SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB / A
REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUER PURSUANT TO
SECTION
12(b)OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ASSOCIATED GOLF MANAGEMENT, INC.
(Name of Small Business Registrant as specified in its charter)
NEVADA 84-1351409
(State or other jurisdiction of (I.R.S. Employer Identification
Number)
incorporation or organization)
11007 North 56th Street, Suite 204, Temple Terrace, Florida 33617
(Address of principal executive offices) (Zip Code)
(813) 988-7775
(Registrant's telephone number, including area code)
Securities registered or to be registered pursuant to Section 12(b) of
the
Act:
NONE NONE
Title of each class to be so registered Name of each exchange
on which each class
is to be registered
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE PER SHARE
(Title of class)
On June 30 1999 the Registrant had outstanding 7,056,059 shares of Common
Stock, par value $.001 per share.
ASSOCIATED GOLF MANAGEMENT, INC.
FORM 10-SB
INDEX
PART I Page No.
Item 1. Description of Business.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Item 3. Description of Properties.
Item 4. Security Ownership of Certain Beneficial Owners and
Management.
Item 5. Directors, Officers, Promoters & Control Persons.
Item 6. Executive Compensation.
Item 7. Certain Relationships and Related Transactions.
Item 8. Description of Securities.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholders Matters.
Item 2. Legal Proceedings.
Item 3. Changes In and Disagreements With Accountants.
Item 4. Recent Sales of Unregistered Securities
Item 5. Indemnification of Directors and Officers
PART F/S
Financial Statements
PART III
Item 1. Index to Exhibits
Item 2. Description of Exhibits
SIGNATURES
ITEM 1. BUSINESS
COMPANY OVERVIEW
Associated Golf Management, Inc. ("Associated"), together with its
wholly-owned subsidiary, "National Senior Tour", Inc. (collectively the
"Company") engages in the development, marketing and management of golf
tournaments for senior professional golfers, and the distribution and
sale of golf-related consumer products. In addition, the Company plans to
design, develop and manage golf courses and operate golf instructional schools
and facilities.
Associated was incorporated under the laws of the State of Nevada in
September, 1996, as "Fairway Enterprises, Inc." ("Fairway"). Fairway was
initially wholly owned by Hanovia Creative Capital Corp. ("Hanovia"), a
corporation formed under the laws of the Province of British Columbia,
Canada in 1984. In October 1996, the shareholders of Hanovia exchanged all the
shares of Hanovia on a one for one basis for shares of Common Stock of
Fairway.
In May, 1997, Fairway acquired all of the issued and outstanding
shares of Fairway Sports, Incorporated, a Florida corporation, ("Fairway
Sports") in exchange for 416,502, shares of Fairway's Common Stock.
On December 14, 1998, Fairway changed its name to Associated Golf
Management, Inc. and incorporated "National Senior Tour", Inc. ("National
Senior Tour") in the State of Florida. "National Senior Tour" is a
wholly-owned subsidiary of the Company that engages in the business of
organizing, marketing, and promoting golf tournaments for professional
golfers over the age of 48. At the beginning of the 1999 tournament season,
the management of the Company planned for the "National Senior Tour" to hold
twelve (12) tournaments. Subsequent to sponsoring the first two tournaments
in the 1999 "National Senior Tour", the Company concluded to reduce the
number of tournaments to 8, including one Q-school instructional tournament.
With the reduction in the number of tournaments, the Company placed greater
emphasis on and enhanced the quality of the golfing experience at the remaining
tournaments while reducing the overhead of the Company experienced in
tournament organization efforts. See BUSINESS-"NATIONAL SENIOR TOUR".
The term the "Company" or "Associated Golf Management" as used
herein includes Associated Golf Management, Inc. and its subsidiary, "National
Senior Tour", unless otherwise indicated. The Company's executive offices
are located at 11007 North 56th Street, Suite 204, Temple Terrace, Florida
33617. The Company's telephone number is 813-998-7775.
In 1999 the Company initiated a website called "BigGolfStore.com"
("Website") to market and promote the "National Senior Tour" tournaments,
the distribution and sale of golf-related consumer products, and the
Company's proposed golf instructional schools ("NST Instructional Schools").
See BUSINESS-WEBSITES/E-COMMERCE. The Company has not yet hosted any "NST
Instructional Schools" but plans to sponsor one during the current fiscal
year. See BUSINESS-NST INSTRUCTIONAL GOLF SCHOOLS.
Of the several different business objectives the Company seeks to
develop in the golfing industry, the Company currently plans to emphasize
and give greater attention to the Company's core business of hosting the
"National Senior Tour" tournaments and to the Company's e-commerce
business objectives.
GOLF INDUSTRY OVERVIEW
Public interest in golf is at an all time high and growing.
Televised golfing events earn excellent exposure for event sponsors and their
products. Additionally, many dedicated club professional working at the
grass roots level have gained the public's interest and have helped to make
golf one of the fastest growing adult participation sports in the country.
The number of professional golfers turning 48 years of age is at an
all time high due to the aging "Baby Boom" generation. Since its
organization in 1980 beginning with only four tournaments, the Senior PGA
Tour has grown to over forty-two events, including the prestigious U.S.
Seniors Open, the Tradition, The PGA Senior's Championship and The Ford
Senior Players Championship. Its prize money now totaling over $40 million
dollars, the Senior PGA Tour is considered by some to be the sports success
story of the 1980's. Now in the 1990's, senior prize money purses have grown
twice as fast as those of the regular PGA Tour. Along with increasing
donations to charities there has also been a dramatic increase in television
exposure. However, as a result of the aging of the "Baby Boom" generation,
potentially more talented players exist than the restrictive PGA Senior Tour
guidelines can accommodate.
Fields of Senior PGA events are limited to seventy-eight players.
Last year's qualifying school offered only 8 spots for 504 players. Further,
even assuming a player makes it through the qualifying school, if he doesn't
finish within the top 31 on the money list, he can lose his tournament
card. To be exempt from qualifying school, a golfer must have won a Senior PGA
Tour event in the last calendar year. This means that he must have finished
among the top 31 golfers on the money list the previous year or rank among the
top 31 all-time money winners on the combined PGA and Senior PGA money list.
Since the Senior PGA Tour primarily consisted of players who
acquired significant earnings on the regular tour before turning 50, the
Company believes a need exists in the field for additional senior professional
players and tour events. Today, as expected, there is no shortage of
outstanding senior professionals who might not otherwise qualify for the
Senior PGA Tour. Growing out of this need for an additional competitive
arena for senior professional golfers, and coupled with the success of
the Senior PGA Tour, the Company is holding "National Senior Tour" golf
tournaments to capitalize on this need.
"NATIONAL SENIOR TOUR"
It is the intention of the Company to develop a first class
professional golf tour for golfers 48 years of age, and older, as an
alternative for seniors who have not qualified for the PGA Senior Tour.
The Company anticipates that tournaments will be held at various golf clubs
throughout the United States and in Europe with the expectation that ex-
PGA touring professionals, accomplished golf professionals, PGA Seniors Tour
players, and world class amateurs will attend and participate in the
tournaments. The Company thereby seeks to provide senior professional
golfers access to a market that had previously been denied to them and
endeavors to provide a unique and lucrative avenue for corporations and service
organizations to reach their customers and audience on local, national,
and international levels.
The Company expects that the aggregate prize purse per tournament
for 1999 will be approximately $100,000.00 in U.S. funds and believes that
the aggregate prize purse per tournament should increase to approximately
$150,000.00 by the year 2001. The Company intends to provide funding for
the prize purses and costs to operate the proposed tournaments from players'
entry fees and corporate sponsorships.
For each tournament, the Company intends to provide all supplies and
equipment which are required for the tournament such as ropes and stakes,
score boards, scoring standards, tents and tournament trailers. The
Company also plans to administer each tournament and to oversee the setup of
the golf course at which the tournament is to be held, to oversee the roping
and course maintenance at such golf course where the tournament is to be
held, and to oversee enforcement of decisions regarding rules and player
relations, entries and standings.
The Company has already held two "National Senior Tour" tournaments
during the current fiscal year under the mark National Senior Tour. The
first of these was held in Beaumont, Texas and was the first "National
Senior Tour" tournament that the Company has held under that mark. In the first
tournament held in the 1999 year, 76 participants entered the competition
and the cost to operate the event was $60,000. There were _______ (_____)
sponsors of this tournament. This tournament received $76,000 in entry
fees, but did not receive any money as gate receipts.
105 participants competed in the second tournament. The cost to
operate the event was $100,000 and the tournament generated $32,000 in
entry fees. There were _____ sponsors of this tournament. The Company did not
receive any money for gate receipts because all gate proceeds for this
tournament were donated to the Buckner Children's Charity. The Company
received approximately $58,000 in sponsorship money for the second
tournament of the 1999 National Senior Tour.
In these tournaments the funding for the prize purse and costs to
operate the tournament was provided by players' entry fees. The Company
anticipates that it will hold an additional ten "National Senior Tour"
tournaments during the 1999 fiscal year.
Fairway Sports, held twenty-one tournaments under the designation
"Senior Series Tour" tournaments since the Company acquired Fairway
Sports approximately two years ago. The "Senior Series Tour" tournaments,
which were discontinued in 1998, were similar in nature to the Company's
National Senior Tour tournaments.
The Company concluded to discontinue the Senior Series Tournaments
in 1998 for several reasons. First, the Company concluded that certain
operational difficulties the previous management of the Company
experienced with the Senior Series Tournaments had undermined most of the
goodwill formerly associated with that tournament series. Second, the Company
determined that the Company's best interests would be better served by
developing a new series of tournaments with a new name and trademark
emphasizing the national character of the Company's new tour.
The Company is actively seeking a PGA Senior Tour affiliation
although there can be no assurance that the Company will be successful in
obtaining a PGA Senior Tour license or affiliation. If the Company were to
obtain a PGA affiliation, the Company believes the Company's potential to
obtain sponsors and participants in its "National Senior Tour" tournaments
should increase.
SALES OF GOLF EQUIPMENT AND PRODUCTS
The Company does not manufacture golf equipment and products, but
plans to sell golf equipment and products through its website
"BigGolfStore.com" and its website to be established called
"nationalseniortour.com." The Company plans to obtain licenses and/or other
agreements to market, promote, distribute, and sell such golf equipment and
products worldwide. See BUSINESS-LICENSING. The Company also intends to
sell golf equipment and products at sites where it hosts its "National
Senior Tour" golf tournaments. The Company further expects to market,
promote, distribute and sell golf equipment and products in Europe with the
assistance of Europa Consultancy Ltd. See BUSINESS-INTERNATIONAL OPERATIONS
and CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-EUROPA CONSULTANCY LTD.
WEBSITE/E-COMMERCE
In 1999, the Company developed and initiated an internet website
located at www.BigGolfStore.com. The website is in the process of being
expanded and constructed further by the Company. The Company has applied
for and received national registration for the domain name "The Big Golf
Store.com" and has a first right of refusal to continue utilizing the
domain name beyond the initial term of two years.
The Company anticipates that the website, once it is expanded, will
promote the Company's "National Senior Tour" golf tournaments in the
United States, Europe, and internationally. The expanded website will also
promote the sale of an estimated 11,000 products and an estimated 100 travel
packages under the terms of merchandise and other agreements the Company
plans to enter into with various prominent businesses.
All technological steps have been taken in connection with the
Company's website expansion program. Although there can be no assurance,
the Company expects the cost for marketing and all related expenditures for
the Website during its first full year to be approximately $100,000. The
expanded Website was completed and introduced during the early part of
the fourth quarter of 1999. The Company does not have any security
authorization concerns other than those pertaining generally to all websites,
such as the protection of data on the Website from hackers and others trying to
obtain sensitive information customers transmit to the Website and the concern
that customers using credit cards might have the numbers stolen and the
concern for the proper authorization of such credit cards. Each of these
concerns is addressed in the manner recommended by the Company's Website
consultant and includes use of the appropriate hardware and software to
restrict access to sensitive data and verify the authority of customers to
use credit cards for the purchase of goods at the website.
The Company has now been granted associate status with Amazon.com
for a period ending in October, 2000. Pursuant to the associate status,
Amazon.com will be a supplier to the Company for golf, fitness and sports
related books to be offered through the Company's website. Although the
arrangement with Amazon.com is not exclusive, Amazon.com currently is the
Company's only supplier for such items.
Other than goods supplied by Amazon.com relating to golf, fitness
and sports related books, the Company will fulfill sales by its website
through an arrangement with "The Golfer's Advantage" of Brooking, South
Dakota, a 27 year old company with 11,000 products available. The 11,000
products to be available via the website are available through our
arrangement with "The Golfer's Advantage," pursuant to which the Company is
to receive 50% of all such sales payable thirty (30) days net of payment by
customers for products sold through the Company's website.
The Company has entered into an agreement in May 1999, with On-Site
Computer Solutions ("On-Site")under which On-Site will design a website
for the "National Senior Tour" golf tournaments which is expected to be
called "nationalseniortour.com." The website will showcase and promote
"National Senior Tour" golf tournaments and will provide a venue for
e-commerce merchandising and marketing.
