UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
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)
Indicated 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 November 20, 1997
Common Stock, par value $.OO1 6,177,039
<PAGE>
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. independent Auditors' Report 4
Balance Sheets - September 30,1997 and 5-6
March 31, 1997
Statements of Operations and Accumulated Deficit -
Three and six months ended September 30, 1997 and 1996 7
Statements of Stockholders Equity-March 31, 1996 through
September 30, 1997 8-9
Statements of Cash Flows - Three and six months ended
September 30, 1997 and 1996 10
Notes to Financial Statements 11-16
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17-19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Securities Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 21
2
<PAGE>
PART I
Item 1. Financial Statements
The following, unaudited Financial Statements for the three and six
month periods ended September 30, 1997, included all adjustment which management
believes are necessary for the financial statements to be presented in
conformity with generally accepted accounting principals.
(THIS SPACE INTENTIONALLY LEFT BLANK)
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Golf Ventures, Inc.
Salt Lake City, Utah
The accompanying consolidated balance sheet of Golf Ventures, Inc. as of
September 30, 1997 and the related consolidated statements of operations,
stockholders' equity and cash flows for the three months and six months then
ended and for the three months and six months ended September 30, 1996 were not
audited by us and, accordingly, we do not express an opinion on them. The
accompanying consolidated balance sheet of Golf Ventures, Inc. as of March 31,
1997 was audited by us and we expressed an unqualified opinion on it in our
report dated June 16, 1997.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
November 5, 1997
4
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Balance Sheets
ASSETS
September 30, March 31,
1997 1997
---- ----
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash $ 14,921 $ 28,563
Real estate inventory 753,131 932,439
Current portion of contract receivable 1,955 472
----- ---
Total Current Assets 770,007 961,474
------- -------
PROPERTY AND EQUIPMENT
Model home - 133,954
Furniture and fixtures 13,106 13,106
Computer equipment 2,350 2,350
----- -----
Total depreciable assets 15,456 149,410
Less: accumulated depreciation (4,435) (2,393)
------ ------
Net Property and Equipment 11,021 147,017
------ -------
OTHER ASSETS
Land held for development (Note 2) 11,857,443 11,475,016
Long-term portion of contract receivable 55,993 55,993
------ ------
Total Other Assets 11,913,436 11,531,009
---------- ----------
TOTAL ASSETS $ 12,694,464 $ 12,639,500
=============== ================
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, March 31,
1997 1997
---- ----
CURRENT LIABILITIES (Unaudited)
<S> <C> <C>
Accounts payable $ 893,265 $ 953,072
Accrued expenses and other liabilities 707,474 659,735
Current portion of long-term debt (Note 3) 903,924 923,320
------- -------
Total Current Liabilities 2,504,663 2,536,127
--------- ---------
LONG-TERM DEBT (Note 3) 6,446,522 6,356,331
--------- ---------
Total Liabilities 8,951,185 8,892,458
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock (10,000,000 shares authorized at par value of $.001) 27,084
and 24,304 class "A"; 315,404 and 287,064 class "B" shares issued and
outstanding (Note 4) 342 311
Common stock (25,000,000 shares authorized
at par value of $.001) 2,101,723 and 1,852,828
shares issued; 2,088,764 and 1,839,837 shares
outstanding, respectively (Note 5) 2,102 1,853
Additional paid-in capital 8,796,973 8,264,828
Accumulated deficit (5,056,138) (4,519,950)
---------- ----------
Total Stockholders' Equity 3,743,279 3,747,042
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,694,464 $ 12,639,500
=============== ================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Operations
(Unaudited)
For the Six Months Ended For the Three Months Ended
September 30, September 30,
---------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- --------
INCOME
<S> <C> <C> <C> <C>
Real estate sales $ 316,546 $ 161,000 $ 305,546 $ 28,000
Cost of real estate sales 179,308 92,484 168,308 15,902
------- ------ ------- ------
Gross Profit on Real
Estate Sales 137,238 68,516 137,238 12,098
------- ------ ------- ------
EXPENSES
Depreciation 2,042 166 1,021 166
General and administrative
expenses 683,264 365,106 429,977 208,587
------- ------- ------- -------
