<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 for the quarterly period ended June 30, 1996; or
[ ] Transition report pursuant to Section 13 or 15(d) of the Exchange Act for
the transition period from to
---------- -----------
COMMISSION FILE NO. 0-24812
BRASSIE GOLF CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1781650
- --------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5806 -A Breckenridge Parkway, Tampa, FL 33610
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(813) 621-4653
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Check 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 [ ]
On June 30, 1996 there were 18,626,036 shares of the issuer's Common Stock,
$.001 par value, and 375,000 shares of the issuer's Preferred Stock, $.001 par
value, outstanding.
Page 1 of 23 Pages
<PAGE> 2
BRASSIE GOLF CORPORATION
QUARTERLY REPORT FOR THE THREE
AND SIX-MONTH PERIODS ENDED JUNE 30, 1996
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets of June 30, 1996 and December 31, 1995 .................... 3
Condensed Consolidated Statements of Operations for the three and six-month periods
ended June 30, 1996 and 1995 ................................................................... 5
Condensed Consolidated Statements of Changes in Shareholders' Equity for the
six-month period ended June 30, 1996 ............................................................ 6
Condensed Consolidated Statements of Cash Flows for the three and six-month periods
ended June 30, 1996 and 1995 .................................................................... 7
Notes to Condensed Consolidated Financial Statements ............................................ 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................................................. 22
Item 2. Changes in Securities .......................................................................... 22
Item 3. Defaults Upon Senior Securities ................................................................ 22
Item 4. Submission of Matters to a Vote of Securities Holders .......................................... 22
Item 5. Other Information .............................................................................. 22
Item 6. Exhibits and Reports on Form 8-K ............................................................... 22
SIGNATURES .............................................................................................. 23
</TABLE>
Page 2 of 23 Pages
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Current assets:
Cash $ 3,303,382 $ 61,437
Marketable equity securities 404,671 39,738
Trade accounts receivable, net 874,842 676,214
Accounts receivable from related parties 770,413 583,729
Inventories 199,262 166,137
Prepaid expenses and other current assets 181,302 129,718
----------- -----------
Total current assets 5,733,872 1,656,973
Property and equipment, net 18,195,849 18,503,231
Intangible assets, net 923,894 838,695
Goodwill, net 4,748,868 4,876,471
----------- -----------
Total assets $29,602,483 $25,875,370
=========== ===========
</TABLE>
See accompanying notes
Page 3 of 23 Pages
<PAGE> 4
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 1,159,842 $ 1,455,605
Accrued interest payable 106,065 182,966
Current portion of long-term debt 1,197,622 1,449,217
Current portion of long-term debt - related parties 2,119,994 464,863
Current maturities of capital lease obligations 31,630 31,630
----------- ------------
Total current liabilities 4,615,153 3,584,281
Long-term debt, less current portion 12,949,798 8,733,554
Long-term debt, less current portion - related parties 4,548,725 6,313,297
Long-term capital lease obligations, less current portion 94,781 110,242
Minority interest payable 93,653 43,669
Shareholders' Equity:
Preferred Stock, $.001 par value;
1,000,000 shares authorized; 375,000 shares issued 375 375
Common Stock, $.001 par value; 50,000,000 shares
authorized; 18,626,036 and 17,678,066 shares
issued and outstanding as of June 30, 1996 and
December 31, 1995, respectively 18,626 17,678
Additional paid-in capital 22,727,381 21,857,456
Accumulated deficit (15,180,929) (14,524,925)
Unrealized (loss) on investments (593) (593)
Foreign currency translation adjustment (264,487) (259,664)
----------- ------------
Total shareholders' equity 7,300,373 7,090,327
----------- ------------
Total liabilities and shareholders' equity $29,602,483 $ 25,875,370
=========== ============
</TABLE>
See accompanying notes
Page 4 of 23 Pages
<PAGE> 5
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- --------------------------------
