SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1997
Commission File Number: 33-12664-D
WORLDWIDE GOLF RESOURCES, INC.
(Formerly JSL, Inc.)
(Exact name of registrant as specified in its charter)
Nevada 88-033551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (204) 885-5555
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.0001 par value
(Title of Class)
Indicate by check mark whether the registrant (a) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The aggregate market value (the average bid and asked prices) of the
voting stock held by non-affiliates of the registrant on December 31, 1997,
was approximately $5,432,524. The number of shares of Common Stock,
$0.0001 par value, outstanding on December 31, 1997, was 13,674,748 shares,
held by approximately 300 shareholders.
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This form 10K contains forward-looking statements within the meaning
of the federal securities laws. These forward-looking statements are
necessarily based on certain assumptions and are subject to significant
risks and uncertainties. These forward-looking statements are based on
management's expectations as of the date hereof, and the Company does not
undertake any responsibility to update any of these statements in the
future. Actual future performance and results could differ from that
contained in or suggested by these forward-looking statements as a result
of factors set forth in this Form 10K (including those sections hereof
incorporated by reference from other filings with the Securities and
Exchange Commission), in particular as set forth in "Business Risks" under
Item 1 and set forth in the "Management's Discussion and Analysis" under
Item 6.
PART I
ITEM 1. BUSINESS
General
Worldwide Golf Resources, Inc. (together with its subsidiaries, unless
the context requires otherwise, the "Company") is currently and has been
engaged in several golf-related ventures; the manufacture and sale of an
innovative golf practice and teaching device (680104 Alberta Ltd. d/b/a
GolfJackT); an 18 hole golf course and club house in Manitoba, Canada,
(Pelican Beach Golf and Country Club); and golf centers designed to provide
a wide variety of practice opportunities, including facilities for driving,
chipping, putting, pitching and sand play, (Worldwide Golf Centers, Inc.).
In addition, the Company manufactured driving range equipment through
Advanced Golf Systems, Inc. d/b/a Range Master of Temecula, California;
manufactured and installed synthetic turf for use in driving ranges, as
well as other applications (Worldwide Golf Resources of Georgia, d/b/a
American Turf, Inc.).
During 1997 the Company commenced a reorganization plan wherein the
Company effected certain strategic management changes and commenced the
elimination of certain non-performing subsidiaries. Range Master ceased
operations in July, 1997 due to a lack of orders sufficient to provide the
Company with an economically viable opportunity to produce competitive
products in the driving range equipment arena. In the third quarter of
1998, the Company sold its synthetic turf manufacturing, sales and
installation subsidiary which was conducted through Worldwide Golf
Resources of Georgia, d/b/a American Turf, Inc. of Rome, Georgia. American
Turf is one of the suppliers of synthetic turf to golf driving ranges, golf
courses, and other athletic fields.
Recent Activity
On January 22, 1997, the Company entered into an agreement with
3422488 Manitoba Ltd. whereby the Company acquired all the issued and
outstanding shares of 2671914 Manitoba, Ltd. (Pelican), a Canadian
Corporation, which owns as its sole asset the real property generally
described as the Pelican Beach Golf and Country Club, located at Gimli,
Manitoba, Canada. Consideration for the purchase was common shares of the
Company which resulted in the original shareholder of Pelican owning
approximately 61% of the Company's total issued and outstanding common
shares following the acquisition. The transaction has been accounted for as
a reverse acquisition whereby, notwithstanding the legal acquisition of
Pelican by the Company, the transaction was accounted for as an acquisition
of the Company by Pelican. Application of reverse acquisition accounting
resulted in the following accounting: (i) the consolidated financial
statements for the companies are issued under the name of Worldwide Golf
Resources, Inc. but are considered to be a continuation of the financial
statements of Pelican, the legal subsidiary; (ii) as Pelican is deemed to
be the acquirer for accounting purposes, its assets and liabilities are
included in the consolidated balance sheets at their historical carrying
values; and (iii) control of the net assets and liabilities of the Company
were acquired by Pelican for deemed consideration being the fair value
ascribed to the net assets of the Company.
On July 22, 1998, the Company entered into an agreement ("Pro Golf
Agreement") to purchase all of the outstanding shares of Pro Golf of
America, Inc. ("Pro Golf"). The Pro Golf Agreement includes the
acquisition of State of the Art Golf Company, Inc. ("SOTA"), which consists
of the rights to the Pro Golf private labels golf products, and an
agreement with the selling shareholders of Pro Golf to purchase their
ownership interests in Pro Golf of Nevada, L.L.C., which operates the
20,000 square foot Pro Golf Discount Superstore in Las Vegas, Nevada, which
Pro Golf Agreement is subject to certain conditions, including financing.
The Pro Golf Agreement further specifies that Worldwide Golf Resources,
Inc. will change its name to "Pro Golf" if and when the Company consummates
the transaction with Pro Golf. Aside from the terms and conditions as set
forth in the Pro Golf Agreement, the transaction will be subject to the
terms and conditions as established by lenders and/or investment bankers
assisting the Company in raising capital for the acquisition, which terms
and conditions may include the formation of a separate holding corporation
and or subsidiary corporation.
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Golf Course Operations
The Company has one 18-hole golf course in Gimli, Canada known as the
Pelican Beach Golf and Country Club which became an approved regulation
golf course on March 31, 1998. The Pelican Beach Golf and Country Club has
a restaurant and catering facility to accommodate large parties and
weddings, a clubhouse, a pro-shop, a driving range and PGA-certified golf
instructors on site. This 18-Hole championship golf course and country club
provides the company with a substantial asset. Gimli is known as the
traveler's paradise. Miles of clean, sandy beaches and a well-developed
tourist industry place this town among the best tourist attractions in
Manitoba. Pelican Beach, located on the shore of Lake Winnipeg, has
received rave reviews and is promised to be one of the top courses in the
province.
The 12,000 square foot clubhouse consists of three floors. The 2,690
square foot ground floor accommodates a kitchen, washrooms and pro shop.
The second floor of the lighthouse-shaped clubhouse hosts a 155-seat
restaurant plus a cocktail lounge. The third floor has another cocktail
lounge where the principal attraction is video lottery terminal machines
and off-track horse race betting. The Company has created a facility that
generates year-round revenues. In addition, there are two large outdoor
decks, including one that seats 200 people in a circular area of 4,300
square feet.
Part of the Company's operating strategy is to acquire golf courses in
areas where it owns or operates, or intends to own or operate, golf centers
so that it has available a golf course on which to: (i) train its golf
instructors so that they may become PGA-certified and (ii) provide full
golf packages and complete instructions to driving range customers. In
addition, the Company believes that it can attract customers of the golf
courses to use its golf centers.
GolfJackT
In October of 1997, the Company purchased 680104 Alberta Ltd. d/b/a
GolfJackT. GolfJackT developed an innovative and revolutionary new golf
practice and teaching product which enables the user to adjust a hitting
platform to create any type of downhill, sidehill or uphill lie, thereby
bringing the golf course to the driving range. Unique features and
advantages of the GolfJackT include: (i) teaches proper swing technique,
(ii) allows for the simulation of real golf shots, and (iii) has no
motorized parts. GolfJackT has been designed for a wide variety of
businesses including: (i) golf courses and driving ranges, (ii) golf
professionals/instructors, (iii) amusement parks, (iv) hotels and resorts,
(v) private and leisure golfers, and (vi) recreation and fun centers.
GolfJackT markets its products principally through a distribution network
consisting of 25 of the golf industry's top salesman, including the world-
renowned golf instructor Michael Hebron. Product marketing activities
include distribution of sales and product literature describing the
Company's product and its benefit, attendance at PGA trade shows, golf
driving ranges and communications with top teaching professionals
throughout the world. The Company has an exclusive patent, number
5,527,042, for the GolfJackT. The Company currently utilizes the
manufacturing facilities of Charlston & Hill Co. located in Lethbridge,
Alberta, Canada to supply the GolfJackT to intended customers.
Worldwide Golf Centers
In January of 1998, the Company formed Worldwide Golf Centers, Inc.,
("WGC") for purposes of operating golf centers designed to provide a wide
variety of practice opportunities, including facilities for driving,
chipping, putting, pitching and sand play. In addition, the Company's golf
centers typically offer golf lessons instructed by PGA-certified golf
professionals, in some cases full-line pro shops and other amenities to
encourage family participation. As of February 1, 1998, the Company owned,
leased or managed 3 golf facilities in the greater Orlando, Florida area,
comprised of: the Altamonte Springs facility, an 18.5 acre facility; the
Casselberry facility, a 22 acre facility; and the Port Orange facility, a
13 acre facility. The Company believes that it attracts customers to its
golf centers primarily due to the quality, convenience and comfort of its
facilities and their appeal to the whole family. The Company's golf centers
are designed around a driving range with target greens, bunkers and sand
traps to simulate golf course conditions. The ranges are lighted to permit
night play, the hitting tees are enclosed or sheltered from above and from
the rear in a climate sensitive environment to permit near all-weather
play. There are approximately 20 to 60 hitting tees in the facilities. In
addition to the driving range, the Company's golf centers include a number
of amenities designed to appeal to golfers and their families, such as a
4,000-6,000 square foot clubhouse (including a restaurant or snack bar),
PGA-certified golf instructors, landscaped 18-hole putting course and a
short game practice area (including putting green and sand traps). The
Company's future plans will include pro shops that are stocked with clubs,
bags, shoes, apparel, videos and related accessories from a number of
suppliers.
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BUSINESS STRATEGY
The Company's principal business strategy is to grow revenue and net
income by capitalizing on the growth and popularity of the game of golf and
by; (i) increasing the number of golf centers it owns, leases or manages
through (a) identifying and acquiring well-located ranges that have the
potential for improvement under better management and with improved or
expanded facilities, including the addition of enclosed hitting areas, full-
line pro shops, miniature golf courses and other amenities and (b) building
new centers in locations where suitable acquisition opportunities are not
available, (ii) seeking to realize economies of scale through centralized
purchasing, accounting, management information systems and cash management;
(iii) incorporating the Company's GolfJackT into its golf centers while
expanding the market of the GolfJackT through independent sales; (iv)
operate the Company's Pelican Beach Golf and Country Club; and (v)
incorporating retail golf stores (See "Business-General-Recent Activity")
within golf centers and through the additional sale of Pro Golf Discount
franchises and increasing the number of golf courses owned by the Company.
The Company is also exploring opportunities to license or franchise the
Golf Centers concept internationally and domestically.
Acquisition of Pro Golf Discount of America. On July 22, 1998, the
Company entered into an agreement to purchase all of the outstanding shares
of Pro Golf of America, Inc. ("Pro Golf") subject to certain conditions,
including financing. Pro Golf has three distinct business focuses which,
when and if the closing occurs, will become a major strategy for the
Company: (1) Retailing- Pro Golf currently has under franchise agreements,
166 stores located in the US, Canada and the Philippines; (2) Franchising-
Pro Golf is the oldest franchisor of specialty golf stores in the United
States; and (3) Equipment Licensing and Marketing- Pro Golf currently
designs and markets two golf equipment brands, Excalibor and Unique, which
are sold through the 166 Pro Golf Discount Stores.
Acquisition of Golf Centers. The Company will continue to participate
in the golf center industry by increasing the number of golf centers it
owns, leases or manages by (i) identifying and acquiring well-located,
under performing ranges that have the potential for improvement through
better management and facility enhancements and (ii) building new centers
in locations where suitable acquisition opportunities are not available.
The Company's principal acquisition strategy is to target stand-alone
ranges or golf centers in stable communities with favorable demographics,
generally in close proximity to upscale urban and suburban areas, which
generally contain the highest concentration of golfers. In determining
which facilities may be suitable acquisition candidates, management
conducts demographic and competitive analyses and considers such factors as
ease of access, visibility from major thoroughfares and potential for
improvement in revenues and operating cash flow through capital
improvements.
