UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
|X| Quarterly report pursuant to Section 13 or 15 (d) of the Securities and
Exchange Act of 1934 for the quarterly period ended June 30, 1998; 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
DIVOT GOLF CORPORATION
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1781650
- -------------------------------- ------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
201 N. Franklin Street, Suite 200 Tampa, FL 33602
- ------------------------------------------------------------------------------
(Address of principal executive offices)
(813) 222-0611
- ------------------------------------------------------------------------------
(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 July 30, 1998 there were 3,408,442 shares of the issuer's Common Stock, $.001
par value, and 5,730 shares of the issuer's Preferred Stock, $.001 par value
outstanding.
Transitional Small Business Disclosure Format Yes |_| No |X|
Page 1 of 23
<PAGE>
DIVOT GOLF CORPORATION
QUARTERLY REPORT FOR THE THREE AND SIX-MONTH
PERIODS ENDED JUNE 30, 1998
FORM 10-QSB/A
TABLE OF CONTENTS
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations for the three-month and
six-month periods ended June 30, 1998 and 1997................................ 5
Condensed Consolidated Statements of Changes in Shareholders' Equity for the
six-month period ended June 30, 1998........................................... 6
Condensed Consolidated Statements of Cash Flows for the three-month and
six-month periods ended June 30, 1998 and 1997................................ 7
Notes to Condensed Consolidated Financial Statements........................... 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations ...............................................................14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..............................................................21
Item 2. Changes in Securities..........................................................21
Item 3. Defaults Upon Senior Securities................................................21
Item 4. Submission of Matters to a Vote of Securities Holders..........................21
Item 5. Other Information..............................................................23
Item 6. Exhibits and Reports on Form 8-K...............................................23
Signatures.............................................................................24
</TABLE>
Page 2 of 24
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DIVOT GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30,1998 December 31,
(Unaudited) 1997
---------------- ---------------
<S> <C> <C>
Current assets:
Cash $ 46,021 $ 53,266
Cash - restricted - 135,019
Trade accounts receivable, net 1,591,240 352,018
Accounts receivable from related parties 253,294 160,543
Inventories 1,106,471 31,611
Prepaid expenses and other current assets 559,521 1,038,588
Total current assets 3,556,547 1,771,045
Property and equipment, net 3,769,758 5,287,805
Other assets, net 758,447 583,400
Goodwill, net 2,697,312 331,250
---------------- ---------------
Total assets $ 10,782,064 $7,973,500
================ ===============
</TABLE>
See accompanying notes
Page 3 of 24
<PAGE>
DIVOT GOLF CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1998 December 31,
(Unaudited) 1997
--------------- ---------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 1,421,818 $ 772,460
Accrued interest payable 57,503 32,751
Income tax payable - -
Short-term debt 3,145,562 -
Foreign income tax payable 181,793 181,793
Current portion of long-term debt 12,000 757,023
Current maturities of capital lease obligations 13,760 21,510
Accrued discount on convertible debentures 20,630 104,037
Total current liabilities 4,853,066 1,869,574
--------------- ---------------
Long-term debt, less current portion 434,649 3,477,256
Long-term capital lease obligations, less current portion 24,366 35,785
Other long term liabilities 99,949 -
Shareholders' Equity:
Preferred Stock, $.001 par value;
1,000,000 shares authorized; 286,980 and 283,170
shares issued and outstanding at June 30, 1998 and
December 31, 1997, respectively (aggregate
liquidation preference $7,458,750 and $1,920,000) 287 283
Common Stock, $.001 par value; 200,000,000 shares
authorized; 3,408,442 and 2,842,167 shares issued
and outstanding June 30, 1998 and December 31,
1997, respectively 3,408 2,842
Additional paid-in capital 38,258,881 32,083,757
Accumulated deficit (32,572,821) (29,176,276)
Less cost of Convertible Preferred Stock held in
treasury, 281,250 shares (210,937) (210,937)
Foreign currency translation adjustment ( 108,784) (108,784)
--------------- ---------------
Total shareholders' equity 5,370,034 2,590,885
--------------- ---------------
Total liabilities and shareholders' equity $10,782,064 $7,973,500
=============== ===============
</TABLE>
See accompanying notes
Page 4 of 24
<PAGE>
DIVOT GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1997 June 30,1998 June 30, 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Operating revenues:
Sales $ 2,602,894 $ - $ 2,602,894 $ -
Golf revenues 1,021 551,327 102,478 994,819
Food and beverage revenues 241 159,439 13,992 256,851
Proshop revenues 20 84,308 9,558 137,675
Membership fees and dues - 246,867 5,784 338,094
Resident membership fees - 100,000 - 130,000
Management and design fees 11,437 332,267 18,375 711,771
Other 5,856 698 5,856 5,957
-------------- --------------- ------------- --------------
Total operating revenues 2,621,469 1,474,906 2,758,937 2,575,167
Operating expenses:
Cost of sales 1,578,042 - 1,578,042 -
Golf course operations 923 380,278 71,290 687,040
Cost of food and beverage sales 287 60,145 23,255 101,201
Cost of proshop sales 4,689 55,668 56,296 91,969
Marketing expenses - 81,474 3,956 149,304
Management and design expenses - 247,340 - 620,566
General and administrative expenses 1,726,446 304,289 2,631,126 632,459
Professional fees, including legal
and accounting 104,316 196,452 410,595 310,104
Depreciation and amortization expense 50,585 175,499 136,506 370,006
-------------- --------------- ------------- --------------
Total operating expenses 3,465,288 1,501,145 4,911,066 2,962,649
-------------- --------------- ------------- --------------
Operating loss (843,819) (26,239) (2,152,129) (387,482)
Other income (expense):
