U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[x] Annual report under Section 13 or 15 (d) of the Securities
Exchange Act of 1934 (No fee required, effective October 7, 1996.)
For the fiscal year ended March 31, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transition period from _____________ to _____________ .
Commission file number 0-21337
GOLF VENTURES, INC.
(Name of Small Business Issuer in Its Charter)
UTAH 87-0403864
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
102 West 500 South, Suite 400, Salt Lake City, Utah 84101
(Address of Principal Executive Offices) (Zip Code)
(801) 363-8961
(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 July 8, 1997 was $1,662,767.
The number of shares outstanding of the issuer's common equity, as of
July 8, 1997 was 2,925,066 shares.
Transitional Small Business Disclosure Format (check one):Yes[ ] No[x]
<PAGE>
PART I
Item 1. Business.
GENERAL
Golf Ventures, Inc. ("GVIC" or "the Company") is a Utah corporation.
GVIC is primarily engaged in developing certain residential and recreational
real estate projects. GVIC's principal corporate offices are located at 102 West
500 South, Suite 400, Salt Lake City, Utah 84101 and its telephone number is
(801) 363-8961. GVI has three full time and one part time employees.
In 1990, American Resources and Development Company, the parent company
of GVIC, acquired a 616 acre real estate development near St. George, Utah. In
1994, the real estate project was renamed Red Hawk(R) International Golf &
Country Club ("Red Hawk(R)"). Also in 1991, ARDCO purchased two residential
developments in St. George consisting of condominiums, cottages, and single
family dwelling lots known as Cotton Manor and Cotton Acres respectively.
In December 1992, pursuant to a Real Estate Acquisition Agreement (the
"ARDCO Real Estate Acquisition Agreement") ARDCO assigned all of its real estate
holdings in Red Hawk(R), Cotton Manor and Cotton Acres to the Company in
exchange for 3,273,728 shares of GVIC common stock, which represented
approximately 86% of the Company's total outstanding shares. GVIC further agreed
to assume all obligations related to the acquired real estate. The obligations
are further described below. On June 1, 1994, GVIC acquired an additional 54
acres of land adjacent to Red Hawk(R) for future development.
Although the real estate market in the St. George area is extremely
competitive, Company management believes 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 the Red Hawk project, the
Company will require additional financing for development, after which
management believes the Red Hawk project will offer competitive values to
potential buyers. There can be no assurance, however, that such financing will
be available on terms and conditions which will allow the Company to develop the
Red Hawk project successfully.
RED HAWK(R) INTERNATIONAL COUNTRY CLUB
Red Hawk(R) International Golf & Country Club 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
Hawk(R) 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 Hawk(R) is situated on rolling farm land surrounded on
three sides by a horseshoe of rolling hills.
Land and Debt
On March 30, 1990, ARDCO purchased, pursuant to an option agreement (as
amended, the "Stucki Purchase Agreement") with Dr. Karl F. Stucki and Mrs.
Marcia C. Stucki, Trustees of the Karl F. and Marcia C. Stucki Income Trust (the
"Stuckis"), 487 acres of real property (the "Stucki Parcel") to be the site of
the proposed Red Hawk(R) project. The total purchase price of the 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 Stucki Parcel. The note included
<PAGE>
monthly payments with the note payable in full in January 1994. In May 1994, the
Company renegotiated the Stucki contract and has been making monthly payments of
$25,000 inclusive of principle and interest. The July 5, 1994 modification
provided for the partial release to GVIC of approximately 200 acres of the
Stucki Parcel as and when the Company pays $6,500 per acre. On July 5, 1996,
GVIC entered into a Further Modification Agreement with the Stuckis whereby
GVIC, in exchange for the Stucki's extending repayment of the Stucki Note,
agreed to pay the Stucki's a lump payment of $75,000 upon the execution of the
Further Modification Agreement and provides for the payment of $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 May 31, 1997, a balance of approximately $2,234,000
remained outstanding on the Stucki note, inclusive of principal and accrued
interest.
