SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDED CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 26, 1997
GOLF VENTURES, INC.
- --------------------------------------------------------------------------------
Exact name of registrant as specified in its charter
Utah 0-21337 87-0403864
- --------------------------------------------------------------------------------
State or other jurisdiction Commission File No. IRS Employer ID #
of incorporation
255 South Orange Avenue, Suite 1515, Orlando, Florida 32801
- --------------------------------------------------------------------------------
Address and zip code of principal executive offices
407-245-7557
- --------------------------------------------------------------------------------
Registrant's telephone number
On February 23, 1998 Registrant filed a report on Form 8-K disclosing
financial information about the reverse acquisition transaction with U.S. Golf
Communities, Inc. as required by the Instructions to this Form and other
applicable Commission Rules. Additional disclosures were made under several
other items in the February 23, 1998 Report with information that was deemed
important and useful to increase the information mix about the Registrant
available in the public markets.
Some corrections need to be made to the financial statements filed with the
February 23, 1998 Report, and these are reflected in this Amended Report.
Certain other information of current importance is also included in this Amended
Report. Nothing material has been deleted from the February 23, 1998 Report
through this Amended Report.
<PAGE>
Item 1. Changes in Control of Registrant
By an earlier filing on Form 8-K filed on or about November 26, 1997, the
Company reported that it had closed on its reverse acquisition transaction with
U.S. Golf Communities, Inc. The result of this transaction was that the
shareholders of U.S. Golf Communities, Inc. received shares of the Company's new
Series D Convertible Preferred Stock constituting approximately 81% of total
common share votes of the Company and constituting approximately 81% of the
total equity shares of the Company. U.S. Golf Communities, Inc. became a wholly
owned subsidiary of the Company, and thereby the Company gained ownership of the
assets and liabilities of U.S. Golf Communities, Inc.
As provided in the Notes to this Form 8-K, audited financial information
about U.S. Golf Communities, Inc. and pro forma combined financial information
about the Company after the U.S. Golf Communities transaction were to be filed
with the Commission within 75 days of the closing on November 26, 1997. This
Form is filed to fulfill that requirement. (See Exhibits)
In this regard, the current Directors and management of the Company are
relying on financial records compiled and kept by the former Directors and
management of the Company in presenting financial information for periods prior
to November 26, 1997.
Item 2. Acquisition or Disposition of Assets
On December 4, 1997, the Company executed and delivered a series of
agreements that resulted in the Company acquiring 81% of the issued and
outstanding stock of Pelican Strand Development Corporation ("Development") from
Maricopa Hardy Development Group, Inc. in return for the issuance of 3,432,713
new restricted shares of authorized Company common stock. Development is the
general partner of a Florida limited partnership which owns and operates the
Pelican Strand golf and country club in Naples, Florida, the value of which the
Company believed justified the purchase price. For the year ended December 31,
1997, the Company's share of Development's net operating loss would have been
$(150,000) if the acquisition of the Company's interest had taken place on or
before January 1, 1997.
Shortly after this closing, the Commission's lawsuit against the Company was
filed without prior notice to the Company. The pendency of the Commission's
lawsuit resulted in the Company receiving notices from legal counsel for
Maricopa Hardy Development Group of a desire to rescind the transaction. The
Company is working to resolve the issues raised by Maricopa Hardy and its legal
counsel. This acquisition will be accounted for under the purchase method of
accounting. The Company's financial statements filed in its Annual Report on
Form 10-KSB will reflect the Pelican Strand acquisition and results.
2
<PAGE>
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
On March 13, 1998, the Company formally terminated its independent auditor
relationship with Jones Jensen & Co. (A response letter from Jones Jensen & Co.
is attached to this filing as an exhibit.)
Each of Jones, Jensen's reports on the financial statements of the Company
for the fiscal years ended March 31, 1997 and 1996 were qualified as to
uncertainty with respect to the Company's ability to continue as a going
concern.
The decision to change accountants was approved by the Company's Board of
Directors.
During the fiscal years ended March 31, 1997 and 1996, and during the period
April 1, 1997 through March 13, 1998, there were no disagreements with Jones,
Jensen on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures or any reportable event.
On March 19, 1998, the Company formally engaged BDO Seidman LLP ("BDO") as
its independent auditors who will audit and report on the financial statements
of the Company for the fiscal year ended December 31, 1997. (A copy of the BDO
engagement letter tin attached to this filing as an exhibit.)
