<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
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(Mark One)
[ ] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the Quarterly Period Ended September 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.
(Name of Small Business Issuer as specified in its charter)
Nevada 04-3226365
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)
266 Beacon Street, Boston, MA 02116
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(Address of principal executive offices) (Zip Code)
(617) 266-3600
--------------
(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 November 7, 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.
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
=======================================================================================================
September 30,
1997
=======================================================================================================
<S> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 28,097
Interest and other receivables 193,695
Inventories 183,661
Prepaid expenses and other current assets 47,485
------------
Total current assets 452,938
------------
PROPERTY AND EQUIPMENT:
Property and equipment, net of accumulated depreciation 14,433,209
Construction in progress 454,737
------------
Property and equipment, net 14,887,946
------------
OTHER ASSETS:
Restricted cash 20,942
Water rights 1,051,992
Investment in golf facilities 1,074,272
Other assets 361,434
------------
Total other assets 2,508,640
------------
$ 17,849,524
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 868,266
Current portion of long term debt 990,441
Current portion of obligation under water-rights agreement 83,928
Deferred revenues 183,142
------------
Total current liabilities 2,125,777
------------
LONG TERM LIABILITIES:
Obligation under water rights agreement 799,037
Long term debt 8,829,373
STOCKHOLDERS' EQUITY:
Preferred stock, $.10 par value; 5,000,000 shares authorized 0
Common stock, $.001 par value; 15,000,000 shares authorized;
3,751,169 shares issued and outstanding 3,751
Additional paid-in capital 8,949,973
Management options 1,212,500
Accumulated deficit (4,070,887)
------------
Total stockholders' equity 6,095,337
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$ 17,849,524
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 3
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERLY PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
==========================================================================================================================
Three Month Three Month
Period Ended Period Ended
September 30, 1997 September 30, 1996
==========================================================================================================================
<S> <C> <C>
REVENUES $ 1,061,161 $ 1,035,017
COSTS AND EXPENSES:
Operating, general and administrative 1,345,341 1,481,284
Noncash compensation charge/(credit) - management stock options 0 (1,111,100)
----------- -----------
Operating income (loss) (284,180) 664,833
Interest income 37 5,847
Interest expense (191,694) (231,416)
----------- -----------
Income (loss) before equity in losses from
unconsolidated affiliate (475,837) 439,264
Equity in losses of unconsolidated affiliate (35,000) 0
----------- -----------
NET INCOME (LOSS) ($ 510,837) $ 439,264
=========== ===========
Net income (loss) per common and common equivalent share ($ 0.14) $ 0.12
=========== ===========
Weighted average number of common and common equivalent shares 3,751,169 3,621,164
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERLY PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
==========================================================================================================
Three Month Three Month
Period Ended Period Ended
September 30, 1997 September 30, 1996
==========================================================================================================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 510,837) $ 439,264
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 118,162 137,747
Noncash compensation charge/(credit) -
management stock options 0 (1,111,100)
Noncash equity in losses of Las Vegas Golf Center 35,000 0
Changes in assets and liabilities:
Interest and other receivables (20,069) 15,256
Prepaid expenses and other assets (8,422) 4,022
Inventories (10,214) (38,288)
Deferred Revenue 74,745 27,293
Accounts payable and accrued expenses (96,967) 269,210
----------- -----------
Cash provided by (used in) operating activities (418,602) (256,596)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (37,089) (6,319)
Golf course development costs capitalized (691,915) (648,931)
Investment in unconsolidated affiliate (46,440) 0
Cash (restricted) released from escrow 0 (4,188)
----------- -----------
Net cash provided by (used in) investing activities (775,444) (659,438)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt (120,611) (50,886)
Proceeds from long term debt 1,172,074 597,755
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Net cash provided by (used in) financing activities 1,051,463 546,869
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($ 142,583) ($ 369,165)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 170,680 $ 745,269
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 28,097 $ 376,104
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</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERLY PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
(CONTINUED)
<TABLE>
<CAPTION>
====================================================================================================================
Three Month Three Month
Period Ended Period Ended
September 30, 1997 September 30, 1996
====================================================================================================================
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Equipment aquired under capital lease $ 262,950 $ --
========== =====
Common stock issued for Las Vegas Golf Center purchase $ 72,000 $ --
========== =====
Golf course development costs transfered to fixed assets $4,040,734 $ --
========== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
========================================================================================================================
Nine Month Nine Month
Period Ended Period Ended
September 30, 1997 September 30, 1996
========================================================================================================================
