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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 March 31, 1999
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
- ------------------------------- --------------------------------
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6730 South Las Vegas Boulevard, Las Vegas, Nevada 89119
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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 May 12, 1999, 8,135,097 shares of common stock 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
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Operations -
Three Months Ended March 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 11
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,593,594 $2,584,900
Accounts receivable 791,591 1,028,800
Inventory 574,550 569,900
Due from Affiliated Store 91,753 19,000
Prepaid expenses and other 283,862 61,900
----------- -----------
Total current assets 3,335,350 4,264,500
Leasehold improvements and equipment, net 24,490,896 24,675,100
Note receivable - related party 20,000 20,000
Deposit for land lease 69,391 225,600
Debt issuance costs, net 375,156 393,300
Other assets 66,969 121,600
----------- -----------
Total assets $28,357,762 $29,700,100
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
1999 1998
----------- -----------
(Unaudited)
CURRENT LIABILITIES:
Current portion of long-term debt $ 515,470 $ 559,300
Current portion of obligations under
capital leases 145,446 121,400
Accounts payable and accrued expenses 1,244,443 1,513,000
Due to Shareholder and Affiliated Store 1,253,188 1,191,900
---------- ---------
Total current liabilities 3,158,547 3,385,600
---------- ---------
Note payable to shareholder 1,480,000 1,705,300
Long-term debt, net of current portion 13,371,578 13,408,100
Obligation under capital leases, net
of current portion 475,766 530,400
Deferred income 891,863 877,100
Deferred tax liability 743,000 743,000
Preferred stock of subsidiary 5,000,000 5,000,000
Minority interest 363,378 607,100
SHAREHOLDERS' EQUITY:
Common stock, no par value; 15,000,000 shares
authorized; 8,135,097 shares issued
and outstanding at March 31, 1999 and
December 31, 1998 6,107,700 6,107,700
Stock options issued 268,300 268,300
Accumulated deficit (3,502,370) (2,932,500)
---------- -----------
Total shareholders' equity 2,873,630 3,443,500
---------- -----------
Total Liabilities and Shareholders' Equity $28,357,762 $29,700,100
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
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REVENUE:
SportPark Las Vegas $ 1,049,487 $ -
Retail Operations 530,469 751,000
Callaway Golf Center[TM] 483,003 501,700
Other 6,250 37,300
----------- -----------
Total revenue 2,069,209 1,290,000
COST OF REVENUE:
SportPark Las Vegas 219,434 -
Retail Operations 430,038 582,000
Callaway Golf Center[TM] 71,130 75,700
----------- -----------
Total cost of revenue 720,602 657,700
----------- -----------
GROSS PROFIT 1,348,607 632,300
OPERATING EXPENSES:
Selling, general and administrative 1,483,300 1,253,300
Depreciation and amortization 410,293 117,000
Preopening expense - 23,000
----------- -----------
Total operating expenses 1,893,593 1,393,300
----------- -----------
OPERATING LOSS (544,986) (761,000)
Net interest (expense) income (343,493) (135,000)
----------- -----------
Loss from continuing operations before
income taxes and minority interest (888,479) (896,000)
Provision benefit for income taxes (74,887) -
Loss from continuing operations before ----------- -----------
minority interest (813,592) (896,000)
Minority interest 243,722 250,000
----------- -----------
NET LOSS $ (569,870) $ (646,000)
=========== ===========
NET LOSS PER SHARE:
Basic and Diluted:
Net loss per share $ (.07) $ (.11)
=========== ===========
See accompanying notes to 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 THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (569,870) $ (646,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Minority interest (243,722) (250,000)
Depreciation and amortization 566,508 155,000
Preopening expense amortization - 23,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 237,209 (174,000)
Increase in inventory (4,650) (57,000)
(Increase) decrease in prepaid expenses
and other (180,947) 10,000
Increase (decrease) in accounts payable
and accrued expenses (268,557) 2,201,000
Increase in deferred income 14,763 53,000
----------- -----------
Net cash provided by (used in) operating
activities (449,266) 1,315,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Project development costs - (5,618,000)
Leasehold improvement expenditures (154,488) -
Leasehold improvement and equipment
disposals, net - 20,000
----------- -----------
Net cash used in investing activities (154,488) (5,598,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of line of credit - (668,000)
Decrease in notes receivable - 18,000
Proceeds from notes payable and note
payable to shareholder, net - 4,651,000
Increase (decrease) in payable to Shareholder
and Affiliated Store (11,465) 173,000
Payments on notes payable and notes payable
to shareholder (345,499) -
Principal payments on capital lease
obligations (30,588) (35,000)
----------- -----------
Net cash provided by (used in)
financing activities $ (387,552) $ 4,139,000
----------- -----------
See accompanying notes to 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 THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Continued)
1999 1998
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (991,306) $ (144,000)
CASH AND CASH EQUIVALENTS,
Beginning of period 2,584,900 429,000
----------- -----------
CASH AND CASH EQUIVALENTS,
End of period $ 1,593,594 $ 285,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest, net of amounts capitalized $ 341,387 $ 142,986
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired through issuance of
note payable $ 39,847 $ -
=========== ===========
See accompanying notes to condensed consolidated financial statements.