The Company entered into an agreement with "The Golfer's Advantage"
("TGA") in March 1999, under which both the Company and TGA agreed to
engage in the promotion of TGA membership and products through the
Company's website "BigGolfStore.com" and its website to be established called
"nationalseniortour.com." Specifically, the Company and TGA agreed to
jointly develop, produce and market the products known as "The Wedge
System," the "Tucker Short Game Test" and any other future products which the
Company and TGA agree to jointly develop, produce, and market.
LICENSING
The Company, as of the date of this Registration Statement, has no
licenses to market, promote, distribute or sell any products,
tournaments, or golf instructional programs other than rights under the
agreements mentioned under the heading BUSINESS- WEBSITES E-COMMERCE. The
Company intends to license and market a wide variety of golf-related branded
consumer products and services worldwide. Further, the Company intends to
license and market a variety of golf-related products which may include, but
may not be limited to, men's and women's sportswear, men's tailored clothing,
neckwear, luggage, socks, headware, belts, small leather goods, eyewear,
furniture, calendars, and various forms of artwork and commemoratives.
The Company is actively seeking a PGA Senior Tour affiliation and
license although there can be no assurance that the Company will be
successful in obtaining a PGA Senior Tour affiliation or license. The
Senior PGA Tour Board of Directors exercises authority over and responsibility
for the granting of tour affiliation. To obtain a PGA Senior Tour
Affiliation the Company has applied to the Board of Directors of the Senior
PGA Tour which consists of golfers playing on the Senior PGA Tour. Some of
these board members have played in the "National Senior Tour" tournament and
the Company believes they appreciate the importance of having a secondary or
feeder tour through the Senior PGA Tour. The Company has been advised
that the Board of Directors of the Senior PGA Tour will meet in January at
which time the Company's affiliation will be considered. An affiliation with
Senior PGA Tour would allow the Company to use the Senior PGA Tour logo
and name in the marketing of the "National Senior Tour" tournaments,
negotiation of sponsorship agreements and similar activities.
MARKETING
The Company intends to market and promote the "National Senior Tour"
golf tournaments, the "NST Instructional Schools", and any golf related
equipment and products, or golf courses and projects that may be
constructed.
The Company intends to rely heavily on e-commerce through its
existing website and website to be established as well as its "National Senior
Tour" golf tournaments to implement the Company's marketing objectives. The
Company's Big Golf Store.com website has only been introduced and operating
for a few weeks, but has been averaging approximately 130 visits per day.
Consequently, the percentage of total sales contributed by purchases on
the website is immaterial at present, representing less than a percent of
total sales.
The Company also intends to utilize direct mailing to solicit
participants and sponsors for its "National Senior Tour" golf
tournaments.
The Company's marketing and licensing strategy is to (i) establish
and expand the worldwide sales of the Company's products; (ii) selectively
establish licensed product lines to be marketed and promoted on the
Company's existing website and website to be created; (iii) expand the
number of "National Senior Tour" golf tournaments to be held; (iv) increase
corporate sponsorships for its NST tournaments and/or golf instructional
schools; (v) establish "NST Instructional Schools"; and (vi) acquire or
establish relationships with certain complementary golf-related businesses,
companies, properties or technologies.
"NST INSTRUCTIONAL SCHOOLS"
The Company currently plans to sponsor a golf instructional school
known under the name "NST Instructional Schools." The Company believes
that growth in the golf instruction industry is driven by existing golfers'
desire to continually improve their golf games and by new golfers seeking to
learn the game. The "NST Instructional School" is designed to provide golf
practice opportunities, affordable golf instruction and related recreational
activities for golfers. The Company intends to set up and operate
numerous "NST Instructional Schools" in the United States and Europe. The
Company has not held any "NST Instructional Schools" to date, but rather has
focused on hosting the "National Senior Tour" tournaments and developing the
goodwill of that aspect of the Company's business. The Company currently
anticipates hosting the first "NST Instructional School" sometime during the
second quarter of 2000.
The target market for the "NST Instructional Schools" are consumers
who wish to seek affordable golf instruction. The Company intends to market
"NST Instructional Schools" principally through: (i) direct response media
advertising; (ii) direct mail programs; (iii) word-of-mouth referrals;
(iv) telemarketing; (v) its website "BigGolfStore.com"; and (vi) its website
to be developed called "national senior tour.com."
The existing "NST Instructional School" faculty has not yet been
determined. The faculty will be comprised of professionals or assistants
selected by the Company. These professionals and assistants will employ a
teaching philosophy that is consistent with Eddie Pearce's approach to
playing the game and Eddie Pearce's approach to teaching. Eddie Pearce
is the Company's President and Chief Executive Officer.
COMPETITION
The Company's competition varies among its business lines. The
consumer markets for goods and services in which Company's marketing and
licensing operations intend to operate are extremely competitive, with the
Company's products and services competing against a mix of established name
brand consumer products and services, products and services licensed or
endorsed by sports and entertainment celebrities, private-label products and
generic products that have not established a distinct brand identity.
Competition in these products and services is primarily centered on styling,
quality, price, brand recognition and service.
In order for the Company to be competitive in these marketplaces,
the Company must effectively maintain and promote the unique brand image of
its services and its licensed products among consumers and establish strong
marketing relationships with manufacturers and distributors of products
which enhance that brand image. While the Company believes that it will compete
effectively, the Company competes with a number of manufacturers and
marketers of sporting goods, recreational products, apparel and other
consumer products and services, many of which have substantially greater
resources than the Company and many of which have well recognized brand
names and broader and more established distribution networks.
The Company also faces competition from other leisure and recreational
activities, and sales of leisure and recreational products and services
are affected by changes in consumer preferences, which are difficult to
predict.
The "National Senior Tour" allows a player to participate in events
that are similar to the PGA Senior Tour. The Company believes that the
"National Senior Tour" is the only tour of its kind in the United States
other than the Senior PGA Tour, because, among other things, of the age
restrictions common to each tournament. The "National Senior Tour" acts
as a feeder tour by providing a venue for senior professionals to sharpen
their skills and further develop their competitive position relative to other
senior golfing professionals, allowing such golfing professionals to
consistently finish among the top eight finalist in Senior PGA Tour Q-
school competitions. In fact, during the current year, the "National Senior
Tour", and in prior years, the Senior Series Tour, supplied the Senior PGA Tour
with over 50% of the Senior PGA Tour's top eight finishers in Q-school
competitions. Golfing professionals who have played in the "National
Senior Tour", or Senior Series Tours, and later played to the Senior PGA Tour
include, among others, Bob Duval, John Jacobs, Walter Hall, Jim Dent,
Bruce Summerhays, Allen Doyle, Bobby Stobble, Dana Quigley and David Lunsten.
Most "National Senior Tour" tournaments are held in cities that do not have
golf tournaments or for that matter any major sporting events. Since the
eligibility rules of the Senior PGA Tour are much more restrictive than
those of the "National Senior Tour", the "National Senior Tour" does not
compete directly against the Senior PGA Tour.
There are several mini-tours around the country with which the
Company does compete. Most of the tournaments are for open fields, which
consist of players of all ages. Only a few of these tours offer competition
for senior professionals like the "National Senior Tour". The golf courses
where these tournaments are held are mostly below average and the
administration of the events is less comprehensive than the "National Senior
Tour". These mini-tours are the Company's primary competitors.
The Company believes that the golf courses where the "National
Senior Tour" has sponsored events are generally considered above average or
excellent from a professional golfing standpoint. All courses where
"National Senior Tour" events were hosted are private or semi-private
courses that would qualify to hold a PGA event. In particular, Idlywild Golf
and Country Club in Boumount, Texas is an exclusive, well-respected course
located in an affluent subdivision of Boumount. Another "National Senior
Tour" tournament was held at Bandit Golf Club in New Braunfels, Texas, a
relatively new golf course built on the outskirts of San Antonio that is
professionally demanding and was in perfect shape when the tournament was
played. Another of the "National Senior Tour" tournaments was hosted at
Royal Oaks Golf and Country, a very-hilly, prestigious club in the
Knoxville area, owned by Jay Hillgenberg, Reggie White and certain other
professional football players, generally considered an excellent course.
Another of the "National Senior Tour" events was held at the Woodland Golf
Course in Columbia, South Carolina, which course is immaculately groomed and
considered professionally challenging. The Company's "National Senior Tour"
tournament held in Albany, Georgia was conducted at the Stonebridge Golf and
Country Club, a course ranked by Golf Digest among the top ten new private
country clubs in the U.S. Another "National Senior Tour" tournament held in
McDonough, Georgia was conducted at the Georgia National, a course reputed to
be a favorite of golfing professionals and always in excellent condition.
The Company intends to continue pursuing plans to develop golf
courses in order to develop its operations and establish its portfolio. There
can be no assurance that suitable golf course development opportunities will be
available or that, because of competition from other purchasers or other
reasons, the Company will be able to consummate developments on
satisfactory terms or to obtain necessary financing. In addition, the
acquisition of golf courses may become more expensive in the future if demand
for golf courses increases.
The Company will compete for the purchase, lease and management of
golf courses with several national and regional golf course companies.
Several of the Company's national competitors have larger staffs and
currently have golf courses owned, leased or under management. In addition,
several of the national competitors and certain of the smaller, regional
companies have significantly greater capital resources than the Company.
Golf courses are also subject to competition for players and members
from other golf courses located in the same geographic areas. The
availability of sufficient acreage often limits the number of competing
courses, particularly in metropolitan areas, and limits the Company's
ability to acquire, develop or construct golf courses in those areas.
SIGNIFICANT CUSTOMERS
During the years ended December 31, 1998 and 1997, no one customer
accounted for a significant portion (10% or more) of the Company's
revenues.
EMPLOYEES
As of the date of this Registration Statement, the Company has four
employees, none of whom have entered into an employment agreement with
the Company. There are no officers of the Company who work less than full-
time for the Company. The Company has no collective bargaining agreements
covering any of its employees, has not experienced any material labor
disruption and is unaware of any efforts or plans to organize its employees.
The Company considers relations with its employees to be good.
INTELLECTUAL PROPERTY RIGHTS
The Company's ""National Senior Tour"," "Biggolfstore" and "NST
Instructional School" brand names are believed by the Company to be
important in the promotion of its business and products. The Company
expects to file trademark registrations to reserve its right to use these
names.
YEAR 2000 COMPLIANCE
BACKGROUND. Some computers, software and other equipment include
programming code in which calendar year data is abbreviated to only two
digits. As a result of this design decision, some of these systems could
fail to operate or fail to produce correct results if A00 is interpreted
to mean 1900, rather then 2000. These problems are widely expected to
increase in frequency and severity as the year 2000 approaches and are
commonly referred to as the "Millennium Bug" or "Year 2000 Problem."
ASSESSMENT. The Year 2000 Problem could affect computers, software
and other equipment used, operated or maintained by the Company.
Accordingly, the Company is reviewing its internal computer programs and
systems to ensure that the programs and systems will be Year 2000 compliant.
The Company presently believes that its computer systems will be Year 2000 in a
timely manner. However, while the estimated cost of these efforts is not
expected to be material to the Company's financial position or any year's
results of operations, there can be assurance to this effect.
INTERNAL INFRASTRUCTURE. The Company believes that it has reviewed
and assessed all of the major computers, software applications, and related
equipment used in connection with its internal operations that would
potentially require modification, upgrade, or replacement to minimize the
possibility of a material disruption to its business. The Company's
internal review of such systems did not identify any material Year 2000
Problem. If the Company had identified an exposure to the Year 2000 Problem,
Management currently estimates the total cost of internal reprogramming of its
software products and the upgrading of purchased hardware and software would
not be material. While this is management's best current estimate, items
outside management's control relating to the Year 2000 Problem may impact the
Company. The Company's website provider has advised the Company that its
internet service hardware and software facilities are all Year 2000
compliant.
The Company has inquired of its lessor and vendors, as the case may
be, concerning the Year 2000 compliance of its non-information technology
systems and has been advised by those individuals or entities that the
Company's fax machine, photocopier, telephone system and similar such important
operating devices are Year 2000 compliant.
The Company estimates the total cost to the Company of completing
any required modifications, upgrades, or replacements of these internal
systems would not have a material adverse effect on the Company's business or
results of operations. The most reasonably likely worst-case Year 2000 scenario
for the Company would be the disablement of the Company's personal
computer/server and all software applications such as Windowsr, Wordr and
Excelr. The Company estimates that the costs of replacing all these
items would not exceed $1,500 in an aggregate.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS. In addition to
computers and related systems, the operations of office and facilities
equipment such as fax machines, photocopiers, telephone switches,
security systems, and other common devices may be affected by the Year 2000
Problem.
CONTINGENCY PLAN. If the Company, notwithstanding its Year 2000
compliance review results, experiences any material Year 2000 issue, the
Company's contingency plan is to replace any Year 2000 sensitive,
disabled computer with a newer computer with Year 2000 compliant ROMs.