GVIC owns two additional parcels of land contiguous to the 487-acre
Stucki Parcel. The first parcel, consisting of approximately 129 acres, was
acquired by ARDCO from an unaffiliated third party and transferred to GVI in
December 1992 under the ARDCO Real Estate Acquisition Agreement. The purchase
price for the parcel was paid in full by delivery of 260,000 shares of ARDCO's
common stock. The second parcel (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. 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. GVI intends to use
the 54 acre parcel for commercial and higher density residential development. At
June 30, 1997 the balance owing on the purchase note was $355,890.
On December 31, 1996 GVIC signed a trust deed note in favor of Miltex
Industries, Geneva Switzerland for $3,238,805. The Company borrowed these funds
to commence construction on the Red Hawk project. The note requires monthly
interest payments calculated at the rate of 10.5% per annum through June 10,
1999, at which time the entire principal balance (together with outstanding
interest therein) is due and payable. The note is secured by a trust deed on the
three parcels of land comprising the Red Hawk project. Interest payable on the
note at June 30, 1997 was approximately $170,000. GVIC expects to be able to
convert this accrued interest to Class B Preferred stock. Since December 31,
1996 and through June 30, 1997 GVIC has borrowed an additional $410,000 from
Miltex on the terms as described above.
On May 31, 1994 the Company borrowed $250,000 from the Foss Lewis
Profit Sharing Plan. The loan is secured by a trust deed in the second position
on the Stucki Parcel, a trust deed in the first position on the 129-acre parcel
and 50,000 shares of GVIC common stock. The outstanding balance of principle and
accrued interest 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 against GVIC. GVIC's management expects to pay
the note in full before December 31, 1997.
Red Hawk(R) Current Developments and 12 Month Plan of Operation
During fiscal year 1997 Washington City completed construction of a
storage tank for culinary (drinking) water in close proximity to Red Hawk(R),
together with a water pumping station and delivery lines which run through
GVIC's Red Hawk development. As a result, management believes that Red Hawk(R)
will have adequate quantities of culinary water available. The cost to GVIC for
this water line was $130,000.
In July 1996 Granite Construction broke ground on Phase I at Red Hawk.
Phase I will consist of 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.
<PAGE>
Through November 1996 Granite roughed in eighteen holes of the golf course,
graded the sites for 102 residential lots, installed sewer laterals to the lots
and graded the major roads in the project. Granite was paid $1,981,681 for its
work. GVIC employed Crown Golf to do the finish grading on the golf course.
Crown has been paid $35,817 and is owed $218,721 through June 30, 1997. In
November, 1996, GVIC stopped construction at its Red Hawk project until
additional funding can be obtained on terms and conditions satisfactory to
Company management. Management can give no assurance as to when or if financing
will be obtained and construction resumed. During the fiscal year ending March
31, 1998, the Company will continue its efforts to acquire permanent financing
for development of Phase I at Red Hawk(R).
Assuming adequate financing can be obtained on terms and conditions
satisfactory to Company management, the Phase I construction could be completed
within six months of the receipt of that financing at a cost of approximately
$5,700,000. Additionally, a sewer line will need to be brought to the property.
As Washington City owns and is responsible for sewer lines, the Company must
negotiate with the City with respect to the construction of and payment for the
sewer line. Construction costs are estimated to be approximately $1,000,000 for
the off-site sewer. The Company estimates that an additional $135,000 will be
required for construction of a gas line. There is a possibility that future
expenditures for on-site electric power will be necessary; however, 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 costs will not be material. Investors should note
that Company management estimates future development costs based upon prior real
estate development industry experience. It therefore relies on its business
judgment, which may not prove accurate as actual results invariably deviate from
estimates. The final plat for Red Hawk will be recorded upon installation of all
improvements and/or bonding of Phase I. The Company management 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. 35 reservations have been taken for residential lots in Red Hawk(R) under
the Company's pre-sales lot program.