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LAS VEGAS DISCOUNT GOLF & TENNIS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements
include the accounts of Las Vegas Discount Golf & Tennis, Inc. ("LVDG") a
Colorado corporation, and its subsidiaries, All-American SportPark, Inc.
("AASP"), LVDG Development Corporation ("Development") and LVDG Rainbow,
Inc. ("Rainbow")(collectively, the "Company"). LVDG owns two-thirds of
AASP, a publicly traded company. All significant inter-company accounts
and transactions have been eliminated.
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission relating to interim financial statements. Accordingly, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of management,
all necessary adjustments have been made to present fairly, in all material
respects, the financial position, results of operations and cash flows of
the Company at March 31, 1999 and for all periods presented.
Certain reclassifications have been made to previously reported amounts to
conform them to the current presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
These condensed consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1998.
The Company's current operations consist of one Company-owned retail store
in Las Vegas, Nevada and the management and operation of a family and
sport-oriented theme park under the name "All-American SportPark" located
in Las Vegas, Nevada. The first SportPark was completed on October 9, 1998.
Included in this 65 acre SportPark located on the south end of the Las
Vegas "Strip" are major attractions which include: The Callaway Golf
Center[TM] including a 110 tee driving range, Divine Nine[R] golf course
and 20,000 square foot club house; All-American SportPark Pavilion, Major
League Baseball Slugger Stadium, NASCAR SpeedPark and All-Sport Arena.
2. CALLAWAY GOLF CENTER[TM]
In the first three months of 1998, AASP operated the Callaway Golf Center
as the managing member of All-American Golf, LLC. AASP owned 80% of the
membership units and Callaway Golf Company ("Callaway Golf") owned the
remaining 20% of the membership units. The Callaway Golf Center occupies
approximately forty-two of the sixty-five acre All-American Sportpark. The
Callaway Golf Center[TM] opened to the public on October 1, 1997.
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All-American Golf, LLC (the "LLC") was formed by Callaway Golf Company
contributing $750,000 of equity capital and loaning the LLC $5,250,000.
AASP contributed the value of expenses it incurred relating to the design
and construction of the golf center and cash in the combined amount of
$3,000,000.
AASP sold its interest in All-American Golf, LLC to Callaway Golf on May 5,
1998 but retained the right to repurchase its 80% interest in the LLC for a
period of two years on essentially the same financial terms under which it
had sold its interest. This sale netted AASP approximately $1.5 million in
cash and relieved AASP of approximately $3 million in debt.
On December 31, 1998, AASP acquired substantially all of the assets subject
to certain liabilities of All-American Golf, LLC that had been managing and
operating the Callaway Golf Center. Under terms of this asset purchase
agreement, AASP paid Active Media Services, an entity related to Callaway
Golf Company, $1,000,000 in the form of a promissory note payable in
quarterly installments of $25,000 over a 10-year period without interest.
In the accompanying condensed consolidated balance sheets, this promissory
note payable has been discounted to its net present value.