Acquire Existing Ranges and Centers. The Company believes the highly
fragmented driving range industry presents numerous opportunities for it to
acquire, upgrade and renovate golf centers and driving ranges. The Company
anticipates that it will purchase the land and facilities of the properties
it acquires but may from time to time enter into long-term leases or
contracts to manage sites where the Company determines ownership to be
uneconomical or where the facilities are not for sale, such as those owned
by municipalities or land which does not permit current development due to
zoning issues and/or land fill oriented sites. After taking operating
control of an acquired range, the Company may commence various capital
improvements to conform the acquired range to the Company's individually
tailored development plan for that site. Capital improvements may include
increasing the number of tee stations, sheltering the hitting stations or
enclosing the driving range, installing lights to permit night play, adding
or expanding pro shop and clubhouse facilities and constructing miniature
golf courses and other amenities to encourage family participation. The
Company trains the staff of newly acquired golf centers in accordance with
the standards of existing facilities, and directs the general manager of
the site to report to the Company's Regional Manager, who in turn reports
to the Company's General Manager located in Las Vegas, Nevada. The Company
also implements operational controls, including a token-based system for
dispensing range balls, centralized cash management and management
information systems, which allow the Company to centrally track the
operations of each facility from its headquarter offices.
<PAGE>
Develop New Centers. In locations where suitable acquisition
opportunities are not available or where the Company determines ownership
is not economically feasible, the Company intends to buy or lease land on
which it will build new golf centers similar to those currently operated by
the Company. To date, the Company has not built a facility under this plan.
Based upon its research, the Company anticipates that under normal
conditions construction of a facility will take approximately four to six
months to complete and can be achieved at a total cost of between $2
million to $3.5 million depending on amenities, exclusive of the cost of
land. However, there can be no assurance that the Company will be able to
construct its facilities in such time periods or for such cost. The Company
will initially form alliances with industry expertise to assist in such
development opportunities.
Inter-relationship Between Other Affiliate Organizations. The Company
believes that its range acquisition and development program can be
integrated within the Company's golf course acquisition strategy wherein
the range customers can be trained at the range training facilities, and
likewise, the golf course facilities in the future may provide range users
with the ability to play golf at the Company's courses. In addition, the
Company's range operations provide the Company's Golf Jack division with an
additional customer base, thus increasing the Company's revenues.
Economies of Scale. The Company believes that by virtue of its size,
the Company will continue to take advantage of quantity discounts on
equipment and golf merchandise sold through its pro shops. All accounting,
insurance, cash management, finance and human resource functions are
monitored centrally at the Company's headquarters. In markets where the
Company has or attains a substantial presence, the Company believes that it
will be able to take advantage of various advertising media to promote
attendance at its facilities.
Licensing and Franchising. The Company has plans, where viable, to
grant non-exclusive license agreements to open up golf centers under the
name "Worldwide Golf Centers" to both non-affiliated and affiliated
entities. The Company anticipates receiving royalties and/or profit
participation from each such golf center. The Company believes that the
growing recognition of the Worldwide Golf Center name and the economies of
scale it realizes in purchasing may make it attractive to license or
franchise the Worldwide Golf Center concept domestically and
internationally. The Company is currently exploring this possibility and
may grant several licenses to test its viability. The Company's ability to
significantly increase revenue, net income and operating cash flow over
time depends in large part upon its success in capital formation,
establishing viable credit facilities, acquiring or leasing and
constructing additional golf facilities at suitable locations upon
satisfactory terms. The acquisition of golf facilities may become more
expensive in the future to the extent that demand and competition
increases. The likelihood of the success of the Company must be considered
in light of the acquisition or lease opportunities available and the
problems, expenses, difficulties, complications and delays frequently
encountered in connection with the construction and opening of new golf
centers. To successfully implement its principal expansion strategy, the
Company must integrate acquired or newly opened golf facilities into its
existing operations. As the Company grows, there can be no assurance that
additional golf facilities can be readily assimilated into the Company's
operating structure.
Leverage Centralized Operations. All purchasing, accounting,
insurance, cash management, finance and human resource functions are
managed centrally at the Company's headquarters. Centralization improves
facility performance by reducing expenses and administrative burdens,
allowing management to focus on customer service and facility operations.
In addition, each facility receives the benefits of the Company's
purchasing power, enabling it to take advantage of quantity discounts on
merchandise sold through its pro shops and equipment used at its
facilities.
<PAGE>
GOLF INDUSTRY OVERVIEW
According to a 1996 study by the NGF, there were approximately 25
million golfers in the United States. The average age of the golf driving
range user was 37.1 years old, with an average household income of $55,700
per year. Those with household income in excess of $75,000 (approximately
35% of all stand-alone range users), were the most likely to visit a stand-
alone range, visiting 3.7 times more frequently than those with household
income of less than $30,000 (19% of all stand-alone range users) and 1.5
times more frequently than those with household incomes between $40,000 and
$75,000 (46% of all stand-alone range users).
Based on published information from the Golf Range and Recreational
Foundation, there were between 1,900 and 2,300 stand-alone driving ranges
in the United States. The average number of tee stations per range in the
industry, as estimated by the NGF was 40, with 50% of all stand-alone
ranges offering 35 or fewer tee stations. Large stand-alone ranges, defined
as ranges with more than 50 tee stations, accounted for approximately 21%
of all facilities. In addition, the NGF estimates that, 92% of all stand-
alone driving ranges were managed by owner-operators. The Company believes
that as a result of the highly fragmented nature of the industry and the
lack of experience, expertise and financial resources of the existing owner-
operators, the industry presents significant opportunities for the Company
to acquire, upgrade and renovate golf centers and driving ranges.
THE GOLF CENTERS
The Company's golf centers are typically larger, more attractive and
offer more amenities than the average golf centers in the industry. The
Company believes that it attracts customers to its golf centers due to the
quality, convenience and comfort of its facilities and their appeal to the
whole family. The golf centers are designed to provide a wide variety of
practice opportunities, including facilities for driving, chipping,
putting, pitching and sand play, and typically offer full-line pro shops,
golf lessons instructed by PGA-certified golf professionals and other
amenities to encourage family participation. They are designed around a
driving range with target greens, bunkers and sand traps to simulate golf
course conditions. Generally, the Company's ranges are lighted to permit
night play and the hitting tees are enclosed or sheltered from the rear in
climate sensitive environment to permit all-weather play. In addition to
the driving range, the Company's golf centers include a number of amenities
designed to appeal to golfers and their families, such as a 4,000-6,000
square foot clubhouse (including a restaurant or snack bar), PGA-certified
golf instructors, landscaped 18-hole putting course and a short game
practice area (including putting green and sand traps). The Company's
future plans will include pro shops that are stocked with clubs, bags,
shoes, apparel, videos and related accessories from a number of suppliers.
The Company's recently acquired centers are undergoing or are expected
to undergo capital improvement programs to add certain amenities. Golf
center design is affected by the size, shape and other characteristics of
available site locations, weather patterns, zoning requirements and market
conditions.
GOVERNMENTAL REGULATION
Operations at the Company's golf facilities involve the use and
limited storage of various hazardous materials such as pesticides,
herbicides, motor oil, gasoline, heating oil and paint. Under various
federal, state and local laws, ordinances and regulations (which are
administered, in the case of federal laws and regulations, primarily by the
United States Environmental Protection Agency), an owner or operator of
real property is generally liable for the costs of removal or remediation
of hazardous substances that are released on or in its property regardless
of whether the property owner or operator knew of, or was responsible for,
the release of hazardous materials. The Company has not been informed by
any governmental authority or instrumentality of any non-compliance of any
environmental laws, ordinances or regulations. Although the Company usually
hires environmental consultants to conduct environmental studies, including
invasive procedures such as soil sampling or ground water analysis, on golf
facilities it owns, operates or intends to acquire, in some cases only
limited invasive procedures are conducted on such properties and in a
limited number of instances no environmental studies are conducted. Even
when invasive procedures are used, environmental studies may fail to
discover all potential environmental problems. Accordingly, there may be
potential liabilities or conditions of which the Company is not aware. 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. Restaurants at certain of
the Company's facilities serve alcoholic beverages and are subject to
certain state "dram-shop" laws, which provide a person injured by an
intoxicated individual the right to recover damages from an establishment
that wrongfully served such beverages to the intoxicated individual.
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BUSINESS RISKS
Growth And Expansion Strategy
The Company's ability to significantly increase revenues, operating
cash flow and net income over time depends in large part upon its success
in acquiring and improving or leasing or constructing additional facilities
at suitable locations upon satisfactory terms. There can be no assurance
that suitable facility acquisition or lease opportunities will be available
or that the Company will be able to consummate acquisition or leasing
transactions on satisfactory terms. The acquisition of facilities may
become more expensive in the future to the extent that demand and
competition increase. The likelihood of the success of the Company must be
considered in light of the problems, expenses, difficulties, complications
and delays frequently encountered in connection with the construction and
opening of new facilities and improvements to existing facilities,
including delays in obtaining required permits. To successfully implement
its expansion strategy, the Company must integrate acquired or newly opened
facilities into its existing operations, which may necessitate the
implementation of enhanced operational and financial systems and may
require additional employees and management, operational, financial and
other resources. As part of its strategy, the Company has recently
announced that its is entering the franchising of golf retail stores
through the acquisition of Pro Golf of America, Inc., a transaction which
has not been completed as of the date of this filing; however is intended
to be complete during the final quarter of 1998. As the Company grows,
there can be no assurance that additional facilities can be readily
assimilated into the Company's operating structure. The Company's inability
to efficiently integrate facilities or to successfully complete the Pro
Golf of America, Inc. acquisition could have a material adverse effect on
the Company's financial condition and results of operations. In addition, a
number of the facilities which the Company has acquired have, and
facilities it may acquire in the future may have, experienced losses. As a
result of the timing of the Company's acquisitions, the seasonality of the
acquired businesses, the expansion of the Company's business to include the
Pro Golf acquisition and other factors, the Company's historical, pro forma
and trailing twelve month results of operations referred to herein are not
necessarily indicative of future results. There can be no assurance that
facilities recently acquired by the Company or those that the Company may
acquire in the future will operate profitably and will not adversely affect
the Company's results of operations.
Dependence On The Golf Industry
The Company is highly dependent on the golf industry, and the public's
interest in utilizing golf practice centers, for the generation of its
revenues and earnings. Activities such as golf have, in the past, been
susceptible to increases and decreases in popularity that have materially
affected the financial condition and results of operations of companies
dependent on such activities, and there can be no assurance that the golf
industry will not suffer a material decrease in popularity, which would
result in a material adverse effect on the Company's business and
operations. In addition, customer spending on activities such as golf is
generally considered to be discretionary spending, which may be
significantly decreased as a result of regional or national economic
downturns.
Vulnerability To Weather Conditions And Seasonal Results
Historically, the second and third quarters of the year have accounted
for a greater portion of the Company's revenues than have the first and
fourth quarters of the year for Company's similar to the Company. This is
primarily due to an outdoor playing season limited by weather. Although
most of the Company's driving ranges and Golf Course in Canada are designed
to be all-weather facilities, portions of the Company's facilities,
including the putting greens and golf courses, are outdoors and vulnerable
to weather conditions. In addition, golfers are less inclined to practice
when weather conditions limit their ability to play golf on outdoor
courses. The Company expects its expansion into the golf retail operations
through the acquisition of Pro Golf to partially offset such seasonality.