Similarly, although the Company uses few software applications, and has been
advised by the vendors of those software applications that the applications
are Year 2000 compliant, in the event a Year 2000 problem arises regarding any
software application, the Company will replace such application with a
newer, Year 2000 compliant version of the software application.
DISCLAIMER. The discussion of the Company's efforts, and
management's expectations, relating to Year 2000 compliance are forward-looking
statements. The Company's Year 2000 compliance status and the level of
incremental costs associated therewith, if any, could be adversely
impacted by, among other things, the availability and cost of programming and
testing resources, vendors' ability to modify proprietary software, and
unanticipated problems identified in ongoing internal compliance reviews.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following is a discussion of the financial condition and results
of operations of the Company as of the date of this Registration Statement.
This discussion and analysis should be read in conjunction with the
accompanying audited Consolidated Financial Statements of the Company
including the Notes thereto which are included elsewhere in this Form 10-
SB.
GENERAL
Associated Golf Management develops, markets and operates golfing
events and tournaments and a qualifying school. The Company from its
inception has not operated profitably. The Company's new management has
determined in order to achieve profitability, the Company must develop a
strong regional and national corporate sponsor base, similar to other
sporting events, such as NASCAR, Senior PGA , NIKE Golf Tour, etc. While
the Company attempts to implement its plan to attract recognized sponsors,
management has put in place controls over expenditures in order to reduce
its current operating losses. These steps include: relocating the Company's
corporate offices to smaller, less expensive quarters, reducing corporate
staff, and limiting travel and marketing costs.
1998 v. 1997
REVENUE
For the year ended December 31, 1998, revenue from continuing
operations was $698,672. Total revenue from continuing operations
decreased by $805,974, or 53%, from $1,540,646 for the year ended December 31,
1997. The Company recorded a net loss from continuing operations in 1988 of
$2,213,876 compared to a net loss of $3,136,247 in 1997. The revenues
received from "National Senior Tour" membership dues increased $88,716 or
233% from $37,937 in 1997 to $126,653 in 1998, respectively. The
increase was due primarily to the implementation of a structured dues
schedule for tournament participation in late 1997 and an increase in
individual dues charged to tournament participants in 1998.
The revenues received from tournament fees decreased by $287,675 or
48%, from $601,825 in 1997 to $314,150 in 1998, respectively. In 1998
the Company held 8 tournaments as compared to 16 held in 1997. Dues in 1998
and 1997 were $300. Beginning in the third quarter of 1998, the Company's
prior management was forced to curtail the number of tournaments due to
continuing operating losses and resulting constraints in liquidity.
The revenues received from sponsor fees and other tournament
revenues decreased by $607,015 or 70%, from $864,884 in 1997 to $257,869 in
1998. The decrease was due to a reduction in the number of golfing
tournaments and events held in 1998 as compared to 1997. While the Company's
golf tournaments are held during the March through November periods, rain may
delay or postpone a tournament. However tournaments are never cancelled due to
weather, just postponed.
The effect of inflation on the Company's revenue and operating
results was not significant.
COSTS AND EXPENSES
Total expenses from operations in 1998 decreased 37% to $2,912,548
from $4,640,893 in 1997. Total tournament and events expenses decreased 51%
to $2,021,009 in 1998 from $4,155,759 in 1997. Tournament and event
expenses decreased significantly as the Company held fewer tournaments and
events in 1998 as compared to 1997. Selling general and administrative
expenses increased 83% to $872,216 in 1998 from $476,820. Selling general and
administrative expenses increased as a result of the Company's efforts to
redirect the Company's operations in light of the decrease in golfing
tournaments and events in 1998 as compared to 1997. The primary costs
incurred by prior management in redirecting the Company's operations were
increased marketing expenses to attract new corporate sponsors, along
with the associated travel and entertainment, and promotional costs incurred
in this unsuccessful effort. Net interest expenses increased to $11,000 in
1998 from $0 in 1997. During 1998, the Company's interest costs related
primarily to a note payable to a Company Officer and Director.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
REVENUE
The Company's revenues decreased by $141,904 to $124,112 for the
second quarter of 1999, from $266,016 during the same period in 1998. Revenues
received from "National Senior Tour" membership dues increased $32,963 or
36% from $91,063 in 1998 to $58,100 in 1999, respectively. The decrease was
due to the Company holding 3 fewer golfing events in the first three months
of 1999 as compared to 1998. Revenues received from tournament fees
decreased by $85,620, or 89.8%, from $95,280 in 1998 to $9,660 in 1999,
respectively. The decrease was due to a reduction in the number of golf
tournaments held in the quarter ended June 30, 1999 as compared to 1998. The
revenues received from sponsor fees and other revenues decreased by $67,691,
or 54.5%, from $124,043 in 1998 to $56,352 in 1999. The decrease was due to a
reduction in the number of golf tournaments and events held during the
quarter ended June 30, 1999 as compared to 1998.
The Company's revenues decreased by $25,434 to $370,695 for the six
months ended 1999, from $396,129 during the same period in 1998. Revenues
received from the "National Senior Tour" membership dues decreased
$32,963, or 36.0% from $91,063 in 1998 to $58,100 in 1999, respectively. The
decrease was due to the reduction in the number of golf tournaments held during
the six month period ended June 30, 1999 as compared to the six months ended
June 30, 1998. Revenues received from tournament fees decreased by $68,300, or
45.9%, from $148,500 in 1998 to $80,200 in 1999, respectively. The decrease
was due to the reduction in the number of tournaments held during the six
months ended June 30, 1999 as compared to 1998. Revenues from sponsorship
and tournament revenues increased by $75,829 to $232,395 for the six months
ended June 30, 1999, from $156,566 during he same period in 1998. While the
Company held fewer tournaments in 1999 as compared to the six months ended June
30, 1998, the increase in revenues was due to the Company's new management
implementing increased controls over the marketing of the events and
ensuring all sponsors met their financial obligations in a timely manner.
The effect of inflation on the Company's revenue and operating
results was not significant.
COSTS AND EXPENSES
The Company's expenses from operations for the second quarter of
1999 decreased $293,446, or 58.2% to $210,318 from $503,764 during the same
period in 1998. Expenses associated with tournaments decreased 93.7% to $11,921
in 1999 from $188,460 in 1998. The decrease was due to the Company holding
fewer golf tournaments and related events during the three months ended
June 30, 1999 as compared to 1998. Selling, general and administrative
expenses decreased $118,428, or 37.8% to $194,795 in 1999 from $313,223 in
1998. The decrease was due to the reduction in the Company's operating staff,
relocating to less expensive office facilities and management's
implementation of cost cutting policies and procedures in 1999.
Depreciation and amortization expense in 1999 was relatively unchanged as
compared to 1998.
The Company's expenses from operations for the six months ended
June, 30, 1999 decreased $206,199, or 24.8% to $624,371 from $830,570 during
the same period in 1998. Expenses associated with tournaments decreased 58.9%
to $77,406 in 1999 from $188,460 in 1998. The decrease was due to the
Company holding fewer golf tournaments and related events during the six months
ended June 30, 1999 as compared to 1998. Selling, general and administrative
expenses decreased $98,188, or 15.4% to $539,761 in 1999 from $637,949
in 1998. The decrease was due to the reduction in the Company's operating
staff, relocating to less expensive office facilities and management's
implementation of cost cutting policies and procedures in 1999.
Depreciation and amortization expense in 1999 was relatively unchanged as
compared to 1998.
ACQUISITIONS
In May 1997, the Company acquired Fairway Sports, Incorporated. The
acquisition was completed primarily in exchange for restricted Common
Stock of the Company. [See NOTE B IN THE CONSOLIDATED FINANCIAL STATEMENTS.]
In May, 1997, the Company completed the acquisition of Fairway
Sports, Incorporated, an inactive corporation with no significant assets or
operations. Effective with the acquisition, all previously outstanding
common and preferred stock of Fairway Sports was exchanged for common
stock of the Company.
LIQUIDITY AND CAPITAL RESOURCES
1998 v. 1997
As of December 31, 1998, the Company had a working capital deficit
of $1,432,912 compared to a deficit of $298,130 at December 31, 1997, an
increase in the deficit of $1,134,782. The decrease in working capital
was substantially due to the decrease in golfing tournaments and related
events in 1998 as compared to 1997 and the significant increase in selling,
general and administrative expenses in 1998 as compared to 1997. As a
result of the Company's operating losses in 1997 and 1998, the Company
generated cash flow deficits of $913,581 in 1998 as compared to $2,784,984
in 1997 from operating activities. While the Company did not make any
investments in 1998, the Company invested $41,120 in equipment and other
assets in 1997. The Company met its cash requirements in 1997 and 1998
through the private placement of the Company's common stock in the amount of
$2,838,422 and $2,070,546 in 1998, respectively. In addition, the Company
borrowed $200,000 in June, 1998 from an officer of the Company. In order to
satisfy the liquidity needs of the Company for the following twelve months, the
Company will be primarily dependent upon proceeds from the sale of the
Company's common and preferred stock. Historically, revenues from existing
operations have not been adequate to fund the operations of the Company. If
the Company is unable to obtain adequate funds from the sale of its stock in
public offerings, private placements, or alternative financing arrangements, it
may be necessary to postpone any additional acquisitions and use cash flow
for internal growth.
The Company has incurred significant amounts of trade debt,
including commitments to structured monthly payments to the Internal Revenue
Service for unpaid past due employee payroll taxes in the amount of $77,500.
The Company plans to meet the monthly payments to the Internal Revenue
Service of $5,000 through cash flow from operations.
While the Company has raised capital to meet its working capital and
financing needs in the past, additional financing is required in order to
meet the Company's current and projected cash flow deficits from operations.
The Company is seeking financing in the form of equity in order to provide
the necessary working capital. The Company currently has no commitments
for financing. If the Company is unable to obtain adequate funds from the
sale of its common stock in public offerings, private placements, or
alternative financing arrangements, it may be necessary to curtail its
operations.
The Company has issued shares of its Common Stock from time to time
in the past to satisfy certain obligations, and expects in the future to
also acquire certain services, satisfy indebtedness and/or make acquisitions
utilizing authorized shares of the capital stock of the Company.
The independent auditors report included in this Registration
Statement on Form 10-SB states that the Company's working capital deficiency
and stockholder's deficit raise substantial doubts about the Company's
ability to continue as a going concern.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
The Company's balance sheet at June 30, 1999 reflects a working
capital deficit of $1,075,218 as compared to a deficit of $1,432,912 at
December 31, 1998. During the six months ended June 30, 1999, the Company's
working capital deficiency decreased $357,694. This was a result of the Company
exchanging common stock in satisfaction of indebtedness and a scale down
of operations during the first six months of 1999.
The Company generated a negative cash flow from operations of
$277,304 for the six months ended June 30, 1999 and $114,546 for the six
months ended June 30, 1998. Negative cash flow from operating activities was
primarily attributable to the Company's loss from operations of $253,676 for
the six months ended June 30, 1999 and $434,441 for the same period in 1998.
Cash flow generated from financing activities was $0 during the six
months ended June 30, 1999 and $70,546 for the six months ended June 30,
1998. Net cash from financing activities decreased due to the Company
not selling any securities during the six months ended June 30, 1999 as
compared to 1998.
RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Company adopted the disclosure requirements under
Statement of Financial Accounting Standards No. 123 (SFAS No. 123)
Accounting for Stock-Based Compensation. See Note 1 in the Consolidated
Financial Statements of the Company, included in this Report on Form 10-SB,
for the full disclosure. In 1997, the Company was required to adopt
Statement of Financial Accounting Standards No. 121 (SFAS No. 121)
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed, which prescribes accounting and reporting standards when
circumstances indicate that the carrying amount of a long-lived asset may be
not recoverable. SFAS No. 121 had no impact on the Company's financial
statements.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Registration Statement on Form 10-SB contains forward-looking
statements, consisting of any statement other than a recitation of
historical facts, that can be identified by words such as "may," "expect,"
"anticipate," "estimate," "hopes," "believes," "continue,"
"intends," "seeks," "contemplates," "suggests," "envisions" or the
negative thereof or other variations thereon or comparable terminology.
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, those risks associated with economic conditions
generally and the economy in those areas where the Company has or expects to
have assets and operations, including Europe, Asia, Africa, North America,
South America or Australia; competitive and other factors affecting the
Company's operations, markets, products and services; those risks associated
with the design, management and operation of golf courses; those risks
associated with the ability to obtain sponsorships and guarantees for
funding of the prize money and other costs associated with the Company's
"National Senior Tour" golf tournaments, those risks associated with the
Company's ability to successfully negotiate with certain project owners, as
well as construction vendors and subcontractors, regarding the completion of
existing golf construction 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, risks relating to the ability of Company to raise
the funds necessary to operate, design, develop, construct, and manage golf
courses, and risks relating to existing litigation, attorney general
investigations, taxes owed, and associated costs arising out of Company'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 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 report 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 registration on Form 10-SB 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.
