<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
-----------
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No fee required)
For the transitional period from _____________ to ____________
Commission File No. 1-13362
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SENIOR TOUR PLAYERS DEVELOPMENT, INC.
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(Name of Small Business Issuer as specified in its charter)
Nevada 04-3226365
- ------------------------------ ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
incorporation or organization)
266 Beacon Street, Boston, MA 02116
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(Address of principal executive offices)(Zip Code)
(617) 266-3600
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes x No
- -------- -------
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
3,751,169 Shares of Common Stock, as of August 10, 1997
Transitional Small Business Issuer Format (check one):
Yes No x
- -------- -------
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED BALANCE SHEET
UNAUDITED
<CAPTION>
- -------------------------------------------------------------------------------------------
June 30,
1997
- -------------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 170,680
Interest and other receivables 173,625
Inventories 173,447
Prepaid expenses and other current assets 53,422
-----------
Total current assets 571,174
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PROPERTY AND EQUIPMENT:
Property and equipment, net of accumulated depreciation 10,452,903
Construction in progress 3,803,556
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Property and equipment, net 14,256,459
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OTHER ASSETS:
Restricted cash 20,942
Water rights 1,051,992
Investment in golf facilities 1,062,832
Other assets 361,648
-----------
Total other assets 2,497,414
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$17,325,047
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $965,233
Current portion of long term debt 589,853
Current portion of obligation under water-rights agreement 81,469
Deferred revenues 108,397
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Total current liabilities 1,744,952
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LONG TERM LIABILITIES:
Obligation under water rights agreement 827,849
Long term debt 8,146,072
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value; 5,000,000 shares authorized 0
Common stock, $.001 par value; 15,000,000 shares authorized;
3,751,169 shares issued and outstanding 3,751
Additional paid-in capital 8,949,973
Management options 1,212,500
Accumulated deficit (3,560,050)
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Total stockholders' equity 6,606,174
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$17,325,047
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERLY PERIODS ENDED JUNE 30, 1997 & 1996
UNAUDITED
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Three Month Three Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $1,411,884 $1,544,842
COSTS AND EXPENSES:
Operating, general and administrative 1,545,119 1,459,640
Noncash compensation charge/(credit) - management stock options (37,500) 138,700
---------- ----------
Operating income (loss) (95,735) (53,498)
Interest income 2,155 6,792
Interest expense (168,291) (240,556)
---------- ----------
Income (loss) before equity in losses from
unconsolidated affiliate (261,871) (287,262)
Equity in losses of unconsolidated affiliate (65,000) 0
---------- ----------
NET INCOME (LOSS) $ (326,871) $ (287,262)
========== ==========
Net income (loss) per common and common equivalent share $ (0.09) $ (0.10)
========== ==========
Weighted average number of common and common equivalent shares 3,732,280 2,933,333
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERLY PERIODS ENDED JUNE 30, 1997 & 1996
UNAUDITED
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Three Month Three Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (326,871) $ (287,262)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 115,909 186,269
Noncash compensation charge/(credit) - management stock options (37,500) 138,700
Noncash equity in losses of Las Vegas Golf Center 65,000 0
Changes in assets and liabilities:
Interest and other receivables 105,501 (4,762)
Prepaid expenses and other assets (10,638) (11,090)
Inventories (24,202) (33,252)
Deferred Revenue (50,604) 54,040
Accounts payable and accrued expenses 502,098 269,650
----------- ----------
Cash provided by (used in) operating activities 338,693 312,293
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,969) (12,985)
Golf course development costs capitalized (2,583,108) (889,728)
Investment in unconsolidated affiliate (64,757) 0
Cash (restricted) released from escrow 0 (2,094)
----------- ----------
Net cash provided by (used in) investing activities (2,661,834) (904,807)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt (96,883) (97,331)
Proceeds from long term debt 2,069,257 380,970
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Net cash provided by (used in) financing activities 1,972,374 283,639
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (350,767) $ (308,875)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 521,447 $1,054,144
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 170,680 $ 745,269
----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERLY PERIODS ENDED JUNE 30, 1997 & 1996
UNAUDITED
(CONTINUED)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three Month Three Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Equipment acquired under capital lease $256,876 $ -
======== ===
Common stock issued for Las Vegas Golf Center purchase $ 72,000 $ -
======== ===
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 & 1996
UNAUDITED
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $2,776,667 $3,125,829
COSTS AND EXPENSES:
Operating, general and administrative 2,621,954 2,654,463
Noncash compensation charge/(credit) - management stock options (33,258) 416,700
---------- ----------
Operating income (loss) 187,971 54,666
Interest income 13,253 10,930
Interest expense (356,200) (449,086)
---------- ----------
Income (loss) before equity in losses from
unconsolidated affiliate (154,976) (383,490)
Equity in losses of unconsolidated affiliate (103,000) 0
---------- ----------
NET INCOME (LOSS) $ (257,976) $ (383,490)
========== ==========
Net income (loss) per common and common equivalent share $ (0.07) $ (0.13)
========== ==========
Weighted average number of common and common equivalent shares 3,716,639 2,933,333
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 & 1996
UNAUDITED
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (257,976) $ (383,490)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 231,082 345,888
Noncash compensation charge/(credit) - management stock options (33,258) 416,700
Noncash equity in losses of Las Vegas Golf Center 103,000 0
Distributions to minority interests in Forest Lakes (349,946) 0
Changes in assets and liabilities:
Interest and other receivables 1,139,526 9,948
Prepaid expenses and other assets 5,611 32,668
Inventories (32,471) (44,916)
Deferred Revenue (66,532) 9,112
Accounts payable and accrued expenses (67,472) (207,513)
----------- -----------
Cash provided by (used in) operating activities 671,564 178,397
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (24,300) (33,226)
Golf course development costs capitalized (3,256,947) (1,334,297)
Investment in unconsolidated affiliate (64,757) 0
Cash (restricted) released from escrow 0 (2,094)
Increase in other assets 0 (50,000)
----------- -----------
Net cash provided by (used in) investing activities (3,346,004) (1,419,617)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt (1,592,373) (223,193)
Proceeds from long term debt 2,851,882 736,298
----------- -----------
Net cash provided by (used in) financing activities 1,259,509 513,105
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $(1,414,931) $ (728,115)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $(1,585,611 $ 1,473,384
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $170,680 $745,269
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1997 & 1996
UNAUDITED
(CONTINUED)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Six Month Six Month
Period Ended Period Ended
June 30, 1997 June 30, 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Equipment aquired under capital lease $256,876 $ -
======== ===
Common stock issued for Las Vegas Golf Center purchase $ 72,000 $ -
======== ===
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 9
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
Senior Tour Players Development, Inc. and Subsidiary ("the Company")
was organized as a Nevada corporation on April 6, 1994 for the purposes
of developing, acquiring, and managing semi-private, private, and
public golf courses and golf practice facilities throughout the United
States. The Company also provides golf course management services and
marketing services for golf course residential development projects.
