<PAGE> 1
BRASSIE GOLF CORPORATION
QUARTERLY REPORT FOR THE THREE-MONTH
PERIOD ENDED MARCH 31, 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 March 31, 1997 and December 31, 1996 . . . . 3
Condensed Consolidated Statements of Operations for the three-month periods
ended March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Condensed Consolidated Statements of Changes in Shareholders' Equity
for the three-month period ended March 31, 1997 . . . . . . . . . . . . . . . . . . . . 6
Condensed Consolidated Statements of Cash Flows for the three-month
periods ended March 31, 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> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ -------------
<S> <C> <C>
Current assets:
Cash $ 127,673 $ 806,079
Marketable equity securities 39,912 39,912
Trade accounts receivable, net 671,670 488,281
Inventories 157,665 133,365
Prepaid expenses and other current assets 59,211 135,114
------------- ------------
Total current assets 1,056,131 1,602,751
Equity investments in subsidiaries 167,129 150,000
Property and equipment, net 10,286,343 10,394,636
Accounts receivable from related parties 456,937 456,937
Intangible assets, net 799,772 868,500
Goodwill, net 611,245 626,245
------------- ------------
Total assets $ 13,377,557 $ 14,099,069
============= ============
</TABLE>
See accompanying notes
Page 3 of 19
<PAGE> 3
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 683,196 $ 773,798
Accrued interest payable 172,561 217,274
Income tax payable 189,712 197,712
Current portion of long-term debt 684,154 684,154
Current portion of long-term debt - related parties 100,000 100,000
Current maturities of capital lease obligations 34,598 34,598
------------ ------------
Total current liabilities 1,864,221 2,007,536
Accrued discount on convertible debentures 609,593 882,188
Long-term debt, less current portion 6,825,976 7,984,832
Long-term debt, less current portion - related parties 1,193,895 1,193,895
Long-term capital lease obligations, less current portion 67,282 75,643
Minority interest payable 111,684 111,684
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; 28,446,753 shares issued and
outstanding 28,447 24,079
Additional paid-in capital 25,772,297 24,406,435
Accumulated deficit (23,016,903) (22,519,314)
Unrealized (loss) on investments (237) (237)
Foreign currency translation adjustment (79,073) (68,047)
------------ ------------
Total shareholders' equity 2,704,906 1,843,291
------------ ------------
Total liabilities and shareholders' equity $ 13,377,557 $ 14,099,069
============ ============
</TABLE>
See accompanying notes
Page 4 of 19
<PAGE> 4
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1997
------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating revenues:
Golf revenues $ 443,492 $ 359,366
Food and beverage revenues 97,412 83,559
Proshop revenues 53,367 49,604
Membership fees and dues 91,227 52,691
Resident membership fees 30,000 95,000
Management and design fees 379,504 531,828
Other 5,259 3,744
----------- -----------
Total operating revenues 1,100,261 1,175,792
Operating expenses:
Golf course operations 306,762 243,428
Cost of food and beverage sales 41,056 34,343
Cost of proshop sales 36,301 30,419
Marketing expenses 67,830 68,809
Management and design expenses 373,226 341,584
General and administrative expenses 441,822 661,232
Depreciation and amortization expense 194,507 267,045
----------- -----------
Total operating expenses 1,461,504 1,646,860
----------- -----------
Operating loss (361,243) (471,068)
Other income (expense):
Interest expense (178,472) (210,602)
Income from (loss on) equity
investments in subsidiaries 19,890 (139,312)
Interest and other income 22,236 4,806
----------- -----------
Net loss before minority interest (497,589) (816,176)
Minority interest expense - (49,984)
----------- -----------
Net loss $ (497,589) $ (866,160)
=========== ===========
Net loss per share $ (.02) $ (.05)
=========== ===========
Weighted average number of shares
outstanding 27,447,900 17,689,100
=========== ==========
</TABLE>
See accompanying notes
Page 5 of 19
<PAGE> 5
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
Issuance of Common Stock in connection with
convertible debenture 4,368,123 4,368
--------------------------------------------------------------------
Translation of foreign currency financial statements
Balance at March 31, 1997 28,446,753 $28,447 375,000 $ 375