Total Expenses 685,306 365,272 430,998 208,753
------- ------- ------- -------
LOSS FROM OPERATIONS (548,068) (296,756) (293,760) (196,655)
-------- -------- -------- --------
OTHER INCOME (EXPENSES)
Other revenue 13,925 9,224 9,295 6,343
Interest income 2,260 25,137 1,483 23,144
Interest expense (4,305) - - -
------ ------ ------ -
Total Other Income
(Expenses) 11,880 34,361 10,778 29,487
------ ------ ------ ------
NET LOSS BEFORE INCOME
TAXES (536,188) (262,395) (282,982) (167,168)
INCOME TAXES - - - -
------ ------ ------ --------
NET LOSS $ (536,188) $ (262,395) $ (282,982) $ (167,168)
=============== ============== =============== ==================
NET LOSS PER COMMON
SHARE $ (0.18) $ (0.15) $ (0.04) $ (0.09)
=============== ============== =============== ==================
</TABLE>
7
<PAGE>
<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
March 31, 1996 284,427 $ 284 1,628,828 $ 1,629 $ 7,173,573 $ (3,834,033)
Common stock issued
for cash at $5.00
per share - - 200,000 200 999,800 -
Offering costs for sale of
common stock for cash - - - - (120,576) -
Common stock issued for
payment of interest - - 20,000 20 34,502 -
Common stock issued
for services rendered - - 4,000 4 11,996 -
Repurchase shares of
class "A" preferred stock (2,500) (3) - - (12,497) -
Class "A" preferred stock
issued for payment of
interest 1,804 2 - - 9,018 -
Class "B" preferred stock
issued for payment of
interest 27,637 28 - - 138,157 -
Contributions of capital
by parent company - - - - 356,054 -
Distributions to parent
company - - - - (325,199) -
Loss for the year ended
March 31, 1997 - - - - - (685,917)
------ ------ ------ ------ ------ --------
Balance, March 31, 1997 311,368 $ 311 1,852,828 $ 1,853 $ 8,264,828 $ (4,519,950)
------- --------- --------- ----------- -------------- --------------
</TABLE>
8
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Stockholders' Equity
(Unaudited)
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1997 311,368 $ 311 1,852,828 $ 1,853 $ 8,264,828 $ (4,519,950)
Class "A" preferred stock
issued for common stock 2,780 3 (1,105) (1 ) (2 ) -
Class "B" preferred stock
issued for payment of 28,340 28 - - 141,672 -
interest
Common stock issued
for services rendered - - 250,000 250 390,475 -
Loss for the six months
ended September 30, 197 - - - - - (536,188)
------ ------ ------ ------ ------ --------
Balance,
September 30, 1997 342,488 $ 342 2,101,723 $ 2,102 $ 8,796,973 $ (5,056,138)
======= ========= ========= =========== ============== ==============
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended For the Three Months Ended
September 30, September 30,
---------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- --------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net (loss) $ (536,188) $ (262,395) $ (282,982) $ (167,168)
Adjustments to reconcile net
cash flowsfrom operations
Depreciation 2,042 166 1,021 166
Common stock issued for
for services and interest 532,425 - 532,425 -
Changes in assets and liabilities:
(Increase) decrease accounts
receivable (1,483) (4,625) (1,483) 14,000
(Increase) decrease inventory 179,308 74,045 196,423 12,691
(Increase) decrease in accounts
payable and accrued expenses (50,521) (112,576) (318,604) 7,257
--------- -------- -------- -----
Net Cash Provided (Used) by
Operating Activities (125,583) (305,385) 126,800 (133,054)
-------- -------- ------- --------
INVESTING ACTIVITIES
Purchase of property and equipment (834) (5,988) - (5,988)
Land held for development (364,261) (1,302,606) (124,599) (888,767)
-------- ---------- -------- --------
Net Cash (Used) in Investing
Activities (365,095) (1,308,594) (124,599) (894,755)
-------- ---------- -------- --------
FINANCING ACTIVITIES
Stock offering costs - (209,000) - (109,000)
Common stock and preferred
stock issued for cash - 1,046,521 - 46,521
Long-term borrowings 245,266 2,558,805 - 558,805
Distribution to parent company - (338,103) - (163,157)
Principal payments on
long-term debt (19,396) (660,726) (2,012) (448,783)
------- -------- ------ --------
Net Cash Provided by
Financing Activities 225,870 2,397,497 (2,012) (115,614)
------- --------- ------ --------
INCREASE (DECREASE) IN CASH (13,642) 783,518 189 (1,143,423)
CASH AT BEGINNING OF PERIOD 28,563 784,380 14,732 2,711,321
------ ------- ------ ---------
CASH AT END OF PERIOD $ 14,921 $ 1,567,898 $ 14,921 $ 1,567,898
=============== ============= ============= ================
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash Paid For:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
</TABLE>
10
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Golf Ventures, Inc. (the Company) was incorporated in the State