The accompanying consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary, The Badlands Golf Club,
Inc. ("The Badlands"), which was established in 1995, and is located in
Las Vegas, Nevada. For the period January, 1995 through December 16,
1996 the Company owned a majority (53.5%) interest in the Forest Lakes
Limited Partnership ("Forest Lakes"), and accordingly, the financial
information presented herein includes the revenue and expense of Forest
Lakes for the six month period ended June 30, 1996. The Company sold
its interest in Forest Lakes on December 16, 1996. All significant
intercompany transactions and balances have been eliminated in
consolidation.
On December 31, 1996 the Company purchased and retained a minority
21.5% ownership interest in the Las Vegas Golf Center (the "Center"), a
golf practice center located in Las Vegas, Nevada. The Center opened
for business on January 17, 1997. The Company accounts for its
ownership interest in the Center under the equity method. Under this
method, the original investment in the Center was recorded at cost and
is adjusted periodically to recognize the Company's share of earnings
or losses after the date of acquisition. During the second quarter of
1997, the Company recorded a $65,000 loss representing the Company's
pro rata share in the Center's start-up operating losses. At June 30,
1997 the Company had capitalized $1,062,832 related to this investment,
which is carried as Investment in Golf Facilities on the accompanying
balance sheet.
The accompanying consolidated financial statements reflect the
application of certain accounting policies described in this note and
elsewhere in the accompanying notes to consolidated financial
statements.
Interim Financial Statements
The accompanying financial statements have been prepared and presented
by the Company without audit in accordance with generally accepted
accounting principles for interim financial statements and with the
instructions to Form 10QSB. Accordingly, these interim
<PAGE> 10
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Interim Financial Statements (continued)
financial statements do not include all information and footnotes
required by generally accepted accounting principles for complete
financial statements. The financial statements reflect all adjustments
and accruals which management considers necessary for a fair
presentation of financial position as of June 30, 1997, and results of
operations for the six month periods ended June 30, 1997 and 1996. The
results for the interim periods presented are not necessarily
indicative of results to be expected for any future period.
Management Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with an original maturity
of three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market, and consist of
food and beverage, golf equipment, clothing, and accessories.
Property, Furniture, Equipment, and Depreciation
Property, furniture, and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful lives
of the assets.
Construction In Progress
At June 30, 1997 construction in progress consisted of design,
construction, and other costs incurred in connection with the
construction of an additional nine holes at The Badlands Golf Club; as
well as design, engineering, and planning costs incurred in connection
with the Company's planned golf course development project in McKinney,
Texas; the planned development of a golf practice center in Cranston,
Rhode Island; and
<PAGE> 11
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Construction In Progress (continued)
the planned development of a golf practice facility outside Houston,
Texas. These costs will be depreciated over the estimated useful lives
of the assets once the assets are placed in service.
Revenue
Revenue consists primarily of green fees, membership dues, golf cart
rental fees, golf course management and development fees, revenue from
food and beverage sales, and pro shop merchandise sales. Deferred
revenue consists of prepaid membership dues which are recognized
ratably over the term of the membership.
Net Income (Loss) per Common and Common Equivalent Share
Net income per common and common equivalent share is computed using the
weighted average number of common and common equivalent shares
outstanding during the period in accordance with the treasury stock
method. The weighted average number of common equivalent shares does
not include the effect of certain out-of-the-money warrants outstanding
as their effect is antidilutive. Net loss per share of common stock is
computed by dividing net loss by the weighted average number of common
shares outstanding during the period. Common equivalent shares, which
would include the effect of the outstanding stock options are not
included in the calculation of net loss per share of common stock
because their effect would be antidilutive.
2. ACQUISITIONS AND SALES
Sale of Forest Lakes Assets and Liquidation of Partnership
On December 17, 1996 the Company consummated the sale of Forest Lakes.
The sale was structured as a sale of substantially all of the assets of
Forest Lakes Limited Partnership. The buyer was BST Associates, an
Illinois general partnership, and unrelated to the Company. The cash
contract purchase price was $4,000,000 payable in full at closing.
Broker commissions and closing costs relating to the sale totaled
$172,318 resulting in net sale proceeds to the Partnership of
$3,827,682. During January, 1997 the Company received partnership
liquidation proceeds of approximately $149,500 against its Partnership
investment of $252,438.
<PAGE> 12
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
2. ACQUISITIONS AND SALES (CONTINUED)
Proposed Golf Course Development - McKinney, Texas
During March, 1996 the Company signed a purchase and sale agreement and
related documents for the proposed development of an 18-hole
championship golf facility located within the Stonebridge Ranch
Development in McKinney, Texas, approximately 25 miles north of Dallas.
Under the terms of the agreement, land will be conveyed to the Company
for $10 and the Company, in turn, shall be responsible for 100% of the
costs of the design, development, and operation of an 18-hole
championship golf course, clubhouse, driving range, and maintenance
facilities. The Company shall have no direct interest in the
residential development which is planned for the land surrounding the
course.
In connection with the design and promotion of the golf course, the
Company intends to utilize the design and marketing services of six
Legends of golf to design three holes each and participate in the
marketing and promotion of the facility. The Company has entered into
agreements with senior pros Sam Snead, Bob Goalby, Chi Chi Rodriguez,
Miller Barber and Orville Moody, and regular PGA touring pro Bruce
Lietzke to provide design and promotional services to the project.
