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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
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
0-22582
NASHVILLE COUNTRY CLUB, INC.
(Name of Small Business Issuer in its Charter)
TENNESSEE 62-1535897
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
402 HERITAGE PLANTATION WAY
HICKORY VALLEY, TENNESSEE 38042
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 764-2300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, NO PAR VALUE PER SHARE
Indicate by check mark whether the registrant (1) has 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) has been subject to such
filing requirements for the past 90 days. YES X NO .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---
The aggregate market value of the voting stock held by non-affiliates
of the registrant (based on the closing sale price of such stock as reported on
March 27, 1997 on the Nasdaq National Market of the National Association of
Securities Dealers, Inc.) was approximately $18,820,300.
As of March 31, 1997, 4,590,435 shares of the registrant's Common
Stock were outstanding.
Transitional Small Business Disclosure Format (Check One):
Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant's definitive Proxy Statement, to be filed
pursuant to Section 14(a) of the Securities Exchange Act of 1934 in connection
with the registrant's 1997 annual meeting of shareholders, have been
incorporated by reference in Part III of this report.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
BACKGROUND AND BUSINESS STRATEGY
Nashville County Club, Inc. (the "Company") was organized in June 1993
to engage in entertainment-related activities. The Company's business strategy
is to create a diversified entertainment company that operates in five
divisions: resorts, restaurants, concert promotion and production, corporate
entertainment marketing and events and television programming.
The Company commenced operations with the opening of its first
restaurant in Nashville, Tennessee in November 1994. This restaurant serves
moderately priced American-style food and beverages in an environment that
offers customers an opportunity to experience the look, sound, feel and
excitement of the country music segment of the entertainment industry. The
Nashville Country Club restaurant creates this environment primarily through
the use of recorded traditional and contemporary country music, a decor which
features country music collectibles and art and a clientele that includes
country music entertainers and music industry professionals. The Company is
developing plans to construct a 107-room hotel adjacent to the Nashville
Country Club restaurant targeted to travelers in the music and tourism
industries.
In April 1996, the Company acquired The Village at Breckenridge Resort
(the "Resort") located in Breckenridge, Colorado. The Resort consists
primarily of the 60-room Village Hotel, the 71-room Breckenridge Mountain
Lodge, nine restaurants and taverns and 120,000 square feet of commercial and
meeting space. The Company also acquired other assets associated with the
Resort, including a travel agency and property management contracts relating to
the management of approximately 315 single family homes and residential
condominium units. Approximately 220 of such units and the 60 rooms in the
Village Hotel are operated as Wyndham Resort units under a franchise agreement
with Wyndham Hotel Company, Ltd.
In August 1996, the Company entered into an agreement in principle
with East West Partners to redevelop certain residential and commercial
facilities at the Resort.
In December 1996, the Company entered into an agreement in principle
to acquire Avalon Entertainment Group, Inc., an entertainment company
specializing in the production of live entertainment events and entertainment
marketing programs for corporate clients. See "Recent Developments."
OVERVIEW
Growth of the Entertainment Industry. The Company believes that a
number of factors, including technological advances resulting in the increased
availability and expanded capabilities of entertainment delivery systems (such
as VCRs, cable television, personal computers, home entertainment systems and
game cartridges and compact personal stereos) and the continued growth of a
global electronic mass media network, have combined to dramatically increase
the visibility of entertainment products (such as professional sports, movies,
television programming and pre-recorded music) and related personalities in
American popular culture, which in turn has resulted in a significant increase
in the manner and extent to which such products and personalities impact that
culture.
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Commercialization of Popular Culture. Historically, goods and services
often have been marketed, directly or indirectly, to appeal to certain
lifestyles, in particular as a means of enabling the consumer to create,
experience or validate, even if only temporarily, a desired lifestyle or
self-image. The Company believes that, in part because of the pervasiveness of
entertainment products and personalities in our popular culture, an increasing
number and variety of products and services are being successfully marketed in
this manner through reference to or association with those entertainment
products and personalities which the advertiser believes most accurately convey
the desired message or image to the consumer.
RESORT OPERATIONS
The Resort is situated on approximately 16 acres between the base of
the Breckenridge Ski Area and historic Main Street at the south end of the town
of Breckenridge, Colorado. The Resort consists of the 60-room Village Hotel,
the 71-room Breckenridge Mountain Lodge, nine restaurants and taverns and
120,000 square feet of commercial and meeting space. The Company also manages
approximately 220 condominium units located in the Resort complex and
approximately 95 additional single family homes and residential condominium
units in Breckenridge, Colorado. The 60 rooms in the Village Hotel and 220 of
the residential units managed by the Company are operated as Wyndham Resort
units pursuant to a ten-year franchise agreement with Wyndham Hotel Company,
Ltd. Management believes that the Resort is one of the premier year-round
destination resorts in the Rocky Mountains, offering guests a multi-day
entertainment experience where they can stay in the Resort's lodging
accommodations, eat in the Resort's restaurants, shop in the Resort's retail
stores, enjoy live entertainment and participate in a variety of outdoor
activities.
Visitors to the Resort in the winter can participate in downhill
skiing, cross-country skiing, snowboarding, ice skating on the Resort's Maggie
Pond, dog sledding and other winter activities. The Resort is also a frequent
host for major international winter events, such as the recent "Chevy Astro
Kingdom Classic Alpine World Cup" and the "International Snow Sculpturing
Championship." In the summer, the Resort is a frequent headquarters for
world-class fly fishing, whitewater rafting, golf, mountain biking and other
popular outdoor activities. In addition, the Resort's concert venues provide
summer visitors with a variety of entertainment options. During the summer
months, the Resort is a regular host to holiday festivals and special events,
including "Genuine Jazz in July," "Fourth of July Great American Music
Festival" and the "Labor Day Weekend Blues Festival." Management believes that
the acquisition of Avalon Entertainment Group, Inc. ("AEG") (see "Recent
Developments") will provide the Company with opportunities to increase the
number and quality of entertainment events held at the Resort.
The Resort offers a wide variety of lodging accommodations. Resort
guests can chose from standard hotel rooms to condominium units with fully
equipped kitchens to luxury homes. The Resort's amenities include a health
club, 2 swimming pools, 11 hot tubs, a billiards room and video arcade and
access to the Breckenridge Ski School, backstage theater, daycare center and
childrens' programs. The Resort's 87,000 square feet of commercial space
offers guests and visitors a wide variety of shopping options in over 30 retail
establishments, including retail shops, specialty food, gift and convenience
stores and ski and mountain bike rental shops. The Resort also features a full
service recreation center. Resort guests can arrange a wide variety of
moderate to high adventure activities through the recreation center, including
golf, whitewater rafting, Jeep tours, gold panning and nature walks in the
summer, and skiing, ice skating, sleigh rides, snowmobiling and dog sledding
in the winter. The Resort also operates a full service travel agency known as
"A Travel Company." A Travel Company offers a unique opportunity to provide
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guests and visitors to the Resort "one-stop shopping" for lodging,
transportation and entertainment needs. The Resort's travel specialists can
arrange discount airfares, airport transfers, car rentals, lift tickets, ski
lessons and equipment rentals. Most major airlines serve Denver and Colorado
Springs airports, both located approximately 2 hours from the Resort.
Management believes that the Resort's setting in the Rocky Mountains
and its wide range of accommodations makes the Resort an ideal location for
conferences and training and executive retreats. In 1997, it is anticipated
that these meetings will provide approximately 36,000 room nights and
approximately $1.5 million in banquet food and beverage revenues to the Resort,
primarily in the non-ski season months. The Resort features 18 meeting rooms
with approximately 33,000 square feet of meeting space and a full range of
convention services, including state-of-the-art audio/visual equipment, a fully
equipped business center and extensive catering facilities. The Resort also
features the Breckenridge Outdoor Education Center, which provides indoor and
outdoor corporate team building activities and challenging courses to fit a
corporate group's objectives.
The Resort offers 11 restaurants and taverns located throughout the
Resort, 8 of which are owned and operated by the Resort and 2 of which are
operated in commercial space leased from the Resort. The Resort's restaurants
and taverns offer a wide variety of dining experiences, from the Village Pasta
Company, offering Italian cuisine and award winning pizza, to the Breckenridge
Cattle Company, offering steaks, seafood and prime rib. Throughout the ski
season, guests and visitors to the Resort can also enjoy live entertainment in
many of the Resort's dining establishments.