of Utah on March 2, 1983 under the name of Gold-Water, Inc. for
the purpose of acquiring and developing mining properties. The
Company's name was subsequently changed to Sierra Tech, Inc. on
September 27, 1989. The Company discontinued its mining
operations in 1992. On December 28, 1992, at a meeting of the
shareholders, the name of the Company was changed to Gold
Ventures, Inc. Also, the Company's common stock was reverse stock
split on the basis of one share for every ten shares of the
Company's outstanding common stock. On February 1, 1996, the
Company reverse split its common stock again on a one share for
every five shares basis. The financial statements reflect the
reverse split on an retroactive basis.
The Company has acquired real estate in St. George, Utah and is
engaged in the business of real estate development, primarily
golf courses, with surrounding residential real estate.
The following is a summary of the more significant of its
accounting policies:
a. Significant Shareholder and Distributions
The Company is a subsidiary of American Resources and Development
Company (ARDCO), formerly Leasing Technology Incorporated. The
Company made distributions to ARDCO of $325,199 for the year
ended March 31, 1997 and received contributions of capital
totaling $356,054 from ARDCO during the year ended March 31,
1997. These contributions and distributions have been treated as
adjustments of additional paid-in capital in the accompanying
financial statements.
b. 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 686,000
2012 536,000
-------
Total $ 5,072,000
================
The Company has elected a March 31 fiscal year end for book and
tax purposes.
c. Net 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. There common stock equivalents are anti-dilutive and
accordingly not used in the net loss per common share
computation.
11
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
d. Profit Recognition and Capitalization of Costs Related to Real
Estate
Income on real estate is recognized in accordance with the
provisions of FASB-66. Revenue and profits from the sale of land
and other real estate have been recognized using the full accrual
method for all periods presented. As such, each sale has been
determined to have been consummated, with the buyers initial and
continuing investment determined to show adequate demonstration
of commitment to pay. In addition, all outstanding remaining
receivables related to these transactions are not subject to
future subordination and the Company no longer has a substantial
continuing involvement with the property with the buyer
substantially assuming the usual risks and rewards of ownership
of the property.
Costs associated with real estate are accounted for in accordance
with the provisions of FASB-67. Accordingly, acquisition,
development and construction costs, including property taxes and
interest on associated debt and selling costs, are capitalized.
Such costs are specifically allocated to the related opponents
or, if relating to multiple components, allocated on an pro rata
basis as appropriate. Estimates are reviewed periodically and
revised as needed. The respective real estate projects are also
periodically reviewed to determine the that carrying amount does
not exceed the net realizable value. To date, no allowance has
had to be provided for estimated impairments of value based on
evaluation of the projects.
e. Concentrations 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.
The Company builds and develops real property in Southern Utah.
In the normal course of business the Company extends secured
credit to its customers.
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,
condominiums and homes it has available for sale. The inventory
is recorded at the lower of cost or market.
h. Accounts Receivable
The Company's notes receivable are from the sale of lots and
condos 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 would allow it to immediately
resell any property which it foreclosed upon.
12
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
I. Property and Equipment
Property and equipment are stated at cost less accumulated
depreciation. Depreciation on equipment is provided using the
straight-line method over an expected useful lives of the assets
(usually three years).
j. Construction Loans Payable
An officer and director 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. During the year ended March 31, 1997,
this obligation was converted into long-term debt.
k. 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.
