SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] Amendment to Application or Report Filed Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 (No Fee Required)
For the quarterly period ended March 31, 1998
Commission File Number
0-21089
GOLDEN BEAR GOLF, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
FLORIDA 65-0680880
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
11780 U.S. HIGHWAY ONE
NORTH PALM BEACH, FLORIDA 33408
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(561) 626-3900
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
GOLDEN BEAR GOLF, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q/A
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets as of
March 31, 1998 (Unaudited) and December 31, 1997......................... 3
Consolidated Condensed Statements of Operations (Unaudited)
for the Three Months Ended March 31, 1998 and 1997....................... 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
for the Three Months Ended March 31, 1998 and 1997....................... 5
Notes to Consolidated Condensed Financial Statements (Unaudited)............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................21
Signatures................................................................................22
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------------- -----------------
(RESTATED)
(UNAUDITED)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,211,065 $ 1,826,033
Accounts receivable, net 13,610,663 13,213,727
Due from International - 184,502
Costs and estimated earnings in excess of billings on uncompleted contracts 1,773,818 725,780
Prepaid expenses and other current assets 1,196,620 867,492
Net current assets of discontinued operations 604,236 773,185
----------------- -----------------
Total current assets 18,396,402 17,590,719
PROPERTY AND EQUIPMENT, net 5,988,817 4,844,577
INTANGIBLES AND OTHER ASSETS, net 1,196,277 774,306
NET NON-CURRENT ASSETS OF DISCONTINUED OPERATIONS 21,789,054 22,737,517
----------------- -----------------
Total assets $ 47,370,550 $ 45,947,119
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 4,567,396 $ 4,304,993
Accrued liabilities 3,153,471 2,885,421
Construction contract loss reserves 7,886,498 6,755,654
Due to International 56,539 -
Billings in excess of costs and estimated earnings on uncompleted contracts 7,824,254 6,034,540
Deferred revenue 1,661,142 659,816
Current portion of notes payable and capital leases 13,097,464 9,392,487
----------------- -----------------
Total current liabilities 38,246,764 30,032,911
NOTES PAYABLE AND CAPITAL LEASES, net of current portion 2,821,450 2,352,913
COMMITMENTS AND CONTINGENCIES (Note 5)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, 20,000,000 shares authorized,
no shares issued and outstanding - -
Common stock-
Class A, $.01 par value, 70,000,000 shares authorized, 2,744,962
shares issued and outstanding 27,450 27,450
Class B, $.01 par value, 10,000,000 shares authorized, 2,760,000
shares issued and outstanding 27,600 27,600
Additional paid-in capital 40,856,943 40,856,943
Accumulated deficit (34,609,657) (27,350,698)
----------------- -----------------
Total shareholders' equity 6,302,336 13,561,295
----------------- -----------------
Total liabilities and shareholders' equity $ 47,370,550 $ 45,947,119
================ ===============
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
3
<PAGE>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1998 1997
----------------- -----------------
(RESTATED)
<S> <C> <C>
REVENUES:
Consumer Division-
Golf instruction revenues $ 1,893,924 $ 1,192,511
Licensing and other revenues 884,622 727,173
Income from operations of JNAI 108,914 405,924
Related party commissions and management fees 93,625 516,893
--------------- ---------------
Total Consumer Division 2,981,085 2,842,501
Construction Division 8,345,471 1,270,498
--------------- ---------------
Total revenues 11,326,556 4,112,999
--------------- ---------------
OPERATING COSTS AND EXPENSES:
Construction and shaping costs 12,074,466 1,582,142
Operating expenses 3,165,160 2,477,297
Corporate administration 1,027,640 1,113,034
Depreciation and amortization 303,420 70,868
--------------- ---------------
Total operating costs and expenses 16,570,686 5,243,341
--------------- ---------------
Operating loss (5,244,130) (1,130,342)
--------------- ---------------
OTHER INCOME (EXPENSE):
Interest income 31,982 57,102
Interest expense (221,791) (21,620)
Other (126,013) 20,780
--------------- ---------------
Total other income (expense) (315,822) 56,262
--------------- ---------------
Loss from continuing operations before income taxes (5,559,952) (1,074,080)
PROVISION (BENEFIT) FOR INCOME TAXES 49,528 (387,389)
Loss from continuing operations (5,609,480) (686,691)
Loss from discontinued operations (1,649,479) (915,951)
--------------- ---------------
Net loss $ (7,258,959) $ (1,602,642)
=============== ===============
EARNINGS PER SHARE - BASIC
AND DILUTED:
Loss from continuing operations per share $ (1.02) $ (0.12)
Loss from discontinued operations per share $ (0.30) $ (0.17)
--------------- ---------------
Net loss per share $ (1.32) $ (0.29)
=============== ===============
Weighted average common shares outstanding 5,504,962 5,505,912
=============== ===============
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
4
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GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1998 1997
----------------- -----------------
(RESTATED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,258,959) $ (1,602,642)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 303,420 70,868
Loss from discontinued operations 1,649,479 915,951
Provision for loss on construction contracts 1,130,844 -
Changes in assets and liabilities:
Accounts receivable (396,936) (1,163,317)
Due from/to International 241,041 (658,964)
Costs and estimated earnings in excess of billings
on uncompleted contracts (1,048,038) 361,115
Prepaid expenses and other current assets (329,128) (130,061)
Intangibles and other assets (461,177) 163,695
Deferred tax asset - (938,971)
Accounts payable 262,403 (1,871,303)
Accrued liabilities 268,050 661,636
Billings in excess of costs and estimated earnings on uncompleted
contracts 1,789,714 548,507
Deferred revenue 1,001,326 666,573
Net cash provided by (used in) operating activities of discontinued (922,341) 2,410,605
operations
--------------- ---------------
Net cash used in operating activities (3,770,302) (566,308)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (318,529) (92,138)
Net cash (used for) investing activities of discontinued
operations (171,218) (2,889,172)
--------------- ---------------
Net cash used in investing activities (489,747) (2,981,310)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term credit facility 5,000,000 -
Proceeds from (payments on) revolving credit facilities, net (1,713,000) 173,460
Payments on notes payable and capital leases (203,411) (13,364)
Proceeds from exercise of stock options - 50,400
Repurchase and retirement of common stock - (43,813)
Net cash provided by (used in) financing activities of discontinued
operations 561,492 (98,541)
--------------- ---------------
Net cash provided by financing activities 3,645,081 68,142
--------------- ---------------
Net decrease in cash and cash equivalents (614,968) (3,479,476)
CASH AND CASH EQUIVALENTS, beginning of period 1,826,033 6,811,046
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 1,211,065 $ 3,331,570
=============== ===============
</TABLE>
(Continued)
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
5
<PAGE>
GOLDEN BEAR GOLF, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------------------
1998 1997
----------------- -----------------
(RESTATED)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Acquisitions of equipment accounted for as capital leases $ 1,089,925 $ -
Discontinued Operations:
Acquisitions of equipment accounted for as capital leases $ 240,300 $ -
Notes payable issued in connection with the acquisition of golf centers $ - $ 2,899,000
</TABLE>
The accompanying notes to consolidated condensed financial statements are an
integral part of these statements.
