UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
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)
255 South Orange Avenue, Suite 1515, Orlando, Florida 32801
(Address of principal executive offices, including zip code)
(407) 245-7557
(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 July 31, 1998
Common Stock, par value $.OO1 24,610,538
<PAGE>
TABLE OF CONTENTS
Heading Page
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements...............................................3
Consolidated Balance Sheet - June 30,1998............................4
Consolidated Statements of Operations
Three and six months ended June 30, 1998 and 1997..................5
Consolidated Statements of Stockholders Equity-December 31, 1996
through June 30, 1998.............................................6-7
Consolidated Statements of Cash Flows - Six months ended
June 30, 1998 and 1997.............................................8
Notes to Consolidated Financial Statements.........................9-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................15-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...................................................18
Item 2. Changes in Securities...............................................19
Item 3. Upon Senior Securities..............................................19
Item 4. Submission of Matters to a Vote of Securities Holders...............19
Item 5. Other Information...................................................19
Item 6. Exhibits and Reports on Form 8-K....................................20
SIGNATURES...................................................................20
2
<PAGE>
PART I
Item 1. Financial Statements
The following, unaudited Financial Statements for the three month period ended
June 30, 1998, include all adjustments which management believes are necessary
for the financial statements to be presented in conformity with generally
accepted accounting principals.
THIS SPACE INTENTIONALY LEFT BLANK
3
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<TABLE>
<CAPTION>
Golf Ventures, Inc.
Consolidated Balance Sheet
June 30, 1998
Assets (unaudited)
<S> <C>
Cash and cash equivalents..............................................................$ 339,756
Accounts receivable:
Trade.............................................................................. 779,757
Related parties..................................................................... 1,437,667
Other ............................................................................ 65,418
Inventories........................................................................... 138,578
Prepaid expenses and other............................................................ 498,754
Investment in and advances to a related party company.................................. 2,241,846
Property and equipment, at cost, net of accumulated
depreciation of $1,774,558.......................................................... 8,190,951
Land and development costs.............................................................. 45,557,710
Goodwill, net of accumulated amortization of $1,291,782................................ 9,647,616
------------
Total assets............................................................................$ 68,898,053
============
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable:
Trade ..............................................................................$ 4,520,298
Related parties.................................................................... 1,979,732
Accrued expenses..................................................................... 783,687
Accrued interest payable:
Related parties.................................................................... 4,347,293
Other.............................................................................. 3,870,185
Loan costs payable.................................................................... 2,086,658
Notes payable.......................................................................... 16,643,109
Related party notes payable............................................................ 25,114,574
Convertible notes payable............................................................. 1,824,665
------------
Total liabilities...................................................................... 61,170,201
------------
Commitments and contingencies...................................................... -
Stockholders' Equity:
Preferred stock - Class A cumulative convertible, $.001 par value,
shares authorized 350,000; issued 24,780......................................... 25
Preferred stock - Class B cumulative convertible, $.001 par value,
shares authorized 350,000; none issued.......................................... -
Preferred stock - Class C cumulative convertible, $.001 par value,
shares authorized 136,039; none issued........................................... -
Preferred stock - Class D convertible, $.01 par value,
shares authorized 8,000,000; 6,672,578 issued...................................... 66,726
Common stock, $.001 par - shares authorized 25,000,000;
issued 9,850,356.................................................................. 9,850
Additional paid-in capital............................................................. 37,702,893
Accumulated deficit..................................................................... (30,051,642)
------------
Total Stockholders' Equity............................................................ 7,727,852
------------
$ 68,898,053
============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Consolidated Statements of Operations
Three Months Six Months
Ended June, 30 Ended June 30,
1998 1997 1998 1997
------------ ----------- ------------ ------------
Operating revenue: (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Dues and fees............................... $ 764,918 $ 624,721 $ 1,475,411 $ 1,201,249
Golf cart rentals.......................... 562,121 571,315 1,296,435 1,246,299
Food, beverage and pro shop sales ......... 419,111 351,257 737,201 639,946
Lot sales ................................. 792,219 843,749 1,104,702 2,352,196
Other.................................... 2,673 27,041 26,382 80,901
------------ ----------- ------------ ------------
Total operating revenue....................... 2,541,042 2,418,083 4,640,131 5,520,591
----------- ----------- ----------- -----------
Costs and expenses:
Cost of merchandise and lots sold.......... 503,173 723,348 778,740 1,703,554
General and administrative expenses......... 2,918,806 2,793,927 5,311,213 5,114,880
----------- ----------- ----------- -----------
Total costs and expenses...................... 3,421,979 3,517,275 6,089,953 6,818,434
----------- ----------- ----------- -----------
Loss from operations......................... (880,937) (1,099,192) (1,449,822) (1,297,843)
Other income (expense):
Interest income.......................... 2,394 5,452 3,459 11,042
Interest expense........................... (962,057) (871,517) (2,243,456) (1,910,091)
Loss on sale of property and equipment.. - - - (8,671)
Loss on equity method investment....... - - - (180,047)
Other...................................... 44,937 33,386 (60) 34,517
------------ ----------- -------------- ------------
Total other income (expense), net............ (914,726) (832,679) (2,053,578) (2,053,250)
----------- ------------ ------------ ------------
Net loss..................................... $(1,795,663) $(1,931,871) $(3,689,879) $(3,351,093)
============ ============ ============ ============
Loss per common share....................... $ (0.19) $ (1.52) $ (0.40) $ (2.64)
========= ========= ========= =========
Weighted common shares outstanding............ 9,495,683 1,270,968 9,319,053 1,270,968