1996 1995 1996 1995
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues:
Golf revenues $ 1,166,772 $ 1,226,543 $ 1,973,489 $ 2,705,792
Food and beverage revenues 220,609 262,927 354,552 594,723
Proshop revenues 121,088 150,333 201,134 304,432
Membership fees and dues 156,587 253,853 210,053 512,264
Resident membership fees 220,000 280,000 315,000 425,000
Management and design fees 430,404 51,379 917,232 130,912
Other 888 203 7,682 3,454
----------- ----------- ----------- -----------
Total operating revenues 2,316,348 2,225,238 3,979,142 4,676,577
Operating expenses:
Golf course operations 675,369 824,526 1,160,329 1,789,600
Cost of food and beverage sales 85,812 98,597 138,197 232,390
Cost of proshop sales 77,546 82,791 127,633 188,245
Marketing expenses 86,530 70,007 162,215 105,067
Management and design expenses 302,176 162,001 617,682 321,613
General and administrative expenses 667,416 392,589 1,408,956 903,839
Depreciation and amortization expense 376,306 276,334 759,194 599,973
----------- ----------- ----------- -----------
Total operating expenses 2,271,155 1,906,845 4,374,206 4,140,727
----------- ----------- ----------- -----------
Operating income (loss) 45,193 318,393 (395,064) 535,850
Other income (expense):
Interest expense (450,155) (322,554) (844,654) (715,507)
Interest and other income 628,892 11,037 633,698 18,203
----------- ----------- ----------- ------------
Net income (loss) before minority interest
and extraordinary item 223,930 6,876 (606,020) (161,454)
Minority interest expense --- --- (49,984) ---
----------- ----------- ----------- -----------
Income (loss) before extraordinary item 223,930 6,876 (656,004) (161,454)
Extraordinary loss --- (4,130,000) --- (4,130,000)
----------- ----------- ----------- -----------
Net income (loss) $ 223,930 $(4,123,124) $ (656,004) $(4,291,454)
=========== ========== =========== ===========
Income (loss) per share before
extraordinary item $ .01 $ --- $ (.04) $ (.01)
Extraordinary loss per share --- (.29) --- (.29)
----------- ----------- ----------- -----------
Net income (loss) per share $ .01 $ (.29) $ (.04) $ (.30)
=========== =========== =========== ===========
Weighted average number of shares
outstanding 18,112,800 14,180,100 17,900,900 14,101,800
=========== =========== =========== ===========
</TABLE>
See accompanying notes
Page 5 of 23 Pages
<PAGE> 6
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 17,678,066 $17,678 375,000 $ 375 $21,857,456 $(14,524,925)
Net loss (656,004)
Issuance of Common Stock in connection with
convertible debenture 922,970 923 819,950
Issuance of Common Stock in a connection with
settlement of litigation 25,000 25 49,975
Translation of foreign currency financial
statements
--------------------------------------------------------------------------
Balance at June 30, 1996 18,626,036 $18,626 375,000 $ 375 $22,727,381 $(15,180,929)
==========================================================================
<CAPTION>
Foreign
Currency Unrealized
Translation Gain (Loss) on
Adjustment Investments Total
--------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1995 $ (259,664) $ (593) $7,090,327
Net loss (656,004)
Issuance of Common Stock in connection with
convertible debenture 820,873
Issuance of Common Stock in a connection with
settlement of litigation 50,000
Translation of foreign currency financial
statements (4,823) (4,823)
-------------------------------------------
Balance at June 30, 1996 $ (264,487) $ (593) $7,300,373
===========================================
</TABLE>
See accompanying notes
Page 6 of 23 Pages
<PAGE> 7
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 223,930 $(4,123,124) $ (656,004) $(4,291,454)
Adjustment to reconcile net income (loss) to
net cash used in operating activities:
Extraordinary loss - disposition of courses --- 4,130,000 --- 4,130,000
Depreciation and amortization 376,306 276,334 759,194 599,973
Net change in other working capital items (788,261) (572,609) (970,950) (926,457)
----------- ----------- ----------- -----------
Net cash used in operating activities (188,025) (289,399) (867,760) (487,938)
Investing activities:
Purchases of property and equipment, net (61,994) (1,174,298) (152,079) (1,576,541)
Payments for loan and amortization costs (74,935) (87,937) (257,329) (87,937)
Other items (143,917) (150,520) (186,684) (359,111)
----------- ----------- ----------- -----------
Net cash used in investing activities (280,846) (1,412,755) (596,092) (2,023,589)
Financing activities:
Additions to long-term borrowings 145,924 1,933,009 5,685,409 2,310,800
Payments for long-term borrowings and capital leases (1,622,682) --- (2,024,783) (1,655,009)
Issuance of common stock 820,873 140,000 870,873 1,514,802
Proceeds on loans from officers and shareholders --- --- 179,121 500,000
----------- ----------- ----------- -----------
Net cash provided (used) by financing activities (655,885) 2,073,009 4,710,620 2,670,593
Effect of foreign currency exchange rate changes on cash 4,299 (38,702) (4,823) (47,846)
----------- ----------- ----------- -----------
Increase (decrease) in cash (1,120,457) 332,153 3,241,945 111,220
Cash at beginning of period 4,423,839 609,860 61,437 830,793
----------- ----------- ----------- -----------
Cash at end of period $ 3,303,382 $ 942,013 $ 3,303,382 $ 942,013
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 553,307 $ 202,000 $ 811,919 $ 474,139
=========== =========== =========== ===========
</TABLE>
See accompanying notes
Page 7 of 23 Pages
<PAGE> 8
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE A. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Brassie Golf Corporation (the "Company"), together with its
predecessors and subsidiaries, has engaged since 1988 in the design,
acquisition, development and management of private, semi-private and daily-fee
(i.e. "public") golf courses.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
of the Company have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-QSB and Rule 10-01 of Regulation S-X of the Securities and Exchange
Commission ("SEC"). Accordingly, the financial statements do not include all
of the information and footnotes required by generally accepted accounting
principles. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three months ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. The accompanying condensed consolidated financial
statements and notes thereto should be read in conjunction with the Company's
audited financial statements as of December 31, 1995 contained in its current
report on Form 10-K.
Revenue Recognition - Revenues of the Company include daily golf fees,
proshop merchandise sales and food and beverage sales. Golf fees include
revenue generated from green fees, cart fees and range fees. Revenues also
include sales of memberships and annual dues charged to members.
Golf fees, proshop merchandise sales and food and beverage sales are
recognized when received. Membership dues collected in advance are deferred as
"unearned income" and recognized over the period of prepayment. Membership
fees that are nonrefundable are recognized by the Company when received.
Goodwill - The Company has classified as goodwill the cost in excess
of the fair value of the net assets, including tax attributes of Summit, which
was acquired through a purchase transaction in June 1995. Goodwill is being
amortized on a straight-line basis over 20 years. Amortization charged to
continuing operations amounted to $65,600 for the three months ended June 30,
1996. No amortization expense in connection with goodwill was incurred in the
three- month period ended June 30, 1995.
Page 8 of 23 Pages
<PAGE> 9
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE A. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company carries its goodwill asset at its purchase price, less
amortized amounts, but subject to annual review for impairment. The Company's
policy for the valuation of goodwill is to calculate the undiscounted projected
future cash flows of Summit expected to be generated over the life of the
goodwill. This amount is then compared to the carrying value of the goodwill
to determine if the asset is impaired.
Income Taxes - The Company records income taxes pursuant to the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (SFAS No. 109). Under SFAS No. 109, deferred taxes are
provided for the difference between the tax and financial statement bases of
assets and liabilities, and a valuation allowance is established for deferred
tax assets that, based upon available evidence, are not expected to be
realized.
Net Loss Per Share - Net loss per share has been computed based on the
weighted average number of shares outstanding during the period presented.
Stock options and warrants are considered anti-dilutive and have not been
considered in the computations.
Reclassifications - Certain reclassifications have been made to the
prior periods' financial statements to conform to the classifications used in
1996. These reclassifications had no effect on net loss or shareholders'
equity as previously reported.