The timing of new center openings and acquisitions may also cause the
Company's results of operations to vary significantly from quarter to
quarter. Accordingly, period-to-period comparisons are not necessarily
meaningful and should not be relied on as indicative of future results. In
addition, variability in the Company's results of operations could cause
the price of the Company's securities to fluctuate following the release of
interim results of operations or other information and may have a material
adverse effect on the price of the Company's securities.
<PAGE>
Competition
The golf centers, golf training devices, and retail operations under
acquisition are each highly competitive and include competition from other
golf centers, traditional golf ranges, golf courses, other retail outlets
and other recreational pursuits. The Company may face imitation and other
forms of competition and the Company cannot prevent or restrain others from
utilizing a similar operational strategy. Many of the Company's competitors
and potential competitors such as Family Golf Centers have considerably
greater financial and other resources, experience and customer recognition
than does the Company. There can be no assurance that competition will not
adversely affect the Company's business or ability to acquire additional
properties.
Dependence On Certain Agreements
The future success of the business and operations of the Company is
dependent, in part, upon certain key operating agreements, including its
real property leases, distribution agreements with respect to the GolfJackT
and the franchise agreements, if and when the Company completes the
acquisition of Pro Golf. The termination of any of these agreements may
have a material adverse effect on the Company. After giving effect to
renewal options none of the Company's leases, as of December 31, 1997, is
expected to expire until June 1 2002. However, the leases may be
terminated prior to their scheduled expiration should the Company default
in its obligations thereunder. The termination of any of the Company's
leases could have an adverse effect on the Company. If any of the Company's
leases were to be terminated, there can be no assurance that the Company
would be able to enter into leases for comparable properties on favorable
terms, or at all. After giving effect to renewal options none of the
Company's mortgages, as of December 31, 1997, is expected to expire until
March 2001 except as stated herein. However, the mortgages may be
terminated prior to their scheduled expiration should the Company default
in its obligations thereunder. On January 15, 1998, in conjunction with
the acquisition of the Altamonte Springs driving range, Worldwide Golf
Centers, Inc. executed an agreement extending and modifying a mortgage
instrument wherein One Million Dollars ($1,000,000) is due on or before
December 15, 1999. Concurrent therewith, Worldwide Golf Centers, Inc.
purchased the Port Orange driving range subject to a mortgage which is
currently in litigation. Worldwide Golf Centers, Inc. purchased the
property on the basis that Worldwide Golf Centers, Inc may have to pay the
full amount of liability of $525,000. However, in the event Worldwide Golf
Centers, Inc is the prevailing party then in that event the mortgage will
remain at $200,000 in principal.
Additional Financing Requirements
The Company anticipates that it will need to raise additional capital
in the future to continue its long-term expansion plans, inclusive of the
financing required to acquire Pro Golf of America, Inc. There can be no
assurance that the Company will be able to obtain additional financing on
favorable terms or at all. The Company's ability to continue as a going
concern is dependent on its ability to raise the additional financing to
purchase Pro Golf of America, Inc., and to execute its reorganization plan
as referenced herein.
Environmental Regulation
Operations at the Company's facilities involve the use and limited
storage of various hazardous materials such as pesticides, herbicides,
motor oil, gasoline, heating oil and paint. Under various federal, state
and local laws, ordinances and regulations, an owner or operator of real
property is generally liable for the costs of removal or remediation of
hazardous substances that are released on or in its property regardless of
whether the property owner or operator knew of, or was responsible for, the
release of hazardous materials. The Company has not been informed by any
governmental authority of any non-compliance or violation of any
environmental laws, ordinances or regulations and the Company believes that
it is in substantial compliance with all such laws, ordinances and
regulations applicable to its properties or operations. As of December 31,
1997, the Company had not incurred material costs of remediation and the
Company knows of no material environmental liability to which it may become
subject. Although the Company usually hires environmental consultants to
conduct environmental studies, including invasive procedures such as soil
sampling or ground water analysis on facilities it owns, operates or
intends to acquire, in some cases only limited invasive procedures are
conducted on such properties and in a limited number of instances no
environmental studies are conducted. Accordingly, there may be potential
environmental liabilities or conditions of which the Company is not aware.
<PAGE>
Control By Current Stockholder
As of December 31, 1997 Janice Shahsavar wife of Mac Shahsavar
beneficially owned 6,160,000 shares of Common Stock, constituting
approximately 45% of such outstanding shares. Mr. Shahsavar is, therefore,
able to exercise significant influence with respect to the election of the
directors of the Company and all matters submitted to a vote of the
stockholders of the Company.
Year 2000 Issues
Certain of the Company's computer systems and software may interpret
the year 2000 as some other date. The operating system generally employed
by the Company is Windows 95, which is year 2000 compliant. The networking,
general ledger and accounts payable and facility point-of-sale and software
programs require software updates or modifications to address the year 2000
problem. The Company is further addressing the matter by replacing certain
older computers and installing off-the-shelf and other third-party software
that is year 2000 compliant, at an estimated cost of less than $1,000. The
Company anticipates that installation of year 2000 compliant software and
hardware will be completed by the end of 1998. The Company does not believe
that the year 2000 problem will have a material affect on the Company's
operations, however, no assurance can be given that the software updates
and new computers will resolve the problem as scheduled or at all.
EMPLOYEES
As of December 31, 1997, the Company employed approximately 6
management employees in the State of Nevada, 40 employees in Canada and 3
employees in Georgia. None of such employees is covered by a collective
bargaining agreement. The Company believes that its relationship with its
employees is satisfactory.
ITEM 2. PROPERTIES
Executive and Administrative Offices. The Company's principal
executive offices are located at 251 Saulteaux Crescent, Winnipeg, MB,
Canada, and the administrative offices are located at 1850 E. Flamingo Rd.,
Suite 111, Las Vegas, Nevada in approximately 2,500 square feet of space
leased from Balboa International under a sublease agreement on a month to
month basis.
American Turf Manufacturing. The Company leases office and warehouse
space at 101 Calhoun Avenue, Rome, Georgia, 30162. The Company as of year
end made monthly lease payments for the utilization of the space in Rome.
Pelican Beach Golf and Country Club. The Pelican Beach Golf and
Country Club is located in Gimli, Manitoba, Canada and is 100% owned by
2671914 Manitoba, Ltd., a Canadian corporation. This 18-hole championship
golf course, which includes the 12,000 square foot clubhouse consisting of
three floors. The 2,690 square foot ground floor accommodates a kitchen,
washrooms, the pro shop and a fine dining room. The second floor of the
lighthouse-shaped clubhouse hosts a 155-seat restaurant plus a cocktail
lounge. The third floor has another cocktail lounge where the principal
attraction is video lottery terminal machines and off-track horse race
betting. In addition, there are two large outdoor decks, including one
that seats 200 people in a circular area of 4,300 square feet.
<PAGE>
Altamonte Springs Driving Range. Altamonte Springs Driving Range is a
driving range complex located on 292 Central Parkway, in Altamonte Springs,
Florida, approximately 11 miles north of Orlando, Florida. The property
consists of a total of 18 acres, 5 acres are owned by Worldwide Golf
Centers, Inc. subject to a 2 year mortgage in the sum of $1 million,
payable $11,900 per month at 9.25% interest, and a 10 year lease payable
monthly at $4,220. The facility is operated by Worldwide Golf Centers,
Inc., a wholly owned subsidiary of the Company.
Casselberry Driving Range. Casselberry Driving Range is a driving
range complex located on Red Bug Lake Road, in Casselberry, Florida,
approximately 15 miles north of Orlando, Florida. The property consists of
20 acres subject to a 4-year lease with two two-year extensions, payable
quarterly at $18,000. The facility is operated by Worldwide Golf Centers,
Inc., a wholly owned subsidiary of the Company.
Port Orange Driving Range. Port Orange Driving Range is a driving
range complex located on S. Nova Road, in Port Orange, Florida,
approximately 1 mile south of Daytona Beach, Florida. The property consists
of 13 acres subject to a disputed mortgage of a maximum amount of $525,000.
GolfJackT. operates from a facility in Lethbridge, Canada, which
property is owned and operated by Tait Management Company. Tait Management
Company is controlled by Gordon Tait, general manager of 680104 Alberta,
Ltd., (a Canadian corporation, and a wholly owned subsidiary of the
Company). Tait Management has a distribution agreement with the Company
wherein Tait Management is responsible for the sales and marketing of the
GolfJackT.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material litigation, nor
to the knowledge of management is any litigation threatened against the
Company which may materially affect the Company. During 1997 and 1998 the
Company settled various lawsuits involving the Company, on a favorable
basis.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
Company's fiscal year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded in the over-the-counter
securities market through the National Association of Securities Dealers
Automated Quotation Bulletin Board System, under the NASDAQ symbol GOFR.
The following table sets forth the quarterly high and low bid prices for
the Company's Common Stock during the last two fiscal years of the Company,
as reported by the National Quotations Bureau. The quotations reflect
inter-dealer prices, without retail mark-up, markdown or commission, and
may not necessarily represent actual transactions.
1997 1996
High Low High Low
1st Quarter $2.38 $1.75 $3.63 $2.00
2nd Quarter $2.12 $0.60 $2.62 $1.88
3rd Quarter $1.19 $0.63 $2.19 $1.75
4th Quarter $0.84 $0.38 $2.31 $1.00
Note: The Company started trading on July 27, 1994
<PAGE>
As of December 31, 1997, the Company had approximately 300
shareholders of the 13,674,748 shares outstanding.
The Company has never declared or paid dividends on its Common Stock.
The Company intends to follow a policy of retaining earnings, if any, to
finance the growth of the business and does not anticipate paying any cash
dividends in the foreseeable future. The declaration and payment of future
dividends on the Common Stock will be the sole discretion of the Board of
Directors and will depend on the Company's profitability and financial
condition, capital requirements, statutory and contractual restrictions,
future prospects and other factors deemed relevant.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Financial Statements and the notes thereto appearing
elsewhere in this document.
RISK FACTORS AND CAUTIONARY STATEMENTS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results and events could differ materially
from those projected, anticipated, or implicit, in the forward-looking
statements as a result of the risk factors set forth below and elsewhere in
this report.
The industry in which the Company competes is highly competitive and
capital intensive. The Company's future growth and profitability will be
dependent upon future developments and/or acquisitions of additional golf
courses, golf practice facilities. The number of attractive and profitable
acquisition and development opportunities may be limited and the Company
may have to compete with other potential buyers whose financial and human
resources may be substantially larger than those of the Company. There can
be no assurance that the Company will be successful in developing or
acquiring any particular project or that any projects acquired or developed
by the Company will be profitable. There can be no assurance that the
Company will be successful in completing the acquisition of Pro Golf or, if
complete, upon terms and conditions satisfactory to the Company.
Additionally, the Company will be dependent upon third party funding in the
form of equity and/or debt to finance its development and acquisition of
future golf courses, golf practice facilities, and Pro Golf. Until funding
is obtained for new golf courses, golf practice facilities, or Pro Golf,
the Company may be unable to proceed with those acquisitions.
EFFECT OF REVERSE ACQUISITION ACCOUNTING
On January 22, 1997, the Company entered into an agreement with
3422488 Manitoba Ltd. whereby the Company acquired all the issued and
outstanding shares of 2671914 Manitoba, Ltd. 2671914 Manitoba, Ltd., a
Canadian Corporation, ("Pelican") owns as its sole asset the real property
generally described as the Pelican Beach Golf and Country Club, located at
Gimli, Manitoba, Canada. Consideration for the purchase was common shares
of the Company which resulted in the original shareholder of Pelican owning
approximately 61% of the Company's total issued and outstanding common
shares following the acquisition. The transaction has been accounted for as
a reverse acquisition whereby, notwithstanding the legal acquisition of
Pelican by the Company, the transaction was accounted for as an acquisition
of the Company by Pelican. Application of reverse acquisition accounting
resulted in the following accounting: (i) the consolidated financial
statements for the companies are issued under the name of Worldwide Golf
Resources, Inc. but are considered to be a continuation of the financial
statements of Pelican, the legal subsidiary; (ii) as Pelican is deemed to
be the acquirer for accounting purposes, its assets and liabilities are
included in the consolidated balance sheets at their historical carrying
values; and (iii) control of the net assets and liabilities of the Company
were acquired by Pelican for deemed consideration being the fair value
ascribed to the net assets of the Company.