<S> <C> <C>
REVENUES $ 3,837,828 $ 4,160,845
COSTS AND EXPENSES:
Operating, general and administrative 3,967,296 4,135,747
Noncash compensation charge/(credit) -
management stock options (33,258) (694,400)
----------- -----------
Operating income (loss) (96,210) 719,498
Interest income 13,290 16,777
Interest expense (547,894) (680,502)
----------- -----------
Income (loss) before equity in losses from
unconsolidated affiliate (630,814) 55,773
Equity in losses of unconsolidated affiliate (138,000) 0
----------- -----------
NET INCOME (LOSS) $ (768,814) $ 55,773
=========== ===========
Net income (loss) per common and common equivalent share $ (0.21) $ 0.02
=========== ===========
Weighted average number of common and common equivalent shares 3,728,275 3,621,164
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
<TABLE>
<CAPTION>
====================================================================================================================
Nine Month Nine Month
Period Ended Period Ended
September 30, 1997 September 30, 1996
====================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) ($ 768,814) $ 55,773
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 349,244 483,635
Noncash compensation charge/(credit) - management
stock options (33,258) (694,400)
Noncash equity in losses of Las Vegas Golf Center 138,000 0
Distributions to minority interests in Forest Lakes (349,946) 0
Changes in assets and liabilities:
Interest and other receivables 1,119,456 25,204
Prepaid expenses and other assets (2,812) 36,690
Inventories (42,685) (83,204)
Deferred Revenue 8,213 36,405
Accounts payable and accrued expenses (164,438) 61,697
----------- -----------
Cash provided by (used in) operating activities 252,960 (78,200)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (61,388) (39,544)
Golf course development costs capitalized (3,948,861) (1,983,227)
Investment in unconsolidated affiliate (111,197) 0
Cash (restricted) released from escrow 0 (6,283)
Increase in other assets 0 (50,000)
----------- -----------
Net cash provided by (used in) investing activities (4,121,446) (2,079,054)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term debt (1,712,984) (274,079)
Proceeds from long term debt 4,023,956 1,334,053
----------- -----------
Net cash provided by (used in) financing activities 2,310,972 1,059,974
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($1,557,514) ($1,097,280)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $1,585,611 $1,473,384
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 28,097 $ 376,104
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 8
SENIOR TOUR PLAYERS DEVELOPMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
UNAUDITED
(CONTINUED)
<TABLE>
<CAPTION>
==============================================================================================================
Nine Month Nine Month
Period Ended Period Ended
September 30, 1997 September 30, 1996
==============================================================================================================
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Equipment aquired under capital lease $ 262,950 $ --
========== ====
Common stock issued for Las Vegas Golf Center purchase $ 72,000 $ --
========== ====
Golf course development costs transfered to fixed assets $4,040,734 $ --
========== ====
</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
SEPTEMBER 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 nine month period ended
September 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 third quarter of
1997, the Company recorded a $35,000 loss representing the Company's pro rata
share in the Center's start-up operating losses. At September 30, 1997 the
Company had capitalized $1,074,272 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
10-QSB. Accordingly, these interim
<PAGE> 10
SENIOR TOUR PLAYERS DEVELOPMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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
September 30, 1997, and results of operations and cash flows for the three and
nine month periods ended September 30, 1997 and 1996. The results for the
interim periods presented are not necessarily indicative of results to be
expected for any future period. These statements should be read in conjunction
with the audited consolidated financial statements, and notes there to, for the
year ended December 31, 1996, included in the annual report on Form 10-KSB.
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 September 30, 1997 construction in progress consisted of 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
<PAGE> 11
SENIOR TOUR PLAYERS DEVELOPMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Construction In Progress (continued)
center in Cranston, Rhode Island; and the planned development of an 18 hole
championship golf course 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 anti-dilutive. 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 anti-dilutive.
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
SEPTEMBER 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 April 1998 with a course opening in early 1999. 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
SEPTEMBER 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
SEPTEMBER 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. Accordingly, the Company
filed a registration statement, which became effective in August 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, 1996.
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
SEPTEMBER 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 CONTRACTS AND AGREEMENTS
In connection with the original eighteen hole facility at the Badlands Golf
Club, which was completed in October 1995, and the additional nine holes, which
were completed in September, 1997, the Company has entered into the following
significant contracts and agreements:
Badlands Land Lease Agreements
During April 1993, 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.
During June, 1996 the Company leased an additional 67 acres abutting The
Badlands to develop an additional nine holes, which was completed in September
1997. 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 October 1, 1997,
with an increase every three years based on the increase in the Consumer Price
Index.
Both leases contain 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. Additionally, the leases require
the Company to pay real estate taxes, assessments, and other charges in
connection with the leased property.
