UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECOND AMENDED FORM 10-KSB
Annual report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934 For the
fiscal year ended March 31, 1997
0-21337
(Commission File Number)
GOLF VENTURES, INC.
(Name of Small Business Issuer in Its Charter)
UTAH 87-0403864
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
345 North 2450 East, St. George, Utah 84790
(Address of Principal Executive Offices) (Zip Code)
(435) 628-8142
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001 per share
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
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-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the year ended March 31, 1997 were $274,000.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of September 30, 1997 was $ 1,802,614.50.
The number of shares outstanding of the issuer's common equity, as of
September 30, 1997 was 2,010,700 shares.
Transitional Small Business Disclosure Format (check one): Yes[ ] No[x]
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PART I
Item 1. Business.
General Information About the Company
Golf Ventures, Inc. ("GVIM" or "the Company") is a Utah corporation
formed in 1983, although it first began its current business plan under its
current name in 1993. GVIM is primarily engaged in developing certain
residential and recreational real estate projects.
Until August, 1997, GVIM's principal corporate offices were located at
102 West 500 South, Suite 400, Salt Lake City, Utah 84101, space that the
Company shared with its then majority voting shareholder, American Resource and
Development Company, Inc. ("ARDCO"). During this period of time, the Company was
under the direction and control of ARDCO. In late Spring 1997, the Company
retained new and separate outside legal counsel, and has been engaged in efforts
(a) to establish an independence from ARDCO to the extent legally possible, and
(b) to negotiate a strategic reorganization of the Company to bring in a more
experienced and larger management team and to bring additional assets and
opportunities to the Company to allow it move forward in a new and healthy
direction. As a step in this process, in August 1997, the Company moved its
principal corporate office to 345 North 2450 East, St. George, Utah 84790 to
better manage the development of the Company's real estate projects in the St.
George area, to reduce overhead costs, and to physically separate the Company
from ARDCO. The Company's new telephone number is (435) 628-8142.
On November 26, 1997 the Company closed on a reverse acquisition
reorganization with U.S. Golf Communities, Inc., ("US Golf") of Orlando,
Florida, a developer of golf courses, golf oriented country clubs and golf
oriented residential communities in the Eastern United States. Under the terms
of this reorganization the Company issued and delivered to the shareholders of
US Golf 6,672,578 shares of Series D Convertible Preferred Stock ("the Series D
Stock"). Each share of the Series D Stock has 4 share votes in any vote of the
common stockholders of the Company, and each share of Series D Stock can be
converted at the option of the holder into 4 shares of Common Stock. The result
of this issuance of Series D Stock is that the shareholders of US Golf now own
approximately 81% of the voting securities and equity of the Company. US Golf is
now a wholly owned subsidiary of the Company.
Except with respect to the foregoing subsequent event disclosure, this
report contains information as of December 31, 1996 and for the year then ended.
More information about the Company following its reorganization with US Golf can
be found in the Company's Reports on Form 8-K filed on November 27 and on
December 19, 1997, and in the Company's anticipated Form 8-K Report to be filed
on or about January 25, 1998, which Report will contain audited financial
statements of US Golf and pro forma financial information about the combined
companies. The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997 (expected to be filed on or before March 31, 1998, will also
contain significant information about the combined companies.
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In February 1996, the Company reverse-split its outstanding shares by
a factor of 5 shares then outstanding into 1 share.
In October, 1997, a holder of Series B Convertible Preferred Stock
converted these shares into 4,052,683 shares of Common Stock, based on
prevailing market pricing for the Company's Common Stock. In early December
1997, the Company issued 3,432,713 shares of its Common Stock to the owners of
the Pelican Strand golf club and development in Naples, Florida and thereby
acquired Pelican Strand as a Company property (See Form 8-K report dated
December 19, 1997). As of December 15, 1997, the Company had 9,546,096 shares of
its common stock issued and outstanding out of 25,000,000 shares of common stock
authorized in the Company's Articles of Incorporation, as amended.1 When used in
this Report, all references to numbers of shares of the Company's common stock
in any transaction, regardless of the date of the transaction, are expressed in
post-reverse split numbers.
At the end of its fiscal year 1997, GVIM had three full time and one
part time employees. As of December 15, 1997, the Company dropped to three full
time employees.
The Company's Real Estate Development Program -- General
In 1990, ARDCO acquired a 616 acre parcel of land that was available
for development near St. George, Utah. In 1991, ARDCO purchased two residential
real estate developments in St. George for condominiums, cottages, and single
family dwelling lots known, respectively, as Cotton Manor and Cotton Acres.
In 1992, ARDCO sold all of its undeveloped 616 acres in St. George,
and its Cotton Manor and Cotton Acres developments to the Company in exchange
for 654,746 shares of GVIM common stock, which represented approximately 86% of
the Company's total outstanding shares at the time. The Company also assumed
$4,338,319 of debt in connection with the acquired ARDCO property. (This debt is
described in more detail below.) No changes took place in the accounting
policies of GVIM as a result of this change in control of the Company.
In 1994, The Company named its 616 acre parcel of undeveloped land the
Red HawkTM International Golf & Country Club ("Red HawkTM"). On June 1, 1994,
GVIM acquired an additional 54 acres of land adjacent to Red HawkTM for future
development.
Although the real estate market in the St. George, Utah area is
extremely competitive, the Company believes that it is well positioned in terms
of pricing and location with respect to the Cotton Manor and Cotton Acres
projects such that it can compete effectively. With respect to Red HawkTM, the
- ---------------------------
1 As noted above, the reverse acquisition reorganization with US Golf resulted
in the shareholders of US Golf receiving 6,672,578 shares of Series D
Convertible Preferred Stock in return for all of the oustanding stock of US
Golf. Each shares of Series D Preferred Stock may be converted at the option of
the holder into four (4) shares of Common Stock. Thus the entire block of Series
D Preferred Stock now in the hands of the former shareholders of US Golf
represents approximately an additional 26,000,000 shares of Common Stock when
and if converted.
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Company will require significant additional financing for development (see "RED
HAWK", below), after which management believes Red HawkTM will offer competitive
values to interested club members and residence buyers.
Other than with respect to the US Golf transaction, discussed briefly
above, the Company has no plans to acquire additional real estate projects in
the near term, and will focus energy and resources on developing and exploiting
its current projects.
The decision of the Company to reorganize with US Golf, as discussed
earlier in this Report, was made in large part to take advantage of US Golf's
greater experience and connections in developing large golf course communities
like Red HawkTM. There can be no assurance that the Company will be able to
acquire the needed financing on terms and conditions which will allow the
Company to effectively and profitably develop Red HawkTM, Cotton Manor or Cotton
Acres.
RED HAWKTM
Red HawkTM is a master-planned residential golfing and recreational
community situated on 670 acres of land that, when completed, will include more
than 945 building lots, a 27 hole golf course, tennis courts, swimming pools,
and other recreational amenities. Red HawkTM is located in southwest Utah, three
(3) miles southeast of St. George in the City of Washington, approximately 120
miles from Las Vegas, Nevada, and within a short drive of several national parks
including Zion National Park and Bryce National Park. Red HawkTM is situated on
rolling farm land surrounded on three sides by a horseshoe of rolling hills.
Land and Debt
As noted earlier, in 1990, the Company's current largest shareholder,
ARDCO, purchased the first 487 acres of Red HawkTM from Dr. Karl F. Stucki and
Mrs. Marcia C. Stucki, Trustees of the Karl F. and Marcia C. Stucki Income Trust
(the "Stuckis"). The purchase price of this property was $3,000,000, which
included a trust deed note (the "Stucki Note") for $2,865,000 bearing interest
at 10% and secured by the land. The note called for monthly payments until
January 1994, when the Stucki Note was to be paid in full.
After acquiring this property and assuming the Stucki Note from ARDCO,
the Company renegotiated the Stucki Note in early 1994 and again in July, 1996
to extend the balloon due date to May 15, 1998. This renegotiation provided for
the partial release to the Company of approximately 200 acres of the Red HawkTM
property securing the Stucki Note as and when the Company pays down the Stucki
Note to the extent of $6,500 per each of these 200 acres, and after the Company
completes certain agreed development expenditures on the land. The Company paid
a lump payment of $75,000 in July 1996 and agreed to pay $25,000 per month
through May 15, 1998, after which time the entire balance of the Stucki Note
will be due and payable. As of August 31, 1997 all payments on the Stucki note
are current and a balance of approximately $2,215,000 remains outstanding on the
Stucki Note, inclusive of principal and accrued interest.
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GVIM owns two additional parcels of land contiguous to the 487 acres
securing the Stucki Note. The first parcel, consisting of approximately 129
acres, was acquired by ARDCO from an unaffiliated third party for $625,000, paid
by delivery of 260,000 shares of ARDCO's common stock and a note for the
remainder of the purchase price. The Company acquired this land from ARDCO in
1992 and assumed the purchase price note. This note has been paid in full.
The second parcel, consisting of 54 acres, was purchased by the
Company on June 1, 1994 from an unaffiliated third party, for a purchase price
of $500,000 and 600 shares of the Company's common stock. Because of its
location, this 54 acre parcel is planned for higher density multiple unit
residence and commercial development.
The terms of the purchase were $25,000 cash down, $25,000 payable 90
days from closing, and annual payments of $100,000, with interest accruing at a
rate of 8% per annum. The first payments were timely made, but the first annual
payment of $100,000 was paid not paid when due on July 4, 1995. In 1996, the
Company brought the note current and reduced the outstanding principal balance
to $359,370. However the Company missed the July 1997 payment and to date has
not had the cash to bring this note current. The Company hopes that the US Golf
transaction, discussed earlier, will provide improved access to needed cash
resources to preserve this land in the Company and to develop its profit
potential.
On June 30, 1996 GVIM borrowed $2,000,000 from Miltex Industries of
Geneva Switzerland, ("Miltex"), and secured the Company's note for this amount
with a trust deed against Red HawkTM. These funds were borrowed to commence
construction at Red HawkTM. By the end of 1996, the Company had borrowed an
additional $1,238,805 from Miltex. Miltex and the Company agreed to include all
of the current outstanding loan balance of $3,238,805 in the original trust deed
note. The Miltex Note requires monthly interest payments at the rate of 10.5%
per annum through June 10, 1999, at which time the entire principal balance
(together with accrued and unpaid interest) is due and payable. In August, 1997
Miltex agreed to accept 28,340 shares of the Company's Class B Preferred stock
in payment of $141,700 of accrued interest for the months of January through
May, 1997. The Company failed to pay interest in June, July, August or September
1997. Interest due and payable on the Miltex Note at September 30, 1997 was
approximately $100,000. To date Miltex has not taken any action to declare a
default or to foreclose on its trust deed against Red HawkTM. Moreover, as of
August 31, 1997 GVIM had borrowed an additional $476,660 from Miltex on the same
terms and with the same collateral security as the $3,238,805 borrowing
described above.