Prior to engaging BDO, neither the Company nor anyone acting on its behalf
consulted with BDO regarding the application of accounting principles to any
specified transaction or the type of audit opinion that might be rendered on the
Company's financial statements. In addition, during the Company's fiscal years
ended March 31, 1997 and 1996, and the interim period from April 1, 1997 to
March 13, 1998, neither the Company nor anyone acting on its behalf consulted
with BDO with respect to any matters that were the subject of a disagreement (as
defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as
described in Item 304(a)(1)(v) of Regulation S-K).
Item 5. Other Events
In connection with the disclosures made herein concerning the Company's
reverse acquisition transaction with US Golf, the Company makes the following
clarifying disclosures of historical information which are designed to bring the
information about the Company in the public markets to a state of currency and
completeness as the Company prepares to file its first Annual Report on Form
10-KSB as a new combined entity with US Golf.
3
<PAGE>
The Company's Historical Connection with George Badger
The Company was organized in 1983, primarily under the auspices of George
Badger, and continued, under Mr. Badger's practical control, without significant
operations until 1993.
In 1990, Mr. Badger caused his affiliate, American Resource and Development
Corporation ("ARDCO") (formerly known as Leasing Technology, Inc.) to acquire a
large tract of land in Washington City, Utah and a large residential development
in St. George, Utah. Duane Marchant, an experienced real estate professional who
was involved with the St. George residential property acquired by ARDCO, was
employed by ARDCO to develop all of these Southern Utah properties. In 1992,
ARDCO concluded that the Company was the appropriate vehicle to hold and develop
these Southern Utah properties, and ARDCO sold the Washington City project, and
the St. George residential developments, then named Cotton Manor and Cotton
Acres, to the Company in exchange for 654,746 new shares of the Company's common
stock, which represented at that time approximately 86% of the Company's total
outstanding shares. Thus ARDCO become the majority shareholder of the Company at
this time. The Company also assumed $4,338,319 of debt to third parties in
connection with the acquired properties. Mr. Marchant became the President of
the Company, and continued in that capacity until the U.S. Golf transaction
closed in November, 1997.
Between its activation as an operating company in 1993 and the Summer of
1997, Mr. Badger continued to exercise control over the financial operations of
the Company, including matters involving the issuance of securities and
disclosures to the public. Mr. Badger and his affiliates have had no control
over the business or affairs of the Company in a legal or practical sense since
late Summer, 1997, although Mr. Badger or members of his family, and ARDCO,
continue to be shareholders of the Company.
On October 10, 1996, a criminal complaint was filed in the Southern District
of New York against Mr. Badger charging him with a number of violations of law
related to alleged unlawful and undisclosed compensation to securities brokers
and promoters to induce them to cause customers to purchase securities issued by
ARDCO and the Company. (The Company has learned that Mr. Badger has pleaded
guilty to counts of: (i) conspiracy to commit securities fraud; (ii) securities
fraud; (iii) criminal contempt; and (iv) perjury.)
Upon learning of the criminal charges filed against Mr. Badger, the Company
retained legal counsel, who conducted interviews of Company management. This
legal counsel drafted a press release issued by the Company (dated October 18,
1996) stating that the Company was undertaking an investigation of Mr. Badger's
activities involving the Company and its securities. Any impression of that
press release of a far ranging and comprehensive independent investigation was
corrected in a later press release (dated August 12, 1997), and the Company
never completed or published a report on any such investigation.
4
<PAGE>
On advice of new legal counsel, the Company began to separate itself from
ARDCO and Mr. Badger, through increasing physical separation and the continuing
retention of independent counsel. Such separation was not completed until late
in the Summer of 1997. By September 1997, the Company was able to relocate its
executive offices to St. George, Utah, in one of the Company's model homes in
the Cotton Manor development, and away from the office sharing arrangement with
ARDCO that had been in place for the prior approximately ten years. All of these
steps were taken by the Company in an effort to achieve practical and actual
distance from ARDCO and Mr. Badger.
In early 1997, U.S. Golf Communities, Inc. ("US Golf") retained Oppenheimer &
Co., investment bankers, to locate a suitable public company merger partner.
Later in 1997, Oppenheimer introduced US Golf to George Badger, Duane Marchant
and the Company. An agreement in principle was reached in mid-1997 for the
Company to acquire US Golf in a transaction that would give the shareholders of
US Golf voting control of the Company. In August, 1997, a definitive agreement
was signed with US Golf for the reverse acquisition. With the closing of the US
Golf transaction on November 26, 1997, voting and financial control of the
Company passed from ARDCO and its affiliates to the shareholders of US Golf,
subject to ratification by the Company's shareholders at the next annual
meeting.
