UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 0-21337
GOLF VENTURES, INC.
(Exact name of registrant as specified in its charter)
UTAH 87-0403864
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
102 WEST 500 SOUTH, SUITE 400, SALT LAKE CITY, UTAH, 84101
(Address of principal executive offices, including zip code)
(801)363-8961
(Registrant's telephone number, including area code)
Indicated by check mark whether the registrant has: (1) filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports); and, (2) been subject to
such filing requirements for the past 90 days. Yes [x] No [ ]
Number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding as of November 20, 1997
Common Stock, par value $.OO1 6,177,039
<PAGE>
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. Balance Sheets - September 30,1997 and 4-5
March 31, 1997
Statements of Operations and Accumulated Deficit -
Three and six months ended September 30, 1997 and 1996 6
Statements of Stockholders Equity-March 31, 1996 through
September 30, 1997 7-8
Statements of Cash Flows - Three and six months ended
September 30, 1997 and 1996 9
Notes to Financial Statements 10-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Securities Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 20
2
<PAGE>
PART I
Item 1. Financial Statements
The following, unaudited Financial Statements for the three and six
month periods ended September 30, 1997, included all adjustment which management
believes are necessary for the financial statements to be presented in
conformity with generally accepted accounting principals.
(THIS SPACE INTENTIONALLY LEFT BLANK)
3
<PAGE>
<TABLE>
GOLF VENTURES, INC.
Balance Sheets
ASSETS
September 30, March 31,
1997 1997
---- ----
CURRENT ASSETS (Unaudited)
<S> <C> <C>
Cash $ 14,921 $ 28,563
Real estate inventory 753,131 932,439
Current portion of contract receivable 1,955 472
------------ -------------
Total Current Assets 770,007 961,474
------------ -------------
PROPERTY AND EQUIPMENT
Model home 134,788 133,954
Furniture and fixtures 13,106 13,106
Computer equipment 2,350 2,350
------------ -------------
Total depreciable assets 150,244 149,410
Less: accumulated depreciation (4,435) (2,393)
------------ -------------
Net Property and Equipment 145,809 147,017
------------ ------------
OTHER ASSETS
Land held for development (Note 2) 11,839,277 11,475,016
Long-term portion of contract receivable 55,993 55,993
------------ ------------
Total Other Assets 11,895,270 11,531,009
------------ ------------
TOTAL ASSETS $ 12,811,086 $ 12,639,500
============ ============
</TABLE>
The accompanying notes are an intergral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, March 31,
1997 1997
---- ----
CURRENT LIABILITIES (Unaudited)
<S> <C> <C>
Accounts payable $ 893,265 $ 953,072
Accrued expenses and other liabilities 707,474 659,735
Current portion of long-term debt (Note 3) 903,924 923,320
------------ ------------
Total Current Liabilities 2,504,663 2,536,127
------------ ------------
LONG-TERM DEBT (Note 3) 6,563,144 6,356,331
------------ ------------
Total Liabilities 9,067,807 8,892,458
------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock (10,000,000 shares
authorized at par value of $.001)
27,084 and 24,304 class "A"; 315,404
and 287,064 class "B" shares issued
and outstanding (Note 4) 342 311
Common stock (25,000,000 shares
authorized at par value of $.001)
2,247,448 and 1,852,828 shares issued;
2,234,489 and 1,839,837 shares
outstanding, respectively (Note 5) 2,247 1,853
Additional paid-in capital 8,796,828 8,264,828
Accumulated deficit (5,056,138) (4,519,950)
------------ ------------
Total Stockholders' Equity 3,743,279 3,747,042
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,811,086 $ 12,639,500
============ ============
</TABLE>
The accompanying notes are an intergral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Operations
(Unaudited)
For the Six Months Ended For the Three Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
INCOME
<S> <C> <C> <C> <C>
Real estate sales $ 316,546 $ 161,000 $ 305,546 $ 28,000
Cost of real estate sales 179,308 92,484 168,308 15,902
------- ------ ------- ------
Gross Profit on Real
Estate Sales 137,238 68,516 137,238 12,098
------- ------ ------- ------
EXPENSES
Depreciation 2,042 166 1,021 166
General and administrative
expenses 683,264 365,106 429,977 208,587
------- ------- ------- -------
Total Expenses 685,306 365,272 430,998 208,753
LOSS FROM OPERATIONS (548,068) (296,756) (293,760) (196,655)
-------- -------- -------- --------
OTHER INCOME (EXPENSES)
Other revenue 13,925 9,224 9,295 6,343
Interest income 2,260 25,137 1,483 23,144
Interest expense (4,305) - - -
------ ------ ----- ------
Total Other Income
(Expenses) 11,880 34,361 10,778 29,487
------ ------ ------ ------
NET LOSS BEFORE INCOME
TAXES (536,188) (262,395) (282,982) (167,168)
INCOME TAXES - - - -
-------- -------- -------- -------
NET LOSS $ (536,188) $ (262,395) $ (282,982) $ (167,168)
============ ============= ============ =============
NET LOSS PER COMMON SHARE $ (0.18) $ (0.15) $ (0.04) $ (0.09)
============ ============= ============ =============
</TABLE>
The accompanying notes are an intergral part of these financial statements.