6
<PAGE>
GOLDEN BEAR GOLF, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited Consolidated Condensed Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the audited Consolidated
Financial Statements and Notes thereto included in Golden Bear Golf, Inc.'s (the
"Company") Annual Report on Form 10-K/A for the fiscal year ended December 31,
1997, as filed with the Securities and Exchange Commission.
The results of operations and cash flows for the three months ended March 31,
1998 are not necessarily indicative of the results of operations or cash flows
which may be reported for the remainder of fiscal 1998.
In order to maintain consistency and comparability between periods presented,
certain amounts have been reclassified from the previously reported financial
statements in order to conform with the financial statement presentation of the
current period. As part of an organizational restructuring, the operations and
financial activity associated with the Company's former Golf and Marketing
Divisions have been consolidated into a new Consumer Division. In addition, the
Company sold its golf centers operations pursuant to a stock sale that closed
subsequent to March 31, 1998. See Note 8. Accordingly, the Company's golf
centers operations have been reclassified in the accompanying Consolidated
Condensed Financial Statements to reflect discontinued operations.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". Accordingly, deferred income taxes have been
provided to show the effect of temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements.
The Company files a consolidated Federal income tax return which includes the
operations of the Company and its subsidiaries. Prior to the reorganization of
the Company on August 1, 1996, the respective entities comprising the current
Company were S Corporations for Federal income tax reporting purposes, and
therefore not subject to Federal income taxes.
A valuation allowance was established for the Company's net deferred income tax
assets as of March 31, 1998 and December 31, 1997 as management believes the
future realization of such deferred tax assets is not more likely than not.
EARNINGS PER SHARE
Effective December 15, 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
per Share," which among other changes, requires that basic earnings per share be
computed without regard to any outstanding common equivalent shares. Earnings
per share in the accompanying Consolidated Condensed Statements of Operations is
computed by dividing the net loss by the weighted average common shares
outstanding for the respective periods presented. Diluted earnings per share as
computed under SFAS No. 128 includes the effects of common stock equivalents,
including the dilutive effect of all outstanding stock options using the
treasury stock method. Diluted earnings per share is the same as basic earnings
7
<PAGE>
per share in the accompanying Consolidated Condensed Statements of Operations.
Options to purchase 670,150 and 420,138 shares of common stock were not included
in computing earnings per share for the three months ended March 31, 1998 and
1997, respectively, because their effects were anti-dilutive for the respective
periods.
COMPREHENSIVE INCOME
Required for 1998 financial statements, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income" which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. This statement requires that an enterprise (i) classify
items of other comprehensive income by their nature in financial statements and
(ii) display the accumulated balance of other comprehensive income separately
from retained deficit and additional paid-in capital in the equity section of
the balance sheets. Comprehensive income is defined as the change in equity
during the financial reporting period of a business enterprise resulting from
non-owner sources. During the three months ended March 31, 1998 and 1997, the
Company did not have any changes in its equity resulting from such non-owner
sources, and accordingly, comprehensive income as set forth by SFAS No. 130 was
equal to the net loss amounts presented for the respective periods in the
accompanying Consolidated Condensed Statements of Operations.
SEGMENT REPORTING
Pursuant to the requirements of SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which is required to be adopted in fiscal
1998, a public business enterprise must report financial and other descriptive
information about its reportable operating segments. Required disclosures
include, among other things, a measure of segment profit or loss, certain
specific revenue and expense items, and segment assets. Information with respect
to the Company's two reportable segments, comprised of the Consumer Division and
Construction Division, is included herein in Note 9.
DERIVATIVE FINANCIAL INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in fair value depends on the intended
use of the derivative and the resulting designation. This statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999. The
Company believes the adoption of SFAS No. 133 will not have a material effect on
the Company's financial condition or results of operations.
2. RESTATEMENT
In connection with the departure of certain members of Paragon's senior
management during 1998, the Company conducted a comprehensive review of
Paragon's construction projects, focusing on the status of the projects, the
costs required to fully complete the jobs and the anticipated profitability or
losses of such projects. Attention was also directed toward determining contract
requirements, including known and unknown amendments and change orders, and the
related estimated anticipated costs of fulfilling those requirements. Based on
the results of the review, it was necessary to recognize additional costs and
losses associated with certain projects based on revised cost estimates related
to uncompleted contracts. As discussed in Note 1 (Accounts Receivable and
Revenue Recognition - Paragon) to the Company's Form 10-K/A for the year ended
December 31, 1997, under percentage-of-completion accounting, the increase in
estimated contract costs results in a decrease in reported revenues and profits.