In late Summer, 1997, ARDCO made claims against the Company for
reimbursements and other amounts arising in connection with the Company's early
years and the introduction of US Golf to the Company. Mr. Badger caused
approximately 860,000 shares to be issued to ARDCO in satisfaction of these
claims. When the President of the Company learned of this stock issuance, he
consulted with legal counsel and took action to cancel the shares, although the
Company had already reported the issuance of these shares in its 10-Q report for
the quarter ended June 30, 1997 with respect to a settlement in principle
believed to have been reached with ARDCO. Thereafter, arm's length negotiations,
through counsel, ensued between the Company and ARDCO, and have continued in an
effort to explore and resolve this claim without litigation, and in an effort to
create a complete legal and practical separation from ARDCO. During the Fall of
1997, the Company believed on several occasions that it understood the nature of
the ARDCO claims and that a settlement in principle had been reached. The
Company attempted in its filings with the Commission to disclose the agreements
in principle it thought it had reached. Each time, however, the parties failed
to consumate any agreement. For example, shortly before the closing of the U.S.
Golf transaction, the Company believed that it had reached an agreement with
ARDCO on this issue, and the then-President of the Company actually signed a
written release agreement, subject to board approval. The Company reported the
pending issuance of shares of common stock to ARDCO in filings with the
Commission during October-December 1997. Subsequent to those filings, problems
and issues arose causing the Company's Board of Directors to question the
validity of the claims and to disapprove the signed settlement proposal.
Recently ARDCO has indicated that its claims are for "services rendered" rather
than based on past advances or reimbursement claims. Prior reports by the
Company on this matter, which have characterized the ARDCO claim to be for past
advances or reimbursements, may have been in error, but were based on what the
Company was hearing from ARDCO at the time. Based on upon uncertainties inherent
5
<PAGE>
in the ARDCO claims, including the pending Commission action against the
Company, ARDCO's management, and Mr. Badger, there is no assurance that the
ARDCO claims can be resolved without litigation in the near future or at all.
Between October 1996 and August 1997, the Company received and responded to
two subpoenas from the Commission concerning Mr. Badger's relationships with the
Company, and Messrs. Marchant and Spencer, the President and Secretary of the
Company, respectively, gave sworn testimony to the Commission with respect to
Mr. Badger's role in the Company.
On December 18, 1997, the Commission filed a civil complaint against Mr.
Badger alleging facts substantially similar to those alleged in Mr. Badger's
criminal charges, discussed above, in Federal District Court in Salt Lake City.
In the same complaint, the Company and certain former officers were alleged to
have caused deficiencies in historical disclosure filings by the Company during
the period of Mr. Badger's involvement with managing the Company, with regard to
the Corporation's investigation of allegations against Mr. Badger, and with
regard to the status of the Company's Red Hawk development in St. George, Utah.
The Company has not yet been required to answer this Complaint. The Company is
attempting to resolve the Commission's concerns with respect to the Company, as
expressed in this Complaint.
The Company's Southern Utah Properties
RED HAWK
In 1994, the Company named its 616 acre parcel of undeveloped land in
Washington, Utah the Red Hawk(TM) International Golf & Country Club ("Red
Hawk(TM)"), and on June 1, 1994, the Company acquired an additional 54 acres of
adjacent land, thus increasing the Red Hawk(TM) project to 670 acres. Red
Hawk(TM) is a master-planned residential golfing and recreational community
that, when completed, will include more than 945 building lots, a 27 hole golf
course, tennis courts, swimming pools, and other recreational amenities. Phase I
was designed to include the first 18 holes on the golf course, five corporate
villa lots, seven cottage lots, and one hundred-two estate lots. The remaining 9
holes on the golf course, the Club House and amenities, and the bulk of the
residential and commercial land developments are planned for subsequent phases,
and have not yet been started, except in the overall project design and surveys.
In 1996, Washington City completed construction of a storage tank for
culinary (drinking) water in close proximity to Red Hawk(TM), together with a
water pumping station and delivery lines which run through Red Hawk(TM), thus
assuring Red Hawk(TM) will have an adequate supply of culinary water available.
(The Company paid part of this water line) In addition, there are ten (10)
separate wells on the Red Hawk property, and these wells will not only provide
the lakes included in the design of the project, but could also be developed
into sources of culinary and irrigation water.