3. SPORTPARK LAS VEGAS LOAN AGREEMENT
On September 15, 1998, AASP entered into a $13,500,000 loan agreement with
Nevada State Bank. The loan is for 15 years with interest measured at a
fixed rate of 4% above the lender's five-year LIBOR rate measured September
1, 1998, 2003 and 2008. The initial interest rate through 2003 is 9.38%.
The loan is secured by substantially all the assets of AASP that existed at
the time the financing was completed. To facilitate this financing
transaction, the owner of the leasehold interest in the land underlying the
Sportpark executed a trust deed granting a security interest in the leased
property to Nevada State Bank to secure repayment of the loan. As
consideration for the Landlord's willingness to provide collateral for the
loan, the Company's President, CEO and its Chairman and a related entity
pledged their stock in the Company as additional collateral.
4. EARNINGS PER SHARE AND SHAREHOLDER'S EQUITY
Basic earnings per share is computed by dividing reported earnings by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share reflects the additional dilution for all
potentially dilutive securities such as stock options. However, when an
entity has a loss from continuing operations, no potential common shares
are included in the computation of any diluted per share amounts. As such,
potential dilution has not been considered in the calculations for the
periods presented.
The weighted-average number of common and common equivalent shares used in
the calculation of basic and diluted earnings per share were 8,135,097 and
5,831,807 for the three-month periods ended March 31, 1999 and 1998,
respectively.
On February 16, 1999, the Board of Directors of AASP approved the award to
the President of the Company, Stock Appreciation Rights ("SAR's") as to
125,000 shares independent of any stock options under AASP's 1998 Stock
Incentive Plan. The base value of the SAR's shall be equal to $6 per share,
however no SAR may be exercised unless and until the market price of AASP's
Common Stock equals or exceeds $10 per share. Amounts to be paid under
this agreement are solely in cash and are not to exceed $500,000. The
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SAR's expire on October 26, 2008. The award of these SAR's had no impact
on results of operations for the periods presented in this report.
No other stock options or similar instruments of AASP or the Company were
granted or issued during the three months ended March 31, 1999.
5. RELATED PARTY TRANSACTIONS
AASP has unsecured, ten percent notes payable to shareholder of $1,480,000
and $1,705,300 at March 31, 1999 and December 31, 1998, respectively. The
Company paid $225,300 on these notes payable in late March 1999.
The Company normally has extensive transactions and relationships with its
chairman and principal shareholder, a retail store owned by the Company's
chairman (the "Affiliated Store") and AASP. The Affiliated Store operates
in Las Vegas, Nevada. The Affiliated Store and the Company benefit through
volume purchasing together and shared costs of local and national
advertising conducted by AASP. The Affiliated Store and the Company owned
store share advertising costs equally in the Las Vegas market area. These
advertising costs were $19,600 and $60,000 for the three months ended March
31, 1999 and 1998, respectively. Purchases of merchandise from the
Affiliated Store are recorded at the Company's cost and totaled $133,851
and $36,000 for the three months ended March 31, 1999 and 1998,
respectively.
6. LEASEHOLD IMPROVEMENTS AND EQUIPMENT
Leasehold improvements and equipment include the following as of March 31,
1999 and December 31, 1998:
1999 1998
----------- -----------
Building $17,631,803 $17,592,200
Land Improvements 3,149,700 3,139,500
Furniture and equipment 1,841,680 1,754,900
Leased equipment 1,079,840 1,041,300
Signs 654,321 651,100
Go-Karts 462,780 479,500
Leasehold improvements 417,922 372,500
Other 168,100 168,100
----------- -----------
25,406,146 25,199,100
----------- -----------
Accumulated depreciation and
amortization (915,250) (524,000)
----------- -----------
$24,490,896 $24,675,100
=========== ===========
7. LEASES
LVDG and AASP share facilities leased from the Chairman of the Board under
a non-cancelable operating lease agreement, which expires January 31, 2005.
Rent is allocated 50% to LVDG and 50% to AASP. Monthly rent from January
to November 1998 was $4,230. Effective December 1998, monthly rent is
$1,830.