RISK FACTORS
CURRENCY FLUCTUATIONS
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. As the Company expects to obtain significant revenues
from its overseas licensees to be obtained and such revenues are generated in
foreign currencies, 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 relating to foreign licensing
arrangements will be converted to U.S. dollars based on the exchange rate
at the time of payment.
INFLATION
The Company does not believe that the relatively moderate rates of
inflation experienced in the United States in recent years have had a
significant effect on its revenues or profitability. Although higher
rates of inflation have been experienced in a number of foreign countries in
which the Company plans to do business, the Company does not believe that such
rates have had a material effect on the Company's revenues or profitability.
High inflation in foreign countries where the Company plans to do business,
however, could have a material effect on the Company's revenues or
profitability. There is also no guarantee that moderate rates of
inflation in the United States will continue.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS AND THIRD PARTIES FOR PRODUCT
DEVELOPMENT AND COMMERCIALIZATION
The Company has established relationships with collaborative
companies. See BUSINESS-WEBSITES/E-COMMERCE. Pursuant to these
relationships, the Company's collaborative companies have specific
responsibilities for the costs of development, promotion, regulatory
approval and/or sale of golf courses and golf related products. The Company
will continue to rely on present and future collaborative companies for the
development of golf courses or golf related products and technologies. There
can be no assurance that the Company will be able to negotiate future such
collaborative arrangements on acceptable terms, if at all, or that current or
future collaborative arrangements will be successful. To the extent that the
Company is not able to establish such arrangements, it could experience
increased capital requirements or be forced to undertake such activities
at its own expense. The amount and timing of resources that any of these
collaborative companies devotes to these activities will generally be
based on progress by the Company in its golf course and golf related product
development efforts. Usually, collaborative arrangements may be terminated
by the collaborative company upon prior notice without cause and there
can be no assurance that any of these collaborative companies will perform its
contractual obligations or that they will not terminate these relationships.
With respect to any products manufactured by third parties, there can be
no assurance that any third-party manufacturer will perform acceptably or
that failures by third parties will not impair the Company's ability to
develop golf courses and deliver products on a timely basis.
UNCERTAINTY OF PROTECTION OF PATENTS, LICENSES, TRADE SECRETS AND
TRADEMARKS
The Company's success depends, in part, on its ability to obtain
rights to use the names "National Senior Tour," "BigGolfStore.com," and "NST
Instructional School" to operate without infringing on the proprietary
rights of others. There can be no assurance that the Company can obtain
registration of these trademarks, or that registrations issued to the
Company will not be infringed upon or designed around by others. The Company
could incur substantial costs in defending itself in litigation brought by
others or prosecuting infringement claims against third parties.
If the outcome of any such litigation is unfavorable to the Company, the
Company's business could be adversely affected.
RISKS REGARDING POTENTIAL FUTURE ACQUISITIONS
The Company's growth strategy includes as a material element the
desire to acquire complementary companies, products or technologies. There is
no assurance that the Company will be able to identify appropriate companies
or technologies to be acquired, or to negotiate satisfactory terms for such
an acquisition. Moreover, because of limited cash resources, the Company
will be unable to acquire any significant companies or products for cash and
the Company's ability to effect acquisitions in exchange for the Company's
capital stock may depend upon the market prices for the Company's Common
Stock. If the Company does complete one or more acquisitions, a number
of risks arise, such as short-term negative effects on the Company's
reported operating results, diversion of management's attention, unanticipated
problems or legal liabilities, and difficulties in the integration of
potentially dissimilar operations. The occurrence of some or all of
these risks could have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED PUBLIC MARKET; POSSIBLE VOLATILITY IN STOCK PRICES; PENNY STOCK
RULES
There has, to date, been no active public market for the Company's
Common Stock, and there can be no assurance that an active public market
will develop or be sustained. Although the Company's Common Stock has been
traded on the OTC Bulletin Board, the trading has been sporadic without
significant volume.
Moreover, the over-the-counter markets for securities of very small
companies such as the Company historically have experienced extreme price
and volume fluctuations during certain periods. These broad market
fluctuations and other factors, such as new product developments and trends
in the Company's industry and the investment markets and economic conditions
generally, as well as quarterly variation in the Company's results of
operations, may adversely affect the market price of the Company's Common
Stock. In addition, the Company's Common Stock is subject to rules
adopted by the Securities and Exchange Commission regulating broker-dealer
practices in connection with transactions in "penny stocks." As a result,
many brokers are unwilling to engage in transactions in the Company's Common
Stock because of the added disclosure requirements.
COURSE CONDITIONS
General turf grass conditions must be satisfactory to attract play
on the Company's golf courses to be acquired. Severe weather or other
factors, including disease, could cause unexpected problems with turf grass
conditions at any golf course or at courses located in the same geographic
region. Turf grass conditions at each of the Company's golf courses to be
acquired also depend to a large extent on the quality and quantity of
available water. The availability of sufficient water is affected by
various factors, many of which are not under the Company's control. There
can be no assurance that certain conditions, including weather, government
regulation or environmental concerns, which would adversely affect the supply
of water to a particular golf course, may not arise in the future.
The Company plans to operate golf courses throughout the country and
could experience natural conditions which are beyond its control (such as
periods of extraordinarily dry, wet, hot or cold weather, or unforeseen
natural events such as storms, hurricanes, fires, floods or earthquakes).
These conditions may occur at any time and may have a significant impact
on the condition and availability of one or more golf courses for play and
on the number of customers a golf course can attract. Except for fire
insurance, the Company does not carry insurance against the effect of
such conditions, which the Company believes to be consistent with standard
practice in the industry. However, the occurrence or reoccurrence of any
such conditions may require increased capital expenditures by the Company
to the extent the Company is not insured and could have a material adverse
effect on the Company's financial condition and results of operations.
Any problems with the conditions of gold courses could materially affect the
Company's financial health as the existence of these conditions could
result in the delay, postponement, or cancellation of the Company's "National
Senior Tour" golf tournaments.
LIMITED OPERATING HISTORY; LACK OF PROFITABILITY
The Company commenced its current operations in 1996. Since that
date, the Company has generated minimal revenues and its operations have not
been profitable. There can be no assurances that the Company will be
successful in promoting its concept, in increasing its "National Senior Tour"
participation, or increasing its revenues. Further, there can be no
assurances that the Company will be able to develop profitable operations
in the future. Results of operations in the future will be influenced by
numerous factors including increases in expenses associated with growth,
market acceptance of the Company's concept, competition, the ability of
the Company to control costs and development of its plan of business. There
can be no assurance that revenue growth or profitability on a quarterly or
annual basis can ever be obtained. Additionally, the Company will be subject
to all the risks incident to a developing business with only a limited history
of operations. Prospective investors should consider the frequency with
which relatively newly developed and/or expanding businesses encounter
unforeseen expenses, difficulties, complications and delays, as well as such
other factors as the possibility of competition with larger companies.
EFFECT OF INTEREST RATE CHANGES
The Company is exposed to the impact of interest rate changes. Such
exposure to market risk is inherent in certain of the Company's financial
instruments which arise from transactions entered into in the normal
course of business.
RELIANCE ON KEY PERSONNEL
The success of the Company is dependent upon the experience and
abilities of its senior management as well as its ability to attract and
retain qualified golf course and golf-product knowledgeable general
managers and superintendents. Key senior management include: Eddie Pearce, Al
Richards, Ferd L. Harrison and Pat Patton. There is significant
competition in the golf course and golf-product management industry for
qualified personnel, and there can be no assurance that the Company will be
able to retain its existing personnel or recruit new personnel to support its
marketing objectives, goals and acquisition plans.
ENVIRONMENTAL REGULATION; LEASES WITH MUNICIPALITIES
Operations at the Company's golf courses to be acquired will involve
the use and storage of various hazardous materials such as herbicides,
pesticides, fertilizers, motor oil and gasoline. Under various federal,
state and local laws, ordinances and regulations, an owner or operator of
real property may become liable for the costs of removing such hazardous
substances that are released on or in its property and for remediation of
its property. Such laws often impose liability regardless of whether a
property owner or operator knew of, or was responsible for, the release of
hazardous materials. In addition, the presence of such hazardous substances,
or the failure to remediate the surrounding soil when such substances are
released, may adversely affect the ability of a property owner to sell such
real estate or to pledge such property as collateral for a loan.
GOLF PARTICIPATION
The success of efforts to attract and retain members at a private
country club and the number of rounds played at a public golf course have
historically been dependent upon discretionary spending by consumers,
which may be adversely affected by general and regional economic conditions.
Golf participation has increased significantly since 1970. Although the
Company believes that demographic trends indicate that it is well positioned to
grow its business and improve its financial performance, a decrease in the
number of golfers or their rates of participation or in consumer spending on
golf could have an adverse effect on the Company's financial condition and
results of operations.
GOVERNMENTAL REGULATION
The Company's golf course design, management, and construction
activities are subject to various federal, state, local and foreign laws
and regulations designed to protect the environment from waste emissions, the
handling, treatment and disposal of solid and hazardous wastes and the
remediation of contaminates associated with the use and disposal of
hazardous substances. Although the Company believes that it is and has been in
substantial compliance with all such laws, ordinances and regulations
applicable to these operations, there may be environmental liabilities or
conditions associated with such activities of which the Company is not
aware. Accordingly, there can be no assurance that future compliance with such
requirements will not have a material adverse effect on the Company's
financial condition.
The Company is also subject to the Federal Occupational Safety and
Health Act and other laws and regulations affecting the safety and health
of employees. Further, 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. The Company is also subject to foreign immigration, labor,
safety and environmental laws in those jurisdictions where it performs services.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's principal executive and administrative offices are
located in Florida, at 11007 North 56th Street, Suite 204, Temple
Terrace, Florida 33617 in leased premises under an agreement for a term
scheduled to expire June 1, 2000. The Company is obligated to pay $9,453.24
in rent per year and is responsible for all sales and use tax and certain
maintenance costs with respect to Company's use of the leased premises. The
Company considers its executive and administrative offices to be adequate and
suitable for its current needs. The Company does not own or lease any
other real estate. The Company does not own any golf courses as of the date of
this Registration Statement.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the
beneficial ownership of the Company's Common Stock as of June 9, 1999 by
(i) each person (or group of affiliated persons who to the knowledge of the
Company is the beneficial owner of five percent or more of the Company's
outstanding shares of Common Stock, (ii) each director and each Named
Executive Officer (as defined in Part I Item 6 of this Form 10-SB) of the
Company and (iii) all directors and executive officers of the Company as
a group. Except as otherwise noted, the Company believes that the persons
listed in this table have sole voting and investment power respecting all
shares of Common Stock owned by them. The business address of each
director and Named Executive Officer listed below is the Company's corporate
address, 11007 North 56th Street, Suite 204, Temple Terrace, Florida 33617.
Security Ownership of Certain Beneficial Owners
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Owner Class
Common None - -
Security Ownership of Management (1)
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Owner Class
Common Eddie Pearce(2) 33,334 Common Shares 0.47%
Common Pat Patton 25,000 Common Shares 0.35%
Common Al Richards 100,000 Common Shares 1.41%
Common Ferd L.Harrison 10,000 Common Shares 0.14%
(1) The total amount of securities held by management and directors of
the Company is 168,334.
(2) Does not include 150,000 shares which could be obtained upon
exercise of nonstatutory stock options. See EXECUTIVE COMPENSATION-STOCK
OPTION PLAN.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of the date of
this Registration Statement with respect to the directors and executive
officers of the Company. The Directors of the Company are elected for a
term of one year or until their successors shall have been duly elected and
qualified. The executive officers serve at the discretion of the
Company's Board of Directors. A summary of the background and experience of
each of these individuals is set forth after the table.
Name Age Position with the Company
Eddie Pearce 46 President, Chief Executive Officer, Director
Pat Patton 50 Vice-President of Marketing, Secretary,
Director
Al Richards 56 "National Senior Tour" Manager, Treasurer,
Director
Ferd L. Harrison 72 Mayoral Liason, Vice-President, Director
EDDIE PEARCE
Mr. Pearce has been the President, Chief Executive Officer, and a
Director of the Company'since January, 1999. Mr. Pearce received an
Arnold Palmer Golf Scholarship and attended Wake Forest University. He also
went to the Tournament Players Division Qualifying School, Myrtle Beach, South
Carolina, the PGA Qualifying School in Houston, Texas, the PGA Business
School in Houston, Texas and received PGA Class A Status. Mr. Pearce was
employed by Nike Tour (1994 to 1996), PGA Tour (1993-he regained
privileges after a ten-year absence), and Tommy Armour Tour and Nike Tour
(1992). Mr. Pearce was an Automotive Dealer Management Consultant and formed
his own company based in Tampa, Florida, from 1986 to 1998. From 1986 to 1998
this Company consulted with numerous automotive dealerships, including Grant
Ford of St. Petersburg, Jim Simmons Pontiac Buick of Concord, North Carolina,
Washington Motor Company of Abbington, VA, among others. Personnel were
reevaluated and retrained. New employees (the number of employees ranged
from 60 to 300) were hired for Sales and all other aspects of the dealership.