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Consolidated Statements of Stockholders' Equity
Common Stock Additional
Par Paid-in Accumulated
Shares Value Capital Deficit
------ ----- ------- -------
<S> <C> <C> <C> <C>
Balance, December 31, 1996.......................... 1,270,968 $ 12,710 $ 544,636 $ (13,322,071)
Conversion of notes payable and
accrued interest to capital.............. - - 5,333,024 -
Conversion of related party notes payable
and accrued interest to capital........... - - 7,133,327 -
Payment of loan costs payable through
the issuance of capital................. - - 1,566,926 -
Recapitalization............................... (1,270,968) (12,710) (54,073) -
Issuance of shares in reverse
acquisition.................................... 5,690,024 5,690 13,138,264 -
Issuance of common stock as payment
of accounts payable.......................... 50,000 50 117,670 -
Issuance of common stock for acquition.......... 3,432,713 3,433 9,436,527 -
Net loss................................ - - - (13,039,692)
---------------- ------------ ------------ --------------
Balance, December 31, 1997......................... 9,172,737 $ 9,173 $ 37,216,301 $ (26,361,763)
Discount on conversion price of
convertible notes payable - - 186,479 -
Issuance of common stock as payment
of accounts payable.......................... 268,458 268 300,490 -
Conversion of Class A preferred stock......... 4,304 4 - -
Conversion of Class B preferred stock.......... 404,857 405 (377) -
Net loss.................................. - - - (3,689,879)
--------------- ------------ ------------ --------------
Balance, June 30, 1998 (unaudited)................ 9,850,356 $ 9,850 $ 37,702,893 $ (30,051,642)
========== ========= ============ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Consolidated Statements of Stockholders' Equity
Convertible Convertible Convertible
Preferred Stock Preferred Stock Preferred Stock Total
Class A Class B Class D Stockholders'
Shares Amount Shares Amount Shares Amount Equity
------ ------ ------ ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996......... - - - - - - (12,764,725)
Conversion of notes payable and
accrued interest to capital. - - - - - - 5,333,024
Conversion of related party
notes payable and accrued
interest to capital - - - - - - 7,133,327
Payment of loan costs payable
through the issuance of
capital...... - - - - - - 1,566,926
Recapitalization.............. 29,084 29 28,340 28 6,672,578 66,726 -
Issuance of shares in reverse
acquisition.............. - - - - - - 13,143,954
Issuance of common stock as
payment of accounts payable - - - - - - 117,720
Issuance of common stock for
acquisition............... - - - - - - 9,439,960
Net loss..................... - - - - - - (13,039,692)
---------- -------- --------- --------- --------- -------- ------------
Balance, December 31, 1997......... 29,084 $ 29 28,340 $ 28 6,672,578 $ 66,726 $ 10,930,494
Discount on conversion price of
convertible notes payable - - - - - - 186,479
Issuance of common stock as
payment of accounts payable - - - - - - 300,758
Conversion of Class A preferred
stock.................. (4,304) (4) - - - - -
Conversion of Class B preferred
stock................. - - (28,340) (28) - - -
Net loss..................... - - - - - - (3,689,879)
---------- -------- --------- ------- -------- --------- -----------
Balance, June 30,
1998 (unaudited)................ 24,780 $ 25 - $ - 6,672,578 $ 66,726 $ 7,727,852
====== ===== ========== ======= ========= ======== ============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Golf Ventures, Inc.
Consolidated Statements of Cash Flows
Six months ended June 30, 1998 1997
<S> <C> <C>
Cash flows from operating activities: (unaudited) (unaudited)
Net loss......................................................$ (3,689,879) $ (3,351,093)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation............................................ 138,119 185,626
Amortization............................................ 526,362 561,004
Discount on conversion price of
convertible notes payable 186,479 -
Cash provided by (used for):
Accounts receivable................................... (607,974) (307,708)
Inventories.......................................... (11,602) 29,420
Prepaid expenses..................................... (315,214) (230,403)
Land and development costs........................... 256,222 1,250,823
Accounts payable....................................... (47,166) 57,649
Accrued expenses...................................... (204,477) 1,037,004
Accrued interest payable............................. 1,660,207 1,393,357
--------------- ------------
Net cash provided by / (used for) operating activities........... (2,108,923) 625,679
-------------- ------------
Cash flows from investing activities:
Purchases of property and equipment.......................... (228,131) (286)
Investment in and advances to affiliate...................... 1,222,477 -
-------------- ---------------
Net cash used for investing activities......................... 994,346 (286)
-------------- ---------------
Cash flows from financing activities:
Proceeds from notes payable................................. 784,322 50,000
Repayments of notes payable................................. (110,598) (524,354)
Proceeds from related party notes payable................... 1,515,898 1,425,672
Repayment of related party notes payable.................... (690,339) (1,520,076)
Proceeds from convertible notes payable............... - 75,000
Loan costs payable.......................................... (424,000) -
------------ ---------------
Net cash provided by / (used for) financing activities........... 1,075,283 (493,758)
------------ ------------
Net increase (decrease) in cash and cash equivalents............ (39,294) 131,635
Cash and cash equivalents, beginning of period.................. 379,050 378,669
------------- ------------
Cash and cash equivalents, end of period......................... $ 339,756 $ 510,304
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
Golf Ventures, Inc.
Notes to Consolidated Financial Statements
1. The unaudited financial statements of the Company include all adjustments
which management believes are necessary to be consistent with the audited
financial statements for the year ended December 31, 1997.
2. Recapitalization and Acquisition of GVI
Effective November 24, 1997, Golf Ventures, Inc. ("GVI") acquired all of the
outstanding stock of U.S. Golf Communities, Inc. ("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 for 100%
of the outstanding stock of USGCI. Upon completing the transaction, the
stockholders of USGCI controlled 81% of the voting rights of the combined
Company.
For financial reporting purposes, USGCI is deemed to be the acquiring
entity. The acquisition has been reflected in the accompanying consolidated
financial statements as (i) 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, 28,340 shares of Class B cumulative
convertible preferred stock and 6,672,578 shares of Class D convertible
preferred stock and (ii) the issuance of the securities discussed in the
following paragraph by USGCI in exchange for all of the outstanding equity
securities of GVI.
In the acquisition, USGCI is deemed to have issued 5,690,024 shares of
common stock. The estimated fair value was based on the fair value of the
securities of GVI, which was obtained by the USGCI stockholders in the
acquisition.
The acquisition was recorded using the purchase method of accounting.
Accordingly, the consideration of $13,143,954 was allocated to the GVI net
assets acquired based on estimated fair values including land and
development costs of $22,136,951, other assets of $158,452, notes payable
and debt of $7,442,667 and other liabilities of $1,708,782.