Interest expense (441,214) (176,189) (646,746) (354,661)
Amortization of debt discount on
convertible debt (94,149) - (354,932) -
Gain on sale of golf course 523,799 - 523,799 -
Write-off of deposit - (100,000)
Loss on equity investment in subsidiaries - (19,890) - -
Interest and other income 39,518 4,694 62,155 26,930
-------------- --------------- ------------- --------------
Net loss $ (815,865) $ (217,624) $ (2,667,853) $ (715,213)
============== =============== ============= ==============
Net loss per share $ (.25) $ (.11) $ (.83) $ (.38)
============== =============== ============= ==============
Weighted average number of shares
outstanding 3,315,520 1,918,213 3,209,110 1,874,280
============== =============== ============= ==============
</TABLE>
See accompanying notes
Page 5 of 24
<PAGE>
DIVOT GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30,1998 June 30,1997 June30,1998 June30,1997
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(815,865) $(217,624) $(2,667,853) $(715,213)
Adjustment to reconcile net loss t o
net cash (used) provided in operating activities:
Gain on sale of assets (523,799) - (523,799) -
Loss on equity investments in subsidiaries - 19,890 - -
Depreciation and amortization 50,585 175,499 136,506 370,006
Amortization of debt discount 94,149 - 354,932 -
Amortization of loan costs 213,199 - 294,972 -
Net change in other working capital items (1,045,771) 559,777 (428,826) 284,673
Accounts receivable from related parties (227,936) - (92,751) -
------------ -------------- -------------- -------------
Net cash (used) provided in operating activities (2,255,438) 537,542 (2,926,819) (60,534)
Investing activities:
Payments for intangibles, net (1,525,018) (1,525,018)
Change in restricted cash 126,012 - 135,019 -
Sales (Purchases) of property and equipment, net 3,417,250 (184,426) 1,420,497 (214,738)
Change in loan and amortization costs - - - 27,827
Additional investment in subsidiaries - (2,364) - 397
------------ -------------- -------------- -------------
Net cash (used) provided in investing activities 2,018,244 (186,790) 30,498 (186,514)
Financing activities:
Additions to short term borrowings 2,065,562 3,565,562
Payments for short term borrowings (1,500,000) (1,500,000)
Additions to long-term borrowings - 50,300 1,025,976 50,300
Payments for long-term borrowings and capital
leases (3,776,898) (331,211) (3,966,125) (1,498,428)
Issuance of common stock 15,000 203,078 15,750 1,573,308
Change in accrued discount on convertible
debentures - (39,099) - (311,694)
Issuance of preferred stock 3,627,913 - 3,747,913 -
------------ -------------- -------------- -------------
Net cash provided (used) by financing activities 431,577 (116,932) 2,889,076 (186,514)
Effect of foreign currency exchange rate changes on
cash - 30 - (10,994)
------------ -------------- -------------- -------------
Increase (decrease) in cash 194,383 233,850 (7,245) (444,556)
Cash (overdraft) at beginning of period (148,362) 127,673 53,266 806,079
------------ -------------- -------------- -------------
Cash at end of period $46,021 $361,523 $46,021 $361,523
============ ============== ============== =============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $241,809 $142,091 $327,022 $284,751
============ ============== ============== =============
</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 6,250 shares of preferred stock was converted into 31,250
shares of common stock. See accompanying notes
Page 6 of 24
<PAGE>
DIVOT GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Preferred Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
--------------- ----------- ----------- ---------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 2,842,167 $2,842 283,170 $ 283 $32,083,757 $ (29,176,276)
Net loss (2,667,852)
Issuance of Warrannts in connection
with payment of debt 525,000
Issuance of Common Stock in connection
with a private placement 51,933 52 15,648
Issuance of Preferred Stock in
connection with a private placement 3,975 4 3,747,909
Preferred Stock dividend - conversion
discount 728,693 (728,693)
Issuance of Common Stock in connection
with Warrant exercise 94,304 94 (94)
Issuance of Common Stock in connection
with convertible debentures 310,276 310 811,153
Issuance of Common Stock in connection
with conversion of Preferred Stock 46,429 46 (165) 0 (46)
Issuance of Common Stock in connection
with the acquisition of Talisman
Tools, Inc. 10,000 10 46,865
Issuance of Common Stock in connection
with the acquisition of
Miller Golf,Inc 53,333 54 299,946
--------------- ----------- ----------- ---------- --------------- ----------------
Balance at June 30, 1998 3,408,442 $3,408 286,980 $ 287 $38,258,881 $ (32,572,821)
=============== =========== =========== ========== =============== ================
</TABLE>
Page 7 of 24
<PAGE>
DIVOT GOLF CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Continued)
(Unaudited)
<TABLE>
<CAPTION>
Convertible Foreign
Preferred Currency
Treasury Stock Translation
Shares Amount Adjustment Total
---------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 (281,250) $ (210,937) $(108,784) $ 2,590,885
Net loss (2,667,852)
Issuance of Warrannts in connection
with payment of debt 525,000
Issuance of Common Stock in connection
with a private placement 15,750
Issuance of Preferred Stock in
connection with a private placement 3,747,913
Preferred Stock dividend - conversion
discount 0
Issuance of Common Stock in connection
with Warrant exercise 0
Issuance of Common Stock in connection
with convertible debentures 811,463
Issuance of Common Stock in connection
with conversion of Preferred Stock 0
Issuance of Common Stock in connection
with the acquisition of Talisman
Tools, Inc 46,875
Issuance of Common Stock in connection
with the acquisition of
Miller Golf, Inc 300,000
---------- ------------- --------------- -------------
Balance at June 30, 1998 (281,250) $ (210,937) $(108,784) $5,370,034
========== ============= =============== =============
</TABLE>
See accompanying notes
Page 8 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
NOTE A. Business of the Company and Significant Accounting Policies
Description of Business
Divot Golf Corporation f/k/a 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 currently is engaged in the
development and marketing of golf-related businesses, and holds certain
licensing rights in the United States and internationally.