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
<PAGE> 16
SENIOR TOUR PLAYERS DEVELOPMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
3. GOLF COURSE CONTRACTS AND AGREEMENTS (CONTINUED)
Water Rights Agreement
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 September 30, 1997:
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 $ 4,896,139
Construction note payable to NationsCredit, secured by The
Badlands, interest is at 10.95%, with principal and interest
due monthly of approximately $48,250, final maturity date of
December, 2001 3,589,546
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 270,289
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 201,404
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 163,804
Capital lease obligation for equipment, principal and
interest payments of approximately $1,000 due monthly, final
maturity date of June, 2001 41,308
Capital lease obligation for telephone equipment, principal
and interest payments of approximately $600 due monthly,
final maturity date of September, 2001 21,648
Capital lease obligation for equipment, principal and
interest payments of approximately $129 due monthly, final
maturity date of June, 2001 5,676
<PAGE> 17
SENIOR TOUR PLAYERS DEVELOPMENT, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
4. LONG TERM DEBT (CONTINUED)
Unsecured line of credit with a bank, payable on demand with
interest at prime rate plus 1.5% (10% at September 30, 1997) 430,000
-----------
$ 9,819,814
Less-current portion 990,441
-----------
LONG TERM DEBT $ 8,829,373
===========
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 are subject to redemption by the Company at a redemption
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 preceding the notice of redemption.
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
SEPTEMBER 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 September 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 "Non-employee Plan"). Under the Non-employee 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
Non-employee 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 Non-employee 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
SEPTEMBER 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 under the circumstances 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 September 30, 1997, a total of 22,222 (or 40%) of the officer's
options had vested. Accordingly, during the nine month period September 30,
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 September 30,
1997 a total of 28,572 shares have vested. Accordingly, during the nine month
period ended September 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
SEPTEMBER 30, 1997
6. INCOME TAXES
At December 31, 1996, the Company had a net operating loss carryforward
available for federal tax purposes of approximately $1,321,000 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 after
December 15, 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 it has sufficient cash, operating lines of
credit, and committed construction financing to meet its current operating
needs. Also, the Company is currently negotiating to raise additional lines of
credit as well as long-term equity and debt financing to fund its current
development projects, and believes it will be successful.
At September 30, 1997, the Company had $28,097 in cash and the Company
had $70,000 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, which was completed in September, 1997.
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 as detailed in the loan
agreement. As of September 30, 1997 the Company had borrowed $3,589,546 under
the loan agreement.
<PAGE> 22
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 September 30, 1997 the Company had
approximately $704,000 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 continued ownership and operation of the
27-hole golf facility at The Badlands Golf Club in Las Vegas; continued
marketing and management of the Las Vegas International Golf Center, in which
the Company has a 21.5% ownership interest, and serves as the day-to-day manager
of the facility; completion of the planned improvements and amenities 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 sales 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 ; 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 18-hole golf
course development in Spring, Texas, a short distance from Route I-45 and the
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 SEPTEMBER 30, 1997 VS. THREE MONTH PERIOD ENDED
- ------------------------------------------------------------------------
SEPTEMBER 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 third quarter ended September 30, 1997 totaled
$1,061,161 compared to $1,035,017 during the third quarter of 1996, a increased
$26,144. The increase, which was anticipated by management, was due to increased
revenues at the Badlands, offset by the sale of the Forest Lakes Golf Club
during December 1996. Revenues at The Badlands Golf Club in Las Vegas during the
third quarter of 1997 totaled $995,001, versus $801,064 during the third quarter
of 1996, an increase of $193,937 (or 24%), and were slightly ahead of
management's expectations. Forest Lakes generated $185,484 in revenues during
the third quarter of 1996 verus $0 in 1997. The Company also generated revenues
from management fees of $66,160 during the third quarter of 1997 under
management contracts with New England Country Club in
<PAGE> 24
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 $1,345,341 during the
quarter ended September 30, 1997 compared to $1,481,284 for the corresponding
period in 1996, a decrease of $135,943. The 1996 expenses included $255,558
relating to Forest Lakes Golf Club versus $0 in 1997.
Operating expenses at The Badlands during the third quarter of 1997
totaled approximately $1,071,495 versus $942,242 in 1996, an increase of
$129,253. The increased costs are primarily due to the increased sales volume
associated with the opening of our clubhouse in September 1996.
Corporate administrative expenses totaled $273,846 during the third
quarter of 1997 compared to $283,484 during the corresponding period in 1996, a
decrease of $9,638.
NON-CASH COMPENSATION 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 third quarter of 1996 the Company recorded a non-cash compensation
credit adjustment of $1,111,100 representing an adjustment to the reserve
initially established in 1995 to account for the probable future vesting of
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 September 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 $191,694 for the quarter ended September 30, 1997
compared to $231,416 during the quarter ended September 30, 1996, a decrease of
$39,722. Forest Lakes
<PAGE> 25
interest totaled $81,720 in 1996 versus $0 during the third quarter of 1997.
Interest expense relating to The Badlands totaled $191,694 during the third
quarter of 1997 versus $149,696 during the third quarter of 1996. Interest at
The Badlands relates to a first mortgage of the golf course, a working capital
line of credit, 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. Total bank debt and capital lease
obligations at The Badlands as of September 30, 1997 totaled $9,619,814, and the
long term obligation under the water rights agreement was $882,965 as of
September 30, 1997. See Note 3 and 4 to the consolidated financial statements
included herein.