Contingent on a successful permitting and design process, course
construction would commence in the Fall of 1997 with a course opening
in late 1998. The Company's ability to successfully develop a golf
course at Stonebridge Ranch is dependent on a number of factors,
including, but not limited to, the ability of the Company to raise the
necessary capital to finance the course, as well as the requirement to
receive all necessary approvals and permits for the construction of the
golf course and related facilities.
Investment in Golftown Driving Range - Saugus, Massachusetts
During July 1996, the Company entered into an agreement with Golftown,
Inc., a Massachusetts corporation that is the majority owner of a golf
practice facility in Saugus, Massachusetts ("Golftown") which opened in
August, 1996. The Company has provided a loan guaranty in the amount of
$295,000 in exchange for a 25% equity ownership in Golftown. Under the
terms of the agreement with Golftown and its lender, the Company has
the opportunity to cure any default under the loan, and in the event of
default, the Company may assume day-to-day management of the Project
and receive a management fee for such services. In addition, the
Company has entered into an agreement for a pledge of voting rights to
a majority of the voting interests of Golftown, which pledge becomes
<PAGE> 13
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
2. ACQUISITIONS AND SALES (CONTINUED)
Investment in Golftown Driving Range - Saugus, Massachusetts
(continued)
effective in the event of default under the loan being guaranteed by
the Company. The President and majority owner of Golftown is Jeffery
Abrams, who is the son of Stanton V. Abrams, the President and Chairman
of the Board of Directors of Senior Tour Players Development, Inc.
Purchase and Sale of Investment in Las Vegas Golf Center, LLC
On December 31, 1996 the Company acquired a 21.5% ownership interest
and a 48.5% ownership interest, and subsequently sold the 48.5%
ownership interest, in the Las Vegas Golf Center, LLC (the "Center"), a
golf practice facility located in Las Vegas, Nevada. The Center is
situated on approximately 42 acres of land leased from Clark County,
Nevada, on the corner of Tropicana and Paradise Roads, directly across
the street from the McCarran International Airport, and approximately
one-half mile from Las Vegas Boulevard (the "Strip"). The Center is
owned by Las Vegas Golf Center, LLC, a Delaware limited liability
company (the "LLC"). The Center includes a driving range with
approximately 120 tee stations on two tiers, a golf school teaching
area, and a 6,500 sq ft clubhouse. The Center opened for business on
January 17, 1997.
The Company acquired a 21.5% membership interest in the LLC from
unrelated individual shareholders of Golf Centers of America, Inc., a
California corporation, for an aggregate purchase price of $400,000
cash consideration, and 323,289 shares of the Company's common stock,
$.001 par value per share ("STPD Shares"), payable as follows:
Cash Consideration $ 20,000 payable on or before December 15, 1996
$180,000 payable on or before January 15, 1997
$200,000 payable on or before January 15, 1998
STPD Shares 161,645 shares on or before January 15, 1997
161,644 shares on or before January 15, 1998
The Company also acquired an additional 48.5% membership interest in
the LLC from unrelated individual shareholders of Selleck Properties,
Inc., a California corporation, for an aggregate purchase price of
$1,532,050 cash consideration, and 369,547 shares of the Company's
common stock, $.001 par value per share.
<PAGE> 14
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
2. ACQUISITIONS AND SALES (CONTINUED)
Purchase and Sale of Investment in Las Vegas Golf Center, LLC
(continued)
All of the shares issued or payable in connection with these
transactions are restricted securities, as defined in Rule 144
promulgated under the Securities Act of 1933, as amended. The Company
granted the sellers of the LLC interests the right to demand
registration of their common stock on a Form S-3 registration statement
or similar form at any time after May 1, 1997. Such a request was
received from the seller during May 1997. The Company has filed a
registration statement, and such filing will become effective during
the third quarter of 1997.
Immediately following the acquisition of the 48.5% membership
interests, the Company sold a 48.5% membership interest in the LLC to
Paul Fireman ("Fireman"), an individual investor and Company
stockholder, for cash consideration of $2,167,953. In addition, the
Company received a $200,000 consulting fee from Fireman in
consideration of certain services rendered in connection with the
structuring and implementation of the transaction, as well as for
arranging certain financing for the LLC.
In consideration of 50,000 shares of common stock of the Company, $.001
par value per share, the Company shall have the option to repurchase
from Fireman a 13.5% membership interest in the LLC (the "Option"). If
the Company exercises the Option on or before December 31, 1997, the
price for a 13.5% LLC interest shall be $900,000. If the Company
exercises the Option after December 31, 1997 but on or before December
31, 1998, the price for a 13.5% LLC interest shall be $1,075,000. If
the Company exercises the Option after December 31, 1998 but on or
before December 31, 1999, the price for a 13.5% LLC interest shall be
$1,350,000.
Additionally, in consideration of certain consulting services and
modification of existing contractual rights relating to the acquisition
of the Company's 21.5% membership interest in the LLC and the financing
of the golf practice facility owned and operated by the LLC, the
Company issued in May 1997 to the Ranchito Company, LLC ("Ranchito"),
50,000 shares of common stock of the Company, $.001 par value per
share. Ranchito is the owner of the remaining 30% membership interest
in the LLC which was not acquired on December 31, 1997.
The Company has been designated the Managing Member of the LLC, and
shall be responsible for the day-to-day management, marketing, and
operation of the Center. The Company receives a management fee equal to
5% of gross revenues generated by the LLC
<PAGE> 15
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
2. ACQUISITIONS AND SALES (CONTINUED)
Purchase and Sale of Investment in Las Vegas Golf Center, LLC
(continued)
as compensation under the terms of the management agreement, and is
also reimbursed for certain accounting and out-of-pocket expenses.