Breckenridge, Colorado, located in Summit County, continues to grow as
a year-round destination location. Vail Resorts, Inc. recently acquired
Breckenridge ski area, the second most popular ski area in North America.
Management believes that Vail Resort's aggressive expansion into Summit County
and strong marketing programs should increase worldwide awareness of, and
increased visits to, Summit County, thereby expanding demand for commercial and
residential space in the area. The Resort is well positioned to capitalize on
this growth.
In August 1996, the Company entered into an agreement in principle
with East West Partners to develop residential and commercial facilities
located at the Resort. Under the terms of the arrangement, the Company will
contribute undeveloped land and commercial space to the venture and East West
Partners will manage master planning, development, construction, funding and
sales.
The Company is exploring other opportunities to acquire equity
interests in destination resort facilities that would compliment the Company's
business strategy.
RESTAURANT OPERATIONS AND DEVELOPMENT
The Nashville Country Club restaurant combines progressive and
traditional recorded country music and broadly appealing American-style food at
moderate prices in a highly-charged, informal atmosphere. The restaurant has a
seating arrangement designed to provide a feeling of spaciousness and
involvement. The ambience is enhanced by the display of country music
collectibles and art. The Nashville Country Club restaurant does not feature
live musical performances or a dance floor.
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As a part of the Company's goal of creating an overall attractive
environment that appeals to dining customers, the Company has positioned its
Nashville restaurant as a preferred location for informal dining by country
music artists and music industry professionals as well as a site for country
music industry special events, such as parties to celebrate "#1" records. Since
the opening of the Company's Nashville restaurant, the restaurant has hosted
numerous special events including MCA Record Company's publicity party for
George Strait, Curb Record Company's party for Tim McGraw, Atlantic Record
Company's platinum party for Confederate Railroad, Buckhorn Publishing
Company's Beatles Album release party, the Dove Awards party for Benson Music
and the Gospel Music Association's party for EMI. None of the above-mentioned
organizations is actively endorsing or promoting the Company's restaurant.
The Nashville restaurant operates seven days a week, opening at 11:00
a.m., continuing operations throughout the lunch/afternoon and dinner/evening
hours and closing in the late evening, and accommodates 180 dining seats with
an additional 45 seats at the bar. The menu features both lunch and dinner
specialties of the day with a broad range of appetizers, salads, soups,
sandwiches, main dinner entrees and desserts with certain regional specialty
items. The bar offers full bar service and selection of alcoholic and
nonalcoholic beverages throughout the day and evening.
RECENT DEVELOPMENTS
In December 1996, the Company entered into an agreement in principle
to acquire Avalon Entertainment Group, Inc. ("AEG"), an entertainment company
specializing in the production of live entertainment events and entertainment
marketing programs for corporate clients. The Company expects to pay the
proposed purchase price for AEG of approximately $6.0 million through a
combination of $2.4 million in cash and $3.6 million in shares of the Company's
Common Stock. The Company's strategy is to use AEG to arrange and promote live
entertainment events to be staged at the Resort and other destinations owned by
the Company. The Company believes that by providing access to premium
entertainment acts, AEG will allow the Company's facilities to develop
brand-name identity as premier entertainment destinations.
The Company is currently developing plans to construct an all-suite
hotel adjacent to its Nashville Country Club restaurant in the music-row area
of Nashville, Tennessee. The hotel will consist of 107 units aimed at
travelers in the music and tourism industries.
OTHER ACTIVITIES
In November 1993, the Company entered into an agreement with the
Nashville Songwriters Foundation, Inc. (the "Foundation") pursuant to which the
Company agreed to manage certain activities of the Foundation, including
activities in connection with the development, financing, construction and
management of a facility to house the Nashville Songwriters' Hall of Fame (the
"Hall of Fame"), which is operated by the Foundation. In consideration for
these services, the Company will be entitled to receive a management fee equal
to 10% of the gross revenues received by the Foundation (excluding interest
income) in connection with the development and operation of the Hall of Fame.
The Company's agreement with the Foundation is for successive one-year terms
which renew automatically unless terminated in advance by either party. The
Foundation currently is continuing to explore possible locations for the Hall
of Fame; however, the Company does not anticipate that its relationship with
the Foundation will develop significantly during fiscal 1997.
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TRADEMARKS
The Company has licensed from its founder, Thomas J. Weaver III, the
exclusive right to use and eventually acquire for nominal consideration the
trademark NASHVILLE COUNTRY CLUB and the related logo design. On July 11, 1995,
the U.S. Patent and Trademark Office ("PTO") issued a Certificate of
Registration for the trademark. The trademark registration is valid for ten
years and may be renewed for an unlimited number of ten-year periods provided
that the Company continues to use the trademark. There can be no assurance,
however, that the trademark does not or will not violate the proprietary rights
of others, that any registration of the trademark or the Company's use thereof
will be upheld if challenged, or that the Company will not be prevented from
using the trademark, any of which could have a material adverse effect on the
Company.
REGULATION AND LICENSES
The Company is subject to federal, state and local laws affecting its
business, including various health, sanitation and safety standards, as well as
regulation of the sale of alcohol and beer. The failure to receive or retain,
or delay in obtaining, a license to serve alcohol and beer in a particular
location could adversely affect the Company's operations in that location and
impair the Company's ability to obtain licenses elsewhere. Restaurants in most
states, including Tennessee and Colorado, are subject to "dram shop" laws and
legislation which impose liability on licensed alcoholic beverage servers for
injuries or damages caused by their negligent service of alcoholic beverages to
a visibly intoxicated person or to a minor, if such service is the proximate
cause of the injury or damage and such injury or damage is reasonably
foreseeable. While the Company maintains liquor liability insurance as part of
its existing comprehensive general liability insurance, which management
believes is adequate to protect against such liability, there can be no
assurance that it will not be subject to a judgment in excess of such insurance
coverage or that it will be able to continue to maintain such insurance
coverage at reasonable costs. The imposition of a judgment substantially in
excess of the Company's insurance coverage would have a material adverse effect
on the Company. The failure or inability of the Company to maintain insurance
coverage could materially and adversely affect the Company. The Americans with
Disabilities Act (the "ADA") prohibits discrimination on the basis of
disability in public accommodations and employment. The Company took into
account the requirements of the ADA in the construction of the Nashville
restaurant; however, the Company could be required to further modify the
restaurant's physical facilities to comply with the provisions of the ADA.
COMPETITION
In general, the businesses in which the Company currently competes are
highly competitive. The Resort competes with other resort facilities in
Breckenridge, Colorado and Summit County which have greater financial and other
resources than the Resort. Some of the Resort's competitors have been in
operation for longer periods than the Resort and have greater marketing,
personnel and other resources than the Resort. The success of the Resort is
dependent on a variety of factors, including the ability of the managers of the
Resort to attract visitors to the Resort on a year-round basis. The restaurant
industry in which the Company competes is also highly competitive. The Company
believes that the principal competitive factors within the restaurant industry
generally include uniqueness and perceived quality of the restaurant, its
proximity to a densely populated area, the atmosphere and cleanliness of the
establishment and the quality of food, beverage and entertainment available.
The Company believes its attention to and emphasis on providing recorded
country music of the highest quality, the exhibition of country
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music collectibles and art, the service of high quality, broadly appealing
American-style food and beverages at moderate prices and the merchandising of
the Company's trademarked fashionwear are factors that differentiate the
Nashville Country Club restaurant from other restaurant entertainment
experiences. The Company believes that the principal competitive factors
within the entertainment industry generally include the uniqueness and
perceived quality of the entertainment offering or attraction, consumer
preferences and changes in the type and number of entertainment offerings.
SEASONALITY
The Company's quarterly results of operations are affected by
seasonality in its operating divisions and fluctuations in the costs of food,
labor, employee benefits and similar costs over which the Company has limited
or no control. The business of the Resort, for instance, is highly seasonal,
with the Resort receiving the majority of its revenues during the period from
November to April. The Company's business also may be affected by the timing
of its acquisitions and inflation.
EMPLOYEES
The Company presently has approximately 440 full-time and part-time
employees. It is the Company's intention to manage its growth consistent with
its ability to attract and retain qualified employees to manage its operations.