COTTON MANOR AND COTTON ACRES
In September 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 and 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, pursuant to the ARDCO Real Estate Acquisition Agreement, the Company
<PAGE>
assumed all of ARDCO's right, title and interest in Cotton Manor and Cotton
Acres and assumed the related liabilities, including ARDCO's outstanding
obligations.
Land and Debt
The total purchase price for Cotton Manor and Cotton Acres under the
Sales Agreement between Property Alliance and ARDCO was $2,592,050, payable as
described below. ARDCO made an initial payment of $23,601 at the time of the
acquisition and assumed various obligations of Property Alliance related to the
acquired properties including, (i) a promissory note with an outstanding balance
of $277,304, payable $30,000 per year, (ii) a promissory note with an
outstanding balance of $101,145, which has been paid in full and (iii) a Special
Improvement District (SID) obligation estimated at $53,000, of which $36,000 has
been paid through June 30, 1997. ARDCO also delivered to Property Alliance a
trust deed note 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
conveyed properties. A portion of the principal on the trust deed note was
payable in six annual installments of $120,000 through February 1, 1997 and
interest is payable in shares of ARDCO common stock. In addition, the Sales
Agreement requires mandatory prepayments of 75% of the gross proceeds from the
sale of the acquired assets plus $2,000 from the sale of each Red Hawk(R) lot.
Although ARDCO and the Company did not make payments on the trust deed note on
the foregoing terms, ARDCO and GVIC have made various oral arrangements with
Property Alliance, described below, with respect to such payments. Additionally,
ARDCO issued 150,000 shares of its Series C Convertible Preferred stock (valued
at $5.00 per share or $750,000) to Property Alliance.
On June 30, 1994, Property Alliance, ARDCO and the Company entered into
a modification of the original Sales Agreement under which, in consideration of
Property Alliance extending the due date of the first four annual payments on
the note (aggregating $480,000) until July 31, 1995, the Company is obligated to
make a mandatory prepayment on the note of $5,000 (rather than $2,000) for each
Red Hawk(R) lot sold by GVIC. In addition, GVIC is obligated to pay Property
Alliance, as a mandatory prepayment on the Note, $175,000 from the first
$1,000,000 of long term financing proceeds the Company secures for development
of Red Hawk(R). As of May 31, 1997 the principal balance of the trust deed note
was $646,502 and accrued interest, payable with ARDCO common stock, was
$485,954.
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.
Cotton Manor and Cotton Acres Current Developments and 12 Month Plan of
Operation.
The Company currently intends to build an additional 102 cottages as
marketing of the project develops. Each cottage is part of a single, detached
planned unit development (PUD). Two cottage models have been completed. Approval
to construct the first 19 cottages has been obtained from the City of St.
George. Installation of the water, sewer and power lines for the 19 units is
completed. GVIC has recently commenced marketing the 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, known as Phase IV, GVIC intends to commence marketing and
developing additional Phases.
Cotton Acres is a 61 acre development consisting of 259 lots. All 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.
These lots have been pre-sold and should all close prior to September, 1997.
Management anticipates that the development and sale of the lots from the
remaining phases should be completed within two years, although there can be no
assurance that market conditions will allow for the sales.
Item 2. Properties.
The Company's executive offices are located at 102 West 500 South,
Suite 400, Salt Lake City, Utah 84101. This office facility consists of
approximately 2,150 square feet and was being leased pursuant to a 24-month
lease which expired on May 31, 1997. The Company is paying $2,229 for the space
<PAGE>
on a month-by-month basis. Management intends to renegotiate the lease, or move
to a different office space within the same building and sign a new lease for
multiple years. The Company shares this office space with ARDCO. The Company and
ARDCO have an oral agreement pursuant to which the Company pays the rent and
certain related overhead charges for both companies and ARDCO pays the salary of
certain of the Company's employees, who also provide part-time services to
ARDCO. Historically, the value of the rent and overhead charges paid by GVI
attributable to ARDCO have been approximately equal to the value of the services
provided by the Company's employees and paid for by ARDCO, however no exact
accounting has been maintained.
