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, 1997; 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 (I.R.S. EmployerIdentification No.)
incorporation or organization)
One Tampa City Center, Suite 2550 Tampa, FL 33602
- ------------------------------------------------------------------------------
(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, 1997 there were 29,519,487 shares of the issuer's Common Stock,
$.001 par value, and 281,250 shares of the issuer's Preferred Stock, $.001 par
value outstanding.
Page 1 of 19
<PAGE>
BRASSIE GOLF CORPORATION
QUARTERLY REPORT FOR THE THREE AND SIX-MONTH
PERIODS ENDED JUNE 30, 1997
FORM 10-QSB
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Operations for the three-month and
six-month periods ended June 30, 1997 and 1996................................ 5
Condensed Consolidated Statements of Changes in Shareholders' Equity for the
six-month period ended June 30, 1997........................................... 6
Condensed Consolidated Statements of Cash Flows for the three-month and
six-month periods ended June 30, 1997 and 1996................................ 7
Notes to Condensed Consolidated Financial Statements........................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations .............................................................. 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 18
Item 2. Changes in Securities.......................................................... 18
Item 3. Defaults Upon Senior Securities................................................ 18
Item 4. Submission of Matters to a Vote of Securities Holders.......................... 18
Item 5. Other Information.............................................................. 18
Item 6. Exhibits and Reports on Form 8-K............................................... 18
Signatures............................................................................. 19
</TABLE>
Page 2 of 19
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------- ---------------
<S> <C> <C>
Current assets:
Cash $ 361,523 $ 806,079
Marketable equity securities 39,912 39,912
Trade accounts receivable, net 409,619 488,281
Inventories 177,093 133,365
Prepaid expenses and other current assets 48,609 135,114
---------------- ---------------
Total current assets 1,036,756 1,602,751
Equity investments in subsidiaries 149,603 150,000
Property and equipment, net 10,332,767 10,394,636
Accounts receivable from related parties 456,937 456,937
Intangible assets, net 763,975 868,500
Goodwill, net 609,545 626,245
---------------- ---------------
Total assets $ 13,349,583 $14,099,069
================ ===============
</TABLE>
See accompanying notes
Page 3 of 19
<PAGE>
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------------- ---------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 966,026 $ 773,798
Accrued interest payable 196,281
Income tax payable 189,712 197,712
Current portion of long-term debt 719,154 684,154
Current portion of long-term debt - related parties 100,000 100,000
Current maturities of capital lease obligations 41,598 34,598
--------------- ---------------
Total current liabilities 2,212,771 2,007,536
Accrued discount on convertible debentures 570,494 882,188
Long-term debt, less current portion 6,502,096 7,984,832
Long-term debt, less current portion - related parties 1,193,895 1,193,895
Long-term capital lease obligations, less current 68,251 75,643
portion
Minority interest payable 111,684 111,684
Shareholders' Equity:
Preferred Stock, $.001 par value;
1,000,000 shares authorized; 281,250 shares 281 375
issued and outstanding
Common Stock, $.001 par value; 50,000,000 shares
authorized; 29,519,487 shares issued and
outstanding 29,520 24,079
Additional paid-in capital 25,974,396 24,406,435
Accumulated deficit (23,234,527) (22,519,314)
Unrealized (loss) on investments (237) (237)
Foreign currency translation adjustment ( 79,041) (68,047)
--------------- ---------------
Total shareholders' equity 2,690,392 1,843,291
--------------- ---------------
Total liabilities and shareholders' equity $13,349,583 $14,099,069
=============== ===============
</TABLE>
See accompanying notes
Page 4 of 19
<PAGE>
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operating revenues:
Golf revenues $ 551,327 $ 640,514 $ 994,819 $ 999,880
Food and beverage revenues 159,439 155,767 256,851 239,326
Proshop revenues 84,308 79,807 137,675 129,411
Membership fees and dues 246,867 152,798 338,094 205,489
Resident membership fees 100,000 220,000 130,000 315,000
Management and design fees 332,267 475,404 711,771 1,007,232
Other 698 7 5,957 3,751
-------------- --------------- ------------- --------------
Total operating revenues 1,474,906 1,724,297 2,575,167 2,900,089
Operating expenses:
Golf course operations 380,278 371,850 687,040 615,278
Cost of food and beverage sales 60,145 61,879 101,201 96,222
Cost of proshop sales 55,668 49,951 91,969 80,370
Marketing expenses 81,474 61,354 149,304 130,163
Management and design expenses 247,340 276,098 620,566 617,682
General and administrative expenses 500,741 632,082 942,563 1,293,314