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, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. 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, 1997 contained in its current Annual
Report on Form 10-KSB.
Investment in Subsidiaries - The Company includes The Gauntlet at Curtis Park, a
wholly owned subsidiary, in its condensed consolidated financial statements,
which disposed of its golf course assets, see Note F - Disposition of Assets .
The Company also holds minority interests in two golf courses in South Carolina,
which the company disposed of in April 1998.
Acquisitions - Acquisitions are accounted for under the purchase method of
accounting, in accordance with generally accepted accounting principles, see
Note E - Acquisitions.
Revenue Recognition - Revenues of the Company include daily golf fees, proshop
merchandise sales, food and beverage sales and sales of golf accessories. 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. Revenues from the
sale of golf accessories are recognized at the time merchandise is shipped to
the customer.
Goodwill - The Company has classified, as goodwill, the cost in excess of the
fair value of the net assets acquired, which were acquired through various
purchase transactions.
Page 9 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
NOTE A. Business of the Company and Significant Accounting Policies (continued)
Goodwill is being amortized on a straight-line basis over 15-20 years.
Amortization charged to continuing operations amounted to $33,435 for the three
months ended June 30, 1998.
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 the investment 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 in accordance with the
Statement of Financial Accounting Standards No. 128, "Earnings Per Share," based
on the weighted average number of shares outstanding during the period
presented. Stock options, warrants and convertible securities are considered
anti-dilutive and have not been considered in the computations.
NOTE B. Long-Term Debt
Long-term debt with financial institutions and other
third parties as of June 30, 1998 consists of the following:
6% convertible debentures due December 31, 1998, unless
converted into common stock, interest payable incrementally
upon conversions with the balance, if any, at maturity, net $ 76,167
of unamortized discounts of $123,013.
Other notes payable 370,482
---------
446,649
Less current portion 12,000
---------
$ 434,649
=========
NOTE C. Short-Term Debt
Line of credit, secured by inventory, accounts receivable,
fixtures, machinery and equipment. Interest paid monthly
at 1% over the bank's prime. $1,077,322
Page 10 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
C. Short-Term Debt (Continued)
Line of credit, secured by Parcel 11-A land at the World
Golf Village. Interest paid monthly at 10.6% 688,240
Short term loans related to certain acquisitions (see Note E
- Acquisitions). 1,080,000
----------
$3,145,562
==========
NOTE D. Shareholders' Equity
Effective June 16, 1998, the Board of Directors declared a reverse stock split
of 15 to 1 shares of the Company's common stock to holders of record on June 16,
1998. Common stock issued and additional paid-in capital as of December 31, 1997
have been restated to reflect this split. All share and per share data,
including stock option plan and warrant information, is stated to reflect the
split.
Effective April 1998, the Company increased the number of common shares
authorized from 50 million to 200 million.
As of June 30, 1998, warrants to purchase 1,537,684 shares of the Company's
Common Stock were outstanding as follows:
# WARRANTS ISSUED EXPIRATION DATE EXERCISE PRICE
----------------- ----------------- --------------
6,667 September 28, 1998 $36.00
15,867 November 17, 1998 $36.00
3,333 December 5, 1998 $15.00
10,000 June 30, 1999 $30.00
66,667 January 20, 2000 $11.25-22.50
60,000 June 30, 2000 $36.00
16,667 September 28, 2000 $36.00
666,667 November 18, 2000 $ 2.00
230,000 December 3, 2000 $15.00
56,666 January 28, 2001 $ 3.00
181,818 April 2, 2002 $ 6.00
133,333 January 28, 2003 $ 2.81
90,000 January 28, 2003 $ 3.00
---------------
1,537,685
===============
During the six months ended June 30, 1998, 280,000 warrants were issued in
payment of various debts issued during the period and 176,755 warrants were
issued in connection with the issuance of preferred stock, in connection with a
private placement. During the same period, 134,751 warrants were exercised in a
cash-less transaction for 94,304 shares of common stock. During the same period
in 1997, no warrants were exercised.
Page 11 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
NOTE D. Shareholders' Equity (Continued)
During the quarter ended June 30, 1998, the Company sold an additional 3,975
shares of preferred stock for $4.0 million, less fees of approximately $300,000.
