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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number: 0-17436
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1034868
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
5325 South Valley View Boulevard, Suite 10, Las Vegas, Nevada 89118
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(Address of principal executive offices including zip code)
(702) 798-7777
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No___
As of November 11, 1996, 5,319,008 shares of common stock, no par value per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
FORM 10-QSB
INDEX
PART I: FINANCIAL INFORMATION Page No.
Item 1. Financial Information:
Unaudited Condensed Consolidated Balance Sheets 3-4
Unaudited Condensed Consolidated Statements of Income 5
Unaudited Condensed Consolidated Statements of Cash Flows 6
Notes to Unaudited Condensed Consolidated Financial
Statements 7-8
Item 2. Management's Discussion and Analysis and
Plan of Operations 9-11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
1996 1995
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 3,754,000 $1,043,000
Accounts receivable from franchisees, net 485,000 422,000
Stock subscriptions receivable 1,000,000 0
Lease termination receivable 3,123,000 3,000,000
Inventories 3,018,000 2,588,000
Prepaid expenses and other 73,000 696,000
Total current assets 11,453,000 7,749,000
FURNITURE, EQUIPMENT AND
LEASEHOLD IMPROVEMENTS, NET 1,995,000 1,522,000
OTHER ASSETS 45,000 140,000
$13,493,000 $9,411,000
NOTE: The balance sheet at December 31, 1995 has been taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
1996 1995
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(Unaudited)
CURRENT LIABILITIES:
Line of credit $ 468,000 $ 0
Current portion of long-term debt 14,000 0
Accounts payable and accrued expenses 3,095,000 3,872,000
Deferred franchise fees 182,000 120,000
Total current liabilities 3,759,000 3,992,000
LONG-TERM DEBT 30,000 0
NOTE PAYABLE TO SHAREHOLDER 651,000 663,000
DEFERRED INCOME TAX LIABILITY 743,000 743,000
MINORITY INTEREST 3,450,000 1,252,000
STOCKHOLDERS' EQUITY:
Preferred stock 2,452,000 5,000
Common stock 3,871,000 3,871,000
Accumulated deficit (1,463,000) (1,115,000)
Total stockholders' equity 4,860,000 2,761,000
$13,493,000 $9,411,000
NOTE: The balance sheet at December 31, 1995 has been taken from the audited
financial statements at that date and condensed.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
REVENUES:
Net merchandise sales $1,330,000 $2,655,000 $7,741,000 $7,611,000
Franchise fees 40,000 40,000 160,000 165,000
Royalties 290,000 326,000 903,000 920,000
Other 50,000 92,000 171,000 169,000
Total revenues 1,710,000 3,113,000 8,975,000 8,865,000
EXPENSES:
Cost of sales 802,000 1,919,000 5,853,000 5,931,000
Selling, general and
administrative 1,028,000 1,112,000 3,456,000 2,925,000
Golf centers and driving
range development costs 6,000 0 207,000 0
Total expenses 1,836,000 3,031,000 9,516,000 8,856,000
INCOME (LOSS) BEFORE
PROVISION FOR INCOME
TAXES AND MINORITY INTEREST (126,000) 82,000 (541,000) 9,000
PROVISION FOR INCOME TAXES 0 0 0 0
INCOME (LOSS) BEFORE
MINORITY INTEREST (126,000) 82,000 (541,000) 9,000
MINORITY INTEREST 53,000 (1,000) 193,000 50,000
NET INCOME (LOSS) $ (73,000) $ 81,000 $ (348,000) $ 59,000
INCOME (LOSS) PER
COMMON SHARE: $ (.01) $ .02 $ (.07) $ .01
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Nine Months
Ended September 30,
--------------------
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (348,000) $ 59,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest (193,000) (50,000)
Depreciation and amortization 81,000 35,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (63,000) 74,000
Increase in lease termination receivable (123,000) (2,484,000)
(Increase) in inventory (430,000) (830,000)
(Increase) decrease in prepaid expenses
and other 623,000 (17,000)
(Increase) decrease in other assets 95,000 (617,000)
Increase (decrease) in accounts payable (323,000) 1,206,000
Increase in deferred franchise fees 62,000 30,000
Net cash provided(used) by operating activities (619,000) (2,594,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,093,000) (250,000)
Refund development costs 85,000 0
Decrease in other assets 0 24,000
Net cash flows used by investing activities (1,008,000) (226,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from line of credit 468,000 0
Proceeds from long-term debt 45,000 0
Payment on long-term debt (1,000) (140,000)
Principal payment on shareholder note payable (12,000) 0
Proceeds from sale of preferred stock 4,000,000 0
Preferred stock issuance costs (162,000) 0
Net cash provided(used) by financing activities 4,338,000 (140,000)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,711,000 (2,960,000)
CASH AND CASH EQUIVALENTS - Beginning of period 1,043,000 3,586,000
CASH AND CASH EQUIVALENTS - End of period $ 3,754,000 $ 626,000
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1996 and for
all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1995 audited financial statements. The results of operations for the periods
ended September 30, 1996 and 1995 are not necessarily indicative of the
operating results for the full year.