3. GOLF COURSE DEVELOPMENT COSTS
The Company is presently developing an additional nine holes at The
Badlands Golf Club, an 18-hole facility which was completed in October
1995, which is situated on approximately 186 acres of leased land. The
9-hole addition under construction at June 30, 1997 is situated on 67
acres of leased land abutting The Badlands. The additional nine holes
is anticipated to be opened in September, 1997. In connection with the
construction of the additional nine holes and the ongoing operation of
the golf course, the Company has entered into the following significant
contracts and agreements:
Badlands Land Lease Agreement - 18 Holes
The Company has leased 186 acres of land in Las Vegas, Nevada, for a
term of 50 years, expiring in July, 2045. The lease agreement contains
four 10-year options to extend the term of the lease based on certain
terms as defined. The lease requires minimum rental payments of
$240,000 per annum, commencing July 1, 1995, with an increase every
three years based on the increase in the Consumer Price Index. The
lease also contains a contingent rental clause requiring the Company to
pay an amount equal to the amount by which 6% of annual gross receipts,
as defined, at The Badlands exceeds the minimum annual rental of
$240,000. The lease also requires the Company to pay real estate taxes,
assessments, and other charges in connection with the leased land.
Badlands Land Lease Agreement - 9 Hole Addition
During June, 1996 the Company leased an additional 67 acres abutting
The Badlands which land is being used to develop an additional nine
holes. The term of the lease will be coterminous with the existing
lease, expiring in July 2045, with four ten-year extension options. The
lease requires minimum rental payments of $120,000 per annum,
commencing on the earlier of: (i) the opening of the additional nine
holes to the general public; or (ii) November 1, 1998. The lease also
requires the Company to pay real estate taxes, assessments, and other
charges in connection with the leased property.
<PAGE> 16
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
3. GOLF COURSE DEVELOPMENT COSTS (CONTINUED)
Water Rights Agreement
The Company has purchased 399 acre-feet of water rights under a water
rights agreement (the "Agreement") for use at The Badlands. The
Agreement requires the Company to pay $13,300 per month commencing on
July 1, 1995 and continuing for ten years through July 2005. The
obligation under the water rights agreement has been capitalized in the
accompanying consolidated balance sheet. The capitalized water rights
will not be amortized since the asset has an indefinite and
indeterminable life span and is transferable by the Company subject to
certain restrictions in the Agreement.
4. LONG TERM DEBT
Long-term debt consists of the following at June 30, 1997:
<TABLE>
<S> <C>
Mortgage note payable to NationsCredit, secured by The Badlands,
interest is at 10.78%, with principal and interest due monthly of
approximately $ 48,900, final maturity date of December, 2001 $4,916,693
Construction note payable to NationsCredit, secured by The Badlands,
interest is at 10.95%, with principal and interest due monthly of
approximately $51,500, final maturity date of December, 2001 2,818,409
Capital lease obligation for turf maintenance and other equipment,
principal and interest payments of approximately $12,660 due monthly,
final maturity date of September, 1999 299,930
Capital lease obligation for turf maintenance and other equipment,
principal and interest payments of approximately $4,500 due monthly,
final maturity date of June, 2002 212,876
Unsecured note due January, 1998 to sellers of ownership interests
of the Las Vegas Golf Center, LLC 200,000
Capital lease obligation for furniture, fixtures, and other equipment,
principal and interest payments of approximately $4,000 due monthly,
final maturity date of January, 2002 171,340
Capital lease obligation for equipment, principal and interest
payments of approximately $1,000 due monthly,
final maturity date of June, 2001 44,000
Capital lease obligation for telephone equipment, principal and
interest payments of approximately $600 due monthly, final
maturity date of September, 2001 22,677
</TABLE>
<PAGE> 17
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
4. LONG TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
Unsecured line of credit with a bank, payable on demand with
interest at prime rate plus 1.5% (10% at June 30, 1997) 50,000
----------
$8,735,925
Less-current portion 589,853
----------
LONG TERM DEBT $8,146,072
==========
</TABLE>
5. STOCKHOLDERS' EQUITY
Common Stock
In November 1994, the Company sold 1,600,000 shares of common stock and
warrants at a price of $5.00 per common share and $.10 per warrant
through an initial public offering. Each warrant entitles the holder to
purchase one share of the Company's common stock at an exercise price
of $5.50 per share, subject to adjustment, at any time until November
16, 1999, at which time the warrants expire. The warrants can be
redeemed by the Company at a price of $5.10 per warrant on 30 days'
written notice, provided the average of the closing bid prices of the
common stock of the Company equals or exceeds $8.00 for 20 consecutive
trading days ending 3 days of the date on which the notice of
redemption is given.
Underwriter's Warrants
In connection with the Company's initial public offering in November
1994, the Company issued 160,000 warrants to the underwriter (the
"Underwriter's Warrants"). Each Underwriter's Warrant entitles the
Underwriter to purchase one share of common stock for $7.25 and one
warrant for $.15.
Overallotment Option
In addition to the Underwriter's Warrants, the Company granted an
overallotment option (the "Option") to the Underwriter. The Option
entitled the Underwriter to purchase additional shares of common stock
and/or additional warrants at the public offering price less the
underwriting discounts and commissions, as defined. In December 1994,
the Underwriter exercised its option and purchased 153,200 warrants for
$13,351 net of discounts and commissions.
<PAGE> 18
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
5. STOCKHOLDERS' EQUITY (CONTINUED)
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock
with such designations, voting, and other rights and preferences as may
be determined from time to time by the Board of Directors.
Stock Option Plans
On June 20, 1994, the Company adopted the 1994 Employee Stock Option
Plan which provides for the granting of non-qualified and incentive
stock options, as defined by the Internal Revenue Code, to key
employees at prices as determined by the Compensation Committee of the
Board of Directors. Under the plan, options for a maximum of 350,000
shares of common stock may be granted over a period not to exceed ten
years. At June 30, 1997, 73,572 options have been granted under this
plan.
On November 10, 1996, the Board of Directors of the Company adopted,
which was subsequently ratified by the shareholders, the 1996
Non-Employee Director Stock Option Plan (the "Nonemployee Plan"). Under
the Nonemployee Plan, options for a maximum 200,000 shares of common
stock may be granted. On December 11, 1996 the Compensation Committee
granted stock options for the purchase of 40,000 shares of common stock
to four members of the Board of Directors under the Nonemployee Plan.
The options were granted with an exercise price of $2.1875 per share,
the fair market value on the date of grant, and vested immediately. On
January 1, 1997, the Compensation Committee granted stock options for
the purchase of an additional 20,000 shares of common stock to the four
members of the Board of Directors under the Nonemployee Plan. The
options were granted with an exercise price of $2.125 per share, the
fair market value on the date of grant, and vested immediately.
