the future
under the Company's 1996 Non-Employee Director Stock Option Plan. In
addition, the Company has reserved 110,000 shares of Common Stock for
issuance upon the exercise of the Bridge Warrants. Holders of such warrants
and options are likely to exercise them when, in all likelihood, the Company
could obtain additional capital on terms more favorable than those provided
thereby. Furthermore, such warrants and options may adversely affect the
terms on which the Company could obtain additional capital. Should a
significant portion of such warrants and options be exercised, the resulting
increase in the amount of Common Stock in the public market may have the
effect of reducing the per share market price thereof. See "Management --
Stock Option Plans", "Shares Eligible for Future Sale" and "Certain
Transactions."
Underwriter's Options May Inhibit Company's Ability to Raise Capital. The
Company has reserved 110,000 shares of Common Stock for issuance upon
exercise of the Stock Purchase Warrants. The Company may find it more
difficult to raise additional equity capital if it should be needed for the
business of the Company while the Stock Purchase Warrants are outstanding. At
any time when the holder or holders of the Stock Purchase Warrants might be
expected to exercise them, the Company would probably be able to obtain
additional equity capital on terms more favorable than those provided in the
Stock Purchase Warrants.
Potential Depressive Effect on Market Price Due to Future Sales of Common
Stock. The Registration Statement also relates to the resale of 700,000
shares of Common Stock which may be sold in the future by the Selling
Stockholders, and which are subject to an eighteen (18) month lock-up period,
which such lock-up can be released by the Underwriter in its sole discretion
at any time after the Effective Date. In addition, 545,000 shares of Common
Stock outstanding prior to the Offering and 110,000 shares issuable pursuant
to the exercise of the Bridge Warrants will be "restricted securities" as
that term is defined in Rule 144 promulgated under the Act (the "Restricted
Securities"). All of the Restricted Securities will be eligible for sale in
the public market pursuant to the provisions of Rule 144 or Rule 701 under
the Act at various times after the Effective Date, subject to the "lock-up"
agreements with the Underwriter described below.
The Company has adopted the 1996 Stock Option Plan pursuant to which it
has granted options to acquire 500,000, 100,000, and 50,000 shares of Common
Stock to Messrs. Stuart Goldstein, Edward Ross, and Chuck Workman,
respectively (the "Employee Options"), and may issue options to purchase up
to an additional 250,000 shares of Common Stock. The Company has also adopted
the 1996 Non-Employee Director Stock Option Plan pursuant to which it has
issued an option to purchase 5,000 shares of Common Stock (the "Director
Options") and may issue options to purchase up to an additional 95,000 shares
of Common Stock.
Holders of the Additional Stock, the Restricted Securities, Employee
Options, Director Options and Bridge Warrants have agreed that they will not,
without the Underwriter's written consent, and, in the case of the Additional
Stock, subject to the terms and conditions described below, sell, transfer,
assign, pledge, hypothecate or otherwise dispose of any of the Additional
Stock, the Restricted Securities, the Bridge Warrants or the shares of Common
Stock issuable upon the exercise of the Employee Options or the Director
Options for a period of 24 months from the Effective Date without consent of
the Underwriter. See "Selling Stockholders; Plan of Distribution."
Any substantial sale of the Additional Stock, the Bridge Warrants, the
Restricted Securities, or the shares of Common Stock issuable upon exercise
of the Director Options or the Employee Options pursuant to Rule 144 or
otherwise may have an adverse effect on the market price of the Company's
securities. See "Description of Securities" and "Shares Eligible for Future
Sale."
Potential Adverse Effect of Issuance of any Authorized Preferred
Stock. The Company has the right to issue shares of preferred stock in the
future without further stockholder approval and upon such terms and
conditions, and having such rights, privileges, and preferences, as the Board
of Directors of the Company may determine. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the
10
<PAGE>
rights of holders of any preferred stock that may be issued in the future. In
addition, the issuance of preferred stock could have the effect of making it
more difficult for a third party to acquire control of, or of discouraging
bids for, the Company. This could limit the price that certain investors
might be willing to pay in the future for the securities offered hereby. See
"Description of Securities."
Dividends Not Likely. The Company has not paid any cash dividends on the
Common Stock. For the foreseeable future, it is anticipated that earnings, if
any, which may be generated from the Company's operations will be used to
finance the operations of the Company and that cash dividends will not be
paid to holders of Common Stock. See "Dividend Policy."
Lack of Experience of the Underwriter. The Underwriter, which commenced
operations in 1994, has acted as an underwriter, or a member of an
underwriting syndicate, in only two public offerings of securities. The
Underwriter's lack of experience may have an adverse impact on its ability to
market the Common Stock offered hereby as well as the development and
maintenance of a trading market for the Company's Common Stock following this
offering. The Underwriter intends to make a market in the Company's Common
Stock. The Underwriter's inexperience may result in the potential inability
of the Underwriter correctly to utilize over-allotment, stabilization and
market maintenance strategies that more experienced underwriters employ to
assist in maintaining orderly trading markets. This may adversely affect the
price of the Common Stock and the ability of purchasers in the Offering to
resell their shares of Common Stock.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE PURCHASE
OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. ANY PERSON
CONSIDERING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY SHOULD BE AWARE
OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THE COMMON STOCK
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO ABSORB A TOTAL LOSS OF
THEIR INVESTMENT IN THE COMPANY AND HAVE NO NEED FOR A RETURN ON THEIR
INVESTMENT.
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from this Offering are estimated at
approximately $4,380,000 ($5,097,750 if the Underwriter's Over-Allotment
Option is exercised in full) after deducting underwriting commissions and
discounts and the estimated expenses of the Offering. Such net proceeds are
expected to be expended approximately as follows:
<TABLE>
<CAPTION>
Application of Proceeds: Amount Percent
------------ ---------
<S> <C> <C>
Repayment of Bridge Loans and short-term debt $1,150,975 26.3%
Acquiring and opening golf centers .......... $2,579,025 58.9%
Improvements to Commack Golf Center ......... 150,000 3.4%
Working capital ............................. 500,000 11.4%
------------ ---------
Total ............................. $4,380,000 100.0%
============ =========
</TABLE>
- ------
(1) The Bridge Loans consist of an aggregate of $836,000 principal amount of
promissory notes accruing interest at a rate of 15% per annum. The Bridge
Loans are due on the earlier of five (5) days following the Effective
Date or October 23, 1998. An aggregate of $601,125 of the proceeds from
the Bridge Loans have been used to redeem 845,000 shares of the Company's
Common Stock and 2,020,000 Class A Warrants (See "Certain Transactions"),
and the remaining $234,875 of such proceeds will be used by the Company
for working capital and to pay ongoing legal and accounting fees. Short
term debt to be paid consists of (i) a $140,000 note payable to a bank
bearing interest at the rate of 10 1/4 % per annum as of September 30,
1996, payable in December 1996, collateralized by all of the assets of
the Company and guaranteed by Edward C. Ross, (ii) an $85,000 note from
another bank bearing interest at 9 3/4 % per annum as of September 30,
1996, maturing on December 17, 1996 (extended from July 16, 1996) and
guaranteed by Edward C. Ross, and (iii) loans made by 28 stockholders of
the Company who were formerly limited partners of the Commack Partnership
in the aggregate amount of approximately $89,975. Proceeds from
short-term debt were used for working capital.
The foregoing represents the Company's best estimate of the allocation of
the net proceeds of this Offering based upon the Company's currently
contemplated operations, the Company's development plans, and current
economic and industry conditions, and is subject to reapportionment among the
categories listed above or to new categories in response to, among other
things, changes in its plans, industry conditions, and future revenues and
expenditures. The amount and timing of expenditures will vary depending on a
number of factors, including the availability and cost of sites for new golf
centers and whether such centers will be owned or leased. The Company has no
definitive agreements with respect to the acquisition or development of
additional golf practice centers or related recreational facilities, except
an option to acquire from the Company's Senior Vice President rights to
operate a golf practice facility and pro shop at Bethpage State Park.
Management believes that the net proceeds of this Offering and revenue
from operations will be sufficient to permit the Company to conduct its
existing operations for at least the next 18 months. The Company's plan of
acquiring or opening three additional golf centers over the next 12 to 18
months (which could involve the use of the Company's Common Stock to pay for
some portion of such acquisitions) is dependent upon the Company's ability to
obtain debt financing to cover approximately 50% of the cost of the new
centers. The Company will be required to raise substantial additional capital
in the future in order to meet its goal of opening at least 10 additional
golf and recreation centers over the next three to five years. There can be
no assurance that the Company will be able to obtain such capital on
favorable terms, if at all. See "Risk Factors -- Additional Financing
Requirements," "Capitalization" and "Business -- Site Location Strategy and
Planned Expansion."
The Company intends to invest the net proceeds of the Offering, until
used, in government securities and insured, short-term, interest-bearing
investments of varying maturities.
12
<PAGE>
DILUTION
At September 30, 1996, the net tangible book value per share of the Common
Stock after giving effect to the redemption by the Company of Common Stock
and warrants from the proceeds of the Bridge Loans was $0.91. The "net
tangible book value per share" represents the amount of the Company's
tangible assets, less the amount of its liabilities, divided by the number of
shares of Common Stock outstanding. The calculation of net tangible book
value as of September 30, 1996 reflects the pro forma events as set forth in
Note 1 of Notes to Financial Statements. The following table illustrates the
per share dilution:
<TABLE>
<CAPTION>
------------------
<S> <C> <C>
Public offering price per share of Common Stock(1) ........................... $5.00
Net tangible book value per share as of September 30, 1996 (unaudited) ....... $0.91
Increase per share attributable to the sale by the Company of one share of
Common Stock offered hereby ................................................. $1.47
------- -------
Net tangible book value per share after Offering(2) .......................... $2.38
-------
Dilution of net tangible book value per share of Common Stock to new investors $2.62
=======
</TABLE>
- ------
(1) Before deducting underwriting discounts and commissions and estimated
offering expenses to be paid by the Company.
(2) After deducting underwriting discounts and commissions and estimated
offering expenses to be paid by the Company.
The following table summarizes as of the date of this Prospectus, after
giving effect to (i) the Company's acquisitions of Commack Golf and Family
Recreation Center, L.P. (the "Commack Partnership") and U.S. Golf and
Entertainment Corp. and (ii) the redemption by the Company of Common Stock
and warrants from the proceeds of the Bridge Loans, and assuming completion
of the Offering, the differences between existing stockholders and the new
investors with respect to (i) the aggregate cash consideration (before
deducting issuance expenses) paid for Common Stock purchased from the
Company, and (ii) the average price per share paid for Common Stock purchased
from the Company.
<TABLE>
<CAPTION>
Percentage of Aggregate Cash Percentage of
Shares Equity Consideration Total Cash Average
Purchased Owned Paid Invested Price
----------- --------------- -------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders 1,245,000 53.1% $2,150,875 28.1% $1.73
New investors ........ 1,100,000 46.9% $5,500,000 71.9% $5.00
----------- --------------- -------------- --------------- ---------
Total .............. 2,345,000 100.0% $7,650,875 100.0%
=========== =============== ============== ===============
</TABLE>
The above table assumes no exercise of outstanding options, the
Underwriter's Over-Allotment Option or the Underwriter's Stock Purchase
Options. If the Over-Allotment Option is exercised in full, the new investors
will have paid $6,325,000 for 1,265,000 shares of Common Stock, representing
72.4% of the total consideration paid for 50.4% of the total number of shares
of Common Stock outstanding. Accordingly, investors in this Offering, on a
fully diluted basis, will experience an immediate dilution of $2.49 per
share.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 30, 1996, and as adjusted to reflect the sale of the Common Stock
at an assumed offering price of $5.00 per share of Common Stock. See "Use of
Proceeds."
<TABLE>
<CAPTION>
September 30, 1996
Unaudited
------------------------------
Pro Forma As Adjusted(1)
------------ --------------
<S> <C> <C>
Short-term debt(2)(3) .................................. $1,465,475 $ 314,500
============ ==============
Stockholders' Equity:
Preferred Stock -- $.001 par value, Authorized --
1,000,000 shares; Issued and outstanding -- None -- --
Common Stock -- $.001 par value, Authorized--
20,000,000 shares; issued and outstanding
1,245,000 shares actual; 2,345,000 shares, as
adjusted ........................................ $ 1,245 $ 2,345
Additional paid-in-capital ............................. 2,723,130 7,102,030
Deficit ................................................ (736,517) (736,517)
------------ --------------
Total stockholders' equity ............................. 1,987,858 6,367,858
------------ --------------
Total Capitalization ................................. $1,987,858 $6,367,858
============ ==============
</TABLE>
- ------
(1) Adjusted to reflect (i) the sale by the Company of the Common Stock
offered hereby and (ii) the repayment of debt. See "Use of Proceeds."
(2) Inclusive of short-term debt to banks of $225,000, to stockholders of
$404,475 and $836,000 of indebtedness relating to the Bridge Loans.
(3) Assumes no exercise of Underwriter's Over-Allotment Option.
14
<PAGE>
DIVIDEND POLICY
The Company has not paid cash dividends on the Common Stock since
inception and does not anticipate paying any cash dividends to its
stockholders in the foreseeable future. The Company currently intends to
retain earnings, if any, for the development and expansion of its business.
The declaration of dividends in the future will be at the election of the
Board of Directors and will depend upon the earnings, capital requirements
and financial position of the Company, general economic conditions and other
pertinent factors.
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's financial statements and related notes thereto and with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
From the period July
26, 1994 (date of For the nine months
formation) to For the year ended ended September 30, 1996
December 31, 1994 December 31, 1995 Unaudited
-------------------- ------------------ ------------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues ...................................... $ -- $ 719,374 $ 710,967
-------------------- ------------------ ------------------------
Operating expenses ............................ -- 1,021,666 906,902
Selling, general and administrative expenses .. -- 87,555 95,969
-------------------- ------------------ ------------------------
-- 1,109,221 1,002,871
-------------------- ------------------ ------------------------
Operating loss ................................ -- (389,847) (291,904)
Other expenses:
Interest .................................... -- 33,572 21,194
-------------------- ------------------ ------------------------
Net loss ...................................... $ -- $ (423,419) $ (313,098)
-------------------- ------------------ ------------------------
Pro forma net loss (1) ........................ $ (889,419) $ (733,098)
------------------ ------------------------
Pro forma net loss per share (1) .............. $ (.71) $ (.59)
------------------ ------------------------
Shares used in computing net loss per share (1) 1,245,000 1,245,000
================== ========================
</TABLE>
<TABLE>
<CAPTION>
September 30,
December 31, 1996
1995 Unaudited
-------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Current assets ............ $ 133,270 $ 96,889
Current liabilities ....... 1,132,493 757,446
Working capital deficiency (999,223) (660,557)
Total assets .............. 3,053,334 2,972,790
Shareholders' equity ...... 1,752,581 1,983,983
</TABLE>
(1) See Note 1 of Notes to Financial Statements of the Company.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In July, 1994, Commack Golf and Family Recreation Center, L.P. (the
"Commack Partnership") was organized to construct, develop and operate the
Commack Golf Center, which commenced operations in March, 1995. In April,
1996, United Acquisition I Corp. (which was incorporated by persons with no
affiliation to the Commack Partnership) (i) loaned $41,200 to the Commack
Partnership in anticipation of its acquisition of the Commack Partnership and
(ii) changed its name to U.S. Golf and Entertainment Corp. ("U.S. Golf
Corp."). In May, 1996, U.S. Golf Corp. raised an additional $500,000 from the
sale of common stock and warrants of which approximately $450,000 was loaned
to the Commack Partnership. In May, 1996, the Company was organized as a
vehicle by which (i) the general and limited partners of the Commack
Partnership exchanged their partnership interests for an aggregate of
1,045,000 shares of the Company's Common Stock; and (ii) the stockholders of
U.S. Golf Corp. exchanged their shares of common stock and warrants for
1,045,000 shares of the Company's Common Stock and 2,020,000 Class A
Warrants. In November, 1996 the Company (A) redeemed, for an aggregate
purchase price of $601,125, 845,000 shares of the Company's Common Stock and
all 2,020,000 Class A Warrants from persons who were formerly stockholders of
U.S. Golf Corp., (B) obtained bridge loans of $836,000 from accredited
investors (the proceeds of which were used in part for the aforesaid
redemption) (the "Bridge Loans") and (C) issued warrants to purchase a total
of 110,000 shares of the Company's Common Stock, at $.10 per share, to the
aforesaid accredited investors (the "Bridge Warrants"). See "Certain
Transactions." The following discussion assumes the Company has owned and
operated the Commack Golf Center since it first commenced operations in March
1995.