In conjunction with the discount allowed on the conversion of the Preferred
Stock into common stock, the Company has recorded dividends of $728,693. Through
June 30, 1998, holders of 165 shares of the 1997 Preferred converted their 1997
Preferred into 46,429 shares of the Company's Common Stock. Additionally, at
June 30, 1998, there were approximately $90,000 of unpaid dividends on the
Company's preferred stock. This amount has been recorded as an adjustment to
liquidation value of the shares.
During the quarter ended June 30, 1998, certain holders of convertible debt
converted approximately $811,463 of notes and unpaid interest into 310,276
shares of common stock. The Company also issued 53,333 shares of common stock
with a fair market value of approximately $300,000 as a part of the acquisition
of Miller Golf, Inc. Stock Option Plan
During April 1998, the Board of Directors and shareholders approved the
formation of the Brassie Golf Corporation 1998 Stock Option Plan (the "1998
Plan") for the purpose of attracting and retaining certain key employees of the
Company. The 1998 Plan provides that an aggregate of 1,500,000 of the Company's
authorized shares be reserved for future issuance. In the case of initial
grants, the exercise price will be fixed by the Board of Directors on the date
of grant.
On June 15, 1998, the Company issued a total of 733,333 options to certain
officers and key employees of the Company under the 1998 Plan These options have
a exercise price of $2.8125 per share, which equals the fair value of the stock
price on the date of grant.
NOTE E. Acquisitions
During the quarter ended June 30, 1998, the Company completed the following
acquisitions:
MILLER GOLF, INC.
On April 8, 1998, the Company completed its $4.3 million acquisition of all the
issued and outstanding stock of Miller Golf, Inc. ("Miller"), a Massachusetts
corporation. The Miller stock was acquired from its shareholders, Robert
Marchetti, Louis Katon, and John Carroll, for a combination of $3.0 million in
cash, $1.0 million in notes payable to the sellers and $300,000 of the Company's
common stock for a total of 53,333 shares which, in the aggregate, had a fair
market value of $300,000 at the date of closing. The sellers' notes payable are
due on September 30, 1998 and accrue interest at 8% per annum and are secured by
a pledge of the common stock of Miller. A Form 8-K was filed on February 12,
1998 describing the terms of this transaction.
To obtain the funds necessary to complete this transaction, the Company issued
$3.0 million of convertible notes. These convertible notes were secured by a
subordinated pledge of the common stock of Miller, which matured on December 31,
1999, and accrued interest at 7% per annum, payable quarterly beginning on July
1, 1998. The notes were convertible into shares of the Company's common stock at
the lessor of $7.50 per share or 75% of the average closing bid price of the
common stock during the last five trading days prior to conversion. The
convertible note holders also received warrants to purchase 98,182 shares of
common stock at $7.50 per share.
Page 12 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
NOTE E. Acquisitions (continued)
On May 31 and June 9, 1998, the holders of these convertible debentures and
warrants exchanged the debt and warrants for 3,000 shares of the 1997 Preferred
and warrants to purchase approximately 133,000 shares of the Company's Common
Stock at $15.00 per share, exercisable for three years from the date of
issuance.
DIVOT GOLF CORPORATION
On April 15, 1998, the Company completed its $500,000 stock acquisition of Divot
Golf Corporation ("Divot"), a Florida corporation. The Divot stock was acquired
from its sole shareholder, Joseph R. Cellura, for a combination of (i)$300,000
in cash and (ii) a short term promissory note in the principal amount of
$200,000 (the "Note"). The Note provides for interest accruing at 6% per annum,
payable quarterly beginning June 30, 1998, with all principal and unpaid
interest due on October 15, 1998. The assets of Divot include its name, certain
patent and licensing rights, and molds for producing a divot repair tool.
Mr. Cellura serves as Director, Chairman of the Board, and Chief Executive
Officer of the Company. The Board believes that the terms of this transaction
are commercially reasonable.
TALISMAN TOOLS, INC.
On April 20, 1998, the Company completed its $101,875 acquisition of all of the
issued and outstanding stock of Talisman Tools Incorporated ("Talisman"), a
Rhode Island corporation. The Talisman stock was acquired from its sole
shareholders, Daniel S. Shedd and Dixon Newbold for a combination of (i) two
short-term, non-interest bearing promissory notes in the aggregate amount of
$55,000 payable on May 20, 1998 and (ii) $46,875 of the Company's common stock
(10,000 shares valued at the date of closing). Talisman is a manufacturer of
high-quality greens repair tools. The assets of Talisman include a pending
patent on the specialized divot repair tool and the proprietary process of
producing the divot repair tool.
As a result of the acquisitions that have occurred subsequent to the close of
the quarter ended June 30, 1998, the Company has redefined its business strategy
out of the golf course operation and into the development of golf related
business and licensing rights.
NOTE F. Disposition of Assets
GAUNTLET AT CURTIS PARK
On April 2, 1998, the Company sold its leasehold interest in the golf course
assets at The Gauntlet at Curtis Park for $5,400,000 of which approximately
$4,800,000 was used to reduce the Company's debt. The net realized gain on the
sale of the golf course was approximately $524,000.
Page 13 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(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, 1998 and 1997 and for the years ended December
31, 1997 and 1996, included in the Company's 1997 Annual Report on Form 10-KSB.