In May, 1994 the Company borrowed $250,000 from the Foss Lewis Profit
Sharing Plan. The loan is secured by a second trust deed on the same acreage at
Red HawkTM that is securing the Stucki Note, a trust deed against the Company's
fee simple interest in the 129-acre parcel, discussed above, and 50,000 shares
of GVIM common stock. The outstanding balance of this loan at June 30, 1997 was
$89,383. Although the Foss Lewis Note was due and payable on May 31, 1995, the
holder has verbally agreed to extend payment and has taken no action to collect
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or foreclose its trust deeds. Currently there is approximately $90,000 still due
to the Foss Lewis Profit Sharing Plan. The Company expects that the US Golf
transaction, discussed above, will enable the Company to pay off this loan and
thus preserve the Company's rights in the pledged acreage, but can make no
assurances in that regard.
Current Developments and 12-Month Business Plan
The final plat for Red HawkTM will be recorded upon installation of
all improvements and/or bonding for the same for Phase I. The Company believes
that no other permits or authorization are required until after filing of the
final plat for Phase I, at which time building permits will be obtained from
Washington City.
In late 1996, Washington City completed construction of a storage tank
for culinary (drinking) water in close proximity to Red HawkTM, together with a
water pumping station and delivery lines which run through Red HawkTM. As a
result, the Company believes that Red HawkTM will have an adequate supply of
culinary water available. The cost to GVIM for this water line was $130,000,
which has been paid.
In July 1996 Granite Construction broke ground on Phase I at Red
HawkTM. Phase I will consist of the development and sale of 102 estate lots, 7
cottages, 5 corporate villas, and construction of the first 18 holes of the golf
course, a double driving range, irrigation, lakes and infrastructure for
utilities. By the end of November 1996, Granite had moved approximately 900,000
cubic yards of dirt, excavated eight (8) lakes, roughed in eighteen holes of the
golf course, graded the sites for the 102 residential lots, installed sewer
laterals to the lots and graded the major roads in Phase I of the project.
Granite was paid $1,981,681 for its work, and the Company called an end to
Granite's efforts in November 1996 as a result of lack of funds.
GVIM contracted with Crown Golf to do the finish grading on the golf
course. Crown has been paid $35,817 and is owed approximately $235,000 as of
September 30, 1997. Crown was called off this project in February, 1997, when
the Company stopped construction at Red HawkTM until additional funding can be
obtained on terms and conditions satisfactory to the Company.
While management looks to the US Golf transaction as a source of
improved funding capabilities for the Company at Red HawkTM, there is no
assurance that the US Golf transaction will close or that it will yield the
benefits hoped for by the Company. The Company will continue its efforts to
obtain sufficient long term financing to complete development of Phase I at Red
HawkTM, and thus to begin cash flow from sales of interests in the development.
Assuming adequate financing can be obtained on satisfactory terms and
conditions, the Company believes that Phase I construction at Red HawkTM could
be completed within six months of the start of that financing at a total cost of
approximately $5,700,000. Additionally, a sewer line will need to be brought to
the property. Washington City owns and is responsible for sewer lines, and the
Company must negotiate with Washington City with respect to the construction of
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and payment for the sewer line. Construction costs are estimated to be
approximately $1,000,000 for the off-site sewer, as per independent bids
received by the Company. The Company estimates that an additional $135,000 will
be required for construction of a gas line based on preliminary estimates
received from the gas company. There is a possibility that future expenditures
for on-site electric power will be necessary, although this has not been
determined and no estimates of costs will be obtained until future demands are
assessed. There can be no assurance that additional development costs will not
be incurred or that such additional costs will not be material. The Company has
estimated the future development costs just recited based upon the prior real
estate development experience of management. This experience and business
judgment may not prove accurate as actual results invariably deviate from
estimates.
COTTON MANOR AND COTTON ACRES
In 1991, ARDCO purchased from Property Alliance, for an aggregate
purchase price of $2,592,050, two real estate developments located in St.
George, Utah consisting of approximately 80 contiguous acres, including an
existing condominium development known as Cotton Manor and a single residence
development known as Cotton Acres. At the time of the acquisition, the two
developments consisted of both developed and undeveloped property. On December
31, 1992, the Company purchased Cotton Manor and Cotton Acres from ARDCO and
assumed the related liabilities, including ARDCO's outstanding obligations to
Property Alliance.
Cotton Manor, a 19-acre development, currently includes 28 completed
condominiums (one two-story building with 16 units and three one-story
four-plexes) and recreational facilities including swimming pool, tennis courts,
and a putting green. Bruce Frodsham, Company Vice President and project manager,
lives at Cotton Manor and is responsible for the maintenance and upkeep of the
Cotton Manor recreational amenities and landscaping. Cotton Manor residents pay
a monthly fee to support the maintenance. The Company maintains property and
liability insurance on the Cotton Manor project at a cost of approximately
$6,000 per year.
Cotton Acres is a 61 acre development consisting of 259 lots. 200 lots
in Phases I-IX have been sold and dwelling units on such lots have been
completed. Development of Phase X, consisting of 19 lots has been completed at a
cost of approximately $165,000. The contractor making the improvements on the
Phase X lots financed the Company's cost at 12% interest. The balance of
principal and interest due the contractor has been paid in full from the
proceeds from the first Phase X sales. All Phase X lots have been sold or
pre-sold with a deposit and should close during the first six months of 1998.
Land and Debt
ARDCO's purchase of Cotton Manor and Cotton Acres from Property
Alliance called for $23,601 cash down and the payment of several promissory
notes as follows: (i) a promissory note to a third party with an outstanding
balance of $277,304, payable $30,000 per year; (ii) a promissory note to a third
party with an outstanding balance of $101,145, which has been paid in full;
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(iii) a Special Improvement District (SID) obligation estimated at $53,000, of
which $36,000 has been paid through June 30, 1997; and (iv) a trust deed note to
Property Alliance in the principal amount of $1,387,000, bearing interest at the
rate of 10% per annum, which note is secured by a trust deed covering the two
groups of properties. Principal on the trust deed note was payable in six annual
installments of $120,000 through February 1, 1997 plus a balloon payment of the
remaining principal, and interest was payable in shares of ARDCO common stock.
ARDCO was also required to pay down the principal of the trust deed note with
75% of the proceeds from each sale units at Cotton Manor or Cotton Acres, and
with $2,000 from the sale of each Red HawkTM lot. In addition, ARDCO issued
150,000 shares of its Series C Convertible Preferred stock (valued at $5.00 per
share or $750,000) to Property Alliance as part of the purchase of this land.
Both ARDCO and, later, the Company failed to make timely payments as
required to and for the benefit of Property Alliance. After negotiations,
Property Alliance, ARDCO and the Company agreed in June, 1994 to extend the due
date of the first four annual payments on the trust deed note (aggregating
$480,000) until July 31, 1995, and the Company agreed to make mandatory
prepayments on the trust deed note of $5,000 (rather than $2,000) for each Red
HawkTM lot sold by GVIM. In addition, GVIM agreed to pay Property Alliance, as a
mandatory prepayment on the trust deed note, $175,000 from the first $1,000,000
of long term financing proceeds the Company secures for development of Red
HawkTM.
As of September 30, 1997 the Company has not made the required
$120,000 annual payment for 1997 due to poor cash flow from low real estate
sales. Accrued interest, payable at the option of the Company in its common
stock, was $486,131 as of August 31, 1997. The trust deed note has a current
principal balance due of $646,502. The Company plans to use proceeds from sales
in Cotton Manor and Cotton Acres to satisfy the trust deed note, and looks to
the US Golf transaction as a source of improved financial resources to meet the
Company's obligations and to preserve the Company's rights in its real
properties, such as Cotton Manor and Cotton Acres. There can be no assurance
that the US Golf transaction will bring such funding resources to the Company,
or that the US Golf transaction will be consummated. There also can be no
assurance that sufficient closed sales from Cotton Manor and/or Cotton Acres
will occur soon enough, or at all, to enable the Company to satisfy its
obligation to Property Alliance and avoid losing these developments in
foreclosure.
The Company's main business plan is focused on Red HawkTM, and the
loss of Cotton Manor and/or Cotton Acres, while material adverse events, would
not necessarily toll the end of the Company or its operations.
Current Developments and 12 Month Business Plan.
The Company currently intends to build an additional 102 cottages as
marketing of the Cotton Manor project develops. Each cottage is part of a
single, detached planned unit development (PUD). In Phase III, two cottages have
been completed. One Phase III cottage has been sold while the other, built and
financed by the Company, is being used as a model, sales office and, since the
end of August, 1997, as the executive offices of the Company.
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Development of the 19 lots in Phase IV has been completed at a cost of
Approximately $11,700 per lot. Two Phase IV lots have been sold and cottages
have been built. One lot was purchased by Bruce Frodsham, Company Vice
President, at the Company's offer price of $15,000. Mr. Frodsham has built a
home on the lot at his cost. Subsequent to March 31, 1997, the other Phase IV
lot was transferred to George Badger, the former President of ARDCO, to enable
Mr. Badger to get a loan to finance a home on the site for entry by the Company
in a home show. The Company's entry won the show award. Currently, Mr. Badger is
paying the indebtedness on the property and lives there from time to time. The
Company is seeking to collect the cost of the lot from Mr. Badger.
GVIM is actively marketing its Cotton Manor cottages and believes that
the initial 19 cottages can be sold within approximately two years. Building
permits will be obtained from the City of St. George as needed. Following the
sale of the 19 units in Phase IV, GVIM intends to commence developing and
marketing additional Phases.
Management anticipates that the development and sale of the lots from
all of the remaining phases of Cotton Acres should be completed within two
years, although there can be no assurance that market conditions will allow for
this schedule.
Item 2. Properties.
Prior to August 1997 the Company's executive offices were located at
102 West 500 South, Suite 400, Salt Lake City, Utah 84101. This office facility
consisted of approximately 2,150 square feet, and the Company was paying $2,229
for the space on a month-by-month basis at the time it moved its executive
offices to St. George, Utah. The Company and ARDCO shared this leased space
based on an oral agreement pursuant to which the Company paid the rent and
certain related overhead charges for both companies, while ARDCO paid the salary
of some of the Company's employees, who also provided part-time services to
ARDCO. Historically, the value of the rent and overhead charges paid by the
Company attributable to ARDCO's use of the leased space have been approximately
equal to the value of the services provided by the Company's employees which
were paid by ARDCO, however no exact accounting has been maintained.
During August 1997 the Company moved its executive offices to a
Company-owned home in the Cotton Manor development to cut costs, to bring
management closer to the Company's assets and operations, and in an effort to
distance the Company from ARDCO. The offices are now located at 345 N. 2450 E.,
St. George, Utah 84790. The Company has a mortgage on the home with a payment of
$1006.00 per month.