NOTE 2 - 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 3,273,728 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, 1997, the Company capitalized
$1,093,468 in construction period interest costs. The cost of the
land is less than the estimated net realizable value of the land.
13
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<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 3 - LONG-TERM DEBT
Long-term debt of the Company is as follows: September 30, March 31,
1997 1997
------------ ---------
(Unaudited)
<S> <C> <C>
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 Red Hawk lot sale also
applies to the note. $ 646,502 $ 646,502
Promissory note secured by land. Annual payments through
August 15, 2016 at $30,524 per year including interest at 10%
per annum. 201,890 201,890
Trust deed note, secured by land and 50,000 shares of the Company's
common stock. Interest accrued at 15% per annum. Principle and
interest were due May 31, 1995. However, the note holder has not
demanded full payment and is accepting partial
payments. 80,575 80,575
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. 355,890 355,890
Promissory note secured by land, bearing interest at 10.5%.
Interest payable monthly with principal and any accrued
interest payable in full on June 10, 1999. 3,649,630 3,440,805
Purchase contract and note secured by land, bearing interest at
10%. Monthly installments of $25,000 due through May 15, 1998
with remaining principal and accrued interest due in full. 2,225,669 2,246,823
Mortgage note payable secured by real estate bearing interest at
11.5%. Due in monthly installments of $911. 90,839 90,915
Mortgage note payable secured by real estate bearing
interest at 8.125%. Due in monthly installments of $919 - 116,800
Mortgage note payable secured by real estate bearing
interest at 8.125%. Due in monthly installments of $879. 99,451 99,451
------ ------
Subtotal 7,350,446 7,279,651
Less Current Portion (903,924) (923,320)
-------- --------
Long-Term Portion $ 6,446,522 $ 6,356,331
=============== ================
14
<PAGE>
<CAPTION>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 3 - LONG-TERM DEBT (Continued)
Maturities on long-term debt are as follows:
<S> <C> <C>
1998 $ 903,924 $ 923,320
1999 2,489,610 2,282,797
2000 3,557,065 3,557,065
2001 73,718 73,718
2002 19,559 19,559
Thereafter 423,192 423,192
------- -------
$ 7,467,068 $ 7,279,651
=============== ================
</TABLE>
NOTE 4 - PREFERRED STOCK
The Company has issued 27,084 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. During the year ended March 31, 1996, 2,500 shares of
class "A" preferred stock were repurchased from the holder for
$12,500. Also, 1,804 of the class "A" preferred shares were issued
during the year end March 31, 1997 as payment of interest on
long-term debt. During the three months ended June 30, 1997, 1,105
shares of common stock were converted back to 2,780 shares of
preferred stock (including 780 shares for accrued dividends)
because the Company decided to allow the holder to reverse the
conversion of the 2,000 shares of preferred stock to 1,105 shares
of common stock in 1996. The reversal of the conversion may allow
the holder to receive even more shares of common stock in the
future, should he decide to reconvert at a later date.
The Company has also issued 287,064 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. Of the total
shares of class "B" preferred stock outstanding, 193,733 shares
were issued during the year ended March 31, 1996 at a price of
$5.00 per share, 160,057 of which were issued to a shareholder of
the Company (see Note 7). During the year ended March 31, 1997, the
Company issued 27, 637 shares of class "B" preferred stock as
payment for interest on long-term debt.
During the six months ended September 30, 1997 an additional 28,340
class "B" preferred shares were issued for interest. The 315,404
class "B" preferred shares were then converted to 3,942,550 shares
of common stock, pursuant to the terms of the series "B" preferred
stock offering at $0.40 per share which is 40% of the low bid price
of $1.00 during the preceding eighteen months.
NOTE 5 - COMMON STOCK
The Company completed a placement of its common stock during the
year ended March 31, 1997, realizing proceeds of $1,000,000 for
which the Company issued 200,000 shares. Offering costs associated
with this transaction totaled $120,576 which has reduced additional
paid-in capital as reflected in the accompanying financial
statements.