The Company's real estate holdings are comprised of one recreational
and residential development consisting of approximately 670 acres near St.
George, Utah named Red Hawk(R) International Golf & Country Club, and two
residential developments in St. George, Utah aggregating approximately 80 acres
known as Cotton Manor and Cotton Acres. See "Item 1. Business." for a more
detailed description of these properties.
Management believes that the Companies properties are adequately
insured given their current state of development.
Item 3. Legal Proceedings.
No legal proceedings are pending at this time.
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 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 Electronic Bulletin Board under the symbol GVIC. As soon as
practicable and applicable listing requirements are met, the Company intends to
apply to have its common stock listed for trading on the National Association of
Securities Dealers Automated Quotation System (NASDAQ), 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.
Calendar Quarters High Bid Low Bid
1995
1st Quarter 6.38 5.50
2nd Quarter 5.38 3.00
3rd Quarter 5.44 4.25
4th Quarter 4.50 3.25
1996
1st Quarter 4.25 2.75
2nd Quarter 3.25 1.32
3rd Quarter 2.38 1.25
4th Quarter 7.50 3.75
1997
1st Quarter 2.63 1.31
2nd Quarter 1.81 1.18
<PAGE>
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 July 8, 1997, the Company had 2,925,066 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 the name of broker-dealers.
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
On June 4, 1996 the Company sold 200,000 shares of its common stock.
The shares were exempt from registration under the Securities Act of 1933, as
amended (the "Securities Act") pursuant to Rule 504 of Regulation D promulgated
thereunder. Net proceeds from the offering were $879,424.
On July 29, 1996 the Company repaid a $17,261 indebtedness owed to
Banque SCS, by issuing 10,000 shares of its common stock to Banque SCS. 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 services valued at $12,000. The
shares were exempt from registration pursuant to Section 4(2) or 3(b) under the
Securities Act.
On September 30, 1996 the Company repaid a $17,260 indebtedness owed to
Banque SCS, by issuing 10,000 shares of its common stock to Banque SCS. 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 for indebtedness of $9,021 to Mr. Dalton. These
shares were exempt from registration under the Securities Act pursuant to Rule
506 of Regulation D promulgated thereunder.
On December 30, 1996 the Company repaid a $138,185 indebtedness to
Banque SCS, by issuing 27,637 shares of its common stock to Banque SCS. The
shares were exempt from registration under the Securities Act pursuant to Rule
903 of Regulation S promulgated thereunder.
<PAGE>
On July 8, 1997 the Company issued 823,343 shares of its common stock
to ARDCO for cash advances and interest of $1,286,857 relating to costs paid on
behalf of the Company by ARDCO since the Company's inception. These shares were
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.
On July 8, 1997 the Company issued 250,000 shares of it common stock to
its officers and the President of ARDCO for services rendered to the Company.
These shares were exempt from registration under the Securities Act pursuant to
Sections 4(2) or 3(b) under the Securities Act.
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 27A of the Securities
Act of 1933 and Section 21E of the securities exchange act of 1934.
Forward-looking statement 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. Reliance
should not be placed on forward-looking statements because they 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 statement. in addition, the Company undertakes no
obligation to publicly updated 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.
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 from Cotton Acres and condominiums from Cotton Manor.
During fiscal 1997, 9 lots were sold at an average price of $30,400. 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. The sales
volume is dependent upon the number of completed lots and condominiums in
inventory. During the past year GVI's available capital was used to develop Red
Hawk and no funds were made available to Cotton Manor or Cotton Acres for
development and 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. 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.
General and administrative expenses decreased $3,075,561, 78%, to
$860,289 during fiscal 1997 from $3,935,850 during fiscal 1996. The decrease was
principally attributable to the 1996 issuance by GVI of 2,835,000 shares of GVI
stock valued at $1.00 per share in exchange for financial services, and the
Company issuing 350,000 shares of GVI stock in exchange for promotional services
valued at $1.00 per share. The decrease was offset somewhat by an increase in
legal fees of $101,687, 202%.