NOTE B. LONG-TERM DEBT
Long-term debt with financial institutions and other third
parties as of June 30, 1996 consists of the following:
<TABLE>
<S> <C>
Golf course development loan to St. James from bank,
payable in monthly principal installments of
$16,319, plus interest beginning August 1, 1995,
with the remaining principal balance and unpaid
interest due July 1, 2002; collateralized by land
and land improvements. Interest is payable at prime
(8.25% at June 30, 1996) plus 1.0%. $ 2,153,839
</TABLE>
Page 9 of 23 Pages
<PAGE> 10
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE B. LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
Golf course development loan to Laurel Valley from bank, payable in principal
payments of $250,000 due April and December 1996 and principal payments of
$83,333, due on April 30, July 30 and October 30, 1998, with remaining
principal balance and unpaid interest due October 30, 1998; collateralized by
land and land improvements. Interest is payable quarterly at prime (8.25% at
June 30, 1996) plus 1.5%. $ 1,750,000
Golf course development loan to Myrtle West from bank, payable in equal
principal payments of $83,333, due on each May 30, August 30 and November 30,
1994 through 1998, with remaining principal balance and unpaid interest due
November 30, 1998; collateralized by land and land improvements. Interest is
payable quarterly at prime (8.25% at June 30, 1996) plus 1.0%. 2,083,333
Golf course development loan to Curtis Park from bank, payable in monthly
principal payments of $31,875, April through November, 1996 through 2000,
with remaining principal balance and unpaid interest due on December 31,
2000; collateralized by leasehold interest in land and land improvements.
Interest is payable monthly at prime (8.25% at June 30, 1996) plus 1.0%. 2,454,375
Unsecured operating term loan from bank, with interest at 10.75%, payable in
monthly installments of $16,723, which includes principal and interest,
through January 1999. 438,319
</TABLE>
Page 10 of 23 Pages
<PAGE> 11
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE B. LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
Convertible 6% debentures due March 1, 1998, unless
converted into common stock, interest payable
incrementally upon conversions with the balance,
if any, at maturity. $ 4,650,000
Other notes payable 617,554
-----------
14,147,420
Less current portion 1,197,622
-----------
$12,949,798
===========
</TABLE>
Page 11 of 23 Pages
<PAGE> 12
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE B. LONG-TERM DEBT (CONTINUED)
Long-term debt with related parties as of June 30, 1996 consists of the
following:
<TABLE>
<S> <C>
Acquisition loan payable to a shareholder of Myrtle West with the entire
principal balance due February 28, 1999; collateralized by a mortgage on land
and land improvements; subordinated to bank loan; bearing no interest through
August 31, 1994, then 9.5% through maturity, payable within 90 days of each
calendar year-end subject to cash surpluses. $1,964,800
Golf Course development loan payable to a shareholder of Curtis Park; principal
due at maturity on June 30, 2001; collateralized by a leasehold interest in
land and land improvements; subordinated to bank loan; bearing no interest
through October 9, 1995, then 9.5% through maturity, payable quarterly. 1,758,962
Construction loan payable to a shareholder of Laurel Valley with entire
principal balance due April 1997, including interest at 10% which began
accruing in April 1993; collateralized by second mortgage on land and land
improvements. 2,119,994
Construction loan payable to a shareholder of St. James, payable in annual
principal payments of $100,000 beginning October 1997 with the remaining
principal balance and unpaid interest due in October 2000, collateralized by
land and improvements and various equipment, subordinated to bank loan, with
interest accruing at prime, adjusted annually (8.75% at October 1, 1995),
plus 2%, payable quarterly. 811,828
Other notes payable 13,135
----------
6,668,719
Less current portion 2,119,994
----------
$4,548,725
==========
</TABLE>
Page 12 of 23 Pages
<PAGE> 13
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE C. SHAREHOLDERS' EQUITY
On June 30, 1995 the Company issued 375,000 shares of preferred stock,
having a stated value of $10.00 and a $.001 par value, as partial consideration
for the Summit Merger. The preferred stock has been designated Junior non-
cumulative Convertible Preferred Stock ("Junior Preferred Stock"), with the
following provisions: 1) each share of Junior Preferred Stock is convertible
into five shares of common stock, or 1,875,000 common shares in the aggregate,
par value $.001; 2) the Junior Preferred Stock is convertible at the option of
the holder at any time for five years from closing of the Summit merger; 3) the
Junior Preferred Stock is redeemable at the option of the Company at any time
after (a) the Company's common stock trades at a price of $5.00 or higher for
30 consecutive trading days as quoted on the NASDAQ system; or (b) issuance of
additional Company common stock in excess of 25% of the shares then issued and
outstanding, i.e., from a merger of the Company, a public offering of its