At the various dealerships inventory ranged from one million to twenty
million dollars; the Part's department revenues ranged from one hundred
thousand to five million dollars and the Body shop revenues from twenty-
five thousand per month to one hundred thousand dollars per month. In 1983, he
attended the Ford Motor Company Operation School to learn how to operate
Automobile Dealerships. Mr. Pearce also worked as a Golf Director at the
Orange Tree Golf and Country Club (Orange Tree ) in Orlando, Florida in
1981 and 1982. At Orange Tree he supervised the maintenance of the golf
course and golf equipment and increased membership from 140 members to 425
members. Thereafter, he spent two years in a project with Arvida Corporation,
which acquired Orange Tree, in which he was responsible for golf clubs and
property. Mr. Pearce was also a Touring Golf Professional from 1973 to
1981. Mr. Pearce's golfing achievements include:
- 1979 placed second, Texas Open
- 1975 placed second, Tallahassee Open
- 1975 placed second, Inverrary Classic, placed second,
Buick Open
- 1974 placed second, Hawaiian Open
- 1974 finished 9th in US Open
- 1972 named to Walker Cup Team
- 1972 Porter Cup Champion
- 1972 College All American
- 1971 College All American
- 1971 Runner-up in US Amateur
- 1971 Atlantic Coast Conference Champion
- 1971 North South Amateur Champion
- 1970 Florida Open Champion
- 1968 Qualified for US Open
- 1968 Qualified for US Amateur
- 1968 USGA Junior Champion
PAT PATTON
Mr. Patton has served as the Vice President of Marketing, Secretary
and a Director of the Company since January, 1999. Mr. Patton holds a
Bachelor's degree from the University of Texas in Business Administration-
Marketing and Management. His graduate school course of study was
International Marketing. Mr. Patton was a member of the part-time business
faculty at Austin Community College Teaching and at St. Edward's University
Teaching. In 1993 he was given an award as an outstanding faculty member at
Austin Community College and in 1998 he was chosen as a national finalist for
an Excellence in Teaching Award presented to Marketing and Advertising
faculty. Mr. Patton has held marketing management positions with Xerox,
Proctor & Gamble and the Upjohn Company. He has also served as a
Sponsorship Coordinator for Liberty Mutual Legends of Golf. At Evergreen
Alliance Golf Ltd. ("EAGL") he was employed as the Director of Marketing.
EAGL is the owner and operator of over 55 golf facilities in 18 states. At
EAGL he coordinated marketing, advertising, public and media relations for
all of EAGL s facilities and implemented marketing research nationally for
EAGL with a specific focus on golf and golf facilities.
AL RICHARDS
Mr. Richards has served as "National Senior Tour" golf tournament
Manager, Treasurer and a Director of the Company since January, 1999.
Mr.Richards attended Goshen College where he completed 2 years. He spent 32
yearsin the construction industry as well as in real estate development. Mr.
Richards was involved in five (5) Golf Course Developments in Florida as
a partner or consultant. While he was a consultant for Sand Kastle
Construction, Inc. (Sand Kastle), Sand Kastle's annual sales increased
from $300,000 to $20,000,000 in less than 5 years. When Sand Kastle was sold
in1989, Mr. Richards involvement with Sand Kastle ended. In 1992 he became
a Golf Pro and played in many Senior Series Tour golf tournaments from 1994 to
1996. Mr. Richards served as Senior Tour Rep for Dogleg Right & Echelon Golf in
1995 and 1996, then became Tour Director of the Senior Series in 1997, which
includedbeing in charge of all Tour Operations. In 1999, Mr. Richards became
Tour Director of the "National Senior Tour" and Secretary of the Company. As
Tour Director, Mr. Richards has been and will continue to be responsible for
management of operations of tour events including, but not limited to,
arranging sites, coordinating schedules, working with marketing associates,
coordinating media on site, MC Pairings, Party & Awards Banquet, player
relations, supervising tee times, scoring, press releases, operation set-up and
dismantling volunteers, as well as overall public relations for the "National
Senior Tour".
FERD L. HARRISON
Ferd L. Harrison has served as Mayoral Liason, Vice President and a
Director of the Company since 1999. Mr. Harrison worked for twelve years
in the field of public finance with the following Wall Street Firms: EF
Hutton (1983-1984) as a special consultant; Smith Barney (1984-1985) as a
special consultant, and (1985-1993) as Vice President; CS First Boston (1993-
1995) as a special consultant. He served as Mayor of Scotland Neck, North
Carolina for 38 years and is a past president of the National League of
Cities and served on its Board of Directors from 1975 through 1995.
Mr. Harrison was also president of the North Carolina League of
Municipalities, President of Electricities of North Carolina, and board
member of the North Carolina Eastern Municipal Power Agency. He is a
past president and a member of the North Carolina Community Development
Council.
President Reagan appointed Mr. Harrison to a seat on the Advisory
Commission of Federalism 1981-1982, and in 1983 to the Advisory Commission on
Intergovernmental Relations, where he served two terms. He also served
as a member of the Intergovernmental Policy Advisory commission in the Office
of the U.S. Trade Representative. He has served as chairman of the Region L.
Council of Governments in North Carolina and was driving force in forming
the Small Cities Council within the National League of Cities. He served as
national chairman of the Council.
Among his honors and achievements:
N.C. League of Municipalities - Lifetime Honorary Member- one of 23
honored in 75 years.
N.C. Distinguished Citizens Award - Awarded by Governor Jim Hunt 1982
Ferd L. Harrison Day - City of Los Angeles, 1982
Ferd L. Harrison Day - North Carolina 1982
Ferd L. Harrison Day - Scotland Neck 1998
City and State Magazine - All Pro 1987
Outstanding Civic Leaders of America
Presidential Award - National League of cities 1996
Mr. Harrison is a former employee of the Federal Bureau of
Investigation. After combat in World War II, he worked with a special
team assigned to conduct the War Crime Trials at Dachau. He was a businessman
who served as president of an appliance, electronics, and tire dealership in
Scotland Neck. Presently, he is Secretary/Treasurer of NSP Specialty
Products of Pinehurst, North Carolina, a manufacturer that produces a
non-toxic, epoxy based coating of 100% solids with no volatile organic
compounds.
Mr. Harrison is a graduate of Wake Forest University.
ITEM 6. EXECUTIVE COMPENSATION
The following table sets forth certain information relating to the
compensation paid by the Company during the last three (3) fiscal years
to the Company's former Chief Executive Officer (Named Executive Officer).
No other executive officer of the Company received total salary and bonus in
excess of $100,000 during the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securit
Other ies Unde-
Name and Annual Restrict rlying All other
Principal Salary Compens- ed Stock Options/ LTIP Compensa-
Position Year ($) Bonus ation Awards SARSs Payouts tion
$ $ ) ($) (#) ($) n ($)
Thomas, 1998 60,750 0 0 0 0 0 0
Taggert, 1997 201,22 0 0 2,750 0 0 0
CEO, 1996 5 0 0 0 0 0 0
President 0
STOCK OPTION PLAN
On January 4, 1999, the Company's Board of Directors approved a
Stock Option Plan for the Company called "1999 Stock Option and Incentive Plan"
("Plan"). The Plan is subject to approval by a majority of the shareholders
of Common Stock of the Company, which approval has not yet been obtained.
The stock subject to awards granted under the Plan shall be shares of the
Company's authorized but unissued Common Stock. The aggregate number of
shares which may be issued as awards or upon exercise of awards under the
Plan shall not exceed 1,500,000 shares. The exercise price in the case
of any incentive stock option shall not be less than the fair market value
on the date of grant and, in case of any option granted to an Optionee who
is a 10% or more shareholder of the total combined voting power of the
outstanding stock of the Company, shall not be less than 110% of the fair
market value on the date of grant. The exercise price in the case of any
nonstatutory stock option shall not be less than 85% of the fair market value
on the date of grant.
On January 4, 1999, the Company granted a nonstatutory stock option
for 150,000 to the Company's President and CEO, Eddie Pearce.
On January 4, 1999, the Company granted nonstatutory stock options
for an aggregate of 300,000 shares to certain consultants of the Company.
As of the date of this Registration Statement, no shares have been
purchased by the recipients of these nonstatutory stock options.
Management of the Company contemplates that incentive stock options
will be issued under the Plan during 1999.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PROMISSORY NOTE. In 1998, Al Richards, an Officer and Director of
the Company advanced $200,000 to the Company for working capital purposes.
The advance is represented by an unsecured promissory note. As of the date
of this Registration Statement, the note's principal, plus accrued interest
has not been paid, and as a result, the Company is in default under the terms
of the note.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company has 15,000,000 authorized shares of Common Stock, $.001
par value per share, of which 7,056,059 shares were issued and outstanding as
of June 9, 1999. All shares of Common Stock outstanding are, and the shares
offered hereby when paid for and issued will be, legally issued, fully
paid and non-assessable. Holders of the Common Stock are entitled to one vote
per share with respect to all matters that are required by law to be
submitted to vote of shareholders. Holders of the Common Stock are not
entitled to cumulative voting. The Common Stock has no redemption,
preemptive or sinking fund rights. Holders of the Common Stock are entitled
to dividends when, as and if declared by the Board of Directors form funds
legally available therefore. Future dividend policy will be determined by
the Board of Directors of the Company in light of financial needs and
earnings, if any, of the Company in light of financial need and earnings, if
any, of the Company and other relevant factors. In the event of liquidation,
dissolution or winding up the Company, holders of Common Stock are entitled
to share proportionately all the remaining assets of the Company, after
satisfaction of the liabilities of the Company.
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of preferred
stock, par value $.001 per share, issuable in such series and bearing
such voting, dividend, conversion, liquidation and other rights and
preferences as the Board of Directors may determine without further action by
the Company's shareholders. As of the date hereof, there are no shares of
Preferred Stock issued and outstanding.
TRANSFER AGENT
The transfer agent for the Company's Common Stock is Pacific Stock
Transfer Co., 3690 S. Eastern Avenue, Suite 218, Las Vegas, Nevada 89109.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
The Company's Common Stock is currently quoted on the OTC Bulletin
Board under the symbol AGMX. Currently there are 132 record holders of
common stock of the Company. The total number of shares of common stock of the
Company subject to Rule 144 restrictions is 4,634,652.
On December 11, 1997 the Board of Governors of the National
Association of Securities Dealers, Inc. ("NASD") approved a series of
changes for the OTC Bulletin Board which affect the Company. The principal
changes include: (i) a rule that only those companies that report their current
financial information to the Securities and Exchange Commission, banking
or insurance regulators will be included for quotation on the OTC Bulletin
Board, (ii) that brokers must review current financial statements on a
company they are recommending before they recommend a transaction in an
OTC security, and (iii) that prior to the initial purchase of an OTC
security, every investor must receive a standard disclosure statement
prepared by the NASD emphasizing the differences between the OTC securities
and other market-listed securities, such as those traded on the NASDAQ Stock
Market, Inc. This Registration Statement is being filed on Form 10-SB with the
Securities and Exchange Commission to register the Company's Common Stock under
Section 12(g) of the Securities Exchange Act of 1934, as amended, which, if
declared effective by the Securities and Exchange Commission, will require the
Company to make current financial filings with the Securities and Exchange
Commission, thus qualifying the Company under the proposed rule change.
In the event the Company's proposed Registration Statement is not declared
effective, the Company's securities would not remain eligible for
quotation on the OTC Bulletin Board, which would materially and adversely
affect the liquidity in the Company's Common Stock.
PRICE RANGE OF COMMON STOCK
On May 22, 1997 the Company's Common Stock began trading on the OTC
Bulletin Board under the symbol FWAE. It now trades on the OTC Bulletin
Board under the symbol AGMX. Prior to such date, there had been no
market for the Company's Common Stock; hereafter, there has been a limited
trading market. While a limited public market currently exists, there can
be no assurances that this market will be sustained or that if sustained, such
market will operate in a stable manner. The following table sets forth
for the periods indicated the high and low closing prices of the Company's
Common Stock as reported on the OTC Bulletin Board. The following quotations
are over-the-market quotations and, accordingly, reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent
actual transactions.
COMMON STOCK(1)
QUARTER 1999 1998 1997
TRADE TRADE TRADE
High Low High Low High Low
1st Quarter 3.25 1.50 12.00 5.0625 - -
2nd Quarter 1.875 1.125 13.50 3.00 9.00 9.00
3rd Quarter 18.00 4.50 15.75 8.375
4th Quarter 1.50 .375 13.125 6
(1) In November, 1998, the Company effected a reverse stock split of
one (1) share for every three (3) shares of Common Stock outstanding as
of November 18, 1998, and the closing prices in this table on and after such
date reflect such reverse split.