The land underlying the All-American SportPark is leased to AASP at a base
amount of $52,083 per month allocated $33,173 to the Callaway Golf Center
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and $18,910 to the Sportpark Las Vegas ("SPLV"). Also, the lease has
provisions for contingent rent to be paid by AASP upon reaching certain
levels of gross revenues at the All-American Sportpark. The lease
commenced October 1, 1997 for the Callaway Golf Center and February 1, 1998
for SPLV. The terms of both leases are 15 years with two five-year renewal
options.
The Company leases retail space for the Company-owned store under a
non-cancelable operating lease agreement which will expire on July 31, 2000
and provide for a base monthly rental payment of $10,300. Under this
lease, the base monthly rental may increase based on increases in the
consumer price index and taxes.
The Company is also obligated under various other capital and non-
cancelable operating leases for equipment that expire at various dates over
the next five years.
8. COMMITMENTS AND CONTINGENCIES
AASP has employment agreements with its President, as well as other key
employees which will require the payment of fixed and incentive based
compensation.
The Company has purchased a comprehensive general liability insurance
policy to cover possible claims for injury and damages from accidents and
similar activities. There is no assurance that it will be sufficient to
cover or be available for future claims.
The Company is involved in certain litigation as both plaintiff and
defendant related to its business activities. Management, based upon
consultation with legal counsel, does not believe that the resolution of
these matters will have a materially adverse effect on the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the Company's
condensed consolidated financial statements and related footnotes included
in this report.
OVERVIEW
The Company's continuing operations consist of the retail location on
Rainbow Boulevard in Las Vegas, Nevada and the management and operation of
a family and sport-oriented theme park under the name "All-American
SportPark". Results of operations for the quarter ended March 31, 1999
include the results of the Rainbow retail store, and the All-American
Sportpark in Las Vegas, Nevada which includes the Sportpark Las Vegas and
the Callaway Golf Center. The Sportpark Las Vegas commenced operations on
October 9, 1998. The Callaway Golf Center commenced operations in October
1997, the Company sold its 80% interest in the Callaway Golf Center on May
5, 1998 and then repurchased 100% of the Callaway Golf Center on December
31, 1998.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 AS COMPARED TO
THREE MONTHS ENDED MARCH 31, 1998
REVENUE. Revenue increased to $2,069,209 in 1999 compared to
$1,290,000 in 1998 due primarily to the opening of the SportPark Las Vegas
on October 9, 1998. The Sportpark Las Vegas contributed $1,049,487 to 1999
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revenues offset by decreased revenues of approximately $220,000 at the
Rainbow store. Rainbow store revenues declined reflecting extremely
competitive conditions in the golf retail business including lower pricing.
Other income declined to $6,250 in 1999 from $37,300 in 1998 due primarily
to management fees of $25,200 earned by AASP in 1998 to manage the Callaway
Golf Center; no management fees were earned in 1999 since AASP now owns
100% of the Callaway Golf Center.
COST OF REVENUE. Cost of revenue increased to $720,602 in 1999
compared to $657,700 in 1998 due mainly to the opening of the Sportpark Las
Vegas on October 9, 1998. This was partially offset by higher costs for
retail operations which are directly related to higher retail revenues in
1998.
SELLING, GENERAL AND ADMINISTRATIVE("SG&A"). These expenses consist
principally of administrative payroll, rent, professional fees and other
corporate costs. These expenses increased to $1,483,300 in 1999 from
$1,253,300 in 1998. The increase is due mainly to the operations of the
Sportpark Las Vegas, which has necessitated increased staffing and
increased sales and marketing costs.
DEPRECIATION AND AMORTIZATION. These costs increased to $410,293 in
1999 compared to $117,000 in 1998 reflecting the higher overall depreciable
base of fixed assets due to the commencement of operations at the SportPark
Las Vegas in October 1998.
NET INTEREST (EXPENSE) INCOME. Net interest expense increased to
$343,493 in 1999 from $135,000 in 1998 due primarily to interest costs on
debt secured by the Sportpark Las Vegas which commenced operation in
October 1998. In addition, some interest costs were capitalized in 1998
because the Sportpark Las Vegas was under development; however, total
borrowings were less in 1998 compared to 1999.
INCOME TAXES. Due to operating losses, the Company has recorded no tax
provision. The tax benefit for 1999 relates to a refund of taxes paid in
prior years.