The Company's investment real estate holdings are comprised of the Red
HawkTM recreational and residential development consisting of approximately 670
acres near St. George, Utah, described above; and two residential developments
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in St. George, Utah aggregating approximately 80 acres known as Cotton Manor and
Cotton Acres, also described above. See "Item 1. Business." for a more detailed
description of these properties.
Management believes that the Company's properties are adequately
insured given their current state of development.
Item 3. Legal Proceedings.
The Company is presently involved in the following pending litigation:
a. On November 21, 1995, the Complaint was filed against the
Company in the Superior Court of Portland County, Georgia,
under the caption Sam Benlow, Inc. n/k/a Financial Information
Network, Inc. v. Golf Ventures, Inc. Civil Action #B-43620.
The Complaint sought payment of $21,141 allegedly due for
services rendered in an advertising campaign. The Company
negotiated a settlement whereby the matter was dismissed in
exchange for the issuance of 4,000 shares of the Company's
common shares, which would be covered by an S-8 registration
statement. To date, such shares have not been delivered and
the foregoing S-8 registration statement has not been filed.
The Company anticipates that this matter will be finally
resolved in the near future.
b. On October 10, 1996, a criminal complaint was filed in the
Southern District of New York against George Badger, then the
President of ARDCO, and thus a "control person" of the
Company. Mr. Badger was indicted on a number of charges and
was arraigned in the U.S. Federal District Court for the
Southern District of New York on October 9, 1996. It is the
understanding of the Company that the indictment related to
alleged unlawful and undisclosed compensation to securities
brokers and promoters to induce them to cause customers to
purchase securities issued by ARDCO and the Company. The
Company has learned that Mr. Badger has pleaded guilty to
counts of: (i) conspiracy to commit securities fraud; (ii)
securities fraud; (iii) criminal contempt; and (vi) perjury.
On August 7, 1997, the Commission issued another subpoena
duces tecum, to GVIM requesting that GVIM produce all minutes
and other documents relating to meetings of the Company's
Board of Directors held during the period of January 1, 1993
through that date. The Company intends to continue to
cooperate fully with the Commission in its investigation.
c. On March 12, 1997, the Company received a subpoena duces tecum
from the Commission to produce certain original documents and
to testify in the Commission's investigation regarding Trading
in Certain Over-the-Counter Securities ("NY-6375") pursuant to
a formal order issued by the Commission under Section 20(a)
under the Securities Act of 1933 and Section 21(a) of the
Securities Exchange Act of 1934. The requested documents
related to the Company's loans or other forms of financing or
credit obtained or sought by the Company and all
correspondence between the Company and the various funding
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entities. On July 25, 1997, the Company President and its
Secretary received subpoenas duces tecum from the Commission,
and on August 7 and 8, such officers testified before the
Commission in New York.
Item 4. Submission of Matters to a Vote of Security Holders.
No items were submitted to a vote of security holders during the fourth
quarter of the Company's fiscal year ended March 31, 1997.
PART II
Item 5. Market for Common Equity & Related Stockholder Matters.
The Company's common stock is currently traded in the over-the-counter
market on the NASDAQ Electronic Bulletin Board under the symbol "GVIM." The
Company intends to apply to have its common stock listed for trading on the main
National Association of Securities Dealers Automated Quotation System (NASDAQ)
as soon as it meets the requirements for such listing, although there is no
assurance that such listing will be obtained.
The following table represents the range of high and low bid quotations
for the calendar quarters indicated since the first quarter of 1995. Please note
that these prices have all be adjusted for the 1-for-5 reverse stock split
effected February 1, 1996.
Calendar Quarters High Bid Low Bid
1995
1st Quarter 4.75 3.00
2nd Quarter 4.50 2.50
3rd Quarter 3.50 1.50
4th Quarter 2.50 1.00
1996
1st Quarter 6.00 3.75
2nd Quarter 7.25 2.50
3rd Quarter 7.00 5.00
4th Quarter 5.50 2.00
1997
1st Quarter 2.75 1.50
2nd Quarter 2.00 1.25
3rd Quarter 3.75 1.13
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The foregoing quotations were obtained from broker-dealers and market
makers who provide daily reports of the NASD Electronic Bulletin Board. The
above quotes reflect inter-dealer prices without retail mark-up, mark-down, or
commissions and may not necessarily represent actual transactions.
As of September 30, 1997, the Company had 2,101,723 shares of its
common stock issued and outstanding, and there were 797 shareholders of record,
which figures do not take into consideration those shareholders whose
certificates are held in "street name" in their brokerage accounts. As of
December 15, 1997, the outstanding common shares had increased to 9,546,096
through the conversion of most of the outstanding shares of Series B Preferred
Stock into common stock, and a subsequent acquisition of a golf course and
resort in Naples, Florida, which acquisition was financed in part with Company
common stock.
As of the date hereof, the Company has not paid or declared any cash
dividends. The Company can give no assurance that it will generate future
earnings from which cash dividends can be paid. Future payment of dividends by
the Company, if any, is at the discretion of the Board of Directors and will
depend, among other criteria, upon the Company's earnings, capital requirements,
and its financial condition as well as other relative factors. Management has
followed the policy of retaining any and all earnings to finance the development
of its business. Such a policy is likely to be maintained as long as necessary
to provide working capital for the Company's operations.
Recent Sales of Unregistered Securities
The following are brief descriptions of sales of securities by the
Company for services, property or cash to support and advance the Company's
business plan. To enable interested persons to better understand these
transactions and their impact on the Company, the Company has elected to report
transactions beginning in 1993 through the current time. Please note that all
numbers of shares have all been adjusted for the 5 shares into 1 share reverse
stock split effected February 1, 1996.
- On January 1, 1993, the Company issued 130,949 shares of common
stock to ARDCO in connection with the Company's purchase of part of the Red
HawkTM acreage known as the Stucki parcel. Based on the knowledge, experience
and economic strength of ARDCO, the Company believes this transaction was exempt
from registration with the Commission under Section 4(2) of the Securities Act
of 1933.
- On May 5, 1994, the Company repaid a $325,819 indebtedness owed to
Olympus Investments by issuing 10,426 shares of common stock. The shares were
exempt from registration under the Securities Act pursuant to Rule 903(c) of
Regulation S promulgated thereunder.
12
<PAGE>
- On May 5, 1994, the Company repaid a $100,000 indebtedness owed to
LaJuana Badger, the wife of George Badger, at that time President of ARDCO, by
issuing 3226 shares of its common stock to Ms. Badger. Based on the knowledge,
experience and economic strength of Mrs. Badger, as advised by her husband, the
Company believes this transaction was exempt from registration with the
Commission under Section 4(2) of the Securities Act of 1933.
- On May 5, 1994, the Company repaid a $215,639 indebtedness owed to
ARDCO by issuing 6932 shares of its common stock. Based on the knowledge,
experience and economic strength of ARDCO, the Company believes this transaction
was exempt from registration with the Commission under Section 4(2) of the
Securities Act of 1933.
- On May 5, 1994, the law firm of Harringan, Ruff, Rider & Spardellati
accepted 65 shares of the Company's common stock as full payment for their
outstanding invoices totalling $2,100.00. Based on the knowledge, experience and
economic strength of Harringan, Ruff, Rider & Spardellati, the Company believes
this transaction was exempt from registration with the Commission under Section
4(2) of the Securities Act of 1933.
- On May 5, 1994, Williamsen & Associates, a corporate publicity firm
accepted 800 shares of the Company's common stock as full payment for a then
outstanding $30,000 bill for services rendered to the Company. Based on the
knowledge, experience and economic strength of Williamsen & Associates, the
Company believes this transaction was exempt from registration with the
Commission under Section 4(2) of the Securities Act of 1933.
- On June 24, 1994 the Stucki family agreed to accept 2,000 shares of
the Company's common stock in payment of the then outstanding unpaid interest on
the Stucki Note in connection with Red HawkTM. Based on the knowledge,
experience and economic strength of the Stucki family and their advisors, the
Company believes this transaction was exempt from registration with the
Commission under Section 4(2) of the Securities Act of 1933.
- On June 1, 1994, the Company issued 120 shares of its common stock
to Daniel C. Watson as part of the purchase consideration for a 50 acre plot of
land. Cash in the amount of $500,000 was also paid. Based on the knowledge,
experience and economic strength of Mr. Watson, the Company believes this
transaction was exempt from registration with the Commission under Section 4(2)
of the Securities Act of 1933.
- On June 29, 1994, the Company issued 16,389 shares of its common
stock to Banque SCS Alliance SA to repay a $286,799 indebtedness owed to Banque
SCS. The shares were exempt from registration under Rule 903(c), Securities Act
of 1933.
- On March 28, 1995, the Company sold 65,694 shares of its Series B
Preferred Stock for to Banque SCS for $328,401.00. These shares were exempt from
registration under the Securities Act pursuant to Rule 903(c) of Regulation S.
13
<PAGE>
- On June 30, 1995, the Company sold 33,676 shares of its Series B
Preferred stock to Olympus Investments Corp. for $168,382. The shares were
exempt from registration under the Securities Act pursuant to Rule 903(c) of
Regulation S promulgated thereunder.
- On January 23, 1996, the Company issued 567,400 shares of the
Company's common stock to Banque SCS as payment for financial advisory and
referral services provided to the Company. The shares were exempt from
registration under the Securities Act pursuant to Rule 903(c) of Regulation S
promulgated thereunder.
- On January 31, 1996, The Company issued 70,000 shares of its common
stock to Corporate Relations Group, Inc. as payment for promotional, advertising
and market maker services to the Company valued at $350,000. Based on the
knowledge, experience and economic strength of Corporate Relations Group, the
Company believes this transaction was exempt from registration with the
Commission under Section 4(2) of the Securities Act of 1933.
- On March 29, 1996, the Company sold 160,057 shares of its Series B
Preferred Stock to Banque SCS for $800,284. The shares were exempt from
registration under the Securities Act pursuant to Rule 903(c) of Regulation S
promulgated thereunder.
- On June 4, 1996, the Company sold 200,000 shares of its common stock
for cash to investors. The shares were exempt from registration under the
Securities Act of 1933 pursuant to Rule 504 of Regulation D promulgated
thereunder. Net proceeds from the offering were $879,424.
- On July 29, 1996, the Company issued 10,000 shares of its common
stock to Banque SCS to repay a $17,261 indebtedness. The shares were exempt from
registration under the Securities Act pursuant to Rule 903 of Regulation S
promulgated thereunder.
- On September 11, 1996, the Company issued 2,000 shares each to Mark
Qualey and Cambridge Consultants for promotional and advertising services valued
at $12,000. Based on the knowledge, experience and economic strength of these
persons, the Company believes this transaction was exempt from registration with
the Commission under Section 4(2) of the Securities Act of 1933.