6
<PAGE>
Since 1992, the Company has expended a total of $2,972,985 on the planning,
development and construction of Red Hawk(TM), most of which was spent on the
construction of Phase I. This amount was funded in part by equity capital
provided by the Company's shareholders, but mostly was debt financed.
Significant cost and effort have been expended in gaining initial government
approvals and permits. The final plat for Red Hawk(TM) will be recorded upon
installation of all Phase I improvements and/or bonding for the same. The
Company believes that no other permits or authorization are required until after
filing of the final plat for Phase I, at which time building permits for homes
at the project can be obtained from Washington City. During 1996, the Company
was optimistic that Phase I could be finished before year-end and that sales of
residential lots could begin in earnest in early 1997. Indeed, substantially all
of the first 18 holes have been roughed in, most of the lakes have been dug out,
and the sewer utilities have been installed in the roughed in residential
portion of Phase I. However, construction was halted in late 1996 before Phase I
could be completed, because of increasing costs and a lack of money. Although
hopeful of rejuvenating the project through new capital, the Company proved
unable to raise any further funds for the project. There is a risk that the
current cessation of work on the project, if continuing, may result in the need
to redo some or all existing local and other governmental approvals obtained to
date.
The Company estimates that approximately 40% of the needed work on Phase I
has been accomplished to date, and that an additional approximately $6,400,000
in investment capital and a solid nine months of construction activity will
bring Phase I of Red Hawk(TM) to a point where golf can take place on the course
and fully developed residential lots can be sold for home construction. If the
Company were to undertake the construction of "spec" homes, or otherwise reserve
to itself the development of the residential units at the project, the capital
required for Phase I would be substantially higher than the $6,400,000 estimate,
and it could take two to three years or more to fully build out the residential
lots in Phase I.
The Company estimates that it could take up to ten years to fully develop all
phases of Red Hawk(TM), and that between $15,000,000 and $60,000,000 of
additional investment capital will be needed to reach the full development
stage, again depending on whether the Company involves itself in the
construction of residential properties or simply sells developed lots.
COTTON MANOR AND COTTON ACRES
Cotton Manor, a 20-acre development approved and platted for a total of 130
units. Of the 36 total approved units in Phases I and II, 28 condominium units
are complete (one two-story building with 16 units and three one-story
four-plexes). Eight units remain to be built. Recreational facilities including
a swimming pool, tennis courts, and a putting green were constructed in Phase I.
7
<PAGE>
The Company has amended the plat for Cotton manor to accommodate 94
additional units as single detached units. These are referred to as "cottages"
or "townhomes". In Phase III, two cottages were built. One Phase III cottage has
been sold to a third person, while the other is being used by the Company as a
model, sales office and, executive office. Development of the 19 lots in Phase
IV has been completed at a cost of approximately $11,700 per lot. Three of the
Phase IV lots have been sold. One lot was purchased by Bruce Frodsham, a former
Company Vice President, at the Company's offer price of $15,000. Mr. Frodsham
has built a home on the lot at his cost. In early 1997, a second Phase IV lot
was transferred to Mr. George Badger to enable Mr. Badger to get a loan to
finance construction of a home on the site for entry by the Company in a home
show. The Company's entry won the "best of the show" award. Currently, Mr.
Badger is paying the indebtedness on the property and lives there from time to
time. A third lot was recently sold to an unaffiliated third party builder.
Building permits will be obtained from the City of St. George as needed.
Following the sale of the 19 units in Phase IV, the Company intends to commence
developing and marketing additional Phases.
While the Company is still marketing Cotton Manor cottage sites, without
further investment the Company cannot build the remaining 17 cottages in Phase
IV or engage in further development of the project.
Cotton Manor residents belong to the Condominium Association or the Planned
Unit Development Association, and pay a monthly fee to support the common area
maintenance. To date, fees collected have not been sufficient to cover costs,
and the Company has subsidized the project from inception. The Company retains
control over the two homeowners associations at Cotton Manor. The Company
maintains property and liability insurance on the Cotton Manor project at a cost
of approximately $6,000 per year.
Cotton Acres is a 60-acre development approved and platted for 238 single
family detached home lots. 182 lots in Phases I-IX have been sold and dwelling
units on these lots have been completed, mostly by the lot buyers instead of the
Company. Development of Phase X, consisting of 19 new lots, has been completed
at a cost of approximately $165,000. All Phase X lots have been sold or pre-sold
with a deposit and are expected to close during the first six months of 1998.