The Company believes that its relationship with its employees is good.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's executive offices are located in Hickory Valley,
Tennessee in a building owned by a limited partnership, the general partner of
which is a corporation owned by Thomas J. Weaver III and Frank A. McKinnie
Weaver, Sr., officers and directors of the Company, and of which they also are
limited partners. The limited partnership does not charge the Company rent for
its executive offices.
The Company leases the real property on which the Nashville restaurant
is located pursuant to a lease agreement that expires in September 2013. The
lease agreement contains an option to purchase the property at a purchase price
of $733,000. The Company currently intends to exercise its option to purchase
the property and is presently evaluating the timing of such purchase. The
current monthly lease payments are approximately $9,750.
In April 1996, the Company acquired certain properties in
Breckenridge, Colorado which comprise The Village at Breckenridge Resort. The
Resort consists primarily of the 60-room Village Hotel and the 71-room
Breckenridge Mountain Lodge, which includes 24 dorm-style employee housing
units and a 126-seat restaurant and bar with associated retail services. The
Resort's other primary facilities consist of nine restaurants and taverns.
These restaurants include The Village Pub, a 150-seat restaurant, Village Pasta
Company, a 131-seat restaurant, Cattle Company, a 134-seat restaurant, Cafe
Breck, an 80-seat restaurant, J.T. Pounders, a 110-seat bar, the Maggie, a
500-seat cafeteria and bar, and Gold Strike Saloon, an apres-ski bar and
function space.
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In addition to the hotels and restaurants described above, the Company
also acquired certain commercial space used in connection with the Resort. The
commercial space consists of approximately 33,000 rentable square feet of
meeting and conference space and 87,000 rentable square feet of retail shopping
space. To serve conventions, the Commercial Space has one ballroom with
approximately 6,700 square feet. The Resort also includes two swimming pools,
a health club, 30 retail shops leased to retail tenants located in the "Bell
Tower Mall" and in other commercial properties within the Resort and a pond
known as the "Maggie Pond," which serves as an ice skating rink in the winter
and a concert stage in the summer.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the Company's
shareholders during the fourth quarter of the fiscal year ended December 29,
1996.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) The Common Stock is quoted on the Nasdaq National Market
under the symbol NCCI. On March 27, 1997, the last reported sale price of the
Common Stock was $5.50 per share. The following table sets forth the range of
high and low sales prices of the Common Stock during each quarterly period
within the two most recent years, as reported on the Nasdaq National Market.
<TABLE>
<CAPTION>
High Low
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<S> <C> <C>
1996
First Quarter $6 1/2 $5
Second Quarter 8 1/4 4 33/64
Third Quarter 6 3/8 4
Fourth Quarter 5 7/8 3 3/8
1995
First Quarter $7 1/2 $4 1/4
Second Quarter 7 3/4 5 1/2
Third Quarter 8 5
Fourth Quarter 6 3/4 5
</TABLE>
(b) The approximate number of holders of record of Common Stock on
March 15, 1997 was 85.
(c) The Company has not paid or declared cash distributions or
dividends and does not intend to pay cash dividends on the Common Stock in the
foreseeable future. The Company currently intends to retain all earnings to
finance the development and expansion of its operations. The declaration of
cash dividends in the future will be determined by the Board of Directors based
upon the Company's earnings, financial condition, capital requirements and
other relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the historical
consolidated financial statements and notes thereto included in Item 7.
GENERAL
The Company has pursued an aggressive growth strategy since its
formation in 1993. The Company opened its first Nashville Country Club
restaurant in Nashville, Tennessee in November 1994. In April 1996, the
Company acquired The Village at Breckenridge Resort (the "Resort") in
Breckenridge, Colorado. In August 1996, the Company entered into an agreement
in principle to redevelop portions of the Resort. In December 1996, the
Company entered into a letter of intent
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to acquire Avalon Entertainment Group, Inc. ("AEG"). The Company is also
developing plans to construct an all-suites hotel adjacent to the Nashville
Country Club restaurant in Nashville, Tennessee. The Company expects to
continue to expand its portfolio of entertainment assets through the
acquisition of businesses and assets that compliment the Company's strategy.
The following discussion summarizes the Company's financial condition,
changes in financial condition and results of operations for the fiscal year
ended December 29, 1996 ("Fiscal 1996") and the fiscal year ended December 31,
1995 ("Fiscal 1995") and sets forth a summary of the Company's future
prospects.
LIQUIDITY AND CAPITAL RESOURCES
Prior to April 29, 1996, the activities of the Company consisted
primarily of the operations of the Nashville Country Club restaurant in
Nashville, Tennessee. The Company's principal source of liquidity and capital
resources prior to April 1996 was the net proceeds of $2,725,000 from the
Company's initial public offering in February 1994 and $300,000 of net proceeds
from a private placement of debt in December 1995 and January 1996. In April
1996, the Company completed a secondary public offering of 1,351,455 units (the
"Units") which generated $11,448,000 of net proceeds. Each Unit consisted of
two shares of Common Stock and one Redeemable Common Stock Purchase Warrant.
The proceeds of this secondary public offering were used to repay the private
placement debt, to fund the cash portion of the purchase price for the Resort,
to pay fees and expenses associated with the acquisition of the Resort, for
property and equipment expenditures and for working capital purposes. As of
December 29, 1996, the Company had cash and cash equivalents of approximately
$2,660,000 and a working capital deficit of approximately $1,799,000, including
$884,000 of current maturities of long-term debt. The Company's primary
requirements for capital are the satisfaction of current liabilities, the
servicing of the Company's short and long-term indebtedness and the acquisition
of businesses and assets in connection with the Company's growth strategy.
The Company has entered into an agreement in principle to acquire
Avalon Entertainment Group, Inc. for approximately $6,000,000. The purchase
price for AEG calls for the issuance of shares of the Company's Common Stock
valued at $3,600,000 and the payment of $2,400,000 in cash. The Company is
also planning to develop a 107-room all-suites hotel adjacent to the Nashville
Country Club restaurant in Nashville, Tennessee. This development, which the
Company estimates will cost approximately $10,300,000, includes the acquisition
of an existing, multi-story parking facility, the purchase of land and the
construction of a hotel with guest suites and office space. In August 1996,
the Company entered into an agreement in principle with East West Partners to
develop residential and commercial facilities located at the Resort. Under the
terms of the arrangement, the Company will contribute undeveloped land and
commercial space to the venture and East West Partners will manage master
planning, development, construction, funding and sales.
The Company intends to finance its cash requirements for the purchase
of AEG and the development of the Nashville hotel project from the proceeds of
public and/or private issuances of its equity and debt securities and from
short-term and long-term bank indebtedness. There can be no assurance that the
Company will be able to obtain financing from these sources or that such
financing will be on terms that are favorable to the Company. To the extent
that the Company is able to finance its growth through external sources of
capital, the Company intends to continue to
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grow its operations through additional acquisitions. Management believes that
there are currently a number of possible future acquisition opportunities in
the entertainment industry, and it is possible that any acquisition could be
material to the Company. Even if the Company is able to secure external
financing sources for its growth plans, there can be no assurance that the
Company will be able to acquire any additional businesses or assets or that any
businesses or assets that are acquired will be or will become profitable.
The Company is currently highly leveraged. In connection with the
acquisition of the Resort, the Company became subject to certain long-term debt
secured by liens on substantially all of the assets of the Resort. The
long-term debt of the Resort totaled $20,406,000 at December 29, 1996, of which
$884,000 represents current maturities. The long-term debt consists of five
notes payable to banks or unaffiliated third parties, totaling $19,997,000,
which are secured by deeds of trust on Resort property and equipment and
security agreements on substantially all other assets of the Resort, and
various other equipment and other notes payable, totaling $409,000. The
Company has entered into discussions with certain of the holders of its
mortgage notes payable to modify the terms of the mortgage notes payable to
reduce scheduled principal payments in 1997 and to extend the maturity dates.
There can be no assurance that the Company will be able to modify the terms of
these mortgage notes payable. In November 1996, the Company entered into a
revolving credit facility which provides up to a maximum of $300,000 of
unsecured borrowings through November 5, 1997. As of December 29, 1996, no
amounts were outstanding under this revolving credit facility.