- On September 30, 1996, the Company issued 10,000 shares of its
common stock to Banque SCS to repay a $17,261 indebtedness. The shares were
exempt from registration under the Securities Act pursuant to Rule 903 of
Regulation S promulgated thereunder.
- On December 10, 1996, the Company issued 1,804 shares of its Series
A Preferred Stock to George Dalton to satisfy indebtedness of $9,020 owed to Mr.
Dalton. Based on the knowledge, experience and economic strength of Mr. Dalton,
the Company believes this transaction was exempt from registration with the
Commission under Section 4(2) of the Securities Act of 1933.
14
<PAGE>
- On December 30, 1996, the Company issued 27,637 shares of its common
stock to Banque SCS to repay a $138,185 indebtedness owed to Banque SCS. The
shares were exempt from registration under the Securities Act pursuant to Rule
903 of Regulation S promulgated thereunder.
- On August 22, 1997 the Company issued a total of 250,000 shares of
its common stock, in the aggregate, to its officers and to an officer of ARDCO
as a bonus for services rendered and to be rendered to the Company during the
critical period of June-December 1997. Mr. Marchant received 150,000 shares, Mr.
Spencer received 35,000 shares, Mr. Frodsham received 30,000 shares and Karl F.
Badger, the President of ARDCO, received 35,000 shares. (The shares of Messrs.
Marchant, Spencer and Frodsham are listed in the table on page 23) The issuance
of these shares was exempt from registration under the Securities Act pursuant
to Section 4(2).
Item 6. Management's Discussion & Analysis of Financial Condition & Results of
Operations.
Statements made or incorporated in this report include a number of
forward-looking statements within the meaning of Section 27(a) of the Securities
Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words anticipates, believes, expects, intends, future, and words of similar
import which express management's belief, expectations or intentions regarding
the Company's future performance or future events or trends. Forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause actual results, performance or achievements of the Company to
differ materially from anticipated future results, performance or achievements
expressly or implied by such forward-looking statements. In addition, the
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
RESULTS OF OPERATIONS
For the Year Ended March 31, 1997, Compared to the Year Ended March 31, 1996.
At March 31, 1997, the Company had total assets of $12,639,500 and
total stockholders equity of $3,747,042 compared with total assets of $6,912,148
and total stockholders equity of $3,341,453 at March 31, 1996. The $5,727,352,
or 83% increase in total assets year-to-year is due primarily to (i) recording
$2,266,104 of the Red HawkTM debt as an asset cost that was not booked as such
in 1996 due to the resolution of certain contingencies, (ii) the capitalization
of $2,200,000 in construction costs on Red HawkTM incurred in 1997, and (iii)
the capitalization of $1,200,000 of development related interest related to Red
HawkTM. Total liabilities at March 31, 1997 increased $5,321,763, or 149%, from
$3,570,695 at year end 1996 to $8,892,458 at year end 1997. The increase is due
to (i) recording $2,266,104 of Red HawkTM debt corresponding to the booking of
the Red HawkTM asset, discussed above, (ii) the loans from Miltex Industries
totaling $3,085,805 for construction and overhead obtained in 1997, and (iii) an
increase in current liabilities of $375,964, explained below.
15
<PAGE>
Total revenue for the fiscal year ended March 31, 1997 ("fiscal 1997")
decreased $460,675, or 63%, to $274,000, compared with $734,675 for the fiscal
year ended March 31, 1996 ("fiscal 1996"). All fiscal 1997 revenue was generated
from the sale of lots at Cotton Acres and condominiums at Cotton Manor. During
fiscal 1997, 9 lots were sold at an average price of $30,400 and no condominiums
were sold. During the comparable prior year period, 20 lots were sold at an
average price of $24,000 and 3 condominium units were sold at an average price
of $84,700. Sales volume is dependent upon the number of completed lots and
condominiums in inventory, as well as demand for the location and type of real
estate being offered. These factors vary from period to period.
During fiscal 1997 the Company's available development capital was used
to preserve and develop Red HawkTM, and no funds were made available to Cotton
Manor or Cotton Acres for development. Therefore no new inventory was available
for sale and sales decreased.
Cost of sales decreased by $354,462, or 69%, to $158,066 for the fiscal
year ended March 31, 1997 from $512,528 for fiscal 1996. As a percentage of
total revenue, cost of sales decreased to 58% in the current year from 70% in
the prior year. This was caused by higher sales prices for existing inventory.
Gross profit decreased $106,213, or 48%, to $115,934 during fiscal 1997 from
$222,147 during fiscal 1996. Gross profit as a percentage of total revenue
increased to 42% from 30% in fiscal 1996, again reflecting lower expenditures on
development.
General and administrative expenses decreased $3,075,561, or 78%, to
$860,289 during fiscal 1997 from $3,935,850 during fiscal 1996. The decrease was
principally attributable to $2,835,000 in financial advisory and referral
expenses incurred in 1996, paid to Banque SCS Alliance SA and others in the form
of shares of the Company's common stock valued at $5.00 per share. These
expenses brought financing sources to the Company and enabled the Company to
raise needed investment capital in Europe. In 1996 the Company also incurred
$350,000 for advertising and promotional services, which was also settled in
shares of common stock valued at $5.00 per share. The stock price used to value
the shares used to pay these two large expenses was determined by the market
value of the Company's stock at the time. These are not expected to be recurring
expenses, their absence in 1997 was the primary difference in expenses for the
two years. The year to year expense decrease was offset somewhat by an increase
in legal fees of $101,687 in 1997, which was a 202% increase in this expense
category. This increase in legal costs was associated with efforts by the
Company to file a Form 10 registration statement with the Commission and efforts
which led to the US Golf transaction, described earlier in Item 1.
The Company had other income of $58,438 during fiscal 1997 compared
with $107,412 during fiscal 1996, a decrease of $48,974, or 46%. The expenditure
of cash caused bank accounts to decline and interest income to also decline.
16
<PAGE>
The Company experienced a net loss of $685,917 in fiscal 1997 compared
with a net loss of $3,606,291 in fiscal 1996. The explanations given for the
lower expenses and revenues also explain the larger loss in 1996.
The Company from time to time has agreed to take one half of the
purchase price of a lot and a note for second half, which is payable upon
completion and/or sale of the home built on the lot, if the Company found such
arrangements to be in the best interests of completing a sale and getting
marketing momentum in the development. There is no policy or rules covering
these arrangements, and these sales are made on an ad hoc basis in the
discretion of the President of the Company. The Company has accounted for these
sales as taking place at the time of the first closing, with income recognized
for the full purchase price with a corresponding receivable entered on the
balance sheet.
LIQUIDITY AND CAPITAL RESOURCES
Until November 26, 1997, the Company was controlled as a majority-owned
subsidiary of ARDCO.2 In this connection, ARDCO provided investment capital to
the Company, both directly and through referrals of investors and lenders to the
Company. Banque SCS Alliance SA is an example of an investor and lender referred
to the Company by ARDCO.
During the time of its majority shareholder control over the Company,
ARDCO caused cash to the moved between the Company and ARDCO on an informal
basis as each company had cash needs. The policy imposed on the Company during
this time period was to account for distributions to ARDCO as return of capital
transactions, and not to provide equivalent distributions to other shareholders.
In 1995, approximately $512,000 in cash was distributed to ARDCO, and in 1996
approximately $195,000 in cash was distributed to ARDCO. (As of December 15,
1997, ARDCO had been distributed $ in cash during 1997.) These distributions
deprived the Company of cash that would otherwise be available for debt service
on its properties and the development of the same.
During fiscal 1998, ARDCO has asserted claims against the Company
alleging that certain amounts previously paid by ARDCO were really Company
expenses or for the benefit of the Company. These claims total approximately
$1.2 million. The Company disputes these claims, but has been in negotiations
with ARDCO for several months in an attempt to achieve a complete settlement of
claims and a mutual complete release as between the two companies. As of the
date of this Second Amended Report (December 15, 1997) no final agreement has
- -------------------------
2 Until 1996, ARDCO held majority control over the Company through its own
shareholdings in the Company. During the first 8 months of 1997, ARDCO exercised
majority control over the Company through its own shares in the Company and
through a proxy to vote the shares of Series B Convertible Preferred Stock held
by Banque SCS Alliance SA. As of September 30, 1997, ARDCO and Banque SCS denied
the existance of a proxy over Banque SCS's shares. On November 26, 1997, the
Company closed on a reorganization agreement with US Golf which resulted in the
shareholders of US Golf becoming the holders of approximately 81% of the voting
stock and equity of the Company. As of this date, ARDCO lost its status as the
majority shareholder of the Company.
17
<PAGE>
been reached with ARDCO except that ARDCO has indicated a desire to take shares
of restricted common stock in settlement of the claims, whatever the amount
finally negotiatedfor the settlement.
As of March 31, 1997, the Company had total current assets of $961,474
and total current liabilities of $2,536,127 which results in a current ratio of
0.38:1, compared to a current ratio of 0.75:1 as of March 31, 1996. The current
ratio decrease was due to a drop in year end cash of $755,817, or 96%: from
$784,380 at year end 1996 to $28,563 at March 31, 1997. The decrease in cash
reflects the slow down in real estate sales and the decrease in borrowings
during the fourth quarter of 1997, as well as payment of land development costs.
The decrease in cash was offset somewhat by the increase in real estate
inventories from $748,010 to $932,439, due primarily to the completion of an
additional town home in the Cotton Manor development and the development of an
additional 19 lots in Phase X of Cotton Acres.
Current liabilities at March 31, 1997 increased $375,964, or 17% over
the prior year due to a $388,953 increase in accounts payable and a $200,040
increase in accrued expenses related to the ongoing interest accruals on real
estate debt.
The following table shows the long term indebtedness of the Company at
March 31, 1997, the amounts due at March 31, 1997 for each item of indebtedness,
an indication of currency or default as to each item of indebtedness, and the
amount of each item of indebtedness that will become due during fiscal 1998:
<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
- --------------------------------------------------------------------------------
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>
The Company has historically satisfied its cash needs through the sale
of real estate in Cotton Manor and Cotton Acres, private placements of
securities and secured borrowings. During 1997, the Company sold $274,000 of
real estate in Cotton Manor and Cotton Acres. This figure is substantially lower
than prior years due to the inability to raise sufficient funds to complete lot
development in Cotton Manor and Cotton Acres, and, in turn, to make sales.
18
<PAGE>
During 1997, the Company borrowed $3,085,805 from Miltex Industries of
Geneva, Switzerland (Miltex). Approximately $2,000,000 of these funds were used
to pay Granite Construction Co. to start the rough grading on the golf course
and the first phase of residential lots at Red HawkTM. Additionally, the Miltex
loans were used to keep the Stucki Note out of default and to pay Company
overhead expenses, including general and administrative expenses. The
construction at Red HawkTM has now stopped until further development money is
raised.