<PAGE>
GENERAL
The Company is engaged in several golf-related ventures, the
manufacture and sale of an innovative golf practice and teaching device; an
18 hole golf course and club house in Manitoba, Canada; and, golf centers
designed to provide a wide variety of practice opportunities, including
facilities for driving, chipping, putting, pitching and sand play. In
addition, the Company manufactured driving range equipment through Advanced
Golf Systems, Inc. d/b/a Range Master of Temecula, California; manufactured
and installed synthetic turf for use in driving ranges, as well as other
applications (Worldwide Golf Resources of Georgia, d/b/a American Turf,
Inc.).
During 1997 the Company commenced a reorganization plan wherein the
Company effected certain strategic management changes and commenced the
elimination of certain non-performing subsidiaries. Range Master ceased
operations in July, 1997 due to a lack of orders sufficient to provide the
Company with an economically viable opportunity to produce competitive
products in the driving range equipment arena. During 1996, due to limited
working capital, the Company ceased its publication segment. In the third
quarter of 1998, the Company sold its synthetic turf manufacturing, sales
and installation subsidiary which was conducted through Worldwide Golf
Resources of Georgia, d/b/a American Turf, Inc. of Rome, Georgia.
PLAN OF OPERATION
The Company's plan of operation for 1998 includes the continued
development of the Pelican Beach Golf and Country Club, the completion of
establishing operations for the golf centers, the sale of American Turf
Manufacturing, the establishing of a manufacturing base and marketing
system for GolfJackT, and the completed acquisition of Pro Golf Discount of
America, Inc.
The Company will seek additional equity and debt sources during 1998
to fund the projects discussed herein as well as other potential
acquisition and development opportunities that may arise.
RESULTS OF OPERATIONS
As a result of the transaction with 3422488 Manitoba Ltd. being
accounted for as a reverse acquisition, the reverse acquisition accounting
resulted in the consolidated financial statements for the companies being
issued under the name of Worldwide Golf Resources, Inc., however are
considered to be a continuation of the financial statements of 2671914
Manitoba Ltd. (Pelican). This reverse acquisition accounting pre-empts the
necessity of producing comparative period results.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company had working capital of ($1,261,287)
compared to ($31,292) at December 31, 1996.
The cash requirements of funding the Company's expansion and
reorganization have historically exceeded cash flow from operations.
Accordingly, the Company has satisfied its capital needs primarily through
debt and equity financings.
The Company's outstanding indebtedness as of December 31, 1997 of
$4,306,188 bears interest at fixed and variable rates currently ranging
from non interest bearing loans to approximately 9.5%. A Regulation S
Placement Memorandum was initiated on January 25, 1997, US$1.5 Million to
be used for working and expansion capital for the Company, including the
completion of construction on the Pelican Beach Golf and Country Club. The
Company completed the offering during the first quarter of 1997. During the
year ended December 31, 1997, the Company was provided loans from the
Chairman of the Board to cover any deficit funding during 1997.
<PAGE>
SEASONALITY
The Company owns a golf course in Gimli, Manitoba, Canada, Pelican
Beach Golf and Country Club where the golf course is generally open only
during the months of April to October. The Company has not completed a full
season with the Pelican Beach Golf and Country Club and is therefore unable
to determine the full effect of such seasonality on the Company's operating
income. The Company owns its golf driving range centers in Orlando,
Florida, which is subject to rain, fire, tornadoes, and hurricanes during
certain months of the year. These weather conditions will cause a loss of
operating income during such weather conditions.
INFLATION
There was no significant impact on the Company's operations as a
result of inflation during 1995, 1996, and 1997.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial Statement Schedules
appearing on page F-1 through F-20 of this Form 10-K
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 3, 1998, William L. Clancy, C.P.A., was terminated as the
independent auditor of the company. On March 6, 1998, the Company reached
an agreement with Arthur Andersen & Co., whereby Arthur Andersen & Co. was
engaged to act as the Company's auditor, commencing with the Company's
audit for the fiscal year ending December 31, 1997. The principal
accountant's report on the Company's financial statements for either the
past two (2) years has not contained either an adverse opinion or a
disclaimer of opinion, nor was qualified or modified as to an uncertainty,
audit scope or accounting principles. The change in accountants was
approved by the Board of Directors of the Company. During the registrant's
two most recent fiscal years and subsequent interim period up to the date
of the change of accountants, there were no disagreements with the former
accountants on any matters of accounting principles or practices, financial
statement disclosure, or auditions, scope or procedures.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
SECTION 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the 1934 Act requires the Company's executive officers, directors and
persons who beneficially own more than 10% of a registered class of the
Company's equity securities to file with the S.E.C. initial reports of
ownership and reports of changes in ownership of common stock and other
equity securities of the Company. Such executive officers, directors, and
greater than 10% beneficial owners are required by S.E.C. regulation to
furnish the Company with copies of all Section 16(a) forms filed by such
reporting persons. Based solely on representation from certain reporting
persons, the Company believes that all filing requirements applicable to
the Company's executive officers, directors and greater than 10% beneficial
owners were complied with except Walter Chomicuk, who is delinquent in
filing forms 3, 4 and 5.
<PAGE>
Change in Management. In December 1996, there was a change in the
Board of Directors of the Company. Kenneth Maul, Janet Maul and G. Vance
Cartee, resigned as directors, and Gerald H. Levine, Marie A. Levine and
Seyed Torabian were elected by the remaining board. In January of 1997,
Srini Chary, M.D. and Mahmood Shahsavar were elected to the Board of
Directors. In July, 1997, Gerald H. Levine, and Marie A. Levine resigned
as Directors, and Elaine Affleck was elected as Director and interim
Secretary/Treasurer and Mac Shahsavar was elected interim President. On
September 15, 1997 the Board of Directors elected Jeffrey B. Johnson as
President, Treasurer and CFO and Debra K. Amigone was elected as Secretary.
At a meeting of Directors held on October 6, 1997 Jeffery B. Johnson was
elected to the Board of Directors until a Special Directors meeting which
was held on December 22, 1997, during which meeting Donald J. Stoecklein
was appointed as President and Debra Amigone was appointed Treasurer. At a
special meeting of shareholders held January 15, 1998, Jeffery B. Johnson
was removed as Director and Donald J. Stoecklein was elected in his place.
Mr. Stoecklein remained as President and Director until May 18, 1998, at
which time he resigned as President and as a Director; however maintained
his position as Corporate Counsel for the Company, with a concurrent
appointment of Mahmood Shahsavar as President. Doctor Shrini Chary also
resigned as a Board member on May 18, 1998. On May 18, 1998 Anthony DeMint
was nominated to the Board of Directors and appointed as Vice President of
Operations and Reginald Ebbeling was appointed to the Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS
NAME AND ADDRESS AGE POSITION HELD-RELATIONSHIP
Mac Shahsavar 40 Chairman of the Board, President
251 Saulteaux Crescent & Director
Winnipeg, MB, Canada R3J 3C7
Debra K. Amigone 45 Secretary/ Treasurer
1850 E. Flamingo Rd., Suite #111
Las Vegas, Nevada 89119
Seyed Torabian 40 Executive Vice President & Director
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Walter Chomichuk, 60 VicePresident International
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Reginald Ebbeling 67 Director
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Alice Elaine Affleck 66 Director
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Anthony DeMint 24 Director, Vice President
1850 E. Flamingo Rd. #111
Las Vegas, Nevada 89119
Mac Shahsavar, Chairman of the Board, Director, and Chief Executive Officer
of the Company. Mr. Shahsavar is currently President and CEO of National
Healthcare Manufacturing Corporation, a NASDAQ listed company. National
Healthcare Manufacturing Corporation is a provider of medical supplies.
Prior to serving as President of National Healthcare Manufacturing
Corporation, Mr. Shahsavar was President and CEO of Excelco Systems, Inc.
Debra K. Amigone, is Secretary and Treasurer of Worldwide Golf Resources,
Inc. Debra has been both a legal assistant and office administrator for
approximately 20 years. Her many years of experience in corporate law and
office administration have given her a vast knowledge of the day to day
operation of a corporation.
<PAGE>
Seyed Torabian, is Executive Vice-President of Worldwide Golf Resources,
Inc. From 1990 to 1993, Mr. Torabian was the Audit Team leader for
Westcoast Energy Inc., responsible for the company's environmental audit
program. From 1982 to 1990, Mr. Torabian was a process and field engineer
for Westcoast, responsible for project management, process optimization,
environmental control and maintenance management systems. In addition, he
has been the Regional Manager of Canex International Consultants Inc., a
private trade and trade financing company, since 1990.
Walter Chomichuk, is Vice President/International of Worldwide Golf
Resources, Inc. Mr. Chomichuk currently oversees all of the Company's
financing and corporate relations outside of the United States. He has
been an instrumental force for the Company since his appointment in 1997.
Alice Elaine Affleck, is a Director of Worldwide Golf Resources, Inc. Since
August 1993, Ms. Affleck has been the Controller and manager of
Administration for National Healthcare Manufacturing Corporation. In
addition, Ms. Affleck has been Executive Assistant to Mr. Shahsavar,
Chairman of the Board and Chief Executive Officer of the Company. Ms
Affleck's additional controllership includes four years (1987 through 1991)
with EA Computer Accounting & Tax Services, three years (1984 through 1987)
with Anesco Group (including administration and accounting for a group of
companies employing in excess of 175 personnel) and eight years (1971
through 1979) with Alpine Blasting Co. Ltd. (including responsibility for
expenditures and accounting for this corporation with a $10,000,000
budget).
Anthony DeMint, is Vice-President of Worldwide Golf Resources, Inc. Mr.
DeMint was brought into the Company during its management reorganization in
October of 1997, as Director of Corporate Development. He has been
instrumental in all aspects of the Company, from acquisitions to day to day
operations. Mr. DeMint has networked himself with many of the golf
industry's leaders and is a contributing member of the National Golf Course
Owners of America (NGCOA). Prior to his involvement with Worldwide Golf,
Mr. DeMint was Chief Operating Officer, Treasurer and Director of another
publicly held import and wholesale company, Cutty-Fleet Trading Co., where
he managed day to day operations and inventory levels in upwards of
$2,000,000 in merchandise. From 1992-1997 Mr. DeMint performed various
secondary management positions at the Aladdin Hotel and Casino, in Las
Vegas, Nevada. While at the Aladdin, he was vital in implementing cost
controls and inventory management. From 1995-1997 Mr. DeMint acted as a
managing consultant to a retail store in Las Vegas and within 18 months
tripled its revenues to approximately $500,000. Mr. DeMint currently holds
a North American Securities Administrators Association (NASAA) Series 63
license.
Reginald Ebbeling was the Managing Partner of Health Industry Development
Initiative for the Province of Manitoba, Department of Trade and Tourism.
Mr. Ebbeling obtained his Bachelor of Science in Pharmacy in 1953, from the
University of Manitoba, was the General Manager of Noco Drugs Manufacturing
from 1970 to 1973, and the President of Ebbeling Pharmacies Ltd. from 1953
to 1970.