MINORITY INTEREST. This amount is calculated as one-third of AASP's
net loss for the applicable period. AASP's net loss for 1999 and 1998 were
approximately the same, thus minority interest is comparable for 1999 and
1998.
NET LOSS. Net loss for 1999 was $569,870 compared to a net loss of
$646,000 in 1998. The losses are principally attributed to the start-up
and fixed costs of the Callaway Golf Center[TM] in 1998 and similar reasons
in 1999 due to the reacquisition of the Callaway Golf Center on December
31, 1998 and the opening of the SportPark Las Vegas in October 1998.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company had working capital of $176,803 as compared
to working capital of $878,900 at December 31, 1998, a decrease of
$702,097. This decrease in working capital resulted mainly from heavy start
up type costs incurred in the first quarter of 1999 to operate, promote and
market the Sportpark Las Vegas. In addition, working capital was used to
reduce outstanding payables by approximately $270,000.
There are no planned major capital expenditures in 1999.
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The Company in the normal course of its business receives sponsorship fees
and various advance payments of different kinds, which are recorded as
deferred income until earned. Such amounts are typically earned over the
term of the contract with the applicable sponsor. Deferred income was
$891,863 at March 31, 1999 compared to $877,100 at December 31, 1998. A
sponsorship fee of $250,000 was received in the first quarter of 1999. It
is anticipated, but cannot be guaranteed, that sponsorship fees and
advances will be a source of cash flow in 1999.
On September 15, 1998, AASP entered into a $13,500,000 loan agreement with
Nevada State Bank. The loan is for 15 years with interest measured at a
fixed rate of 4% above the lender's five-year LIBOR rate measured September
1, 1998, 2003 and 2008. For 1998 through August 31, 2003 the loan bears
interest of 9.38%. The loan is secured by substantially all the assets of
AASP that existed at the time the financing was completed. Debt service
for this loan approximates $140,000 per month.
On December 31, 1998 AASP purchased substantially all the assets and
assumed certain liabilities of the Callaway Golf Center[TM] for $1,000,000
payable in quarterly installments of $25,000 for a 10 year period with no
interest. The Callaway Golf Center generated positive cash flow in the
first quarter of 1999. If required to fund corporate operations, management
believes that additional borrowings against the Callaway Golf Center could
probably be arranged although there can be no assurance that AASP would be
successful in securing such financing.
The Company's Chairman has historically loaned funds to the Company as
needed. Such lendings were $1,705,300 at December 31, 1998 and have
decreased to $1,480,000 at March 31, 1999. This decrease is due to the
Company repaying $225,300 of these loans in late March 1999. The remaining
loans are due in the year 2001 and bear interest at ten percent per annum.
Interest payments of $186,000 through March 31, 1999 have been deferred, a
practice which could continue throughout 1999 if necessary.
Operating Activities. Net cash used in operating activities was $449,266
for the three months ended March 31, 1999 compared to net cash provided by
operating activities of $1,315,000 for the three months ended March 31,
1998. The primary reason for the difference relates to changes in accounts
payable and accrued expenses. In 1998, payables increased approximately
$2.2 million whereas in 1999 payables decreased approximately $270,000 due
to the Company making a concerted effort to decrease its payables balance.
Other factors contributing to the change in cash flow from operations are
(1) increased prepaid expenses in 1999 compared to 1998 and (2) increased
SG&A costs in 1999 compared to 1998 relating to corporate administration
and marketing and promotion.
Investing Activities. Net cash used in investing activities was $154,488
and $5,598,000 for the three months ended March 31, 1999 and 1998,
respectively. Uses in 1998 relate to development costs to build the
Sportpark Las Vegas whereas 1999 relates to normal leasehold improvement
expenditures.
Financing Activities. Net cash used in financing activities was $387,552
for the three months ended March 31, 1999 compared to net cash provided by
financing activities of $4,139,000 for the three months ended March 31,
1998. The primary difference between the two periods is in 1998 when the
Company received approximately $4.6 million in financing from third parties
and a principal shareholder.