====================================================================
</TABLE>
<TABLE>
<CAPTION> Foreign
Additional Currency Unrealized
Paid-in Accumulated Translation Gain on
Capital Deficit Adjustment Investment Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $24,406,435 $ (22,519,314) $ (68,047) $(237) $ 1,843,291
Net loss (497,589) (497,589)
Issuance of Common Stock in connection with
convertible debenture 1,365,862 1,370,230
Translation of foreign currency financial statements (11,026) (11,026)
--------------------------------------------------------------------
Balance at March 31, 1997 $25,772,297 $ (23,016,903) $(79,073) $(237) $ 2,704,906
====================================================================
</TABLE>
See accompanying notes
Page 6 of 19
<PAGE> 6
BRASSIE GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (497,589) $(866,160)
Adjustment to reconcile net loss to
net cash (used) provided in operating activities:
Income from investments in subsidiaries (19.890) 139,312
Depreciation and amortization 194,507 267,045
Net change in other working capital items (275,104) (177,367)
Accounts receivable from related parties - (42,767)
---------- ---------
Net cash (used) provided in operating activities (598,076) (679,937)
Investing activities:
Sales (purchases) of property and equipment, net 27,827 (63,958)
Change in loan and amortization costs (30,312) (182,394)
Additional investment in subsidiaries 2,761 (50,113)
---------- ---------
Net cash provided (used) in investing activities 276 (296,465)
Financing activities:
Additions to long-term borrowings - 5,500,000
Payments for long-term borrowings and capital leases (1,167,217) (378,770)
Issuance of common stock 1,370,230 50,000
Changes in accrued discount on convertible debentures (272,595) -
Proceeds on loans from officers and shareholders - 179,121
---------- ----------
Net cash provided (used) by financing activities (69,582) 5,350,351
Effect of foreign currency exchange rate changes on cash (11,024) (9,122)
Increase (decrease) in cash (678,406) 4,364,827
Cash at beginning of period 806,079 52,608
---------- ----------
Cash at end of period $ 127,673 $4,417,435
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 102,891 $ 150,975
========== ==========
</TABLE>
See accompanying notes
Page 7 of 19
<PAGE> 7
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 months ended March 31, 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> 8
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
NOTE A. BUSINESS OF THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Amortization charged to continuing operations amounted to $15,000 for the three
months ended March 31, 1997, and $65,600 in the three-month period ended March
31, 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 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.
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 loss or shareholders'
equity as previously reported.
Page 9 of 19
<PAGE> 9
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<TABLE>
NOTE B. LONG-TERM DEBT
<S> <C>
Long-term debt with financial institutions and other third
parties as of March 31, 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
March 31, 1997) plus 1.0%. $ 2,041,855
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 March 31, 1997) plus 1.0%. 2,309,497
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. 319,370
Convertible 6% debentures due March 1, 1998, unless converted
into common stock, interest payable incrementally
upon conversions with the balance, if any, at maturity. 2,423,597
Other notes payable 415,811
----------
Less current portion 7,510,130
684,154
----------
$6,825,976
==========
</TABLE>
Page 10 of 19
<PAGE> 10
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<TABLE>
NOTE B. LONG-TERM DEBT (CONTINUED)
<S> <C>
Long-term debt with related parties as of March 31, 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
----------
Less current portion 1,293,895
100,000
----------
$1,193,895
==========
</TABLE>
Page 11 of 19
<PAGE> 11
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
NOTE C. SHAREHOLDERS' EQUITY
As of March 31, 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 periods ending March 31, 1997 and 1996, no
warrants were exercised.
During the three-month periods ending March 31, 1997 and 1996, no
employee stock options were issued, exercised or redeemed.