Phase XI has been platted and approved for a final 37 lots. At the current time,
pre-sale reservations have been received by the Company for 10 of the Phase XI
lots. Management anticipates that the development and sale of the lots from all
of the remaining potential phases of Cotton Acres could be completed within two
years, provided that sufficient development funding becomes available for this
purpose. There is also no assurance that market conditions will allow for this
schedule, even if sufficient funding were available.
Item 6. Resignation of Registrant's Directors
On December 18, 1997, as previously announced, Duane Marchant, the former
President of the Company, resigned as an officer and director of the Company in
the wake of his being named in the Commission's civil complaint, discussed in
8
<PAGE>
Item 5, above. Mr. Marchant had previously agreed with the Company that he would
resign if he was named as a defendant in a Commission action.
Item 7. Financial Statement, Pro Forma Financial Information and Exhibits
Attached as Amended Exhibit 99.1 are the audited balance sheet of U.S. Golf
Communities, Inc. at December 31, 1996 and the audited income statements and
statements of cash flows for the years ended December 31, 1996 and 1995.
Attached as Amended Exhibit 99.2 are the unaudited balance sheets and income
statements as of September 30, 1997 and 1996 for U.S. Golf Communities.
Attached as Amended Exhibit 99.3 are pro forma financial statements combining
financial information for U.S. Golf Communities at December 31, 1996 and
financial information for the Company at March 31, 1997.
Item 8. Changes in Fiscal Year
As a result of the reverse acquisition transaction with U.S. Golf
Communities, Inc., and pursuant to Commission accounting rules, the Company has
changed its fiscal year from March 31 to December 31. The Company will file its
first audited financial statement with its new fiscal year end for the year
ended December 31, 1997 in connection with its Annual Report on Form 10-KSB due
on or before March 31, 1998.
Item 9. Sales of equity securities pursuant to Regulation S
Not Applicable.
The following exhibits are filed with the Report.
Exhibit No. Description
10.1 Letter from Jones, Jensen & Co. recognizing the cessation
of the independent auditor relationship. *
10.2 Letter from BDO Seidman LLP accepting independent auditor
relationship with the Company. *
Amended 99.1 Audited Financial Statements for U.S. Golf Communities,
Inc. as of December 31, 1996. *
9
<PAGE>
Amended 99.2 Unaudited Financial Statements for U.S. Golf Communities,
Inc. as of September 30, 1996 and 1995. *
Amended 99.3 Pro Forma Combined Financial Information for Golf
Ventures, Inc. (as of March 31, 1997) and U.S. Golf
Communities, Inc. (as of December 31, 1996)
* Incorporated by reference from the Company's Form 8-K/A, filed with the
Commission on May 6, 1998, File No. 0-21337.
GOLF VENTURES, INC.
/s/ Warren Stanchina
---------------------------
Warren Stanchina, President
DATED: September 17, 1998
10
Golf Ventures, Inc.
Pro Forma Consolidated Financial Information
Explanatory Headnote (Unaudited)
Introduction
On August 25, 1997, Golf Ventures, Inc. (the "Company") entered into an
Agreement and Plan of Reorganization (the "Agreement") with U.S. Golf
Communities, Inc. ("U.S. Golf"). The closing of the transaction between the
Company and U.S. Golf occurred on November 26, 1997. Under the terms of the
agreement, the Company issued 6,672,578 shares of the Company's new Series D
Convertible Preferred Stock in exchange for all of the common stock of U.S. Golf
Communities, Inc. Each share of Series D Preferred Stock is convertible into
four (4) shares of Common Stock of Golf Ventures, Inc. Prior to conversion, each
share of Series D Preferred Stock has four (4) votes in any vote of common
stockholders of the Company.
U.S. Golf Communities, Inc. is a recently formed company that immediately prior
to its acquisition by Golf Ventures, Inc. issued 1,270,968 shares of its capital
stock in exchange for the outstanding common stock and partnership interests in
the following entities:
U.S. Golf Communities, Inc. U.S. Golf (Cutter Sound), Inc.
Golf Communities of America, Ltd. Northshore Golf Partners, Ltd.
U.S. Golf Pinehurst Plantation, Ltd. Northshore Development, Ltd.
U.S. Golf (Plantation), Inc. Northshore U.S. Golf, Inc.
Wedgefield Limited Partnership Montverde Properties, Ltd.
U.S. Golf (Wedgefield), Inc. U.S. Golf (Montverde), Inc.
FSD Golf Club, Ltd. Montverde Investment Group, Ltd.
U.S. Golf (FSD), Inc. U.S. Golf Leasing Co., Inc.
Cutter Sound Development, Ltd. U.S. Golf Services & Development, Inc.