3. 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 of Golf Ventures, Inc. ("GVI") issued
its capital stock in exchange for 100% of the outstanding common stock and
partnership interests of various entities engaged in the business of real
estate development, primarily golf courses, with surrounding residential
real estate.
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.
4. Acquisition of Pelican Strand Development Corporation
On December 4, 1997, GVI acquired 81% of the outstanding capital stock of
Pelican Strand Development Corporation ("PSDC") in exchange for 3,432,713
shares of restricted common stock valued at $2.75 per share. PSDC is the 10%
general partner of Pelican Strand LTD ("PSL"), a Florida limited
partnership, which is developing a private golf course community in Naples,
Florida. The acquisition has been accounted for using the purchase method of
accounting, and the results of the acquired business have been included in
the consolidated financial statements since the date of acquisition. The
excess of the purchase price over the fair values of the net assets acquired
was $8,550,054 and has been recorded as goodwill, which is being amortized
on a straight-line basis over ten years, based on the expected development
period of the project.
Pro Forma Financial Information (Unaudited)
9
<PAGE>
The following pro forma information has been prepared assuming acquisitions
of GVI and PSDC had taken place at the beginning of the six months ended
June 30, 1997. The pro forma information includes adjustments for the
amortization of goodwill arising from the transactions.
The pro forma financial information is not necessarily indicative of the
results of operations as they would have been had the transaction been
effected on the assumed dates.
(Unaudited)
Six months ended June 30, 1998 1997
------------------------- ---- ----
Net sales.......................$ 4,640,131 $ 5,532,641
Net loss...........................(3,503,400) (4,255,420)
Loss per common share...................(0.38) (0.46)
5. Related Party Transactions
The Company is affiliated with various other companies through common
control and stock ownership, which are not included in the accompanying
consolidated financial statements. Material related party transactions
between the Company and the affiliated companies consisted of the following:
Accounts Receivable Related Parties
Amounts due from related parties are comprised of amounts advanced to
certain stockholders and to entities related by common management which
are not included in the accompanying consolidated financial statements.
The advances are noninterest bearing with no stipulated terms for
repayment.
Management Fees
U.S. Golf Management, Inc. (formerly "U.S. Golf Communities, Inc."); FSD
Golf Club, Ltd.; Northshore Golf Partners, Ltd.; Northshore Development,
Ltd.; Wedgefield Limited Partnership; and Pelican Strand Development
Corporation have management agreements with related party companies.
Advances to Affiliates
PSDC has recorded advances to affiliates from PSL and other related
companies for construction costs incurred on their behalf of $1,351,940
and $2,574,417 as of June 30, 1998 and December 31, 1997, respectively.
The advances to affiliates are non-interest bearing and have no stipulated
repayment terms.
6. Purchase of Minority Interest and Goodwill
The Company owned approximately 60% of US Golf Pinehurst Plantation, Ltd.
("Plantation") and approximately 60% of another limited partnership, US Golf
Pinehurst National, Ltd. ("National"), through March 1996. The remaining 40%
of both Plantation and National was owned by an unrelated third party.
During March 1996, the Company exchanged its 60% ownership of National, paid
$2,300,000 and issued a $1,200,000 note payable to acquire the remaining 40%
ownership interest in Plantation from the unrelated third party. The balance
of the Plantation minority interest at the date of the acquisition was
$798,447. The Company accounted for its investment in National under the
equity method of accounting. The balance of the Company's investment in
National at the date of acquisition was $1,272,274. The acquisition of the
remaining 40% interest was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess of the
purchase price over the estimated fair value of net assets acquired amounted
to approximately $3,974,000, which was accounted for as goodwill and
amortized over its estimated useful life of ten years. The operating results
of Plantation were included in the Company's consolidated results of
operations from the April 1994 inception of the partnership.
10
<PAGE>
During the fourth quarter of 1997, the Company completed an evaluation of
the economic value of the Plantation goodwill. It was determined during the
evaluation that the cash flow expected to be generated from Plantation would
be less than the recorded cost of the related assets and goodwill.
Accordingly, the Company recorded a provision for impairment of goodwill of
$1,846,633 to reduce the carrying value of the goodwill to its current fair
value, which was included in general and administrative expenses in the
statement of operations for the year ended December 31, 1997.
<TABLE>
<CAPTION>
7. Notes Payable
Notes payable consist of the following:
June 30, 1998
-------- ----
<S> <C>
Second mortgage note payable. This note is non-interest bearing through November
1996 and bears interest at prime plus 2% (10.5% at June 30, 1998) interest
thereafter. Principal and interest are payable based on lot sale release
prices until maturity in September 1999. Collateralized by certain Company
land and assets............................................................................... $ 5,143,590*
Prime plus 1% (9.5% at June 30, 1998) mortgage note payable to a bank with
principal and interest payable based on lot sale release prices.
Collateralized by certain land of the Company................................................ 3,938,399*
10% note payable due in monthly installments of $25,000 through May 15, 1998,
at which time the remaining principal and accrued interest are due in full.
Collateralized by certain land of the Company................................................ 2,192,236
9% mortgage note payable to a bank with principal and interest due in monthly
installments of $9,447 through maturity in October 2001. Collateralized by
certain land and assets of the Company....................................................... 1,018,471
7.12% unsecured note payable to an international bank with principal and accrued
interest currently due. Personally guaranteed by the Company President and
other related parties........................................................................ 1,000,000
10% mortgage note payable with principal and accrued interest past due.
Collateralized by certain land of the Company. This note is currently in
litigation (see Note 9)...................................................................... 916,824*
10% note payable with interest payable in shares of the Company's common stock
and principal due currently. Collateralized by certain land of the Company................... 646,502*
8% note payable due in annual installments of $100,000 plus accrued interest.
Collateralized by certain land of the Company................................................ 474,482*
Various unsecured notes payable bearing interest ranging from 10% to 12.5% with
principal and accrued interest payable on demand after December 31, 1998..................... 419,328
Various mortgage notes payable bearing interest ranging from 8.13% to 12.5%.
Collateralized by certain land of the Company................................................ 306,693
11.7% unsecured note payable to an international bank with accrued interest due
each six months and the principal due on July 22, 1999....................................... 250,000
Other notes payable............................................................................. 336,584**
-----------
$16,643,109
===========
</TABLE>
* Notes repaid or ** partially repaid on July 2, 1998 (see Note 11).