Stock Option Agreements - Management Options
Effective June 20, 1994, the Company entered into employee stock option
agreements with certain officers and key employees granting them
options to acquire up to 1,111,111 shares of the Company's common stock
for an exercise price of $1.00 per share. Under these agreements, each
employee's options vest and become exercisable based on the Company
achieving certain financial benchmarks, as defined.
At December 31, 1996 the Company's balance sheet reflected an accrual
of $1,250,000 relating to the management options. The $1,250,000
balance at December 31, 1996 was calculated based on the market price
of the Company's common stock on December 31,
<PAGE> 19
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
5. STOCKHOLDERS' EQUITY (CONTINUED)
Stock Option Plans (continued)
1996 ($2.125), less the exercise price of $1.00 per share, multiplied
by the number of shares subject to the options (1,111,111).
At December 31, 1996, 555,555 (or 50%) of the management stock options
issued in 1994 vested, as the Company achieved the financial benchmarks
called for under the option agreements for the year ended December 31,
1996. On March 19, 1997, a vote was adopted by the Company's
Compensation Committee, and then ratified by the Board of Directors, to
amend the option agreements in order to delete the benchmarks. The
Board voted to accept the optionholders' voluntary delay of 10% of
their vested option shares and to replace the benchmarks with an
extended vesting schedule, based on continuing employment with the
Company. Under the revised vesting schedule, 40% or 444,445 of the
options vested on December 31, 1996 and the remaining 666,666 options
will vest pro rata on December 31, 1997, 1998, and 1999. At the time
these options are exercised, the proceeds will be credited to the
capital accounts. EXCEPT AS DESCRIBED BELOW, THIS CHANGE WILL RESULT IN
NO FURTHER CHARGES OR CREDITS AGAINST EARNINGS OF THE COMPANY RELATED
TO THE MANAGEMENT OPTIONS. During the second quarter of 1997 one of the
officers, who had been granted a total of 55,555 options, resigned. As
of June 30, 1997, a total of 22,222 (or 40%) of the officer's options
had vested. Accordingly, during the second quarter of 1997, the Company
recorded a $37,500 noncash compensation credit to reverse the
compensation expense related to the unvested options.
Deferred Compensation
Effective December 11, 1996, the Company granted stock options to an
officer ('"Officer") of the Company granting options to acquire up to
100,000 shares of the Company's common stock for an exercise price of
$1.00 per share. Under the stock option agreement, the options vest pro
rata over seven years beginning March 5, 1995. During the second
quarter of 1997 the Officer resigned from the Company, resulting in no
future vesting of these options. As of June 30, 1997 a total of 28,572
shares have vested. Accordingly, during the six month period ended June
30, 1997, the Company recorded a noncash compensation charge of $4,242
to reflect the remaining expense associated with these stock options.
<PAGE> 20
SENIOR TOUR PLAYERS DEVELOPMENT, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
6. INCOME TAXES
At December 31, 1996, the Company had a net operating loss carryforward
available for federal tax purposes of approximately $1,347,000 with
expiration dates beginning in 2009. The Company has provided a
valuation allowance equal to 100% of the gross deferred tax asset due
to the uncertainty surrounding the realization of the deferred tax
asset.
7. CONTINGENT LIABILITIES & RELATED PARTY TRANSACTION
Loan Guaranty
The Company is a guarantor on a loan in the amount of $295,000 made to
Golftown, Inc., a Massachusetts corporation which is the majority owner
and operator of a driving range facility located in Saugus,
Massachusetts ("Golftown").
During July 1996 the Company entered into an agreement with Golftown,
Inc., a Massachusetts corporation which owns and operates a driving
range facility in Saugus, Massachusetts (the "Project"). The Company
has agreed to guaranty a loan in an amount of $295,000 made to
Golftown, in exchange for a 25% equity interest in the Project.
Under the terms of the agreement with Golftown and its lender, the
Company has the opportunity to cure any default under the loan, and in
the event of a default, the Company may assume day-to-day management of
the Project and receive a management fee for such services. In
addition, the Company has entered into an agreement for a pledge of
voting rights to a majority of the voting interest of Golftown, which
pledge becomes effective in the event of a default under the loan being
guaranteed by the Company. The President and majority stockholder of
Golftown, Inc is Jeffrey Abrams, the son of Stanton V. Abrams, the
President and Chairman of the Board of Directors of Senior Tour Players
Development, Inc. The driving range opened to the general public during
August, 1996.
8. NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board (FASB)
issued SFAS No. 128, Earnings Per Share which is effective for the
fiscal year ending December 30, 1997 and early adoption is not
permitted. The Company does not expect the adoption of this standard to
have a material effect on its financial position or its results of
operations.
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RISK FACTORS AND CAUTIONARY STATEMENTS
- --------------------------------------
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Actual results and anticipated events could differ
materially from those projected, anticipated, or implicit, in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this report.
The industry in which the Company competes is highly competitive and
capital intensive. The Company's future growth and profitability will be
dependent upon future developments and/or acquisitions of additional golf
courses and golf practice facilities. The number of attractive acquisitions and
development opportunities may be limited and the Company may compete with other
potential buyers whose financial and management resources are substantially
greater than those of the Company. There can be no assurance that the Company
will be successful in developing or acquiring any particular project or that any
projects acquired or developed by the Company will be profitable. Additionally,
the Company will be dependent upon third-party funding in the form of equity
participation and/or debt to finance its development and acquisition of future
golf courses and golf practice facilities. Until funding is obtained for new
golf courses and golf practice facilities, the Company will be unable to proceed
with those projects.
In addition to competing with the Company at the acquisition and
development stage, competitors could also acquire and/or develop golf courses
and/or golf practice facilities in the same market as a Company facility and put
the Company at a competitive disadvantage with respect to pricing and costs of
operation. The Company's revenues will be largely dependent on industry factors
which are beyond its control such as the availability of discretionary income
for golf, a sustained level of popularity for golf, and shifting consumer
preferences.
LIQUIDITY AND CAPITAL RESOURCES.