The amount of shares of capital stock issued were determined based upon
partnership percentages of the individual entities and the relative value of
each entity to the aggregate group of entities based upon their appraised values
and profit and cash flow potential, as agreed to in writing by all stockholders
and partners involved.
In September 1997, certain debt holders exchanged their notes and accrued
interest totaling approximately $12,466,000 for equity in U.S. Golf Communities,
Inc. and related companies.
Since these entities were under common ownership and control, the acquisitions
were accounted for in a manner similar to a pooling of interests, and their
financial information is presented as if they were a single entity since
inception.
Based on the controlling interest in Golf Ventures, Inc. obtained by U.S. Golf
shareholders as a result of this transaction, the transaction will be accounted
for as an acquisition of Golf Ventures, Inc. by U.S. Golf Communities, Inc. (a
reverse acquisition in which U.S. Golf is considered the acquirer for accounting
purposes).
The pro forma condensed consolidated balance sheets as of September 30, 1997
assume the transaction was consummated as of September 30, 1997, and the pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997 and 1996 assume
the transaction was consummated as of January 1, 1996.
The pro forma condensed consolidated financial statements may not be indicative
of the actual results of the transactions. In particular, the pro forma
condensed consolidated financial statements are based on management's current
estimate of the allocation of the purchase price, the actual allocation of which
may differ. In the opinion of management, all adjustments have been made that
are necessary to present fairly the pro form data.
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Pro Forma Consolidated Balance Sheets
September 30, 1997
(Unaudited)
U.S. Golf U.S. Golf Golf
Communities, Pro Forma Ventures, Eliminating Consolidated
Inc. Adjustments Inc. Entries Pro Forma
---- ----------- ---- ------- ---------
Assets:
<S> <C> <C> <C> <C> <C>
Cash $ 436,045 $ $ 14,921 $ $ 450,966
Notes and accounts receivable 750,357 57,948 808,305
Inventories 127,683 127,683
Prepaid expenses 80,637 80,637
Property and equipment, net 8,069,303 145,809 8,215,112
Land under development 24,025,179 12,592,408 1,448,326 38,065,913
Deferred loan costs 59,964 59,964
Goodwill 3,377,755 3,377,755
Other assets 258,212 258,212
Investment in subsidiary 5,191,605 (3) (5,191,605) -
-------------- ---------- ------------- ----------- -------------
$ 37,185,135 $5,191,605 $ 12,811,086 $(3,743,279) $ 51,444,547
============== ========== ============= =========== =============
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Pro Forma Consolidated Balance Sheets
September 30, 1997
(Unaudited)
U.S. Golf U.S. Golf Golf
Communities, Pro Forma Ventures, Eliminating Consolidated
Inc. Adjustments Inc. Entries Pro Forma
---- ----------- ---- ------- ---------
Liabilities and Stockholders' Equity:
<S> <C> <C> <C> <C> <C>
Accounts payable $ 3,010,421 $ $ 893,265 $ $ 3,903,686
Accrued expenses 6,329,110 707,474 7,036,584
Loan costs payable 1,410,658 1,410,658
Notes payable 32,518,943 7,467,068 39,986,011
------------ ----------- ----------- ----------- ------------
Total liabilities 43,269,132 9,067,807 52,336,939
------------ ----------- ----------- ----------- ------------
Partners' deficit:
General partners (1,081,510) 1,081,510 (2) - - -
Limited partners (4,602,117) 4,602,117 (2) - - -
Stockholders' equity (deficit):
Preferred stock - Class A
cumulative convertible - - 29 - 29
Preferred stock - Class B
cumulative convertible - - 313 - 313
Preferred stock - Class D
convertible 66,726 (3) - - 66,726
Common stock 500 12,210 (2) 2,247 (12,710) 2,247
Additional paid-in capital - 5,124,879 (3) 8,796,828 (8,786,707) 18,183,759
13,048,759 (2)
Accumulated deficit (400,870) (18,744,596)(2) (5,056,138) 5,056,138 (19,145,466)
------------ ----------- ----------- ----------- ------------
Total partners' and
stockholders' equity (deficit) (6,083,997) 5,191,605 3,743,279 (3,743,279) (892,392)
------------ ----------- ----------- ----------- ------------
$ 37,185,135 $ 5,191,605 $12,811,086 $(3,743,279) $ 51,444,547
============ =========== =========== =========== ============
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc
Pro Forma Consolidated Statement of Operations (Unaudited)
Year Ended December 31, 1996