Accordingly, the accompanying financial statements reflect the changes to
restate the previously filed financial statements for the period ended March 31,
1998 giving effect to the additional costs and losses incurred on the projects.
The Company recorded a construction contract loss reserve totaling approximately
$7.9 million and $6.8 million in the accompanying Consolidated Condensed Balance
Sheets as of March 31, 1998 and December 31, 1997, respectively. As a result of
the above restatement, the Company also determined that it was necessary to
provide a full valuation allowance to reserve for the deferred tax asset of
$2,855,663 and $1,748,202 previously
8
<PAGE>
recorded at March 31, 1998 and December 31, 1997, respectively. The effect of
the restatement on the Company's results for continuing operations is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31, 1998
-------------------------
<S> <C>
REVENUES:
As previously reported $ 18,997,700
As restated $ 11,326,556
INCOME (LOSS) FROM CONTINUED OPERATIONS
BEFORE INCOME TAXES:
As previously reported $ 562,663
As restated $ (5,559,952)
NET LOSS:
As previously reported $ 778,290
As restated $ 7,258,959
LOSS PER SHARE - BASIC AND DILUTED:
As previously reported $ (0.14)
As restated $ (1.32)
</TABLE>
Revenue and income (loss) from continued operations before income taxes as
restated herein exclude results of Golden Bear Golf Centers, Inc. which have
been reclassified to "Loss from discontinued operations" in the accompanying
Consolidated Condensed Statements of Operations. See Note 8.
3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted construction and shaping contracts
consist of the following for contracts recognized under the
percentage-of-completion method of accounting:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------------- -----------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 35,061,581 $ 23,824,133
Estimated loss (3,983,059) (1,528,973)
--------------- ---------------
31,078,522 22,295,160
Less billings to date (37,128,958) (27,603,920)
--------------- ---------------
$ (6,050,436) $ (5,308,760)
=============== ===============
</TABLE>
The amounts associated with costs and estimated earnings on uncompleted
construction and shaping costs are included in the accompanying Consolidated
Condensed Balance Sheets under the following captions:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------------- -----------------
<S> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 1,773,818 $ 725,780
Billings in excess of costs and estimated
earnings on uncompleted contracts (7,824,254) (6,034,540)
--------------- ---------------
$ (6,050,436) $ (5,308,760)
=============== ===============
</TABLE>
9
<PAGE>
The Company recorded a construction contract loss reserve totaling $7,886,498
and $6,755,654 in the accompanying Consolidated Condensed Balance Sheets as of
March 31, 1998 and December 31, 1997, respectively, which represents the balance
of estimated losses on certain uncompleted contracts for which management of the
Company believes losses are probable.
4. NOTES PAYABLE AND CAPITAL LEASES
Notes payable and capital leases consist of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------------- ----------------
<S> <C> <C>
Capital lease obligations secured by equipment and furniture,
maturing through January, 2003(1) $ 2,781,768 $ 1,804,047
Revolving credit facility with a bank, with interest at prime payable
quarterly, matures in September, 1999(2) 7,159,410 8,872,410
Short-term credit facility with a bank, with interest at greater of prime
or Federal Funds rate +1/2% payable at maturity in May, 1998(3) 5,000,000 -
Notes payable, with principal and interest ranging from 8 3/4% to
10 3/4% payable monthly, maturing through December, 2002(4) 977,736 1,068,943
------------- --------------
15,918,914 11,745,400
Less current portion (13,097,464) (9,392,487)
-------------- --------------
$ 2,821,450 $ 2,352,913
============== ==============
</TABLE>
(1) The Company acquired certain construction equipment, computer equipment,
office furniture and phone systems equipment by entering into financing
arrangements that were accounted for as capital leases. Included in such
capital lease obligations are additions during the three months ended March
31, 1998 of approximately $1.1 million to finance the acquisition of
certain construction equipment. These capital lease obligations have terms
of up to five years and require monthly payments representing principal and
interest at rates ranging from 8.5% to 12.7%.
(2) In September 1997, the Company entered into a definitive credit agreement
with a bank for a $10 million revolving credit facility that has a term of
two years. Outstanding borrowings, which bear interest at the prime rate
payable quarterly, are secured by Company assets excluding various golf
center properties and certain other assets pledged to secure other
long-term debt. All amounts outstanding under this credit facility were
repaid in full in July 1998, and the credit facility was terminated.
Accordingly, all amounts related to the credit facility are classified as a
current liability in the accompanying March 31, 1998 balance sheet.
(3) On February 27, 1998, the Company entered into a second definitive credit
agreement with the financial institution that previously in September 1997
had provided the $10 million revolving credit facility to the Company. The
new credit facility provides for additional short-term borrowings of up to
$5 million to be used to finance the working capital requirements of the
Company's wholly-owned construction subsidiary, Paragon Construction
International, Inc. ("Paragon"). All amounts outstanding under this credit
facility were repaid in full in July 1998, and the credit facility was
terminated. Accordingly, all amounts related to the credit facility are
classified as a current liability in the accompanying March 31, 1998
balance sheet.
(4) The Company financed the purchase of certain construction equipment and
vehicles by issuing notes payable secured by the assets purchased. Such
notes payable have terms of up to five years and require monthly payments
representing principal and interest at rates ranging from 8 3/4% to 10
3/4%.
10
<PAGE>
5. COMMITMENTS AND CONTINGENCIES
CLAIMS AND ASSESSMENTS
In August 1995, Paragon brought an arbitration claim against a customer for
breach of contract. Paragon alleges it has properly completed the construction
relating to the renovation of the customer's golf course and is seeking final
payment of retainage and related amounts due, together with additional damages,
totaling approximately $350,000. Simultaneous to this claim of arbitration, the
customer filed a counterclaim of arbitration against Paragon for alleged
construction defects in the renovation of its golf course. Although the customer
recently claimed its damages were in excess of $1.2 million, the initial claim
submitted by the customer in arbitration was for $750,000. The ultimate outcome
of this matter is not determinable at this time; accordingly, no provision for
loss regarding this matter had been established at March 31, 1998.