LIMITATION OF LIABILITY OF DIRECTORS
Pursuant to the Nevada General Corporation Law, the Company's Articles
of Incorporation exclude personal liability for its Directors for monetary
damages based upon any violation of their fiduciary duties as Directors,
except as to liability for any breach of the duty of loyalty, acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, or any transaction from which a Director receives
an improper personal benefit. This exclusion of liability does not limit
any right which a Director may have to be indemnified and does not affect
any Director's liability under federal or applicable state securities laws.
The Company has agreed to indemnify its directors against expenses,
judgments, and amounts paid in settlement in connection with any claim
against a Director if he acted in good faith and in a manner he believed to
be in the best interests of the Company.
<PAGE>
BOARD OF DIRECTORS COMMITTEES AND COMPENSATION
Compensation Committee Interlocks and Insider Participation
The Board of Directors does not have a Compensation Committee. During
fiscal 1995 and up to this filing, the Board of Directors, through the
Prior Chairman of the Board, Mr. Kenneth L. Maul, reviewed and approved the
compensation of the Company's executive officers. Mr. Maul served as Chief
Executive Officer of the Company since its inception through December 1996.
At year end December 31, 1997, Mac Shahsavar, Chairman oversaw the
compensation of the Company's executive officers.
Board of Director's Report on Executive Compensation
General. As noted above, the Board of Directors of the Company does
not have a Compensation Committee and, accordingly, during the fiscal year
ended December 31, 1995, the Board of Directors, through the Chairman of
the Board, reviewed and approved the compensation of the Company's
executive officers.
Overall Policy; Significant Factors. During fiscal 1995, the
compensation decisions made by the Board of Directors in respect of the
Company's executive orders were influenced by three major factors. First,
the start-up nature of the company brings with it all of the normal capital
requirements to sustain growth, therefore certain stock compensation was
granted in lieu of salaries, commissions and for services rendered. This
practice may be extended into the future on a case by case basis and
accordingly filed with the Securities and Exchange Commission. Secondly,
the acquisitions undertaken during fiscal 1994 and 1995 brought executives
with their own respective salary structures which were reviewed and
adjusted as required. Finally, as the Company continues to mature, certain
additions to the executive staff will be required. As the company is
required to seek talent in outside market, it will be required to provide a
competitive compensation package.
As overall policy, however, the Board continues to believe that long-
term compensation tied to the creation of stockholder value should
constitute a significant component of the compensation to be earned by its
executive officers. In this respect, it will be the Board's policy to
attempt to restrain base cash compensation (subject to competitive
pressures), while providing the incentive for Management to increase
stockholder value by providing such officers with significant numbers of
market-price stock that will not confer value upon the officers unless and
until the Company's share price rises. The Board of Directors expects that
stock options will constitute a significant component of the compensation
package provided to executive officers.
The Board believes that cash bonuses are, at times, appropriate based
upon the performance of the Company's business compared to its internal
expectations and general business conditions.
ITEM 10. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term Compensation
Annual Compensation
Name and Year
Principal
Positions
Awards Payouts
Securitie
Restric s All
Other ted Underlyin LTI Other
Salary Bonus Annual Stock g P Compe
($) ($) Compens Awards Options/ Pay n-
ation ($) SARs out satio
($) ($) s n
($) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Mac
Shahsavar,
Chairman 1997 $494,700 $104,000
</TABLE>
STOCK OPTION PLANS
In October 1997, the Company's Board of Directors adopted an Incentive
Stock Option Plan (the "1997 Plan") under which options granted are
intended to qualify as "incentive stock options" or "nonqualified options"
under Sections 421 and 422A of the Internal Revenue Code of 1986, as
amended (the "Code"). This Plan replaced an earlier incentive stock option
plan of the Company. Pursuant to the Plan, options to purchase up to
1,500,000 shares of the Company's Common Stock may be granted to employees
of the Company. The Plan is administered by the Board of Directors, which
is empowered to determine the terms and conditions of each option, subject
to the limitation that the exercise price cannot be less than the market
value of the Common Stock on the date of the grant (110% of the market
value in the case of options granted to an employee who owns 10% or more of
the Company's outstanding Common Stock) and no option can have a term in
excess of 10 years (5 years in the case of options granted to employees who
own 10% or more of the Company's Common Stock). On December 29, 1997, the
Board of Directors granted an option to Mac Shahsavar, the Company's
President, to purchase up to 400,000 shares of Common Stock at $0.55 per
share.
<PAGE>
There are currently a total of 1,500,000 options outstanding under the
1997 Plan with an exercise price of $0.55 per share.
OPTION GRANTS IN 1997
Under the 1997 Stock Option Plan, the Company granted 1,500,000 stock
options to its management and employees. The exercise price of the options
is $0.55 per share, expiring December 29, 2002. The Group I stock options
(1,105,000) were earned immediately. The Group II stock options (395,000)
are earned over the two year period from date of grant starting in December
29, 1997.
In addition, during 1997, 50,000 stock options were issued as
compensation for consulting services provided by an unrelated party. The
options are exercisable at $0.87 per share and expire November 5, 2002.
PRIOR OPTION GRANTS (1996)
In 1996, options were granted to an unrelated party in connection with
a loan obtained by the Company. The options allow for the option holder to
acquire 300,000 common shares at $2.00 per share, expiring August 5, 2000.
The loan was fully repaid in 1997 and the option has not yet been
exercised.
Director's Compensation
At the date of this filing, there were no formal Director's
Compensation programs. The Board of Directors does, however, reserve the
right to implement such a plan as appropriate for retaining its current
members and in attracting outside directors. Directors are reimbursed for
their reasonable out-of-pocket expenses incurred on Company business. From
time to time directors may be provided with stock options.
Other Significant Benefit Arrangements
Employees Stock Option Plan. At the date of this filing there are no
formal Employee Stock Option Plans. However, Management will ask the Board
of Directors to review the possible implementation of such a program as
Management believes employees' ownership interest in the company is
positive both in terms of employee morale and in personnel retention.
Profit Sharing 401(k) Plan. No segment of the Company currently
provides a 401(k) plan for any of its employees. It is, however, expected
to be a matter for the Company's Board of Directors to review as Management
believes such programs are beneficial both to the Company's employees
themselves and as a means of attracting and retaining quality personnel.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management as of
December 31, 1997
Amount and Nature of Percent of
Name and Address of Beneficial Owner Beneficial Ownership Class
Mac Shahsavar -0- Common
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Debra K. Amigone .0010 Common
1850 E. Flamingo Rd., Suite #111
Las Vegas, Nevada 89119
Seyed Torabian .0022 Common
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Walter Chomichuk, .0055 Common
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Alice Elaine Affleck .0007 Common
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Anthony DeMint -0-
1850 E. Flamingo Rd. Suite 111
Las Vegas, Nevada 89119
Reginald Ebbeling .0033 Common
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J 3C7
Janice Shahsavar (1) .4498 Common
251 Saulteaux Crescent
Winnipeg, MB, Canada R3J3C7
Officer & Directors
(as a group 6 persons)
(1) Janice Shahsavar is the wife of the President, Mac Shahsavar.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March of 1997 the Company issued 255,000 shares to Mahmood (Mac)
Shahsavar, the Company's President and Chairman of the Board of Directors,
and issued 25,000 to Dr. Srini Chary, each of whom are, or at the time of
issuance, were, officers or employees of the Company, in consideration of
their contribution to the Company of their respective know how as to
company operations.
<PAGE>
During the past fiscal year, the Company paid legal fees in the
aggregate of $25,865 to Sperry Young & Stoecklein, a law firm of which
Donald J. Stoecklein, a past officer and director of the Company, is a
member.
Included in selling, general and administrative expense for 1997 is
$16,000 of rent expense paid to Balboa International, Inc. The Company is
related to Balboa International, Inc., as Donald J. Stoecklein, former
Director and President is a Director of Balboa International, Inc. and
Debra Amigone is Secretary of Balboa.
During the fiscal year ending December 31, 1996, land held for resale
with a book value of $230,978 was transferred to the shareholder, 3422488
Manitoba Ltd. for the same amount in repayment of part of the shareholder's
loan.
On February 13, 1996, concurrent with the purchase by 3422488 Manitoba
Ltd., the former shareholders of 3422488 Manitoba Ltd. forgave amounts
advanced to 3422488 Manitoba Ltd. totaling $421,763. This was a recorded as
a credit to contributed surplus. In addition, at the same time 3422488
Manitoba Ltd. transferred land held for resale to the then shareholders as
repayment of shareholder's loans of $131,176. The excess of exchange amount
of $131,176 over the book value of $97,813 was recorded as shareholders'
contribution.
On January 22, 1997, the Company purchased 100% of the issued and
outstanding shares of 2671914 Manitoba, Ltd. for 6,160,000 treasury shares.
2671914 Manitoba, Ltd., a Canadian Corporation, owns as its sole asset the
real property generally described as the Pelican Beach Golf and Country
Club, located at Gimli, Manitoba, Canada. Mac Shahsavar, a director of the
Company, is the controlling shareholder of 3422488 Manitoba Ltd., the
corporation selling 100% of its interest in 2671914 Manitoba Ltd., which
corporation owns the Pelican Beach Golf and Country Club, to the Company.
From time to time, the Company has borrowed funds from its officers,
directors and stockholders. As of December 31, 1997 the Company owed
$761,977 to Mac Shahsavar, the Company's Chairman.
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this Report
1. Financial Statements:
A. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
1. Independent Auditors Report F-2
2. Financial Statements:
Consolidated Balance Sheet at December 31, 1997 and 1996 F-3
Consolidated Statements of Operations for the Years ended
December 31, 1997 and 1996 F-4
Consolidated Statements of Operation for the 166 Day Period Ended
February 1996, F-5
Consolidated Statement of Stockholders Equity for the Years ended
December 31,1997, 1996 and February 13, 1996 F-6
Consolidated Statement of Cash Flows for the Years ended
December 31,1997 and 1996 F-7
Consolidated Statement of Cash Flows for the Period ended
February 13, 1996 F-8
Notes to Consolidated Financial Statements F-9 - F-23
All schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes
thereto.
2. During the fiscal year 1997, the Company filed the following 8-Ks.
Mac Shahsavar and Srini Chary appointed to Board.
Acquisition of Pelican Beach. Resignation of Michael
Arp. (8-K filed January 22, 1997)
Change in Accountant. (8-K filed February 25, 1997)
Mac Shahsavar elected as President and Elaine Affleck
elected to Board and Secretary. Resignation of Gerald
and Marie Levine. (8-K Filed July 21, 1997)
Election of a new Board of Directors and new officers
appointed. Acquisition of GolfJack. Resignation of
Andrew Rafkin. (8-K filed November 5, 1997)
Removal of Jeff Johnson as President and the appoint of
Don Stoecklein, Seyed Torabian and Debra Amigone as
officers. (8-K filed December 22, 1997)
<PAGE>
3. Subsequent to the end of the fiscal year, the Company filed the
following reports on Form 8-K
Removal of Jeff Johnson as Director and Don Stoecklein
elected to Board. (8-K filed January 20, 1998)
Change of Accounts (8-K filed March 9, 1998)
Changes of Officers and Directors and resignation of
Don Stoecklein and Srini Chary. (8-K filed May 19,
1998)
Acquisition of Legends (8-K filed on August 8, 1998)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
WORLDWIDE GOLF RESOURCES, INC. DATED: October 6, 1998
By:/s/Mac Shahsavar By:/s/Debra K. Amigone
Mac Shahsavar Debra K. Amigone
President & Principal Executive Officer Secretary/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Mac Shahsavar President, Principal
Mac Shahsavar Executive Officer October 6, 1998
& Director
/s/Debra K. Amigone Secretary / Treasurer October 6, 1998
Debra K. Amigone
/s/Seyed Torabian Executive Vice President October 6, 1998
Seyed Torabian
/s/Walter Chomichuk Vice President
Walter Chomichuk International October 6, 1998
/s/Alice Elaine Affleck Director October 6, 1998
Alice Elaine Affleck
/s/Anthony DeMint Director October 6, 1998
Anthony DeMint
/s/ Reginald Ebbeling Director October 6, 1998
Reginald Ebbeling
<PAGE>
WORLDWIDE GOLF RESOURCES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
TOGETHER WITH AUDITORS' REPORT
<PAGE>
AUDITORS' REPORT
To the Shareholders of
WORLDWIDE GOLF RESOURCES, INC.:
We have audited the consolidated balance sheets of WORLDWIDE GOLF
RESOURCES, INC. (a Nevada corporation) as at December 31, 1997 and 1996 and
the consolidated statements of operations, shareholders' equity
(deficiency), and cash flows for the year ended December 31, 1997, the 322
day period ended December 31, 1996, and the 166 day period ended February
13, 1996 (see Note 1). These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards in Canada, which are in substantial agreement with those in the
United States of America. Those standards require that we plan and perform
an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December
31, 1997 and 1996 and the results of its operations and the changes in its
financial position for the year ended December 31, 1997, the 322 day period
ended December 31, 1996, and the 166 day period ended February 13, 1996 in
accordance with generally accepted accounting principles in the United
States of America.