common stock under a Registration under the Securities Act of 1993 or an
additional private placement offering through an underwriter; 4) the Junior
Preferred Stock is subordinate to future senior preferred shares that the
Company may later issue; 5) the Junior Preferred Stock shall not pay dividends
unless the Company fails to redeem the shares in accordance with the above
provisions, at which time the dividend will be paid at a rate of 5% from that
date; 6) the Junior Preferred Stock will have no voting rights on matters that
can be voted by the common stock and voting rights will exist only as to
preferences, rights, powers, priority or ranking of the Junior Preferred Stock;
and 7) in the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, after payment of the
debts and other liabilities of the Company, the holder of each share of Junior
Preferred Stock then outstanding shall be entitled to be paid out of any of the
assets or surplus funds of the Company (prior to and in preference to any
distribution to the common shareholders), an amount equal to $10.00 per share
with respect to any such share of Junior Preferred Stock. If assets of the
Company are not sufficient to satisfy the $10.00 per share distributions, then
the assets of the Company shall be distributed ratably to the Junior Preferred
shareholders in proportion to their respective distributive amounts.
On July 18, 1994, the Company increased the number of authorized
shares of common stock to 50,000,000 shares.
As of June 30, 1996, warrants to purchase 2,138,000 shares of the
Company's common stock were outstanding. These warrants have exercise prices
ranging from $2.00 to $3.25 per share; 100,000 warrants expire September 28,
1998; 238,000 warrants expire November 17, 1998; 150,000 warrants expire June
30, 1999; 1,400,000 warrants expire June 30, 2000, and 250,000 warrants expire
September 28, 2000.
Page 13 of 23 Pages
<PAGE> 14
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE C. SHAREHOLDERS' EQUITY (CONTINUED)
During the three-month period ended June 30, 1996, no warrants were
exercised. During the three-month period ended June 30, 1995, the holders of
warrants to purchase 100,000 shares of the common stock exercised their
warrants, for which the Company received $140,000 in cash.
On June 3, 1994, the Board of Directors and the stockholders of the
Company adopted the Brassie Golf Corporation 1994 Stock Option and Restricted
Stock Purchase Plan (the "Stock Option Plan") as an incentive for key
employees. The purchase price for any Stock Awards and the exercise price for
any Options may not be less than the fair market value for the common stock on
the date of grant. Unless otherwise agreed between the grantee and the
Company, the Stock Awards and Options expire 90 days after termination of the
grantee's relationship with the Company. At a meeting of the Option Committee
on June 30, 1995, and subject to consent of the aforesaid HIGSI grantees, the
Stock Awards and Options previously granted and outstanding were repriced at
$2.00 (the market trading price of the stock on the date of grant) and the
period for their exercise was extended to five years from their June 3, 1994
grant. Concurrently, the Option Committee granted further Options and Stock
Awards exercisable for five years from June 30, 1995 at an exercise price of
$2.00 to certain Directors and Officers of the Company and its subsidiaries.
Options Outstanding
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ----------------------
AVAILABLE NUMBER PRICE PER
FOR GRANT OF SHARES SHARE
------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1994 1,100,000 400,000
Options granted (986,750) 986,750 $2.00
Options canceled 104,225 (104,225) -
Options exercised - - -
---------------------------
Balances at December 31, 1995 217,475 1,282,525
---------------------------
Options granted - - -
Options canceled - - -
Options exercised - - -
---------------------------
Balances at June 30, 1996 217,475 1,282,525
===========================
</TABLE>
Page 14 of 23 Pages
<PAGE> 15
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
NOTE D. LEGAL PROCEEDINGS
In connection with the Company's February 21, 1996 Agreement in Principle
("AIP") with its three Pension Fund Partners, definitive agreements were
reached during the second quarter of 1996 with regards to two of the Company's
four golf courses. However, the Company's efforts to interpret the AIP and
negotiate with the Edmonton Pipe Industry Trust Fund ("Edmonton") regarding the
two other courses were unsuccessful. On May 31, 1996, Edmonton commenced an
action claiming breach of contract, specific performance, a constructive trust
and temporary and permanent injunctive relief. At a hearing conducted on July
12, 1996 in the Circuit Court in and for Hillsborough County, the judge granted
a preliminary injunction with respect to certain matters set forth in the AIP,
specifically those relating to a reallocation of ownership interests. The
Company filed a notice of appeal to this preliminary injunction on August 1,
1996 and will file an appeal brief by August 15. The Company continues to
negotiate with Edmonton regarding the AIP.