11
<PAGE>
Of the above notes and mortgage notes payable, $7,565,365 were past due as
of June 30, 1998 of this amount $6,258,672 was included in the $22,351,424
total debt repaid on July 2, 1998 as a result of the Company's debt
refinancing (see Note 11). The Company is currently in the process of
negotiating an extension or modification of the terms of the $1,306,693
still past due.
<TABLE>
<CAPTION>
8. Notes Payable to Related Parties
Notes payable to related parties consist of the following:
June 30, 1998
-------- ----
<S> <C>
Various unsecured notes payable to stockholders and other related parties
bearing interest ranging from 7.13% to 12% with principal and accrued interest
due on demand after December 31, 1998.......................................................... $ 5,111,243**
10.5% promissory note payable with principal and accrued interest payable on
June 10, 1999. Collateralized by certain land of the Company.................................. 3,649,630**
Mortgage note payable with principal and interest payable based on lot sale
release prices until maturity in March 1999. Interest of 17% and 21% per
annum from March 23, 1997 to March 22, 1998; and March 23, 1998 to
maturity at March 22, 1999, respectively, is payable monthly. Additional
interest of 8% and 4% for March 31, 1996 to March 31, 1997 and March 23,
1997 to March 22, 1998, respectively, is payable at maturity. Collateralized
by certain land of the Company............................................................... 2,986,627**
8.25% unsecured note payable to a stockholder with principal and accrued
interest due December 31, 1998............................................................... 2,706,760**
Unsecured notes payable to stockholders bearing interest ranging from 10% to
12.5% payable annually and principal due currently.......................................... 1,765,000
Prime plus 1% (9.5% at June 30, 1998) note payable with principal and
accrued interest currently due.............................................................. 1,200,000*
Various unsecured notes payable to stockholders bearing interest ranging from
1.3% to 8% with principal and accrued interest due on demand................................ 1,200,000
7.5% mortgage note payable to a stockholder with principal and interest payable
based on lot sale release prices until maturity in November 1998. Collateralized
by certain land and assets of the Company. The Company has guaranteed
an interest rate equal to a rate based on the euro dollar market rate plus 5%............... 1,972,685*
Prime (8.5% at June 30, 1998) note payable with interest payable and
principal due currently. Collateralized by certain land and assets of the Company........... 1,000,000*
8.68% mortgage note payable to a stockholder with principal and accrued interest
due December 31, 1998. Collateralized by certain land and assets of the
Company..................................................................................... 872,660**
Note payable issued in connection with the PSDC acquisition. The
note is collateralized by the Company's investment in PSDC................................. 800,000*
10% mortgage note payable to a trust owned by certain stockholders with
principal and accrued interest past due. Collateralized by certain land of the
Company.................................................................................... 523,503*
Note payable issued in connection with PSDC acquisition. The note is
personally guaranteed by the Company President............................................. 500,000*
8.25% mortgage note payable to a stockholder with principal and accrued interest
due anytime after December 31, 1998. Collateralized by certain land of the
Company..................................................................................... 456,553**
4% unsecured note payable to related party. Principal and accrued interest due
November 1998.............................................................................. 250,000
Other related party notes payable.............................................................. 119,913**
-------------
$ 25,114,574
============
</TABLE>
* Notes repaid or ** partially repaid on July 2, 1998 (see Note 11).
Of the above notes and mortgage notes payable, $7,468,132 were past due as
of June 30, 1998 of this amount $1,724,464 was included in the $22,351,424
total debt repaid on July 2, 1998 as a result of the Company's refinancing
(see Note 11). The Company is currently in the process of negotiating an
extension or modification of the terms of the $5,743,668 still past due.
12
<PAGE>
9. Litigation
On May 24, 1994 a complaint was filed against the Company's U.S. Golf
Pinehurst Plantation, Ltd. subsidiary in the U.S. District Court for the
Middle District of North Carolina alleging that the Company was infringing
on the trademark of Resorts of Pinehurst, Inc. arising out of the use of the
term "Pinehurst Plantation" in connection with the Company's golf course
operations and residential lot development. On July 14, 1997 judgement was
entered against the Company holding that there was an infringement but
postponing a decision on damages. On July 15, 1997 the Company appealed this
judgement. On July 15, 1998 the Fourth Circuit Court of Appeals unanimously
affirmed the district court's judgement. On September 4, 1998 the District
Court entered a permanent injunction against the Company ordering that it
cease any use of the word "Pinehurst" except "to fairly and accurately
describe their geographic location". The Company is in the process of
complying with this judgement and does not expect any material adverse
impact from either the judgement or any future decision on damages.
On November 21, 1995, the Complaint was filed against the Company in the
Superior Court of Portland County, Georgia, under the caption Sam Benlow,
Inc. n/k/a Financial Information Network, Inc. v. Golf Ventures, Inc. The
Complaint sought payment of $21,141 allegedly due for services rendered in
an advertising campaign. The Company negotiated a settlement whereby the
matter was dismissed in exchange for the issuance of 4,000 shares of the
Company's common shares, which would be covered by an S-8 registration
statement. To date, such shares have not been delivered and the S-8
registration statement has not been filed. The Company anticipates that this
matter will be finally resolved once the Company becomes able to use Form
S-8 in the near future.
On October 10, 1996, a criminal complaint was filed in the Southern District
of New York against George Badger, then the President of ARDCO, and a
"control person" of the Company. Mr. Badger was indicted on a number of
charges and was arraigned in the U.S. Federal District Court for the
Southern District of New York on October 9, 1996. It is the understanding
the company that the indictment related to alleged unlawful and undisclosed
compensation to securities brokers and promoters to induce them to cause
customers to purchase securities issued by ARDCO and the Company. The
Company has learned that Mr. Badger has pleaded guilty to counts of: (i)
conspiracy to commit securities fraud; (ii) securities fraud; (iii) criminal
contempt; and (vi) perjury.