The Company had other income of $58,438 during fiscal 1997 compared
with $107,412 during fiscal 1996, a decrease of $48,974, 46%.
The Company experienced a net loss of $685,917 in fiscal 1997 compared
with a net loss of $3,606,291 in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
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 increase in
total assets of $5,727,352, 83% is due primarily to (i) recording $2,266,104 of
the Stucki Parcel as an asset on the balance sheet, (ii) the capitalization of
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$2,200,000 in construction costs on the Red Hawk project, and (iii) $1,200,000
of capitalized development related interest. Total liabilities at March 31, 1997
increased $5,321,763, 149%, from $3,570,695 to $8,892,458. The increase is due
to (i) recording $2,266,104 of debt on the Stucki Parcel corresponding to the
land described above, (ii) loans from Miltex Industries of $3,238,805 for
construction and overhead, (iii) an increase in current liabilities of $375,964
explained below.
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 the decrease in year end cash of $755,817, 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 in GVI and the decrease in
borrowings during the fourth quarter of FY 1997. The decrease in cash was offset
somewhat by the increase in real estate inventories of $184,429, 25%, from
$748,010 to $932,439 due primarily to the completion of an additional townhome
in the Cotton Manor development and the construction of an additional 19 lots in
Phase X of Cotton Acres. There are now two townhomes being used as models until
they are sold.
Current liabilities at March 31, 1997 increased $375,964, 17%, over the
prior year due to an increase in accounts payable of $388,953, 67%, and an
increase in accrued expenses of $200,040, 44%, related to the ongoing interest
accrual for notes payable associated with the Company's prior year real estate
activities (both acquisition and development).
The Company has historically satisfied its cash needs through the sale
of real estate in Cotton Manor and Cotton Acres and 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 make sales. During the year the
Company borrowed $3,238,805 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 in Red Hawk. Additionally, the Miltex funds were used
to keep the Stucki land Note and to pay Company overhead expenses, including
general and administrative expenses. The construction at Red Hawk has now
stopped until further development money is raised. Management of the Company can
give no assurance that the company will be able to obtain financing on
acceptable terms or that such financing if available, will be sufficient to fund
the company's operations.
Completion of Phase I in Red Hawk and the subsequent sale of lots in
Phase I will depend largely on the ability of GVI, to raise additional funds,
preferably long term financing on acceptable terms and conditions. GVI is
pursuing development loans in the $10,000,000 to $14,000,000 range. GVI will
also continue to develop and sell lots and townhomes in the Cotton Manor/Acres
developments as financing becomes available. These sales will not be sufficient
to financially support the Company's overhead and the Red Hawk project. The
Company's ongoing overhead and land obligations are approximately $75,000 per
month. Additionally, GVI has approximately $900,000 of long-term debt due during
1998. If the Company does not receive sufficient financing for the Red Hawk
project, the Company intends to meet its obligations through private or public
offerings of common and/or preferred stock for cash and additional borrowings.
No assurance can be given that the Company will succeed in obtaining sufficient
financing for Red Hawk or, if unsuccessful, that it will raise sufficient cash
to meet its obligations through the sale of securities or additional borrowings.
<PAGE>
Item 7. Financial Statements and Supplementary Data.
The Following financial statements and documents are filed herewith on
the pages listed below, as part of Part II, Item 8 of this report.
Document ..........................................................Page
1. Financial Statements and Accounts Report:
Independent Auditor's Report.............................. F-3
Consolidated Financial Statements:
Consolidated Balance Sheet................................ F-4
Consolidated Statements of Operations and
Accumulated Deficit for the Years Ended
March 31, 1997 and 1996................................... F-6
Statement of Stockholders' Equity
March 31, 1997 and 1996................................... F-7
Consolidated Statements of Cash Flows
for the Years Ended March 31, 1997 and 1996............... F-9
Notes to Consolidated Financial Statements
Notes 1 through 12........................................F-11
2. Financial Statement Schedules
Schedule VIII - Valuation and Qualifying
Accounts..................................................F-18
Schedule X - Supplementary Income Statement
Information...............................................F-18
Schedule XI - Real Estate and Accumulated
Depreciation..............................................F-19
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.
