UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ________________
Commission File Number 0-21337
GOLF VENTURES, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0403864
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
102 WEST 500 SOUTH, SUITE 400, SALT LAKE CITY, UTAH, 84101
(Address of principal executive offices, including zip code)
(801) 363-8961
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant has: (1) 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) been subject to such
filing requirements for the past 90 days. Yes X No_
Number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of February 11, 1997
Common Stock, par value $.001 1,852,828
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TABLE OF CONTENTS
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Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. Balance Sheets - December 31, 1996 and 4
March 31, 1996
Statements of Operations and Accumulated Deficit -
Nine months ended December 31, 1996 and 1995 and three
months ended December 31, 1996 and 1995 5
Statements of Stockholders Equity--March 31, 1995 through
December 31, 1996 6-7
Statements of Cash Flows - Nine months ended
December 31, 1996 and 1995 and three months ended
December 31, 1996 and 1995 8-9
Notes to Financial Statements 10-14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Securities Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 18
<PAGE>
PART I
Item 1. Financial Statements
The following, unaudited Financial Statements for the three and nine
month periods ended December 31, 1996, include all adjustments which management
believes are necessary for the financial statements to be presented in
conformity with generally accepted accounting principals.
(THIS SPACE INTENTIONALLY LEFT BLANK)
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Balance Sheets
ASSETS
December 31, March 31,
1996 1996
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash $ 64,916 $ 784,380
Accounts receivable, net (Note 1) 72,528 92,153
Inventory (Note 1) 560,965 748,010
--------------- ----------------
Total Current Assets 698,409 1,624,543
PROPERTY AND EQUIPMENT 9,112 -
LAND HELD FOR DEVELOPMENT (Note 3) 11,220,339 5,287,605
--------------- ----------------
TOTAL ASSETS $ 11,927,860 $ 6,912,148
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Construction loans payable $ 185,775 $ 185,775
Current portion of long-term debt (Note 5) 507,700 942,574
Accrued expenses 941,588 1,031,814
--------------- ----------------
Total Current Liabilities 1,635,063 2,160,163
--------------- ----------------
LONG-TERM DEBT (Note 5) 6,253,027 1,410,532
--------------- ----------------
Total Liabilities 7,888,090 3,570,695
--------------- ----------------
COMMITMENTS AND CONTINGENCIES (Note 7) - -
--------------- ----------------
STOCKHOLDERS' EQUITY
Preferred stock (10,000,000 shares authorized at par value of $.001
24,304 and 25,000 class "A" and 287,064 and 259,427 class "B"; shares
issued and outstanding, respectively (Note 6) 311 284
Common stock (25,000,000 shares authorized
at par value of $.001) 1,852,828 and 1,628,828
shares issued and 1,842,442 and 1,618,442 shares
outstanding, respectively (Note 7) 1,853 1,629
Additional paid-in capital 8,328,704 7,173,573
Accumulated deficit (4,291,098) (3,834,033)
--------------- ----------------
Total Stockholders' Equity 4,039,770 3,341,453
--------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,927,860 $ 6,912,148
=============== ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Operations
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
--------------------------------- ----------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUE
<S> <C> <C> <C> <C>
Real estate sales $ 274,000 $ 652,907 $ 113,000 $ 311,107
Cost of sales - real estate 160,422 430,254 67,938 151,207
--------------- --------------- --------------- ----------------
Gross Profit 113,578 222,653 45,062 159,900
GENERAL AND
ADMINISTRATIVE EXPENSES 621,445 310,595 162,042 127,962
--------------- --------------- --------------- ----------------
NET LOSS FROM OPERATIONS (507,867) (87,942) (116,980) 31,938
OTHER INCOME
Interest income 34,935 5,536 9,798 2,110
Other income 15,867 15,736 6,641 8,035
--------------- --------------- --------------- ----------------
NET LOSS $ (457,065) $ (66,670) $ (100,541) $ 42,083
=============== =============== =============== ================
LOSS PER SHARE $ (0.27) $ (0.01) $ (0.05) $ 0.00
=============== =============== =============== ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Stockholders' Equity
Additional
Prferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1995 92,694 $ 93 1,532,607 $ 1,533 $ 3,140,391 $ (227,742)
Class "A" preferred stock
converted to common
stock (2,000) (2) 1,221 1 1 -
Class "B" preferred stock
issued for cash 193,733 193 - - 968,473 -
Common stock issued for