In connection with the acquisition of the Resort, the Company agreed
to repurchase shares of the Company's Common Stock owned by certain prior
owners of the Resort in an aggregate amount of up to $413,170 and agreed to pay
a fee of $97,000 to one of the former owners of the Resort. The Company is
currently negotiating the amount and timing of such repurchase and payment.
The Company expects to fund these payments from the proceeds of public and/or
private issuances of its equity and debt securities, cash flow from operations
and short-term bank debt.
Management believes that cash flow from operations, the proceeds of
future issuances of its equity and debt securities and the use of short-term
bank debt will be adequate to fund the operations and expansion plans of the
Company during 1997. In addition, to provide any additional funds necessary
for the continued pursuit of the Company's growth strategies, the Company may
incur, from time to time, additional short-and long-term bank indebtedness.
The availability and attractiveness of any outside sources of financing will
depend on a number of factors, some of which will relate to the financial
condition and performance of the Company, and some of which will be beyond the
Company's control such as prevailing interest rates and general economic
conditions. There can be no assurance that such additional financing will be
available or, if available, will be on terms acceptable to the Company.
RESULTS OF OPERATIONS
Because of the significant growth of the Company since its formation,
the Company's historical results of operations and period-to-period comparisons
of such results and certain financial data may not be meaningful or indicative
of future results. The Company's audited consolidated results of operations
for Fiscal 1996 may not be readily comparable to the Company's audited
consolidated results of operations for Fiscal 1995.
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COMPONENTS OF INCOME
The following are the principal components of the Company's revenues
and expenses:
Revenues. The Company's revenues are derived primarily from room
rentals, food and beverage sales, commercial leasing, travel services,
entertainment events and ancillary departments at the Resort, and from food and
beverage and merchandise sales at the Nashville Country Club restaurant.
Departmental Expenses. Departmental expenses include those costs
directly attributable to the operations of a revenue department, including
rental fees paid to the owners of living units managed by the Resort, payroll
and related expenses, cost of goods sold (food and beverage and travel
services) and other operating expenses. Other operating expenses generally
include guest supplies, travel agent commissions, linen, cleaning supplies,
guest supplies, equipment costs, restaurant entertainment costs and special
promotions.
Administrative and General Expenses. Administrative and general
expenses include all corporate overhead expenses related to the Company's
headquarters such as payroll and related expenses, occupancy, administrative,
shareholder services and other operating expenses, as well as those expenses
typically categorized as administrative and general expenses in a resort
environment, including payroll and related expenses, office supplies and travel
expenses of management, human resources, purchasing and accounting.
Administrative and general expenses also include credit card commissions,
accounting and legal fees, insurance costs and bad debt expenses.
Sales and Marketing Expenses. Sales and marketing expenses include
those expenses incurred for the sales and marketing staff, including payroll
and related expenses, travel expenses, advertising campaigns and promotional
materials.
Property Operation and Maintenance Expenses. Property operation and
maintenance expenses include payroll and related expenses for maintenance
personnel, cost of repairs and maintenance, energy costs for gas, electricity
and water, trash removal and property taxes.
Depreciation and Amortization Expense. Depreciation and amortization
expense consists of the depreciation of the Company's property and equipment
and amortization of deferred loan fees.
Interest Expense. Interest expense consists primarily of the interest
costs associated with long-term debt recorded on the books of the Resort.
SEASONALITY
The Resort's operations are subject to significant seasonal variations
with substantially all of the Resort's operating profits generated in the first
quarter and in the months of November and December, which periods correspond to
the winter ski season. Generally, the Resort reports a loss for the spring,
summer and fall periods. The Company's operations for Fiscal 1996 include the
operations of the Resort from April 29, 1996 and, accordingly, do not include
the financial results of the Resort for the first quarter of 1996. In
addition, the operations of the Resort may fluctuate
-11-
<PAGE> 13
significantly due to a number of factors, including weather. Such fluctuations
may materially affect the Company's revenues and profitability.
GENERAL
The Resort was acquired on April 29, 1996. Accordingly, prior to that
date, all of the operating results of the Company were those of the Nashville
Country Club restaurant and corporate activities. As a result of the inclusion
of the operations of the Resort from April 29, 1996, the Company's consolidated
revenues increased to $10,809,000 for Fiscal 1996, compared to $2,300,000 for
Fiscal 1995. Consolidated net loss for Fiscal 1996 was $3,127,000 compared to
$794,000 for Fiscal 1995. The increase in net loss was due in part to the
timing of the acquisition of the Resort (the Resort contributed $2,518,000 of
the consolidated net loss in Fiscal 1996). Net loss from corporate activities
and the Nashville Country Club restaurant improved from Fiscal 1995 to Fiscal
1996 from a net loss of $794,000 to a net loss of $609,000, resulting primarily
from a reduction in sales and administrative and general expenses. Interest
expense on a consolidated basis increased to $1,223,000 in Fiscal 1996 from
$3,000 in Fiscal 1995, primarily as a result of the acquisition of the Resort,
which resulted in the assumption of $20,644,000 of long-term debt.
The Resort was acquired on April 29, 1996. Accordingly, the results
of operations of the Resort for Fiscal 1995 and for the period in Fiscal 1996
prior to April 29, 1996 are not included in the historical financial statements
of the Company. The following discussion of results of operations for the
Nashville Country Club Restaurant is on a historical basis and the discussion
of results of operations for the Resort is on a pro forma basis as if the
Resort had been acquired on January 1, 1995. The pro forma financial data
included in the financial statements of the Company included in Item 7 of this
Annual Report reflect the pro forma financial results of the Resort and the
actual financial results of the Nashville Country Club restaurant for the
periods presented.
NASHVILLE COUNTRY CLUB RESTAURANT
Revenues at the Nashville Country Club restaurant decreased by
$161,000 (7%) in Fiscal 1996 to $2,139,000 compared to $2,300,000 in Fiscal
1995. The overall decrease is due to poor winter weather conditions in
Nashville and a loss of summer revenue due to a drop in tourism corresponding
to the Atlanta Olympic games. Food and beverage departmental expenses, as a
percent of revenues, remained relatively constant from Fiscal 1995 to Fiscal
1996.
Administrative and general expenses and sales and marketing expenses
decreased $176,000 to $515,000 in Fiscal 1996 from $691,000 in Fiscal 1995.
The decrease resulted from a reduction in advertising expenditures associated
with a more focused advertising program and a reduction of other administrative
and general expenses through a greater emphasis on controlling costs.
All other expenses related to the Nashville Country Club restaurant
and corporate activities, including property operation and maintenance and
depreciation and amortization, remained relatively constant from Fiscal 1995 to
Fiscal 1996.
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<PAGE> 14
VILLAGE AT BRECKENRIDGE RESORT
Revenues at the Resort increased $3,697,000 to $18,586,000 in 1996
from $14,889,000 in 1995. The increase is primarily due to an increase in
rooms, food and beverage and other revenues. The increase in rooms revenues is
due in part to the acquisition of additional living units under management
contracts, an 11% increase in average room rates from Fiscal 1995 to Fiscal
1996 and an 8% increase in revenue occupied room nights. The increase in
revenue occupied room nights resulted from an enhanced sales and marketing
department and management's positioning of the Resort as a year-round
destination resort. The increase in food and beverage revenues is due
primarily to an increase in banquet revenues resulting from a 33% increase in
the number of group room nights at the Resort. The increase in other revenues
is due primarily to improved operations of A Travel Company, a full service
travel agency owned and operated by the Resort and an increase in the number of
entertainment events held at the Resort.
Departmental expenses at the Resort increased $3,298,000 to
$13,021,000 in 1996 from $9,723,000 in 1995. Rooms departmental expenses, as a
percent of rooms revenues, remained relatively constant from 1995 to 1996.
Food and beverage departmental expenses, as a percent of food and beverage
revenues, increased from 79% in 1995 to 85% in 1996. The increase is due
primarily to an increase in cost of goods sold for food and beverage items
which could not be passed on through higher menu pricing due to increased
competition in the Breckenridge market. Other food and beverage departmental
expenses remained relatively constant from 1995 to 1996. Other departmental
expenses, as a percent of other revenues, also remained relatively constant
from 1995 to 1996.