Paragon's construction contracts generally provide for warranties that obligate
Paragon to remedy certain construction defects that may arise in the ordinary
course of providing such construction services. Such warranties, which are
customary in the construction industry are usually effective for a period of one
year from the completion date of the respective projects. The Company's
management does not expect the costs associated with corrective action or
penalties incurred pursuant to these warranties, if any, to have a material
impact on its results of operations.
On July 28, 1998, individuals purporting to be shareholders of the Company filed
a class action lawsuit in the United States District Court for the Southern
District of Florida. The lawsuit was filed by the plaintiff individually and on
behalf of all others who purchased common stock of the Company from August 1,
1996 through July 24, 1998, excluding defendants and certain other related
persons or entities, against the Company and certain of the Company's officers
and directors. The complaint alleges that during the purported class period, the
Company violated applicable sections of the Securities Exchange Act of 1934 by
making misrepresentations or omissions of material fact in publicly filed
documents and in other alleged public statements relating to the Company's
financial condition and that of its wholly-owned subsidiary, Paragon
Construction International, Inc. The plaintiff is seeking an unspecified amount
of damages, interest, costs and attorneys' fees. Since the filing of this
matter, seven additional lawsuits have been filed against the Company and
certain of its present and former officers and directors. Six of these lawsuits
were filed in the United States District Court for the Eastern District of New
York. The allegations in these additional lawsuits are essentially the same as
those contained in the initial lawsuit and two lawsuits have asserted claims
under the Securities Act of 1933.
The Company intends to vigorously defend each of the foregoing lawsuits, but
their respective outcomes cannot be predicted. Any of such lawsuits, if
determined adversely to the Company, could have a material adverse effect of the
Company's financial position and results of operations. The Company's ultimate
liability with respect to any of the foregoing proceedings is not presently
determinable.
The Securities and Exchange Commission is conducting a private investigation to
determine whether the Company or certain of its current or former officers,
director and employees have engaged in conduct in violation of certain
provisions of the Securities Exchange Act of 1934 and the rules and regulations
thereunder. The Company believes that such investigation is focused principally
on the recognition of additional costs and losses associated with the review of
Paragon's construction projects discussed in Note 2 and the Company's public
statements and accounting systems with respect thereto. The Company is
cooperating in such investigation.
11
<PAGE>
ACCUMULATED DEFICIT AND LIQUIDITY
The Company has incurred operating losses from continuing operations which has
resulted in an accumulated deficit of approximately $34.6 million and a working
capital deficiency of approximately $19.9 million at March 31, 1998. The Company
incurred a net loss of approximately $17,000,000 (unaudited) for the six months
ended June 30, 1998 and expects such losses to continue during the remainder of
fiscal 1998. Management's plans in regard to these matters include obtaining
funds from the sale of Golden Bear Golf Centers, Inc. to an unrelated party (See
Note 8), as well as reducing on-going expenses at Paragon. In connection with
Paragon, the Company is negotiating with certain project owners, as well as
construction vendors and subcontractors, to expedite the completion of those
projects and to minimize the cost associated with such completion.
Future working capital requirements are dependent on the Company's ability to
complete the sale of Golden Bear Golf Centers which closed on July 21, 1998, to
successfully complete negotiations regarding Paragon as discussed in the
preceding paragraph and to achieve and maintain profitable operations in the
future. Although there can be no assurances, management believes the Company
will be successful in realizing these objectives, and, accordingly, will
generate sufficient cash flow from operations to rectify the Company's current
working capital deficiency and to meet future working capital requirements. To
the extent that capital requirements exceed available capital or the Company is
unable to successfully complete negotiations regarding Paragon, the Company will
need to seek alternative sources of financing to fund its operations. The
Company has no existing credit facility and no assurance can be given that
alternative financing will be available, if at all, in a timely manner, on
favorable terms. If the Company is unable to obtain satisfactory alternative
financing, the Company may be required to delay or reduce its proposed
expenditures or sell additional assets in order to meet its future obligations.
6. OPERATIONS OF JNAI
The apparel licensing activities of the Company in the Far East are conducted
through Jack Nicklaus Apparel International ("JNAI") and its various
partnerships. The Company serves as a 50% general partner and is generally
entitled to receive 50% of the cash distributions of the various partnerships'
operations. The Company's investment in JNAI is recorded on the equity method.
The following is a condensed summary of the operating results of JNAI:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------
1998 1997
--------------- --------------
<S> <C> <C>
Licensing revenues $ 379,845 $ 765,250
Operating expenses 114,955 83,268
Provision (benefit) for income taxes 47,062 (129,866)
============== =============
Net income $ 217,828 $ 811,848
============== =============
</TABLE>
7. RELATED PARTY TRANSACTIONS
Pursuant to a design services marketing agreement, the Company marketed golf
course designs worldwide for Nicklaus Design, the golf course design division of
Golden Bear International, Inc. ("International"), a privately owned company
controlled by Jack Nicklaus. As part of an organizational restructuring to
refocus on its core businesses, the Company terminated the design services
marketing agreement effective January 1, 1998. Concurrent with the termination
of the design services agreement, International assumed certain financial
obligations of the Company to employees and third parties formerly involved in
the design marketing function, and the Company obtained a ten year exclusive
commitment from International to continue the marketing of Paragon's golf course
construction services to Nicklaus Design clients and prospects. The arrangement
between the parties will permit Paragon to utilize the services of Nicklaus
Design's sales staff as needed on an independent contract basis and Paragon has
agreed to pay International a commission equal to five percent of the projected
gross profit margin negotiated by
12
<PAGE>
Paragon in golf course construction contracts procured by Nicklaus Design. The
Company and Paragon will also be entitled to receive finder's fees from
International for business leads generated by them which result in definitive
golf course contracts for Nicklaus Design.