- --------------------------------
The Company believes that is has sufficient cash, operating lines of
credit, and committed construction financing to meet its current operating
needs, and to complete construction of an additional nine holes at The Badlands
Golf Club in Las Vegas, Nevada, which is presently under construction and
scheduled for completion and opening in September 1997.
At June 30, 1997, the Company had $170,680 in cash and cash equivalents
and the Company had $450,000 available under its $500,000 revolving working
capital line of credit with U.S. Bank of Nevada.
On November 15, 1996, The Badlands Golf Club, Inc., a wholly owned
subsidiary of the Company, entered into a loan agreement with NationsCredit, a
NationsBank company, for a $5,000,000 construction and permanent loan. At
closing the loan provided the Company with $4,000,000 to complete construction
of a nine hole addition at The Badlands, presently under construction. The loan
has a fixed interest rate of 10.95% and is being amortized over twenty years.
The loan has a maturity date of December 1, 2001, however the Company has an
option to extend the term of the loan for an additional five years upon payment
of a .5% extension fee, provided that no event of default exists, and provided
that certain financial conditions are met, all
<PAGE> 22
as detailed in the loan agreement. As of June 30, 1997 the Company had borrowed
$2,818,409 under the loan agreement.
In addition to the $4,000,000 construction proceeds, the loan provides
for the availability to the Company of an additional $1,000,000 in "Earnout
Advances" as defined in the loan agreement. The earnout funds will be made
available to the Company over a period of thirty (30) months following the loan
closing as long as certain operating results are achieved at The Badlands,
including minimum debt service coverage ratios, and other revenue and cash flow
criteria.
It is the Company's practice to lease golf carts, maintenance
equipment, and office and golf equipment at its owned golf facilities. The
Company is leasing substantially all of its turf maintenance equipment and
certain furniture, fixtures, and equipment at The Badlands Golf Club under
various capital lease obligations. As of June 30, 1997 the Company had
approximately $751,000 outstanding under the lease agreements. The Company has
leased its golf cart fleet at The Badlands Golf Club under an operating lease.
PLAN OF OPERATION.
- ------------------
The Company's plan of operation for the next twelve months with regards
to existing properties will include completion of the nine hole addition at The
Badlands Golf Club in Las Vegas, and continued ownership and operation of that
27-hole golf facility; completion of the planned improvements at the Las Vegas
International Golf Center, including a 17,500 square foot clubhouse addition
which will be leased to Pro Golf of America, Inc., for the sale of golf
merchandise, and through a licensing agreement with Golf Digest, New York Times
Company Magazine Group, Inc. ("Golf Digest"), the establishment of a Golf Digest
Golf school, as well as the continuing marketing and management of that facility
in which the Company has a 21.5% ownership interest, and serves as the
day-to-day manager of the facility; continued management of New England Country
Club in Bellingham, Massachusetts which the Company operates under a management
contract which commenced in March, 1995.
The Company's plans for the next twelve months with regards to
development of golf courses and golf practice facilities include the completion
of the permitting and design, and commencement of construction of the proposed
18-hole golf course development at Stonebridge Ranch in McKinney, Texas,
approximately 25 miles north of Dallas; completion of the design and permitting
process, and the commencement of construction of a proposed golf practice center
in Cranston, Rhode Island; completion of the due diligence, design, permitting,
and fund rasing, and commencement of construction of a proposed golf practice
center in Spring, Texas, a short distance from Route I-45 and Woodlands Parkway,
just outside Houston, Texas; completion of the due diligence, design and
permitting, fund raising, and the start of construction of several proposed golf
practice facilities in the Washington D.C.-Baltimore metro area.
Over the next twelve months the Company will continue its fund raising
efforts to finance the proposed golf course development and golf practice
facility projects in Texas, Rhode Island, and the Washington D.C.-Baltimore
metro area, and elsewhere; and will continue to search for opportunities for the
acquisition, lease, and development of golf courses and golf practice facilities
throughout the United States.
<PAGE> 23
The Company will also seek out opportunities to manage or lease
existing golf courses, particularly in regions of the country where the Company
already has an established presence, or in situations where the Company has an
equity position in the project.
The Company is currently seeking additional debt and equity sources,
and will continue to do so during the next twelve months to fund the projects
discussed herein, as well as other potential acquisition and development
opportunities that may arise.
Notwithstanding the Company's desire and plans to do so, the Company's
ability to successfully develop the projects discussed herein is dependent on a
number of factors, including, but not limited to, the ability of the Company to
raise the necessary capital to finance the projects, and the ability to obtain
all necessary approvals and permits for the construction and operation of the
proposed facilities.
Except for the properties described herein, as of the date of this
report, the Company has no binding or definitive commitments or agreements to
acquire, lease, or develop any additional golf courses or golf practice
facilities; however, additional acquisition, development, lease, or management
agreements may be negotiated or entered into at any time.
RESULTS OF OPERATIONS
Three Month Period Ended June 30, 1997 vs. Three Month Period Ended
- -------------------------------------------------------------------
June 30, 1996
- -------------
The Company was organized in April, 1994 and generated its initial
operating revenues during the first quarter ended March 31, 1995 when it
acquired a 53.5% interest in the Forest Lakes Golf Club in Sarasota, Florida.
The Company was deemed to be a development stage company as described in FAS-7
"Accounting and Reporting by Development Stage Enterprises" until the fourth
quarter of 1995, when the Badlands Golf Club, the Company's initial development
project, opened for public play.
On December 17, 1996, the Company consummated the sale of its interest
in The Forest Lakes Golf Club. The sale was structured as a sale of
substantially all of the assets of Forest Lakes Limited Partnership. The Company
received cash proceeds of approximately $149,500 in January 1997 against its
Partnership investment of $252,438.
Since its acquisition in 1995, the Company had managed the Forest Lakes
Golf Club under a management agreement. Effective December 31, 1996, the Company
no longer manages the facility, or has any ownership interest therein.