Results of Operations. The following table sets forth selected operations
data of the Company expressed as a percentage of total revenues (except for
operating expenses which is expressed as a percentage of operating revenues)
for the periods indicated below:
<TABLE>
<CAPTION>
Nine Months Ended
Fiscal Year Ended September 30, 1996
December 31, 1995 Unaudited
----------------- ------------------
<S> <C> <C>
Operating revenues ......................... 100.0% 100.0%
Operating expenses ......................... 142.0 127.6
Selling, general and administrative expenses 12.2 13.5
Loss from operations ....................... (54.2) (41.1)
Interest expense ........................... 4.7 3.0
Net loss ................................... (58.9) (44.0)
Pro forma net loss ......................... (123.6) (103.1)
</TABLE>
Year Ended December 31, 1995. During 1995, the Company had total revenues
of $719,374 and a net loss of $423,419.
Results of operations for the year ended December 31, 1995 reflect 10
months of operations of the Commack Golf Center, but do not reflect any
operations of the Commack Golf Center's miniature golf facility, children's
party room facility, snack bar or rental payments from the golf instruction
lessee.
Operating revenues consisted of driving range sales, lesson sales and
rental income from the pro shop which was opened for only five months in
1995. Although the Commack Golf Center was opened in March, 1995, a number of
related amenities (i.e., the 18-hole miniature golf course, the golf teaching
center, the pro shop, the children's party room and the snack bar) were not
completed or fully operational until the second quarter of 1996, which
negatively impacted the Company's operating revenues in 1995.
Operating expenses, consisting of land rent, depreciation and amortization
of golf driving range facilities and equipment, operating wages and employee
costs, utilities and all other facility operating costs, aggregated
$1,021,666 for 1995.
Selling, general and administrative expenses were $87,555 for the year
ended December 31, 1995, consisting of $42,500 in advertising expenses,
approximately $15,000 in sales promotion and commission expenses,
approximately $15,600 in general office expenses, and the remainder in
miscellaneous expenses. These expenses
16
<PAGE>
do not include the payment of any salaries to the Company's executive
officers, the anticipated costs of recruiting and hiring additional
executives and do not reflect the anticipated expenses associated with the
Company's plans to acquire or develop additional golf and recreational
centers, including marketing and advertising costs relating to the opening of
new locations.
Interest expense (net of capitalized interest costs) was $33,572,
reflecting borrowings outstanding as a result of the debt financing related
to the construction of the Commack Golf Center which was opened in March,
1995.
Nine Months Ended September 30, 1996 (unaudited). During the period ended
September 30, 1996, the Company had total revenues of $710,967 and a net loss
of $313,098. Because the Commack Golf Center commenced operations in March,
1995, there can be no meaningful nine month comparison of the results of
operations during the period ended September 30, 1996 and the comparable 1995
period. Due to the severe weather during the first 100 days of this nine
month period, Management does not believe the results for this period are
necessarily indicative of the results for the full year ended December 31,
1996.
Operating revenues consisted of driving range sales and lesson sales. The
Company received limited rental revenue from the pro shop during this period.
Operating expenses, consisting of land rent, depreciation and amortization
of golf driving range facilities and equipment, operating wages and employee
costs, utilities and all other facility operating costs, aggregated $906,902
for this period.
Selling, general and administrative expenses were $95,969 for the period
ended September 30, 1996, which included $14,300 in landscaping expenses,
$6,897 in amortization expenses, $6,178 in professional fees, $28,104 in
advertising expenses, $8,485 in commissions/promotion expenses, $4,707 in
telephone expenses, $7,275 in office expenses, and the remainder in
miscellaneous expenses. These expenses do not include the payment of any
salaries to the Company's executive officers, the anticipated costs of
recruiting and hiring additional executives and do not reflect the
anticipated expenses associated with the Company's plans to acquire or
develop additional golf centers, including marketing and advertising costs
relating to the opening of new locations.
Interest expense (net of capitalized interest costs) was $21,194
reflecting borrowings outstanding as a result of the debt financing related
to the construction of the Commack Golf Center.
Liquidity and Capital Resources. The Commack Partnership's partners
provided the Commack Partnership's initial capital in 1994 through
subscriptions for limited partnership interests in the aggregate amount of
$2,190,000, general partner contributions of $10,000 and loans by certain
general and limited partners to the Commack Partnership in the aggregate
amount of $404,475 through September 30, 1996.
The Company has taken a number of steps to improve the operations of the
Commack Golf Center which include opening the miniature golf course in April,
1996, increasing the advertising and marketing of the Commack Golf Center
within the community (including establishing a summer golf camp and high
school golf team practice program), insuring that Zevo Golf open a
fully-stocked golf pro shop at the Commack Golf Center, and implementing a
well-publicized golf instruction program for group and individual
instructions.
The Commack Partnership, at December 31, 1995, had a $215,000 note payable
to a bank with an interest at the rate of 2% above the banks prime lending
rate (10 3/4 % per annum) at December 31, 1995. This note, which is payable
on demand and is collateralized by all the assets of what was the Commack
Partnership, is guaranteed by certain former general and limited partners of
the Commack Partnership. During the nine months ended September 30, 1996,
$75,000 was repaid to the bank, reducing the outstanding balance to $140,000
at September 30, 1996 and bears interest at the rate of 10 1/4 % per annum.
In addition, the Commack Partnership borrowed $110,000 from another bank.
This note bears interest at the rate of 1 1/2 % above the bank's prime
interest rate per annum (10 1/4 % at December 31, 1995. During the nine
months ended September 30, 1996, $25,000 was repaid to the bank, reducing the
outstanding balance to $85,000 at September 30, 1996. The note, as amended,
matured on September 17, 1996 and was immediately renewed for an additional
three months with an interest rate of 9 3/4 %. The obligation is guaranteed
by certain former general and limited partners.
The Commack Partnership's, outstanding indebtedness to these banks and to
its general and limited partners has been assumed by the Company.
17
<PAGE>
In April, 1996, U.S. Golf Corp. (which was incorporated and received
equity investments from its founding stockholders in the amount of $54,500 in
November, 1995), loaned $41,200 to the Commack Partnership in anticipation of
the acquisition of the Commack Partnership. In May, 1996, U.S. Golf Corp.
raised an additional $500,000 from the sale of common stock and warrants to a
limited number of investors in a private financing. In May, 1996, the Company
was organized as the corporate entity through which this acquisition could
occur on a tax-free basis to the stockholders of U.S. Golf Corp. and the
general and limited partners of the Commack Partnership. In connection with
the Company's private offering of the Bridge Loans and Bridge Warrants in
November, 1996, the Company redeemed, for an aggregate purchase price of
$601,125, 845,000 shares of the Company's Common Stock and all 2,020,000
Class A Warrants from persons who were formerly stockholders of U.S. Golf
Corp. In addition, the Company obtained $234,875 in additional working
capital from the proceeds of such private offering.
The Company anticipates making substantial additional expenditures in
connection with the opening of new golf centers. See "Use of Proceeds." These
expenditures primarily relate to projected acquisition and opening costs,
associated marketing activities and the addition of personnel. Based on the
Company's experience with its existing golf center, the Company estimates
that the average cost of opening a center will be approximately $1,000,000 to
$3,000,000 depending on size and location; however, there can be no assurance
that these costs will not exceed $3,000,000.
The Company anticipates that it will continue to generate negative cash
flows from investing activities for the acquisition and opening of new
facilities which will exceed its operating cash flows until the Company has
more golf centers in operation. The Company anticipates that its inability to
generate operating cash flow in amounts necessary to offset its anticipated
negative cash flow from investing activities will be addressed by cash flow
from financing activities, including the net proceeds of this Offering and
the 50% debt financing projected to be available for new centers as discussed
below.
The Commack Golf Center was financed with approximately 85% equity and 15%
debt. The Company believes that the net proceeds of this Offering and the
Company's operating cash flow will be sufficient to provide the Company with
the equity portion of any financing for three additional centers within the
next 12 to 18 months. The Company believes that it can finance future
projects at a 50/50 debt to equity ratio; however, there can be no assurance
that it will be able to do so. The Company will be required to raise
additional capital to meet its goal of acquiring or opening at least 10 new
facilities over the next three to five years. There can be no assurance that
the Company will be able to raise such additional financing on favorable
terms, if at all. See "Risk Factors -- Additional Financing Requirements."
The loss of the Commack Golf Center, which is the Company's only golf
center, would have a material adverse effect on the Company's financial
condition and results of operations. See "Risk Factors -- Single Location"
and "-- Lease."
Trends. The Company plans to open additional golf centers. Management
believes that over time, the Company's revenues and operating income from the
Commack Golf Center and the additional centers it intends to open should
increase due to customer awareness, programs marketing the golf centers to
various special interest groups, expanding ties to the local business and
golfing community, and the growing popularity of golf. The Company expects
that, in the near term, it will continue to experience losses from
pre-opening costs and initial operating expenses associated with new centers.
The Company's interest expenses will likely increase as a result of
borrowings to fund the opening and acquisition of new facilities.
Seasonality. The Company's revenues from the Commack Golf Center for the
period from April through October (the second and third quarters of the year)
are expected to account for a greater portion of the Company's operating
revenue than will the first and fourth quarters of the year. Similar results
are expected for the other facilities the Company may acquire or open in
climates similar to that of the northeastern United States. Although some
portions of the Commack Golf Center are protected from inclement weather,
other portions of the Commack Golf Center, such as the miniature golf course,
the putting green and related recreational amenities, are outdoors and
vulnerable to weather conditions. Moreover, golfers may be less inclined to
practice when weather conditions limit their ability to play golf on outdoor
courses. This seasonal pattern is expected to cause the Company's results of
operations to vary significantly from quarter to quarter. Accordingly,
period-to-period comparisons are not necessarily meaningful and should not be
relied on as indicative of future results.
18
<PAGE>
BUSINESS
Introduction. U.S. Golf and Entertainment Inc. (the "Company") is seeking
to become a national owner/operator of upscale, high-volume, year-round golf
practice and instructional centers and related recreational facilities. The
Company's facilities are intended to provide attractive and affordable
practice and teaching venues to a large and increasing golf population. The
Company currently operates the Commack Golf and Family Recreation Center, a
modern 19-acre, 120-tee facility located in central Long Island (the "Commack
Golf Center"). The Commack Golf Center, which commenced operations in March,
1995, offers practice opportunities for driving, pitching, putting, chipping
and sand play, as well as an 18-hole miniature golf course, a snack bar, a
full-service pro shop and a golf learning center. The Commack Golf Center
offers a comfortable year-round environment for beginner and experienced
golfers to practice and improve their game. The Company's management believes
that their business experience, marketing skills and industry relationships
will provide the Company with opportunities to acquire and/or open other golf
practice facilities and learning centers.
Industry Overview. Over the past decade, the popularity of golf
throughout the United States and the demand for golf courses and golf driving
range facilities has experienced continued growth. According to the National
Golf Foundation, the number of golfers in the United States increased to
approximately 25 million players in 1995, from approximately 21.2 million
players in 1987, and the total number of rounds played increased by a
proportionate amount. Management believes that these trends will continue for
the foreseeable future as golf becomes an increasingly popular recreational
activity. Industry statistics indicate that women and juniors comprise 55% of
all new golfers in 1995. Management believes that its strategy of
owning/operating upscale, family-oriented golf practice facilities in prime
suburban locations will exploit the opportunities presented by these
demographic trends.
According to the Golf Range and Recreation Association of America (the
"GRRA"), as of November 1, 1995, there were 1,932 freestanding golf driving
ranges in the United States, an increase of approximately 200 facilities over
the prior year's total. Management believes the following factors account for
the growth in the number of golf practice centers, and that such factors will
continue to provide demand for such facilities: steady inflow of new players;
a limited number of golf courses available for daily fee play; and flexible
time considerations for the use of golf practice facilities.
A typical golf center is owned by an individual or by a municipal
recreational agency that neither offers the type of "brand-name" golf
instruction that the Company can offer nor a full-service golf pro-shop.
Within the past five years, several companies have been organized as
multi-site operators of golf practice facilities (in a manner similar to the
consolidation that has taken place in the ownership and management of 18-hole
golf courses), but to date management believes that all of these companies
own and/or manage less than three (3) percent of the golf practice ranges
throughout the United States. The Company believes these consolidation trends
will continue and that it can take advantage of opportunities that will exist
when single-site golf center owners want to sell their centers to a
professionally managed company.
The Commack Golf Center. The Commack Golf Center is a modern 19-acre
facility that features a double decker range with 120 hitting tees, 60 of
which are heated and 20 of which are situated on natural grass. The hitting
field is tree lined and covered with sodded grass, sand traps, and water
hazards. Golfers can practice a full array of golf shots by aiming at any one
of the five greens located at varying distances from the hitting tees.
In April, 1996, the Commack Golf Center opened an 18-hole miniature golf
course that is lighted for night play. The course attracts repeat customers
and creates additional traffic for the driving range by offering an
attraction for children while parents use the driving range. The Company
expects that other golf practice facilities that it acquires or opens in the
future will also have related miniature golf facilities.
The Commack Golf Center is open year-round, seven days a week. During the
spring and summer seasons, it is open from 8:00 a.m. to midnight and during
the winter and fall seasons, from 9:00 a.m. to 8:00 p.m. It is located at
Exit 52 of the Long Island Expressway, and is visible to approximately
120,000 cars per day that travel past the Commack Golf Center on that
highway.
19
<PAGE>
The Commack Golf Center's revenues are derived from selling buckets of
balls for use on the driving range, charging for rounds of miniature golf,
fees for lessons, rental payments from the pro shop, rental payments from the
golf instruction concession, and a percentage of revenues from the food and
beverages sold at the concession. The Commack Golf Center also generates
revenue by selling club memberships. For a membership fee of $1,000 a year,
members are entitled to unlimited golf balls and practice time at the range.
Additionally, club members receive a videotaped golf lesson.
The Commack Golf Center offers group lessons for players at every level,
from beginners to serious club players, using the instruction techniques
developed over many years by respected golf instruction professionals. The
Commack Golf Center instruction area is housed in an all-weather facility
that has three eleven foot high doors to allow golfers the opportunity to
drive balls on to the hitting field. This facility also includes a sand trap
and a small putting green. Lesson packages can be purchased in conjunction
with prepaid buckets of range balls. The teaching center is the ideal spot
for touring professionals to conduct clinics or golf schools.