Page 15 of 23 Pages
<PAGE> 16
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Condensed Consolidated Financial Statements included herein for the
three and six-month periods ended June 30, 1996 and 1995 and for the years
ended December 31, 1995 and 1994 and the nine-month period ended December 31,
1993, included in the Company's 1995 report on Form 10-K.
Brassie Golf Corporation (the "Company") together with its
predecessors and subsidiaries, has engaged since 1988 in the design,
acquisition, development and management of private, semi-private and daily-fee
(i.e., "public") golf courses. The Company's portfolio currently consists of
31 owned, leased and managed golf courses: three owned golf courses in the
states of North Carolina (1) and South Carolina (2); one leased golf course in
Virginia, which opened for public play in June 1995; Hale Irwin Golf Services,
Inc., an international golf course design and management company based in St.
Louis, Missouri, and, as a result of the June 30, 1995 acquisition of Summit
Golf Corporation, a portfolio of 27 facilities under management contracts at
June 30, 1996, including private, semi-private and daily-fee golf courses in 10
states throughout the U.S. For purposes of this discussion and analysis, St.
James, Laurel Valley and Myrtle West, which were constructed or acquired by the
Company prior to 1994, and Curtis Park, constructed on land leased in April
1994 are referred to hereafter as "Owned" courses.
The Company's consolidated financial statements include the accounts
of the Company and all majority-owned subsidiaries. The Company acquired or
developed its four currently owned golf courses at varying times during the
financial statement periods presented herein. The following table indicates
the number of full months each course was operating during the respective
periods:
<TABLE>
<CAPTION>
Quarter Ended June 30,
---------------------
1996 1995
---- ----
<S> <C> <C> <C>
St. James (opened for play October 1991) 3 3
Laurel Valley (opened for play April 1993) 3 3
Myrtle West (acquired December 30, 1993) 3 3
Curtis Park (opened for play June 1995) 3 1
</TABLE>
Page 16 of 23 Pages
<PAGE> 17
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Three golf courses were acquired by the Company in a single
transaction during April 1994, and were transferred back to the previous owners
during May 1995. The operating results of these three facilities are included
only from the date of acquisition through the date of disposition and write off
in May 1995.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995
(A) Revenues
The Company derives its revenues primarily from golf fees (including
greens fees, range fees and cart fees), management and design fees, membership
fees and annual dues, pro shop sales and food and beverage sales.
The period-to-period increase (decrease) in each of the revenue
categories is as follows:
<TABLE>
<CAPTION>
Quarter Ended June 30
--------------------- Increase
1996 1995 (Decrease)
---------- ---------- ----------
<S> <C> <C> <C>
Golf Fees $1,166,772 $1,226,543 $ (59,771)
Design and Management Fees 430,404 51,379 379,025
Membership Fees and Annual Dues 376,587 533,853 (157,266)
Food & Beverage 220,609 262,927 (42,318)
Pro Shop Sales 121,088 150,333 (29,245)
Other Income 888 203 685
---------- ---------- ----------
$2,316,348 $2,225,238 $ 91,110
---------- ---------- ----------
</TABLE>
Page 17 of 23 Pages
<PAGE> 18
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
In the aggregate, the Company generated $2,316,348 in revenues during
the quarter ended June 30, 1996 compared to $2,225,238 during the quarter ended
June 30, 1995. The $91,110 increase is primarily due to $230,602 attributable
to Curtis Park which opened for play in June 1995 and $379,025 attributable to
an increase in design and management fees, substantially offset by $60,000 of
residential membership fees at St. James and $425,371 as a result of the
disposition of three previously owned courses.