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The Company's current and expected sources of working capital are its cash
balances, which were $1,593,594 at March 31, 1999, and cash flow from
operations including sponsorship fees and advance deposits of various
kinds. The Company has raised considerable capital in the past 2 years for
development projects. The SportPark Las Vegas is now operational. The
Company believes that any working capital deficiency that may occur could
be funded from a combination of existing cash balances and, if necessary,
additional borrowings from lenders or other sources. Expansion programs in
other locations are not yet planned although expansion is a strategic
objective of the Company. If and when expansion does occur, such expansion
is expected to be funded primarily by third parties.
Year 2000
The Company's accounting system was updated during the first quarter of
1998 and is year 2000 compliant. The Company's All-American SportPark has
a number of computerized systems including a point of sale system. The
vendors of the various systems have advised management that they are all
year 2000 compliant. During the first quarter of 1998, the Company hired a
consultant to upgrade all of the Company's other computers and workstations
so that they were all year 2000 compliant. The Company will likely incur
additional costs in 1999 which are not expected to be material.
The Company may be vulnerable to the failure of other companies to be year
2000 compliant. During the fourth quarter of 1998, the Company commenced
its assessment of whether third parties with which the Company has material
relationships are year 2000 compliant. The Company is continuing to
evaluate its vendors and suppliers to determine if there would be a
material effect on the Company's business if they do not timely become year
2000 compliant. The Company does not have any significant year 2000 issues
related to its customers. The Company intends to initiate formal
communications with all of its significant vendors and suppliers with
respect to their year 2000 compliance programs and status during the second
quarter of 1999.
Although the Company expects its internal systems to be year 2000
compliant, the failure of any of its significant vendors or suppliers to
correct a material year 2000 problem could result in an interruption in
certain normal business activities and operations.
A reasonably likely worst case scenario would be for a segment of the
Company's SportPark to shut down, and depending on which segment(s) was
shut down and for how long, the Company's results of operations could be
adversely affected. Daytime operations of the Callaway Golf Center[TM]
should not be affected at all. A shutdown of operations at the Rainbow
retail store could also adversely affect the Company.
The Company has not yet initiated formal contingency planning processes to
mitigate the risk to the Company if any vendors or suppliers are not
prepared for the year 2000, but the Company intends to complete this
process by June 30, 1999.
Special Cautionary Notice Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in
this Quarterly Report contains statements that are forward-looking such as
statements relating to plans for future expansion and other business
development activities, as well as other capital spending and financing
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sources. Such forward-looking information involves important risks and
uncertainties that could significantly affect anticipated results in the
future and, accordingly, such results may differ from those expressed in
any forward-looking statements made by or on behalf of the Company. These
risks and uncertainties include, but are not limited to, those relating to
development and construction activities, dependence on existing management,
leverage and debt service (including sensitivity to fluctuations in
interest rates), domestic or global economic conditions, changes in federal
or state tax laws or the administration of such laws, changes in
regulations and application for licenses and approvals under applicable
jurisdictional laws and regulations.
15
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
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. None.
16
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
LAS VEGAS DISCOUNT GOLF & TENNIS, INC.
May 14, 1999 By: /s/ Voss Boreta
Voss Boreta, President and
Chief Executive Officer
May 14, 1999 By: /s/ Kirk Hartle
Kirk Hartle, Chief Financial Officer
17
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT METHOD OF FILING
- ------- ----------------
27. FINANCIAL DATA SCHEDULE Filed herewith electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited condensed balance sheets and unaudited condensed statements of
income found on pages 3 and 4 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,593,594
<SECURITIES> 0
<RECEIVABLES> 791,591
<ALLOWANCES> 0
<INVENTORY> 574,550
<CURRENT-ASSETS> 3,335,350
<PP&E> 24,490,896
<DEPRECIATION> 0
<TOTAL-ASSETS> 28,357,762
<CURRENT-LIABILITIES> 3,158,547
<BONDS> 0
<COMMON> 6,107,700
0
0
<OTHER-SE> (3,234,070)
<TOTAL-LIABILITY-AND-EQUITY> 28,357,762
<SALES> 2,069,209
<TOTAL-REVENUES> 2,069,209
<CGS> 720,602
<TOTAL-COSTS> 720,602
<OTHER-EXPENSES> 1,893,593
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (343,493)
<INCOME-PRETAX> (813,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> (813,592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (569,870)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