Administrative and general expenses increased by $120,000 to
$1,694,000 in 1996 from $1,574,000 in 1995. The increase is primarily due to
increased staff levels. Administrative and general expenses, as a percent of
total Resort revenues, decreased from 10.6% of Resort revenues in 1995 to 9.1%
in 1996. The decrease is primarily due to the stabilization of staffing levels
in administration, human resources and accounting, thereby providing the
ability to increase revenues without corresponding increases in administrative
and general expenses.
Sales and marketing expenses increased by $258,000 to $934,000 in 1996
from $676,000 in 1995. The increase is primarily due to an increase in payroll
and related costs as the Resort placed a greater emphasis on increasing its
sales force and to increases in advertising and promotion costs designed to
increase the number of revenue occupied room nights at the Resort.
Property operations and maintenance expenses and depreciation expense
remained relatively constant from 1995 to 1996.
Interest expense decreased $96,000 to $1,800,000 in 1996 from
$1,896,000 in 1995. The decrease is due to principal payments made in 1996 on
the Resort's long-term debt which decreased the average outstanding debt
balance.
OTHER CONSOLIDATED ITEMS
Income Taxes. As of the end of Fiscal 1996, the Company had net
operating loss carryforwards (NOL's) of approximately $4.5 million for income
tax purposes, which expire at various dates through 2011. Pursuant to
Statement of Financial Accounting Standards No. 109,
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<PAGE> 15
"Accounting for Income Taxes," the tax benefit of such NOL's and the net tax
benefit of other temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes are to be recorded as an asset. Deferred tax assets are
then reduced by a valuation allowance for the amount of any tax benefits which,
based on current circumstances, are not expected to be realized. Due to the
losses of the Company through Fiscal 1996, management was unable to determine
that realization of the net deferred tax asset, totaling $1,770,000 at the end
of Fiscal 1996, was more likely than not and thus provided a valuation
allowance for the entire net deferred tax asset.
Adoption of New Accounting Pronouncements. In March 1995, the
Financial Accounting Standards Board ("FASB") Issued Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" ("SFAS 121"), which
requires impairment losses to be recorded on long-lived assets in operations
when indicators of impairment are present and undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount.
SFAS 121 also addresses the accounting for long-lived assets that are expected
to be disposed of. The adoption of SFAS 121 in the first quarter of 1996 did
not have a material impact on the Company's consolidated financial statements.
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the market price of the
Company's stock at the date of grant over the amount the employee must pay to
acquire the stock. The impact of applying SFAS 123 was not material in Fiscal
1996 and Fiscal 1995.
The foregoing discussion may contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Such statements are
intended to be covered by the safe harbors created by such provisions. These
statements include the plans and objectives of management for future growth of
the Company, including plans and objectives relating to the acquisition of AEG,
the development of the Nashville hotel and the consummation of future private
and public issuances of the Company's equity and debt securities. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which
are beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements included in this Form 10-KSB will prove to
be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
-14-
<PAGE> 16
ITEM 7. FINANCIAL STATEMENTS.
The following financial statements required by this item are filed
herewith:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants dated April 4, 1997 16
Consolidated Balance Sheet as of December 29, 1996 17
Consolidated Statements of Operations for each of the two years
in the period ended December 29, 1996 18
Consolidated Statements of Stockholders' Equity for each of
the two years in the period ended December 29, 1996 19
Consolidated Statements of Cash Flows for each of the two
years in the period ended December 29, 1996 20
Notes to Consolidated Financial Statements 21
</TABLE>
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<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Nashville Country Club, Inc.:
We have audited the accompanying consolidated balance sheet of Nashville
Country Club, Inc. (a Tennessee corporation) and subsidiaries as of December
29, 1996, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period ended December
29, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nashville Country Club, Inc.
and subsidiaries as of December 29, 1996, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 29, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Dallas, Texas,
April 4, 1997
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<PAGE> 18
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--DECEMBER 29, 1996
<TABLE>
<S> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 2,659,921
Accounts receivable, net of allowance for doubtful accounts of $85,500 611,279
Inventories 429,987
Prepaid expenses and other current assets 139,771
--------------
Total current assets 3,840,958
PROPERTY AND EQUIPMENT, net 34,043,605
OTHER ASSETS, net of accumulated amortization 223,544
--------------
Total assets $ 38,108,107
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current portion of long-term debt $ 884,311
Accounts payable 1,282,723
Advanced deposits 1,739,839
Accrued payroll and related taxes 319,610
Due to homeowners 515,589
Accrued property taxes 385,605
Other accrued expenses 512,366
--------------
Total current liabilities 5,640,043
CAPITAL LAND LEASE OBLIGATION 733,000
LONG-TERM DEBT, net of current portion 19,521,739
--------------
Total liabilities 25,894,782
--------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; authorized 1,000,000 shares, 334,285 of Series A
convertible preferred stock issued and outstanding, $10,029 liquidation
preference 10,000
Common stock, no par value; authorized 20,000,000 shares, 4,590,435 shares
issued and outstanding 16,770,423
Accumulated deficit
--------------
(4,567,098)
--------------
Total stockholders' equity 12,213,325
--------------
Total liabilities and stockholders' equity $ 38,108,107
==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-17-
<PAGE> 19
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Historical Pro Forma (See Note 3)
For the Years Ended For the Years Ended
----------------------- ----------------------------
December 29, December 31, December 29, December 31,
1996 1995 1996 1995
----------- ---------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Rooms $4,202,040 $ - $9,917,739 $8,228,926
Food and beverage 4,151,056 2,215,436 6,443,827 6,033,868
Commercial leasing 786,085 - 1,387,800 1,400,145
Other 1,669,787 14,144 2,975,076 1,455,710
----------- ---------- ----------- -----------
Total revenues 10,808,968 2,299,580 20,724,442 17,118,649
----------- ---------- ----------- -----------
DEPARTMENTAL EXPENSES:
Rooms 3,283,172 - 6,623,823 5,399,157
Food and beverage 4,003,775 2,030,826 5,619,823 5,045,954
Other 1,615,045 - 2,688,084 1,308,861
----------- ---------- ----------- -----------
Total departmental expenses 8,901,992 2,030,826 14,931,730 11,753,972
----------- ---------- ----------- -----------
DEPARTMENTAL PROFIT
1,906,976 198,754 5,792,712 5,364,677
----------- ---------- ----------- -----------
UNDISTRIBUTED OPERATING EXPENSES:
Administrative and general 1,460,723 479,602 2,080,420 2,054,012
Sales and marketing 825,182 211,680 1,062,603 888,037
Property operation and maintenance 981,918 205,924 1,463,598 1,474,246
Depreciation and amortization 599,277 113,845 823,655 858,514
----------- ---------- ----------- -----------
Total undistributed operating
expenses 3,867,120 1,011,051 5,430,276 5,274,809
----------- ---------- ----------- -----------
GROSS OPERATING (LOSS) PROFIT (1,960,144) (812,297) 362,436 89,868
INTEREST INCOME (EXPENSE):
Interest income 55,938 21,200 59,960 21,200
Interest expense (1,223,103) (2,800) (1,821,965) (1,898,710)
----------- ---------- ----------- -----------
NET LOSS $(3,127,309) $ (793,897) $(1,399,569) $(1,787,642)
=========== ========== =========== ===========
NET LOSS PER COMMON SHARE $ (.87) $ (.54) $ (.30) $ (.39)
=========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,575,867 1,470,000 4,590,435 4,590,435
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 20
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 29, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
Preferred Stock Common Stock Total
---------------------- ---------------------- Accumulated Stockholders
Shares Amount Shares Amount Deficit Equity
--------- -------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, January 1, 1995 334,285 $ 10,000 1,470,000 $3,224,747 $ (645,892) $ 2,588,855
Net loss - - - - (793,897) (793,897)
--------- -------- --------- ---------- ------------ ------------
BALANCES, December 31, 1995 334,285 10,000 1,470,000 3,224,747 (1,439,789) 1,794,958
Issuance of shares of
common stock and warrants,
net of offering costs - - 2,702,910 11,448,049 - 11,448,049
Issuance of shares of
common stock in business
combination - - 417,525 2,097,627 - 2,097,627
Net loss - - - - (3,127,309) (3,127,309)
--------- -------- --------- ---------- ------------ ------------
BALANCE, December 29, 1996 334,285 $ 10,000 4,590,435 $16,770,423 $ (4,567,098) $ 12,213,325
========= ======== ========= =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-19-
<PAGE> 21
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 29, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(3,127,309) $ (793,897)
----------- ----------
Adjustments to reconcile net loss to net cash used in
operating activities-
Depreciation and amortization 599,277 139,493
Loss on asset retirement - 2,751
Changes in assets and liabilities-
Decrease in accounts receivable 107,462 -
Increase in inventories (59,885) (29,774)
(Increase) decrease in prepaid expenses and
other current assets (98,222) 5,429
Increase in other assets (85,132) (73,822)
Increase (decrease) in accounts payable 368,305 (210,060)
Increase in advance deposits 1,593,141 -
Increase (decrease) in accrued expenses 607,733 (35,267)
----------- ----------
Total adjustments 3,032,679 (201,250)
----------- ----------
Net cash used in operating activities (94,630) (995,147)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Resort, net of $231,259 of cash acquired (7,823,329) -
Purchase of property and equipment (617,520) (54,395)
Increase in other assets - (11,456)
----------- ----------
Net cash used in investing activities (8,440,849) (65,851)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of offering costs 11,448,049 -
Proceeds from borrowings 1,497,731 250,000
Principal payments on long-term debt (1,986,091) -
----------- ----------
Net cash provided by financing activities 10,959,689 250,000
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,424,210 (810,998)
CASH AND CASH EQUIVALENTS, beginning of year 235,711 1,046,709
----------- ----------
CASH AND CASH EQUIVALENTS, end of year $ 2,659,921 $ 235,711
=========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest was $1,259,699 and $2,800 for 1996 and 1995,
respectively.