On March 12, 1997, the Company received a subpoena duces tecum from the
Commission to produce certain original documents and to testify in the
Commission's investigation regarding Trading in Certain Over-the-Counter
Securities ("NY-6375") pursuant to a formal order issued by the Commission
under Section 20(a), under the Securities Act of 1933 and Section 21(a) of
the Securities Exchange Act of 1934. The requested documents related to the
Company's loans or other forms of financing or credit obtained or sought by
the Company and all correspondence between the Company and the various
funding entities. On July 25, 1997, the Company President and its Secretary
received subpoenas duces tecum from the Commission, and on August 7 and 8,
such officers testified before the Commission in New York.
On August 7, 1997, the Commission issued another subpoena duces tecum, to
GVIM requesting that GVIM produce all minutes and other documents relating
to meetings of the Company's Board of Directors held during the period of
January 1, 1993 through that date. The Company intends to continue to
cooperate full with the Commission in its investigation.
On April 27, 1997, the Company's Montverde Property, Ltd. subsidiary was
sued to enforce a mortgage in the original principal amount of $916,824,
which had matured November 5, 1996, by Thomas C. McCarty in the Circuit
Court of the Fifth Judicial Circuit in and for Lake County, Florida. On
April 11, 1997, the parties entered into a payment arrangement to make
monthly payments in the amount of $15,000 while Montverde diligently pursues
alternatives to payoff the mortgage. The payment arrangement was without
13
<PAGE>
prejudice to Montverde's asserting any claims or defenses to the mortgage
enforcement. On December 8, 1997 the Commission filed a complaint against
the Company and certain of its former officers and directors in the United
States District Court for the district of Utah (SEC v. Badger, et al). The
Commission alleges that certain historical disclosure filings by the Company
were erroneous, and thus violations of Section 10(b) of the Securities
Exchange Act and Rule 10b-5. The Company is talking with the Commission in
an effort to resolve this litigation. The Company has not yet been required
to answer the complaint.
In March 1998 Daniel C. Watson a lender secured by a trust deed on the Red
Hawk project commenced foreclosure proceedings as a result of the Company's
default on the loan. The Company reached a settlement with the lender and
agreed to pay an additional $100,000 for his forbearance in not noticing up
a trustee's sale. No foreclosure action was taken against the Company.
On December 4, 1997, the Company entered into a stock purchase agreement
(the "agreement") with Maricopa Hardy Development Group, Inc. ("Maricopa")
for the Company's purchase of 81% of the outstanding capital stock of
Pelican Strand Development Corporation. Subsequent to December 4, 1997,
Maricopa claimed that the Company had breached certain terms of the
agreement and requested that the Company rescind the agreement. The Company
believe that the terms of the agreement have been met and has refused to
rescind the stock purchase agreement. The parties are negotiating a
resolution to this dispute and the Company believes that there will be no
further action or consideration required by either party, and no lawsuit has
been filed against the Company.
10. Conversion of Notes Payable and Related Party Notes Payable into Capital
During 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.
11. Subsequent Events
On July 2, 1998, the Company entered into several agreements with Credit
Suisse First Boston Mortgage Capital LLC. to provide a $50,950,000 financing
facility for various development projects, as well as, for the restructuring
of various secured notes payable and for the reduction in accounts payable
of the Company. This borrowing is through a three year note at an annual
interest rate of 4.5 percentage points over the London Interbank Offered
Rate ("LIBOR"), as defined in the Promissory Note. Interest on the borrowing
will be paid monthly with minimum principal repayments of $14,050,000 due on
or before July 1, 1999 and $36,550,000 on or before July 1, 2000.
The Company used $29,856,492 of the net proceeds from this loan to pay-off
outstanding principal and accrued interest on its secured debt at July 2,
1998, and has established certain property tax, insurance, and specific
project development and interest reserve accounts, all of which will be used
in connection with the further development of the Company's properties.
On July 2, 1998 the Company held-back borrowing $6,500,000 of the total loan
until it becomes necessary for these funds to be used for certain
development and improvement projects in order to reduce interest expense.
Project development and improvement funds as of July 2, 1998, as well as,
any future advances are deposited into a Construction Escrow Account and
managed in accordance with the draw provisions of the loan agreement.
On July 2, 1998, the Company entered into a Cash Management Agreement as a
provision of the Loan Agreement whereby the management of the various tax,
insurance, interest and operating accounts is specified.
Also, on July 2, 1998, the Company arranged and guaranteed a similar
financing facility with Credit Suisse First Boston Mortgage Capital LLC. For
the Company's Pelican Strand, Ltd. development project ("Pelican Strand").
This financing facility provides for the borrowing of $35,600,000 for
various development projects, as well as, for the restructuring of the
14
<PAGE>
secured notes payable at Pelican Strand. This borrowing also is through a
three year note at an annual interest rate of 4.5 percentage points over
LIBOR. Interest on the borrowing is to be paid monthly with minimum
principal repayments of $5,778,765 due on or before July 1, 1999 and
$15,033,015 on or before July 1, 2000. On July 2, 1998, Pelican Strand used
$20,712,856 of the net proceeds from the loan to pay-off the outstanding
principal and accrued interest on its secured note and established certain
property tax, insurance, project development and interest reserve accounts
which will be used in connection with the further development of Pelican
Strand's properties.
On July 2, 1998, Pelican Strand held-back borrowing $3,500,000 of the total
loan until it becomes necessary for these funds to be used for certain
development and improvement projects. Project development and improvement
funds as of July 2, 1998 as well as any future advances are deposited into a
construction escrow account and managed in accordance with the draw
provisions of the Pelican Strand loan agreement.
Also, on July 2, 1998, Pelican Strand entered into a separate Cash
Management Agreement as a provision of its Loan Agreement whereby the
management of the various tax, insurance, interest and operating funds is
specified.
As consideration for structuring and advisory services provided by Credit
Suisse First Boston Mortgage Capital LLC. for these loans, the Company and
Pelican Strand, Ltd. paid fees of $4,327,500 at closing and are obligated
for an additional $5,000,000 payment by November 15, 1998. The Company also
issued 13,651,710 shares of its Common Stock to Credit Suisse First Boston
Mortgage Capital LLC., representing 24.9% of the current and committed
shares of stock to be outstanding after the completion of various corporate
actions agreed with by Credit Suisse First Boston Mortgage Capital LLC. The
value of these shares approximately $19,112,400, together with the
additional $5 million in fees will be accounted for as an investment in and
an advance to Pelican Strand Ltd. in the Company of approximately
$14,194,420. At July 2, 1998 the Company had issued a total of 13,648,182
shares in payment of the common stock portion of this fee, which represented
55.5% of the then outstanding shares of the Company.