Depreciation and amortization expense 175,499 260,463 370,006 527,508
-------------- --------------- ------------- --------------
Total operating expenses 1,501,145 1,713,677 2,962,649 3,360,537
-------------- --------------- ------------- --------------
Operating income (loss) (26,239) 10,620 (387,482) (460,448)
Other income (expense):
Interest expense (176,189) (272,959) (354,661) (483,561)
Loss on equity investment in
subsidiaries (19,890) (42,787) - (182,099)
Interest and other income 4,694 628,892 26,930 633,698
-------------- --------------- ------------- --------------
Net income (loss) before minority interest (217,624) 323,766 (715,213) (492,410)
Minority interest expense - - - (49,984)
-------------- --------------- ------------- --------------
Net income (loss) $ (217,624) $ 323,766 $ (715,213) $ (542,394)
============== =============== ============= ==============
Net income (loss) per share $ (.01) $ .02 $ (.03) $ (.03)
============== =============== ============= ==============
Weighted average number of shares
outstanding 28,773,200 18,112,800 28,114,200 17,900,90
============== =============== ============= ==============
</TABLE>
See accompanying notes
Page 5 of 19
<PAGE>
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Preferred
Shares Amount Shares Amount
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 24,078,630 $24,079 375,000 $ 375
Net loss
Conversion of Preferred Stock to Common Stock 468,750 469 (93,750) (94)
Issuance of Common Stock in connection with
convertible debenture 4,972,107 4,972
Translation of foreign currency financial
statements
----------- ---------- ---------- ----------
Balance at June 30, 1997 29,519,487 $29,520 281,250 $ 281
=========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Foreign
Additional Unrealied Currency
Paid-in Accumulated Gain on Translation
Capital Deficit Investment Adjustment Total
----------- -------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $24,406,435 $ (22,519,314) $(237) $(68,047) $ 1,843,291
Net loss (715,213) (715,213)
Conversion of Preferred Stock to Common Stock (375) 0
Issuance of Common Stock in connection with
convertible debenture 1,568,336 1,573,308
Translation of foreign currency financial
statements (10,994) (10,994)
----------- -------------- ----------- ----------- -------------
Balance at June 30, 1997 $25,974,396 $ (23,234,527) $(237) $(79,041) $2,690,392
=========== ============== =========== =========== =============
</TABLE>
See accompanying notes
Page 6 of 19
<PAGE>
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30,1997 June 30, 1996 June 30, 1997 June 30, 1996
-------------- ------------- --------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(217,624) $323,766 $(715,213) $(542,394)
Adjustment to reconcile net income (loss) to net cash
(used) provided in operating activities:
Loss on equity investments in subsidiaries 19,890 42,787 - 182,099
Depreciation and amortization 175,499 260,463 370,006 527,508
Net change in other working capital items 559,777 (808,963) 284,673 (986,330)
Accounts receivable from related parties - (143,917) - (186,684)
-------------- ------------- ---------------- --------------
Net cash (used) provided in operating activities 537,542 (325,864) (60,534) (1,005,801)
Investing activities:
Purchases of property and equipment, net (184,426) (56,994) (214,738) (120,952)
Change in loan and amortization costs - (74,935) 27,827 (257,329)
Additional investment in subsidiaries (2,364) (293,789) 397 (343,902)
-------------- ------------- ---------------- --------------
Net cash (used) provided in investing activitiy (186,790) (425,718) (186,514) (722,183)
Financing activities:
Additions to long-term borrowings 50,300 29,411 50,300 5,529,411
Payments for long-term borrowings and
capital leases (331,211) (1,281,231) (1,498,428) (1,660,001)
Issuance of common stock 203,078 820,873 1,573,308 870,873
Change in accrued discount on convertible
debentures (39,099) - (311,694) -
Proceeds on loans from officers and shareholders - - - 179,121
-------------- ------------- ---------------- --------------
Net cash provided (used) by financing activit (116,932) (430,947) (186,514) 4,919,404
Effect of foreign currency exchange rate changes on
cash 30 4,299 (10,994) (4,823)
-------------- ------------- ---------------- --------------
Increase (decrease) in cash 233,850 (1,178,230) (444,556) 3,186,597
Cash at beginning of period 127,673 4,417,435 806,079 52,608
-------------- ------------- ---------------- --------------
Cash at end of period $361,523 $3,239,205 $361,523 $3,239,205
============== ============= ================ ==============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $142,091 $392,629 $284,751 $543,604
============== ============= ================ ==============
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
During the six months ended June 30, 1997, preferred stock and additional
paid in capital declined by $94 and $375
respectively, and common stock increased by $469 when 93,750 shares of
preferred stock was converted into 468,750 shares of common stock.