Certain 1995 amounts have been reclassified to conform with 1996
classifications. Net merchandise sales and cost of sales have each been
reduced to reflect intercompany sales of $767,000 for the nine months and
$261,000 for the three months ending September 30, 1995. Such
reclassifications had no effect on reported net income.
NOTE 2. STATEMENT OF CASH FLOWS
For the purposes of the statements of cash flows, the Company considers all
highly liquid debt investments purchased with a maturity of three months or
less to be cash equivalents.
Supplemental disclosures of cash flow information:
Cash paid during the nine months ended on:
September 30,
1996 1995
-------------------
Interest $58,000 $46,000
Income taxes $ 0 $ 1,000
Non cash investing and financing activities: None.
NOTE 3. LEASE
On July 22, 1996, All-American SportPark, Inc., a subsidiary of Saint Andrews
Golf Corporation executed a 15 year (two 5 year options) ground lease for 65
acres of vacant land for the development of the company's first All-American
SportPark project. Future minimum lease payments for the next five years
follow:
Year 1 $625,000
2 625,000
3 625,000
4 625,000
5 625,000
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 4. RELATED PARTY TRANSACTIONS
Las Vegas Retail - related party purchases inventory at cost from the Company.
Such purchases amounted to $1,096,000 and $434,000 for the nine months ended
September 30, 1996 and 1995, respectively.
NOTE 5. PREFERRED STOCK ISSUANCE
On July 29, 1996, Saint Andrews Golf Corporation ("SAGC") sold 500,000 shares
of its newly designated Series A Convertible Preferred Stock to Three Oceans
Inc. ("TOI"), an affiliate of Sanyo North America Corporation, for $5,000,000.
As of September 30, 1996, TOI has paid $4,000,000 for 400,000 shares. The
additional 100,000 shares were issued and paid for on October 27, 1996. SAGC
is using these proceeds, less the $162,000 estimated cost of issuance, to
develop its subsidiary, All-American SportPark, Inc.
Each share of the Series A Convertible Preferred Stock issued to TOI is
convertible into one share of SAGC's Common Stock at any time. The Series A
Convertible Preferred Stock has a liquidation preference of $10 per share and
the holder is entitled to receive dividends equal to any declared on SAGC's
Common Stock. Under certain circumstances, SAGC may redeem the Series A
Convertible Preferred Stock at a redemption price of $12.50 per share. Each
share of Series A Convertible Preferred Stock is entitled to one vote and will
vote along with the holders of SAGC's Common Stock.
Pursuant to the term of the Agreement, TOI also received an option to purchase
up to 250,000 shares of SAGC's Common Stock at $5.00 per share at any time
until July 29, 2001.
The Agreement provides for certain demand and piggyback registration rights
with respect to the shares of Common Stock issuable upon the conversion of the
Series A Convertible Preferred Stock and the exercise of the option.
Pursuant to the Agreement, SAGC expanded the number of Directors of SAGC from
four to five, and elected Hideki Yamagata as a Director of SAGC. Mr. Yamagata
is president of Three Oceans Inc.