REVENUES during the second quarter ended June 30, 1997 totaled $1,411,884
compared to $1,544,842 during the second quarter of 1996, a decrease of
$132,958. The decline, which was anticipated by management, was due to the sale
of the Forest Lakes Golf Club during December 1996 offset by the increase in
revenue at the Badlands. Forest Lakes generated $277,623 in revenues during the
second quarter of 1996 verus $0 in 1997. Revenues at The Badlands Golf Club in
Las Vegas during the second quarter of 1997 totaled $1,351,800, versus
$1,238,343 during the second quarter of 1996, an increase of $113,457, and were
slightly ahead of management's expectations. The Company also generated revenues
from management fees of $60,084 during the second quarter of 1997 under
management contracts with New England
<PAGE> 24
Country Club in Bellingham, Massachusetts, and a management contract with Las
Vegas International Golf Center, in which the Company owns a 21.5% interest.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES were $1,545,119 during the
quarter ended June 30, 1997 compared to $1,459,640 for the corresponding period
in 1996, an increase of $85,479. The 1996 expenses included $240,887 relating to
Forest Lakes Golf Club versus $0 in 1997.
Operating expenses at The Badlands during the second quarter of 1997
totaled approximately $1,104,554 versus $894,704 in 1996, an increase of
$209,850.
Corporate administrative expenses totaled $440,565 during the second
quarter of 1997 compared to $324,050 during the corresponding period in 1996, an
increase of $116,515.
NON-CASH COMPENSATION CHARGE/(CREDIT) - MANAGEMENT STOCK OPTIONS. During 1996
the Company was accounting for certain stock options granted to executive
officers of the Company during 1994. Effective June 20, 1994, the Company
entered into employee stock option agreements with certain officers and key
employees granting them options to acquire up to 1,111,111 shares of the
Company's common stock for an exercise price of $1.00 per share.
During the second quarter of 1996 the Company recorded a non-cash compensation
charge of $138,700 relating to these options. At December 31, 1996, the
Company's balance sheet reflected an accrual of $1,250,000 included in
stockholders' equity relating to the management options. The $1,250,000 balance
at December 31, 1996 was calculated based on the market price of the Company's
common stock on December 31, 1996 ($2.125), less the exercise price of $1.00 per
share, multiplied by the number of shares subject to the options (1,111,111).
At December 31, 1996, 555,555 (representing 50%) of the management options
issued in 1994 vested, as the Company achieved certain financial benchmarks
called for under the option agreements for the year ended December 31, 1996. On
March 19, 1997 a vote was adopted by the Company's Compensation Committee, and
then ratified by the Board of Directors, to amend the option agreements in order
to delete the financial benchmarks as described in the option agreements. The
Board voted to accept the optionholders' delay of 10% of their vested option
shares and to replace the benchmarks with an extended vesting schedule, based on
continuing employment by the Company. Under the revised vesting schedule, 40% or
444,445 of the options vested December 31, 1996, and 60% or 666,666 vest pro
rata on December 31, 1997, 1998, and 1999. At the time these options are
exercised, the proceeds will be credited to the capital accounts. Except as
described below, this change will result in no further charges or credits
against earnings related to these management stock options. During the second
quarter of 1997 one of the officers, who had been granted a total of 55,555
options, resigned. As of June 30, 1997, a total of 22,222 (or 40%) of the
officer's options had vested. Accordingly, during the second quarter of 1997,
the Company recorded a $37,500 noncash compensation credit to reverse the
compensation expense related to the unvested options.
INTEREST EXPENSE totaled $168,291 for the quarter ended June 30, 1997 compared
to $240,556 during the quarter ended June 30, 1996, a decrease of $72,265.
Forest Lakes interest totaled $81,755 in 1996 versus $0 during the second
quarter of 1997. Interest expense relating to The Badlands totaled $168,291
during the second quarter of 1997 versus $158,801 during the second quarter of
1996. Interest at The Badlands relates to a first mortgage of the golf course,
an
<PAGE> 25
obligation incurred in connection with the purchase of water rights; and
interest on capital leases relating to turf maintenance equipment, furniture,
fixtures, and other equipment. Total bank debt and capital lease obligations at
The Badlands as of June 30, 1997 totaled $8,485,925, and the long term
obligation under the water rights agreement was $909,318 as of June 30, 1997.
See Note 3 and 4 to the consolidated financial statements included herein.
INTEREST INCOME totaled $2,155 during the second quarter of 1997 compared to
$6,792 during the corresponding period in 1996.
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATE. On December 31, 1996 the Company
purchased and retained a minority 21.5% ownership interest in the Las Vegas Golf
Center (the "Center"), a golf practice center located in Las Vegas, Nevada. The
Center opened for business on January 17, 1997. The Company accounts for its
ownership interest in the Center under the equity method. Under this method, the
original investment in the Center was recorded at cost and is adjusted
periodically to recognize the Company's share of earnings or losses after the
date of acquisition. During the second quarter of 1997, the Company recorded a
$65,000 loss representing the Company's pro rata share in the Center's start-up
operations. See notes to consolidated financial statements included herein. At
June 30, 1997 the Company had capitalized $1,062,832 related to this investment,
which is carried as Investment in Golf Facilities on the balance sheet included
with the consolidated financial statement included herein.
Six Month Period Ended June 30, 1997 vs. Six Month Period Ended June 30, 1996
- -----------------------------------------------------------------------------
REVENUES during the six month period ended June 30, 1997 totaled $2,776,667
compared to $3,125,829 during the six month period ended June 30, 1996, a
decrease of $349,162. The decline, which was anticipated by management, was due
to the sale of the Forest Lakes Golf Club during December 1996 offset by the
increase in revenue at the Badlands. Forest Lakes generated $714,717 in revenues
during the six month period ended June 30, 1996 versus $0 in 1997. Revenues at
The Badlands Golf Club in Las Vegas during the six month period ended June 30,
1997 totaled $2,697,310, versus $2,382,235 during the six month period ended
June 30, 1996, an increase of $315,075. The Company also generated revenues from
management fees of $79,357 during the six month period ended June 30, 1997 under
management contracts with New England Country Club in Bellingham, Massachusetts,
and a management contract with Las Vegas International Golf Center, in which the
Company owns a 21.5% interest.