6
<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 intergral part of these financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Statements of Stockholders' Equity
(Unaudited)
Additional
Preferred Stock Common Stock Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------ ------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance,
March 31, 1997 311,368 $ 311 1,852,828 $ 1,853 $ 8,264,828 $(4,519,950)
Class "A" preferred stock
issued for common stock 2,780 3 (1,105) (1) (2) -
Class "B" preferred stock
issued for payment of 28,340 28 - - 141,672 -
interest
Common stock issued
for services rendered - - 395,725 395 390,330 -
Loss for the six months
ended September 30, 1997 - - - - - (536,188)
------- ----- --------- ------- ----------- -----------
Balance,
September 30, 1997 342,488 $ 342 2,247,448 $ 2,247 $ 8,796,828 $(5,056,138)
=== ==== ======= ===== ========= ======= =========== ===========
</TABLE>
The accompanying notes are an intergral part of these financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
GOLF VENTURES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended For the Three Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net (loss) $ (536,188) $ (262,395) $ (282,982) $ (167,168)
Adjustments to reconcile net
cash flows from operations
Depreciation 2,042 166 1,021 166
Common stock issued for
for services and interest 532,425 - 532,425 -
Changes in assets and liabilities:
(Increase) decrease accounts
receivable (1,483) (4,625) (1,483) 14,000
(Increase) decrease inventory 179,308 74,045 196,423 12,691
(Increase) decrease in accounts
payable and accrued expenses (50,521) (112,576) (318,604) 7,257
------- -------- -------- -----
Net Cash Provided (Used) by
Operating Activities (125,583) (305,385) 126,800 (133,054)
-------- -------- ------- --------
INVESTING ACTIVITIES
Purchase of property and equipment (834) (5,988) - (5,988)
Land held for development (364,261) (1,302,606) (124,599) (888,767)
-------- ---------- -------- --------
Net Cash (Used) in Investing
Activities (365,095) (1,308,594) (124,599) (894,755)
-------- ---------- -------- --------
FINANCING ACTIVITIES
Stock offering costs - (209,000) - (109,000)
Common stock and preferred
stock issued for cash - 1,046,521 - 46,521
Long-term borrowings 245,266 2,558,805 - 558,805
Distribution to parent company - (338,103) - (163,157)
Principal payments on
long-term debt (19,396) (660,726) (2,012) (448,783)
------- -------- ------ --------
Net Cash Provided by
Financing Activities 225,870 2,397,497 (2,012) (115,614)
------- --------- ------ --------
INCREASE (DECREASE) IN CASH (13,642) 783,518 189 (1,143,423)
CASH AT BEGINNING OF PERIOD 28,563 784,380 14,732 2,711,321
------ ------- ------ ---------
CASH AT END OF PERIOD $ 14,921 $ 1,567,898 $ 14,921 $ 1,567,898
============ ============ ========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash Paid For:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
</TABLE>
The accompanying notes are an intergral part of these financial statements.