Prior to July 1, 1997, the Company was primarily engaged in the design,
ownership and management of golf courses. In order to capitalize on the growth
in the golf products and accessories industry and the experience of its new
management, on July 1, 1997, the Company commenced a corporate restructuring
plan that included selling its golf course ownership and design businesses and
acquiring businesses engaged in the development, licensing, and marketing of
golf-related products and services. Since November 1997, the Company has
acquired Divot Golf Corporation, a designer and supplier of golf products;
Miller Golf, Inc., a supplier of high-quality golf accessory products; and
Talisman Tools Incorporated, a manufacturer of high-quality greens repair tools.
The Company has also acquired two parcels of land located within the World Golf
Village, a destination golf resort currently under construction by third
parties, south of Jacksonville, Florida.
The Gauntlet at Curtis Park golf course, operated through a wholly owned
subsidiary of the Company, continues to be included in the condensed
consolidated financial statements as of June 30, 1998.
RESULTS OF OPERATIONS
Quarter Ended June 30, 1998 Compared to Quarter Ended June 30, 1997
In the aggregate, the Company generated $2,621,469 in revenues during the three
months ended June 30, 1998 compared to $1,474,906 during the three months ended
June 30, 1997. This increase of $1,146,563, or 78% is attributed to $2,602,894
of revenue from the operations of the Company's newly acquired subsidiary Miller
Golf, Inc. ("Miller"), offset by a decrease in golf course revenues of
$1,456,331 related primarily to the disposition of the Gauntlet at St. James and
Gauntlet at Curtis Park golf courses in November, 1997 and April, 1998 and the
sale of the management division in July, 1997. Until the Company can more fully
implement its business strategies, no assurance can be given that the Company's
revenues will continue to increase.
Despite the 78% increase in revenues, the Company's total operating expenses
increased by $1,964,143, or 131%, to $3,465,288 during the three month period
ended June 30, 1998. The increase is due to a combination of a $247,340 decrease
attributed to design expense, an $81,474 decrease in marketing and golf course
activities, a decrease of $490,192 in golf course operating expense attributed
to the sale of the golf courses, a decrease of $92,136 in professional fees and
a $124,914 decrease in depreciation and amortization, which resulted primarily
from the sale of the design division and the golf course operations. These
decreases were offset by an increase of $1,578,042 of manufacturing costs
related to the Miller revenues and $1,422,157 in general and administrative
expenses of which $830,711 relates to Miller and $591,446 relates directly to
the hiring of key employees necessary to facilitate the execution of ongoing
business activities.
Page 14 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
As noted under "Management's Discussion and Analysis of Financial Condition and
Results of Operations --Recent Developments -- Sale of Curtis Park," the Company
disposed of its remaining interest in golf courses on April 2, 1998. At that
time, the Company recorded a gain of approximately $524,000 for the quarter
ended June 30, 1998. Golf course operations included in the historical financial
statements included 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 the golf course. The Company evaluated the cost of operations at
its facility and established 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 analyzed
its actual versus budgeted results.
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 by 150% from $176,189 during the three-month period
ended June 30, 1997 to $441,214 during the three-month period ended June 30,
1998. The increase of $265,025 is primarily due to an increase in borrowings,
which the Company required to acquire a parcel of land., as more fully described
under "-- Recent Developments," and the amortization of $150,000 of financing
costs related to the borrowings.
During the quarter ended June 30, 1998, the Company charged to amortization
expense $94,149 of debt discount because the holders converted certain debt
instruments.
Interest and other income increased from $4,694 during the three-month period
ended June 30, 1997 to $39,518 during the three-month period ended June 30,
1998.
For the quarter ended June 30, 1998, the Company had a net loss of $815,865, an
increase of $598,241 from the net loss of $217,624 for the three-month period
ended June 30, 1997. The increase is attributable to the reasons stated above,
namely, a substantial decrease in revenues resulting from the disposition of
operating assets and an increase, due to the restructuring, in general and
administrative expenses that offset the decrease in operating expenses related
to the disposed properties.
Inflation did not have a material effect on the Company's operations during the
three-month periods ended June 30, 1998 or June 30, 1997.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
In the aggregate, the Company generated $2,758,937 in revenues during the six
months ended June 30, 1998 compared to $2,575,167 during the six months ended
June 30, 1997. This increase of $183,770, or 7% is attributed to $2,602,894 of
revenue from the operations of the Company's newly acquired subsidiary Miller
Golf, Inc. ("Miller"), offset by a decrease in of golf course revenues of
$2,419,124 related primarily to the disposition of the Gauntlet at St. James and
Gauntlet at Curtis Park golf courses in November, 1997 and April, 1998 and the
sale
Page 15 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
of the management division in July, 1997. Until the Company can more fully
implement its business strategies, no assurance can be given that the Company's
revenues will continue to increase.
Despite the 7% increase in revenues, the Company's total operating expenses
increased by $1,948,417, or 66%, to $4,911,066 during the six month period ended
June 30, 1998. The increase is due to a combination of a $620,566 decrease
attributed to design expense, a $145,348 decrease in marketing and golf course
activities, a decrease of $729,369 in golf course operating expense attributed
to the sale of the golf courses, and a $233,500 decrease in depreciation and
amortization, which resulted primarily from the sale of the design division and
the golf course operations. These decreases were offset by an increase of
$1,578,042 of manufacturing costs related to the Miller revenues and $1,998,667
in general and administrative expenses of which $830,711 relates to Miller and
$591,446 relates directly related to the hiring of key employees necessary to
facilitate the execution of ongoing business activities. These decreases were
offset by an increase of $1,167,956 in general and administrative expenses
directly related to the hiring of key employees necessary to facilitate the
execution of ongoing business activities and an increase of $100,491 of
professional fees, which were primarily legal and accounting fees incurred in
connection with the Company's efforts towards complying with the Securities and
Exchange Commission and NASDAQ and other costs incurred to pursue acquisitions
and financing alternatives, some of which were unsuccessful. No assurance can be
given that future efforts to acquire other businesses or properties or to raise
additional capital will be successful.