The Commack Golf Center also offers individual golf lessons under the
supervision of Chuck Workman a respected teaching and touring professional.
In October 1996, the GRRA awarded the Commack Golf Center with "Honorable
Mention" as one of the ninety best golf ranges in the United States.
The Pro Shop. The Commack Golf Center's golf pro shop, which is leased to
Zevo Golf ("Zevo"), offers its customers a full range of golf equipment and
accessories. This pro shop is popular with the beginning golfers who are
using the Commack Golf Center to develop their game. The lease with Zevo is
for a term from June, 1996 through April, 1997 and contains rental provisions
totalling $16,100. In addition, the lease contains a right of first refusal
provision granting Zevo the right to operate the pro shop at the Commack Golf
Center and any other golf pro shops of any new Company locations during the
period of 1997-1998.
Location. The Commack Golf Center is located in Commack, New York, a
central Long Island location. Commack, together with the neighboring
townships of Huntington and Smithtown total over 336,000 people with a median
income of approximately $77,000. The Commack Golf Center is visible from the
Long Island Expressway and is easily accessible at Exit 52.
The Commack Golf Center is located within a high traffic commercial
district that includes the Commack Multiplex, a 16 screen facility, which is
one of the highest grossing movie theaters in the Northeast. In August of
1995, a Costco Price Club opened directly across from the Commack Golf
Center.
Planned Expansion. The Company will seek to acquire or open new centers in
locations that have similar characteristics to that of the Commack Golf
Center -- upscale market demographics, within a high traffic commercial area
and easy access. The Company expects to (1) improve the operations of
acquired facilities with its professional management staff, (2) upgrade the
existing facility with additional amenities, including related recreational
and entertainment facilities, (3) establish professional golf training
centers, and (4) enhance such facilities' advertising and marketing
activities with strategically designed programs that will take advantage of
the Company's access to well known golf professionals. The Company
anticipates that most of the centers to be acquired or opened in the future
will have between 70-100 hitting tees, will be lighted to permit night play
and will be partially enclosed and/or heated to permit all weather play.
The Company is actively pursuing acquisition opportunities throughout the
northeast United States and currently has approximtely ten opportunities
under active review. Such opportunities are in preliminary stages of
development, and consummation of any acquisition is subject to satisfaction
of various conditions, including due diligence and negotiation of definitive
agreements. The Company has not concluded any definitive terms with respect
to any potential acquisition or expansion opportunities, except for an
exclusive option to acquire, from its Senior Vice President at fair market
value (as determined by an independent appraiser), rights to operate a 20 tee
golf practice facility and pro shop at Bethpage State Park, a well-known
municipal facility which includes five golf courses, the "Black Course" of
which has been selected to host the U.S. Open Golf Championship in 2002. The
term of such option is for a period commencing on October 1, 1996 and
terminating on December 31, 1999 and is contingent upon any necessary
approvals of the New York State Department of Parks. The Company will only
consider exercising this option in the event the current lease for these
facilities, which expires in 1998, is extended by the New York State
Department of Parks.
20
<PAGE>
Management believes that its real estate contacts and golf industry
relationships will enable it to identify acquisition, expansion and
promotional opportunities that might not otherwise be available to its
competitors. Management believes that these factors, together with the
fragmented state of the golf center industry, should provide the Company with
a large number of potential expansion or acquisition options over the next
three to five years, notwithstanding that competitors also may be seeking to
expand their existing operations.
Management believes that the net proceeds of this Offering, debt financing
and cash flow from operations, will be sufficient to permit the Company to
acquire and open three additional golf centers over the next 12 to 18 months.
Such belief is based on certain assumptions, including assumptions as to the
availability and cost of suitable locations and the availability of debt
financing to cover at least 50% of the cost of acquiring and opening each
center. See "Risk Factors" and "Use of Proceeds."
Marketing And Advertising. Management intends to develop marketing and
advertising programs that will allow it to take advantage of its relationship
with prominent teaching and touring professionals, including its Senior Vice
President, Chuck Workman. The Company expects to advertise in local and
community newspapers, on radio and local cable television channels, use
direct mailings and have a regular series of promotions, discounts, teaching
clinics, and equipment demonstrations to increase awareness of its golf
centers. The Company also will seek to work with professional golf tour
organizers when a major golf event (such as the Long Island Northville Open
- -- one of the leading Senior Tour events) occurs near the Commack Golf Center
or one of the other golf centers the Company intends to open in the future.
Competition. The golf driving range business is competitive and includes
competition from golf courses as well as other forms of recreation. Certain
of the Company's competitors have considerably greater financial, marketing,
personnel and other resources than the Company, as well as greater experience
and customer recognition than the Company. In the Long Island market, the
Company faces strong competition from several nearby freestanding golf
driving ranges and from local public and private golf courses which offer
golf practice facilities. While management believes that the location of and
the amenities associated with the Commack Golf Center provide it with certain
competitive advantages, there can be no assurance that the Company will be
able to successfully compete with its competitors.
Within the past five years, one company, Family Golf Centers, Inc.,
headquartered in Melville, New York, has become the nation's largest owner
and operator of golf driving ranges and that company is pursuing an
aggressive development and acquisition strategy that has increased the number
of ranges (to approximately 30) under its operation as of October 1, 1996.
This company's substantial capital and track record gives it a significant
competitive advantage over the Company in acquiring or developing golf
practice facilities. The Company is aware of several other public and private
companies that are also pursuing multi-site acquisition and development
opportunities in the golf driving range and practice facility segment and
that may compete directly or indirectly with the Company. Several other large
and well-financed companies are active in the management of 18-hole golf
courses; however, none of these companies has focused on the driving range,
golf practice and learning center segments, although there can be no
assurance that they may not do so in the future.
The Company purchases golf balls and other equipment from a number of
suppliers. The Company anticipates that it will have no difficulty in
obtaining golf balls from such suppliers.
Properties. The Commack Golf Center is currently the Company's only
property. The Company occupies the site pursuant to a commercial lease with
an initial term of fifteen (15) years (until April, 2010) with two (2) five
(5) year renewal terms at the option of the Company. The rent for the
premises is $500,000 per year through April, 1998 with increases of
approximately 2.75% per year thereafter so that in year fifteen (15), the
rental is $665,000 per year. After year fifteen (15), the lease is renewable
at continuing increases of approximately 2.75% or the fair market value rent
at the time of the increase, whichever is greater. As additional rent, the
Company will pay twenty-five (25%) percent of its gross revenue from
$2,400,000 to $3,000,000 and ten (10%) percent of its gross revenue over
$3,000,000.
The lease requires the Company to observe certain covenants, in addition
to its obligation to make timely rent payments. These covenants include a
limitation on the property's use as a golf driving range, and related
recreational facilities; payment of applicable real estate taxes and
assessments; timely payment for improvements to the property so as to avoid
the creation of liens against the property; maintenance of adequate insurance
for
21
<PAGE>
property damage and personal injury (including worker's compensation); and
compliance with laws and ordinances. The Company is currently in full
compliance with its warranties and obligations under the lease. If the
Company fails to comply with any of these covenants, the landlord has rights
against the Company, including the right to terminate the lease and evict the
Company from the premises.
Employees. As of October 1, 1996, the Company had five (5) full-time
employees and sixteen (16) part-time employees. The Company anticipates that
the additional golf centers it intends to open in the future will be staffed
in a manner consistent with the Commack Golf Center. None of the Company's
employees is represented by a collective bargaining agreement. The Company
has never experienced a strike or work stoppage, and considers its
relationship with its employees to be good.
Environmental Regulation. Golf and recreational centers use and store
various hazardous materials such as motor oil, gasoline, pesticides,
herbicides and paint. Under various federal, state and local laws, ordinances
and regulations, an owner or operator of real property is generally liable
for the costs of removal or remediation of hazardous substances that are
released on its property, regardless of whether the owner or operator knew
of, or was responsible for, the release of such hazardous materials. The
Company has not been advised of any non-compliance or violation of any
environmental laws, ordinances or regulations and the Company believes that
it is in substantial compliance with all such laws, ordinances and
regulations applicable to its Commack Golf Center. The Company, however, has
not performed any environmental studies on the Commack Golf Center and, as a
result, there may be potential liabilities and/or conditions of which the
Company is not aware. If any such liabilities or conditions arise with
respect to the Commack Golf Center or any other facility which may be opened,
acquired or operated by the Company in the future, there could be a material
adverse effect on the Company.
The Company is subject to the Fair Labor Standards Act and various state
laws governing such matters as minimum wage requirements, overtime and other
working conditions and citizenship requirements.
Insurance. The Company carries property and liability insurance that it
believes is adequate. While the Company will make every effort to maintain
insurance by industry standards, the Company could suffer a loss from a
casualty or liability for an event not covered by insurance or in amounts in
excess of coverage. Any such loss could have a material adverse effect on the
Company.
Legal Proceedings. The Company does not know of any material litigation
or proceeding pending, threatened or contemplated to which it is or may
become a party.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their positions held
with the Company, and their ages are as follows:
<TABLE>
<CAPTION>
Name Age Position
---------------------- ----- -----------------------------------------------
<S> <C> <C>
Edward C. Ross ....... 52 Chairman of the Board, Chief Financial Officer and
Director
Stuart M. Goldstein .. 37 President, Chief Executive Officer and Director
Chuck Workman ........ 60 Senior Vice President and Director
Garry Howatt ......... 43 Director
Michael L. Faltischek 49 Secretary and Director -- nominee
Robert J. Schwartz ... 38 Director -- nominee
</TABLE>
The following is a brief summary of the background of each director and
executive officer of the Company:
Edward C. Ross has served as the Chairman of the Board, Chief Financial
Officer and a director of the Company since May, 1996. From March, 1994 to
May, 1996, Mr. Ross was the founding general partner of the Commack Golf and
Family Recreation Center, L.P., the entity that developed the Commack Golf
Center. Mr. Ross has been a partner in the accounting firm of Finkle, Ross &
Rost since 1975. He also has been involved as a principal in various start-up
companies as well as established operating businesses, ranging from
manufacturing to real estate to financial consulting. Mr. Ross is a Certified
Public Accountant in New York and New Jersey, and is a member of the American
Institute of Certified Public Accountants. Mr. Ross is a director of Sel-Leb
Marketing, Inc., a publicly traded company. In February, 1994, Mr. Ross was
President of Coastal Riverview Development Corp. ("Coastal"), which served as
the general partner of Coventry Shopping Plaza Associates ("Coventry"), a
limited partnership and the owner and operator of a shopping center in
Providence, Rhode Island. On February 1, 1994, Coventry filed a petition for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court, Eastern District of New York. The petition was dismissed at
the debtor's request in October, 1994. Mr. Ross was also President of Coastal
when it was the general partner of Conrans Plaza Associates ("Conrans"), a
limited partnership which owned and operated a shopping center in East
Hanover, New Jersey and which filed a petition for reorganization under
Chapter 11 in the U.S. Bankruptcy Court, Eastern District of New York on July
11, 1995. Conrans successfully emerged from these proceedings in March, 1996.
Stuart M. Goldstein has served as President, Chief Executive Officer and
director of the Company since September 1996. From June 1992 through
September 1996, Mr. Goldstein was Vice President of Wharton Management Group,
Inc., a registered investment advisor specializing in the management of a
diversified core of investment portfolios valued in excess of $500 million.
From August 1989 through May 1992, Mr. Goldstein was a principal with
Constable Partners L.P., where he was active in the management of the
company's interests in mergers and acquisitions, spin-offs and special
situations. Since 1991, Mr. Goldstein has been a member of the Metropolitan
Golf Association, a governing body overseeing approximately 300 golf
facilities and clubs in the New York tri-state area, where he serves as a
member of the Public Golf and Junior Committees. Mr. Goldstein received a
B.S. in finance from Syracuse University.
Chuck Workman has served as the Senior Vice President and a director of
the Company since May, 1996. Since 1980, Mr. Workman has been the Director of
Golf for the five golf courses located at Bethpage State Park, Bethpage, New
York. As the Director of Golf at this facility, Mr. Workman operates the golf
driving range, owns and manages the Chuck Workman Pro Shop and supervises
golf instruction offered by more than five teaching professionals. Mr.
Workman also organizes various golf tournaments at Bethpage State Park. Since
1985, Mr. Workman has played in approximately 100 PGA Senior Tour Golf
Tournaments.
Garry Howatt has been a director of the Company since May, 1996. Since
1985, Mr. Howatt has been the Managing Partner and President of Mt. Freedom
Golf (in New Jersey), which operates an upscale driving range, miniature golf
course, batting range and golf pro shop. From 1972 through 1984, Mr. Howatt
was a professional hockey player with the New York Islanders (1972-1981), the
Hartford Whalers (1981-1982) and the New Jersey Devils (1982-1984).
23
<PAGE>
Michael L. Faltischek is a senior partner at the firm of Ruskin, Moscou,
Evans & Faltischek, P.C., a general practice law firm located in Mineola, New
York, where he has served as managing partner since 1976. Since September,
1995, Mr. Faltischek has served as a trustee on the Board of the Long Island
Power Authority. Mr. Faltischek was admitted to practice law in the State of
New York in 1974, having received his Juris Doctor degree, cum laude, from
Brooklyn Law School in 1973. Mr. Faltischek will be elected to the Company's
Board of Directors after the closing of the Offering.
Robert J. Schwartz has been a Vice President, Director of Marketing for
Golf Magazine Properties, a division of Times Mirror Magazines since August,
1993. From May 1984, through August 1993, Mr. Schwartz was a Senior Vice
President at NW Ayer, Inc., a major advertising agency, where he was a
management supervisor for Maxfli Golf. Mr. Schwartz received an MBA in
marketing from New York University and a B.S. in advertising from the
Newhouse School at Syracuse University. Mr. Schwartz will be elected to the
Company's Board of Directors after the closing of the Offering.
Vacancies and newly-created directorships resulting from any increase in
the number of authorized directors may be filled by a majority vote of the
directors then in office. Officers are elected by, and serve at the pleasure
of, the Board of Directors. The loss of services of Edward Ross, Stuart
Goldstein or Chuck Workman could have a material adverse effect on the
Company. See "Risk Factors -- Dependence on Key Employees." The Board of
Directors intends to establish Audit and Compensation Committees following
the completion of the Offering. Michael L. Faltischek will be appointed as
Chairman of both such committees.
The Company's employee directors do not receive any additional
compensation for their services as directors. Non-employee directors do not
receive a cash compensation for serving as such, but are reimbursed for
expenses. Pursuant to the Company's 1996 Non-Employee Director Stock Option
Plan, each non-employee director will receive options to purchase 5,000
shares of Common Stock upon initial election to the Board of Directors and
will receive 5,000 additional options upon each annual re-election.
The Underwriter has a five-year right, effective upon the Closing, to
designate one nominee to the Company's Board of Directors, which shall not
exceed seven persons during such period without the Underwriter's consent. As
of the date of this Prospectus, the Underwriter has no intention to nominate
any person for election as director.
Employment Agreements. The Company has entered into a five (5) year
employment agreement with Stuart Goldstein commencing on September 16, 1996.
Mr. Goldstein shall serve as President and Chief Executive Officer and will
devote 100% of his time to the Company. The Agreement provides for annual
compensation of $125,000 for the first year, $150,000 for the second year and
$200,000 per year for the remainder of the term, as well as options to
purchase 500,000 shares of Common Stock. In addition, Messrs. Edward Ross and
Chuck Workman have entered into five (5) year employment agreements with the
Company. In accordance with their respective contracts, each of Messrs. Ross
and Workman is entitled to annual compensation of $30,000 and $25,000,
respectively, as well as options to purchase 100,000 and 50,000 shares of
Common Stock, respectively. Each of Messrs. Ross and Workman shall devote
their respective time to the business of the Company on an as-needed basis.