9
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Golf Ventures, Inc. (the Company) was incorporated in the State of Utah on March
2, 1983 under the name of Gold-Water, Inc. for the purpose of acquiring and
developing mining properties. The Company's name was subsequently changed to
Sierra Tech, Inc. on September 27, 1989. The Company discontinued its mining
operations in 1992. On December 28, 1992, at a meeting of the shareholders, the
name of the Company was changed to Gold Ventures, Inc. Also, the Company's
common stock was reverse stock split on the basis of one share for every ten
shares of the Company's outstanding common stock. On February 1, 1996, the
Company reverse split its common stock again on a one share for every five
shares basis. The financial statements reflect the reverse split on an
retroactive basis.
The Company has acquired real estate in St. George, Utah and is engaged in the
business of real estate development, primarily golf courses, with surrounding
residential real estate.
The following is a summary of the more significant of its accounting policies:
a. Significant Shareholder and Distributions
The Company is a subsidiary of American Resources and Development Company
(ARDCO), formerly Leasing Technology Incorporated. The Company made
distributions to ARDCO of $325,199 for the year ended March 31, 1997 and
received contributions of capital totaling $356,054 from ARDCO during the year
ended March 31, 1997. These contributions and distributions have been treated as
adjustments of additional paid-in capital in the accompanying financial
statements.
b. Income Taxes
The Company has adopted SFAS 109, Accounting for Income Taxes. No provision has
been made for federal income taxes due to net operating loss carryforwards,
sufficient to offset any current tax liabilities. No deferred tax asset is being
recognized currently based on the Company's past operating performance. The net
operating losses are expected to expire as summarized below.
Year ended
to expire Amount
2007 $ 16,000
2008 114,000
2009 97,000
2010 3,623,000
2011 686,000
2012 536,000
Total $ 5,072,000
The Company has elected a March 31 fiscal year end for book and tax purposes.
c. Net Loss Per Share of Common Stock
The computation of net loss per share of common stock is based on the weighted
average number of shares outstanding during each period. There common stock
equivalents are anti-dilutive and accordingly not used in the net loss per
common share computation.
10
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
d. Profit Recognition and Capitalization of Costs Related to Real Estate
Income on real estate is recognized in accordance with the provisions of
FASB-66. Revenue and profits from the sale of land and other real estate have
been recognized using the full accrual method for all periods presented. As
such, each sale has been determined to have been consummated, with the buyers
initial and continuing investment determined to show adequate demonstration of
commitment to pay. In addition, all outstanding remaining receivables related to
these transactions are not subject to future subordination and the Company no
longer has a substantial continuing involvement with the property with the buyer
substantially assuming the usual risks and rewards of ownership of the property.
Costs associated with real estate are accounted for in accordance with the
provisions of FASB-67. Accordingly, acquisition, development and construction
costs, including property taxes and interest on associated debt and selling
costs, are capitalized. Such costs are specifically allocated to the related
opponents or, if relating to multiple components, allocated on an pro rata basis
as appropriate. Estimates are reviewed periodically and revised as needed. The
respective real estate projects are also periodically reviewed to determine the
that carrying amount does not exceed the net realizable value. To date, no
allowance has had to be provided for estimated impairments of value based on
evaluation of the projects.
e. Concentrations of Risk
The Company maintains its cash in bank deposit accounts at high credit quality
financial institutions. The balances, at times, may exceed federally insured
limits.
The Company builds and develops real property in Southern Utah.
In the normal course of business the Company extends secured credit to its
customers.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
The changes in operating assets and liabilities are shown net of non cash
transactions.
g. Inventory
The Company carries in inventory the cost of the developed lots, condominiums
and homes it has available for sale. The inventory is recorded at the lower of
cost or market.
h. Accounts Receivable
The Company's notes receivable are from the sale of lots and condos in its
Cotton Manor and Cotton Acres projects. The Company has recorded an allowance
for doubtful accounts of $5,000. The Company holds a trust deed on the
properties sold and the Company expects that its sales backlog would allow it to
immediately resell any property which it foreclosed upon.
11
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 1 -ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
I. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation on equipment is provided using the straight-line method over an
expected useful lives of the assets (usually three years).
j. Construction Loans Payable
An officer and director of the Company has arranged for short term loans to
finance the construction of homes held in inventory for resale. The loans are
secured by the homes and accrue interest at variable rates. During the year
ended March 31, 1997, this obligation was converted into long-term debt.
k. Estimates
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of commitments and contingencies, and the reported
revenues and expenses.