U.S. Golf Golf
Communities, Ventures, Pro Forma Consolidated
Inc. Inc. Adjustments Pro Forma
---- ---- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 8,170,970 $ 274,000 $ $ 8,444,970
Costs and expenses:
Cost of sales 1,816,100 158,066 1,974,166
Operating expenses 9,542,050 860,289 10,402,339
----------- ---------- ---------- ------------
11,358,150 1,018,355 12,376,505
----------- ---------- ---------- ------------
Loss from operations (3,187,180) (744,355) (3,931,535)
Other income (expense):
Interest expense (4,182,476) (10,142) 785,715(5) (3,406,903)
Other (493,632) 68,580 (425,052)
----------- ---------- ---------- ------------
(4,676,108) 58,438 785,715 (3,831,955)
----------- ---------- ---------- ------------
Loss before minority interest (7,863,288) (685,917) 785,715 (7,763,490)
Minority interest in loss of subsidiary 68,111 - 68,111
----------- ---------- ---------- ------------
Net loss $(7,795,177) $ (685,917) $ 785,715 $ (7,695,379)
=========== ========== ========== ============
Loss per share $ (.27)
============
Weighted average number of common shares outstanding 28,489,495
============
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Pro Forma Consolidated Statement of Operations (Unaudited)
Nine Months Ended September 30, 1997
U.S. Golf Golf
Communities, Ventures, Pro Forma Consolidated
Inc. Inc. Adjustments Pro Forma
---- ---- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 7,619,736 $ 316,546 $ $ 7,936,282
Costs and expenses:
Cost of sales 2,165,015 176,952 2,341,967
Operating expenses 7,341,269 924,150 8,265,419
----------- ---------- --------- -----------
9,506,284 1,101,102 10,607,386
----------- ---------- --------- -----------
Loss from operations (1,886,548) (784,556) (2,671,104)
Other income (expense):
Interest expense (3,956,115) (14,447) 766,286(5) (3,204,276)
Other 19,268 33,963 53,231
----------- ---------- --------- -----------
(3,936,847) 19,516 766,286 (3,151,045)
----------- ---------- --------- -----------
Net loss $(5,823,395) $ (765,040) $ 766,286 $(5,822,149)
=========== ========== ========= ===========
Loss per share $ (.20)
===========
Weighted average number of common shares outstanding 28,937,760
===========
See accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Pro Forma Consolidated Statement of Operations (Unaudited)
Nine Months Ended September 30, 1996
U.S. Golf Golf
Communities, Ventures, Pro Forma Consolidated
Inc. Inc. Adjustments Pro Forma
---- ---- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 6,326,672 $ 242,768 $ $ 6,569,440
Costs and expenses:
Cost of sales 1,509,500 174,758 1,684,258
Operating expenses 8,533,325 3,990,527 12,523,852
------------ ----------- --------- -----------
10,042,825 4,165,285 14,208,110
------------ ----------- --------- -----------
Loss from operations (3,716,153) (3,922,517) (7,638,670)
Other income (expense):
Interest expense (2,399,554) 549,921(5) (1,849,633)
Other (374,937) 120,501 (254,436)
------------ ----------- --------- -----------
(2,774,491) 120,501 549,921 (2,104,069)
------------ ----------- --------- -----------
Loss before minority interest (6,490,644) (3,802,016) 549,921 (9,742,739)
Minority interest in loss of subsidiary 68,111 68,111
------------ ----------- --------- -----------
Net loss $ (6,422,533) $(3,802,016) $ 549,921 $(9,674,628)
============ =========== ========= ===========
Loss per share $ (.34)
===========
Weighted average number of common shares outstanding 28,439,612
===========
Set accompanying headnote and notes to pro forma consolidated financial statements (unaudited).
</TABLE>
6
<PAGE>
Golf Ventures, Inc.
Notes to Pro Forma Consolidated Financial Information
(Unaudited)
1. Pro Forma Adjustments
The pro forma condensed consolidated balance sheet as of September 30, 1997
assumes the transaction was consummated as of September 30, 1997, and the pro
forma condensed consolidated statements of operations for the year ended
December 31, 1996 and the nine months ended September 30, 1997 and 1996 assume
the transaction was consummated as of January 1, 1996.
2. Reorganization of U.S. Golf communities, Inc.
U.S. Golf Communities, Inc. ("USGCI") is a company formed in April 1996 that
immediately prior to its acquisition by Golf Ventures, Inc. ("GVI") issued
1,270,968 shares of its capital stock in exchange for 100% of the outstanding
common stock and partnership interests in the following entities:
U.S. Golf Management, Inc. (formerly U.S. Golf (Cutter Sound), Inc.