See accompanying notes
Page 7 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(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 and six months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. 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, 1996 contained in its current Annual
Report on Form 10-KSB.
Investment in Subsidiaries - The Company holds majority interest in the golf
courses at Curtis Park (100%) and St. James (80%) which are included in the
Company's condensed consolidated financial statements. The Company also holds
30% investments in two golf courses, Laurel Valley and Myrtle West, which are
accounted for using the equity method of accounting.
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.
Page 8 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE A. Business of the Company and Significant Accounting Policies (continued)
Amortization charged to continuing operations amounted to $1,700 for the
three-month period ended June 30, 1997, and $65,600 for the three-month period
ended June 30, 1996.
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 Income ( Loss) Per Share - Net income (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.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of primary and fully diluted earnings per share for these
quarters is not expected to be material.
Reclassifications - Certain reclassifications have been made to the
prior periods' financial statements to conform to the classifications used in
1997. These reclassifications had no effect on net income (loss) or
shareholders' equity as previously reported.
Page 9 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
NOTE B. Long-Term Debt
<S> <C>
Long-term debt with financial institutions and other third parties as of June 30
1997 consists of the following:
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
(8.5% at June 30, 1997) plus 1.0%. $ 1,992,896
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 (8.5% at June 30, 1997) plus 1.0%. 2,245,747
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. 277,741
Convertible 6% debentures due March 1, 1998, unless converted into common stock,
interest payable incrementally upon conversions with the balance, if any, at
maturity. 2,269,995
Other notes payable 434,871
-----------
7,221,250
Less current portion 719,154
-----------
$ 6,502,096
===========
</TABLE>
Page 10 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
NOTE B. Long-Term Debt (continued)
<S> <C>
Long-term debt with related parties as of June 30, 1997 consists of the
following:
Loan payable to a related party, principal due at maturity on June 30, 2001,
collateralized by a leasehold interest in land and land improvements,
subordinated to bank loan, with interest payable quarterly at 9.5%. $ 469,000
Construction loan payable to a shareholder of St. James, payable in annual
principal payments of $100,000 beginning October 1996 with the remaining
principal balance and unpaid interest due on October 2000, collateralized by
land and improvements and various equipment, subordinated to bank loan, with
interest accruing at prime, adjusted annually (8.25% at October 1, 1996),
plus 2%, payable quarterly. 811,828
Other notes payable 13,067
-----------
1,293,895
Less current portion 100,000
-----------
$ 1,193,895
===========
</TABLE>
Page 11 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE C. Shareholders' Equity
As of June 30, 1997, warrants to purchase 5,188,000 shares of the
Company's common stock were outstanding. These warrants have exercise prices
ranging from $0.75 to $3.25 per share; 100,000 warrants expire September 28,
1998; 238,000 warrants expire November 17, 1998; 50,000 warrants expire December
5, 1998; 150,000 warrants expire June 30, 1999; 1,000,000 warrants expire
January 24, 2000; 2,000,000 warrants expire February 4, 2000; 1,400,000 warrants
expire June 30, 2000, and 250,000 warrants expire September 28, 2000.
During the three-month and six-month periods ending June 30, 1997 and
1996, no warrants were issued or exercised.