services - - 95,000 95 424,905 -
Common stock subscriptions
paid in services (Note 7) - - - - 2,835,000 -
Distributions to parent
company - - - - (195,197) -
Income (loss) for the
year ended
March 31, 1996 - - - - - (3,606,291)
------------ --------- ------------- ----------- -------------- --------------
Balance, March 31, 1996 284,427 284 1,628,828 1,629 7,173,573 (3,834,033)
Distributions to parent
company (Unaudited) - - - - (339,060) -
Contribution of capital
by parent company
(Unaudited) - - - - 522,216 -
Common stock issued for
cash (Unaudited) - - 224,000 224 1,046,297 -
Class "B" preferred stock
issued for interest
(Unaudited) 27,637 27 - - 138,157 -
Class "A" preferred stock
issued for interest
(Unaudited) 1,804 2 - - 9,019 -
Class "B" preferred stock
repurchased by the
Company (Unaudited) (2,500) (2) - - (12,498) -
------------ --------- ------------- ----------- -------------- --------------
Balance forward 311,368 $ 311 1,852,828 $ 1,853 $ 8,537,704 $ (3,834,033)
------------ --------- ------------- ----------- -------------- --------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Stockholders' Equity (Continued)
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance forward 311,368 $ 311 1,852,828 $ 1,853 $ 8,537,704 $ (3,834,033)
Stock issuance costs
(Unaudited) - - - - (209,000) -
Income (loss) for the
nine months ended
December 31, 1996
(Unaudited) - - - - - (457,065)
------------ --------- ------------- ----------- -------------- --------------
Balance,
December 31, 1996 311,368 $ 311 1,852,828 $ 1,853 $ 8,328,704 $ (4,291,098)
============ ========= ============= =========== ============== ==============
The accompanying notes are an integral part of these financial statements.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Cash Flows
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
--------------------------------- ----------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- -----------
OPERATING ACTIVITIES (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ (457,065) $ (66,670) $ (100,541) $ 42,083
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation 496 - 330 -
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable 19,625 (7,544) 24,250 (35,388)
(Increase) decrease in inventory 187,045 338,533 113,000 126,913
Increase (decrease) in accrued
expenses 56,979 195,225 26,279 (21,147)
--------------- --------------- --------------- ----------------
Net Cash Provided (Used)
by Operating Activities (192,920) 459,544 (63,318) 112,461
--------------- --------------- --------------- ----------------
INVESTING ACTIVITIES
Property and equipment (9,608) - (3,620) -
Land held for development (3,498,966) (390,190) (2,196,360) (120,926)
--------------- --------------- --------------- ----------------
Net Cash Provided (Used)
by Investing Activities (3,508,574) (390,190) (2,199,980) (120,926)
--------------- --------------- --------------- ----------------
FINANCING ACTIVITIES
Preferred stock redeemed (12,500) - (12,500) -
Capital contributed by parent 522,216 - 522,216 -
Stock offering costs (209,000) - - -
Common stock issued for cash 1,046,521 - - -
Long-term borrowings 2,683,727 418,382 275,000 250,000
Distributions to parent company (339,060) (210,288) (958) -
Principal payments on
long-term debt (709,874) (60,865) (150,078) (54,673)
--------------- --------------- --------------- ----------------
Net Cash Provided (Used)
by Financing Activities 2,982,030 147,229 633,680 195,327
--------------- --------------- --------------- ----------------
INCREASE (DECREASE) IN CASH (719,464) 216,583 (1,502,982) 186,862
CASH AT BEGINNING
OF PERIOD 784,380 20,091 1,567,898 49,812
--------------- --------------- --------------- ----------------
CASH AT END OF PERIOD $ 64,916 $ 236,674 $ 64,916 $ 236,674
=============== =============== =============== ================
The accompanying notes are an integral part of these financial statements.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Cash Flows (Continued)
For the Nine Months Ended For the Three Months Ended
December 31, December 31,
--------------------------------- ----------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
SUPPLEMENTAL CASH
FLOW DISCLOSURES
Cash Paid For:
<S> <C> <C> <C> <C>
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
NON CASH FINANCING
ACTIVITIES
Preferred stock issued for debt $ 147,205 $ 168,382 $ 147,205 $ -
Land purchased for a note
payable $ 2,433,768 $ - $ - $ -
The accompanying notes are an integral part of these financial statements.
</TABLE>
9
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1996 and December 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Golf Ventures, Inc., (the Company), has acquired real estate in
St. George, Utah and is engaged in the business of real estate
development, primarily golf courses with residential real estate.