As noted under "Management's Discussion and Analysis of Financial Condition and
Results of Operations --Recent Developments -- Sale of Curtis Park," the Company
disposed of its remaining interest in golf courses on April 2, 1998. At that
time, the Company recorded a gain of approximately $524,000. Golf course
operations included in the historical financial statements included 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 the golf course. The
Company evaluated the cost of operations at its facility and established
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 analyzed its actual versus
budgeted results.
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 by 82% from $354,661 during the six month period
ended June 30, 1997 to $646,746 during the six month period ended June 30, 1998.
The increase of $292,085 is primarily due to an increase in borrowings, which
the Company required to acquire a parcel of land., as more fully described under
"-- Recent Developments," and the amortization of $150,000 of financing costs
related to the borrowings.
During the six months ended June 30, 1998, the Company charged to amortization
expense $354,661 of debt discount because the holders converted certain debt
instruments.
Page 16 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
During the six months ended June 30, 1998, the Company forfeited a $100,000
deposit on an unsuccessful acquisition and incurred another $60,000 in related
costs that the Company has written off.
Interest and other income increased from $26,930 during the three-month period
ended June 30, 1997 to $62,155 during the six month period ended June 30, 1998.
For the six months ended June 30, 1998, the Company had a net loss of
$2,667,853, an increase of $1,952,640 from the net loss of $715,213 for the six
month period ended June 30, 1997. The increase is attributable to the reasons
stated above, namely, a substantial decrease in revenues resulting from the
disposition of operating assets and an increase, due to the restructuring, in
general and administrative expenses that offset the decrease in operating
expenses related to the disposed properties.
Inflation did not have a material effect on the Company's operations during the
six month periods ended June 30, 1998 or June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Historically, golf revenues, resident membership fees, membership sales and
annual dues, pro shop revenue, food and beverage revenue and management and
design fees have been the principal source of funds to pay the operating
expenses of the Company. As of April, 1998, the Company had disposed of all of
its interests in golf courses. This effectively eliminated the primary source of
the Company's revenues. The Company has reorganized and refocused its
operations. Currently, however, the Company does not have sufficient operations
to fund its activities or its strategic plan. In the short-term, therefore, the
Company will be dependent on additional infusions of capital or debt to fund its
operations. And in the foreseeable future, the Company will continue to rely on
long-term borrowing and equity financing to fund acquisitions and capital
improvements. The Company cannot predict at what point in time it will be able
to fund its working capital needs out of funds generated from current
operations.
Working Capital
As noted above, the Company is not generating sufficient revenues from
its operations to fund its activities and therefore is dependent on additional
financing from external sources. This fact raises substantial doubt about the
Company's ability to continue as a going concern. The Company expects to raise
additional amounts from private placements or registered public offerings of its
securities in 1998. If the Company is successful in raising additional capital
in 1998, management believes that the Company will have adequate resources to
continue to meet its working capital requirements to pay its current debt
obligations, fund capital improvements and expand and develop businesses. There
is no assurance that such additional funding will be completed. The inability to
obtain such financing would have a material adverse effect on the Company.
The Company had a working capital deficiency of $1,296,519 as of June
30, 1998, as compared to a working capital deficiency of $98,529 as of December
31, 1997. The reduction in working capital of $1,197,990 from December 31, 1997
to June 30, 1998 relates primarily to the net loss for the six month period
ended June 30, 1998
Page 17 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
offset by an increase in working capital of approximately $1.0 million from the
proceeds of the sale of its leasehold interest in the golf course assets at the
Gauntlet at Curtis Park.
On April 2, 1998, the Company used approximately $4,800,000 of the
proceeds from the sale of its leasehold interest in the golf course assets at
the Gauntlet at Curtis Park to reduce its debt, which resulted in a decrease in
its working capital deficit of approximately $1,000,000. See "- Recent
Developments - Sale of Curtis Park."
On May 8, 1998, the Company secured a working capital revolving line of
credit of up to $1,100,000, due May 10, 1999 with interest at 10.6% per annum,
secured by Parcel 11-A land at the World Golf Village, which reduced bank lines
of credit by approximately $675,000.
The total borrowings for the Company were $3,592,211 as of June 30,
1998 compared to $4,234,279 as of December 31, 1997. The net decrease in
borrowings of $642,068 from December 31, 1997 to June 30, 1998 consists
primarily of to the conversion of approximately $315,000 of convertible
debentures and use of the proceeds from the Curtis Park sale.
The Company commenced a private placement offering in December 1997 of
the 1997 Preferred for $1.92 million, less associated costs of $165,000 to
secure such funding. The 1997 Preferred was offered for a price of $15,000 per
unit. One hundred twenty-eight units (128) were sold, which equates to 1,920
shares of 1997 Preferred. Each unit consisted of 15 Preferred Shares and 667
warrants to purchase common shares. Each preferred share has a liquidation value
of $1,000 and each warrant is exercisable immediately for a period of 3 years to
purchase one share of common stock for $15.00 each.