In the aggregate, the Company generated $3,979,142 in revenues during
the six months ended June 30, 1996 compared to $4,676,577 during the six months
ended June 30, 1995. The $697,435 decrease is primarily due to $110,000 of
residential membership fees at St. James and $1,698,196 as a result of the
disposition of three previously owned courses, offset by $316,320 attributable
to Curtis Park which opened for play in June 1995 and $786,320 attributable to
an increase in design and management fees.
(B) Costs and Expenses
The Company's total operating expenses increased to $2,271,155 during
the three-month period ended June 30, 1996 from $1,906,845 during the quarter
ended June 30, 1995.
Of the $364,310 increase, approximately $227,000 was attributable to
Curtis Park, approximately $206,000 for Summit, and approximately $317,000 for
general and administrative expenses, offset by approximately $448,000 from the
disposition of the three previously owned courses.
The Company routinely evaluates the cost of operations at each of its
facilities and establishes budgeted amounts for each significant category of
expense in the areas of pro shop, food and beverage, golf course maintenance,
and general, selling and administrative expenses. Monthly, the Company
analyzes its actual versus budgeted results. Management anticipates that, as a
result of its ongoing review process, costs and expenses will decline as a
percent of revenues.
Golf course operations include the compensation and benefits costs of
course personnel and related payroll taxes, golf cart leases, equipment rental
and maintenance, clubhouse repairs and upkeep, insurance, utilities, chemicals,
seed and fertilizers, water, supplies and other miscellaneous costs incurred in
the operation of a golf course.
Generally, costs are expected to be higher during the first three
years of operation due to higher maintenance, advertising, and other start up
expenses; operating expenses are expected to stabilize after approximately the
initial three year period.
Page 18 of 23 Pages
<PAGE> 19
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses include management and
administrative compensation, related payroll taxes and benefits, professional
fees, including legal and accounting and other consultants, telephone,
utilities, insurance, other taxes, travel, meals and entertainment and office
expenses, including rents.
Interest expense increased from $322,554 during the three-month
period ended June 30, 1995 to $450,154 during the three-month period ended June
30, 1996. The increase of $127,600 is primarily due to $59,526 of interest for
Curtis Park operations and $76,955 for the convertible debentures, offset by
$27,970 from the disposition of the three previously owned courses. The prime
rate decreased from 9.0% at June 30, 1995 to 8.25% at June 30, 1996.
Interest and other income increased from $11,037 during the
three-month period ended June 30, 1995 to $628,892 during the three-month
period ended June 30, 1996. Of this $617,855 increase, approximately $580,000
in proceeds were received from a settlement of claims in connection with a
subsidiary's former disposition of securities; the remaining increase is
primarily due to higher returns on the Company's other investments.
(C) Extraordinary item
As reported in the Company's report on Form 8-K filed on July 6, 1995
and incorporated herein by reference, the Company incurred a loss of $4,130,000
in connection with the disposition and write off of three previously owned
courses during the three months ended June 30, 1995.
(D) Net Income (Loss)
For the quarter ended June 30, 1996, the Company had net income of
$223,930, an increase of $4,347,054 from the net loss of $4,123,124 for the
three-month period ended June 30, 1995. An extraordinary loss of $4,130,000
was recorded in the three months ending June 30, 1995 for the disposition of
previously owned courses. The remaining increase is attributable to the
reasons stated above.
(E) Inflation
Inflation has not had a material effect on the Company's operations
during the three-month periods ended June 30, 1996 or June 30, 1995.
Page 19 of 23 Pages
<PAGE> 20
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Historically, golf fees, membership fees and dues, pro shop sales,
food and beverage sales and management and design fees have been the principal
source of funds to pay the operating expenses of the Company. To fund
acquisitions and capital improvements, the Company is reliant upon long-term
borrowing and equity financing.