An additional 20,000 shares of common stock were issued during the
year ended March 31, 1997 as payments for $34,522 of accrued
interest or long-term debt. 4,000 shares of common stock were also
issued during the year ended March 31, 1997 as payment for $12,000
of services rendered to the Company.
The Company has issued 12,991 shares which have been offered to
creditors in settlement of accrued expenses. However, the creditors
have not yet accepted the shares. These shares are considered
issued but not outstanding for financial statement purposes.
15
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 5 - COMMON STOCK (Continued)
During the six months ended September 30, 1997, 250,000 shares of
common stock were issued for services provided by officers and
President of its parent company. the services were valued at $1.56
per share which is the average bid price at the time the shares
were issued.
NOTE 6 - GOING CONCERN
The Company's financial statements have been prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company has incurred significant losses since inception, has a
substantial working capital deficit and has debt significantly in
excess of stockholders' equity. During the year ended March 31,
1997, the Company was able to raise working capital through the
private placement of its common stock. However, cash flow
projections show that the Company's reserves are not adequate to
cover its needs for the near future. Management of the Company
plans to raise additional capital through a private placement or
additional debt financing and the Company anticipates generating
additional revenue from increased sales.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
For the Quarter Ended September 30, 1997, Compared with the Quarter
Ended September 30, 1996.
Management will not attempt to restate numerical information here that
is clear from the financial statements. Rather management will attempt explain
its view of the results and the reasons therefore.
Gross Income from operations for the September 1997 quarter increased
significantly over the results in the same quarter last year due to increased
sales of lots in the Cotton Manor and Cotton Acres developments. Given the
dependence of the Company on both the demand for its real estate and on
available development capital to create new saleable lots, the Company expects
wide variability in sales results from quarter to quarter. During the past year,
and specifically during the last six months, the Company has had only sporadic
and small infusions of development capital, and this limitation on development
capital has hindered the Company's ability to maximize or stabilize the sales
potential of its inventory.
Cost of sales during this year's second quarter were also higher than
in the same quarter last year as a concomitant result of the higher sales
activities that also yielded higher gross operating income.
General and administrative expenses were significantly higher for the
September 30, 1997 quarter as compared with the same quarter last year,
primarily as a result of the issuance of approximately $391,000 worth of
restricted common stock to the officers and Directors of the Company, and
including shares issued to the President of American Resource and Development
Company, the former parent of the Company, in recognition of his valuable
services to the Company, during the second quarter. These stock awards
recognized the significant time and effort put into the Company by the officers
and Directors over the past year, including in connection with the negotiation
and closing of the U.S. Golf transaction, which is discussed in more detail
below. This compensation item affected both the three month and the six month
comparison of G & A expense. Higher administrative expenses were also incurred
in connection with the legal and accounting assistance obtained in connection
with the U.S. Golf transaction.
As a result of the higher sales revenues, the higher expenses were not
all passed to the bottom line, with the Company's net loss of ($282,982) for the
September 30, 1997 quarter exceeding its net loss of ($167,168) for the year ago
quarter by a smaller margin than the increase in quarterly expenses.
For the Six Months Ended September 30, 1997, Compared with the Six
Months Ended September 30, 1996.
The same factors, discussed above, that explain the higher revenues,
expenses and net loss as between the quarter ended September 30, 1997 and the
17
<PAGE>
same quarter last year also explain the similar increases in these categories
for the six month comparisons at September 30, 1997 and September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Current assets at September 30, 1997 declined by approximately $200,000
from year end March 31, 1997 as a result of sales of lots held in inventory
during the six months since year end, and as a result of spending the cash that
was generated by those sales on administrative and operating expenses, including
the paydown of certain land-related debts and payables. Paydown of debt did not
significantly reduce capitalized construction interest, however, thus resulting
in higher Land Held for Development amounts at September 30, 1997
notwithstanding sales of lots from inventory during the same period.
Reductions in accounts payable and current portion of long term debt
are the results of debt paydowns enabled by the increased sales of lots during
the six months ended September 30, 1997. Advances from U.S. Golf Communities,
Inc., accruing interest on past due debt amounts, and accrued expenses
associated with the U.S. Golf transaction resulted in higher total liabilities
at September 30, 1997 than at year-end.