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 the existing board 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.
<PAGE>
The following table sets forth the name and office held by each director
and officer of the company, followed by a brief resume of each individual.
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 Secretary/Treasurer and Director
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 President of Leasing Technology
Incorporated, a diversified publicly held company involved in real estate
development and franchising and which is the principal stockholder in the
Company. Mr. Marchant is the father-in-law of Mr. Frodsham.
BRUCE E. FRODSHAM, Vice President and a director of the Company, earned a
B.S. Degree in Ornamental Horticulture from Brigham Young University in 1988. He
is also the Sales Manager of Cotton Acres and Cotton Manor. Mr. Frodsham was
Vice President of Frodsham Better Lawns from 1985 to 1991 and 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 computer operator and consultant. Mr. Frodsham is the
son-in-law of Mr. Marchant.
STEPHEN B. SPENCER, Secretary/Treasurer and a Director of the Company, is a
Certified Public Accountant and has been the Secretary/Treasurer and Director of
ARDCO since 1990. 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 became a director of the Company in June, 1991.
GEORGE H. BADGER, resigned as President, Chief Executive Officer and a
Director of ARDCO, (the parent company to GVIC) on December 31, 1996. Mr. Badger
served as a director of ARDCO since June 1992, and was President since 1993. On
October 9, 1996, Mr. Badger was arraigned in the U.S. Federal District Court for
the Southern District of N.Y. on charges of conspiracy to commit securities
fraud and criminal contempt. Mr. Badger is cooperating fully with the U.S.
Attorney in the investigation of this matter.
Item 10. Executive Compensation.
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.
<PAGE>
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 July 7, 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)
each director; and (iii) all current directors and executive officers as a
group.
NAME AND ADDRESS OF NUMBER OF PERCENT
BENEFICIAL OWNER SHARES OWNED1 OF CLASS
Banque SCS Alliance SA 126,9432 4.34%
P.O. Box 880
12111 Geneva 3, Switzerland
American Resources and Development Co. 1,355,589 46.34%
102 West 500 South, Sutie 400
Salt Lake City, UT 84101
Duane H. Marchant 156,989 5.37%
102 West 500 South, Suite 400
Salt Lake City, UT 84101
Bruce E. Frodsham 30,000 1.03%
102 West 500 South, Suite 400
Salt lake City, UT 84101
Stephen B. Spencer 35,0003 1. 20%
102 West 500 South, Suite 400
Salt Lake City, UT 84101
All Officers and Directors as
Group (3 persons) 221,989 7.59%
Item 12. Certain Relationships and Related Transactions.
ARDCO is the parent company to GVI by virtue of its holding the
majority voting rights of the common stock of GVI. (See Item 11.)
Duane H. Marchant was the President of Property of 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.
- --------
1 Unless otherwise indicated the individuals or entities identified
herein each own their respective shares and have sole voting and sole
investment powers regarding their disposition. The percentages are
based upon 2,925,066 shares of GVI common stock outstanding as of July
8, 1997 and are computed in accordance with rule 13d-3 of the
Securities Exchange Act of 1934, as amended.
2 Does not include 287,064 shares of Series B Preferred stock held of
record by Banque SCS Alliance SA (Banque SCS), which shares as of July
7, 1997 had an aggregate of approximately 3,588,300 votes. Banque SCS
has appointed ARDCO as proxy to vote such preferred shares. Giving
effect to the Series B Preferred Stock, ARDCO has the right to
4,943,889 votes at meetings of the Company's stockholders.
3 Mr. Spencer is an officer and director of ARDCO but disclaims
beneficial ownership of shares held by ARDCO.