The following is a summary of the more significant of its
accounting policies:
A. INCOME TAXES
The Company has adopted SFAS 109, Accounting for Income Taxes. No
provision has been made for federal income taxes due to net
operating loss carryforwards, sufficient to offset any current tax
liabilities. No deferred tax asset is being recognized currently
based on the Company's past operating performance. The net
operating losses are expected to expire as summarized below.
Year ended
to expire Amount
------------------ ----------------
2007 $ 16,000
2008 114,000
2009 97,000
2010 3,623,000
2011 450,000
----------------
Total $ 4,300,000
================
The Company has elected a March 31 fiscal year end for book and
tax purposes.
B. EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The computation of net loss per share of common stock is based on
the weighted average number of shares outstanding during each
period. The common stock equivalents are anti-dilutive and
accordingly are not used in the loss per share computation.
C. INCOME RECOGNITION
Income on real estate is recognized in accordance with the
provisions of FASB-66.
D. CONCENTRATION OF RISK
The Company maintains its cash in bank deposit accounts at high
credit quality financial institutions. The balances, at times, may
exceed federally insured limits. At March 31, 1996 the Company
exceeded the insured limit by approximately $584,380.
The Company builds and develops real property in Southern Utah. In
the normal course of business the Company extends secured credit
to its customers.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1996 and December 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
E. CONSTRUCTION LOANS PAYABLE
An officer of the Company has arranged for short term loans to
finance the construction of homes held in inventory for resale.
The loans are secured by the homes and accrue interest at variable
rates.
F. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
The changes in operating assets and liabilities are shown net of
non cash transactions.
G. INVENTORY
The Company carries in inventory the cost of the developed lots
and condominiums it has available for sale. The inventory is
recorded at the lower of cost or market.
H. ACCOUNTS RECEIVABLE
The Company's accounts receivable are from the sale of lots and
condominiums in its Cotton Manor and Cotton Acres projects. The
Company has recorded an allowance for doubtful accounts of $5,000.
The Company holds a trust deed on the properties sold and the
Company expects that its sales backlog will allow it to
immediately resell any property which it foreclosed upon.
I. ESTIMATES
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of commitments
and contingencies, and the reported revenues and expenses.
J. UNAUDITED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited
statements of operations, stockholders' equity and cash flows for
the three months and nine months ended December 31, 1996 and 1995
include all of the adjustments necessary for a fair statement of
results. All such adjustments are of a normal recurring nature.
NOTE 2 - REORGANIZATION, NAME CHANGE AND STOCK SPLIT
On December 28, 1992, at a meeting of the shareholders the name of
the Company was changed to Golf Ventures, Inc. Also a reverse
stock split was approved of one share for ten shares of the
Company's outstanding common stock. The financial statements have
been restated to reflect the reverse stock split on a retroactive
basis.
On February 1, 1996, the Company reverse split its common stock on
a 1 share for 5 shares basis. The financial statements reflect the
reverse stock split on a retroactive basis.
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1996 and December 31, 1996
NOTE 3 - LAND HELD FOR DEVELOPMENT
On December 28, 1992 the Company purchased the Red Hawk real
estate development and the Cotton Manor/Cotton Acres real estate
development. The land was purchased for 654,746 shares of common
stock and the assumption of debt. The Red Hawk land is undeveloped
and in order for the Company to realize its investment it will
need to obtain adequate financing. The land was acquired from a
company which ended up with control of the Company as a result of
the transaction, therefore the land was recorded at predecessor
cost.
For the year ended March 31, 1996, the Company capitalized
$514,687, in construction period interest costs. The cost of the
land is less than the estimated net realizable value of the land.
NOTE 4 - RELATED PARTY TRANSACTIONS
During the year ended March 31, 1996, the Company issued 193,733
shares of class "B" preferred stock to a shareholder for cash
totaling $968,666 (See Note 6).
During the nine months ended December 31, 1996 the Company
completed a private placement of 200,000 shares of its common
stock at $5.00 per share. The Company incurred $100,000 of costs
in connection with the stock offering for net proceeds of
$900,000.
NOTE 5 - LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(Unaudited)
Promissory note secured by land. Interest accrued at 10% per
annum, payable in shares of the Company's common stock. $120,000
principal plus a percentage of the proceeds of lot sales payable
annually beginning on February 1, 1991 through February 1, 1997
at which time the balance will be due as a balloon payment.