Winnipeg, Canada
July 22, 1998
Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference
In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when the
financial statements are affected by conditions and events that cast
substantial doubt on the company's ability to continue as a going concern,
such as those described in Note 1 to the financial statements. Our report
to the shareholders dated July 22, 1998 is expressed in accordance with
Canadian reporting standards which do not permit a reference to such events
and conditions in the Auditors' Report when these are adequately disclosed
in the financial statements.
Winnipeg, Canada
July 22, 1998
<PAGE>
WORLDWIDE GOLF RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(NOTE 1)
<TABLE>
Assets 1997 1996
CURRENT ASSETS
<S> <C> <C>
Cash $38,548 4,202
Accounts receivable 146,595 -
Inventory 186,912 -
Prepaid expenses and deposits 67,122 622
----------- ----------
439,177 4,824
PROPERTY AND EQUIPMENT (Note 3) 2,267,825 1,922,635
PATENT, net of accumulated amortization of $536 53,035 -
GOODWILL, net of accumulated amortization of 311,169 299,342
$192,164 (1996 - $74,835)
ASSET UNDER DEVELOPMENT (Note 4) 1,095,058 308,811
----------- -----------
$4,166,264 $ 2,535,612
<FN>
</TABLE>
<TABLE>
Liabilities And Stockholders' Equity
(Deficiency)
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable and accrued liabilities $1,646,708 $ 33,060
Deferred revenue - 3,056
Current portion of obligation under capital 53,756 -
lease (Note 5)
---------- -----------
1,700,464 36,116
SHAREHOLDER'S LOAN (Notes 6 and 12) 761,977 47,404
MORTGAGE PAYABLE (Note 7) 1,669,198 1,739,256
OBLIGATION UNDER CAPITAL LEASE (Note 5) 174,549 242,503
---------- -----------
4,306,188 2,065,279
---------- -----------
SHAREHOLDERS' EQUITY (DEFICIENCY)
Capital stock (Note 8) 3,598,618 680,072
Stock options (Note 8) 300,300 -
Deficit (4,022,650) (206,654)
Cumulative translation adjustment (16,192) (3,085)
----------- ------------
(139,924) 470,333
----------- ------------
$4,166,264 $ 2,535,612
=========== ===========
<FN>
</TABLE>
<PAGE>
WORLDWIDE GOLF RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR AND 322 DAY PERIOD ENDED DECEMBER 31, 1997 AND 1996
(NOTE 1)
<TABLE>
1997 1996
<S> <C> <C>
SALES (Note 11) $2,015,129 $241,470
COST OF GOODS SOLD 1,477,529 154,213
---------- --------
GROSS PROFIT 537,600 87,257
OPERATING EXPENSES
Selling, general and administrative (Notes 8 and 12) 4,353,596 293,911
---------- --------
NET LOSS $3,815,996 $206,654
========== ========
BASIC LOSS PER SHARE $ 0.32 $ 0.03
========== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 11,814,875 6,160,000
========== =========
<FN>
</TABLE>
<PAGE>
WORLDWIDE GOLF RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE 166 DAY PERIOD ENDED FEBRUARY 13, 1996
(NOTE 1)
<TABLE>
<S> <C>
SALES $ -
OPERATING EXPENSES
Selling, general, and administrative 103,898
--------
NET LOSS $103,898
========
BASIC LOSS PER SHARE $0.02
========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,160,000
=========
<FN>
</TABLE>
Note: The pushdown accounting method was applied to restate assets and
liabilities as at February 13, 1996 (See Note 1). Such accounting
generally results in increased amortization and depreciation in future
periods. Accordingly, this statement and the Company's consolidated
financial statements for the periods ending December 31, 1997 and 1996
are not comparable in all material respects, since those consolidated
financial statements report results of operations and cash flows using
the new cost basis.
<PAGE>
WORLDWIDE GOLF RESOURCES,INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIODS ENDED DECEMBER 31, 1997, DECEMBER 31, 1996 AND FEBRUARY 13, 1996
(NOTE 1)
<TABLE>
Cumulative
Common Shares (Note 8) Translation
Shares Amount Stock Deficit Adjustment Total
options
<S> <C> <C> <C> <C> <C> <C>
BALANCE, August 31, 20 $54 $ - $(44,326) $ - $(44,272)
1995
NET LOSS - - - (103,898) - (103,898)
TRANSLATION ADJUSTMENT - - - - (662) (662)
DIVIDENDS - - - (2,449) - (2,449)
TRANSFER OF ASSETS TO
SHAREHOLDERS - 33,363 - - - 33,363
IN EXCESS OF BOOK
VALUE (Note 12)
FORGIVENESS OF - 421,763 - - - 421,763
SHAREHOLDERS' LOANS
(Note 12)
REVALUATION ADJUSTMENT - 376,227 - - - 376,227
(Note 1)
RECLASSIFICATION OF - (151,335) - 150,673 662 -
DEFICIT (Note 1)
-----------------------------------------------------------
BALANCE, February 13, 20 680,072 - - - 680,072
1996
NET LOSS - - - (206,654) - (206,654)
TRANSLATION ADJUSTMENT - - - - (3,085) (3,085)
----------------------------------------------------------
BALANCE, December 31, 20 680,072 - (206,654) (3,085) 470,333
1996
REVERSE ACQUISITION
10,112,728 - - - - -
ADJUSTMENT (Note 8)
ISSUE OF SHARES (Note 8)
3,562,000 3,457,295 - - - 3,457,295
SHARE ISSUE COSTS - (538,749) - - - (538,749)
ISSUE OF STOCK OPTIONS
(Note 8) - - 300,300 - - 300,300
NET LOSS - - - (3,815,996) - (3,815,996)
TRANSLATION ADJUSTMENT
- - - - (13,107) (13,107)
------------------------------------------------------------
BALANCE, December 31, 1997
13,674,748 $3,598,618 $300,300 $(4,022,650) $(16,192) $(139,924)
========== ========== ======== ============ ========== ==========
<FN>
</TABLE>
<PAGE>
WORLDWIDE GOLF RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31, 1997 AND 1996
(Note 1)
<TABLE>
1997 1996
<S> <C> <C>
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
Net loss $(3,815,996) $ (206,654)
Items not affecting cash
Depreciation and amortization 193,873 91,714
Purchased services through issuance of shares 358,041 -
Compensation to employees and
Directors through issuance of shares and 999,680 -
options
------------ -----------
(2,264,402) (114,940)
Net change in non-cash operating assets and
liabilities
Accounts receivable 69,720 102,560
Inventories 2,095 98,647
Prepaid expenses and deposits (23,179) 5,244
Accounts payable and accrued liabilities 1,289,703 (85,077)
Deferred revenue (3,018) 3,065
Accrued interest on capital lease 29,546 11,493
------------- ----------
(899,535) 20,992
INVESTING ACTIVITIES
Acquisition of cash in 680104 Alberta Ltd. 5,199 -
Acquisition of cash in Worldwide Golf 24,723 -
Resources, Inc.
Acquisition of property and equipment (341,634) (6,270)
Investment in asset under development (821,990) (93,543)
------------ -----------
(1,133,702) (99,813)
------------ -----------
FINANCING ACTIVITIES
Repayment of loans (126,047) -
Advances from shareholder 735,814 278,524
Issuance of capital stock for cash 1,480,000 -
Repayment of mortgage - (196,792)
Payments on capital lease (34,105) -
----------- ----------
2,055,662 81,732
---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH FLOWS 11,921 (15)
---------- ----------
INCREASE IN CASH AND EQUIVALENTS 34,346 2,896
CASH, beginning of year 4,202 1,306
--------- ---------
CASH, end of year $38,548 $ 4,202
========= ==========
CASH PAID FOR
Interest $35,510 $18,431
========== ==========
Income taxes $ - $ -
========== ==========
<FN>
</TABLE>
<PAGE>
WORLDWIDE GOLF RESOURCES,INC.
CONSOLIDATED STATMENT OF CASH FLOWS
FOR THE PERIOD ENDED FEBRUARY 13, 1996
(NOTE 1)
<TABLE>
<S> <C>
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net loss $(103,898)
Net change in non-cash operating assets and liabilities
Accounts receivable 37,247
Prepaid expenses 29,166
Land held for resale (16,642)
Accounts payable and accrued liabilities (17,146)
----------
(71,273)
----------
INVESTING ACTIVITY
Golf course and clubhouse construction (including (153,070)
----------
capitalized interest)
FINANCING ACTIVITIES
Repayment from related party 4,619
Repayment of bank loans (105,670)
Advances from shareholders 409,480
Proceeds from mortgages 109,191
Dividends paid (2,449)
----------
415,171
----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,133
----------
INCREASE (DECREASE) IN CASH AND BANK INDEBTEDNESS 194,961
CASH AND BANK INDEBTEDNESS, beginning of year (193,655)
----------
CASH, end of year $1,306
==========
CASH PAID FOR
Interest $102,117
==========
Income taxes $ -
==========
<FN>
</TABLE>
Note: The pushdown accounting method was applied to restate assets and
liabilities as at February 13, 1996 (See Note 1). Such accounting
generally results in increased amortization and depreciation in future
periods. Accordingly, this statement and the Company's consolidated
financial statements for the periods ending December 31, 1997 and 1996 are
not comparable in all material respects, since those consolidated financial
statements report results of operations and cash flows using the new cost
basis.
<PAGE>
1. DESCRIPTION OF BUSINESS, GOING CONCERN CONSIDERATIONS AND
BASIS OF PRESENTATION
Description of Business
Worldwide Golf Resources, Inc. ("the Company") is incorporated under
the laws of the State of Nevada. The Company is primarily engaged in
manufacturing and marketing of synthetic turf, range equipment and a
patented golf-training device to golf driving ranges and entertainment
facilities and the operation of a golf course and country club.
Effective January 22, 1997, Worldwide Golf Resources, Inc. ("WWG")
entered into an agreement with 3422488 Manitoba Ltd. (the parent
company of 2671914 Manitoba Ltd., a private company operating as
Pelican Beach Golf and Country Club, "Pelican") whereby WWG acquired
all of the issued and outstanding common shares of Pelican, a private
company. Consideration for the purchase was common shares of WWG which
resulted in the original shareholder of Pelican owning approximately
61% of WWG's total issued and outstanding common shares following the
acquisition. This transaction has been accounted for as a reverse
acquisition whereby, notwithstanding the legal acquisition of Pelican
by WWG, the transaction was accounted for as an acquisition of WWG by
Pelican. Application of reverse acquisition accounting results in the
following:
(i)The consolidated financial statements are issued under the name of
WWG but are considered to be a continuation of the financial
statements of Pelican, the legal subsidiary.