Under the previous design services marketing agreement, the Company generally
had been entitled to 10% of the gross design fees collected by Nicklaus Design
for its role in marketing such design services. At December 31, 1997, the
Company had a net receivable balance due from International in the amount of
$184,502, substantially all of which was comprised of commissions payable under
the former design services marketing agreement. The Company had earned
commissions in this capacity of $359,393 during the three months ended March 31,
1997.
Pursuant to the terms of a personal services management agreement, International
and Mr. Nicklaus have retained the Company as the exclusive manager and
representative to market the personal endorsement services of Mr. Nicklaus,
pursuant to which the Company is generally entitled to approximately 20% to 30%
of the personal endorsement fees received by Mr. Nicklaus. During the three
months ended March 31, 1998 and 1997, the Company earned management fees
attributable to providing such services of $93,625 and $157,500, respectively.
The Company has an office staff sharing agreement with International which
provides for the sharing of the services of certain specifically identified
office staff and personnel that can effectively serve the needs of both
organizations. During the first three months of fiscal 1998 and 1997, payroll
and related costs associated with such shared employees totaling $27,750 and
$145,200, respectively, were allocated to International. The Company also
previously subleased its corporate office facilities from International through
July 31, 1997. The rent expense incurred under such sublease for the first three
months of fiscal 1997 was $148,402. Effective August 1, 1997, the Company
entered into a separate lease agreement for its corporate office facilities
directly with the owner of such facilities. In addition, the Company had
maintained certain office space in Singapore through October 31, 1997 that was
shared with International. During the three months ended March 31, 1997, a total
of $70,000 of costs associated with maintaining such facilities was allocated to
International. Effective November 1, 1997, the Company relocated its office
facilities in Singapore and entered into a lease for its new facilities that are
no longer shared with International. As of March 31, 1998, the Company had a net
balance due to International of $56,539, comprised primarily of billings for
certain golf course maintenance consulting services provided on behalf of
Paragon.
In the ordinary course of business, the Company purchases golf equipment
manufactured by Nicklaus Golf Equipment Company, L.C., a privately owned company
in which Mr. Nicklaus has a 50% equity interest. Such equipment is purchased
primarily for resale in the pro shops of the Company's golf centers and for
promotional programs associated with the Company's Nicklaus Flick Golf Schools.
During the three months ended March 31, 1998 and 1997, the Company purchased
such golf equipment at a cost of $7,658 and $38,667, respectively.
During the three months ended March 31, 1998 and 1997, the Company paid
Executive Sports International, a privately held company owned in part by a
member of the Nicklaus family, $53,197 and $9,968, respectively, for certain
printing and graphics services.
8. DISCONTINUED OPERATIONS
On July 20, 1998, the Company sold all of the issued and outstanding stock of
its Golden Bear Golf Centers, Inc. ("Golf Centers") subsidiary to an unrelated
party for $32 million less the outstanding balance of any capital lease
obligations and purchase money indebtedness remaining in connection with the
Company's initial purchase of the Company's golf center facilities. The purchase
price approximates the book value of the Company's investment in Golf Centers,
and the Company does not expect to incur any significant gain or loss on the
sale. Golf Centers was incorporated in December 1992 to offer franchise
opportunities for the operation of golf instruction and practice facilities that
consist of practice stations and the teaching techniques developed by Jack
Nicklaus, Jim Flick and the International staff. In connection with the
franchise program, Golf Centers entered into various agreements with franchisees
including, but not limited to, development and license agreements which provided
for the establishment and operation of golf centers and use of various
trademarks, trade names and associated logos and symbols. In
13
<PAGE>
addition, Golf Centers also owned and operated its own golf instruction and
practice facilities at numerous locations in several states.
Prior to the closing of the sale, Golf Centers distributed certain assets and
liabilities to the Company. The Company has classified the amounts related to
Golf Centers as discontinued operations and has included its results of
operations as "Loss from discontinued operations" in the accompanying
Consolidated Condensed Statements of Operations. The loss from discontinued
operations totaled $1,649,479 and $915,951 for the three months ended March 31,
1998 and 1997, respectively.
The net assets of the discontinued operations at March 31, 1998 and December
31,1997, as presented in the accompanying Consolidated Condensed Balance Sheets,
are as follows:
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31,1997
--------------------- ---------------------
<S> <C> <C>
Current assets $ 4,104,912 $ 3,812,770
Property and equipment, net 23,379,835 23,510,655
Other assets 6,690,852 6,777,646
--------------- ---------------
Total assets 34,175,599 34,101,071
--------------- ---------------
Current liabilities 3,500,676 3,039,585
Other liabilities 8,281,633 7,550,784
--------------- ---------------
Total liabilities 11,782,309 10,590,369
--------------- ---------------
Net assets of discontinued operations $ 22,393,290 $ 23,510,702
=============== ===============
</TABLE>
9. SEGMENT REPORTING
The Company's revenue generating operations are conducted through two divisions,
comprised of the Consumer Division and the Construction Division. The Consumer
Division primarily includes golf instruction activities along with the
development of the licensed products and marketing endorsement relationships.
The Construction Division reflects the operating activities of Paragon, which is
primarily engaged in the construction and shaping of golf courses.