Through June 30, 1998, 265 units, or 3,975 shares of 1997 Preferred and
176,755 warrants to purchase Common Stock at $15.00 per share, were issued for
approximately $4.0 million, less fees of approximately $300,000. Of the 265
units, 200 units were issued in exchange for $3.0 million of convertible
debentures. See "-- Recent Developments -- Miller Golf Acquisition". In
conjunction with the discount allowed on the conversion of the Preferred Stock
into common stock, the Company has recorded dividends of $728,693. Through June
30, 1998, holders of 165 shares of the 1997 Preferred converted their 1997
Preferred into 46,429 shares of the Company's Common Stock.
Through June 30, 1998, holders of warrants associated with the convertible
debentures exercised 134,751 warrants in a cashless exercise and received 94,304
shares of Common Stock. The Company is currently negotiating with the holders of
the remainder of these warrants to substitute approximately 667,000 warrants
with an exercise price of $2.00 per share for the remaining warrants.
Use of Funds
From the proceeds obtained through the private placement of preferred
stock, the sale of businesses, and the sale of interests in its golf course
assets, the Company is attempting to position itself to execute its new business
plan.
Page 18 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
The Company has used these proceeds in a variety of acquisitions designed
to capitalize on the growth in the golf products and accessories industry and
the experience of its new management. See " -- Recent Developments."
RECENT DEVELOPMENTS
World Golf Village Developments
The World Golf Village, a golf resort currently under development by
third parties south of Jacksonville, Florida, is expected to open in phases,
with the first phase having opened in May, 1998. In December 1996, the Company
acquired Parcel 2 for approximately $475,000 and on January 16, 1998 acquired
Parcel 11-A at the World Golf Village. The 11-A parcel was acquired for total
consideration of approximately $1,850,000. The Company plans to develop the
World Golf Village Spa (the "Spa") and the Bungalows at World Golf Village (the
"Bungalows") on parcel 11-A.
Sale of Curtis Park
In a closing on April 2, 1998, the Company sold its leasehold interest
in the Gauntlet at Curtis Park golf course to KSL Fairways, Inc. This was the
only remaining golf course interest held by the Company, and this sale concluded
the Company's previous strategy of golf course ownership. The interest was sold
for $5,400,000.
Miller Golf Acquisition
On April 8, 1998, the Company completed its $4.3 million stock
acquisition of Miller Golf, Inc. ("Miller"), a Massachusetts corporation (the
"Miller Golf Transaction"). Miller is a supplier of high-quality golf
accessories such as bag tags, divot repair tools and towels. The Miller stock
was acquired from its stockholders, Robert Marchetti, Louis Katon, and John
Carroll, for a combination of $3.0 million in cash, $1.0 million in notes
payable to the sellers and $300,000 of the Company's common stock (53,333 shares
valued at the fair market value of the common stock at the date of closing). The
notes payable to the sellers are due on September 30, 1998, accrue interest at
8% per annum, and are secured by a pledge of the common stock of Miller.
To obtain the funds necessary to complete this transaction, the Company
issued $3.0 million of convertible notes. These convertible notes were secured
by a subordinated pledge of the common stock of Miller, which matured on
December 31, 1999, and accrued interest at 7% per annum, payable quarterly
beginning on July 1, 1998. The notes were convertible into shares of the
Company's common stock at the lessor of $7.50 per share or 75% of the average
closing bid price of the common stock during the last five trading days prior to
conversion. The convertible note holders also received warrants to purchase
98,182 shares of common stock at $7.50 per share. On May 31 and June 9, 1998,
the holders of these convertible debentures and warrants exchanged the debt and
warrants for 3,000 shares of the 1997 Preferred and warrants to purchase
approximately 133,000 shares of the Company's Common Stock at $15.00 per share,
exercisable for three years from the date of issuance.
Page 19 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
Divot Acquisition
On April 15, 1998, the Company completed its $500,000 stock acquisition
of Divot Golf Corporation ("Divot"), a Florida corporation from its sole
stockholder, Joseph R. Cellura, the Chairman and Chief Executive Officer of the
Company.
Talisman Tools Acquisition
On April 20, 1998, the Company completed its $101,875 stock acquisition
of Talisman Tools Incorporated ("Talisman"), a Rhode Island corporation. The
Talisman stock was acquired from its stockholders, Daniel S. Shedd and Dixon
Newbold, for a combination of (i) two short-term, non-interest bearing
promissory notes in the aggregate amount of $55,000 payable on May 20, 1998 and
(ii) $46,875 of the Company's common stock (10,000 shares valued at the fair
market value of the common stock on the date of closing). Additionally, the
Company issued a $35,000 short-term promissory note to Taylor Box Company in
payment of certain company payables of Talisman Tools. To date each of these
notes remains unpaid. Talisman is a manufacturer of high-quality greens repair
tools. The assets of Talisman include a pending patent on the specialized divot
repair tool and the proprietary process of producing the divot repair tool.
Acquisition Plan
The Company intends to grow principally through acquisitions of other
companies that provide golf products or services. The Company intends to
complete the majority of these acquisitions for a combination of stock and cash.
Page 20 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(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, 1997 for a description of legal proceedings to which the
company is a party.