(ii) As Pelican is deemed to be the acquirer for accounting
purposes, its assets and liabilities are included in the
consolidated balance sheets at their historical carrying values.
(iii) Control of the net assets of WWG is acquired by Pelican for
deemed consideration being the fair value ascribed to the net assets of
WWG which is nominal.
Accordingly, the accounting for the business combination as a reverse
acquisition at January 22, 1997 is as follows:
Deemed consideration $ -
Fair value of tangible net assets of WWG prior to
the transaction:
Cash 24,723
Other current assets 380,672
Property and equipment 159,750
Current liabilities (369,946)
Short-term loans and notes payable (238,079)
-----------
(42,880)
----------
Goodwill $42,880
=========
<PAGE>
1. DESCRIPTION OF BUSINESS, GOING CONCERN CONSIDERATIONS AND
BASIS OF PRESENTATION (continued)
Description of Business (continued)
In accordance with the reverse acquisition method of accounting, the
results of operations for the year ended December 31, 1997 represent
the results of Pelican for the period from January 1, 1997 to January
21, 1997 and the consolidated results of Pelican and WWG for the period
from January 22, 1997 to December 31, 1997.
These consolidated financial statements also include the accounts of
WWG's wholly owned subsidiaries, Worldwide Golf Resources, Inc. (a
Georgia corporation, previously American Turf Manufacturing, Inc.),
Advance Golf Systems, Inc. (trading as Range Master) and 680104 Alberta
Ltd. (trading as GolfJack).
In accordance with the reverse acquisition accounting, the comparative
consolidated financial statements presented as at December 31, 1996 and
for the 322 day period ended December 31, 1996 and for the 166 day
period ended February 13, 1996 represent the financial position and
results of operations of Pelican only.
Effective February 13, 1996, all of the issued and outstanding shares
of Pelican were acquired by 3422488 Manitoba Ltd. for a purchase price
of $680,072. The excess of the purchase price over the fair value of
the net assets of $303,845 resulted in goodwill of $376,227, which is
being amortized over five years. In accordance with the push-down
accounting method, Pelican's assets and liabilities are restated to
their fair values at February 13, with the only adjustment required
being the recording of goodwill of $376,227 and an increase in
contributed surplus of $376,227. The deficit of $150,673 and
cumulative translation adjustment of $662 prior to acquisition were
reclassified to capital stock.
Immediately prior to the acquisition of Pelican by 3422488 Manitoba
Ltd., Pelican affected a statutory amalgamation with its parent
companies. As there was no change in ownership interest, Pelican's
financial statements as at and for the period ended February 13, 1996
were combined with its parent companies at book value using the pooling-
of-interest method of accounting. The parent companies had no
significant assets other than their investment in Pelican prior to the
amalgamation. The statutory amalgamation affected a fiscal year end on
February 13, 1996. Prior to February 13, 1996, Pelican's fiscal year
end was August 31.
<PAGE>
1. DESCRIPTION OF BUSINESS, GOING CONCERN CONSIDERATIONS AND
BASIS OF PRESENTATION (continued)
Going Concern Considerations and Basis of Presentation
During 1997, the Company incurred a consolidated net loss of $3,815,996
and the shareholders' deficiency was $139,924 at December 31, 1997.
Since the change in control of the Company during the reverse
acquisition as described above, the Company has undergone significant
reorganization accompanied by senior management turnover. These re-
organizations are part of the process of focusing the Company on its
profitable operations, along with entering other facets of the golf
industry including the operations of golf training and entertainment
facilities. These reorganization activities include the closing down
of the operations of the Las Vegas Golf Magazine, Las Vegas Golf Guide
Publications and Range Master. In October 1997, 680104 Alberta Ltd.,
owner of the patent for GolfJack, an innovative golf training device,
was acquired (see Note 13). In addition, the Pelican Beach Golf Course
and Country Club was under construction and development during most of
1997. These re-organization and development activities resulted in
significant administrative and development expenditures, the write-off
of assets no longer used in operations, and had a negative impact on
the Company's revenue generating activities.
Subsequent to year end, the Company acquired three driving ranges
located in Orlando, Florida and entered into a definitive agreement to
acquire all of the outstanding shares of Pro Golf of America, Inc. (see
Note 14). Management intends to continue the reorganization
activities, divesting of less profitable operations. Subject to its
ability to divest certain operations at or above its book value, the
proceeds from the sale of divested operations will be used to repay
liabilities and invest in the remaining operations. In addition,
management expects to be able to concentrate its efforts on its core
operations, including the expansion of Pro Golf of America, Inc.'s
operations.
These consolidated financial statements have been prepared in
accordance with generally accepted accounting principles on a going
concern basis, which presumes carrying values of assets and liabilities
based on their realization and discharge in the normal course of
business.
The Corporation's ability to continue as a going concern is dependent
on its ability to raise capital to purchase Pro Golf of America, Inc.,
to obtain financing to discharge its current liabilities, and to
execute its reorganization plan as described above.
These consolidated financial statements do not give effect to any
adjustments which could be necessary should the Company be unable to
continue as a going concern and therefore be required to realize its
assets and discharge its liabilities in other than the normal course of
business and at amounts different from those reflected in the
accompanying consolidated financial statements.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
These consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated upon consolidation. All
amounts are stated in U.S. dollars.
Inventories
Raw materials are valued at the lower of cost and replacement cost.
Finished goods are valued at the lower of cost and net realizable
value. Cost is determined on the first in, first out basis.
Property and Equipment
Property and equipment is recorded at cost less accumulated
depreciation. Costs of additions, betterments, renewals and interest
during development are capitalized. Repairs and maintenance are
expensed as incurred. Gains or losses on dispositions are recognized in
the statement of operations in the period the disposition occurs.
Depreciation is being provided for using the following rates and
methods:
Pumphouse and irrigation system 4% declining balance
Equipment 10% to 20% declining balance
Equipment under capital lease 10 years straight-line
Office equipment 3 to 5 years straight-line
Leasehold improvements 7 years straight-line
Patent and goodwill
Patent and goodwill are recorded at cost less accumulated amortization.
Amortization is being provided for using the straight-line method over
the following number of years:
Patent 15 years
Goodwill 3 to 5 years
Goodwill is written down when there has been a permanent impairment in
the value of unamortized goodwill. A permanent impairment in goodwill
is determined by comparison of the carrying value of unamortized
goodwill with undiscounted future earnings of the related business.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Asset Under Development
Asset under development is recorded at cost. Cost includes all
expenditures incurred in acquiring the asset and preparing it for use.
Interest costs on related debt obligations are capitalized until the
asset is substantially completed and ready for its intended and
productive use.
Leases
Leases entered into are classified as either capital or operating
leases. Leases that transfer substantially all of the benefits and
risks of ownership to the Company are accounted for as capital leases.
At the time a capital lease is entered into, an asset is recorded
together with a related long-term obligation. Equipment under capital
lease is being depreciated over its useful life.
Rental payments under operating leases are charged to expenses as
incurred.
Translation of Foreign Currencies
The assets and liabilities of subsidiaries located outside of the
United States are translated into United States dollars using exchange
rates at the balance sheet date. Revenue and expense items are
translated using the average rate of exchange prevailing during the
period. Gains and losses resulting from translation of foreign
subsidiaries are deferred and shown as a separate component of
shareholders' equity (deficiency) (cumulative translation adjustments).
Cumulative translation adjustments represent the net unrealised foreign
exchange gains and losses on the translation of the financial
statements of entities into United States dollars.
Transactions denominated in a currency other than United States dollars
are translated at average rates of exchange prevailing during the
period. Gains and losses resulting from foreign currency transactions
are included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingencies 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.
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Loss Per Share
Loss per share data has been computed by dividing net loss by the
weighted average number of common shares outstanding during the year.
In accordance with reverse acquisition accounting, loss per share for
the period prior to acquisition is calculated using the weighted
average number of shares of Pelican outstanding during the period
restated for their conversion to an equivalent number of the Company's
shares.
3. PROPERTY AND EQUIPMENT
<TABLE>
1997 1996
Accumulated
Cost Depreciation Net Net
<S> <C> <C> <C> <C>
Land and golf $ 1,472,686 $ - $ 1,472,686 $1,534,496
course
Pumphouse and 160,702 11,872 148,830 161,538
irrigatio System
Equipment 478,222 37,718 440,504 5,184
Equipment under 221,739 31,413 190,326 221,417
capital
Lease
Office 18,059 4,346 13,713 -
equipment
Leasehold 2,060 294 1,766 -
improvements ---------- ---------- ---------- ---------
$2,353,468 $85,643 $2,267,825 $1,922,635
========== ========== ========== ==========
<FN>
</TABLE>
A capital lease obligation of $315,976 was incurred when the Company
entered into a lease for equipment in August, 1996.
4. ASSET UNDER DEVELOPMENT
The Clubhouse at Pelican Beach Golf and Country Club was under
development during the period ending December 31, 1997 and was
completed in June 1998. The golf course was under development in the
fiscal period ended February 13, 1996 and was completed in July 1996.
Mortgage interest of $111,749 and $113,861 was capitalized and included
in the golf course for the periods ended December 31, 1996 and February
13, 1996, respectively.
<PAGE>
5. OBLIGATION UNDER CAPITAL LEASE
The Company leases golf course equipment under a capital lease in
Canadian dollars. The lease obligation is converted to United States
dollars using the exchange rate as at December 31, 1997 as follows:
1998 $79,533
1999 79,533
2000 79,533
2001 46,392
---------
Total minimum lease payments 284,992
Less: amount representing interest approximating 12.6% 56,686
---------
228,305
Less: current portion 53,756
---------
$174,549
=========
6. SHAREHOLDER'S LOAN
The loan payable to a shareholder of the Company is unsecured, non-
interest bearing, with no specified terms of repayment. The
shareholder has agreed not to require repayment until January 1, 1999.
Accordingly, the loan has been classified as long-term.
7. MORTGAGE PAYABLE
The mortgage is secured by the property and project known as "Pelican
Beach Golf and Country Club" and bore interest at 9.5% per annum. On
August 2, 1996, the mortgage was amended with interest payable to the
extent of 50% of positive cash flow from the project as determined by a
formula described in the Amending Agreement. No interest was accrued
on the mortgage since August 2, 1996. The mortgage matures on March
31, 1999 and is renewable for a two-year term with interest at 9.5% per
annum.
<PAGE>
8. CAPITAL STOCK
As a result of the reverse acquisition (See Note 1), the capital stock
of the Company consists of the following:
Prior to January 22, 1997 - Capital stock of Pelican
Authorized
Unlimited Common shares, no par value
Issued
20 Common shares $680,072
As at January 22, 1997
As a result of the reverse acquisition (see Note 1), the outstanding
shares of the Company, ("the continuing consolidated entity"), consists
of the number of WWG shares issued to date with an ascribed value equal
to the share capital of the continuing entity as at January 22, 1997.