The following are brief descriptions of sales of securities by the Company
for settlements, services, property or cash to support and advance the
Company's business plan since the first quarterly filing on Form 10Q for the
three month period ended March 31, 1998.
- On April 8, 1998, the Company issued 218,182 shares to Credit Suisse
First Boston Mortgage Capital LLC., as a due diligence deposit for
structuring and advisory services in connection with securing an adequate
financing facility to further the development of the Company's properties.
The Company believes this transaction was exempt from registration with
the Commission under Section 4(2) of the Securities Act of 1933.
- On July 6, 1998, the Company issued 862,000 shares of its common stock to
American Resource and Development Company in settlement of certain claims
for compensation for services. These shares valued at $1,456,780 will be
accounted for as a non-operating expense in the current financial reporting
period of the Company. The Company believes this transaction was exempt from
registration with the Commission under Section 4(2) of the Securities Act of
1933.
- On July 1, 1998, the Company issued 250,000 shares of its common stock to
Dr. B. Menne to repay a $312,500 indebtedness. The Company believes this
transaction was exempt from registration with the Commission under Section
4(2) of the Securities Act of 1933.
- On July 2, 1998, the Company issued 13,430,000 shares to Credit Suisse
First Boston Mortgage Capital LLC., as further consideration for structuring
and advisory services in connection with securing an adequate financing
facility to further the development of the Company's properties. The Company
believes this transaction was exempt from registration with the Commission
under Section 4(2) of the Securities Act of 1933.
15
<PAGE>
The Company has committed as a condition to the Credit Suisse First Boston
Loan Agreements to settle certain pre-merger disputed obligations and loan
fees with certain 3rd parties, which will require the Company to issue an
additional 2,046,000 shares of common stock. Additionally, the Company has
agreed to the conversion of approximately $1,845,950 of unsecured debt in
exchange for the issuance of 1,476,761 shares of common stock. These
additional issuances of common stock are subject to effectiveness of an
increase in the amount of common stock authorized under the Company's
Articles of Incorporation, action which was approved by shareholder written
consent to become effective after notice to the shareholders generally.
Item 2. Management's Discussion & Analysis of Financial Condition & Results of
Operations.
Statements made or incorporated in this report include a number of
forward-looking statements within the meaning of Section 27(a) of the Securities
Act of 1933 and Section 21(e) of the Securities Exchange Act of 1934.
Forward-looking statements include, without limitation, statements containing
the words "anticipates", "believes", "expects", "intends", "future", and words
of similar import which express management's belief, expectations or intentions
regarding the Company's future performance or future events or trends.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause actual results, performance or achievements of
the Company to differ materially from anticipated future results, performance or
achievements expressly or implied by such forward-looking statements. In
addition, the Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
RESULTS OF OPERATIONS
For the Quarter Ended June 30, 1998, Compared to the Quarter Ended June 30,
1997.
Total operating revenues for the quarter ended June 30, 1998 were $2,541,042
compared to $2,418,083 for the quarter ended June 30, 1997. The following table
compares the changes in the Company's revenues identified by the various golf
course operations and development activities:
<TABLE>
<CAPTION>
1998 1997 1998/1997 % Change
---- ---- --------- --------
<S> <C> <C> <C> <C>
Dues and Fees $ 764,918 $ 624,721 140,197 22.4%
Golf Cart Rentals 562,121 571,315 (9,194) (1.6%)
Food, Beverage & Pro Shop Sales 419,111 351,257 67,854 19.3%
Lot Sales 792,219 843,749 (51,530) (6.1%)
Other 2,673 27,041 (24,368) (90.1%)
------------- ------------ --------------- ----------
Total Operating Revenues $2,541,042 $2,418,083 $ 122,959 5.1%
========== ========== ============= ============
</TABLE>
As this table shows, although total revenues increased by $122,959, or 5.1% for
the quarter ended June 30, 1998 compared to the quarter ended June 30, 1997,
there were offsetting variances between golf course and club operations and
property sales. Of the ($51,530) decrease in lot sales, a decrease of ($637,400)
occurred at the Company's Cutter Sound development project offset by an increase
of $560,412 in lot sales at the Company's Northshore development project in the
quarter ended June 30,1998 as compared to the quarter ended June 30, 1997. This
decrease at Cutter Sound was the result of exclusive waterfront homesites with
yacht slips being sold in the quarter ended June 30, 1997 that did not repeat in
the current quarterly period. Of the increase in dues and fees 70% or $98,012 is
attributed to Northshore related to the increase in lot sales noted above.
16
<PAGE>
Cost of merchandise and lots sold was $503,173 for the quarter ended June 30,
1998 as compared to $723,348 for the quarter ended June 30, 1997. This
($220,175) decrease in cost, is attributed to the decrease in lot sales at
Cutter Sound of approximately $715,000.
General and Administrative expenses were $2,918,806 for the quarter ended June
30, 1998 compared to $2,793,927 for the quarter ended June 30, 1997. This
increase of $124,879 includes $219,198 of expenses for the Company's Pelican
Strand and Golf Ventures acquisitions that were effective in the last quarter of
1997, however were not included in the quarter ended June 30, 1997, offset by
reductions in general and administrative expenses throughout the Company.
Interest expense was $962,057 for the quarter ended June 30, 1998 compared to
$871,517 for the quarter ended June 30, 1997. This increase of $90,540 was due
to higher borrowing levels during the quarter ended June 30, 1998 of
approximately $2 million over the same quarter of the previous year.
The cumulative effect of these results, reported above, is reflected in the
decreased net loss of $136,208 in the quarter ended June 30, 1998 compared to
the quarter ended June 30, 1997.