During the three-month and six-month periods ending June 30, 1997 and
1996, no employee stock options were issued, exercised, redeemed, or cancelled.
NOTE D. Subsequent Event
On July 16, 1997, the Company sold its golf course management operations
to Granite Golf Group, Inc., of Phoenix, Arizona. To accomplish this
transaction, the Company sold all the outstanding capital stock of two of its
subsidiaries, Club Operations and Property Management, Inc., a Florida
corporation, and Brassie Golf Management Services, Inc., a Delaware corporation
to Granite. The sales price for the subsidiaries was comprised of $600,000 cash
at closing and, at the Company's sole election, either (i) $250,000 cash to be
paid within one year of closing or (ii) $500,000 of Granite common stock, one
half of which is to be paid one year from closing and one half to be paid two
years from closing. Refer to the Form 8-K filed July 31, 1997 incorporated
herein by reference for additional information.
Page 12 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
Item 2. Managements 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, 1997 and 1996 and for the years ended
December 31, 1996 and 1995, included in the Company's 1996 Annual Report on Form
10-KSB.
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 at June 30, 1997 consists of 25 owned, leased
and managed golf courses: a majority owned golf course in North Carolina, two
minority investments in golf courses in South Carolina; a 100% owned subsidiary
that leases a golf course in Virginia; Hale Irwin Golf Services, Inc., an
international golf course design company based in St. Louis, Missouri, and, as a
result of the June 30, 1995 acquisition of Summit Golf Corporation, a portfolio
of 21 facilities under management contracts at June 30, 1997, including private,
semi-private and daily-fee golf courses in 10 states throughout the U.S.
The following table indicates the number of full months each owned or
partially owned course was operating during the respective periods:
<TABLE>
Percentage Ownership Quarter Ended June 30,
as of 6/30/97 1997 1996
<S> <C> <C> <C>
Curtis Park (opened for play June 1995) 100% 3 3
St. James (opened for play October 1991) 80% 3 3
Laurel Valley (opened for play April 1993) 30% 3 3
Myrtle West (acquired December 30, 1993) 30% 3 3
</TABLE>
As a result of the change in the Company's percentage of ownership interests at
the Laurel Valley and Myrtle West golf courses effective February 29, 1996, the
financial results for the three months and six months ending June 30, 1996 were
restated to report those investments under the equity method of accounting.
Curtis Park and St. James continue to be included in the condensed consolidated
financial statements as subsidiaries of the Company. See Item 1.c. of the
Consolidated Financial Statements as reported in the Company's December 31, 1996
Annual Report on Form 10-KSB and incorporated herein by reference for a
description of the Company's ownership interests in each of the aforementioned
golf courses.
Page 13 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
RESULTS OF OPERATIONS
Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996
(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
1997 1996 (Decrease)
------------- -------------- ----------
<S> <C> <C> <C>
Golf Fees $ 551,327 $ 640,514 $ (89,187)
Design and Management Fees 332,267 475,404 (143,137)
Membership Fees and Annual Dues 346,867 372,798 (25,931)
Food & Beverage 159,439 155,767 3,672
Pro Shop Sales 84,308 79,807 4,501
Other Income 698 7 691
------------- -------------- -----------
$1,474,906 $ 1,724,297 $ (249,391)
</TABLE>
Page 14 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
In the aggregate, the Company generated $1,474,906 in revenues during
the quarter ended June 30, 1997 compared to $1,724,297 during the quarter ended
June 30, 1996. This decrease of $249,391 is primarily due to a $143,137 decrease
in design and management fees and a $89,187 decrease in golf fees.
(B) Costs and Expenses
The Company's total operating expenses decreased to $1,501,145 during
the three-month period ended June 30, 1997 from $1,713,677 during the quarter
ended June 30, 1996.
The decrease of $212,532 was primarily attributable to a decline in
general and administrative expenses of $131,341 and a decline in depreciation
and amortization of $84,964.
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.
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 decreased from $272,959 during the three-month period
ended June 30, 1996 to $176,189 during the three-month period ended June 30,
1997. The decrease of $96,770 is primarily due to a $41,778 decrease in interest
expense related to conversions of the convertible debenture into common stock
and a $33,369 decrease as a result of refinancing the second mortgage at Curtis
Park. The prime rate increased from 8.25% at June 30, 1996 to 8.50% at June 30,
1997.