On April 3, 1998, the Company delivered the remaining 30% minority ownership in
two golf courses in South Carolina, The Gauntlet at Myrtle West and The Gauntlet
at Laurel Valley, to the EPI Pension Fund under the March 26, 1998 court ordered
hearing. The Company also recorded, in operations, the amount of the anticipated
settlement of the litigation with EPI Pension Fund.
Item 2. Changes in Securities
From January 1, 1998 to June 30 , 1998, the Company sold 3,975 shares of its
1997 convertible preferred stock ("1997 Preferred"). The 1997 Preferred was sold
solely to sophisticated and accredited investors pursuant to a private placement
offering in reliance upon Section 4 (2) of the Securities Act of 1933, as
amended. Proceeds from the private placement were approximately $3.7 million.
The 1997 Preferred was offered in units of 15 preferred shares, with each share
having a liquidation value of $1,000, plus 667 warrants (exercisable at $15.00
per share for a period of 3 years) for a price of $15,000 per unit. The holders
of the 1997 Preferred are entitled to 7% cumulative dividends payable quarterly
with percentage increases in the foreseeable future. The 1997 Preferred is
convertible immediately into shares of the Company's common stock at $1,000 per
share so converted divided by the "conversion price" which is a formula based on
the lesser of $10.50 or 75% of the average closing price during the 10-day
period prior to conversion. Through June 30, 1998, holders of 165 shares of the
1997 Preferred converted their 1997 Preferred into 46,429 shares of the
Company's Common Stock.
Item 3. Defaults Upon Senior Securities
The Company has defaulted on certain obligations of its senior securities by
failing to meet its obligation to file a registration statement, having such
registration statement become effective by a certain date, and having its annual
shareholder meeting. The holders of the securities under d,efault have waived
their rights and granted the Company an extension of time to cure the defaults.
Accordingly, the Company filed Form SB-2 on July 1, 1998 within the extension
period provided.
Item 4. Submission of Matters to a Vote of Security-Holders
The Annual Meeting Of Stockholders of the Company was held on May 28, 1998 and
June 2, 1998. At the meeting, the following actions were taken by the
stockholders:
Page 21 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
PART II - OTHER INFORMATION (continued)
1. Approved amendments to the Company's Certificate of Incorporation and
By-laws providing for the classification of the Board of Directors into three
classes, with members of each class serving for staggered terms.
For: 1,671,957
Against: 45,589
Abstain: 66,707
2. Elected five members of the Board of Directors.
<TABLE>
<CAPTION>
Name Age Director Since Term For Against Abstain
- - - ---- --- -------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Clifford F. Bagnall...................... 43 1997 3 years 1,682,724 0 101,528
Joseph R. Cellura........................ 43 1997 3 years 1,682,724 0 101,528
Preston H. Cottrell...................... 48 -- 2 years 1,682,724 0 101,528
Jeremiah M. Daly........................ 44 1997 2 years 1,682,724 0 101,528
</TABLE>
3. Approved a proposal to amend the Company's Certificate of Incorporation
to change the Company's name to "Divot Golf Corporation."
For: 1,746,657
Against: 33,756
Abstain: 3,829
4. Approved a proposal to amend the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock, par value $.001,
from 50 million to 200 million shares.
For: 1,639,997
Against: 136,298
Abstain: 7,957
5. Approved the Company's 1998 Stock Option Plan.
For: 1,543,322
Against: 173,389
Abstain: 67,542
Page 22 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
PART II - OTHER INFORMATION (continued)
6. Approved a proposal to amend the Company's Certificate of Incorporation
to effect a reverse stock split of the Company's Common Stock on a 1 for 15
ratio.
For: 1,639,901
Against: 138,264
Abstain: 6,087
7. Approved the appointment of Ernst & Young L.L.P., Certified Public
Accountants, as the auditors for the ensuing year and to authorize the directors
to fix the remuneration to be paid to the auditors.
For: 1,702,189
Against: 23,983
Abstain: 58,080
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 on Form 8K
Dated June 19, 1998
Dated June 15, 1998
Dated June 12, 1998
Dated May 28, 1998
Dated May 1, 1998
Dated April 30, 1998
Dated April 23, 1998
Dated February 13, 1998
Dated January 12, 1998
Dated January 12, 1998
Page 23 of 24
<PAGE>
DIVOT GOLF CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(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.
DIVOT GOLF CORPORATION
/s/Clifford F. Bagnall
-------------------------------------------
Clifford F. Bagnall, Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: August 14, 1998
Page 24 of 24
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 46,021
<SECURITIES> 0
<RECEIVABLES> 1,591,240
<ALLOWANCES> 0
<INVENTORY> 1,106,471
<CURRENT-ASSETS> 3,556,547
<PP&E> 3,769,758
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,782,064
<CURRENT-LIABILITIES> 4,853,066
<BONDS> 0
0
287
<COMMON> 3,408
<OTHER-SE> 5,366,339
<TOTAL-LIABILITY-AND-EQUITY> 10,782,062
<SALES> 2,602,894
<TOTAL-REVENUES> 2,758,937
<CGS> 0
<TOTAL-COSTS> 4,911,066
<OTHER-EXPENSES> (131,022)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 646,746
<INCOME-PRETAX> (2,667,853)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,667,853)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,667,853)
<EPS-PRIMARY> (.83)
<EPS-DILUTED> (.83)
</TABLE>