Accordingly, the ascribed share capital of the continuing consolidated
entity for accounting purposes, is computed as follows:
Common
Shares
Existing share capital of Pelican $680,072
Ascribed value of the shares of WWG
Share capital of the continuing consolidated entity $680,072
The number of outstanding common shares of the Company as at January
22, 1997 is computed as follows:
Existing outstanding common shares of WWG 3,952,748
Common shares issued to effect business combination with 6,160,000
Pelican
Outstanding common shares of the Company as at January 22, 10,112,748
1997
<PAGE>
8. CAPITAL STOCK (continued)
Subsequent to January 22, 1997
Common Shares
Number of
Shares Amount
Balance, January 22, 1997 10,112,748 $ 680,072
Issuance of shares for cash 2,080,000 1,630,000
Issuance of shares in business
Combination with GolfJack (Note 13) 537,500 231,125
Issuance of shares
for purchased services 564,500 896,790
Issuance of shares as compensation
to management and directors 380,000 699,380
Share issue costs - (538,749)
Balance at December 31, 1997 13,674,748 $ 3,598,618
The authorized share capital of the Company consists of 50,000,000
common shares with $0.0001 par value per share.
Stock Options
Under the 1997 Stock Option Plan, the Company granted 1,500,000 stock
options to its management and employees. The exercise price of the
options is $0.55 per share, expiring December 29, 2002. The Group I
stock options (1,105,000) were earned immediately. The Group II stock
options (395,000) are earned over the next two years starting from
December 29, 1997.
The fair value of these stock options is estimated using the Black-
Scholes option-pricing model with the following assumptions: no
expected dividend yield, expected volatility of 84.2%, risk-free
interest rate of 5.7%, and expected life of two years.
<PAGE>
8. CAPITAL STOCK (continued)
Stock Options (continued)
A summary of the status of the 1997 Stock Option Plan is as follows:
Weighted
Average
Exercise
1997 Price
Options outstanding, beginning of year - $-
Options granted 1,500,000 0.55
Options exercised - -
Options cancelled or expired - -
Options outstanding, end of year 1,500,000 $0.55
Options exercisable, end of year 1,105,000 $0.55
Weighted-average fair value of options granted $0.26
during the year
The compensation cost that has been charged against income for the 1997
Stock Option Plan was $287,300 in 1997.
In addition, during 1997, 50,000 stock options were issued as
compensation for consulting services provided by an unrelated party.
The options are exercisable at $0.87 per share and expire November 5,
2002. The fair value of these stock options is estimated at $0.26
using the Black-Scholes option-pricing model with the same assumptions
as used for the employee stock options. Consulting fees expense of
$13,000 has been charged against income in 1997.
In 1996, options were granted to an unrelated party in connection with
a loan obtained by the Company. The options allow the holder to
acquire 300,000 common shares at $2.00 per share, expiring August 5,
2000. The loan was fully repaid in 1997 and the option has not yet
been exercised. No amount was recorded with respect to these options.
Warrants
A Regulation S Placement Memorandum was placed on January 25, 1997 to
raise $1.5 million to be used for working and expansion capital for
American Turf Manufacturing, Inc. and Advanced Golf Industries, Inc.
d.b.a. Range Master, both wholly-owned subsidiaries of the Company, and
for expansion of the clubhouse of the Pelican Beach Golf and Country
Club. Under this Private Placement 1,480,000 units were issued at
$1.00 per unit. Each unit is comprised of one common share and one
common share warrant. The warrant has an exercisable price of $2.00
per share at any time prior to April 1, 1998. No warrants were
exercised prior to the expiration date. The entire amount of the
proceeds of $1,480,000 was included in shares issued for cash. The
value of the warrants is determined to be nominal.
<PAGE>
9. INCOME TAXES
The Company and its subsidiaries had accumulated accounting losses of
approximately $3,800,000 as at December 31, 1997. The tax net
operating loss carry-forward as at December 31, 1997 has not yet been
determined. Any deferred tax assets arising from the loss
carryforwards would be netted against an equal amount of valuation
allowance.
10.LEASES
At December 31, 1997, the Company was committed under an operating
lease which expires August 31, 1998 to rent office premises in Las
Vegas, Nevada. Total rent to be paid for the period January 1, 1998 to
August 31, 1998 is $32,700.
11. SEGMENT INFORMATION
The Company operates primarily in, and derives revenue from, golf-
related ventures including manufacturing of synthetic turf and golf-
training equipment and operation of a golf course and country club.
Sales to customers in the United States and foreign countries are as
follows:
December December February
31, 1997 31, 1996 13, 1996
Sales to customers in the United States $1,790,580 $- $-
Sales to customers outside of the
United States 224,549 241,470 88,656
----------- --------- ---------
$2,015,129 $ 241,470 $88,656
12. RELATED PARTY TRANSACTIONS
December 31, 1997
Included in selling, general and administrative expense is $25,865 of
legal fees paid to Sperry, Young and Stoecklein, for legal work
performed by Don Stoecklein, President of the Company from September
1997 to March 1998.
<PAGE>
12. RELATED PARTY TRANSACTIONS (continued)
December 31, 1997 (continued)
Included in selling, general and administrative expense is $16,000 of
rent expense paid to Balboa International, Inc. The Company is related
to Balboa International, Inc. as Don Stoecklein is a Director of Balboa
International, Inc.
December 31, 1996
During the fiscal year ending December 31, 1996, land held for resale
with a book value of $230,978 was transferred to the shareholder,
3422488 Manitoba Ltd. for the same amount in repayment of part of the
shareholder's loan.
February 13, 1996
Concurrent with the purchase by 3422488 Manitoba Ltd. on February 13,
1996, the former shareholders of Pelican forgave amounts advanced to
Pelican totaling $421,763. This was recorded as a credit to
contributed surplus.
During the fiscal year ending February 13, 1996, Pelican transferred
land held for resale to the then shareholders as repayment of
shareholders' loans of $131,176. The excess of the exchange amount of
$131,176 over the book value of $97,813 was recorded as shareholders'
contribution.
13.BUSINESS ACQUISITION
Acquisition of 680104 Alberta Ltd.
Effective October 23, 1997, the Company acquired all of the outstanding
shares of 680104 Alberta Ltd. (d.b.a. GolfJack), a company which owns
the patent and distribution rights to the GolfJack, in exchange for
537,500 restricted shares of the Company. This transaction has been
accounted for using the purchase method.
Purchase price $231,125
Fair value of net assets acquired:
Cash 5,199
Inventory 67,665
Prepaid expenses 3,360
Patent 53,571
129,795
Excess of purchase price over fair value
of assets acquired, allocated to goodwill $101,330
<PAGE>
13.BUSINESS ACQUISITION (continued)
Acquisition of 680104 Alberta Ltd. (continued)
The results of operations have been included in the accounts of the
Company from the acquisition date. Pro-forma results of operations
have not been presented for the full year as it would not be materially
different from the 1997 results of operations.
Concurrent with the acquisition, the Company entered into a
distribution agreement with Tait Management Services Ltd. ("Tait").
Under the distribution agreement, Tait is the sole distributor for
GolfJack and acquires GolfJacks units from the Company at a discount
from list price for sale to customers. The agreement has a one-year
term with automatic renewal at the end of each term.
14.SUBSEQUENT EVENTS
Share Issuances
On January 21, 1998, 784,000 shares were issued under an S-8
registration for administrative services rendered in fiscal 1997. The
shares were valued at $0.78/share for a total compensation of $611,520.
The full amount of the liability and expense has been accrued in these
consolidated financial statements.
On February 25, 1998, 1,500,000 restricted shares valued at $645,000
were issued with respect to the acquisition of assets from Legends of
Golf (see below).
In addition, 320,000 S-8 shares and 282,000 restricted shares were
issued for services rendered in fiscal 1998. The value of these shares
totals $374,844.
Acquisition of Golf Ranges
Effective January 1, 1998, the Company (through its wholly-owned
subsidiary Worldwide Golf Centers, Inc.) acquired certain assets and
assumed the liabilities of three golf ranges in Florida from Legends
Sports, Inc. in exchange for consideration of 1,500,000 restricted
shares of the Company. Total consideration paid was as follows:
Restricted shares issued to Legends Sports, Inc. $645,000
Shares issued for purchase costs 160,000
Debt assumed 1,799,469
Capital lease obligations assumed 348,265
Other payables assumed 337,556
-----------
$3,290,290
<PAGE>
14.SUBSEQUENT EVENTS (continued)
Acquisition of Golf Ranges (continued)
The total consideration paid was allocated, based on the estimated fair
value of the assets and liabilities acquired at the date of
acquisition, as follows:
Land $2,411,497
Buildings 386,515
Equipment 492,278
----------
$3,290,290
Debt assumed consists of the following:
Note payable, James Deas, bears interest at a rate of 12%
per annum, matures December 15, 1999, collateralized by a $1,000,000
first deed of trust on certain real property (Altamonte).
Note payable, Scott's Golf Driving Range, Inc., bears
interest at 6% per annum, currently due and payable, under
negotiation to extend, collateralized by a first deed of
trust on certain real property (Port Orange). 525,000
Note payable, Mac Shahsavar, shareholder of the Company, non-
interest bearing, no specified terms of repayment 274,469
------------
$1,799,469
Capital leases consist of the following:
Red Bug modular buildings, matures December 31, 2001 $38,400
Altamonte Restaurant, matures March 1, 2006 513,763
----------
552,163
Less: amount representing interest (167,935)
amount representing taxes (35,963)
----------
$348,265
In addition, the Company has also assumed two operating leases for the
land at Altamonte and Red Bug. Future minimum lease payments are as
follows:
1998 $118,901
1999 $122,314
2000 $125,897
2001 $129,659
2002 $50,651
<PAGE>
14.SUBSEQUENT EVENTS (continued)
Potential Acquisition of Pro Golf of America, Inc.
On July 22, 1998, the Company entered into an agreement to purchase all
of the outstanding shares of Pro Golf of America, Inc. ("Pro Golf") for
$7,500,000 cash, subject to the following conditions to be satisfied
within 60 days following the execution of the agreement:
a) The Company to obtain financing to satisfy the cash requirements
for the purchase price of Pro Golf, State of the Art Golf Company,
Inc. (see b) below) and Pro Golf of Nevada, L.L.C. (see c) below).
b) The Company to enter into an agreement with State of the Art Golf
Company, Inc. (SOTA) to acquire all of the assets of SOTA, which
consists of the rights to the Pro Golf private labels golf
products, for consideration of $500,000.
c) The Company to enter into an agreement with the shareholders of Pro
Golf (selling shareholders) to purchase their ownership interests
in Pro Golf of Nevada, L.L.C., which operates the Pro Golf Discount
Superstore in Las Vegas, Nevada.
d) The Company and the selling shareholders to develop a mutually
agreed incentive plan authorizing the issuance of options to
purchase up to 200,000 common shares of the Company to the key
employees of Pro Golf, excluding the selling shareholders.
e) The Company to issue 250,000 common shares to be held in escrow
until the closing date, which will be no later than October 15,
1998. In the event that the purchase of Pro Golf has not occurred
on or before the closing date, these shares will be released to the
selling shareholders.
Pro Golf is the franchiser of 166 "golf only" retail stores in the
United States, Canada, and the Philippines. In addition, Pro Golf
utilizes the franchised stores as a distribution network for the
various private label products that are licensed by Pro Golf.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 38,548
<SECURITIES> 0
<RECEIVABLES> 146,595
<ALLOWANCES> 0
<INVENTORY> 186,912
<CURRENT-ASSETS> 439,177
<PP&E> 2,353,468
<DEPRECIATION> 85,643
<TOTAL-ASSETS> 4,166,264
<CURRENT-LIABILITIES> 1,700,464
<BONDS> 0
0
0
<COMMON> 3,598,618
<OTHER-SE> 284,108
<TOTAL-LIABILITY-AND-EQUITY> 4,166,264
<SALES> 2,015,129
<TOTAL-REVENUES> 2,015,129
<CGS> 1,477,529
<TOTAL-COSTS> 1,477,529
<OTHER-EXPENSES> 4,353,596
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,815,996
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,815,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,815,996)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> 0
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