U.S. Golf Communities, Inc. Northshore Golf Partners, Ltd.
Golf Communities of America, Ltd. Northshore Development, Ltd.
U.S. Golf Pinehurst Plantation, Ltd. Northshore U.S. Golf, Inc.
U.S. Golf (Plantation), Inc. Montverde Properties, Ltd.
Wedgefield Limited Partnership U.S. Golf (Montverde), Inc.
U.S. Golf (Wedgefield), Inc. Montverde Investment Group, Ltd.
FSD Golf Club, Ltd. U.S. Golf Leasing Co., Inc.
U.S. Golf (FSD), Inc. U.S. Golf Services & Development, Inc.
Cutter Sound Development, Ltd.
The amount of shares of capital stock issued were determined based upon
partnership percentages of the individual entities and the relative value of
each entity to the aggregate group of entities based upon their appraised values
and profit and cash flow potential, as agreed to in writing by all stockholders
and partners involved.
Since these entities were under common ownership and control, the acquisitions
were accounted for in a manner similar to a pooling of interests, and their
financial information is presented as if they were a single entity since
inception.
3. Acquisition of Golf Ventures, Inc.
Effective November 24, 1997, GVI acquired the stock of USGCI in a reverse
acquisition in which USGCI's stockholders acquired voting control of GVI. The
acquisition was accomplished through an exchange of stock in which GVI exchanged
6,672,578 shares of Class D convertible preferred stock ("Class D Stock") for
100% of the outstanding stock of USGCI. The Class D stock will automatically
convert into shares of the Company's common stock at a conversion rate of four
shares of common stock for each share of Class D Stock upon the approval of an
increase of the Company's authorized common stock to 100,000,000 shares expected
to be completed at the first meeting of the Company's board of directors
subsequent to the acquisition. Upon completing the transaction, the stockholders
of USGCI controlled 81% of the voting rights of the combined Company.
For financial reporting purposed, USGCI is deemed to be the acquiring entity.
The acquisition has been reflected in the accompanying consolidated financial
statements as (a) a recapitalization of USGCI (whereby the issued and
outstanding stock of USGCI was converted into 29,084 shares of Class a
cumulative convertible preferred stock, 313,404 shares of Class B cumulative
preferred stock and 6,672,578 shares of Class D convertible preferred stock and
(b) the issuance of the securities discussed in the following paragraph by USGCI
in exchange for all of the outstanding equity securities of GVI.
7
<PAGE>
Golf Ventures, Inc.
Notes to Pro Forma Consolidated Financial Information
(Unaudited)
The acquisition of USGCI is deemed to have issued 2,247,448 shares of common
stock. The purchase price of GVI is computed by valuing the outstanding shares
of common stock of GVI (2,247,448 shares) at $2.31 or $5,191,605.
The purchase price for Golf Ventures, Inc. is anticipated to be allocated as
follows:
Carrying value of assets acquired $12,811,086
Excess of cost over net assets acquired applied
to land under development* 1,448,326
-----------
Fair value of liabilities assumed 14,259,412
9,067,807
-----------
Total purchase price $ 5,191,605
===========
* The fair market value of Golf Ventures, Inc.'s land under development
is in excess of its carrying value. The excess cost over net assets
acquired has been applied to increase the carrying value of the land
under development accordingly.
4. conversion of Notes Payable and Related Party Notes Payable into Capital
During September 1997, $5,333,024 of notes payable and accrued interest and
$7,133,327 of related party notes payable and accrued interest, respectively,
were converted into Company capital at conversion prices equal to $1 of capital
for each $1 of debt converted.
5. Interest Expense
To remove interest expense on debt that was converted to equity. The interest
expanse removed is equal to the amount of debt converted multiplied by their
related interest rates for the year ended December 31, 1996 and the nine months
ended September 30, 1997 and 1996.
6. agreement and Plan of Reorganization
The Agreement and Plan of Reorganization between Golf Ventures, Inc. and U.S.
Golf Communities, Inc. required that U.S. Golf Communities, Inc. have a minimum
of $12,000,000 in total stockholders' equity immediately prior to the
transaction. On November 24, 1997, by unanimous written consent, the board of
Directors of Golf Ventures, Inc. waived the $12,000,000 requirement in
consideration of a minimum of $12,000,000 of U.S. Golf Communities, Inc.'s debt
being converted to stockholders' equity (see Note 4).
8