In connection with the initial closing of the Agreement, SAGC granted TOI
certain first refusal rights with respect to debt and/or equity financing
arrangements for SportParks developed by SAGC's subsidiary All-American
SportPark, Inc. and any arrangements to obtain electrical and electronic
equipment for such SportParks. In addition, SAGC granted TOI and its
designees certain signage rights at All-American SportPark, Inc.'s first two
SportParks.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
SEASONALITY
Las Vegas Discount Golf & Tennis, Inc.'s (the "Company") business is seasonal.
The Company typically experiences sales peaks in the Spring and pre-Christmas
seasons. Accordingly, the results of interim periods may not be indicative of
results for the full year.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
During the nine months ended September 30, 1996, the Company had a net loss of
$348,000 as compared to a net income of $59,000 for the same period in 1995.
Total revenues for the first nine months of 1996 increased by approximately
$110,000 (1%) as compared to the same period in 1995. The increase in
revenues was primarily attributable to a $130,000 increase in merchandise
sales which was partially offset by a $20,000 net decrease in other revenue
categories. Royalties declined $17,000 (2%) to $903,000, primarily due to
lower sales at the franchisee level in the third quarter. Management believes
the lower sales in the third quarter of 1996 were temporary declines due to
poor weather during September in the Canadian provinces, the relocation of two
Canadian stores, and an unexpected sales decline during the three weeks of the
Olympic Games.
Cost of Sales as percentage of merchandise sales decreased from 78% in 1995 to
76% in 1996 as a result of a shift in product mix to items with higher average
profit margins.
Selling, general and administrative expenses increased by $531,000 (18%) in
1996 as compared to 1995, primarily attributable to the expenses of operating
the two new company owned stores in Encino and Westwood, California. These
stores were opened April 1995 and August 1995 respectively, resulting in
increased expenses for the first two quarters of 1996 as compared to the first
two quarters of 1995. See discussion under Three Months Ended September 30,
1996 for decline in third quarter expenses. Research and development expenses
increased $207,000 due to expenditures for All-American SportPark, Inc.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
During the three months ended September 30, 1996, the Company had a net loss
of $73,000 as compared to a net profit of $81,000 for the same period in 1995.
Total revenues for the third quarter of 1996 decreased by approximately
$1,403,000 (45%) as compared to the same period in 1995. The decrease in
revenues was primarily attributable to a $1,325,000 decrease in merchandise
sales coupled with a $78,000 net decrease in other revenue categories.
Management believes the decrease in merchandise sales in the third quarter
1996 resulted from temporary declines due to poor weather during September in
the Canadian provinces, relocation of two Canadian Stores, and an unexpected
sales decline during the three weeks of the Olympic Games. Royalties
decreased $36,000(10%) in the third quarter to $290,000 primarily due to lower
sales at the franchise level for the reasons discussed above.
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Cost of Sales as percentage of merchandise sales decreased from 72% in 1995 to
60% in 1996 as a result of a shift in product mix to items with higher average
profit margins.
Selling, general and administrative expenses decreased by $84,000 (8%) in 1996
as compared to 1995 due to settlement of the Saint Andrews Golf Corporation's
(SAGC) ground lease lawsuit. In anticipation of the settlement on October 1,
1996 SAGC reclassified $123,000 of legal fees expensed during 1996.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital of approximately
$7,693,000 compared to $3,757,000 at December 31, 1995. The increase was due
to the sale of preferred stock by the Company's majority-owned subsidiary.
Cash increased from $1,043,000 at December 31, 1995 to $3,754,000 at September
30, 1996. This increase in cash was primarily attributable to financing
activities with a $3,838,000 increase from the issuance of preferred stock by
Saint Andrews Golf Corporation and a $500,000 net increase in borrowings.
These financing activities were offset by $619,000 of cash used by operations
primarily due to the net loss and an increase in inventory. Cash flows from
investing activities used $1,008,000 as a result of $1,093,000 of capital
expenditures during the nine months which were primarily related to the All-
American SportPark, Inc. subsidiary, which was slightly offset by a $85,000
refund for returned items on the development of the golf/sports park
development (referred to under "Legal Proceedings" in this Report).