INTEREST INCOME totaled $37 during the third quarter of 1997 compared to $5,847
during the corresponding period in 1996.
FEQUITY 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 third quarter of 1997, the Company recorded a
$35,000 loss representing the Company's pro rata share in the Center's start-up
operations. See notes to consolidated financial statements included herein. At
September 30, 1997 the Company had capitalized $1,074,272 related to this
investment, which is carried as Investment in Golf Facilities on the balance
sheet included with the consolidated financial statement included herein.
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1997 VS. NINE MONTH PERIOD ENDED
- ----------------------------------------------------------------------
SEPTEMBER 30, 1996
- ------------------
REVENUES during the nine month period ended September 30, 1997 totaled
$3,837,828 compared to $4,160,845 during the nine month period ended September
30, 1996, a decrease of $323,017. 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
$900,201 in revenues during the nine month period ended September 30, 1996 verus
$0 in 1997. Revenues at The Badlands Golf Club in Las Vegas during the nine
month period ended September 30, 1997 totaled $3,692,310, versus $3,183,299
during the nine month period ended September 30, 1996, an increase of $509,011
(or 16%). The Company also generated revenues from management fees of $145,518
during the nine month period ended September 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 $3,967,296 during the nine
month period ended September 30, 1997 compared to $4,135,747 for the
corresponding period in 1996, a decrease of $168,451. The 1996 expenses included
$755,553 relating to Forest Lakes Golf Club versus $0 in 1997.
Operating expenses at The Badlands during the nine month period ended September
30, 1997 totaled $3,012,616 versus $2,508,609 in 1996, a increase of $504,007.
The increased costs are primarily due to the increased sales volume associated
with the opening of our clubhouse in September 1996.
<PAGE> 26
Corporate administrative expenses totaled $954,680 during the nine month
period ended September 30, 1997 compared to $871,585 during the corresponding
period in 1996, an increase of $83,095.
NON-CASH COMPENSATION CREDIT - MANAGEMENT STOCK OPTIONS. During The nine month
period ended September 30, 1996 the Company recorded a non-cash compensation
credit adjustment of $694,400, versus $33,258 during the nine month period ended
September 30, 1997. The 1996 credit adjustment 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 September 30, 1997 versus Three Month
Period Ended September 30, 1996" elsewhere in this report for a more detailed
explanation of noncash charges/(credits).
INTEREST EXPENSE totaled $547,894 for the nine month period ended September 30,
1997 compared to $680,502 during the nine month period ended September 30, 1996,
a decrease of $132,608. Forest Lakes interest totaled $246,815 in 1996 versus $0
during the nine month period ended September 30, 1997. Interest expense relating
to The Badlands totaled $538,033 during the nine month period ended September
30, 1997 versus $433,670 during the nine month period ended September 30, 1996.
Interest at The Badlands relates to a first mortgage of the golf course; a
working capital line of credit; 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 $13,290 during the nine month period ended September 30,
1997 compared to $16,777 during the corresponding period in 1996.
EQUITY IN LOSSES OF UNCONSOLIDATED AFFILIATE. During The nine month period ended
September 30, 1997, the Company recorded a $138,000 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 September 30, 1997 versus Three Month
Period Ended September 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 None
<PAGE> 27
ITEM 5. OTHER INFORMATION
RISK FACTORS AND CAUTIONARY STATEMENTS
When used in this Form 10-QSB 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 None
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: November 14, 1997 By: /s/ Brendan M. Kissane
-------------------------------
Brendan M. Kissane
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 28,097 28,097
<SECURITIES> 0 0
<RECEIVABLES> 193,695 193,695
<ALLOWANCES> 0 0
<INVENTORY> 183,661 183,661
<CURRENT-ASSETS> 452,938 452,938
<PP&E> 14,887,946 14,887,946
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 17,849,524 17,849,524
<CURRENT-LIABILITIES> 2,125,777 2,125,777
<BONDS> 9,628,410 9,628,410
0 0
0 0
<COMMON> 3,751 3,751
<OTHER-SE> 6,091,586 6,091,586
<TOTAL-LIABILITY-AND-EQUITY> 17,849,524 17,849,524
<SALES> 1,061,161 3,837,828
<TOTAL-REVENUES> 1,061,161 3,837,828
<CGS> 0 0
<TOTAL-COSTS> 1,345,341 3,967,296
<OTHER-EXPENSES> 0 (33,258)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 191,694 547,894
<INCOME-PRETAX> (510,837) (768,814)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (510,837) (768,814)
<EPS-PRIMARY> (.14) (.21)
<EPS-DILUTED> (.14) (.21)
</TABLE>