NOTE 2 - LAND HELD FOR DEVELOPMENT
On December 28, 1992 the Company purchased the Red Hawk real estate development
and the Cotton Manor/Cotton Acres real estate development. The land was
purchased for 3,273,728 shares of common stock and the assumption of debt. The
Red Hawk land is undeveloped and in order for the Company to realize its
investment it will need to obtain adequate financing. The land was acquired from
a company which ended up with control of the Company as a result of the
transaction, therefore the land was recorded at predecessor cost.
For the year ended March 31, 1997, the Company capitalized $1,093,468 in
construction period interest costs. The cost of the land is less than the
estimated net realizable value of the land.
12
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 3 - LONG-TERM DEBT
<TABLE>
<CAPTION>
<S> <C> <C>
Long-term debt of the Company is as follows: September 30, March 31,
1997 1997
(Unaudited)
Promissory note secured by land. Interest accrued at 10% per
annum, payable in shares of the Company's common stock.
$120,000 principal plus a percentage of the proceeds of lot
sales payable annually beginning on February 1, 1991 through
February 1, 1997 at which time the balance will be due as a
balloon payment. $2,000 from each Red Hawk lot sale also
applies to the note. $ 646,502 $ 646,502
Promissory note secured by land. Annual payments through
August 15, 2016 at $30,524 per year including interest at 10%
per annum. 201,890 201,890
Trust deed note, secured by land and 50,000 shares of the
Company's common stock. Interest accrued at 15% per annum.
Principle and interest were due May 31, 1995. However, the note
holder has not demanded full payment and is accepting partial
payments. 80,575 80,575
Trust deed note payable, secured by land. Interest accrued at 8%
per annum. Payable $100,000 per year plus the accrued interest
for that year. 355,890 355,890
Promissory note secured by land, bearing interest at 10.5%.
Interest payable monthly with principal and any accrued
interest payable in full on June 10, 1999. 3,649,630 3,440,805
Purchase contract and note secured by land, bearing
interest at 10%. Monthly installments of $25,000 due
through May 15, 1998 with remaining principal and accrued
interest due in full. 2,225,669 2,246,823
Mortgage note payable secured by real estate bearing interest
at 11.5%. Due in monthly installments of $911. 90,839 90,915
Mortgage note payable secured by real estate bearing
interest at 8.125%. Due in monthly installments of $919 116,622 116,800
Mortgage note payable secured by real estate bearing
interest at 8.125%. Due in monthly installments of $879. 99,451 99,451
------ ------
Subtotal 7,467,068 7,279,651
Less Current Portion (903,924) (923,320)
-------- --------
Long-Term Portion $ 6,563,146 $ 6,356,331
=============== =============
</TABLE>
13
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 3 - LONG-TERM DEBT (Continued)
Maturities on long-term debt are as follows:
1998 $ 903,924 $ 923,320
1999 2,489,610 2,282,797
2000 3,557,065 3,557,065
2001 73,718 73,718
2002 19,559 19,559
Thereafter 423,192 423,192
------- -------
$ 7,467,068 $ 7,279,651
============= =============
NOTE 4 - PREFERRED STOCK
The Company has issued 27,084 shares of its class "A" cumulative convertible
preferred stock through a private placement at $5 per share. The preferred stock
pays a cumulative dividend at the rate of 10% per annum and is convertible into
common stock per terms of the offering. The preferred stock also has certain
preferences in liquidation. During the year ended March 31, 1996, 2,500 shares
of class "A" preferred stock were repurchased from the holder for $12,500. Also,
1,804 of the class "A" preferred shares were issued during the year end March
31, 1997 as payment of interest on long-term debt. During the three months ended
June 30, 1997, 1,105 shares of common stock were converted to 2,780 shares of
preferred stock.
The Company has also issued 287,064 shares of class "B" preferred stock. The
class "B" preferred stock has a preference upon liquidation of $5.00 per share,
plus all accrued and unpaid dividends, whether or not earned or declared. The
preference is secondary to the liquidation preference of the class "A" stock.