NO DIVIDENDS ANTICIPATED TO BE PAID
The Company has not paid any cash dividends on its Common Stock
since its inception and does not anticipate paying cash dividends in the
foreseeable future. The future payment of dividends is directly
dependent upon future earnings of the Company, its financial requirements and
other factors to be determined by the Company's Board of Directors, in its sole
discretion. For the foreseeable future, it is anticipated that any earnings
which may be generated from the Company's operations will be used to finance
the growth of the Company, and that cash dividends will not be paid to Common
Stockholders.
CONTROL OF THE COMPANY; POSSIBLE ISSUANCES OF PREFERRED STOCK
Due to the widely dispersed ownership of the issued and outstanding
shares of Common Stock of the Company, the Company's officers and
directors may be able to influence the election of all of the Company's
directors and thereby control the operations of the Company. In addition,
the Board of Directors has the authority to issue up to 10,000,000 shares of
preferred stock and to fix the dividend, liquidation, conversion, redemption
and other rights, preferences and limitation of such shares without any further
vote or action of the shareholders. Accordingly, the Board of Directors is
empowered, without shareholder approval, to issue preferred stock with
dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or the rights of the holders of the
Company's Common Stock. In the event of issuance, the preferred stock
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. Although the
Company has no present intention to issue any additional shares of its
preferred stock, there can be no assurance that the Company will do so in
the future. See Part 1, Item 8. ADESCRIPTION OF SECURITIES.
ITEM 2. LEGAL PROCEEDINGS
ALABAMA EASTER SEAL SOCIETY, INC. V. FAIRWAY SPORTS, INC. (Case No.
CV-98-3388 in the Fifteenth Judicial Circuit Court of Alabama). On March
24, 1999, Judge Tracy McCooey entered a default judgment in the amount of
$10,000.00 against Fairway Sports, Inc. in the action. A hearing to
determine damages was set for May 21, 1999.
IMPERIAL PALACE CASINO, INC. D/B/A IMPERIAL PALACE HOTEL & CASINO V.
FAIRWAY SPORTS, INC. AND TOM TAGGART (Case No. A398252 in the District
Court for Clark County, Nevada). The Company and the Plaintiff reached a
settlement whereby the Company would pay Plaintiff a total of $23,000.00.
The Company has already paid Plaintiff $10,000.00 and plans to pay
Plaintiff an additional $13,000.00 by September 25, 1999.
SALEM LEASING CORP. V. FAIRWAY SPORTS, INC. (Case No. 99 CVD 3258 in
the General Court of Justice District Court Division, Forsyth County,
North Carolina). Plaintiff alleges that on March 4, 1997, Plaintiff and
Defendant entered into a Vehicle Lease and Service Agreement("Vehicle Lease")
pursuant to which Defendant leased motor vehicles from Plaintiff. According to
Plaintiff, the Defendant is obligated under the Vehicle Lease to purchase
the vehicles in the event of a breach or default by Defendant under the
Vehicle Lease. Plaintiff alleges that, as of April 16, 1999, Defendant is in
arrears in the amount of $23,155.48. Plaintiff also claims that Defendant has
failed to honor its purchase obligation and that an additional $28,108.04 is
owed to Plaintiff. Plaintiff further seeks attorney's fees as it alleges that
the Vehicle Lease provides for the recovery of reasonable attorney's fees
incurred in enforcing Plaintiff's rights under the Vehicle Lease.
Plaintiff's total claim, therefore, amounts to $51,263.52 plus interest,
costs, and attorney's fees. The Company believes it has a valid defense
to this claim as the vehicle leased under the Vehicle Lease referenced in
the Plaintiff's Complaint has been returned to the Plaintiff.
PRINCE CONTRACTING CO., INC. V. FAIRWAY SPORTS, INC. (Case No. 99
01488 in the Thirteenth Judicial Circuit in and for Hillsborough County,
Florida). On March 17, 1999, Plaintiff served a complaint on Defendant
alleging that on or about August 18, 1998, Plaintiff and Defendant entered
into a construction contract and escrow agreement for site development of
Lexington Oaks Golf Course in Pasco County, Florida. Plaintiff claims that
Defendant breached the contract by failing to pay Plaintiff for the labor,
services, and material furnished under the construction contract and breached
the escrow agreement by failing to fund the escrow account. Plaintiff's
Complaint demands damages, costs, attorney's fees, and interest in general
terms as it does not demand a specific dollar figure. The Company believes
Plaintiff has been paid in full.
ATTORNEY GENERAL. The Attorney General of the State of Florida has
made inquiries of the Company concerning the operations of Fairway
Sports, Inc.. The Florida Attorney General has required that the Company
provide it with a variety of information related to the tournament operations
of Fairway Sports. The information requested by the Attorney General
pertained to receipts, sponsorships, expenses, number of players, and prize
monies awarded in connection with tournament operations. The Company has
cooperated with and believes it has fully responded to the Florida Attorney
General in this inquiry.
INTERNAL REVENUE SERVICE. Fairway Sports, Inc. owes approximately
$77,500.00 in unpaid taxes to the Internal Revenue Service. The Company
has proposed a payment plan whereby the Company would pay the full amount of
the taxes owed. The IRS has not yet entered in a settlement with the Company
respecting the proposed payment plan. Pending execution of a settlement
agreement with the Internal Revenue Service, the Company is making
payments under the proposed payment plan of $1,500.00 per month through
November 31, 1999 and is scheduled to make a final payment on December 31,
1999 of an additional $70,000.00.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In May 1997, the Company issued an aggregate of 416,502 shares of
Common Stock in connection with the acquisition of Fairway Sports, Inc.
in a private transaction exempt from registration under Section 4(2) of the
Act. The Company relied upon representations by Fairway Sports, Inc. to the
effect that it was able to evaluate the fairness of the transaction, had
adequate access to the requested information and was acquiring the shares for
investment without intention to distribute the shares of the Company. A
legend also was imposed on the shares delivered to Fairway Sports. The
transaction was accounted for using the purchase method of accounting.
The value received by the Company were assets having a historical and fair
value of $417.
During 1997, the Company issued an aggregate of 1,084,085 shares
of the Company's Common Stock for an aggregate of $2,838,422 in a private
offering exempt from registration under Section 4(2) of the Act. In
connection with the issuance, the Company relied upon representations
from the purchasers that the shares being purchased were for investment
without any intention to distribute the shares, that the purchasers had been
given access to all information requested and that the investors were familiar
with the golfing industry. Also, the shares issued in the offering contained
a restrictive legend to which the purchasers consented. Company did not
incur any underwriting discounts nor any offering costs, other than immaterial
expenses such as printing and mailing fees, in connection with this
offering.
During 1997, the Company issued an aggregate of 2,750,000 shares
of Common Stock to consultants and employees in exchange for $2,750 of
services in transactions exempt from registration pursuant to Rule 701 of
the Act. In connection with the issuances, the Company determined that shares
were issued either to employees or consultants of the Company rendering
bona fide services to the Company that were not in connection, directly or
indirectly, with the offer or sale of securities in a capital raising
transaction and that did not directly or indirectly promote or maintain a
market for the Company's securities. The services provided the Company
represented the agreed upon value of such services.
In May 1998, the Company issued a total of 1,823,055 shares of
Common Stock for an aggregate of $70,546.00 in a private offering exempt
from registration under Regulation D of the Act. The shares issued in this
offering were issued based upon representations from the purchasers that
they were acquiring the shares for investment without any present intention to
distribute the shares, that they had received all information requested
and had received answers to all questions asked of the Company. Further, the
purchasers consented to the imposition of a restrictive legend that was
placed on the shares issued in the transaction referencing Rule 144. The
Company did not incur any underwriting discounts nor any offering costs,
other than immaterial expenses such as printing and mailing fees, in
connection with this offering.
In December, 1998, the Company sold a total of 4,000,000 shares
of its Common Stock for an aggregate of $1,000,000 in a private offering
exempt from registration under Regulation D of the Act. The shares issued
in this offering were issued based upon representations from the purchasers
that they had received all information requested and had received answers to
all questions asked of the Company and consented to the imposition of a
restricted legend that was placed on the shares issued in the transaction
referencing Rule 144. The Company did not incur any underwriting
discounts nor any offering costs, other than immaterial expenses such as
printing and mailing fees, in connection with this offering.
In 1998, the Company issued an aggregate of 225,000 shares of
Common Stock to consultants and employees for services in exchange for
$225 of services in transactions exempt from registration pursuant to Rule
701 of the Act. In connection with the issuances, the Company determined that
shares were issued either to employees of the Company or consultants rendering
bona fide services to the Company that were not connection, directly or
indirectly with the offer or sale of securities in a capital raising
transaction and did not directly or indirectly promote or maintain a market
for the Company's securities. The services provided the Company represented
the agreed upon value between the Company and the consultants and employees
such services.
During the six month period ended June 30, 1999, the Company issued
an aggregate of 85,836 shares of Common Stock to consultants and employees
for services in an exempt transaction under Rule 701 in exchange for $134,166
of services. In connection with the issuances, the Company determined that
shares were issued either to employees of the Company or consultants
rendering bona fide services to the Company that were not in connection,
directly or indirectly with the offer or sale of securities in a capital
raising transaction and that did not directly or indirectly promote or
maintain a market for the Company's securities. The services provided the
Company represented the agreed upon value between the Company and the
consultants and employees such services. Also, during the six month
period ended June 30, 1999, the Company issued an aggregate of 143,333
shares of Common Stock in connection with conversions of debt exempt from
registration under Section 4(2) of the Act. The shares issued in this
offering were issued based upon representations from the purchasers that they
were acquiring the shares for investment without any present intention to
distribute the shares, that they had received all information requested and
had received answers to all questions asked of the Company. The purchasers
also consented to the imposition of a restrictive legend that was placed on
the shares issued in the transaction referencing Rule 144. The value of the
stock issued was based upon the recent price of the Common Stock of $3.48 per
share.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Bylaws provide that the Company will indemnify its
directors and executive officers and may indemnify its other officers,
employees and agents to the fullest extent not prohibited by Nevada law.
The Company is also empowered under its Bylaws to enter into indemnification
agreements with its directors and officers and to purchase insurance on
behalf of any person it is required or permitted to indemnify.
In addition, the Company's Articles provide that the Company's
directors will not be personally liable to the Company or any of its
stockholders for damages for breach of the director's fiduciary duty as a
director or officer involving any act or omission of any such director or
officer. Each director will continue to be subject to liability for
breach of the director's fiduciary duties to the Company for acts or omissions
that involve intentional misconduct, fraud or a knowing violation of law, or
the payment of dividends in violation of Nevada corporate law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor
is the Company aware of any pending or threatened litigation that may result
in claims for indemnification by any director or officer.
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1998 AND 1997
FORMING A PART OF ANNUAL REPORT
PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934
ASSOCIATED GOLF MANAGEMENT, INC.
ASSOCIATED GOLF MANAGEMENT, INC.
Index to Financial Statements
Page
Report of Independent Certified Public Accountants F-3
Consolidated Balance Sheet at December 31, 1998 F-4
and 1997
Consolidated Statements of Losses for the two years F-6
ended December 31, 1998 and 1997
Consolidated Statements of Deficiency in Stockholders' F-7
Equity for the two years ended December 31, 1998 and
1997
Consolidated Statements of Cash Flows for the two F-8
years ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements F-9
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
Consolidated Balance Sheet as of June 30, 1999 and F-17
December 31, 1998
Consolidated Statement of Losses for the six months F-17
ended June 30, 1999 and 1998
Consolidated Statement of Cash Flows for the six F-20
months ended June 30, 1999 and 1998
Notes to consolidated financial statements at F-21
June 30, 1999
STEFANOU & COMPANY, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1360 Beverly Road
Suite 305
McLean, VA 22101-3621
703-448-9200
703-448-3515 (fax)
Philadelphia, PA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Associated Golf Management, Inc.