Loss per common share of ($.19) for the quarter ended June 30, 1998 compared to
($1.52) for the quarter ended June 30, 1997 is a result of the decrease in the
Company's net loss in 1998 of ($1,795,663) compared to a net loss in 1997 of
($1,931,871) and the increase in the number of weighted average of common shares
outstanding for the comparative periods. This increase of 8,224,715 in the
weighted average shares, starting in the first quarter of 1998, is the result of
the reverse acquisition of Golf Ventures, Inc by US Golf Communities, Inc. which
added 5,690,024 shares and the acquisition of Pelican Strand which increased the
shares outstanding by 3,432,713.
For the Six Months Ended June 30, 1998, Compared to the Six Months Ended June
30, 1997.
Total operating revenues for the six months ended June 30, 1998 were $4,640,131
compared to $5,520,591 for the year six months ended June 30, 1997. The
following table compares the changes in the Company's revenues identified by the
various golf course operations and development activities:
<TABLE>
<CAPTION>
1998 1997 1998/1997 % Change
---- ---- --------- --------
<S> <C> <C> <C> <C>
Lot Sales $1,104,702 $2,352,196 ($1,247,494) (53.0%)
Dues and Fees 1,475,411 1,201,249 274,162 22.8%
Golf Cart Rentals 1,296,435 1,246,299 50,136 4.0%
Food, Beverage & Pro Shop Sales 737,201 639,946 97,255 15.2%
Other 26,382 80,901 (54,519) (67.4%)
---------- ---------- ------------- ----------
Total Operating Revenues $4,640,131 $5,520,591 ( $880,460) (15.9%)
========== ========== ============= ==========
</TABLE>
As this table shows, lot sales accounted for all of the decrease in total
revenues for the six months ended June 30, 1998 compared to the six months ended
June 30, 1997. Of this ($1,247,494) decrease in lot sales, approximately
($1,762,200) occurred at the Company's Cutter Sound development project offset
by a $560,412 increase in lot sales at the Company's Northshore development
project in the six months ended June 30,1998 as compared to the six months ended
June 30, 1997. This decrease at Cutter Sound was the result of exclusive
waterfront homesites with yacht slips being sold in the six months ended June
30, 1997 that did not repeat in the current quarterly period.
Cost of merchandise and lots sold was $778,740 for the six months ended June 30,
1998 as compared to $1,703,554 for the six months ended June 30, 1997. Of this
$924,814 decrease in cost, approximately $949,000 resulted from decreased sales
of lots discussed above.
17
<PAGE>
General and Administrative expenses were $5,311,213 for the six months ended
June 30, 1998 compared to $5,114,880 for the six months ended June 30, 1997.
This increase of $196,333 includes $239,599 of expenses for the Company's
Pelican Strand and Golf Ventures acquisitions that were effective in the last
quarter of 1997, however were not included in the six months ended June 30,
1997.
Interest expense was $2,056,977 for the six months ended June 30, 1998 compared
to $1,910,091 for the six months ended June 30, 1997. This increase in other
income (expense) of $146,886 was offset by none recurring losses on investments
totaling $180,047 for the six months ended June 30, 1997.
The cumulative effect of these results, reported above, is reflected in the
increased net loss of ($152,307) in the six months ended June 30, 1998 compared
to the six months ended June 30, 1997. This loss is the result of the Company's
high debt interest cost coupled with total general and administrative operating
overhead. In order to sustain these costs the Company will be required to
increase its level of annual revenues by approximately $7,500,000 at current
operating margins. The Company believes that this level of revenues is
attainable with its further development plans.
The Company is in the real estate development business. Costs of acquiring and
developing property accumulate during the development process, and debt incurred
to pay for these costs generates increasing interest expense. In the early
stages of a property development company's business plan, revenues are generally
not sufficient to cover these expenses, thus operating losses occur. The key to
the Company achieving profitable operations is the availability of sufficient
debt and/or equity funding to move its properties from development stage to a
sustained revenue producing stage. Historically, other than at Cotton Acres and
Cotton Manor, the Company has not been able to attract and manage sufficient
funding to achieve the timely development of its properties. The Company has
also acquired more development properties than it has had the ability to timely
develop into revenue producing properties, largely as a result of opportunities
that could not be ignored or postponed.
The Company believes that the newly closed Credit Suisse First Boston loan
facility provides the Company with financial resources to actively pursue those
development projects that were in the planning stage. The Company is also
closely examining all of its current development projects to determine if one or
more existing projects might better serve the Company as a property sale in the
near term as opposed to continuing development efforts.
Loss per common share of ($.38) for the six months ended June 30, 1998 compared
to ($2.64) for the six months ended June 30, 1997 is a result of the Company's
net loss in 1998 of ($3,503,400) compared to a net loss in 1997 of ($3,351,093)
and the increase in the number of weighted average of common shares outstanding
for the comparative periods. This increase of 8,048,085 in the weighted average
shares, starting in the first quarter of 1998, is the result of the reverse
acquisition of Golf Ventures, Inc by US Golf Communities, Inc. which added
5,690,024 shares and the acquisition of Pelican Strand which increased the
shares outstanding by 3,432,713.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Debt Liabilities:
The notes payable indebtedness of the Company at June 30, 1998 was $43,582,348,
(see Note 7, "Notes Payable" and Note 8, "Notes Payable to Related Parties" of
the Notes to the Consolidated Financial Statements of the Company):
The Company has historically satisfied its cash needs through the sale of real
estate, private placements of securities and secured borrowings. During the
first six months of 1998, the Company sold approximately $1,105,000 of real
estate, or approximately 37% lower than the first six months of 1997.
18
<PAGE>
A summary of the Company's borrowing activities during the first six months of
1998 follows:
Total notes payable at December 31, 1997.................. $42,083,065
Total borrowings during 1998............................ 2,300,220
Total repayment's during 1998........................... (800,937)
Total notes payable at March 31, 1998..................... $43,582,348
The Company will be obligated to pay over $29 million in notes during 1998 of
which $15 million were delinquent at June 30, 1998. The Company's working
capital at June 30, 1998 plus limited revenue from real estate sales and golf
course operations will not be sufficient to pay these notes as and when due.
Management recognized that the Company had to secure additional financial
resources or consider disposing of assets to enable it to continue operations.
As discussed in notes 7, 8 and 11 of the financial statements included in this
report the Company, on July 2, 1998, closed on a new credit facility that
satisfies a significant portion of these financial requirements. As a condition
of the new financing the Company still needs to raise approximately $5,000,000.