<PAGE>
Bruce E. Frodsham, Vice President of the Company, is the son-in-law of
Duane H. Marchant, President of the Company.
The Company and ARDCO share office space. Refer to Item 2. Properties.
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 (1) Certificate of Incorporation, as amended
3.1(1) By - Laws, as amended
10.1 (1) Option contract (Stucki)
10.2 (1) Extension to Option Contract (Stucki)
10.3 (1) Further Amendment to Option Contract (Stucki)
10.4 (1) Modification Agreement (Stucki)
10.5 (1) Further Modification Agreement (Stucki)
10.6 (1) Sales Agreement (Property Alliance)
10.7 (1) Addendum to Sales Agreement (Property Alliance)
10.8 (1) Acquisition Agreement (ARDCO)
10.9 (1) Agreement (Bear River Contractors)
23.1 Consent of Independent Auditor
27.1 Financial Data Schedule
(1) Incorporated by reference to the Form 10-SB Registration
Statement filed with the Commission September 6, 1996, File No.
0-21337.
(b) No report on Form 8-K was filed by the Company during the three month period
ended March 31, 1997.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GOLF VENTURES, INC.
(Registrant)
BY: /s/ Duane H. Marchant
------------------------
Duane H. Marchant, President
Dated: July 15, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title
/s/ Duane H. Marchant President, Chief Executive July 15, 1997
------------------------ Officer and Director
Duane H. Marchant (Principal Executive Officer)
/s/ Bruce E. Frodsham Vice President, and Director July 15, 1997
-------------------------
Bruce E. Frodsham
/s/ Stephen B. Spencer Secretary/Treasurer and July 15, 1997
------------------------- Director (Chief Financial
Stephen B. Spencer Officer, Chief Accounting
Officer and Controller
<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 opinon 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.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
Salt Lake City, Utah
June 16, 1997
<PAGE>
GOLF VENTURES, INC.
Financial Statements
March 31, 1997 and 1996
<PAGE>
C O N T E N T S
Independent Auditors' Report ........................................... 3
Balance Sheet .......................................................... 4
Statements of Operations ............................................... 6
Statements of Stockholders' Equity ..................................... 7
Statements of Cash Flows ............................................... 9
Notes to the Financial Statements ..................................... 11
Supplemental Schedules ................................................ 18
<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.
4
<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.
5
<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.
6
<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.
7
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Stockholders' Equity (Continued)
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
---------- ---------- ---------- ----------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance forward
March 31, 1996 284,427 $ 284 1,628,828 $ 1,629 $ 7,173,573 $ (3,834,033)
Common stock issued
for cash at $5.00
per share - - 200,000 200 999,800 -
Offering costs for sale of
common stock for cash - - - - (120,576) -
Common stock issued for
payment of interest - - 20,000 20 34,502 -
Common stock issued
for services rendered - - 4,000 4 11,996 -
Repurchase shares of
class "A" preferred stock (2,500) (3) - - (12,497) -
Class "A" preferred stock
issued for payment of
interest 1,804 2 - - 9,018 -
Class "B" preferred stock
issued for payment of
interest 27,637 28 - - 138,157 -
Contributions of capital
by parent company - - - - 356,054 -
Distributions to parent
company - - - - (325,199) -
Loss for the year ended
March 31, 1997 - - - - - (685,917)
------------ --------- ------------- ----------- -------------- --------------
Balance, March 31, 1997 311,368 $ 311 1,852,828 $ 1,853 $ 8,264,828 $ (4,519,950)
============ ========= ============= =========== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
8
<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.
9
<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.
10
<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.
11
<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. There 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.
e. Concentrations of Risk
The Company maintains its cash in bank deposit accounts at high
credit quality financial institutions. The balances, at times,
may exceed federally insured limits.
The Company builds and develops real property in Southern Utah.
In the normal course of business the Company extends secured
credit to its customers.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
The changes in operating assets and liabilities are shown net of
non cash transactions.
g. Inventory
The Company carries in inventory the cost of the developed lots,
condominiums and homes it has available for sale. The inventory
is recorded at the lower of cost or market.