Temple Terrace, Florida
We have audited the accompanying consolidated balance sheet of
Associated Golf Management, Inc. and subsidiaries as of December 31, 1998
and 1997 and the related consolidated statements of losses, deficiency in
stockholders' equity, and cash flows for the two years then ended. These
financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based upon our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 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 Associated
Golf Management, Inc. and subsidiaries as of December 31, 1998 and 1997,
and the results of its operations and its cash flows for the two years
ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note
J, the Company is experiencing difficulty in generating sufficient cash
flow to meet its obligations and sustain its operations, which raises
substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note
J. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
McLean, Virginia
May 22, 1999
F-3
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
_____ _____
CURRENT ASSETS:
Cash and equivalents $ 402,000 $ 44,810
__________ _________
Total current assets 402,000 44,810
PROPERTY AND EQUIPMENT-AT COST:
Furniture and equipment 41,120 41,120
__________ _________
41,120 41,120
Less accumulated depreciation 16,448 8,224
__________ _________
24,672 32,896
OTHER ASSETS:
Organization costs, less 272 371
accumulated amortization of $223 __________ _________
in 1998 and $124 in 1997
272 371
__________ _________
$ 426,944 $ 78,077
========== =========
See accompanying notes to consolidated financial statements
F-4
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 AND 1997
1998 1997
LIABILITIES ___________ __________
CURRENT LIABILITIES:
Current maturities of long-term $200,000 $ -
debt (NOTES C, G & H)
Accounts payable and accrued 1,634,912 342,940
expenses ____________ __________
Total current liabilities $1,834,912 342,940
COMMITMENTS AND CONTINGENCIES (NOTE F)
DEFICIENCY IN STOCKHOLDERS' EQUITY (NOTE E)
Preferred stock, par value, - -
$.001 per share; 10,000,000
shares authorized; none used at
December 31 1998 and 1997
Common stock, par value, $.001 6684 2001
per share; 15,000,000 shares
authorized; 6,683,557 issued at
December 31, 1998; 2,000,838
(restated) shares issued at
December 31, 1997
Additional paid-in-capital 3,937,368 2,871,280
Accumulated deficit (5,352,020) (3,138,144)
___________ ___________
(1,407,968) (264,863)
___________ ___________
$ 426,944 $ 78,077
=========== ===========
See accompanying notes to consolidated financial statements
F-5
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF LOSSES
YEARS ENDED DECEMBER 31, 1998 and 1997
1998 1997
__________ ___________
Revenues:
Dues $ 126,653 $ 37,937
Tournament fees 314,150 601,825
Sponsor fees and other
tournament revenue 257,869 864,884
___________ ___________
698,672 1,504,646
Cost and expenses:
Tournaments 2,021,009 4,155,750
Selling, general and
administrative 872,216 476,820
Depreciation and amortization 8,323 8,323
Interest 11,000 -
__________ __________
2,912,548 4,640,893
Operating loss (2,213,876) (3,136,247)
Income (taxes) benefit - -
__________ ___________
Net loss $ (2,213,876) $ (3,136,247)
=========== ============
Loss per common share
(basic and assuming dilution) $ (.34) $ (1.29)
=========== ============
Weighted average common shares
outstanding 6,532,084 2,438,842
=========== ============
See accompanying notes to consolidated financial statements
F-6
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF DEFICIENCY IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
Common Stock Additional Accumulated
Shares Amount Paid-in- Deficit
Capital
Total
___________
Balance at 1,751,928 $1,752 $29,940 $(1,897) $29,795
January 1,1997
Effect of reverse
Stock split
(Note E) (1,167,952) (1,168) 1,168 - -
___________ _______ _____ ________ _______
Balance at
January 1, 1997
as restated 583,976 584 31,108 (1,897) 29,795
Shares issued
in connection
with acquisition
of Fairway
Sports, Inc. 416,502 417 - - 417
Shares issued
in connection
with private
placement, net of
costs 1,084,085 1,084 2,837,338 - 2,838,422
Shares issued
to consultants
and employees
in exchange for
services 2,750,000 2,750 - - 2,750
Effect of reverse
Stock split
(Note E) (2,833,825) (2,834) 2,834 - -
Net loss - - - (3,136,247) (3,136,247)
___________ _______ _____ ___________ ___________
Balance at
December 31,
1997 as
restated 2,000,838 2,001 2,871,280 (3,138,144) (264,863)
Sale of stock
in connection
with private
placement,
net of costs 1,823,055 1,823 68,723 - 70,546
Shares issued
to consultants
and employees
in exchange for
services 225,100 225 - - 225
Effect of reverse
Stock split
(Note E) (1,365,436) (1,365) 1,365 - -
Sale of stock
in connection
with private
placement, net of
costs 4,000,000 4,000 996,000 - 1,000,000
Net loss - - - (2,213,876) (2,213,876)
_________ ______ _______ ___________ __________
Balance at
December 31,
1998 6,683,557 $ 6,684 $3,937,368 $(5,352,020) $(1,407,968)
========= ======== ========== ============ ===========
See accompanying notes to consolidated financial statements
F-7
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 and 1997
1998 1997
____ ____
Increase (decrease) in cash and equivalents
Cash flows from operating
activities $ (2,213,876) $(3,136,247)
Net loss for the year
Adjustments to reconcile
net earnings to net cash
provided by operating activities:
Depreciation 8,323 8,323
Increase (decrease) in:
Accounts payable and
accrued expenses 1,291,972 342,940
_________ _______
Net cash provided
by operating activities (913,581) (2,784,984)
Cash flows used in
investing activities
Capital expenditures,
net of disposals - (41,120)
_________ ________
Net cash used in
investing activities - (41,120)
========= =========
Cash flows provided (used)
in financing activities:
Proceeds from issuance
of notes payable
and other 200,855 -
Proceeds from issuance
of common stock,net 1,070,546 2,838,422
Net cash, provided
(used) in financing
activities 1,271,401 2,838,422
__________ _________
Net (decrease) increase in
cash and equivalents 357,820 12,318
Cash and equivalents at
beginning of year 44,180 32,492
__________ _________
Cash and equivalents
at end of year $ 402,000 $ 44,810
Supplemental Disclosures
of Cash Flow
Information
Cash paid during the year
for interest $-0- $-0-
========== ==========
Common stock issued
for services $ 225 $ 2,750
Acquisition:
Assets acquired $ - $ 417
Accumulated deficit - -
Liabilities assumed - -
Common stock issued - (417)
Net cash paid for acquisition $ - $ -
====== ========
See accompanying notes to consolidated financial statements
F-8
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 and 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the
preparation of the accompanying consolidated financial statements
follows.
Business and Basis of Presentation
The Company was incorporated under the laws of the State of Nevada under
the name Fairway Enterprises, Inc. (Company) in September, 1996. The
Company was a wholly-owned subsidiary of Hanovia Creative Capital Corp.,
a Company formed under the laws of British Columbia, Canada in 1984.
In October, 1996, the shareholders exchanged all of the outstanding shares
of common stock of Hanovia on a one for one basis for shares of common
stock in the Company.
In May, 1997 the Company completed an acquisition of Fairway Sports,
Incorporated (Fairway Sports), an inactive corporation with no
significant assets or operations. The Company was subsequently named
Associated Golf Management, Inc. Effective with the acquisition, all
previously outstanding common stock of Fairway Sports was exchanged for
common stock of the Company, resulting in the previous security holders
of Fairway Sports owning approximately 30% of the voting stock of the
Company. The exchange ratio was one (1) share of Fairway Sports common
stock in exchange for one (1) share of the Company's common stock, ten
(10) shares of Fairway Sports Series A preferred stock in exchange for
one (1) share of the Company's common stock and five (5) shares of
Fairway Sports Series B preferred stock in exchange for one (1) share of
the Company's common stock.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Significant intercompany transactions have been
eliminated.
The Company develops, markets and operates golfing events, tournaments
and a qualifying school. The activities are conducted primarily in the
southeast and Midwestern parts of the United States.
Revenue Recognition
The Company follows a policy of recognizing revenues from sales of
membership dues upon receipt of funds from members. Revenues from
tournament fees, including sponsorships and other tournament revenues are
recognized at the time the tournament is played.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
and amortization. For financial statement purposes, depreciation and
amortization are provided using the straight-line method over their
estimated useful. The straight line method of depreciation is also used
for tax purposes.
Advertising
The Company follows the policy of charging the costs of advertising to
expenses incurred.
F-9
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997 AND 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES (continued)
Income Taxes
Income taxes are provided based on the liability method for financial
reporting purposes in accordance with the provisions of Statements of
Financial Standards No. 109, "Accounting for Income Taxes".
Under this method deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
removed or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in the consolidated statements of
operations in the period that includes the enactment date.
Cash Equivalents
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid debt instruments purchased with a maturity date of three
months or less to be cash equivalents.
Impairment of Long-Lived Assets
The Company has adopted Statement of Financial Accounting Standards No.
121 (SFAS 121). The Statement requires that long-lived assets and
certain identifiable intangibles held and used by the Company be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. SFAS No. 121
also requires assets to be disposed of be reported at the lower of the
carrying amount or the fair value less costs to sell.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments and related items which potentially subject the
Company to concentrations of credit risk consist primarily of cash, cash
equivalents and trade receivables. The Company places its cash and
temporary cash investments with high credit quality institutions. At
times, such investments may be in excess of the FDIC insurance limit.
The Company's customers are not concentrated geographically and it
periodically reviews its trade receivables in determining its allowance
for doubtful accounts.
Stock Based Compensation
The Company accounts for stock transactions in accordance with APB
Opinion 25, "Accounting for Stock Issued to Employees." In accordance
with statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation," the Company has adopted the proforma
disclosure requirements.
F-10
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE A-SUMMARY OF ACCOUNTING POLICIES (continued)
Liquidity
As shown in the accompanying financial statements, the Company incurred a
net loss of $2,213,876 during the year ended December 31, 1998 and
$3,136,247 during the year ended December 31, 1997. The Company's current
liabilities exceeded its current assets by $1,432,912 as of December 31,
1998.
Comprehensive Income
The Company does not have any items of comprehensive income in any of the
periods presented.
New Accounting Pronouncements
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131") in the year ended December 31, 1998. SFAS establishes standards for
reporting information regarding operating segments in annual financial
statements and requires selected information for those segments to be
presented in interim financial reports issued to stockholders. SFAS 131
also establishes standards for related disclosures about products and
services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision
maker, or decision making group, in making decisions how to allocate
resources and assess performance. The information disclosed herein,
materially represents all of the financial information related to the
Company's principal operating segment.
Earnings Per Share
The Company has adopted Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," specifying the computation, presentation and
disclosure requirements of earnings per share information. Basic earnings
per share has been calculated based upon the weighted average number of
common shares outstanding. Stock options and warrant's have been excluded
as common stock equivalents in the diluted earnings per share because they
are either antidilutive, or their effect is not material. There is no
effect on earnings per share information for the year ended December 31,
1998 relating to the adoption of this standard.
NOTE B-BUSINESS COMBINATION
In May, 1997, the Company purchased, in an exchange for common stock,
Fairway Sports Incorporated (Fairway Sports) in a transaction accounted for
using the purchase method of accounting. The total purchase price and
carrying value of net assets acquired of Fairway Sports were as follows:
Net assets acquired $ 417
Net liabilities -
_____
$ 417
=====
As Fairway Sports was an inactive corporation with no significant
operations, the Company recorded the carryover historical basis of net
tangible assets acquired, which did not differ materially from their fair
values at the date of acquisition. The results of operations subsequent to
the date of acquisition are included in the Company's consolidated
statement of losses.
F-11
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE C-LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 consists of the following:
1998 1997
____ ____
Note payable to officer
with interest at 10.5%
per annum; unsecured $200,000 -
Less current portion 200,000 -
________ _____
$ - $ -
Aggregate maturities of long-term debt as of December 31, 1998 and 1997
are as follows:
Year Amount
____ ______
1999 $200,000
2000 -
2001 -
2002 -
2003 and
after -
______
$200,000
========
NOTE D-INCOME TAXES
Financial Accounting Standard No. 109 requires the recognition of deferred
tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statement or tax returns.
Under this method, deferred tax liabilities and assets are determined based
on the difference between financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Temporary differences between taxable
income reported for financial reporting purposes and income tax purposes
are insignificant.
At December 31, 1998, the Company has available for federal income tax
purposes a net operating loss carryforward of $5,300,000, expiring the year
2014, that may be used to offset future taxable income. The Company has
provided a valuation reserve against the full amount of the net operating
loss benefit, since in the opinion of management based upon the earnings
history of the Company, it is more likely than not that the benefits will
not be realized. Due to significant changes in the Company's ownership,
the Company's future use of its existing net operating losses may be
limited.
Components of deferred tax assets as of December 31, 1998 are as follows:
Non current:
Net operating loss carryforward $1,800,000
Valuation allowance 1,800,000
_________
Net deferred tax asset $ -
=========
NOTE E-CAPITAL STOCK
The Company was incorporated under the laws of the state of Nevada in
September, 1996 under the name Fairway Enterprises, Inc. (See Note A).
F-12
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE E-CAPITAL STOCK (continued)
On January 1, 1997 the Company's authorized stock was 15,000,000 shares
of common stock, par value $.001 per share and 10,000,000 shares of
preferred stock, par value $.001 per share. On that date, the Company
had outstanding 1,751,928 shares of common stock and no shares of
preferred stock.
In May, 1997, the Company issued 416,502 shares of common stock in
connection with the acquisition of Fairway Sports, Inc. (See Note B)
In 1997, the Company issued 1,084,085 shares of the Company's common
stock in exchange for $2,838,422, net of offering costs.
In May 1998, the Company issued a total of 1,823,055 shares of Common
Stock for an aggregate of $70,546.00 in a private offering, net of
offering costs.
In November, 1998 the Company adopted, by unanimous consent of its Board
of Directors, a resolution authorizing a reverse stock split of one (1)
share for every three (3) shares of common stock outstanding as of
November 18, 1998. All references in the financial statements to common
stock, per share amounts, number of shares outstanding and stockholders'
equity amounts have been restated as if the reverse split had occurred as
of the earliest period presented.
In November, 1998, the Company sold a total of 4,000,000 shares of its
Common Stock for an aggregate of $1,000,000 in a private offering, net of
offering costs..