Management's plans include raising equity capital, and alliances or other
partnering agreements with entities interested in and having the resources to
support the Company's plans, or other business transactions, which would
generate sufficient resources to assure continuation of the Company's
operations.
Going Concern
The financial statements of the Company for the year ended December 31, 1997
includes an explanatory paragraph as to an uncertainty with respect to the
Company's ability to continue as a going concern. This is based on the
historical losses of the Company and its default under certain debt liabilities
as discussed above.
YEAR 2000 SOFTWARE ISSUE.
The Company uses a number of computer software programs and operating systems in
its operations, including applications used in sales and marketing, billing,
point of sales data collection, and other administrative functions. The Company
believes that the manufacturers of the software applications it uses most
frequently, including its systems software and its word-processing and
spreadsheet software, are in the process of preparing or have already completed
Year 2000 remediations for their products. There can be no assurance, however,
that such remediation efforts have been or will be successful. In addition, the
Company communicates electronically with a number of its banks, customers and
suppliers with respect to a variety of functions, including cash management,
ordering, billing and payroll. Any failure of the software of the Company's
suppliers or customers to address the Year 2000 issue could impair the Company's
ability to perform such functions. The Company is analyzing the potential impact
of the Year 2000 issue on the Company's software and on the Company's
interactions with its suppliers and customers and expects to make appropriate
responses to address any issue identified by the end of 1998. Given the
information known at this time about the Company's systems, coupled with the
Company's ongoing, normal course-of-business efforts to upgrade or replace
business critical systems as necessary, it is currently not anticipated that
these "Year 2000" costs will have any material adverse effect on the Company's
business, financial condition or results of operations. However, the Company is
still in the preliminary stages of analyzing its software applications and, to
the extent they are not fully "Year 2000" compliant, there can be no assurance
that the costs necessary to update software, or potential systems interruptions,
would not have a material adverse effect on the Company's business, financial
condition or results of operations.
19
<PAGE>
PART II
Item 1. Legal Proceedings
On December 8, 1997, the U.S. Securities and Exchange Commission filed a
complaint against Golf Ventures, Inc. and certain of its former officers and
directors. The SEC has alleged violations of certain sections of the
Securities and Exchange Act of 1934 and various rules in connection with the
purchase and sale of Golf Ventures, Inc. securities and reporting and
disclosure requirements. At this time, the Company is still in negotiations
on an administrative settlement with the SEC, and is unable to predict the
outcome. However, the Company believes that based on these negotiations, and
because the acts complained of occurred under prior management, the ultimate
conclusion of this case will not have a significant impact on future
operations of the Company.
U.S. Golf Pinehurst Plantation, Ltd. ("Pinehurst") is a defendant in a
lawsuit alleging trademark infringement arising out of the use of the term
"Pinehurst Plantation" in connection with its golf course operations and
residential lot development. Pinehurst lost the trial and has appealed the
verdict. The claim for monetary damages is over $1,000,000. While any
litigation or investigation has an element of uncertainty, in the opinion of
management and legal counsel, there is no reasonable probability at present
of any substantial liabilities arising out of this matter.
On December 4, 1997, the Company entered into a stock purchase agreement
(the "agreement") with Maricopa Hardy Development Group, Inc. ("Maricopa")
for the purchase of 81% of the outstanding capital stock of Pelican Strand
Development Corporation (see Note 4). Subsequent to December 4, 1997,
Maricopa claimed that the Company breached certain terms of the agreement
and requested that the Company rescind the agreement. The Company believes
that the terms of the agreement have been met and has refused to rescind the
agreement. The parties have negotiated a resolution to this dispute, and no
lawsuit has been filed against the Company.
Montverde Properties LTD is a defendant in a lawsuit for the enforcement of
a $916,824 mortgage note payable, which was in default (see Note 7). The
Company had entered into a payment arrangement with the mortgage holder for
monthly payments of $15,000 until the mortgage can be refinanced. This
refinancing was accomplished and the note and all accrued interest was
repaid in connection with the July 2, 1998 debt restructuring (see Note
11.).
The Company is involved in various other lawsuits and litigation matters on
an ongoing basis as a result of its day-to-day operations. However, the
Company does not believe that any of these other or any threatened lawsuits
and litigation matters will have a material adverse effect on the Company's
financial position or results of operations.
20
<PAGE>
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
As of June 9, 1998 the shareholders of the Company, acting by
the written consent of a majority of the issued and
outstanding shares eligible to vote, adopted these
resolutions:
1. An increase to 100,000,000 Authorized Common Shares.
2. The ratification of all outstanding and previously
outstanding shares of preferred stock.
3. The change of the Company's name to "Golf Communities
of America, Inc."
These actions by shareholder written consent will become
effective upon general notice thereof to the shareholders at
large expected during the third quarter.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) This Item is not applicable to the Company.
(b) No Reports on Form 8-K were filed by the Company during
the quarter ended June 30, 1998. On July, 17, 1998 the
Company files an 8-K reporting the refinancing and debt
restructuring
agreements with Credit Suisse First Boston Mortgage, Inc.
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.
Signature Position with Company Date
/s/ Warren Stanchina President, Chief Executive Officer September 17, 1998
- -------------------- and Director
/s/ Eric LaGrange Senior Vice President and Chief
- -------------------- Accounting Officer September 17, 1998
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 339,756
<SECURITIES> 0
<RECEIVABLES> 2,282,842
<ALLOWANCES> 0
<INVENTORY> 138,578
<CURRENT-ASSETS> 0
<PP&E> 9,965,509
<DEPRECIATION> 1,774,558
<TOTAL-ASSETS> 68,898,053
<CURRENT-LIABILITIES> 0
<BONDS> 43,582,348
0
66,751
<COMMON> 9,850
<OTHER-SE> 7,651,251
<TOTAL-LIABILITY-AND-EQUITY> 68,898,053
<SALES> 1,841,903
<TOTAL-REVENUES> 4,640,131
<CGS> 778,740
<TOTAL-COSTS> 6,089,953
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,243,456
<INCOME-PRETAX> (3,689,879)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,689,879)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,503,400)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> (0.40)
</TABLE>