Working Capital
The Company had a surplus in working capital in the amount of
$1,118,719 as of June 30, 1996, compared to a working capital surplus of
$3,098,534 as of March 31, 1996 and a working capital deficiency of $1,927,308
as of December 31, 1995. The $5,025,842 increase in working capital through
March 1996 was primarily a result of $5,500,000 in proceeds for long term 6%
convertible debentures sold in March 1996 that were used to pay down a portion
of short term obligations. The reduction in working capital of $1,979,815 from
March 31, 1996 to June 30, 1996 relates substantially to $2,119,994 in debt
that is now classified as current portion of long-term debt. This debt, which
is due in April 1997 to a shareholder of Laurel Valley, was appropriately
classified as long-term debt as of March 31, 1996.
The total borrowings for the Company were $20,816,139 as of June 30,
1996 compared to $22,285,080 as of March 31, 1996 and $16,960,931 as of
December 31, 1995. The increase of $5,324,149 through March 1996 resulted
primarily from the long term 6% convertible debentures sold in March. The
reduction in borrowings of $1,468,941 from March 31, 1996 to June 30, 1996
resulted from the paydown of debt and the conversion of debentures into common
stock.
Proceeds from Developer's Resident Lot Sales
By agreement with developers of residential real estate developments
contiguous to certain golf courses constructed or acquired by the Company,
initial membership fees are paid to the Company by the developer on behalf of
the purchasing resident upon the closing of each lot sale pursuant to
negotiated or assumed agreements. Such arrangements are in effect at St. James
and Laurel Valley. Through June 19, 1995, the Company was required by its
secured lender at St. James to apply all such fees to reduce its bank debt upon
each payment thereof. During May 1995, the bank agreed to permit the Company
to retain the resident membership fees rather than apply them against the
outstanding loan balance. During the three months ended June 30, 1996, 44 lots
were sold by the developer at St. James, the proceeds of which increased cash
by $220,000, compared to 56 lots sold during the three-month period ended June
30, 1995, the proceeds of which reduced the bank debt by $220,000 and increased
cash by $60,000. As of June 30, 1996, the Company estimates that there will be
263 future residential lots to be sold, each of which when sold would generate
a $5,000 resident
Page 20 of 23 Pages
<PAGE> 21
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
membership fee under the agreement at St. James. Furthermore, there are
approximately 425 lots at Laurel Valley upon the sale of which future resident
membership fees may be in the range of $3,000 - $5,000 per lot. Although lot
sales have continued to close at St. James subsequent to June 1996, there can
be no assurance as to whether any additional lot sales will continue or, if
they do occur, over what period of time the membership fees paid at closing
will be received by the Company.
Page 21 of 23 Pages
<PAGE> 22
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See the footnotes to the Condensed Consolidated Financial Statements of the
Company included herein and the Consolidated Financial Statements of the
Company for the year ended December 31, 1995, incorporated herein by reference
in Form 10-K.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule (for SEC use only)
(b) Reports
None
Page 22 of 23 Pages
<PAGE> 23
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS THREE MONTHS ENDED JUNE 30,
1996 AND 1995
(Unaudited)
SIGNATURES
Pursuant to the requirements 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.
BRASSIE GOLF CORPORATION
/s/ Steve Tucker
--------------------------------------------
Steve Tucker, Controller
(Principal Financial and Accounting Officer)
Date: August 12, 1996
Page 23 of 23 Pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BRASSIE GOLF
CORPORATION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,303,382
<SECURITIES> 404,671
<RECEIVABLES> 1,645,255
<ALLOWANCES> 0
<INVENTORY> 199,262
<CURRENT-ASSETS> 5,733,872
<PP&E> 18,195,849
<DEPRECIATION> 0
<TOTAL-ASSETS> 29,602,483
<CURRENT-LIABILITIES> 4,615,153
<BONDS> 17,593,304
0
375
<COMMON> 18,626
<OTHER-SE> 7,281,372
<TOTAL-LIABILITY-AND-EQUITY> 29,602,483
<SALES> 555,686
<TOTAL-REVENUES> 3,979,142
<CGS> 265,830
<TOTAL-COSTS> 4,374,206
<OTHER-EXPENSES> (633,698)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 844,654
<INCOME-PRETAX> (656,004)
<INCOME-TAX> 0
<INCOME-CONTINUING> (656,004)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (656,004)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