$2,000 from each
<S> <C> <C>
Red Hawk lot sale also applies to the note. $ 646,502 $ 721,502
Promissory note secured by land. Annual
payments through August 15, 2016 at $30,524
per year including interest at 10% per annum. 201,890 204,435
Promissory note secured by land, bearing
interest at 9.75% payable in full including
accrued interest on June 18, 1997. 1,188,805 355,000
---------------- ---------------
Balance forward $ 2,037,197 $ 1,280,937
----------------- ---------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
12
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1996 and December 31, 1996
NOTE 5 - LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
(Unaudited)
<S> <C> <C>
Balance forward $ 2,037,197 $ 1,280,937
Purchase contract and note secured by land. Interest accrued at
10% per annum, payable monthly at $25,000 per month until May 15,
1998 at which time the
balance including accrued interest will be due. 2,283,690 -
Trust deed note secured by land. Interest accrued at 10% per
annum, payable monthly at $5,000 per month through January 30,
1996 at which time the
balance including accrued interest will be due. - 401,366
Trust deed note secured by land and 50,000 shares of the Company's
common stock. Interest accrued at 15% per annum. Principal and
interest were due May 31, 1995. However, the note holder has not
demanded full payment and is accepting partial
payments. 80,470 211,433
Trust deed note payable, secured by land. Interest
accrued at 8% per annum. Payable $100,000 per
year plus the accrued interest for that year. 359,370 459,370
Trust deed note, dated June 10, 1996, to be repaid after 36
months. The note is secured by a trust deed on 616 acres of the
Red Hawk property. The note bears interest at 10.5% per
annum which is payable monthly. 2,000,000 -
----------------- -----------------
Subtotal 6,760,727 2,353,106
Less Current Portion (507,700) (942,574)
----------------- -----------------
Long-Term Portion $ 6,253,027 $ 1,410,532
================= =================
The accompanying notes are an integral part of these financial statements.
</TABLE>
13
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1996 and December 31, 1996
NOTE 5 - LONG-TERM DEBT (CONTINUED)
Maturities on long-term debt are as follows:
1996 $ 507,700
1997 1,144,557
1998 2,515,517
1999 2,196,884
2000 145,936
After 2000 250,133
---------------
$ 6,760,727
NOTE 6 - PREFERRED STOCK
The Company has issued 27,000 shares of its class "A" cumulative
convertible preferred stock through a private placement at $5 per
share. The preferred stock pays a cumulative dividend at the rate
of 10% per annum and is convertible into common stock per terms of
the offering. The preferred stock also has certain preferences in
liquidation. In 1996, 2,000 shares were converted into 1,221
shares of common stock. The Company has also issued 259,427 shares
of class "B" preferred stock. The class "B" preferred stock has a
preference upon liquidation of $5.00 per share, plus all accrued
and unpaid dividends, whether or not earned or declared. The
preference is secondary to the liquidation preference of the class
"A" stock. The class "B" preferred stock is convertible at anytime
before March 31, 1998 at the rate of 1 share of common stock to be
valued at 40% of the low bid price for free trading shares at my
time during the eighteen months preceding the conversion. The
Company may redeem the class "B" preferred stock on or before
March 31, 1998 at $5.00 per share plus dividends accrued at 10%
per annum.
NOTE 7 - COMMON STOCK SUBSCRIBED
On March 22, 1994 the Company entered into an agreement to issue
567,000 shares of common stock. In May of 1994 the Company
terminated the offering due to non performance by the sales agent.
In 1996, the shares were issued for services rendered and valued
at $5.00 per share.
The Company has issued an additional 10,386 shares which have been
offered to creditors in settlement of accrued expenses by the
creditors have not yet accepted the shares. These shares are
considered issued but not outstanding for financial statement
purposes. The amount of the liabilities is included in accrued
expenses at December 31, 1996 and March 31, 1996, respectively.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Item 2. Management's Discussion & Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months ended 12/31/96 compared to Three Months ended 12/31/95
Sales for this period decreased $198,107 (64%) from $311,107 to
$113,000. Income from operations decreased from a net gain of $42,083 to a net
loss of $100,541, a change of $142,624 (339%).
Sales include the sale of real estate from the Cotton Manor and Cotton
Acres subdivisions. During the current three month period four lots were sold
from the Cotton Acres subdivision for an average of $28,250. This compares to
ten lots sold for an average of $23,363 in the comparable prior year period. The
average cost of the lots sold in the current period was $12,643, 45% of sales,
and the average cost of the lots sold for the same period last year was $12,691,
54% of sales. The volume of lot sales has been adversely affected by the
non-availability of funds needed to develop new lots. Inventory levels of
completed lots remain very low. GVI has completed building two model townhomes
within the Cotton Manor subdivision. GVI is considering selling these units to
generate funds to continue the development of both lots and townhomes.