OPERATING, GENERAL AND ADMINISTRATIVE EXPENSES were $2,621,954 during the six
month period ended June 30, 1997 compared to $2,654,463 for the corresponding
period in 1996, a decrease of $32,509. The 1996 expenses included approximately
$500,000 relating to Forest Lakes Golf Club versus $0 in 1997.
Operating expenses at The Badlands during the six month period ended
June 30, 1997 totaled approximately $1,941,121 versus $1,566,366 in 1996, an
increase of $374,755.
Corporate administrative expenses totaled $680,833 during the six month
period ended June 30, 1997 compared to $588,101 during the corresponding period
in 1996, an increase of $91,941.
NON-CASH COMPENSATION CHARGE/(CREDIT) - MANAGEMENT STOCK OPTIONS. During The six
month period ended June 30, 1996 the Company recorded a non-cash compensation
charge of $416,700,
<PAGE> 26
versus a credit of $33,258 during the six month period ended June 30, 1997. The
1996 charge represented an adjustment to the reserve established in 1995 for the
probable future vesting of stock options granted to executive officers and key
employees of the Company in 1994. Refer to Note 5 to the consolidated financial
statements included herein and to "Results Of Operations - Three Month Period
Ended June 30, 1997 versus Three Month Period Ended June 30, 1996" elsewhere in
this report for a more detailed explanation of noncash charges/(credits).
INTEREST EXPENSE totaled $356,200 for the six month period ended June 30, 1997
compared to $449,086 during the six month period ended June 30, 1996. Forest
Lakes interest totaled $165,095 in 1996 versus $0 during the six month period
ended June 30, 1997. Interest expense relating to The Badlands totaled $346,339
during the six month period ended June 30, 1997 versus $283,974 during the six
month period ended June 30, 1996. Interest at The Badlands relates to a first
mortgage of the golf course, an obligation incurred in connection with the
purchase of water rights; and interest on capital leases relating to turf
maintenance equipment, furniture, fixtures, and other equipment. See Notes 3 and
4 to the consolidated financial statements included herein.
INTEREST INCOME totaled $13,253 during the six month period ended June 30, 1997
compared to $10,930 during the corresponding period in 1996.
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATE. During The six month period ended
June 30, 1997, the Company recorded a $103,000 loss representing the Company's
pro rata share in the Las Vegas Golf Center's start-up operations. See notes to
consolidated financial statements included herein and to "Results Of Operations
- - Three Month Period Ended June 30, 1997 versus Three Month Period Ended June
30, 1996" elsewhere in this report for a more detailed explanation of Equity in
Losses of Unconsolidated Affiliates.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings.
ITEM 2. CHANGES IN SECURITIES None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On June 27, 1997 the Company held its Annual Meeting of Shareholders. The
shareholders voted on four items. The first item was to fix the number of
Directors that shall constitute the whole Board of Directors of the Corporation
at seven and to divide the Directors into three classes, the first ( "Class I")
to be elected for a term of one year, the second ("Class II" ) to be elected for
a term of two years, and the third ("Class III") to be elected for a term of
three years. The second item was the election of the seven directors. The third
item was the ratification of management's selection of Arthur Andersen LLP as
the independent auditors of the Company for the fiscal year ending December 31,
1997. And the final item was the approval of the 1996 Non-Employee
<PAGE> 27
Directors Stock Option Plan, as discussed in note 5 of the consolidated
financial statements included herein. These matters were noticed to shareholders
of record, and solicited prior to the Annual Meeting through proxies sent to
holders of record of the Company's common stock as of the close of business May
10, 1997. The following directors were nominated and duly elected at the Annual
Meeting:
<TABLE>
<CAPTION>
NAME TITLE CLASS
---- ----- -----
<S> <C> <C> <C>
Stanton V. Abrams President & CEO III
(1) Richard B Rogers Senior Vice President I
Michael J. Meluskey Treasurer, Secretary II
Stanley Bernstein Independent Outside Director III
Robert L. Seelert Independent Outside Director II
Arnold Mullen Independent Outside Director III
Alan L. Stanzler Independent Outside Director I
</TABLE>
(1) During the second quarter of 1997, Mr. Rogers resigned as Senior Vice
President of the Company. Mr. Rogers will remain on the Board of Directors as an
Independent Outside Director.
ITEM 5. OTHER INFORMATION
RISK FACTORS AND CAUTIONARY STATEMENTS
When used in this Form 10QSB and in future filings by the Company with the
Securities and Exchange Commission, in the Company's press releases, and in oral
statements made with the approval of an authorized executive officer, the words
or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project", and similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to certain
risks and uncertainties, including those discussed under the caption "Risk
Factors and Cautionary Statements" at the beginning of Item 2 of this report.
These risks and uncertainties could cause actual results to differ materially
from historical results and those results and events anticipated or projected.
The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The Company
also wishes to advise readers that the factors contained in this report could
affect the Company's financial performance and could cause the Company's actual
results and financial position to differ materially from any opinions or
statements expressed with respect to future periods in any current statements.
The Company will not undertake and specifically declines any obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements, or to reflect the occurrence of anticipated or unanticipated
events.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS. NONE
<PAGE> 28
(b) REPORTS ON FORM 8-K
On January 2, 1997 the Company filed a report of Form 8-K to report the sale by
the Company of Forest Lakes Golf Club located in Sarasota, Florida. The Company
had acquired a combined 53.5% interest in Forest Lakes Limited Partnership,
owner of Forest Lakes Golf Club, in January 1995 for $252,438. The Company's
interest in Forest Lakes was comprised of a 34% general partnership interest and
a 19.5% limited partnership interest. The Company's general partnership interest
had been purchased by the Company from Senior Tour Players, Inc., an affiliate
of the Company.
The sale was structured as a sale of substantially all of the assets of Forest
Lakes Limited Partnership. The buyer was BST Associates, an Illinois
partnership, and unrelated to the Company. The cash contract price was
$4,000,000.
As part of the Form 8-K filing, the Company filed three pro forma financial
statements, including (i) a pro forma balance sheet as of September 30, 1996;
(ii) a pro forma statement of operations for the nine month period ended
September 30, 1996; and (iii) a pro forma statement of operations for the year
ended December 31, 1995.
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
Dated: August 10, 1997 By:
---------------------------------
Brendan M. Kissane
Controller
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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