Page 12 of 19
<PAGE> 12
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(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 month periods ended March 31, 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 currently 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 March
31, 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>
<CAPTION>
Quarter Ended March 31,
Percentage Ownership -----------------------
as of 3/31/97 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 ending March 31, 1996 are 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> 13
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH 31, 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 March 31
--------------------------- Increase
1997 1996 (Decrease)
----------- ---------- ----------
<S> <C> <C> <C>
Golf Fees $ 443,492 $ 359,366 $ 84,126
Design and Management Fees 379,504 531,828 (152,324)
Membership Fees and Annual Dues 121,227 147,691 (26,464)
Food & Beverage 97,412 83,559 13,853
Pro Shop Sales 53,367 49,604 3,763
Other Income 5,259 3,744 1,515
----------- ---------- ---------
$ 1,100,261 $1,175,792 $ (75,531)
</TABLE>
Page 14 of 19
<PAGE> 14
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 $1,100,261 in revenues during
the quarter ended March 31, 1997 compared to $1,175,792 during the quarter
ended March 31, 1996. This decrease of $75,531 is primarily due to a $152,324
decrease in design and management fees offset by a $84,126 increase in golf
fees.
(B) Costs and Expenses
The Company's total operating expenses decreased to $1,461,504 during
the three-month period ended March 31, 1997 from $1,646,860 during the quarter
ended March 31, 1996.
Of the $185,356 decrease, $219,410 was attributable to general and
administrative expenses and $72,538 to depreciation and amortization, offset
by an increase of $63,334 for golf course operations and $31,642 for management
and design expenses.
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 $210,602 during the three-month
period ended March 31, 1996 to $178,472 during the three-month period ended
March 31, 1997. The decrease of $32,130 is primarily due to a $36,723
decrease in interest expense as a result of refinancing the second mortgage at
Curtis Park. The prime rate increased from 8.25% at March 31, 1996 to 8.50% at
March 31, 1997.
Page 15 of 19
<PAGE> 15
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Interest and other income increased from $4,806 during the three-month
period ended March 31, 1996 to $22,236 during the three-month period ended
March 31, 1997.
For the quarter ended March 31, 1997, the Company incurred a gain on
equity investments in subsidiaries of $19,890, an improvement of $159,202 over
the $139,312 loss for the quarter ended March 31, 1996.
(C) Net Loss
For the quarter ended March 31, 1997, the Company had net loss of
$497,589 an improvement of $368,571 from the net loss of $866,160 for the
three-month period ended March 31, 1996. The increase is attributable to the
reasons stated above.
(D) Inflation
Inflation has not had a material effect on the Company's operations
during the three-month periods ended March 31, 1997 or March 31, 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 $808,090 as of March
31, 1997, as compared to a working capital deficiency of $404,785 as of
December 31, 1996. The reduction in working capital of $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 total borrowings for the Company were $8,804,025 as of March 31,
1997 compared to $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.
Page 16 of 19
<PAGE> 16
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS THREE MONTHS ENDED MARCH 31,
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 March 31, 1997, 6 lots were sold by the developer at St.
James, the proceeds of which increased cash by $30,000, compared to 19 lots sold
during the three-month period ended March 31, 1996, the proceeds of which
increased cash by $95,000. As of March 31, 1997, the Company estimates that
there will be 178 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
March 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> 17
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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
None
Page 18 of 19
<PAGE> 18
BRASSIE GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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/Steve Tucker
------------------------------------
Steve Tucker, Controller
(Principal Financial and
Accounting Officer)
Date: May 15, 1997
Page 19 of 19
<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 MARCH 31, 1997.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 127,673
<SECURITIES> 39,912
<RECEIVABLES> 671,670
<ALLOWANCES> 0
<INVENTORY> 157,665
<CURRENT-ASSETS> 1,056,131
<PP&E> 10,286,343
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,377,557
<CURRENT-LIABILITIES> 1,864,221
<BONDS> 8,087,153
0
375
<COMMON> 28,447
<OTHER-SE> 2,676,084
<TOTAL-LIABILITY-AND-EQUITY> 13,377,557
<SALES> 150,779
<TOTAL-REVENUES> 1,100,261
<CGS> 77,357
<TOTAL-COSTS> 1,461,504
<OTHER-EXPENSES> (42,126)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 178,472
<INCOME-PRETAX> (497,589)
<INCOME-TAX> 0
<INCOME-CONTINUING> (497,589)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (497,589)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