Total general and administrative expenses increased $34,080 (27%) from
$127,962 during the three months ended December 31, 1995 to $162,042 during the
three months ended December 31, 1996. The increase is due primarily to the
increase in legal fees paid for ongoing matters. Interest income was $9,798 this
period compared with $2,110 for the same period last year, resulting in a change
of $7,686 (364%). Interest income relates to the interest earned on the
remaining balance of the $2,000,000 CD placed in the bank for Granite
Construction's (Granite) work on Red Hawk. Through January 31, 1997 Granite had
earned and received $1,981,681 on the Red Hawk contract. Granite has completed
their contract and the CD account has been closed.
Management believes that the future of the Company will depend on its
ability to find long term financing for its Red Hawk project.
Nine Months ended 12/31/96 compared to Nine Months ended 12/31/95
Sales for this period decreased from the same period in the prior year
by $378,907 (58%) from $652,907 to $274,000. The net loss also increased for the
same period by $390,395 (586%) from $66,670 to $457,065.
Sales include the sale of real estate from the Cotton Manor and Cotton
Acres subdivisions. During the current nine month period, ten lots were sold
from the Cotton Acres subdivision for an average of $26,833 compared with
fourteen lots and three condominiums sold for an average of $21,950 and $84,667,
respectively, in the comparable prior year period. The average cost of lots sold
this year was $12,462 and total cost of sales was $124,618, 45% of sales,
compared with the average cost of the lots and condominiums sold last year of
$12,391 and $56,420, respectively, and total cost of sales of $342,736, 59% of
sales. The cost of sales is higher due to the sale of three condominiums during
the prior year period compared with no condominiums sold in the current period.
15
<PAGE>
Total general and administrative expenses increased $310,850 (100%)
from $310,595 during the nine months ended December 31, 1995 to $621,445 during
the nine months ended December 31, 1996. The increase is due primarily to the
cost of travel and fees paid for promotional services incurred in an effort to
increase awareness and expand the markets for the Company's common stock. Also,
legal fees increased for ongoing matters and a $100,000 fee was paid by the
Company to a landowner to renegotiate the terms of the land purchase. This fee
was expensed during the period.
Liquidity and Capital Resources
At December 31, 1996, the Company had total assets of $11,927,860,
total liabilities of $7,888,090 and total stockholders equity of $4,039,770
compared with total assets of $6,912,148, total liabilities of $3,570,695 and
total stockholders equity of $3,341,453 at March 31, 1996. At December 31, 1996
cash decreased by $719,464 (92%) to $64,916 from $784,380 on March 31, 1996. The
increase in total assets was due primarily to the addition of the Stucki land
($2,266,104) to the balance sheet. Also, development costs increased for
capitalized payments of $1,981,681 to Granite Construction, capitalized interest
on borrowings of $733,948 and $93,169 paid to Washington City for installation
of a water line. Total liabilities at December 31, 1996 increased by $4,317,395
(121%) to $7,888,090 from $3,570,695 at March 31, 1996. The increase was due to
an increase in long-term debt of $4,842,495, related to the loans from Miltex
Industries and Banque SCS received in the prior quarter and the addition of the
Stucki loan for $2,266,104 offset by loan paydowns and a reduction in accrued
expenses.
As of December 31, 1996, the Company had total current assets of
$698,409 and total current liabilities of $1,635,063 which results in a current
ratio of 0.43:1; compared with a current ratio of 0.75:1 as of March 31, 1996.
The current ratio decrease was due primarily to the decrease in cash in banks
after completing payment to Granite Construction. Real estate inventory as of
December 31, 1996 decreased by $187,045 (25%) to $560,965 due primarily to the
sale of ten lots in the Cotton Acres subdivision since March 31, 1996. Accounts
receivable also decreased $19,625 (21%) from $92,153 to $72,528 for the receipt
on lot sales receivables in Cotton Acres.
Current liabilities at December 31, 1996 decreased by $525,100 (24%),
from March 31, 1996 due primarily to a loan payoff of $401,366, additional loan
paydowns and a reduction in accrued expenses of $90,226 (9%).