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-20-
<PAGE> 22
NASHVILLE COUNTRY CLUB, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 1996
1. NATURE OF BUSINESS AND MANAGEMENT'S BUSINESS STRATEGY:
Nashville Country Club, Inc. (the "Company") was incorporated in
September 1993 for the purpose of developing, owning and operating restaurants,
hotels and other entertainment-related business assets. The Company opened its
first restaurant in Nashville, Tennessee on November 17, 1994 (the "Nashville
Restaurant").
In April 1996, the Company acquired The Village at Breckenridge Resort
(the "Resort"), a resort complex consisting of hotels, restaurants, meeting and
commercial space, and property management contracts with respect to guest
accommodations located in properties included in and separate from the Resort,
all located in Breckenridge, Colorado. The accompanying consolidated financial
statements include the revenues and expenses of the Resort from the date of
acquisition (April 29, 1996) through December 29, 1996. The operations of the
Resort are recorded on the books of The Village at Breckenridge Acquisition
Corp., Inc., a wholly owned subsidiary of the Company.
Since inception, the Company's principal source of funding has been
net proceeds from issuances of the Company's common stock which have been used
to implement the Company's business strategy. The net proceeds, which totaled
approximately $14 million, have been used to construct the Nashville
Restaurant, to acquire the Resort, to purchase property and equipment and to
fund the operations of the Nashville Restaurant and the Resort. The Company
reported net losses of $3,127,309 and $793,897 for the fiscal years ended
December 29, 1996 and December 31, 1995, respectively. In addition, the
Company has a working capital deficit of $1,799,085 as of December 29, 1996.
The net loss for 1996 is primarily due to the timing of the acquisition of the
Resort in April 1996. On a proforma basis, as if the Resort were acquired on
January 1, 1996, the net loss for 1996 would have been $1,399,569.
Management has undertaken recent actions to increase revenues and
reduce expenses at the Nashville Restaurant and at the Resort to address the
net losses incurred by these operations. The Company has also entered into a
letter of intent with an unaffiliated third party development company to
redevelop portions of the Resort's assets (Note 9) and has proposed a hotel to
be constructed adjacent to the Nashville Restaurant to compliment the Nashville
Restaurant's operations.
In addition, the Company has entered into a letter of intent to
acquire Avalon Entertainment Group, Inc. ("AEG"), an entertainment marketing
company whose primary operations occur in the second and third quarter. The
purchase price of approximately $6 million, subject to adjustment, will be paid
in a combination of $2.4 million in cash and $3.6 million in shares of the
Company's stock. The Company has entered into agreements with two investment
-21-
<PAGE> 23
advisors to assist the Company in obtaining financing for its activities. Such
financing will be used to finance a portion of the cash requirements for the
acquisition of AEG, the development of the Nashville hotel and the acquisition
of equity interests in other businesses that compliment the Company's business
strategy.
2. SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries - NCC Broadcast, Inc. and The Village
at Breckenridge Acquisition Corp., Inc. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash in banks and
highly liquid investments purchased with an original maturity of three months
or less.
Inventories
Inventories consist primarily of food and beverage, retail, and
operating supplies, and are stated at the lower of cost or market on a
first-in, first-out (FIFO) basis.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
for using the straight-line method over 5 to 7 years on furniture, fixtures,
and equipment and 30 to 39 years on buildings and improvements.
Other Assets
Loan fees incurred with respect to certain of the Company's mortgage
notes payable are being amortized over the five year term of the note payable
using the straight-line method. Accumulated amortization of loan fees totaled
$28,497 at December 29, 1996. Costs incurred during the investigation of
potential acquisitions or development projects are capitalized and charged to
expense at such time as management concludes that the project is no longer
deemed viable. Management continually evaluates the viability of such
projects.
Advance Deposits and Revenue Recognition
Advance deposits are recorded as a liability until rooms and other
services are provided and revenues are earned. Advance deposits reflected in
the accompanying balance sheet relate primarily to the winter ski season ending
in April.
-22-
<PAGE> 24
Property Management Contracts
The Resort has contracts relating to the management and rental of
approximately 315 living units, located in properties included in and separate
from the Resort. These contracts are primarily for a period of one year with
renewal options. The Resort pays a fee of 55% to 60% of the gross revenue to
the owner of the living unit. This amount is due monthly and is recorded as
due to homeowner in the accompanying consolidated balance sheet. Revenues
generated from the rental of these units are reported as rooms revenue with the
fee paid to the owner reported as rooms department expense in the accompanying
consolidated statement of operations. The loss of all or a significant amount
of the contracts would be significant to the operations of the Resort.
Income Taxes
The Company accounts for income taxes under the liability method
required by Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires recognition of deferred income
tax assets and liabilities based on enacted tax laws for any temporary
differences between financial reporting and tax bases of assets, liabilities
and carryforwards. Deferred tax assets are then reduced by a valuation
allowance for the amount of any tax benefits which, based on current
circumstances, are not expected to be realized.
Net Loss Per Common Share
The computation of net loss per common share is based on the weighted
average number of common shares outstanding. The effect of outstanding options
and warrants has not been considered as their inclusion would be antidilutive.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Adoption of New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"), which requires impairment losses to be recorded on long-lived
assets in operations when indicators of impairment are present and undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The adoption of SFAS 121 in the first
quarter of 1996 did not have a material impact on the Company's consolidated
financial statements.
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), encourages, but does not require,
companies to record compensation
-23-
<PAGE> 25
cost for stock-based employee compensation plans at fair value. The Company
has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the market price of the Company's stock at the date of grant over the
amount the employee must pay to acquire the stock. The impact of applying SFAS
123 was not material in 1996 and 1995.
Fair Value of Financial Instruments
As of December 29, 1996, the carrying amount of cash and cash
equivalents, accounts receivable, accounts payable, accrued liabilities,
capital leases and long-term debt are reflected in the consolidated financial
statements at cost which approximates fair value.
Reclassifications
Certain reclassifications have been made to the 1995 consolidated
financial statements to conform with classifications used in 1996.
3. ACQUISITION OF THE RESORT:
Effective April 29, 1996, the Company acquired the Resort from an
unaffiliated third party for approximately $31.5 million, consisting of
approximately $8.1 million in cash, $2.1 million of common stock (417,525
shares) and the assumption of $21.3 million of net Resort liabilities. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the net purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values on the date of
acquisition. The allocation was made as follows:
<TABLE>
<S> <C>
Assets acquired:
Property $30,360,000
Furniture, fixtures, and equipment 1,100,000
Cash 231,000
Accounts receivable 719,000
Other current assets 318,000
-----------
32,728,000
-----------
Liabilities assumed:
Long-term debt 20,644,000
Accounts payable 776,000
Other current liabilities 1,156,000
-----------
22,576,000
-----------
Net assets acquired $10,152,000
===========
</TABLE>
The unaudited pro forma information included in the accompanying consolidated
statements of operations reflects the results of operations of the Company as
if the acquisition of the Resort had occurred on January 2, 1995. The
unaudited pro forma net loss per common share has been prepared assuming that
3,120,435 shares of common stock issued in connection with the acquisition of
the Resort and the secondary stock offering (Note 7) had been outstanding since
January 2, 1995. The effect of outstanding stock options and warrants to
purchase common stock has not been considered as their inclusion would be
antidilutive.