Each of Messrs. Goldstein, Ross and Workman is subject to a covenant not to
compete with the Company which prohibits each of them from competing with the
Company during the terms of their respective employment agreements and for a
period of two (2) years thereafter in the United States.
Stock Option Plans. The Company maintains two stock option plans, as
amended, pursuant to which an aggregate of 1,000,000 shares of Common Stock
may be granted.
1996 Stock Option Plan. The 1996 Stock Option Plan (the "1996 Plan") was
adopted by the Board of Directors and the stockholders of the Company in May,
1996. Under the 1996 Plan, as amended, 900,000 shares of Common Stock have
been reserved for issuance upon exercise of options designated as either (i)
incentive stock options ("ISOs") under the Internal Revenue Code (the
"Code"), or (ii) non-qualified options. ISOs may be granted under the 1996
Plan to employees and officers of the Company. Non-qualified options may be
granted to consultants, directors (whether or not they are employees),
employees or officers of the Company.
The purpose of the 1996 Plan is to encourage stock ownership by certain
directors, officers and employees of the Company and certain other persons
instrumental to the success of the Company and to give them a greater
personal interest in the success of the Company. The 1996 Plan is
administered by the Board of Directors or by a stock option committee
selected by the Board. The Board or such committee, within the limitations of
the 1996 Plan, shall determine the persons to whom options will be granted,
the number of shares to be covered by each
24
<PAGE>
option, whether the options granted are intended to be ISOs, the duration and
rate of exercise of each option, the option purchase price per share and the
manner of exercise, the time, manner and form of payment upon exercise of an
option, and whether restrictions such as repurchase rights by the Company are
to be imposed on shares subject to options. ISOs granted under the 1996 Plan
may not be granted at a price less than the fair market value of the Common
Stock on the date of grant (or 110% of fair market value in the case of
persons holding 10% or more of the voting stock of the Company).
Non-qualified options granted under the 1996 Plan may not be granted at a
price less than 85% of the fair market value of the Common Stock on the date
of grant (or the fair market value in the case of persons holding 10% or more
of the voting stock of the Company). The aggregate fair market value of
shares for which ISOs granted to any person are exercisable for the first
time by such person during any calendar year (under all stock option plans of
the Company and any related corporation) may not exceed $100,000. The 1996
Plan will terminate in December, 2006. The term of each option granted under
the 1996 Plan will expire not more than ten years from the date of grant (or
five years from the date of grant in the case of persons holding 10% or more
of the voting stock of the Company). Options granted under the 1996 Plan are
not transferable during an optionee's lifetime but are transferable at death
by will or by the laws of descent and distribution. As of the date hereof,
500,000 options have been granted under the 1996 Plan to Stuart Goldstein,
the President and Chief Executive Officer of the Company; 120,000 of such
options are designated as ISOs as defined in the Code (20,000 of which vest
on December 31, 1996 and the balance of which shall vest ratably per quarter
for 20 quarters commencing on March 31, 1997). The remaining 380,000 options
are Non-Qualified Options as defined in the Code, 30,000 of which vest on
December 31, 1996 and the remainder of which shall vest ratably per quarter
for 20 quarters commencing on March 31, 1997. Mr. Goldstein has the right to
require the Company, at its expense, to register the shares issuable upon
exercise of the options after thirty-six (36) months from the Effective Date.
In addition, 100,000 options have been granted under the 1996 Plan to Edward
Ross, the Chairman of the Company and 50,000 to Chuck Workman, the Company's
Senior Vice President, all of which are ISOs. Messrs. Ross and Workman's
options shall vest ratably per quarter over a period of five (5) years
commencing December 31, 1996. All the aforementioned options granted are
exercisable at a price of $5.00 per share and expire ten years from the date
of grant.
1996 Non-Employee Director Stock Option Plan. The 1996 Non-Employee
Director Stock Option Plan (the "Directors Plan") was adopted and approved by
the Board of Directors and the stockholders of the Company in May, 1996.
Options to purchase an aggregate of 100,000 shares of Common Stock may be
issued pursuant to the Directors Plan. Pursuant to the terms of the Directors
Plan, each independent unaffiliated Director automatically shall be granted,
subject to availability, without any further action by the Board of
Directors: (i) a non-qualified option to purchase 5,000 shares of Common
Stock upon their election to the Board of Directors; and (ii) a non-qualified
option to purchase 5,000 shares of Common Stock on the date of each annual
meeting of stockholders following their election to the Board of Directors at
which they are re-elected to the Board. The exercise price of each option is
the fair market value of the Common Stock on the date of grant. Each option
expires five years from the date of grant and vests in two annual
installments of 50% each on the first and second anniversary of the date of
grant. Options granted under the Directors Plan generally are not
transferable during an optionee's lifetime but are transferable at death by
will or by the laws of descent and distribution. In the event an optionee
ceases to be a member of the Board of Directors (other than by reason of
death or disability), then the vested portion of the option may be exercised
for a period of 180 days from the date the optionee ceased to be a member of
the Board of Directors. In the event of death or permanent disability of an
optionee, all options accelerate and become immediately exercisable until the
scheduled expiration date of the option. As of the date hereof, options to
acquire 5,000 shares of Common Stock have been granted to Mr. Garry Howatt
under the Directors Plan.
Limitation of Liability and Indemnification Matters. The Company's
Certificate of Incorporation: (i) eliminates the liability of the directors
of the Company for monetary damages to the fullest extent permitted by
Delaware law; and (ii) authorizes the Company to indemnify its officers and
directors to the fullest extent permitted by Delaware law. The By-Laws of the
Company provide broad indemnification for officers and directors against
expenses (including legal fees, judgments and Company-approved settlements)
incurred in connection with any civil or criminal action which arises from
the performance of duties for the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company pursuant
to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
Key Man Insurance. The Company is the sole beneficiary of a $1,000,000
term life insurance policy covering Stuart Goldstein.
25
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date hereof, the ownership of
the Common Stock by (i) each person who is known by the Company to own of
record or beneficially more than 5% of the outstanding Common Stock, (ii)
each of the Company's directors, nominees for directors, and executive
officers, and (iii) all directors, nominees for directors, and executive
officers of the Company as a group. Except as otherwise indicated, the
stockholders listed in the table have the sole voting and investment power
with respect to the shares indicated.
<TABLE>
<CAPTION>
Percentage Percentage
Name and Address of Number of Shares Before After
Beneficial Owner Beneficially Owned Offering(1) Offering(1)
--------------------------------- ------------------ ------------ ------------
<S> <C> <C> <C>
Edward C. Ross(2)
c/o the Company
4 Henry Street
Commack, NY 11725 74,350 5.95% 3.16%
Stuart M. Goldstein(3)
c/o The Company
4 Henry Street
Commack, N.Y. 11725 50,000 3.86% 2.09%
Chuck Workman(4)
c/o the Company
4 Henry Street
Commack, NY 11725 61,302 4.91% 2.61%
Garry Howatt(2)
c/o the Company
4 Henry Street
Commack, NY 11725 53,749 4.30% 2.29%
Edward C. Ross and
Stuart M. Goldstein(5)
c/o the Company
4 Henry Street
Commack, NY 11725 700,000 56.22% 29.85%
Robert Schwartz
c/o the Company
4 Henry Street
Commack, NY 11725 -- -- -- -- -- --
Michael L. Faltischek
c/o Ruskin, Moscou, Evans
& Faltischek, P.C.
170 Old Country Road
Mineola, NY 11501 -- -- -- -- -- --
All directors, nominees for
directors, and executive
officers of the Company as a
group (6 persons)
(1)(2)(3)(4)(5) 939,401 75.45% 40.06%
</TABLE>
(1) Does not include shares issued pursuant to the exercise of the
Underwriter's Over-Allotment Option.
(2) Includes 5,000 shares of Common Stock issuable upon the exercise of
options within 60 days of the date of this Prospectus.
(3) Includes 50,000 shares of Common Stock issuable upon the exercise of
options within 60 days of the date of this Prospectus.
(4) Includes 2,500 shares of Common Stock issuable upon the exercise of
options within 60 days of the date of this Prospectus.
(5) Shares owned beneficially by persons listed as Selling Stockholders but
held by Messrs. Ross and Goldstein as custodian/limited power of attorney
for such persons. Messrs. Ross and Goldstein disclaim beneficial
ownership of such shares. Messrs. Ross and Goldstein have limited
dispositive power over, but have no pecuniary interest in, such shares.
Until such shares of stock are sold, the holders thereof, and not Messrs.
Ross and Goldstein, retain all voting rights in connection with such
stock. See "Selling Stockholders; Plan of Distribution."
26
<PAGE>
CERTAIN TRANSACTIONS
The Commack Partnership was organized in 1994 to construct, develop and
operate the Commack Golf Center. The Commack Partnership's limited partners
provided the Commack Partnership's with capital of $2,190,000 through a
private placement of limited partnership interests that was exempt from the
registration requirements of the Act pursuant to Regulation D thereunder. The
general partners contributed $10,000 of capital to the Commack Partnership.
In the latter part of 1995 and the first quarter of 1996, the Commack
Partnership borrowed a total of $404,475 from the limited partners and two
general partners in connection with the development of the Commack Golf
Center. The indebtedness from the limited partners will be repaid from the
proceeds of this Offering. The indebtedness to the general partners
($314,500) is non-interest bearing and due on demand.
In November, 1995, United Acquisition I Corp., was incorporated and
received equity investments from its founding stockholders in the amount of
$54,500. This company had no affiliation with the Commack Partnership at the
time of its formation. In April, 1996, this company (whose name was changed
to U.S. Golf and Entertainment Corp., herein referred to as "U.S. Golf
Corp.") loaned $41,200 to the Commack Partnership in anticipation of the
purchase (the "Purchase") of the partnership interests of the Commack
Partnership for its stock. In May, 1996, U.S. Golf Corp. raised an additional
$500,000 from the sale of common stock and warrants (which was a precondition
to the Purchase) of which approximately $450,000 was loaned to the Commack
Partnership in anticipation of the Purchase. The Purchase was effected
through the organization of the Company (in May, 1996) as the corporate
entity which would (i) exchange, on a tax-free basis, the partnership
interests in the Commack Partnership for 1,045,000 shares of Common Stock in
the Company; and (ii) exchange, on a tax-free basis, the stock and warrants
of U.S. Golf Corp (i.e., 1,045,000 shares and 2,020,000 warrants) for an
identical amount of Common Stock and warrants in the Company. These exchanges
were consummated on June 3, 1996. Subsequent to the Purchase, the terms of
the warrants were modified to reflect the exercise price of the Class A
Warrants offered by the Company in exchange for their registration in the
Registration Statement.
In November, 1996 the Company (A) redeemed, for an aggregate purchase
price of $601,125, 845,000 shares of the Company's Common Stock and all
2,020,000 Class A Warrants from persons who were formerly stockholders of
U.S. Golf Corp., (B) obtained Bridge Loans of $836,000 from accredited
investors (the proceeds of which were used in part for the aforesaid
redemption) and (C) issued Bridge Warrants to purchase a total of 110,000
shares of the Company's Common Stock, at $0.10 per share, to the aforesaid
accredited investors. The aggregate purchase price of $601,125 described in
(A) above was allocated as follows: 325,000 shares of the Company's Common
Stock plus 975,000 warrants were redeemed for $1.00 per unit, 520,000 shares
of Common Stock plus 520,000 warrants were redeemed for $0.53 per unit
($275,600) and the remaining 525,000 warrants were redeemed for a total of
$525.
In , 1996, persons owning an aggregate of 700,000 shares of Common
Stock (herein listed as Selling Stockholders) entered into Custody
Agreements/Irrevocable Powers of Attorney with Edward Ross and Stuart
Goldstein. Pursuant to these Agreements/Powers of Attorney, Messrs. Ross and
Goldstein were granted the irrevocable authority to sell those shares of
Common Stock, subject to the Underwriters consent, at any time from the
Effective Date to the second anniversary of the Effective Date, with the
Selling Stockholders receiving $2.90 per share (in the case of 500,000
shares) or $1.25 per share (in the case of 200,000 shares) and the Company
receiving the proceeds of such sales in excess of such amounts. See "Selling
Stockholders; Plan of Distribution."
DESCRIPTION OF SECURITIES
The following summary descriptions are qualified in their entirety by
reference to the Company's Certificate of Incorporation, a copy of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
Common Stock. The Company is authorized to issue 20,000,000 shares of
common stock, par value $.001 per share (the "Common Stock"). As of the date
of this Prospectus, there were 1,245,000 shares of Common Stock issued and
outstanding and held of record by 57 stockholders. Each stockholder is
entitled to one vote per share of Common Stock owned by such stockholder on
all matters submitted to a vote of the stockholders.
27
<PAGE>
The Common Stock is not entitled to preemptive rights and is not subject
to redemption. Subject to the dividend rights of holders of any then
outstanding preferred stock, holders of Common Stock are entitled to receive
dividends at such times and in such amounts as the Board of Directors, from
time to time, may determine. Subject to the liquidation preference of any
then outstanding preferred stock, holders of Common Stock are entitled to
receive, on a pro rata basis, all remaining assets of the Company available
for distribution to the holders of Common Stock in the event of the
liquidation, dissolution or winding up of the Company.
All outstanding shares of Common Stock are, and the shares of the Common
Stock issued pursuant to the Offering will be, validly issued, fully paid and
non-assessable.
Preferred Stock. The Board of Directors has the authority to cause the
Company to issue, without any further vote or action by the stockholders, up
to 1,000,000 shares of preferred stock, par value $.001 per share (the
"Preferred Stock"), in one or more series, to designate the number of shares
constituting any series, and to fix the rights, preferences, privileges and
restrictions thereof, including dividend rights, voting rights, rights and
terms of redemption, redemption price or prices and liquidation preferences
of such series. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders. The issuance of Preferred Stock with
voting and conversion rights may adversely effect the voting power of the
holders of Common Stock, including the loss of voting control. The Company
has no present plans to issue any shares of Preferred Stock. See "Risk
Factors -- Potential Adverse Effect of Issuance of any Authorized Preferred
Stock."
Warrants. In connection with the Company's private offering consummated in
November, 1996, the Company issued an aggregate of 110,000 Bridge Warrants,
each such warrant entitling the holder thereof to purchase one (1) share of
Common Stock at an exercise price of $0.10 per share, subject to adjustment.
The Bridge Warrants are exercisable commencing one (1) year from the
Effective Date until October 23, 2001.
Delaware Takeover Statute. The Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the Board of Directors of the Company
approved either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the Company outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned (x) by persons who are directors and also officers and (y) by
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or (iii) on or subsequent to such
date, the business combination is approved by the Board of directors and
authorized at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3 % of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include, among other things:
(i) any merger or consolidation involving the Company and the interested
stockholder; (ii) any sale, lease, exchange, mortgage, transfer, pledge or
other disposition of 10% or more of the assets of the Company involving the
interested stockholder; (iii) subject to certain exceptions, any transaction
that results in the issuance or transfer by the Company of any stock of the
Company to the interested stockholder; (iv) any transaction involving the
Company that has the effect of increasing the proportionate share of the
stock of any class or series of the Company beneficially owned by the
interested stockholder; or (v) the receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the Company. In general, Section 203 defines
an "interested stockholder" as any entity or person beneficially owning 15%
or more of the outstanding voting stock of the Company and any entity or
person affiliated with or controlling or controlled by such entity or person.