The amounts due to Property Alliance have not been paid for several
months, and Property Alliance could declare the Company in default and foreclose
on the acreage securing the repayment of these amounts, described earlier in
this report. Because of the personal relationship between Mr. Marchant and the
management of Property Alliance, forbearance on any declaration of default has
been obtained, largely on the expectations from the US Golf transaction,
described earlier in this report.
Completion of Phase I at Red HawkTM and the sale of Phase I lots will
depend largely on the Company's ability to raise additional funds, preferably
long term financing on acceptable terms and conditions. The Company is pursuing
development loans for Red HawkTM in the $10,000,000 to $14,000,000 range. GVIM
will also continue to develop and sell lots and town homes in the Cotton
Manor/Cotton Acres developments as financing for development there becomes
available. However even if financing were available for Cotton Acres and Cotton
Manor, sales at these projects will not yield enough earnings and free cash to
financially support the Company's overhead and the development or keeping of Red
HawkTM.
The Company's ongoing overhead and debt service obligations are
approximately $75,000 per month at December 31, 1996. Approximately $900,000 of
long-term debt will become due during fiscal 1998. As noted in Item 1, above,
the development of Phase I at Red HawkTM could be completed within six months of
the receipt of approximately $5,700,000 in development funds. Further
Development at Cotton Acres, in Phases XI and XII, will require approximately
$490,000. If the Company does not receive sufficient long term financing to
effectively develop its St. George properties, the Company intends to meet its
obligations on such properties at a subsistence level through short term
borrowings, offerings of common and/or preferred stock for cash and/or through
private or public debt offerings. There is no assurance that these financing
sources will be available to the Company in sufficient amounts or at all.
Item 7. Financial Statements and Supplementary Data.
The Following financial statements and documents are filed herewith on
the immediately following pages listed below, as part of Part II, Item 7 of this
report.
Document...................................................................Page
1. Financial Statements and Accounts Report:
Independent Auditor's Report.................................F-1
19
<PAGE>
Consolidated Financial Statements:
Consolidated Balance Sheet...................................F-2-3
Consolidated Statements of Operations and Accumulated
Deficit for the Years Ended March 31, 1997 and 1996............F-4
Statement of Stockholders' Equity at
March 31, 1997 and 1996......................................F-5-6
Consolidated Statements of Cash Flows for the Years
Ended March 31, 1997 and 1996................................F-7-8
Notes to Consolidated Financial Statements
Notes 1 through 12.............................................F-9
2. Financial Statement Schedules
Schedule VIII - Valuation and Qualifying Accounts.............F-16
Schedule X - Supplementary Income Statement Information...... F-17
Schedule XI - Real Estate and Accumulated Depreciation........F-18
Other schedules are omitted because of the absence of conditions under which
they are required or because the required information is given in the
consolidated financial statements or notes thereto.
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Golf Ventures, Inc.
We have audited the accompanying balance sheets of Golf Ventures, Inc., as of
March 31, 1997 and the related statements of operations, stockholders' equity
and cash flows for the years ended March 31, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about 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.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golf Ventures, Inc., as of
March 31, 1997 and the results of its operations and its cash flows for the
years ended March 31, 1997 and 1996 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has incurred significant losses since
inception, has a substantial working capital deficit, and has debt significantly
in excess of stockholders' equity, all of which raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 7. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules on pages 18 and 19 are
presented for purposes of additional analysis and are not a required part of the
basic consolidated financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic consolidated financial statements taken as a whole.
Jones, Jensen & Company
Salt Lake City, Utah
June 16, 1997
F-1
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Balance Sheet
ASSETS
March 31,
1997
CURRENT ASSETS ----------------
<S> <C>
Cash $ 28,563
Real estate inventory 932,439
Current portion of contract receivable 472
----------------
Total Current Assets 961,474
PROPERTY AND EQUIPMENT
Model home 133,954
Furniture and fixtures 13,106
Computer equipment 2,350
----------------
Total depreciable assets 149,410
Less: accumulated depreciation (2,393)
Net Property and Equipment 147,017
OTHER ASSETS
Land held for development (Note 2) 11,475,016
Long-term portion of contract receivable 55,993
Total Other Assets 11,531,009
TOTAL ASSETS $ 12,639,500
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
1997
CURRENT LIABILITIES ----------------
<S> <C>
Accounts payable $ 953,072
Accrued expenses and other liabilities 659,735
Current portion of long-term debt (Note 3) 923,320
----------------
Total Current Liabilities 2,536,127
LONG-TERM DEBT (Note 3) 6,356,331
----------------
Total Liabilities 8,892,458
STOCKHOLDERS' EQUITY
Preferred stock (10,000,000 shares authorized
at par value of $.001) 24,304 class "A" and 287,064
class "B" shares issued and outstanding (Note 4) 311
Common stock (25,000,000 shares authorized
at par value of $.001) 1,852,828 shares issued
and 1,839,837 shares outstanding (Note 5) 1,853
Additional paid-in capital 8,264,828
Accumulated deficit (4,519,950)
----------------
Total Stockholders' Equity 3,747,042
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,639,500
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Operations
For the Years Ended
March 31,
1997 1996
INCOME ---------------- ---------------
<S> <C> <C>
Real estate sales $ 274,000 $ 734,675
Cost of real estate sales 158,066 512,528
---------------- ---------------
Gross Profit on Real Estate Sales 115,934 222,147
---------------- ---------------
EXPENSES
Investment banking and financing
services (Note 5) - 3,260,000
Depreciation 2,393 -
General and administrative expenses 857,896 675,850
---------------- ---------------
Total Expenses 860,289 3,935,850
---------------- ---------------
LOSS FROM OPERATIONS (744,355) (3,713,703)
---------------- ---------------
OTHER INCOME (EXPENSES)
Other revenue 29,931 101,877
Interest income 38,649 5,535
Interest expense (10,142) -
---------------- ----------
Total Other Income (Expenses) 58,438 107,412
---------------- ---------------
NET LOSS BEFORE INCOME TAXES (685,917) (3,606,291)
INCOME TAXES - -
---------------- ----------
NET LOSS $ (685,917) $ (3,606,291)
================ ===============
NET LOSS PER COMMON SHARE $ (0.38) $ (2.59)
================ ===============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 1,799,633 1,393,386
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Stockholders' Equity
Additional
Preferred 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 (Note 4) (2,000) (2) 1,221 1 1 -
Class "B" preferred stock
issued for cash (Note 4) 193,733 193 - - 968,473 -
Common stock issued for
services (Note 5) - - 95,000 95 424,905 -
Common stock issued for
services rendered
(Note 5) - - - - 2,835,000 -
Distribution to parent
company - - - - (195,197) -
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)
------------ --------- ------------- ----------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<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>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Cash Flows
For the Years Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES ----------------- -----------------
<S> <C> <C>
Net loss $ (685,917) $ (3,606,291)
Items not requiring cash flow
during the current period:
Depreciation 2,393 -
Common stock issued for services 12,000 3,260,000
Changes in assets and liabilities:
(Increase) decrease accounts receivable 35,375 2,955
(Increase) decrease inventory 5,936 416,782
(Increase) decrease in contract receivable 313 62
Increase (decrease) accounts
payable and accrued expenses 580,993 397,146
----------------- -----------------
Net Cash Provided (Used) by
Operating Activities (48,907) 470,654
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (32,610) -
Land held for development (3,614,959) (708,276)
----------------- -----------------
Net Cash (Used) in Investing Activities (3,647,569) (708,276)
----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 3,085,805 355,000
Principal payments on long-term debt (1,042,925) (126,558)
Contributions from parent company 356,054 -
Distribution to parent company (325,199) (195,197)
Sale of common stock for cash 1,000,000 -
Payment of stock offering costs (120,576) -
Sale of preferred stock for cash - 968,666
Retirement of preferred stock (12,500) -
----------------- ------------
Net Cash Provided by Financing Activities 2,940,659 1,001,911
----------------- -----------------
INCREASE (DECREASE) IN CASH (755,817) 764,289
CASH AT BEGINNING OF YEAR 784,380 20,091
----------------- -----------------
CASH AT END OF YEAR $ 28,563 $ 784,380
================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Cash Flows
For the Years Ended
March 31,
1997 1996
SUPPLEMENTAL CASH FLOW DISCLOSURES ------------------- ------------------
<S> <C> <C>
Cash Paid For:
Interest $ 367,817 $ -
Income taxes - $ -
NON CASH FINANCING ACTIVITIES
Common stock issued for services $ 12,000 $ 3,260,000
Debt incurred for acquisition of inventory $ 190,365 $ -
Debt recorded for acquisition of land held
for development $ 2,390,725 $ -
Debt incurred for acquisition of property
and equipment $ 116,800 $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 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 stock splits 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. ARDCO
has common directors and management with the Company. The Company
made distributions to ARDCO of $325,199 and $195,197 for the
years ended March 31, 1997 and 1996, respectively, 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
----------------
Total $ 4,436,000
================
The Company has elected a March 31 fiscal year end for book and
tax purposes.
F-9
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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. The common stock equivalents are anti-dilutive and
accordingly not used in the net loss per common share
computation.
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.
In 1997 the Company capitalized debt of approximately $2,300,000
which it had previously recorded as a contingent liability. Prior
to 1997 the Company's investment in the land secured by the debt
was contingent upon factors which made the likelihood of
completion of the purchase uncertain. The contingencies were
resolved in 1997 and accordingly the debt and the related
increase in costs were recorded.
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.
F-10
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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 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, 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.
F-11
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 3 - LONG-TERM DEBT
Long-term debt of the Company is as follows: March 31,
1997
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. Additionally,
the Company is obligated to pay $5,000 from each
lot sale to the note holder and $175,000 from the
first $1,000,000 received in long term financing.
The note is in technical default, but the note
holder has taken no collection action. $ 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
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. 80,575
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
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. 3,440,805
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. 2,246,823
Mortgage note payable secured by real estate
bearing interest at 11.5%. Due in monthly
installments of $911. 90,915
-------------------
Balance forward $ 7,063,400
-------------------
F-12
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 3 - LONG-TERM DEBT (Continued) March 31,
1997
---------
Balance forward $ 7,063,400
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
--------------
Subtotal 7,279,651
Less Current Portion (923,320)
--------------
Long-Term Portion $ 6,356,331
==============
Maturities on long-term debt are as follows:
1998 $ 923,320
1999 2,282,797
2000 3,557,065
2001 73,718
2002 19,559
Thereafter 423,192
--------------
$ 7,279,651
==============
NOTE 4 - 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 a one time 6% of investment bonus from the
first profits of the Company. The preferred stock is convertible
into common stock on, or before March 1, 1998 on the basis of an
exchange price of 60% of the average bid price of the common
stock for the 90 days immediately prior to conversion. For
illustration purposes only, if the 1,804 Series A preferred
shares issued during 1997 were to be converted at this time, such
shares would be converted into 4,956 shares of common stock,
based upon an average bid during the relevant period of $3.03.