-24-
<PAGE> 26
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at December 29, 1996:
<TABLE>
<S> <C>
Land $14,041,904
Land under capital lease 800,000
Buildings and improvements 17,794,141
Furniture, fixtures, and equipment 2,102,922
-----------
34,738,967
Less-Accumulated depreciation (695,362)
-----------
Property and equipment, net $34,043,605
===========
</TABLE>
5. LEASES:
Operating Leases
The Resort leases its retail stores under noncancelable operating
lease agreements. The agreements generally require that the Resort pay
applicable property taxes, insurance, repairs, and common area maintenance
costs, which are billable to tenants under lease terms. Expense pass-throughs
billed to tenants totaled approximately $290,000 for 1996. Several of these
leases also require percentage rent payments based on sales and have escalation
clauses based on changes in the consumer price index for future periods.
The following is a schedule of future minimum rents to be received
(excluding percentage rent payments) under the noncancelable operating lease
agreements.
<TABLE>
<S> <C>
Year Ending December 31,
- ------------------------
1997 $1,132,000
1998 979,000
1999 800,000
2000 435,000
2001 235,000
Thereafter 342,000
----------
Total minimum rents $3,923,000
==========
</TABLE>
Capital Lease
The Company is a party to an agreement dated September 30, 1993 to
lease real property on which the Nashville restaurant is located. The lease
had an initial term of twenty years with a ten-year renewal option. Initial
lease payments were $5,000 per month. Upon the completion of the Company's
initial public offering, effective March 1, 1994, lease payments totaling
$84,000 annually commenced. Effective March 1, 1995, in accordance with terms
of the lease agreement, the monthly lease payment increased to $7,000 plus 4
1/2% of the purchase option price.
In accordance with terms of the lease agreement, at any time during
the lease term, the Company has the option to purchase the leased property for
$800,000 less lease payments and base rent paid through the closing date, or in
the event of the death of the original landlord, the amount of base rent paid
by the Company prior to and within 60 days after such death. The land under
-25-
<PAGE> 27
capital lease and the lease obligation totaling $800,000 were recorded on the
consolidated balance sheet due to the existence of the bargain purchase option
provision in the lease. As a result of the death of the lessor of the property
on June 23, 1994, the Company's option to purchase the property became fixed at
$733,000 in August 1994.
The Company's intent is to exercise its option to purchase the
property and it is presently evaluating the timing of that decision and the
means by which it will finance the purchase. Rental expense totaled $118,185
and $111,487 during 1996 and 1995, respectively.
6. LONG-TERM DEBT:
Long-term debt consists of the following at December 29, 1996:
<TABLE>
<S> <C>
Note payable to a bank, bearing interest at 9%, due in monthly installments of
$115,021, including interest, through January 31, 2001, when unpaid principal and
interest are due. The note is collateralized by a deed of trust on property and
security agreement, including the assignment of leases and rents and financing
statements. $ 11,044,403
Note payable to an unaffiliated third party, interest due monthly at 7% through
March 1997, monthly installments of $47,216, including interest, beginning
April 1997 through December 1, 1999, when unpaid principal and interest are due.
The note is collateralized by two wraparound deeds of trust on the property and
security agreement, including the assignment of leases and rents and financing
statements. 5,253,057
Note payable to a bank, bearing interest at 10%, due in monthly installments of
$24,590 including interest, through March 1, 1998 when unpaid principal and interest
are due. The note is collateralized by a deed of trust on property and security
agreement, including the assignment of leases and rents and financing statements.
Note payable to an unaffiliated third party, bearing interest due monthly at 9%,
principal balance due December 21, 1999. The note is collateralized by the deed of
trust on property and security agreement, including the assignment of leases and
rents and financing statements. 1,625,941
Note payable to an unaffiliated third party, bearing interest due monthly at 9%,
principal balance due December 21, 1999. The note is collateralized by the deed of
trust on property and security agreement, including the assignment of leases and
rents and financing statement. 1,250,000
Note payable to two individuals, interest at 9%, due in monthly installments of
$7,925, including interest through October 1, 2013 when unpaid principal and
interest are due. The note is collateralized by a deed of trust on property and
security agreement, including the assignment of leases and rents and financing
statements. 823,107
Equipment notes payable to financial institutions, bearing interest ranging from 11%
to 15.5%, due in monthly installments of principal and interest, with various
maturity dates through July 2001. The notes are collateralized by accounts
receivable, equipment, machinery and contract rights. 324,537
Note payable to an unaffiliated third party, bearing interest at 9%, due annually in
June, $50,000 principal payment due June 1997, balance due June 1998. The note is
secured by rental management and property management agreements. 85,000
--------------
20,406,050
Less-Current portion (884,311)
--------------
$ 19,521,739
==============
</TABLE>
-26-
<PAGE> 28
Future annual maturities of long-term debt consists of the following at
December 29, 1996:
<TABLE>
<S> <C>
1997 $ 884,311
1998 2,249,967
1999 6,690,480
2000 583,044
2001 9,304,432
Thereafter 693,817
-----------
Total $20,406,050
===========
</TABLE>
The Company entered into a private placement with five non-affiliated
accredited investors pursuant to which the Company borrowed $250,000 in
December 1995 for working capital purposes. In January 1996, the Company
entered into one additional note agreement with a non-affiliated accredited
investor for $50,000 under the same terms. The Notes were repaid in April 1996
with proceeds from the stock offering. (Note 7)
In November 1996, the Company entered into a revolving credit facility
which provides up to a maximum of $300,0000 of unsecured borrowings through
November 5, 1997. Amounts outstanding under the revolving credit facility bear
interest at prime plus 2%. As of March 28, 1997, no amounts have been borrowed
under the revolving credit facility.
7. STOCKHOLDERS' EQUITY:
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred
stock. The Company has designated 557,143 shares of the authorized preferred
stock as Series A Convertible Preferred Stock ("Series A Preferred Stock"), of
which 334,285 shares have been issued to the Company's founder and others for
various services rendered. These shares are reflected in the accompanying
consolidated balance sheet at $10,000. Holders of shares of Series A Preferred
Stock are not entitled to vote, except as required by applicable law. Each
share of Series A Preferred Stock has a liquidation preference of $0.03 per
share and is convertible into one share of common stock at the option of the
holder (i) if during the five-year period following the issuance of the Series
A Preferred Stock the Company has earned after tax income for any fiscal year
of at least $500,000 based on generally accepted accounting principles and (ii)
at any time, in the event that 80% or more of the Company's common stock is
acquired by an entity or individual not previously affiliated with the Company
if the common stock has traded at an average bid price per share of $7.50 or
more during the preceding 90 business days or if the acquisition price per
share for the Company's common stock is $7.50 or more. The Series A Preferred
Stock does not have any preference on the payment of dividends and participates
equally in all dividends on a share for share basis with the common stock.
Common Stock
The Company was initially capitalized through the issuance of 780,000
shares of common stock to the Company's Chairman of the Board in September 1993
for $500,000 in cash, and through the issuance of 334,285 shares of preferred
stock as described above.
-27-
<PAGE> 29
In February 1994, the Company completed an initial public offering of
690,000 shares of the Company's no par value common stock, which resulted in
net proceeds to the Company totaling $2,724,747. In connection with the
offering, a warrant was granted to the underwriter to purchase up to 60,000
shares of common stock at $6.00 per share, exercisable over a period of four
years commencing one year from the date of the offering.