Transfer Agent and Warrant Agent. American Stock Transfer and Trust
Company, 40 Wall Street, New York, New York 10005, has been appointed as the
transfer agent and warrant agent for the Common Stock and Class A Warrants.
28
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons who may be deemed to be
"affiliates" of the Company, as that term is defined under Rule 144, is
entitled to sell within any three-month period a number of restricted shares
beneficially owned for at least two years that does not exceed the greater of
(i) one percent of the then outstanding shares of Common Stock, or (ii) the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding the filing of a Form 144 with the Securities and Exchange
Commission with respect to such sale. Sales under Rule 144 also are subject
to certain requirements as to the manner of sale, notice and the availability
of current public information about the Company. A person who is not an
affiliate of the Company any time during the 90-day period preceding such
sale and has beneficially owned such shares for at least three years is
entitled to sell such shares without regard to the volume or other
requirements pursuant to Rule 144(k).
Any employee, officer, or director of, or consultant to, the Company, who
purchased his or her shares pursuant to a written compensatory plan or
contract may be entitled to rely on the resale provisions of Rule 701 under
the Act, which permits non-affiliates to sell their Rule 701 shares of Common
Stock without having to comply with the public information, holding period,
volume limitations, or notice provisions of Rule 144, and which permits
affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
Company becomes subject to the reporting requirements of Sections 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Following the Offering, 545,000 shares of Common Stock currently
outstanding as well as 110,000 common shares issuable pursuant to the
exercise of the Bridge Warrants will be "restricted securities" as that term
is defined in Rule 144 promulgated under the Act (the "Restricted
Securities"). All of such shares of Common Stock will be eligible for sale in
the public market pursuant to the provisions of Rule 144 or Rule 701 under
the Act at various times after the Effective Date, subject to the "lock-up"
agreements with the Underwriter described below.
Holders of the Additional Stock will be subject to lock-up agreements for
a period of two (2) years from the Effective Date, subject to earlier release
by the Underwriter. It is the intention of the Underwriter to release such
lock-ups as early as practicable on or after the Effective Date if in its
sole judgment, market conditions and public demand for additional shares of
the Company's Common Stock so warrant.
The Company has adopted the 1996 Stock Option Plan, as amended, pursuant
to which it has issued options to purchase 500,000, 100,000 and 50,000 shares
of Common Stock to each of Messrs. Stuart Goldstein, Edward Ross and Chuck
Workman, respectively.
The Company has adopted the 1996 Non-Employee Director Stock Option Plan
pursuant to which it has issued options to purchase 5,000 shares of Common
Stock to Mr. Garry Howatt and may issue options to purchase up to an
additional 95,000 shares of Common Stock.
Holders of the Additional Stock, the Restricted Securities, Bridge
Warrants, the Employee Options and the Director Options have agreed that they
will not, without the Underwriter's written consent, and, in the case of the
Additional Stock, subject to the terms and conditions described below, sell,
transfer, assign, pledge, hypothecate or otherwise dispose of any of the
Additional Stock, the Restricted Securities, the Bridge Warrants, or the
shares of Common Stock issuable upon exercise of the Employee Options or
Director Options for a period of 24 months after the Effective Date without
the consent of the Underwriter. See "Selling Stockholders; Plan of
Distribution."
Following the expiration of the lock-up period (or prior thereto if the
Underwriter should so agree) and/or restrictive periods described above, a
substantial sale of securities pursuant to Rule 144 or otherwise could occur
and might have an adverse effect on the market price of the Company's
securities.
29
<PAGE>
SELLING STOCKHOLDERS; PLAN OF DISTRIBUTION
Pursuant to the exchange agreement with the stockholders of U.S. Golf
Corp., the Company issued 1,045,000 shares of Common Stock and 2,020,000
Class A Warrants to such stockholders. In addition, pursuant to the exchange
agreement with the limited partners of the Commack Partnership, the Company
issued 1,045,000 shares of Common Stock to such limited partners. In
November, 1996, 845,000 shares of Common Stock and all 2,020,000 Class A
Warrants were repurchased from certain former U.S. Golf Corp. stockholders by
the Company. The Company has agreed to include the remaining 200,000 shares
of Common Stock held by other former U.S. Golf Corp. stockholders and a total
of 500,000 shares of Common Stock held by the limited partners of the Commack
Partnership in the Registration Statement of which this Prospectus is a part.
The 700,000 shares of Common Stock being so registered are referred to herein
as the "Additional Stock" and the holders thereof as the "Selling
Stockholders."
The following table sets forth the record ownership of the Common Stock
held by the Selling Stockholders as of the date of this Prospectus and the
number of shares of Common Stock to be sold:
<TABLE>
<CAPTION>
Number of
Number of Number of Shares of
Shares of Shares of Common Stock Percentage
Common Stock Common Stock After After
Name of Selling Stockholder Prior to Offering to be Registered Offering(1) Offering(1)(2)
------------------------------------ ----------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Edward Ford(3) ..................... 19,500 15,952 3,548 *
William Pattison(4) ................ 5,000 5,000 0 *
Chuck Workman(4)(5) ................ 58,802 10,000 48,802 2.1
Donald Balbinder(4) ................ 25,000 25,000 0 0
Jonathan Halperin(4) ............... 25,000 25,000 0 0
David B. Lever(4) .................. 25,000 25,000 0 0
Peter Halperin(4) .................. 25,000 25,000 0 0
Craig W. Effron(4) ................. 50,000 50,000 0 0
Alan Koch(4) ....................... 25,000 25,000 0 0
Steve Aptecker(6) .................. 9,500 5,952 3,548 *
Pasquale J. Bagnato(6) ............. 14,250 8,932 5,318 *
Matthew Barbara(6) ................. 9,500 5,952 3,548 *
Paul E. Barbara(6) ................. 9,500 5,952 3,548 *
Howard Baron(6) .................... 9,500 5,952 3,548 *
Robert Brosnan(6) .................. 19,000 11,905 7,095 *
Eugene Bernstein(6) ................ 9,500 5,952 3,548 *
Harold Bernstein(6) ................ 9,500 5,952 3,548 *
Julius A. Binetti(6) ............... 9,500 5,952 3,548 *
David Brand(6) ..................... 9,500 5,952 3,548 *
Teri R. Costello(6) ................ 19,000 11,905 7,095 *
Joseph Duerr ....................... 19,000 11,905 7,095 *
Kevin Fee(6) ....................... 19,000 11,905 7,095 *
Edward Feinberg(6) ................. 9,500 5,952 3,548 *
Donald Feinsod(6) .................. 19,000 11,905 7,095 *
Alan Feldman(6) .................... 9,500 5,952 3,548 *
David Feldman(6) ................... 19,000 11,905 7,095 *
Alvin Finkle(6) .................... 38,000 23,808 14,192 *
Clark Gillies(6) ................... 19,000 11,905 7,095 *
Jack Herrick(6) .................... 19,000 11,905 7,095 *
Raina Herrick(6) ................... 19,000 11,905 7,095 *
Carmine Inserra(6) ................. 14,250 8,932 5,318 *
Uwe Krupp .......................... 38,000 23,808 14,192 *
Frank Lemieux(6) ................... 19,000 11,905 7,095 *
Peter Leonard(6) ................... 19,000 11,905 7,095 *
Gilbert Lerner(6) .................. 38,000 23,808 14,192 *
Harvey Lerner(6) ................... 9,500 5,952 3,548 *
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Number of
Number of Number of Shares of
Shares of Shares of Common Stock Percentage
Common Stock Common Stock After After
Name of Selling Stockholder Prior to Offering to be Registered Offering(1) Offering(1)(2)
------------------------------------ ----------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Alvin Levine(6) .................... 47,500 29,762 17,738 *
Phyllis Lido(6) .................... 9,500 5,952 3,548 *
Marc Locker(6) ..................... 19,000 11,905 7,095 *
Douglas Lopez(6) ................... 19,000 11,905 7,095 *
Jonathan Lopez(6) .................. 9,500 5,952 3,548 *
Matthew Lopez(6) ................... 9,500 5,952 3,548 *
Gary Pezza(6) ...................... 38,000 23,808 14,192 *
Joseph D. Posillico(6) ............. 19,000 11,905 7,095 *
Mario Posillico(6) ................. 19,000 11,905 7,095 *
Carole Provenzano/Elias Rodriquez(6) 14,250 8,932 5,318 *
Audrey Reed(6) ..................... 38,000 23,808 14,192 *
Joanne M. Russell(6) ............... 9,500 5,952 3,548 *
Eros Sanchez(6) .................... 38,000 23,808 14,192 *
Daniel Saretto(6) .................. 14,250 8,931 5,319 *
Larry Sussman(6) ................... 9,500 5,952 3,548 *
Larry H. Weiss(6) .................. 9,500 5,952 3,548 *
Marcia Zimmerman(6) ................ 9,500 5,952 3,548 *
</TABLE>
- ------
(1) Assumes all shares of Common Stock registered will be sold concurrently
with the Offering.
(2) Based on the number of shares of Common Stock outstanding after the
Offering. Assumes that the Underwriter does not exercise its
Over-Allotment Option.
(3) This Selling Stockholder shall receive up to $1.25 per share in respect
of up to 10,000 shares of Common Stock sold on his behalf and up to $2.90
per share in respect of the remaining 5,952 shares of Common Stock sold
on his behalf from the Effective Date to the second anniversary of the
Effective Date. The Company shall receive the proceeds from such sales in
excess of $1.25 per share or $2.90 per shares, as the case may be.
(4) These Selling Stockholders shall receive up to $1.25 per share of Common
Stock sold on their behalf from the Effective Date to the second
anniversary of the Effective Date. The Company shall receive the proceeds
from such sales in excess of $1.25 per share.
(5) Chuck Workman, the Company's Senior Vice President, is a principal of
Chuck Workman Pro Golf, Ltd., a general partner of the Commack
Partnership.
(6) These Selling Stockholders shall receive up to $2.90 per share of Common
Stock sold on their behalf from the Effective Date to the second
anniversary of the Effective Date. The Company shall receive the proceeds
from such sales in excess of $2.90 per share.
* indicates a security ownership of less than 1%.
In . 1996, these Selling Stockholders entered into Custody
Agreements/Limited Irrevocable Powers of Attorney with Edward C. Ross and
Stuart M. Goldstein jointly (the Chairman and President of the Company)
pursuant to which Messrs. Ross and Goldstein were granted the limited
irrevocable authority to sell those shares, subject to the Underwriter's
consent, at any time from the Effective Date to the second anniversary of the
Effective Date. All proceeds from the sale of Additional Stock will be
proportionately distributed to all of the Selling Stockholders (up to $2.90
per share for 500,000 shares and $1.25 per share for 200,000 shares), with
the balance of such proceeds delivered to the Company. Until the Additional
Stock is sold, the holders thereof retain all voting rights in connection
with such stock.
The Additional Stock being offered by the Selling Stockholders pursuant to
this Prospectus may be offered and sold from time to time as market
conditions permit in the over-the-counter market, or otherwise, at prices and
terms then prevailing or at prices related to the then current market price,
or in negotiated transactions. They may be sold by one or more of the
following methods, including, without limitation: (a) a block trade in which
31
<PAGE>
a broker or dealer so engaged will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; and (c)
face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from the Selling
Stockholders in amounts to be negotiated. Such brokers and dealers, which may
include the Underwriter, and any other participating brokers and dealers may
be deemed to be "underwriters" within the meaning of the Act in connection
with such sales, and any profits realized or commissions received may be
deemed underwriting compensation.
All of the Additional Stock to be offered by the Selling Stockholders is
held in custody under irrevocable powers of attorney by Edward C. Ross and
Stuart M. Goldstein jointly, and any Additional Stock not sold within two (2)
years of the Effective Date will be returned to the Selling Stockholders.
The Company has agreed to indemnify the Selling Stockholders against
certain civil liabilities, including liabilities under the Act.
In the event shares of Additional Stock are sold within the two (2) year
period from the Effective Date, each Selling Stockholder will be entitled to
receive proceeds from the future sale of his, her or its respective
Additional Stock in amounts up to $2.90 per share of Additional Stock sold
with respect to the 500,000 shares of Additional Stock held by the former
limited partners of the Commack Partnership, and up to $1.25 per share of
Additional Stock sold held by certain former stockholders of U.S. Golf Corp.
Except for the costs of including the Additional Stock within the
Registration Statement, which costs are borne by the Company, the Selling
Stockholders will bear all expenses of any offering by them of such
securities, including the costs of their counsel and of any sales commissions
incurred.
Each Selling Stockholder has agreed not to sell, transfer or assign,
pledge, hypothecate or otherwise dispose of any of such Selling Stockholder's
shares of Additional Stock for a period of 18 months after the Closing of the
Offering, without the consent of the Underwriter.
The Underwriter may release the Selling Stockholders from these lock-up
agreements at any time in its sole discretion. The determination of whether
to grant such a release will be made by the Underwriter based on such
considerations as the Underwriter may deem relevant, including but not
limited to market conditions and public demand for additional shares of
Common Stock of the Company. As of the date of this Prospectus, no agreements
have been reached regarding the release of any such lock-up agreement but it
is the intention of the Underwriter to release such lock-ups as early as
practicable on or after the Effective Date if in its sole judgment, market
conditions and public demand for additional shares of the Company's Common
Stock so warrant. There are no relationships and/or affiliations between the
Selling Stockholders and any of their officers, directors, affiliates and
associates and the Underwriter and its officers, directors, principal
shareholders and affiliates.
32
<PAGE>
UNDERWRITING
The Company has entered into an underwriting agreement (the "Underwriting
Agreement") with First United Equities Corporation (the "Underwriter")
pursuant to which it will serve as the underwriter in connection with the
Offering. In accordance with Underwriting Agreement, the Underwriter has
agreed to purchase from the Company, and the Company has agreed to sell to
the Underwriter 1,100,000 shares of Common Stock on a "firm commitment"
basis.
The Underwriter is committed to purchase and pay for all of the Common
Stock offered hereby, if any Common Stock is purchased. The Common Stock is
being offered by the Underwriter subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to approval of
certain legal matters by Underwriter's counsel and to certain other
conditions.
The Underwriter has advised the Company that it proposes to offer the
Common Stock to the public at the offering price set forth on the cover page
of this Prospectus. In addition, it may allow to certain dealers who are
members of the NASD concessions not in excess of $0.25 per share of Common
Stock of which not more than $0.125 for each share of Common Stock may be
reallowed to other dealers who are members of the NASD.
The initial public offering price of the Common Stock determined by
negotiation between the Company and the Underwriter and is not necessarily
related to the Company's assets, book value, results of operations, or other
established criteria of value, and should not be regarded as an indication of
the future market price of the Common Stock. Factors considered in
determining the offering price of the Common Stock consisted of the present
state of the Company's development, the future prospects of the Company, an
assessment of management, the general condition of the securities markets,
the demand for similar securities of companies comparable in development or
markets, and prevailing economic condition.
No member of management and no one acting at their direction is expected
to recommend, encourage or advise any investor to open brokerage accounts
with any broker-dealer that makes a market in the Common Stock. Management
also is not expected to make any recommendation to existing stockholders with
respect to the sale or purchase of the Common Stock. Officers, directors or
employees of the Company will not be permitted to purchase Common Stock in
the Offering.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities, including
liabilities under the Act.