The preferred stock also has certain preferences in liquidation.
During the year ended March 31, 1996, 2,000 shares including
accrued dividends of $3,679 were converted into 1,221 shares of
common stock. An additional 2,500 shares of class "A" preferred
stock were repurchased from the holder for $12,500 during the
year ended March 31, 1997. 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. Accrued expenses include unpaid
dividends at March 31, 1997 of $42,321.
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 any
time during the eighteen months preceding the conversion.
F-13
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 4 - PREFERRED STOCK (CONTINUED)
For illustration purposes only, if 1,000 class "B" preferred
shares (disregarding accrued interest) were to be converted at
this time, such shares would be converted into 10,638 shares of
common stock, based upon a low bid during the relevant period of
$1.18. 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. The class "B" preferred shares are entitled to
vote along with the common shares.
NOTE 5 - COMMON STOCK
In January 1996, the Company issued 70,000 shares of unregistered
and restricted common stock to an investment banking firm as
payment of a $350,000 retainer fee for providing investment
banking services to obtain additional debt and equity financing.
The number of shares issued was based on the market value of the
shares on the date of issuance. These fees were expensed in the
accompanying statement of operations for the year ended March 31,
1997.
The Company issued 25,000 shares of unregistered and restricted
common stock in February 1996 to a European bank as compensation
for promotional services provided to the Company in securing
additional debt and equity financing. These shares have been
valued at $75,000 representing the market value of the shares at
the date of issuance. These fees were also explained in the
accompanying statement of operations for the year ended March 31,
1997.
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 on long-term debt in accordance with the terms of the
related promissory note. 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.
NOTE 6 - RELATED PARTY TRANSACTIONS
a. Stock Issuances
During the year ended March 31, 1996, the Company issued 160,057
shares of class "B" preferred stock to a shareholder for cash of
$800,285 (see Note 4).
F-14
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 6 - RELATED PARTY TRANSACTIONS (Continued)
b. Sales to Related Parties
In 1997 the Company sold one lot to one of its officers and
shareholders. The lot was sold for cash of $15,000, which is the
price at which the lot was being offered to the public.
NOTE 7 - 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.
NOTE 8 - SUBSEQUENT EVENT
a. Proposed Acquisitions
GVI has entered into discussions with an unrelated company
regarding a possible business reorganization that would combine
the two companies. The unrelated company is extensively involved
in golf course construction and management.
b. Stock Issued for Services - (Unaudited)
On August 22, 1987 the Company issued 250,000 shares of its
common stock as a bonus for services rendered. The shares were
issued to certain of its officers and to the President of ARDCO.
The shares were valued at $390,725 or $1.56 per share, which was
the average trading price at the date of issuance.
c. Transfer to Related Party (Unaudited)
Subsequent to March 31, 1997 the Company transferred to a
shareholder its model home for the assumption of the debt on the
model home. The debt was approximately equal to the cost of the
model home, so no sale and no gain or loss will be recognized on
the transfer.
F-15
<PAGE>
GOLF VENTURES, INC.
Supplemental Schedules
March 31, 1997 and 1996
Schedule VIII - Valuation and qualifying accounts
Allowance for returns and bad debts:
Balance at Balance at
Beginning End of
of Year Additions Deductions Year
------- --------- ---------- ----
March 31, 1997 $ 5,000 $ - $ - $ 5,000
March 31, 1996 5,000 - - 5,000
F-16
<PAGE>
Schedule X - Supplementary income statement information
For the Years Ended
March 31,
1997 1996
------------- ------------
Maintenance and repair $ 35,749 $ 16,571
Depreciation and amortization 2,393 -
Taxes, other than payroll and income taxes 6,743 32,668
Royalties - -
Advertising 17,323 1,002
F-17
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Supplemental Schedules
March 31, 1997 and 1996
Schedule XI - Real Estate and Accumulated Depreciation
Life on
which
Costs Gross depreciation
capitalized amount in latest
(Disposals) at which Accumu- income
Initial subsequent carried lated Date of statements
cost to to at close deprec- construc- Date is
Description Encumbrances Company acquisition of period iation tion acquired computed
- -------------------------- ------------ ---------- ------------ ----------- ------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Red Hawk Development
St. George, Utah
Undeveloped Land
Convertible subordinated
Debentures $ 185,000
Foss Lewis Construction,
Trust Deed Note 80,575
Miltex Industries, Ltd.
Promissory Note 3,440,805
Daniel C. Watson
Trust Deed Note 355,890
Stucki income trust,
Trust Deed Note 2,246,823
$ 6,309,093 $4,135,000 $6,242,166 $10,377,166 $ N/A 7-8-96 3-30-90 N/A
=========== ========== ========== =========== ======= ====== ======= ======
Cotton Manor/Cotton
Acres Dev.
St. George, Utah
Improved residential
Blaine Harmon Family
Trust, Promissory Note $ 201,890
Property Alliance, Inc.
Promissory Note 646,502
$ 848,392 $1,902,130 $ (804,280) $ 1,097,850 $ N/A 9-1-91 9-1-91 N/A
=========== ========== ========== =========== ======= ====== ====== ======
</TABLE>
F-18
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
This item is not applicable.
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons
All Directors of the Company serve a term of one (1) year until the next
Annual Shareholders Meeting or until their death, resignation, retirement,
removal, disqualification, or until their successors have been elected and
qualified. Vacancies in an existing board of directors are to be filled by a
majority vote of the remaining Directors. Officers of the Company serve at the
will of the Board of Directors.
The following table sets forth the name and age of each Director and
Executive Officer of the Company as of December 31, 1996, followed by a brief
resume of each named individual. Information is also provided about the former
president of ARDCO, a person who played a significant role in the development
and management of the Company up to August, 1997, but who is no longer
affiliated with the Company.
NAME AGE POSITION HELD
---- --- -------------
Duane H. Marchant 58 President, Chief Executive Officer and Director
Bruce E. Frodsham 32 Vice President and Director
Stephen B. Spencer 41 Director, Secretary and Treasurer
DUANE H. MARCHANT, President, Chief Executive Officer and Director of
the Company, earned a B.S. Degree in business management from Brigham Young
University in 1956 and an M.B.A. Degree from Utah State University in 1967. Mr.
Marchant is a registered real estate broker in the State of Utah and has over 25
years of experience in real estate development and marketing. From 1990 until
August 1995, he served as a director and executive officer of ARDCO, which is a
publicly held company involved in real estate development and franchising and
which is currently the largest stockholder in the Company. Mr. Marchant has been
a Director of the Company since 1992, and is the father-in-law of Mr. Frodsham.
In August, 1997, Mr. Marchant took on the additional duties of Treasurer of the
Company.
BRUCE E. FRODSHAM, Vice President and a Director of the Company is
also the Sales Manager of Cotton Acres and Cotton Manor. Mr. Frodsham earned a
B.S. Degree in Ornamental Horticulture from Brigham Young University in 1988,
and was Vice President of Frodsham Better Lawns from 1985 to 1991. He is a
specialist in professional grass management, weed control, ornamental design and
landscaping. Mr. Frodsham was a main-frame computer operator for Brigham Young
University for three years and is a free- lance computer operator and
consultant. Mr. Frodsham became a Director of the Company in 1992, and is the
son-in-law of Mr. Marchant. In August 1997 Mr. Frodsham took on the additional
21
<PAGE>
duties of Secretary of the Company. He resigned as a Director of the Company
effective on the closing of the US Golf reorganization transaction.
STEPHEN B. SPENCER, Secretary, Treasurer and a Director of the
Company, is a Certified Public Accountant and was the Secretary/Treasurer, and a
director of ARDCO from 1990 until 1997. From 1988 to 1990, he worked for Mrs.
Fields, Inc. as an Assistant Financial Controller and then Controller, and from
1985 to 1988, he was the Director of Operations for the Salt Lake Convention and
Visitors Bureau. Mr. Spencer resigned as an officer of the Company in August
1997, and resigned as a Director of the Company effective on the closing of the
US Golf reorganization transaction.
GEORGE H. BADGER, resigned as President and a Director of ARDCO (a
significant shareholder in GVIM) on December 31, 1996. As President of ARDCO,
Mr. Badger was a "control person" of the Company between 1992 and the end of
1996. Mr. Badger was indicted on a number of charges and was arraigned in the
U.S. Federal District Court for the Southern District of New York on October 9,
1996. It is the understanding of the Company that the indictment related to
alleged unlawful and undisclosed compensation to securities brokers and
promoters to induce them to cause customers to purchase securities issued by
ARDCO and the Company. The Company has learned that Mr. Badger has pleaded
guilty to counts of: (i) conspiracy to commit securities fraud; (ii) securities
fraud; (iii) criminal contempt; and (vi) perjury. The Company has no further
ongoing dealings with Mr. Badger, other than as required to reach settlements
with Mr. Badger and ARDCO with respect to a separation of the Company from the
control of these persons.
Executive and Director Compensation
The Company has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or directors.
The following table sets forth a summary of cash and non-cash
compensation for each of the last three fiscal periods ended March 31, 1997,
1996, and 1995, with respect to the Company's Chief Executive Officer. No
executive officer of the Company has earned a salary greater than $100,000
annually for any of the periods depicted.
Summary Compensation Table
Name & Principal Position Year Salary
- ------------------------- ---- ------
Duane H. Marchant 1997 $72,000
President & CEO 1996 $72,000
1995 $72,000
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information, to the best knowledge of
the Company, as of September 30, 1997, with respect to the beneficial ownership
of the Company's Common Stock by (i) each person known by the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock; (ii)
22
<PAGE>
each Director of the Company; and (iii) all current Directors and Executive
Officers as a group.
<TABLE>
<CAPTION>
===============================================================================================================================
NUMBER OF SHARES PERCENT NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF OF COMMON STOCK OF OF SERIES B OF
BENEFICIAL OWNER BENEFICIALLY OWNED CLASS PREFERRED STOCK3 CLASS
BENEFICIALLY OWNED
===============================================================================================================================
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Banque SCS Alliance SA 721,252(4,5) 34.32% 315,404(4,6) 100%
P.O. Box 880
12111 Geneva 3, Switzerland
- -------------------------------------------------------------------------------------------------------------------------------
American Resources 594,309 28.27% 0 0
and Development Co.