The revenues, operating income (loss), depreciation and amortization, and
capital expenditures of the respective segments are set forth below.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------------
1998 1997
--------------- -----------------
<S> <C> <C>
Revenues:
Consumer division $ 2,981,085 $ 2,842,501
Construction division 8,345,471 1,270,498
------------- ---------------
$ 11,326,556 $ 4,112,999
============= ===============
Operating income (loss):
Consumer division $ 754,197 $ 1,115,868
Construction division (4,876,637) (1,095,676)
Corporate administration (1,121,690) (1,150,534)
------------- ---------------
$ (5,244,130) $ (1,130,342)
============= ===============
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------------------
1998 1997
--------------- -----------------
<S> <C> <C>
Depreciation and amortization:
Consumer division $ 20,838 $ 18,831
Construction division 188,532 14,537
Corporate administration 94,050 37,500
------------- ---------------
$ 303,420 $ 70,868
============= ===============
Capital expenditures:
Consumer division $ 42,109 $ 44,137
Construction division 259,874 35,250
Corporate administration 16,546 12,751
------------- ---------------
$ 318,529 $ 92,138
============= ===============
</TABLE>
Information with respect to identifiable assets of the respective segments is
set forth below.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Identifiable assets:
Consumer division $ 1,472,503 $ 1,434,442
Construction division 20,186,921 17,584,685
Corporate administration 3,317,836 3,417,290
Net assets of discontinued operations 22,393,290 23,510,702
-------------- --------------
$ 47,370,550 $ 45,947,119
============== ==============
</TABLE>
10. SUBSEQUENT EVENT
During July 1998, the Company repaid in full the outstanding balance due under
its revolving and short-term credit agreements, and the agreements were
terminated. See Note 4. Accordingly, all amounts outstanding at March 31, 1998
and December 31, 1997 are classified as current liabilities in the accompanying
balance sheets.
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
As part of an organizational restructuring to refocus on its core businesses,
the operations and financial activity associated with the Company's former Golf
and Marketing Divisions have been consolidated into a new Consumer Division.
Accordingly, the Company now operates its business through two divisions
comprised of the Consumer Division and the Construction Division. The Consumer
Division is involved in the licensing and franchising of NICKLAUS, JACK NICKLAUS
and GOLDEN BEAR branded products throughout the world, the operation of the
NICKLAUS FLICK GOLF SCHOOLS and the generation of marketing fees related to Jack
Nicklaus' personal endorsements. The Construction Division provides technical
construction services principally in connection with the construction and
renovation of golf courses and resort-related facilities.
Under the terms of a design services marketing agreement, the Company had
marketed golf course designs worldwide for Nicklaus Design. However, as part of
its organizational restructuring, the Company terminated the design services
marketing agreement effective January 1, 1998 and entered into a ten year
exclusive commitment from International to market Paragon's golf course
construction services to Nicklaus Design clients and prospects. The arrangement
between the parties will permit Paragon to utilize the services of Nicklaus
Design's sales staff as needed on an independent contract basis and Paragon will
be compensated by Nicklaus Design for any design leads generated through
Paragon's activities.
In connection with the departure of certain members of Paragon's senior
management during 1998, the Company conducted a comprehensive review of
Paragon's construction projects, focusing on the status of the projects, the
costs required to fully complete the jobs and the anticipated profitability or
losses of such projects. Attention was also directed toward determining contract
requirements, including known and unknown amendments and change orders, and the
related estimated anticipated costs of fulfilling those requirements. In the
review, the Company found evidence that former management of Paragon falsified
records, underbid construction projects, misrepresented the status of
construction projects and made false statements about Paragon's revenues, costs
and profits to the Company's executive management and Board of Directors. Based
on the results of the review, it was necessary to recognize additional costs and
losses associated with certain projects based on revised cost estimates related
to uncompleted contracts. As discussed in Note 1 (Accounts Receivable and
Revenue Recognition - Paragon) to the Company's Form 10-K/A for the year ended
December 31, 1997, under percentage-of-completion accounting, the increase in
estimated contract costs results in a decrease in reported revenues and profits.
Accordingly, the accompanying Consolidated Condensed Statements of Operations
reflect the changes to restate the previously filed financial statements for the
period ended March 31, 1998 giving effect to the additional costs and losses to
be recorded on the projects. As a result of the above restatement, the Company
also determined that it was necessary to write-off the deferred tax asset of
$2,855,663 and $1,748,202 previously recorded at March 31, 1998 and December 31,
1997, respectively.
As a result of the aforementioned review and restatement, numerous purported
class action lawsuits have been filed against the Company and certain current
and former officers and directors of the Company, asserting various claims under
the federal securities laws. In addition, the staff of the Securities and
Exchange Commission is conducting an investigation relating to these matters.
While it is not feasible to predict or determine the outcome of these
proceedings or to estimate the amounts or potential range of loss with respect
to these matters, management believes that an adverse outcome with respect to
such proceedings could have a material impact on the financial condition,
results of operations and cash flows of the Company.
The Company has taken steps to stabilize Paragon's operations and to reduce
on-going expenses at Paragon. The Company has closed its offices in Atlanta,
Phoenix and in Manila, Philippines, and has reduced its field and corporate
personnel. The Company intends to continue to be involved in golf course
construction on some basis and is presently in discussions with a third party to
explore a range of alternatives.
16
<PAGE>
The Securities and Exchange Commission is conducting a private investigation to
determine whether the Company or certain of its current or former officers,
director and employees have engaged in conduct in violation of certain
provisions of the Securities Exchange Act of 1934 and the rules and regulations
thereunder. The Company believes that such investigation is focused principally
on the recognition of additional costs and losses associated with the review of
Paragon's construction projects discussed in Note 2 and the Company's public
statements and accounting systems with respect thereto. The Company is
cooperating in such investigation.