The Company has granted to the Underwriter an option exercisable for 45
days from the date of this Prospectus, to purchase up to 165,000 additional
shares of Common Stock (the "Over-Allotment Option"). The Underwriter may
exercise this option, in whole, from time to time, solely for the purpose of
covering over-allotments, if any, made in connection with the sale of the
Securities.
The Company has agreed to pay to the Underwriter a non-accountable expense
allowance equal to 3% of the gross proceeds of the Offering, or $165,000
($189,750 if the Underwriter exercises the Over-Allotment Option in full) of
which $25,000 has already been paid and an additional $25,000 that may be
paid prior to the Offering. The Company has treated this payment as a
deferred offering cost. The Company has also agreed to pay all of the costs
of qualifying the Common Stock under federal and state securities laws,
together with legal and accounting fees, printing and other costs in
connection with the Offering estimated by the Company to aggregate
approximately $405,000. The Company is also required to reimburse the
Underwriter for due diligence expenses of up to $10,000.
The Company has granted to the Underwriter options to purchase 110,000
shares of Common Stock for an aggregate of $110 (the "Stock Purchase
Option"). The exercise price of the Stock Purchase Warrants are $6.50 per
share. The Stock Purchase Warrants is exercisable over a period of five years
commencing one year from the Effective Date.
The Company has entered into an agreement with the Underwriter providing
for the payment of a fee to the Underwriter in the event the Company closes a
merger, acquisition, financing or other similar transaction during the five
year period beginning on the effective date of the Registration Statement
with a party to whom the
33
<PAGE>
Company was introduced by the Underwriter. In such event, the Company shall
pay a finder's fee of 5% of the first $5,000,000 of consideration realized or
paid by the Company and 2.5% of the excess over $5,000,000. Any such finder's
fee will be paid in cash, subject to certain exceptions, at the closing of
such transaction. The Company has also entered into an agreement with the
Underwriter to act as its financial consultant, for a period of three years
commencing on the Effective Date, at an annual fee of $36,000 (exclusive of
any accountable out-of-pocket expenses), which fees will be payable at a
rate of $3,000 per month. This fee, as distinguished from the finder's fee to
be paid in connection with mergers, financings and other similar transactions
arranged by the Underwriter, covers such regular and customary consulting
services such as disseminating information about the Company to the
investment community, assisting in the preparation of annual and interim
reports and press releases, arranging meetings with securities analysts, and
rendering advice on a host of other financial and operational matters.
The Company has agreed that, for a period of three (3) years from the
Effective Date, the Underwriter shall have a right of first refusal to act as
the Company's underwriter for any public or private offering of the Company's
securities.
Holders of the Additional Stock, the Restricted Securities, the Bridge
Warrants, the Employee Options, and the Director Options have agreed that
they will not, without the Underwriter's consent, and in the case of the
Additional Stock, subject to the terms and conditions described above, sell,
transfer, assign, pledge, hypothecate or otherwise dispose of any of the
Additional Stock, the Bridge Warrants, the Restricted Securities or the
shares of Common Stock issuable upon the exercise of the Employee Options or
the Director Options for a period of 24 months after the Effective Date. It
is the intention of the Underwriter to release such lock-ups with respect to
the Additional Stock as soon as practicable after the Effective Date if in
its sole judgment, market conditions and public demand for additional shares
of the Company's Common Stock so warrant.
The Underwriter has a five year right effective upon the Effective Date,
to designate either an advisor to or one nominee for director to the
Company's Board of Directors, which shall not exceed seven persons during
such period, without the Underwriter's consent. As of the date of this
Prospectus, the Underwriter has no intention to nominate any person for
election as a director.
Prior to this offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock has been determined by negotiations between the Company and the
Underwriter. Among the factors considered in determining the offering price
were the Company's financial condition, prospects and management. There can
be no assurance however, that the price at which the Common Stock will sell
in any public market after the Offering will not be lower than the offering
price. It will be the responsibility of the Underwriter and any participants
in the selling group to sell the Common Stock hereby to be registered.
Neither the Underwriter nor any of the participants of the underwriting group
have a material relationship with the promoters, officers and/or directors of
the Company.
The Underwriting Agreement provides for reciprocal indemnification between
the Company and the Underwriter against certain liabilities in connection
with the Registration Statement, including liabilities under the Act. The
Company and the Underwriter have agreed to indemnify each other against
liabilities arising out of or based upon any untrue statement or alleged
untrue statement of any material fact or omission or alleged omission of a
material fact required to be stated or necessary to make the statements made
no misleading, in each case only to the extent made in reliance upon or in
conformity with written information furnished by the respective party for use
herein. If such indemnifications are unavailable or insufficient, the Company
and the Underwriter have agreed to damage contribution arrangements between
them based upon relative benefits received from this Offering and relative
fault resulting in such damages.
While the Underwriter commenced operations in 1994, it has acted as an
underwriter in public offerings of securities in only two (2) prior
offerings. The Underwriter's lack of experience may have an adverse impact on
its ability to market the Common Stock offered hereby as well as the
development and maintenance of a trading market for the Company's securities
following this offering.
The foregoing includes a brief summary of the Underwriting Agreement, a
copy of which has been filed with the Securities and Exchange Commission as
an Exhibit to the Registration Statement.
INDEMNIFICATION AND ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation provides that the Company
shall, to the fullest extent permitted by the laws of the State of Delaware,
as the same may be amended and supplemented, indemnify its officers and
directors, and the indemnification provided for therein shall not be deemed
exclusive of any other rights
34
<PAGE>
to which those indemnified may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
which official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. The Company will have
the power to purchase and maintain officers' and directors' liability
insurance in order to insure against the liabilities for which such officers
and directors are indemnified.
Certain provisions of the Company's Certificate of Incorporation and
By-Laws could have an anti-takeover effect, in that they could discourage
acquisition bids for the Company or could make such an acquisition more
difficult to accomplish. The provisions of the Certificate of Incorporation
which could have such an effect, in addition to the provisions which
authorize the Company to issue shares of preferred stock and additional
shares of Common Stock, include the prohibition of taking of stockholder
action by written consent without a meeting and provisions restricting to the
Board of Directors the right to fill newly created directorships and
preventing removal of directors without cause. The provisions of the By-Laws
which may have such effect include advance notice requirements for
stockholders' proposals and director nominations and, under certain
circumstances, voting requirements with respect to amendment of the By-Laws.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING
THE COMPANY PURSUANT TO THE FOREGOING PROVISION, OR OTHERWISE, THE COMPANY
HAS BEEN INFORMED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE
COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE
ACT AND IS THEREFORE UNENFORCEABLE.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Ruskin, Moscou, Evans & Faltischek, P.C., Mineola, New York.
Michael L. Faltischek, a partner of such law firm, will become a director of
the Company following the completion of the Offering.
Certain legal matters will be passed upon for the Underwriter by Rubin
Baum Levin Constant Friedman & Bilzin, Miami, Florida.
EXPERTS
The financial statements included in this Prospectus and Registration
Statement for the year ended December 31, 1995 and the period July 26, 1994
(date of inception) to December 31, 1994 with respect to the Company, have
been audited by Farber, Blicht & Eyerman, L.L.P., independent certified
public accountants, as indicated in their report with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, the Registration Statement on
Form SB-2 under the Act for the Common Stock offered hereby. This Prospectus,
which is a part of the Registration Statement, does not contain all of the
information contained in the Registration Statement. For further information
with respect to the Company and the securities offered hereby, reference is
made to the Registration Statement, including the Exhibits thereto, which may
be inspected, without charge, at the Securities and Exchange Commission, or
copies of which may be obtained from the Securities and Exchange Commission
in Washington, D.C., and at the Northeast Regional Office at Seven World
Trade Center, New York, New York 10048, upon payment of the requisite SEC
fees. Statements contained in this Prospectus as to the content of any
contract or other document referenced are qualified by reference to the copy
of such contract or other document filed as an Exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and such other periodic reports as
management may determine to be appropriate and as may be required by law.
35
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
FINANCIAL STATEMENTS AND AUDITORS' REPORT
FOR THE PERIOD JULY 26, 1994
(DATE OF INCEPTION) TO
DECEMBER 31, 1994 AND
FOR THE YEAR ENDED DECEMBER 31, 1995
F-1
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
Number
-------------
<S> <C>
Report of Independent Auditors ....................................................................... F-3
Balance Sheets at December 31, 1995 and September 30, 1996 (unaudited) ............................... F-4 - F-5
Statements of Operations for the period July 26, 1994 (date of inception) to December 31, 1994, the
year ended December 31, 1995 and the nine months ended September 30, 1995 and 1996 (unaudited) ...... F-6
Statements of Shareholders' Equity for the period July 26, 1994 (date of inception) to December 31,
1994, the year ended December 31, 1995 and the nine months ended September 30, 1996 (unaudited) ..... F-7
Statements of Cash Flows for the period July 26, 1994 (date of inception) to December 31, 1994, the
year ended December 31, 1995 and the nine months ended September 30, 1995 and 1996 (unaudited) ...... F-8 - F-9
Notes to Financial Statements ........................................................................ F-10 - F-15
</TABLE>
F-2
<PAGE>
<TABLE>
FARBER, BLICHT & EYERMAN, LLP
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Certified Public Accountants 255 Executive Drive, Suite 215 Plainview, NY 11803-1715
Telephone: (516) 576-7040 Facsimile: (516) 576-1232
</TABLE>
To the Board of Directors
U.S. Golf and Entertainment Inc.
Commack, New York
We have audited the accompanying balance sheet of U.S. Golf and
Entertainment Inc. as of December 31, 1995, and the related statements of
operations, shareholders' equity and cash flows for the year then ended and
for the period July 26, 1994 (date of inception) to December 31, 1994. 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 generally accepted auditing
standards. 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 U.S. Golf and
Entertainment Inc. at December 31, 1995 and the results of its operations and
its cash flows for the year then ended and for the period July 26, 1994 (date
of inception) to December 31, 1994, in conformity with generally accepted
accounting principles.
Plainview, New York
April 30, 1996 (except for Notes 1,
2, and 11 through 14, the latest of which is
dated November 8, 1996)
F-3
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
BALANCE SHEETS
ASSETS (NOTE 7)
<TABLE>
<CAPTION>
(Note 2)
Pro Forma
December 31, September 30, September 30,
1995 1996 1996
-------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current assets:
Cash .......................................... $ 345 $ 52,717 $ 287,592
Construction bond receivable (Note 3) ......... 65,000 -- --
Due from shareholders (Note 4) ................ 15,588 8,588 8,588
Prepaid expenses and other current assets ..... 52,337 35,584 35,584
-------------- --------------- ---------------
Total current assets ....................... 133,270 96,889 331,764
-------------- --------------- ---------------
Property and equipment, at cost, less accumulated
depreciation and amortization (Note 5) ........ 2,799,962 2,654,135 2,654,135
-------------- --------------- ---------------
Other assets:
Deferred costs, net of accumulated amortization
of $6,947; $13,844 at September 30, 1996
(Note 6) ................................... 118,102 134,153 134,153
Deferred public offering costs (Note 6) ....... -- 85,613 85,613
Deposits ...................................... 2,000 2,000 2,000
-------------- --------------- ---------------
120,102 221,766 221,766
-------------- --------------- ---------------
$3,053,334 $2,972,790 $3,207,665
============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Note 2)
Pro Forma
December 31, September 30, September 30,
1995 1996 1996
-------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Current liabilities:
Cash overdraft ................................ $ 19,185 $ -- $ --
Notes payable -- bank (Note 7) ................ 325,000 225,000 225,000
Notes payable -- other ........................ -- -- 231,000
Accounts payable .............................. 434,427 79,443 79,443
Due to shareholders' (Note 8) ................. 324,450 404,475 404,475
Unearned income (Note 1(d) .................... 16,908 16,231 16,231
Accrued expenses .............................. 12,523 32,297 32,297
-------------- --------------- ---------------
Total current liabilities .................. 1,132,493 757,446 988,446
-------------- --------------- ---------------
Deferred rent costs (Note 9) .................... 168,260 231,361 231,361
-------------- --------------- ---------------
Commitments and contingencies (Note 9)
Shareholders' equity (Notes 1, 11, 12, 13 and
14):
Preferred stock -- par value $.001 per share:
Authorized -- 1,000,000 shares
Issued and outstanding shares -- none -- -- --
Common stock -- par value $.001 per share:
Authorized -- 20,000,000 shares
Issued and outstanding shares -- 1,045,000
shares;
2,090,000 shares at September 30, 1996,
and
1,245,000 shares -- pro-forma September
30, 1996 ................................. 1,045 2,090 1,245
Additional paid-in-capital .................... 2,174,955 2,718,410 2,723,130
Deficit ....................................... (423,419) (736,517) (736,517)
-------------- --------------- ---------------
1,752,581 1,983,983 1,987,858
-------------- --------------- ---------------
$3,053,334 $2,972,790 $3,207,665
============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period
July 26, 1994
(date of For the For the
inception) For the year nine months nine months
to ended ended ended
December 31, December 31, September 30, September 30,
1994 1995 1995 1996
-------------- -------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues .................................... $ -- $ 719,374 $ 600,990 $ 710,967
-------------- -------------- --------------- ---------------
Operating expenses .......................... -- 1,021,666 772,743 906,902
Selling, general and administrative expenses -- 87,555 81,939 95,969
-------------- -------------- --------------- ---------------
-- 1,109,221 854,682 1,002,871
-------------- -------------- --------------- ---------------
Operating loss .............................. -- (389,847) (253,692) (291,904)
Other expenses:
Interest .................................. -- 33,572 20,109 21,194
-------------- -------------- --------------- ---------------
Net loss .................................... $ -- $ (423,419) $ (273,801) $ (313,098)
============== ============== =============== ===============
Net loss per share .......................... $ -- $ (.41) $ (.26) $ (.21)
============== ============== =============== ===============
Number of shares used in computing net loss
per share .................................. -- 1,045,000 1,045,000 1,509,444
============== ============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD JULY 26, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1994,
THE YEAR ENDED DECEMBER 31, 1995 AND
THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
Common Shares
-----------------------
Number of Additional
Shares Paid-In
Issued Amount Capital Deficit Total
----------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Proceeds from the issuances of
common shares (net of related
expenses of $34,000) ............ 1,045,000 $1,045 $2,174,955 $ -- $2,176,000
----------- -------- ------------ ------------ ------------
Balance, December 31, 1994 ....... 1,045,000 1,045 2,174,955 -- 2,176,000
Net loss for the year ended
December 31, 1995 ............... -- -- -- (423,419) (423,419)
----------- -------- ------------ ------------ ------------
Balance, December 31, 1995 ....... 1,045,000 1,045 2,174,955 (423,419) 1,752,581
Proceeds from the issuance of
common shares (net of related
expenses of $10,000) ............ 1,045,000 1,045 543,455 -- 544,500
Net loss for the nine months ended
September 30, 1996 (unaudited) .. -- -- -- (313,098) (313,098)
----------- -------- ------------ ------------ ------------
Balance, September 30, 1996
(unaudited) ..................... 2,090,000 $2,090 $2,718,410 $(736,517) $1,983,983
=========== ======== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
July 26, 1994 For the For the
(date of For the year nine months nine months
inception) to ended ended ended
December 31, December 31, September 30, September 30,
1994 1995 1995 1996
-------------- -------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss .............................. $ -- $ (423,419) $ (273,801) $(313,098)
-------------- -------------- --------------- ---------------
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization ......... -- 169,845 114,530 163,076
Deferred rent costs ................... -- 168,260 139,682 63,101
Issuances of common shares for
services rendered .................. -- -- -- 2,500
Changes in assets and liabilities:
Construction bond receivable .......... -- (65,000) (65,000) 65,000
Prepaid expenses and other current
assets ............................. (69,285) 16,948 5,371 16,753
Accounts payable ...................... 406,310 28,117 121,411 (354,984)
Unearned income ....................... -- 16,908 23,940 (677)
Accrued expenses ...................... 6,868 5,655 8,004 19,774
Deposits .............................. (2,000) -- -- --
-------------- -------------- --------------- ---------------
Total adjustments ................ 341,893 340,733 347,938 (25,457)
-------------- -------------- --------------- ---------------
Net cash provided by (used in) operations 341,893 (82,686) 74,137 (338,555)
-------------- -------------- --------------- ---------------
Cash flows used in investing activities:
Purchase of property and equipment .... (2,115,233) (747,627) (747,627) (10,352)
Deferred public offering costs ........ -- -- -- (85,613)
Other deferred costs incurred ......... (108,201) (16,848) (21,847) (22,948)
-------------- -------------- --------------- ---------------
Net cash used in investing activities ... (2,223,434) (764,475) (769,474) (118,913)
-------------- -------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from issuances of common
shares ............................. 1,450,000 660,000 653,000 552,000
Short-term financing, bank ............ 300,000 215,000 25,000 --
Payments on short-term financing, bank -- (190,000) -- (100,000)
Borrowings from shareholders .......... 125,000 199,450 97,000 80,025
Loans to shareholders ................. -- (15,588) (8,588) --
Collection of shareholder loans ....... -- -- -- 7,000
Cash overdraft ........................ 40,641 (21,456) (40,641) (19,185)
Costs associated with the issuances of
common shares ...................... (34,000) -- -- (10,000)
-------------- -------------- --------------- ---------------
Net cash provided by financing activities 1,881,641 847,406 725,771 509,840
-------------- -------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-8
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
For the period
July 26, 1994 For the For the
(date of For the year nine months nine months
inception) to ended ended ended
December 31, December 31, September 30, September 30,
1994 1995 1995 1996
-------------- -------------- --------------- ---------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net increase in cash ........................ $ 100 $ 245 $30,434 $52,372
Cash, beginning of period ................... -- 100 100 345
-------------- -------------- --------------- ---------------
Cash, end of period ......................... $ 100 $ 345 $30,534 $52,717
============== ============== =============== ===============
Supplemental disclosure of non-cash financing
activities and cash flow information:
Subscriptions for common stock ............ $660,000 $ -- $ -- $ --
============== ============== =============== ===============
Property and equipment contributed and
exchanged for common stock ............. $100,000 $ -- $ -- $ --
============== ============== =============== ===============
Cash paid during period:
Interest ................................ $ 1,000 $37,000 $20,000 $23,000
============== ============== =============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-9
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND
1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF OPERATIONS AND BASIS OF PREPARATION
On May 17, 1996, U.S. Golf and Entertainment Inc. (the "Company") was
incorporated in the State of Delaware to develop and become a national
owner/operator of upscale, high-volume, golf practice and instructional
centers and related recreational facilities. The Company is a newly formed
corporation and there have been no operations since inception through
September 30, 1996 except as discussed in the following paragraph.