102 West 500 South,
Suite 400
Salt Lake City, UT 84101
- -------------------------------------------------------------------------------------------------------------------------------
Miltex Industries -0- -0- 28,3403 8.24%
c/o Camille Froidevaux
Budinet & Associates
20 Rue Senebier, P.B. 166
1211 Geneva, Switzerland
- -------------------------------------------------------------------------------------------------------------------------------
Duane H. Marchant 156,989 7.46% 0 0
345 North 2450 East
St. George, UT 84790
- -------------------------------------------------------------------------------------------------------------------------------
Stephen B. Spencer 35,000 1.66% 0 0
102 West 500 South
Suite 400
Salt Lake City, UT 84101
- -------------------------------------------------------------------------------------------------------------------------------
Bruce E. Frodsham 30,000 1.43% 0 0
345 North 2450 East
St. George, UT 84790
- -------------------------------------------------------------------------------------------------------------------------------
All Officers and Directors of 221,989 10.55% 0 0
the Company as a Group
(3 persons)
===============================================================================================================================
</TABLE>
- --------
3 Series B Preferred Shares, in the aggregate, are able to cast
approximately 4,052,683 common share votes, which calculation is based on the
market price of GVIM Common Stock into which the Series B Preferred Stock is
convertible. This voting power was calculated based on the September 30 low bid
price of $1.00 per share.
4 Banque SCS Alliance SA owns 51.5% of the outstanding common stock of
ARDCO. ARDCO's shares in the Company are attributed to Banque SCS as a
beneficial owner and "affiliate" of ARDCO. 5 During the Company's third fiscal
quarter, Banque SCS converted its Series B Preferred Stock into 4,052,683 shares
of Common Stock based on the coversion ratio prescribed for Series B Preferred
Stock at that time.
6 Banque SCS's Series B Preferred Stock could cast (at September 30, 1997)
3,887,608 common share votes at meetings of the Company's stockholders. This
effectively gives Banque SCS majority voting control of the Company, especially
when combined with its control over ARDCO and its shares of the Company's common
stock. Under the laws of Switzerland, Banque SCS is prohibited from disclosing,
and has declined to disclose to the Company the names of the beneficial owners
of the shares and votes in the Company held by Banque SCS. (See Note 4 of the
Financial Statements for further disclosure.
23
<PAGE>
Item 12. Certain Relationships and Related Transactions.
ARDCO is a significant shareholder of the Company. The Company and
ARDCO shared office space through August, 1997. Under this arrangement, the
Company paid the rental expense for both companies, and ARDCO paid the salary
and benefits of two shared employees.
Duane H. Marchant, President of the Company, was the President of
Property Alliance at the time of ARDCO's purchase of Cotton manor and Cotton
Acres from Property Alliance. Mr. Marchant resigned as president of Property
Alliance at the time of the purchase. Mr. Marchant was an officer of ARDCO at
the time of the sale of Red HawkTM, Cotton Manor and Cotton Acres to the
Company. Shortly after the sale, Mr. Marchant resigned as an officer of ARDCO
and remained as President of the Company. (See Item I, above, for a fuller
discussion of the indebtedness and dealings between Property Alliance and the
Company.)
Bruce E. Frodsham, Vice President of the Company, is the son-in-law of
Duane H. Marchant, President of the Company.
On January 23, 1996, the Company issued 567,400 shares of the Company's
common stock to Banque SCS Alliance SA as payment for financial advisory and
referral services provided to the Company. The shares were exempt from
registration under the Securities Act pursuant to Rule 903(c) of Regulation S
promulgated thereunder. Banque SCS was instrumental in referring Miltex
Industries to the Company for a loan transaction, and also Banque SCS provided
needed investment capital to the Company later in 1996. The number of shares
paid to Banque SCS was negotiated and agreed with the Bank.
On July 5, 1996 the Company, ARDCO and the Stucki family entered into a
modification of the Stucki Note and related agreements, in connection with Red
HawkTM, which states: "The parties acknowledge that Golf Ventures, Inc. had been
assigned the rights of [ARDCO] by assignment of even date, and Golf Ventures,
Inc. is therefore the buying party to the transaction". This effectively takes
ARDCO out of the Stucki transaction and makes GVIM the sole direct purchaser of
the Stucki portion of Red HawkTM. (See more detailed disclosure under Item 1,
above.)
During 1996, the Company borrowed a total of $3,238,805 from Banque SCS
Alliance SA, a shareholder of both the Company and of ARDCO. The loan is secured
by a trust deed against Red HawkTM. (See an expanded description under "Red
HawkTM" in Part I, Item 1, above.)
On March 29, 1996 the Company sold 160,057 shares of its Series B
Preferred stock to Banque SCS Alliance SA, an existing shareholder, for
$800,284.
On December 31, 1996 the Company sold 27,637 shares of its Series B
Preferred stock to Banque SCS Alliance SA, an existing shareholder, for
$138,185.
24
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits
The following exhibits are filed herewith or are incorporated by
reference to exhibits previously filed with the Securities and Exchange
Commission. The Company shall furnish copies of exhibits for a reasonable fee
(covering the expense of furnishing copies) upon request.
Exhibit No. Exhibit Name
3.1 Certificate of Incorporation, as amended*
3.2 The Company's ByLaws, as amended *
10.1 Option contract (Stucki)*
10.2 Extension to Option Contract (Stucki)*
10.3 Further Amendment to Option Contract (Stucki)*
10.4 Modification Agreement (Stucki)*
10.5 Further Modification Agreement (Stucki)*
10.6 Sales Agreement (Property Alliance)*
10.7 Addendum to Sales Agreement (Property Alliance)*
10.8 Acquisition Agreement (ARDCO)*
10.9 Agreement (Bear River Contractors)*
10.10 Reorganization Agreement with U.S. Golf Communities, Inc.** 10.11
Amendment No 1 to Reorganization Agreement with U.S.
Golf Communities
23.1 Consent of Independent Auditor
* Incorporated by reference to the Company's Form 10-SB Registration
Statement filed with the Commission September 6, 1996, File No. 0-21337.
** Incorporated by reference from the Company's First Amended Form 10-KSB,
filed with the Commission October 21, 1997, File No. 0-21337.
(b) The following reports on Form 8-K were filed by the Company during the
fiscal year ended March 31, 1997:
August 12, 1997 The Company filed a report on Form 8-K for
the purpose of correcting a previous press release
issued by the Company on October 18, 1996 concerning
the charges filed October 10, 1996 against Mr. George
Badger.
September 8, 1997 The Company filed a report on Form 8-K
concerning its issuance under Regulation S promulgated
under the Securities Act of 28,340 shares of Series B
Preferred Stock to Miltex Industries, Inc.
25
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934,
the Registrant caused this Second Amended Annual Report on Form 10-KSB to be
signed on its behalf by the undersigned, thereunto duly authorized.
GOLF VENTURES, INC.
(Registrant)
Dated: December 19, 1997 BY:/s/ Warren Stanchina
--------------------------
Warren Stanchina, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Second Amended Report on Form 10-KSB has been signed below by the following
persons, being a majority of the board of directors of the registrant, on behalf
of the registrant and in the capacities and on the date indicated.
Signature Position with Company Date
--------- --------------------- ----
/s/ Warren Stanchina President, Chief Executive December 19, 1997
- --------------------- Officer and Director
/s/ Wolfgang Duren Vice President and Director December 19, 1997
- -------------------
/s/ Eric LaGrange Senior Vice President and Chief December 19, 1997
- --------------------- Financial and Accounting Officer
26
ADDENDUM # 1 TO AGREEMENT AND PLAN OF REORGANIZATION
WHEREAS an AGREEMENT AND PLAN OF REORGANIZATION dated as of August 25,
1997 (the "Agreement") was executed and delivered by and among (a) GOLF
VENTURES, INC., a Utah corporation ("GVI") , U.S. GOLF COMMUNITIES, INC., a
Delaware corporation ("USGCD"), and the USGCD Securityholders; and
WHEREAS all capitalized terms used in this Addendum are used exactly
as defined in the Agreement; and
WHEREAS unanticipated regulatory and other delays in completing the
conditions and expectations of the parties have occurred and the parties are now
agreed on a method for bringing this Agreement to Closing sooner than would
otherwise occur were the Agreement to continue under its present terms; and
WHEREAS US Golf has been unable to produce audited financial statements
as of either December 31, 1996 or as of a recent date near the Closing through
no fault nor bad faith on its part, and is therefore unable to comply with the
requirements of Section 11(a)(v); and
WHEREAS the parties desire to create and enter into this Addendum to
the Agreement to modify the Agreement only in the ways and specifics contained
in this Addendum, and otherwise affirm the particulars of the Agreement as being
in full force and effect; and,
WHEREAS the parties have used the same paragraph and section numbering
in this Addendum as they used in the Agreement, for ease of comparison between
this Addendum and the Agreement,
NOW THEREFORE IT IS AGREED AS FOLLOWS:
2. Plan of Reorganization. By virtue of their respective execution of
this Agreement, GVI and the USGCD Securityholders hereby agree and consent that,
subject to the satisfaction by USGCD and the Affiliated Shareholders on the one
hand, and by GVI on the other hand, of the covenants and conditions precedent
described in this Agreement in Sections 8 and 11, respectively, on the one hand,
and in Sections 9 and 11, respectively, on the other hand, on the Closing Date
(as hereinafter defined) all of the USGCD Securities shall be exchanged with GVI
for shares of GVI's Series D Convertible Preferred Stock or, in the case of the
Option Holders, for GVI options entitling the holder thereof to acquire GVI
Common Stock. The Series D Preferred Stock to be issued under the Agreement is
comprised of authorized but unissued shares of GVI Series D Preferred Common
Stock and shall be exchanged on the following basis: 5.2499 shares of Series D
Preferred Stock for each one (1) USGCD Common Share(s) tendered and exchanged
therefor (the "Conversion Ratio"). It is the intent of the parties hereto that
the pre-Reorganization, as defined herein, shareholders of GVI shall retain
approximately 19% of the Common Stock following conversion of the Series D
Preferred Stock into Common Stock (the "Reorganization"). In the event that
either USGCD or GVI should issue additional equity or rescind any currently
<PAGE>
outstanding equity prior to the Closing Date, as defined erein, the Conversion
Ratio shall be adjusted proportionately to preserve the foregoing expectation.
Fractional shares of USGCD shall be rounded up to the nearest whole share. Prior
to such exchange, GVI also shall establish its Long Term Equity-Based Incentive
Plan, and shall reserve 3,000,000 (post-Reorganization) shares of GVI Common
Stock for issuance thereunder. The Option Holders shall be entitled to exercise
their respective USGCD Options with respect to their pro rata portion of such
reserved shares. GVI hereby agrees to issue to the USGCD Securityholders and the
USGCD Securityholders hereby accept, in exchange for all of the USGCD
Securities, an aggregate of 6,672,578 shares of Series D Preferred Stock and the
GVI stock option plan as described above. The shares of Series D Preferred Stock
shall be issued to the USGCD Securityholders based upon the number of USGCD
Common Shares held as indicated on EXHIBITS 1 AND 2, and as summarized in a
schedule attached to this Addendum labeled "Addendum Schedule 1".