DISCONTINUED OPERATIONS
On July 20, 1998, the Company sold all of the issued and outstanding stock of
it's Golden Bear Golf Centers, Inc. ("Golf Centers") subsidiary to an unrelated
party for approximately $32 million less the outstanding balance of any capital
lease obligations and purchase money indebtedness remaining in connection with
the Company's initial purchase of the Company's golf center facilities. Golf
Centers was incorporated in December 1992 to offer franchise opportunities for
the operation of golf instruction and practice facilities that consist of
practice stations and the teaching techniques developed by Jack Nicklaus, Jim
Flick and the International staff. In connection with the franchise program,
Golf Centers entered into various agreements with franchisees including, but not
limited to, development and license agreements which provided for the
establishment and operation of golf centers and use of various trademarks, trade
names and associated logos and symbols. In addition, Golf Centers also owned and
operated its own golf instruction and practice facilities at numerous locations
in several states.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1997
For the three months ended March 31, 1998, total revenues increased to $11.3
million, up 175.6% compared to revenues of $4.1 million for the comparable
period of 1997.
The $7.2 million increase in total revenues during the current quarterly period
was principally the result of an increase in Construction Division revenues to
$8.3 million from $1.3 million for the first quarter of last year. The low
volume of construction business for the first quarter of last year was the
result of management's decision to curtail such activities pending the
implementation of new systems and the integration of new management during 1997.
Revenues attributable to the Consumer Division increased to $3.0 million for the
three months ended March 31, 1998, reflecting a 7.1% increase from the
comparable period of the prior year. Such increase in Consumer Division revenues
was due to an increase in golf instruction operations.
The Company incurred operating losses of $5.2 million and $1.1 million during
the three months ended March 31, 1998 and 1997, respectively. The increase in
the operating loss incurred for the current quarterly period was primarily
attributable to an increase in operating expenses from the expanded level of
operations in the majority of the Company's businesses.
The operating loss incurred for the three months ended March 31, 1998 was also
impacted by an increase in the amount of depreciation and amortization expense,
which increased to $0.3 million during the first quarter of the current year
from $0.1 million for the comparable period of 1997, due primarily to the
addition of equipment used for Paragon's operations. Corporate administration
expenses, which are comprised primarily of personnel-related costs, decreased
slightly to $1.0 million for the current quarterly period from $1.1 million for
the comparable period of the prior year.
Interest expense for the three months ended March 31, 1998 increased to $0.2
million from less than $0.1 million for the first three months of 1997,
attributable primarily to outstanding borrowings under the Company's $10 million
credit facility and $5 million short-term credit facility during the current
quarterly period. The Company's provision for income taxes for the three months
ended March 31, 1998 reflects an effective tax rate of 0.9% of the pre-tax
losses reported as compared to a benefit for income taxes for the three months
ended March 31, 1997 which reflects an effective tax rate of 36.1% of the
pre-tax losses reported. The decrease in the effective tax rate for the current
quarterly period is primarily attributable to management's determination that
the future realization of
17
<PAGE>
deferred tax assets is not more likely than not and as such, a valuation
allowance has been established against the Company's deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998 and December 31, 1997, the Company had a working capital
deficit of $19.9 million and $12.4 million, respectively, along with cash and
cash equivalents of $1.2 million and $1.8 million, respectively.
Certain of the Company's working capital requirements are financed by borrowings
under a $10 million revolving credit facility. Borrowings under the facility are
secured by Company assets excluding various golf center properties and certain
other assets pledged to secure other long-term indebtedness. At March 31, 1998
and December 31, 1997, outstanding borrowings under the facility were
approximately $7.2 million and $8.9 million, respectively. The credit agreement
for the facility contains customary conditions and covenants with respect to the
conduct of the Company's business, including dividend payment limitations, and
requires the maintenance of various financial ratios. At March 31, 1998, the
Company was out of compliance with respect to its maintenance of the required
ratio of EBITDA to interest expense plus current maturities of debt, as defined
in the credit agreement, for which it obtained a waiver from the financial
institution. During July 1998, all amounts outstanding under this credit
facility were repaid in full, and the credit facility was terminated.
Accordingly, all amounts related to the credit facility are classified as a
current liability in the accompanying balance sheets.
The Company entered into a definitive credit agreement with this same lender on
February 27, 1998 for an additional short-term $5 million credit facility.
Borrowings under the new facility are limited to a percentage of Paragon's
eligible trade receivables and net costs and estimated earnings in excess of
billings on uncompleted construction contracts, subject to certain limitations
and stipulations as set forth in the credit agreement. The new credit agreement
provides for a term of 90 days and as of March 31, 1998, the outstanding balance
of borrowings under the facility was $5 million. Outstanding borrowings are
cross-collateralized with related indebtedness under the $10 million revolving
credit facility previously provided to the Company by this same lender, whereby
all advances payable to such lender are secured by Company assets excluding
various golf center properties and certain other assets pledged to secure other
long-term debt. During July 1998, all amounts outstanding under this credit
facility were repaid in full, and the credit facility was terminated.
Accordingly, all amounts related to the credit facility are classified as a
current liability in the accompanying balance sheets.
The Company has incurred operating losses from continuing operations which has
resulted in an accumulated deficit of approximately $34.6 million and a working
capital deficiency of approximately $19.9 million at March 31, 1998. The Company
incurred a net loss of approximately $17,000,000 (unaudited) for the six months
ended June 30, 1998 and expects such losses to continue during the remainder of
fiscal 1998. Management's plans in regard to these matters include obtaining
funds from the sale of Golf Centers to an unrelated party, as well as reducing
on-going expenses at Paragon. In connection with Paragon, the Company is
negotiating with certain project owners, as well as construction vendors and
subcontractors, to expedite the completion of those projects and to minimize the
cost associated with such completion.
Future working capital requirements are dependent on the Company's ability to
complete the sale of Golden Bear Golf Centers which closed on July 21, 1998, to
successfully complete negotiations regarding Paragon as discussed in the
preceding paragraph and to achieve and maintain profitable operations in the
future. Although there can be no assurances, management believes the Company
will be successful in realizing these objectives, and, accordingly, will
generate sufficient cash flow from operations to rectify the Company's current
working capital deficiency and to meet future working capital requirements. To
the extent that capital requirements exceed available capital or the Company is
unable to successfully complete negotiations regarding Paragon, the Company will
need to seek alternative sources of financing to fund its operations. The
Company has no existing credit facility and no assurance can be given that
alternative financing will be available, if at all, in a timely manner, on
favorable terms. If the Company is unable to obtain satisfactory alternative
financing, the Company may be required to delay or reduce its proposed
expenditures or sell additional assets in order to meet its future obligations.