Commack Golf and Family Recreation Center, L.P., a New York limited
partnership (the "Partnership") was organized in July, 1994, to construct,
develop and operate the Commack Golf and Family Recreation Center, which
commenced operations in March, 1995. In November, 1995, United Acquisition I
Corp. (whose name was changed to U.S. Golf and Entertainment Corp. in April,
1996, ("US Golf Corp."), was incorporated and through September 30, 1996,
basically has had no operations. US Golf Corp. was not affiliated with the
Partnership when incorporated. US Golf Corp. received equity investments from
its founding shareholders in the amount of $54,500, $41,200 of which were
loaned to the Partnership in March, 1996 in anticipation of the Company's
acquisition of the Partnership. In May, 1996, US Golf Corp. raised an
additional $500,000 from the sale of its common shares and warrants, of which
approximately $450,000 was also loaned to the Partnership. In June, 1996, the
Company, entered into exchange agreements with (i) the shareholders of US
Golf Corp., whereby the shareholders of US Golf Corp. exchanged their common
shares and warrants for 1,045,000 common shares and 2,020,000 warrants of the
Company and (ii) the general and limited partners of the Partnership, whereby
the partners exchanged their partnership interests for an aggregate of
1,045,000 common shares of the Company. In November, 1996, 845,000 common
shares of the Company and warrants to purchase 2,020,000 common shares of the
Company which was issued in connection with the aforementioned exchange with
US Golf Corp. was redeemed by the Company in consideration of $601,125. The
aforementioned exchanges were accounted for as a reverse acquisition, since
the transaction was in effect, equivalent to the issuance of common shares by
the Partnership for the net monetary assets of the aforementioned other
entities, accompanied by a recapitalization where no goodwill or other
intangible was recorded. The financial statements of the Company at December
31, 1995 and at September 30, 1996 represent the combined financials of all
the aforementioned entities.
The following unaudited pro forma summary combines the results of
operations of the entities from the commencement of operations, after giving
effect to the increase in officer's compensation based upon employment
agreements (Note 13), the interest expense associated with the acquisition
funding and the amortization of the discount attributable to the value of the
warrants issued in connection with the November, 1996 private placement (Note
12). The pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the results of operations
as they would have been had the transactions been effective on the assumed
dates.
<TABLE>
<CAPTION>
Pro forma
----------------------------------
Nine months
Year ended ended
December 31, September 30,
1995 1996
-------------- ---------------
(unaudited) (unaudited)
<S> <C> <C>
Revenue $ 719,374 $ 710,967
Net loss $ 889,419 $ 733,098
Net loss per share $ (.71) $ (.59)
Number of shares used in computing net
loss per share 1,245,000 1,245,000
</TABLE>
B. METHOD OF DEPRECIATION
Depreciation and amortization of property and equipment has been
calculated on the straight-line method for financial reporting purposes. For
tax reporting purposes, the Company uses the straight-line or accelerated
methods of depreciation.
F-10
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(Information with respect to the nine months ended September 30, 1995 and
1996 is unaudited)
1. Summary of Significant Accounting Policies - (Continued)
Expenditures for maintenance, repairs, renewal and betterments are
reviewed by the Company and only those expenditures representing improvements
to property and equipment are capitalized. At the time property and equipment
are retired or otherwise disposed of, the cost and accumulated depreciation
are eliminated from the asset and accumulated depreciation accounts and the
gain or loss on such disposition is reflected in income.
The Company adopted Financial Accounting Standards ("FAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" for the year ended December 31, 1995. The adoption of FAS
121 had no material effect on the financial statements.
C. FAIR VALUE OF FINANCIAL INSTRUMENTS
Effective for fiscal years ending after December 15, 1995, Statement of
Financial Accounting Standards No. 107 requires entities with total assets
less than $150 million to disclose the fair value of financial instruments
recognized in the balance sheet. At December 31, 1995, the carrying amounts
of the Company's financial instruments, including cash, receivables, accounts
payable, and notes and non-related loans payable approximate fair value. It
is not practicable to determine the fair values of the receivable from and
loans payable to certain shareholders.
D. REVENUE RECOGNITION
Revenue is recognized by the Company when its services are rendered to its
customers. Revenues from annual membership and the sale of gift certificates
are deferred as unearned income at the time of receipt and are credited to
income when earned on a straight-line basis or redeemed.
E. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, 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
financial statements and revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F. INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of September 30, 1996 and the
nine months ended September 30, 1995 and 1996, are unaudited but, in the
opinion of management of the Company, reflects all adjustments (consisting of
normal and recurring adjustments) necessary for a fair presentation.
The financial position as of September 30, 1996, and the results of
operations and cash flows for the nine months ended September 30, 1995 and
1996 are not necessarily indicative of the results that may be expected for
the entire year.
2. UNAUDITED PRO FORMA BALANCE SHEET
The unaudited pro forma balance sheet has been prepared as of September
30, 1996 to give effect to the i) proceeds from the sale of Units in
November, 1996 for $836,000 of which $601,125 was used to redeem 845,000
common shares and 2,020,000 warrants (Note 12) and ii) the discount
attributable to the value of the warrants issued in connection with the sale
of the Units, aggregating $605,000.
F-11
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(Information with respect to the nine months ended September 30, 1995 and
1996 is unaudited)
3. CONSTRUCTION BOND RECEIVABLE
In February, 1995, the Company was required to post a $65,000 construction
bond to insure the completion of various building improvements necessary to
attain its certificate of occupancy. The bond was refunded to the Company in
January, 1996.
4. DUE FROM SHAREHOLDERS
The amounts due from the shareholders, aggregating $15,588, at December
31, 1995 are due on demand and are non-interest bearing. During the nine
months ended September 30, 1996, $7,000 of the aforementioned balance was
collected.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1995 and
September 30, 1996:
<TABLE>
<CAPTION>
Estimated
useful
lives 1995 1996
------------- ------------ ------------
<S> <C> <C> <C>
Leasehold improvements 15 years(*) $2,873,790 $2,872,180
Furniture and fixtures 7 years 34,798 34,798
Machinery and equipment 5 years 54,272 66,234
------------ ------------
2,962,860 2,973,212
Accumulated depreciation
and amortization 162,898 319,077
---------- ------------
$2,799,962 $2,654,135
============ ============
</TABLE>
(*) Over life of lease (Note 9).
6. DEFERRED COSTS
Deferred costs consist substantially of costs to acquire the land lease.
These costs are being amortized on a straight-line basis over the life of the
lease (fifteen years).
Deferred public offering costs arose from certain professional fees and
other related costs in connection with the proposed public sale of the
Company's common shares (Note 14). These costs have been deferred and will be
charged to shareholders' equity upon successful completion of the sale of
common shares or charged to operations if the sale is not completed.
7. NOTES PAYABLE -- BANK
The Company, at December 31, 1995 had a $215,000 note payable to a bank
bearing interest at the rate of 2% above the banks prime lending rate (10
3/4% per annum at December 31, 1995). The note, which is payable on demand
and collateralized by all the assets of the Company, is guaranteed by certain
shareholders. During the nine months ended September 30, 1996, $75,000 was
paid to the bank reducing the outstanding balance to $140,000 at September
30, 1996. The note matures on December 3, 1996 and bears interest at the rate
of 10 1/4% per annum.
In addition, the Company, at December 31, 1995, had a note payable of
$110,000 to another bank. The note bears interest at the rate of 1 1/2% above
the bank's prime interest rate per annum (10.25% at December 31, 1995).
During the nine months ended September 30, 1996, $25,000 was repaid to the
bank, reducing the outstanding balance to $85,000 at September 30, 1996. The
note, as amended, matured on September 17, 1996 and was immediately renewed
for an additional three months with interest at the rate of 9 3/4% per annum.
The obligation is guaranteed by certain shareholders of the Company.
F-12
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(Information with respect to the nine months ended September 30, 1995 and
1996 is unaudited)
8. DUE TO SHAREHOLDERS
The amount payable to shareholders as at December 31, 1995 and September
30, 1996 are non-interest bearing and are payable on demand.
9. COMMITMENTS AND CONTINGENCIES
a) The Company leases its land under a ground lease for an initial term of
15 years, with two successive renewal periods of five years each. The lease
is scheduled to expire in April, 2010. Future minimum rentals required as of
December 31, 1995 and September 30, 1996 under the lease are as follows:
<TABLE>
<CAPTION>
1995 1996
------------ -----------
<S> <C> <C>
1996 $ 483,000 $ --
1997 500,000 500,000
1998 509,000 506,000
1999 523,000 519,000
2000 537,000 533,000
2001 -- 547,000
Thereafter 5,670,000 5,259,000
------------ -----------
$8,222,000 $7,864,000
============ ===========
</TABLE>
The Company records a liability for deferred rent costs to the extent that
the rental commitment, amortized on a straight-line basis over the term of
the lease, exceeds actual lease payments.
Rental payments under the lease range from an initial $450,000 to $665,000
per annum. The lease also provides for rent increases based upon various
percentages over stated gross revenue of the Company. The Company is
responsible for all related rental expenses on the property. Rent expense
approximated $469,000 for the year ended December 31, 1995, and $328,000 and
$421,000 for the nine months ended September 30, 1995 and 1996, respectively.
b) The Company is subject to a broad range of various federal, state and
local laws, ordinances and regulations, that as an owner or operator of real
property, may involve general liability for the costs of removal or
remediation of hazardous substances. The Company has not been advised of any
non-compliance or violation of any environmental laws or regulations and the
Company believes that it is in substantial compliance with all such laws and
regulations applicable to the Commack Golf Center. The Company, however, has
not performed any environmental studies on the Commack Golf Center and, as a
result, there may be potential liabilities and/or conditions of which the
Company is not aware. If any such liabilities or conditions arise with
respect to the Commack Golf Center or any other facility which may be
constructed, acquired or operated by the Company in the future, said
liabilities and remedial cost could be material.
10. INCOME TAXES
The Company, as of September 30, 1996, has available approximately $80,000
of net operating loss carryforwards (expiring through the year 2011) to
reduce future Federal and state income taxes. Since there is no guarantee
that the related deferred tax asset will be realized by reduction of taxes
payable on taxable income during the carryforward period, a valuation
allowance has been computed to offset in its entirety the deferred tax asset
attributable to this net operating loss in the amount of approximately
$32,000. Prior to the exchanges (Note 1), losses incurred by the Partnership
are included in the personal returns of the former partners and are taxed
depending on their personal tax situation. The Partnership does not incur any
taxes.
11. STOCK OPTION PLANS
The Company maintains two stock option plans, as amended, pursuant to
which an aggregate of 1,000,000 shares of Common Stock may be granted.
F-13
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(Information with respect to the nine months ended September 30, 1995 and
1996 is unaudited)
11. Stock Option Plans - (Continued)
The 1996 Stock Option Plan (the "1996 Plan") was adopted by the Board of
Directors and the stockholders of the Company on November 4, 1996. Under the
1996 Plan, as amended, 900,000 shares of Common Stock have been reserved for
issuance upon exercise of options designated as either (i) incentive stock
options ("ISOs") under the Internal Revenue Code (the "Code"), or (ii)
non-qualified options. ISOs may be granted under the 1996 Plan to employees
and officers of the Company. Non- qualified options may be granted to
consultants, directors (whether or not they are employees), employees or
officers of the Company.
The 1996 Plan is administered by the Board of Directors or by a stock
option committee selected by the Board. ISOs granted under the 1996 Plan may
not be granted at a price less than the fair market value of the Common Stock
on the date of grant (or 110% of fair market value in the case of persons
holding 10% or more of the voting stock of the Company). Non-qualified
options granted under the 1996 Plan may not be granted at a price less than
85% of the fair market value of the Common Stock on the date of grant (or the
fair market value in the case of persons holding 10% or more of the voting
stock of the Company). The 1996 Plan will terminate in December, 2006. The
term of each option granted under the 1996 Plan will expire not more than ten
years from the date of grant (or five years from the date of grant in the
case of persons holding 10% or more of the voting stock of the Company). As
of the date hereof, 500,000 options have been granted under the 1996 Plan to
the Company's President; 120,000 of such options are designated as ISOs as
defined in the Code (20,000 of which will vest on December 31, 1996 and the
balance of which shall vest ratably per quarter for 20 quarters commencing on
March 31, 1997). The remaining 380,000 options are Non-Qualified Options as
defined in the Code, 30,000 of which will vest on December 31, 1996 and the
remainder of which shall vest ratably per quarter for 20 quarters commencing
on March 31, 1997. In addition, 100,000 options have been granted under the
1996 Plan to the Chairman of the Board of Directors of the Company and 50,000
to the Company's Vice President. Their options vest ratably per quarter over
a period of five years commencing December 31, 1996. All the aforementioned
granted options are exercisable at a price of $5.00 per share and expire in
ten years from date of grant.