The Company has historically satisfied its cash needs through the sale
of real estate, the private placements of securities and secured borrowings. In
June 1996, the Company completed an offering under Section 504 of the Securities
Act of 1933 (the "Securities Act"). Net proceeds to GVI were $889,424. Also in
June, GVI borrowed $2,000,000 from Miltex Industries. With this cash GVI
escrowed sufficient funds to allow Granite to commence construction on Phase I
of the Red Hawk project in July, 1996. Through January, 1997 GVI has paid to
Granite $1,981,613 toward the Phase I improvements and Granite has completed its
work on Red Hawk. Crown Construction is now doing finish work on the golf
course. During this fiscal year, through January 1997, GVI has borrowed $933,805
from Banque SCS, a stockholder of GVI.
Construction on the Red Hawk project has now slowed significantly due
to the lack of sufficient long-term financing. The Company has land and debt
16
<PAGE>
payments due during the current year of approximately $600,000 and liquidity for
the coming year will be dependent on its ability to secure long- term financing
for the Red Hawk project, upon the cash flow generated from the closing of lot
sales in Red Hawk, and from sales related to Cotton Manor and Cotton Acres
projects. Subject to receipt of sufficient financing to complete construction,
the Company believes that 19 lots in Phase X of Cotton Acres will be completed
in May. Many of these lots have been pre-sold and should be completely sold out
by May. Also, 19 pads for townhome units in Cotton Manor, Phase IV have been
completed. One townhome has been built and sold, two more are under
construction. These sales will not be sufficient to financially support the
Company and the Red Hawk project. If the Company does not receive sufficient
financing for the Red Hawk project, the Company intends to meet its obligations
through private offerings of common and/or preferred stock for cash and
additional borrowings. No assurance can be given that the Company will succeed
in obtaining sufficient financing for Red Hawk or, if unsuccessful, that it will
raise sufficient cash to meet its obligations through the sale of securities or
additional borrowings. Without the additional financing, the Company has
sufficient cash for operations to continue for only two or three months.
PART II
Item 1. Legal Proceedings
Mid Valley Ventures, ( Mid Valley) was the holder of a mortgage on
certain of the Company's properties and had recorded a notice of default in the
Washington County recorders office. On April 12, 1996 the Company filed an
action in the U.S. District Court of Utah, Central Division, to enjoin the
foreclosure. On June 19, 1996 Mid Valley filed a counter claim against the
Company. On August 30, 1996 in an effort to mitigate damages, the Company paid
$436,025.39 as payment for sums due under the trust deed being foreclosed on by
Mid Valley, subject to the Company reserving its claims against Mid-Valley. The
note is now considered paid in full, and a deed of reconveyance has been
executed and received by the Company. The Company's complaint for damages and
Mid Valley's counter claim were referred to mediation which was unsuccessful.
The matter will probably proceed to trial.
Item 2. Changes in Securities
On December 31,1996 the Company issued 27,637 shares of Class B
Preferred Stock to Banque SCS for $138,185 of accrued interest owed through that
date to Banque SCS and Miltex Industries on borrowings. The issuance of stock to
said entities was a transaction by the Company not involving any public offering
and thereby exempt from registration under the Securities Act of 1933 pursuant
to Section 4 (2) of said Act.
Item 3. Defaults Upon Senior Securities
The Company's note with Property Alliance became payable in full on
February 1, 1997. The principle balance of the note was $646,502 on said date.
Property Alliance has taken no action against the Company and management expects
to extend the term of the note on favorable terms.
17
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's securities holders
during the quarter ended December 31, 1996.
Item 5. Other Information
On November 21, 1996, George H. Badger, former President and Director,
Leasing Technology Incorporated, a major shareholder of the Company, appeared in
the U.S. Federal District Court for the Southern District of New York on a
complaint charging him with one count of conspiracy to commit securities fraud
and one count of criminal contempt.
Item 6. Exhibits and Reports on Form 8-K
This Item is not applicable to the Company.
No Report on form 8-K was filed by the Company during the three
month period ended December 31, 1996.
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.
GOLF VENTURES, INC.
(Registrant)
BY: /s/ Duane H.Marchant
DUANE H. MARCHANT, President
Dated: February 12, 1997
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 date indicated.
Signature Title Date
/s/ Duane H. Marchant President, Chief Executive
DUANE H. MARCHANT Officer and Director ----------------------
(Principal Executive Officer)
/s/ Stephen B. Spencer Secretary / Treasurer and
STEPHEN B. SPENCER Director (Chief Financial ----------------------
Officer, Chief Accounting
Officer and Controller)
18
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