The Company depends on revenue from sales of lots to pay operating
expenses and to provide development capital and/or debt service. Historically,
borrowings and private placements of common and preferred stock have generated
limited development funds, and the lots sold during the recent six months were
available for sale as a result of this past funding. However the Company's land
is significantly mortgaged at the present time, and the Company will likely have
no further ability to borrow against its assets. A shrinking inventory and
limited development capital also makes the private placement of stock uncertain.
In short, the Company faces an uncertain future with the constricted liquidity
it now is experiencing.
The following table shows each item of long term indebtedness of the
Company as of September 30, 1997, together with information about the status of
each loan and the property or properties that serve as collateral security for
each loan:
<TABLE>
<CAPTION>
================================================================================
Lender Amount of Status Property Used as
Indebtedness At 12/15/1997 Collateral
================================================================================
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Alliance Properties, Inc. $646,502 Delinquent Cotton Manor/Cotton Acres
- --------------------------------------------------------------------------------
Blaine Harmon 201,890 Delinquent Cotton Manor/Cotton Acres
- --------------------------------------------------------------------------------
Foss Lewis, Inc. 80,575 Delinquent Red HawkTM
- --------------------------------------------------------------------------------
Watson Family Trust 355,890 Delinquent Red HawkTM
- --------------------------------------------------------------------------------
Stucki Family Trust 2,246,823 Current Red HawkTM
- --------------------------------------------------------------------------------
Miltex Industries 3,440,805 Current Red HawkTM
- --------------------------------------------------------------------------------
TH 2 Transworld 96,915 Paid Red HawkTM
- --------------------------------------------------------------------------------
Knutson Mortgage 99,451 Current Cotton Manor/Cotton Acres
- --------------------------------------------------------------------------------
Fleet Mortgage 116,805 Current Cotton Manor/Cotton Acres
- --------------------------------------------------------------------------------
TOTAL 7,279,000 *
================================================================================
</TABLE>
18
<PAGE>
THE U. S. GOLF TRANSACTION
On November 26, 1997, the Company closed on its agreement to acquire
all of the common stock of U.S. Golf Communities, Inc. ("US Golf") from the
current US Golf shareholders. In return, the Company issued 6.6 million shares
of Series D Convertible Preferred Stock to the US Golf shareholders. This
reverse acquisition transaction resulted in US Golf becoming a wholly owned
subsidiary of the Company, and in the US Golf shareholders now holding 81% of
the voting stock and equity of the Company. This reorganization and change in
control of the Company brings a larger and more diverse asset base to the
Company, given U.S. Golf's ownership and operation of several golf courses and
related residential or resort developments in the Eastern United States.
Moreover, U.S. Golf has demonstrated an ability to raise needed development
capital for its projects. The Company expects enhanced capital raising abilities
as a result of the combination of the two companies that will raise needed funds
to cure defaults on the Company's properties and to allow the Company to move
forward on development of its St. George, Utah properties.
The Company has filed preliminary proxy materials with the Commission
in anticipation of its annual shareholders' meeting. In those preliminary proxy
materials, significant additional information is provided with respect to US
Golf. This information can be accessed over the World Wide Web at the
Commission's EDGAR Archives web site, www.sec.gov.
While the Company expects significant benefits to its current
shareholders from the U.S. Golf transaction, there can be no assurance that the
reverse acquisition of US Golf will yield the expected benefits to the Company.
19
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's securities holders
during the quarter ended September 30, 1997.
Item 5. Other Information
None
20
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) This Item is not applicable to the Company.
(b) A Report on Form 8-K was filed by the Company on September 8,
1997 disclosing the settlement of a debt obligation for the
issuance of preferred stock.
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.
BY: /s/ Warren Stanchina
------------------------------
Warren Stanchina, President, Chief Executive
Officer and Director
Dated: December 19, 1997 BY: /s/ Eric LaGrange
------------------------------
Senior Vice President and Chief Fiancial
and Accounting Officer
21