In April 1996, the Company completed a secondary public offering of
1,351,455 units, each consisting of two shares of common stock and one
redeemable common stock purchase warrant. The net proceeds were used to
consummate the acquisition of the Resort (Note 3), to repay indebtedness (Note
6), and for working capital purposes. The redeemable warrants are detachable
and separately transferable. Each redeemable warrant entitles the holder to
purchase one share of common stock at a price of $6.25 per share until April
2001, and is redeemable by the Company at $.05 per warrant under certain
conditions. In connection with the secondary offering, the underwriter was
granted a warrant to acquire up to 120,000 units at $15.50 per unit.
On August 14, 1995, the Company issued options to purchase up to
50,000 shares of common stock at a price of $5.50 per share to certain
employees under the Nashville Country Club, Inc. 1995 Stock Option Plan. The
options are subject to a vesting schedule that provides for vesting in four
equal installments on each annual anniversary date. As of December 29, 1996,
no options have been exercised.
8. INCOME TAXES:
At December 29, 1996, the Company had net operating loss carryforwards
of approximately $4.5 million for income tax purposes which expire at various
dates through 2011. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets as
of December 29, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $ 1,740,000
Deferred costs 70,000
Other 20,000
------------
1,830,000
Deferred tax liabilities:
Accelerated depreciation for tax (60,000)
------------
Net deferred tax assets 1,770,000
Valuation allowance (1,770,000)
------------
$ -
============
</TABLE>
During 1996, the valuation allowance for net deferred tax assets
increased $1,229,000 from $541,000 to $1,770,000.
-28-
<PAGE> 30
9. COMMITMENTS:
Franchise Agreement
On February 1, 1996, the Resort entered into a franchise agreement
with Wyndham Hotel Company, Ltd. to operate certain of the rooms in the Resort
as a Wyndham Resort and for the use of the Wyndham name and reservation system,
including Wyndham advertising, marketing, and promotions. The royalty fee,
payable beginning January 1997, related to the above agreement is equal to one
percent of room revenues, as defined. In addition, the Resort is also
obligated to pay a marketing fee of one and one half percent of room revenues
and a commission fee of seven and one half percent of room rates, as defined.
Total fees paid in 1996 were $52,000.
Redevelopment of the Resort
In August 1996, the Company entered into a letter of intent with an
unaffiliated third party development company which set forth the major business
points pursuant to which the two parties would form a joint venture to
redevelop a portion of the Resort's assets. It is anticipated that the Company
will contribute cash and certain land and buildings to the joint venture and
the joint venture partner will contribute cash and services. Proceeds from the
sale of redeveloped assets and from the management of assets retained by the
joint venture will be distributed as provided in the letter of intent, subject
to the negotiation of a definitive joint venture agreement. As of March 28,
1997, the joint venture partners are proceeding with initial planning and
design efforts associated with the redevelopment.
Repurchase of Stock
In connection with the acquisition of the Resort, the Company agreed
to repurchase up to $413,170 of stock issued to the sellers of the Resort. The
Company is currently negotiating with the holders of the shares subject to the
repurchase as to the timing of the repurchase.
-29-
<PAGE> 31
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required by this Item regarding the directors and
executive officers of the Company will be included in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A in connection with the
Company's 1997 annual meeting of stockholders and is incorporated herein by
reference thereto.
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this Item regarding the directors and
executive officers of the Company will be included in the Company's definitive
Proxy Statement to be filed pursuant to Regulation 14A in connection with the
Company's 1997 annual meeting of stockholders and is incorporated herein by
reference thereto.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item will be included in the
Company's definitive Proxy Statement to be filed pursuant to Regulation 14A in
connection with the Company's 1997 annual meeting of stockholders and is
incorporated herein by reference thereto.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be included in the
Company's definitive Proxy Statement to be filed pursuant to Regulation 14A in
connection with the Company's 1997 annual meeting of stockholders and is
incorporated herein by reference thereto.
-30-
<PAGE> 32
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
*3.1 -- Charter of the Company, as amended.
*3.2 -- Restated Bylaws of the Company.
*4.1 -- Specimen Common Stock Certificate.
*4.2 -- Paragraph 6 of the Charter of the Company (included in Exhibit 3.1).
*10.1 -- Lease dated September 30, 1993 between the Company and William Madison Smith.
*10.2 -- Employment Agreement dated as of January 1, 1994 between the Company and
Thomas Jackson Weaver, III
*10.3 -- Employment Agreement dated as of January 1, 1994 between the Company and Prab
Nallamilli.
*10.4 -- Intentionally omitted.
*10.5 -- Stock Purchase Warrant dated February 24, 1994 between the Company and Yee,
Desmond, Schroeder & Allen, Inc.
*10.6 -- Form of Indemnification Agreement between the Company and each of the
directors and executive officers.
*10.7 -- Employment Agreement dated April 29, 1996 between the Company and Jeffrey
McIntyre.
*10.8 -- Employment Agreement dated April 29, 1996 between the Company and Mark van
Hartesvelt.
**10.9 -- Nashville Country Club, Inc. 1995 Stock Option Plan.
**10.10 -- Form of Stock Option Agreements for options granted under the 1995 Stock
Option Plan.
**21 -- Subsidiaries of the Company.
27 -- Financial Data Schedule
</TABLE>
- ---------------
* Incorporated by reference to the same exhibit number in the Company's
Registration Statement on Form SB-2 (Registration No. 33-69944).
** (Incorporated by reference to the same exhibit number in the Company's Form
10-KSB for the fiscal year ended December 31, 1995.)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarterly period ended
December 29, 1996.
-31-
<PAGE> 33
SIGNATURES
In accordance with the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized in the city
of Hickory Valley, Tennessee, on the 11th day of April, 1997.
NASHVILLE COUNTRY CLUB, INC.
By: /s/ Thomas Jackson Weaver III
-------------------------------------
Thomas Jackson Weaver III
Chairman of the Board, Chief
Executive Officer and President
In accordance with the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in the capacities
and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Thomas Jackson Weaver III Chairman of the Board, Chief Executive April 11, 1997
- --------------------------------------------- Officer and President (Principal Executive
Thomas Jackson Weaver III and Financial Officer)
/s/ Prab Nallamilli Director, Director of Operations April 11, 1997
- ---------------------------------------------
Prab Nallamilli
/s/ Frank Bumstead Director April 11, 1997
- ---------------------------------------------
Frank Bumstead
/s/ Charles Flood Director April 11, 1997
- ---------------------------------------------
Charles Flood
/s/ Jeffrey McIntyre Director April 11, 1997
- ---------------------------------------------
Jeffrey McIntyre
/s/ Louis J. Risi, Jr. Director April 11, 1997
- ---------------------------------------------
Louis J. Risi, Jr.
/s/ Steven L. Risi Director April 11, 1997
- ---------------------------------------------
Steven L. Risi
/s/ Jose F. Rosado Director April 11, 1997
- ---------------------------------------------
Jose F. Rosado
</TABLE>
-32-
<PAGE> 34
<TABLE>
<S> <C> <C>
/s/ Mark van Hartesvelt Director April 11, 1997
- ---------------------------------------------
Mark van Hartesvelt
/s/ Frank A. McKinnie Weaver, Sr. Director April 11, 1997
- ---------------------------------------------
Frank A. McKinnie Weaver, Sr.
/s/ Kyle Young Director April 11, 1997
- ---------------------------------------------
Kyle Young
/s/ Bryan Cusworth Chief Financial Officer (Principal April 11, 1997
- --------------------------------------------- Accounting Officer)
Bryan Cusworth
</TABLE>
-33-
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ---------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 2,659,921
<SECURITIES> 0
<RECEIVABLES> 696,779
<ALLOWANCES> 85,500
<INVENTORY> 429,987
<CURRENT-ASSETS> 3,840,958
<PP&E> 34,738,967
<DEPRECIATION> 695,362
<TOTAL-ASSETS> 38,108,107
<CURRENT-LIABILITIES> 5,640,043
<BONDS> 20,254,739
0
10,000
<COMMON> 16,770,423
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 38,108,107
<SALES> 0
<TOTAL-REVENUES> 10,808,968
<CGS> 0
<TOTAL-COSTS> 8,901,992
<OTHER-EXPENSES> 3,785,620
<LOSS-PROVISION> 81,500
<INTEREST-EXPENSE> 1,223,103
<INCOME-PRETAX> (3,127,309)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,127,309)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,127,309)
<EPS-PRIMARY> (.87)
<EPS-DILUTED> 0
</TABLE>