Page 15 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Interest and other income decreased from $628,892 during the three-month
period ended June 30, 1996 to $4,694 during the three-month period ended June
30, 1997. Of this $624,198 decrease, approximately $580,000 relates to proceeds
received in 1996 from a settlement of claims in connection with a subsidiary's
former disposition of securities; the remaining decrease is attributable to
lower returns on the Company's other investments due to lower available cash
balances in 1997.
For the quarter ended June 30, 1997, the Company incurred a loss on
equity investments in subsidiaries of $19,890, an improvement of $22,897 over
the $42,787 loss for the quarter ended June 30, 1996.
(C) Net Loss
For the quarter ended June 30, 1997, the Company recognized a net loss
of $217,624 as compared to a net income of $323,766 for the three-month period
ended June 30, 1996. The decrease is attributable to the reasons stated above.
(D) Inflation
Inflation has not had a material effect on the Company's operations
during the three or six-month periods ended June 30, 1997 or June 30, 1996.
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 working capital deficiency of $1,176,015 as of June
30, 1997, as compared to a working capital deficiency of $808,090 as of March
31, 1997 and $404,785 as of December 31, 1996. The working capital deficiency
increased by $403,305 from December 31, 1996 to March 31, 1997 relates primarily
to the net loss for the three-month period ended March 31, 1997 and an increase
in accounts receivable and a decrease in accounts payable due to seasonality at
the golf courses. The reduction in working capital of $367,925 from March 31,
1997 to June 30, 1997 relates primarily to a $282,830 increase in accounts
payable and accrued expenses and $65,720 in other current liabilities.
The total borrowings for the Company were $8,515,145 as of June 30, 1997
compared to $8,804,025 as of March 31, 1997 and $9,962,881 as of December 31,
1996. The reduction in borrowings of $1,158,856 from December 31, 1996 to March
31, 1997 consists of $1,042,441 due to the conversion of debentures into common
stock and $116,415 in payments on bank loans. The reduction in borrowings from
March 31, 1997 to June 30, 1997 of $288,880 consists of $153,602 due to the
conversion of debentures into common stock and $135,278 in payments on bank
loans.
Page 16 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Proceeds from Developer's Resident Lot Sales
By agreement with developers of residential real estate developments
contiguous to the St. James golf course, 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.
During the three months
ended June 30, 1997, 20 lots were sold by the developer at St. James, the
proceeds of which increased cash by $100,000, compared to 44 lots sold during
the three-month period ended June 30, 1996, the proceeds of which increased cash
by $220,000. As of June 30, 1997, the Company estimates that there will be 158
future residential lots to be sold, each of which when sold would generate a
$5,000 resident membership fee under the agreement at St. James. Although lot
sales have continued to close at St.
James subsequent to June 1997,
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 17 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of the Consolidated Financial Statements of the Company for the year
ended December 31, 1996 for a description of legal proceedings to which the
Company
is a party.
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
See Form 8-K filed July 31, 1997 incorporated herein by reference.
Page 18 of 19
<PAGE>
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(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/Stephen A. Tucker
Stephen A. Tucker
Chief Financial Officer
Date: August 13, 1997
Page 19 of 19
<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE
27 Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 361523
<SECURITIES> 39912
<RECEIVABLES> 409619
<ALLOWANCES> 0
<INVENTORY> 177,093
<CURRENT-ASSETS> 1036756
<PP&E> 10332767
<DEPRECIATION> 0
<TOTAL-ASSETS> 13349583
<CURRENT-LIABILITIES> 2212771
<BONDS> 7764242
0
281
<COMMON> 29520
<OTHER-SE> 2660591
<TOTAL-LIABILITY-AND-EQUITY> 13349583
<SALES> 394526
<TOTAL-REVENUES> 2575167
<CGS> 193170
<TOTAL-COSTS> 2962649
<OTHER-EXPENSES> (26930)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354661
<INCOME-PRETAX> (715213)
<INCOME-TAX> 0
<INCOME-CONTINUING> (715213)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (715213)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