12
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 3,273,728 shares of
common stock and the assumption of debt. The Red Hawk land is
undeveloped and in order for the Company to realize its
investment it will need to obtain adequate financing. The land
was acquired from a company which ended up with control of the
Company as a result of the transaction, therefore the land was
recorded at predecessor cost.
For the year ended March 31, 1997, the Company capitalized
$1,093,468 in construction period interest costs. The cost of the
land is less than the estimated net realizable value of the land.
13
<PAGE>
<TABLE>
<CAPTION>
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
--------------------
<S> <C>
Promissory note secured by land. Interest accrued at 10% per
annum, payable in shares of the Company's common stock. $120,000
principal plus a percentage of the proceeds of lot sales payable
annually beginning on February 1, 1991 through February 1, 1997
at which time the balance will be due as a balloon payment.
$2,000 from each Red Hawk lot sale also applies to the note. $ 646,502
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
-------------------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 3 - LONG-TERM DEBT (Continued)
<S> <C>
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
===================
</TABLE>
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 is convertible into common stock per terms
of the offering. The preferred stock also has certain preferences
in liquidation. During the year ended March 31, 1996, 2,000
shares 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.
The Company has also issued 259,427 shares of class "B" preferred
stock. The class "B" preferred stock has a preference upon
liquidation of $5.00 per share, plus all accrued and unpaid
dividends, whether or not earned or declared. The preference is
secondary to the liquidation preference of the class "A" stock.
The class "B" preferred stock is convertible at anytime before
March 31, 1998 at the rate of 1 share of common stock to be
valued at 40% of the low bid price for free trading shares at my
time during the eighteen months preceding the conversion. The
Company may redeem the class "B" preferred stock on or before
March 31, 1998 at $5.00 per share plus dividends accrued at 10%
per annum. 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.
15
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
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 or long-term debt. 4,000 shares of common stock were
also issued during the year ended March 31, 1997 as payment for
$12,000 of services rendered to the Company.
The Company has issued 12,991 shares which have been offered to
creditors in settlement of accrued expenses. However, the
creditors have not yet accepted the shares. These shares are
considered issued but not outstanding for financial statement
purposes.
NOTE 6 - RELATED PARTY TRANSACTIONS
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).
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.
16
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
March 31, 1997 and 1996
NOTE 8 - SUBSEQUENT EVENT
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.
17
<PAGE>
GOLF VENTURES, INC.
Supplemental Schedules
March 31, 1997 and 1996
Schedule VIII - Valuation and qualifying accounts
Allowance for returns and bad debts:
<TABLE>
<CAPTION>
Balance at Balance at
Beginning End of
of Year Additions Deductions Year
<S> <C> <C> <C> <C>
March 31, 1997 $ 5,000 $ - $ - $ 5,000
March 31, 1996 5,000 - - 5,000
<CAPTION>
Schedule X - Supplementary income statement information
For the Years Ended
March 31,
1997 1996
<S> <C> <C>
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
</TABLE>
18
<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>
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>
19
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 28,563
<SECURITIES> 0
<RECEIVABLES> 472
<ALLOWANCES> 0
<INVENTORY> 932,439
<CURRENT-ASSETS> 961,474
<PP&E> 149,410
<DEPRECIATION> 2,393
<TOTAL-ASSETS> 12,639,500
<CURRENT-LIABILITIES> 2,536,127
<BONDS> 6,356,331
0
311
<COMMON> 1,853
<OTHER-SE> 3,744,878
<TOTAL-LIABILITY-AND-EQUITY> 12,639,500
<SALES> 274,000
<TOTAL-REVENUES> 274,000
<CGS> 158,066
<TOTAL-COSTS> 158,066
<OTHER-EXPENSES> 860,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,142
<INCOME-PRETAX> (685,917)
<INCOME-TAX> 0
<INCOME-CONTINUING> (685,917)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (685,917)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