The class "B" preferred stock is convertible at anytime before March 31, 1998 at
the rate of 1 share of common stock to be valued at 40% of the low bid price for
free trading shares at my time during the eighteen months preceding the
conversion. The Company may redeem the class "B" preferred stock on or before
March 31, 1998 at $5.00 per share plus dividends accrued at 10% per annum. Of
the total shares of class "B" preferred stock outstanding, 193,733 shares were
issued during the year ended March 31, 1996 at a price of $5.00 per share,
160,057 of which were issued to a shareholder of the Company (see Note 7).
During the year ended March 31, 1997, the Company issued 27, 637 shares of class
"B" preferred stock as payment for interest on long-term debt.
During the six months ended September 30, 1997 an additional 28,340 class "B"
preferred shares were issued for interest. The 315,404 class "B" preferred
shares were then converted to 3,942,550 shares of common stock.
NOTE 5 -COMMON STOCK
The Company completed a placement of its common stock during the year ended
March 31, 1997, realizing proceeds of $1,000,000 for which the Company issued
200,000 shares. Offering costs associated with this transaction totaled $120,576
which has reduced additional paid-in capital as reflected in the accompanying
financial statements.
An additional 20,000 shares of common stock were issued during the year ended
March 31, 1997 as payments for $34,522 of accrued interest or long-term debt.
4,000 shares of common stock were also issued during the year ended March 31,
1997 as payment for $12,000 of services rendered to the Company.
The Company has issued 12,991 shares which have been offered to creditors in
settlement of accrued expenses. However, the creditors have not yet accepted the
shares. These shares are considered issued but not outstanding for financial
statement purposes.
During the six months ended September 30, 1997, 395,725 shares of common stock
were issued for services provided by its parent company.
14
<PAGE>
GOLF VENTURES, INC.
Notes to Financial Statements
September 30, 1997 and 1996
NOTE 6 -GOING CONCERN
The Company's financial statements have been prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred significant losses since inception, has a
substantial working capital deficit and has debt significantly in excess of
stockholders' equity. During the year ended March 31, 1997, the Company was able
to raise working capital through the private placement of its common stock.
However, cash flow projections show that the Company's reserves are not adequate
to cover its needs for the near future. Management of the Company plans to raise
additional capital through a private placement or additional debt financing and
the Company anticipates generating additional revenue from increased sales.
15
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
For the Quarter Ended September 30, 1997, Compared with the Quarter Ended
September 30, 1996.
Management will not attempt to restate numerical information here that
is clear from the financial statements. Rather management will attempt explain
its view of the results and the reasons therefore.
Gross Income from operations for the September 1997 quarter increased
significantly over the results in the same quarter last year due to increased
sales of lots in the Cotton Manor and Cotton Acres developments. Given the
dependence of the Company on both the demand for its real estate and on
available development capital to create new saleable lots, the Company expects
wide variability in sales results from quarter to quarter. During the past year,
and specifically during the last six months, the Company has had only sporadic
and small infusions of development capital, and this limitation on development
capital has hindered the Company's ability to maximize or stabilize the sales
potential of its inventory.
Cost of sales during this year's second quarter were also higher than
in the same quarter last year as a concomitant result of the higher sales
activities that also yielded higher gross operating income.
General and administrative expenses were significantly higher for the
September 30, 1997 quarter as compared with the same quarter last year,
primarily as a result of the issuance of approximately $300,000 worth of
restricted common stock to the members of the officers and Directors of the
Company during the second quarter. These stock awards recognized the significant
time and effort put into the Company by the officers and Directors over the past
year, including in connection with the negotiation and closing of the U.S. Golf
transaction, which is discussed in more detail below. This compensation item
affected both the three month and the six month comparison of G & A expense.
Higher administrative expenses were also incurred in connection with the legal
and accounting assistance obtained in connection with the U.S. Golf transaction.
As a result of the higher sales revenues, the higher expenses were not
all passed to the bottom line, with the Company's net loss of ($282,982) for the
September 30, 1997 quarter exceeding its net loss of ($167,168) for the year ago
quarter by a smaller margin than the increase in quarterly expenses.
The Company expects that the closing of the U.S. Golf transaction in
the third quarter, as now anticipated as of the date hereof, will bring a
greater ability to the Company to obtain development capital that will (a)
reduce outstanding indebtedness and its associated interest expense, and (b)
allow for increasing the Company's inventory of saleable lots. Moreover, the
Company expects to have better access to the development money it needs to bring
its Red HawkTM development to the point of generating sales.