The Company's sources of working capital include its current cash balance,
cash flows from operating activities, a $400,000 bank line of credit and the
issuance of 500,000 shares of Series A Convertible Preferred Stock for St.
Andrews Golf Corporation. On July 29, 1996, Saint Andrews Golf Corporation
("SAGC") sold 500,000 shares of its newly designated Series A Convertible
Preferred Stock to Three Oceans Inc. ("TOI"), an affiliate of Sanyo North
America Corporation, for $5,000,000. As of September 30, 1996, TOI had paid
$4,000,000 for 400,000 shares. The additional 100,000 shares were issued for
$1,000,000 on October 27, 1996. SAGC is using these proceeds, less the
$162,000 estimated cost of issuance, to develop its subsidiary, All-American
SportPark, Inc.
Management believes that these sources of cash will be adequate to fund
operations throughout the balance of 1996.
Working capital requirements are the greatest in the first and fourth quarters
as the Company increases inventories to meet demands for the Spring and pre-
Christmas seasons. Since certain Company Brands inventory items have a longer
ordering cycle and will require the Company to stock increasing levels of such
items as the demand of franchisees increases, the Company believes it will
need greater working capital to finance inventory requirements.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In May of 1994, SAGC entered into a Ground Lease (the "Lease") for
approximately 33 acres of land on Las Vegas Boulevard which it intended to use
for the development of a golf/sports park. The lease contained provisions
which allowed the lessor to terminated the lease within the first 6 years of
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the 15 year lease term in the event that the lessor entered into a sale of the
property as long as the intended use of the property after the sale was not a
golf/sports park as contemplated by SAGC.
In June 1995 the lessor notified SAGC that it had entered into a sale
agreement for the parcel and that it was exercising its right of termination.
Pursuant to cancellation provisions contained within the Lease, SAGC was
entitled to reimbursement of unamortized construction costs which it incurred,
based upon the criterion contained within the lease, up to an aggregate amount
of $3.5 million.
Upon notification of the Lease termination, SAGC ceased construction
activities and submitted substantiation for construction costs totaling
approximately $3.9 million. Utilizing applicable formulas derived from the
Lease SAGC believed that, based on the maximum expenditures available for
reimbursement of $3.5 million, $3,279,465 in costs were reimbursable by the
purchaser. The purchaser reviewed such support and indicated that he believed
that only a portion of the construction costs submitted were reimbursable
within the context of the Lease agreement.
On February 27, 1996 SAGC filed a complaint against the purchaser with the
District Court, Clark County, Nevada, against the purchaser of the parcel
seeking an unspecified amount of compensatory damages, punitive damages
attorney fees and costs.
In October 1996, a settlement of $3,217,500 was reached and paid to SAGC.
Item 2. CHANGES IN SECURITIES - None.
Item 3. DEFAULTS UPON SENIOR SECURITIES - None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
Item 5. OTHER INFORMATION - None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Financial Data Schedule: Filed herewith electronically
(b) Reports on Form 8-K.
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
By:/s/ Voss Boreta
Voss Boreta, President
and Chief Financial Officer
Date: November 18, 1996
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<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
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27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed consolidated balance sheets and unaudited condensed
consolidated statements of income found on pages 3, 4 and 5 of the Company's
Form 10-QSB for the year to date, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 3,754,000
<SECURITIES> 0
<RECEIVABLES> 4,608,000
<ALLOWANCES> 0
<INVENTORY> 3,018,000
<CURRENT-ASSETS> 11,453,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,493,000
<CURRENT-LIABILITIES> 3,759,000
<BONDS> 0
<COMMON> 3,871,000
0
2,452,000
<OTHER-SE> (1,463,000)
<TOTAL-LIABILITY-AND-EQUITY> 13,493,000
<SALES> 7,741,000
<TOTAL-REVENUES> 8,975,000
<CGS> 5,853,000
<TOTAL-COSTS> 5,853,000
<OTHER-EXPENSES> 3,663,000
<LOSS-PROVISION> (541,000)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (541,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (348,000)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