3. Delivery of the USGCD Securities. On the Closing Date, the USGCD
Common Shareholders will deliver to GVI, in exchange for the Series D Preferred
Stock as hereinabove provided, certificates representing all of the issued and
outstanding USGCD Common Shares duly endorsed in blank with signature guaranteed
or with executed stock powers attached thereto with signature guaranteed and in
transferrable form with any required documentary or transfer tax stamps affixed
at the USGCD Common Shareholders' sole and exclusive expense so as to make GVI
the sole owner thereof, free and clear of any and all liens, claims and
encumbrances, of any nature whether accrued, absolute, contingent or otherwise.
...............
7. Representations and Warranties of GVI. By virtue of its execution of
this Agreement, GVI hereby represents and warrants to USGCD and the USGCD
Securityholders as follows:
...............
(e) Capitalization. The capitalization of GVI as of the
Closing Date will be substantially as follows:
Authorized Issued and Outstanding
25,000,000 shares of Common Stock 6,290,692 shares1
10,000,000 shares of Preferred Stock 58,676 shares2
- --------
1 Includes shares presently issued and outstanding plus: (a) up to
225,700 shares to be converted from Class A Preferred; (b) 3,942,450 to convert
GVI Class B Preferred; and (c) 30,000 shares to be issued to settle the
obligation owed to Airport Development Group. This amount does not include any
shares that may be issuable to George Badger or to American Resources and
Development Co., a Utah corporation ("ARDCO") following the Closing.
2 The preferred stock issued to date is as follows:
<TABLE>
<S> <C> <C> <C>
Series A Convertible Preferred 350,000 authorized 25,000 issued 25,000 outstanding
Series B Convertible Preferred 350,000 authorized 259,427 issued 33,676 outstanding
Series C Preferred 136,093 authorized 136,093 issued 0 outstanding
</TABLE>
2
<PAGE>
All shares of Common Stock and Preferred Stock issued and outstanding are duly
authorized, validly issued, fully paid and nonassessable. The shares of GVI
Series D Preferred Stock issued under this Agreement to the USGCD
Securityholders who received USGCD Common Shares in connection with the Golf
Interests Acquisition (defined below) shall, in the aggregate, constitute not
less than eighty-one percent (81%) of the total voting power and economic
interest of immediately following such issuance. The parties acknowledge that
GVI will have at Closing insufficient authorized but unissued shares of its
Common Stock to allow for the conversion of all of the Series D Preferred Stock,
which will all be in the hands of the USGCD Securityholders. The parties agree
to work together following the Closing to call a shareholders meeting of GVI for
the purpose, among others, to increase the authorized common shares of GVI to
100,000,000 shares.
........
(r) Shares Validly Issued without Assessment or Liabilities. All of
the shares of Series D Preferred Stock, as and when delivered as required
pursuant to this Agreement, will be duly and validly issued, fully paid and
non-assessable with no personal liability attaching to the ownership thereof and
will convey to the USGCD Securityholders good and valid title to such
securities, free and clear of any liens, encumbrances or claims of any nature,
contingent or otherwise, and will entitle the USGCD Securityholders to all the
rights of holders of such securities, subject in each case to the restrictions
on transferability imposed by the Securities Act and the rules and regulations
of the United States Securities and Exchange Commission (the "SEC") promulgated
thereunder. The GVI Common Stock issuable upon the conversion of the Series D
Preferred Stock will be similarly endowed legally.
..........
(y) Actions Not to be Taken Prior to Closing. Prior to the Closing
Date, GVI will not, without the prior written consent of USGCD, do or agree to
do any of the following:
..........
(iii) No Contracts or Modifications. Except for a settlement and
release to be entered into with ARDCO, a similar agreement to be entered into
with George Badger, and a similar agreement with certain engineers who have
rendered valuable service to GVI and deserve compensation in a negotiated
settlement, [to continue as in the Agreement] ...........
(vii) No Issuance of Securities. Other than the issuance of
common stock to ARDCO, George Badger, the engineers referenced in (iii), above,
and the creation and issuance of Series D Preferred Stock to the shareholders of
USGCD, [to continue as in the Agreement]
..........
3
<PAGE>
10. Registration Rights.
(a) "Piggy-back Rights." If at any time, or from time to time,
GVI proposes to file a registration statement on any appropriate form (a
"Registration Statement") (other than in connection with an exchange offer or a
registration statement on Form S4 or S-8 or at the demand of, or on behalf of,
any shareholder of GVI) under the Securities Act with respect to any Common
Stock for sale to the public for its own account which would permit registration
of Common Stock (for the purposes of this Section 10 "Registrable Securities"),
to be received upon the conversion of the Series D Preferred Stock and upon the
exercise of any option, by the USGCD Securityholders, Banque SCS, Olympus
Investments and Miltex Industries (collectively for the purposes of this Section
10, the "Holder(s)"), GVI shall: [to continue as in the Agreement]
11. Conditions Precedent to Closing.
(a) Conditions Precedent of GVI.
(v) Financial Statements. USGCD Audited Financial
Statements reflecting a minimum net book value of USGCD's properties of twelve
million dollars ($12,000,000) shall not be a condition of closing for GVI, but
shall become a covenant of USGDCD to perform as soon as possible following
Closing recognizing that significant financial statements for USGCD will need to
be filed with the SEC on or before the 75th day following Closing. [Section
11(a) to continue as in the Agreement]
(b) Conditions Precedent of USGCD. All of the obligations of
USGCD and the USGCD Securityholders under and pursuant to this Agreement are and
shall be subject to the representations and warranties of GVI being true and
correct at the Closing Date except for such representations and warranties that
are expressly given as of a specific date or as of the date hereof and the
fulfillment prior to or on the Closing Date of each of the following:
(i) Stock Certificates. Certificates for the
shares of Series D Preferred Stock in such names and in such denominations as
the USGCD Securityholders as shown in the attached Appendix A.
(vii) Satisfaction of SEC Requirements. GVI (A)
shall have responded to all outstanding comments of the SEC regarding its Form
10-SB, (B) shall have amended its Form 10-SB (to the extent and/or including the
requirement that its Financial Statements be amended as needed to meet the SEC
comments, (C) shall have filed preliminary proxy materials with the SEC in
connection with a stockholder's meeting (i) entitling it to modify its capital
structure to enable it to convert the Series D Preferred Stock, (ii) adopting
the GVI Long Term Equity-Based Incentive Plan; and (D) shall have issued Press
Releases and/or filed any required Forms 3 and 4 and Reports on Form 8-K and
Schedules 14D, or Schedules 13D, to reflect changes in management and/or control
which occurred or, if reportable, which were agreed upon prior to Closing.
4
<PAGE>
(xi) Shareholder Matters. [Waived]
...............
(13) (b) Restrictive Legend. The USGCD Securityholders further covenant
and agree that the certificates representing all of the shares of Series D
Preferred Stock to be delivered pursuant to this Agreement, as well as all
shares of Common Stock issuable in conversion of the Series B Preferred Stock,
shall bear a restrictive legend in substantially the following form:
"The Shares represented by this certificate have not been
registered under the Securities Act of 1933 as amended. They
may not be sold, assigned or transferred in the absence of an
effective registration statement for the Shares under the said
Securities Act, receipt of a 'no action' letter from the
Securities and Exchange Commission or an opinion of counsel
satisfactory to the Corporation that registration is not
required under said Securities Act."
...............
16. Closing Date. The closing of the transaction contemplated herein
(the "Closing") shall take place in person, by mail or otherwise and be
consummated on Wednesday, November 12, 1997, or as soon thereafter as is
practically possible.
...............
29. Notices. Any notice hereunder shall be given, and any instrument
delivered, four days after being mailed or registered certified mail, postage
prepaid, or 24 hours after such notice has been sent by straight telegram,
telex, facsimile or other means of instantaneous transmission, charges pre-paid
as follows:
NAME ADDRESS
If to GVI Attn: Duane H. Marchant
345 North 2450 East
St. George, Utah 84790
435-628-8142
435-674-7938 facsimile
with a simultaneous copy to: Lorin E. Patterson, Esq.
Ray Quinney & Nebeker, P.C.
79 South Main Street, Suite 700
Salt Lake City, Utah 84111
801-532-1500
801-532-7543 facsimile
If to USGCD and the USGCD Attn: Mr. Warren Stanchina
Security Holders within 255 South Orange Ave. Suite 1515
twelve (12) months following Orlando, Florida 32801
the Closing: 407-245-7557
407-245-7585 facsimile
5
<PAGE>
with a simultaneous copy to: James R. Leone, Esq.
1275 Lake Heathrow Lane
Heathrow Florida 32746
407-805-9200
407-805-9030 facsimile
All provisions of the Agreement not specifically amended by this
Addendum # 1 shall be read together with the provisions of this Addendum effect
the parties' desire to amend the Agreement as shown by the words and context of
this Addendum No. 1.
IN WITNESS WHEREOF, the parties have executed this Addendum # 1 as of
October 31, 1997.
GOLF VENTURES, INC. U.S. GOLF COMMUNITIES, INC.
By: /s/ Duane H. Marchant By: /s/ Warren J. Stanchina
------------------------------- -------------------------------
Duane H. Marchant, President Warren J. Stanchina, President
USGCD SECURITYHOLDERS
By: /s/ Wolfgang Duren
-----------------------------------
Wolfgang Duren, Attorney-In-Fact
6
<PAGE>
Appendix A
NUMBER OF RESTRICTED
NAME OF SERIES D
US GOLF SHAREHOLDER PREFERRED SHARES
Autohaus Augsburg 155,237
Niels Baltus-Michaelsen 20,354
Gotz Von Bentzel 42,756
de Smet, Edmond 37,564
Cornelia Duren 102,448
Wolfgang Duren 1,164,859
Hermann Flachsmann 659,195
Wolfgang Gorwitz 75,133
Alfons Jungsberger 31,757
Volker Klemens 37,564
Nicolaus Kummer 68,234
Dr. Heinrich Ludwig 75,133
Dr. Walter Massmann 210,577
Dr. W. Menne 0
Peter Muthig 112,696
Thomas Rimbach 52,500
Walter Sandbichler 37,564
Franz Speith 37,564
Dan and Marianne Stanchina 15,750
Double Eagle Properties, Ltd. 1,306,614
Michaela Wiedemann 95,875
Dr. Michael Wiedemann 614,470
Wolfgang Duren, Trustee (Cutter Sound,
M-K-R - N & C Kummer GBR) 111,145
Wolfgang Duren, Trustee (Cutter Sound,
M-K-R - T. Rimbach) 111,145
Wolfgang Duren, Trustee (Cutter Sound,
M-K-R - Menne Share) 231,362
Sub Total for Share Exchange 5,407,498
Wolfgang Duren, Trustee (PGP) 1,265,080
Sub Total for Loan Conversion Shares 1,265,080
Total GVI Stock To Be Issued To USG Shareholders 6,672,578
7