CURRENCY FLUCTUATIONS
18
<PAGE>
Although substantially all of the Company's contracts are denominated in United
States dollars, fluctuations in the value of foreign currencies relative to the
United States dollar could impact the Company's results of operations. A
substantial portion of the revenues of the Company's overseas licensees are
generated in foreign currencies and accordingly, fluctuations in the value of
these currencies relative to the United States dollar could adversely affect the
Company's profitability. Royalty payments received by the Company or by its JNAI
equity investee relating to foreign licensing arrangements are generally based
on the exchange rate at the time of payment. Although the Company's construction
contracts outside of the United States are generally denominated in United
States dollars, certain payments to local subcontractors and vendors on various
overseas projects are made in the functional currencies of the respective
countries and accordingly, the effective costs to complete certain overseas
projects may increase or decrease as foreign currencies fluctuate relative to
the United States dollar. The Company's JNAI joint venture enters into futures
contracts to hedge its anticipated receipt of certain royalty payments
denominated in Japanese yen. Apart from these futures contracts on the part of
JNAI which were not material to the Company's results of operations, the Company
does not currently engage in hedging activities with respect to currency
fluctuations, but may do so in the future. Furthermore, the Company has
historically engaged in significant business activities in Japan and Asia. To
the extent that markets in these geographic areas are volatile and unfavorably
impact the Company's customers, such events could have an adverse effect on the
Company's operations in the region going forward.
YEAR 2000
The Year 2000 issue exists because many computer systems and applications
currently use two-digit fields to designate a year. As the century date change
occurs, date-sensitive systems may recognize the year 2000 as 1900, or not at
all. This inability to properly treat the Year 2000 issue may cause systems to
process critical financial and operational information incorrectly. The Company
has evaluated the modifications required to ensure that its computer systems are
Year 2000 compliant. Such modifications are not anticipated to be significant
and the costs associated with such modifications will be expensed as incurred.
In the opinion of management, the conversions required to comply with the Year
2000 issue are not expected to have a material effect on the Company's results
of operations.
MARKET RISK
The Company is exposed to market risks, including changes in interest rates and
currency exchange rates. Based on the Company's interest rate and foreign
exchange rate exposure at March 31, 1998, a 10% change in the current interest
rate or historical currency rate movements would not have a material effect on
the Company's financial position or results of operations over the remainder of
the current fiscal year.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Quarterly Report on Form 10-Q contains forward-looking statements made
pursuant to the safe harbor provisions of the Securities Litigation Reform Act
of 1995. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties, including
but not limited to, to those risks associated with economic conditions generally
and the economy in those areas where the Company has assets and operations
including Asia and Japan; competitive and other factors affecting the Company's
operations, markets, products and services; those risks associated with the
licensing and franchising of golf centers; those risks associated with the
performance of Paragon Construction International and stabilization of its
activities, including its ability to obtain new contracts and remain
competitive, its ability to obtain a joint venture partner or other satisfactory
collaborative agreement with a third party, its ability to successfully
negotiate with certain project owners, as well as construction vendors and
subcontractors, regarding the completion of existing projects and the
minimization of costs associated with such completion, risks relating to
estimated contract costs, estimated losses on uncompleted contracts and
estimates regarding the percentage of completion of contracts, and risks
relating to litigation and associated costs arising out of Paragon's activities
and the matters discussed in this report; risks relating to changes in interest
rates and in the availability cost and terms of financing; risks related to the
performance of financial markets; risks related to changes in domestic and
foreign laws, regulations and taxes; risks
19
<PAGE>
related to changes in business strategy or development plans; risks related to
the outcomes of the pending lawsuits against the Company and the associated
costs; risks associated with future profitability; and other factors discussed
elsewhere in this release and in documents filed by the Company with the
Securities and Exchange Commission. Many of these factors are beyond the
Company's control. Actual results could differ materially from these
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the forward-looking information contained in this press
release will, in fact, occur. The Company does not undertake any obligation to
revise these forward-looking statements to reflect future events or
circumstances and other factors discussed elsewhere in this report and the
documents filed by the Company with the Securities and Exchange Commission.
20
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the three-month period
ended March 31, 1998.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN BEAR GOLF, INC.
By: /S/ STEPHEN S. WINSLETT
----------------------------------------------------
Stephen S. Winslett
Senior Vice President and Chief Financial Officer
Date: October 19, 1998
22
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GOLDEN BEAR
GOLF, INC.'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,211,065
<SECURITIES> 0
<RECEIVABLES> 15,824,714
<ALLOWANCES> (2,214,051)
<INVENTORY> 59,202
<CURRENT-ASSETS> 18,396,402
<PP&E> 8,392,337
<DEPRECIATION> (2,107,380)
<TOTAL-ASSETS> 47,370,550
<CURRENT-LIABILITIES> (38,246,764)
<BONDS> (2,821,450)
0
0
<COMMON> (55,050)
<OTHER-SE> (6,247,286)
<TOTAL-LIABILITY-AND-EQUITY> (47,370,550)
<SALES> (8,345,471)
<TOTAL-REVENUES> (11,326,556)
<CGS> 12,074,466
<TOTAL-COSTS> 16,570,686
<OTHER-EXPENSES> 126,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221,791
<INCOME-PRETAX> 5,559,952
<INCOME-TAX> 49,528
<INCOME-CONTINUING> 5,609,408
<DISCONTINUED> 1,649,479
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,258,959
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.32
</TABLE>