16
<PAGE>
For the Six Months Ended September 30, 1997, Compared with the Six Months Ended
September 30, 1996.
The same factors, discussed above, that explain the higher revenues,
expenses and net loss as between the quarter ended September 30, 1997 and the
same quarter last year also explain the similar increases in these categories
for the six month comparisons at September 30, 1997 and September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Current assets at September 30, 1997 declined by approximately $200,000
from year end March 31, 1997 as a result of sales of lots held in inventory
during the six months since year end, and as a result of spending the cash that
was generated by those sales on administrative and operating expenses, including
the paydown of certain land-related debts and payables. Paydown of debt did not
significantly reduce capitalized construction interest, however, thus resulting
in higher Land Held for Development amounts at September 30, 1997
notwithstanding sales of lots from inventory during the same period.
Reductions in accounts payable and current portion of long term debt
are the results of debt paydowns enabled by the increased sales of lots during
the six months ended September 30, 1997. Advances from U.S. Golf Communities,
Inc., accruing interest on past due debt amounts, and accrued expenses
associated with the U.S. Golf transaction resulted in higher total liabilities
at September 30, 1997 than at year-end.
The Company depends on revenue from sales of lots to pay operating
expenses and to provide development capital and/or debt service. Historically,
borrowings and private placements of common and preferred stock have generated
limited development funds, and the lots sold during the recent six months were
available for sale as a result of this past funding. However the Company's land
is significantly mortgaged at the present time, and the Company will likely have
no further ability to borrow against its assets. A shrinking inventory and
limited development capital also makes the private placement of stock uncertain.
In short, the Company faces an uncertain future with the constricted liquidity
it now is experiencing.
Moreover, the Company has nearly $1,000,000 in debt coming due during
1998, much of which is secured by the Company's projects, including Red HawkTM.
Foreclosure actions by these lenders could have an adverse effect on the
Company's long term survival if these debt amounts are not paid as and when due
during 1998.
THE U. S. GOLF TRANSACTION
As of August 25, 1997, the Company has agreed to acquire all of the
common stock of U.S. Golf Communities, Inc. from the current shareholders of
U.S. Golf, in return for equity securities of the Company comprising 81% of the
voting stock and equity of the Company. This reorganization and change in
control of the Company will bring a greater and more diverse asset base to the
Company, given U.S. Golf's ownership and operation of several golf courses and
residential or resort developments in the Eastern United States. Moreover, U.S.
17
<PAGE>
Golf has demonstrated an ability to raise needed development capital for its far
larger projects, and the Company expects similar enhanced capital raising
abilities as a result of the combination of the two companies. It is anticipated
that the U.S. Golf transaction will close during the third quarter, probably
before the end of November, 1997.
The Company has filed preliminary proxy materials with the Commission
in anticipation of its annual shareholders' meeting. In those preliminary proxy
materials, significant information is provided with respect to U.S. Golf and the
contemplated U.S. Golf transaction. This information can be accessed over the
World Wide Web at the Commission's EDGAR Archives web site, www.sec.gov. The
shareholders of the Company are not being asked to approve the U.S. Golf
transaction, inasmuch as it does not constitute a merger of the two companies or
a sale by the Company of all or substantially all of its assets. Rather the
Company is purchasing U.S. Golf, albeit U.S. Golf shareholders will become the
controlling shareholders of the Company. Under the agreement with U.S. Golf, the
management of U.S. Golf will become the executive management of the Company
following the closing of the U.S. Golf transaction.
While the Company expects significant benefits to its current
shareholders from the U.S. Golf transaction, there can be no assurance that the
U.S. Golf transaction will close, or that if closed, it will yield the expected
benefits to the Company.
18
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's securities holders
during the quarter ended September 30, 1997.
Item 5. Other Information
None
19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) This Item is not applicable to the Company.
(b) A Report on Form 8-K was filed by the Company on September 8,
1997 disclosing the settlement of a debt obligation for the
issuance of preferred stock.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GOLF VENTURES, INC.
BY: /s/ Duane H. Marchant
------------------------------
DUANE H. MARCHANT, President
Dated: November 20, 1997
20
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