The 1996 Non-Employee Director Stock Option Plan (the "Directors Plan")
was adopted and approved by the Board of Directors and the stockholders of
the Company on November 4, 1996. Options to purchase an aggregate of 100,000
shares of Common Stock may be issued pursuant to the Directors Plan. Pursuant
to the terms of the Directors Plan, each independent unaffiliated Director
automatically will be granted, subject to availability, without any further
action by the Board of Directors; (i) a non-qualified option to purchase
5,000 shares of Common Stock upon their elections to the Board of Directors;
and (ii) a non-qualified option to purchase 5,000 shares of Common Stock on
the date of each annual meeting of stockholders following their election to
the Board of Directors at which they are re-elected to the Board. The
exercise price of each option is the fair market value of the Common Stock on
the date of grant. Each option expires five years from the date of grant and
vests in two annual installments of 50% each on the first and second
anniversary of the date of grant. As of the September 30, 1996, options to
acquire 5,000 shares of Common Stock at an exercise price of $5.00 per share,
have been granted under the Directors Plan.
12. PRIVATE PLACEMENT
On November 8, 1996, the Company obtained financing from the private sale
of eleven Units, each Unit consisting of i) a 15% promissory note (the
"Note") of the Company in the principal amount of $76,000 and ii) warrants to
purchase 10,000 shares of common shares of the Company (subject to
anti-dilution). The Notes are payable upon the earlier to occur of October
23, 1998 or five business days following the closing of a Public Offering of
securities of the Company. Each Warrant entitles the holder to purchase,
commencing 12 months after the effective date of the Public Offering, one
common share at an exercise price equal to $0.10 per share (subject to
anti-dilution) for a period of five years from the date of closing of the
Public Offering. The Company has attributed a value of $605,000 to the
warrants as a discount associated with the cost of funding the Units
F-14
<PAGE>
U.S. GOLF AND ENTERTAINMENT INC.
NOTES TO FINANCIAL STATEMENTS - (Continued)
(Information with respect to the nine months ended September 30, 1995 and
1996 is unaudited)
12. Private Placement - (Continued)
and will amortize such costs over the life of the Units. The proceeds from
the sale of the Units was used to redeem 845,000 common shares and warrants
to purchase 2,020,000 common shares of the Company for a total consideration
of $601,125. The Company intends to use the balance of the proceeds for
working capital.
13. EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement commencing on September
16, 1996 with its President. The Agreement provides for annual base
compensation of $125,000 through the period ending December 31, 1997,
$150,000 for the year ending December 31, 1998 and $200,000 per year through
the period ending December 31, 2001, as well as options to purchase 500,000
shares of Common Stock. In addition, the Company entered into five year
employment agreements, commencing with the effective date of the proposed
public offering (Note 14), with its Chairman of the Board of Directors and
Vice President. In accordance with their respective contracts, the Chairman
of the Board of Directors and Vice President are entitled to annual
compensation of $30,000 and $25,000, respectively, as well as options to
purchase 100,000 and 50,000 common shares, respectively. See Note 11 for
details of the options granted the aforementioned officers. The Chairman of
the Board of Directors and the Company's President will devote their
respective time to the business of the Company on an as-needed basis.
14. PROPOSED PUBLIC OFFERING
On November 6, 1996, the Company entered into a letter of intent with an
underwriter to sell, on a firm commitment basis, 1,100,000 shares of common
stock (subject to an additional 165,000 common shares if the underwriter
exercises an over-allotment option in full). The common shares will be
offered to the public at $5.00 per share. The letter of intent also provides,
among other things, for up to an additional 700,000 common shares to be
registered on behalf of certain selling shareholders and if the common shares
are sold prior to the second anniversary of the effective date of the public
offering, such shareholders will receive $2.90 per share in the case of
500,000 common shares and $1.25 per share in the case of 200,000 common
shares. Any proceeds in excess of the $2.90 and $1.25 per share will be
retained by the Company.
F-15
<PAGE>
==============================================================================
No person is authorized in connection with any offering made hereby to
give any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or any
Underwriter. This Prospectus does not constitute an offer to sell or a
solicitation of any offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstance create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof or that there has been no change in the affairs of the Company since
such date.
------
TABLE OF CONTENTS
Page
--------
Prospectus Summary ........................... 3
Risk Factors ................................. 6
Use of Proceeds .............................. 12
Dilution. .................................... 13
Capitalization. .............................. 14
Dividend Policy .............................. 15
Selected Financial Data ...................... 15
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16
Business ..................................... 19
Management ................................... 23
Principal Stockholders ....................... 26
Certain Transactions ......................... 27
Description of Securities .................... 27
Shares Eligible for Future Sale .............. 29
Selling Stockholders; Plan of Distribution ... 30
Underwriting ................................. 33
Indemnification and Anti-takeover
Provisions .................................. 34
Legal Matters ................................ 35
Experts ...................................... 35
Additional Information ....................... 35
Financial Statements ......................... F-1
------
Until 25 days after the announcement of the termination of this Offering,
all dealers effecting transactions in registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
==============================================================================
<PAGE>
==============================================================================
U.S. GOLF AND ENTERTAINMENT INC.
1,100,000 Shares of Common Stock
------
PROSPECTUS
------
First United Equities Corporation
_____________, 1997
==============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") gives a
corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The same Section also gives a corporation
power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise for expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper. Also, the Section states
that, to the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
such action, suit or proceeding, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Article Twelfth of the Registrant's Certificate of Incorporation provides
that: The corporation shall, to the fullest extent permitted by the
provisions of Section 145 of the DGCL, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and
the indemnification provided for herein shall not be deemed exclusive of any
other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee, or agent and shall inure to the benefit
of the heirs, executors, and administrators of such a person."
The Registrant's by-laws provide language substantially in the following
form: (a) The Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party to any threatened,
pending or completed action, suit, proceeding or claim, whether civil,
criminal, administrative or investigative, by reason of the fact that he or
she is or was or has agreed to be a trustee, director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a trustee, director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees and expenses), judgment, fines, penalties
and amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of any such action, suit, proceeding or
claim. Such indemnification shall not be exclusive of other indemnification
rights arising under any by-law, agreement, vote of directors or stockholders
or otherwise and shall inure to the benefit of the heirs and legal
representatives of such person; (b) The Corporation may purchase and maintain
insurance on any person who is or was a trustee, director, officer,
II-1
<PAGE>
employee or agent of the Corporation or is or was serving at the request of
the Corporation as a trustee, director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability incurred by him in any such position or arising out of his
status as such, whether or not the Corporation would have the power to
indemnify him against such liability.
Section 102(b)(7) of the DGCL, enables corporations to adopt provisions in
their certificates of incorporation eliminating or limiting the personal
liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director: (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders: (ii) for acts and omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under section 174
of the DGCL; or (iv) for any transaction from which the director derived an
improper personal benefit. Such provision does not eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision became effective. Section 102(b)(7) has no effect on the
availability of equitable remedies, such as injunctions or rescission, for
breach of fiduciary duty. The registrant's Certificate of Incorporation
provides that the personal liability of the directors of the corporation is
eliminated to the fullest extent permitted by the provisions of paragraph (7)
of subsection (b) of Section 102 of the DGCL, as the same may be amended or
supplemented.
See Section 7 of the form of the Underwriting Agreement filed as Exhibit
1.1 to the Registration Statement for certain provisions relating to
indemnification of the registrant and its officers, directors and controlling
persons.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses payable by the
Registrant, in connection with the sale and distribution of the securities
being registered, other than underwriting discounts and commissions. All of
the amounts shown are estimated except the Securities and Exchange Commission
registration fee, the NASDAQ listing fee, the NASD filing fee and the
Underwriter's non-accountable expense allowance.
<TABLE>
<CAPTION>
-----------
<S> <C>
SEC registration fee .......................... $ 13,141
NASDAQ listing fee ............................ 10,000
NASD filing fee ............................... 1,765
Blue Sky fees and expenses .................... 30,000
Printing and engraving expenses ............... 120,000
Legal fees and expenses ....................... 175,000
Accounting fees and expenses .................. 50,000
-----------
Underwriter commissions ....................... 550,000
===========
Underwriter's non-accountable expense allowance 165,000
===========
Miscellaneous ................................. 5,094
-----------
Total .................................... $1,120,000
-----------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Registrant has issued securities without
registration under the Act, as follows:
1. In November, 1995, U.S. Golf Corp. issued and sold 545,000 shares of
common stock and 520,000 common stock purchase warrants to various
founding stockholders for an aggregate purchase price of $54,500.
2. In May, 1996, U.S. Golf Corp. issued and sold 500,000 shares of common
stock and 1,500,000 common stock purchase warrants to various
purchasers in connection with a private financing for an aggregate
purchase price of $500,000.
II-2
<PAGE>
3. In June, 1996, (i) the general and limited partners of the Commack
Partnership exchanged their partnership interests for an aggregate of
1,045,000 shares of Common Stock and (ii) the stockholders of U.S. Golf
Corp. exchanged their shares of common stock and warrants for 1,045,000
shares of Common Stock and 2,020,000 Class A Warrants.
4. In November 1996, the Company issued and sold to various accredited
investors for an aggregate of $836,000, an aggregate of (i) $836,000 of
15% promissory notes and (ii) warrants to acquire 110,000 shares of
Common Stock.
The issuances described above were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of such Act as
transactions by an issuer not involving any public offering. In addition, the
recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view
to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the certificates issued in such transactions. All
recipients had adequate access, through their relationships with the
Registrant or otherwise to information about the Registrant.
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
***1.1 Form of Underwriting Agreement
**3.1 Certificate of Incorporation of the Registrant
**3.2 By-Laws of the Registrant
*4.1 Form of Common Stock Certificate
***4.2 Form of Representative's Warrant Agreement
*5.1 Opinion and Consent of Ruskin, Moscou, Evans & Faltischek, P.C.
***10.1 1996 Stock Option Plan, as amended
**10.2 1996 Non-Employee Director Stock Option Plan
***10.3 Form of Financial Advisory Agreement between the Registrant and the Underwriter
**10.4 Form of Exchange Agreement between Registrant and the partners of the Commack Golf & Family Recreation
Center, L.P.
**10.5 Form of Exchange Agreement between Registrant and the shareholders of U.S. Golf and Entertainment
Corp.
***10.6 Form of Amended Employment Agreement between the Registrant and an Executive Officer (Chairman)
***10.7 Form of Executive Agreement between the Registrant and an Executive Officer (President)
***10.8 Form of Amended Employment Agreement between the Registrant and an Executive Officer (Senior
Vice-President)
***10.9 Option Agreement between Registrant and Senior Vice President.
***10.10 Form of Redemption Agreements
***10.11 Form of Lock-Up Agreements
***10.12 Form of Custody Agreement and Irrevocable Power of Attorney
*24.1 Consents of Farber, Blicht & Eyerman, L.L.P., Independent Certified Public Accountants
*24.2 Consent of Ruskin, Moscou, Evans & Faltischek, P.C. (included in Exhibit 5.1)
25.1 Power of Attorney (included on signature page)
*27.1 Financial Data Schedule
</TABLE>
- ------
* To be filed by amendment
** Previously filed with the initial Registration Statement on May 31, 1996
*** Previously filed with Amendment No. 1 to the Registration Statement on
November 14, 1996.
II-3
<PAGE>
ITEM 28. UNDERTAKINGS
(a) The undersigned Company hereby undertakes that:
(1) It will file, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Act, it shall treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) It will file a post-effective amendment to remove from registration
any of the Common Stock that remains unsold at the end of the offering.
(4) It will provide to the Underwriter at the closing specified in the
underwriting agreement, certificates in such denominations and registered
in such names as required by the Underwriter to permit prompt delivery to
each purchaser.
(5) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(6) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Act, the Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in Commack, New York, on December 19, 1996.
U.S. GOLF AND ENTERTAINMENT INC.
By: /s/ EDWARD C. ROSS
-----------------------------
Edward C. Ross, Chairman
Pursuant to the requirements of the Act, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated. Each person whose signature appears below hereby authorizes each
of Edward C. Ross, Stuart Goldstein and Chuck Workman with full power of
substitution to execute in the name of such person and to file any amendment
or post-effective amendment to this Registration Statement (or any
Registration Statement filed pursuant to Rule 462) making such changes in
this Registration Statement as the Registrant deems appropriate and appoints
each of Edward C. Ross, Stuart M. Goldstein and Chuck Workman with full power
of substitution, attorney-in-fact to sign and to file any amendment and
post-effective amendment to this Registration Statement.
<TABLE>
<CAPTION>
Signature Title Date
-------------------------- -------------------------------------- --------------------
<S> <C> <C>
/s/ EDWARD C. ROSS Chairman of the Board, Chief Financial December 19, 1996
- --------------------------- Officer and Director (Principal
Edward C. Ross Financial and
Accounting Officer)
/s/ STUART M. GOLDSTEIN President, Chief Executive Officer and December 19, 1996
- --------------------------- Director
Stuart M. Goldstein
/s/ CHUCK WORKMAN Senior Vice President and Director December 19, 1996
- ---------------------------
Chuck Workman
/s/ GARRY HOWATT Director December 19, 1996
- ---------------------------
Garry Howatt
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
***1.1 Form of Underwriting Agreement
**3.1 Certificate of Incorporation of the Registrant
**3.2 By-Laws of the Registrant
*4.1 Form of Common Stock Certificate
***4.2 Form of Representative's Warrant Agreement
*5.1 Opinion and Consent of Ruskin, Moscou, Evans & Faltischek, P.C.
***10.1 1996 Stock Option Plan, as amended
**10.2 1996 Non-Employee Director Stock Option Plan
***10.3 Form of Financial Advisory Agreement between the Registrant and the Underwriter
**10.4 Form of Exchange Agreement between Registrant and the partners of the Commack Golf &
Family Recreation Center, L.P.
**10.5 Form of Exchange Agreement between Registrant and the shareholders of U.S. Golf and
Entertainment Corp.
***10.6 Form of Amended Employment Agreement between the Registrant and an Executive Officer
(Chairman)
***10.7 Form of Employment Agreement between the Registrant and an Executive Officer
(President)
***10.8 Form of Amended Employment Agreement between the Registrant and an Executive Officer
(Senior Vice-President)
***10.9 Option Agreement between Registrant and Senior Vice-President
***10.10 Form of Redemption Agreements
***10.11 Form of Lock-Up Agreements
***10.12 Form of Custody Agreement and Irrevocable Power of Attorney
*24.1 Consents of Farber, Blicht & Eyerman, L.L.P., Independent Certified Public Accountants
*24.2 Consent of Ruskin, Moscou, Evans & Faltischek, P.C. (included in Exhibit 5.1)
25.1 Power of Attorney (included on signature page)
*27.1 Financial Data Schedule
</TABLE>
- ------
* To be filed by amendment
** Previously filed with the initial Registration Statement on May 31, 1996
*** Previously filed with Amendment No. 1 to the Registration Statement on
November 14, 1996.