In 1997 and 1998, the Company has also issued common stock in exchange
for services rendered by certain employees and consultants of the
Company.
NOTE F-COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office space on a year-to-year basis in Temple
Terrace, Florida.
Consulting Agreements
The Company has consulting agreements with outside contractors, certain
of whom are also Company stockholders. directors and officers. The
Agreements are generally for a term of 12 months from inception and
renewable automatically from year to year unless either the Company or
Consultant terminates such engagement by written notice.
Litigation
In 1998, the Alabama Easter Seal Society, Inc. filed a complaint against
Fairway Sports, Inc. in the 15th Judicial Court of Alabama. The
complaint seeks payment of services provided the Company in connection
with a golf outing held in Montgomery, Alabama. In March, 1999 the Court
entered a default judgement against the Company in the amount of $10,000
plus damages. The Company acknowledges that it is indebted to the
Plaintiff for services rendered, however disputes the amount owed.
Management believes the ultimate outcome of this matter will not have a
material adverse effect on the Company's consolidated financial position
or results of operations.
F-13
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE F-COMMITMENTS AND CONTINGENCIES (continued)
In December, 1998, the Imperial Palace Casino filed a complaint against
Fairway Sports, Inc. in the District Court for Clark County, Nevada. The
complaint seeks payment for services rendered in connection with a golf
outing. The obligation is included in accounts payable and accrued
expenses at December 31, 1998. In May, 1999 the Company and the Plaintiff
reached a settlement of the dispute. Under settlement, the Company
agreed to pay the Plaintiff $23,000.
In March, 1999, Prince Contracting Co., Inc. filed a complaint against
Fairway Sports, Inc., a wholly-owned subsidiary of the Company, in the
13th Judicial Circuit in and for Hillsborough County, Florida. The
complaint seeks payment for labor, services and materials furnished under
a construction contract and breach of an escrow agreement. The amount of
the claim has not been specified by the Plaintiff. Accordingly, an
estimate of the ultimate loss, or range of loss, cannot now be
determined. The Company believes it has meritorious defenses to the
Plaintiff's claims and intends to vigorously defend itself against its
claims.
In May, 1999, Salem Leasing Company filed a complaint against Fairway
Sports, Inc., a wholly-owned subsidiary of the Company, in the General
Court of Justice District Division for Forsyth County, North Carolina.
The complaint seeks payment under remaining term of an agreement to lease
certain personal property in the amount of $51,263, plus interests, costs
and attorney's fees. The Company acknowledges that it is indebted to the
Plaintiff, however disputes the amount owed. Management believes the
ultimate outcome of this matter will not have a material adverse effect
on the Company's consolidated financial position or results of
operations.
The Attorney General of the State of Florida has made inquiries with the
Company concerning the operations of Fairway Sports, Inc., in 1998 and
1999. The Florida Attorney General has required that the Company provide
it with a variety of information related to the tournament operations of
Fairway Sports. The Company has cooperated with and believes it has
fully responded to the Florida Attorney General in this inquiry.
The Company is involved in various claims arising in the ordinary course
of business. In the opinion of management, the outcome of such current
legal proceedings, claims and litigation could have a material effect on
annual operating results or cash flow when resolved in a future period.
However, the ultimate liability cannot now be determined because of
considerable uncertainties that exist. In the opinion of management there
matters will not materially affect the Company's consolidated financial
position or results of operations.
Joint Venture
Subsequent to the date of the accompanying financial statements, the
Company entered into a letter of intent to form a joint venture with a
developer of golf courses. Subject to certain conditions, the joint
venture would design, develop and manage five (5) new golf courses in the
southeastern United Sates. If consummated, the letter of intent requires
the Company to provide $2,500,000 to the joint venture.
The Company currently does not have the funds available to meet this
potential obligation.
F-14
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE G-RELATED PARTY TRANSACTIONS
In 1998, an Officer and Director of the Company advanced $200,000 to the
Company for working capital purposes. The advance is represented by an
unsecured note (see Note C). As of the date of these financial statements,
the note's principal, plus accrued interest has not been paid, and as a
result, the Company is in default under the terms of the note.
NOTE H-EARNINGS PER SHARE
The following table presents the computation of basis and diluted loss
per share:
1998 1997
Net (loss) available
for common
shareholders $(2,213,876) $(3,136,247)
Basic and fully
diluted loss per
share $ (.34) $ (1.29)
Weighted average
common shares
outstanding 6,532,084 2,428,842
========== =========
Net loss per share is based upon the weighted average of shares of common
stock outstanding. In November, 1998, a one (1) for three (3) reverse
stock split of the Company's common stock was effected (See Note E).
Accordingly, all historical weighted average share and per share amounts
have been restated to reflect the reverse stock split.
NOTE I-SUBSEQUENT EVENTS
Subsequent to the date of the accompanying financial statements, the
Company issued options to purchase Company common stock to certain
employees, directors and consultants as partial consideration for services
being rendered to the Company. The terms of the options are as follows:
Exercise Price Per Share Number Outstanding Date of Expiration
________________________ __________________ __________________
$1.25 450,000 January, 2002
Subsequent to the date of the accompanying financial statements, the
Company entered into an agreement with a Company Director to provide
consulting and marketing services to the Company. The Director shall be
compensated in the form of Company restricted common stock. In addition,
the Director was granted an option to purchase Company common stock at
$2.00 per share, which shall fully vest in July, 2000.
Subsequent to the date of the accompanying financial statements, the
Company entered into an agreement with the Golfers' Advantage ("TGA"),
under which both the Company and TGA agreed to engage in the promotion
of TGA membership and golf- related products through the Company's
internet web site to Company members. TGA shall be solely responsible
for the administration of the website, marketing of the products,
maintaining inventory, and fulfilling all sales. The Company shall
assist in the marketing of TGA products to its members and shall receive
50% of all TGA profits from sales to Company members.
Subsequent to the date of the accompanying financial statements, the
Company entered into an agreement with a Company Director to provide
consulting and marketing services to the Company. The Director shall be
compensated in the form of Company restricted common stock. In addition,
the Director was granted an option to purchase Company common stock at
$2.00 per share, which shall fully vest in July, 2000.
F-15
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE J-GOING CONCERN MATTERS
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements during the years ended December 31, 1998 and 1997, the Company
incurred losses of $2,213,876 and $3,136,247, respectively. These factors
among others may indicate that the Company will be unable to continue as a
going concern for a reasonable period of time.
The Company's existence is dependent upon management's ability to develop
profitable operations and resolve its liquidity problems. Management
anticipates the Company will attain profitable status and improve its
liquidity through the continued developing and marketing of its services
and additional equity investment in the Company. The financial statements
do not include any adjustments that might result should the Company be
unable to continue as a going concern.
In order to improve the Company's liquidity, subsequent to the date of
these financial statements the Company's management has undertaken the
following actions:
- Obtained a $75,000 loan from a Company shareholder. The loan is
unsecured, incurs interest at 10% per annum and is payable on
demand.
- Issued 143,333 shares of restricted common stock in exchange for
unpaid debts of $500,000.
- Implemented procedures to reduce Company overhead, general and
administrative costs.
- Initiated plans for 10 National Senior Tour Golf Tournaments in
1999.
- Implemented a marketing program to expand its tournament and
event corporate sponsorship.
In addition, the Company is actively pursuing additional equity financing
through discussions with investment bankers. There can be no assurance the
Company will be successful in its effort to secure additional equity
financing.
If operations and cash flows continue to improve through these efforts,
management believes that the Company can continue to operate. However,
no assurance can be given that Management's actions will result in
profitable operations and the resolution of its liquidity problems.
F-16
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS June 30, December 31,
1999 1998
Current assets
Cash and equivalents $ 124,694 $ 402,000
Inventory, at cost 85,000 -
_________ ____________
Total current assets 209,694 402,000
Property, machinery and
equipment, at cost 17,740 24,672
Other assets:
Note receivable and other 30,000 272
_________ ____________
$ 257,434 $ 426,944
The accompanying notes are an integral part of these statements.
F-17
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS - CONTINUED
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1999 1998
Current Liabilities:
Current maturities of
long term debt $ 200,000 $ 200,000
Accounts payable and
accrued liabilities 1,084,912 1,634,912
__________ __________
Total current liabilities 1,284,912 1,834,912
Deficiency in Stockholders' Equity
Preferred stock, par value,
$.001 per share; 10,000,000
shares authorized; none issued - -
Common stock, par value,
$.001 per share;
15,000,000 shares authorized;
6,683,557 issued at December 31,
1998; 7,056,059
issued at June 30, 1999 7,056 6,684
Additional paid in capital 4,571,163 3,937,368
Accumulated deficit (5,605,697) (5,352,020)
___________ ___________
(1,027,478) (1,407,968)
___________ ___________
$ 257,434 $ 426,944
=========== ===========
The accompanying notes are an integral part of these statements
F-18
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF LOSSES
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
____ ____ ____ ____
REVENUES:
Dues $ 58,100 $ 46,693 $ 58,100 $ 91,063
Tournament Fees 9,660 95,280 80,200 148,500
Sponsorship and
tournament revenue 56,352 124,043 232,395 156,566
______ _______ _______ ________
124,112 266,016 370,695 396,129
_______ _______ _______ _______
EXPENSES:
Tournaments 11,921 188,460 77,406 188,460
Selling, General and
Administrative 194,795 313,223 539,761 637,949
Depreciatio & Amortization 3,602 2,081 7,204 4,161
_______ _______ _______ _______
210,318 503,764 624,371 830,570
Operating Loss Before Income
Income Tax Expense (86,206) (237,748) (253,676) (434,441)
Income tax expense - - - -
________ _________ _________ _________
NET LOSS $ (86,206) $(237,748) $(253,676) $(434,441)
======== ========= ========= ==========
Loss per common share
(basic and assuming dilution) $ (.01) $ (.06) $ (.03) $ (.11)
Weighted average common
shares outstanding 7,058,788 4,137,885 7,410,753 4,025,335
The accompanying notes are an integral part of these statements.
F-19
ASSOCIATED GOLF MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1999 1998
____ ____
Increase (decrease) in cash
Cash flows from operating activities
Net loss $ (253,676) $(434,441)
Adjustments to reconcile net (loss)
earnings to net cash provided by
operating activities:
Depreciation and amortization 7,204 4,161
Common stock issued in connection
for services rendered 134,166
Changes in assets and liabilities
Inventory and prepaid expenses (85,000)
Other assets (30,000)
Accounts payable and accrued
liabilities (50,000) 315,734
________ _______
Net cash provided by (used in)
operating activities (277,306) (114,546)
Cash flows from financing activities
Proceeds from issuance of stock - 70,546
Net cash provided by (used in)
financing activities - 70,546
_________ ________
Net increase (decrease) in cash (277,306) (44,000)
Cash at beginning of period 402,000 44,810
_________ ________
Cash at end of period $ 124,694 $ 810
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ - $ -
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Common stock issued in exchange for
services $ 134,166 $ -
Common stock issued in exchange for debts 500,000 -
The accompanying notes are an integral part of these statements.
F-20
ASSOCIATED GOLF MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(Unaudited)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to SEC Form 10-QSB, and
therefore, do not include all the information necessary for a fair
presentation of financial position, results of operations and cash flows
in conformity with generally accepted accounting principles.
In the opinion of the Company, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the
year ended December 31, 1999. The unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-KSB for the year ended December 31, 1998.
Amounts for the six months ended June 30, 1998 have been reclassified to
conform with the June 30, 1999 presentation.
Consolidated Statements
The consolidated financial statements include the accounts of Associated
Golf Management, Inc. and its wholly owned subsidiaries. Significant
intercompany transactions have been eliminated in consolidation.
INVENTORY
The Company's inventory at June 30, 1999 consists of golf equipment and
related golf products for consumer use. The inventories are available for
sale to participants and spectators at the Company's golf and qualifying
school events . The inventory is stated at the lower of cost or market
determined by the first-in, first -out (FIFO) method.
Components of inventories at June 30, 1999 are as follows:
Finished goods $ 85,000
F-21
EXHIBITS
EXHIBIT INDEX
Number Description of Exhibit Page
______ ______________________ ____
(11) Computation of Earnings per Common
and Common Share Equivalents E-1
ASSOCIATED GOLF MANAGEMENT, INC.
COMPUTATION OF LOSS EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARES
For the years ended December 31, 1998 and 1997
1998 1997
____ ____
Shares outstanding at beginning
of period 6,002,515 1,751,928
Weighted average of common
shares issued
during the period
529,569 686,914
Weighted average of common
shares outstanding during the
period (adjusted for 1 for 3
reverse stock split in 1998) 6,532,084 2,438,842
Stock options and warrants
outstanding-not included
as they have no dilative effect - -
Shares used in computing
earnings per common
share 6,532,084 2,438,842
Loss per common share
($2,213,876/6,532,084) $ (.34)
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Loss per common share
($3,136,247/2,438,842) $ (1.29)
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E-1
